What would it take for us to rapid price increases?

[Madison320]

This question is for those who believe the gold bugs are wrong. That the US is not going to experience rapid price increases from all the QE. That gold is not going to go up in terms of dollars. That prices are going to remain flat like in Japan.

Here's my question: What would it take to have rapid price increases (in $) here in the US? Currently we're borrowing over a trillion a year, printing a trillion a year, have 0% interest rates and are running 500 billion trade deficits. What would it take to have price increases? 2 trillion annual borrowing? 2 trillion annual QE? 1 trillion trade deficits? Do you believe there is a point at which we can inflate the currency and have it show up in the price of things?

 

[Seraphim]

Most of the informed QE opposers are not saying QE in and of itself will cause import prices to spike.

What will cause that is a sudden loss of confidence in the dollar where demand for those dollars drops quickly.

 

[ninepointfive]

probably the collapse of the petrodollar

 

[Seraphim]

Exactly.

The Euro is the 2nd petro currency. It's the only reason why the enslaved periphery countries want to remain in the Euro. Access to **relatively** cheap oil.

probably the collapse of the petrodollar

 

[FSP-Rebel]

Partially why China has shown positive overtures to BTC recently to their people. Make a boon in the market which will entice more people out of usd. speculation i know

 

[dannno]

Lack of wheelbarrows will keep prices down.

 

[bbjaylive]

Most of the informed QE opposers are not saying QE in and of itself will cause import prices to spike.

What will cause that is a sudden loss of confidence in the dollar where demand for those dollars drops quickly.

Exactly WHAT would cause a sudden loss of confidence?

To the OP, to see troublesome inflation like above 6%, the economy would probably have to be running at full employment (~5% unemployment) and the government would still be running deficits (as % of GDP) as large as they are now. There would be too much money in the economy.

For hyperinflation to happen, something similar to the following scenarios would have to happen:

- In a radical move to reduce black unemployment and 'punish' white America for its 'crimes against people of colour', Obama passes the "Major Reparation Act" and seizes (not without a major civil war of course) all farmland from white owners and redistributes it to unemployed, young, urban black males who have no idea how to manage a farm, thus destroying America's food production, resulting in it having to import most of its food and borrow from the IMF.

- In a sudden change of events, Obama is impeached and thrown out of office for having ties to a Kenyan terrorist group and inexplicably, Sarah Palin is voted in as his replacement in a quick election. Naturally, because her foreign policy staff is comprised of Co-Secretaries of Defense, Michele Bachmann and Rick Santorum and their Christian Zionism, they wage war on every Muslim nation in the world in the defense of Israel. Unfortunately, they are fought against by basically every other nation in the world ending up in World War III. America loses, and has to sign a treaty promising to pay war reparations (mostly in Euros and Yuan). America is also invaded by China and other countries, having its factories seized, destroying its food production.


BTW, QE is irrelevant to price increases, since QE is just accumulating as bank reserves which don't enter the economy for the simple fact that banks don't lend reserves.

 

[cbc58]

BTW, QE is irrelevant to price increases, since QE is just accumulating as bank reserves which don't enter the economy for the simple fact that banks don't lend reserves.

That's what they tell us is supposed to be happening...

 

[Madison320]

Most of the informed QE opposers are not saying QE in and of itself will cause import prices to spike.

What will cause that is a sudden loss of confidence in the dollar where demand for those dollars drops quickly.

In my opinion the physical increase in the money supply is ultimately more important than any psychological effects. Suppose we had a stable monetary base, a balanced budget, balanced trade deficits and no price increases. And then suppose that secretly the fed started doing QE without anyone knowing about it. If the fed secretly doubled the monetary base I believe over time prices would double, even without people knowing about it. The simple fact of twice as much money chasing the same amount of goods would cause prices to double despite there being no psychological effects.

 

[Brian4Liberty]

What would it take to have price increases?

Price of what?

If the economy were allowed to recover and wages were allowed to go up, then there would probably be dramatic increases in things that consumers buy. Housing would really take off.

 

[Madison320]

BTW, QE is irrelevant to price increases, since QE is just accumulating as bank reserves which don't enter the economy for the simple fact that banks don't lend reserves.

What's the point of QE if the recipient of the QE can never spend it?

 

[Danan]

A wave of new investments, suddenly increasing confidence in the economy and/or increasing debt-based private consumption. In short, anything that would lead commercial banks to loan out money to the maximum amount possible (or to make use of the massive new bank reserves, to put it differently).

 

[cbc58]

What's the point of QE if the recipient of the QE can never spend it?

They can create new money out of thin air and issue loans equaling 90% of their reserves, and so on, and so on, and so on.

 

[Madison320]

A wave of new investments, suddenly increasing confidence in the economy and/or increasing debt-based private consumption. In short, anything that would lead commercial banks to loan out money to the maximum amount possible (or to make use of the massive new bank reserves, to put it differently).

My point is that if our budget deficits, trade deficits and QE continue at anywhere near the current pace, massive price increases are inevitable. No amount of positive psychology will stop the price increases.

 

[bbjaylive]

That's what someone should ask Ben Bernanke.

If you want to know about the monetary system and why QE isn't working from a libertarianish/Austrian perspective, you should follow Cullen Roche and Ed Harrison on twitter. You'll find them a lot more palatable than the MMT folks. Try Steve Keen too.

 

[Madison320]

Price of what?

The general price of everything. The result of inflation.

 

[bbjaylive]

My point is that if our budget deficits, trade deficits and QE continue at anywhere near the current pace, massive price increases are inevitable. No amount of positive psychology will stop the price increases.

Trade deficits are not necessarily a bad thing. Thomas Sowell debunked this in "Basic Economics".

 

[Tod]

I heard someone the other day (Jim Rogers?) saying that the reason we have seen relatively low price inflation despite all the QE'ing is because of the way that the money is being added to the economy: from the top down. Consequently it is taking a while to filter down to us mundanes.

 

[Madison320]

Trade deficits are not necessarily a bad thing. Thomas Sowell debunked this in "Basic Economics".

I agree as long as over time the deficits are balanced out with surpluses. But we're running chronic trade deficits. Which relates to another reason we're not seeing price increases. In addition to banks accumulating reserves, so are foreigners. Eventually that money has to buy something.

Let me reask the question, "What good is QE (or any money) if you can't eventually spend it?

 

[ninepointfive]

I heard someone the other day (Jim Rogers?) saying that the reason we have seen relatively low price inflation despite all the QE'ing is because of the way that the money is being added to the economy: from the top down. Consequently it is taking a while to filter down to us mundanes.

yeah,generally its the oil and energy pricing first with the dollar losing value on international markets. this is driving prices higher for the meantime