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Money Growth Does Not Cause Inflation!

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Richard Wilson
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Post: #11
RE: Money Growth Does Not Cause Inflation!

QE does have a benefit outside of spurring consumption. The exchange rate will depreciate and that'll aid growth via trade balance. That's the reason the ECB is fixing to undertake their own QE. The Euro had strengthened too much.

25.04.2014 08:06
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Helsworth
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Post: #12
RE: Money Growth Does Not Cause Inflation!

Richard Wilson Wrote:
QE does have a benefit outside of spurring consumption. The exchange rate will depreciate and that'll aid growth via trade balance. That's the reason the ECB is fixing to undertake their own QE. The Euro had strengthened too much.

That's just it, Richard. QE does not spur consumption - simply because households are too leveraged as it is - and they're trying to deleverage. Japan stuck with QE for over a decade and they still had deflation. QE is NOT money printing and it doesn't lead to inflation!
It's just a swap operation; the net in the system remains 0.
QE is a blunt instrument; fiscal policy is what's needed to create aggregate demand and economic growth.
http://www.financialsense.com/contributo...-inflation


http://www.lostoutputclock.com/


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This post was last modified: 25.04.2014 08:10 by Helsworth.

25.04.2014 08:09
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Richard Wilson
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Post: #13
RE: Money Growth Does Not Cause Inflation!

It does lower the exchange rate Wink

25.04.2014 09:12
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Helsworth
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Post: #14
RE: Money Growth Does Not Cause Inflation!

Richard Wilson Wrote:
It does lower the exchange rate Wink

By what considerable amount? Enough to trigger a competitive edge in absorbing aggregate demand from abroad? Hardly. The chinese are focusing now on internal consumption. That might lower the USA's trade deficit in a substantial way.
At the end of the day, the currency sovereign is the price setter. If the government wants to pay more money for the same amount of goods or for less than that ammount... the price of that good will increase. Just like if OPEC sells you 100 million barrels and you pay say 10 dollars; then that's the T0 reference. If OPEC sells you 100 million barrels and demands 10,05 dollars instead of the previous 10; then at T1, you're gonna have a price increase of 0,5%.
In the economy, the story about inflation (in lack of demand and supply shocks) has always to do with psychological fear. Too many people thinking QE means printing money; too many people thinking QE is inflationary.


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This post was last modified: 25.04.2014 10:58 by Helsworth.

25.04.2014 10:55
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Richard Wilson
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Post: #15
RE: Money Growth Does Not Cause Inflation!

Well, in the case of Japan, recent efforts have led to a fair depreciation in the Yen. This is the reason the ECB is moving toward QE. The ECB doesn't actually think it's going to stimulate consumption much because consumers are saving and public sectors are still consolidating. It's all about rolling back some of the appreciation. The Euro has gotten too strong. It'll also help to stabilize and spread risks. Borrowing rates for Spain are almost as low as in Germany.

25.04.2014 11:13
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Helsworth
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Post: #16
RE: Money Growth Does Not Cause Inflation!

Richard Wilson Wrote:
Well, in the case of Japan, recent efforts have led to a fair depreciation in the Yen. This is the reason the ECB is moving toward QE. The ECB doesn't actually think it's going to stimulate consumption much because consumers are saving and public sectors are still consolidating. It's all about rolling back some of the appreciation. The Euro has gotten too strong. It'll also help to stabilize and spread risks. Borrowing rates for Spain are almost as low as in Germany.

The value of the euro is not a problem within the EU. The problem is unemployment. The problem is the lack of a surplus recycling mechanism. The problem is that there's no banking union. That the ECB is NOT guaranteeing euro deposits, but the (currency users) member governments. The problem is that a euro in an Italian bank is worth more than a euro in a Greek bank - which is worth more in a French bank; and a euro in a German bank is worth more than that euro in the French bank. That's the case in Europe - that's not the case for the UK or the USA. The European Investment Bank is standing on a mountain of capital, which cannot be used because of the Maastricht treaty. Because all those european projects have to be cofunded by the member governments - who are essentially bankrupt (for the euro is a foreign currency to all governments). In Europe, austerity is the real problem.


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This post was last modified: 25.04.2014 11:30 by Helsworth.

25.04.2014 11:28
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Akeron
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Post: #17
RE: Money Growth Does Not Cause Inflation!

Yea, it basically comes down to how velocity and transactions actually do change. They're just very hard to measure, so economists assume they're constant for convenience's sake.

100*3=60*5
150*2=60*5
180*2=60*6

The point is that velocity and transaction don't always change, and indeed, effective prices will change nonetheless even if nominal prices stay the same. Pricing is relative after all. Money has no intrinsic value.

Usually, this gets hidden from product quality decreasing. For example, boxes of cereal can get smaller over time, office appointments can become shorter and provide less services, or errors can happen more often in mass production or services that are provided.


Why return? That's a good question.
29.06.2017 06:55
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CommieScum
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Post: #18
RE: Money Growth Does Not Cause Inflation!

Nonsense

31.08.2017 23:55
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Hilder
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Post: #19
RE: Money Growth Does Not Cause Inflation!

Speaking in terms of a box of cereals, if Greece had mad inflation and now increases property prices involving foreign capital in the country, what happens then?

This post was last modified: 27.09.2017 01:12 by Hilder.

26.09.2017 02:04
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