Obama 7 - now what?

[Patman]

Re: Obama 7 - now what?

i'm curious as to what will happen when all these things cash out again... I suspect that they are re-inflating the bubble... which means that the money multiplier is again too high and we could still be subject to a cascading effect. I have to wonder if the increases we've seen in the years is often the same dollar just amplified more and more each time. For the "market" to actually raise above inflation there needs to be more money in that market than there was before. Otherwise that money is just phantom money... its good for whomever cashes out before it collapses whether its granny or Mr. Super Rich but its hell on whomever gets the window slammed on their fingers.

The problem is that investment is seen, de facto, as a means of enrichment on its own. Absent is the idea that failure is possible and even long term growth is not inevitable and in fact impossible. There's a lie and a rub somewhere. You can't increase forever if you aren't taking money in from somewhere.

This doesn't mean I don't believe in the principle of the markets to allocate resources... but I think there's a fundamental failure in the system that trips every once in awhile and people have put a lot of faith in things that can't possibly be true as long as money supply is finite.

 

[Kepler]

Re: Obama 7 - now what?

This doesn't mean I don't believe in the principle of the markets to allocate resources... but I think there's a fundamental failure in the system that trips every once in awhile and people have put a lot of faith in things that can't possibly be true as long as money supply is finite.

But now we have government propping up the tulips (enter pushing up daisies joke here).

 

[Bill]

Re: Obama 7 - now what?

The only way the U.S. government can make a dent in all the debts we have is for the Fed to keep creating boatloads of money and pay back our creditors with cheaper (devalued) dollars.

 

[Patman]

Re: Obama 7 - now what?

But now we have government propping up the tulips (enter pushing up daisies joke here).

Its green, it has leaves, it must be eaten... what's the problem?

 

[Kepler]

Re: Obama 7 - now what?

The only way the U.S. government can make a dent in all the debts we have is for the Fed to keep creating boatloads of money and pay back our creditors with cheaper (devalued) dollars.

But who's going to buy the new debt?

The only way to make a dent in the debt is to run a surplus and pay it down. That can be done with a combination of lower spending and higher taxes. The question is: will the public stand for either of those things, or is it so conditioned by brainless promises of spending and brainless demonization of taxation that they'll delay action until it's too late?

I think we all know the answer to that.

 

[Patman]

Re: Obama 7 - now what?

But who's going to buy the new debt?

The only way to make a dent in the debt is to run a surplus and pay it down. That can be done with a combination of lower spending and higher taxes. The question is: will the public stand for either of those things, or is it so conditioned by brainless promises of spending and brainless demonization of taxation that they'll delay action until it's too late?

I think we all know the answer to that.

No, we'll go to inflation with a heavy emphasis on welfare. This is a little into the CT territory but inflation is a question whom its going to "favor"... usually it'll "favor" the upper echelon... but if the gov'ts welfare system is cranked up far enough it can be engineered so that its in the "favor" of the poor and middle classes. The truth is nobody is "favored" by it but the money has to come from somewhere. Inflation is probably easier to do than tax and cuts. Hence why the Dems aren't so concerned about the cost of univ. health care... even if you have to print money you can structure it so that the rich take the internal bath while the lower classes maintain a status quo. Hence, its why its no big deal (its also no big deal when you are morally righteous but that's another conversation for another day... dems needing gov't to fulfill their moral obligations and all.)

 

[Kepler]

Re: Obama 7 - now what?

The left has no monopoly on moral righteousness. Inflation erodes savings. If savings has become hyper-concentrated at the top, then inflation will hurt the top the most. I think the top would still prefer that pattern of wealth distribution, if that's the "bath" they're taking.

 

[St. Clown]

Re: Obama 7 - now what?

The left has no monopoly on moral righteousness. Inflation erodes savings. If savings has become hyper-concentrated at the top, then inflation will hurt the top the most. I think the top would still prefer that pattern of wealth distribution, if that's the "bath" they're taking.

The unwashed masses tend to not understand what creates inflation, and will then be enamored by promises to fix the inflation with "fixes" that do nothing to help the situation.

As for a comment asked earlier, we did see inflation during this loose money supply situation. They tended to concentrate mostly in the various asset bubbles with muted spillover into other products; some/most have retracted in price since then. Now we're not seeing the inflationary pressures due to unemployment. It's a typical Phillips Curve situation - measuring the trade-off between inflation and unemployment.

For those not following the Phillips Curve debates, and care to read a very brief synopsis of it, the curve's legitimacy was in debate during the 90's and into this decade. It was then found to still hold true, but we experienced an inward shift during that period. I happen to think that during the 90's when the debate first started, most, if not all, of the inflation focused on the stock market - especially the NASDAQ.

 

[LynahFan]

Re: Obama 7 - now what?

Except for the last ten months or so.

It looks a lot more like the red one, if it peaked sooner and at a lower point.

To me, it looks like the blue curve should be shifted to the left by about 12 months, so that its largest drop (at month 12) is on top of 1929's drop. The market climbed back up to -25% in 1930, too - before the bottom really dropped out...

 

[Kepler]

Re: Obama 7 - now what?

To me, it looks like the blue curve should be shifted to the left by about 12 months, so that its largest drop (at month 12) is on top of 1929's drop. The market climbed back up to -25% in 1930, too - before the bottom really dropped out...

Well this is about as good a test of the two competing views of what caused the second dip of the Great Depression as we're likely to get. FDR thought it was pulling back on the New Deal policies too quickly, the Austrians have pushed the theory that FDR actually caused the second dip.

I'm sure it's greatly complicated by the differences between the world economy then and now, with so many more markets for potential investment to move to but, meh, economics never really "repeats," like social psychology.

Whichever side's predictions don't come true will honestly admit their theories aren't predictive and therefore not useful.

 

[LynahFan]

Re: Obama 7 - now what?

Whichever side's predictions don't come true will honestly admit their theories aren't predictive and therefore not useful.

So - about that offer for my bridge...

 

[Bill]

Re: Obama 7 - now what?

The only way to make a dent in the debt is to run a surplus and pay it down.

Won't happen. The debt has become too large for that to be a reality. Running
a surplus might bring it down a tad, but the overall debt is just too big for that to help much. Besides, we don't exactly have a good track record of running surpluses. I think the government will choose to monetize the debt, despite what the Fed says.

 

[geezer]

Re: Obama 7 - now what?

Won't happen. The debt has become too large for that to be a reality. Running
a surplus might bring it down a tad, but the overall debt is just too big for that to help much. Besides, we don't exactly have a good track record of running surpluses. I think the government will choose to monetize the debt, despite what the Fed says.

If that happens (or continues to happen, or at a faster pace or whatever) does it mean that poor working slobs like myself (who live week to week) will see a continued, accelerating reduction in real pay due to inflation?

 

[ScoobyDoo]

Re: Obama 7 - now what?

Won't happen. The debt has become too large for that to be a reality. Running
a surplus might bring it down a tad, but the overall debt is just too big for that to help much. Besides, we don't exactly have a good track record of running surpluses. I think the government will choose to monetize the debt, despite what the Fed says.

Funny. The debt was under control when Clinton left office. Must be Obama's fault.

 

[LynahFan]

Re: Obama 7 - now what?

Funny. The debt was under control when Clinton left office.

The deficit maybe, but not the debt. That was Reagan's fault.

 

[Plante26]

Re: Obama 7 - now what?

The deficit maybe, but not the debt. That was Reagan's fault.

Tough to blame any sitting president for a deficit considering that they don't have the ability to spend taxpayer money via the national budget.

They can, however, spend it on staging multiple White House concerts.

 

[geezer]

Re: Obama 7 - now what?

Funny. The debt was under control when Clinton left office. Must be Obama's fault.

The debt has continually risen relative to GDP for decades, except for that brief time when Gingrich was in power
http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms
However, Obama is the first since WWII to crank it up over 100% of the GDP. Its' now officially a runaway train.

 

[Plante26]

Re: Obama 7 - now what?

Funny. The debt was under control when Clinton left office. Must be Obama's fault.

Obammer pretty much sounded the alarm during the campaign, saying, "We're bleeding to death!" with regards to deficit spending.

Now he's basically said, "The only way to save ourselves is to slash our own throat" with regards to stimulus spending.

And somehow, almost half of America AGREES with him.

Now THAT makes sense.....

 

[Handyman]

Re: Obama 7 - now what?

Ok a bit off topic, but I was bored so I decided to watch Rambo III just so I could see some old school explosions and a few things stuck out. First of all it takes place in Afghanistan which I had completely forgotten. Second, there is a part where Richard Crenna is being interrogated by the Russians and he talks about how foolish this whole fight was and America would know since they had their Vietnam. And third, the movie was dedicated to all of the strong and brave Afghanis. Funny how things change in 15 years. Now it is America fighting in Afghanistan stuck in a war they can't get out of.

So basically we either need to end this war or send Rambo in to fight it for us!

Seriously though, it is time. Forget the sunk costs, nothing is changing. Soldiers are dying and the generals keep asking for more. Our debt is rising so fast it is giving us all a nosebleed, unemployment is still way too high and yet we are throwing our money and resources (which we dont even really have) into fighting two wars that have been going on for way too long. It is one thing if you are using wars to stimulate the economy...history is filled with such actions and I could justify that. These wars having been going on for 8 and 6 years respectively and they have done nothing but help crater our economy to new lows. And instead of pulling out, or at least setting it up, pretty much everyone agrees Obama is going to send more troops to Afghanistan so we can have another surge. Just another empty promise...

Time to cut our losses and go home. At this point we are like that friend we all have that goes to the casino, wins 100 bucks on blackjack, thinks he can win more so stays at the table, loses 500 and instead of getting up and leaving keeps cashing in in hopes of winning it all back only to lose every dime he has. Time to get a bit selfish and worry about ourselves.

 

[MinnFan]

Re: Obama 7 - now what?

So the theory goes that you can pump money into the economy in order to get it moving and then snatch the punch bowl by reducing the money supply (raise interest rates) once velocity starts to increase.

Under Carter we increased the money supply by 13% and in order to get inflation under control the Fed had to increase the prime rate to 20%.

We now have increased the money supply 120%. What is it going to take to bring things back in line?