"John R. Carroll" wrote in message
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"Ed Huntress" wrote in message
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"Ed Huntress" wrote in message
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"Ed Huntress" wrote in message
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"F. George McDuffee" wrote in
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On Wed, 7 Jan 2009 17:58:40 -0500, "Ed Huntress"
wrote:



Think about how this question arose. I said you can't have simultaneous
inflation and deflation. George says you can if you have multiple
currencies. I said we have only one currency. So George brought up
"spondulucks" or whatever and the fact that these securities act like
money.

I'd forgotten that. Good old Spondulucks.
Currency only moves in a single direction at a time, that's true.


Hell, sheep act like money, if you barter for them. But that doesn't make
them a currency. They're just an asset you can trade or sell for
currency.

"Monetizing" securities is a jargony way of saying "selling them."
Governments monetize thin air; gold can be monetized; saying that
securities can be monetized means that they can be sold. It's pure
jargon, and it clouds the issue. And the issue is that sheep may come and
sheep may go, but their ups and downs do not reflect a currency inflation
or deflation. Their ups and downs are *measured* by their value in
currency.

OK but I believe it's Georges contention that "spondulucks" are an
alternate currency, or that was what was intended.

Yes, it is, apparently. And it's my contention that you have to pick
something of accepted value as the basis for determining what is inflating,
and what is deflating. If you paid your bank loans in sheep or spondulucks,
if you could stick them in a parking meter, or deposit them in a savings
account, then sheep or spondulucks could be your currency, or an alternate
currency, and you would have a new question, which is, which currency is the
one that inflates or deflates? Because, in a free market, one is always
inflating relative to the other, and vice versa, making it impossible to say
whether you're suffering from currency inflation or sheep deflation. g

Which, of course, makes the question meaningless and therefore useless. You
need someplace to stand. To be useful for considering economic issues, you
have to pick one currency and define the dynamics of an economy in terms of
that. Since we have only one currency (have you tried paying a traffic
ticket in sheep?), the issue reduces to this: How are aggregate prices
rising or falling in terms of that currency? That's the meaningful
definition of inflation and deflation.

He's correct. Do you understand the purpose the original credit defaults
served? They provided a hedge for commercial paper that short circuited
the requirement for someone to find, and then physically borrow a bond.


I think so, but those price relationships have little to do with inflation
or deflation in the real economy. Those are the machinations of finance,
which, even in good times, are nothing more than (financial) products rising
and falling in price -- as measured by the underlying currency -- in a given
market. They don't tell you whether your paycheck is going to rise and fall
next week.

They of course have an influence on the economy and thus they have an
indirect effect on inflation or deflation. But they are not the inflation or
deflation itself. Nor do they measure it directly. All they can tell you is
if the markets are happy or unhappy, and what the fallout might be.


So there is no simultaneous inflation and deflation when you have a
single currency. You can have one or the other. The price of sheep, or
securities, may rise or tank, but unless they're rising or falling
because *currency* is inflating or deflating, they have no relationship
to general inflation or deflation. As a commodity, or an asset, their
value is just rising or falling relative to everything else. And
"everything else" is measured in relation to currency.

I could as easily contend that the asset values are not what is
fluctuating - it's the value of the currency.

It may be. But if the currency is what you are being paid, and what you pay
your bills and loans in, then it's the thing that matters.

It's a matter of focus and field of view, two more industry obfuscations.
LOL

g This one, though, can be dealt with fairly easily. Inflation and
deflation have meaning in terms of their broad effects on an economy, such
as general employment levels, interest rates, and so on. Rising sheep prices
may just reflect a newly acquired taste for lamb. Bonds may rise in price
because stocks are falling, which may reflect something other than general
price rises or declines. Prices can remain static while the stock and bond
markets sort themselves out.



Finance would be less opaque to us non-specialists if people just said
what they mean. d8-) If you "monetize" your "highly liquid assets," you
mean you just sold something that somebody wanted to buy -- today.

The opaqueness is necessary largely because of people unlike you Ed, who
don't or can't do the research.
Were anyone to speak the plain truth - they wouldn't buy a damned thing.
The investment would be obviously stupid.

I don't mind having an economy that runs by fiat -- confidence in the
government's management of the currency -- but I am not happy about one that
runs as a perpetual shell game. I'd like to see plain language applied to
it, for the same reason I want to see plain language applied to the law.

You'd also put all of those 35 year old analusts out on the street. You
know, the ones producing wads of metrics indicating that the Turkey is
doing great.
The snarky pitter patter that surrounds finance serves the same purpose
sex appeal does in other products advertising.
The patina of insider buzz words keeps otherwise intelligent sheep coming
in for repeated shearings G
Lobbyists do the same, har dee har.
How far do you think Wayne would have gotten telling the plain truth?
There is a guy monetizing fear and he's done well by himself doing it.

But, as you know, my career can be described as one that has tried to
undermine those people and what they do. And I have some experience at it,
having been a marketing manager and having owned an advertising agency.
Finance is too shameful even for me. d8-)

--
Ed Huntress