Well, those were banks that loaned out the gold, they had fractional reserve of gold, they were not safe boxes in the real sense of the word.
But in reality the bank runs were a very small problem, this problem was overblown by the US gov't, when they introduced the FDIC to help their banking friends to get more customers, that was helping the banking monopolies to hold on to the market with less competition and without having to earn the trust of the people. That was the moral hazard, which became part of the reason for the latest financial crash, since the Steagall was removed but FDIC stayed in place.
I feel like it's an episode of South Park - hey there, Mr. Poo.
From TFA:
"To have the skills to break into highly sensitive systems like that is an impressive level of criminal activity," said Kurt Baumgartner, a senior security researcher for Kaspersky Lab, a computer security firm.
- yeah, I bet it takes impressive level of criminal activity consisting of some 'LOL Cat' or maybe a 'Hot Malaysian Massage' screen saver and off the shelf 'back-orifice' of some sort.
But anyway, what did this guy do that the Fed isn't doing anyway?
traveling to the US on business
- that right there is a punishable offense, well at the very least your 'junk' may have to be touched.
The 32 year-old resident of Malaysia was observed by an undercover Secret Service agent
- they are making it sound much dirtier than it was.
selling stolen credit card data in a diner
- stay classy Mr. Poo. At a diner?
Why can't you be more respectable and do it like the Fed does, they sell their junk bonds on the bond market, with bells and whistles.
After arresting him and seizing his laptop (which was "heavily encrypted")
- with ROT13
authorities discovered evidence
- as I said, with ROT13.
Lin Min Poo had hacked into the Federal Reserve Bank of Cleveland and stolen over 400,000 stolen credit and debit card numbers.
- BASTARD! How dare he steal the STOLEN credit card numbers? Fed was just going to sell them themselves at a diner.
Also, according to authorities, Mr. Poo managed to hack into FedComp, a data processor for federal credit unions, enabling him to access the data of various federal credit union.
- various 'credit union'. Yeah, that one credit union is extremely 'various' indeed.
He also hacked into computer system of a Department of Defense contractor that provides systems management for military transport and other military operations, potentially compromising highly sensitive military logistics information.
- well, in his defense, he was just going to sell that highly classified systems management information at a better restaurant, he has SOME standards.
"If a guy from Malaysia can get into networks like this, you can imagine what the Chinese and Russians, the people with real capabilities, are able to do
- OMG! Call the Pentagon, they need to check if the database of the stolen mortgage back securities papers hasn't been stolen!
In fact, the penetration of sensitive national security computers by overseas hackers — many of them believed to be state sponsored — is rapidly emerging as one of the country’s most alarming national security threats, officials said. And the threat is not just from foreign governments and for-profit hackers. Officials have also expressed worries that terrorist groups may be capable of the same sorts of sophisticated penetrations.
- clearly, more F35s are needed to stop these attacks. What was that about the Republicans voting to STOP pig, I mean pork spending?
HOW, just HOW will they STOP all that pork spending if there is clearly so much that needs to be done right now, to prevent the terrorists from winning by 'hacking' into the White House and stealing the toilet cleaning schedule?
Pentagon officials said Sunday they were unable to respond immediately to questions about whether Poo's hacking of the contractor's computers had compromised military troop movements. But spokesman Bryan Whitman said in an e-mailed statement to NBC News: "We are keenly aware that our networks are being probed everyday. That's precisely why we have a very robust and layered active defense to protect our networ
they didn't make a living document, that was a bunch of bullshit, various rulings to go around the actual limitations imposed onto the government and you are eating their propaganda.
I don't agree at all, abolishment of slavery was happening anyway, but now due to the distorted understanding of the Rights, the people are becoming slaves to their government again.
amendments shouldn't even exist, they are a cause of a major misunderstanding of the vast majority of people, making them think that the only rights they have are the ones that are counted in the amendments.
It was a bad idea then, it's a horrific problem now. You have all the rights and gov't has the ones listed, that's how it should be.
The problem is not that anybody will see the naked images, the problem is not even that these scanners are probably worse for your health than the terrorists, the problem is even not that somebody is touching 'your junk' and the problem is even not that none of these procedures are making anything any safer (they are not.)
The problem is that you are a human being, and if you allow yourself to be treated like cattle, they will.
The problem is that those Freedoms and Liberties are eroding and you are allowing them to take the Freedoms and Liberties away.
People died and killed others for this kind of stuff because it matters. You only have one life, do you want to be cattle or a human?
I didn't say anything about 'means of production', I said 'production'. However wealth is in production and not in consumption, any moron can consume and they do. Producing is the hard part of economy.
Scandinavian countries, as I already noted, do not spend anywhere near as much per capita as US does. Nobody spends as much as US does anyway. US only was able to spend so much after the war, because it had no competition in production and was producing for the entire world.
Eventually the competition caught up and displaced the over-taxed, over-regulated US in the production game. --
Saying that Scandinavian countries have the strongest economy is bunk, they are not exporting as much as China or Singapore or Germany for example.
They are very small, compared to most countries, and that is also an important factor. However if they do manage to outproduce their spending, than I do not see the problem, however if they do overspend, they will eventually become Greece.
You seem to be stuck on the Scandinavian countries, yet what do we have there, what kind of population vs what kind of resources?
I know that Finland is extremely socialistic, it is highly unionized and everything is tight there, it's over-regulated but it's small. You can't apply their standards to any country with a large enough population, that it will not accept such high levels of unionization and generally following the same gov't rules.
They do live like an oversized family, well good for them, but I still expect their economy to start losing manufacturing as China completely displaces their cell phone industry for example with its own, cheaper, better phones.
Finland will lose its manufacturing shortly, as the US crisis hits the world, the only standing economies will be in the most economically free zones, and ironically that means China, Singapore, South America but not Europe, or Scandinavia.
Finland will be surviving on its raw exports of timber and probably fresh water though. But they basically have no food growing capacity there.
--
I do believe what I am saying and I do not see a reason to turn you into a believer here, don't worry about it.
As I said, if the item is actually absent, you can't buy it. So if the Moon physically doesn't have any food, you can't buy food at all. Otherwise, if there is something that can be bought, then it can be bought with gold, and history shows this to be true. But fiat eventually loses all value, and that's also clearly shown by history time and again.
Oh, no doubt that what you have is the rule of the stupid. I, personally found a place which most corresponds to my ideas of how an economy must be ran, you have your own choices.
Corporations do generate wealth, because they are creating goods, they are CREATING things.
Gov't does not create anything that market is asking for, they are not building anything that market can use obviously (well, until they nationalize a failing business and subsidize it, so that the competition loses against it even though it's highly inefficient, as the deal with the banks and GM right now).
Yes, gov'ts do not generate wealth.
Yes, I do not see why gov't is needed at all to create infrastructure, which will always be overpriced with the gov'ts and it's going to be pretty much taking wealth away from productive members of society and spending it on clearly unproductive stuff.
Gov't shouldn't be involved in building any infrastructure, it is a private sector problem. It is and always was, up to the private sector to create its own economy, gov't can only take the wealth produced by other people and spend it.
Gov't is only capable of spending, but obviously while economy is strong, as was the case with US post WWII, since US had no competition on the market, the gov't can be tolerated, for the luxury and the parasite that it is on the body of the economy of the society.
However unfortunately, as gov't is growing based on all these wealth taken away from the productive sector of society during the good times, it becomes impossible to simply reduce the size of the gov't in the bad times, because it becomes so powerful and entrenched into the thinking.
Just look at the comments to my posts, that are left here, on/., clearly people are very much pro-government, this magical thinking is completely dominating the equation. The magical thinking being, that gov't actually has any wealth or can produce any wealth at all.
Obviously any normal household knows that during the hard time spending must be cut OR income must be increased. So either find a better paying job, or get a second (maybe part-time) job and/or cut spending.
Gov't doesn't have any earnings, so the only correct way to deal with it in the hard times is to cut gov't spending. In USA the last time gov't behaved responsibly, was when it cut its own spending by 70% during the 1920 recession, which ended in 1 year. Yet by the Keynesian theories, it shouldn't even be possible for economy to restructure itself via massive layoffs and capital/credit reallocation and by restarting economy with more optimized and needed production.
Clearly the gov't decided it was never again going to cut its own spending after the 1920 recession, and unfortunately it started messing with economy in much more involved way, it lead to the Great Depression from 1929 and on, and into all the other recessions and the current depression and the possible hyper-inflationary depression that's coming, once the gov't kills US currency.
You think US gov't doesn't want anybody to hold US dollars?
Then why is it that when in 2006, when Dubai was trying to offload some US dollars by buying a port in USA, they weren't allowed to do that?
AFAIC that's because US prints money and exports it, it's exporting inflation to all the other nations, and it's expecting them to hold the US Dollars and never to return them to US.
It's not possible to exchange the US dollars for anything meaningful and even remotely valuable in US anymore (well, for a non-trivial amount of dollars of-course, but in reality anything you'd be buying in US could be bought somewhere else much cheaper anyway.)
The point is that US doesn't want you to STOP holding to their dollars. It wants you to take that fiat and hold it 'under the floor boards', so that you'd end up exchanging your earnings for nothing.
Let me get this straight, you argue that Japan had deflation because they had inflation.
- you should get it straight, for a guy who talks about logic, you can't see to follow a simple example of one.
Recession causes deflation, Japan followed the advice of Bernanke and started fighting deflation with inflation.
What the hell are you talking about? I never said Japan had deflation because they had inflation, that's freaking insane.
Japan had deflation due to recession, they should have allowed the recession to do what it does, to restructure their market. USA was able to do so in 1920, the recession in US was severe, but it only lasted for 1 year.
Instead, Japan started fighting deflation with inflation.
Can you follow a sentence? Can you understand what I am saying by following the words strung together?
Japan started printing money to fight deflation. Just like you are suggesting everybody should do. Just like Bernanke suggesting everybody should do. Just like every Fed chair since 1920 suggesting this, just like every Keynesian suggesting this.
Can you follow this? Did I make myself clear this time? I don't know how to ensure you do not get confused by simple words.
I would say deflation caused a bit of pain for all those unemployed people.
- Deflation caused their pain in the Great Depression?
Really?
Deflation?
Falling prices?
The beginning of the Great Depression was only different from the recession 1920 in one way: Great Depression started out of a recession that government decided it was going to fix. By inflation. By spending.
It was NOT deflation that caused pain during the Great Depression! It was government intervention, inflation, mis-allocation of capital and of labor, it was mis-allocation of credit. It was INFLATION and SPENDING that caused the recession to turn into Great Depression.
Capitalist is anybody who saves money that he is earning and then tries to apply that money to buy some tools or land, patents or whatever it is, that's needed in order to start production. That capital also goes towards hiring people.
In the Free Market, where credit is not stolen by the gov't to continue insane spending sprees, the saver could also get credit, a loan with collateral.
So when I start my business, I put down my own money and a business plan, I show some meaningful ideas in the plan, the creditor then decides whether to supply me with more money in return for some sort of interest on the money. So I become the 'production owner', I hire people, buy tools and start some business, that's hopefully going to make a profit, and enough of profit to pay back to the creditor and make more money to pay me for my risks, after all, that the reason I am doing it.
The gov't is stealing the credit from the private sector on one hand, and it's stealing the purchasing power of the potential clients by inflating the monetary supply, while it's also stealing the reason to even do work through taxes and inflation.
So I moved my production somewhere else, suck on that, the government monster (that's not directed at you, that's my general feeling about this.)
They are also pulling every ounce of joy out of actually creating a working business, by bearing me in all the bureaucracy that I have to drown in to satisfy all of their visions, of how my business should run, to become a government snitch on my customers? Fuck them! Let's see how they survive once enough of productive people leave and capital leaves. Let's see how that works out for them.
As to economies, they are all mixed, the only people who always end up on top are those, who really know how to entangle themselves in the top of the system, so they can skim from the top, and it's usually government related.
--
OK
1. 'Labor class'. Should it be 'healthy'? Well, did you ask the laborers, are they interested in becoming subsistence farmer again?
Sure it should be healthy. By healthy I do mean that it should be making a market rate, it should be based on performance, it should be able to save for retirement NOT through government programs, but with either personal, independent investments, or by using some private help.
However is government making that particular class any healthier? My argument is that the government is the cause that you don't even SEE the labor class in America. Where are all these laborers? Well, there are SOME in the 'Government Motors' (I am fully expecting that company to crash again, in less than 2 years, it wasn't restructured, just subsidized. Silly people, who bought their stocks are all down on the stocks, even though the stock is up by about $2, but it was all sold in the IPO by the original holders at 35-36, and then, whoever bought it at that price now sees a loss, because it closed at 34.)
The US government has destroyed that very class of people you are arguing need to be healthy. They are gone. The US gov't killed it. And that's after the Free Market created it. The US gov't killed it by forcing the capital out of the country, by forcing production out of the country.
2. I don't know what you want to say by this. The US government has caused the tuition prices for post-secondary education to go much higher than where they should be by providing government loans, which pushed the prices up.
Every time the gov't gets involved into subsidizing something, the prices go up. So once the gov't provided loans, the colleges/universities all raised their prices. This happens every time, every time loans go up, prices follow within days.
I don't see how gov't can improve anybody's chances at getting an education at all. Before the gov't department of education existed, the market had ways of educating people to the level they needed, because market has a feedback loop, and it finds the prices and sets
- beats me, I remember the story only vaguely, but it was an inflated asset bubble.
Was the trigger for the Great Depression, the stock market crash, because of central planning?
- YEAH! Obviously. The central planning that was the monetary policy of printing money. The reason for the bubble on the equity market was due to the inflation of the monetary supply.
Was the most recent mortgage bubble caused by central planning?
- jesus. What else do you think it was?
Even the internet bubble before was caused by central planning. --
Explanation:
Rules and regulations and taxes and printing of the fiat, especially after the Nixon's gold shock, the price fixing and the subsidies to gov't created monopolies, all of these caused the outflow of production capacity from the country.
The money supply though was growing, and just exactly like during the twenties, the eighties suffered from accumulation of too much money, which clearly showed itself in the excesses of the internet bubble age, when tens, no hundreds of millions of dollars were 'invested' into imaginary ideas, in hopes of IPO even if the company in question had nothing, no clients, no product, no idea that made any sense.
--
I know that Clinton is credited with the boom of the nineties, but he had nothing to do with that, personally.
HE had to do with the bubble that was inflated in the mortgage market.
When the Internet bubble burst, Greenspan (so called champion of free market, though clearly a central planning monster), lowered the interest rates to something ridiculous, like 1% and started printing.
The Internet age equity was oversold, thus allowing Google for example to have a nice fat IPO, well, at least they had earnings.
But at the same time the another unfortunate thing plaid out. The Great Depression gave gov't opportunity to take away more economic freedoms from the society and to introduce plenty of various moral hazards. Unlike most other countries, USA introduced FDIC, which created a HUGE moral hazard in banking. The thing that held that monster in check, was a timely introduced Glass Steagall. Of-course the gov't created and propped monopolies in financial sector had more and more money and power, provided to them by the gov't in form of subsidies, free money (1% interest) and any regulations that prevented the competition from arising.
So eventually there was no question, the combination of FDIC and Glass Steagall was too juicy to pass, so there was enough gov't provided resources thrown at this problem and Glass Steagall was gone.
The remaining moral hazard of FDIC though stayed. IF FDIC WAS ALSO ABOLISHED TOGETHER WITH GLASS STEAGALL THERE WOULDN'T HAVE BEEN SUCH A CRASH!
The FDIC provided the phony security to the people, who lent their deposits to the banks. The banks didn't care to earn customers' trust. The customers didn't care who they gave money to.
So this was one part of the equation.
At the same time, the gov't also provided another type of insurance - mortgage insurance in form of Freddie and Fannie, and this gave banks ability to resell any kind of SIV to whoever, as long as there was the gov't seal of approval on the package, and Freddie/Fannie provided it.
All of this was happening in the face of the country losing production capacity and increasing its trade deficits, but the gov't was promoting spending (and still it is promoting spending) and borrowing to do it too.
The entire crash was created by the gov't, who inflated the housing bubble, created the mortgage SIVs that were sold and resold, and gave enough incentives for everybody to not pay any attention to what the banks are doing through FDIC, all of this happening while the jobs were leaving and interest rates were staying amazingly low!
People treated their houses as investment in the market, which w
I argue there was no middle class in the 19th century
- in the beginning of the 19 century there was no middle class, by the mid 18 hundreds, there was already a middle class formed, which consisted of professionals and small business owners and industrialists. I consider middle class to be people who made it on their own in an economy mostly dominated by old money to become independently wealthy, in that sense the US has seen enormous increases of people, who started their own businesses, who never could do it before the capitalism and industrial revolution, because they were busy being subsistence farmers. I also include all the various professionals into the definition of the middle class, so all the engineers and scientists and doctors and teachers actually, and there was a significant increase in all these professions.
You are definitely very strange with your definition of the middle class, there were plenty of small businesses and professionals starting from mid 18 hundreds to much earlier than your post WWII era.
but laborers wages weren't taxed then as wages aren't real income
- and nobody's wages should be taxed, as none of that money is 'real' income, because real income is something you end up spending on yourself or on somebody else, but it's not 'income' if you just continue investing it. Of-course that's silly, all of the money that's earned is income, but none of it should be taxed.
US infrastructure wasn't destroyed in the war *and* that there was an educated, healthy middle class that could not only work in factories, but could also afford to purchase the goods produced in them.
- yet just before the war ended there was the Great Depression and people couldn't really afford to buy anything. What do you think, the money just magically appeared in their bank accounts, so they could afford all of these new goods?
No.
What really happened was that all of the soldiers, who returned from the war, and all of the civilians, who were backing the war effort were re-employed by the post-war economy, which meant that all of the military production facilities were restructured and converted into civilian use.
THAT is called CAPITAL. The cheap post-war labor, applied to that capital was the formula needed to produce all of the goods that were lacking due to the war and the previous depression, and there was incredible amount of demand that production could not even saturate fast enough, especially given that the rest of the world didn't see that kind of capital, they had their capital devastated.
This wasn't middle class, AFAIC, this was basic cheap labor, that benefited from enormous under-supply and from the fact that US currency became the reserve.
This was a fluke caused by the eventuality of the way war played out. This type of 'middle class' is not about to happen again, unless again, there will be a major catastrophe and some one particular country comes out immune to it and is then put into a position to resupply the entire world with goods.
You are longing for the time, that was created by special kind of circumstance, the time that USA profited immensely from and thus was able to grow its gov't much beyond its means in NORMAL time, where US is not the only country on the block with production capacity.
US has squandered that capital and that production capacity and that wealth and savings on this enormous spending that it undertook, and now US is left standing there, waving its dick in its hand (excuse me for the visual).
Education, health care, EI etc.etc., where not the reason for the rise of post-war US economy, they were CONSEQUENCE, as the US was able to outspend anybody with its new found windfall profit from the collapsed societies of other countries.
As to your call to describe a perfect society, where everybody is fed and educated and happy, I don't believe that society ever existed, I don't believe in such perfect ide
Also in the URL you'll see this: idle.slashdot.org. Delete the "idle." part and you'll get a normally sized text area, but the reasons for this are.... obscured by smog - Chinese style.
As such, the economy was working with the local supply and demand.
- and what changed? Do you think there is no local demand? But USA is running 50Billion/month trade deficit, where is all the production to satisfy even local demand, forget about foreign?
--
The children, who were employed at the early days of factories, those were the same children, who would have worked on their parents' farms from age of 4. So what has really changed for them? Their parents needed them to work on the farms and in most cases their parents sent them to work at the factories. They clearly could have stayed subsistence farmers, but they didn't. And eventually these children became the middle class, which appeared in the 19 century.
As to slavery - actually that was declared illegal much before the 19 century. The Watt steam engine created in the free market was the REAL force that allowed the slaves to be freed, as well as children and women eventually, as it became the force that moved the things forward in all types of production, including production of sugar, which is where slave labor was used the most.
As to how US economy operates today, you are not even touching on that subject. Today the US economy can't even be called an economy, as it is lopsided and incomplete, with the production part of economy missing and only consumption being present paid for by the borrowed money by the very people who are supplying the US 'economy' with the manufactured goods. This will come to an end soon now.
--
... Nixon... price in those metals....Economically, this is very constraining
- yeah, I know. It's very constraining that you can't print MONEY.
So you get rid of the entire dependence on money (gold) and you print fiat.
Too bad that you can't also PRINT WEALTH. Because wealth is production, and while the gold was at least something that kept your gov't somewhat honest, the fiat does not suffer from such a downside.
The Fed mandate up until very lately, was price stability. Eventually this decade the Fed also said that their mandate includes JOB stability, but the most interesting thing happened in the second part of this year, when Bernanke came out and said that now the Fed mandate also includes inflation - raising of prices.
Fed chairman believes that the prices are not rising fast enough, forget about stability or jobs.
Well, let's see how this plays out for the strained US consumer - the rise in prices caused by inflation of the US dollar. ---
What you're asking for, in terms of price deflation, is exactly the goal of an ideal communist economy. Read up on the deflationary spiral, or "stagflation", and you'll understand it a little better.
- I was born in the USSR, now unfortunately a long time ago. Whatever you may believe about such economies, you have no clue what really happens it seems. In reality the USSR (and North Korea etc.) were printing TRILLIONS of rubles, none of which were backed by anything useful beyond their weapons systems really.
You are also wrong about price deflation - that's the ideal of the Free Market. In the free market prices fall due to newly found efficiencies and competition.
Governments can only cause prices to go UP.
Free markets cause prices to go down.
You are confused about even such a simple fact, it's really a failure of the US education system, I assume it's because it has too much gov't involvement, excuse me for that assumption.
Please observe what happened to Japan in the 1990s with regard to deflation.
- yeah. If only Japan did the reasonable thing and didn't follow the advice of Ben Bernanke and didn't inflate their monetary supply and thus didn't try to propel forward all of this magic of subsidizing the US consumer through punishing its own consumers and by killing the purchasing power of the Japanese people.
The Japan would have been better off and in the long run the US would have been better off.
The Japan would have quickly recovered, just the way US recovered from a recession in 1920, when gov't just cut its spending by 70% and allowed the economy to restructure, and the 'roaring twenties' followed. Instead Japan inflated its money and destroyed its economy, and in an aging population that they have, their problems are going to bite them even more, it's not over for them, they didn't see the last chapter in this depression they created for themselves.
I argue that deflation is a GOOD thing, not a bad one. Deflation is contraction of monetary supply and it causes prices to fall and economy to restructure by cutting out jobs that shouldn't exist.
Of-course the gov'ts hate deflation, as they have to cut their spending like everybody else does (and US did in 1920).
However Japan was not in such a terrible shape as USA is in today. Japan had its debt, but almost ALL of the Japanese debt was internal! It was all bonds sold to their own citizens and their own companies.
US has all this debt all over the world.
Japan had the highest savings rate in the 90s, so they had enough capital to last them through even worse a recession.
US has the lowest savings rate it ever had.
Japan was a net exporter of consumer goods.
US has a 50Billion/month trade deficit.
Deflation is the last thing you want your economy to do systematically, across the board. It encourages people to put off consumption and make a recession last a lot longer than it could.
- what? You really think that? But dude, Japan would have had deflation if it didn't follow Bernanke and didn't INFLATE its monetary supply.
Japan would have had deflation if only it didn't ruin its economy by inflating its money and stealing the purchasing power from its citizens. You know, you should research and show us a single time that deflation actually HURT somebody! (as opposed to inflation, which actually DESTROYED entire countries).
The recession of the 19 century and the one in 1920, they had deflation, but all of these recessions were over in a year or even in a few months! Yet the inflation causes the recessions even to turn into depressions, you should really look into that.
This is precisely why the Fed continues to print money.
- the Fed is printing 600 Billion now with QE2, that's exactly how much US federal gov't will borrow by June 2011. Don't tell me you don't see what's going on - they are printing their own debt. They are not expecting to be able to sell all of those gov't bonds anymore, and they are right. Nobody wants US bonds, the prices are falling and the long term interest rates are rising.
(look at all of these answers to my comments, look at how I have been moderated as 'troll' or 'flamebait', isn't that striking that so many people are so blind and not seeing the economic destruction brought upon them by their own gov't?)
By trying to keep inflation above 2% we can avoid the nasty business of dealing with a deflationary spiral
I do not trust US gov't to report anything correctly and without cooking the books. The GDP, the CPI are bullshit numbers. They are not reporting M3 anymore, well no surprise, they don't want you to know what the real numbers are.
Bank notes are backed by gold or whatever commodity you prefer, like silver or corn or cotton.
The point is that you can't print cotton or corn or silver or gold. First of all there is real work involved in actually producing/mining these commodities, secondly they cannot be produced/mined without restrained, that's just not happening.
Cash, on the other hand, can be printed without any limits and it is.
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The more immediate effect of deflation is economic recession
- what the heck? are you really thinking this, because it is very sad?
You are completely confusing the cause and effect. The economic recession causes deflation by causing contraction of monetary supply and eventual fall of prices, not the other way around!
unemployment and lower wages
- yes, recessions do that. Check out all the recessions during the 19 century, and the recession of 1920, when US gov't cut its spending by 70% and the recession was gone in 1 year and the US had what is known as the 'roaring twenties'.
It is a very very very good thing to have unemployment and lower wages during a recession, because that is the contraction, the cutting of the fat, that is the bust part of the boom/bust cycle.
Like any engine, the economy cycles through expansions and contractions, and contractions LEAD to expansions by restructuring of the resources that NEED to be restructured.
Of-course there must be increased unemployment during the bust! That's because the boom created all of the excesses that must be cut, all that suboptimal capital and labor needs to be reallocated and applied to something else!
That's a good thing, that's what pushes the economy to start producing something new by applying all of that cheapened labor to all of that released capital. Bust leads to new boom by using problem solving ideas and applying the labor that was fired to the capital that was freed.
It's what the gov't is fighting with every bail-out, with every subsidy, with every stimulus, with every new printed or borrowed dollar and every time it lowers the interest rates.
Gov't wants to maintain the pre-bust levels of spending, while what the economy really needs is to get people to stop spending, to have them save money, rebuild the capital and apply the released labor to the rebuilt capital.
Consumer prices trail behind on the downward slope
- they better fall, but look at the gov't. Bernanke comes out every now and then and says: "we must create more inflation, the prices are falling, or worse yet, they are not rising fast enough for our liking".
THAT is magical thinking. That is insanity. In an actual recession prices need to fall, expenses (and gov't spending is an expense) must be cut, labor must be fired so that the market can restructure and reapply itself in a meaningful way.
Thinking that gov't can push this restructuring into an indefinite future by the magic of the printing press and borrowing is just asking for a bigger bust.
Every day that the market is not allowed to restructure on its own, just worsens the eventual resulting crash.
Yeah, because the madness of crowds or bank crashes in the past never occurred when there was no central banking. Oh wait, yes they did.
- overrated. As much ever, as it was overrated during the Great Depression, which did see the bank runs, but only 3% of deposits were actually GONE, the rest were eaten by the gov't inflation.
here's nothing "real" about using those items as money. A piece of gold has little use when there's a shortage of food, for example.
- not exactly. It is the fiat that has no value at all, not even as toilet paper when there is no food. But gold can be always exchanged directly for food. In Zimbabwe you can do that today, while you can't get anything for their dollars, you can use gold to buy stuff, including food.
Of-course if there is just no food period, then there is no question. You can't buy something that doesn't even exist.
Furthermore, people will store their gold in the bank and get bank notes in return, which people will then use as money, and the cycle starts all over again.
- banks that do this are only used as safety boxes, those banks cannot cause inflation if they are not lending out that same gold that they are holding as deposits. This is clearly not the same as just printing money out of the blue with no backing at all. The bank notes that are backed by gold, are nothing more than that gold, just easier to carry.
And yet people might not produce because people don't want to consume
- nonsense. People always want to consume. Question is can they PAY for consumption. People who do not want to consume, what are they, paintings? Who is not interested in getting food/energy/entertainment/clothing/whatever? Somebody who is a monk? OK, but most people are always ready to consume whatever you give them, that's the reason there IS welfare and SS and EI - people are always interested in consumption.
It's the production that is difficult, consumption is trivial.
social obligations (in the U.S. anyway) are not pretend, they are real
- well sure, they are social obligations pushed forward to the future generations by borrowing the money to pay for them, because the past and the current recepients of these obligations are not and were not paying for them.
And I mean that they were not paying for any of it - the SS fiasco, the pyramid that it is, if all the current employees lost their jobs today, then all of the SS checks would stop tomorrow. That's because that money went to various other programs that politicians got elected upon, but didn't raise taxes on the very people, who elected them actually to pay for any of it, so that money got spent one time. You cannot spend the same money more than once (less you found a way to interfere with the laws of thermodynamics and conservation of energy.)
The ever increasing social obligations require ever increasing debt. Originally people paid much less in taxes both in terms of percentage points and in terms of total absolute cost, the retirement age was also lower. With further increases in types of obligations, getting more people to benefit from these programs, the costs were increasing, but since SS was never an investment/insurance program, it didn't keep and invest the money, it is now full of IOUs and no actual cash, so the pyramid can only go on as the new people keep paying for the old.
So who exactly is OBLIGED here? Is it the children, who are obliged to pay for the 'social obligations' that their parents/grandparents are receiving?
Well, as you said: FUCK.THAT.SHIT. that's why I am not part of that type of economy any longer. I prefer economy where people are responsible for their own future and retirement plans by investing their own earned money into their own businesses and taking their own RISKS with their money.
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these social programs were the original justification for the government taxing wages - wrong, unless you count waging wars as part of 'social programs'. New Deal didn't introduce income taxes, it was done around 1913 in USA at least, before that time the US federal gov't was paid for by consumption taxes upon some luxuries. 50% of the taxes came from saloons selling alcohol and the reason that income taxes were introduced was because the anti-saloon movement in USA approached the feminist movement, who were also anti-saloon and more importantly they were anti-alcohol. That's also the beginning of the entire prohibition disaster. Also the original income tax was only applied to the richest people in USA and they paid under 1.5% income tax. Of-course as the gov't saw the huge increases in their 'revenue', they started growing and increasing the taxes over and over, clearly if you give them a finger, they'll take your hand. It was one of the worst decisions that USA public allowed it's gov't to make, it gave away the liberties and freedoms to get some security and clearly now it lost both. --
You are forgetting that Pre-New Deal, the capitalists paid for everything.
- you are forgetting that pre-new deal gov't CAUSED the recessions of 1920 and 1929, only while the 1920 recession ended in 1 year, after the gov't cut its costs by over 70%, the 1929 recession turned into the Great Depression as the gov't decided it was going to fight fire with fire and started printing/spending and generally getting involved into economy.
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Overall (today) it's a big net loss for the labor class and a big win for the capitalists.
- the corruption of the gov't (by corruption I mean the gov't meddling with economy of society) has caused SOME corporatists to take advantage of the political system and gain immensly by having gov't protected monopolies. However it is not true at all, that the capitalists have a net win and labor has a net loss, everybody has a net loss in this and those
Sure, Spain imported too much silver and gold and didn't produce anything, so they had an oversupply of these materials and underproduction.
However these materials in themselves didn't lose value, they weren't destroyed, they stayed around and with eventual industrial revolution based on capitalism, the production took off and gold was still the money of the time and prices on produced goods fell.
Throughout the 19 century the prices on goods fell, didn't rise, as they started doing after the 1913.
As I said earlier, the real wealth is in production. But the real money is not fiat.
Production capacity is the real wealth of society and if the society creates pressures that lessen its ability to produce, that society fails.
So Spain is yet just another example of what happens to society that has no production.
Obviously without production the value of money goes down, but real money is what makes production possible.
Spain became a society of people too drunk on their power and unwilling to do any actual work - so how is that different from US and many European countries now, who are also drunk, they believe they can get everything they want, all the Chinese manufactured goods without giving anything back except for the useless pieces of printed paper.
You are saying "Alas for your thesis", well as far as my thesis goes, gold has been increasing in value ever since the creation of the US Fed and the fiat money has being declining in value, even in the last 10 years USD lost 30% of its value against other currencies, and it lost hundreds of percents against commodities such as gold and others as well.
What is real money? It's clearly not pieces of printed paper.
Slashdot Mirror
I am sorry, I didn't want to make you feel this dirty.
I only had one thing to say really, that Mr. Poo needs to have his junk looked at once again, since nobody knows what can come out of it.
Well, those were banks that loaned out the gold, they had fractional reserve of gold, they were not safe boxes in the real sense of the word.
But in reality the bank runs were a very small problem, this problem was overblown by the US gov't, when they introduced the FDIC to help their banking friends to get more customers, that was helping the banking monopolies to hold on to the market with less competition and without having to earn the trust of the people. That was the moral hazard, which became part of the reason for the latest financial crash, since the Steagall was removed but FDIC stayed in place.
The hell with that, they should grab that locker and skip the country.
I feel like it's an episode of South Park - hey there, Mr. Poo.
From TFA:
"To have the skills to break into highly sensitive systems like that is an impressive level of criminal activity," said Kurt Baumgartner, a senior security researcher for Kaspersky Lab, a computer security firm.
- yeah, I bet it takes impressive level of criminal activity consisting of some 'LOL Cat' or maybe a 'Hot Malaysian Massage' screen saver and off the shelf 'back-orifice' of some sort.
But anyway, what did this guy do that the Fed isn't doing anyway?
traveling to the US on business
- that right there is a punishable offense, well at the very least your 'junk' may have to be touched.
The 32 year-old resident of Malaysia was observed by an undercover Secret Service agent
- they are making it sound much dirtier than it was.
selling stolen credit card data in a diner
- stay classy Mr. Poo. At a diner?
Why can't you be more respectable and do it like the Fed does, they sell their junk bonds on the bond market, with bells and whistles.
After arresting him and seizing his laptop (which was "heavily encrypted")
- with ROT13
authorities discovered evidence
- as I said, with ROT13.
Lin Min Poo had hacked into the Federal Reserve Bank of Cleveland and stolen over 400,000 stolen credit and debit card numbers.
- BASTARD! How dare he steal the STOLEN credit card numbers? Fed was just going to sell them themselves at a diner.
Also, according to authorities, Mr. Poo managed to hack into FedComp, a data processor for federal credit unions, enabling him to access the data of various federal credit union.
- various 'credit union'. Yeah, that one credit union is extremely 'various' indeed.
He also hacked into computer system of a Department of Defense contractor that provides systems management for military transport and other military operations, potentially compromising highly sensitive military logistics information.
- well, in his defense, he was just going to sell that highly classified systems management information at a better restaurant, he has SOME standards.
"If a guy from Malaysia can get into networks like this, you can imagine what the Chinese and Russians, the people with real capabilities, are able to do
- OMG! Call the Pentagon, they need to check if the database of the stolen mortgage back securities papers hasn't been stolen!
In fact, the penetration of sensitive national security computers by overseas hackers — many of them believed to be state sponsored — is rapidly emerging as one of the country’s most alarming national security threats, officials said. And the threat is not just from foreign governments and for-profit hackers. Officials have also expressed worries that terrorist groups may be capable of the same sorts of sophisticated penetrations.
- clearly, more F35s are needed to stop these attacks. What was that about the Republicans voting to STOP pig, I mean pork spending?
HOW, just HOW will they STOP all that pork spending if there is clearly so much that needs to be done right now, to prevent the terrorists from winning by 'hacking' into the White House and stealing the toilet cleaning schedule?
Pentagon officials said Sunday they were unable to respond immediately to questions about whether Poo's hacking of the contractor's computers had compromised military troop movements. But spokesman Bryan Whitman said in an e-mailed statement to NBC News: "We are keenly aware that our networks are being probed everyday. That's precisely why we have a very robust and layered active defense to protect our networ
they didn't make a living document, that was a bunch of bullshit, various rulings to go around the actual limitations imposed onto the government and you are eating their propaganda.
I don't agree at all, abolishment of slavery was happening anyway, but now due to the distorted understanding of the Rights, the people are becoming slaves to their government again.
amendments shouldn't even exist, they are a cause of a major misunderstanding of the vast majority of people, making them think that the only rights they have are the ones that are counted in the amendments.
It was a bad idea then, it's a horrific problem now. You have all the rights and gov't has the ones listed, that's how it should be.
The problem is not that anybody will see the naked images, the problem is not even that these scanners are probably worse for your health than the terrorists, the problem is even not that somebody is touching 'your junk' and the problem is even not that none of these procedures are making anything any safer (they are not.)
The problem is that you are a human being, and if you allow yourself to be treated like cattle, they will.
The problem is that those Freedoms and Liberties are eroding and you are allowing them to take the Freedoms and Liberties away.
People died and killed others for this kind of stuff because it matters. You only have one life, do you want to be cattle or a human?
That has got to be the funniest thing I've read here in a month.
- jesus, that must have been one sad month.
I didn't say anything about 'means of production', I said 'production'. However wealth is in production and not in consumption, any moron can consume and they do. Producing is the hard part of economy.
Scandinavian countries, as I already noted, do not spend anywhere near as much per capita as US does. Nobody spends as much as US does anyway. US only was able to spend so much after the war, because it had no competition in production and was producing for the entire world.
Eventually the competition caught up and displaced the over-taxed, over-regulated US in the production game.
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Saying that Scandinavian countries have the strongest economy is bunk, they are not exporting as much as China or Singapore or Germany for example.
They are very small, compared to most countries, and that is also an important factor. However if they do manage to outproduce their spending, than I do not see the problem, however if they do overspend, they will eventually become Greece.
You seem to be stuck on the Scandinavian countries, yet what do we have there, what kind of population vs what kind of resources?
I know that Finland is extremely socialistic, it is highly unionized and everything is tight there, it's over-regulated but it's small. You can't apply their standards to any country with a large enough population, that it will not accept such high levels of unionization and generally following the same gov't rules.
They do live like an oversized family, well good for them, but I still expect their economy to start losing manufacturing as China completely displaces their cell phone industry for example with its own, cheaper, better phones.
Finland will lose its manufacturing shortly, as the US crisis hits the world, the only standing economies will be in the most economically free zones, and ironically that means China, Singapore, South America but not Europe, or Scandinavia.
Finland will be surviving on its raw exports of timber and probably fresh water though. But they basically have no food growing capacity there.
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I do believe what I am saying and I do not see a reason to turn you into a believer here, don't worry about it.
As I said, if the item is actually absent, you can't buy it. So if the Moon physically doesn't have any food, you can't buy food at all. Otherwise, if there is something that can be bought, then it can be bought with gold, and history shows this to be true. But fiat eventually loses all value, and that's also clearly shown by history time and again.
Oh, no doubt that what you have is the rule of the stupid. I, personally found a place which most corresponds to my ideas of how an economy must be ran, you have your own choices.
Hi there, Marxist AC.
Corporations do generate wealth, because they are creating goods, they are CREATING things.
Gov't does not create anything that market is asking for, they are not building anything that market can use obviously (well, until they nationalize a failing business and subsidize it, so that the competition loses against it even though it's highly inefficient, as the deal with the banks and GM right now).
Yes, gov'ts do not generate wealth.
Yes, I do not see why gov't is needed at all to create infrastructure, which will always be overpriced with the gov'ts and it's going to be pretty much taking wealth away from productive members of society and spending it on clearly unproductive stuff.
Gov't shouldn't be involved in building any infrastructure, it is a private sector problem. It is and always was, up to the private sector to create its own economy, gov't can only take the wealth produced by other people and spend it.
Gov't is only capable of spending, but obviously while economy is strong, as was the case with US post WWII, since US had no competition on the market, the gov't can be tolerated, for the luxury and the parasite that it is on the body of the economy of the society.
However unfortunately, as gov't is growing based on all these wealth taken away from the productive sector of society during the good times, it becomes impossible to simply reduce the size of the gov't in the bad times, because it becomes so powerful and entrenched into the thinking.
Just look at the comments to my posts, that are left here, on /., clearly people are very much pro-government, this magical thinking is completely dominating the equation. The magical thinking being, that gov't actually has any wealth or can produce any wealth at all.
Obviously any normal household knows that during the hard time spending must be cut OR income must be increased. So either find a better paying job, or get a second (maybe part-time) job and/or cut spending.
Gov't doesn't have any earnings, so the only correct way to deal with it in the hard times is to cut gov't spending. In USA the last time gov't behaved responsibly, was when it cut its own spending by 70% during the 1920 recession, which ended in 1 year. Yet by the Keynesian theories, it shouldn't even be possible for economy to restructure itself via massive layoffs and capital/credit reallocation and by restarting economy with more optimized and needed production.
Clearly the gov't decided it was never again going to cut its own spending after the 1920 recession, and unfortunately it started messing with economy in much more involved way, it lead to the Great Depression from 1929 and on, and into all the other recessions and the current depression and the possible hyper-inflationary depression that's coming, once the gov't kills US currency.
You think US gov't doesn't want anybody to hold US dollars?
Then why is it that when in 2006, when Dubai was trying to offload some US dollars by buying a port in USA, they weren't allowed to do that?
AFAIC that's because US prints money and exports it, it's exporting inflation to all the other nations, and it's expecting them to hold the US Dollars and never to return them to US.
It's not possible to exchange the US dollars for anything meaningful and even remotely valuable in US anymore (well, for a non-trivial amount of dollars of-course, but in reality anything you'd be buying in US could be bought somewhere else much cheaper anyway.)
The point is that US doesn't want you to STOP holding to their dollars. It wants you to take that fiat and hold it 'under the floor boards', so that you'd end up exchanging your earnings for nothing.
AFAIC inflation is a form of slavery.
Let me get this straight, you argue that Japan had deflation because they had inflation.
- you should get it straight, for a guy who talks about logic, you can't see to follow a simple example of one.
Recession causes deflation, Japan followed the advice of Bernanke and started fighting deflation with inflation.
What the hell are you talking about? I never said Japan had deflation because they had inflation, that's freaking insane.
Japan had deflation due to recession, they should have allowed the recession to do what it does, to restructure their market. USA was able to do so in 1920, the recession in US was severe, but it only lasted for 1 year.
Instead, Japan started fighting deflation with inflation.
Can you follow a sentence? Can you understand what I am saying by following the words strung together?
Japan started printing money to fight deflation. Just like you are suggesting everybody should do. Just like Bernanke suggesting everybody should do. Just like every Fed chair since 1920 suggesting this, just like every Keynesian suggesting this.
Can you follow this? Did I make myself clear this time? I don't know how to ensure you do not get confused by simple words.
I would say deflation caused a bit of pain for all those unemployed people.
- Deflation caused their pain in the Great Depression?
Really?
Deflation?
Falling prices?
The beginning of the Great Depression was only different from the recession 1920 in one way: Great Depression started out of a recession that government decided it was going to fix. By inflation. By spending.
It was NOT deflation that caused pain during the Great Depression! It was government intervention, inflation, mis-allocation of capital and of labor, it was mis-allocation of credit. It was INFLATION and SPENDING that caused the recession to turn into Great Depression.
For shame indeed.
I really don't know what you want from me.
Capitalist is anybody who saves money that he is earning and then tries to apply that money to buy some tools or land, patents or whatever it is, that's needed in order to start production. That capital also goes towards hiring people.
In the Free Market, where credit is not stolen by the gov't to continue insane spending sprees, the saver could also get credit, a loan with collateral.
So when I start my business, I put down my own money and a business plan, I show some meaningful ideas in the plan, the creditor then decides whether to supply me with more money in return for some sort of interest on the money. So I become the 'production owner', I hire people, buy tools and start some business, that's hopefully going to make a profit, and enough of profit to pay back to the creditor and make more money to pay me for my risks, after all, that the reason I am doing it.
The gov't is stealing the credit from the private sector on one hand, and it's stealing the purchasing power of the potential clients by inflating the monetary supply, while it's also stealing the reason to even do work through taxes and inflation.
So I moved my production somewhere else, suck on that, the government monster (that's not directed at you, that's my general feeling about this.)
They are also pulling every ounce of joy out of actually creating a working business, by bearing me in all the bureaucracy that I have to drown in to satisfy all of their visions, of how my business should run, to become a government snitch on my customers? Fuck them! Let's see how they survive once enough of productive people leave and capital leaves. Let's see how that works out for them.
As to economies, they are all mixed, the only people who always end up on top are those, who really know how to entangle themselves in the top of the system, so they can skim from the top, and it's usually government related.
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OK
1. 'Labor class'. Should it be 'healthy'? Well, did you ask the laborers, are they interested in becoming subsistence farmer again?
Sure it should be healthy. By healthy I do mean that it should be making a market rate, it should be based on performance, it should be able to save for retirement NOT through government programs, but with either personal, independent investments, or by using some private help.
However is government making that particular class any healthier? My argument is that the government is the cause that you don't even SEE the labor class in America. Where are all these laborers? Well, there are SOME in the 'Government Motors' (I am fully expecting that company to crash again, in less than 2 years, it wasn't restructured, just subsidized. Silly people, who bought their stocks are all down on the stocks, even though the stock is up by about $2, but it was all sold in the IPO by the original holders at 35-36, and then, whoever bought it at that price now sees a loss, because it closed at 34.)
The US government has destroyed that very class of people you are arguing need to be healthy. They are gone. The US gov't killed it. And that's after the Free Market created it. The US gov't killed it by forcing the capital out of the country, by forcing production out of the country.
2. I don't know what you want to say by this. The US government has caused the tuition prices for post-secondary education to go much higher than where they should be by providing government loans, which pushed the prices up.
Every time the gov't gets involved into subsidizing something, the prices go up. So once the gov't provided loans, the colleges/universities all raised their prices. This happens every time, every time loans go up, prices follow within days.
I don't see how gov't can improve anybody's chances at getting an education at all. Before the gov't department of education existed, the market had ways of educating people to the level they needed, because market has a feedback loop, and it finds the prices and sets
Was the tulip crash because of central planning?
- beats me, I remember the story only vaguely, but it was an inflated asset bubble.
Was the trigger for the Great Depression, the stock market crash, because of central planning?
- YEAH! Obviously. The central planning that was the monetary policy of printing money. The reason for the bubble on the equity market was due to the inflation of the monetary supply.
Was the most recent mortgage bubble caused by central planning?
- jesus. What else do you think it was?
Even the internet bubble before was caused by central planning.
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Explanation:
Rules and regulations and taxes and printing of the fiat, especially after the Nixon's gold shock, the price fixing and the subsidies to gov't created monopolies, all of these caused the outflow of production capacity from the country.
The money supply though was growing, and just exactly like during the twenties, the eighties suffered from accumulation of too much money, which clearly showed itself in the excesses of the internet bubble age, when tens, no hundreds of millions of dollars were 'invested' into imaginary ideas, in hopes of IPO even if the company in question had nothing, no clients, no product, no idea that made any sense.
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I know that Clinton is credited with the boom of the nineties, but he had nothing to do with that, personally.
HE had to do with the bubble that was inflated in the mortgage market.
When the Internet bubble burst, Greenspan (so called champion of free market, though clearly a central planning monster), lowered the interest rates to something ridiculous, like 1% and started printing.
The Internet age equity was oversold, thus allowing Google for example to have a nice fat IPO, well, at least they had earnings.
But at the same time the another unfortunate thing plaid out. The Great Depression gave gov't opportunity to take away more economic freedoms from the society and to introduce plenty of various moral hazards. Unlike most other countries, USA introduced FDIC, which created a HUGE moral hazard in banking. The thing that held that monster in check, was a timely introduced Glass Steagall. Of-course the gov't created and propped monopolies in financial sector had more and more money and power, provided to them by the gov't in form of subsidies, free money (1% interest) and any regulations that prevented the competition from arising.
So eventually there was no question, the combination of FDIC and Glass Steagall was too juicy to pass, so there was enough gov't provided resources thrown at this problem and Glass Steagall was gone.
The remaining moral hazard of FDIC though stayed. IF FDIC WAS ALSO ABOLISHED TOGETHER WITH GLASS STEAGALL THERE WOULDN'T HAVE BEEN SUCH A CRASH!
The FDIC provided the phony security to the people, who lent their deposits to the banks. The banks didn't care to earn customers' trust. The customers didn't care who they gave money to.
So this was one part of the equation.
At the same time, the gov't also provided another type of insurance - mortgage insurance in form of Freddie and Fannie, and this gave banks ability to resell any kind of SIV to whoever, as long as there was the gov't seal of approval on the package, and Freddie/Fannie provided it.
All of this was happening in the face of the country losing production capacity and increasing its trade deficits, but the gov't was promoting spending (and still it is promoting spending) and borrowing to do it too.
The entire crash was created by the gov't, who inflated the housing bubble, created the mortgage SIVs that were sold and resold, and gave enough incentives for everybody to not pay any attention to what the banks are doing through FDIC, all of this happening while the jobs were leaving and interest rates were staying amazingly low!
People treated their houses as investment in the market, which w
I argue there was no middle class in the 19th century
- in the beginning of the 19 century there was no middle class, by the mid 18 hundreds, there was already a middle class formed, which consisted of professionals and small business owners and industrialists. I consider middle class to be people who made it on their own in an economy mostly dominated by old money to become independently wealthy, in that sense the US has seen enormous increases of people, who started their own businesses, who never could do it before the capitalism and industrial revolution, because they were busy being subsistence farmers. I also include all the various professionals into the definition of the middle class, so all the engineers and scientists and doctors and teachers actually, and there was a significant increase in all these professions.
You are definitely very strange with your definition of the middle class, there were plenty of small businesses and professionals starting from mid 18 hundreds to much earlier than your post WWII era.
but laborers wages weren't taxed then as wages aren't real income
- and nobody's wages should be taxed, as none of that money is 'real' income, because real income is something you end up spending on yourself or on somebody else, but it's not 'income' if you just continue investing it. Of-course that's silly, all of the money that's earned is income, but none of it should be taxed.
US infrastructure wasn't destroyed in the war *and* that there was an educated, healthy middle class that could not only work in factories, but could also afford to purchase the goods produced in them.
- yet just before the war ended there was the Great Depression and people couldn't really afford to buy anything. What do you think, the money just magically appeared in their bank accounts, so they could afford all of these new goods?
No.
What really happened was that all of the soldiers, who returned from the war, and all of the civilians, who were backing the war effort were re-employed by the post-war economy, which meant that all of the military production facilities were restructured and converted into civilian use.
THAT is called CAPITAL. The cheap post-war labor, applied to that capital was the formula needed to produce all of the goods that were lacking due to the war and the previous depression, and there was incredible amount of demand that production could not even saturate fast enough, especially given that the rest of the world didn't see that kind of capital, they had their capital devastated.
This wasn't middle class, AFAIC, this was basic cheap labor, that benefited from enormous under-supply and from the fact that US currency became the reserve.
This was a fluke caused by the eventuality of the way war played out. This type of 'middle class' is not about to happen again, unless again, there will be a major catastrophe and some one particular country comes out immune to it and is then put into a position to resupply the entire world with goods.
You are longing for the time, that was created by special kind of circumstance, the time that USA profited immensely from and thus was able to grow its gov't much beyond its means in NORMAL time, where US is not the only country on the block with production capacity.
US has squandered that capital and that production capacity and that wealth and savings on this enormous spending that it undertook, and now US is left standing there, waving its dick in its hand (excuse me for the visual).
Education, health care, EI etc.etc., where not the reason for the rise of post-war US economy, they were CONSEQUENCE, as the US was able to outspend anybody with its new found windfall profit from the collapsed societies of other countries.
As to your call to describe a perfect society, where everybody is fed and educated and happy, I don't believe that society ever existed, I don't believe in such perfect ide
why is the comment entry window so narrow?
- due to outsourcing.
Also in the URL you'll see this: idle.slashdot.org. Delete the "idle." part and you'll get a normally sized text area, but the reasons for this are .... obscured by smog - Chinese style.
As such, the economy was working with the local supply and demand.
- and what changed? Do you think there is no local demand? But USA is running 50Billion/month trade deficit, where is all the production to satisfy even local demand, forget about foreign?
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The children, who were employed at the early days of factories, those were the same children, who would have worked on their parents' farms from age of 4. So what has really changed for them? Their parents needed them to work on the farms and in most cases their parents sent them to work at the factories. They clearly could have stayed subsistence farmers, but they didn't. And eventually these children became the middle class, which appeared in the 19 century.
As to slavery - actually that was declared illegal much before the 19 century. The Watt steam engine created in the free market was the REAL force that allowed the slaves to be freed, as well as children and women eventually, as it became the force that moved the things forward in all types of production, including production of sugar, which is where slave labor was used the most.
As to how US economy operates today, you are not even touching on that subject. Today the US economy can't even be called an economy, as it is lopsided and incomplete, with the production part of economy missing and only consumption being present paid for by the borrowed money by the very people who are supplying the US 'economy' with the manufactured goods. This will come to an end soon now.
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... Nixon... price in those metals....Economically, this is very constraining
- yeah, I know. It's very constraining that you can't print MONEY.
So you get rid of the entire dependence on money (gold) and you print fiat.
Too bad that you can't also PRINT WEALTH. Because wealth is production, and while the gold was at least something that kept your gov't somewhat honest, the fiat does not suffer from such a downside.
The Fed mandate up until very lately, was price stability. Eventually this decade the Fed also said that their mandate includes JOB stability, but the most interesting thing happened in the second part of this year, when Bernanke came out and said that now the Fed mandate also includes inflation - raising of prices.
Fed chairman believes that the prices are not rising fast enough, forget about stability or jobs.
Well, let's see how this plays out for the strained US consumer - the rise in prices caused by inflation of the US dollar.
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What you're asking for, in terms of price deflation, is exactly the goal of an ideal communist economy. Read up on the deflationary spiral, or "stagflation", and you'll understand it a little better.
- I was born in the USSR, now unfortunately a long time ago. Whatever you may believe about such economies, you have no clue what really happens it seems. In reality the USSR (and North Korea etc.) were printing TRILLIONS of rubles, none of which were backed by anything useful beyond their weapons systems really.
You are also wrong about price deflation - that's the ideal of the Free Market. In the free market prices fall due to newly found efficiencies and competition.
Governments can only cause prices to go UP.
Free markets cause prices to go down.
You are confused about even such a simple fact, it's really a failure of the US education system, I assume it's because it has too much gov't involvement, excuse me for that assumption.
Please observe what happened to Japan in the 1990s with regard to deflation.
- yeah. If only Japan did the reasonable thing and didn't follow the advice of Ben Bernanke and didn't inflate their monetary supply and thus didn't try to propel forward all of this magic of subsidizing the US consumer through punishing its own consumers and by killing the purchasing power of the Japanese people.
The Japan would have been better off and in the long run the US would have been better off.
The Japan would have quickly recovered, just the way US recovered from a recession in 1920, when gov't just cut its spending by 70% and allowed the economy to restructure, and the 'roaring twenties' followed. Instead Japan inflated its money and destroyed its economy, and in an aging population that they have, their problems are going to bite them even more, it's not over for them, they didn't see the last chapter in this depression they created for themselves.
I argue that deflation is a GOOD thing, not a bad one. Deflation is contraction of monetary supply and it causes prices to fall and economy to restructure by cutting out jobs that shouldn't exist.
Of-course the gov'ts hate deflation, as they have to cut their spending like everybody else does (and US did in 1920).
However Japan was not in such a terrible shape as USA is in today. Japan had its debt, but almost ALL of the Japanese debt was internal! It was all bonds sold to their own citizens and their own companies.
US has all this debt all over the world.
Japan had the highest savings rate in the 90s, so they had enough capital to last them through even worse a recession.
US has the lowest savings rate it ever had.
Japan was a net exporter of consumer goods.
US has a 50Billion/month trade deficit.
Deflation is the last thing you want your economy to do systematically, across the board. It encourages people to put off consumption and make a recession last a lot longer than it could.
- what? You really think that? But dude, Japan would have had deflation if it didn't follow Bernanke and didn't INFLATE its monetary supply.
Japan would have had deflation if only it didn't ruin its economy by inflating its money and stealing the purchasing power from its citizens. You know, you should research and show us a single time that deflation actually HURT somebody! (as opposed to inflation, which actually DESTROYED entire countries).
The recession of the 19 century and the one in 1920, they had deflation, but all of these recessions were over in a year or even in a few months! Yet the inflation causes the recessions even to turn into depressions, you should really look into that.
This is precisely why the Fed continues to print money.
- the Fed is printing 600 Billion now with QE2, that's exactly how much US federal gov't will borrow by June 2011. Don't tell me you don't see what's going on - they are printing their own debt. They are not expecting to be able to sell all of those gov't bonds anymore, and they are right. Nobody wants US bonds, the prices are falling and the long term interest rates are rising.
(look at all of these answers to my comments, look at how I have been moderated as 'troll' or 'flamebait', isn't that striking that so many people are so blind and not seeing the economic destruction brought upon them by their own gov't?)
By trying to keep inflation above 2% we can avoid the nasty business of dealing with a deflationary spiral
- well, gee, even WallMart is reporting inflation rates much higher than that.
I do not trust US gov't to report anything correctly and without cooking the books. The GDP, the CPI are bullshit numbers. They are not reporting M3 anymore, well no surprise, they don't want you to know what the real numbers are.
WallM
Bank notes are backed by gold or whatever commodity you prefer, like silver or corn or cotton.
The point is that you can't print cotton or corn or silver or gold. First of all there is real work involved in actually producing/mining these commodities, secondly they cannot be produced/mined without restrained, that's just not happening.
Cash, on the other hand, can be printed without any limits and it is.
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The more immediate effect of deflation is economic recession
- what the heck? are you really thinking this, because it is very sad?
You are completely confusing the cause and effect. The economic recession causes deflation by causing contraction of monetary supply and eventual fall of prices, not the other way around!
unemployment and lower wages
- yes, recessions do that. Check out all the recessions during the 19 century, and the recession of 1920, when US gov't cut its spending by 70% and the recession was gone in 1 year and the US had what is known as the 'roaring twenties'.
It is a very very very good thing to have unemployment and lower wages during a recession, because that is the contraction, the cutting of the fat, that is the bust part of the boom/bust cycle.
Like any engine, the economy cycles through expansions and contractions, and contractions LEAD to expansions by restructuring of the resources that NEED to be restructured.
Of-course there must be increased unemployment during the bust! That's because the boom created all of the excesses that must be cut, all that suboptimal capital and labor needs to be reallocated and applied to something else!
That's a good thing, that's what pushes the economy to start producing something new by applying all of that cheapened labor to all of that released capital. Bust leads to new boom by using problem solving ideas and applying the labor that was fired to the capital that was freed.
It's what the gov't is fighting with every bail-out, with every subsidy, with every stimulus, with every new printed or borrowed dollar and every time it lowers the interest rates.
Gov't wants to maintain the pre-bust levels of spending, while what the economy really needs is to get people to stop spending, to have them save money, rebuild the capital and apply the released labor to the rebuilt capital.
Consumer prices trail behind on the downward slope
- they better fall, but look at the gov't. Bernanke comes out every now and then and says: "we must create more inflation, the prices are falling, or worse yet, they are not rising fast enough for our liking".
THAT is magical thinking. That is insanity. In an actual recession prices need to fall, expenses (and gov't spending is an expense) must be cut, labor must be fired so that the market can restructure and reapply itself in a meaningful way.
Thinking that gov't can push this restructuring into an indefinite future by the magic of the printing press and borrowing is just asking for a bigger bust.
Every day that the market is not allowed to restructure on its own, just worsens the eventual resulting crash.
Yeah, because the madness of crowds or bank crashes in the past never occurred when there was no central banking. Oh wait, yes they did.
- overrated. As much ever, as it was overrated during the Great Depression, which did see the bank runs, but only 3% of deposits were actually GONE, the rest were eaten by the gov't inflation.
here's nothing "real" about using those items as money. A piece of gold has little use when there's a shortage of food, for example.
- not exactly. It is the fiat that has no value at all, not even as toilet paper when there is no food. But gold can be always exchanged directly for food. In Zimbabwe you can do that today, while you can't get anything for their dollars, you can use gold to buy stuff, including food.
Of-course if there is just no food period, then there is no question. You can't buy something that doesn't even exist.
Furthermore, people will store their gold in the bank and get bank notes in return, which people will then use as money, and the cycle starts all over again.
- banks that do this are only used as safety boxes, those banks cannot cause inflation if they are not lending out that same gold that they are holding as deposits. This is clearly not the same as just printing money out of the blue with no backing at all. The bank notes that are backed by gold, are nothing more than that gold, just easier to carry.
And yet people might not produce because people don't want to consume
- nonsense. People always want to consume. Question is can they PAY for consumption. People who do not want to consume, what are they, paintings? Who is not interested in getting food/energy/entertainment/clothing/whatever? Somebody who is a monk? OK, but most people are always ready to consume whatever you give them, that's the reason there IS welfare and SS and EI - people are always interested in consumption.
It's the production that is difficult, consumption is trivial.
social obligations (in the U.S. anyway) are not pretend, they are real
- well sure, they are social obligations
pushed forward to the future generations by borrowing the money to pay for them, because the past and the current recepients of these
obligations are not and were not paying for them.
And I mean that they were not paying for any of it - the SS fiasco, the pyramid that it is, if all the current employees lost their jobs today, then
all of the SS checks would stop tomorrow. That's because that money went to various other programs that politicians got elected upon, but didn't
raise taxes on the very people, who elected them actually to pay for any of it, so that money got spent one time. You cannot spend the same
money more than once (less you found a way to interfere with the laws of thermodynamics and conservation of energy.)
The ever increasing social obligations require ever increasing debt. Originally people paid much less in taxes both in terms of percentage points
and in terms of total absolute cost, the retirement age was also lower. With further increases in types of obligations, getting more people to benefit
from these programs, the costs were increasing, but since SS was never an investment/insurance program, it didn't keep and invest the money, it is now
full of IOUs and no actual cash, so the pyramid can only go on as the new people keep paying for the old.
So who exactly is OBLIGED here? Is it the children, who are obliged to pay for the 'social obligations' that their parents/grandparents are receiving?
Well, as you said: FUCK.THAT.SHIT. that's why I am not part of that type of economy any longer. I prefer economy where people are responsible for
their own future and retirement plans by investing their own earned money into their own businesses and taking their own RISKS with their money.
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these social programs were the original justification for the government taxing wages - wrong, unless you count waging wars as part of 'social programs'.
New Deal didn't introduce income taxes, it was done around 1913 in USA at least, before that time the US federal gov't was paid for by consumption
taxes upon some luxuries. 50% of the taxes came from saloons selling alcohol and the reason that income taxes were introduced was because the
anti-saloon movement in USA approached the feminist movement, who were also anti-saloon and more importantly they were anti-alcohol. That's also the
beginning of the entire prohibition disaster. Also the original income tax was only applied to the richest people in USA and they paid under 1.5%
income tax. Of-course as the gov't saw the huge increases in their 'revenue', they started growing and increasing the taxes over and over, clearly
if you give them a finger, they'll take your hand. It was one of the worst decisions that USA public allowed it's gov't to make, it gave away the liberties
and freedoms to get some security and clearly now it lost both.
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You are forgetting that Pre-New Deal, the capitalists paid for everything.
- you are forgetting that pre-new deal gov't CAUSED the
recessions of 1920 and 1929, only while the 1920 recession ended in 1 year, after the gov't cut its costs by over 70%, the 1929 recession turned into
the Great Depression as the gov't decided it was going to fight fire with fire and started printing/spending and generally getting involved into
economy.
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Overall (today) it's a big net loss for the labor class and a big win for the capitalists.
- the corruption of the gov't (by corruption
I mean the gov't meddling with economy of society) has caused SOME corporatists to take advantage of the political system and gain immensly by
having gov't protected monopolies. However it is not true at all, that the capitalists have a net win and labor has a net loss, everybody has a net loss
in this and those
Sure, Spain imported too much silver and gold and didn't produce anything, so they had an oversupply of these materials and underproduction.
However these materials in themselves didn't lose value, they weren't destroyed, they stayed around and with eventual industrial revolution based on capitalism, the production took off and gold was still the money of the time and prices on produced goods fell.
Throughout the 19 century the prices on goods fell, didn't rise, as they started doing after the 1913.
As I said earlier, the real wealth is in production. But the real money is not fiat.
Production capacity is the real wealth of society and if the society creates pressures that lessen its ability to produce, that society fails.
So Spain is yet just another example of what happens to society that has no production.
Obviously without production the value of money goes down, but real money is what makes production possible.
Spain became a society of people too drunk on their power and unwilling to do any actual work - so how is that different from US and many European countries now, who are also drunk, they believe they can get everything they want, all the Chinese manufactured goods without giving anything back except for the useless pieces of printed paper.
You are saying "Alas for your thesis", well as far as my thesis goes, gold has been increasing in value ever since the creation of the US Fed and the fiat money has being declining in value, even in the last 10 years USD lost 30% of its value against other currencies, and it lost hundreds of percents against commodities such as gold and others as well.
What is real money? It's clearly not pieces of printed paper.