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Reducing Inflation

Wallstreetatheist
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1/28/2012 10:19:04 PM
Posted: 4 years ago
Propose a plan to stop detrimental inflation in the United States.

My plan:
Abolish the federal reserve system
Confer the authority of sole issuer of paper money to the Treasury
Fix national money to the gold standard
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RoyLatham
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1/29/2012 4:10:23 AM
Posted: 4 years ago
At 1/28/2012 10:19:04 PM, Wallstreetatheist wrote:
My plan:
Abolish the federal reserve system
Confer the authority of sole issuer of paper money to the Treasury
Fix national money to the gold standard

The population generally increases and, due to advancing technology, productivity generally increases. If the money supply is fixed there will be deflation. Going to gold standard means the amount of money tracks mining technology. The money supply grows at the rate at which gold is extracted.

When Spain conquered the New World, they brought great quantities of gold back to Spain. The result was one of the worst inflationary episodes in history. If, for example, if someone figured a cheap way to extract the minute quantities of gold that is dissolved in sea water, we would have hyper-inflation. In general, there is no good reason to tie economic growth to mining technology. The likely result is either inflation or deflation depending upon how the economy grows.

In the present world, there are competing uses for gold that affect it's use to back currency. It's used in electronics, for example. That means that the amount of gold for money will increase or decrease depending upon manufacturing technology.

Gold ornaments are the traditional wedding gifts in India. This use is so large that when the economy in India is doing well, the price of gold rises from increased demand.

With governments printing money, the problem is that they usually print too much, so there tends to be chronic inflation. Milton Friedman proposed replacing the Federal Reserve with a formula that automatically adjusts the money supply to match the expansion and contraction of the economy. Inflation would automatically be prevented by the formula increasing interest rates to slow the increase in the money supply.
Wallstreetatheist
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1/29/2012 11:39:39 AM
Posted: 4 years ago
The likely result is either inflation or deflation depending upon how the economy grows.

"Although economies on silver and gold standards sometimes experienced inflation, inflation rates in such economies seldom exceeded 2 percent per year, and the overall experience over the centuries was inflation of close to zero. Economies on paper-money standards, which all economies have today, have displayed much more inflation. As Peter Bernholz (2003, p. 1) points out, "the worst excesses of inflation occurred only in the 20th century" in countries where metallic standards were no longer in force. In 1971 the U.S. government cut the U.S. dollar's last link to gold, ending its commitment to redeem dollars for gold at a fixed rate for foreign central banks. Even among countries that have avoided hyperinflation, inflation rates have generally been higher in the period after 1971. But inflation rates in most countries have been lower since 1985 than they were in 1971–1985."
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darkkermit
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1/29/2012 12:27:31 PM
Posted: 4 years ago
At 1/29/2012 11:39:39 AM, Wallstreetatheist wrote:
The likely result is either inflation or deflation depending upon how the economy grows.

"Although economies on silver and gold standards sometimes experienced inflation, inflation rates in such economies seldom exceeded 2 percent per year, and the overall experience over the centuries was inflation of close to zero. Economies on paper-money standards, which all economies have today, have displayed much more inflation. As Peter Bernholz (2003, p. 1) points out, "the worst excesses of inflation occurred only in the 20th century" in countries where metallic standards were no longer in force. In 1971 the U.S. government cut the U.S. dollar's last link to gold, ending its commitment to redeem dollars for gold at a fixed rate for foreign central banks. Even among countries that have avoided hyperinflation, inflation rates have generally been higher in the period after 1971. But inflation rates in most countries have been lower since 1985 than they were in 1971–1985."

Look at this graph and notice how bad the inflation/deflationary cycles were on the gold standard:
http://en.wikipedia.org...
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MyVoiceInYourHead
Posts: 260
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1/29/2012 1:58:55 PM
Posted: 4 years ago
At 1/28/2012 10:19:04 PM, Wallstreetatheist wrote:
Propose a plan to stop detrimental inflation in the United States.


My plan:
Abolish the federal reserve system
Confer the authority of sole issuer of paper money to the Treasury
Fix national money to the gold standard

Why would you want to base your money supply on something that we, the people, have nothing of? Also given the current stock of private gold reserves and their price, having a gold standard would cause massive devaluation of the dollar. Would you want to take that risk?

This is the Ron Paul policy and whilst I think he is by far the best of the Republican candidates (he is mistrustful of the current money system) I think he is advocating the wrong solution. The Federal Reserve is just a smoke screen anyway - it's the man behind the curtain in the Land of Oz that we need to watch.

It's not what makes up the currency that matters, it's who controls the quantity of money. At the moment it's being (poorly) controlled by the banking sector who lend way too much in the booms and not enough during a downturn. Western governments can produce very little of their own money at no interest to nobody. 97% of UK money and 99% of US money has been borrowed into existence from commercial financial institutions at interest so that we effectively have a rent-a-currency! About half of this debt is unnecessary. Very little of our money stock is debt-free (i.e. cash or its electronic equivalent). And the world leaders are running about like headless chickens not knowing their arses from their elbows. Until they solve the debt-saturation problem in the system through the simple process of Monetary Reform they can't do anything.

Monetary Reform aims to do the following:
1. Phase out the national debt (over 15 years). The money creation power should be returned to democratic control. In the UK, the Monetary Policy Committee would be charged with the task of issuing all new money to the Treasury.
2. Banks can only lend money that they actually have - abolish fractional reserve lending.
3. We need more debt-free money in the real economy to stimulate demand and less loans.

There's no reason why we couldn't have an economy that recycled existing money instead of relying on debt-ridden temporary money. We could have very low inflation (price stability) and no more booms and busts.
16kadams
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1/29/2012 3:29:04 PM
Posted: 4 years ago
At 1/29/2012 12:27:31 PM, darkkermit wrote:
At 1/29/2012 11:39:39 AM, Wallstreetatheist wrote:
The likely result is either inflation or deflation depending upon how the economy grows.

"Although economies on silver and gold standards sometimes experienced inflation, inflation rates in such economies seldom exceeded 2 percent per year, and the overall experience over the centuries was inflation of close to zero. Economies on paper-money standards, which all economies have today, have displayed much more inflation. As Peter Bernholz (2003, p. 1) points out, "the worst excesses of inflation occurred only in the 20th century" in countries where metallic standards were no longer in force. In 1971 the U.S. government cut the U.S. dollar's last link to gold, ending its commitment to redeem dollars for gold at a fixed rate for foreign central banks. Even among countries that have avoided hyperinflation, inflation rates have generally been higher in the period after 1971. But inflation rates in most countries have been lower since 1985 than they were in 1971–1985."

Look at this graph and notice how bad the inflation/deflationary cycles were on the gold standard:
http://en.wikipedia.org...

oh wow
https://www.youtube.com...
https://rekonomics.wordpress.com...
"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross
16kadams
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1/29/2012 5:12:46 PM
Posted: 4 years ago
inflation rates: http://www.usinflationcalculator.com...

Just kinda if you wanna know. I think it is better then the Wikipedia graph.
https://www.youtube.com...
https://rekonomics.wordpress.com...
"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross
RoyLatham
Posts: 4,488
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1/30/2012 8:05:32 PM
Posted: 4 years ago
At 1/29/2012 11:39:39 AM, Wallstreetatheist wrote:
The likely result is either inflation or deflation depending upon how the economy grows.

"Although economies on silver and gold standards sometimes experienced inflation, inflation rates in such economies seldom exceeded 2 percent per year, and the overall experience over the centuries was inflation of close to zero. Economies on paper-money standards, which all economies have today, have displayed much more inflation. As Peter Bernholz (2003, p. 1) points out, "the worst excesses of inflation occurred only in the 20th century" in countries where metallic standards were no longer in force. In 1971 the U.S. government cut the U.S. dollar's last link to gold, ending its commitment to redeem dollars for gold at a fixed rate for foreign central banks. Even among countries that have avoided hyperinflation, inflation rates have generally been higher in the period after 1971. But inflation rates in most countries have been lower since 1985 than they were in 1971–1985."

If growth rates are slow and gold recovery is slow, then sure. However, that doesn't mean that one factor controls the other. Here's a summary of the inflation episode from Spanish gold:

"The importation of New World gold into Spain coincided with a corrosive inflation that has come to be known as the "price revolution." Although prices had dropped steadily during the 1400s, after 1500 they began to rise dramatically — 300 percent by 1600, according to economist Earl Hamilton, who wrote a well-known book on the phenomenon. The reasons for this are complex, but it seems clear that at least in part it was a matter of a sharply increasing amount of money (in the form of silver and gold) chasing a relatively fixed output of goods and services, thus bidding up the price. " http://www.straightdope.com...

It's probably true that the worst inflation occurred by abandoning gold as a standard, it's also true that tying economic growth to mining technology makes sense and is not a guarantee of a stable currency. What exactly is the theory that says growth ought to match mining? It makes no sense to me.

A mechanism that tracks growth solves the problem.
Wallstreetatheist
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1/31/2012 3:06:26 AM
Posted: 4 years ago
If the money supply is fixed there will be deflation.

Deflation isn't bad. There is a pervasive force of Keynesians who claim it's bad, yet a decent argument has yet to be made against it.

Going to gold standard means the amount of money tracks mining technology. The money supply grows at the rate at which gold is extracted.

This is the bad part of the gold standard, but inflation in the US won't hit rates like it did in Zimbabwe with the gold standard. I think the current increase in the gold supply is a consistent 1-2% a year now. But, regardless of current times, yes, the large discoveries of gold (e.g. California 1860's) led to periods of inflation.

if someone figured a cheap way to extract the minute quantities of gold that is dissolved in sea water, we would have hyper-inflation.

If people found a way to extract the minute diamonds from candle flames, diamonds would become worthless.

In general, there is no good reason to tie economic growth to mining technology. The likely result is either inflation or deflation depending upon how the economy grows.

In the present world, there are competing uses for gold that affect it's use to back currency. It's used in electronics, for example. That means that the amount of gold for money will increase or decrease depending upon manufacturing technology.

Good point.

Gold ornaments are the traditional wedding gifts in India. This use is so large that when the economy in India is doing well, the price of gold rises from increased demand.

I was primarily asking for your method of curtailing inflation in the US.

With governments printing money, the problem is that they usually print too much, so there tends to be chronic inflation.

Thank you. Also, those governments end up insolvent.

Milton Friedman proposed replacing the Federal Reserve with a formula that automatically adjusts the money supply to match the expansion and contraction of the economy. Inflation would automatically be prevented by the formula increasing interest rates to slow the increase in the money supply.

That is what the gold standard does precisely: "Because exchange rates were fixed, the gold standard caused price levels around the world to move together. This comovement occurred mainly through an automatic balance-of-payments adjustment process called the price-specie-flow mechanism. Here is how the mechanism worked. Suppose that a technological innovation brought about faster real economic growth in the United States. Because the supply of money (gold) essentially was fixed in the short run, U.S. prices fell. Prices of U.S. exports then fell relative to the prices of imports. This caused the British to demand more U.S. exports and Americans to demand fewer imports. A U.S. balance-of-payments surplus was created, causing gold (specie) to flow from the United Kingdom to the United States. The gold inflow increased the U.S. money supply, reversing the initial fall in prices. In the United Kingdom, the gold outflow reduced the money supply and, hence, lowered the price level. The net result was balanced prices among countries."
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Starcraftzzz
Posts: 487
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2/4/2012 4:16:51 PM
Posted: 4 years ago
At 1/28/2012 10:19:04 PM, Wallstreetatheist wrote:
Propose a plan to stop detrimental inflation in the United States.


My plan:
Abolish the federal reserve system
Confer the authority of sole issuer of paper money to the Treasury
Fix national money to the gold standard
There is no detrimental inflation in US.
Starcraftzzz
Posts: 487
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2/4/2012 4:29:16 PM
Posted: 4 years ago
At 1/31/2012 3:06:26 AM, Wallstreetatheist wrote:
If the money supply is fixed there will be deflation.

Deflation isn't bad. There is a pervasive force of Keynesians who claim it's bad, yet a decent argument has yet to be made against it.
There has never been a period of deflation with a good economy.
Deflation is bad because it makes sitting on money a good "investment" meaning instead of people using that money it just sits and goes to waste.
Second deflation makes it so anyone or any business that borrowed money will no longer be profitable because deflation corrodes away the nominal dollar value.

At 1/31/2012 3:06:26 AM, Wallstreetatheist wrote:
This is the bad part of the gold standard, but inflation in the US won't hit rates like it did in Zimbabwe with the gold standard. I think the current increase in the gold supply is a consistent 1-2% a year now. But, regardless of current times, yes, the large discoveries of gold (e.g. California 1860's) led to periods of inflation.
Has already posted inflation and deflation were lie 10 times worse on the gold standard then without it.
Someone already posted the graphs and inflation/deflation were way worse when we were on the gold standard, recessions were also worse and growth was lower. This is because being on a gold standard prevents you from expanding or increasing the money supply meaning you have less resources to combat recessions

At 1/31/2012 3:06:26 AM, Wallstreetatheist wrote:
I was primarily asking for your method of curtailing inflation in the US.
There's no need to curtail inflation because inflation isn't at bad levels.
darkkermit
Posts: 11,204
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2/4/2012 4:36:38 PM
Posted: 4 years ago
At 2/4/2012 4:29:16 PM, Starcraftzzz wrote:

There has never been a period of deflation with a good economy.

Gilded Ages.

Deflation is bad because it makes sitting on money a good "investment" meaning instead of people using that money it just sits and goes to waste.

If the opportunity to invest offers bigger payoffs then the opportunity to sit on me, people will invest. Deflation could cause a liquidity trap, If real interest rates are too low.

Second deflation makes it so anyone or any business that borrowed money will no longer be profitable because deflation corrodes away the nominal dollar value.

If one using Net-Present Valuing, one should take into consideration that cash flow will be lower in the future do to deflation.

The computer industry has been doing well despite the fact that the nominal and real value of computers and electronics have been lowering.


At 1/31/2012 3:06:26 AM, Wallstreetatheist wrote:
This is the bad part of the gold standard, but inflation in the US won't hit rates like it did in Zimbabwe with the gold standard. I think the current increase in the gold supply is a consistent 1-2% a year now. But, regardless of current times, yes, the large discoveries of gold (e.g. California 1860's) led to periods of inflation.
Has already posted inflation and deflation were lie 10 times worse on the gold standard then without it.
Someone already posted the graphs and inflation/deflation were way worse when we were on the gold standard, recessions were also worse and growth was lower. This is because being on a gold standard prevents you from expanding or increasing the money supply meaning you have less resources to combat recessions

At 1/31/2012 3:06:26 AM, Wallstreetatheist wrote:
I was primarily asking for your method of curtailing inflation in the US.
There's no need to curtail inflation because inflation isn't at bad levels.
Open borders debate:
http://www.debate.org...
Starcraftzzz
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2/4/2012 5:22:39 PM
Posted: 4 years ago
At 2/4/2012 4:36:38 PM, darkkermit wrote:
At 2/4/2012 4:29:16 PM, Starcraftzzz wrote:

There has never been a period of deflation with a good economy.

Gilded Ages.
When we use your chart or therefor the numbers from your chart and plot them on a graph with economic growth and employment growth we find that every time deflation occurred the economy was/wen into recession.
The Gilded ages did have decent economic growth but that growth did not occur when there was deflation.
http://en.wikipedia.org...
http://en.wikipedia.org...

At 2/4/2012 4:36:38 PM, darkkermit wrote:
At 2/4/2012 4:29:16 PM, Starcraftzzz wrote:
Deflation is bad because it makes sitting on money a good "investment" meaning instead of people using that money it just sits and goes to waste.

If the opportunity to invest offers bigger payoffs then the opportunity to sit on me, people will invest. Deflation could cause a liquidity trap, If real interest rates are too low.
Yes and deflation makes it so investing offers lower payoffs.

At 2/4/2012 4:36:38 PM, darkkermit wrote:
At 2/4/2012 4:29:16 PM, Starcraftzzz wrote:
Second deflation makes it so anyone or any business that borrowed money will no longer be profitable because deflation corrodes away the nominal dollar value.

If one using Net-Present Valuing, one should take into consideration that cash flow will be lower in the future do to deflation.
Can't be done when you got a loan before deflation occurred. Second because of deflation there are less incentives to lend. Are you going to lend some $100 and make a deal with them that 5 years from now they only pay you $50?

At 2/4/2012 4:36:38 PM, darkkermit wrote:
The computer industry has been doing well despite the fact that the nominal and real value of computers and electronics have been lowering.
The computer industry isn't the same as the economy.
darkkermit
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2/4/2012 5:35:26 PM
Posted: 4 years ago
At 2/4/2012 5:22:39 PM, Starcraftzzz wrote:
At 2/4/2012 4:36:38 PM, darkkermit wrote:
At 2/4/2012 4:29:16 PM, Starcraftzzz wrote:

There has never been a period of deflation with a good economy.

Gilded Ages.
When we use your chart or therefor the numbers from your chart and plot them on a graph with economic growth and employment growth we find that every time deflation occurred the economy was/wen into recession.
The Gilded ages did have decent economic growth but that growth did not occur when there was deflation.
http://en.wikipedia.org...
http://en.wikipedia.org...

However, that could mean the deflation is a result of a recession, not a cause of a recession.

At 2/4/2012 4:36:38 PM, darkkermit wrote:
At 2/4/2012 4:29:16 PM, Starcraftzzz wrote:
Deflation is bad because it makes sitting on money a good "investment" meaning instead of people using that money it just sits and goes to waste.

If the opportunity to invest offers bigger payoffs then the opportunity to sit on me, people will invest. Deflation could cause a liquidity trap, If real interest rates are too low.
Yes and deflation makes it so investing offers lower payoffs.

How? The real interest earned should be roughly the same. Nominal will be different of course, but not real.

At 2/4/2012 4:36:38 PM, darkkermit wrote:
At 2/4/2012 4:29:16 PM, Starcraftzzz wrote:
Second deflation makes it so anyone or any business that borrowed money will no longer be profitable because deflation corrodes away the nominal dollar value.

If one using Net-Present Valuing, one should take into consideration that cash flow will be lower in the future do to deflation.
Can't be done when you got a loan before deflation occurred. Second because of deflation there are less incentives to lend. Are you going to lend some $100 and make a deal with them that 5 years from now they only pay you $50?

Well if deflation is constant, then yes you can.

Your references the liquidity trap. However if real interest rates are greater then inflation, then nominal interest rates will be greater then 0%.

At 2/4/2012 4:36:38 PM, darkkermit wrote:
The computer industry has been doing well despite the fact that the nominal and real value of computers and electronics have been lowering.
The computer industry isn't the same as the economy.

It's part of the economy. You'd have to offer a great evidence to show why the computing industry is an exception to the rule.
Open borders debate:
http://www.debate.org...
Starcraftzzz
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2/4/2012 6:09:09 PM
Posted: 4 years ago
At 2/4/2012 5:35:26 PM, darkkermit wrote:
At 2/4/2012 5:22:39 PM, Starcraftzzz wrote:
At 2/4/2012 4:36:38 PM, darkkermit wrote:
At 2/4/2012 4:29:16 PM, Starcraftzzz wrote:

There has never been a period of deflation with a good economy.

Gilded Ages.
When we use your chart or therefor the numbers from your chart and plot them on a graph with economic growth and employment growth we find that every time deflation occurred the economy was/wen into recession.
The Gilded ages did have decent economic growth but that growth did not occur when there was deflation.
http://en.wikipedia.org...
http://en.wikipedia.org...

However, that could mean the deflation is a result of a recession, not a cause of a recession.
So a recession following every time of deflation means the recession is a cause of deflation?

At 2/4/2012 4:36:38 PM, darkkermit wrote:
At 2/4/2012 4:29:16 PM, Starcraftzzz wrote:
Deflation is bad because it makes sitting on money a good "investment" meaning instead of people using that money it just sits and goes to waste.

If the opportunity to invest offers bigger payoffs then the opportunity to sit on me, people will invest. Deflation could cause a liquidity trap, If real interest rates are too low.
Yes and deflation makes it so investing offers lower payoffs.

How? The real interest earned should be roughly the same. Nominal will be different of course, but not real.

1) Because holding money during deflationary periods offers high payoffs.

At 2/4/2012 4:36:38 PM, darkkermit wrote:
At 2/4/2012 4:29:16 PM, Starcraftzzz wrote:
Second deflation makes it so anyone or any business that borrowed money will no longer be profitable because deflation corrodes away the nominal dollar value.

If one using Net-Present Valuing, one should take into consideration that cash flow will be lower in the future do to deflation.
Can't be done when you got a loan before deflation occurred. Second because of deflation there are less incentives to lend. Are you going to lend some $100 and make a deal with them that 5 years from now they only pay you $50?
Deflation makes it so almost every business suddenly has to pay past debts with less income because as deflation occurs they make less nominal money. Company A borrowed $100 and is expected to pay it back in 5 years. They can do this because they used that money to produce $20 in goods however now with inflation that $20 is only $15.
At 2/4/2012 5:35:26 PM, darkkermit wrote:
Well if deflation is constant, then yes you can.
The question wasn't if it could happen the question was would you?
Would you lend someone $100 and tell them to give you $50 five years later?


At 2/4/2012 4:36:38 PM, darkkermit wrote:
The computer industry has been doing well despite the fact that the nominal and real value of computers and electronics have been lowering.
The computer industry isn't the same as the economy.

It's part of the economy. You'd have to offer a great evidence to show why the computing industry is an exception to the rule.
Does the computer industry have its own banks that only operate within that industry does it also has consumers who only buy products from that industry? Do investments from the computer industry only come from the computer industry? All those answers are no. The computer industry doesn't operate like the economy does.
16kadams
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2/11/2012 1:43:37 PM
Posted: 4 years ago
Gold standard=bad.

Under Winston Churchill he made the depression longer and worse because of the gold standard.
http://goldnews.bullionvault.com...

A gold standard would make ups and downs more extreme. It would be impossible to inflate it deflate, damaging the economy as the dollar needs to be flexible. Leading to unessacary busts.
http://m.cnbc.com...

We need A strong $, but a gold standard is bad, it is simple.
https://www.youtube.com...
https://rekonomics.wordpress.com...
"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross
Wallstreetatheist
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2/13/2012 5:04:07 PM
Posted: 4 years ago
Are you illiterate?

No, I am not illiterate; however, it appears you are either just that, or your mind inserts words into other's thoughts to mold them into what you wish.

I asked for,
"'Propose a plan to stop detrimental inflation in the United States.'

My plan:
Abolish the federal reserve system
Confer the authority of sole issuer of paper money to the Treasury
Fix national money to the gold standard."

I did not ask for current inflation, past inflation, or imaginary inflation; I asked for a plan to stop detrimental inflation in the United States. You chose to respond with an irrelevant non-answer, but you weren't the only one. I logically emphasized and reiterated this post's purpose to which you replied with an insult in the form of an irrelevant conclusion. Now that we have that settled, propose a plan to stop detrimental inflation in the United States.

Respectfully Submitted,
Wallstreetatheist
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Starcraftzzz
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2/13/2012 6:42:01 PM
Posted: 4 years ago
At 2/13/2012 5:04:07 PM, Wallstreetatheist wrote:
Are you illiterate?

No, I am not illiterate; however, it appears you are either just that, or your mind inserts words into other's thoughts to mold them into what you wish.
I find that hard to believe considering after a whole page of discussion your still asking a question that has already been answered.

At 2/13/2012 5:04:07 PM, Wallstreetatheist wrote:
I asked for,
"'Propose a plan to stop detrimental inflation in the United States.'
Why would you propose a plan to stop something that isn't happening?

At 2/13/2012 5:04:07 PM, Wallstreetatheist wrote:
My plan:
Abolish the federal reserve system
So you'd abolish a system that has reduces the length and severity of recessions and almost completely wiped out deflation and has reduced the repent fluctuations in inflation.
The only reason you'd do that is if you are stupid
http://en.wikipedia.org...
http://butnowyouknow.net...
http://www.angrybearblog.com...

At 2/13/2012 5:04:07 PM, Wallstreetatheist wrote:
Fix national money to the gold standard."
Historically the gold standard had more inflation and deflation then when we left it
http://en.wikipedia.org...

Not to mention in the great depression the sooner a country left the gold standard the sooner that country economy began growing
http://thinkprogress.org...

I don't even have to post arguments because history and all the data prove that you are 100% incorrect and clueless. The real question is how were you able to be duped into believing that 2+2 is 5? An even better question Is how do we prevent others from becoming ignorant and clueless like yourself.
DevinKing
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2/29/2012 9:00:30 PM
Posted: 4 years ago
At 1/28/2012 10:19:04 PM, Wallstreetatheist wrote:
Propose a plan to stop detrimental inflation in the United States.

--Challenge Accepted.

--This solution is an and/or solution meaning the components could be used separately or in conjunction with each other for higher effectiveness.

--First off, Fractional Reserve Banking should be allowed (I can explain why if you wish), but, Banks should have to have the reserves present at the time a loan is made. Making banks have the reserves necessary before hand would decrease the growth in debt and the money supply simultaneously.

--Secondly, if inflation were to become a problem in the U.S., either a financial transaction tax on banks, or a national sales tax, both of which would be indexed to the severity of the inflation could slow the growth in prices by slowing down the circulation speed of currency and soaking up excess cash flowing around.

My plan:
Abolish the federal reserve system
Confer the authority of sole issuer of paper money to the Treasury
Fix national money to the gold standard

--Wrong. Wrong. And Wrong.

--Keeping the Federal Reserve is actually a good idea. This is because if the treasury had control over the paper money supply, it would have the potential for abuse by politicians.

--Fix it too the gold standard? Gold prices have increased how many hundreds of percents over the past decade and people still argue that it would be a way to stabilize our currency. This would produce rampant deflation. Bad idea. Deflation hurts producers of products, which is one of the principle reasons it is bad. It hurts them because they buy their supplies at a high price and then sell there products at a lower price than normal. This makes it more difficult for them to make a profit or even recover costs.

--I can elaborate on anything above at your request.
After demonstrating his existence with complete certainty with the proposition "I think, therefore I am", Descartes walks into a bar, sitting next to a gorgeous priest. The priest asks Descartes, "Would you like a drink?" Descartes responds, "I think not," and then proceeds to vanish in a puff of illogic.
darkkermit
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2/29/2012 11:26:42 PM
Posted: 4 years ago
At 2/29/2012 9:00:30 PM, DevinKing wrote:

--First off, Fractional Reserve Banking should be allowed (I can explain why if you wish), but, Banks should have to have the reserves present at the time a loan is made. Making banks have the reserves necessary before hand would decrease the growth in debt and the money supply simultaneously.


That kind of ruins the purpose of fractional reserve banking. By definition, fractional reserve banking occurs If a bank only has a fraction of its reserves available.
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Greyparrot
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3/1/2012 5:30:24 AM
Posted: 4 years ago
At 1/31/2012 3:06:26 AM, Wallstreetatheist wrote:
If the money supply is fixed there will be deflation.

Deflation isn't bad. There is a pervasive force of Keynesians who claim it's bad, yet a decent argument has yet to be made against it.

If you believe this, then no-one can likely dissuade you from the gold standard, but do try to re-evaluate the possibility of high peaks and lows as economic productivity and population changes wildly while gold remains fixed.
DevinKing
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3/1/2012 4:02:05 PM
Posted: 4 years ago
At 2/29/2012 11:26:42 PM, darkkermit wrote:
At 2/29/2012 9:00:30 PM, DevinKing wrote:

--First off, Fractional Reserve Banking should be allowed (I can explain why if you wish), but, Banks should have to have the reserves present at the time a loan is made. Making banks have the reserves necessary before hand would decrease the growth in debt and the money supply simultaneously.


That kind of ruins the purpose of fractional reserve banking. By definition, fractional reserve banking occurs If a bank only has a fraction of its reserves available.

--Let me rephrase, banks should have to have the reserves present at the time a loan is made.
After demonstrating his existence with complete certainty with the proposition "I think, therefore I am", Descartes walks into a bar, sitting next to a gorgeous priest. The priest asks Descartes, "Would you like a drink?" Descartes responds, "I think not," and then proceeds to vanish in a puff of illogic.
darkkermit
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3/1/2012 4:08:57 PM
Posted: 4 years ago
At 3/1/2012 4:02:05 PM, DevinKing wrote:
At 2/29/2012 11:26:42 PM, darkkermit wrote:
At 2/29/2012 9:00:30 PM, DevinKing wrote:

--First off, Fractional Reserve Banking should be allowed (I can explain why if you wish), but, Banks should have to have the reserves present at the time a loan is made. Making banks have the reserves necessary before hand would decrease the growth in debt and the money supply simultaneously.


That kind of ruins the purpose of fractional reserve banking. By definition, fractional reserve banking occurs If a bank only has a fraction of its reserves available.

--Let me rephrase, banks should have to have the reserves present at the time a loan is made.

They do have reserves present. When was the last time you went to the bank, asked for money, and they refused because there were no reserves present?
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DevinKing
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3/1/2012 4:18:35 PM
Posted: 4 years ago
At 3/1/2012 4:08:57 PM, darkkermit wrote:
At 3/1/2012 4:02:05 PM, DevinKing wrote:
At 2/29/2012 11:26:42 PM, darkkermit wrote:
At 2/29/2012 9:00:30 PM, DevinKing wrote:

--First off, Fractional Reserve Banking should be allowed (I can explain why if you wish), but, Banks should have to have the reserves present at the time a loan is made. Making banks have the reserves necessary before hand would decrease the growth in debt and the money supply simultaneously.


That kind of ruins the purpose of fractional reserve banking. By definition, fractional reserve banking occurs If a bank only has a fraction of its reserves available.

--Let me rephrase, banks should have to have the reserves present at the time a loan is made.

They do have reserves present. When was the last time you went to the bank, asked for money, and they refused because there were no reserves present?

--No, they do not. Banks have two weeks to obtain the reserves to back a loan. This means that the banking industry can actually issue a great deal of loans and then back it by shuffling money around. This means that the banking industry in aggregate can have a great deal more loans outstanding than what should be possible with its given reserves.
After demonstrating his existence with complete certainty with the proposition "I think, therefore I am", Descartes walks into a bar, sitting next to a gorgeous priest. The priest asks Descartes, "Would you like a drink?" Descartes responds, "I think not," and then proceeds to vanish in a puff of illogic.
darkkermit
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3/1/2012 4:22:42 PM
Posted: 4 years ago
At 3/1/2012 4:18:35 PM, DevinKing wrote:
At 3/1/2012 4:08:57 PM, darkkermit wrote:
At 3/1/2012 4:02:05 PM, DevinKing wrote:
At 2/29/2012 11:26:42 PM, darkkermit wrote:
At 2/29/2012 9:00:30 PM, DevinKing wrote:

--First off, Fractional Reserve Banking should be allowed (I can explain why if you wish), but, Banks should have to have the reserves present at the time a loan is made. Making banks have the reserves necessary before hand would decrease the growth in debt and the money supply simultaneously.


That kind of ruins the purpose of fractional reserve banking. By definition, fractional reserve banking occurs If a bank only has a fraction of its reserves available.

--Let me rephrase, banks should have to have the reserves present at the time a loan is made.

They do have reserves present. When was the last time you went to the bank, asked for money, and they refused because there were no reserves present?

--No, they do not. Banks have two weeks to obtain the reserves to back a loan. This means that the banking industry can actually issue a great deal of loans and then back it by shuffling money around. This means that the banking industry in aggregate can have a great deal more loans outstanding than what should be possible with its given reserves.

We've already went over this.

The bank has some reserves available, otherwise I wouldn't be able to get money from my savings account upon demand.
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DevinKing
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3/1/2012 4:34:30 PM
Posted: 4 years ago
At 3/1/2012 4:22:42 PM, darkkermit wrote:
At 3/1/2012 4:18:35 PM, DevinKing wrote:
At 3/1/2012 4:08:57 PM, darkkermit wrote:
At 3/1/2012 4:02:05 PM, DevinKing wrote:
At 2/29/2012 11:26:42 PM, darkkermit wrote:
At 2/29/2012 9:00:30 PM, DevinKing wrote:

--First off, Fractional Reserve Banking should be allowed (I can explain why if you wish), but, Banks should have to have the reserves present at the time a loan is made. Making banks have the reserves necessary before hand would decrease the growth in debt and the money supply simultaneously.


That kind of ruins the purpose of fractional reserve banking. By definition, fractional reserve banking occurs If a bank only has a fraction of its reserves available.

--Let me rephrase, banks should have to have the reserves present at the time a loan is made.

They do have reserves present. When was the last time you went to the bank, asked for money, and they refused because there were no reserves present?

--No, they do not. Banks have two weeks to obtain the reserves to back a loan. This means that the banking industry can actually issue a great deal of loans and then back it by shuffling money around. This means that the banking industry in aggregate can have a great deal more loans outstanding than what should be possible with its given reserves.

We've already went over this.

The bank has some reserves available, otherwise I wouldn't be able to get money from my savings account upon demand.

--No, we did not "go over this already."

--The entire conversation is in text. Conveniently, its actually really easy to find. Now could you please quote me on saying that they do not have reserves?

--What I said was that banks are able to make far more loans than they would be able to otherwise because of the two week clause. They do have reserves present, just not as much as what would be required at that specific time and place under a system where they had to have them at the time the loan is made rather than within two weeks. That's why we should scrap the two week clause. Did I miss something?
After demonstrating his existence with complete certainty with the proposition "I think, therefore I am", Descartes walks into a bar, sitting next to a gorgeous priest. The priest asks Descartes, "Would you like a drink?" Descartes responds, "I think not," and then proceeds to vanish in a puff of illogic.
16kadams
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3/1/2012 6:44:58 PM
Posted: 4 years ago
At 2/29/2012 11:46:18 PM, FREEDO wrote:
Absolutely nothing.

Inflation isn't a problem.

http://en.wikipedia.org...

In the long term it will be as if we keep inflating prices and other things will rise and or arise. But the current rate of inflation (although I dislike it) is actually fairly minor correct.
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"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross