[The Land Of] The Rising Sun Sets On Peter Schiff's Senseless +M1 = Inflation Argument

[SchittReport]

one more important point here is that idiot schiff is saying that assuming all things are constant and only money supply changes. well, sorry, peter but oil supply and demand, supplier concentration, buyer concentration, etc. change every second of the day - so your analogy was flawed from the beginning.

it must have taken you hours to think of this analogy? hahaha. fail.

not to mention the most important point of all - that US M3 money supply is not even growing. hahaha. fail.

[SchittReport]

btw. i should also point out that idiot schiff mixed some elements of the real-balance effect into his argument, when these are actually two distinct concepts.

thats how dumb he is.

[SchittReport]

the conclusion is a cookie for all my friends here - everyone made good points in relation to this subject :)

[SchittReport]

japan is a good example of where consumer spending has been maintained, but the prices of goods are falling.

in reality, the whole aggregate demand model is antiquated, STATIC and linear to the point of being not very useful at all (you would trust a dumbell like peter schiff to use examples like this). most economists use DYNAMIC models now to understand how money supply (as well as other factors) influence pricing. i will post some SCP slides i wrote many years back for reference.

[SchittReport]

therefore, there is in effect, no direct correlation (and certainly no linear effect) between an increase in aggregate demand and increase in price levels for a particular item. price levels for a particular item are determined by a number of other factors - production costs, availability of substitutes / competing products etc.

for example, with $1000, people may pay the bare minimum or try and get a discount for what they consider to be non-core items but bid up necessities.

[SchittReport]

well, we all know what the objective of QE is: to stimulate aggregate demand. and thats precisely what an increase in money supply does; stimulate aggregate demand. the presupposition is that people will buy more at the SAME, EXISTING price levels. it does not mean that people will pay more. it also does not mean that people will plunk the whole $1000 into that particular item on auction, they may pay $100 for oil and use $900 to buy other items at other auctions.

[dsglop]

Where's my cookie? Maybe you had a different idea. You're probably thinking that buying bonds simply puts cash on banks balance sheets and needs to be loaned out before it goes into circulation, and that hasn't happened enmasse yet. That's true, but I think the commodities market is the bigger factor.

[jetmanisme]

The most charitable interpretation of Schiff's argument that I can come up with is that he's arguing MV=PT and then pretending that V and T are always constant/don't exist?

[dsglop]

Didn't pete say -on another video- saying that oil spiking in the 70s was caused by leaving the gold standard? What did the OPEC embargo due to supply? And wasn't that the moment oil spiked? Coincedence? Just like oil spiking now just happened to be at the same time people are worried that the ME will fall to anti US nuts- other than pete. His ability to create arguments to fit his world view amazes me. If it weren't for that, he wouldn't have a single skill.

[dsglop]

"Those charts on Japan are fake! They make pete look stupid so the BoJ must be liars! Just like the Fed! I just don't understand how deflation can happen with low interest rates. I'm a genius! If I don't get it, it's not true!"

Says the cult member.

[dsglop]

The problem is that people bring money to this "auction" (the commodities market) specifically because of the turmoil in the ME. And it's not to actually use it, it's to make money selling it at a higher price. This "auction" creates its own demand and sucks money in from people who have no business being there.

[heckler73]

RE: the $1000 nonsense

Where did the 10x Multiplier come from? How did the people go from $100 to $1000 all of a sudden? What are the prices of everything else in relation to the 10x? Did incomes rise? If the price is that high without relative change in Y, who the hell is buying?

His supplemental analogy is just ridiculously subjective and overly simplistic.

[heckler73]

If the bidders pool resources, they can lift the bid beyond $100, but then you get a surplus at the end. The surplus gets sold at a discount (or added to the next auction), and expectations change in response (Cobweb Theorem) to future auctions. This can, in turn, lead to a deflationary environment as expectations shift (ala Japan). Pete also doesn't account for the short-run inelasticity of supply and demand, where minute shifts in S or D can create disproportionate changes in prices.

[AntiSchiff]

Okay, the problem with his analogy is that it doesn't take sticky wages and prices into account, hence the proportionate increase in money held leads to no real effects with no real effects.

This one works: slate com/id/1937/