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mathematically perfected economy™ (MPE™)    1  :   the singular integral solution of  1) inflation and deflation,  2) systemic manipulation of the cost or value of money or property, and  3) inherent, artificial multiplication of debt into terminal systemic failure;    2  :  every prospective debtor's right to issue legitimate promises to pay, free of extrinsic manipulation, adulteration, or exploitation of those promises, or the natural opportunity to make good on them;    3  :  our right to certify, to enforce, and to monetize industry and commerce by this one sustaining and truly economic process.

MORPHALLAXIS, January 14, 1979.

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 Post subject: Inflation vs. Deflation: The Quantity Theory of Money
PostPosted: 20 Jan 2009, 8:01 pm 
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Quote:
East Coast Economics

I’m deliberately being simplistic and reducing the inflation/deflation debate to the monetarist framework; I think it’s useful as a starting point in order to get a grasp of the facts - and I like scary graphs. So take a look at the St. Louis Fed statistics regarding currency in circulation and monetary base: despite abundant talk of the Fed printing money, currency in circulation on an absolute level has not increased that drastically over the last few months. Sure, the slope of the curve or pace of increase has accelerated a lot, but from an absolute perspective things don’t look too bad:


Image

Quote:
East Coast Economics

Unfortunately, the above graph only shows currency in circulation, or the amount of currency available to consumers. The picture looks very different when you look at the US monetary base (i.e. Fed reserves and the reserves of commercial banks at the Fed): the monetary base has more than doubled over the course of 2008.


Image

Quote:
East Coast Economics

Hard to argue that this looks like it should spell inflation. Why haven’t we seen any of it so far? The answer is simple: banks have increased their excess reserves and are too scared of what may come to lend to the consumer. The graph below shows the missing link between monetary base expansion and the growth (or lack thereof) in the volume of currency in circulation, namely bank reserves in excess of Fed requirements.


Image

Quote:
East Coast Economics

The above charts suggest that we are currently seeing deflation concerns because banks are increasing their excess reserves faster than the Fed is expanding the monetary base; in other words, all the additional money printed by the Fed is getting soaked up by banks and the consumer is seeing decelerating inflation. This trend is bound to reverse suddenly and drastically once credit thaws, though. At that point do you think the Fed will be able to drain excess cash from the system fast enough to prevent massive inflation?

http://eastcoasteconomics.wordpress.com/2009/01/20/inflation-vs-deflation-the-quantity-theory-of-money-m-v/


My Comment:

The last chart has to be one of the scariest you will ever see...this is new ground...that may be abruptly ending when we fall off the cliff.

Quote:
Mike Montagne Said:

artificial sustention - artificially [and temporarily] sustaining an interest-bearing monetary system beyond its legitimate capacity to sustain itself only to a maximum practical lifespan.

Inherently, artificial sustention requires replenishing a circulation to maintian vital circulatory volume, by means which the subject system cannot afford to service.

The potential method of artificial sustention is untended/unserviced accumulation of insoluble debt, beyond the capacity to service already terminal sums of debt. In a monetary system subject to interest, and in the final stages of inherent multiplication of debt which necessitate artificial sustention for instance, public debt is accumulated potentially far beyond the means of subject commerce to service the whole of public and private debt.

Artificial sustention can only work so long as escalation of redundant programs and funding by expansion of already terminal sums of debt can match and reach the subjects of private multiplication of debt in time to sustend servicing private debt. Substantial bankruptcy, failure, and/or further escalation of private debt indicate that the practical limits of artificial sustention are exceeded, upon which the ultimate, terminal failure manifests upon the self destructive system.

Only eradication of interest can solve inevitable collapse as a consequence of inherent multiplication of debt by interest. Particularly as this requires de-privatization of imposed systems of usury existing under the guise of "banking," artificial sustention and evasion of solution together certify pervasive corruption and/or usurpation of purportedly representative government.




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 Post subject: Re: Inflation vs. Deflation: The Quantity Theory of Money
PostPosted: 20 Jan 2009, 9:16 pm 
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East Coast Economics wrote:
despite abundant talk of the Fed printing money, currency in circulation on an absolute level has not increased that drastically over the last few months. Sure, the slope of the curve or pace of increase has accelerated a lot, but from an absolute perspective things don’t look too bad:

When I explain inherent failure as a consequence of interest, I use a static circulation to demonstrate the principle, because a person who is unaccustomed to handling dynamic relationships of this sort can best understand the principle in relation to a static circulation. People who don't think dynamically at all (practically) assert in reply, "but it can grow." Of course, the system would have to grow forever; cannot grow forever (because resources are finite); and... without getting too deep, basically what you have then is a whole thing which is falling apart at a brink of failure which can only dispossess us of all we produce to merely tread water, with marginalized parts comprising a weak link which breaks still and brings the whole business down. The latter of course is something we cannot justify even if it were possible to tread water forever, which requires ever escalating rates of production for naught... so on and so forth.

But one thing you understand from the static circulation of the usual example is that as ever more of the circulation is inherently dedicated to servicing debt, leaving ever less to sustain the industry which is obligated to do so, the only recourse is to increase the circulation. This of course isn't the cause of increasing prices. On the contrary, the increasing costs of servicing debt cause both the increasing of prices (to maintain vital margins of solubility) and the necessity to increase the circulation, so that enough circulation exists to sustain the separate need to sustain commerce/industry.

So this is what you see in the first graph; and what that increase really represents. It isn't a matter of there being so much more circulation to sustain commerce/industry. Au contraire, most of this goes to servicing debt, which is why the increasing circulation roughly parallels the increasing sum of debt and increasing industry together.

East Coast Economics wrote:
Unfortunately, the above graph only shows currency in circulation, or the amount of currency available to consumers. The picture looks very different when you look at the US monetary base (i.e. Fed reserves and the reserves of commercial banks at the Fed): the monetary base has more than doubled over the course of 2008.

Reserves are a bogus principle ostensibly preserving the integrity of the system. They're really not of concern to us except as any weakness in the principle paves the way for catastrophe or subversion. The whole system is designed to sustain the latter; so reserves aren't of particular concern on that count either. What matters to us is the nature of the money and its inherent ramifications. The nature of the money predicates evolution of the volume of circulation, and the proportional disposition of that volume toward sustaining commerce/industry, versus servicing the ever escalating sum of debt.


East Coast Economics wrote:
Hard to argue that this looks like it should spell inflation. Why haven’t we seen any of it so far? The answer is simple: banks have increased their excess reserves and are too scared of what may come to lend to the consumer.

Well it isn't that simple at all. But it is simple. The cost of servicing the ever greater sum of debt drives the costs of all things however subject ever upward likewise. But if we go back to the 1970s, we see that the so called Fed constantly pretended to save us from "inflation" (price inflation) by maintaining Ron Paul's goal of elevated interest rates.

Elementary mathematicians know what the consequence of that is. If you maintain such high interest rates as the circulation cannot be increased sufficiently to afford the higher prices industry needs to charge to maintain viable margins of solubility, then you marginalize your industry; you expatriate your industry; and you develop trade deficits... and the whole ostensible benefit to you is merely an alternate form of destruction: they simply make the money so expensive that you can't afford to pay for the price inflation! So instead of paying the prices which would sustain your industry, you're paying it to your pretend creditors, who merely issue your own promises to pay at such cost to you.

So they marginalized industry, and why aren't prices rising? Well, there's a few simple answers. Foreign industry rising in the wake of your expatriated industry under a newer implementation of the system of exploitation is not subject to the same indebtedness, or the rate of multiplication thereof. Nor can local industry raise prices to such a long compromised market. Furthermore, at the terminal stages of the multiplication of debt, the collapsing private sector is so compromised that the only way to maintain the vital circulation is government over-spending — the debts of which we are not even servicing (proportionately), which is why they do not compel immediate upward adjustments of industrial prices in accord with the multiplying sum of debt. We're simply not servicing those extra escalating costs because we haven't a prayer to do so, and save the system (perpetuate the system of exploitation).

The fact then is not just that "banks" "are too scared of what may come to lend to the consumer." The fact is that the private sector is so marginalized that it cannot afford to service any more debt, which of course means it's actually impossible to justify lending any more to them (even though they are borrowing through the government beyond said limit). This is the critical, inevitable credit-worthiness issue at the terminus of the finite lifespan.


East Coast Economics wrote:
The above charts suggest that we are currently seeing deflation concerns because banks are increasing their excess reserves faster than the Fed is expanding the monetary base

I've already invalidated this proposition, for the other factors explain the credit-worthiness issue, which, together with a sum of debt which already exceeds our capacity to service it, comprises a terminal, unrecoverable state. Yes, you can pour "free" money (debt you will simply not service) onto the consequences for some while, but the government and the people are already theoretically bankrupt, which is why all the satellite banks are going under: Because they've borrowed this "money" from the Fed, they're obligated to pay it back, even if we can't, and thus they can't get it from us.

So the disappearance of the circulation despite the escalating rates of government over-spending is a simple consequence of servicing debt according to the nature of the currency; and the only reason that's not working out any longer is we've reached the inevitable terminal sum of debt.


So, yes. What we have here is a situation where we can only tread water by artificial sustention (for some very limited while); and the worst thing a President could do would be to prop up the very criminals who chose exploitation as their sustenance, to perpetuate the system of exploitation despite its further, inherent escalation of costs and consequences.

We can understand all these few things merely from the nature of the currency, and by modeling the consequences of maintaining a vital circulation as required by the nature of the currency. So can the President understand these things. But he sent my proposition back to me, without even opening it.

I think there's an even scarier chart, actually of 13 months ago. See the Federal Reserve Data on *NON-BORROWED* RESERVES. It's a thriller:

http://perfecteconomy.com/pg-current-shaping-of-the-failure.html




mike


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"When the freedom they wished for most was the freedom from responsibility, then Athens ceased to be free, and never was free again."



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 Post subject: Re: Inflation vs. Deflation: The Quantity Theory of Money
PostPosted: 21 Jan 2009, 11:44 am 
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Quote:
Mike said:

When I explain inherent failure as a consequence of interest, I use a static circulation to demonstrate the principle, because a person who is unaccustomed to handling dynamic relationships of this sort can best understand the principle in relation to a static circulation. People who don't think dynamically at all (practically) assert in reply, "but it can grow." Of course, the system would have to grow forever; cannot grow forever (because resources are finite); and... without getting too deep, basically what you have then is a whole thing which is falling apart at a brink of failure which can only dispossess us of all we produce to merely tread water, with marginalized parts comprising a weak link which breaks still and brings the whole business down. The latter of course is something we cannot justify even if it were possible to tread water forever, which requires ever escalating rates of production for naught... so on and so forth.

The cost of servicing the ever greater sum of debt drives the costs of all things however subject ever upward likewise. But if we go back to the 1970s, we see that the so called Fed constantly pretended to save us from "inflation" (price inflation) by maintaining Ron Paul's goal of elevated interest rates.

Elementary mathematicians know what the consequence of that is. If you maintain such high interest rates as the circulation cannot be increased sufficiently to afford the higher prices industry needs to charge to maintain viable margins of solubility, then you marginalize your industry; you expatriate your industry; and you develop trade deficits... and the whole ostensible benefit to you is merely an alternate form of destruction: they simply make the money so expensive that you can't afford to pay for the price inflation! So instead of paying the prices which would sustain your industry, you're paying it to your pretend creditors, who merely issue your own promises to pay at such cost to you.

We can understand all these few things merely from the nature of the currency, and by modeling the consequences of maintaining a vital circulation as required by the nature of the currency. So can the President understand these things. But he sent my proposition back to me, without even opening it.


The Ron Paul, Austrian argument, that a higher rate of interest (they seem to have a disdain for "easy money") would have somehow prevented the current credit crisis is truly bizarre. Are they saying that our monetary system must reduce the amount of loans in order to properly operate? And if this is true, then isn't this a serious flaw unto itself?

This concept is consistent with their stated goals to have gold and silver act as money. They espouse a system that would make money and loans scarce which would deny most of the poor and middle class from ever attaining greater prosperity and the ability to aspire to bigger things (business start-ups, a nicer home, an affordable education, etc).

The problem isn't the rate of interest but the interest itself. Sure, if there were less loans, the multiplication of debt might be delayed but, on the other hand, the higher rate of interest might simply offset any real benefit.

Quote:
Mike said:

I think there's an even scarier chart, actually of 13 months ago. See the Federal Reserve Data on *NON-BORROWED* RESERVES. It's a thriller:

http://perfecteconomy.com/pg-current-shaping-of-the-failure.html


The fractional banking system was without even the most modest fraction. Here is an updated chart:

Image

The "reserves" are building again but does this really matter if there are too few worthy and willing borrowers? Again, we go back to your brilliant identification of "artificial sustention." And what would Ron Paul and the Austrians suggest now? Should the banks dramatically raise their rates to prevent "easy money" - it doesn't really matter as the outcome will be the same.




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 Post subject: Re: Inflation vs. Deflation: The Quantity Theory of Money
PostPosted: 21 Jan 2009, 5:05 pm 
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DrKrbyLuv wrote:
The Ron Paul, Austrian argument, that a higher rate of interest (they seem to have a disdain for "easy money") would have somehow prevented the current credit crisis is truly bizarre. Are they saying that our monetary system must reduce the amount of loans in order to properly operate? And if this is true, then isn't this a serious flaw unto itself?

He never gives comprehensive reasons, so we can only conjecture.

From what I've read, the Austrians generally accept that circulatory inflation engenders price inflation. This is the generally accepted proposition virtually all conventional "economics," but of course there is no proof of cause; and this was the original question which inspired the idea of mathematically perfected currency™. (Home page.) I assume that Paul just follows along.

But the idea is preposterous even to the initiate. I mean, why aren't we paying down our debt with the purported increases in circulation? He doesn't even balance his judgment with an assessment of what's going out of the circulation in the way of servicing existent debt. So he isn't accounting for everything, or even the most basic things, by any stretch of the imagination.

Here again we see how preposterous their rejection of math is. They aren't accounting for *anything* mathematically. They're not counting. They're not adding. They're not subtracting. They aren't determining the resultant proportions (which you have to do to claim circulatory inflation). They don't want you to consider the depletion of the circulation by the nature of the currency (obligation to pay principal and interest out of the general circulation, in servicing debt). You don't have to account for any of these things if you're an Austrian "economist."

So Paul likewise doesn't account for them at all. This is just routine quackery for Austrians and the Paul camp. Griffin for instance (friend of Paul and also an Austrian E), claims interest doesn't multiply debt in proportion to a circulation because we can do work for the bank. So they think they've come up with a clever exception that proves the sum of debt doesn't increase by so much as periodic interest on the sum of debt. Do they evaluate if it is even *possible* for all of us to do so to the degree which nullifies irreversible multiplication of debt? Absolutely not. But when you do evaluate the degree to which we would all have to work for the bank to nullify multiplication of debt by interest, you realize it isn't even close to practical that we ever do so.

The Ostrians (new word :-) nonetheless just stop right there. I don't know what it is, a clan? Klan? A collection of somethings clever, however unqualified, impossible, or impractical, is as good as knowledge in the Ostrian camp.


DrKrbyLuv wrote:
This concept is consistent with their stated goals to have gold and silver act as money. They espouse a system that would make money and loans scarce which would deny most of the poor and middle class from ever attaining greater prosperity and the ability to aspire to bigger things (business start-ups, a nicer home, an affordable education, etc).

Well, you remember those folks who got thrown in jail — gold confiscated and all that — when he was running for president. Those are Ron's buddies. They're gold bugs, most of them. And the last thing they really want actually is a return to the constitutional price of gold. They want to revise the Constitution to multiply their wealth, which is the very crime of the system they complain about.

A scarcity of money is one of the worst things you can do to industry or producers (which all the rest of us are). In fact if you don't have a dollar in effective circulation for every dollar of wealth, you have in every case of deficiency a case where as a consequence of deprivation, the person suffering the deficiency must earn the deficiency again to have what they should have acquired by it in the first place. This might not seem like a substantial injury, but its impact is huge.

If for instance 10,000 of us are standing in a circle, every so often doing $10 worth of work, and having $10 for the work we did in the previous period, all of us can trade our wealth all at once by turning to the person to our left, taking their $10 for what we just produced (and giving it to them).

What's the consequence of the least deficiency?

If every 10th person around the circle is deprived of $5, then this transaction which we could have executed instantly breaks down until they earn the $5 from someone else, who in turn is lacks it. How did this money disappear? From interest. But a transaction which we could otherwise do all at once suddenly may take months.

It doesn't take a genius to figger out what ol cowboy Paul would do to "the economy" if he raised interest rates. The foreclosure rate itself would multiply. That would be the cowboy move of the century.

And let's not forget the idea of fiscal integrity toward all this legitimate federal debt which has been piled up. Sure, just pay it all. No matter how it was accumulated and who it didn't serve.

Now there's a recipe for prosperity. Higher interest, waaaaay higher taxes. Great stuff, Paul. Just what Jefferson would advocate. (Or was it Hamilton?)

The Ostrians are all over the road, and our poor younger generations will eventually understand that they should be thankful Mr. Paul wasn't elected to tear down one bank, only to raise his own an penalize us even moreso. Let's have a volunteer Paul state come forth to subject itself to higher taxes, higher interest, a constricted circulation that they'll have to buy from Paul's gold bug buddies at ten times the constitutional value of gold. Sure, these are the principles our country was founded on.

Step forward, whatever state would do so. Show us anyone with their head out of the sand that's all enthused to go to that place.


DrKrbyLuv wrote:
The problem isn't the rate of interest but the interest itself.

Well they don't understand either thing, and they won't even engage in counting the difference. But the higher the rate of interest, the faster the dispossession by multiplication of debt.


DrKrbyLuv wrote:
The "reserves" are building again but does this really matter if there are too few worthy and willing borrowers? Again, we go back to your brilliant identification of "artificial sustention." And what would Ron Paul and the Austrians suggest now? Should the banks dramatically raise their rates to prevent "easy money" - it doesn't really matter as the outcome will be the same.

What will the rats at the hen house come up with next? Is this a sleight of hand? A new accounting method? You mean amongst all this bank failure, the suffering banks are succeeding in paying off their *borrowed* reserves???

I would frankly have to question the integrity of these figures — which is to put my suspicion very, very mildly. I smell a skunk. But no matter. What condition are *WE* in? That's the real question.

As I see it... wherever those changes are coming from, look out. Nobody's buying us a free lunch out there.

(Thanks for the new chart. That's incredible!)




mike


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"When the freedom they wished for most was the freedom from responsibility, then Athens ceased to be free, and never was free again."



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 Post subject: Re: Inflation vs. Deflation: The Quantity Theory of Money
PostPosted: 21 Jan 2009, 5:30 pm 
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Quote:
Mike said:

What will the rats at the hen house come up with next? Is this a sleight of hand? A new accounting method? You mean amongst all this bank failure, the suffering banks are succeeding in paying off their *borrowed* reserves???


Spot on - it's not like they are accumulating money - they are accumulating "loan chips" that are not being sold off at a spread. This makes it worse in respect to the fact that they are borrowing at close to -0- and are still not lending. Mike, make no mistake, you're right these numbers are painting an accurate portrait of artificial sustension.




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 Post subject: Re: Inflation vs. Deflation: The Quantity Theory of Money
PostPosted: 21 Jan 2009, 7:16 pm 
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Got to be; and worse, they're skewing the game with reckless abandon for any integrity at all... just to keep the exploitation game going. There's no other purpose in the whole thing at all.




mike


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"When the freedom they wished for most was the freedom from responsibility, then Athens ceased to be free, and never was free again."



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While 12,000 homes a day continue to go into foreclosure, mathematically perfected economy™ would re-finance a $100,000 home with a hundred-year lifespan at the overall rate of $1,000 per year or $83.33 per month. Without costing us anything, we would immediately become as much as 12 times as liquid on present revenue. Transitioning to MPE™ would apply all payments already made against existent debt toward principal. Many of us would be debt free. There would be no housing crisis, no credit crisis. Unlimited funding would immediately be available to sustain all the industry we are capable of.

There is no other solution. Regulation can only temper an inherently terminal process.

If you are not promoting mathematically perfected economy™, then you condemn us to monetary failure.



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