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Old 09-11-2012, 05:35 AM #64
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Quote:
Originally Posted by Frank101 View Post
This is Keynes idea of multipliers and circular flow. In reality, you can't invest money you don't have without major risk and leverage. This is why capital comes first, you need to accumulate wealth to risk and invest. The way monetary policy is, it forces people who have savings and retirement accounts to take riskier bets investing in companies rather than relying on accumulating interest for loans.

I don't like it for similar reasons you don't. It's not fair for someone who chooses to under consume in the present in order to live more comfortably later on in life (retirement). With no real return on savings, the Fed's policy encourages spending money now before it becomes less valuable in the future and therefore doesn't go as far.


yeah you can't have your cake and eat it too...

nominal interest rates reflect the opportunity cost of holding cash, so periods of low inflation are generally going to be correlated with a low expected return on capital, and hence low interest rates.
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Old 09-11-2012, 08:56 AM #65
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No, I do get it. And I see why zero inflation would stagnate an economy. But when you have to pay an inflated 25 dollars for a pack of gum, would you think it would be about time to reconsider the value of your currency? That's the point I was trying to make. And I read that the NGDP approach does rely on government stimulus packages in times of uncertainty to proactively resist reduced NGDP growth.
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Old 09-11-2012, 01:30 PM #66
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why should we care about demand side inflation? supply side inflation is the only thing we care about, and the central bank has no control over that.
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Old 09-11-2012, 01:58 PM #67
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I don't know. I'm no economist and macro was one of the few B's I got in college. My 5-minute googling session of NGDP clearly didn't verse me in economics. Like most Americans, the candidate's outlook on the FED is not the primary reason I am going to vote for that candidate. Are there any candidates pushing NGDP? Are there any nations actually using it?
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Old 09-11-2012, 02:03 PM #68
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There are no countries explicitly targetting it, but there are many who implicitly do.

Australia, Israel, Sweden, Switzerland, and the Fed during the great moderation.
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Old 09-11-2012, 03:02 PM #69
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I have read that the fed, as current, could've taken steps to mitigate the collapse but failed to do so. do you agree with that?
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Old 09-11-2012, 03:04 PM #70
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yes
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