N-gDp LPT is Vladimir Lenin’s Answer to Destroying Capitalism

N-gDp LPT is Vladimir Lenin’s Answer to Destroying Capitalism Price-level targeting? That sounds exactly like how Vladimir Lenin said he would overthrow capitalism, and presumably capitalists, by making their money worthless. Inflation is a chronic, across-the-board increase in prices; or, looking at the other side of the coin, depreciation of money. Contrary to the newfound stagflationist (advocates of N-gDp LPT), inflation, when it exists, is the most perverse and perhaps the most disruptive economic force capitalism encounters. Inflation cannot destroy real property nor the equities in these properties, but it can and does capriciously transfer the ownership of vast amounts of these equities thus unnecessarily accelerating the process by which wealth is concentrated among a smaller and smaller proportion of people. The concentration of wealth ownership among the few is inimical both to the capitalistic system and to democratic forms of government. A financial oligarchy and a government of, boy and for the people simply cannot exist side by side.  Prices in the United States have been rising at varying rates in almost every year since 1933. Until the advent of WWII, the proper appellation for this chronic rise is “reflation”. That is, the price rise created greater price balance within the economy which was more in balance with the commitments made before the financial onslaught of the Great Depression. During WWII we had official price stability and “black market” inflation. This was reflected in the price indices as soon as price controls were removed. In absolute terms, each year confronts all of us with a higher and higher level of prices with no end in sight.  The stagflationists say, if inflation runs a little lower than its target, then let it run a little hotter, so goods and services will cost more. How absurd! Unfortunately, academia is full of stagflationists - David Beckworth in National Review: "An inflation driven by the central banks creation of extra money, on the other hand, should increase prices and wages very close to proportionately” [sic]..."That alternative would stabilize the growth of nominal spending: the total amount of dollars spent throughout the economy..." [sic] “A coalition of economists released a letter Friday urging the Fed to change the criteria it uses to make decisions. Specifically, the group, called "Fed Up," is advocating for a higher inflation rate target than the current 2 percent level.” cnb.cx/2gZF0Ly Rethink 2% - Brad DeLong bit.ly/2s67De9 John Williams at his Shadowstats website: "And if inflation was still calculated the way that it was in 1980, the inflation rate would be about 10 percent today." Readers should note that calculating inflation on a year-to-year basis minimizes, over time, the reported rate of inflation - since the rate is being calculated from higher and higher price levels (reference base periods). A $ today, using 1967 (a former base-period year), is equivalent to $7.99 of consumer purchasing power in May 2018 (using the CPI calculator). The current base period utilized references 1982-1985 prices. What cost one dollar bill in 1913, today, in May 2018, costs $25.76 in terms of the CPI (which chronically understates inflation). Inflation has been the most destructive force capitalism and consumers, ever faced.   That’s why the BLS just reported a spike in inflation:06/12/2018: “In May, the Consumer Price Index for All Urban Consumers increased 0.2 percent seasonally adjusted; rising 2.8 percent over the last 12 months, not seasonally adjusted.” And: 06/13/2018 “The Producer Price Index for final demand rose 0.5 percent in May” Feeling groovy? The second verse was as bad as the first: The Fed caved into the similar mantra in June of 2017. 22 Luminaries (And Dick Bove) Sign Open Letter To Fed Demanding End Of QE2 bit.ly/2F3T2Xm Economic fluctuations reveal dynamic lags and concentrations. So the stagflationists, inevitably get their comeuppance (as inflation accelerates relative to real-output). It’s once again, FOMC schizophrenia: Do I stop -- because inflation is increasing? Or do I go -- because R-gDp is falling? [Stagflation’s dilemma, viz., the FOMC’s policy mix blunder] N-gDp LPT targeting by stagflationist advocates is unwarranted and destructive. It produced, since the advocates banded together and wrote a letter to Janet Yellen, higher prices, a breakout in yields, a continued flattening of the yield curve, a falling U.S. dollar, and 3 FOMC rate hikes, precipitating larger federal deficits, and a credit downgrade from China. And after all this "irrational exuberance", stocks have declined into the 4th Elliott wave correction. Tematica Research: • By my read the data here is mixed. Core Capex orders have risen at a 1.2% annual rate year-to-date, which is well below the 20%+ pace we had last September. • Regional Fed survey data of capex intentions are above historical standards but down to an 8-month low and have been declining for 3 consecutive months. • Instead, companies have been engaging in buybacks and paying dividends, on pace to total almost $1T in the 12 months ending March! Good news for investors, but not the economy. • But 40% of Americans can't handle a $400 emergency? • According to recent Wallet Hub study, the average household credit card balance is $8,166, just $300 shy of the level considered unsustainable and this at a time when the unemployment rate is at a multi-decade low The problem is that this theoretical concept is back-asswards. Targeting nominal values is STUPID. Why? Because nominal values are contingent upon the rate-of-change in real values in that they are two sides of the same coin. Alfred Marshall, “The Cash-Balances Approach:: “Unlike the supply and demand analysis applicable to commodities, the supply of and the demand for money are simply the two sides of the same “coin.”. This follows from the fact that the suppliers are simultaneously the demanders, and the demanders are simultaneously the suppliers. If a person increases his demand for money, he is simultaneously reducing his supply of money in the schedule sense; and if he is increasing the supply of money, he is reducing his demand for money. It may be said therefore, that an increase in the demand for money is concomitantly associate with an equal and opposite decrees it e supply of money, and vice versa; and that an increase in the supply of money is concomitantly associated with an equal and opposite decrees in the demand for money, and vice versa.” Leland J. Pritchard (Ph.D., Economics, Chicago 1933) “Together with the concept of an economic "elasticity" coefficient, Alfred Marshall is credited with defining PED ("elasticity of demand") in his book Principles of Economics, published in 1890.[20] He described it thus: "And we may say generally:— the elasticity (or responsiveness) of demand in a market is great or small according as the amount demanded increases much or little for a given fall in price, and diminishes much or little for a given rise in price".[21] He reasons this since "the only universal law as to a person's desire for a commodity is that it diminishes ... but this diminution may be slow or rapid. If it is SLOW... a small fall in price will cause a comparatively LARGE increase in his PURCHASES. But if it is RAPID, a small fall in price will cause only a VERY SMALL increase in his PURCHASES. In the former case... the elasticity of his wants, we may say, is great. In the latter case... the elasticity of his demand is small."[22] Mathematically, the Marshallian PED was based on a point-price definition, using differential calculus to calculate elasticities.[23] - Wikipedia It is axiomatic. You don't target N-gDp. You target R-gDp. And total spending, AD, does not equal N-gDp as the Keynesian economist claim. If the Fed’s technical staff can't target R-gDp, how can they target N-gDp? And why would the Fed target N-gDp - when it could target R-gDp? So the “nominal-anchor” prevents bond prices from rising - because “inflation is overshooting”, and interest rates from falling, slowing any recovery or slowing real output? No, that perpetuates income inequality. Stagflationist thinking is as ephemeral as their RX. The fact is that these McCarthyite armchair economists are “Know-Nothings”. The stagflationists don’t know money from mud pie. Rates-of-change in monetary flows, volume X’s velocity (for the same time intervals or distributed lags), equal RoC’s in P*T (where N-gDp is a subset of “aggregate nominal spending”). The distributed lag effect of money flows have been mathematical constants for greater than 100 years. Thus we know several things, that money is robust, that the RoC in R-gDp = exactly 10 months, trough to peak. And we know whether money is robust because we know when inflation accelerates relative to inflation, whose distributed lag is exactly 24 months, trough to peak. Since the distributed lag effects of monetary flows are mathematical constants (which no economist understands or even knows about), you know in advance, what th trade-off between R-gDp and inflation, or the monetary fulcrum, will be. So we know when interest rates will respond to the monetary fulcrum, based on fixed money lags, and the "arrow of time". So to target N-gDp is stupid. It maximizes inflation and minimizes real-output. IF you can target R-gDp, why try targeting N-gDp? R-gDp accelerates before inflation. And we know when the teeter-totter tips. That’s why you target R-gDp as a policy standard, and obviously, not the other way around. The debit and deposit turnover time series is documentary proof. ---– Michel de Nostradame