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The Federal Reserve and the money supply:

harrytruman
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7/23/2016 1:28:48 AM
Posted: 4 months ago
As we all know, the Federal reserve has been printing 300 million dollars a day for quite some time, being about 110 billion annually, but just recently, they decided to start reducing the monetary base, i.e. the amount of paper in circulation, but for some reason the m2 money supply, the amount of money promised by banks through bank accounts and deposits, is increasing. {1}

What does this mean? It means that banks are now creating money which is literally nothing, a whole new level of fiat, banks no longer issue paper which is backed by nothing, they are now issuing literal nothing backed by more nothing. The problem is that eventually banks will have to redeem this nothing, and if they can"t, then they will close. After the price of a Hershey"s chocolate bar rose to 1.50$, a 50% increase over 3 years, or an inflation rate of 17%, you now get to go down the deflation ride, that means you get to lose your job, and all your bank account money gets deleted, and stocks plummet, and no one has any money.

But wait, we had all that since with inflation, this is called stagflation, when you combine the slowed business, and general poverty of deflation with the unstable value of the currency and a rise in the cost of living associated with inflation. This just gets a whole lot better when your account for how we have unemployment rate of 22%, and how we have no industry here. To put our predicament simply, our entire economy is nothing more than a huge bubble based on paper backed by nothing and nothing backed by paper, which is only accepted by anyone because;
1.It is the world"s reserve currency
2.It"s not like any other currency is any better
The issue is eventually people are going to notice that they are receiving paper for goods and services with real value, and though this paper can be used to buy other goods and services of real value, the rate at which it can do this is going down, because the US isn"t really producing anything. The only reason fiat ever worked under any instances was because it could be used to buy goods and services, but if the issuing power behind this paper doesn"t produce anything of real value that you can buy, why then would anyone else accept them for their goods and services? This is why the value of our money is plummeting, while business slows and unemployment grows, because we don"t manufacture anything but foney money and government debt, which is never going to get paid off, and which central banks around the globe use as a basis to create more phony money, the difference is that they produce things, and their economy isn"t run entirely on paper.
Think about it, say you issue a private currency which everyone accepts because you run a store and it is accepted there, but eventually everyone accepts it at their stores, so you no longer sell anything but print paper, why would people accept it? The guy who promised he would accept it isn"t selling anything with which to buy with his money, but people continue to accept it because they know they can still spend it at other stores, but people become less and less willing to accept it knowing that it was based on a promise which the issuer cannot fulfill, but is rather fulfilled by others.
Eventually this guy makes a living on nothing more than loaning money from others, promising them that they can issue paper just as widely accepted because it has a basis in his debt, and printing paper which he uses to finance his daily needs. Eventually everyone will see such a person as a slime ball scam artist and demand some kind of valuable asset in exchange for their paper.
{1}. http://www.usdebtclock.org...
capob
Posts: 73
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7/23/2016 3:18:56 PM
Posted: 4 months ago
At 7/23/2016 1:28:48 AM, harrytruman wrote:
As we all know, the Federal reserve has been printing 300 million dollars a day for quite some time, being about 110 billion annually, but just recently, they decided to start reducing the monetary base, i.e. the amount of paper in circulation, but for some reason the m2 money supply, the amount of money promised by banks through bank accounts and deposits, is increasing. {1}

What does this mean? It means that banks are now creating money which is literally nothing, a whole new level of fiat, banks no longer issue paper which is backed by nothing, they are now issuing literal nothing backed by more nothing. The problem is that eventually banks will have to redeem this nothing, and if they can"t, then they will close. After the price of a Hershey"s chocolate bar rose to 1.50$, a 50% increase over 3 years, or an inflation rate of 17%, you now get to go down the deflation ride, that means you get to lose your job, and all your bank account money gets deleted, and stocks plummet, and no one has any money.

But wait, we had all that since with inflation, this is called stagflation, when you combine the slowed business, and general poverty of deflation with the unstable value of the currency and a rise in the cost of living associated with inflation. This just gets a whole lot better when your account for how we have unemployment rate of 22%, and how we have no industry here. To put our predicament simply, our entire economy is nothing more than a huge bubble based on paper backed by nothing and nothing backed by paper, which is only accepted by anyone because;
1.It is the world"s reserve currency
2.It"s not like any other currency is any better
The issue is eventually people are going to notice that they are receiving paper for goods and services with real value, and though this paper can be used to buy other goods and services of real value, the rate at which it can do this is going down, because the US isn"t really producing anything. The only reason fiat ever worked under any instances was because it could be used to buy goods and services, but if the issuing power behind this paper doesn"t produce anything of real value that you can buy, why then would anyone else accept them for their goods and services? This is why the value of our money is plummeting, while business slows and unemployment grows, because we don"t manufacture anything but foney money and government debt, which is never going to get paid off, and which central banks around the globe use as a basis to create more phony money, the difference is that they produce things, and their economy isn"t run entirely on paper.
Think about it, say you issue a private currency which everyone accepts because you run a store and it is accepted there, but eventually everyone accepts it at their stores, so you no longer sell anything but print paper, why would people accept it? The guy who promised he would accept it isn"t selling anything with which to buy with his money, but people continue to accept it because they know they can still spend it at other stores, but people become less and less willing to accept it knowing that it was based on a promise which the issuer cannot fulfill, but is rather fulfilled by others.
Eventually this guy makes a living on nothing more than loaning money from others, promising them that they can issue paper just as widely accepted because it has a basis in his debt, and printing paper which he uses to finance his daily needs. Eventually everyone will see such a person as a slime ball scam artist and demand some kind of valuable asset in exchange for their paper.
{1}. http://www.usdebtclock.org...

The issue is eventually people are going to notice that they are receiving paper for goods and services with real value

For the amount of time people have been accepting fiat money, there doesn't appear to be any indication people will start noticing they are receiving paper for goods, and this sort of point diminishes the value of the topic. People care about stores of wealth, not what the vehicle for that wealth is.

Banks across the globe coordinate, as I suspected and recently read in an article describing a definite pattern of tight cooperation. The nature of a bubble is context. A lemon could be $1 or $100 without there being a bubble; instead it is a matter of whether that lemon is $100 and the apple is $1. If all assets are inflated, and the money supply is growing from debt, this is not a bubble, it is inflation and it is a strategy of debt based asset grabbing.

Instead, if you want to make theories on why m2 is growing while circulating cash is decreasing, you can consider that banks in cooperation with governments desire to have strict control over currency, and wish to have the ability to mandate negative interest rates in the form of fees or actual negative interest rates, and wish to have the ability to bail out banks by seizing accounts of consumers (bail in, bail out).

And, that manufacturing in the US has gone down precipitously, and that the GDP of the US is service based, and largely a consequence of the dollar being the "reserve currency", and largely a matter of operations on wall st, are all obvious. That this might be a plan to diminish US power in order to integrate it into global trade deals and global government is less obvious. That this might also be a plan to favor China, where authoritarianism is easier, is also less obvious.

With these things being obvious and semi-obvious, the real work comes from determining how to counter, and it is not done by trying to inform people on an internet forum.
harrytruman
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7/23/2016 4:29:20 PM
Posted: 4 months ago
For the amount of time people have been accepting fiat money, there doesn't appear to be any indication people will start noticing they are receiving paper for goods, and this sort of point diminishes the value of the topic. People care about stores of wealth, not what the vehicle for that wealth is.

Yes, but the dollar must collapse eventually, and when it does we will end up instituting a gold backed currency, when the Mark collapsed after World War One that's what happened. Yes, people care about the wealth not what it is represented by, the problem is that if one storage of wealth continuously losses its value you would be inclined not to use it. Just like if you are making a recipe which calls for 1 cup of water, it doesn't really matter what the water is in, though if one cup has holes in it so the water continuously is lost, you wouldn't use it to measure a cup.

Instead, if you want to make theories on why m2 is growing while circulating cash is decreasing, you can consider that banks in cooperation with governments desire to have strict control over currency, and wish to have the ability to mandate negative interest rates in the form of fees or actual negative interest rates, and wish to have the ability to bail out banks by seizing accounts of consumers (bail in, bail out).

Yes, the banks want to control the cash supply, and confiscate your accounts, the end result is the banks will collapse due to a inability to repay in cash, then Uncle Sam will have an excuse to nationalize the banks. The best way to protect yourself is to keep all your money in paper cash, at the very least if your paper is with you banks cannot create fiat money of 10-33 times that based on that same paper, and if we are thrown into a deflationary spiral your paper will still be with you.

And, that manufacturing in the US has gone down precipitously, and that the GDP of the US is service based, and largely a consequence of the dollar being the "reserve currency", and largely a matter of operations on wall st, are all obvious. That this might be a plan to diminish US power in order to integrate it into global trade deals and global government is less obvious. That this might also be a plan to favor China, where authoritarianism is easier, is also less obvious.

With these things being obvious and semi-obvious, the real work comes from determining how to counter, and it is not done by trying to inform people on an internet forum.
capob
Posts: 73
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7/23/2016 5:21:06 PM
Posted: 4 months ago
At 7/23/2016 4:29:20 PM, harrytruman wrote:
For the amount of time people have been accepting fiat money, there doesn't appear to be any indication people will start noticing they are receiving paper for goods, and this sort of point diminishes the value of the topic. People care about stores of wealth, not what the vehicle for that wealth is.

Yes, but the dollar must collapse eventually, and when it does we will end up instituting a gold backed currency, when the Mark collapsed after World War One that's what happened. Yes, people care about the wealth not what it is represented by, the problem is that if one storage of wealth continuously losses its value you would be inclined not to use it. Just like if you are making a recipe which calls for 1 cup of water, it doesn't really matter what the water is in, though if one cup has holes in it so the water continuously is lost, you wouldn't use it to measure a cup.

Instead, if you want to make theories on why m2 is growing while circulating cash is decreasing, you can consider that banks in cooperation with governments desire to have strict control over currency, and wish to have the ability to mandate negative interest rates in the form of fees or actual negative interest rates, and wish to have the ability to bail out banks by seizing accounts of consumers (bail in, bail out).

Yes, the banks want to control the cash supply, and confiscate your accounts, the end result is the banks will collapse due to a inability to repay in cash, then Uncle Sam will have an excuse to nationalize the banks. The best way to protect yourself is to keep all your money in paper cash, at the very least if your paper is with you banks cannot create fiat money of 10-33 times that based on that same paper, and if we are thrown into a deflationary spiral your paper will still be with you.

And, that manufacturing in the US has gone down precipitously, and that the GDP of the US is service based, and largely a consequence of the dollar being the "reserve currency", and largely a matter of operations on wall st, are all obvious. That this might be a plan to diminish US power in order to integrate it into global trade deals and global government is less obvious. That this might also be a plan to favor China, where authoritarianism is easier, is also less obvious.

With these things being obvious and semi-obvious, the real work comes from determining how to counter, and it is not done by trying to inform people on an internet forum.

I appreciate your intellect, but I think you are making the mistake many people do by asserting talking points without proof, which convolutes the discussion

Yes, but the dollar must collapse eventually, and when it does we will end up instituting a gold backed currency, when the Mark collapsed after World War One that's what happened.

You are asserting the dollar must collapse without providing evidence, and then you are asserting once it does there will be a gold backed currency because it happened after WWI. Both of these assertions can be disproved depending on the proofs you bring up, but, as there are many arguments for those assertions, I'm not going to attempt to disprove all the arguments without knowing the ones you are relying on.

the problem is that if one storage of wealth continuously losses its value you would be inclined not to use it.

You are wrong in both this statement and the analogy that follows. The inflation rate is too slow for the average person to notice and commit to doing something about it - all the while, this is why investors invest in interest earning investments instead of holding cash. If I recall, the dollar has lost more than 95% of its value since inception, and yet, it is still widely used, so clearly, that money loses value does not stop people from using it.
Perhaps, what you meant to say was, if a storage of wealth continuously losses its value, you would be inclined not to use it as a storage of wealth. And, again, investors don't.

Just like if you are making a recipe which calls for 1 cup of water, it doesn't really matter what the water is in, though if one cup has holes in it so the water continuously is lost, you wouldn't use it to measure a cup.
Again, here we see the difference between a store of wealth and use for exchange. Clearly, despite the dollar losing value over time, it is still used to measure the value if items. People and vendors simply adapt to inflation by increasing prices.

the end result is the banks will collapse due to a inability to repay in cash, then Uncle Sam will have an excuse to nationalize the banks.

This is also not true, but nearly so. More importantly, it seems to convey a problematic point of view. The banks did not come up with a strategy, have that strategy fail, and then get bailed out. This point of view is that the banks are stupid. Why would anyone consider their winning opponent stupid? Instead, you would probably be better putting it as: The banks will force default by excessive debt, cause consolidation by the destruction of smaller banks, and seize securities on real assets, all the while getting bail out money from the government, which happens to be in cahoots.

The best way to protect yourself is to keep all your money in paper cash, at the very least if your paper is with you banks cannot create fiat money of 10-33 times that based on that same paper

Again, wrong - this time because of exaggeration. Keeping cash is, perhaps, at best, a "better" way of storing wealth than leaving money in the bank, but certainly not the best. This is where asset hedging, precious metals, and investment comes in.

I recognize a lot of your arguments from youtube. The problem is, virtually all arguments found in youtube videos in regards to these topics are incorrect in nuanced ways, and the videos from people who have better arguments on youtube are virtually ignored. And, this is why I say, don't bother attempting to generally inform people online. Anything with a any bite to it gets no attention - for multiple reasons. It is better to specifically inform individuals and form groups.
harrytruman
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7/23/2016 7:45:15 PM
Posted: 4 months ago
You are asserting the dollar must collapse without providing evidence, and then you are asserting once it does there will be a gold backed currency because it happened after WWI. Both of these assertions can be disproved depending on the proofs you bring up, but, as there are many arguments for those assertions, I'm not going to attempt to disprove all the arguments without knowing the ones you are relying on.

Alright, here's the proof, the Federal Reserve has been printing 300 million paper dollars a day until just recently, now they are reducing the paper supply, like history has shewn, depressions are caused by a rapid increase of the money supply, followed by a decrease in the money supply, whereas bubbles are caused by a rapid increase in the money supply which doesn't stop until the bubble pops, resulting in a recession. The 1873 and 1`893 depressions, for example, where caused by European investors putting large sums of gold and silver into the American stock market, then withdrawing, whereas the housing bubble was caused by easy credit and a larger money supply, causing a bubble, which popped. Whereas the great depression was caused by rapidly increasing the money supply, causing a bubble, then decreasing it, not only causing the bubble to pop, but also to create the conditions of an 1873 style depression, resulting in a hybrid, in today times this would cause stagflation, which is basically combining the issues of deflation- reduced spending, slowed economy, job loss, etc. - with inflation, which reduces the value of the money.

This is very problematic because normally inflation and stagnation are opposites, stagflation being the actual issue of deflation, because deflation itself is not bad, it is stagnation which is associated with deflation, which is a problem. Stagflation is combining both of these, so you can't fight stagnation by increasing the money supply or fight inflation by decreasing the money supply, because obviously inflation isn't fighting stagnation, and stagnation isn't fighting inflation, and you would just make one of these issues worse while the other remains just as bad. It is a classic issue with Keynesian economics.

You are wrong in both this statement and the analogy that follows. The inflation rate is too slow for the average person to notice and commit to doing something about it - all the while, this is why investors invest in interest earning investments instead of holding cash. If I recall, the dollar has lost more than 95% of its value since inception, and yet, it is still widely used, so clearly, that money loses value does not stop people from using it.

No- inflation is at 17 or 11%, depending on what price you are basing this off of, it's just that Uncle Sam says that inflation is at 0%, and that we should fear deflation, even though prices are going through the roof. It's a big lie, he obviously hasn't been to a grocery store lately---

Perhaps, what you meant to say was, if a storage of wealth continuously losses its value, you would be inclined not to use it as a storage of wealth. And, again, investors don't.

Yes- but stocks are going to plummet because they are over valued, corporations loan money to buy their own stock and inflate the price, so stocks will eventually plummet, and gold and silver will be the only safe investments. Again, if the dollar collapses and he only investments left untouched are gold and silver, we would b inclined to return to a gold based currency.

Again, here we see the difference between a store of wealth and use for exchange. Clearly, despite the dollar losing value over time, it is still used to measure the value if items. People and vendors simply adapt to inflation by increasing prices.

No- Roman coin used to be the most trusted currency in the word, but they minted too much, and it collapsed.

This is also not true, but nearly so. More importantly, it seems to convey a problematic point of view. The banks did not come up with a strategy, have that strategy fail, and then get bailed out. This point of view is that the banks are stupid. Why would anyone consider their winning opponent stupid? Instead, you would probably be better putting it as: The banks will force default by excessive debt, cause consolidation by the destruction of smaller banks, and seize securities on real assets, all the while getting bail out money from the government, which happens to be in cahoots.

True, they will attempt a bail-in strategy, and seize your accounts, but they will also try to nationalize the banks, like they did with healthcare.

Again, wrong - this time because of exaggeration. Keeping cash is, perhaps, at best, a "better" way of storing wealth than leaving money in the bank, but certainly not the best. This is where asset hedging, precious metals, and investment comes in.

But these would put your cash into the hands of banks, and yes, 10-33 are correct estimates since banks are only required to hold 3-10% of your money on reserves.
capob
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7/23/2016 10:49:34 PM
Posted: 4 months ago
bubbles are caused by a rapid increase in the money supply which doesn't stop until the bubble pops, resulting in a recession.

Again, the nuance is missed. A bubble is caused by debt in combination with inflation and deflation, not inflation and deflation alone. In fact, you can have a bubble without inflation by simply making loans easier to get for one segment of the economy (housing), and then raising interest rates causing defaults on adjustable rate loans. In fact, you can also have a bubble based on hysteria (tulips).

depressions are caused by a rapid increase of the money supply, followed by a decrease in the money supply.

Not always, but I understand what you are conveying. You don't even need a decrease in the money supply to create a depression, you just need to commit the money supply mostly to debt service, and that will diminish business activity, causing in stagflation.

Whereas the great depression was caused by rapidly increasing the money supply, causing a bubble, then decreasing it, not only causing the bubble to pop

It's not quite that simple, and I wouldn't use "rapid" to describe the money supply changes
http://www.sjsu.edu...
https://fee.org...

This is very problematic because normally inflation and stagnation are opposites, stagflation being the actual issue of deflation, because deflation itself is not bad

You've lost me a bit here on "stagflation being the actual issue of deflation, because deflation itself is not bad". Stagnation and inflation are not opposites - they address different matters: 1. the money supply, and 2. the money velocity for business activity.

because obviously inflation isn't fighting stagnation, and stagnation isn't fighting inflation, and you would just make one of these issues worse while the other remains just as bad. It is a classic issue with Keynesian economics.

Why did Keynesian economics come up?

No- inflation is at 17 or 11%, depending on what price you are basing this off of

I didn't say the inflation rate is not high, I said it was " too slow for the average person to notice and commit to doing something about it". Sure, people notice groceries getting more expensive, but the average person doesn't do anything about it.

Yes- but stocks are going to plummet because they are over valued, corporations loan money to buy their own stock and inflate the price, so stocks will eventually plummet, and gold and silver will be the only safe investments.

Again, it is not the amount that determines a bubble or over valuation, it is the context. Even with corporations taking loans to buy their stock, this does not mean there will be an exit of that money from the stock market. The housing bubble was obvious. I was warning people in 2005 about it. It was obvious because banks were lending to people they knew would/could not pay back the loans, and it was being encouraged at the federal level. This, then, was a bubble by the nature that time guaranteed it would pop. With stocks, in regards to corporations buying their own stocks, there is nothing guaranteeing the money will exit the stock market. Certainly, it is extremely volatile, and a run on the stock market is possible, potentially caused by loan defaults.

As for gold being the only safe investments, well, not entirely true. It is not entirely true both because there are other safe-ish investments, and because gold and silver are not absolutely safe.

True, they will attempt a bail-in strategy, and seize your accounts, but they will also try to nationalize the banks, like they did with healthcare.

Perhaps some of the discreditation of "libery movement" types comes from their unfounded certainty. Unless you know something I don't, it is not a matter of "they will", it is, instead, a matter of "they might".

and yes, 10-33 are correct estimates since banks are only required to hold 3-10% of your money on reserves.
I wasn't saying you were wrong about "10-30", I was saying you were wrong about cash being "The best way to protect yourself"
harrytruman
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7/24/2016 1:28:13 AM
Posted: 4 months ago
If there is less money, it will stagnate, money is guaranteed to move slower if there is less if it, stagnation is what causes deflation, since if there is less buying thgthgen businesses reduce their prices, so, if money stagnates but prices don't reduce, then we have just as big a problem as If they did reduce, causing deflation. It ius the cause of deflation which has adverse side effected, whereas if deflation happensdhappensd becxasuse of dvancementsd in technology, like in Switzerland it is good,so deflation is not inhererintly bad, it ius stagnation which commonly accompanies it.

Larry Nichols, who worked with the Clinton's, who are oiwnefd by thgthge banks,said that their plan is to nationalize the banks, they just dfid it with e and in Greece, why not here?
capob
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7/24/2016 2:10:55 AM
Posted: 4 months ago
At 7/24/2016 1:28:13 AM, harrytruman wrote:
If there is less money, it will stagnate, money is guaranteed to move slower if there is less if it,
This is incorrect. Less money does not mean slower money velocity, nor does more money mean higher money velocity. They do trend together, stagnation and decreased money supply, but it is not guaranteed. And, this is because, in deflation, businesses know that, if they invest in production now, they will be losing money through deflation in that investment when they try to sell the manufactured goods. But, if you'd like a counter example, if everyone had approximately 10 sea shells in some sea shell economy, and I went and took half of all of them, they'd simply adjust by changing prices and it wouldn't cause stagnation.

stagnation is what causes deflation

Stagnation can cause deflation, but it is just one of multiple potential causes.

, since if there is less buying thgthgen businesses reduce their prices

This is not the reason stagnation causes deflation. Stagnation means lower money velocity, which means there's a lot of money sitting around not being used, which means the actual moving currency that represents the value of the economy is decreased; ie, the effective money supply is decreased.

It ius the cause of deflation which has adverse side effected, whereas if deflation

I'm afraid not. As I mentioned above, deflation means capital expenditures you made now are inherently losing value owing to the opportunity cost of investing in manufacturing vs holding money that is gaining in value.

Larry Nichols, who worked with the Clinton's, who are oiwnefd by thgthge banks,said that their plan is to nationalize the banks, they just dfid it with e and in Greece, why not here?

I'm not saying it won't happen, I'm saying you don't know for certain, and it is better not to pretend you do. Even if a policy maker wrote about what he planned on doing, and even if that policy maker were truthful, there is still the question of opportunity.
harrytruman
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7/24/2016 3:38:22 AM
Posted: 4 months ago
Alright, Switzerland has a deflation rate of 25, yet they maintain a low unemployment rate, and an economic growth rate of 2%. So deflation itself isn't harming them, deflation is only harmful because of unemployment and stagnation, which the Swiss don't have so obviously correlation is commonly but not always causation in this case, like I said,, unemployment is caused by decreased spending/decreased investment, which are both caused by stagnation, which causes lowered spending, which results in shop owners lowering their prices to sell out their stock, followed by closing down. This is bad deflation.

Good deflation, which is what the Swiss have, is caused by advancements in production and technology, reducing the prices of goods, which increases the goods sold by shops increasing their profits. It's supply and demand, bad deflation is when the demand lessens faster than the supply, good deflation is when the supply grows faster than the demand.
capob
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7/24/2016 4:23:09 AM
Posted: 4 months ago
At 7/24/2016 3:38:22 AM, harrytruman wrote:
Alright, Switzerland has a deflation rate of 25, yet they maintain a low unemployment rate, and an economic growth rate of 2%. So deflation itself isn't harming them
bad deflation is when the demand lessens faster than the supply, good deflation is when the supply grows faster than the demand.

Supply and demand of what?

Where are you getting this deflation rate of 25 number? If it were the case that the deflation rate were 25%, practically no one would invest in anything, (since most things give less than a 15% ROI).

The minor deflation rate reported (http://www.tradingeconomics.com...) wouldn't severely deter business investments dealing with 10% ROI. Instead, it is a matter of comparing the situation where in someone is losing value by holding money (inflation), and is thereby encouraged to invest, or someone who is gaining value by holding it.

I suspect the Swiss have a deflation rate to support their long term position of being a place to store value.

BTW, what crazy country do you live in such that you are having this sort of conversation when you are 15?
harrytruman
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7/24/2016 3:33:20 PM
Posted: 4 months ago
At 7/24/2016 4:23:09 AM, capob wrote:
At 7/24/2016 3:38:22 AM, harrytruman wrote:
Alright, Switzerland has a deflation rate of 25, yet they maintain a low unemployment rate, and an economic growth rate of 2%. So deflation itself isn't harming them
bad deflation is when the demand lessens faster than the supply, good deflation is when the supply grows faster than the demand.

Supply and demand of what?

Where are you getting this deflation rate of 25 number? If it were the case that the deflation rate were 25%, practically no one would invest in anything, (since most things give less than a 15% ROI).

The minor deflation rate reported (http://www.tradingeconomics.com...) wouldn't severely deter business investments dealing with 10% ROI. Instead, it is a matter of comparing the situation where in someone is losing value by holding money (inflation), and is thereby encouraged to invest, or someone who is gaining value by holding it.

I suspect the Swiss have a deflation rate to support their long term position of being a place to store value.

BTW, what crazy country do you live in such that you are having this sort of conversation when you are 15?

I didn't say 25, I said 2%, I just accidentally didn't press shift, I live in the United States.
harrytruman
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7/24/2016 4:02:25 PM
Posted: 4 months ago
Supply and demand of what?

Alright, when the money supply increases, spending increases also, if you had a million dollars, you would buy a chocolate bar for 5$ or even 10$ because you have money to burn. Whereas someone on budget of 50$ probably wouldn't buy one even for 1$. When the money supply decreases, people have less money, and spend less.

This is where inflation and deflation come in, when people can buy more products, they have less regard for the price, so shop owners increase rices and the supply to sell more products, since people are just as likely to buy their products if they cost 10$ as 1$, this is called the supply curve.

In deflation, businesses get slowed activity due to a decreased money supply, so they lower prices to get more business, this is called the demand curve.

If the money supply stayed the same, then if businesses got slowed business, leading to them reducing prices, people would be more likely to buy at their shop, due to the supply curve, the price will eventually balance out, if shop owners increase their prices, the demand curve will lower them until they balance out to a price the market is willing to pay, which remains roughly the same due to our flat money supply in this scenario.