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Thoughts on Inflation
#31
(02-22-2021, 11:56 PM)Finster Wrote: Wow Dave, a lot of moving parts in there.  I agree with some of the points, but it mixes up too many different things to paint a coherent picture.  In particular it still tries to juxtapose a real process, technology, with a monetary process, deflation.  As a result, the writer is hopelessly confused.

Technology is a real phenomenon.

Inflation is a monetary phenomenon.

.

YES.

Hence my request for HELP.

HOW do we reconcile massive price decreases in a world of massive inflation?

UN CONFUSE his observations, add yours

in order to describe the future

and calculate how to prepare and prosper and help others do the same.




any ideas?
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#32
DaveGillie Wrote:
Finster Wrote:Wow Dave, a lot of moving parts in there.  I agree with some of the points, but it mixes up too many different things to paint a coherent picture.  In particular it still tries to juxtapose a real process, technology, with a monetary process, deflation.  As a result, the writer is hopelessly confused.

Technology is a real phenomenon.

Inflation is a monetary phenomenon.

.

YES.

Hence my request for HELP.

HOW do we reconcile massive price decreases in a world of massive inflation?

UN CONFUSE his observations, add yours

in order to describe the future

and calculate how to prepare and prosper and help others do the same.




any ideas?

I think you have a pretty good grasp of this, Dave.  Technology does indeed exert a downward pressure on prices.  I'm only emphasizing that the price decreases you see are the result of real cost reductions.

Let's go back to the example of digging a hole.  Suppose the technology known as a shovel has just been invented.  Digging hole by hand - literally - that may have taken 100 hours, now takes only 5 hours.  This is a real twenty-fold cost reduction.  Now suppose that due to inflation, the value of the currency has gone down by half.  The price of the hole still decreases by a factor of ten, even in the depreciated currency.

Why am I making a big deal out of this distinction?  Because the Fed and the government pretend it doesn't exist.  They just point to the prices of things going down and use that as a justification to inflate even more.  This is what they're doing when they use the prices of consumer goods to measure "inflation".  If the real cost of goods declines by 5% and they inflate by 5%, prices don't change and they pretend they haven't inflated.  This is tantamount to claiming for themselves all the benefits of technological advance.  They justify this fraud by claiming that technology and productivity are holding down inflation.

I'm saying we should call them on it.  Don't fall for the line that technology and productivity are holding down inflation, because they're not.  The Fed is only using them to try and hide it.
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#33
Cool Cool Cool

I used to worry about inflation vs. deflation.  Now I'm just preparing for the apocalypse.  Much simpler.
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