did the FED pump liquidity during the depression?

[bart]

Re: did the FED pump liquidity during the depression?

Finster, is the minting of gold (etc) coins to guarantee their quality and make them more tranferable 'creating money,' or does your "money=infinite inflation" axiom only apply to fiat money not tied directly to a true gold (etc) standard?

If it's the former, why does the act of using gold as 'money' instead of 'stuff for barter' imply an inflation?


Bart, if it's the latter, why is it logically wrong to say that any money creation=infinite inflation?

And would it be possible to have a 'deflation' in a barter-based economy?

The easy one first - yes, it's possible to have a deflation in a barter based economy - although not likely. Very broadly, since money tends to be equivalent to goods in a barter based economy, things like multiple bad harvests or epidemics drop the quantity of the goods/"money".

Your first question is very tough, primarily because I don't know how you're defining inflation. But using my preferred broad definition of inflation as "more money than goods", any money created beyond the quantity of goods and services (that are in demand) that are produced is inflation.

[WDCRob]

Re: did the FED pump liquidity during the depression?

The easy one first - yes, it's possible to have a deflation in a barter based economy - although not likely. Very broadly, since money tends to be equivalent to goods in a barter based economy, things like multiple bad harvests or epidemics drop the quantity of the goods/"money".

But if "money" is goods and services, doesn't a reduction in those goods and service imply both a reduction in money AND a reduction in the stuff that "money" is trying to buy?

Your first question is very tough, primarily because I don't know how you're defining inflation. But using my preferred broad definition of inflation as "more money than goods", any money created beyond the quantity of goods and services (that are in demand) that are produced is inflation.

I'll use your definition of inflation and grant that before any fiat money is created "money" and goods/services are in balance.

In those cases, doesn't anything beyond a simple fiat representation/substitute for items being bartered (usually metals, but the Crown's printing press could churn out paper in units of chickens or wheat, I suppose) equal inflation? As long as the fiat currency is directly tied to chickens or gold or whatever there's no inflation.

But print more money than you have chickens and you've got Finsters infinite [undefined!] inflation, yes?

I realize I'm in over my head here and that the questions could be nonsensical, so feel free to throw your hands in the air and blame Finster. ;)

[bart]

Re: did the FED pump liquidity during the depression?

But if "money" is goods and services, doesn't a reduction in those goods and service imply both a reduction in money AND a reduction in the stuff that "money" is trying to buy?

Its very easy to get into circular logic here. In one sense, you're correct, but if you look at the whole picture of "economic activity" and that "money" in a "normal" economy is smaller than total goods, a reduction in that "money" is proportionally a larger percentage drop in that "money" than it is in goods.

I'll use your definition of inflation and grant that before any fiat money is created "money" and goods/services are in balance.

In those cases, doesn't anything beyond a simple fiat representation/substitute for items being bartered (usually metals, but the Crown's printing press could churn out paper in units of chickens or wheat, I suppose) equal inflation? As long as the fiat currency is directly tied to chickens or gold or whatever there's no inflation.

But print more money than you have chickens and you've got Finsters infinite [undefined!] inflation, yes?

I'm having trouble tracking what you're asking - you're mixing a barter system with a fiat system and also with a paper money with some kind of actual backing.

I can comment on one area though - the assumption that you seem to be making that when a currency is directly tied to something like gold or chickens ensures no inflation is not correct.
Chickens can be bred and new gold deposits can be found. Lots of inflationary and deflationary effects occurred after the California gold rush around 1850, and again when the Comstock and other silver lodes were discovered and mined from 1860-1875 or so.

I realize I'm in over my head here and that the questions could be nonsensical, so feel free to throw your hands in the air and blame Finster. ;)

I do that at every available opportunity... Finster abuse (in both directions) is an art form... ;-)

[Finster]

Re: did the FED pump liquidity during the depression?

Stated another way, the broad deflation definition being less money than goods does not require that the prior money quantity was related to the existence of a prior inflation... a priori (*cough, cough*)...

But shrinking the money supply without it ever having been expanded beyond zero would be a trick even Helicopter Ben would need divine intervention with ...

I give it an 8.1 out of 10... thou art quite cleverly twisting my point ...

Not pure cleverness, I must demur. For when a point starts out with more spin than a googleplex of neutrinos, twisting it is but child's play ...:eek:

[Finster]

Re: did the FED pump liquidity during the depression?

Finster, is the minting of gold (etc) coins to guarantee their quality and make them more tranferable 'creating money,' or does your "money=infinite inflation" axiom only apply to fiat money not tied directly to a true gold (etc) standard?

The term "money" as I'm using it here is credit/debt based money - an IOU. Virtually all paper or fiat money is of this sort, so you are definitely on the right track. Gold, on the other hand, does not fit this definition ... exchanging a gold piece for a good or service is simply the trading of one commodity for another.

If it's the former, why does the act of using gold as 'money' instead of 'stuff for barter' imply an inflation?

As suggested above, the use of gold does not imply an inflation.

Insightful question, by the way...

[WDCRob]

Re: did the FED pump liquidity during the depression?

I'm having trouble tracking what you're asking - you're mixing a barter system with a fiat system and also with a paper money with some kind of actual backing.

1) Barter = no inflation, goods and service in balance with "money"
2) Gold coins = same, if quantity of gold is stable
3) Paper money = same, if paper money is fully backed by gold

Those assumptions could be wrong, but I don't see how minting gold coins or printing paper fully backed by gold is inflationary in and of itself. And I'm wondering if Finster counts items 2) and 3) as "creating money" (and thus creating infinite inflation), or if he's talking only about an unpegged currency?

I can comment on one area though - the assumption that you seem to be making that when a currency is directly tied to something like gold or chickens ensures no inflation is not correct. Chickens can be bred...

Right...I was assuming those were constant. Though now I'm wondering what a govt should do when genetic engineering puts two chicks in every egg of our poultry-backed economy.

I do that at every available opportunity... Finster abuse (in both directions) is an art form... ;-)

Yes, this is the most obvious point of your entire discussion.

[bart]

Re: did the FED pump liquidity during the depression?

But shrinking the money supply without it ever having been expanded beyond zero would be a trick even Helicopter Ben would need divine intervention with ...

Deponent sayeth not about the beasties in the basement of the Manor, let alone the ones around the dungeons... ;)

Not pure cleverness, I must demur. For when a point starts out with more spin than a googleplex of neutrinos, twisting it is but child's play ...:eek:

Have you been playing with neutrinos again? You know the neighbors already wonder about those eerie glows and lightning bolts and "noises"...

[WDCRob]

Re: did the FED pump liquidity during the depression?

The term "money" as I'm using it here is credit/debt based money - an IOU. As suggested above, the use of gold does not imply an inflation.

Ok, now I get what you were arguing. Thanks.

[bart]

Re: did the FED pump liquidity during the depression?

1) Barter = no inflation, goods and service in balance with "money"
2) Gold coins = same, if quantity of gold is stable
3) Paper money = same, if paper money is fully backed by gold

Those assumptions could be wrong, but I don't see how minting gold coins or printing paper fully backed by gold is inflationary in and of itself. And I'm wondering if Finster counts items 2) and 3) as "creating money" (and thus creating infinite inflation), or if he's talking only about an unpegged currency?

In and of itself, I agree... but as noted above gold discoveries and chicken breeding can be a major factor.

Right...I was assuming those were constant. Though now I'm wondering what a govt should do when genetic engineering puts two chicks in every egg of our poultry-backed economy.

Bingo... and therein lies the issue that has caused *every* monetary system, whether gold backed or not, to fail.

Yes, this is the most obvious point of your entire discussion.

He & I do have our fun bantering & harassing each other, and hopefully it also stirs folk to think about the actual issues we abuse each other on... and don't forget that Finster has a certain minimum amount of *finning* he needs to avoid foaming at the mouth... ;)

[WDCRob]

Re: did the FED pump liquidity during the depression?

Bingo... and therein lies the issue that has caused *every* monetary system, whether gold backed or not, to fail.

So no points off for my not knowing the answer I guess.

[bart]

Re: did the FED pump liquidity during the depression?

So no points off for my not knowing the answer I guess.

You get a bonus rimshot though... ;)
http://www.nowandfutures.com/grins/rimshot.mp3

And just in case you weren't tongue in cheek, the problem with a monetary system, whether gold or fiat or whatever, is the people behind it; their ethics and understanding of long term consequences, the education of "regular" folk that don't know enough to see when they're being scammed by "vested interests", and of course the "special" banksters and similar themselves.

[Finster]

Re: did the FED pump liquidity during the depression?

Have you been playing with neutrinos again? You know the neighbors already wonder about those eerie glows and lightning bolts and "noises"...

Mea culpa.

I needed some really penetrating rays to get this spy shot inside Bart's Backyard Bank.

Deponent sayeth not about the beasties in the basement of the Manor, let alone the ones around the dungeons... ;)

Have you been playing in my dungeon again?

Bad enough having barts in my belfry ...

...He & I do have our fun bantering & harassing each other, and hopefully it also stirs folk to think about the actual issues we abuse each other on... and don't forget that Finster has a certain minimum amount of *finning* he needs to avoid foaming at the mouth... ;)

And there's no guarantee against the foaming at the mouth even then ... ;)

[bart]

Re: did the FED pump liquidity during the depression?


You cracked me up on that one, I submit!

Bad enough having barts in my belfry ...

I wish I knew how to keep them just in the belfry...