Quote from: Lloydie on January 14, 2014, 04:22:16 PM

Quote from: benzone on January 14, 2014, 10:43:58 AM

Quote from: deisik on January 14, 2014, 07:59:19 AM

....
This is oversimplification. Inflation (as price increase) also depends on money velocity and productivity. I am also curious about the source of the data...

I didn't say that money supply is the only variable in the equation of exchange. But we need to respect the economic terms for what they are and not mix different categories even if they are in a cause and effect relationship.

Equation of exchange (most popular form): M*V = P*Q

M - money supply (mass of money in circ.)
V - velocity
P - price level
Q - productivity or quantity of product (goods, services)

So if you have a growing economy (Q is rising) and there is no change in the way you do business i.e. trade (V doesn't change) you need to increase the money supply to support this growth. Most prices are downward rigid and this is the only way to make it work. If Q and M are in proportion there is no inflation, just healthy growth supported by growing money supply.

This is all pretty elementary, no differences in opinions between economic theories etc.

The above is a BS equation as since the ZLB, the Fed has added to money supply but velocity has fallen to 1965 levels. And get this, the Fed can't explain why!!!

Yes my friends, QE/money printing is one huge EXPERIMENT that no one truly understands. But I have a pretty good idea it's not going to end well.

Honestly, we should get these fucking useless equations out of here.

Just because Q is increasing doesn't mean the economy is growing. It could simply be asset price inflation and speculative activity creating the false impression of economic growth. You are assuming V doesn't change when it has fallen to decade lows? WTF?

As the money supply has increased V has fallen commensurately. Bet you can't find that one in your neo classical text books.

This is the only way to make it work?!? Heads up fellas, it's not working. Period.

For everything else there is Bitcoin.

Curious about your "1965 velocity level" point. Haven't heard that. I guess that seems plausible, but I would like to see the data on that. I mean, velocity, as I'm sure you know, isn't really possible to capture (this is actually the beauty of bitcoin, it can be captured there).... velocity is often thought to remain pretty stable. If it's being calculated from the equation via other variables, there's problems there too, since inflation, gdp and even MS are all calculated differently then they once were (in 65). Yet, it should also be pointed out, if your using the variables and the equation to calculate velocity, your clearly saying the equation matters.

As for QE - I agree it's an experiment. But, it's not an experiment for the sake of experimenting. I do agree it won't end well. But, why it's happening? I think I have a theory. The Fed knew we were in a shit storm in 2008/09. They utilized every tool they had in the aftermath, and still in a shit storm. Their sole hope with QE is to buy time because they know everything is being held up by a thread. I do not think, for one second, those on the Fed don't know the severity of damage that QE most likely will cause. I think they simply think in terms of immediate gratification (or in the short run). They didn't care about the long run consequences. The irony here is that's exactly how Greenspan and the former Fed administration thought about the 01' recession and 9/11.... 'let's just heal the world now' (as if they could)... that sort of logic may hold things up temporarily, but as we all know, those actions led to the housing bubble, which burst and caused worse problems. Point being, problems will continue to erupt and the tools are growing less and less, as the severity grows. It will end in devastation and most likely a world war because as the US goes down, the world will too. Desperation will get bad.... real bad and poor choices will be made so that countries can eat and survive.

Bitcoin provides a new hope to this chain of events because it could help the world deleverage, which is the primary problem. Bitcoin, or something like it, not the Fed's policy, could help save the world. It's always that way. Technology is what lifts economies... not government (or psuedo-gov'ts in this case).