And Now We're Headed For The GREATEST Depression

[bamacre]

:sneaky:

Economics is a science. It is, as you know, a Social Science. What people think is happening is how they will react to whatever confronts them. Not the people who sit atop the cherry cream soda but the ones to whom an economy means not much at all beyond their own capacity to evaluate their reality.

We've successfully 'stimulated' probably 2 million jobs with the 'package' started by Bush. That information is nice to some and to others it is meaningless.
What is real is that we've done this by printing dollars and dumping that into the accumulated debt, obviously. This then has the effect of making the foreign lenders who use our debt and their asset for their reserve currency holding a bit antsy about the economic health of the US in contrast to some other 'powerhouse'. IF we keep up debt financing our current operating shortfall beyond some ratio to other financial/economic factors coupled with the mandated by recovery reduced yield to those foreign lenders we will eventually weaken the dollar vis a vis other wanna be reserve currencies to the point where the money supply outflow via dis intermediation in our banks and deposits in theirs provides the stimulus and opportunity for their growth and requires us to make up that lending short fall. Who do we lend it to? To us again creating high inflation thus eliminating deflationary factors but also stimulating a buy now mentality...
But, buy what? Foreign goods will be significantly more expensive thus creating the incentive at home to provide for this demand which requires an increase in the money supply... More printing! We will have created the notion of Economic Health and prosperity.
To accomplish this we must keep the folks out of work now able to exist at least and for that talent (brilliance) to not loose its desire to execute. We are the most creative Nation with the most capable workforce IF we don't have to battle with competition geared to undercut our labor force's earning power... That entails a bit of isolationism... iow, Change the Psyche of the American a bit. Move us away from 'Walmart' shopping to the extent it is not in our interest nationally...

So in summary:
We can and will survive because we can. And to enable that the Government must provide stimulus to the people in forms that consider the total picture. Every dollar spent by Government IS a stimulus is some form!
Additionally, we can't really fall into a 'deep depression' because long before that happens other dynamics mentioned above will occur... they have to... and over time the US will emerge stronger than before...

Forgive me if I have misunderstood some of your post, but creating money out of thin air doesn't equate to creating resources out of thin air. And we aren't borrowing money from ourselves, we're dependent upon foreigners, that is who owns our debts. The more we print and the more they think we'll print, the less they will want to lend. I also totally disagree with your statement that "every dollar spent by government is stimulus in some form." Bush and Co spent a lot of dollars, did you feel stimulated? Every dollar spent by government is one less spent by someone else, and every dollar loaned to government is one less loaned to someone else. And if everyone is loaning money to government, well, who else can loan money to anyone else?

 

[werepossum]

Forgive me if I have misunderstood some of your post, but creating money out of thin air doesn't equate to creating resources out of thin air. And we aren't borrowing money from ourselves, we're dependent upon foreigners, that is who owns our debts. The more we print and the more they think we'll print, the less they will want to lend. I also totally disagree with your statement that "every dollar spent by government is stimulus in some form." Bush and Co spent a lot of dollars, did you feel stimulated? Every dollar spent by government is one less spent by someone else, and every dollar loaned to government is one less loaned to someone else. And if everyone is loaning money to government, well, who else can loan money to anyone else?

Quoted for truth and veracity. And considering that federal government workers earn on average almost twice the total compensation as private sector workers, a new federal government job wipes out almost two private sector jobs.

 

[Acanthus]

Quoted for truth and veracity. And considering that federal government workers earn on average almost twice the total compensation as private sector workers, a new federal government job wipes out almost two private sector jobs.

Wat.

Every statistic i've seen on government wages says they on average earn a LOT less, and have more stringent requirements.

 

[LunarRay]

Forgive me if I have misunderstood some of your post, but creating money out of thin air doesn't equate to creating resources out of thin air. And we aren't borrowing money from ourselves, we're dependent upon foreigners, that is who owns our debts. The more we print and the more they think we'll print, the less they will want to lend. I also totally disagree with your statement that "every dollar spent by government is stimulus in some form." Bush and Co spent a lot of dollars, did you feel stimulated? Every dollar spent by government is one less spent by someone else, and every dollar loaned to government is one less loaned to someone else. And if everyone is loaning money to government, well, who else can loan money to anyone else?

I don't expect folks to applaud my comments and say right on
IF I were a Tenured Full Professor of Economics I'd simply state my position and rely on prior work to substantiate it... take it or leave it so to speak... :awe:

Yes, indeed, we rely on the desire for Foreign investment to provide for our debt... but that is also their Reserve holding... The dollar is the big kid on the block and most international trading is demoninated in Dollars.
So it is in anyone's interest to be that Reserve provider and have all trading denominated in their currency... it provides stabilty for them.

I still maintain every dollar spent by Government IS a stimulus or can be seen as such... The important bit is to where it is spent... increase SSI and you put money in the hands of the elderly and disabled... sure to be spent all over the nation but mainly in one sector. IF they buy more bombs they stimulate that sector and etc... We are that government and also that recipient... That is my point...
IF foreign central banks stop lending to fund our debt... what happens? Remember we are not on a gold/sliver or potato standard... IT is a simple proposition... Equilibrium will occur... IT has to.. Does how much foreign lending is made control how many dollars are printed? We, I maintain, will insure that the required internal money supply is provided in balance with inflationary and demand factors. Full Faith and Credit and all that... we borrow from ourselves if no one else will lend or we'll inflate or deflate the dollar to cover that condition. And, the more we are isolated the less affect it has on our internal objectives... It seems to me...

We are simply too big a demand nation to roll over and die. It won't happen... It can't happen... May not buy as many toyota or bmw cars but we'll maybe buy a ford if it is cheaper and pretty. EDIT: I should add: IF you need driving that 40 miles to work each day and can't buy a car to do it... someone closer will assume that job. A zero sum event... not to you but your loss is another's gain.

 

[LunarRay]

Wat.

Every statistic i've seen on government wages says they on average earn a LOT less, and have more stringent requirements.

Government employees have that built in security. That enables one to incur debt beyond the private sector worker who works at the pleasure of the company or if self employed even more 'worry' attaches. And that bit enables a better life style over time. End of the day it is about equal... over a lifetime event.

The trickle all about theory of one more worker in the force implies great gobs of economic activity. For the Government it is a double whammy... They don't pay out benefits and they do collect some revenue from that person and from all the trickling affect...

 

[LunarRay]

The more we print and the more they think we'll print, the less they will want to lend.

Exactly right and what I said, I hope. And that is the movement away from the dollar as being the World's Trading Currency... or Reserve Currency...

I mentioned earlier that we keep printing dollars and financing our current needs via debt... no other way. Build a big Dam or a Rail system from LA to NY and you put folks to work... that is always LT debt financing... never out of current revenue... over time it is a win win scenario... but suppose no one will lend us the money to do that.... Do we not do it? Or do we pay the wages and suppliers and recognize that that event provides revenue across the board and reduces the benefit outflow that would otherwise occur? But, what occurs to the economics of simply printing dollars to put the money into the supply... did we need to increase the money supply... I say, Yes! I say that the amount of money supply before the LA to NY train system was not enough to cover that expansion... I assume the FED can count... Inflation follows events usually... and it is usually caused by more money supply than is needed... so on the one hand you cause inflation and on the other you mitigate it... well, hopefully...
I maintain that people will buy more in an inflationary time than in a depressed time... That old Psyche bit...

 

[JSt0rm]

we need inflation. With my industry there is massive money to be gained or lost and without inflation people just wont take the risk.

 

[bamacre]

Yes, indeed, we rely on the desire for Foreign investment to provide for our debt... but that is also their Reserve holding... The dollar is the big kid on the block and most international trading is demoninated in Dollars. So it is in anyone's interest to be that Reserve provider and have all trading denominated in their currency... it provides stabilty for them.

But that won't last, it can't last. We were given that status when the dollar was backed by something tangible, and we spent so much we had to drop that. Since then our dollar has been backed by faith, faith that our economy and military are strong, stronger than everyone else at least. That provides stability, and that is what they seek. When we lose that perception, and it's only a matter of time until we do, we lose our status as the world's reserve currency. Remember, we may have $14 trillion in debt now, but we also face about 7x that amount in unfunded liabilities.

I still maintain every dollar spent by Government IS a stimulus or can be seen as such... The important bit is to where it is spent... increase SSI and you put money in the hands of the elderly and disabled... sure to be spent all over the nation but mainly in one sector. IF they buy more bombs they stimulate that sector and etc... We are that government and also that recipient... That is my point...

The recipients of what though? That is the question. While building bombs create jobs, what good do those jobs do for everyone else? There are people working jobs at Microsoft who make my computer's operating system, farmers who produce my food, and a barber who cuts my hair. If someone is employed to build bombs that blow up in Iraq, how does that improve my life? Yes, he spends money into the economy, but what you fail to see is that he produces nothing of use to anyone. Just because he has a job and spends money does not mean he is beneficial to the economy. Our economy is not good because we have jobs, our economy is good because we're capable of buying shit we need and want.

IF foreign central banks stop lending to fund our debt... what happens?

We have to either cut spending, or we have massive inflation. Either way, it means a decrease in the standard of living for the majority of the American people.

Just because we can print money at will does not mean we have an unlimited supply of resources, just an endless supply of money. It's the purchasing power of that money that matters. I hate to bring up Zimbabwe, but, well, I am.

Remember we are not on a gold/sliver or potato standard... IT is a simple proposition... Equilibrium will occur... IT has to.. Does how much foreign lending is made control how many dollars are printed? We, I maintain, will insure that the required internal money supply is provided in balance with inflationary and demand factors. Full Faith and Credit and all that... we borrow from ourselves if no one else will lend or we'll inflate or deflate the dollar to cover that condition. And, the more we are isolated the less affect it has on our internal objectives... It seems to me...

There's a video in my sig that ends with someone saying "it is not possible to manage something you cannot define." They try, they really do. But they fail. And how can we loan money to ourselves? We have no savings, we have nothing to loan the government. Again, it's not about money, but what money can buy that matters. Money is a tool, there was an economy before there was money.

We are simply too big a demand nation to roll over and die. It won't happen... It can't happen...

It can, and if things don't change, it will. No one cares about our demands, it's what we can offer in return that raises eyebrows.

 

[LunarRay]

To be honest I haven't even looked at the value of the condo since I bought it. I have no desire to move. I do know that my payment is still exactly what the bank told me it would be and what I agreed to pay when I signed those papers.

That is the beauty of it all, I think...

You have a house and you have a house payment and nothing changed for you... And that is so because it was a very long term investment. You may never move from it or accept as a disincentive the acceptance of employment elsewhere and necessitate moving. So long as you have the ability to make the payments you are a happy camper...
Others saw their purchase as a short term event... a money making gamble.... and they lost!
Risk begot more risk and created more avenues for risk... it is or was the one sector with the greatest growth potential... and then... boom! It had to happen because folks doing the borrowing and the lending both encouraged this growth.... but once folks could not make the payments ... that is, once folks didn't want buying what was being sold cuz they got scared (the Psyche bit) they created the big bang! Stuff kept deflating waiting for the buyer who never came....
Ya gotta love greed! Only the smart player survives... and the little guy who wanted more and more... he got less and less.. and now complains cuz he is bankrupt... he shot himself in the foot with a load of greed that he ought to be thankful didn't take the whole leg...

 

[bamacre]

I maintain that people will buy more in an inflationary time than in a depressed time... That old Psyche bit...

Well, if you believe as I do, rising prices are not the only result of monetary inflation. You also have mal-investment, and the two are intertwined. We just went through a massive inflation of the money supply, which created the housing bubble, so sure, your statement up there is spot on. But I wonder if you (now) see the whole picture.

 

[LunarRay]

But that won't last, it can't last. We were given that status when the dollar was backed by something tangible, and we spent so much we had to drop that. Since then our dollar has been backed by faith, faith that our economy and military are strong, stronger than everyone else at least. That provides stability, and that is what they seek. When we lose that perception, and it's only a matter of time until we do, we lose our status as the world's reserve currency. Remember, we may have $14 trillion in debt now, but we also face about 7x that amount in unfunded liabilities.

My pontification is that Money=Power. I do agree that we will lose that status of Reserve Currency 'defender' but only if we cannot control the lenders... ehhehehehe and we do a good job of that... but, no matter. IF we lose it we do and we'll be forced into an isolation event of some measure coupled with a significant change in what we import... and manufacture at home... (IF we're smart about it)
Unfunded liabilities are tomorrow's issue... and will always be so... it seems to me... The notion is that when they come do they do. SSI has this neat trust account filled with IOU's... who owes who's... Why it is we owe us. But no matter there either... Business is compelled to set up 'Sinking funds' to account for that stuff and government does essentially the same thing as I see it... end of the day analysis.



The recipients of what though? That is the question. While building bombs create jobs, what good do those jobs do for everyone else? There are people working jobs at Microsoft who make my computer's operating system, farmers who produce my food, and a barber who cuts my hair. If someone is employed to build bombs that blow up in Iraq, how does that improve my life? Yes, he spends money into the economy, but what you fail to see is that he produces nothing of use to anyone. Just because he has a job and spends money does not mean he is beneficial to the economy. Our economy is not good because we have jobs, our economy is good because we're capable of buying shit we need and want.

Well, usually I think the ability to buy is contingent upon having the ability to pay for it.
The micro aspect of how many pink Chevy trucks bought by folks in Des Moines is related to the macro economics of the nation and world but individually it is very very small. But assume that Des Moines has 20% unemployed and you can build an infrastucture bit like say a wind mill that supplies electricity to the grid that will employ a thousand construction folks there... and stimulate production of related goods elsewhere... at least for the time of the construction... you may also enable those construction folks to buy pink trucks locally to haul their tools etc... which helps those folks... but then it ends... and you'd better hope you created a sustaining event in Des Moines or you'd be back where you started but still have the wind mill and some employed maintance folks and suppliers... Bombs don't do that but it does keep the other nations in line... The little picture creates the big picture in my view... iow, micro, I'm a demand sided thinker, has a lot to do with what the macro side of economics must provide. It is the person who does not buy that creates the dilema... it is their collective Psyche that must be changed and you do that best by creating a real change... telling my grandson that the money supply has increased beyond the demand is meaningless to him... but tell him there is work to be had gives him the sense of prosperity when he acquires the job. And he runs out and buys his Porche.. well, BMW 328...



We have to either cut spending, or we have massive inflation. Either way, it means a decrease in the standard of living for the majority of the American people.

Just because we can print money at will does not mean we have an unlimited supply of resources, just an endless supply of money. It's the purchasing power of that money that matters. I hate to bring up Zimbabwe, but, well, I am.

You assume that massive government spending creates massive inflation... I think the opposite. I think if you create the beginning of an economic event via spending it CAN sustain continued growth.. which over time equalizes the affect of the debt financing... I think it is reasonable to opine that each dollar spent internally can trickle into 5 or more and that reduces other out flows of government programs... Revenue neutral is not bad... and a positive flow is my objective for it all. If only I could affect more than what my dogs eat... and that is problematic at best...



There's a video in my sig that ends with someone saying "it is not possible to manage something you cannot define." They try, they really do. But they fail. And how can we loan money to ourselves? We have no savings, we have nothing to loan the government. Again, it's not about money, but what money can buy that matters. Money is a tool, there was an economy before there was money.

Currency is nothing more than the vehicle of transfer of oranges for spicy green peppers with out bringing in the peppers for the oranges... that is my premise. So I agree!
Any excess dollars the individual holds by virture of what ever conditions provide for it can be placed into the TBills and etc... the beta is zero... Gives folks the warm and fuzzies.. ok.. so Bill Gates buys Tbills and government takes that currency and puts it into the flow by many means... or burns it... Spending it on bridges is stimulus with a greater trickle than a bomb... but it has different objectives... hopefully both with our economic health in mind. My point is that to not stimulate is to stagnate and allow our society to terminate or devolve back to the 1700s with few with wealth and many with nothing... hard work back then prevailed but now hard work provides little to the worker and much to the employer, often... Who benefits from that event? ... So, we installed Prevailing wage scenario to insure the government's investment goes where it was intended.



It can, and if things don't change, it will. No one cares about our demands, it's what we can offer in return that raises eyebrows.

We could isolate a bit more... Our demand would cause investment in property, plant and equipment to meet that demand... but it must be done in a way that reduces the risk to the investor... American Investors providing for American workers... We cannot hope to produce to the level of our demands so other nations will supply but we've to enact law to protect us and not them... NAFTA is insanity... IMO...
I don't really much care what happens in Japan or Korea or China economically except we've to be strong militarily to thwart their incentive to war to provide for their citizen and his basic needs...
As I see it it is a big circle and unless we keep our mind focused we'll have a longer road to recovery.. but, we can't fail... as I said, we are the largest demand nation on earth... other folks know this too.. they want giving us their goods... and want us healthy... hehehehehehehehe when that stops, if it does, then we've created 'Sinn Fein'.. (we ourselves)
And isolationism at least a smart version of it will and ought to be employed... we have food, raw material.. and brains..

 

[Acanthus]

Protectionism is the buzzword the corporations employ to stop global labor arbitrage.

 

[LunarRay]

Well, if you believe as I do, rising prices are not the only result of monetary inflation. You also have mal-investment, and the two are intertwined. We just went through a massive inflation of the money supply, which created the housing bubble, so sure, your statement up there is spot on. But I wonder if you (now) see the whole picture.

Hehehehehehehehe, To be truthful... I'm quite myopic and suffer from tunnel vision on stuff Economic... What is beyond my vision is relevant, I suppose, but I'm more prone to stopping the bleeding now and worry about the broken leg tomorrow.

Put differently and don't you want hearing another anology... () I don't care what it takes to get workers to work and industry to flurish... I don't care who outside the US gets hurt or who wishes to join others in pursuit of their objectives... We are too big and have too much to need anyone... Economically. If you'd like to limit spending then start with stop giving food money to the hungry abroad... give it to the hungry at home... a stimulus... imagine that.. they'd go to the local store and buy stuff...
So, it is I am my Sister's keeper... but my Sister lives in NYC... not in Zimbabwe.

We seemed to have created ... what was it called.. Equity loans... which helped stimulate the economy... debt increase beyond belief... then the cycle turns and those folks owe more than the value of the house... boom!

I wouldn't be opposed to a gold standard... say one ounce of gold for 100,000$ Take a hand full of rings and send them to Saudi Arabia... just kiddin...

Consider that to be a Debt holiday... extinguish all debt... no one owes anyone anything... heheheheheheh

 

[Darwin333]

Well, if you believe as I do, rising prices are not the only result of monetary inflation. You also have mal-investment, and the two are intertwined. We just went through a massive inflation of the money supply, which created the housing bubble, so sure, your statement up there is spot on. But I wonder if you (now) see the whole picture.

Something that I have not seen mentioned is that inflation, by its nature, punishes capital formation. Capital formation is how you truly move up the ladder in society and the lack of it in the middle class is why the middle class is stagnant and/or moving backwards. There are many reasons why the can't or won't but the bottom line is you almost never get wealthier by spending more than you have/make. Some get lucky but that is basically what it is, a speculative gamble.

The problem is that inflation, especially the methods being discussed, gives everyone else incentive to go into debt as well. You damn sure don't want to save money that is losing value, better to borrow money and pay it back with less "value" later. This might be good for the economy short term but long term (how about say.... right now?) it will go tits up as the consumer gets too leveraged.

Then you have the entire "cheap money" that tends to cause those bubbles things and thats sortof a bad thing.