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U.S. Dollar on a roll


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Sporty, I m not talking about the phoney CPI measure of inflation which is not a measure of inflation anyway.Price rises arent inflation, they are a symptom of inflation not the cause. The CPI measures price rises, and it does its best to artificially understate price rises. I m talking about M3 growth,MZM, or Austrian True Money Supply growth, which has been running at between 10-16% per year. So debt to GDP growth has been about 330%. For every USD of GDP growth, the US have added 4 USD of debt and liabilities.

 

Check out about the 10th chart down on this page M3 growth

 

This solultion to every crisis that happens by trying to prevent a recession is now finally leading to the crack up boom.

 

Ludwig Von Mises says it best...

 

"The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved"

 

and...

 

"The boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The boom comes to an end as soon as additional quantities of fiduciary media are no longer thrown upon the loan market. But it could not last forever even if inflation and credit expansion were to go on endlessly. It would then encounter the barriers which prevent the boundless expansion of circulation credit. It would lead to the crack-up boom and the breakdown of the whole monetary system"

 

I think this is the stage we are entering now, which will play out over the next 5-10 years.

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Howdy junglesoup,

 

 

Respectfully, your explanation is HORSESHIT !

 

 

· M0: Physical currency. A measure of the money supply which combines any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy. M0 is the most liquid measure of the money supply. It only includes cash or assets that could quickly be converted into currency.[6]

· M1: M0 + demand deposits, which are checking accounts. This is used as a measurement for economists trying to quantify the amount of money in circulation. The M1 is a very liquid measure of the money supply, as it contains cash and assets that can quickly be converted to currency.

 

· M2: M1 + time deposits, savings deposits, and non-institutional money-market funds. M2 is a broader classification of money than M1. Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic monetary conditions.[8] M2 is a key economic indicator used to forecast inflation.[9]

· M3: M2 + large time deposits, institutional money-market funds, short-term repurchase agreements, along with other larger liquid assets. This is the broadest measure of money and is used by economists to estimate the entire supply of money within an economy.[10]

 

The CPI, has much greater bearing, on what is inflation, the supply of money available, is only one factor.

 

So How does Inflation or Deflation relate to the CPI?

â??Price Inflationâ? is the percentage increase in the price of the basket of products over a specific period of time.

 

â??Price Deflationâ? is, of course, the percentage decrease in the price of the basket of products over a specific period of time.

 

For convenience Price Inflation has been shortened in common usage to simply â??Inflationâ? and similarly Price Deflation has been shortened to â??Deflationâ?Â.

(*Interestingly this is not Webster's definition of Inflation... More)

In order to calculate the percent of inflation or deflation we have to use the Consumer Price Index as a starting point.

So assuming You wanted to calculate the inflation rate from July 2000 until July 2008.

You need to know the CPI for the starting and ending dates. So the CPI index in July 2000 is 172.8 and the CPI index is 219.964 in July 2008. (Note they went to a three decimal place accuracy in between).

The formula is: (end -start)/start

so we have (219.964-172.8)/172.8 =

47.164/172.8= .2729

Now that has to be converted to a percent so we multiply it by 100 to get 27.29% inflation.

Normally, the inflation rate is calculated on an annual basis for example from July 2007 until July 2008. That will give you the amount of inflation in one year. Which is typically called "The Inflation Rate".

 

So from this example we can see how the Consumer Price Index (CPI) is used to calculate the actual inflation rate.

 

http://inflationdata.com/inflation/Inflation_Articles/Inflation_or_CPI.asp

 

 

In the most recent 8 years, July 2000 to July 2008, the total inflation over the 8 years, was 27.29% or on a KISS average, 27.29/8 = 3.41125% per year.

 

Here you will see the inflation rate since 1926, average of 3.57%

 

http://www.investmenttools.com/thestate/rate_of_inflation_yearly.htm

 

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Howdy junglesoup,

 

 

Respectfully, your explanation is HORSESHIT !

 

 

· M0: Physical currency. A measure of the money supply which combines any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy. M0 is the most liquid measure of the money supply. It only includes cash or assets that could quickly be converted into currency.[6]

· M1: M0 + demand deposits, which are checking accounts. This is used as a measurement for economists trying to quantify the amount of money in circulation. The M1 is a very liquid measure of the money supply, as it contains cash and assets that can quickly be converted to currency.

 

· M2: M1 + time deposits, savings deposits, and non-institutional money-market funds. M2 is a broader classification of money than M1. Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic monetary conditions.[8] M2 is a key economic indicator used to forecast inflation.[9]

· M3: M2 + large time deposits, institutional money-market funds, short-term repurchase agreements, along with other larger liquid assets. This is the broadest measure of money and is used by economists to estimate the entire supply of money within an economy.[10]

 

The CPI, has much greater bearing, on what is inflation, the supply of money available, is only one factor.

 

So How does Inflation or Deflation relate to the CPI?

â??Price Inflationâ? is the percentage increase in the price of the basket of products over a specific period of time.

 

â??Price Deflationâ? is, of course, the percentage decrease in the price of the basket of products over a specific period of time.

 

For convenience Price Inflation has been shortened in common usage to simply â??Inflationâ? and similarly Price Deflation has been shortened to â??Deflationâ?Â.

(*Interestingly this is not Webster's definition of Inflation... More)

In order to calculate the percent of inflation or deflation we have to use the Consumer Price Index as a starting point.

So assuming You wanted to calculate the inflation rate from July 2000 until July 2008.

You need to know the CPI for the starting and ending dates. So the CPI index in July 2000 is 172.8 and the CPI index is 219.964 in July 2008. (Note they went to a three decimal place accuracy in between).

The formula is: (end -start)/start

so we have (219.964-172.8)/172.8 =

47.164/172.8= .2729

Now that has to be converted to a percent so we multiply it by 100 to get 27.29% inflation.

Normally, the inflation rate is calculated on an annual basis for example from July 2007 until July 2008. That will give you the amount of inflation in one year. Which is typically called "The Inflation Rate".

 

So from this example we can see how the Consumer Price Index (CPI) is used to calculate the actual inflation rate.

 

http://inflationdata.com/inflation/Inflation_Articles/Inflation_or_CPI.asp

 

 

In the most recent 8 years, July 2000 to July 2008, the total inflation over the 8 years, was 27.29% or on a KISS average, 27.29/8 = 3.41125% per year.

 

Here you will see the inflation rate since 1926, average of 3.57%

 

http://www.investmenttools.com/thestate/rate_of_inflation_yearly.htm

 

With respect, I know what the M money measurements are, and the CPI, and what is inflation.So you dont need to cut paste the first thing you googled for my benefit. I m not going to get into a tedious debate about this, and the nature of money. Most dictionary definitions are wrong in their def of inflation. Inflation is everywhere and always a monetary issue. You are saying CPI plays apart in inflation. It doesn't. The CPI only measures price changes, which as I said before are the symptom of monetary inflation, and not the cause. The CPI is a flawed method, especially since they changed out it was calculated in 1996. They use hedonics, substitution, geometric weigthings,seasonal adjustments, everything that will hide real price rises. The unofficial rate of "inflation" using the old method of CPI is between around 6-10%.

 

My point is that M3 has been running at a very high rate, which has led to asset bubble after asset bubble. IF you want thinkin inflation has been running at 3.27% a year, then that is delusional. The CPI can hide it all it wants, and the BLS can under report it...but the true rate of money growth has been staggering. This is the root cause of price rises. Price rises are the symptom. Gold is up 300% since 2000, oil is up over 1000%, wheat is up 500%, copper, zinc,lead, corn,all up by huge amounts during this secular bull market in commodities. yet teh CPI is at 3% a year...it is a joke, and I dont think anyone believes the government numbers, aprt from the fact that many economists have shown the flaws of the methodology which is the CPI. M3 growth is a measure of broad money and credit growth has been running the printing presses like mad over the last few years. My original point is that M3 growth has been running at 10-16% a year in recent times. I guess if it is horseshit, then all the MBS, CDS and outstansing treasury bond debt, GSE debt is all an illusion. It doesnt exist. :smirk: :surprised:

I work in this now, and it is pretty much accepted that the CPI is not inflation. The media go on about oil inflation, wheat inflation, always looking at the symptom not the cause. They dont understand what part supply side markets, demand side markets, inelasticity of prices,monetary policy play in it all.

 

You have cut an pasted some very rudimentary definitions. You are missing my point entirely. Find me some figures that say credit and m3 have not been running at double digit rates. Expect the USD will rally for a while yet,before the decline continues. There is nothing to support the USD fundamentally.

 

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So, let me get this right, dictionaries are wrong, the US Federal Reserve is wrong, and generally accepted calculation is wrong, interesting the world is all wrong and your right.

 

Sounds to me like your confusing Monetary Inflation, with Actual Inflation,

 

â??Since the end of 1995 M1 has increased a paltry 18.8% while M2 is up 89.5%. But M3 is up 130%. GDP by comparison is up roughly 67% in the same period so M3 growth is almost double GDP growth. Consumer debt has grown about 123% in the same period or about equivalent to M3 growth. Business debt is up 97%. It has taken an incredible amount of debt and money to obtain GDP growth over the past decade. This is monetary inflation at its best. â??

 

THAT WAS NOT, AS YOU STATED EARLIER. EVEN THAT RUNNING AT AN AVERAGE OF ONLY 10%.

 

NOT WHAT IS GENERALLY ACCEPTED AS INFLATION, that is running at 3.41125%, since July 2000!

 

Remember, if you can not dazzle them with Brilliants, Baffle them with Bullshit.

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So, let me get this right, dictionaries are wrong, the US Federal Reserve is wrong, and generally accepted calculation is wrong, interesting the world is all wrong and your right.

 

Sounds to me like your confusing Monetary Inflation, with Actual Inflation,

 

â??Since the end of 1995 M1 has increased a paltry 18.8% while M2 is up 89.5%. But M3 is up 130%. GDP by comparison is up roughly 67% in the same period so M3 growth is almost double GDP growth. Consumer debt has grown about 123% in the same period or about equivalent to M3 growth. Business debt is up 97%. It has taken an incredible amount of debt and money to obtain GDP growth over the past decade. This is monetary inflation at its best. â??

 

THAT WAS NOT, AS YOU STATED EARLIER. EVEN THAT RUNNING AT AN AVERAGE OF ONLY 10%.

 

NOT WHAT IS GENERALLY ACCEPTED AS INFLATION, that is running at 3.41125%, since July 2000!

 

Remember, if you can not dazzle them with Brilliants, Baffle them with Bullshit.

 

Sounds to me like your confusing Monetary Inflation, with Actual Inflation,

 

This is nonsense this statement. There only is one type of inflation and that is monetary. Inflation of the money supply. So what is the cause of actual inflation. I said three times now...that Price rises or the CPI are the result of monetary inflation, the true cause is the increase in money and credit growth. MOnetary growth causes price rises. The CPI is a con, a sham. No respected economist believes the CPI. It has been manipulated to under state inflation. It doesnt target credit growth and money supply. It might be accepted by the media and the government, but it is not accepted in specialist circles where economics are understood. The fact that you try to seperate monetary inflation with actual inflation whatever that is suppose to mean shows a distinct lack of understanding...

 

This is an easy to understand version of the flaws of the CPI, if you want any long PDFs that totally debunk the CPI I ll send you them...

 

Core Inflation

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My previous statement was not disputed.

 

â??So, let me get this right, dictionaries are wrong, the US Federal Reserve is wrong, and generally accepted calculation is wrong, interesting the world is all wrong and your right.â?Â

 

Interesting, you dispute; â??Sounds to me like your confusing Monetary Inflation, with Actual Inflationâ? yet, in your rebuttal, you separate the two.

 

I am aware, of the thinking of a very small minority in the economic field that think, something, like you. I prefer to deal with Reality, and the real world. Iâ??ll stick with the U.S. Federal Reserve definition, considered the benchmark, in the US, for the definition, of the word INFLATION, by 99%+ of the inhabitants.

 

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My previous statement was not disputed.

 

â??So, let me get this right, dictionaries are wrong, the US Federal Reserve is wrong, and generally accepted calculation is wrong, interesting the world is all wrong and your right.â?Â

 

Interesting, you dispute; â??Sounds to me like your confusing Monetary Inflation, with Actual Inflationâ? yet, in your rebuttal, you separate the two.

 

I am aware, of the thinking of a very small minority in the economic field that think, something, like you. I prefer to deal with Reality, and the real world. Iâ??ll stick with the U.S. Federal Reserve definition, considered the benchmark, in the US, for the definition, of the word INFLATION, by 99%+ of the inhabitants.

 

The FED are the most inept,incompetent,ignorant central bankers. They have been one of the main source of all the problems the US and world economy is facing. Bernanke has spent his whole career learning about printing money...I quote you a 2001 paper by Bernanke on deflation. I have done a research paper on Bernanke which got some good recongnition online. You can read all his work at in journals...Here is what Bernanek wrote in 2002...

 

"The conclusion that deflation is always reversible under a fiat money system follows from basic economic reasoning. A little parable may prove useful: Today an ounce of gold sells for $300, more or less. Now suppose that a modern alchemist solves his subject's oldest problem by finding a way to produce unlimited amounts of new gold at essentially no cost. Moreover, his invention is widely publicized and scientifically verified, and he announces his intention to begin massive production of gold within days. What would happen to the price of gold? Presumably, the potentially unlimited supply of cheap gold would cause the market price of gold to plummet. Indeed, if the market for gold is to any degree efficient, the price of gold would collapse immediately after the announcement of the invention, before the alchemist had produced and marketed a single ounce of yellow metal.

 

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."

 

Insane..now he is at the helm of the printing press.

 

 

Quite an interesting piece and a coindence that just today that on a mainstream channel like CNBC that they have a piece and an interview saying that the real rate of inflation is or price rises is about 10-11%.

 

How can the USD lose 50% of its value against many currencies over 7 years yet report 3% average CPI. Countries that have a USD peg report a CPI at between 8-15%, yet the US report their CPI at 3-4%? How can that be? How can countries that are pegged to the USD and have currencies that have been strengthening against the USD have a CPI 3 or 4 times higher than the the US CPI. If the US currency is weaker than the Singapore dollar yet Singapore have a higher CPI, how is that possible considering the US import 70% of its consumption needs. I m not asking for an answer as I know already. The CPI was changed in 1996 by the Boshkin commission, a government economist to design the CPI so that price rises would not show up. Hedonics, substitution, geometrics etc etc. Yet you only have to look at the value of the USD against real assets, tangibles like gold, platinum, oil, copper, wheat. YOu can only produce so much oil, and mine so much gold ina year, but ina fiat money system you can print an unlimited amount of confetti money. It is no coindence that since August 2007 since the FED cut interest rates from 5.25% to 2% that oil more than doubled. It is not that oil has went up in price(a symptom) it is that more money is chasing relatively fewer goods. The CPI can hide price rises, but look at real tangibles..this tells the real story. Even the DOW, the S+P and the real estate market have declined in real terms...they are down 50% in gold terms, and all other currencies...they are only up in USD terms. The Zimbabwee stock market is up 600% this year...but it is down in terms of real assets, and all other currencies.

 

You also say that 99% of American believe the BLS CPI numbers. Thats not the feedback I m getting...when I hear countless news paper articles, radio phone ins with people complaining their cost living is going through the roof. I think very few believe the BLS figures. Same here in the UK...no one believes the CPI,..anyway...CNBC article and interview today...

 

Real CPI 10%

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