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Krugman Takes Shiff and Poor Paulites to Task

Discussion in 'BBS Hangout: Debate & Discussion' started by glynch, Dec 17, 2011.

  1. glynch

    glynch Contributing Member

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    I'm sure the faith will remain strong; mere facts or data can't weaken it, but still...
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    December 15, 2011, 4:40 pm
    Inflation Predictions
    Peter Schiff on Glenn Beck, Dec. 28, 2009:

    PAYNE: So, where are you then, Peter, with respect to inflation? Do you think this is going to be the big story of 2010?

    SCHIFF: You know, look, I know inflation is going to get worse in 2010. Whether it’s going to run out of control or it’s going to take until 2011 or 2012, but I know we’re going to have a major currency crisis coming soon. It’s going to dwarf the financial crisis and it’s going to send consumer prices absolutely ballistic, as well as interest rates and unemployment.

    PAYNE: And what does that mean? For people watching this show, what does that mean for the average American?

    SCHIFF: It means their life is going to get a lot more difficult. It means things that they need to buy, things like food and energy, are going to be much more expensive. Ultimately, interest rates are going to rise and their entire standard of living is going to plunge.

    And I’m hoping the government doesn’t respond to this inflation with price controls because that’s going to make it even worse. Now, you’re going to be waiting in long lines to get basic food items or to get energy because there’s going to be shortages. People might be going to the black market.

    PAYNE: You’re talking you’re talking Zimbabwe, Weimar, Germany — I mean, you’re really talking about something like that actually happening in this country.

    SCHIFF: It will happen if we don’t change policies. There is still time to change.

    PAYNE: Right.

    SCHIFF: I mean, I’m running for the United States Senate, so I can try to change that myself. But if we don’t reverse course, if we continue to stimulate, then we will end up with hyperinflation and it will be like Zimbabwe.

    OK, strictly speaking the time hasn’t run out — we could, I guess, see an explosion of inflation next year. But with commodity prices down, wages going nowhere, and the dollar actually strengthening against other currencies, it’s kind of hard to see where that’s supposed to come from.

    Look, the Austrian/Ron Paul types made some very strong predictions about inflation — and rightly, given their model of how the world works. In their version of reality, it really isn’t possible to triple the monetary base without dire effects on the price level. In my version of reality, of course, that’s not only possible but what the model predicts in a liquidity trap.

    So since we did indeed triple the monetary base with nothing much happening to inflation, the right lesson to draw is that their model is all wrong. Unfortunately, I see no hint that anyone in that camp is prepared to consider that possibility
     
  2. bingsha10

    bingsha10 Member

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  3. Space Ghost

    Space Ghost Contributing Member

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    Exactly how was Schiff wrong? This is not to say he's right.

    He's right. Congress stopped them from more massive stimulus
     
  4. Dubious

    Dubious Contributing Member

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    I'm no bigtime economist, but all the money we keep pumping into the American economy, that would normally cause inflation, gets bled over into China so there no excess money supply here, certainly no excess in buying power for working people, so it couldn't give you American inflation.

    Since China is a State controlled economy I guess the State can sit on as much of that money supply as they want to control their inflation rate.

    (eventually the US wold be credit broke and China would have debts it can't collect, I guess)
     
    1 person likes this.
  5. SamFisher

    SamFisher Contributing Member

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    He's talking about monetary stimulus, genius QE1, 2, low interest rates etc.

    Zimbabwe much?

    Edit: oh ha ha, now this is fun,

    Looks like we have a charter member of the Peter Schiff Kreskin Genius FX investment club.

    Perhaps you can take your money out and put it in some sort of blind trust to keep your inherent stupidity from sabotaging your family's future? Which, admittedly, is probably limited to sitting around and eating paste if they share your brilliant worldview.

    HA HA HA. HA HA HA.
     
    #5 SamFisher, Dec 17, 2011
    Last edited: Dec 17, 2011
  6. Johndoe804

    Johndoe804 Member

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    Good post. But there are other factors that generate inflation in particular industries from money creation. Keep in mind that not all of the money created ends up overseas. A lot of the time, the money that we borrow ends up being spent in particular industries as part of legislation and ends up causing inflation in those particular industries. A good example of this is housing and higher education.
     
  7. Kyrodis

    Kyrodis Contributing Member

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    Ding ding ding...we have a winner. :grin:

    Monetary policy cannot flood the economy with new dollars unless there is demand for loans.

    In the current environment, QE is like pushing on a string. Electronically adding a trillion dollars into bank reserves is like is like printing tons of bills and throwing it all down a hole somewhere.

    Since the average household is still deleveraging from massive debt accrued between 2003-2007, nobody's willing to borrow, and very little new money actually makes it into the economy.
     
  8. Johndoe804

    Johndoe804 Member

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    But fiscal policy can, and a loose monetary policy assists a loose fiscal policy in a situation in which the government has to borrow in order to meet their legislative comittments.

    This is turning into a good thread. :)
     
  9. Kyrodis

    Kyrodis Contributing Member

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    True...but I've never seen a convincing argument as to why inflation should be the primary concern right now. I don't claim to be an macro-economic expert, but I believe unemployment and economic contraction are the two main bogeys that need to be dealt with at the moment.

    We're not in a situation where there's too much money chasing too few goods and services. The productive output of our economy didn't suffer a massive collapse due to political instability (like Zimbabwe), nor do we have tons of foreign-denominated debt (like Weimar).

    Inflation hawks never seem to grasp the fact that historical cases of hyperinflation were created as a result of exogenous factors (war, famine, political instability, foreign-denominated debt) that ultimately led governments to out-of-control printing.

    In my opinion, now's not the time to be worried about inflation (especially with the CPI as low as it is). If the government's going to deficit-spend, they need to deficit-spend in a way that actually increases the economy's productive output. The vast majority of the fiscal policy done to date has been little more than lining banks' coffers with more money.

    Meanwhile, households are still deleveraging...
     
  10. tingYAO

    tingYAO Member

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    Hey everybody. Look at my butt.
     
  11. Johndoe804

    Johndoe804 Member

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    This may not be the case at this point in time, but I think that the inflation hawks are hawking because they see the writing on the wall -- the federal government is maintaining a very expensive and politically disruptive foreign policy, and, at its current rate, its financial outlays are unsustainable, and nothing is being done to address the issue. We're seeing Congress spend more with the promise of cutting the rate of borrowing over long periods of time. Without some serious changes to federal revenues and outlays, there will be political instability as entitlement programs become more difficult to fund. It may not be bad now, but if unemployment continues to remain relatively high, and uncertainty continues in financial markets with regard to the European economic situation, and political instability continues in the middle east, the world political situation may not remain so stable. The fact is, you and I can discuss what the ideal policy would be for the given situation, but, despite the apparent lack of bi-partisanship in Washington, the two political factions seem to compromise on increasing expenditures without increasing revenues, while the economic situation of the past decade would have called for a more restrained monetary and fiscal policy, so that we don't find ourselves in our current situation when markets do invariably fall into a slump.
     
  12. Johndoe804

    Johndoe804 Member

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    But you're correct, inflation isn't an immediate worry. The main worry is that we're putting ourselves in a bad situation that will negatively affect the general welfare of the average person.
     
  13. NMS is the Best

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    Paul Krugman is the most totally awesome economist ever!

    [​IMG]
     
  14. SamFisher

    SamFisher Contributing Member

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    Hello, let me introduce you to my friend, Context. If you actually knew him, you wouldn't be as embarrassing as you actually are.

    http://krugman.blogs.nytimes.com/2010/04/05/me-and-the-bubble/

    Have fun investing with P. Schiff. Hope you didn't lose too much shorting UST's this year.
     
  15. jopatmc

    jopatmc Contributing Member

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    It's inflating!
     
  16. larsv8

    larsv8 Contributing Member

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    I am going to mark down this day in my calendar as the first time I noted the word "haters" used in an adult publication instead of the word "critics"
     

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