Lets make fun of Obama while he is still relevant.

[David Horn]

(11-29-2016, 04:27 PM)Galen Wrote:

(11-29-2016, 04:05 PM)David Horn Wrote: So you believe that negative interest rates are fully compatible with inflation then?  Please elaborate. 

There's an issue here, but calling it inflation is simply wrong.

Inflation is an increase in the money supply.  It will always show up somewhere, often as an asset bubble as is consumer price inflation.  Negative interest rates are a consequence of this inflation as well because the central banks are using the money created to buy bonds.  Until the current bout of money printing negative nominal interest rates have never been seen before.

MV = PQ.  If the PQ side is unchanged, then you can assume that inflation is zero.  Yes, M may have increased, but if V remains low -- actually declining at the same rate M increases -- the quotient remains fixed. In fact, Abe has tried to get money into circulation fast enough to reverse the declining quotient there.  Being frugal isn't all it's cracked up to be.