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Friedman's is exactly the model I have in mind. To some extent we
do see productivity gains "passed along" to the consumer.
Market forces however do come into play and without an expansion of money
supply in accordance with productivity gains we experience a choking off
of capital available for growth (of both inovation and production) as
more and more successes (that have created and benfited from the
productivity gains) compete for the same limited capital pool for their
own growth.
The federal reserve bank in San Francisco used to have a game in their
lobby (I don't know if they still do) where the visitor could adjust
knobs for interest rates, money supply, and taxes and then watch the
effect on the economy in terms of inflation and productivity. Their
algorithm included lag time from the time of change until the effects
rippled thru the economy and reflected the ripples thru the feedback
loops. It was quite a challanging game to maintain growth and avoid
collapse while fiddling with the knobs. Only very slight tweaks
used sparingly from time to time (like flying a helicopter) were
ultimately successful.
Boater805
At 06:32 AM 5/18/2008, you wrote:
This is an interesting
discussion and one in which I'd like to join with
my take.
Milton Friedman stated that inflation is and always will be nothing more
than a monetary phenomenon. I believe that this makes a lot of sense.
It hearkens back to the simplicity of the barter system of
trade.
You bring up an important point, namely, that productivity gains can
offset inflationary growth in the monetary base. I believe this makes
sense also. If we can produce more stuff with fewer resources, then the
price of that stuff should come down relative to everything else.
Right? If we increase the money supply by the same amount, give or take
a bit, then I would think that price reductions from productivity
improvements would be erased. Perhaps remaining about the same as it
were before the inflation of the money supply. So, why is that maneuver
by central bankers necessary at all? Why can't consumers just keep the
benefits derived from these productivity improvements and passed along
to the masses, creating a higher standard of living for all?
What am I missing?
Just my thoughts.
Dan
hostmaster wrote:
>
> Ira's post in thinly veiled nonsense. Yes, the Saudi's still have
> almost 2 million bbl/day reserve output available. However, the
> Saudis CORRECTLY point out that an increase in production by them
> would not have any material effect on the markets. The markets
> themself are setting the price largely due to speculation in futures
> trading (the sort of thing this list is really supposed to be about
> but that Ira's article totally ignored to comment upon). A look at
> the price fluctuations compared to net changes in inventories shows
> they are decoupled and therefore therefore we can conclude price is
> not currently linked to supply/demand. In fact the net inventory
> changes in crude oil (both in the US and globally) show that prices
> are rising while inventories are rising. Rising inventories indicate
> a declining demand (or at least demand in excess of supply). Either
> way one wishes to interpret it the conclusion is that price is
> decoupled from supply and demand and an increase in supply would
> merely increase inventories without moderating prices.
>
> Likewise, Ira's rant goes on about inflation and interest rates and
> money supply expansion without discussing productivity. While I
won't
> attempt to argue that productivity gains completely offset some of
the
> money growth supply factors, the fact Ira completely ignores that
part
> of the equation again exposes his tirade for what it is (as opposed
to
> any kind of sound financial analysis). I have been a member of this
> list long enough to know that Ira is not a fool nor unaware of these
> counterbalancing economic factors. Therefore I can only conclude his
> article was authored deliberately in a way to justify a viewpoint
> rather than to provide a financial analysis of any kind. That's just
> my opinion but if you go back and reread his tripe in detail I think
> you will find it funny instead of freightening.
>
> Boater805
>
> At 11:55 AM 5/17/2008, you wrote:
>
>> First of all, I seriously doubt if the Saudi's can raise output.
I
>> strongly suspect they are at full production now.
>>
>> As to filling up the reserves, Bush is hell bent to keep the
reserves
>> up rather than use them for a short term solution to high
prices. (A
>> solution which would do little to help the price problem
anyway).
>>
>> Ira's post offers some sobering thoughts but what would happen
if oil
>> came down? What if it came down to $80? And if we stopped
promoting
>> the insane idea of bio fuels driving up food prices? If grain
came
>> down 50% and meat 30%? Then what would the consumer situation
look
>> like? Science fiction? I don't think so. I think the whole
ethanol
>> craze is being seen for just what it is, crazy. A fuel that
costs
>> more to make, pollutes worse than fossil fuels, and drives
food
>> through the roof is certainly not the answer. Atomic energy
and
>> hydrogen fuel cells are where I'm putting my energy dollars from
this
>> point forward. Solar and wind will be minor players, especially
for
>> home use but they do little or nothing for transportation and
large,
>> commercial purposes.
>>
>> So, a lot of the problems can be solved by simply forgetting
about
>> ethanol and I feel there is a large amount of speculation in
oil
>> now. We moved from 100 to 125 in days but demand most
certainly
>> didn't increase by 25% in days. Who knows, maybe things will
work
>> out after all.
>>
>> Bob
>>
>> At 01:46 PM 5/17/2008, you wrote:
>> >And strangly Mr.Bush justifies Saudi for not raising oil
outputs,not
>> >only that he was not in a favour of stopping filling oil
reserve
>> >near Gulf of Mexico...very strange attitude and this has
been
>> >discussed among all leading newpapers round the world.
>> >--- In
realtraders@xxxxxxxxxxxxxxx
>>
<
mailto:realtraders%40yahoogroups.com>, "Ira"
<mr.ira@xxx> wrote:
>> > >
>> > > It is time to take a good look at where we are at this
time. In
>> >the first quarter of this year more than 158,000 families
lost their
>> >homes to foreclosure. The American public is going deeper in
debt
>> >every day. In a society where 70% of the economy is driven
by
>> >consumer spending, inflation and debt are economy killers.
Millions
>> >of people have homes that are worth less than the mortgage
amount on
>> >their home. When they look at the economics of the situation
will
>> >they pay the inflated mortgage payments or walk away from
the
>> >house? Family homes were the main source of their wealth and
now
>> >with that gone they have no place to go for that extra money
they
>> >need to pay the ever-increasing cost of living. Duke Power
said
>> >that they are cutting off utilities to 50 people a day
because of
>> >unpaid utility bills. Whether the government wants to admit
it or
>> >not we are in a recession. We are also in an inflationary
spiral
>> >that won't quit. The government is pumping liquidity into
the
>> >system at an alarming rate to save the financial
institutions that
>> >created a large portion of the problem.
>> > >
>> > >
>> > >
>> > > The balance of the article is on the web site if you
are
>> >interested.
>> > >
>> > >
>> > >
>> > > Just one man's opinion.
>> > >
>> > > Ira
>> > >
www.delta100.com
<
http://www.delta100.com/>
>> > >
>> > > No virus found in this outgoing message
>> > > Checked by PC Tools AntiVirus (4.0.0.26 -
10.072.012).
>> > >
http://www.pctools.com/free-antivirus/
>>
<
http://www.pctools.com/free-antivirus/>
>> > >
>> >
>> >
>> >
>> >------------------------------------
>> >
>> >Yahoo! Groups Links
>> >
>> >
>> >
>>
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Date:
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>
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