2012 American Election (Presidential and otherwise)

Discussion in 'General Discussion Forum' started by The Vault Dweller, Nov 7, 2012.

  1. DammitBoy

    DammitBoy Carbon Dated and Proud

    Feb 23, 2006
    I'm no rocket surgeon, but it seems to me that less buying power and inflation go hand in hand.

    People are not earning less, their money is worth less due to inflation. Prices go up, because the value of the dollar is dropping.

    The value of the dollar is dropping, because the Fed is printing money like toilet paper.
  2. Sander

    Sander This ghoul has seen it all
    Staff Member Admin Orderite

    Jul 5, 2003
    Yes, but the two are not the same thing, and inflation has certainly been existent (I never disputed this). However, inflation has been pretty modest by basically any measure throughout the crisis. That's because the crisis wasn't caused by a lack of available capital. Massive private debt played a large role, and inflation would help mitigate the debt burden by devaluing it.

    Stagnant wages (and falling on balance -- see unemployment/underemployment) are a big part of the problem, yes. Normally inflation is compensated by rising wages, and that's not the case right now.

    Well, this is really not true. Or rather, it wasn't true until QE3. Previous money pumping had basically no effect on inflation. That's a bad thing: it means people and businesses were still hanging on to their money despite a vastly increased money supply. That's a stagnant economy and a recipe for disaster. QE3 was specifically designed to cause inflation as a means to help kickstart the economy.

    It's meant to incentivize capital to start investing again and to devalue private debt. Moreover, lower wage costs (because wages will lag behind prices) will help stimulate employment. Finally, a lower internatoinal price point for the dollar will help exports. These aren't particularly controversial economic ideas or really disputed in scientific literature, they're essentially accepted fact and have worked often in similar depressions around the globe.

    Yes, the problem is then a short-term fall in purchasing power, and that's why there needs to be a balance, there. Inflation shouldn't be too high, but low inflation hurts an economy in depression, too. The pain of a loss of purchasing power could easily be mitigated by stimulus packages, by the way.
  3. 4too

    4too Vault Senior Citizen

    Apr 30, 2003
    Apt Metaphor

    Apt Metaphor

    When the euphemism for printing dollars to buy back assets is quantitative easing sure does sound like the natural act is to follow up with toilet paper. ;)

  4. DammitBoy

    DammitBoy Carbon Dated and Proud

    Feb 23, 2006
    Sander wins the fail for not understanding that people currently can't afford the high cost of gas to get to the store where they can't afford food.

    This does not lead them to stand up and cheer about devalued debt.

    A huge fail also on not understanding that no incentive for investing capital is going to work until those folks understand how badly obamacare is going to hit them in the pants.

    I blame his ivory tower syndrome (no windows facing reality).

    So far, we've had a "short-term fall" of four years and no sign of any improvement for the next four years...
  5. alec

    alec White heterosexual male Orderite

    May 21, 2003
    Hey kettle! :D
  6. Sander

    Sander This ghoul has seen it all
    Staff Member Admin Orderite

    Jul 5, 2003
    You win the fail for not understanding my point.

    No, but it will still help them.

    Well, now we're talking about a few different things. The impact of the ACA isn't entirely clear, but it's very unlikely to be a major burden on businesses because of the many offsets provided.

    More importantly, though, this is a completely separate issue. The effect of QE3 has nothing whatsoever to do with the ACA, and moreover, the ACA will be irrelevant for a lot of the capital that is currently stagnant (that is: with investors). Even if the ACA has some kind of disastrous effect, that effect would be more disastrous without policies to get out of the liquidity trap.

    And this is just not true. There has been no four-year fall, there has been a rise over the past four years - too slowly, but there has been a recovery. More importantly, QE3 was not implemented until a few months ago, so to blame the previous four years on QE3 is nonsensical. And to say that there's no sign of recovery is, quite simply, fals -- and demonstrably so, as the USA has been in a recovery for years on end.
  7. TheWesDude

    TheWesDude Sonny, I Watched the Vault Bein' Built!

    Feb 25, 2005
    on the larger economic scale, debt may be devalued.

    on the personal scale, is only devalued when your income raises when you pay it off vs when it was accrued.

    say you accrue 100$ debt. you make 50k a year.

    you pay it off the following year. no interest so it is still 100$. your pay is still 50k. the debt did not devalue, it stayed the same for your finances. ( neither inflation or deflation )

    now lets say for the same $100 debt and 50k a year.

    it accrues interest and a year later you pay off $150 on 50k a year. that "value" of that debt was higher when paid than when accrued. ( inflation )

    same $100 debt and 50k year starting point.

    but now a year later you pay off $100 and you are making 60k when you do it. as a % of your income, that debt became lower. ( deflation )

    so regardless of what happens at the larger economics, for personal finances can show drastically different.

    but that is personal finances and NOT economics.
  8. DammitBoy

    DammitBoy Carbon Dated and Proud

    Feb 23, 2006
    Sanders separate issues that have nothing to do with each other mysteriously have an unintended consequence of increasing everyone's burden to make ends meet.

    Note for ivory tower boy: most folks ends are not meeting, no matter what story you like to believe...
  9. Sander

    Sander This ghoul has seen it all
    Staff Member Admin Orderite

    Jul 5, 2003
    Yes, lots of people have financial issues. Something I never disputed. Nice straw man, though.
  10. DammitBoy

    DammitBoy Carbon Dated and Proud

    Feb 23, 2006
    It will not work. We have a stagnant economy and no amount of pumping toilet paper money into this economy will help. Wages are frozen or falling. Inflation hurts the poor and the middle class the hardest. Devaluation of debt helps out rich people.

    Ipso facto - QE3 will help the 1% and hurt the rest of us. Thanks for looking out Obama!
  11. Yoshi525

    Yoshi525 Vault Senior Citizen

    Dec 10, 2006
    Sander, ivory tower or not, talks a lot of sense when it comes to macroeconomics. He doesn’t claim, as far as I can see, that macroeconomic policy can be applied to the individual. It is, after all, macroeconomic.

    Obviously that doesn’t help your average Joe Bloggs in the short term, the economic mismanagement of the past decade should however tell use that short term solutions aren’t always best.

    I am however going to call you out on this Sander:

    Whilst you're point is essentially accurate, your statement that gold has no practical value is false. Gold has many practical uses especially in chemistry and electronics, whilst it's value is greatly inflated due to it's usage as currency (and jewellery, though the two can overlap), it would still have a relatively high value regardless. Electrochemically similar elements (not used in currency/ aesthetics) such as those of the platinum group are examples of this.
  12. valcik

    valcik So Old I'm Losing Radiation Signs

    Dec 20, 2008
  13. Sander

    Sander This ghoul has seen it all
    Staff Member Admin Orderite

    Jul 5, 2003
    There's a little argument over this, but the view of the majority of economists does not concur with this view. Most importantly, this kind of bubble will be averted specifically because of the Fed's commitment to QE3 over a longer term -- which is what is actually spurring investment in bonds. A chicken-and-egg kind of thing, there.

    Also note that these are two economists speaking in an extremely partisan setting, so take what they say with a grain of salt.

    It would have some value, sure, but that value wouldn't come close to approaching the value it holds now, which almost entirely artificial. Its current value is so high that it basically precludes the use of gold in a lot of instances, because it's just too expensive.

    The poor and middle class hold a ton of overvalued debt in the form of mortgages, car loans and the like. They would be helped tremendously by inflation in the long term. Of course, that actually hurts the banking sector, who are owed all that debt.

    And yes, inflation would hurt in the short term, which is why I am also advocating more comprehensive social programs (something you oppose, it should be noted, so I don't quite get your sudden concern for the poor).

    But inflation will help tremendously in the private sector. Again, devaluing debt, spurring investment of cash that just isn't moving right now, and improving the USA's exports (devalued dollar = cheaper for foreigners to buy your shit, also: devalued public debt yay). That will lead to increased employment, and should lead to a way out of this liquidity trap.

    In fact, as with all the other doomsday stuff the right is throwing up, we've actually seen an accelerating recovery this past year. If you were right and this inflation (which has risen slowly) would hurt people tremendously, we would not be seeing what is actually happening.