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Thread: Part III: Inflation, Gold, Printing Money & Productivity Explained

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    Default Part III: Inflation, Gold, Printing Money & Productivity Explained

    Part III: Inflation, Gold, Printing Money & Productivity Explained

    The Story So far.....
    http://www.stripperweb.com/forum/sho...d.php?t=111950
    http://www.stripperweb.com/forum/sho...d.php?t=112027

    So, X's economy is operating at full equilibrium of 66 Baby Sits / Evening.
    In the next meeting, some other smart woman comes up with a new service, Breakfast and Lunch Catering. Now X has also wisened up and will use the same strategy of 1 home catering to 2 families.
    With the same logic, X can now do 66 Catering / Day, and by now you would have guessed that X needs to print another 66 coupons for this. Assuming Catering and Baby Sitting have the same value

    X's new GDP is 132 Baby-Sit-Catering / Day and to sustain this X has printed a total of 132 coupons

    Takeaways:
    * Whenever there are new products and services created, Fed needs to print money
    * Look around and think of the Products and Services which are there now and compare it to 20 years ago
    * If Strip Clubs come up with the idea of Champagne rooms, Fed needs to Print money
    * Every day, Americans are coming up with new products and services and fed needs to print money
    * Ideas that were used in other products can be used in new products making the whole economy efficient and more productive and Fed needs to Print money

    Valentine's Day Comes to X
    On Feb 14th, X's community suddenly sees a huge demand for Baby Sitting. The demand is so huge that some people are willing to pay 2 coupons for a one Baby Sitting.
    In other words, the Baby Sitting Services has inflation. Also, since coupons are being used for Baby Sitting, on Feb 14th, Catering suffers a huge recession and its prices drops to almost fraction of a coupon
    X's GDP on Feb 14th, 66 Baby Sits and 66 Food Catering. Although X is operating at Full Capacity, it has suffered a temporary inflation

    What should X do?
    Answer: Nothing.

    Feb 14th is a Volatile Pricing day driven purely by supply and demand. When Prices are affected by Supply and Demand, Fed should do nothing

    When Fed separates Volatile prices measuring Inflation, this is exactly what they are doing.
    If you read Shady Web-sites written by clueless idiots, they say it is a conspiracy theory to hide true inflation.

    If the Price of something goes up, Either new Businesses enter to make profit, driving the price down, or, people stop buying that stuff, driving the price down
    So, The Next Feb 14th,
    i) Families may think it is profitable to Baby Sit and more people will Baby Sit driving the price down.
    ii) Someone may come up with a smart idea of one family hosting 10 kids driving up the capacity and driving the price down

    That is, X should allow the Market Forces to work its magic and shouldn't interfere. In a Free Market, Prices are the biggest
    indicators/influencers for new ideas and new investment and usually shouldn't be touched with

    Bottomline, It sucks that Gasoline prices have gone up. But, its not Fed's Job to control that. If Gas prices have gone up permanently,
    either, people will consume less gasoline or someone will come up with alternatives. Yes, there is inflation in the economy. But, this inflation
    is not induced by Fed. Also, Supply Demand Inflation never leads to Hyperinflation (the dooms day scenario predicted by Shady web-sites)

    Going Back to the previous example, If there are only 132 coupons and everybody uses all their coupons for Baby Sitting, Prices have only doubled and that is the maximum price it can reach

    So far, you've been introduced to Inflation caused by Supply and Demand and this is the kind of Inflation Fed doesn't worry about and hence it removes it from "Core Inflation"
    I wanted to Introduce the Inflation that we should be really worried about. But the post is already long
    So, Coming Up The Other Inflation, Hyperinflation and Stagflation

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    dont humor them by trying to analyse it logically
    its a sociopathic construct

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    It sucks that Gasoline prices have gone up. But, its not Fed's Job to control that. If Gas prices have gone up permanently,
    either, people will consume less gasoline or someone will come up with alternatives. Yes, there is inflation in the economy. But, this inflation
    is not induced by Fed.
    Again the global nature of the economy and commodities, the relative importance of currency exchange rates etc. is being totally ignored ...



    (snip)"And now that we're in an economic downturn, or maybe even a recession, what does that have to do with it?
    When you have weaker economic growth, the Fed usually lowers interest rates—one of the things that lowers the value of the dollar.

    So how does a falling dollar contribute to rising oil prices?
    It's a little bit complicated. Oil is priced in dollars on the world market. When the dollar is weaker, foreign currencies are stronger, by definition. That means people in other countries can buy more oil for the same amount of money. So let's assume oil is $100 per barrel, and $100 is equal to 70 euros. If the euro appreciates against the dollar by 10 percent, then instead of 70 euros it will take only 63 euros to buy one barrel of oil. So that oil becomes cheaper to foreigners, and they can buy more.

    And do they buy more?
    Usually, yes. There are other factors obviously, like in many countries taxes are such a big portion of the cost of oil that the savings aren't that dramatic. But it would still make sense to buy more if the price in your own currency goes down.

    So for those of us stuck with the dollar, why does that make the price of oil or gasoline go up?
    As people in other countries buy more, demand rises, and it drives up the price in dollars, which, again, is how the price of oil is denominated on world markets. So in the United States it looks like the price is going up sharply, in dollars, while in other countries it's actually going up by much less or staying about the same."(snip)


    ... arguably the Fed is about the ONLY domestic 'controller' of the US dollar's exchange rate value, via Fed interest rate policy, via Fed money printing policy etc.

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    Quote Originally Posted by Melonie View Post
    Again the global nature of the economy and commodities, the relative importance of currency exchange rates etc. is being totally ignored ...
    Its not being ignored. Its just that you are putting way too much importance to it than it actually requires attention to.

    Dollar rate matters only if we are importing. But US is an importer and an exporter and net/net things usually cancel out.

    Also, the biggest ticket items for a US consumer is
    i) House (Exchange rate don't matter)
    ii) Education (Exchange rate don't matter)
    iii) Cars, Appliances & Gadgets (Mostly imports, but prices have consistently fallen for many years)

    Having said that after explaining inflation, I'll explain foreign exchange & trade

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    Dollar rate matters only if we are importing. But US is an importer and an exporter and net/net things usually cancel out.
    news flash ... the US is running a sustained deficit to the tune of about 3 billion dollars per DAY. There isn't any equilibrium on the horizon ... and particularly so where oil and now food are concerned ... unless of course you're advocating drilling for oil in the ANWR or abandoning ethanol fuel programs so US farmers can grow a surplus of food for export again.

    In regard to housing, second news flash. Lumber, vinyl siding (made from oil), copper pipes, concrete for foundations, (energy intensive) window glass etc. are all based on the 'global' pricing of commodities. Thus exchange rate does indeed matter in regard to the US dollar cost of new housing ! However, market pricing of existing housing is another story entirely.

    In regard to education, you are correct that exchange rate doesn't matter if you have cash ! However, if you are looking at student loans, Fed interest rate policy matters a whole lot.

    In regard to cars and appliances at least, the same globally priced commodities issue definitely applies to the steel / stainless steel / copper / glass that are used in their manufacture. There is some truth to your statement that prices have consistently fallen ... however this has been driven by foreign manufacturers exporting into the USA at often gov't subsidized pricing, and resulted in US auto and appliance manufacturers being forced to sell at break-even or at a loss to attempt to retain market share. Now, however, thanks to the falling US dollar exchange rate, the German and Japanese exporters are facing shrinking or non-existant profit margins as they attempt to hold the US dollar pricing of their merchandise steady while their production costs denominated in Yen or Euros skyrockets in comparison. Ironically, even US based manufacturers are now being 'stung' as their offshore production facilities experience rising production costs denominated in currencies other than the US dollar.



    (snip)"LOS ANGELES — The falling dollar is forcing automakers to scramble for ways to maintain profit margins on cars they import from Europe, Asia and Canada.
    Some, like General Motors (GM), find themselves in the odd situation of limiting the number of models they bring in from overseas subsidiaries even though they might be able to sell more in the USA.

    Foreign makers, meanwhile, are considering producing more models at U.S. plants or building new factories. Some even are increasing production here to ship more U.S.-made cars overseas.

    "The pressure will be for the dollar to continue falling," says Joerg Dittmer, senior industry analyst for consultants Frost & Sullivan. The result will be "more domestically made cars."

    Even as GM was introducing variants in its Australian-made Pontiac G-8 at the New York auto show last week, President Fritz Henderson told reporters in Los Angeles that the key to profitability is to make sure it "carefully controls the volumes" of such imports."(snip)

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    What happens to the US dollar if this comes true?:

    "The U.S. Treasury will default on contracts with investors, mostly individuals, who loaned the government money in 1979 on the agreement that they would receive 9.125 percent interest every year until their bonds mature in the year 2009. "

    full article http://www.rense.com/general48/bond.htm

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    Quote Originally Posted by Adelina View Post
    What happens to the US dollar if this comes true?:

    "The U.S. Treasury will default on contracts with investors, mostly individuals, who loaned the government money in 1979 on the agreement that they would receive 9.125 percent interest every year until their bonds mature in the year 2009. "

    full article http://www.rense.com/general48/bond.htm
    There are shady web-sites and there are scum web-sites. This one belongs to the category of Scum.

    Investors bought Callable Bonds and Callable Bonds are....... get this...... Callable. Gasp!!! The horror.

    Seriously, you are what you read

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    ^^^ yes there is a difference between a high interest rate investment vehicle being purchased by an investor with the up-front knowledge that the investment vehicle can be 'repurchased' before maturity (i.e. your callable T Bonds ... where the investor does get his money back earlier or later), and a high interest rate investment vehicle being purchased by an investor without the knowledge that a gov't bailout program may force that investor to accept both a lower interest rate and less total payback WITHOUT the original investment being 'repurchased'.

    In the first case, the investor gets to keep whatever high interest payments they have already received up to the point where the T Bond is 'repurchased' by the US gov't ... also at which point the investor receives cash payment from the US gov't for the full value of the underlying T Bond and is free to reinvest that money elsewhere. However, in the second case, the investor does NOT get the full (promised) value of the underlying investment vehicle back to reinvest. They are simply stuck receiving a lower interest rate than they originally signed up for, and stuck receiving fewer total dollars in payback than they signed up for.

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    Quote Originally Posted by xanfiles1 View Post
    There are shady web-sites and there are scum web-sites.
    Are there no good ones? Do all websites fall into either 'shady' or 'scum'?

    Does this mean that in future we can only post links here to stories from the BBC, Economist, FT or CNN? Or are they bad too?

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    Quote Originally Posted by StuartL View Post
    Are there no good ones? Do all websites fall into either 'shady' or 'scum'?

    Does this mean that in future we can only post links here to stories from the BBC, Economist, FT or CNN? Or are they bad too?
    If you have time to read,
    Have,
    Basic Math/Probability/Statistics (+Time Value, Present Value)
    Basic Accounting (How to detect where Cash gets spent and earned + Profitable growth)
    Basic Economics (Opportunity Costs, Sunk Costs and of course the Baby Sitting Co-op model)
    Human Biases (Recency Bias, Overconfidence bias, Dumb luck bias......)

    Although logic can't be thought, many shady web-sites don't even pass basic logic tests

    WSJ, FT, NPR, BBC Washington Post, NYT are all good (CNN, FOX, NBC, ABC are mainly driven by ratings and mostly for the mass ).
    WSJ articles are especially very thorough.

    Above all do your own thinking.

    Shady web-sites are written by a single person with an agenda. He will not have time to do actual research, but just rant off something in a drunken stupor or a fit of anger. It may have a Soap Opera value to it, and human beings inherently love the tabloids, but don't get your knowledge from those web-sites.

    You have so few minutes to spare in a day and why do you have to waste it by reading lies and misinformation and mostly whinings by idiots?

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    ^^^ personally, I find that websites that you claim provide 'lies and misinformation' actually tend to provide 'heads up' subject matter which allows me to stay ahead of the curve. Case in point, Russ Winter ...



    In a nutshell, every MBA financial analyst has a rather thorough knowledge of Math / Probability / Statistics / Accounting / Economics. However they also typically have their own biases, either politically motivated or employer motivated. And most operate 'inside the SAME box'. The latter seems to explain why financial analysts have been so consistently WRONG in trying to forecast or adequately explain recent economic developments !

    If you want speculative 'misinformation', here you go ! . However, that sort of speculative 'misinformation' tells me it's probably time to load back up on my gold holdings !

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    Quote Originally Posted by xanfiles1 View Post
    Above all do your own thinking.

    Shady web-sites are written by a single person with an agenda. He will not have time to do actual research, but just rant off something in a drunken stupor or a fit of anger. It may have a Soap Opera value to it, and human beings inherently love the tabloids, but don't get your knowledge from those web-sites.

    You have so few minutes to spare in a day and why do you have to waste it by reading lies and misinformation and mostly whinings by idiots?
    As a single person with more than one website, I can say that I do all my article preparation and writing in a drunken stupor and / or fit of anger. I find that the only way to write coherently.

    The funny thing, which I think you may have missed, is that there is a wealth of knowledge in the financial newsletter industry. Smart people are all over the place and some of them can write! Even more amazingly, some of them are smart, can write and are not employed by a merchant bank - so they can offer their opinion without worrying about losing their job.

    If only I were employed by a merchant bank, sigh... Then I wouldn't worry about anything because of my seven figure annual bonus.

    Next you'll be telling us that the only true information source is the government...

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    Quote Originally Posted by StuartL View Post
    As a single person with more than one website, I can say that I do all my article preparation and writing in a drunken stupor and / or fit of anger. I find that the only way to write coherently.

    The funny thing, which I think you may have missed, is that there is a wealth of knowledge in the financial newsletter industry. Smart people are all over the place and some of them can write! Even more amazingly, some of them are smart, can write and are not employed by a merchant bank - so they can offer their opinion without worrying about losing their job.

    If only I were employed by a merchant bank, sigh... Then I wouldn't worry about anything because of my seven figure annual bonus.

    Next you'll be telling us that the only true information source is the government...
    When did I claim Merchant Bank employees are smart?

    This is also in reply to Melonie's comment too. MBA's are too involved in day to day Wall Street activities to
    i) Get the Big Picture
    ii) Go Back to Basics
    iii) Remove themselves from the Herd
    iv) Not get Pressured from Mass Idiotic Views

    Analysts and Stock Brokers are the worst stock pickers.

    Finally, Smart Value Investors who have employed Basic Math/Accounting/Economics/Probability/10-k reading and don't read shady web-sites have consistently beaten the market.

    Here's a big research data for you
    Newsletter Editors on an average have severly underperformed market. That means you have to pick the Best Newsletter Editor. That means you have to do more research. Instead of researching Newsletter Editors, you are much better off researching companies and Investing in them

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    Quote Originally Posted by xanfiles1 View Post
    When did I claim Merchant Bank employees are smart?

    This is also in reply to Melonie's comment too. MBA's are too involved in day to day Wall Street activities to
    i) Get the Big Picture
    ii) Go Back to Basics
    iii) Remove themselves from the Herd
    iv) Not get Pressured from Mass Idiotic Views

    Analysts and Stock Brokers are the worst stock pickers.

    Finally, Smart Value Investors who have employed Basic Math/Accounting/Economics/Probability/10-k reading and don't read shady web-sites have consistently beaten the market.

    Here's a big research data for you
    Newsletter Editors on an average have severly underperformed market. That means you have to pick the Best Newsletter Editor. That means you have to do more research. Instead of researching Newsletter Editors, you are much better off researching companies and Investing in them
    Where do I start???

    "Analysts and Stock Brokers are the worst stock pickers." Maybe, maybe not. Your evidence is what exactly? And I note that all of your comments always apply to ALL. All website owners are scum or shady. All analysts can't pick stocks, etc.

    "Finally, Smart Value Investors who have employed Basic Math/Accounting/Economics/Probability/10-k reading ... have consistently beaten the market." You will probably find both Mel and I agreeing with you on this. We are both probably united in disliking the tone with which you tell us all this though. Your written style is - frankly - rude and very arrogant.

    I don't propose to give stock picks. I never have and never will. I do my direct investment for me and that is it. So there is no track record of mine to monitor, praise or criticise. Bearing in mind that I am in this business, that is how it should be. Unless I run a fund, I should keep my picks to myself. If you want to hear them, you should pay for them.

    However, you tell us all this with an attitude of "I know it all and I am the greatest". Maybe you are. We don't know each other. So perhaps. But probably, you are not, that is the statistical near certainty.

    Therefore, may I respectfully ask that unless you plan to publish your own picks and results, you quit telling all the rest of us how crap we are when compared to your all seeing eye and all knowing mind.

    I and probably most of the others that help in the DD come here, to help. Not to pick fights. I don't want to argue. The trouble is that unless someone sets you straight, some of the 'economic theory' you have been dispensing will be believed by the readers here who are new to the area.

    I know that I always pick holes in your posts - well not always, but often - but I do this largely because you take the tone that whatever you type is the truth. In most areas of life, and certainly economics, a situation is never black or white. It is always a series of possibilities. You seem to discount any viewpoint other than your own as stupid / scum / shady etc.

    That can't actually be your real opinion can it?

    That the entire world is wrong. Except for xanfiles?

    From here, I plan to bow out of this thread. It will probably be for the best...

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    Default Re: Part III: Inflation, Gold, Printing Money & Productivity Explained

    Quote Originally Posted by StuartL View Post
    Where do I start???

    "Analysts and Stock Brokers are the worst stock pickers." Maybe, maybe not. Your evidence is what exactly? And I note that all of your comments always apply to ALL. All website owners are scum or shady. All analysts can't pick stocks, etc.

    "Finally, Smart Value Investors who have employed Basic Math/Accounting/Economics/Probability/10-k reading ... have consistently beaten the market." You will probably find both Mel and I agreeing with you on this. We are both probably united in disliking the tone with which you tell us all this though. Your written style is - frankly - rude and very arrogant.

    I don't propose to give stock picks. I never have and never will. I do my direct investment for me and that is it. So there is no track record of mine to monitor, praise or criticise. Bearing in mind that I am in this business, that is how it should be. Unless I run a fund, I should keep my picks to myself. If you want to hear them, you should pay for them.

    However, you tell us all this with an attitude of "I know it all and I am the greatest". Maybe you are. We don't know each other. So perhaps. But probably, you are not, that is the statistical near certainty.

    Therefore, may I respectfully ask that unless you plan to publish your own picks and results, you quit telling all the rest of us how crap we are when compared to your all seeing eye and all knowing mind.

    I and probably most of the others that help in the DD come here, to help. Not to pick fights. I don't want to argue. The trouble is that unless someone sets you straight, some of the 'economic theory' you have been dispensing will be believed by the readers here who are new to the area.

    I know that I always pick holes in your posts - well not always, but often - but I do this largely because you take the tone that whatever you type is the truth. In most areas of life, and certainly economics, a situation is never black or white. It is always a series of possibilities. You seem to discount any viewpoint other than your own as stupid / scum / shady etc.

    That can't actually be your real opinion can it?

    That the entire world is wrong. Except for xanfiles?

    From here, I plan to bow out of this thread. It will probably be for the best...
    Stuart,
    Its called messaging, because first you have to give direction and only later engage in discussion. Thats why Republicans win debates over Democrats (At least in the eyes of mass, not the elite)

    Republicans look arrogant, but they give direction(even though it is wrong). The Democrats, like Melonie's posts, go into a lot of details and in the process lose the sense of direction

    Here's my pick, a mix of World 1000 Stocks & World Bonds (80%, 20%)

    Look, how arrogant I'm at picking the split. If I say, "anything you are comfortable with", the end user goes in a loop of deciding that mix (75-25? 50-50? 60-40?) and will never invest

    "All web-sites are scum". That message makes sure user sticks with WSJ/FT and only after they gain understanding themselves will they look for other web-sites.

    "Not All Web-sites are scum, there are some hidden gems written by very good authors" leaves the end user confused and stressed because the burden of finding those good sites is on them and Instead of reading fantastic articles on WSJ, they go about finding those hidden gems or don't read anything at all.
    And by mere probability, they end up reading shady/scum web-sites

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