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Peter Schiff Video Blog - Inflation Propaganda Exposed

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January 12, 2013 – Comments (13)

13 Comments – Post Your Own

#1) On January 12, 2013 at 12:40 PM, Treborn822 (85.56) wrote:

A fox poll says people are concerned about rising prices? I wonder if it is because Fox pushes daily that mass inflation is around the corner due to President Obama?

The fact is that inflation probably will rise. Supply and Demand. As the supply of the dollars rise inflation should follow. But if the new money printed stays in the hands in the top 1% the money supply does not increase for the bottom 99%. Therefore inflation does not occur on a large scale factor. Same applies if the new money leaves the USA - The US money supply does not increase and inflation does not occur on a mass scale.

 

 

 

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#2) On January 12, 2013 at 12:45 PM, Treborn822 (85.56) wrote:

LOL - I love how he picks the items in the basket of 20 goods that he know will prove his point.

If fair, he should have picked random items.

And one area, like energy, can skew results dramatically. 

 

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#3) On January 13, 2013 at 10:21 AM, MoneyWorksforMe (< 20) wrote:

Treborn822

Is that really your argument? 

 "But if the new money printed stays in the hands in the top 1% the money supply does not increase for the bottom 99%."

This is wrong on so many levels, and its due to a complete misunderstanding of fractional reserve banking and the fed's current QE program. How does the government pay its rapidly growing workforce when expenditures  >> revenues? Answer: Via the creation of enormous debt. Who is funding most of the deficit? Answer: Indirectly, the federal reserve.

The vast majority, of people who work for the government are outside the "1%". And they spend their money on goods and services, or deposit a portion of it at a bank just like any other middle class American.

 And do you really think the people within the 1% opt to keep most of their assets in the form of cash!? That is funny--really funny actually. Look at the US stock market, look at certain areas of real estate--especially commerical, and look at commodities and precious metals..

"Same applies if the new money leaves the USA - The US money supply does not increase and inflation does not occur on a mass scale."

US Money supply doesn't increase!? Huh?

US M1 went vertical years ago:

 http://research.stlouisfed.org/fred2/series/M1/

And US M2 since 2008 has a trend that appears to resemble the beginnings of an exponential function, ending the earlier linear trend. M2 increased $200 bill. in December ALONE.

 http://research.stlouisfed.org/fred2/series/M2

 I'm not sure what point you're trying to make when you say "money leaving the US" as if there is no such thing as the global economy. When money flows outside the US it doesn't disappear into a vacuum. The global economy is more connected than ever before. When considering inflation, you should consider the system to be the entire globe, NOT just the US. Hot money flows outside the US will cause the relative wealth of the rest of the world, vs. the US to increase. As their wealth increases, at the expense of the US, they will be able to afford more goods and services. This increased demand outside of the US will cause upward pressure on prices here in the states.

 

"LOL - I love how he picks the items in the basket of 20 goods that he know will prove his point.

If fair, he should have picked random items.

And one area, like energy, can skew results dramatically."

Please explain how Schiff's calculations during the 1970-1980 period nearly perfectly reflect the reported CPI and current comparisons are not even close, using the SAME basket of goods...

 

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#4) On January 13, 2013 at 10:41 AM, ETFsRule (99.94) wrote:

"And US M2 since 2008 has a trend that appears to resemble the beginnings of an exponential function, ending the earlier linear trend. M2 increased $200 bill. in December ALONE.

http://research.stlouisfed.org/fred2/series/M2"

Too bad you don't know how to properly analyze the data. If you take ANY data series that grows by a certain % each year (even 1% per year), it will appear to grow exponentially. That's why it is important to have a basic understanding of numbers and statistics if you're going to talk about stuff like this.

On a log scale, you can visually see that M2 growth is the same as ever:

http://research.stlouisfed.org/fredgraph.png?g=evW

On a percentage basis, M2 growth is slower than it was for most of the 80's:

http://research.stlouisfed.org/fredgraph.png?g=evX

Oh and lol @ Schiff's methods. Pretty sad when someone can't just admit their predictions were wrong.

If you want to see a real alternative price index from a politically unbiased source, which includes thousands of items (instead of just 20), you can find it right here:

http://bpp.mit.edu/usa/

Go Patriots!

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#5) On January 13, 2013 at 10:41 AM, ETFsRule (99.94) wrote:

.

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#6) On January 13, 2013 at 11:38 AM, NOTvuffett (< 20) wrote:

"If you take ANY data series that grows by a certain % each year (even 1% per year), it will appear to grow exponentially."

This is the very definition of exponential growth.  Just for fun let us compute 1.01^1000.  Unless my calculator is broken, it is slightly less than 21000.

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#7) On January 14, 2013 at 8:33 AM, MoneyWorksforMe (< 20) wrote:

 "On a log scale, you can visually see that M2 growth is the same as ever:"

 This is patently false:

 http://research.stlouisfed.org/fred2/graph/?chart_type=line&s[1][id]=M2&log_scales=Left

A smaller X scale on the log graph reveals several junctures between 2008 and present where the rate of growth in M2 was much faster than the previous period, when it was steady/constant. One can attempt to draw the conclusion that these are minor anomolies that a longer term graph evens out---I strongly disagree. 

 

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#8) On January 14, 2013 at 6:30 PM, ETFsRule (99.94) wrote:

" This is patently false: "

No it is not. You can look at any time scale you want and you will see that the exact same trend has continued. There are tiny little bumps up or down, but the slope of the line is clearly the same when viewed on a log scale.

I even showed you the percentage changes in a separate graph so that you can quantitatively compare the yearly changes of the past few years with the typical, historical values. Yet you ignore it and keep grasping at straws.

Tell me: what specific, yearly percentage increase in M2 do you believe will lead to catastrophic inflation? And why do you believe this? Can you support your theory with specific examples?

And how does your theory account for the low inflation numbers in the years 1980-1987, when M2 was growing much faster than it is today?

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#9) On January 16, 2013 at 8:46 PM, MoneyWorksforMe (< 20) wrote:

"No it is not. You can look at any time scale you want and you will see that the exact same trend has continued. There are tiny little bumps up or down, but the slope of the line is clearly the same when viewed on a log scale."

Those "tiny little bumps" are >+$500 billion over a 3-6 month period. That's nothing to sneeze at. Then again I suppose all this recent talk regarding US deficits and debt on the order of trillions has conditioned people to think billion dollar sums are now trivial.

 "I even showed you the percentage changes in a separate graph so that you can quantitatively compare the yearly changes of the past few years with the typical, historical values."

Okay so it's not unprecedented, but by comapiring the two spikes since 2008 vs. the previous 28 years, there is only two  of equal or greater size.

 "Tell me: what specific, yearly percentage increase in M2 do you believe will lead to catastrophic inflation?"

Firstly, I never said anything about "catastrophic inflation". I simply believe , like Schiff ,that current inflation rates are higher than the governent currently reports. I also agree with him that inflation is heading higher over time. M2 increasing at its current rate, along with the inablity of the fed to hike interest rates, and slow global growth  ( few goods being produced) are sufficient enough to cause steadilly increasing inflation. If money velocity was to jump to levels seen during the 1980's either due to a decrease of confidence in the dollar due to continued economic weakness, or increased lending/speding  due to relative economic strength, inflation would easily exceed its previous high of 13.5% in 1980.

 "And how does your theory account for the low inflation numbers in the years 1980-1987, when M2 was growing much faster than it is today?"

Again, M2 itself, does not explain inflation. I never said that, and I'm not quite sure why you're trying to make that connection. With that being said, when Volcker hiked interest rates over 15% he was able to break the back of inflation, despite money supply growth. The dramatic increase in the cost of capital, significanly reduced M2 money velocity:

 http://research.stlouisfed.org/fred2/series/M2V?cid=32242

And even more confusing to me though, is that you think the 13.5%, 10.3%, 6.2%, 3.2%, 4.3% 3.6%, 1.9%, and 3.6% from   1980 - 1987 respectively was low? There was one sub 2% reading during that entire period....

 


 

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#10) On January 17, 2013 at 12:50 PM, ETFsRule (99.94) wrote:

"Okay so it's not unprecedented, but by comapiring the two spikes since 2008 vs. the previous 28 years, there is only two  of equal or greater size. "

Dude. It's not about "spikes" in the 80's. M2 growth was at 8% or higher, almost continuously, for 7 straight years in the 80's. And inflation was still very low.

"And even more confusing to me though, is that you think the 13.5%, 10.3%, 6.2%, 3.2%, 4.3% 3.6%, 1.9%, and 3.6% from   1980 - 1987 respectively was low? There was one sub 2% reading during that entire period...."

You're changing the subject. No one was talking about money velocity until you brought it up just now. I said inflation was low.

Look at the inflation trend over that period. M2 growth was high for that entire time (higher than where it is now). And by 1987, inflation had dropped to around 1%, even though M2 grew by 10% that year.

http://research.stlouisfed.org/fred2/graph/?g=eDX

"Again, M2 itself, does not explain inflation. I never said that, and I'm not quite sure why you're trying to make that connection."

You're the one who brough up M2 in a discussion about inflation.

"If money velocity was to jump to levels seen during the 1980's either due to a decrease of confidence in the dollar due to continued economic weakness, or increased lending/speding  due to relative economic strength, inflation would easily exceed its previous high of 13.5% in 1980."

So your theory is that money velocity causes inflation? Well, in the late 90's, money velocity did increase back to the levels of the 1980's - it was much higher, actually. And inflation remained low:

http://research.stlouisfed.org/fred2/graph/?g=eE4

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#11) On January 18, 2013 at 10:45 AM, MoneyWorksforMe (< 20) wrote:

"So your theory is that money velocity causes inflation? Well, in the late 90's, money velocity did increase back to the levels of the 1980's - it was much higher, actually. And inflation remained low:"

http://research.stlouisfed.org/fred2/graph/?g=eE4

No, that isn't my theory. A combination of a rapidly increasing money supply, high velocity of money, and low interest rates, especially when looking forward, causes high levels of inflation.

The 1990's had high money supply and high money velocity, but the fed funds rate was set at 6%. Additionally the economy was strong, growing steadilly at over 3%. Economic strength is key to keeping inflation in check as the fed can easily act without tipping the economy back into recession. During the very late 70's and early 80's economic growth was weakening, causing the markets to fear the fed couldn't increase rates.

In sum: High inflation is caused by: 1.) A rapid increase in M2 money supply 2.) high velocity of money 3.) Low current interest rates. But more importantly, market expectations of low interest rates in the future due to continued economic weakness.

Currently we have 1. and 3. Conditions are very conducive to higher inflation, even if the M2 money velocity was to pick up only modestly.

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#12) On January 18, 2013 at 12:42 PM, ETFsRule (99.94) wrote:

"No, that isn't my theory. A combination of a rapidly increasing money supply, high velocity of money, and low interest rates, especially when looking forward, causes high levels of inflation."

Ok, so as I understand it:

1. You believe high inflation will always occur if these 3 conditions are met.

And:

2. You believe high inflation will only occur if these 3 conditions are met.

This is getting pretty convoluted now, and I can't find a period in US history where all these conditions were met concurrently, so I can't find a way to test this idea one way or another.

Regardless, Schiff's method is stupid and he has consistantly been wrong in his inflation predictions.

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#13) On January 19, 2013 at 12:55 AM, MoneyWorksforMe (< 20) wrote:

"Ok, so as I understand it:

1. You believe high inflation will always occur if these 3 conditions are met.

And:

2. You believe high inflation will only occur if these 3 conditions are met."

In certainly most cases yes--this I believe is a good guideline.  However, I believe there is one big exception: if global money supply growth far outpaces global GDP growth indefintely. This can occur even while money velocity remains tame. The inflation is far more subtle in this case i.e. it increases at a slower rate, but it is possible for it to increase to high levels as the rapidly increasing money supply is chasing a much slower growing number of available goods and services.

 "Regardless, Schiff's method is stupid and he has consistantly been wrong in his inflation predictions."

Schiff has been too agressive with his inflation calls, but I believe in the end he will be considered far more right than wrong.  As time goes on it is becoming more clear that this will end in high levels of inflation, its just a matter of when. Schiff tends to overestimate market participants ability to connect the dots, which leads him to being early in many of his calls, i.e. he has a hard time predicting, short - medium term psychology.

The fed has every incentive to underreport current levels of inflation. Okay, sure, Schiff's methodology may be a little extreme, but I do think he is onto something.

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