Sorry about the length of this response, but there is a lot to respond to.
Yes but you seem to think that both the government and independent market analysts are entirely ignorant of this fact. The government knows how fractional reserve systems work and they took the money multiplier into account *before* the quantitative easing occurred. We don't have skyrocketting inflation because banks are increasing their reserve requirements both because of increased regulation and because they're terrified to lend money. This has an inverse effect, thus for a while in spite of lots of money being thrown at the economy, the banks actually contracted the money supply.
That doesn't seem to stop governments from constantly criticising the banks for not doing enough to support businesses, in other words issuing more loans. The UK government has gone as far as creating new state owned banks, such as the green investment banks and the business investment bank, backed by taxpayer money in order to increase the credit supply. While it would be a shock if governments didn't understand how commercial banks amplify the supply of money, it wouldn't be too surprising given many politicians demonstrated that they don't even understand the difference between deficit and debt. I did say earlier in the thread that this money still has to enter circulation before it can create inflation, but we have to remember monetised deficit spending does enter circulation and is a inflationary risk.
Between inflation and deflation, our governments will side with inflation. As the biggest debtor they are the primary beneficiary of currency debasement, plus they believe cheaper currency makes their economy more competitive. That and Ben Bernanke, claiming to be a scholar of the great depression, has made it his personal mission to combat deflation at all costs.
Over the long term historical trend 2% is what we've been seeing. Anything below 5% is considered pretty okay. We have people speculating that the banks will suddenly release their reserves and cause another bubble, but this has yet to happen.
As I've said elsewhere in the thread, I don't trust the government figures on inflation, independent measurements always end up higher. It's like any figure the government would rather be lower, as the people who control how the measurements are made; they can tweak them in their favour. In the UK for instance the government boasts about full time employment is on the rise. What they fail to mention is that the governments definition of full time employment is 16 hours, not the 35-40 hours the public consider full time...
Adjusted for inflation in relation to what, exactly? RGDP? People who bang on about the gold standard tend to relate the value of a currency in comparison to gold.
In relation to the dollar. Open up any inflation calculator online and look at $850 in 1980 vs the same buying power today. It would take over $2300, by the governments measurement of inflation, for it to beat its all time high measured in dollars.
Well, yeah. Inflation is GOOD and it's what we want to happen with our type of economy. When I say "speculation" I'm talking about people buying anything with the notion that it will increase in value over time. That is ALWAYS speculating, no matter how sure you think you are.
Inflation is not in the interests of the vast majority of the population. Even a mortgage owner who is seeing their debt nibbled at by inflation, loses out when it comes to the increased cost of living. You cannot devalue your way to prosperity, especially when everyone else is at this race to the bottom as well. They want to get people spending more, while at the same time they're eroding their disposable income.
It had more to do with rampant inflation at the time, which The Fed was able to subside by increasing interest rates (with the downside of losing jobs).
Inflation did go out of control after the fallout of the world being forced off the gold standard, so high interest rates were necessary to reinforce confidence in the currency. In the Bank of England, they actually went as high as 17% at one point in the late 1970s. Prior to 1971, the highest rate you saw was 8%, then boom.
Of course that tool isn't available today. They're keeping rates down to prop up the economy and debtors. If confidence in the currency did become a problem, any increase in interest rates would obliterate the economy. Thus, you can understand why it would be in their interests to downplay inflation.
Look, not everyone is out to get you. That said, investing is tricky. It is always a gamble and in order to make a profit you need to do something others aren't. That's why I am not too thrilled about the idea of investing in stocks, at least right now. EVERYONE seems to be investing in stocks these days, up to the point where "investing" has become synonymous with the word stocks. There are other markets, such as emerging funds, but I'm not too sure how much of that is saturated at this point either.
People say you should invest with a diversified portfolio but if everyone is investing into diversified markets (let's assume 100% diversity by everyone) then nobody actually made any money. It would all just be inflation. It's not the government trying to screw everyone over. The government is seriously doing the best they can for everyone but there is still the harsh reality that in real life, not everyone can be the winner. That's just the way it goes.
That comment wasn't intended as a "the government is out to get me". I was saying you cannot base all your decisions on how the government 'could' screw you, because that's a possibility; where as the threat of inflation is right here and now. The government is already screwing people by cooperating with the central bank to inflate away their debts, the collateral damage being savers and a rising cost of living. The question is how to respond to that, without getting hit by one of these flash crashes or wiped out when the current paradigm inevitably changes. They cannot keep rates at 0.5%/0.25% forever, and the longer they remain this low the more damage they will cause when they do go up. Right now, someone is taking out a mortgage they can only afford at today's interest rates, which they will lose when interest rates inevitably go up.
You can always assume inflation, in any case. Ever. Our economy depends on it. HYPERINFLATION is another story, and what you are saying is basically a doomsday scenario. If the stock market tanked that would do the opposite of what you are saying and there would be a DE-flation. Basically, all this money that existed at one point just evaporated into thin air. Luckily, we are able to prevent this or hyperinflation from happening using fractional reserve techniques. We are in America; this isn't Zimbabwe and however much you'd like to think there's some huge conspiracy there really isn't (well, aside from the banks making a shit ton of money off the whole thing).
Please don't attach labels like "conspiracy theory" to my comments. I'm not going on a limb here, just commenting on what is actually going on.
I seriously doubt our governments would "allow" there to be deflation, because deflation hurts debtors and governments are the biggest debtors of them all. They'd sooner add zeros to their currency, wiping out debts measured in it, than allow deflation to take hold. Credit demand fell off a cliff in 2008 and low credit demand is inherently deflationary, so part of the money creation going on is trying to combat that. But if they keep creating money at this scale, especially when it's to fund government deficits, it's going to stop being about deflation. If deflation was winning, the cost of living wouldn't be a worsening problem.
