M3 is back...

[bart]

Re: M3 is back...

Well it's a good thing gold is on the move today, because that Canadian government tax grab has the income trusts tanking big time!

On to your gold chart. It is suggesting gold will return to its earlier highs within a couple months or so? FWIW, my gold forecast is calling for something very similar, only just a little later on towards mid-year. Remarkable concurrence.

I'd make a tinfoil hat enabled comment about that income trust move in Canada, but I'm feeling charitable towards that North American Partnership outfit today.

Very much so on gold, and tentatively am looking for a another peak around Jan 1st. Two great minds with but a single thought... ;)

[Finster]

Re: M3 is back...

I'd make a tinfoil hat enabled comment about that income trust move in Canada, but I'm feeling charitable towards that North American Partnership outfit today.

Well since as a result I'm at least $10K poorer than yesterday, maybe you could direct some of that charitable impluse this way ... ;)

Tinfoil hat comments welcome!

[bart]

Re: M3 is back...

Well since as a result I'm at least $10K poorer than yesterday, maybe you could direct some of that charitable impluse this way ... ;)

Tinfoil hat comments welcome!

Its pretty much just semi-informed conjecture. All I'm looking at is the longer term trend towards what's behind the curtain at http://www.spp.gov. The various applicable laws will need to be aligned, and this is likely one of the steps.

There's also the more obvious one of governments being fond of tax income.

[Finster]

Re: M3 is back...

Its pretty much just semi-informed conjecture. All I'm looking at is the longer term trend towards what's behind the curtain at http://www.spp.gov. The various applicable laws will need to be aligned, and this is likely one of the steps.

There's also the more obvious one of governments being fond of tax income.

Well if this piece of high-sounding politico-bureaucratic claptrap is any indication, I'll don my foil beanie, too! ;-)

The Security and Prosperity Partnership of North America (SPP) was launched in March of 2005 as a trilateral effort to increase security and enhance prosperity among the United States, Canada and Mexico through greater cooperation and information sharing.

This trilateral initiative is premised on our security and our economic prosperity being mutually reinforcing...

Of course these types always hunger for more tax revenue, but the way in which it is collected and the complexity of the system matter too. Instead of cutting the dividend tax rate here, for example, and giving us a whole new layer of complexity, our politicos could have simply treated corporate payments of dividends as deductible to the corporations, like their interest payments to bond lenders are, and then let the individual investors pay the same rate on both. Doing it the way they did, however, was IMO a cynical attempt to gain voter sympathy as the other could have been demagogued as a tax cut for "rich corporations".

Politics. Yuck.

[bart]

Re: M3 is back...

Of course these types always hunger for more tax revenue, but the way in which it is collected and the complexity of the system matter too. Instead of cutting the dividend tax rate here, for example, and giving us a whole new layer of complexity, our politicos could have simply treated corporate payments of dividends as deductible to the corporations, like their interest payments to bond lenders are, and then let the individual investors pay the same rate on both. Doing it the way they did, however, was IMO a cynical attempt to gain voter sympathy as the other could have been demagogued as a tax cut for "rich corporations".

Politics. Yuck.

Not only that, but by making the additional complexity, more bureaucratic jobs are created... which after all is one of the primary functions of a bureaucracy.
As you can see, I switched to my cynic hat temporarily... ;)

[Finster]

Re: M3 is back...

Not only that, but by making the additional complexity, more bureaucratic jobs are created... which after all is one of the primary functions of a bureaucracy.
As you can see, I switched to my cynic hat temporarily... ;)

How could you not be cynical when it comes to politicians and bureaucrats? The complexity of the tax code is an important source of power for them. By setting tax rates high and then creating a network of loopholes, exceptions and traps, they can grant special favors to moneyed constituencies, who in turn then depend on the politicians for continued breaks and favors. Keeps the campaign donations flowing!

It's the same kind of logic behind the creation of central banks and the fostering of inflation. Inflation is a form of taxation that politicians can levy covertly to fund programs, promises and wars without having to directly present voters with the bill. Instead the costs show up at the grocery store, gas pump, and in our utility bills. Because the spending is obvious but the cost is not, it allows the politician to appear to be producing something.

Even corporate managements like inflation because in combination with artificially low interest rates it makes traditional saving fruitless and forces marginal capital into the stock market. That lowers the cost of capital for corporate managements to spend on empire-building acquisitions and with which to fund their stock option gravy train, while giving them a less sophisticated shareholder base that is less likely to notice their hands in the cookie jar.

… and you thought you were being cynical …

[bart]

Re: M3 is back...

… and you thought you were being cynical …

That was just my kinder, gentler, 1000 points of light cynic mode... ;)

The next constitution I write will not have legal protection of any kind for any politicians, or any corporate body fictions either. :mad:

[Finster]

Re: M3 is back...

That was just my kinder, gentler, 1000 points of light cynic mode... ;)

The next constitution I write will not have legal protection of any kind for any politicians, or any corporate body fictions either. :mad:

As a central bank guru, however, how would treat the issue of central banking in your constitution?

Would such things exist? If so, what constraints would you place on them? If not, what would be the nature of your monetary and banking system?

[bart]

Re: M3 is back...

As a central bank guru, however, how would treat the issue of central banking in your constitution?

Would such things exist? If so, what constraints would you place on them? If not, what would be the nature of your monetary and banking system?

Thanks for the vote of confidence but in no way do I consider myself a central bank guru. I'm literally not well enough read or educated or experienced in the area.

But that said, and with the disclaimer that my opinions are very much in a state of flux and quite incomplete, a central bank would probably not exist under "my constitution" but the basic functions would. A country just plain has to have functions like check clearing, international flows, production of coin & currency, and also an organization or body to handle things like inflow sterilization.

The basic constraint would be the lack of any legal or governmental or other shield. In other words, they could be sued by any citizen for dereliction of duty, the primary duty being zero inflation.

[Finster]

Re: M3 is back...

Thanks for the vote of confidence but in no way do I consider myself a central bank guru. I'm literally not well enough read or educated or experienced in the area.

Well would you consider Alan Greenspan a central bank guru? Or Ben Bernanke?

And how good have they done? :rolleyes:

But that said, and with the disclaimer that my opinions are very much in a state of flux and quite incomplete, a central bank would probably not exist under "my constitution" but the basic functions would. A country just plain has to have functions like check clearing, international flows, production of coin & currency, and also an organization or body to handle things like inflow sterilization.

The basic constraint would be the lack of any legal or governmental or other shield. In other words, they could be sued by any citizen for dereliction of duty, the primary duty being zero inflation.

That pretty clinches my vote!

Now maybe just for kicks, we wrestle with the question of how you define "zero inflation". (No, this is not going to turn into an FDI plug...;) But I sure hope after all the ink spilt here on price and value indices, you're not going to suggest some measure of consumer prices!) What about other possibilites? Money supply? Would you target some monetary aggregate? Allow no money growth? For example, by insisting on the apparently quaint, *old fashioned* notion that somebody actually has to save money for someone else to borrow it? Or maybe stipulate that per-capita money supply be held constant? Tie it to gold and/or silver?

This is not just an academic question, though; there has been some serious public discussion about an inflation target and we may even de facto have one. Amazingly, however, the question of how you define that target is all but absent from the discussion.

[bart]

Re: M3 is back...

Well would you consider Alan Greenspan a central bank guru? Or Ben Bernanke?

They might be, given the correct environment... I honestly don't know. Neither one are unintelligent.

Now maybe just for kicks, we wrestle with the question of how you define "zero inflation". (No, this is not going to turn into an FDI plug...;) But I sure hope after all the ink spilt here on price and value indices, you're not going to suggest some measure of consumer prices!) What about other possibilites? Money supply? Would you target some monetary aggregate? Allow no money growth? For example, by insisting on the apparently quaint, *old fashioned* notion that somebody actually has to save money for someone else to borrow it? Or maybe stipulate that per-capita money supply be held constant? Tie it to gold and/or silver?

This is not just an academic question, though; there has been some serious public discussion about an inflation target and we may even de facto have one. Amazingly, however, the question of how you define that target is all but absent from the discussion.

You define zero inflation by the basic definition - money equal to goods, also know as stable prices. For the nitty gritty details, just hire a few demonstrated experts that are subject to the same rules and let them go at it.
Its not ultra rocket science if I can get close with Excel with a bunch of days work and virtually no training.

As far as targeting a monetary aggregate, not likely... but we're getting into both too many slippery slopes and also beyond the level of my certain knowledge for me to say much more.

Money supply must change and usually grow in virtually any reasonably sane economy.
I also would not tie money to gold or silver, etc. - it can easily be an artificial constraint on growth, can be used as an ugly "control" tool much like current fiat is, and also is too subject to the flaws of the "living off interest" basic definition of capitalism.

[Finster]

Re: M3 is back...

They might be, given the correct environment... I honestly don't know. Neither one are unintelligent.

Maybe it's not so much in the cerebral department but in the spinal area?

..................

Quibble time. Can you rectify the following two statements?

a central bank ... [its] primary duty being zero inflation.

Money supply must change and usually grow in virtually any reasonably sane economy.

[bart]

Re: M3 is back...

Maybe it's not so much in the cerebral department but in the spinal area?

Or, in more or a local vernacular, cojones... ;)

Quibble time. Can you rectify the following two statements?

a central bank ... [its] primary duty being zero inflation.
---------
Money supply must change and usually grow in virtually any reasonably sane economy.

If the economy is sane, goods (and services) production will be increasing and therefore in order to maintain stable prices, money supply must also increase equivalently.

By sane, I basically mean that production only goes two ways - up or down (level is effectively down), and up is by far the more favorable and "correct" of the two - even if its only caused by population increase.

[Finster]

Re: M3 is back...

If the economy is sane, goods (and services) production will be increasing and therefore in order to maintain stable prices, money supply must also increase equivalently.

By sane, I basically mean that production only goes two ways - up or down (level is effectively down), and up is by far the more favorable and "correct" of the two - even if its only caused by population increase.

I'd definitely stick with the population increase. The problem with the first is it gets into subjective judgments as to the amount or value of goods and services produced. It's Alan Greenspan's best friend, "productivity". And when known as "hedonics" also the best friend of Michael Boskin. Used to justify all sort of inflationary mischief.

A verrrry slippery slope you are on with those two ...

[bart]

Re: M3 is back...

I'd definitely stick with the population increase. The problem with the first is it gets into subjective judgments as to the amount or value of goods and services produced. It's Alan Greenspan's best friend, "productivity". And when known as "hedonics" also the best friend of Michael Boskin. Used to justify all sort of inflationary mischief.

A verrrry slippery slope you are on with those two ...

Truth on the mischief... but just imagine Greenspan's or Boskin's face if they were sued for millions, etc.

I also think a decent inflation measure (I could always use "index" or "price index" to tweak you ;)) is quite possible to do... but perfect 100% accuracy isn't.