The Fed is Taxation without representation.

[LunarRay]

but how does that create anything but debt for the poor/middle class? Like I said, if they can't or won't save they will generally not gain wealth. They might be employed but if there is negative incentive to save they will probably be employed and in a ton of debt, which is one way the wealthy get more wealth at the expense of the lower rungs...

The incentives go to the wealthy to create employment... the incentives to the middle or lower classes are intended to create spending and like you said, debt. Debt is another means to stimulate an economy... like the creation of the home equity loans... buy buy buy... see the economy flourish...

I don't want the poor, lower and middle class to save.. I want them to spend... I don't mind a healthy economy creating the desire to incur debt by the lower then upper classes... that is a good economy with all sorts of confidence... and that Psyche is what makes it work..

 

[Darwin333]

The incentives go to the wealthy to create employment... the incentives to the middle or lower classes are intended to create spending and like you said, debt. Debt is another means to stimulate an economy... like the creation of the home equity loans... buy buy buy... see the economy flourish...

I don't want the poor, lower and middle class to save.. I want them to spend... I don't mind a healthy economy creating the desire to incur debt by the lower then upper classes... that is a good economy with all sorts of confidence... and that Psyche is what makes it work..

That sorta makes the poor and middle class poorer by design. That isn't a good thing in my book.

 

[Darwin333]

Ask yourself what 'items' in your own bucket of assets are devalued by inflation. Cash... sure!... Your home... not really and the mortgage is fixed, hopefull... but in either case you'll use future dollars (inflated ones) to pay for it! Your car?... hmmmm, you bought it and it has built in obsolesence... it probably has debt so inflated future dollars pay for that too...
The only real issue is to hope your income increases to match what you spend on that was 'inflated'.

Past labor/profits paid for past items... or movie tickets.. if the items are fixed assets like a house or pony... what changed? Other than you might get the same 'real' dollars for your house in more of the inflated kind.

There are exceptions....

I will get to the rest of your post in the morning but I love the irony of your example. The exceptions have mostly been housing and healthcare which have rose in cost far greater than "inflation" (whose .gov numbers conveniently leave out a few of the key things we require). That is one of the main reasons that the middle class has stagnated so much.

I hope we fix the problem, it sounds like you simply wish to give a heroin addict another shot of heroin to temporarily stop the withdrawal symptoms. You know the longer you do that the worst it is when you eventually stop.

 

[LunarRay]

That sorta makes the poor and middle class poorer by design. That isn't a good thing in my book.

Well... there was a time and a philosophy in which folks prided themselves on not being in debt... to pay cash for everything... and gowth was slow and economic cycles occurred just like always... it is all about equilibrium... All things equal out over time.

I have no problem with that rather smart approach to one's own 'finances'. I'm trying to address today's issue of double digit unemployed and many off those rolls and the remedy... My solution is to have government spend, to have the people spend and if they incur debt all the better... Once we're back in good stead then a balance should occur among debt and spending AND if there isn't well equalize again... and again... eventually, The Economy (the people) will learn its own level and stay within reasonable parameter of that..

 

[LunarRay]

I will get to the rest of your post in the morning but I love the irony of your example. The exceptions have mostly been housing and healthcare which have rose in cost far greater than "inflation" (whose .gov numbers conveniently leave out a few of the key things we require). That is one of the main reasons that the middle class has stagnated so much.

I hope we fix the problem, it sounds like you simply wish to give a heroin addict another shot of heroin to temporarily stop the withdrawal symptoms. You know the longer you do that the worst it is when you eventually stop.

I'm not really sure why heath care has increased beyond the beyonds... The infrastructure is in place so maybe it is in the equipment that keeps getting updated. It is not like they hire tons of professionals to heal the sick folks (legal or illegal ones)... they get to them when they do.. MED/MAL might play a bit but not in sync with the rate of increase of health care in general.
There use to be a fellow... BaliBabyDoc who often would help define the bits that made up the inflationary and real aspects of healthcare... I don't have enough insight to even opine on it... It don't make sense to me sooooo....

The heroin analogy is not really applicable... the dynamics are far different as I see them...
Here is what I see that will happen or what ought to happen...
We WILL spend and stimulate from the Government until the Economy is moving in the right direction... We (government) WILL overspend and fund objectives regardless of any other facts that might occur... IF we do this for long enough... there will come a point either economically or politically or both when the rest of the 'economically strong' world sees us as not being an asset to their objectives... They will break from the dollar and seek to denominate trade in their own currency... that will shock us but not kill us... we'll isolate a bit and seek to increase providing for our own demands as the dollar weakens and weakens... which is not in the rest of the world's best interest so they may attempt to intervien or even invest in the US but not in the debt... No matter what happens we'll be ok... In general ok... IF we sort out the dilema before any of that happens we'll be back at our status quo ante of a few years ago... just as rich or poor as we were...
We are the biggest Elephant in the herd and that matters... The world won't want us to fail but that ain't the politics of France for instance... and some other places as well... These folks live off our consumption... who is going to buy their goods if the dollar falls dramatically? So... end of the day... I'm not worried about how the world sees us... but am worried about how we've not seemed to care about the reality of our own productive capability... This One World Order stuff is nice in theory but in practice it hurts the big guy more than the rest... We are that big guy... and need to focus on our own folks at the expense of that agenda...

 

[First]

Would you prefer "an intentional decrease of value/purchasing power on past labor/profits"?

Inflation doesn't decrease profits or wages if done properly, and this has been quite well documented and researched. Mild inflation boosts consumer confidence because we've seen it directly lead to more spending, which props up businesses that wouldn't otherwise exist without those spenders while simultaneously creating new businesses. And since spending by itself accounts for near 70% of economic output yearly, it's impact is huge. Mild inflation also gives the (sometimes illusionary) annual increase in wages which (again if done properly) leads to real increases in wages and standards of living.

It can't be a tax if it doesn't actually hurt you, but besides, it's not like inflation is avoidable; it happened without the Fed for decades, in fact it was mostly in the form of the far worse alternative scenario of deflation and generally destroyed any prospect of equities growth.

 

[LunarRay]

Ich bin ein Ökonom!

A tax is a non-penal, But compulsory transfer of resources from the private to the public sector levied on a basis of predetermined criteria and without reference to specific benefit received.

Je suis le Financier!

A tax is a Revenue, a Redistribution, a Repricing and a (loosely) Representation...

Inflation is neither German nor French... errr... or a Tax.

 

[Darwin333]

Inflation doesn't decrease profits or wages if done properly, and this has been quite well documented and researched. Mild inflation boosts consumer confidence because we've seen it directly lead to more spending, which props up businesses that wouldn't otherwise exist without those spenders while simultaneously creating new businesses. And since spending by itself accounts for near 70% of economic output yearly, it's impact is huge. Mild inflation also gives the (sometimes illusionary) annual increase in wages which (again if done properly) leads to real increases in wages and standards of living.

It can't be a tax if it doesn't actually hurt you, but besides, it's not like inflation is avoidable; it happened without the Fed for decades, in fact it was mostly in the form of the far worse alternative scenario of deflation and generally destroyed any prospect of equities growth.

I said past profits/labor. If, as a product of my labor, I make $100 today and stick it under my mattress in 10 years inflation will have reduced the value or purchasing power of that $100. Therefor my past labor or profit is now worth less in terms of purchasing power. It is the very definition of inflation.

In our current climate any sort of substantial inflation (4% or so) will be the death nail of the housing market, jack up interest rates and kill the Federal budget and sorry to tell ya bud, wages ain't going up anytime soon.

We still have that entire $5 a day and illegal immigrant problem to deal with before we can ever see wages really rise (especially above 4% a year).

I am frankly amazed that so many people I would consider left leaning are for policies that by design make the poor/middle class poorer. The entire "spend spend spend on bullshit that you don't need" economic system was a debt fueled bubble that creates a ton of jobs somewhere else and a few jobs at best buy here.

Edit: And yes, inflation IS avoidable. Certain people like inflation and thats why we have "targets" that tend to exclude a lot of things that we kinda need (like housing).

 

[LunarRay]

Darwin333,

I fit the mold of a Social Liberal but a Fiscal Conservative. I say this so that you can more readily pigeon hole me accurately. IOW, I can't find the money to pay for the Social Programs I'd like to see enacted :'(.

One way, however, to provide for those programs is to have the coffers of the Government overflowing... This can occur when the inflow exceeds the inflow, obviously. That happened during Clinton but to me that was 'funny' money. I would rather see economic growth occur while a decrease in personal debt also is seen... Equity loans on housing are 'Funny' money, for instance. It provides a mechanism that simply taps into that inflated asset value to enable purchasing that contains the notion of a future sale of that asset and getting those dollars today - not always but often. But a question might ought to be: Why did (almost across the board) the cost of housing increase at an insane rate? To sustain that the 'Lenders' had to facilitate the borrowers via more insane lending practices... The obvious question is: Why was that allowed to happen and by whom? There can be no doubt that even a slight down tick would cause the entire market to explode... What was the motive for that? Any 'Turnip' could tell the market could not continue that way so there MUST have been a definite plan to enable it despite the economic disaster that condition had to inspire.
Sooooo, One can argue that for years (but not all that many of them) our Elected officials and the various (semi) independent bodies worked in concert to predictably create what today we call an Economic ummmm illness... Either that or they are simply the stupidest idiots ever to be employed in the service of this country.

 

[piasabird]

How come when a city runs low on taxes,they have the ability to increase the multiplier for property tax to make up the difference? It is not a set tax it is a forced tax enforced with monopoly power of a government because most people cant easily move if the real estate market is down. Yet municipalities wonder why citizens leave their towns to escape their high taxes. Is it any wonder?

 

[LunarRay]

How come when a city runs low on taxes,they have the ability to increase the multiplier for property tax to make up the difference? It is not a set tax it is a forced tax enforced with monopoly power of a government because most people cant easily move if the real estate market is down. Yet municipalities wonder why citizens leave their towns to escape their high taxes. Is it any wonder?

Folks in that situation need a Tax Payer advocacy event like Prop 13 in California.

You are the government... the folks drawing the government pay checks work for you... Tell them what you want them to do... Of course, they'll make up the short fall, if any, by reducing the funding to schools and police and fire protection and the like... They'll show you!!! And while they are doing this 'cutting' they'll erect statues and build executive mansions and take care of all the really essential bits...
I think government ought to serve the people... When I go to the DMV I expect to have them cheer my arrival but no... they act like I'm interrupting their yatzee game.
Most of my property taxes come back to my county and so DMV is not an apple/apple affair... but my county has lots of issues to fund and just can't afford to do it... So... ride bicycles until the roads are fixed... and turn down the lights a bit, I guess.