Shiller: More Stimulus Needed
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CalculatedRisk on Sun, 06/29/2008 - 5:49am (333 comments)
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Buying a little time is the only viable strategy remaining. Exponential growth ftw!
Robust inflation would be the best remedy.
Short Bucky!
This will prevent housing from returning to price levels that are once again affordable.Lets get on with foreclosures.
The only good stimulus I can think of is infrastructure rebuilding, including putting up a new energy infrastructure. Provides jobs, saves money in the long run, results in less money going overseas.
But the gang we have in power won't do it. And yes, it's longer term, won't help next quarter. But we need some longer term economic stimulus, or we're just going to bump along the bottom for years to come.
These stimulus checks are effectively tax cuts, therefore I'm in favor of them.
It'd be better if we could make the stimulus checks permanent - either cut the tax rates or just mail people the checks every year/quarter.
Starve the beast!
I like stimulus package, but a better way would be a permanent tax cut, and defer the recession to the next generation.
bob Dobbs--The only good stimulus I can think of is infrastructure rebuilding, including putting up a new energy infrastructure. Provides jobs, saves money in the long run, results in less money going overseas.
what you and Galbraith said makes sense--rebates like these are for the criminally insane.
I'm turning Japanese
I think I'm turning Japanese
I really think so
2nd half recovery cancelled? but why? WHY?
"With the "2nd half recovery" apparently cancelled, and the immediate effects of the stimulus mostly behind us, it is not surprising that more stimulus is being discussed. But if the stimulus checks go to Saudi Arabia or China, it isn't really helping (there is no multiplier effect)."
CR, I'm with you on this one. BTW, as a nation, we just borrowed and spent $300 billion during the current round of rebates. Was it worth it? Our kids and their kids now get to pay an extra $300 billion plus interest. Does anyone know if it was worth it?
Remember the overconfidence and cavalier attitude towards the stock market in the 90's and the real estate market earlier this decade? What about the US govenrnment's debt market? Guess that'll never go down either.
I can't understand the call for reduced taxes (I'm no advocate of high tax rates, but we've already eaten the meal, and the bill has been presented). The deficit will be paid by tax increases (in devalued dollars, or not) or we will default on our debt. There is no free lunch.
These are our options. Which would you like to see enacted? If I am incorrect, please tell me what other option exists.
Calling for reduced taxes in light of our debt level is unrealistic and offers no means to retire the debt or to build a less indebted future. More of the same is not a fix. More of the same leads to more of the same, and that's how we got here.
Why cannot the US economy grow when people spend within the limits of what they earn. Why does the govt want people to consume more than they are earning ?
"...we just borrowed and spent $300 billion during the current round of rebates. Was it worth it? Our kids and their kids now get to pay an extra $300 billion plus interest. Does anyone know if it was worth it?"
Darth Vader: I find your lack of faith disturbing.
Gimme the money and gimme it now! And while you're at it, keep em coming!
All bets are off.
The cynical point of view that ALL the palliative actions taken to date have one goal, to kick the can down the road past the November election...is sadly, quite persuasive.
"We simply do not have the means to quantify all the issues related to the rebates. But the models we do have suggest that the overall effects of the rebates are modest at best."
-Shiller
I don't understand why he is so willing to recommend repetitive tax rebates as needed (like a prescription!), when he writes this stuff two paragraphs before it. If the effects are "modest at best", then why bother?
WPA anyone?
Starve the beast!
Mercutio
I'm glad to hear you're in favor of bringing the troops home.
Give everybody $500K, and we'll all be rich!
Petey, the gov-ment has to spend less, not tax more. Taking money away from productive people to give to the non productive is not the answer.
I've got a lot of respect for Robert Shiller but I just don't see how these stimuli are going to do anything other than prolong the inevitable.
We need an economy that can thrive in a world as it will be in 2015, not as it was in 2005.
The US needs to develop its own energy sources while it still can afford to do so !!!
And Shiller goes on to argue that more stimulus is needed:
[W]e should be putting in place another stimulus package like the current one, and stand ready for another after that, and another.
And the future is..... Zimbabwe.
Between new record deficits, growing off-balance sheet obligations through guarantees for FHLB and Ginnie Mae debt, and the still unresolved problem of future obligations for Medicare, etc., how long before the U.S. loses it's AAA rating?
How about if the guarantees for Freddie and Fannie becomes explicit?
I think I may buy more gold...
Just pathetic. Stimulus really clobbered the budget hard this spring. The dollar won't be able to tolerate another cash burning exercise like the last one. It's apparent to me that the difficult decisions are now being made. We are trimming consumption. That's the right response to destroyed balance sheets and extreme debt. If officials just lay off of the giveaways we'll get on the road to a sustainable society at a new level of normal.
Bob_in_MA writes:
I think I may buy more gold...
Wait and see if Trichet does what he should.
"I can't understand the call for reduced taxes (I'm no advocate of high tax rates, but we've already eaten the meal, and the bill has been presented). The deficit will be paid by tax increases (in devalued dollars, or not) or we will default on our debt. There is no free lunch."
Here is why you cut taxes, especially when it will simply cause a larger deficit:
"[He] tells us that first we've got to reduce spending before we can reduce taxes. Well, if you've got a kid that's extravagant, you can lecture him all you want to about his extravagance. Or you can cut his allowance and achieve the same end much quicker."
Personally, I'd much rather that the American people have their tax dollars back in their hands, where it belongs. Much better than the government having it.
The US govt's budget deficit it just over 4%. That's not too huge - it's in the same ballpark as France and Germany's gov't deficits, and just over half Japans' deficit of 7.5%!
Deficit - Wikipedia, the free encyclopedia
The total gov't debt for the US is similarly middling in size:
List of countries by public debt - Wikipedia, the free encyclopedia
I'm all for the government spending less, but I'm even more for not having spent what we don't have in the first place. Even if we cut government spending to zero, we will still need a tax increase to pay down the debt.
I assume you're okay with zero taxation. You can't take money from "non-productive people" - they don't have it. Cutting taxes on "productive people" (who have benefitted greatly from deficit spending by THEIR representatives) will result in default.
BTW: The number of "non-productive people" is growing at an alarming rate.
Are the top .1% of the populace in income and wealth "productive people"?
I was disgusted to hear Obama call for another stimulus check. So much for "change you can believe in."
It's time to stop handing out sugar pills, and swallow the bitter pil.
BTW: The number of "non-productive people" is growing at an alarming rate.
-Petey Wheatstraw
Like the people who modeled and designed CDO's and MBS? LOL
Terry writes:
It's time to stop handing out sugar pills, and swallow the bitter pil.
It'll not happen, look for the FED to come up with more creative solutions.
op. cit. the election observation above - all current policy activity is viewed through that prism - policy to treat the disease rather than the symptoms will not come until after November...
Woo hoo, free beer on Uncle Sam! Wait, that's us.
Odd that Schiller would argue this, when his own data says we are still solidly in bubble territory.
Moreover, the lack of lending is caused mainly by (i) irrational asset pricing, which makes rational banks fear to lend; (ii) a reduction in cheating; and (iii) lack of confidence in rating agencies, which prevents securitization.
There is one great benefit to rebates, but we should acknowledge it is social, not economic: it redistributes income to those most harmed by sudden food and energy inflation.
if it comes that is...
"Personally, I'd much rather that the American people have their tax dollars back in their hands, where it belongs. Much better than the government having it."
How true. Far better for people to spend their money on slots, bingo, lottery tickets, booze, porn and cigarettes than to tax them for stupid things like debt reduction and infrastructure investment. It's been proven over and over again that the individual citizen always makes the most intelligent use of his money.
It's been proven over and over again that the individual citizen always makes the most intelligent use of his money.
Freedom's a bitch, don.
And they'd learn that lesson too, if we didn't bail them out for their poor decisions.
Cheers,
prat
"How true. Far better for people to spend their money on slots, bingo, lottery tickets, booze, porn and cigarettes than to tax them for stupid things like debt reduction and infrastructure investment."
-bluestatedon
Aha! Here's what this is really all about: The states are likely losing a considerable amount of tax revenue from regressive streams that require discretionary income.
Let's give all of our tax money to Halliburton, the banks, the shadow banks, millionaires and billionaires, homebuilders, corporate farmers growing corn for energy, oil companies, and other productive types. The trickle down will lift us all and balance the budget.
That's the ticket.
"How true. Far better for people to spend their money on slots, bingo, lottery tickets, booze, porn and cigarettes than to tax them for stupid things like debt reduction and infrastructure investment. It's been proven over and over again that the individual citizen always makes the most intelligent use of his money."
Obviously you're being sarcastic here. But yes, it actually has in fact been proven over and over again that individual citizens tend to make better decisions than to their governments. I'd think that world history, 1946-1991, showed this quite conclusively.
Stimuli, more properly.
Oh I don't know. We have that Lottery gimmick that is soaking the unproductive at wonderfully high rates and they can't get enough!
I think we have found ways of getting into everyone's pocketssesss.
A stimulus package is like giving a man with a gunshot wound a hit of morphine.
It seems to give temporary reprieve but doesn't address the fundamental cause of the man's distress.
World history from 1946 - 1991 is pretty extensive. Can you be more specific?
If I understand what you're getting at, it would seem to follow logically that one person with all of the wealth would make the best decisions for all concerned.
It don't work that way.
Before the first stimulus check oil was @ 72$ (the day it was announced ).Today Oil is 140$ plus . Why do more stimlus packages ? Raise rates and get oil back down ur causing STAGFLATION @ 140 oil . In july Iran will get bombed and oil will hit 175$ and we will have hyperstagflation . Maybe then we will ABOLISH THE FEDERAL RESERVE . Of course the ECB will raise rates on the Thursday and you will see oil run. This whole mess have been building for 25 years in the works.There alot of people to Blame . Clinton , Bush , The FED , The media , Cramer , The treasury , Greenspan ,Congress , and any other dumbass that believed a realtor . House prices must realine to cover rents . 1 in 13 houses will end up in Default .City's and state might go BK hell the cental banks could go bk . This Maddness has to stop
I sincerely hope that after this crisis is over, Keynesianism would be dead. For Keynesian economists, paying a team to dig a hole and the other to fill it stimulates the economy. The effect is zero wealth increase, two teams of tired guys and increased national debt. I hoped that Keynesian economics would be dead after Japan's lost decade where repeated "stimulations" achieved nothing except swelling the debt to enormous level.
At least classical Keynesian economists would like to pay the debt during boom. Current bunch of neokeynesians would like to "stimulate" the economy all the time.
By the way, what is so bad about recessions anyway? If the economy requires restructuring, recessions can speed it up, diverting capital and labor from unproductive into productive parts of the economy. Instead, Keynesian economists would rather conserve the badly working economic organism.
Poszi,
Maybe if George Bush or Mercutio is running the show we'd have people digging holes and filling them in.
If it's me, we're building transit infrastructure, investing in wind and solar power, maybe some nuke plants, etc.
Last time I checked, we have some pretty goddamn amazing legacies left from the WPA. Beautiful courthouses, parks and highways and bridges in NY (though if it were me instead of Moses, we'd have spent the money on transit instead of highways)
Great stuff was built and is still in use. Your hole argument is a red herring.
It is refreshing to see so many readers "get it." Oil is expensive because of the the debased dollar and high taxes and huge deficits and deferred infrastructure and unfunded liabilities. All issues of government mismanagement. While we may be a long way from "blood of patriots" time we are well past the need for a Second Constitutional Convention.
The FED won't raise rates this year and more creative methods will be put into action to prolong the downturn.
It's the only way the financials can be salvaged.
Why doesn't Shiller just go for it & propose that all legal tax paying citizens recieve $250K payments each year for the next 20 years. No one would need jobs, everyone could just shop! No one would have their house foreclosed ! Banks & Wall Street would be happy !The illegal problem would be solved because they would have to work selling us things at WalMart! And the recession would then really be passed on to the next generation! Happineess all around for everyone !(Sarcasm).
I'm buying SKF with my rebate.
We don't need more retail sale stimulus.
We don't need more imports of oil and consumer goods, or more retailing and distribution jobs for selling imports in big-box stores.
We don't need more construction jobs building big-box stores, distribution centers, or McMansions.
We need people to be working at building and rebuilding infrastructure that matches the needs of a nation with an aging populace in a world with an aging populace and a limited supply of cheap energy from fossil fuels.
No matter whether the current high price of oil is due to speculation or genuine supply/demand effects, we know that if "peak oil" isn't already upon us, it can't be far off. And the current price spike is making crystal clear the degree to which the present American economic system and its infrastructure just don't work without cheap energy.
We need to fight unemployment by putting people to work rebuilding our railways and cities, and building wind farms, solar energy farms, and nuclear generating plants to free us from bondage to fossil fuels.
There's no shortage of work to be done. But until we get it done, living standards as measured by material goods consumption are going to have to be lower.
Back when the first Bush was president he gave a speech in which he said something like, "We have the will, but not the wallet."
That was bulls**t then and it still is. This is an immensely wealthy nation which has allowed its wealth to be concentrated in a small number of hands that are squandering it on private jets, gargantuan houses, and Brobingnagian yachts.
The ruling class has the wallet, but not the will.
While we may be a long way from "blood of patriots" time we are well past the need for a Second Constitutional Convention.
Sorry Bob Dawg, but the fix is really quite simple: One constitutional amendment that eliminates ALL campaign contributions; and only allows candidates to receive public funding.
By November, both candidates will have been bought by corporate America. The subsequent bad decisions that will be made in 2009 will be called "government mismanagement", when it really is "earning our bribe, er, campaign contribution".
Of course I expect some irrational rant about the 1st Ammendment guaranteeing that politians whoring themselves is quite alright. These people also tend to whine the loudest about government mismanagement.
Quite sad.
popcorn?
[moves towards lifeboats]
"I'm buying SKF with my rebate" That's all of 4 shares... unless you margin it UP!!
The only thing the government should be concerned with is a safety net for those who fall on hard times: food, water, shelter, security, and medicine. Giving out cash is a HUGE mistake, and just punts the problem down the road at even more expense.
With a good social safety net, there is no need to "rescue" any bank or organization, as ultimately, people can start over even if they hit rock bottom.
The argument that the US debt to GDP ratio is in line with other nation's is akin to saying elephant shit is as proportional to its mass as mouse shit is proportional to its mass.
Yeah. So? It's still a heaping big pile and will take longer to clean up.
"Robust inflation would be the best remedy."
It is the ONLY remedy.
This is politically incorrect thought: we as a nation are living beyond our means. Standard of living has to go down. Translation: become poor as a nation. Robust, sustained inflation is the best method to achieve it. That is what going to happen.
Inflation rate will be higher than income growth. For a long long time, may be a generation or two.
the ECB will rise the rate. why? because the elites have sold out usa. thats why eu will not go down the ZIRP way.
for us, its over. the rich have no problems, they will just move, let me rephrase, they have already moved to switzerland. from now they will use eu as their new toy instead of the old us. well maybe in 50 years when they have ravaged through eu they will come back to the rebuilt us and the cycle will continue.
so no, the us wont attack iran, it will be probably the by 'democraticly' elected parliaments brought to life 'united' eu in 5 years. the truth is sad.
sounds like a quite realistic scenario, doesnt it
i'm going to do my part to help save the gov't money, and spend more, which is there stated goal.
therefore, i'll just bypass sending in my taxes, since there simply going to send them back.
"And they'd learn that lesson too, if we didn't bail them out for their poor decisions."
Believe it or not, I agree 100%, which is why I have vanishingly small amounts of sympathy for the vast majority of people in foreclosure. Nobody put a gun to someone's head forcing them to sign on for ridiculous loans that they could never repay.
Contemporary liberalism has largely become an exquisitely calibrated exercise in very selective excuse-making, which is balanced perversely by contemporary conservatism, which believes that kicking a man when he's down is the best way to get a shoe shine. If we could rid ourselves of both worldviews we'd be vastly better off.
TANSTAAFL, always and forever. You can't have anything without paying for it somehow, someway. You can't have paved roads, bridges, fire protection police, education, meat inspection, or NORAD without paying for it. The only question is how you do so, and that's where politics comes in, for better or worse.
I think our economy would benefit from some sort of national health care system, but as a taxpayer I'm extremely reluctant to subsidize obesity, smoking, drug or alcohol abuse, or any of the other myriad ways in which people destroy their own health voluntarily. Liberals would declare this to be "discrimination."
The tobacco settlement took care of the health problems caused by smoking.
A recession is a normal part of the economic cycle and not to be dreaded. I am not short any stocks at this time. About half my portfolio is in domestic stocks. I don't have an interest in a recession coming now as opposed to another time.
We do not need more borrowing (stimulus). We just need to let things take their course.
I don't know why everyone is whining about what us Joes are going to do with the money. Face the facts. The stock market is crap, so too bonds. Joe has already taken that into account with his dwindling 401k. Real estate is a disaster, and Joe is in no mood to throw good money after bad. Jobs are getting iffy, with slave wages leaving little progress on debt reduction. So what productive use is Joe supposed to use the money for? The economice elitists here say to invest it. Ok. If Joe buys lottery tickets he is helping improve the state's finances he would be stuck with anyway. And who knows, Joe just might get lucky. The difference between being underwater and surfing the waves is merely one more 'leveraged' dollar invested at the local liquor store.
Rob Dawg "...While we may be a long way from "blood of patriots" time we are well past the need for a Second Constitutional Convention."
Wouldn't have given a second thought to such a recommendation up until recently. Recent economic and geo-political problems have clearly demonstrated that the federal government(executive and legislative branches) have become so influenced by party politics and the need to raise cash, that system of checks and balances is breaking down. There's not a shred of integrity left.
So, Rob, where to begin and how best to eliminate negative influences from creeping into this process also?
John writes:
I'm buying SKF with my rebate.
I used my last one on WaMu Puts. My next will be used to buy gold.
We repudiate our debt the old fashioned way, 6% per year.
A pipe dream, but... shouldn't it be possible to design a tax system that automatically provides a countercyclical effect without requiring additional government action?
How about weekly rebates?
Feds helicopers are obviously are not sufficient to do a decent money carpet bombing. One needs to start the congress helicopters get the economy to move to a self sustaining economic state - whatever that may be.
There is no easy fix, there are huge dislocations in the economy and those need to correct. A first step would be a widespread recognition of what is absurdly off, what was normal over the course of history and what will be required in the medium term future. US consumer spending the economy out of this hole is clearly out of the question.
Better than another incentive.
Once we get the Iraqi army up to speed, we invade Canada with them. Canadians are too nice to really fight back so the war will be short and with minimal casualties.
Once we have secured victory, we force Canada to provide health care to the US.
The cost per car for GM will go down significantly. Medicare/Medicaid costs go to zero. Good times are back.
In return for all of this, we promise to watch Hockey more often.
It is a win-win.
They need to revamp Monopoly to include rebates and bailouts.
Believe it or not, I agree 100%
Heh. I'd be a lot more sympathetic (read: less irrationally opposed) to socialist policies if socialists would admit this as a first principal and discuss how to avoid it. Medicare is a joke among my wife and her friends (all doctors.) They all have stories about docs and patients scamming the system. In a country with so little cultural (i.e. non-economic) unity and so much diversity of circumstance, I don't see how we can avoid massive, outrageously indifferent fraud in any nationalized system.
In other news, my wife and I received our stimulus check yesterday: one glorious united states dollar.
I suppose the frame I'm going to buy for it will help stimulate the chinese economy a bit.
Cheers,
prat
simian, have not the chinese bought the canadian oil sands? what if they launch a product embargo?
what will the americans do without consuming? i dont even want to imagine the withdrawal symptoms ...
we are well past the need for a Second Constitutional Convention
Wouldn't make a damn bit of difference since the enemy is . . . us.
Plus we couldn't make as functional a document as the original Constitution if we tried. Not in a thousand sessions.
First Attendees must never have held prior elective office nor been trained as lawyers.
Second is the hardest; 2/3rds of the Legislatures need to call for a convention. No doubt this will become easier as economic conditions warrant.
Third we need to be newly clear as to the limits of power Federal, State and the rest to individuals.
I see the major areas to be closing loopholes the Founding Fathers never even bothered to enumerate. For instance the right to privacy. so fundamental they never thought the right need be explicitly protected. they wisely understood an explicit right defined was subject to erosion. They incorrectly assumed future generations would think the same.
Second and of most interest to this group would be a new section on the limits of fiscal policy. A balanced budget requirement goes without saying. The rest would deal with money supply growth (inflation) and such.
Fourth establish term limits and a formal Bureaucracy Branch of Government. Too much mischief in the Executive primarily but also Legislative and Judicial when it comes to execution of public policy. The Military would also participate so as to insulate their action from political whim.
Then with my plan fully implemented by overwhelming voice vote we can leisurely devote the rest of the weekend to saving the wildlife.
For those who think that people spend the money most effectively, how about no government at all? No military, no Fed. departments (Transportation, Education, Defense, Commerce, DHS, et.al. The Grover Way: drown the gov. in the bathtub.
Everybody can get their guns, and we'll can have lives that really are nasty, brutish, and short. The GOP way.
Somehow I don't think the folks in the gated communities have planned for those hungry folks who will strip their houses and bank accounts (at gun point).
We can send Ben Franklin a message (James Dobson will deliver it!) that we did have a Republic, but we couldn't keep it, as he questioned at the time of the Constitution.
Due to the ideological blindness of the neoliberals, we seem to have embraced an especially perverse form of "bastard Keynesianism" -- i.e. handing tax rebate checks to consumers is "good" economic stimulus while spending public money on public infrastructure is "bad" socialism.
Of course, since excessive consumer spending is in part what got us into this mess, the result is a textbook "hair of the dog that bit you" effect -- it may make the hangover a bit less painful, but it just makes the underlying condition (alcoholism/debt-deflation risk) worse.
I think the Fed and all the other folks are like the building super trying to slow a falling elevator. He let the Billionares off at the top floor bar and the rest of us are on the free falling elevator headed for the 8th basement level parking garage or lower. You who want to take the hard medicine are arguing that the super should just cut the cable and clean up the mess at the bottom. I get the feeling that you think you got off with the Billionares. I don't think so.
Me I'd rather get off at the first floor lobby thank you. Even better I'd like to get off at the mid level bar and grill with exciting stories to tell about that scary free fall that stopped a just the right time.
Good Luck to the super and you elevator riders.
We may become/are the 1st 2nd World Country=A 3rd World Country with Nukes!
Petey Wheatstraw writes:
I can't understand the call for reduced taxes (I'm no advocate of high tax rates, but we've already eaten the meal, and the bill has been presented). The deficit will be paid by tax increases (in devalued dollars, or not) or we will default on our debt. There is no free lunch.
Petey For President!!!
Heh. I'd be a lot more sympathetic (read: less irrationally opposed) to socialist policies if socialists would admit this as a first principal and discuss how to avoid it.
Amen.
I'm okay with some socialism. I'm okay with some capitalism. I'm even okay with an ugly mix of both. Just don't BS me that there aren't costs & benefits of any of them. There are - bring it out in the open & less discuss. Then I'll tell you what I like & don't like.
Bob Dobbs wrote:
"The only good stimulus I can think of is infrastructure rebuilding, including putting up a new energy infrastructure. Provides jobs, saves money in the long run, results in less money going overseas."
Bob D you nailed it.
another stimulus package is all about letting this criminal crowd leave town before the rain of fire and brimstone.
an energy appollo project ( 6 months ago i mistakenly called it a Manhattan project) is what we need the gov to spend tax money on...
not another plasma tv rebate.
face it our leaders, who DO know better, are all willfully sending us to financial hell
Bob_Dobbs et. al.,
Yes 'twould be nice for infrastructure projects. Theoretically they increase eeficiency. Problem is, when politicians do it we get theis:
Gravina Island Bridge - Wikipedia, the free encyclopedia
"According to USA Today, the bridge was to have been nearly as long as the Golden Gate Bridge and taller than the Brooklyn Bridge.[6] Ketchikan's primary industry is tourism, so the bridge was designed to be tall enough to accommodate the cruise ships which frequent the Alaskan waters during the summer."
And no Gary, YOU can't stop it. That's the problem with gov't throughout all human history. Pyramids anyone...anyone...Bueler?
Cheers,
mock turtle writes:
face it our leaders, who DO know better, are all willfully sending us to financial hell
You nailed it here too.
Have a look at this :-
DollarDaze Economic Commentary Blog - Gold, Oil, Stocks, Investments, Currencies, and the Federal Reserve
Mercutio wrote:
These stimulus checks are effectively tax cuts, therefore I'm in favor of them. (snip)
Starve the beast!
Mercutio | 06.29.08 - 10:39 am | #
mercutio, you are either very brave or seriously in error...
dont starve the beast...tame the beast...
its our beast,
without him you are at the mercy of all the other beasts out there...
foreign gov and corporate...
and with them you have little or no vote and no voice.
dryfly,
"There are - bring it out in the open & less discuss. Then I'll tell you what I like & don't like."
Yes, nice. Problem is, socialist have the nasty tendency of hiring thugs to shoot those that disagree with them.
Hang on someone's banging on my door...brb.
Cheers,
There are no governments only corporations that look like governments.
mock turtle,
"and with them you have little or no vote and no voice."
Like we have any now. Bwahahahahahaha!
Cheers,
poszi wrote:
I sincerely hope that after this crisis is over, Keynesianism would be dead. For Keynesian economists, paying a team to dig a hole and the other to fill it stimulates the economy. The effect is zero wealth increase...
Pozzi you say some bright things time to time but this aint one of em.
read the history of the grand coolee dam
or the appollo moon project.
the secret is picking appropriate targets for gov expenditure
AND especially private public partnerships...seed money, research etc.
demand side , and supply side economics are not mutually exclusive and need not be enemies.
"It's apparent to me that the difficult decisions are now being made."
The increase in payday loans, 401K loans, and unexpectedly robust consumer spending argue otherwise.
Rob Dawg writes:
It is refreshing to see so many readers "get it." Oil is expensive because of the the debased dollar and high taxes and huge deficits and deferred infrastructure and unfunded liabilities snip
Rob Dawg i respectfully disagree with HALF your analysis
i say respectfully because i have been reading your posts for a long long time here and learned a lot from you.
the debasement of the us dollar is only part of the story, yes your right it is an important part
but also the cost of oil is rising against nearly all other major currencies..,
other forces are involved besides and in addition to your good point.
I can't understand the call for reduced taxes (I'm no advocate of high tax rates, but we've already eaten the meal, and the bill has been presented). The deficit will be paid by tax increases (in devalued dollars, or not) or we will default on our debt. There is no free lunch.
1)
I agree with you
2)
with one caveat. We could hold taxation steady and markedly reduce govt spending. this could help to pay off the deficit w/o raising taxes. It would be "painful" as we would lose a lot of services. and of course there would be arguing about what services need to go. but as an extreme example: what if we reduced Defense and health spending to 1/10th of current spending and diverted all of that to debt reduction.
3)
the hard core neo-economists always point to the Laffer Curve. In theory, raising taxes raises tax revenue until a certain point... after this point raising taxes serves as a disincentive to work, so people work less which overcomes the effect of the tax hike, so revenue drops. Of course, nobody knows where this mythical reversal point is. In general, the libs think we haven't hit it yet (and thus raising taxes will help) and the conservs feel that we've passed the point (so dropping taxes will help).
I personally highly doubt we're on the "disincentive" side of the tax curve, since the uber rich really don't seem to have a problem working at all.
poszi,
"I sincerely hope that after this crisis is over, Keynesianism would be dead."
Ain't gonna die because it give gov'ts power. As totally ludicrous as Keynsianism is, until the gov't is prevented from indoctrinating children, it won't go away.
mock turtle,
"the secret is picking appropriate targets for gov expenditure"
Did you miss my post like five minutes ago?
Here it is again:
Gravina Island Bridge - Wikipedia, the free encyclopedia
Please sir, tell me how your system gets rid of this.
Cheers,
i have one problem with socialist. they see intelectuals as enemies, so what did they in 1950? in eastern europe, they put idiots into all funtions.
yes idiots, no not the average 'joe six pack', they put joe's cousin 'jake cant bind his shoes'. speaking of shoes, just remember chruscov Shoe-banging incident - Wikipedia, the free encyclopedia
so everyone who thinks capitalism won cold war because it was superior, no it wasnt. its just impossible to loose against idiots in charge
I'm okay with some socialism. I'm okay with some capitalism.
Well, since this thread has veered off into political land anyway, I'll say this:
I wish it were possible in discussions to differentiate between federal and state socialism. I never hear people advocating that California, say, institute universal health care, but my reading of the constitution gives us every to do so (heaven forfend.) Why must every program be federal? The U.S. is enormous and enormously different. Why shouldn't there be fifty different styles of government to suit fifty states?
While we are on (off?) the topic, it's time to break up the western states, starting with California.
Cheers,
prat
The US has a totally destructive love affair with erradicating the business cycle.
It is the very fear of not wanting to suffer a downturn that has brought the US to this point and all anyone can propose (Shiller,included) is to spend more money so we avoid the business cycle, which got us herein the first place.
The country is so screwed with this form of financial (lack of) leadership.
Heaven help us cause another stimulus package ain't going to solve the long term problems.
UPDATING WOULD BE VERY DESIRABLE!
Prof. Shillers powerful and well-known chart of real inflation-corrected U.S. home prices, shown in the NYT on 8/27/2006
- NY Times
and last updated 6/4/2007 (download Excel file) at his webpage
Irrational Exuberance
needs updating to include the subsequent year of steep price drop.
Down from the 2006 peak of 100., the latest real price level is well-estimated as 77.6, see here
Real Dow & Real Homes & Personal Saving & Debt Burden
(and the history-inferred will return to price level is ca. 54.)
so everyone who thinks capitalism won cold war because it was superior, no it wasnt. its just impossible to loose against idiots in charge
wow. then America must be the superest power ever given our current crop. we're invinsible!!!!!!
How much more stimulus can this economy take. We have ran up almost 4 trillion dollars of debt in 7 years because of tax cuts. Borrowed trillions more on houses ,cars, boob jobs,granite counter tops, and vacations because of record low interest rates. We are back at a 2% FFR again. I honestly think we are doing Warp 9 with Scotty muttering something about dilithium crystals now.
YTL,
"what if we reduced Defense and health spending to 1/10th of current spending and diverted all of that to debt reduction."
How about 1/10000000000000th. We are sorrounded by two BIG oceans, and have as neighbors Mexico and Canada. Canadians aren't very war like, and our gov't seems intent on giving back the south west to Mexico without a fight. So what's the need?
Cheers,
The sad thing is that other than the boob jobs mostly it was a total waste of money.
"socialist have the nasty tendency of hiring thugs to shoot those that disagree with them."
Coming from an "american" that statement is the epitomy of irony.
Rob Dawg wrots:
( regarding a second constitutional covention)
"Third we need to be newly clear as to the limits of power Federal, State and the rest to individuals.
I see the major areas to be closing loopholes the Founding Fathers never even bothered to enumerate. For instance the right to privacy."
Rob Dawg i agree with you, but the founders , they tried, but the b@$^@rds that have haunted DC in the last 100 years cant seem to read nor understand the 10th amendment...the final amendment to the bill of rights
"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."
"...reserved to the people"
"...reserved to the people"
"...reserved to the people"
"...reserved to the people"
"...reserved to the people"
"...reserved to the people"
"...reserved to the people"
"...reserved to the people"
"...reserved to the people"
"...reserved to the people"
prat,
"The U.S. is enormous and enormously different."
So was the Soviet Union. Apparently having all decisions made by some group of geniuses for such a large area doesn't work.
Hooocoodanode!
Cheers,
sequoia:
it's not just the tax cuts. In fact, if I recall revenue may have went up after the tax cuts (I can't remember... and obviously there are other reasons why tax revenue went up)
as with all things, there is yin and yang.
the yin: tax revenue
the yang: govt spending
the problem is that yang is always greater than yin in our country. when yin explodes, yang becomes behemoth. when yin shrinks, yang gets bigger anyway.
what would our situation have been had our govt
1) not changed medicare
2) not invaded Iraq
3) not done stimulus checks
4) need I go on?
I'm not a "starve the beaster" like some posters. I think that many things are much better done by government. I've been in places with very limited govt and in general they aren't nice places to be. Even if you're rich. (if you all want limited govt move to Kenya. it's English speaking, limited govt, and has very low taxes, and high amount of concentrated wealth).
But I also think we need some yin and yang balance.
At least with Tax and Spend democrats you get an attempt for balance. (increase tax increase spend)
but this new crop simply cuts taxes and deficit spends. we can't have our cake and eat it too.
give Americans the TRUE options. do they want
1. higher tax and higher service
or
2. lower tax and lower service.
"Once we get the Iraqi army up to speed, we invade Canada with them. Canadians are too nice to really fight back so the war will be short and with minimal casualties."
I noted that this has been tried before, in 1812.
Unfortunately, the US lost. British/Canadian forces briefly captured Detroit, but declined to keep it.
They also burned parts of Washington, but again, failed to finish the job.
As for Canadians being too nice to fight back, I suggest you have not watched Junior A hockey.
If they unleash their 14 year olds against us, we're toast.
sqeezed,
""socialist have the nasty tendency of hiring thugs to shoot those that disagree with them."
Coming from an "american" that statement is the epitomy of irony."
Sorry? Do youn assume that I think the US isn't socialist/facist already?
Cheers,
How about 1/10000000000000th
c'mon. won't somebody think of the children?!!!!
Yes, I would also consider 1/100000000th. I wrote 1/10th as a starting point.
Some interesting facts on the history of money :-
DollarDaze Economic Commentary Blog - Gold, Oil, Stocks, Investments, Currencies, and the Federal Reserve: The Fate of Paper Money by Mike Hewitt
Enjoy.
fried,
"I noted that this has been tried before, in 1812."
Yep. You canucks have a nasty habit of using collective military force for protecting your borders. Funny that.
Cheers,
YTL,
Should have winked on that one, sorry.
Cheers,
In return for all of this, we promise to watch Hockey more often.
If I watch more hockey my wife will divorce me - and she loves hockey too but within 'reason'...
90% of the weekend evenings when I'm 'here' I have a college hockey game on the tube simultaneously. If I'm not 'here' I'm usually at a game. There aren't enough hours in the day for more hockey around our house.
Wait until the Americans start sneaking over the Canadian border looking for work.
Sequoia512 writes:
How much more stimulus can this economy take. We have ran up almost 4 trillion dollars of debt in 7 years because of tax cuts.
Let's try this again slowly. There is no level of taxation possible to meet the spending ability of government. none. The deficit is not caused by tax cuts. Deficits are only caused by excess spending. This is not word gaming. It is absolutely necessary to understand which is cause and effect because the process is not reflexive.
Why must every program be federal? The U.S. is enormous and enormously different. Why shouldn't there be fifty different styles of government to suit fifty states?
Living in Japan I was struck with the income tax balance: 10% national and 20% local.
"starve the beast" does in fact leave more tax monies available for state-level application.
The populations of California and Canada are roughly the same.
The only downside is race-to-the-bottom effects of industry leaving the state to avoid higher taxation.
This can be solved by instituting a land value & resource severance tax regime. Good luck taking your real property across state lines and extracting resources remotely.
Misean
i did see your post and followed your link
you make a good point...but
i'm familiar with ted stevens politics
look, just cause people rob banks doesn mean we should end all banking.
just because people sin doesnt mean we should end all religion.
we need to reform the system.
government programs and the idea of government itself is neither good nor bad
there are good governments and there are tyrannies and every shade in between.
we need more of what is going on here on these pages at CR..between all of us.
its time to take gov power out of the hands of the few.
two suggestions
limit all contributions, whether from a corporation or an individual, to any one candidate to 1000 dollars. (it is obscene the amount of money IBs have given both dems and repubs.
increase the number of representative back to the level the founders envisioned 1 to about 50,000 people...
now it averages 1 to a million cause those B@s^ard$ in DC limited the membership in the house of reps to435 no matter what the population of the US.
this enable a person to run for office with a tiny budget, shoe leather, shaking hands visiting local organizations, churches and town hall meetings, and without mega media nor corporate nor wealthy donor backing...we the people!
never hear people advocating that California, say, institute universal health care
It happens all the time! We actually passed a single-payer system through the legislature but the Governator <a href=http://www.sfgate.com/cgi-bin/article.cgi?f=/news/archive/2006/09/22/state/n164426D89.DTL"?>vetoed it. Too bad, we could really have used the 30% efficiency improvement in a public system.
Canada actually got its healthcare system through provincial copycatting - it worked so well in the early provinces that the other ones copied it. We'll probably get it that way in the states too, since Baucus is Finance Chair in the Senate.
mock turtle,
"just cause people rob banks doesn mean we should end all banking."
No it doesn't. However, gov't always researves the right to shoot you. No one else has that right.
Cheers,
"Once we get the Iraqi army up to speed, we invade Canada with them. Canadians are too nice to really fight back so the war will be short and with minimal casualties."
We will let you take Ontario and Quebec, Please..............
After seeing your performance in Iraq, a US trained Iraqi force would be like...Western Canadians smear them into the boards two minutes into the 1st period...........
Misean writes:
Yes, nice. Problem is, socialist have the nasty tendency of hiring thugs to shoot those that disagree with them.
Hang on someone's banging on my door...brb.
Hmmmm and the capitalist don't.
Though I think the capitalists can afford better thugs, nicer arms and flasher ads.
"You canucks"
Misean,
for the record, I'm American. I grew up near the border. Close enough to know the Junior A players constitute a fearsome force.
Canadian watching with popcorn
I keep hoping Canada will invade the US and take over.
i have one problem with socialist. they see intelectuals as enemies, so what did they in 1950? in eastern europe, they put idiots into all funtions.
Given the current occupant of the White House, the US is already socialist...
I think if you took out the "stimulus" package from the equation, then the recession would have been declared already.
This was a purely legacy-saving manouver, intended to get the president to the end of his term without a 2nd recession.
By fudging the numbers to meet the definition of "not yet a recession" he can claim stuff worked. If we had a declared recession, then the congress and public sentiment would be working harder to avoid some of these policies.
if he can keep 1 micro-point in the black, he can say he was right., As soon as we get 2 consecutive quarters in the red, he is toast.
/2c
Misean quoted:
YTL,
"what if we reduced Defense and health spending to 1/10th of current spending and diverted all of that to debt reduction."
and then Misean added
How about 1/10000000000000th. We are sorrounded by two BIG oceans, and have as neighbors Mexico and Canada.
to that i say right on
why does the United states have nearly 100 foreign military bases
IN ITALY!!!!!!!!!!!!
WE HAVE HUNDREDS OF BASES ALL OVER THE STINKING PLANET
we still ccupy germany and japan...what the hell?????
the USA spends nmore money of defanse and war THAN ALL OTHER COUNTRIES ON THE PLANET COMBINED!!
i don't agree with rev wright but this is why loonies like him have followings... because they are a little bit right (no insult intended against canada) (1812 hmmm, maybe not)
(and dont get me started on how many ELECTED governments we have destabilized overthrown or leaders we have assassinated....
i believe in a strong national defense and i am not a pacifist but current policy and spending is off the hook
Vader,
"Hmmmm and the capitalist don't."
Nope. Because that would violate the non aggression theory.
Do you really want to shoot someone into submission? I don't.
Cheers,
i have one problem with socialist. they see intelectuals as enemies, so what did they in 1950? in eastern europe, they put idiots into all funtions.
That was commies not socialists.
I think we all agree, the past is over.
This is still a dangerous world.
Its a world of madmen and uncertainty
and potential mental losses.
Rarely is the question asked
Is our children learning?
Will the highways of the Internet become more few?
Do you have Blacks in Brazil?
Why dontt the French have a word for entrepreneur?
How many hands have I shaked?
They misunderestimate me.
I am a pitbull on the pant leg of opportunity.
I know that the human being and the fish can coexist.
Families is where our nation finds hope,
where our wings take dream.
Put food on your family!
Knock down the toll booth!
Make the economy gooder!
Vulcanize society!
Make the pie higher! Make the pie higher!
by George W. Bush
(words arranged by Richard Thompson)
Sorry. Couldn't help it. What with all the fine commenters here punching a dead horse senseless, I had to interject a historionacal note to lighten up the discussion.
Misean wrote:
....No it doesn't. However, gov't always reserves the right to shoot you. No one else has that right...
hey Misean, agreed... i'm a gun tote'n liberal...strongly support the 2nd amendment and all the bill of rights.
adams in federalist 46 speaks to my heart.
On 'socialism' & 'capitalism'...
When I was in my 'libertarian' phase in college I went to a 'worker owned bicycle co-op' to build a bike - my primary transportation back then (the first oil crunch).
It was an arrangement where you could 'rent tools & a bench' and work beside the 'co-op members'. Thinking it was similar to a 'Food Co-op' I asked one of them ... "So how can I join?". I was building quite a few bikes back then.
They looked at me dumb-founded and said... "You have to be asked to become a member... do you have a friend or family here?"
I replied "No - but why should that matter?" He said it wasn't like a buying club or food co-op where the benefit was lower cost produce... he said they all make their living from this co-op... it was like a 'collective farm' and they were the worker-members.
A light went off in my head - "Oh so you guys are like a SMALL BUSINESS or PROPRIETORSHIP"... They almost threw me out on the street with my bike half built...
"NO!! We are NOT A BUSINESS... WE ARE SOCIALISTS!!! THIS IS NOT FOR PROFIT - WE SHARE THE WORK AND SHARE THE REWARDS..." Blah, Blah Blah.
I quit arguing and just asked them to describe how it all worked - in the end what they described was a proprietorship or partnership run as sub-chapter s, i.e. no profit, all wages. BFD - no difference. BTW - it held together for over a generation and still might be functioning that way for all I know - last transaction I had with them was in the early 90s & they were still a co-op then. Better success record than many 'privately owned capitalist small businesses' I've done biz with.
Just like there is a difference between 'multi-national corporate capitalism' and 'small biz'... there is a difference between small socialism and 'state run enterprises'. Small co-ops & collectives if the membership is tight & focused can work well.
I would propose that small biz capitalism & small socialism could live side-by-side quite comfortably & without conflict - they really isn't that much difference.
I am not certain the same can be said for multi-national corps & SOEs... I think that mix will eventually either lead to an ugly convergence OR conflict. Either would be a disaster for us peons, IMHO.
Misean
Do you really want to shoot someone into submission? I don't.
Yea a true capitalist would do the profit and losses.
A trivia fact, during WWI Krupp the German Steel maker used a Vickers a British company's design for artillery fuses. After the war, they settled up based on the number of British dead and wounded figuring so many per artillery shell.
let's not misunderstand that the stimulas checks are not a tax rebate, they are an advance on next years's income. There will be a line on the tax form for adding to your gross income, the amount you recieved on your stimulus check. Most of us will be most unhappy that we have to pay tax on the "free money" we received last year.
Bob Dobbs: "The only good stimulus I can think of is infrastructure rebuilding, including putting up a new energy infrastructure. Provides jobs, saves money in the long run, results in less money going overseas."
I agree completely. This is exactly what we ought to be doing. In addition to the benefits mentioned above, it would put us in better position to compete economically going forward.
mock turtle,
Just having a discussion. You and I have almost always been in agreement.
Cheers,
Democracy is a form of government that lets the powerful elites battle each other without killing the peons.
As opposed to the other way of raising armies and razing your enemy.
Vader,
"A trivia fact, during WWI Krupp the German Steel maker used a Vickers a British company's design for artillery fuses. After the war, they settled up based on the number of British dead and wounded figuring so many per artillery shell."
So you agree. Without gov't such bullshit couldn't happen.
Cheers,
More stimulus, lower taxes, rate cuts, rate hikes, in the end all these issues are irrelevant. It all comes down to the very simple fact that amount of energy and consumer bling the US imports must equal the amount of ag, goods, and services exported.
The global economy is roughly structured along the lines or a jail, with the scrowling alfa-stud being market disipline. For many yeats England, and then the US were the masters of this alfa-stud due to their innovation, manufacturing prowess and flexibility. And because of these strengths an ideology of letting the markets rule has held sway. England and the US would often send the alfa-stud's gang called market discipline after smaller, weaker punks who couldn't make the grade. It was often ugly and bloody, but the US always said afterwards that the discipline did those weaklings some good.
But boy how things have changed. After decades of economic decadence, the US is cornered in the jailhouse shower, cowering naked in a corner. Which way should it flee? We have three of the alfa-studs worst crew members--commodity inflation, deflation, and a dollar collapse--blocking all the exits. Which way would you run?
So all the US is really debating is by which means is the market actually going to inject a brutal load of discipline into the US' backside?
My euros are on a gangbang
Misean
May I humbly suggest than any large scale human enterprise generates such bullshit.
Must be something about massive bureaucracies, private, public or government that does it.
Vader,
"Democracy is a form of government that lets the powerful elites battle each other without killing the peons.
As opposed to the other way of raising armies and razing your enemy."
If that is the only benefit of modern gov'ts, then I say down with them.
But that's just me.
Cheers,
Misean.. yes, and when we do disagree once in a while it's a good and fun fight...
(i have learned a lot from the steady posters here!)
except the one troll who shall not be named
Bismark knew it. So did every POTUS til LBJ.
Simply put Guns or Butter
kevin av saltsjöbaden
Yea one of the interesting things that is happening is the decline of the western capitalist market driven ideology being replaced with something different.
Only US firepower keeps it going now. But when a couple of those expensive aircraft carriers get smacked by a cheap quiet sub, it will be the ending.
Vader,
"May I humbly suggest than any large scale human enterprise generates such bullshit. "
You are correct. I dream. I consider you a friend...so I am done on this.
It would be nice that humans get something else...but we won't.
Cheers,
dryfly: "NO!! We are NOT A BUSINESS... WE ARE SOCIALISTS!!! THIS IS NOT FOR PROFIT - WE SHARE THE WORK AND SHARE THE REWARDS..." Blah, Blah Blah.
ROTFLMAO!
In debating universal health care, socialism, tax cuts, etc., consider one fact:
One umbrella organization, CMS, now administers Medicare, Medicaid, and the State Childrens Health Insurance Program. CMS oversees government program that account for one-third of all U.S. health insurance expenditures.
Within two decades, if nothing changes, it will be about one half.
There is no doubt the U.S govt. will go broke unless the U.S. can reduce the extravagant and rising cost of health care. There is also no doubt that higher taxes will be required to pay for health care, and they probably will fall mainly on business and the wealthiest people.
The U.S. will soon start a long march that leads straight to a single-payer govt. program within a decade.
there was a famous journalist and historian, now deceased, who said
"the biggest problems are the result of solutions"
wish i could remember his name
this speaks to what Misean, Vadeer and i and other are talking about me thinks.
YTL: "what if we reduced Defense and health spending to 1/10th of current spending and diverted all of that to debt reduction."
You will wrench medicare from our aging parents' cold dead hands, dude.
If that is the only benefit of modern gov'ts, then I say down with them.
But that's just me.
You need to spend some time in the Middle East. My roommate was Turkish - the stories he told of eastern Turkey scared the crap out of me.
Once you have more than one person - you have gov't. If it isn't a formal state then it quickly forms into ad hoc 'mafias' warlords & clans. The human race is about as 'individual' as dogs. We 'pack' instinctively.
So decide what kind of gov't you will have then prepare to stand up to the alternative packs - both internal & external. Its inevitably bloody.
mock turtle,
I have nothing against governmental infrastructure or scientific projects. Some investments cannot be financed by private sector because the benefits are long-term and external. I only despise Keynesianism which does not look at utility of the spending and the balance of costs/benefits. Economics is supposed to be science about utilizing scarce resources but Keynesianism promises something "for free". If you distribute money as a rebate or start an infrastructure project, you shift resources but you don't create magically anything. If you tax people more for the spending, government spends what people would spend instead. If you run a deficit, you borrow from the future tax income. If you inflate the currency, you take resources from the savers. Somebody must pay (figuratively) for everything. If the utility of the action is greater than the cost, I'd support it. But stimulating for stimulating is wasting resources. And giving away money to be spent, building bridges to nowhere and useless airports in every town (Japan's example) destroy wealth instead of creating it.
"the biggest problems are the result of solutions"
The quote doesn't Google, but it sounds an awful lot like Mencken.
"So you agree. Without gov't such bullshit couldn't happen."
Unfalsifiable. Has there ever been a human society without some form of government? I certainly can't think of one. Aside from ugly and temporary breakdowns in a society.
Who controls the government is always the more interesting question, in my book.
Personally, I do not need the tax rebate checks.
Just send me a 50 inch TV, 3 cases of beer and a nice, comfy chair.
Poszi
you make good points above and it appears we have less of a disagreement that it appeared near the top.
hey by the way i mis-spelled your handle earlier...not intentional..sorry
mcok turtle,
"there was a famous journalist and historian, now deceased, who said
"the biggest problems are the result of solutions""
Might be H. L. Menchen. I searched, but could not verify.
Cheers,
Meantime in the real world :-
Credit Card Issuers Face Bigger Losses Than Expected
CNNMoney.com: 404 Page Not Found
Credit card issuers - ranging from standalone companies such as Discover Financial Services (DFS) and American Express Co. (AXP) to those at banks like Washington Mutual Inc. (WM) and Citigroup Inc. (C) - are likely to suffer worse losses in the coming quarters than initially expected.
CONJURE'S FUN FACTS
Shabtai Shavit, who retired as Mossad's head in 1996, warned yesterday "that Israel has 12 months in which to destroy Iran's nuclear programme or risk coming under nuclear attack itself."
$200 oil? $250?
The U.S. will soon start a long march that leads straight to a single-payer govt. program within a decade.
without a doubt. I think I posted on this point about a week ago or so?
CMS is more powerful than your post implies however. When CMS decides on coverage and on payment almost all the other insurers follow.
So if CMS says "this is now covered" then usually United Health Group and Blue Cross and Kaiser and all the others also say "this is now covered". If CMS says "this is not covered" then they follow as well.
As I discussed last week (I think), this year CMS decided it would revalue how they reimburse Doctors. To be brief, the goal was to increase compensation for "thinking" (i.e. internal medicine, etc) and decrease compensation for "procedures" (i.e. surgery, interventional radiology, interventional cardiology)
all of the insurers are following. Thus, regardless if you see Medicare/Medicaid or not your compensation is affected.
This will profoundly effect Americans. Because you'll see more people willing to go into primary care and less into procedure subspecialties (we have way too many subspecialists in America. I say this as a super-subspecialist).
as health care costs escalate eventually a few things will happen
1) business will increasingly not pay for insurance.
2) business will default on their insurance obligations
3) more people will go on public insurance
4) CMS will have more of a stronghold
however, despite what people think CMS does not have a carte blanche. they must stay within (rapidly increasing) expenditure limits.
so this year as example CMS restructured how it would pay doctors but everything had to be REVENUE NEUTRAL.
eventually it will get so expensive that CMS will have to ration. so you will find more and more things "uncovered". Not unlike what happens in all the socialized countries. and as they are uncovered the private insurers will follow.
and then we will nationalize. Don't believe the hype. it will be different than today but not necessarily better or worse. different. American's won't like it. there will necessary changes: ("what do you mean I can't go to the ER and see a nose surgeon when I've had a runny nose for 2 days????") and there will be reasonable sacrifices ("what do you mean that medicine that costs $500,000 per month won't be used when it can extend my life for 2 months") and hard sacrifices ("what do you mean the backlog of MRI machines is a month. My child had a seizure!!!")
but it will happen. 100% guaranteed.
Anonymous Bosch
Misean
i think you are right that it sound like HL Menchen...
somehow i think it was somebody who died recently...heard it on the radio during a eulogy...
but i'm old the memory aint so good no mo
mp, don't forget that he said if Obama is elected they would need to attack before he takes office. Wouldn't that be a nice first 100 days. Gas at $9. Banks collapsing. Elderly freezing in NE.
mp writes:
CONJURE'S FUN FACTS
Shabtai Shavit, who retired as Mossad's head in 1996, warned yesterday "that Israel has 12 months in which to destroy Iran's nuclear programme or risk coming under nuclear attack itself."
$200 oil? $250?
$20-$25 oil if you don't mind a little enhancement of the Lanthanide Series in your barrel.
Only recently no-longer-headlining-on-Letterman who comes to mind, and subversive enough to have made such an astute statement would be George Carlin.
Economics is supposed to be science about utilizing scarce resources but Keynesianism promises something "for free".
Keynes never did - he was fully aware of the costs & trade offs of stimulus. At a later date the stimulus not only gets taken away but anti-stimulus applied to slow over-stimulated economies... that was according to their Gospel the way to dampen the biz cycle and smooth out.
However a lot of his less cleaver students over-sold the product & didn't push that dampening part so much (or not at all).
That BTW isn't a lot different than the free market types - the greater minds behind it didn't pretend that there weren't costs. There would be cycles - but according the them self-correcting.
A lot of the current crop of gov't leaders who say they are in favor of 'markets' haven't come clean on that part. The love the boom but not the bust so much.
In short we have 'Keynsians' in recession & 'Free Marketers' in recoveries and if that isn't explosively dangerous I don't know what is...
Shabtai Shavit, who retired as Mossad's head in 1996, warned yesterday "that Israel has 12 months in which to destroy Iran's nuclear programme or risk coming under nuclear attack itself."
ahmadinejad is a loudmouth who has virtually no say in his country regarding iranian foreign policy.
those decisions are made by a supreme clerical council which has said repeatedly no first strike against israel...
but our local loudmouth and his sycophant press prefer to quote their loudmouth cause war is good business
mock turtle writes:
cause war is good business
Oil you mean.
Well, we can expect Seb's wright model B to save us,'
Cheers,
You will wrench medicare from our aging parents' cold dead hands, dude.
Emma:
I wasn't actually advocating that we drop defense/medicare by 90%. I was only stating that we could decrease our deficit without raising taxes, and gave a simple example of how it could be done.
and your follow up comment shows exactly what our problem is. nobody is willing to consider reductions in service, or willing to pay more for them.
no matter what one proposes someone will jump and scream
"drop defence, what are we French?"
"drop medicare? what about grandma"
"drop education? will someone think about the children"
"drop farm subsidies- and trust our food to the Chinese?
and so on.
there is no party for me. Because I am very socially liberal, but fiscally conservative. by the latter I really only mean that I believe we should have a BALANCED budget.
I don't care if we spend a lot, so long as we pay for it. I don't care if we have lower taxes, as long as we give something up.
The mastery of the Republican party is that they have sold the average American that you can have both. But the American is all-too willing to believe the message. thus we see MASSIVE deficits during Republican governments. But this does not absolve the Democrats either... because the deficits don't improve much (and even worsen sometimes) under Democratic leadership as well.
we need at least 4 parties
1. socially liberal fiscally liberal
2. socially liberal fiscally conservative
3. socially conservative fiscally conservative
4. socially conserviatve fiscally liberal
right now we have no party #2 or #3.
FWIW:
IMO
Ron Paul would be party #3
and
Dennis Kucinich would be party #2.
YTL,
FWIW
"IMO
Ron Paul would be party #3
and
Dennis Kucinich would be party #2."
So would I.
Cheers,
Qatar Won't Raise Crude Oil Output as Prices Soar
Qatar Won't Raise Crude Oil Output as Prices Soar (Update1) - Bloomberg.com
Oil may reach $170 a barrel this year as demand for fuel grows in the U.S. and as the dollar continues to weaken, OPEC President Chakib Khelil said yesterday.
Who needs the sour stuff, light sweet is in short supply.
Misean writes:
Well, we can expect Seb's wright model B to save us,'
Uh, will that be in time for next week's recovery? I hope so.
The recovery, AND, a stimulus check. Woohoo!
(Whoever) up-thread who suggested a stimulus check a week is completely out of touch. It should be a check-a-month, and big enough to cover a jumbo mortgage. That way we could use our eBay profits to cover food, shelter, and gas for frequent trips to Lefty's.
To get back on topic for just a second - when I read CR's headline this AM (Shiller: More Stimulus Plz) I about soiled my shorts.
I am still stunned - they haven't even sent out all the checks yet. WTF?
Okay back to fixing the world...
Poszi wrote
"I only despise Keynesianism which does not look at utility of the spending and the balance of costs/benefits."
after ready dryfly i realize this sentence can be interpreted two ways (maybe more
first poszi despises all Keynesian economics...(not my interpretation
or
poszi despises that part Keynesian econ which as mis-applied pretends to give something for nothing procuring undesired or unnecessary goods and services
the second interpretation was how i understood the point.
whats interesting is that both supply side and demand side eeconomics have their "portions" of the curve where their theories hold sway.
for example, clearly, where taxation is at 60 70 80 percent their is little or no incentive to R&D, take risk,and invest.
this doesnt mean we should reduce capital gains taxes to zero.
correspondingly..it is pretty well esxtablished economic theory that lesser fair, free market capitalism will not always establish an employment level that is anywhere near 90%...history has shown that free market equilibria can be established at much much lower levels.
This is my demo. I hope they don't call it the No. 2 Party.
ya know i just re read CR headline for this thread
"Robert Shiller writes in the NY Times: One Rebate Isnt Enough"
it reminded me of eric claptons quote about alcohol for alcoholics
one drink is never enough...two is too many
hmmmm
"Robust, sustained inflation is the best method to achieve it. That is what going to happen."
Robust sustained inflation in Russia in the early 90s caused people to stick their heads in their kitchen ovens and turn on the gas. During such periods the weak go to the wall, and over.
Some more news trickling in.
Report: Covert U.S. ops in Iran
Report: Covert U.S. ops in Iran – The CNN Wire - CNN.com Blogs
Misean, i also wanted to write about the army spending and the two oceans, and i also wondered against who is this big army necessary since in the north you have just few polite canadians and in the south are the catholic mexicans.
then it cames to my mind that i forgot the real dangers, the hordes of godzillas hiding in the pacific and the atlantis empire in the atlantic xD
Report: Covert U.S. ops in Iran
BB - my understanding was that has been going on ever since we 'secured' Iraq. Is this really news or for internal consumption?
Bob Dobbs-a second u nailed it for you!
We need a energy conversation project..The trickle down affect and intangibles down the road are to enormous not to realize...
This is paramount to the longevity of the US...
DarthVader-
If you really think the US is going to pay back that 300 billion dollars, I have a bridge in Brooklyn I would like to sell you.
This is my demo. I hope they don't call it the No. 2 Party.
ROFL. we'll be the doo-doos.
actually, I see no reason why the political parties shouldn't be named after excrement. it will keep them modest.
Imagine if we had the doodoos, the dumps, the shits and the craps.
President YTL and the doodoos opposed the shitty and crappy bill. We are still unsure on which side of the fence the dumps lie
dryfly writes:
Is this really news or for internal consumption?
"..told CNNs Late Edition with Wolf Blitzer Congress has authorized up to $400 million"
Thought I'd add it since there's finally a dollar value to it.
Is this really news or for internal consumption?
Am I the only one cynical enough to think that this administration WANTS the price of oil to keep rising? If I was really a conspiracy theorist I might imagine that AIPAC and GS are similarly interested in that result of Isreali saber-rattling.
cd said: "We need a energy conversation project."
I know that wasn't what you meant, but I can't help but make the observation that a conversation is all we've had for the last 30+ years.
dryfly and mock turtle,
Replace "Keynesian" by "Neokeynesian" in most places of my posts above to avoid confusion. Indeed, Keynes wanted to smooth the cycle and increase taxes during the expansion. The current crop of his followers, forgets about the second part.
Although the traditional Keynesianism may indeed sometimes work, I'm nevertheless still skeptical because after living through a modern depression-type event in my country, I'm glad this recipe was not used. It would have had just increased the length of the downturn with only slightly smaller intensity but with larger cumulative pain. I believe that generally most of the economic problems (if not almost all) are created during the expansion phase and there is nothing you can do to undo the damage. Recession only expose the problems. And some cures are worse than the illness.
hmmm, back in third grade when I learned the meaning of "covert", it did not mean "announced by white house and published on CNN.
Either this is yet another example of Bush administration blundering or Dryfly is right. Again. I'm betting on dryfly.
Would it be more of a help, instead of sending out stimulus checks, to just issue credits toward the debt of your choice? And if you have no debt, perhaps to the charity of your choice or towards the debt of your choice?
The problem is not that we don't have enough money to spend. The problem is that we can't control our addiction to debt.
350 yrs. ago we won independence from tyranny. Thank goodness that happened, so that now we have the freedom to enslave ourselves to debt. How fitting that nearing July 4th, we are trying to free ourselves from debt by loaning ourselves more money.
Any solution is going to have to involve the end to easy credit, which has proven irresistable to the common man.
Although the traditional Keynesianism may indeed sometimes work, I'm nevertheless still skeptical
We agree...
Ooops, that would be 230 or so years ago, but whatever, a long time ago.
poszi,
I think mechanisms are available to moderate booming economies and cushion busts, but they run afoul of human nature.
The most recent iteration is a particularly good example as it was never viewed as anything but a recovery. But the decade of the 90s was looked at in the same way. According to those lights, we are never in a boom or bubble - only recovering to our 'normal' conditions.
It's been mooted we could at least require banking operations to expand reserves when the economy is humming - preparation for future difficulties. But the response will always be 'Things are great. We don't need it. Why would you do that now?'
State/County/City bond issues share the problem, however obvious it may be to us here.
WAIT, Ben! I haven't even received my stimulus check yet. When I am finally able to buy that iPod Touch, that will be the tipping point. I will singlehandedly save the world!
The stimulus while giving the impression of providing relief to the public is actually buying time for the banks.
Thank goodness that happened, so that now we have the freedom to enslave ourselves to debt. How fitting that nearing July 4th, we are trying to free ourselves from debt by loaning ourselves more money.
Happy Fourth of July fellow debt-serfs!
BB, I hear that from time to time and of course it's logical.
But two things: i) I see no evidence they're using that time for any serious deleveraging. On the contrary, all energies appear to be devoted to masking the extent of individual banks' problems from view. And ii) given the estimates of gearing, there's not enough time available to do them much if any good.
I hope I'm mistaken on both counts.
Wow; have been reading reviewing all the posts; we should all get college credit for this thread, although I don't quite know what we'd call the course.
One thing: I hear the "starve the beast" people. My answer, more or less progressive is "Overthrow the Empire."
Stop spending hundreds of billions and thousands of lives to defend "American interests" abroad. Those interests are the empire, owned by the few, which we all pay for and get increasingly little benefit from.
End the empire, and you've cut the beast down to the size of a small collie. And then we can all make intelligent decisions on how to move forward.
Outsider: Based on the document you refered to, is there any doubt that Congress should abolish the "Government" called the Federal Reserve?
"But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security." John Hancock 1776
Sunday June 30 3:38 PM EDT
196 posts since this morning and 75 people online. Why am I thinking tomorrow will be a wild day for the markets...
In short we have 'Keynsians' in recession & 'Free Marketers' in recoveries
"We are all Keynsians now" -- R. Nixo
Rome is burning but let's make sure that the populace is entertained with gladiators. Amazing but not totally unexpected as it is election year. To give Shiller credit, he is trying to get money into people's hands who will spend it on the economy. Unfortunately, we borrow the money from one country to spend on another country's goods so we stimulate two other countries. Eventually, the bill comes to be paid and assets have to be sold at fire sales.
As I stated the other day to a friend, let's get the foreclosures and bankruptcies done. The faster you fall, the faster you can get up.
"BB - my understanding was that has been going on ever since we 'secured' Iraq. Is this really news or for internal consumption?"
Apparently they stepped it up late last year to the tune of $400 mill a year. The article has some, but not all details on what they're doing. Trying to destabilize various religious factions, among other things.
This is all about Hersh's latest story on the middle east. Haven't read it yet, but here's the text on Truthout.
t r u t h o u t | Preparing the Battlefield
burnside writes:
i) I see no evidence they're using that time for any serious deleveraging.
ii) given the estimates of gearing, there's not enough time available to do them much if any good.
On i) I'd say they are working on it, banks are trying to sell stuff off, look at what UBS has done. In the meantime paulson is jetting off to meet any CB he can, I'll bet it is to hammer out some deals. Look forward to more creative solutions from the FED.
I'd agree with you on your 2nd point though, still they will try, the alternative is unfathomable.
I think I may as well just say it.
Although we rightly credit Robert Schiller with recognizing (and charting) housing imbalances, it doesn't follow that he's an Austrian or a Keynes purist.
So no reason to find his stance on stimuli surprising.
Stop spending hundreds of billions and thousands of lives to defend "American interests" abroad.
One of the interesting conspiracy theories regarding Iraq/Iran is that both countries will be attacked after challenging dollar hegemony; maybe it's just a coincidence.
If one misguided economic distortion is called a stimulus and two are called stimuli, what do you call 180 million of them?
Ugh, where do they find these pseudo economists?
The idea of a multiplier effect is ridiculous.
Why not just make these rebates permanent? Once a week. That'll be great for economic growth.
It's so amazing that economic fallacies like this are reprised year after year and decade after decade. Frederic Bastiat wrote about these fallacies over 150 years ago yet "economists" are STILL using them!
Stop feeding the tumor.
Outsider: Based on the document you refered to, is there any doubt that Congress should abolish the "Government" called the Federal Reserve?
We can't! do you know why?
Because the Fed won't let us!!! They are in control and they do not want to give up the power!! It is really that simple.
Besides, if we abolish the Federal Reserve for greed or incompetence we would only have to establish another banking organization to, hopefully manage and represent us Globally and we all know the absolute power saying!!!!!
Robert,
If 180 million get $500 checks why does it cost 300 billion?
And what do you call that?
We are in for a rough time, likely very rough.
If we continue our denial and hope, it will be
very rough and very long.
Waiting for better graduates from better
schools will be too little, and far too late.
On paper, the knowledge and productivity of
average Americans was good enough, in 1950.
But now, they both must be improved quickly,
by whatever means necessary. (radically; now)
RGMiron, why abolish just let the congress buy out the member banks, and then maybe just maybe will the FED look for the interest of people AKA antiinflation mandate and not its shareholders AKA bailing out banks through ALF (another lending facility) as someone has pointed out earlier
i really like Alf 
the fix is really quite simple: One constitutional amendment that eliminates ALL campaign contributions; and only allows candidates to receive public funding.
This is foolish, unconstitutional, and it just treats the symptom. The real problem is that too much power is concentrated in Washington, D.C. Pass a flat tax, deregulate, and eliminate earmarking and you'll place a serious dent in the corruption.
Who wants to bet that the stimulus checks are being used, primarily, to offset high fuel costs ?
Interesting comments on this thread. I agree fully with up-thread comments on the need to improve the US infrastructure with new energy sources like solar, wind, and Nuclear power plants. I would also add that we should be building desalination plants since we are running out of water in the West. However, you are forgetting one thing -- the environmentalists and their army of lawyers. There are groups that are dedicated to delaying and defeating each and every one of the projects mentioned above. This is basically what has been going on in the US for the last thirty years and is the primary reason we are in the sad state we are in now vis a vis infrastructure. If you think that environmentalists will support alternative energy sources, you are wrong. They will oppose any project that has even the slightest impact on the environment.
Since I am basically an optimistic person, I hate to throw a turd in the punchbowl. However until we are able to greatly reduce the influence of the so called environmentalists, there will be little or no progress on development of new energy sources in the US.
RGMiron: You are right, the Bear bailout and the continuing alphabet-soup lending windows are only about the FED's self-preservation and nothing more. They could care less about anyone else in this world. Member banks know that if/when the financial system and all its multi-trillion dollar swaps fail, the FED as we know it is finished.
Angry Renter,
Another perspective: I noticed the howl from the right when Senator Obama declined the campaign financing mechanism.
He responded to the realities of soft money - special interests will generally find a way to get money into the process. You'd have to be a chump to exchange the appearance of a populist program for the real thing. So evidently he's no chump.
Was that the death of distributed campaign finance, as it was characterized? Nope. Just calling a spade a spade.
It's broken. Fix it or give it up.
As I just endorsed my $300 "stimulus" check to deposit in savings, I commented to my wife, "I wish we could opt out of this silly program."
It is, after all, not a rebate, not a tax break, not a gift, but a loan with an unspecified interest rate for an unspecified term. I have no doubt that this scheme will benefit some individuals, many politicians, a few retailers and many foreign manufacturers. But I think those of us who neither want nor need this "stimulus" should be allowed to opt out of the program thereby saving all of us a few dollars in the future.
From what I hear on call-in public radio programs (archived on the net) from local NPR stations across the U.S. (I've listened to dozens of them), it's clear that the general public is still confused about what's causing the housing depression. It's still all subprime subprime subprime subprime subprime subprime subprime subprime subprime.
No progress will be made until the public recognizes that it's a return (overshoot?) to fundamentals.
This means deflation. This means decade long recessionary/no growth. This means double-digit unemployment. This means a fundamental restructuring of the U.S. economy.
Wonderin writes:
Why cannot the US economy grow when people spend within the limits of what they earn. Why does the govt want people to consume more than they are earning ?
Wonderin | 06.29.08 - 10:51 am
It's not the government, it's wall st. growth, growth and more growth. if you are a boring utility with small growth and 6% dividend you are nothing. which leads to companies like ge, tyco, siemens etc. which grow only by acquisition. then when things get a little rocky, they divest many of the companies they bought. your revenue shrinks the next quarter, but you have a good explanation as to why it did.
We are going to attack Iran. Watch as oil pushes past $200 a barrel. Watch a carrier group get mauled. See the significant terrorist attack on US soil. This is like Barbara Tuckmans "Guns of August" being replayed live with a new cast of idiots.
But I think those of us who neither want nor need this "stimulus" should be allowed to opt out of the program thereby saving all of us a few dollars in the future.
Well, you could always donate your rebate back to the US Gov't. Or, just don't cash the check.
Nova,
Maybe we'll get a Seven Days in May before a Guns of August.
"With the "2nd half recovery" apparently cancelled, and the immediate effects of the stimulus mostly behind us, it is not surprising that more stimulus is being discussed. But if the stimulus checks go to Saudi Arabia or China, it isn't really helping (there is no multiplier effect)."
Of course...that is where the money is coming from via UST borrowing. The fact is..we don't HAVE the money to stimulate with....
It is, after all, not a rebate, not a tax break
actually it is in fact a tax rate cut against 2008 tax bill due next year.
I didn't qualify for the rebate checks due to last year's income but I still might qualify for the $300 cut, depending on how my income shapes up this year.
BrantW writes:
The fact is..we don't HAVE the money to stimulate with....
Spot on.
This means deflation. This means decade long recessionary/no growth. This means double-digit unemployment. This means a fundamental restructuring of the U.S. economy.
Anonymouse | Homepage | 06.29.08 - 4:37 pm | #
Not necessarily - there are two factors: deflationary pressures and fiscal & monetary response.
The question is which will dominate. Considering the current deflation is structural & the inflationary response is purely policy it comes down to personal opinion: do you believe the policy people will pump paper out fast enough to cause offsetting inflation? I believe they will - I think they've hardly begun.
That doesn't mean the assets currently deflating will recover in 'real terms'... I don't think they will. But they don't have to be - they just need to be covered 'nominally'.
My guess is most of the systemic bank losses will be papered over at the expense of peoples savings & general cost of living. I think you are seeing that already take place and we aren't close to done.
And to those saying 'but they don't have good collateral' - so then change the policy - make collateral unnecessary. Or us fiscal measures like RTC II. There are lots of ways to skin this cat.
the fix is really quite simple: One constitutional amendment that eliminates ALL campaign contributions; and only allows candidates to receive public funding.
This is foolish, unconstitutional,
Since when is a constitutional amendment unconstitutional. Turn off Faux News; it's obviously rotting your brain...
stimulinfinium.
argh. That wasn't supposed to be from anonymouse.
dryfly writes: ...do you believe the policy people will pump paper out fast enough to cause offsetting inflation?
You left one key word out of there: income. Offsetting income inflation. Where is it dryfly? Neither myself nor anyone I know is receiving more than a 3.5-4% increase in wage/salary (and gubment stats say this in aggregate). Their real estate and stock portfolios are tanking.
So what's your evidence that it's happening now? And precisely how will spiraling income inflation occur in the U.S.? With the lack of bargaining power and one of the worst labor markets in decades, if people were going to press for higher wages they already would have.
Face it. This is a deflationary sh!tstorm.
Anonymouse,
Significant wage inflation is in China and all other dollar-pegged countries. It's as good as domestic wage inflation for price pressures of goods.
Great policy: US borrows from China, sends checks to its citizens, who buy goods made in China. Great fiscal policy for China! Plus, China increases furthers its ownership of US assets.
Anonymouse,
Just sent a note to NPR's Morning Edition, as their frequent use of 'subprime crisis' has been on my mind for some time also.
Makes them sound a bit behind the curve, doesn't it?
Someone said rebates are essentially tax cuts. Nonsense! The government is sending people checks. Its not a policy (that implies that some intelligence is behind it); it's a copout. What do we accomplish? The government deficit increases and people spend the checks. How does this help with the housing crisis? How does it help to allieviate the credit crunch? It helps neither. It's a foolish action that a divided, incompetent government can agree on...that's all it is.
You left one key word out of there: income. Offsetting income inflation.
You don't understand money creation - you don't NEED income to go up for that... increasing income is a side-effect not central to the plan... they just create the money from thin air and where it goes is where it goes.
Inflation is NOT wage increases... nor is it price increases... inflation is money supply increase. Period. If it ends up as income so be it. If not that's okay too... to them.
But putting enough money out there will raise prices and usually wages... but not necessarily all the same.
I mean to be honest? If they thought they could pump money into banking & finance and NOT have it ANY OF IT end up in wages... they'd get a big ol'boner and be hot after it. They want this 'targeted' as possible to the banking sector.
They don't even care if housing prices go up or not... if foreclosures go down or not... they just want the financial loses associated with them to go-away & preserve the system.
Any existing fed reg's or policy hurdles are apt to be swept away to make this possible IF they seriously perceive the threat of deflation is real.
I see the deflationary pressures out there, not disputing that - I am not at all convinced we will see deflation (decline in over all money supply) as a result. I've been saying that for years and so far no one can show me real deflation - just the symptoms.
That does not mean we average peons will be 'wealthier' in real terms after the reinflation - we won't - but the losses will get covered & the banks will survive. The rest of us might not, but the banking system will. Bank on it.
poszi writes: Significant wage inflation is in China and all other dollar-pegged countries. It's as good as domestic wage inflation for price pressures of goods.
That's an entirely different issue.
How does rising prices of goods increase the money in people's pockets to pay off their mortgage or buy a house? It doesn't. It takes money away from them, and house prices continue to tank, and the economy continues to sink.
Furthermore, where are these spiraling price increases in products outside of gasoline and some food? Not in autos. Not in durable goods. Not in houses. Not in what drives consumption therefore driving aggregate demand therefore driving nominal GDP. As nominal GDP shrinks to 0, so does inflation. And deflation occurs well before nominal GDP hits 0.
Revro writes:
i have one problem with socialist. they see intelectuals as enemies, so what did they in 1950? in eastern europe, they put idiots into all funtions.
yes idiots, no not the average 'joe six pack', they put joe's cousin 'jake cant bind his shoes'. speaking f shoes, just remember chruscov Wikipedia, the free encyclopedia
Sho...anging_incident
so everyone who thinks capitalism won cold war because it was superior, no it wasnt. its just impossible to loose against idiots in charge
Remember 'Heck of a job, Brownie'? Are you saying W is a socialist?
dryfly,
I appreciate all you say.
But I think the idea presupposes a passive public, and I'm not at all sure we have that.
dryfly writes: Inflation is NOT wage increases... nor is it price increases... inflation is money supply increase. Period. If it ends up as income so be it. If not that's okay too... to them.
I respect your opinion a lot, so I'm not intending to insult you here. But your response didn't answer my question, or perhaps it did in the "they just create the money from thin air and where it goes is where it goes" part. That's basically an "I don't know," which makes your argument an assertion.
My unanswered question was, And precisely how will spiraling income inflation occur in the U.S.? I'm asking for scenarios whereby, as I stated in the second comment, inflation can increase the money in people's pockets to pay off their mortgage or buy a house?
The typical one given is rise in wages/salaries/assets. But then I already stated, With the lack of bargaining power and one of the worst labor markets in decades, if people were going to press for higher wages they already would have.
And the population's asset portfolio is going down, both stocks and real estate. So how do people begin paying off their mortgages and begin buying houses again? Their income isn't there to do it. This means more defaults, fewer house sales, fewer jobs, and less aggregate demand leading to falling nominal GDP leading to deflation.
Anonymouse,
Argentina's example is not convincing?
You need to change some details, but it's a good example of an inflationary collapse.
Anonymouse,
I don't know what a deflationary shitstorm is, not being an economist, but why do you think there must be some income inflation to keep pace with the papering over of bad debt?
Incomes will not keep up with inflation and therefore standards of living will decline. It really does seem that simple.
But I think the idea presupposes a passive public, and I'm not at all sure we have that.
burnside | 06.29.08 - 5:39 pm | #
No - I assume a somewhat 'agitated' public. And faced with job loss they will demand action - almost ALL action results in increased money supply.
I seriously doubt policy officials would come out and say "Lets jack up money supply & velocity to save the banking system... oh and if you can by pass workers wages... do it."
But they would do it if they could because it would make the resetting of the banking system less costly (to them).
Everything they are going now - the TAF, the forced marriages of banks funded by the fed backing, the low rates in spite of 'non-core' price inflation... tell me this policy is in place now. Save the banks via targeted reinflation - worry about the resultant 'systemic inflation' later.
Its that last part that's gonna really suck - we are in the early phase I believe.
It will get ugly if the 'Sizzler' performs as advertised...if they turn out to be a credible threat to the US projection of air superiority then when they are used we will raise the ante...which starts at tactical nuclear devices.
Anon,
Seems to me what's proposed is the FED will destroy the economy before it will permit banking system insolvency.
Possible. I certainly hope not.
The correct stimulus would be to stop the Imperialistic war mongering and spend the trillions of dollars at home on infrastructure: renewable energy, public transportation, schools.
poszi, sportsfan,
I think I addressed that in my comment at 5:42 pm, but I'm really just wanting to know, how do people begin paying off their mortgages and begin buying houses again? without any spiraling income increases. Any scenarios will do. Will the Federal Reserve and the Treasury with assistance from Congress buy up all outstanding underwater mortgages? Because outside of that, or sending people their mortgage check every month for 30 years via a new "stimulus plan", then incomes must rise to answer the question posed above.
almost ALL action results in increased money supply.
You've got me there. I missed that.
I respect your opinion a lot, so I'm not intending to insult you here. But your response didn't answer my question, or perhaps it did in the "they just create the money from thin air and where it goes is where it goes" part. That's basically an "I don't know," which makes your argument an assertion.
No it is not an 'I don't know' its an 'It doesn't matter' so long as enough of this ends up papering over the banking system liabilities - it might not paper over yours or mine.
It doesn't have to result in us having more income. Nor does it have to result in GDP>0. It is possible to have increasing money supply (inflation) and still have GDP
anonymouse:
people don't have to pay off their mortgages.
instead, we could in theory have "the boner situation" (listed above).
money is created to bail out the banks.
as example, an RTC II is set up, it buys back ALL the bad mortgage paper causing the banks to go whole. It ratchets up the deficit tremendously.
people's income doesn't go up a whiff. but monetary inflation sure will.
dryfly writes:
No it is not an 'I don't know' its an 'It doesn't matter' so long as enough of this ends up papering over the banking system liabilities - it might not paper over yours or mine.
Again, how do people begin paying off their mortgages and begin buying houses again? I'll take any scenario as your argument, and say thank you sir. But just saying "inflation will solve it" is not an argument, it's an assertion.
. . . how do people begin paying off their mortgages and begin buying houses again?
With great difficulty no doubt, and many do not survive long enough to pay off and buy again.
It's not about the individual payor or buyer. It's just about keeping the system appearing intact on the surface.
Seven and a half months from now, all hell breaks loose and it doesn't matter which guy is standing there.
Yearning To Learn writes: ...as example, an RTC II is set up, it buys back ALL the bad mortgage paper causing the banks to go whole.
That's exactly what I'm asking for, an argument as to precisely how this housing deflation gets resolved.
Thank you sir. I respectfully disagree that this will occur.
anonymouse:
here's what I think will really happen:
Fannie and Freddie will continue to be pressured to "refinance" bad mortgages. Their caps will continue to be increased. In doing so, a lot of bad debt will be loaded into Fannie, Freddie, Ginnie and probably FHA.
several of these firms (Fannie/Freddie) have opaque financials at best, so it will really be hard to know what is in them.
Loading them up like this will allow the private banks to offload a lot of risk. In a few years, Fannie and Freddie will be found to be insolvent.
They are obviously too big to fail. also, it will be a few years from now so people will have "forgotten" where these bad loans really came from. And thus, few will make a sound when they are nationalized.
and all the free marketers will say "see, that's what happens when government gets involved. They're not smart and efficient like we are".
by the way:
this is already happening.
sorry, I'd love to stay and debate, but I'm being summoned by my master to do some chores.
(sigh)
oops lastly before I go:
I agree: no wage price spiral due to globalization and wage arbitrage.
that is unless we get a major protectionist movement (possible) and then you could see it happen.
"The question is which will dominate. Considering the current deflation is structural & the inflationary response is purely policy it comes down to personal opinion: do you believe the policy people will pump paper out fast enough to cause offsetting inflation? I believe they will - I think they've hardly begun."
What many have said the past year or two: if left to itself, inflation. But it won't be left to itself.
Yearning To Learn,
Thanks again for a plausibly laid out argument.
I'm fairly convinced the above cannot occur fast enough to keep millions more from defaulting, leaving house prices spiraling down further and wreaking more joblessness and reducing aggregate demand (thereby inducing general price deflation, which is my argument).
It's just such a massive problem. It would require a 10 trillion dollar gubment bailout, which is about the amount of "phantom wealth" created by the speculative mania as calculated by Dean Baker.
Anonymouse writes:
how do people begin paying off their mortgages and begin buying houses again?
They don't. Until prices drop enough for demand to come in again.
In the meantime banks writeoff and the FED keeps bailing so that there won't be systemic failure.
The USD will continue it's precipitous decline. The FED will maintain rates or lower, it's all they can do for this year. At least that's my opinion.
Again, how do people begin paying off their mortgages and begin buying houses again? I'll take any scenario as your argument, and say thank you sir. But just saying "inflation will solve it" is not an argument, it's an assertion.
Anonymouse | Homepage | 06.29.08 - 5:56 pm | #
1) Houses are NOT the only things people buy.
2) Mortgages are not the only way banks make money.
3) If we absolutely HAVE to have people buying lots more McMansions...
then foreclosure & rapid 'rehabilitation' of personal credit so that people can buy again is as credible an alternative to 'saving housing' as is direct subsidy & bail out. In some ways more actionable & politically less problematic from the 'fiscally prudent' citizens POV.
All will result in significant money supply creation.
Regardless it all starts with a reloaded banking sector. So the fed finds ways to reload them - job one - aided & abetted by treasury & congress. Very inflationary if taken all the way to the end game.
I think we see that starting now.
But, but, I thought the "experts" were saying that we live in a resilient economy? Therefore, no need to send money to people?
Federal Budget DEFICIT has gone from
$5 Trillion to $9,4 trillion in last seven years. If bush tries real hard he can double the amount of Federal debt during his time in office. That's right he has a real good shot at creating more debt than all the other presidents combined. Nice Republican legacy.
Add in the balance of payments deficit of $800 trillion and you have a nice double wammy.
The total US debt (governmental, private and corporate) is now over 300% of GDP and growing exponentially.
But the "debts don't matter" crowd still think that everything is aok (at least until the November election).
Truthiness is such a wonderful philosophy in life. Which I could do it, click my slippers spin three times and say I believe.
"It's been mooted we could at least require banking operations to expand reserves when the economy is humming - preparation for future difficulties. But the response will always be 'Things are great. We don't need it. Why would you do that now?'
-burnside
I think that would likely be the most elegant way to smooth things. And I also agree with poszi that nearly all economic problems are created during the expansion phase. I believe the Chinese are increasing reserve requirements right now to cool off speculation and inflation. Interesting to see how that works out. I remember when the monetarists in the '80s were so optimistic about managing the economy through interest rate changes and were always crowing about how their way was superior because it wasn't affected by politics...
BB writes:They don't. Until prices drop enough for demand to come in again.
Okay, I agree. But that crushes the consumer. Loss of 10 trillion in housing assets the population thought was there; loss of jobs due to real estate hitting a much lower floor, whatever and whenever that may be; loss of consumer confidence as this occurs.
I don't see how that allows aggregate demand to increase, and if aggregate demand doesn't increase, neither does nominal GDP and neither does price inflation.
Federal Budget DEFICIT
Actually, John, that's the federal debt which of course is an accumulation of the deficits.
On Bush doubling the debt during his terms, I'm reminded that Reagan managed to triple the national debt during his terms.
I've played those 3X, 2X slot machines in Vegas. It didn't work out any better than I expect this will.
I don't see how that allows aggregate demand to increase, and if aggregate demand doesn't increase, neither does nominal GDP and neither does price inflation.
Aggregate demand won't increase as a feeling of poverty (along with some real poverty) increases. Prices, though, will continue to increas as the dollar continues to fall in purchasing power. Americans will be screwed for years to come.
Personally, I think sending out money is a great idea. What took them so long to figure it out?
How about specified tax rebate checks?
For example this month I need:
Food 100 bucks
Gas 125 bucks
Help with mortgage 200 bucks
Beer 50 bucks
TOTAL 475 bucks a month
You know, work out some type of monthly program with people. Some will need 1500 month. Oh well. I mean like it is not hard to create a zillion dollars in seconds.
And this MUST be indexed to the massive inflation down the road.
Where do we sign up?
dryfly,
Thanks for your responses. I don't necessarily disagree with some of what you write; I'm afraid we're talking past each other, so I'll leave it there.
I'm fairly convinced the above cannot occur fast enough to keep millions more from defaulting, leaving house prices spiraling down further and wreaking more joblessness and reducing aggregate demand (thereby inducing general price deflation, which is my argument).
That is NOT inconsistent with what I'm saying - price deflation of assets can occur with price increase in other sectors (like resources, labor, etc.).
Price deflation is NOT deflation.
Price inflation is NOT inflation.
Its the growth in money supply vs. credit destruction (acting as money) that matters. Which wins in this time frame? Who knows.
That's the point I'm trying to make... I can see housing prices continue to decline, stock market decline... and yet food & energy continue to skyrocket IF money supply increases too much, too fast.
I mean you envision ugly - if what I envision could happen would be FUGLY.
The reason the fed & congress would allow it to occur is because (1) they don't know they are setting us up for that & think everything is nicely sterilized or (2) don't care because the banking sector is more important to them than anything else. Pick one or both.
sportsfan,
No way in the largest economy on the planet (with U.S.consumer spending alone accounting for about 23% of gross world product) that if nominal U.S. GDP shrank then U.S. prices could still increase. Maybe for one month, but I doubt even that. If nominal U.S. GDP actually contracted then goodbye BRIC/OPEC.
Thanks for your responses. I don't necessarily disagree with some of what you write; I'm afraid we're talking past each other, so I'll leave it there.
Same here - have a good end of weekend.
Is aggregate demand really falling or is spending just shifting-more on fuel and food, less on cars and houses. If the latter, how will more stimulus help? Extending unwmployment makes sense as it targets those whose demand actually is falling. But handing out checks to everyone, how does that help?
Doc?
When I read 'elegant' in that context, I catch the faint fragrance of theoretical math studies.
Or do I?
I suggest that we help defeat the Taliban by buying all the Afghani opium.
Then we send opium out instead of a stimulus package.
No way in the largest economy on the planet (with U.S.consumer spending alone accounting for about 23% of gross world product) that if nominal U.S. GDP shrank then U.S. prices could still increase. Maybe for one month, but I doubt even that. If nominal U.S. GDP actually contracted then goodbye BRIC/OPEC.
The increase in nominal dollars? Sure.
If measured in 'real inflation adjusted dollars', gold, bbls oil, bushels corn, euros, yen... etc., then I don't know.
Also BRICs could go negative GDP along with US and we could still see price increases... IF EVERYONE INCREASED MONEY SUPPLY!!!
Insane? Sure. Possible? Absolutely.
If it happens we've all been tele-transported to Bizzaro World.
dryfly,
I understand your point. I'm perfectly willing to accept inflation as an increase in money and credit supply (or just money supply). All I've been referring to with the world "inflation" is an increase in aggregate price levels. So please mentally replace every time I've referred to "inflation" to mean "aggregate price levels."
I think they'll fall hard in 2-5 years.
But handing out checks to everyone, how does that help?
Aheadofthecurve | 06.29.08 - 6:28 pm | #
I think you have to ask... helps who? Probably helps the d00dz sending out the checks heading into November.
Ya I'm cynical.
dryfly writes:Insane? Sure. Possible? Absolutely.
Now I fully understand your argument.
Thank you sir. It is quite insane policy. I don't think world debt-holders would be asleep deep enough to ignore ongoing hyperinflation. But it's possible.
plschwartz,
With a worldwide shortage of morphine reported, why didn't you suggest this long ago?
We probably should be planting poppies here - the ultimate (and a legitimate) cash crop.
plschwartz writes:
I suggest that we help defeat the Taliban by buying all the Afghani opium.
They are planting wheat , it offers better prices than opium.
kis writes:
"Am I the only one cynical enough to think that this administration WANTS the price of oil to keep rising?"
Kona's Gold writes:
"The Fed could have crushed the speculators yesterday with just a quarter point hike and the threat of further hikes"
It's been so obvious for years, and more so during the last 18 month oil and commodity price run-ups, that the fed has no interest whatsoever in controlling inflation, that it raises the question of what their real intention is regarding inflation in general and the impending oil, ag and material price spike blow-off in particular.
On the one hand their efforts "possessing or acting with the desire to do noble and romantic deeds, without thought of realism and practicality, romantic to extravagance, absurdly chivalric, apt to be deluded", cause me to think the leader's name should be changed to Ben Quixote.
On the other hand there arises the possibility that their plan is more 'cunning, scheming, and unscrupulous', involving perhaps words such as 'rationing', 'price controls' or worse 'nationalization', in which case the leader's name might best be changed to Ben Machiavelli.
"Probably helps the d00dz sending out the checks heading into November."
Bush isn't on the ballot. Congress-not sure it will make much difference in any key races. Will it help McCain? I doubt it; I also think Charlie Black is wrong about a terrorist attack helping McCain. It will just point out that the current policy, which he supports is a failuer.
I think they'll fall hard in 2-5 years.
Anonymouse | Homepage | 06.29.08 - 6:31 pm | #
I hear ya. But I'm telling ya - if we see an explosion in money supply - nominal prices for inelastic products will NOT fall - they will explode in price even if asset prices (especially 'real prices) decline.
I am not a Chicago School junkie but they got this part right I think - inflation is always a monetary event. Always.
I'd appreciate if any of you guys could clear something up for me. Are falling prices always bad? Now the 1930s had falling prices and the economy was obviously terrible. But my understanding is that prices fell from 1870 up to right before WW I and that was a time of relative prosperity, though punctuated by brief bank panics. Am I off base here?
When I read 'elegant' in that context, I catch the faint fragrance of theoretical math studies.
-Burnside
Not a mathematician, but I've known a few and true enough that is where I heard that phrase!
Aheadofthecurve writes: I'd appreciate if any of you guys could clear something up for me. Are falling prices always bad?
Take a trip to Japan. Is that good or bad? If former, no. If latter, possibly yes.
Bush isn't on the ballot. Congress-not sure it will make much difference in any key races. Will it help McCain? I doubt it; I also think Charlie Black is wrong about a terrorist attack helping McCain. It will just point out that the current policy, which he supports is a failuer.
My gut feeling is it is all about congress - Bush went along because (1) legacy, he doesn't want to go out w/ a recession - good luck w/ that and (2) they don't want congress to do something really scary (from a GOP perspective) and have to vote against & veto. These preempt congressional actions.
As far as McCain? My guess is Bush hates him - that was established in SC 200 & first term. I think W believes there will be fewer skeletons unearthed from a McCain admin than an Obama admin. Obama's gang will be all over the records & files. Pay back & to be avoided. JMHO.
Aheadofthecurve writes:
[dryfly] "Probably helps the d00dz sending out the checks heading into November."
Bush isn't on the ballot. Congress-not sure it will make much difference in any key races
It helps all incumbents who are on the ballot. It gives the appearance they are doing something and, even more importantly, doing something for US.
There is no dispute in Washington over the desire to avoid a revolt at the ballot box. On that subject there is wide bipartisan support.
What concerns me is not politicans calling for more bailout checks, but people like Shiller, who should (and I thought did) know better.
This should shut up the folks over at Mish's site for a while. Gov't checks in the mailbox every month and deflation, HA!
Dryfly wrote
Inflation is NOT wage increases... nor is it price increases... inflation is money supply increase. Period. If it ends up as income so be it. If not that's okay too... to them.
dryfly...i would suggest that inflation...the increase in the money supply well beyond the growth in the production of goods and services...always RESULTS in either increased wages, increased prices or both within a closed system.
international free trade stymies what i wrote above...for awhile....
that is,when you are trading with a country like china that produces huge quantities of inexpensive goods with incredibly cheap labor... wage and or price inflation is forestalled for awhile...
Take a trip to Japan. Is that good or bad? If former, no. If latter, possibly yes.
Anonymouse | Homepage | 06.29.08 - 6:44 pm | #
Even if I went there I don't think I understand their culture well enough to say whether their QOL is better today or during the boom. Many things I've read actually suggest to me that Japan is a more livable place today. Once grinding poverty is overcome, there is no correlation bewteen growth in GDP and happiness or real QOL.
It's amazing how history repeats.
As soon as a country adopts a fiat currency it's only a matter of time until they get themselves in trouble and try to print their way out with disasterous results.
It's fascinating to watch the predictions made by people like Marc Faber coming true so soon.
People should seriously look at moving their wealth out of the country.
I'd appreciate if any of you guys could clear something up for me. Are falling prices always bad?
If you have lot of debt they can be a disaster in the short-term, but long term it's harder to make that case.
The US has had several depresions in its history, each one followed by immense prosperity.
In the past we've chosen a path that has produced very good results.
Apparently now it's time to slay the golden goose.
I'd appreciate if any of you guys could clear something up for me. Are falling prices always bad?
No - not always. Depending on the structure of the economy & your own individual finances it can be 'unfavorable'... 'favorable' or 'neutral'.
Price deflation favors savers and generally favors labor intensive operations priced for the here and now.
It usually is unfavorable to anyone with leverage, debt or long lasting capital... and generally is unfavorable to production processes requiring sizable fixed investment (equipment, research, physical inventory, etc.).
I mean look at your biomed companies - how long it takes them to develop a product before it cash flows... then imagine they were looking at a deflationary environment where they invest in R&D and capital today... but the product sells for less money than anticipated later just due to deflationary pressure? If you anticipate that condition going forward do you even start the R&D today?
Now if you had to borrow on top of that (say from a VC) it makes the deflationary pressures even greater UNLESS they provide negative interest rates (pay you to take the money - unlikely).
It makes the hurdle much higher before you go forward with big long term projects.
Once grinding poverty is overcome, there is no correlation bewteen growth in GDP and happiness or real QOL.
Aheadofthecurve | 06.29.08 - 6:54 pm | #
I agree.
ac-I'm not sure that falling prices necessarily implies a depression. Prices can fall because of technological improvements (Moore's Law in computers, long distance phone service falling because of automated switching, etc.).
AotC,
Our policy of accepting ~2% annual inflation tends to mask those gains. But they're real enough.
Aheadofthecurve writes:
ac-I'm not sure that falling prices necessarily implies a depression. Prices can fall because of technological improvements (Moore's Law in computers, long distance phone service falling because of automated switching, etc.).
Aheadofthecurve | 06.29.08 - 7:03 pm | #
Again - price declines are NOT deflation. Decline in money supply is deflation.
In the Moore's law example there was always more money (inflation) so instead of buying the same computing power for less they spend almost as much or MORE for much more computing power. In a deflationary world that becomes a much tougher proposition.
several posters above talk about threats to attack iran, stimulus checks and other things are being used to affect the election
this is better ( or worse depending...)
Lieberman says we are going to probably get a domestic terrorist attack next year, so we all better vote Republican
Lieberman: U.S. May Be Attacked In 2009 - Face The Nation - CBS News
now what is plainly stupid about this is that Lieberman implies that terrorists wait to hit us till the first year of a presidents term to test that new president.
anybody with half a brain who has tracked terrorist hits against the us knows they try to hit US interests here and or abroad as often and when ever THEY CAN
there have been a handful of refinery explosions in Britain and the US that were chalked up to industrial accidents, that were likely terrorist hits.
have people forgotten the airbus that crashed into rockaway new york a month or two after 911...claimed to be a desing error in the plane. bull s#i^ how many airbus A300 were IMMEDIATELY grounded.
US got hit early middle and late in clintons term. remember the 747, that blew up off the south coast of long island and they blamed boeing fuel tank wiring. how many 747s were immediatelly grounded?
remember egyptian air flight 990 being flown into the sea as the copilot screamed terrorist tell tail prayers picked up by the black box?
Lieberman is pathetic
More fear mongering by the neocons
the terrorists will strike when ever..why the f haven't we wiped them out in afghanistan and the tribal regions??? why does Bin Laden continue to suck air.
what i think about Lieberman is not polite to say.