Thread: 30K Investment
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Old 12-01-2013, 01:10 PM   #30
lzydata
Master Member
 
Join Date: Oct 2010
Posts: 3,279
So, who's right, wrong?
Good question. Sorry for the wall of text below, but it takes some explanation.

Since the global financial crisis and great recession, and the Federal Reserve's emergency measures and QE massively expanded the money supply and its balance sheet, some people have predicted massive inflation, even hyperinflation. On the other side, people like Paul Krugman thought that we were in a liquidity trap and so zero interest rates and a bigger money supply would not cause inflation.

4 years and counting, it is clear from US inflation numbers, bond yields and so on that Krugman was right and the inflation-is-coming! people were wrong. The people who were betting on hyperinflation lost money on their bets. Singapore's inflation is higher but not by that much and shows no sign of exploding. Confronted with this reality, a rational person would amass the facts, re-examine his theories and see where he went wrong. But people aren't always rational and they certainly don't like to admit they were wrong.

One easy response of someone in denial is, "the government must be faking the inflation numbers." It's a conspiracy! Never mind that in a capitalist economy, most prices are out in the open for anyone to see. You could in theory and in practice collect your own price data, and people like the MIT Billion Prices Project have. The BPP's data coincides remarkably with the government's on annual, monthly and even daily inflation.

But here I see a cleverer way of denying that there is any problem with your philosophy. Inflation is growth in prices, whether it is broad like consumer prices and producer prices, sectors like food, housing and health care, or at the micro level like Fuji apple, NUS tuition, "2-veg-1-meat-mixed-rice-in-the-neighbourhood-coffeeshop" inflation. For example, everyone knows there is housing inflation in Singapore because prices and rents are rising, and there is private transport inflation mainly because COE prices are exploding.

Instead, our friend redefines inflation to mean "growth in money supply", not prices. Then of course, tautologically, the growth in money supply means there is "inflation", according to his private definition of inflation. This is a way for him to "explain" that there is massive inflation when no one in the real world buying most real goods and services sees it.

Since he did not respond, I don't know if GamerSg eats or drinks or pays his bills with fiat money, but he certainly uses the Internet. If his Internet service bill has not risen in years, for example, and here he is assuring us inflation is really 25% or 40% or some large figure, I think that this is either a deeply delusional person off his medication, or he is just dishonest with himself and others. His only response to this is to hurl insults. I think Paul Krugman can take the hit to his reputation.
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