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

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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.

Q is quantity of product, price is a separate variabale ... ah what's the point. Go ahead, ignore all theory and blindly believe that almighty Bitcoin will save us all.

benzone

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