Be Prepared for the Worst [Archive]

Vessol

11-01-2009, 09:02 AM

Any number of pundits claim that we have now passed the worst of the recession. Green shoots of recovery are supposedly popping up all around the country, and the economy is expected to resume growing soon at an annual rate of 3% to 4%. Many of these are the same people who insisted that the economy would continue growing last year, even while it was clear that we were already in the beginning stages of a recession.

A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.

Anytime the central bank intervenes to pump trillions of dollars into the financial system, a bubble is created that must eventually deflate. We have seen the results of Alan Greenspan's excessively low interest rates: the housing bubble, the explosion of subprime loans and the subsequent collapse of the bubble, which took down numerous financial institutions. Rather than allow the market to correct itself and clear away the worst excesses of the boom period, the Federal Reserve and the U.S. Treasury colluded to put taxpayers on the hook for trillions of dollars. Those banks and financial institutions that took on the largest risks and performed worst were rewarded with billions in taxpayer dollars, allowing them to survive and compete with their better-managed peers.

This is nothing less than the creation of another bubble. By attempting to cushion the economy from the worst shocks of the housing bubble's collapse, the Federal Reserve has ensured that the ultimate correction of its flawed economic policies will be more severe than it otherwise would have been. Even with the massive interventions, unemployment is near 10% and likely to increase, foreigners are cutting back on purchases of Treasury debt and the Federal Reserve's balance sheet remains bloated at an unprecedented $2 trillion. Can anyone realistically argue that a few small upticks in a handful of economic indicators are a sign that the recession is over?

What is more likely happening is a repeat of the Great Depression. We might have up to a year or so of an economy growing just slightly above stagnation, followed by a drop in growth worse than anything we have seen in the past two years. As the housing market fails to return to any sense of normalcy, commercial real estate begins to collapse and manufacturers produce goods that cannot be purchased by debt-strapped consumers, the economy will falter. That will go on until we come to our senses and end this wasteful government spending.

Government intervention cannot lead to economic growth. Where does the money come from for Tarp (Treasury's program to buy bad bank paper), the stimulus handouts and the cash for clunkers? It can come only from taxpayers, from sales of Treasury debt or through the printing of new money. Paying for these programs out of tax revenues is pure redistribution; it takes money out of one person's pocket and gives it to someone else without creating any new wealth. Besides, tax revenues have fallen drastically as unemployment has risen, yet government spending continues to increase. As for Treasury debt, the Chinese and other foreign investors are more and more reluctant to buy it, denominated as it is in depreciating dollars.

The only remaining option is to have the Fed create new money out of thin air. This is inflation. Higher prices lead to a devalued dollar and a lower standard of living for Americans. The Fed has already overseen a 95% loss in the dollar's purchasing power since 1913. If we do not stop this profligate spending soon, we risk hyperinflation and seeing a 95% devaluation every year.

http://www.forbes.com/forbes/2009/1116/opinions-great-depression-economy-on-my-mind.html

paade

11-01-2009, 10:05 AM

good shit. Massive inflation is the only way out of the hole that your talented politicians have dug. And Europe will follow suite sooner or later. China and Russia will triumph.
I think your biggest problem is that only 3% of the american people actually produce anything, the rest just flip burgers, sell shit at Wallmart etc.

Just yesterday i watched some american 2-3 years old housing program from TV. A couple was buying a house and they were looking to buy some plywood-miracle that had a pricetag of $470k. The price was way over what they could have afforded, but the seller said that the price was just going to keep climing and they would soon be filthy rich.
I wonder how theyre doing now.

Villa

11-01-2009, 10:09 AM

paade

11-01-2009, 10:12 AM

I hear in Finland, you just pile some snow together and move in.

get your facts straight: iglus are made from ice and reindeer poop.

Villa

11-01-2009, 10:19 AM

get your facts straight: iglus are made from ice and reindeer poop.
Oh, I thought that was the new Ben&Jerry's ice cream...

Bissen

11-01-2009, 10:35 AM

Oh, I thought that was the new Ben&Jerry's ice cream...

It's both.

Ohhh and Vessol. Any suggestions on how to prepare for the worst? Should I buy the SAS survival handbook and hit the local forest?

I call tinfoil.

Sarcasm sold separately.

Laxe

11-01-2009, 12:03 PM

capitalism FUCK YEAH!

Silverhandorder

11-01-2009, 05:06 PM

Ohhh and Vessol. Any suggestions on how to prepare for the worst? Should I buy the SAS survival handbook and hit the local forest?

If you have savings get out of the dollar. Otherwise it won't effect you much. Buy up things that you know you will need and might not be available in American market if the recession hits.

The Cougar

11-01-2009, 07:18 PM

I'm fearing this too. I'm hoping that the Austrians are at least partially wrong, or this could turn very ugly.

lafayette

11-01-2009, 07:29 PM

Corporatism FUCK YEAH!

Its great, isnt it :rolleyes:

shook

11-01-2009, 07:33 PM

capitalism FUCK YEAH!

why is this the fault of capitalism?

Bissen

11-01-2009, 07:35 PM

I'm fearing this too. I'm hoping that the Austrians are at least partially wrong, or this could turn very ugly.

You live in Norway. You guys sealed yourselves hermetically a long time ago...

Reckun

11-01-2009, 07:35 PM

Its great, isnt it :rolleyes:

stfu commie :D

Sharuk

11-01-2009, 07:36 PM

I believe the world is burning to the ground....

Bissen

11-01-2009, 07:43 PM

I believe the world is burning to the ground....

Baby steps mate. Baby steps...

Vessol

11-01-2009, 08:03 PM

Just yesterday i watched some american 2-3 years old housing program from TV. A couple was buying a house and they were looking to buy some plywood-miracle that had a pricetag of $470k. The price was way over what they could have afforded, but the seller said that the price was just going to keep climing and they would soon be filthy rich.
I wonder how theyre doing now.

Yup. That's the kind of shit that partially got us in this mess in the first place. Artificially raising prices. My mom lost her job because she refused to do this for Countrywide, as well as subprime mortgages. They would pay off appraisers to give exceedingly high values and constantly sell off the directives.
Why? Because the government made them. Go go Fair Housing Bill, thanks Clinton. The same people who made this derivatives mess are the ones fixing it.
I think it's hilarious that people think that free market capitalism is behind this.

Vessol

11-01-2009, 08:05 PM

It's both.

Ohhh and Vessol. Any suggestions on how to prepare for the worst? Should I buy the SAS survival handbook and hit the local forest?

I call tinfoil.

Sarcasm sold separately.

What Silver said as for items to disappear first in a panic and when price control is put into effect. Seriously price control is what they will do when inflation hits, and it is going to hit, hard. You'll see major shortgages of certain goods. Namely canned food, toilet paper and batteries. Buy up some here and there.

Here is a good list of things you should keep an eye out for. Don't go fucking Y2k on it. Just if you have some extra money, consider buying a big thing of toilet paper and storing it away, or batteries, or gravy.

http://www.thepowerhour.com/news/items_disappearfirst.htm

Glaive

11-01-2009, 08:10 PM

suck my prosperous dick
http://www.ft.com/cms/s/0/54fd57dc-c18c-11de-b86b-00144feab49a.html

Vessol

11-01-2009, 08:16 PM

suck my prosperous dick
http://www.ft.com/cms/s/0/54fd57dc-c18c-11de-b86b-00144feab49a.html

I've been wondering this for awhile and always wanted to ask a Finn.

Why don't you give 100% of your earnings to your government and develop programs so they give you all you need? You say it works great for your healthcare, are you not trusting enough to let them take over everything?

Gaal

11-01-2009, 08:30 PM

Fuck yea Canada's seventh.

Its actually sad what is happening to you guys down there though I feel bad for you.

Luckily my government is to incompetent to try and take away our freedoms.

Vessol

11-01-2009, 08:36 PM

Fuck yea Canada's seventh.

Its actually sad what is happening to you guys down there though I feel bad for you.

Luckily my government is to incompetent to try and take away our freedoms.

Lol.

You think that when the USD collapses the Canucks will be spared? They call it "Globalism" for a reason. That's like saying that there is a giant tree with many many branches. Some branches are small, some are huge and could almost said to be independent of the tree, but not quite. Now if a lumberjack comes waltzing through the forest and see's this tree and then chops it down. What happens to all the branches on that tree?

Gaal

11-01-2009, 08:40 PM

Lol.

You think that when the USD collapses the Canucks will be spared? They call it "Globalism" for a reason. That's like saying that there is a giant tree with many many branches. Some branches are small, some are huge and could almost said to be independent of the tree, but not quite. Now if a lumberjack comes waltzing through the forest and see's this tree and then chops it down. What happens to all the branches on that tree?

Trust me I understand completely that we wont be spared but the US has so many major problems that will amplify your depression immensely.

Illegal immigration, a broken health care system, two major conflicts, just to name a few.

Fuck I am so glad that my country doesn't border Mexico.

Bissen

11-01-2009, 08:47 PM

I've been wondering this for awhile and always wanted to ask a Finn.

Why don't you give 100% of your earnings to your government and develop programs so they give you all you need? You say it works great for your healthcare, are you not trusting enough to let them take over everything?

You have to take nations on separate scales.

For instance. Finlands government don't consist of corporately bought electives. Do I have to mention what nations do consist of just that?

jonyak

11-01-2009, 08:47 PM

Luckily my government is to incompetent to try and take away our freedoms.

Ain't this the truth.

Vessol

11-01-2009, 08:52 PM

You have to take nations on separate scales.

For instance. Finlands government don't consist of corporately bought electives. Do I have to mention what nations do consist of just that?

Still, I'm wondering why Finland doesn't entrust their entire welfare to the government, if they do well on healthcare, are they too skeptical of the government to provide everything for them?

Ain't this the truth.

Lol. Canada and Mexico are bought owned and operated by US.

At least you guys don't have intrusive governments.

oh wait

http://www.michaelgeist.ca/content/view/4069/125/

Glaive

11-01-2009, 09:01 PM

I've been wondering this for awhile and always wanted to ask a Finn.

Why don't you give 100% of your earnings to your government and develop programs so they give you all you need? You say it works great for your healthcare, are you not trusting enough to let them take over everything?

Because we are not idiots and understand that the world is not in black and white. Some things are better off with the government keeping its hands out of it, while other things do require it.

Vessol

11-01-2009, 09:02 PM

Because we are not idiots and understand that the world is not in black and white.

Avoiding the question is avoiding the question. Do you not trust your government enough to take care of your welfare? If so, then how are you any different then me except to a different degree.

Gaal

11-01-2009, 09:04 PM

Still, I'm wondering why Finland doesn't entrust their entire welfare to the government, if they do well on healthcare, are they too skeptical of the government to provide everything for them?

Lol. Canada and Mexico are bought owned and operated by US.

At least you guys don't have intrusive governments.

oh wait

http://www.michaelgeist.ca/content/view/4069/125/

Lol If you think that people here would let the Government do that you are severely mistaken. You see us Canadians still have power over what our government does.

Furthermore your link is broken

Redfire592

11-01-2009, 09:05 PM

Yo Vessol i'm really happy for you and im gonna let you finish, but president obama is the most black president of all time, he ain't gonna let a brotha down

Glaive

11-01-2009, 09:05 PM

Avoiding the question is avoiding the question. Do you not trust your government enough to take care of your welfare? If so, then how are you any different then me except to a different degree.

You don't understand. It's not that I don't trust the government, it's that I think many things are done better without the government. Like I said in my previous post, you can't see things in black and white.

And, yes, I am the same as you to a degree.

Bissen

11-01-2009, 09:06 PM

Still, I'm wondering why Finland doesn't entrust their entire welfare to the government, if they do well on healthcare, are they too skeptical of the government to provide everything for them?

Because there have to be a carrot aswell. Communism pretty much failed remember?

I live in the highest taxed nation in the world (Denmark), and I frickin love it here.
Free health care meaning, we have some of the healthiest people and workforce around.
We have free education and not only that. The students get paid to become subjects of higher learning, meaning we have one of the highest rates of people with a college education and up.

And I can still afford a home, a car, a nice gaming rig, whores, booze, weed (freetown of christiania ftw btw), et fucking cetera....

Time and time again this little 5 million citizen nation get pointed out as the happiest nation on the globe.
Something must be working in order for that to happen.

Did I forget to mention polarbears run amok in the street at winter time? Still happy though.

Vessol

11-01-2009, 09:07 PM

How's your debt?

Bissen

11-01-2009, 09:09 PM

How's your debt?

It just turned last year. I blame the states ;)

Vessol

11-01-2009, 09:12 PM

It just turned last year. I blame the states ;)

How's your natural resources? What is your economy based on?

Bissen

11-01-2009, 09:23 PM

How's your natural resources? What is your economy based on?

Bacon and windmills. No shit! :)

Lots of natural gas. Mærsk (largest container ship operator and supply vessel operator in the world.) Even though not going good for him atm.

Then we have as I said a large group of intellectuals working in medicin and the advancement of technology in general.

Btw. The more you earn in Denmark the more you pay in tax. Still a ton a rich bastards here though. Something must be working for them aswell...

Uhh! We're also the least corrupt nation on the globe. Just had to get that out there also ;)

here's some wiki info

According to World Bank Group, Denmark has the most flexible labor market in Europe; the policy is called flexicurity. It is easy to hire, fire, and find a job. Denmark has a labor force of about 2.9 million. Denmark has the fourth highest ratio of tertiary degree holders in the world.[51] GDP per hour worked was the 10th highest in 2007. Denmark has the world's lowest level of income inequality, according to the UN, and the world's highest minimum wage, according to the IMF. As of June 2009 the unemployment rate is at 6.3 percent, 2.6 percentage points under the EU average at 8.9 percent.
Denmark is one of the most competitive economies in the world according to World Economic Forum 2008 report, IMD, and The Economist. According to rankings by OECD, Denmark has the most free financial markets in EU-15 and also one of the most free product markets, owning to liberalisation in the 1990s.

Vessol

11-01-2009, 09:27 PM

And what's going to happen in Denmark once the global service/retail economy collapses?

Bissen

11-01-2009, 09:28 PM

And what's going to happen in Denmark once the global service/retail economy collapses?

We will breed our pigs and sow our potatoes just like the old days.

Glaive

11-01-2009, 09:49 PM

Uhh! We're also the least corrupt nation on the globe. Just had to get that out there also ;)

i like how finland was the least corrupt country in 2002, 2003, and 2004, but has since then consistently fallen down in the charts :P i bet it's due to our douche bag of a prime minister.

Tenebrion

11-01-2009, 09:53 PM

So I believe we can all agree that China is about to rule the world.

I guess that means Communism wins, eh?

Strangia

11-01-2009, 10:01 PM

And what's going to happen in Denmark once the global service/retail economy collapses?

You mean "whats going to happen when the basis for the Chinese/Indonesian/Indian/Brazilian economy collapses".

Vessol

11-01-2009, 10:01 PM

So I believe we can all agree that China is about to rule the world.

I guess that means Communism wins, eh?

Lol. China is communist? Awesome joke man, awesome joke.

You mean "whats going to happen when the basis for the Chinese/Indonesian/Indian/Brazilian economy collapses".

Nope. Both the service/retail economies of Western nations and the resource based/exploitation economies of the third world and China/India/Brazil and interlinked. However the ones whom will feel it the most are Western nations.

Bissen

11-01-2009, 10:15 PM

Nope. Both the service/retail economies of Western nations and the resource based/exploitation economies of the third world and China/India/Brazil and interlinked. However the ones whom will feel it the most are Western nations.

The down side of getting rich by screwing the poor.

Strangia

11-01-2009, 10:21 PM

Nope. Both the service/retail economies of Western nations and the resource based/exploitation economies of the third world and China/India/Brazil and interlinked. However the ones whom will feel it the most are Western nations.
It will still be a worldwide depression, however, I do foresee Chinese hegemony pretty soon.

Vessol

11-01-2009, 10:47 PM

Yes, this is definitely the Chinese/Indian Century.

Bissen

11-01-2009, 11:00 PM

Yes, this is definitely the Chinese/Indian Century.

Bububut Cheyney, Kristol, Rumsfeld, Wolfowitz etc had plans for a "New American Century". 9/11 was part of that plan remember?

http://www.newamericancentury.org/
http://www.newamericancentury.org/RebuildingAmericasDefenses.pdf

Page 63
Further, the process of transformation, even if it brings revolutionary change, is likely to be a long one, absent some catastrophic and catalyzing event – like a new Pearl Harbor.

Uh oh! And the chinese ruined EVERYTHING! I hate the chinese! MAO!

Ohh that's the vietnamese...

Vessol

11-01-2009, 11:55 PM

In my opinion the NeoConservatives are just used by the banking cartels for their own purposes. The exact plan of the Neocons for the "New American Century" is what will greatly accelerate the fall of America and the Western world. They are tools, just like the Muslim extremists are.
An excellent film on the two is "The Power of Nightmares" by the BBC a couple years back.

Make no mistake. Look at the Chinese government now and add more technology to their state powers, that is what the future holds.

xpiher

11-02-2009, 12:06 AM

why is this the fault of capitalism?

because capitalism is flawed at its core duh! :rolleyes:

I wouldn't blame this just on the feds, and I don't think Ron Paul's doom and gloom prediction will come true. Not saying that he is way off base, but I just don't think its going to be as bad, and as bad for the reasons he says, the great depression. I stick by my assumption I made in 2006, the economy will recover by 2012 and we'll see the "bounce back" late 2010.

Because we are not idiots and understand that the world is not in black and white. Some things are better off with the government keeping its hands out of it, while other things do require it.

I would have to agree with this statement. Somethings the gov should be involved in, and other things the gov has no biz being involved in.

Because there have to be a carrot aswell. Communism pretty much failed remember?

I live in the highest taxed nation in the world (Denmark), and I frickin love it here.
Free health care meaning, we have some of the healthiest people and workforce around.
We have free education and not only that. The students get paid to become subjects of higher learning, meaning we have one of the highest rates of people with a college education and up.

And I can still afford a home, a car, a nice gaming rig, whores, booze, weed (freetown of christiania ftw btw), et fucking cetera....

Time and time again this little 5 million citizen nation get pointed out as the happiest nation on the globe.
Something must be working in order for that to happen.

Did I forget to mention polarbears run amok in the street at winter time? Still happy though.

Good points all around

So I believe we can all agree that China is about to rule the world.

I guess that means Communism wins, eh?

lol

Bububut Cheyney, Kristol, Rumsfeld, Wolfowitz etc had plans for a "New American Century". 9/11 was part of that plan remember?

http://www.newamericancentury.org/
http://www.newamericancentury.org/RebuildingAmericasDefenses.pdf

Page 63

Uh oh! And the chinese ruined EVERYTHING! I hate the chinese! MAO!

Ohh that's the vietnamese...

Nice quote from Blackwater right there I tell you what :D

Ok lets be real here. America has been slated to fuck itself ever since we went to a service primary industry. What I mean by this is, a country that doesn't create its own goods (for the most part) cannot possible prosper for long. What America needs to do in at this time is go back to creating thigns, new things, implementing a different tax code to encourage production companies to move to the states, get the hell out of all wars (although I know Afghanistan will be fucked by this and America will be as well), and change its policy on issuing of credit. IMO, and you can argue against this if you feel inclined, the main reason other Western countries haven't felt the brunt of this global market downturn, is because most countries keep a tight check on credit. Americans in general are too ready to spend, spend, spend even when they have nothing to spend and part of the reason is because credit is too easy to get. Tighten credit, get people working, get people earning a little bit more, curb inflation = fix the problem

In my opinion the NeoConservatives are just used by the banking cartels for their own purposes. The exact plan of the Neocons for the "New American Century" is what will greatly accelerate the fall of America and the Western world. They are tools, just like the Muslim extremists are.
An excellent film on the two is "The Power of Nightmares" by the BBC a couple years back.

Make no mistake. Look at the Chinese government now and add more technology to their state powers, that is what the future holds.

Been trying to tell people that now for 5 years and some political theories have been saying it since the early 90s. China will create a super Asian hegemon. Anyone else intrested in seeing another "cold war." Realism Bi-polar politics are so win. :lmao:

1998altima

11-02-2009, 12:08 AM

because capitalism is flawed at its core duh! :rolleyes:

I wouldn't blame this just on the feds, and I don't think Ron Paul's doom and gloom prediction will come true. Not saying that he is way off base, but I just don't think its going to be as bad, and as bad for the reasons he says, the great depression. I stick by my assumption I made in 2006, the economy will recover by 2012 and we'll see the "bounce back" late 2010.

I would have to agree with this statement. Somethings the gov should be involved in, and other things the gov has no biz being involved in.

Good points all around

lol

Nice quote from Blackwater right there I tell you what :D

Ok lets be real here. America has been slated to fuck itself ever since we went to a service primary industry. What I mean by this is, a country that doesn't create its own goods (for the most part) cannot possible prosper for long. What America needs to do in at this time is go back to creating thigns, new things, implementing a different tax code to encourage production companies to move to the states, get the hell out of all wars (although I know Afghanistan will be fucked by this and America will be as well), and change its policy on issuing of credit. IMO, and you can argue against this if you feel inclined, the main reason other Western countries haven't felt the brunt of this global market downturn, is because most countries keep a tight check on credit. Americans in general are too ready to spend, spend, spend even when they have nothing to spend and part of the reason is because credit is too easy to get. Tighten credit, get people working, get people earning a little bit more, curb inflation = fix the problem

STFU Mr. 10 posts in OT! WTF are you over here for?!?!?!

xpiher

11-02-2009, 12:10 AM

STFU Mr. 10 posts in OT! WTF are you over here for?!?!?!

political discussion with people who are actually intelligent conservatives rather than the retards who I have to deal with in real life. Its kinda like being in college again.

Death's Chill

11-02-2009, 12:12 AM

Eh, it could still be worst. While it's true that it will indeed become so, it's not THAT bad, unless you can't find a job ANYWHERE at all. Which is possible but rather unlikely.

Just ride it out, spend your money, but spend it wisely. Don't go into debt, for the love of fucking god, it you cannot control your credit card, cut the motherfucker up. For the very impulsive or weak willed, credit cards are shiny depression cards.

Vessol

11-02-2009, 12:32 AM

@xpiher

Jobless recovery FTW, amirite?

xpiher

11-02-2009, 12:33 AM

@xpiher

Jobless recovery FTW, amirite?

That what happens when all the profit is created through BS. Like I said, america needs to start producing again or else we are fucked. Not everyone can be lucky/smart enough to be a lawyer or stock broker and flipping burgers and cleaning people's cloths don't give enough money to live on.

See we can agree on things

Edit: Lets just hope the dollar isn't further devalued by all the Chinese investment .... oh wait nvm. You know whats funny, Chinese elite are buying summer homes in the US and Africa now :lmao:

Vessol

11-02-2009, 12:48 AM

xpiher

11-02-2009, 12:53 AM

But you just said you think there is going to be a full recovery and that Ron Paul was full of shit.

Government spending can come from taxes, selling treasury bonds, or just printing new money. Good luck taxing people further, good luck trying to sell our treasury bonds, lol. That leaves us with printing money out of nowhere. It doesn't take a rocket scientist to realize that have a cup of juice and then adding more and more water to it deludes it. Same with our fiat currency.

I never said it would be a full recovery. I said the economy would bounce back at the end 2010. That doesn't mean it will be worth anything, that people without service industry skill will be able to find work, or that Ron Paul is completely full of shit. I just don't see the collapse he sees. By 2012 the economy should level off and recover unless something major happens

A surge in tech school applications mean that people will be getting back to work, but not producing anything. It sucks, but its not like this hasn't happened before.

Vessol

11-02-2009, 12:59 AM

xpiher

11-02-2009, 01:07 AM

So you don't think that massively expanding the money supply will cause any problems? The physical money supply is only 2% of the actual currency supply, but between 2008 and 2009 it doubled from 800 billion to around 1.4 trillion. While it normall had a steady growth of a few billion a year, that is an incredible growth. If that's just the physical money supply, what about the other 98%?

What about the 23 trillion given to the TARP fund? (that was what was reported in April, god knows how much it is now).

I didn't say it wouldn't have any affect, I just don't think its going to have the huge affect you and Ron Paul say it will. This of course is assuming that, after the initial loans made by banks to companies and individuals are made (hasn't happened yet) credit isn't handed out again like water to people in the desert. Americans are hooked on credit and thats part of the problem. If credit wasn't easy to get and wasn't made necessary to have based in part to its availability, then the issue may not of happened in the first place. You know exactly what I'm talking about since it directly affected you.

Tibernicus

11-02-2009, 01:40 AM

We've thrown shit loads of fake money at the problem to fix it, and it will crumble just in time for a Republican to get elected and blamed.

xpiher

11-02-2009, 01:43 AM

We've thrown shit loads of fake money at the problem to fix it, and it will crumble just in time for a Republican to get elected and blamed.

Probably, but the republicans started throwing fake money at the problem. Both parties are dumb.

Still think there will be a bounce back late 2010 (q3 q4)

Edit: Bounce backs can happen without massive creations of jobs.

DeepUndercover

11-02-2009, 01:58 AM

And what's going to happen in Denmark once the global service/retail economy collapses?

We are going to keep selling our brainpower? (and the whole natural gas and pigs thing will help too) :)

As far as why we do not fancy a complete government takeover of every business - well, I guess its a matter of moderation.

We don't see competition on the the healthcare market as giving the actors an incentive to keep people alive cheaper and smarter. Keeping people alive costs money. So either you cut on the cost or the care. The latter is easier - (or a reduction in the funding of the cost, ofc).. Don't want to do that. Free market mechanics have no soul. Healthcare needs soul.

Now as for my vegetables, my car or my shoes - I trust my government to check that the guys putting the stuff on the market, does so within the rules we have established to prevent child labour, the use of pesticides or what have you. Within those parameters they are welcome to compete as they see fit to become my particular choice. Because, you see, I do acknowledge that the free market mechanics have a wide range of benefitial uses. But I also trust my government to make sure that checks and balances are kept on those mechanics. And in these cases I have a wide range of choices in terms of cost and quality.

Lung cancer - not so much. I don't want anybody thinking about the cost if my father was about to go down with something nasty like that. Or your father or mother for that matter. Forcing somebody to think about cost when their health is on the line is a severely inhumane idea to me.

There is no reason to believe that a completely unbridled free market will work in favour of us in all cases. We have to inject empathy.

In healthcare we need a lot of it. Shoemaking - not so much.

DeepUndercover

11-02-2009, 02:24 AM

Good luck taxing people further,.

Well, maybe you should. There is one family in the US that is worth as much as the bottom 100 million combined. You have probably shopped in one of their stores at some point. A lot of that 100 million prob do.

Maybe its time to ask them to hand a little bit more back as a thank you for providing them with a market that have made them insanely rich.

Even a guy like Buffett agrees that he pays too little in taxes.

You guys had a clue in the 50's (93% marginal tax under a republican president anyone?) - and drunk on that success you decided to forego moderation and yell "Fuck it! Have at it Mr. Gecko!".

Taroth

11-02-2009, 03:51 AM

I feel many important details are beyond armchair logic in this case. I dont have the information to agree or disagree, but I do hope you are wrong Vessol.

Whatever gives the best bottom-line coverage to consumers at the best price is what I support for healthcare, whether it be from government or the private sector. It seems that government-run healthcare is doing a better job overall in the world, but that doesn't mean its perfect or sustainable.

xpiher

11-02-2009, 04:17 AM

We are going to keep selling our brainpower? (and the whole natural gas and pigs thing will help too) :)

As far as why we do not fancy a complete government takeover of every business - well, I guess its a matter of moderation.

We don't see competition on the the healthcare market as giving the actors an incentive to keep people alive cheaper and smarter. Keeping people alive costs money. So either you cut on the cost or the care. The latter is easier - (or a reduction in the funding of the cost, ofc).. Don't want to do that. Free market mechanics have no soul. Healthcare needs soul.

Now as for my vegetables, my car or my shoes - I trust my government to check that the guys putting the stuff on the market, does so within the rules we have established to prevent child labour, the use of pesticides or what have you. Within those parameters they are welcome to compete as they see fit to become my particular choice. Because, you see, I do acknowledge that the free market mechanics have a wide range of benefitial uses. But I also trust my government to make sure that checks and balances are kept on those mechanics. And in these cases I have a wide range of choices in terms of cost and quality.

Lung cancer - not so much. I don't want anybody thinking about the cost if my father was about to go down with something nasty like that. Or your father or mother for that matter. Forcing somebody to think about cost when their health is on the line is a severely inhumane idea to me.

There is no reason to believe that a completely unbridled free market will work in favour of us in all cases. We have to inject empathy.

In healthcare we need a lot of it. Shoemaking - not so much.

Great argument

Sharuk

11-02-2009, 04:30 AM

Well, maybe you should. There is one family in the US that is worth as much as the bottom 100 million combined. You have probably shopped in one of their stores at some point. A lot of that 100 million prob do.

Maybe its time to ask them to hand a little bit more back as a thank you for providing them with a market that have made them insanely rich.

Even a guy like Buffett agrees that he pays too little in taxes.

You guys had a clue in the 50's (93% marginal tax under a republican president anyone?) - and drunk on that success you decided to forego moderation and yell "Fuck it! Have at it Mr. Gecko!".

The Richest People in our country play well over 2/3rds of our Income Tax and a new stat came out a few weeks ago that what was it 49% of the population wont be paying taxes in the next few years?

Yea....screw those rich people, they just hoard it all dont they!

xpiher

11-02-2009, 04:40 AM

The Richest People in our country play well over 2/3rds of our Income Tax and a new stat came out a few weeks ago that what was it 49% of the population wont be paying taxes in the next few years?

Yea....screw those rich people, they just hoard it all dont they!

Well over 2/3rds? More like 1/3. 39% is what the tax rate is I think, which can be cut down to about 30% with tax write offs. The 49% stat is pretty close to being right, but it doesn't take into account that about 20% of the population isn't working right now due to massive lay offs with nothing new being made.

In tough times, lower taxes on the majority of people at the expense of a 3% increase on the top 1%-5% of people sounds like a good idea doesn't it.

Sharuk

11-02-2009, 04:45 AM

Well over 2/3rds? More like 1/3. 39% is what the tax rate is I think, which can be cut down to about 30% with tax write offs. The 49% stat is pretty close to being right, but it doesn't take into account that about 20% of the population isn't working right now due to massive lay offs with nothing new being made.

In tough times, lower taxes on the majority of people at the expense of a 3% increase on the top 1%-5% of people sounds like a good idea doesn't it.

i meant as in they pay over 2/3rds of our income tax we collect, not that the tax rate is over 2/3rds

15%-16% isnt working if you count underemployed (though i expect it to hike up over 20% sooner or later)

The problem is we are broke, we cant fix this with taxes and again 49% or so of the country doesnt pay taxes, and alot of them get checks in the mail from the government

xpiher

11-02-2009, 04:50 AM

i meant as in they pay over 2/3rds of our income tax we collect, not that the tax rate is over 2/3rds

15%-16% isnt working if you count underemployed (though i expect it to hike up over 20% sooner or later)

The problem is we are broke, we cant fix this with taxes and again 49% or so of the country doesnt pay taxes, and alot of them get checks in the mail from the government

Theres a lot fucked up, but the idea behind the 3% increase is sound since that 3% is done to lower the taxes of people who pay them, but aren't rich. Personally, I think we need to change the way taxes are collected anyways. Withholding causes more problems than what it solves, which is making sure dumb people pay their taxes without having to write a huge check, and taxing interest made from savings is just retarded. Why save money when you'll just have to pay it to the gov?

Fair Tax aka Luxury Tax FTW

Edit: Less people would be on welfare and not working if there was assistance provided to people who do work. My firend lost his job because his baby sitter bailed so he had to stay home from work to watch his kid. Got fired the next day.

Silverhandorder

11-02-2009, 04:55 AM

Western Countries will be forced to produce again. This correction is going to be very painful. All government programs will collapse. It's not rocket science it happened before. Just because US and Europe are huge does not mean they will be totally fucked.

There is no recovery in the short term. We are heading for a monster crash. After the crash a republican FDR will be elected. We will have a long as depression and by the time we will produce our national advantages will be squandered. Hopefully I am wrong but if I was a betting man I would bet on history.

Death's Chill

11-02-2009, 05:59 AM

The Richest People in our country play well over 2/3rds of our Income Tax and a new stat came out a few weeks ago that what was it 49% of the population wont be paying taxes in the next few years?

Yea....screw those rich people, they just hoard it all dont they!

Actually the majority of income tax comes from the middle man. Figure in about 250 million or so, earning 40k a year. That's at least 8,000 dollars in total taxes annually.

That's two trillion dollars right there.

paade

11-02-2009, 04:08 PM

Yes, this is definitely the Chinese/Indian Century.

not so sure about India, its just that the more i hear about that country and their way of doing things, the more im amazed they managed to have anykind of economy at all. Reminds me of Elbonia from Dilbert.

Also, the next big bubble will propably burst in China, as there are other countries in Asia that offer even cheaper labor than China.
Russia will be a badass in economy in this century imo.

Still think there will be a bounce back late 2010 (q3 q4)

Edit: Bounce backs can happen without massive creations of jobs.

lol, i dont think you realise how deep in shit the western world is atm, especially USA. Massive inflation will hardly boost your economy in just two years, because you still have to compete with China etc.

Silverhandorder

11-02-2009, 04:15 PM

not so sure about India, its just that the more i hear about that country and their way of doing things, the more im amazed they managed to have anykind of economy at all. Reminds me of Elbonia from Dilbert.

Also, the next big bubble will propably burst in China, as there are other countries in Asia that offer even cheaper labor than China.
Russia will be a badass in economy in this century imo.

Both India and China practice market intervention. Both are emerging economies that is why there is a lot of bad and outdated parts. However make no mistake the fact that they are working on actually producing things will make them the New America of the world.

Even though other Asian countries can undercut, what they supply is not enough without Chinese goods. If anything China will start to compete with them. However Chinese consumer is emerging and that means that they no longer need to rely on us to buy their goods.

Lastly Russia has a tough time right now. Their economy is exporting raw resources. Their infrastructure is not equipped to grow their industrial base.

paade

11-02-2009, 04:49 PM

Even though other Asian countries can undercut, what they supply is not enough without Chinese goods. If anything China will start to compete with them. However Chinese consumer is emerging and that means that they no longer need to rely on us to buy their goods.

Lastly Russia has a tough time right now. Their economy is exporting raw resources. Their infrastructure is not equipped to grow their industrial base.

thats exactly my point, China has to compete with other rising Asian countries as well. It may never again get the same numbers in economy growth that it had in recent years. And for the emerging Chinese consumer... maybe, maybe not... since the start of this recession (or is it okay to say depression by now?) of all the lost jobs in the world, China has about 40% of those. And thats despite the massive amounts of money that Chinese gov has used as stimulus.

Russia has tough time now, low oil price etc, but it still has the biggest natural resources in the world. Unless they totally fuck up (communism part II), i see no reason why they wouldnt be big.

jakeoc

11-03-2009, 07:31 PM

if america invades Russia and China Invades Japan Africa and Europe can get out of Economic Depression by making bombs guns and bullets(and make the ones going to US soldiers jam hahaha lulz)

Bissen

11-03-2009, 07:46 PM

You guys had a clue in the 50's (93% marginal tax under a republican president anyone?) - and drunk on that success you decided to forego moderation and yell "Fuck it! Have at it Mr. Gecko!".
It was Eisenhower. The last true president of America. At least the last that didn't get murdered.

Vessol

11-03-2009, 08:27 PM

I feel many important details are beyond armchair logic in this case. I dont have the information to agree or disagree, but I do hope you are wrong Vessol.

I hope I am wrong too.

StainlessSteelRat

11-03-2009, 08:49 PM

I didn't say it wouldn't have any affect, I just don't think its going to have the huge affect you and Ron Paul say it will. This of course is assuming that, after the initial loans made by banks to companies and individuals are made (hasn't happened yet) credit isn't handed out again like water to people in the desert. Americans are hooked on credit and thats part of the problem. If credit wasn't easy to get and wasn't made necessary to have based in part to its availability, then the issue may not of happened in the first place. You know exactly what I'm talking about since it directly affected you.

Exactly how are we going to avoid what RP predicts if we continue w/ low interest rates and an increasing money supply? Exactly how will inflation be avoided? How will Americans become 'unhooked on credit'?

http://www.youtube.com/watch?v=tCTQnxoFVy0&feature=channel

http://www.youtube.com/watch?v=F4DiODl47ps&feature=related

Watch the parts about money supply and interest rates.

We are going to keep selling our brainpower? (and the whole natural gas and pigs thing will help too) :)

As far as why we do not fancy a complete government takeover of every business - well, I guess its a matter of moderation.

We don't see competition on the the healthcare market as giving the actors an incentive to keep people alive cheaper and smarter. Keeping people alive costs money. So either you cut on the cost or the care. The latter is easier - (or a reduction in the funding of the cost, ofc).. Don't want to do that. Free market mechanics have no soul. Healthcare needs soul.

Lung cancer - not so much. I don't want anybody thinking about the cost if my father was about to go down with something nasty like that. Or your father or mother for that matter. Forcing somebody to think about cost when their health is on the line is a severely inhumane idea to me.

There is no reason to believe that a completely unbridled free market will work in favour of us in all cases. We have to inject empathy.

In healthcare we need a lot of it. Shoemaking - not so much.

And you don't think the gov't will have to be 'cost concious'? Where are they going to get all this money to pay for the health care? Why are they seeking to cut Medicare spending by $500 billion in order to fund this new plan? How can they cut spending all of a sudden? Baby boomers are retiring, turning 65; more people are going to be on Medicare. You seem to believe that gov't can cut costs when they pay $600 for a toilet seat. I think it much more logical to expect them to cut care since they have NEVER cut costs.

Empathy comes from doctors, not gov't, not corporations. The cost of healthcare is driven by gov't monetary policy and regulations. Sure, some corps exist to make money, but others are NFPs.

If what you have works, that's great. But make no mistake, countries are not similar. Gov'ts are not similar. The track record of the US gov't (i.e. Medicare) is horrible. US gov't healthcare will only create more problems.

Sharuk

11-04-2009, 04:25 AM

Actually the majority of income tax comes from the middle man. Figure in about 250 million or so, earning 40k a year. That's at least 8,000 dollars in total taxes annually.

That's two trillion dollars right there.

"New data released by the IRS today offers interesting insights into the distributional spread of the federal income tax burden, new analysis by the Tax Foundation shows. The new data shows that the top-earning 25% of taxpayers (AGI over $62,068) earned 67.5% of the nation's income, but they paid more than four out of every five dollars collected by the federal income tax (86%). The top 1% of taxpayers (AGI over $364,657) earned approximately 21.2% of the nation's income (as defined by AGI), yet paid 39.4% of all federal income taxes. That means the top 1% of tax returns paid about the same amount of federal individual income taxes as the bottom 95% of tax returns."

http://taxprof.typepad.com/taxprof_blog/2007/10/top-1-pay-more-.html

http://www.rushlimbaugh.com/home/menu/top_50__of_wage_earners_pay_96_09__of_in come_taxes.guest.html

Yes its Rush, but he came up on google

http://home.netcom.com/~rdavis2/richpay.html

http://www.dallasnews.com/sharedcontent/dws/bus/columnists/sburns/stories/DN-burns_04bus.ART.State.Edition1.4603045.h tml

And the Stats seem to disagree with your statement

Vanno

11-05-2009, 12:03 AM

I'm with Scott Sumner when it comes to the money supply; it has actually been tight since about Summer of last year. At best, significant inflation is a remote possibility.

Vessol

11-05-2009, 12:09 AM

The paper money supply only comprises of 3% of the actual money supply, yet between 2008 and 2009 it near doubled, that's tight?

Vanno

11-05-2009, 12:20 AM

The paper money supply only comprises of 3% of the actual money supply, yet between 2008 and 2009 it near doubled, that's tight?

Go read Scott Sumner is all I can say. Simply saying that the money supply expanded, is no indication of whether monetary policy has been tight or not, MV=PQ and all.

here are a couple good places to start

http://macromarketmusings.blogspot.com/2009/10/what-was-stance-of-monetary-policy-late.html

http://www.voxeu.org/index.php?q=node/3961

Vessol

11-05-2009, 12:30 AM

So you think that artificially lowered interest rates and easy money is suddenly "tight monetary control"? Interest rates are still incredibly low and adjusted by the Fed.

The whole basis of his argument seems to be the crisis was caused because there wasn't enough credit available, lol.

He also thinks its the Fed's responsibility to "stabalize" the market, which their track record is not positive on.

Why not liquidate our debt, have a bad recession/depression and pull out of it? What the Fed is doing is only making it worse.

StainlessSteelRat

11-05-2009, 12:43 AM

Go read Scott Sumner is all I can say. Simply saying that the money supply expanded, is no indication of whether monetary policy has been tight or not, MV=PQ and all.

here are a couple good places to start

http://macromarketmusings.blogspot.com/2009/10/what-was-stance-of-monetary-policy-late.html

http://www.voxeu.org/index.php?q=node/3961

Depends on how you define all the terms. The Fed can adopt an 'easy money' policy by setting interest rates low but banks can hold onto that money (as they are doing now) which makes money in the marketplace 'tight'. Bottom line, having looked at your links, you are basing your opinion on people that already buy into an economic system where they believe the Fed is capable of controlling the economy. There's a huge underlying assumption to everything these guys posit.

Regardless, increasing the money supply causes inflation. Price increases as a result of this inflation may or may not be seen at the time the supply is increased. And his stance has no bearing on whether we will see the effects of the inflation that has already occurred.

Vanno

11-05-2009, 12:58 AM

You clearly didn't read what he posted, but that is to be expected. I already explained that rates and quantity aren't necessarily indicative of policy (didn't you read your Friedman?)

Secondly, the phrase "artificially lowered rates" is entirely meaningless. Artificial compared to what? Finally, you assert that money was easy last year, yet provide absolutely no evidence for this aside from an increase in the quantity of dollars (stating nothing about velocity, or better yet NGDP). It is a one sided approach two a multifaceted issue.

Vessol

11-05-2009, 01:02 AM

Vanno

11-05-2009, 01:12 AM

Regardless, increasing the money supply causes inflation. Price increases as a result of this inflation may or may not be seen at the time the supply is increased. And his stance has no bearing on whether we will see the effects of the inflation that has already occurred.

No it doesn't. There is no reason to believe an increase in money supply necessitates inflation, unless we assume a static market, which is a stupid assumption. Inflation happens when the rate of money growth outpaces demand for money. Your last sentence puzzles me. What are you trying to say?

Vanno

11-05-2009, 01:28 AM

By artificially lower interest rates I mean interest rates which are set by the Fed instead of the market determining rates.

And I read what he posted, he believes that the reason that all this is happening is because there was not enough credit to make up for the amount desired. He believes that the Fed should monitor and police the market.

If you believe the Fed is effective at all in policing the market, you should read up on history. Especially since the end of the Bretton Woods Agreement. Also read End the Fed.

All they do is create fake prosperity by lowering interest rates, expanding credit, and inflating the money supply.

Again, you obviously did not read the posts, or you would not have said "he believes the Fed should monitor and police the market," which is entirely erroneous. He is suggesting the Fed set monetary policy based on forward looking market expectations. He also suggests when the Fed diverts to far from market expectations, that bad things happen.

What rates are you talking about; how do we know that the market wouldn't determine rates to be near the levels they are? Seems a decrease in money demand would push rates lower to me, which is exactly what the Fed did.

As for the effectiveness of monetary policy, I don't disagree with you; I don't believe Sumner would either. Most the notable recessions in history were a result of bad monetary policy before and during the recession. More specifically, inflationary policy prior to the recession and deflationary policy during the recession, apposed to a neutral policy, as advocated by guys like Friedman and Hayek.

I should read End the Fed, a novel by an Economic amateur? I like Paul and all, but I'll stick to actual Econ professors.

Vessol

11-05-2009, 03:20 AM

So you believe deflation is happening? That the cause of the crisis is the Fed refusing to provide enough credit when it is demanded? The problem with that theory is the fact that fiat currency has no value. Look at any other fiat currency in history and you see it collapsing eventually, it's not a sustainable currency.
Why not let the market determine the value of currency and trade what it believes is valuable? Why should we have a body that answers to nobody monitor and inflate our currency and adjust our interest rates in order to push borrowers to borrow more then they save?

If you don't want to read Paul, then why not read Rothbard or Hayek? Or Mises?

Fed monetary policy has ALWAYS been negative for real growth and has created false prosperty.
That's why you have this sham that is a "jobless recovery". What the hell are we producing? You can't have value without something backing it up. Jobs can't be created for the sake of jobs. You need something to back it up.
No. We get jobs with no real production and then we go and spend spend spend, and borrow borrow borrow. Buy houses with no money down. Buy a new car with almost no interest! According to the Fed, this stimulates the economy. Of course it does, it stimulates a delusional economy. A whole economic state of delusion of wealth.

Vanno

11-05-2009, 05:10 AM

I just mentioned Hayek (who was an anti inflationist and deflationist, and would probably support my view, which is basically the Friedman critique of the Great Depression). Once again, you clearly have an axe to grind, and don't care to actually listen to what is being said.

xpiher

11-05-2009, 05:21 AM

A jobless recovery isn't a sham. It just means that companies are making profit, the over all economy is on an up swing, but more jobs aren't being created. Basically, its a profit centric recovery. It would happen regardless of federal regulation since a good portion of people, prior to q3 of 2009, believed the economy wouldn't start to recovery until well into 2011. They began to cut back on spending, and enacted polices like hiring freezes to save money.

ts interesting to monitor the psychological impacts on economics in general. If people, but more importantly investors/"capitalist" view the economy positively, they are more willing to spend money on growth instead of "hording" profit for a future down turn.

So a jobless recovery, IMO, is "normal" in a recession. At the very least, should be expected in a capitalist soceity where as a job centric growth economy should be more expected in a more economicall liberal society. See the policies inacted in Britin and America under democratic or labor party during economic hard time especially FDR.

StainlessSteelRat

11-05-2009, 06:28 AM

No it doesn't. There is no reason to believe an increase in money supply necessitates inflation, unless we assume a static market, which is a stupid assumption. Inflation happens when the rate of money growth outpaces demand for money. Your last sentence puzzles me. What are you trying to say?

You don't need any assumptions. Inflation, by definition, is an increase in the money supply.

What you are referring to is the effect of inflation.

His article revolves around whether the Fed had implemented a tight or easy monetary policy and how you can't look simply at interest rates in order to conclude one or the other. Either way, inflation is still there.

Vanno

11-06-2009, 12:34 AM

You don't need any assumptions. Inflation, by definition, is an increase in the money supply.

What you are referring to is the effect of inflation.

His article revolves around whether the Fed had implemented a tight or easy monetary policy and how you can't look simply at interest rates in order to conclude one or the other. Either way, inflation is still there.

No it isn't. Inflation is an increase in price levels, which is a factor of more than just the money supply (and definitely more than the monetary base.)

Vanno

11-06-2009, 12:37 AM

StainlessSteelRat

11-06-2009, 08:26 PM

No it isn't. Inflation is an increase in price levels, which is a factor of more than just the money supply (and definitely more than the monetary base.)

http://www.econlib.org/library/Enc/Inflation.html

Read that to see where I am coming from. I know inflation causes price increases; that increase is the source of inflation 'rates'.

The point is, increasing the money supply is inflation. Each dollar is worth less/has less purchasing power. This is already true regardless of changes in consumer prices. The effects just haven't reached us yet b/c most of the increase has been held by the banks (0 velocity).

But if you read that article and examine the equations shown; M and V are on one side, price and real income are on the other. So increasing M does result in inflation. At some point the other side of the equation must balance out. It just takes time w/ 0 velocity. OR, M will have to be shrunk quickly via very high interest rates. I believe they were set to 20% by the Fed early 80s to arrest the runaway inflation of the 70s. And M was increased a pittance at that time compared to what they are doing now.

xpiher

11-06-2009, 09:07 PM

It is possible to increase the money supply and not cause infaltion. In order for an incrased money supply to cause inflation, the money actually has to circulate in the economy. Although the FED has "increased" the money supply, it hasn't began to circulate and is likely to not circulate for a bit longer. In fact, it possible for the money supply to not increase money circulation since a good portion of the money lent is going back to the government with interest. Assuming of course that the banks actually pay of their government loans, I know not all bank got loans, and the government takes the money it gets back and not put it into the economy, just the interest it incurs.

StainlessSteelRat

11-06-2009, 09:46 PM

Sunam

11-07-2009, 02:06 PM

So you believe deflation is happening? That the cause of the crisis is the Fed refusing to provide enough credit when it is demanded? The problem with that theory is the fact that fiat currency has no value. Look at any other fiat currency in history and you see it collapsing eventually, it's not a sustainable currency.

That is not the only argument for the expectation of deflation, the argument I support is the theory attributed to Hyman Minsky – Financial instability hypothesis.

Fiat currency has value because fiat currency is the means of final payment for our tax liabilities to the government. Its only when the government changes the type of fiat currency, over issues fiat currency when the private sector has excess savings (in terms of the fiat currency), when the economy is running at full capacity (that is also full employment 2-3% not the NAIRU) and if there are supply shocks (e.g. Zimbabwe).

It’s my belief that no economic system is sustainable. The combination of uncertainty and money makes sure of this.

You don't need any assumptions. Inflation, by definition, is an increase in the money supply.

I find it helps to differentiate between the two definitions of inflation. The first being price inflation and the second monetary inflation. The former being the generally accepted definition of inflation and the latter the Austrian definition.

StainlessSteelRat

11-07-2009, 09:23 PM

I find it helps to differentiate between the two definitions of inflation. The first being price inflation and the second monetary inflation. The former being the generally accepted definition of inflation and the latter the Austrian definition.

That does help some, but at the same time, price driven inflation has to result from lack of resources. If monetary supply is static, price won't change unless supply is altered. So is that really inflation?

Is it possible to see across the board scarcity to the point where prices increase and cause inflation? Obviously, when OPEC reduces production the price of oil goes up, but that does not create inflation b/c it's a single product.

I just don't ever see inflation occuring due to changes in that side of the equation. It's always been increases in M.

Vanno

11-10-2009, 03:18 AM

That does help some, but at the same time, price driven inflation has to result from lack of resources. If monetary supply is static, price won't change unless supply is altered. So is that really inflation?

Is it possible to see across the board scarcity to the point where prices increase and cause inflation? Obviously, when OPEC reduces production the price of oil goes up, but that does not create inflation b/c it's a single product.

I just don't ever see inflation occuring due to changes in that side of the equation. It's always been increases in M.

You don't need lack of resources for price inflation. Money demand increases can cause price inflation as well (money is a good like anything else, and has it's own market). Likewise, as in your example, oil can definitely cause price inflation, as it is a component in pretty much any manufacturing process; it will be even more inflationary if the dearth is expected over a long time horizon.

Tenebrion

11-10-2009, 03:26 AM

brb, prapring for worst.

Vanno

11-10-2009, 03:27 AM

http://www.econlib.org/library/Enc/Inflation.html

Read that to see where I am coming from. I know inflation causes price increases; that increase is the source of inflation 'rates'.

The point is, increasing the money supply is inflation. Each dollar is worth less/has less purchasing power. This is already true regardless of changes in consumer prices. The effects just haven't reached us yet b/c most of the increase has been held by the banks (0 velocity).

But if you read that article and examine the equations shown; M and V are on one side, price and real income are on the other. So increasing M does result in inflation. At some point the other side of the equation must balance out. It just takes time w/ 0 velocity. OR, M will have to be shrunk quickly via very high interest rates. I believe they were set to 20% by the Fed early 80s to arrest the runaway inflation of the 70s. And M was increased a pittance at that time compared to what they are doing now.

Great blog. Anyway, it states the following

"In a nutshell, inflation occurs—that is, the purchasing power of the dollar shrinks—to the extent that the nominal supply of dollars grows faster than the real demand to hold dollars. A standard approach to analyzing the connection between the money supply (M) and the general price level (P) uses an accounting identity called the “equation of exchange”:"

This was precisely the basis for my argument that monetary policy is not loose or expansionary right now. Liquidity is very important in this down market, and demand for money holding is much higher than the current money supply (add in that banks have first dibs, and aren't lending much, and you have a deflationary environment).

StainlessSteelRat

11-10-2009, 04:04 PM

You don't need lack of resources for price inflation. Money demand increases can cause price inflation as well (money is a good like anything else, and has it's own market). Likewise, as in your example, oil can definitely cause price inflation, as it is a component in pretty much any manufacturing process; it will be even more inflationary if the dearth is expected over a long time horizon.

Money demand will increase the price of money (i.e. interest) assuming M is constant. It won't cause price inflation. In our regulated markets, where the Fed sets interest rates instead of letting the market set the price of money, money demand is satisfied w/ an increase in M; inflation.

Sure, the price of oil will affect many other items, but it's still not enough to cause inflation. Oil doubled in price not too long ago, there was not general inflation. The time horizon would have to be long which would mean there are other variables at play and which would probably include prices increases across the board.

StainlessSteelRat

11-10-2009, 04:10 PM

This was precisely the basis for my argument that monetary policy is not loose or expansionary right now. Liquidity is very important in this down market, and demand for money holding is much higher than the current money supply (add in that banks have first dibs, and aren't lending much, and you have a deflationary environment).

Except you are drawing the wrong conclusion. Just b/c velocity is low doesn't mean there isn't inflation; it's just delayed. At some point, the money must either enter the market or be withdrawn and destroyed by the Fed. The lack of lending doesn't make this a deflationary market.....

That's like pretending the housing market is on the mend b/c prices have stabilized and homes are being built.....when in the background, the gov't is sitting on tens of thousands of inventory.

Currently, the low interest rate set by the Fed will lead to an increase in velocity and eventual inflation. To predict no inflation w/o a change in Fed policy and interest rates is ludicrous.