Can government print more money without causing inflation?

So, if you test your claim, you should see a very strong and direct inverse relationship between saving and velocity. When savings INCREASE, velocity DECREASES according to your claim, as well as the reverse. Let's test your claim.

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Not much support for your claim there.

No it doesn't, it's deferred consumption.

You think vast pools of savings are sewn into mattresses? No. They are held in savings vehicles that form the basis of fractional banking.

 

I believe this is another false idea from economists. Velocity has very little to do with inflation.

But many high-level economists erroneously believe it does. They have complex mathematical equations, but they totally miss the fundamentals of how the underlying purchasing power of money arises.

There are so many false ideas floating around and prevalent in the field of economics, I could start multiple threads about it. It's hard to focus on any one of them with so many false ideas floating around. You people always bring up some other when I am discussing another one.

Which of course does NOT necessarily imply anyone is better off if the money is spent twice in two months.

This whole idea that everyone is better off if they spend more money is insanity.

If everyone is reluctant to spend and is trying to hoard money, guess what? Price goes DOWN.

But the stupid policymakers at the Central Bank don't like that, so they will try to prevent those prices from going down by pumping out money. THEY are the ones that cause the economic suffering.


In a free market, it would be an equilibrium, and with price going down, quantity bought/sold would return to a roughly equal point it was before. Demand would not go down in such a case without supply (well, particularly labor supply) going up by a correlating amount.

 

Nonsense. There are too many confounding variables.

Actually, your graph does show savings trending up while velocity trends down. But it's not visually obvious because confounding variables and restriction of the range obscure the relationship. Unfortunately, understanding that would require you to know some statistics, which you don't.

Deferred consumption implies foregone production, as I already proved to you.

Depositor savings are almost irrelevant to modern fractional reserve banking; and even if they weren't, most bank lending is for non-productive asset purchases, not consumption or investment in productive capacity. Even student loans are only weakly related to subsequent economic activity.

 

The subject was economic activity -- consumption and the associated production and investment -- not inflation.

Sure it does.

People are better off on average if more money is spent because that increases economic activity and production. More goods and services being consumed is almost the definition of being better off.

And so do production, employment, wages, etc. We saw this clearly demonstrated in the early 1930s, and we saw the opposite clearly demonstrated in the early 1940s. Hello?

Nonsense. They are usually just trying to manage the inherent instability of the debt money system (and when they inevitably fail, bail out the banks and the rich).

Nonsense.

 

I thought it should have been obvious to you, but I explained why more money being spent does not necessarily result in more economic activity.
Prices go down.

But many people and policymakers still mistakenly think that more money being spent is good.

Furthermore, trying to use artificial means to goad people into exchanging goods or services is going to result in lower economic efficiency. People are buying those goods not so much because it was inherently worth it to them, but you are trying to push them to, by penalizing them with inflation if they don't.

It's just a bad idea all around, for more than one reason.

Let me try to repeat again, the same reason that consumers would want to hoard money and be reluctant to spend is also the same reason producers would want to hoard money and be willing to sell at lower prices.
Quantity stays the same, because supply goes up in proportion to the reduction in demand.

Why is that nonsense?

 

That quite a pile of horseshit.

No, it describes DEFERRED consumption. When the rainy day comes the savings are converted to consumption. And while they are in savings vehicles, they are returned to the economy via fractional banking.

If you are right, then savings shouldn't show much of a relationship to investment. Let's have a look.

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Well, contrary to your claim, they track each other rather well. Do you double check anything before you smugly announce it as "fact"?

You are simply wrong. Savings are not isolated from the overall economy, and it most certainly does show a relationship with investment spending.

An economy where savings are very low is an economy that is choosing short-term consumption over long-term investment. That's short sighted.

 

That's a fascinating issue to bring up. I am going to have to give that one some thought.

I would have to imagine though that it is impossible for every party to save too much money in the overall economy though. When you think about what money actually represents. One person's savings generally represent another person's debts.
What we should really be concerned about is too much debt. So when we're talking about savings, perhaps most of what we're talking about is avoiding debts.

 

Still trying the free market myth? Crikey! Suppose we had, and its a ridiculous assumption, something close. We would automatically see macroeconomic instability that destroys any notion of a well behaved equilibrium. Any shock will lead to mass unemployment and therefore the destruction of human capital. Hysteresis in unemployment is guaranteed, making any reference to the laws of labour supply and labour demand particularly loony.

 

Do not be prejudiced. I am just supporting certain elements of the free market, the free market structure. As such, I feel your comments really have no bearing on this thread. (i.e. equivocation fallacy, you are using the terminology with a much broader meaning than I am) Sorry if the terminology "free market" is a hot button word for you, but I really don't thing you are talking about here what I was talking about.

When I used the term 'free market', the context is supply, demand, and the money supply, and natural equilibrium that will be reached if the Central Bank does not interfere. And you go off on this screed.

 

There isn't a free market. You're constructing myth around bobbins, nothing more. I illustrated that with your ridiculous attempt at referring to equilibrium. The lesson? Learn some economics, rather than throwing out buzzwords without any actual understanding.

 

Still not understanding what I am referring to.

 

You made error, nothing more. You demonstrated no understanding of either 'free market economics' or supply & demand. I've proven that with a diddy little scientific term: hysteresis.

 

But were wrong.

Only because quantity goes down.

But higher economic activity and well-being.

The problem is that in a debt money system like ours, positive feedback means deflation is potentially disastrous, while inflation isn't.

And pay lower wages, and employ fewer workers....

No. Google "price elasticity of demand" and start reading.

It's contrary to basic facts of economics.

 

Erroneous educating erroneous? Keep going!

 

Fact.

No, it implies foregone production because total demand is reduced.

And therefore less total demand, consumption and production in the meantime.

But to the modest extent that savings enable bank lending, it's mostly lending for asset purchases, not investment in production capacity.

<sigh> You are only looking at "investment" in the accounting sense, not the economic sense.

<yawn> You merely tricked yourself again. That "investment" total includes -- is in fact dominated by -- non-productive asset purchases, not productive investment in capacity. The Japanese record shows the actual effect of high savings rates: the biggest stock and real estate bubble in the history of the world up to that time, and a consequent crash that flattened the Japanese economy for DECADES.

No, you are. You just don't understand what that graph actually says.

But only a very weak relationship to productive investment that actually makes people better off.

Nonsense. Who on earth do you incorrectly imagine gets the money when consumers spend it? Producers, duh! Who do you think is more likely to spend that money on productive investment, producers? Or banksters and the financial manipulators, speculators, etc. that banksters prefer to lend to?

 

So you agree with him that reducing demand increases supply?? Too funny.

 

I'm sure you can read. I was just amused that neither of you understand Econ 101, but you pretend otherwise in your exchanges. Its like two puppies pretending to fight.

 

Your theatrical <sigh> and <yawn> makes you look stupid. You should probably stop.

You keep making assertions that when tested against against the data aren't validated, and then you just stonewall.

Let's go back to your original claim of a strong obvious direct inverse relationship between savings and velocity.

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The evidence simply isn't cooperating with your assertions of a strong obvious inverse relationship. Further, you're claiming a causative inverse relationship and you can't even show that there is associative inverse relationship the majority of the time.

You want to back up your claims with evidence, I'm in. If you want to childishly and immaturely engage in <yawn> and <sigh>, take a hike.

 

I love how you think a botched effort at referring to the MV=PT identity is debate

 

I pointed out how it was stupid to expect inflation to increase economic efficiency.
You people claim it would result in more spending, conflating and confusing that with more economic exchange. (It's not "more" just because you measure it differently with inflated currency)

 

<yawn>

No. What actually happens is that you pretend to test my statements against data that do not actually do so, and pretend such data refute my statements. You do this in two ways: by pretending I said something I did not say (strawman fallacy), or by citing data that are not relevant to what I said (ignoratio elenchi fallacy). Then when I explain why your data are not a valid test of my statement, you accuse me of stonewalling.

I made no such claim. So quote it or retract. And FYI, a "direct" relationship is the opposite of an "inverse" relationship.

<sigh> As YOUR OWN GRAPH shows, MZM velocity has been in a strong secular downtrend for ~40 years, falling by ~2/3 in that time. Only an economic ignoramus would imagine it could reflect consumer spending velocity. Indeed, as M1 is a much better measure of money in consumers' hands than MZM, why didn't you show the graph of M1 velocity vs savings rate, hmmmmm?

Oh, wait a minute, that's right: you carefully didn't use the most relevant and valid measure of money velocity because it proves me right:


https://fred.stlouisfed.org/series/M1V#

Tsk, tsk. Naughty, naughty.

<yawn> See the actual relevant graph of velocity, for M1: uptrend for ~30y from 1975-2007, then downtrend. That is a pretty good inverse of savings, which were on a downtrend from 1975-2005, then reversed into an uptrend for the last 15 years.

<sigh> If you want to debate honestly, by testing statements I actually made with data that are actually relevant, I'm in. If you want to disingenuously mislead readers with your strawman and ignoratio elenchi fallacies, take a hike.

 

Wish I could say the same....

 

Still no content? Thats a darn shame. Not even a counter on the importance of cost plus pricing? Perhaps a critique that acknowledges post-Keynesianism has constructed its approach from Marxist underpinnings?

 

Wait. Hold it.
Prices are going up, if gradually. I.e., we have inflation. But real median income has been stagnant for about 30 years. Consumers want to hoard money? Really? About half of America can't scrape together $400 for an emergency. And about 80% can't handle an emergency costing them $1000.

So notice one bit of bullshit in the standard capitalist economic bag of tricks, please. ... The common claim is that worker demands for higher wages and increases in the minimum wage cause inflation. Yet all this time there has been NO increase in the MW, and real median incomes are stagnant, ... BUT .... at the same time we've seen significant inflation AND the wealth and income disparity has dumped HUGE increases in wealth into the pockets of the rich. But the workers need to sacrifice wage increases to avoid inflation????

AND, during this pandemic which is producing depression-era unemployment with 40 million out of a job, and with lines of people waiting to receive free food-bank food, top incomes of the top rich folks have increased by $434 billion according to some reports.

 

This amused me. The idea that inflation reflects capital-labour conflict is Marxist.