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Well yes, the Fed has a policy of mild inflation i.e. "down relative to commodities". That's policy its not accidental.

But at least you are being consistent.

Though nothing like 50% was destroyed: M1, MZM

Well yes, the Fed has a policy of mild inflation i.e. "down relative to commodities". That's policy its not accidental.

But at least you are being consistent.

Though nothing like 50% was destroyed: M1, MZM

“If you tell a lie big enough and keep repeating it, people will eventually come to believe it” Right now we have an entire political party that is built on lies. Don't believe me? Check the interest rates on the 10 year treasury notes. I guarantee you that the federal government can borrow at a lower interest rate than you. Does that look like raging inflation is right around the corner? Does that look like a government that is borrowing beyond it's means? No.

Funny, the data seems to disagree with you. http://research.stlouisfed.org/fred2/data/PSAVERT.txt

The savings rate fell off a cliff around 1982, which is just about the time that the bull market leading up to the 2000 meltdown, then slid back downwards, then jumped back up again at the end of 2008. That nearly 20 year bull market was a time of general prosperity, when people COULD have been saving up money for the inevitable downturn that cyclical markets will bring. They didn't. The data clearly shows that people SAVE MORE when times are hard.

The problem is our culture puts more emphasis on buying a new Toyota, or a new flatscreen tv, rather than making sure that you save for the inevitable downturns, and the inevitable point where you're going to want to retire. Part of this is consumerism, and part of this is simply peoples' attitude that the government will somehow make it all better, and they don't need to worry - see the ridiculously low amount of retirement savings most people have, compared to the cost of the car they're driving. They think nothing of spending $300-500 a month on a car loan for 5-6 years, but ask them to put aside the same amount in their 401(k) and they'll scream bloody murder about how they don't have the money to afford that.

Then why have real wages been stagnant for over a decade

Average real wages have been stagnant because average real total compensation has been rising. Benefit costs, especially health insurance, is where most compensation has been going. Because many benefits are pre-tax, it costs less for a business to provide more non-wage compensation than wages.

he rapidly increased federal spending

That's somewhat true, but it was necessary since state governments generally can't run deficits. If you combine federal and state governments, spending growth has slowed. Also, the increased deficit is much more a matter of revenue than of spending.

And housing prices always go up, right? http://research.stlouisfed.org/fred2/series/BASE

What's the point of selling gold in a vending machine when no one is going to take a gold coin as currency?

Because as the dollar continues to lose value against gold at roughly 20% in the last 5 years (actually more like 10 years but that is not displayed on that web site), anyone getting 1.75% interest on a CD or 2.5% on a T-bill is an idiot.

Given that the printing press at the FED is in overdrive, it is very likely that the dollar will accelerate its decline in the next few years. Every dollar printed, does not create purchasing power, it simply dilutes the purchasing power of all the existing dollars out there.

A lot of us are seeing the writing on the wall for the dollar. If the premium is low enough, I will be a regular customer of these machines

I ask because I find evidence the local chapter is prepared... and has become a model for at least one other large metro area:

Minneapolis / St. Paul Business Journal
Red Cross recruiting volunteers for Level 3 disaster response

{snip}
The chief criteria for making Level 3 is the number of volunteers trained to combat a major disaster... So far, St. Louis is the only Level 3 chapter in the Midwest.
Local chapters aren't required to lift themselves to Level 3{snip}
The (Minneapolis-St. Paul) chapter, which is modeling its effort off of St. Louis', already has begun meeting with city mayors and business leaders in its Get Ready in 2007 campaign.
According to St. Louis' estimates, costs to provide Red Cross disaster response for a Level 2 disaster are between $10,000 and $50,000, but a Level 3 response takes as much as $250,000.
Get Ready requires several steps.{snip}

The dollar figures above show the Red Cross direct relief expenditures in a disaster, not the losses of disaster clients, FYI.

Of course, history shows other risks are much more likely in St. Louis, such as
flood
http://www.stlouisfed.org/publications/re/articles/?id=1880
tornados http://www.usgennet.org/usa/mo/county/stlouis/weather/1927tornado.htm http://www.usgennet.org/usa/mo/county/stlouis/cyclone.htm
earthquake:

" Federal Emergency Management Agency warned that a serious earthquake in the New Madrid Seismic Zone could result in "the highest economic losses due to a natural disaster in the United States," further predicting "widespread and catastrophic" damage across Alabama, Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and particularly Tennessee, where a 7.7 magnitude quake or greater would cause damage to tens of thousands of structures affecting water distribution, transportation systems, and other vital infrastructure." http://en.wikipedia.org/wiki/New_Madrid_Seismic_Zone#Potential_for_future_earthquakes http://foxy955stl.com/national/jimgates/american-red-cross-offers-safety-tips-for-earthquakes/

and zombie attack http://www.riverfronttimes.com/2007-02-07/news/doomsday-disciples/full/-1/

Of course, Minneapolis has never prepared for hurricanes, nor has Detroit. Being far inland, over 600 miles inland, as is St. Louis, kinda reduces the risk of hurricanes, don'tcha think?

Also, preparing for one kind of emergency prepares one for most of the perils of other likely crises. Having a network of friends, knowing where to meet up if you can't get home, knowing who to call in emergency (since interstate long distance often works when local phone lines overload), preparing your house, keeping emergency money on hand (especially coins for payphones because cellphones are the first network to overload and fail in disaster) food and water on hand along with clothing and communications tools, knowing evac routes and where high ground is, all are applicable to multiple emergencies.

Lessons learned shows us learning the common skills and acquiring the commonly needed assets is the best investment of time and money, the core of the 'All Modes' preparedness approach sensible agencies apply to disaster preparedness.

Therefore, I must, again, ask for you to cite your source, and explain why a city six-hundred-miles inland _should_ prepare for a hurricane, when there are much more likely risks to consider.

Apparently you don't know the numbers:

by allowing the country and people to save again

The personal savings rate has already returned to 1995 levels.
http://research.stlouisfed.org/fred2/data/PSAVERT.txt

by getting rid of the insurmountable debt

America is in the middle of the pack for debt per GDP.
http://www.nationmaster.com/graph/eco_deb_ext_pergdp-economy-debt-external-per-gdp

by increasing production capabilities of the country.

Again, the US is in the middle of the pack for value added manufacturing per GDP (and still #1 in the world in raw dollars). We're #13 for per capita manufacturing, and China is #64.
http://www.nationmaster.com/graph/ind_man_val_add_cur_us_pergdp-added-current-us-per-gdp

Peter Schiff is trying to convince you that America is last place in the world economy, and the rest of the world has no incentive to prevent us from collapsing. He's wrong, and you're credulous. QED.

Average call to shock time in Milwaukee is 8.6 minutes. That is call until paramedics are at the door. Police times aren't tracked in Milwaukee, but Cleveland, Atlanta, Detroit, Baltimore, and St. Louis, which aren't exactly known for their police response all average well under 20. I sincerely doubt that Milwaukee takes more than four times as long as any of those cities. When you compare the number of tickets issued with overall crimes rates there isn't any relationship. http://research.stlouisfed.org/wp/2006/2006-048.pdf shows tickets increasing, during a time when crime rates fell. It doesn't seem that those two are all that closely related.

http://research.stlouisfed.org/fred2/series/BASE

Tell me how this will not lead to hyperinflation. No country since Zimbabwe has done this, and look where they ended up.

How about you listen to the argument first?

I did a 4 year full time engineering degree back in the 1970s, while living at my parents house. Tuition fees plus books and other materials (lab coats, lab goggles, drafting equipment, pens, paper, etc.) probably came to less than $10k total. In today's money, that would probably be $25-30k, due to inflation/debasement of currency http://research.stlouisfed.org/fred2/series/CPIAUCNS?cid=9. The long hours each week (lectures, lab, assignments, study) meant there was no possibility of part-time work during term, but with summer jobs, I managed to graduate without any loans.

Later in my career, realizing I was in a country with free education (OK, I paid the damn high taxes), I went back to university part time, and got my MSc and PhD in other areas of engineering. The cost was just in textbooks and suchlike (also lost evenings, weekends, and vacations), although I also took several weeks unpaid leave of absence from work for thesis finalization.

I didn't say steal money, I said stole the value. That's what happens when money is created. The people who create the money get to use it at full value, while every one of us is left in the lurch when all that extra money hits the consumers. And this all seems justified to you because it has created "stability in the market"? I don't see this stability. And if the FED was powerful enough to prevent instability, then why didn't it? Oh so it didn't have enough power so it should have more now... I know those aren't your words, but that is what too many people are thinking.

Here's your source btw.

The X dollars in circulation just have to circulate fast enough.

I think you're confusing cause and effect. For example, in hyperinflation, it's true that people will tend to spend their depreciating money very quickly. However, the currency is not losing value because people are spending their money quickly; the currency is losing value because the government is rapidly expanding the money supply.

Why do you think we had deflation during most of the 19th century? Because people spent their money slower and slower? No, it was because the money supply was relatively stable, while the number of goods rose.

...building on bubble after bubble. But blaming it on FRB is just plain wrong.

Did you ever notice that bubbles tend to grow when the fractional reserve banks are quickly expanding the money supply, and bubbles tend to pop when the rapid expansion finally slows or stops? There certainly seems to be a connection.

What blows my mind is how liberals often act like the Great Depression somehow vindicated their case against the unregulated free market. The reality is that the Austrian economists were vindicated. They said, "Don't inflate the money supply." But, of course, that's what the Fed and the FRBs did during the 1920's, and a bubble grew. The Austrians said, "Do nothing. Let the economy fix itself." But, unlike in previous panics, Hoover did not listen. He intervened, and the economy grew worse. Then Roosevelt intervened even more, and things got so bad that we now call it the Great Depression. And then there was WW2, which further devastated the economy. Finally, when the government lifted the war-time price controls, prosperity returned.

But now, Hoover is remembered as a non-interventionist, when he in fact intervened more than any president before him. Perhaps Bush will be remembered as a non-interventionist as well, because, just as Hoover did not intervene as much as Roosevelt, Bush did not intervene as much as Obama.

Here we are in the 21st century, and we still haven't learned out lessons. Look at what the Fed has done to the monetary base since October. That's a ticking time bomb. Also, we were told that if we didn't pass the stimulus, unemployment would go all the way to 9%. Well, we passed the stimulus, and now unemployment is 9.8% and still climbing! We've increased the minimum wage (i.e. made low-paying jobs illegal), extended unemployment insurance (i.e. took money from employers and used it to pay people to stay unemployed) and now teenage unemployment is over 20%. Isn't fucking with the economy fun?

Christ. Hopefully, when we start getting 1970's style stagflation, people will finally wake up and the pendulum will swing back towards the free market. But I'm not holding my breath.

May be you can explain this chart to me?

The wrong reporting about UA was corrected immediately, yet it sent the markets into a nose dive from which they haven't recovered yet.

This is the same ridiculous, absurd reasoning that makes the summary sound so crazy. (In the case of the summary, it seems the real story is a bit more complicated. A misleading summary on Slashdot? I'm shocked, SHOCKED etc.)

UAL's stock (symbol:UAUA) recovered most of its value later that day, and the rest shortly after that. You can't even tell when the false story broke if you look at the last year of the stock's price.

The US market nosedive is a symptom of the bust portion of the latest boom/bust cycle driven by low interest rates in the 90's/00's. (If you thought a nation-wide personal savings rate closing in on zero was unsustainable, you were right!) While it's true that specific news events can pop a bubble in a sudden and dramatic way, that doesn't mean those events were the cause of the subsequent problems! The problems have been slowly building up as more houses were being built than people wanted to buy, and as artificially low interest rates caused stocks to be priced higher than (as it turns out) they were worth. There's nothing to be done now but watch the pendulum swing back the other way, as it would in any market where there's more supply than demand.

Legally, many banks cannot loan money at this time.

This hasn't been true for some while if you look at the reserve statistics: http://research.stlouisfed.org/fred2/series/BOGNONBR

There may be some extra reserves held against further depreciation of assets, but investments in solid assets could certainly be made (and are made in, for example, treasuries) without jeopardizing the reserve requirements. The more likely reason that most banks don't lend much money these days is that nobody who wants loans is qualified and nobody who's qualified wants loans.

"do you have a cite for that Pelosi quote?"

http://www.youtube.com/watch?v=-UR5M5teyQ0

It's also worth nothing that the Great Depression was a global problem too.

Secondly, politicians keep saying that this is going to be worse than the great depression, if it isn't already. They're saying, as you are repeating, that companies are losing jobs fast and that the unemployment rate might hit a whopping 8 or 9 percent in 2009. In 1982 the unemployment rate surpassed 10% and in 1932, during the great depression, the unemployment rate in the US exceeded 24%.

It's also worth reminding everyone that Obama's Chief of Staff, Rahm Emmanuel, said that "You never want a crisis to go to waste".

Face it, politicians exaggerate at best, and lie at worst, in order to get their agendas and pet projects passed through. I'm not a conspiracy theorist. I believe in empirical evidence and admittedly all I have to offer is circumstantial evidence and conjecture. But given a basic understanding of economics, world history and the fact that Obama is employing the same Wall-Street bankers that he's vilifying to the American people and using as a scapegoat, I'm suspicious. I'm fearful that Tim Geithner (current Treasury Secretary and former President of the New York Federal Reserve Bank), Ben Bernanke and the rest of the Wall-Street guys that Obama has surrounded himself with are intentionally advising congress and the White House on bad policy. That the actions that the US government is taking might actually be designed hyperinflate the US dollar so that in a year or two the central banks can offer us a new North American currency similar to the Euro, packaged in a nice, neat North American Union that will make the Wall-Street Bankers richer at everyone's expense.

Did you happen to catch the Tonight Show with Jay Leno this evening ? When Leno asked Obama where the stimulus money was he said the banks are holding on to it! I tried to find you a youtube but it was only aired an hour or so ago. It should be up on Youtube shortly and you can verify.

With respect, classical economics and Austrian economics are not quite the same thing, and the Austrian school of economics explains this quite well.

Notice any similarities here? No, it's not a perfect fit, but it's the best I could do on short notice.

No one is saying that these models have nothing to do with malinvestment, but it's likely the inputs to the model are also obfuscated by distorted monetary signals

Nope, it was Irving Fisher's "The Debt-Deflation Theory of Great Depressions" I was trying to allude to. "the more debtors pay, the more they owe. The more the economic boat tips, the more it tends to tip. It is not tending to right itself, but is capsizing" (Fisher 1933)

Unless, as was the case with California recently, you get an IOU instead of a check. Or inflation has kicked in, and your money buys 50% of what it would have a year ago. Inflation can become a real bitch when you are doubling the monetary base every four months.

That $105 fine is going to seem cheap this time next year if the Fed doesn't neutralize these funds before they get out into the wild, which doesn't seem to be in the cards at this point.

GPs post was pretty nonsensical, and I would responded if you hadn't already done so. Still, there were a couple things about your post that struck me as odd.

The creation of money is governed by supply and demand of loans, there is nothing artificial about it.

Except that the Federal Reserve Bank either pushes money in or pulls money out by buying or selling those loans in their "open market operations"... there's nothing natural about those transactions.

I hope you will agree than the higher the money supply is, the less each individual dollar will be worth, also known as inflation. (That is, of course, assuming the total amount produced remains roughly constant.) Dollars react to supply and demand just like any other good, aside from the fact that the supply is controlled by government printing and fractional reserve requirements. Check out the increase in money supply in the past 8 months, and then tell me whether you think there will be inflation whenever consumer demand (which some call "velocity") picks back up.

http://research.stlouisfed.org/fred2/data/M1SL.txt

(M1 may not be the best indicator... M3 is probably better, but the fed stopped reporting it in 2006, as it started showing higher growth rates than M1 and M2.)

The US had an annualized inflation rate of 0,09% in December 2008 and hasn't had an inflation rate above 4% since 1991. What exactly are you talking about?

Using CPI as a measure of inflation is... not optimal. They keep changing it, starting in the early 90s, which is (not coincidentally) when you cited as the last time the CPI was above 4%.

http://www.shadowstats.com/article/56

What I'd love an economist-person to explain is to what degree the following graphs should terrify my children, and their children, and their children's children.

These graphs show the Monetary Base over time, which is to say the amount of real money (US dollars) that exists. Take special note of the last year or so, into which was born the concept of 700bn bailouts and 900bn stimulus packages.

Monetary Base

The Chinese have been engaging in protectionism for years now, by keeping their currency artificially low.

You accuse the Chinese of manipulating the currency. Yet, look at what our wonderful FED is doing to our own currency. That chart represents how much money the FED has printed (fisically, electronically or otherwise). If you really think we are at risk of "deflation", you have been drinking too much kool-aid.

Also, look at history, we (the US) conned the world by telling them that dollars where redeemable for gold. And once the dollar became the world currency, we went off of the gold standard (1971) and started printing it like crazy.

One ounce of gold was worth $35-$36 beginning 1971, it is worth $914 at close today. That means that the dollar lost 96% of its value in 38 years.

The Chinese may not be free of sin, but we are certainly not the country to throw the first stone.

What do you think will happen if the Chinese let their currency gain value? Every product that comes from China will become more expensive, or simply unavailable. This "protectionism" is letting you buy cheap products. In the short run, yes, China's exporting companies will suffer, but in the long run, products in China will become cheap (relative to the US and the rest of the world), and they will enjoy consumption like we have here.

So this disease is nothing more than the cost meeting the supply and demand function of classical economics. Don't you think exploding prices is more an effect of inflation?

Therefore, what costs $1 today might cost $10 a week later. (In fact, The USA economy has been doing this kind of thing recently.)

I saw a typo.

Given the simple axiom of supply and demand, do you really think that the supply of dollars by the FED is outstripping the fall in demand caused by the economic downturn? Granted that graph is a reflection of what banks are holding onto, but what do you think is going to happen to the purchasing power of the individual using USD once it all hits the consumer market? The better term for this is Stagflation and there is still a large amount of doubt by this armchair economist if Keynesian Economics can do anything about it.

As for my personal solution, I'll continue to write and design software for a hard product that is designed and manufactured locally in the US and sold globally. And that's the best I can do to help cure stagflation.

Mass transit is neither cost-effective nor green. Per passenger-mile, it costs more to operate and generates more green-house gases than private automobiles. But don't believe me. Check out what the Federal Reserve Bank of St. Louis, The Atlantic, and others have to say about it.

http://www.stlouisfed.org/publications/re/2004/c/pages/light_rail.html

Based solely on dollar cost, the annual light-rail subsidies could instead be used to buy an environmentally friendly hybrid Toyota Prius every five years for each poor rider and even to pay annual maintenance costs of $6,000. Increases in pollution would be minimal with the hybrid vehicle, and 7,700 new vehicles on the roadway would result in only a 0.5 percent increase in traffic congestion.3 And there would still be funds left overâ"about $49 million per year. These funds could be given to all other MetroLink riders (amounting to roughly $1,045 per person per year) and be used for cab fare, bus fare, etc.

http://www.theatlantic.com/doc/197910/197910

The received wisdom on this topic is easily stated: 1. It is self-evident that public transportation is vastly more energy-efficient than automobiles; 2. It is self-evident that investing money to improve transit facilities will attract many more passengers. Therefore, the national energy policy ought to give major attention to building new transit systems and revitalizing old ones. Unfortunately, both of these "self-evident" premises turn out to be false.

http://www.templetons.com/brad/transit-myth.html

Particularly disturbing were the numbers for some of the worst transit systems, including the light rail in San Jose, which I sometimes ride. That system takes twice as much energy per passenger than private cars do. It's not even the worst -- that's Cleveland, which also is part of a grid more dependent on fossil fuels than San Jose.

http://www.gregburch.net/cars/plans.html

From a purely utilitarian point of view, it would be cheaper to simply buy compact cars for the poorest of the poor, or even subsidize some kind of taxi cab service for poor people. But that idea is too "way out there" - much stranger than ripping up our cities for years and years while the planners implement their expensive dreams.

No, its not. And regulated fractional reserve banking requires banks to get their money from somewhere, contrary to your indication that it does not. They have to acquire the reserves, and the permission to issue more money via reserve regulations.

Have you read up on what an "open market operation" is? I have, several times, and I still don't know how that ever passed for legitimate bookkeeping. Here's roughly how it works:

The Fed sets an interest rate target. By itself, this would be tilting at windmills that meant nothing. But if banks are charging interest rates that are higher than the target, the Fed buys securities (usually Treasury bonds) from the banks, depositing money directly into the banks' individual reserve accounts at the Federal Reserve in order to purchase them. Because the banks now have more reserves, they can make more loans. This is a rise in supply of loans without a corresponding rise in demand for them, and thus loan prices (interest rates) fall through competition.

Wait, where did the Fed get the money? That's the 2 Trillion Dollar Question. Federal reserve accounts are just ledgers full of numbers. Today they're spreadsheets on a computer; previously, paper ledgers were used, but it's the same idea. Either way, no physical dollar bills ever changed hands from Fed to bank, ever since the Fed was created in 1913. And, when you unwind it all, which is a long and annoying process described in very obfuscatory language on the Fed's own websites, the Fed basically prints money to buy back the government's own debt. The Fed just marks a number under its own "Fed liabilities" column, labeling it "Oops, my bad, this is an IOU not real money", but the Fed also gains a security with equal dollar value to the IOU, dropped under the "Fed assets" column, so the Fed's books come out with a net change of $0.

And, of course, because the bank selling the securities now has more money sitting in its reserve account, and it doesn't need to hold the reserves to cover any new checking deposits, it can make profits by lending the money out. The recipients spend it, and those who were paid deposit it into their own checking accounts. At this point 90% of that gets loaned out a second time (10% reserve requirements[*]), and 90% of that gets loaned out a third time (net of 0.90*0.90=0.81, for those counting at home), and so on until the money supply has expanded by nearly 10-fold (limit 1/0.10=10 as t goes to infinity).

([*] Actually, it's worse than that. The 10% reserve requirement is the figure for demand deposits, i.e. checking accounts. For time deposits -- i.e. savings accounts, CDs, and anything else with time restrictions -- the reserve requirement is 0% instead. And the law recently changed so that banks can automatically roll over customers' demand deposits into time deposits, without asking or telling the customers, if money sits in a demand deposit account for long enough. So the process can potentially reach infinity.)

This flow of money from bank to bank is the "velocity of money" euphemism that economists speak of. What's actually happening is that the small amount of monetary inflation created through open market operations is multiplied through fractional banking, and at the same time the monetary inflation transforms into price inflation driving up prices as it changes hands. This saves the Fed work, because each new round of loans adds more competition on interest rates, but each new round also drives up price inflation to ever-increasing heights. This is the reason why the government eventually has to "cool off the economy" during boom years (i.e. slow down the "velocity of money" and decrease monetary inflation) by raising target rates and pumping money back out of the economy through security sales. If the Fed didn't take back and destroy the IOUs (thus raising interest rates), inflation would get out of control and the economy would fall into a stagflationary recession (i.e. what happened in the 1970s when politicians practiced straight Keynesian economics and just opened the money spigot).

That it is, a "rule of thumb", the offical definition of a recession is when the National Bureau of Economic Research (NBER) business cycle dating committee agrees that there is (was) a recession, and they have now agreed to that. This is the definition which also showed that the Bush1.0 Gulf War 1.0 recession ended more than a year before newly elected Bill Clinton was elected and took credit for the recovery. And the "y2k" recession began before Bush2.0 was elected to take the blame. (That being said, his and the fed's management of that recession and the 9/11 "recession" has certainly created more long-term damage to the economy than either Clinton or the two Bush's could ever do on their own.) NBER's claim that we've been in a recession is akin to your doctor pointing out that you have a hangnail after you've been beheaded. For a look at some real scary statistics, at the St. Louis Fed's Net Free or Borrowed Reserves of Depository Institutions numbers going back to 1950 or Excess Reserve of Depository Institutions going back to 1925. or The Adjusted Monetary Base going back to 1910. Or any of several other monetary statistics that are several black swan SD's away from their multigenerational mean.

Bush's Treasury chairman Paulson and Bernanke have engineered a truly astounding experiment in monetary policy topped only by Robert Mugabe's 10^21% hyperinflationary monetary policies. The economy has enough inertia that we will see 1-5 years of deflation or disinflation as the "imagined" debt money supply virtually disappears, leaving too many goods chasing too few dollars. But the medium/long term effect is inflation, because only currency printing presses and inflation can reduce a debt brought on by a mad government and personal debt fueled spending spree that powered the economy for at least a decade.

That it is, a "rule of thumb", the offical definition of a recession is when the National Bureau of Economic Research (NBER) business cycle dating committee agrees that there is (was) a recession, and they have now agreed to that. This is the definition which also showed that the Bush1.0 Gulf War 1.0 recession ended more than a year before newly elected Bill Clinton was elected and took credit for the recovery. And the "y2k" recession began before Bush2.0 was elected to take the blame. (That being said, his and the fed's management of that recession and the 9/11 "recession" has certainly created more long-term damage to the economy than either Clinton or the two Bush's could ever do on their own.) NBER's claim that we've been in a recession is akin to your doctor pointing out that you have a hangnail after you've been beheaded. For a look at some real scary statistics, at the St. Louis Fed's Net Free or Borrowed Reserves of Depository Institutions numbers going back to 1950 or Excess Reserve of Depository Institutions going back to 1925. or The Adjusted Monetary Base going back to 1910. Or any of several other monetary statistics that are several black swan SD's away from their multigenerational mean.

Bush's Treasury chairman Paulson and Bernanke have engineered a truly astounding experiment in monetary policy topped only by Robert Mugabe's 10^21% hyperinflationary monetary policies. The economy has enough inertia that we will see 1-5 years of deflation or disinflation as the "imagined" debt money supply virtually disappears, leaving too many goods chasing too few dollars. But the medium/long term effect is inflation, because only currency printing presses and inflation can reduce a debt brought on by a mad government and personal debt fueled spending spree that powered the economy for at least a decade.

That it is, a "rule of thumb", the offical definition of a recession is when the National Bureau of Economic Research (NBER) business cycle dating committee agrees that there is (was) a recession, and they have now agreed to that. This is the definition which also showed that the Bush1.0 Gulf War 1.0 recession ended more than a year before newly elected Bill Clinton was elected and took credit for the recovery. And the "y2k" recession began before Bush2.0 was elected to take the blame. (That being said, his and the fed's management of that recession and the 9/11 "recession" has certainly created more long-term damage to the economy than either Clinton or the two Bush's could ever do on their own.) NBER's claim that we've been in a recession is akin to your doctor pointing out that you have a hangnail after you've been beheaded. For a look at some real scary statistics, at the St. Louis Fed's Net Free or Borrowed Reserves of Depository Institutions numbers going back to 1950 or Excess Reserve of Depository Institutions going back to 1925. or The Adjusted Monetary Base going back to 1910. Or any of several other monetary statistics that are several black swan SD's away from their multigenerational mean.

Bush's Treasury chairman Paulson and Bernanke have engineered a truly astounding experiment in monetary policy topped only by Robert Mugabe's 10^21% hyperinflationary monetary policies. The economy has enough inertia that we will see 1-5 years of deflation or disinflation as the "imagined" debt money supply virtually disappears, leaving too many goods chasing too few dollars. But the medium/long term effect is inflation, because only currency printing presses and inflation can reduce a debt brought on by a mad government and personal debt fueled spending spree that powered the economy for at least a decade.

That it is, a "rule of thumb", the offical definition of a recession is when the National Bureau of Economic Research (NBER) business cycle dating committee agrees that there is (was) a recession, and they have now agreed to that. This is the definition which also showed that the Bush1.0 Gulf War 1.0 recession ended more than a year before newly elected Bill Clinton was elected and took credit for the recovery. And the "y2k" recession began before Bush2.0 was elected to take the blame. (That being said, his and the fed's management of that recession and the 9/11 "recession" has certainly created more long-term damage to the economy than either Clinton or the two Bush's could ever do on their own.) NBER's claim that we've been in a recession is akin to your doctor pointing out that you have a hangnail after you've been beheaded. For a look at some real scary statistics, at the St. Louis Fed's Net Free or Borrowed Reserves of Depository Institutions numbers going back to 1950 or Excess Reserve of Depository Institutions going back to 1925. or The Adjusted Monetary Base going back to 1910. Or any of several other monetary statistics that are several black swan SD's away from their multigenerational mean.

Bush's Treasury chairman Paulson and Bernanke have engineered a truly astounding experiment in monetary policy topped only by Robert Mugabe's 10^21% hyperinflationary monetary policies. The economy has enough inertia that we will see 1-5 years of deflation or disinflation as the "imagined" debt money supply virtually disappears, leaving too many goods chasing too few dollars. But the medium/long term effect is inflation, because only currency printing presses and inflation can reduce a debt brought on by a mad government and personal debt fueled spending spree that powered the economy for at least a decade.

This is all a lie! You can't trust statistics or facts. Where there is money, there is wealth.... at least so I am told. Just look at the government's own numbers for the number of dollars in the economy (http://research.stlouisfed.org/fred2/series/BASE Federal Reserve) - they have created $650billion more dollars in the last three months effectively increasing the total number of dollars in the economy by only 61%. Wealth has nothing to do with the goods in the economy, only the number of pieces of paper exchanged as currency.
I say the only way to create more stuff is to let the government print more money. Just think how much better everyone will be.... you know.... when everyone is a millionaire.

Bottom line - we boned.

On the other hand you have the socialist/protectionist model, where the market is severely constrained to fit a social/ideological agenda. This results in high prices, low productivity, high unemployment, and stagnation. On the other hand, it's stable, and there is less fear of living in a cardboard box.

This sounds very much like most Americans' description of Western Europe. Yet, unemployment rate is 7.5% in The Euro area Source: ECB, which is not very different from the US figure (6.1%) Source: St. Louis FED. By the way, the definition of unemployment is quite different (some people who would be considered unemployed by EU standards wouldn't be by US statistical conventions).

Reagan predicted that his tax cuts would increase revenue, which was NOT the case

The Reagan tax cuts really did increase revenue. (Or at least the tax cuts were associated with rising revenue, if you want to argue about causation.) Many other interesting graphs here.

Here is a novel thought, why don't they not take my money and I can give it directly to the poor children. Why does the government need a cut?

Because, by and large, you won't. (well okay, you might, but most people wouldn't). Relying on individuals to be willing and able to appropriately address the country's national-level problems through voluntary donations of their own personal funds is simply unrealistic. The guaranteed result of adopting such a policy would be the effective destruction of the social safety net that many Americans rely on. And while you personally might find that acceptable, the vast majority of Americans do not.

Well, you may have a point, although it has been shown that growth in government spending for social programs reduces charitable contributions.

Then, again, some people are just miserly.

Taxing people and spending that money, and just plain printing it and causing inflation is effectively the same thing. Taxation lets you target who pays, inflation means you target people with savings automatically.

Currently what basically every government in the world has is both. They can tax and they can print money. And borrowing money from foreign sources to spend is the same as printing it, inflation wise - though when it is paid back it's the same as destroying money and hence deflationary.

The US is doing all three, it borrows from abroad. It prints money as fast it can without being called on it (see http://research.stlouisfed.org/fred2/series/BORROW - when the Fed loans money to banks that's exactly the same as printing money until those loans are paid back). And it taxes the people.

Printing money to cover the government budget is not a stupid idea. It just has one "minor" problem, there has to be some way of stopping the government doing a Zimbabwe. If the US government printed the money it collects in taxes there wouldn't be a problem - people would have higher incomes due to not paying those taxes, and the inflation from the printing would eat up that extra income for a zero sum result (unless you were living on a fixed income/savings, in which case it'd suck, but overall for the entire economy it's the same).

It would, in fact, be a much more efficient system - the cost of tax collection would be removed, barriers to entry in business would be reduced, etc, etc. Printing money these days costs nothing - you don't actually have to print the paper just push some numbers around in a computer.

Of course it will never work, because politicians are retarded and would think "we can just print ten times as much and make the voters rich, so they'll vote for us - the inflation won't bite until after we are out when it will be someone elses problem".

So you would need an educated, intelligent people to stop the government from doing such stupid things. Which obviously is never going happen.

If you think taxes cap government spending, please look at the US, it clearly does no such thing - at least in the short/medium term.
 

real wages are down from their peak (which occurred more than 35 years ago)

However real hourly compensation has been rising pretty steadily. More benefits are being passed through employers tax free, such as health care costs, which don't show up in wages. And the government pulls out more of your money in payroll taxes (of course, if you think Social Security and other taxes are a waste, then you might be able to argue that real compensation has not actually been going up).

minimum wage is just over half of its peak

Minimum wage workers tend to be young. Only 2% of workers over age 25 earn the minimum wage. About half of minimum wage earners are under age 25, and about one-fourth are age 16-19.

The minimum wage probably causes more unemployment (and for illegal aliens, informal employment) than it helps to reduce poverty. Most people in poverty earn more than the minimum wage, but are poor because they work fewer hours than those not in poverty. Often this is because they are single parents.

there are 12 million more Americans living in poverty today than 30 years ago

Of course, the definition of "poverty" has been raised during this time. 30 years ago, most people in poverty did not have microwave ovens or refrigerators or a car. See this article for a comparison of "the poor" from 30 years ago to today.

I'm not saying it is cool to be poor, but it is far easier to be poor in 2008 than 1978.

Keep in mind we have taken on about 30 million illegal immigrants over the last 30 years as well. They are doing a heck of a lot better in the US than they would have were they came from (where they would be truly "poor"), but they will pull down average wage numbers as they don't come in highly skilled.

millions are now losing their homes

That is true, but of course homeownership was at an all time high of 69% before the bubble burst. It still remains higher than most other developed countries. Plus while they may be defaulting on home loans, most are able to rent.

Unemployment is at 6 percent nationwide and 11 percent in my state of Michigan.

US unemployment is actually 5.7%, while Michigan's is 8.5%.

But this does make one think that Michigan is doing something wrong. According to the Economic Freedom of North America study, Michigan is ranked 39th of the states and provinces in terms of subnational level economic freedom. Thus, I suggest that Michigan improve its policies to enhance its economic freedom.

You might not be aware of this fact it if you come from a background of privilege, but that doesn't say good things about you.

Well I've done the taxes for many poor immigrants to help them get the Earned Income Tax Credit, which actually does something to reduce poverty.

As a percentage of GDP, the U.S. debt situation is about the same as ...

And does that debt count unfunded entitlement obligations, like Medicare and Social Security, which are functionally the same as debt? NO? Well, then it's not so rosy, is it? Read is the US bankrupt? for a more sobering look.

Total Bullshit. The fall in housing prices has nothing to do with a contraction of the money supply, and we are not experiencing general deflation. We don't even include food and fuel when we calculate inflation for the very reason we're seeing right now - their price fluctuations often have little to do with the valuation of money. But a little research shows me that the CPI nevertheless increased .6% annualized last month, and it's been positive all year (I don't think it has ever been negative, at least not over the course of a year - the fed prevents that). Housing prices are falling because houses were overvalued (go look at the ratio of house values / rents on those houses - you will notice that they are relatively constant for a long time then shoot up... the housing bubble). I notice that housing was the entirety of your list of assets that were experiencing price drops. In any case, here's a link to a graph of the money supply: http://research.stlouisfed.org/publications/usfd/page6.pdf. You can see we are not seeing any type of collapse.

One of the few things the fed has near total control over is the money supply, and that allow them essentially to prevent deflation under any circumstances. Worry about something else.

now the country's technically insolvent.

Not that I disagree with your point, but what does that mean, and what figure should I be looking at, and what's its significance?

I found this to be a better exposition, but who will heed the warning?

We need a truce: Conservatives will acknowledge the dire emergency of global warming, if liberals acknowledge the dire emergency of future national bankruptcy (i.e. increasing liabilities of the federal government, state/local governments, and some private employers).

Don't worry, the Republicans are certain to make sure we hold the next president responsible.

That won't even keep pace with inflation. Real inflation (not the CPI bs that the government hands out every year, which excludes stuff like fuel) is running between 10% and 12%.

Yes, actually there was. You claimed that we don't have financial muscle because China can threaten to crash our currency. Except, there's no value to a threat that destroys them too, because we know they won't follow through on it, so yes, actually, you were wrong

Except you ignore the fact that we were just pressuring them on trade, they did make that threat and we did back down.


You didn't make a point, you were fearmongering because you're ignorant.

Read this

http://www.stlouisfed.org/news/speeches/2005/11_09 _05.htm

and you won't be ignorant anymore. (at least not on this subject)


So your idea of a rational point is ignoring current events and pointing to an old, poorly written opinion piece?!?

Sure, Sparky, live in your delusional fantasy world where year and a half old opinions you agree with actually matter and a knowledge of real current events is ignorance.

Yep, you're a shining example of how the stupidity, cowardice, and ignorance of the typical American allows the most insane policies to continue.

"So, no, there was nothing wrong in what I said."

Yes, actually there was. You claimed that we don't have financial muscle because China can threaten to crash our currency. Except, there's no value to a threat that destroys them too, because we know they won't follow through on it, so yes, actually, you were wrong.

"Of course, addressing the actual point instead of snarking off would involve you actually knowing what you're talking about so I didn't really expect that."

You didn't make a point, you were fearmongering because you're ignorant.

Read this

http://www.stlouisfed.org/news/speeches/2005/11_09 _05.htm

and you won't be ignorant anymore. (at least not on this subject)

This is the "haha" factor for you! Government *prints* money. As much as they want. And US is probably one of the worst countries in that regard. IT just hasn't cought up with them yet.

Money is viewed as a money supply. M1, M2 and M3. US doesn't even publish M3 money supply!!!

For more information about M1,M2 and M3 money supplies,
    http://economics.about.com/cs/money/a/money_supply .htm
    http://research.stlouisfed.org/fred2/data/M3SL.txt
    http://research.stlouisfed.org/fred2/data/M2SL.txt
    http://research.stlouisfed.org/
    http://research.stlouisfed.org/fred2/series/M2

Regardless, money supply is increasing now faster than before. How? Gov't is printing money. It is preferable that the money supply is representative of some real value, but it is not. US has been running a huge trade deficit now for a number of years, yet the currency has not devalued as much as needed. The reason is that other countries like China and Japan are storing their USD and not buying stuff with it. So it should be clear that money just represents a perceived value, not a real value.

When gov't "borrows" money, it may mean A LOT of things. In the US, they just transfered the money from the retirement plan (whatever it is called - social security?) which is currently overpaid, and spend the money. Now that they'll need to dip into the retirement funds, well, there's nothing in that "account" so they'll just move it from elsewhere. To get money you can issue bonds, increase taxes or just print money. The problem with printing money is inflation (devaluation of the fiat (or paper only, like USD) currency). They more you print, the less a single unit is worth. So essentially inflation caused by money printing is exactly the same as a flat tax.. Right now the inflation in the US could be lowered by slowing down of the money printing. *But* US can't do that because they have to pay for the deficits. So instead of increasing taxes, they just print money. The result is exactly the same (less purchasing power for people), but when you increase taxes the politicians get blamed, but when they print money the "economy" gets blamed. Another problem with printing money is that countries that hold huge amount of USD will start to see their stockpile decrease in value. So they will start to spend. And this will drive inflation in the US.

The US economy may be nearing a tipping point where the USD will be devalued by as much as 50%. For example, USD lost 30% with respect to CND (Canadian $) in the last 2 or 3 years. It used to be 1.6 CND/USD, but now it is 1.12 CND/USD. If a US person got a CND savings account that got them NO return at all (0% interest rate) they would have gained 43% in 2-3 years. An investment of 100,000 USD to canadian currency would result in 160,000 CND. Today, 160,000 CND is worth about 143,000 USD. This is all because of devaluation of USD due to US trade deficit. And the US trade deficit is NOT yet accounted for because China and Japan hold over 1 trillion USD!! They spend that, and USD is devalued further.

The GP probably described the tax system as best as one possibly can. You are just a little ignorant that the value of fiat currencies is arbitrary.

PS. Gov't does actually need to *print* money. They just punch in a number and that's how much money is lend out. It only takes a fraction of a second to create another billion and thereby decrease the value of current money.

This is the "haha" factor for you! Government *prints* money. As much as they want. And US is probably one of the worst countries in that regard. IT just hasn't cought up with them yet.

Money is viewed as a money supply. M1, M2 and M3. US doesn't even publish M3 money supply!!!

For more information about M1,M2 and M3 money supplies,
    http://economics.about.com/cs/money/a/money_supply .htm
    http://research.stlouisfed.org/fred2/data/M3SL.txt
    http://research.stlouisfed.org/fred2/data/M2SL.txt
    http://research.stlouisfed.org/
    http://research.stlouisfed.org/fred2/series/M2

Regardless, money supply is increasing now faster than before. How? Gov't is printing money. It is preferable that the money supply is representative of some real value, but it is not. US has been running a huge trade deficit now for a number of years, yet the currency has not devalued as much as needed. The reason is that other countries like China and Japan are storing their USD and not buying stuff with it. So it should be clear that money just represents a perceived value, not a real value.

When gov't "borrows" money, it may mean A LOT of things. In the US, they just transfered the money from the retirement plan (whatever it is called - social security?) which is currently overpaid, and spend the money. Now that they'll need to dip into the retirement funds, well, there's nothing in that "account" so they'll just move it from elsewhere. To get money you can issue bonds, increase taxes or just print money. The problem with printing money is inflation (devaluation of the fiat (or paper only, like USD) currency). They more you print, the less a single unit is worth. So essentially inflation caused by money printing is exactly the same as a flat tax.. Right now the inflation in the US could be lowered by slowing down of the money printing. *But* US can't do that because they have to pay for the deficits. So instead of increasing taxes, they just print money. The result is exactly the same (less purchasing power for people), but when you increase taxes the politicians get blamed, but when they print money the "economy" gets blamed. Another problem with printing money is that countries that hold huge amount of USD will start to see their stockpile decrease in value. So they will start to spend. And this will drive inflation in the US.

The US economy may be nearing a tipping point where the USD will be devalued by as much as 50%. For example, USD lost 30% with respect to CND (Canadian $) in the last 2 or 3 years. It used to be 1.6 CND/USD, but now it is 1.12 CND/USD. If a US person got a CND savings account that got them NO return at all (0% interest rate) they would have gained 43% in 2-3 years. An investment of 100,000 USD to canadian currency would result in 160,000 CND. Today, 160,000 CND is worth about 143,000 USD. This is all because of devaluation of USD due to US trade deficit. And the US trade deficit is NOT yet accounted for because China and Japan hold over 1 trillion USD!! They spend that, and USD is devalued further.

The GP probably described the tax system as best as one possibly can. You are just a little ignorant that the value of fiat currencies is arbitrary.

PS. Gov't does actually need to *print* money. They just punch in a number and that's how much money is lend out. It only takes a fraction of a second to create another billion and thereby decrease the value of current money.

This is the "haha" factor for you! Government *prints* money. As much as they want. And US is probably one of the worst countries in that regard. IT just hasn't cought up with them yet.

Money is viewed as a money supply. M1, M2 and M3. US doesn't even publish M3 money supply!!!

For more information about M1,M2 and M3 money supplies,
    http://economics.about.com/cs/money/a/money_supply .htm
    http://research.stlouisfed.org/fred2/data/M3SL.txt
    http://research.stlouisfed.org/fred2/data/M2SL.txt
    http://research.stlouisfed.org/
    http://research.stlouisfed.org/fred2/series/M2

Regardless, money supply is increasing now faster than before. How? Gov't is printing money. It is preferable that the money supply is representative of some real value, but it is not. US has been running a huge trade deficit now for a number of years, yet the currency has not devalued as much as needed. The reason is that other countries like China and Japan are storing their USD and not buying stuff with it. So it should be clear that money just represents a perceived value, not a real value.

When gov't "borrows" money, it may mean A LOT of things. In the US, they just transfered the money from the retirement plan (whatever it is called - social security?) which is currently overpaid, and spend the money. Now that they'll need to dip into the retirement funds, well, there's nothing in that "account" so they'll just move it from elsewhere. To get money you can issue bonds, increase taxes or just print money. The problem with printing money is inflation (devaluation of the fiat (or paper only, like USD) currency). They more you print, the less a single unit is worth. So essentially inflation caused by money printing is exactly the same as a flat tax.. Right now the inflation in the US could be lowered by slowing down of the money printing. *But* US can't do that because they have to pay for the deficits. So instead of increasing taxes, they just print money. The result is exactly the same (less purchasing power for people), but when you increase taxes the politicians get blamed, but when they print money the "economy" gets blamed. Another problem with printing money is that countries that hold huge amount of USD will start to see their stockpile decrease in value. So they will start to spend. And this will drive inflation in the US.

The US economy may be nearing a tipping point where the USD will be devalued by as much as 50%. For example, USD lost 30% with respect to CND (Canadian $) in the last 2 or 3 years. It used to be 1.6 CND/USD, but now it is 1.12 CND/USD. If a US person got a CND savings account that got them NO return at all (0% interest rate) they would have gained 43% in 2-3 years. An investment of 100,000 USD to canadian currency would result in 160,000 CND. Today, 160,000 CND is worth about 143,000 USD. This is all because of devaluation of USD due to US trade deficit. And the US trade deficit is NOT yet accounted for because China and Japan hold over 1 trillion USD!! They spend that, and USD is devalued further.

The GP probably described the tax system as best as one possibly can. You are just a little ignorant that the value of fiat currencies is arbitrary.

PS. Gov't does actually need to *print* money. They just punch in a number and that's how much money is lend out. It only takes a fraction of a second to create another billion and thereby decrease the value of current money.