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LaydeeBug

(10,291 posts)
Fri Oct 18, 2013, 12:34 PM Oct 2013

Oh, this 'person' posted this on a friend's FB wall regarding purchasing power

Here:
"What kills purchasing power more than anything is inflation (the same amount of money buys less). What causes inflation is the devaluing of our currency. What causes that is the over-spending and then the borrowing and printing (like what this most recent fight was all about). And all this is what furthers the gap between rich and poor. Which is why I am a conservative."

I don't have to show up to every fight, but this smacks of 'moral high ground while standing on a heap of bullshit'.


13 replies = new reply since forum marked as read
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zbdent

(35,392 posts)
12. swallowing Bush's *****, and
Fri Oct 18, 2013, 01:10 PM
Oct 2013

eating the vanilla ice cream which comes out of Rush Limbaugh's butt ... at least, he was told it was vanilla ice cream. He refused to admit it was horrible.

upaloopa

(11,417 posts)
3. We have had very low inflation for several years now.
Fri Oct 18, 2013, 12:47 PM
Oct 2013

The reason is because the consumer has little buying power. There may be a large money supply but it is not in the hands of consumers.
If consumers had large sums of money they would bid up prices but that is not the case
The reason the guy is conservative is because he is low information

Beearewhyain

(600 posts)
4. There is more under heaven and earth
Fri Oct 18, 2013, 12:50 PM
Oct 2013

than in his philosophy. Just off the top of my head, if debasing the currency always leads to inflation then we should be drowning in it considering that the fed has expanded the monetary base since 2009 by about a factor of three. However, due to being close to the zero lower bound has prevented the inflationary effects.

I love how these folks will make absolutist statements stringing together things that almost makes sense in a 'truthiness" way yet will deny what is directly observable.

jeff47

(26,549 posts)
6. If their theory was correct
Fri Oct 18, 2013, 01:01 PM
Oct 2013

Then we should have been suffering massive inflation since 2000. W borrowed a TON of money.

Yet inflation since 2000 has been extremely low. Kinda indicates their theory is wrong.

 

nadinbrzezinski

(154,021 posts)
7. If inflation was based on how much paper money is printed
Fri Oct 18, 2013, 01:03 PM
Oct 2013

the US should be in hyper, hyper, hyper inflation mode.

I mean, we have printed literally trillions of the stuff since we are the reserve currency.

The Magistrate

(95,636 posts)
8. He Does Not Even Get The Standard Doctrine Of Inflation Right, Ma'am
Fri Oct 18, 2013, 01:05 PM
Oct 2013

The classic defined cause of inflation is 'too much money chasing too few goods'. In other words, if the amount of money in circulation increases more rapidly than the quantity of goods and services available to purchase, each unit of money must necessarily be able to purchase a lesser amount of goods and services. This can work in reverse, of course: if the supply of money increases more slowly than the quantity of goods and services, each unit of money must necessarily be able to purchase a greater quantity of goods. The former is as destructive as the latter, though in different ways. Inflation harms creditors, since the units of money in which a debt will be repaid will have less purchasing power; creditors protect themselves by lending only at higher rates of interest, which, by making money itself more expensive to acquire, insures that less of it will be used for productive investment, and so reduces the production of goods and availability of services. Deflation harms debtors, since they must repay debts with units of money worth more than those they borrowed, and the very units of money needed to repay are more scarce and hard to come by; debtors frequently cannot manage to repay under these conditions and must forfeit assets to creditors, which when widespread drives down the value of assets generally and places many of them idle, again reducing the production of goods and services.

Government is far from the only agency of increase for the supply of money; private extension of credit has exactly the same effect on the amount of money available as does government creation of debt. Government debt becomes a capital asset for those who hold it, just as does private debt ( in the form of various sorts of commercial paper ); the only difference is that generally private debt is more likely to be wiped out by default and bankruptcy than government debt. Without the capital assets provided by government bonds, and the liquid market for them, a very large proportion of economic activity would seize up; in effect, deflation would be imposed, by a reduction in the supply of money. In our present economy, a similar result would occur if credit cards were removed, and people required to pay cash for all purchases, and allowed to borrow only upon security of real property or specie; in effect, deflation would be imposed, by reduction in the supply of money. Like it or not, our entire economic system depends on lavish extension of credit and creation of money, and whether this is done by private or public agency makes no essential difference, though it remains still the case the government debt is a more secure asset than private debt, as a general case.

 

Pretzel_Warrior

(8,361 posts)
9. This person doesn't understand much
Fri Oct 18, 2013, 01:07 PM
Oct 2013

What kills purchasing power is when wages don't keep up with rising prices. You can blame Republican-backed offshoring of jobs to low cost regions for depressing wages. You can thank oil cartel and big agriculture for spiking food and gas prices with their manipulation (food and gas are two large and volatile components of CPI).

Squinch

(51,332 posts)
10. I'd tell her that that was true, and that for that reason she should be thrilled and telling all
Fri Oct 18, 2013, 01:07 PM
Oct 2013

her friends about the fact that the deficit is less than half of what it was when Obama took office, and she should also throw in that inflation under Obama is lower than under most Republican presidents. Then throw this (from Forbes, no less) at her:

http://www.forbes.com/sites/adamhartung/2013/05/16/economically-could-obama-be-americas-best-president/

 

Egalitarian Thug

(12,448 posts)
11. "I avoided learning even the most basic principles of economics (or anything else),
Fri Oct 18, 2013, 01:10 PM
Oct 2013

that's why I'm a conservative."

 

Savannahmann

(3,891 posts)
13. As with many issues, there are many truths to the situation.
Fri Oct 18, 2013, 01:19 PM
Oct 2013

First, it is true that inflation does reduce the buying power of money. If income does not keep pace with inflation, then your real money is less while the amount may be the same. Remember a million dollars in 1960 was a hell of a lot more money than the same amount now. So there is some truth to that.

Second, fiscal responsibility is what every family practices. We all budget ourselves to spend what we can actually afford. But in our families, much as in the nation, there are times when you have to do things on credit, like buying a house. Then we have our own individual servicing of the debt, which we do. But we still want Christmas for the kids, or braces for little sally, or baseball camp for Junior. So we put that on credit too. Now families know as the Government knows, that in thirty years, the payments on that house are going to be much easier to make. Because the amount you're paying, let's say $800 for the purposes of this discussion, may be the better part of a whole week's pay now, in thirty years with normal inflation, will be what you get for a day or two of work.

So inflation while bad in that it reduces the overall buying power, is also good for eliminating the long term cost of credit.

Then there is the last truth. A weak dollar in comparison to foreign money is not always a bad thing. Yes it makes foreign products more expensive, but it also means we will export more because our products are cheaper there. So a weak dollar reduces your buying power, for foreign made goods, it increases the buying power of those same nations in buying American. Suddenly, the American car looks pretty good by comparison.

As always the discussion can't be reduced to a talking point, because there are various nuances that are lost. Then the discussion is reduced to the kindergarten level with my dad can beat up your dad applicability.

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