The spending bills are passed and the money supply is already going to increase. That's a matter of fact.

Now the problem on everyone's mind should be what Pres. Ford called "Public Enemy #1" in 1974: Inflation.

What do we do now to encourage the savings we need? Do we need a grassroots movement? Is this the time for the "live simple" crowd to shine or are they just gonna go along with the massive spending in hopes that it solves everything?

As silly as the WIN program was, it might be time for us to reconsider it now unless we're prepared for massive inflation by the middle of the next decade.



This isn't a thread to debate what has already happened (spending bills, TARP, etc), this is a thread to discuss what is going to happen and how to stop it (if possible?).

[Edited on March 10, 2009 at 2:19 PM. Reason : .]

3/10/2009 2:15:17 PM

Quote :

"What do we do now to encourage the savings we need? "

..... have you seen the savings rates lately?

3/10/2009 2:25:30 PM

Quote :

"This isn't a thread to debate what has already happened (spending bills, TARP, etc), this is a thread to discuss what is going to happen and how to stop it (if possible?)."

It is possible for you to stop it...but only if your last name is Bernanke.

Inflation is, always and everywhere, a monetary phenomena.

Quote :

"..... have you seen the savings rates lately?"

Around 5% last time I saw, up from very recent lows of -1 to 1%. And that's of disposable income, not gross.

It is still pathetically low.

[Edited on March 10, 2009 at 2:41 PM. Reason : a]

3/10/2009 2:29:46 PM

Quote :

"What do we do now to encourage the savings we need? Do we need a grassroots movement? Is this the time for the "live simple" crowd to shine or are they just gonna go along with the massive spending in hopes that it solves everything?"

I think as Friedman and Volker both demonstrated in their own ways, the problem is in the price of credit (i.e., as others, including Friedman put it, a monetary phenomena). We've been living on 10+ years of artificially cheap credit, creating an asset bubble and depressing the savings rate (i.e., what's the return on delayed gratification?)

I think the answer is going to ultimately be very painful adjustments to the price of credit - i.e., interest rates. I don't necessarily think any crash-course WIN program is going to do it - inflation wasn't tamed until Volker cracked down inflation through raising interest rates, and with them hovering around 0% now, I doubt they'll be tamed until such a move here too.

For those unfamiliar with WIN:

http://en.wikipedia.org/wiki/Whip_inflation_now

[Edited on March 10, 2009 at 2:42 PM. Reason : WIN]

3/10/2009 2:40:50 PM

Step 1) Toss Nancy Palosi out of congress.

[Edited on March 10, 2009 at 2:46 PM. Reason : >.<]

3/10/2009 2:46:39 PM

At least on a personal level, it seems like when you know inflation is coming, better to invest or spend, rather than save. There's bound to be something out there that is not going to get less valuable as fast as the dollar.

As far as when inflation will occur, I believe Friedman had some charts that showed increases in money supply - growth vs. inflation - seems like it was something like a 1-2 year delay.

3/10/2009 2:52:12 PM

Quote :

"I think the answer is going to ultimately be very painful adjustments to the price of credit - i.e., interest rates. I don't necessarily think any crash-course WIN program is going to do it - inflation wasn't tamed until Volker cracked down inflation through raising interest rates, and with them hovering around 0% now, I doubt they'll be tamed until such a move here too."

That's the obvious historical answer to any inflation problem, and unfortunately I think we're gonna have to expect it in the next decade, hopefully not sooner rather than later. Sooner would likely mean that we're already experiencing hyperinflation due to TARP 5: This Time It's Personal or something.

The savings rate is good right now, but the gov. savings rate needs to be much lower, and with the debt we started with post-War On Terror, it was already damn near impossible to get it to something responsible. I like spending on stuff like infrastructure and unemployment, but we probably need to put more money back into people's hands right now, which will likely be saved by them.

The more we spend now, the harder SS/Medicare reform will be later, too.

Looking at this from a historical perspective, it took about a decade for the spending of the 60s to spur the all-on inflation of the 70s, but part of that was due to price controls and the eventual correction.

[Edited on March 10, 2009 at 4:06 PM. Reason : .]

3/10/2009 4:05:30 PM

Quote :

"TARP 5: This Time It's Personal or something."

Tarp VI: Son of TARP
TARP VII: Never Return to TARP Lake
TARP VIII: TARP Takes Manhattan (Or was that TARP II?)
TARP IX: TARP Goes to Hell

3/10/2009 4:28:46 PM

TARP X: Resurrection

In a future marred by civil war and the abolition of democracy, High President Barack Hussein III orders Cyborg Ben Bernanke to unleash the self-aware TARP X program

3/10/2009 4:53:21 PM

I think we are more worried about deflation right now

3/10/2009 5:04:33 PM

I say Raise interest rates

I would gladly increase my personal savings if they were in the 8-10% range

3/10/2009 5:25:25 PM

Quote :

"Raise interest rates I would gladly increase my personal savings if they were in the 8-10% range"

Yep. When you get a better return on borrowing money and investing it rather than saving money and investing it, people are going to borrow rather than save.

3/10/2009 7:32:13 PM

isn't the point of savings that banks can make more money from investing your money. thus they actually have a sustainable business?

3/10/2009 8:57:26 PM

when people are not repaying their loans than banks can not afford to pay interest on savings.

3/10/2009 9:13:19 PM

Wearing a button is about as effective as anything Tax-cheat Timmy is going to come up with.

3/10/2009 9:23:48 PM

glad to see you're filling hooksaw's shoes in the childish nicknames department for anyone we don't agree with.

That way, we're sure to keep the discourse at a 4th grade level.

3/10/2009 9:32:40 PM

Quote :

"when people are not repaying their loans than banks can not afford to pay interest on savings."

this

Quote :

"Wearing a button is about as effective as anything Tax-cheat Timmy is going to come up with."

thank you for your input

3/10/2009 9:50:44 PM

Quote :

"I think we are more worried about deflation right now"

Prawn is consistently the only guy with a proper clue about the economy.

3/11/2009 8:37:01 AM

deflation isn't all bad.

if you have had a high savings rate, it's actually good.

3/11/2009 8:40:58 AM

So, what is it? Deflation or inflation?

Oh, and the savings rate... if we have high rates of inflation and terrible interest rates what's the point of saving? I guess a slow bleed is better than instant death in the market.

It would be nice to see the interest rates go back up, they've dropped at least 2% in the last year or so where I bank.

3/11/2009 8:55:20 AM

its inflation

Deflation is a myth invented by the keynesians to get you to buy more shit that you dont need and cant afford

3/11/2009 9:08:09 AM

Yeah, I'm certainly not feeling any deflation. Grocery bills are up about 25%, none of my other bills are shrinking either. Plus Cary won't be happy until my water bill is $75/month - regardless of actual water consumption.

3/11/2009 9:15:51 AM

Quote :

"Grocery bills are up about 25%"

Over what time period? We did have inflation and it was at pesky levels through a lot of last year, but we're in the middle of a reversal on that trend

http://www.nytimes.com/2009/01/02/business/02dairy.html

Quote :

"As American dairy farmers increased their shipments of powdered milk, cheese and other dairy ingredients to foreign markets, their incomes rose. And the demand surge helped drive up the price of milk for American families. The national average for whole milk peaked at $3.89 a gallon in July, up from an average of $3.20 a gallon in 2006. But now, demand for dairy products is stalling amid a global economic slowdown and credit crisis, even as supplies have increased. The result is a glut of milk — and its assorted byproducts, like milk powder, butter and whey proteins — that has led to a precipitous drop in prices. The price of powdered skim milk, used in infant formula, dairy products and processed foods, has fallen to roughly 80 cents a pound today from about $2.20 in mid-2007. Other dairy products have declined as well. Whole milk at grocers has not declined as rapidly as wholesale powdered milk, but it has dropped to $3.67 a gallon, down nearly 6 percent from the peak. "

I can post in a host of other links about how deflation in the near term is what we need to look out for first, then we can worry about inflation down the road.

3/11/2009 9:25:19 AM

^Over the past year. I'll let you know when the grocery bill goes down. Don't look for that post any time soon. When the price of the raw materials changes the resulting price drops always take a lot longer than a resulting price increase.

Wouldn't be all that surprised if the raw materials used in food production are back up before any significant price reduction trickles down to the consumer.

3/11/2009 9:35:19 AM

^ Actual monetary inflation ticks up, not down. As such, one should expect an upward bias in food prices as the wages of the workers producing/shipping/handling the food increases over time.

3/11/2009 10:33:56 AM

Quote :

"when people are not repaying their loans than banks can not afford to pay interest on savings."

Banks can't afford to pay interest when depositors withdraw due to media induced panic.

3/11/2009 10:53:43 AM

Hey, don't you owe me $100?

3/11/2009 11:23:02 AM

I think we ahve been seen inflation on necessities and for services (haircuts, Dr. Appts)

but deflation for raw material commodities (gas, copper, fertilizer) and for luxury non-essential goods (cars, clothes, luxury products, etc)

3/11/2009 11:27:24 AM

Quote :

"Step 1) Toss Nancy Palosi out of congress. "

3/11/2009 12:50:57 PM