Re: Money supply, GDP and inflation


"Rumpelstiltskin" <PleaseDoNotReplyByEmail@xxxxxxxxxxx> wrote in message news:t57cj496rcr4n9j2us836iuqfg3f4176tm@xxxxxxxxxx
On Tue, 2 Dec 2008 18:08:29 -0800 (PST), mg <mgkelson@xxxxxxxxx>
wrote:

On Dec 2, 6:39 pm, "Jerry Okamura" <okamuraj...@xxxxxxxxxxxxx> wrote:
"mg" <mgkel...@xxxxxxxxx> wrote in message

news:7db2ce02-a41f-4339-86ce-45516884e9ba@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
On Dec 2, 10:44 am, "Jerry Okamura" <okamuraj...@xxxxxxxxxxxxx> wrote:



> "mg" <mgkel...@xxxxxxxxx> wrote in message

>news:1aabfa27-7c4b-4a53-aa29-d6bff45531f2@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
> On Dec 1, 4:24 pm, Gary <n...@xxxxxxxx> wrote:

> > I've been trying to figure out how much this financial crisis is > > going
> > to cost us retirees. We are approaching unchartered waters so it
> > is all guess work. Here is my theory.

> > First of all we should be grateful if these bailouts put the system
> > back on an even keel. And grandparents had no such luck in
> > 1929-1934. So although we complain, the bailouts will work to
> > our benefit -- if they solve the problem. If they don't ... I don't
> > suppose it will matter.

> > First point I'd like to make is that this is NOT a taxpayer bailout.
> > Taxpayers are not being required to pay this bill. So who will pay
> > it ? We will but through inflation. The only question is :"how
> > much inflation" ? imo, Much.

> > I've been trying to decide how to calculate the (at least ) trillion
> > dollars needed.

> > The GDP for the past few years has run close to $14 trillion. One
> > trillion about 7% of that. I figure at this stage of the game, all
> > our financial assets have just lost at least 7% of their value. I
> > refer to bank deposits, bonds, savings etc. But we will probably
> > need another trillion before it's over. That means our financial
> > assets will lose a total of about 14% in the next few months. Which
> > means that for every $1,000 we now own, we will have $860 by next
> > year. My guess is that (true) inflation will run over 10% in the
> > coming years.

> > And I think we are lucky to get off that easy. At least I hope we
> > are.

> > If anybody has a better idea, I'd like to hear it.

> > Here are some facts on the money supply. I tried, but I cannot
> > figure out the money supply. I do know it's M-1 that will hurt us.

> >http://research.stlouisfed.org/publications/mt/

> >http://upload.wikimedia.org/wikipedia/en/5/51/Currency_component_of_t...

> From what I gather, the $1 trillion you mention is just the tip of the
> iceberg. I've heard total figures for the bailout at about $7
> trillion, for instance. Some of it, presumably, will be coming back to
> the taxpayer, though.

> As you mentioned, the bailout costs will not be paid back by the
> taxpayer and neither will the $11+ trillion national debt. It will be
> paid back eventually by inflation in my opinion and I think retirees
> will be particularly hard hit.

> If not the taxpayer, who is going to pay back the increase in the > debt?
> How
> is inflation going to pay back the increase in the national debt?

I'm not going to pretend that I can predict the US economic future for
a certainty. If I could, I could make a fortune in the stock market.
However, one example of how a government can completely pay off its
debt without raising taxes is to simply print the money and pay it.

yes, the can do that, but that is not the same thing as paying the debt by
inflation.

Printing a lot of money causes inflation.


Printing ten trillion dollars will cause more than inflation, it
will cause the rapid collapse of the dollar to a fraction of its
already-collapsed value. I would hope the fraction would
still be at least half. Printing the money may be our only
sensible option, because I don't see any way of paying this
debt off, and paying the interest on it every year is just a
slow-death approach to a delayed but perhaps unavoidable
day of reckoning.

No the way out of this hole is simple. Don't spend more than you receive for a long enough period of time, and you will have solved the problem, without the need to print more money.

.

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