Research Finds Link Between Inflation and Laughter In Federal Reserve Meetings

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Research Finds Link Between Inflation and Laughter In Federal Reserve Meetings

Posted by samzenpus on Monday September 23, 2013 @01:38AM from the wild-ride dept.

schliz writes "A one percentage point increase in an inflation forecast brings about a 75% rise in laughter, according to an American University PhD student, who studied transcripts of the Federal Open Market Committee at the Federal Reserve. Laughter usually comes in response to witticisms during a meeting at the time of the inflation forecast, and has been shown to be a mechanism for coping with the stress of a perceived threat."

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So? by Anonymous Coward · 2013-09-23 01:47 · Score: 1, Insightful

Those with their boots on the necks of general public usually think their power over the masses is funny.
They're not laughing with us, they're laughing at us. It helps cover the sounds of the rest of us gasping for air.
1. Re:So? by x2A · 2013-09-23 02:06 · Score: 2
  
  The powerful don't want to see inflation, it makes their money worth less.,
  
  --
  The revolution will not be televised... but it will have a page on Wikipedia
2. Re:So? by cascadingstylesheet · 2013-09-23 02:11 · Score: 4, Insightful
  
  The powerful don't want to see inflation, it makes their money worth less.,
  Inflation makes everybody's money worth less. I visited Brazil during hyperinflation. It wasn't just the "powerful" suffering.
  BTW, "the powerful" did fine in the US during the 1970s .../p?
3. Re:So? by Anonymous Coward · 2013-09-23 02:21 · Score: 0, Flamebait
  
  Suppose you are wealthy. Suppose you gained your wealth largely by counterfeiting.
  Is it to your net advantage to QE... er, counterfeit, a billion dollars, given there will be a slight increase in inflation as you spend it?
  I'll let you work out the math here, or alternately note that counterfeiting is profitable, illegal and suppressed by legal force in the general case, excluding the Federal Reserve.
4. Re:So? by Anonymous Coward · 2013-09-23 02:23 · Score: 1
  
  Wrong! The powerful want inflation because it widens the disparity of wealth. The rich can weather the storm, the poor can't. So the purchasing power of the rich is even greater regardless of the monetary worth of the dollar.
5. Re:So? by locofungus · 2013-09-23 02:24 · Score: 4, Informative
  
  The powerful are fine with inflation. They hold a wide range of assets, some of which will be inflation proof.
  While their net wealth might go down in a time of high inflation, it will go down more slowly than the vast majority of people and the powerful's income is likely to be somewhat inflation proof allowing them to buy up yet more assets as people are forced to sell the few things they own that are inflation proof in order to raise funds for day to day living.
  
  --
  God said, "div D = rho, div B = 0, curl E = -@B/@t, curl H = J + @D/@t," and there was light.
6. Re:So? by Anonymous Coward · 2013-09-23 02:25 · Score: 1
  
  They are laughing with glee at meeting or exceeding the Fed's explicit target for inflation. It drives down the value of the federal debt and allows corporations to raise prices while optionally choosing whether or not to provide raises for their employees. The elite are largely insulated from the effects of inflation through various investment strategies such as gold or just plain betting on higher inflation using derivatives. Meanwhile, mom and pop get socked with higher grocery bills while the talking heads debate how to slow the growth of 'entitlements' like social security.
7. Re:So? by jellomizer · 2013-09-23 02:32 · Score: 2
  
  There is good inflation and bad inflation.
  Good inflation is when the cost of goods and services rise, to match in increase of income of the consumers.
  Bad inflation is when the cost of goods and services rise, at a faster rate then the increase of income of the customers.
  We are having low inflation now... However income has dropped, so it is still bad, and it is worse then when we have high inflation and a strong growth of income.
  
  --
  If something is so important that you feel the need to post it on the internet... It probably isn't that important.
8. Re:So? by alexander_686 · 2013-09-23 02:42 · Score: 2
  
  On balance, inflation helps borrows and penalizes lenders.
  For the conspiracy minded the Fed is controlled by the banks. In theory they would love deflation – except for the economic recessions that tend to follow.
  For historical context read about the Cross of Gold speech – or read the Wizard of OZ: http://en.wikipedia.org/wiki/Cross_of_Gold_speech
9. Re:So? by Mike · 2013-09-23 02:52 · Score: 4, Funny
  
  There is good inflation and bad inflation. ...
  We are having low inflation now...
  Spoken like a true Keynesian.
10. Re:So? by Anonymous Coward · 2013-09-23 03:05 · Score: 0
  
  To the contrary, inflation doesn't effect the wealthy as it does the rest of us. Inflation usually means that the income they derive from their investments rise with the inflation. What it actually means is that they don't have to compete as much for the things they purchase. If you are very wealthy, inflation is a good thing.
11. Re:So? by lxs · 2013-09-23 03:10 · Score: 1
  
  You don't think that the powerful sit on a pile of cash do you?
  We make our money work for us by investing it in commodities and businesses and reap that sweet sweet profit.
12. Re:So? by Anonymous Coward · 2013-09-23 03:21 · Score: 0
  
  The powerful hold lots of cash?
  Cash is only potential power; real power is equity. And when you have equity, inflation is desirable and makes your stuff worth more compared to the stuff that the Little People use.
  That's why they're laughing at you. Inflation is a way to transfer wealth away from people who use money, toward people who own expensive things (companies, multiple houses, etc).
13. Re:So? by Anonymous Coward · 2013-09-23 03:22 · Score: 1
  
  The world is round, not flat...
  Spoken like a true Copernican.
  You realize that's not a counter-argument, right?
14. Re:So? by FhnuZoag · 2013-09-23 03:32 · Score: 1
  
  This runs totally counter to reality.
  The rich have a lot of monetary assets. For example, money in the bank, investment vehicles, etc etc. Their wealth goes down *faster* than the majority of people. Unless they leave the country, of course.
  The poor have less monetary wealth - indeed, most of their monetary stuff are *debts*. For example, mortgages. Under inflation, the amount you owe under your mortgage stays fixed nominally, while the price of your house increases. Thus you are better off. Under inflation, your wages will also rise to compensate for the rise in the cost of living. Hence, if you aren't living off of interest, you are relatively unaffected by the pain.
  Historically, the poor have always clamoured for inflationary policy, while the rich have always pushed for deflation, for this exact reason. See the debates over free silver, leaving the gold standard, etc. This is textbook stuff.
15. Re:So? by FhnuZoag · 2013-09-23 03:36 · Score: 1
  
  You need to look at the difference between wage inflation and cost of living inflation. The 1970s external oil price shocks created a cost of living spike. But nowadays the conservatives controlling the economy are worried about wage inflation for some deeply mysterious reason, despite the fact that the wages for the majority of people have been in decline. (Cost of living hasn't increased as a direct effect of this, because people literally can't afford to pay more.)
16. Re:So? by Anonymous Coward · 2013-09-23 03:49 · Score: 0
  
  It's a big difference when your income is from inflation, and insider information, which can always grow!
  Captcha: disjoint
17. Re:So? by Anonymous Coward · 2013-09-23 03:49 · Score: 0
  
  Look I understand why people hate the current crop of rich in this country, but this kind of paranoia is pointless. The Fed can cause as much inflation as it wants. What they don't want is deflation or stagflation. Both of these are destructive to everyone.
18. Re:So? by Dunbal · 2013-09-23 03:50 · Score: 2, Informative
  
  You realize it's a comment and not an argument at all, right?
  
  --
  Seven puppies were harmed during the making of this post.
19. Re:So? by Anonymous Coward · 2013-09-23 03:56 · Score: 2, Insightful
  
  Except that cost of living has continued to increase, though you wouldn't know that looking at the official numbers because the government rules out everything that gets more expensive as "too volatile" to include in the index, so the government's official cost of living numbers excludes everything that gets more expensive.
20. Re:So? by Dunbal · 2013-09-23 03:57 · Score: 5, Informative
  
  Rofl. Yeah, money in the bank. Julius Baer, Switzerland, in several european currencies. Tokyo, Japan, in several asian currencies. OK how about financial instruments. Short term bonds in dollars (US, Canadian, Australian, NZ), euros, pounds, reals, yen, rubles... Stocks, in several stock exchanges around the world, in diversified sectors. Gold, silver, platinum, copper, diamonds (and I ain't talking jewelry or certificates here). Now let's talk real estate....
  Seriously, you are full of shit. The rich don't give a damn about inflation in one country or the next. What they DO care about is how to profit from the situation. There's always profit, if you're big enough.
  
  --
  Seven puppies were harmed during the making of this post.
21. Re:So? by Dunbal · 2013-09-23 04:04 · Score: 1
  
  income, not equity. I don't care how many billions you have, if you have no income you will eat your way through them. If your income is larger than your expenses, you can fuck up as many times as you want, risk as much as you want, and you will always have more today than you had yesterday.
  
  --
  Seven puppies were harmed during the making of this post.
22. Re:So? by i+kan+reed · 2013-09-23 04:12 · Score: 2
  
  Or any other type of economics that acknowledges the basic reality of the way economies and peoples' lives interact. Behavioralism makes no denial of this premise either. If your economic system requires you to specifically ignore one way things can turn out to be valid, that isn't a testament to its quality.
23. Re:So? by njnnja · 2013-09-23 04:15 · Score: 1
  
  Good inflation is when the cost of goods and services rise, to match in increase of income of the consumers. Bad inflation is when the cost of goods and services rise, at a faster rate then the increase of income of the customers.
  In an economic sense, "inflation" is actually only the first, because inflation is where there is a general rise in the cost of all goods and services. But income to a consumer is a cost of good or service to an employer (labor cost). If more people realized that "inflation" doesn't mean that a gallon of milk costs more, it means that you will see a nominal rise in your paycheck, it wouldn't be such a boogeyman.
  
  The source of the confusion was from the 1970's, when you had inflation combined with an oil supply shock, such that the costs of everything was going up, at the same time that the economy became less productive. People think the bad thing was the costs of things going up, when the real problem was that real incomes declined because of the oil shocks - nominal incomes were relatively flat.
24. Re:So? by i+kan+reed · 2013-09-23 04:16 · Score: 1
  
  It almost sounds like you had the same high school history teacher as I did, because that was definitely a lesson I had. And not to worry, populist low-information economics has somehow turned pro-gold standard in the past decade or so, because they imagine that somehow massive deflation would be a good thing in a society where the net debt burden has increased to unprecedented levels.
  I don't get it, but magical economic panaceas are always nice to promise.
25. Re:So? by tmosley · 2013-09-23 04:17 · Score: 2
  
  Wrong. The powerful get to use the printed money first, stealing purchasing power from everyone else. This is one of the most fundamental arguments against fiat currency.
26. Re:So? by tmosley · 2013-09-23 04:18 · Score: 3, Insightful
  
  Good inflation is when you print money and spend it first. Bad inflation is when other people print money and devalue the dollars in your pocket.
27. Re:So? by i+kan+reed · 2013-09-23 04:19 · Score: 2
  
  Let's not forget super-leveraged investments that are so disconnected from the value of the currency they're priced in, that for simplicity's sake, banks often barter the interest rates of one security to another.
28. Re:So? by tmosley · 2013-09-23 04:23 · Score: 5, Insightful
  
  That is incorrect. Inflation is great for those who get to print it. The Fed and thus the banks are the ones that get first access to that money, and get to charge interest on it, interest that can mathematically be paid from no source except default. Default destroys resources. This monetary system thus forces destruction of resources through malinvestment.
  
  Money is not wealth. Money is a CLAIM on wealth, which is composed of real things. Printing money does not create more wealth--it just dilutes it, and redistributes it to those who get first access to the printed money.
29. Re:So? by Anonymous Coward · 2013-09-23 04:23 · Score: 0
  
  The powerful don't want to see inflation, it makes their money worth less.,
  The REALLY powerful love inflation. Who cares about the debt ceiling when they'll just inflate it away? Since they can't pass new taxes and hope to stay in power, borrow borrow borrow, inflate it all away, and the money comes out of our savings and retirement and people don't even see it happening.
30. Re:So? by Anonymous Coward · 2013-09-23 04:29 · Score: 0
  
  Since when did the powerful store their wealth in currency? All the rich people I know keep a minimal amount of dollars, and put the rest into investments - which grow with inflation. Inflation hits people living paycheck-to-paycheck the hardest because they're the ones actually holding the hot potato.
31. Re:So? by disposable60 · 2013-09-23 04:43 · Score: 1
  
  But interest rates on deposits and bonds go UP; and this is where most of these nabobs make most of their coin. The late 70s and early 80s saw Tbills paying upwards of 16%, but that meant mortgage rates were 18+. Bad for the people who work for a living, but no problem for the folks who can pay cash for the new villa.
  
  --
  You're looking for quotes? See my journal.
32. Re:So? by Anonymous Coward · 2013-09-23 04:56 · Score: 2, Informative
  
  Like how destructive to everyone the "deflation" of the cost of technology over the last 30 years has been?
  "Deflation" is a canard. It simply means that the actual value created by human innovation and efficiency increases, for a particular lucky domain, hasn't been siphoned off entirely by the financial system. The "goal" of 0% means nothing other than it's a number that the public has been hypnotized into thinking is optimal, for which the siphoners should be praised in acheiving. Quite the opposite. Human progress means the costs of goods and services -should- be going down, and the standard of living going up correspondingly. Those savings on particular goods in a massive scale translate into investment in more jobs and more prosperity, precisely as we have seen in the tech industry, despite having every imaginable impediment and rent-seeing drain placed on it.
  Respect history and the economic realities directly before your eyes before blindly repeating the mantra of theft that keeps the majority of the country making no net economic progress, year after year, decade after decade, generation after generation.
33. Re:So? by Anonymous Coward · 2013-09-23 05:37 · Score: 0
  
  If the rich wanted deflation, we would have it. Your textbooks are wrong.
34. Re:So? by JesseMcDonald · 2013-09-23 05:41 · Score: 2
  
  If more people realized that "inflation" doesn't mean that a gallon of milk costs more, it means that you will see a nominal rise in your paycheck, it wouldn't be such a boogeyman.
  It means both. However, whether you're talking about inflation or deflation, the change in your paycheck always trails the effect on the price of consumer goods, so a gallon of milk still costs more relative to your current paycheck. Under deflation it's just the opposite: sure, your paycheck is decreasing, but your expenses are decreasing even faster.
  This is not to say that we'd be better off with forced deflation rather than inflation. As with any other commodity, the price of money is best left to the market rather than central planners. Natural deflation is a signal that there is a need for saving and investment, while inflation signals that it's time to spend. Forcing either results in a suboptimal allocation of resources.
  
  --
  "The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
35. Re:So? by Jane+Q.+Public · 2013-09-23 05:57 · Score: 1
  
  "The powerful don't want to see inflation, it makes their money worth less."
  Not true. At least, partially not true.
  
  Inflation makes OUR money worth less. Not theirs. Why? The time delay factor.
  
  See, when the government and the banks inflate the money supply, where does that new money go first? Answer: the banks, the government, and Wall Street.
  
  But it takes time for an inflated money supply to significantly affect prices. During that time, the banks, government, & Wall Street have already used that money... at full value. It isn't until later, by the time it gets into your hands and mine, that we see the bad effects of inflation.
36. Re:So? by Impy+the+Impiuos+Imp · 2013-09-23 06:33 · Score: 1
  
  I don't know why people keep looking at it as rich people doing this. Inflation benefits borrowers by slowly (or rapidly) reduciing what they borrowed to chump change. If they can keep up the interest payments, as government does, then they never have to pay it back.
  That they pay your money out like a fool paying a credit card, well, the government is getting close to having a balanced budget again...not counting the annual interest payment.
  Got your money's worth?
  
  --
  (-1: Post disagrees with my already-settled worldview) is not a valid mod option.
37. Re:So? by Bodhammer · 2013-09-23 06:34 · Score: 1
  
  We have designed inflation for two reasons:
  
  1) Because we have a progression (in both meanings of the word) it is a stealth way for politicians to raise taxes.
  
  2) It is a form of economic warfare being used against the Middle East and Chinese trade deficits. We are paying them in dollars that are worth less and less.
  
  --
  "I say we take off, nuke the site from orbit. It's the only way to be sure."
38. Re:So? by Khashishi · 2013-09-23 06:57 · Score: 1
  
  Yeah, but if you are in debt, that's a good thing.
39. Re:So? by njnnja · 2013-09-23 07:36 · Score: 1
  
  No, you are still misunderstanding. Gross Domestic Income is equal to Gross Domestic Product by construction (definition). While the change in *my* paycheck may lag or lead changes in GDP, the aggregate income of everybody must exactly match those changes at the exact same time, by definition.
  
  What you may be thinking of is that since the increases that I see in my paycheck are nominal, there is some portion of that change attributable to real growth in income and some portion attributable to inflation. But just like the real price of objects changes (e.g., apples could get more expensive and oranges get cheaper, even though overall inflation is zero, due to actual changes in apple/orange production or changing consumer taste), changes in the real value of my paycheck relative to the real income of others can occur that make it difficult to see what inflation is really doing. If there is overall inflation, and I am not seeing an increase in my paycheck, then somebody else must be seeing that increase in their paycheck/wages/income, or else GDP != GDI which is not possible.
40. Re:So? by alexander_686 · 2013-09-23 07:47 · Score: 1
  
  We have had inflation long before either of those 2 reasons. The Fed choses to pursue a low inflation policy because
  1. It is theoretically impossible and in reality undesirable (see the history of price controls) to have zero inflation and
  2. Hyperinflation and deflation both tend to destroy the real economy.
  Other countries that try to use inflation to get rid of their debts tend to end up in worse shape. Governments win the first round but then investors wise up and win all other rounds.
  Now, I think you are talking about financial repression. One method is to get negative real interest rates. (real interest rates = nominal (or quoted) interest rates - inflation). That was used by western nations after WWII to lessen their debts (which were way over 100% of their GNP) and today.
  http://en.wikipedia.org/wiki/Financial_repression
  Or look up Pimco’s Bill Gross. He has written some good stuff on this.
41. Re:So? by Anonymous Coward · 2013-09-23 07:57 · Score: 0
  
  Under inflation, your wages will also rise to compensate for the rise in the cost of living.
  If only...
42. Re:So? by Shark · 2013-09-23 08:00 · Score: 1
  
  The powerful don't hold a significant portion of their wealth as cash in a bank account. Even stocks aremore resilient to inflation. Land is great for that, properties, some commodities... When you have that kind of wealth, protecting it from inflation is relatively trivial.
  
  --
  Mind the frickin' laser...
43. Re:So? by stymy · 2013-09-23 08:04 · Score: 1
  
  I hope you realize that until the Fed was created, the US underwent a series of brutal recessions and crashes. The problem is that whatever happens, inflation, deflation, no change or whatever, it needs to be predictable so that companies, banks, and consumers can easily make long-term plans. Volatility makes such planning almost impossible, so as a result everyone is more conservative, no one spends money, and growth slows or you might even end up with a recession. So proper guidance is necessary to provide the stability that long-term investment requires.
44. Re:So? by clarkkent09 · 2013-09-23 08:19 · Score: 1
  
  Exactly, I don't know why this is so hard to understand. This is how it traditionally works in banana republics:
  Step 1. Promise free stuff (spending on the poor etc)
  Step 2. Gain power, influence and wealth by winning an election.
  Step 3. Pay for the above spending by borrowing
  Step 4. Once the debt gets too large, pay it by printing money
  The resulting inflation that mostly harms the poor from the step 1 is a side effect, left to the next government to deal with with austerity measures (guess who suffers the most again).
  
  --
  Negative moral value of force outweighs the positive value of good intentions.
45. Re:So? by alexander_686 · 2013-09-23 08:43 · Score: 1
  
  How is this being moded as insightful? The biggest risk that bankers face is inflation. It’s basic banking 101.
  Read up on “Real Interest Rates” because that drives the “Spread” that determines their profitability. Raising inflation raises costs faster than revenue – see “Duration”. We know that inflation is a risk – otherwise the “Yield Curve” would be downward sloping.
  When inflation rates raise interest rates rise. When interest rates rise bonds (and loan) values fall. Bonds and loans are a bank’s primary asset.
  http://en.wikipedia.org/wiki/Real_interest_rate
  http://en.wikipedia.org/wiki/Net_interest_spread
  http://en.wikipedia.org/wiki/Bond_duration
  http://en.wikipedia.org/wiki/Yield_curve
  I will agree with you that inflation does not generate wealth but it does not held “those who get hold of it first” (FYI, banks and the wealthy don’t get the money first but that is a separate issue.)
46. Re:So? by alexander_686 · 2013-09-23 10:45 · Score: 1
  
  I would like to know your source. I don’t know of any conservative that is concerned today about wage inflation – or anybody for that matter. Wage inflation is going nowhere until unemployment and underemployment go down. Any rise in wages will result will be counteracted by this huge underutilized supply.
  Now if you want to argue that conservatives are against a minimum wage (or a rise in it) – that would be true – but that is something different then wage inflation.
47. Re:So? by Anonymous Coward · 2013-09-23 12:52 · Score: 0
  
  I will agree with you that inflation does not generate wealth but it does not held “those who get hold of it first”
  All you're talking about are second order effects. Printing new money means that some of the value represented by existing notes is now represented by the new notes. Whoever gets the new notes will get that transferred value. When it's used as a banking reserve that means the banks have less risk to pay/cover for. In a competitive market that lower cost will be passed on to their customers however in reality that often doesn't happen.
  The value of existing notes also changes over time due to the real economy's value changing over time with real wealth creation and destruction but that is independent of the above mechanism.
  A common policy however is to print some money so that as the real economy grows in value the change in value of each note is reduced. It's also used as a tax mechanism.
48. Re:So? by Anonymous Coward · 2013-09-23 15:50 · Score: 0
  
  Oh.., nope, pretty sure we gotta argument going here. Whatza matta with you flatlanders.?
49. Re: So? by Anonymous Coward · 2013-09-24 00:56 · Score: 0
  
  Index everything. Use technology to automate it, making the indexing of govt payments seamless. Then we can just not think about finances and get on with the more creative aspects of our lives, creating new technology and advancing knowledge.
50. Re: So? by Anonymous Coward · 2013-09-24 01:06 · Score: 0
  
  Why is inflation a necessary consequence? If the people were free to innovate, produce better drug crop yields for example, why can't knowledge, technology, and goods and services increase too?
  There isn't really a production capacity problem. There's a lack of demand problem, and a psychological meanness factor that wants to impose scarcity artificially. Govt can deal with inflation by indexing. In the modern world indexing can be handled automatically by computer programs, making adjustments for inflation seamless and transparent.
  Ultimately, inflation is psychological; we can break that sociopathic psychology with technology such as automatic indexing.
51. Re: So? by Anonymous Coward · 2013-09-24 01:13 · Score: 0
  
  In 1920 I could buy a suit for $20. But today I can buy a flashlight for $20. Did they have the technology to make cheap electric light in 1920?
  So along with inflation has come a rise in the standard of living.
52. Re:So? by JesseMcDonald · 2013-09-24 06:00 · Score: 1
  
  While the change in *my* paycheck may lag or lead changes in GDP, the aggregate income of everybody must exactly match those changes at the exact same time, by definition. ... If there is overall inflation, and I am not seeing an increase in my paycheck, then somebody else must be seeing that increase in their paycheck/wages/income, or else GDP != GDI which is not possible.
  Indeed. I'm not disputing that. However, the distribution is not random; it favors those close to the source of the inflation. The people responsible for the inflation get a "raise" first. Assuming you're not among the politically well-connected, their spending has already bid up prices by the time the extra money makes it to your paycheck. The effect of supply-side inflation is to transfer wealth from the commoners to the political class.
  
  --
  "The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
53. Re:So? by JesseMcDonald · 2013-09-24 06:14 · Score: 1
  
  You could make the same argument in favor of "stabilizing" the price of any other commodity, and it would be just as wrong there is it is concerning price controls on money. Life is change. Attempts to guarantee "stability" do nothing but ensure malinvestment as people respond to corrupted price signals, making things that much worse when the controls are inevitably discovered to be untenable.
  There were recessions and crashes before the Federal Reserve, but they were the result of external shocks (or political blunders, like trying, and failing, to prop up the Bank of England with massive loans), not systemic, predictable malinvestment as in the case of the Great Depression or the lesser boom/bust cycles which have occurred since. Moreover, while the pre-Fed crashes may have been sharper, they were resolved more quickly and with less net impact on the average citizen.
  
  --
  "The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
54. Re:So? by JesseMcDonald · 2013-09-24 06:33 · Score: 1
  
  2. Hyperinflation and deflation both tend to destroy the real economy.
  The second part of this is a myth. The example always used here, the Great Depression, is basically the only known case where deflation was correlated with a recession or depression. This is because it was not simply a decrease in prices, but a gigantic credit contraction as people realized that most of the money they thought they had didn't really exist. The credit contraction—an inevitable result of fractional-reserve banking practices taken to extremes—caused both the depression and the deflation, not the other way around. There are plenty of examples of deflation in other contexts where no recession occurred.
  Recessions are the correction phases following wide-scale malinvestment. Explicitly inflationary or deflationary policies are among the more obvious ways to cause malinvestment on a broad scale, though they're hardly the only ones. There is nothing to fear from natural inflation or deflation which results from a change in the demand for money; on the contrary, both are essential price signals regarding the balance between saving and consumption.
  
  --
  "The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
55. Re:So? by njnnja · 2013-09-24 08:37 · Score: 1
  
  However, the distribution is not random; it favors those close to the source of the inflation.
  To the contrary, that happens only if the the change in prices is real, not inflationary. Let's say that the central bank decides to inflate by buying huge amounts of financial assets from banks. Assuming that the supply of those financial assets is large enough such that the central bank's purchases do not have an impact on the price of those securities (a good assumption for huge fixed income markets such as Treasuries and MBSs, not a good assumption for smaller markets like individual stocks, but I'll address that later), the inflation that occurs does not benefit the banks. Think about it this way; if the central bank buys $100MM of Treasuries from a bank, then the bank is no better off because there is no difference between holding $100MM worth of Treasuries versus holding $100MM worth of cash. It's the same thing as the old joke about, what weighs more, a ton of bricks or a ton of feathers - neither, they both weigh the same.
  
  However, if the central bank purchases do affect the price of those financial assets, then the gains to the banks is not a benefit because of the inflation being caused, but rather it is a benefit due to the increased real demand for those financial assets. In my earlier post, it is like the price of apples going up because McDonalds (or some other large purchaser) decides to buy a whole lot more apples than oranges. Apple growers benefit from the increase in price of apples, but that is a real increase in price, not inflation.
  
  The other thing I want to mention is that your comment about "politically well-connected" benefiting is absolutely true, with a caveat. It is not so much that the well-connected benefit from the central bank purchases, again, as long as those purchases are at fair market value, you are just exchanging $X wealth for $X wealth. However, let's assume that the central bank needs to put some amount of money into circulation just to keep some even amount of inflation (you could even assume 0% inflation if you think about net injections and allow for net currency injections to be negative). But let's say that the government runs an expansionary fiscal policy, which of course, is chosen by political means, and there is no reason to believe that there is an $X for $X exchange; rather, it is likely that there are politically chosen winners who get more than $X in exchange for $X and losers who get less than $X in exchange for $X.
  
  If the central bank a) allows the government to run a deficit, and b) does not change its original monetary plan, then there will be more inflation because there is more net currency added into circulation than the central bank had determined was "appropriate," and there are politically chosen winners and losers. But it is not the result of the central bank's purchases, rather, it is the result of the inflationary fiscal policy. Also note that even if the central bank negates the fiscal expansion by withdrawing exactly as much money from circulation as the fiscal policy adds (and therefore there is no inflation at all), the winners and losers are the ones that were chosen by the government. So the fact that politically connected groups benefit from their relationship to the government is independent of whether the central bank allows inflation or not.
56. Re:So? by alexander_686 · 2013-09-24 09:45 · Score: 1
  
  Well, we have basically had inflation and fiat money since the Great Depression so not a whole lot of time series to test. Well, there is also the panics of 1819, 1837,1857, 1907 and the recession of 1882. Just in the US. I can pull out more examples if you want to go globally - Tulip Bubble, South Sea Bubble, Japan since the 1990s, etc.
  I would recommend Milton Friedman’s Monetary History of the United States, 1867-1960. It’s a good read. The US economy was growing around 5% a year while the money (i.e .gold being dug up) supply was expanding about 1% a year. When gold was found in California, South Africa, or Australia the economy hummed along fine. When there were no major gold strikes money became scare and that had a real impact.
  At the very least, deflation favors
  1. Financial assets over real assets. Financial assets pick up both interest income and deflation value.
  2. The haves over the have nots. The haves gain wealth by doing nothing – the value of their assets just grows. The have nots have to pack back loans with more expensive dollars.
  Deflation skews investment away from productive actives. Then there are the cognitive and psychological factors issues with deflation. Man’s brain was not designed to go that way.
  I am hard pressed to think of one major figure who thinks that deflation is good. I can think of some who think it’s better than the “politically motivated actions” of the Fed.
57. Re:So? by tmosley · 2013-09-25 06:35 · Score: 1
  
  I see you cannot into math. You see, there is this thing called a denominator. When the denominator gets larger, the answer gets smaller. Arbitraging the difference between systems with different denominators is what I am talking about here. If you can't understand that, then you probably have a PhD in economics from Princeton, and a masters in witch medicine from Monkey Money University (I hear it's a prestigious school).
  
  I bet you are a firm believer in homeopathic medicine too. It is the same as the "economics" you espouse.
58. Re: So? by tmosley · 2013-09-25 06:40 · Score: 1
  
  What? Are you honestly trying to say that inflation CAUSES technological advancement? Not only that but you are saying it increases the standard of living? Even as wages fail to keep pace? Are you NUTS!? Oh, I get it, you work for the Fed.
59. Re: So? by tmosley · 2013-09-25 06:41 · Score: 1
  
  Ah, the backwards thinking of the cargo cult of modern economics. It would be quaint if it wasn't so genocidal.
60. Re:So? by Khashishi · 2013-09-25 09:58 · Score: 1
  
  How does default destroy resources? Default destroys debt. Assets remain.
61. Re:So? by alexander_686 · 2013-09-25 10:18 · Score: 1
  
  Oh – now I get what you are trying to say. Yes, “They” do get the free money.
  By the way – who is “Thay”? Part of the reason why I was confused is that in the US and most G20 countries “They” are not banks or the government.
62. Re:So? by alexander_686 · 2013-09-25 10:30 · Score: 1
  
  It depends on which side of the transaction – one person’s debt is another person’s asset.
  And by default we are not meaning “going into bankruptcy and restarting the debt.” Financial Repression would be a better word.
  Let’s say I invest, save, or lend out $100. Inflation jumps unexpected by 100%. I still have $100 but it’s value is ½. If that is the case why should I bother to invest, save, or plan for the long term? Generally they don’t. Investment tends to be lower in countries with high inflation.
  The rich have tactics to help mitigate some of the impacts of inflation. The poor less so. It is why inflation has been called a tax on the poor.
63. Re:So? by Khashishi · 2013-09-25 15:02 · Score: 1
  
  It depends on if wages keep up with inflation. If not, then employers are benefiting, until workers get fed up and quit.
Alternate Title by Rob+the+Bold · 2013-09-23 01:47 · Score: 4, Insightful

I propose an alternate title to this story:
"An open invitation for cranky Slashdotters to complain about waste of taxpayer money -- despite it being non-governmental funded -- to study a topic I find ridiculous."

--
I am not a crackpot.
1. Re:Alternate Title by jbeaupre · 2013-09-23 01:54 · Score: 1
  
  "An open invitation for cranky Slashdotters to complain."
  FTFY
  
  --
  The world is made by those who show up for the job.
2. Re:Alternate Title by Anonymous Coward · 2013-09-23 01:58 · Score: 0
  
  Wake up call: Inflation is a hidden tax -- one that is designed to work under your radar. Judging by your attitude, it's working exactly as planned.
3. Re:Alternate Title by Anonymous Coward · 2013-09-23 02:02 · Score: 1
  
  Hey, now. We're also going to get the crowd of "people who slept through Undergraduate Macroeconomics 101 ranting about 'fiat currency'".
4. Re:Alternate Title by Anonymous Coward · 2013-09-23 02:09 · Score: 1
  
  Tell us more about how currency should be a "store of value", and how stashing dollars under your mattress should produce a positive real rate of return.
  I'm seeing the link between inflation and laughter already! It involves listening to the resulting comments from economic illiterates.
5. Re: Alternate Title by Anonymous Coward · 2013-09-23 02:10 · Score: 0
  
  Much lower than any other tax. And we can just index everything, seamlessly now with technology.
6. Re:Alternate Title by Mitchell314 · 2013-09-23 02:11 · Score: 0
  
  Go take an actual class in economics.
  
  --
  I read TFA and all I got was this lousy cookie
7. Re:Alternate Title by x2A · 2013-09-23 02:14 · Score: 2
  
  When inflation is above interest, or you store money in a way which doesn't get interest, then yes, it does act as a stimulus by allowing spending of money that is otherwise not being spent. Unfortunately, the main spending of the US federal government is on its war machine... so the problem is what is done with the debt+inflation tax, not the fact that it exists.
  You do also need income to at least rise at the rate of the inflation, and then it only hits money not being spent, but neoliberal policies are making that happen less and less, with the worst off seeing a decrease in real wages, a refusal to increase minimum wage being heavily responsible there.
  
  --
  The revolution will not be televised... but it will have a page on Wikipedia
8. Re: Alternate Title by alexander_686 · 2013-09-23 02:58 · Score: 1
  
  You cannot nor should you try.
  To pick a nit - To measure inflation you need to measures the value assigned by a person – which is ordinal not cardinal. i.e. it can be ranked but not measured. CPI estimates that value but there are known flaws – it is a approximation. And this is an imporant nit.
  More importantly one should not even try. See the 1970s oil crisis. If oil quadruples in price overnight that increase will show up in inflation. The jump in inflation is telling you something – that you should reallocate your scarce resources – unless everybody has a COLA built into their wages – so money floods into the system which spurs more inflation which triggers more COLA increases, etc. Soon you have a permanent high level of inflation which is not pleasant – see Brazilian currency history.
  Things fall apart when everybody indexes. Kind of like the Red Queen's Race.
9. Re:Alternate Title by Rob+the+Bold · 2013-09-23 02:58 · Score: 1
  
  Hey, now. We're also going to get the crowd of "people who slept through Undergraduate Macroeconomics 101 ranting about 'fiat currency'".
  Wow. You're not wrong. I did not expect that one. Guess I should have.
  
  --
  I am not a crackpot.
10. Re:Alternate Title by tinkerton · 2013-09-23 03:01 · Score: 3, Interesting
  
  An open invitation to see causal relationships actually. This is /..
  "Laughter at Federal Reserve Meetings May Cause Inflation".
11. Re:Alternate Title by Anonymous Coward · 2013-09-23 03:01 · Score: 0
  
  Wow you jump to conclusions fast. You assume he wants to make a profit from stashing money under his mattress. I am pretty sure he'd just like it if he stashed $1 under his mattress and 100 years from now was still able to buy 1 chocolate bar with it. That's how other stores of value tend to work over the long term (gold, for example).
  And then you jump to insults. Coward indeed. Although I guess you can say pot calling kettle black.
12. Re: Alternate Title by Anonymous Coward · 2013-09-23 03:17 · Score: 0
  
  Things fall apart when everybody indexes. Kind of like the Red Queen's Race.
  Which is why social security should be indexed to wages and not inflation.
13. Re:Alternate Title by Anonymous Coward · 2013-09-23 03:18 · Score: 1
  
  If you buy a chocolate bar with that dollar today and stash it under your mattress for a century, it will be inedible at best. Why should it retain value in paper form but not in chocolate form?
  Or, more seriously, a negative inflation rate incentivizes mattressing your money rather than doing something useful with it, which is catastrophic on a large scale. Maintaining a precisely zero inflation rate is very difficult for obvious reasons, so every developed economy in the world attempts to maintain a slightly positive rate instead.
  Currency is supposed to be a medium of exchange. It's not supposed to be a store of value over the long term, that's just not its job. You might as well be complaining that your hat doesn't unclog toilets particularly well, and a plunger works better for that purpose. Well, no shit! That's not a problem with your hat, is it?
  We need some kind of remedial economics class for (nominal) adults.
14. Re:Alternate Title by Anonymous Coward · 2013-09-23 03:24 · Score: 0
  
  I just wish that this education would extend more universally throughout our society.
  If nothing else it would make the next time I am held up at gunpoint, and thoughtfully provided by the thief with a postgraduate thesis on how this robbery is actually to my benefit (it is, after all, increasing the "velocity of money", for one), much more thought-provoking.
15. Re:Alternate Title by Anonymous Coward · 2013-09-23 03:32 · Score: 1
  
  It's not supposed to be a store of value over the long term, that's just not its job.
  You seem to be neglecting that, until Nixon, that's precisely what it was, and what the United States Government told us it was and should be.
16. Re: Alternate Title by alexander_686 · 2013-09-23 03:34 · Score: 1
  
  Social Security is already indexed to the Average Wage Index.
  http://en.wikipedia.org/wiki/Social_Security_(United_States)#Primary_Insurance_Amount
  Now this has worked well since historically 1. AWI has increased faster than inflation and 2. AWI has risen faster than the ratio between retired folks and working folds has risen. This may not be true in the future.
17. Re:Alternate Title by Dunbal · 2013-09-23 04:07 · Score: 1
  
  If you buy a chocolate bar with that dollar today and stash it under your mattress for a century, it will be inedible at best. Why should it retain value in paper form but not in chocolate form?
  Gold, on the other hand...
  
  --
  Seven puppies were harmed during the making of this post.
18. Re:Alternate Title by Rob+the+Bold · 2013-09-23 04:34 · Score: 1
  
  That's how other stores of value tend to work over the long term (gold, for example).
  If one wants a "store of value" such as precious metal, then wouldn't purchasing a dollar's worth of gold be a better approach than complaining that the dollar itself wasn't up to the job?
  If that's what one wants, shouldn't one do that? Then when society collapses or whatever he figures will happen to the rest of us over that 100 years, he can laugh at us. From the grave, at least -- since I doubt any particular financial philosophy is an elixir of life . . . but who knows? I don't personally think it's a good plan, but if someone else believes in it, they're free to do it.
  
  --
  I am not a crackpot.
19. Re:Alternate Title by Ravaldy · 2013-09-23 04:39 · Score: 1
  
  We have to find something for human workers to do since they're jobs are being replaced by the chinese, automation or advanced robotix.
20. Re:Alternate Title by Anonymous Coward · 2013-09-23 04:44 · Score: 0
  
  We have to find something for human workers to do since they're jobs are being replaced by the chinese, automation or advanced robotix.
  Hey! It's racism with a healthy mix of misspelled and misused words. Of course, I'm the real racist(TM) for pointing out that implying the Chinese aren't "humans" is racist. Shame on me.
21. Re:Alternate Title by JesseMcDonald · 2013-09-23 05:28 · Score: 1
  
  If one wants a "store of value" such as precious metal, then wouldn't purchasing a dollar's worth of gold be a better approach than complaining that the dollar itself wasn't up to the job?
  Sure, except for a couple of minor issue. First, you're going to be taxed on the change in the nominal dollar price of the gold, even though the change is due to the dollar losing value, not the gold gaining value—never mind the extra paperwork involved. Second, all your internal accounting and external contracts are probably still denominated in dollars, which complicates any attempt at rational economic calculation. You can try to compensate, but calculating the right index is far from easy. (It's not just the change in prices.) Finally, even if you were to personally avoid the dollar entirely, that won't fix the effect of supply-side manipulation on the rest of the economy. Inflation and deflation are price signals relating to the balance between saving and consumption; messing with those signals has much the same effect as price controls, except that when it's the price of the currency which is being controlled, the effects are felt everywhere, not just in a narrow range of commodities.
  
  --
  "The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
22. Re:Alternate Title by Anonymous Coward · 2013-09-23 05:49 · Score: 0
  
  "Maintaining a precisely zero inflation rate is very difficult for obvious reasons, so every developed economy in the world attempts to maintain a slightly positive rate instead."
  Tell me about it! Working for a living is difficult, so I just rob people instead.
23. Re:Alternate Title by Anonymous Coward · 2013-09-23 06:10 · Score: 0
  
  That's part of the problem. Everything they're teaching is wrong.
24. Re:Alternate Title by Anonymous Coward · 2013-09-23 07:29 · Score: 0
  
  You're implying that economists themselves are subject to perverse incentives. Nonsense I say, nonsense!
25. Re:Alternate Title by Anonymous Coward · 2013-09-23 08:39 · Score: 0
  
  Exactly! Every expert is part of the conspiracy. Only anonymous cowards on Slashdot know what's really going on.
26. Re:Alternate Title by Anonymous Coward · 2013-09-23 16:11 · Score: 0
  
  I'll take the chocolate bar. You guys obviously have no clue what they are doing to gold for the next ten years
27. Re: Alternate Title by Anonymous Coward · 2013-09-24 01:21 · Score: 0
  
  Brazil fell apart? Last I heard they had free healhcare.
28. Re: Alternate Title by Anonymous Coward · 2013-09-24 01:23 · Score: 0
  
  In a democracy you get to vote, and also leave freely.
Banks rushing... by i+kan+reed · 2013-09-23 01:48 · Score: 4, Funny

Banks are now rushing to plant stand-up comics on the reserve board so they can game on metric they haven't been able to before.
In other news, concept of "causation" completely lost on those making the most important decisions affecting the world economy.
Fed laughter correlated to the housing bubble by Anonymous Coward · 2013-09-23 01:51 · Score: 3, Informative

From 2012: http://multiplier-effect.org/?p=3362
Wish I could laugh by Anonymous Coward · 2013-09-23 01:51 · Score: 1

I'd laugh but I'm too busy crying. What we need to do is get these folks back to living inside of the circle of consequece instead of outside of it. Nobody else gets to vote themselves a raise, create their own health plan, retirement, etc. These guys should have to sleep in the same bed they've made for the rest of us.
1. Re:Wish I could laugh by Trepidity · 2013-09-23 01:58 · Score: 4, Insightful
  
  Nobody else gets to vote themselves a raise, create their own health plan, retirement, etc.
  Um, that's pretty much how C-level executives work at large companies. They are nominally under the control of the board, who is nominally the elected representatives of the shareholders, but like with our elected political representatives, in practice they have quite a bit of unrestrained control over things like voting each other raises and approving golden-parachute contracts (formally on behalf of the shareholders who voted the board in, of course).
  
  --
  10 PRINT CHR$(205.5+RND(1)); : GOTO 10
2. Re: Wish I could laugh by Anonymous Coward · 2013-09-23 02:12 · Score: 0
  
  What if we all can sleep in beds like theirs, because we abandon scarcity thinking?
Needs a soundtrack by smittyoneeach · 2013-09-23 01:51 · Score: 1

How about "Stranglehold" by Ted Nugent?

--
Get thee glass eyes, and, like a scurvy politician, seem to see things thou dost not.--King Lear
1. Re:Needs a soundtrack by JustOK · 2013-09-23 02:05 · Score: 1
  
  Isn't he dead or in prison now?
  
  --
  rewriting history since 2109
2. Re:Needs a soundtrack by Sique · 2013-09-23 02:22 · Score: 1
  
  Poetical justice for a poet :) His grand posturing was worth nil, he wasn't interesting enough to have anything done about him.
  
  --
  .sig: Sique *sigh*
AGW FRAUD by Anonymous Coward · 2013-09-23 01:56 · Score: 0, Troll

Hey morons why aren't you talking about the GW fraud?
http://www.latimes.com/science/la-sci-climate-change-uncertainty-20130923,0,791164.story
"Since just before the start of the 21st century, the Earth's average global surface temperature has failed to rise despite soaring levels of heat-trapping greenhouse gases and years of dire warnings from environmental advocates. Now, as scientists with the Intergovernmental Panel on Climate Change gather in Sweden this week to approve portions of the IPCC's fifth assessment report, they are finding themselves pressured to explain this glaring discrepancy. "
Imagine that. Scientists being asked to explain why their science doesn't seem to be working out. The nerve.
"Though scientists don't have any firm answers, they do have multiple theories."
Uh huh. They don't have theories, they have wild speculation. Morons.
1. Re:AGW FRAUD by Sique · 2013-09-23 02:57 · Score: 1
  
  Surface atmospheric temperatures are only one aspect of global warming. Other indices have increased: glaciers are still melting, sealevels rise, insurance payments for weather induced catastrophes (an indicator for the number of exceptional weather events) are on the rise.
  There is no fraud. There is just puzzlement why one indicator didn't rise in the last 15 years.
  Peope calling this fraud are fraudsters (or their fanboys).
  
  --
  .sig: Sique *sigh*
2. Re:AGW FRAUD by Anonymous Coward · 2013-09-23 03:04 · Score: 0
  
  Here is an example that will help people relate to why part of the earth are cooler, even though the earth is heating up. Imagine you come home on a cool day and your furnace is off. You turn it on but the registers are closed in the bedrooms. The hot air then all enters only the living,/dinning room/ kitchen areas. This pushes all the cold to the bedrooms so he temperature there actually drops. In fact, while it was cool there before, icicles actually may start forming. The more you turn up the heat, the more the cold is forced into the bedrooms and the icicles keep growing. I'm sure many of you here have seen this effect in your own houses. We have models that demonstrate this too!
  You stupid bunch of fuckwads.
3. Re:AGW FRAUD by Anonymous Coward · 2013-09-23 03:23 · Score: 0
  
  http://climate.nasa.gov/key_indicators#globalTemp
  You are one dumb fuck retaerd.
4. Re:AGW FRAUD by Anonymous Coward · 2013-09-23 03:36 · Score: 0
  
  Except of course it's fucking colder.
  Go wax your weenie.
So I guess meetings now are real knee-slappers. by gestalt_n_pepper · 2013-09-23 01:57 · Score: 2

Especially when discussing inflation 5 years out.

--
Please do not read this sig. Thank you.
That laughing you hear... by Anonymous Coward · 2013-09-23 01:58 · Score: 1

The laughing you hear isn't because they're nervous about inflation. They're nervous that someday you might just figure out the scam. The scam that inflation is just a hidden government tax that they don't even have finite control over.
silkroad forums quick link by Anonymous Coward · 2013-09-23 01:58 · Score: 0

http://www.tinyurl.com/silkroadbitch
1. Re:silkroad forums quick link by Anonymous Coward · 2013-09-23 03:28 · Score: 0
  
  If you are going to use a short URL, use something that actually works. BBCode is probably the best way here.
They should hire more women by K.+S.+Kyosuke · 2013-09-23 02:01 · Score: 0

As far as unfortunate consequences are concerned, more women in Federal Reserve meetings would at least curb the man's laughter rate in those meetings.

--
Ezekiel 23:20
Haha hahaha ha... by MrKaos · 2013-09-23 02:05 · Score: 3, Insightful

hahahah ahaha haha hahahahaha hahahah ahahaha...

--
My ism, it's full of beliefs.
1. Re:Haha hahaha ha... by Anonymous Coward · 2013-09-23 02:27 · Score: 1
  
  Muahahahah Muaahaha Muahaha Muahahahahaha Muahahahah Muaahahaha...
  FTFY
Muahahaha! by Squeebee · 2013-09-23 02:13 · Score: 1

What is this kind of laugh? http://www.youtube.com/watch?v=JfUM5xHUY4M
1. Re:Muahahaha! by Anonymous Coward · 2013-09-23 06:22 · Score: 0
  
  I prefer the Sideshow Bob evil laugh.
Appropriate Image macro ... by Anonymous Coward · 2013-09-23 02:16 · Score: 2, Funny

http://wheresthefridge.files.wordpress.com/2012/06/thumbs_we_told_them_the_wealth_would_trickle_down.jpg

We told them the wealth would "trickle down"!
Coping mechanism or evil cackle? by Anonymous Coward · 2013-09-23 02:20 · Score: 0

Or perhaps one disguised as the other???
other correlations which may not be causation by nimbius · 2013-09-23 02:22 · Score: 1

1. uncontrollable sobbing in the mens room may be attributable to the creation of a monster that no longer seems to respond to any economic theory past or present.
2. exhausted yawns and dosing are considered a sign that regulation is being proposed.
3. flatulence indicates carmimes deli has started using that half-mayo half-mustard topping on its deli subs again...

--
Good people go to bed earlier.
It saves time by jollyreaper · 2013-09-23 02:31 · Score: 3, Funny

It's pretty easy to laugh all the way to the bank when you're already there.

--
Kwisatz Haderach
Sell the spice to CHOAM
This Mahdi took Shaddam's Throne
Let's rise the inflation by 20% by Anonymous Coward · 2013-09-23 02:36 · Score: 0

...and make the assholes suffocate.
It hurts the powerful less than the weakest by MikeRT · 2013-09-23 02:50 · Score: 3, Informative

The powerful can absorb the costs more. If you have $20m in cash and inflation reduces your currency's value by 50% that is a negligible loss for you in terms of being able to live comfortably. However, someone who had only $20k in cash savings has been effectively crippled because the loss to their savings has a much nearer term effect on their quality of life. That is to say, a millionaire can get by on inflated millions in savings and be fine until they die if they live a middle class life style, but a middle class person may have just much of their ability to survive unemployment wiped out or reduced from a year down to 3 or six months.
1. Re:It hurts the powerful less than the weakest by dkleinsc · 2013-09-23 03:27 · Score: 1
  
  However, someone who had only $20k in cash savings has been effectively crippled because the loss to their savings has a much nearer term effect on their quality of life.
  Not necessarily. Using some examples with 2% inflation and real dollars:
  - Your $20000 is now worth $19600, but your $90000 mortgage debt is now worth $88200, for a net gain of $1400. Especially if you have a fixed-rate mortgage, that means the bank assumed a certain level of inflation when determining your interest rate, and you are getting hurt if inflation is actually lower than that.
  - Your $20000 is now worth $19600, but your boss gives you a corresponding raise from $25000 a year to $25500 a year, for a net gain of $100. Large employers in particular tend to factor this into annual reviews and the like.
  - Your $20000 is now worth $19600, and you're an independent contractor, and your customer base was in either of the first two situations. So because they each have $750 more in disposable income, you can increase your prices from $100 to $105 an hour without risking losing customers, so you now go from making $25000 a year to $26250 a year, for a gain of $1250.
  
  --
  I am officially gone from /. Long live http://www.soylentnews.com/
2. Re:It hurts the powerful less than the weakest by FhnuZoag · 2013-09-23 03:50 · Score: 1
  
  That only makes sense in terms of how literally everything affects the rich less. But inflation tends to be less regressive. For the rich, the $20m in cash is also what generates most of your cashflow, as capital gains. Whereas someone with $20K in savings will only be seeing negligible interest payments from that. Instead, his daily life would be determined by his income from his job, which would scale automatically with inflation.
  Deducting the value of a household's home (which scales with inflation) from their net worth, the median US household's inflation-vulnerable wealth is actually $-12,000. In other words, for most people, inflation actually increases their net worth, in real terms.
3. Re:It hurts the powerful less than the weakest by Dunbal · 2013-09-23 04:02 · Score: 4, Insightful
  
  Your tax bracket is suddenly 30% instead of 20%... oh wait, what? People always forget this amazing benefit (for the government) of inflation.
  
  --
  Seven puppies were harmed during the making of this post.
4. Re:It hurts the powerful less than the weakest by i+kan+reed · 2013-09-23 04:21 · Score: 1, Flamebait
  
  "Waah, the last few dollars of my income are taxed at a slightly higher rate, and I'm deliberately ignoring, for the sake of making my argument not completely retarded, that the government does inflation adjust tax brackets quite frequently."
5. Re:It hurts the powerful less than the weakest by Anonymous Coward · 2013-09-23 05:06 · Score: 1
  
  I realize everyone else reading /. is a successful professional, but after going 2 years without a raise (company freeze), when I finally got a COL raise the amount was less than the SNAP my family was receiving, but was enough to make us ineligible. The working poor are generally screwed by inflation.
6. Re:It hurts the powerful less than the weakest by i+kan+reed · 2013-09-23 06:51 · Score: 1
  
  Yes, SNAP isn't treated sensibly, nor is minimum wage, but taxes are. I feel bad for you, and don't vote for the idiots who do that, but that wasn't the point under discussion.
7. Re:It hurts the powerful less than the weakest by dkleinsc · 2013-09-23 07:06 · Score: 1
  
  It sounds like you were screwed all right, but not by inflation:
  (1) Your employer screwed you by freezing salaries. Were executive salaries frozen or cut during the same period? I doubt it.
  (2) The federal government screwed you by making people like you ineligible for SNAP. This was probably because as bad as your life was / is, they got hit by millions of families who are in even worse shape. And, if you didn't see the news, the Republicans in the House just passed a bill to cut SNAP even more, which could mean several million more people like you will get screwed next year.
  Inflation is at worst no higher than it was 25 years ago, and probably much lower, so it is unlikely to be the true source of your problems. Put the blame where it is due: Your boss, and people in Congress who believe that SNAP shouldn't exist.
  
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  I am officially gone from /. Long live http://www.soylentnews.com/
This isn't a story from The Onion? by fsagx · 2013-09-23 02:56 · Score: 1

I had to click through both links just to be sure.
Sure, laugh while you can monkey boy by fustakrakich · 2013-09-23 03:02 · Score: 2

As you quantitatively ease yourselves into our bungholes to the tune of 85 billion a month...

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“He’s not deformed, he’s just drunk!”
Just like Enron by moxley · 2013-09-23 04:27 · Score: 1

Or could it be that they're just assholes who have a better understanding of what a house of mirrored cards our debt based financial system is than most of the public, and (like those douches at Enron who laughed about old lady's power being shut off due to such high bills thanks to their profiteering/racketeering) think it's pretty damn funny that they kite a whole system the way a criminal kites a check.
Keynesian Cognitive Dissonance by bill_mcgonigle · 2013-09-23 04:36 · Score: 3, Insightful

The Keynesian School (along with some Monetarists), which controls The Fed, claims to not believe that printing money ("quantitative easing") can in, in fact, create price inflation (they contend it should get the economy roaring and the opposite should happen). Now Keynes himself didn't believe this, but his disciples think he was mistaken on that particular count.
Meanwhile, the Austrian School economists contend that the money creation is itself the monetary inflation (by definition...) and that price inflation is just an inevitable consequence of monetary inflation (more dollars in the pool means each dollar has less value).
The trouble is, the Austrians take that consequence to say that it means that ultimately the central banks are harmful to the economy, since they're constantly interfering in the transfer of information across the economy by interfering with pricing and interest signals. If you're a central banker, the idea that central bankers are harmful can't be true, so if anything happens that indicates the the Austrians might be right after all, it's going to be a a bit unsettling.

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My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
1. Re:Keynesian Cognitive Dissonance by Hillgiant · 2013-09-23 08:53 · Score: 1
  
  Okay. I'll bite. Where is the inflation?
  
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2. Re:Keynesian Cognitive Dissonance by bill_mcgonigle · 2013-09-23 09:08 · Score: 2
  
  Okay. I'll bite. Where is the inflation?
  It's currently $84B per month, but if you look at the numbers Sen. Lahey's office uncovered, that pales in comparison to the $16T+ in new dollar creation that the Fed secretly engaged in.
  If you mean prices, you can look here for the pre-political CPI-U calculations (no basket substitutions, etc.) or you could look at any commodities index over the time period, or, heck, just go to the grocery store. If you buy food for a family, try pricing ground beef, peanut butter, or a sack of flour, both now and 5 years ago. They're up over 50%.
  
  --
  My God, it's Full of Source!
  OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
3. Re:Keynesian Cognitive Dissonance by Anonymous Coward · 2013-09-23 14:47 · Score: 0
  
  It gets exported to places like China or any place else that is silly enough to think US Treasuries are a safe investment.
inflation is good by Khashishi · 2013-09-23 07:24 · Score: 2

Almost all outputs of human labor are perishable. Grain stored in a silo will rot or get infested. Cars break down. Computers become obsolete. Money should reduce in value too, since money is (or should be) foremost a mechanism for exchange of perishable goods or labor. If money increases in value in time, or even stays the same, this encourages hoarding, since money becomes a better investment than what it supposed to stand for. If you did me a favor ten years ago, it matters to me less than if you did one today, because time erases everything. Your money should also be worth somewhat less today. It's silly to think that the labor or goods of your ancestors should entitle you to goods today, but people think that way about money.
Of course, the rich DO NOT want their money to diminish in value.
1. Re:inflation is good by Anonymous Coward · 2013-09-23 13:20 · Score: 0
  
  But the poor do want their money to diminish in value?
  If you had a choice between saving a deflationary money and holding an inflationary one, all else being equal, which would you choose?
  Would you want sound money to be made illegal? Do you think this would be good for the economy?
2. Re:inflation is good by Anonymous Coward · 2013-09-25 02:06 · Score: 0
  
  Do you really think hoarding physical goods is better for society than hoarding something virtual?
3. Re:inflation is good by Anonymous Coward · 2013-09-26 03:45 · Score: 0
  
  The rich don't store their assets in cash.
  Unfortunately, the rest of us don't have enough money to diversify enough to mitigate the risk. Your best bet is a high-interest savings account or some other safe place to park money where you won't lose a shitload of it to inflation every year.
  What concerns me most though, is that wages don't go up with inflation. So every year, everyone is paid a little less for their work. And now we have a society with an ultra-rich elite, and an ultra big working poor. Its the second gilded age of capitalism.
Laffer Curve? by JeffAtl · 2013-09-23 08:07 · Score: 1

Is this the concept behind the Laffer Curve?
Natural: Economic downturn linked to low inflation by jokkebk · 2013-09-23 22:42 · Score: 1

Alternate explanation would be that usually economic downturn is linked with low inflation, whereas when economy is thriving, inflation is often a concern.

Could it just be that people tend to laugh more when things are going well in general (omitting inflation), and are in turn more somber at hard times?

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http://codeandlife.com
Inflation - one of most misunderstood subjects by Anonymous Coward · 2013-09-24 08:14 · Score: 0

A lot of people always think of the quote from Friedman, when thinking about inflation:
"Inflation is always and everywhere a monetary phenomenon"
Problem is, that's a massive misquote; the full quote is:
"Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output."
Second part sound like some insignificant technobabble? Well it's not. It's the difference between actually understanding inflation and macroeconomics, and being an idiot goldbug, predicting that hyperinflation is perpetually just around the quarter.
So what does that second half of the statement mean? It means that, so long as your are increasing economic-output/GDP when you create and spend money, then you don't have to get inflation (this includes government utilizing money creation as well).
This is where goldbugs and right-leaning economics prime their shÃtbombs filled with fallacious (yet superfically credible) arguments, backed with an ample dose of sneering and condescension (ever notice this is how all controversial economic arguments are debated? like it's about smears/image rather than logic?), and say "money doesn't just grow on trees", "well that didn't work in Weimar-Germany/Zimbabwe", and similar trite garbage.
Just point them back to Milton Friedman (as right-leaning an economist as they come), and his quote on inflation, and point out that so long as you are raising economic-output/GDP enough, it is valid.
Remember: Banks create money all the time when they extend loans - they actually are not reserve-constrained, they are capital constrained (google 'endogenous money'); no hyperinflation here, and there's absolutely no reason it can't be the same with government.
The objection right-leaning people have, is the suggestion that instead of banks having sole undemocratic control over money creation, government should be allowed utilize it as well, to put money creation under democratic control.
This changes the very narrative of politics and economics to such a huge degree, and changes the very idea about what is physically/socially/politically possible in all countries around the world, that it is easily the most important topic there is about anything at this moment in time.
The frustrating thing though, is hardly anybody has a fÃcking clue about it :/ people are so politically polarized on this topic (such as the ensuing posters that will be disparaging me saying "don't know where you learned your economics, *insert trite argument-free put-down here*"), that they are totally blind to how enormously important this issue is, and how it is at the very heart of almost all our political/societal problems.
For a long time now, way more than a century, this has been the most problematic and important topic there is in all of politics - that's my own personal view, but I really don't think that is overstating it at all, given that it greatly affects every living person on the planet, in a huge way.