The Future of the United States of America

[Rolling Thunder]

Y'know Dele, I once worked out a theory of eco-politics that said that once positive growth returned the government began to slowly increase taxation and interest rates- very slowly, so as to curb the excesses of the market and, to a lesser extent, consumer spending, and pay off the debts. Raising the rates dramatically is likely, once the recession is over, to pitch us straight back into negative growth...

 

[Horticulture]

So what you are essentially saying is that Fed made the markets more volatile and more unstable in the past through their mistakes but they have come up with new theories that somehow makes it impossible for them to do mistakes and hurt the economy. This is also known as This time it's different [http://www.incademy.com/courses/Fifteen-favourite-fallacies/%22Investing-is-just-gambling-anyway,-so-why-not-take-a-few-chances%22/15/1041/10002] -fallacy. Easy example of Fed still doing mistakes can be found by looking at them inflating the money supply with interest rate cuts on 21th century when there was absolutely no need for such cuts and then raising them too late which is followed by worldwide recession/depression. Doesn't that sound awfully familiar to you?

Youre right that they are not playing it tight now, but they will have to raise the rates very high to deal with the inflation as soon as some light can be seen at the end of the tunnel.

The potential for the Fed to make mistakes strikes me as a poor reason to forgo a coherent monetary policy. The effects of this policy are pretty well understood, and, before you continue to accuse me of delusional thinking, they've been thoroughly analyzed over decades upon decades. I'm honestly insulted, having taken great pains to explain the basis for my positions, to be accused of wishful thinking, especially when such accusations are delivered along with positions for which no coherent explanation is offered. "The Fed had a monetary policy, and then there was a depression," which appears to be the extent of your argument, isn't terribly convincing.

 

[Rolling Thunder]

Don't bother Horticulure, arguing with Dele is like bashing your head against a brick wall. He simply ignores the bits he can't argue against and repeats his arguments, parrot-fashion, namely that of blaming government and that since my theory has flaws, his has won, despite it's own flaws.

 

[Dele]

Y'know Dele, I once worked out a theory of eco-politics that said that once positive growth returned the government began to slowly increase taxation and interest rates- very slowly, so as to curb the excesses of the market and, to a lesser extent, consumer spending, and pay off the debts. Raising the rates dramatically is likely, once the recession is over, to pitch us straight back into negative growth...

I never claimed anything else. Unfortunately for your theory Fed is currently playing extremely aggressive expansion of money supply and at some point they most likely will have to make a choice between quickly rising interest rates or high inflation.

The potential for the Fed to make mistakes strikes me as a poor reason to forgo a coherent monetary policy. The effects of this policy are pretty well understood, and, before you continue to accuse me of delusional thinking, they've been thoroughly analyzed over decades upon decades. I'm honestly insulted, having taken great pains to explain the basis for my positions, to be accused of wishful thinking, especially when such accusations are delivered along with positions for which no coherent explanation is offered. "The Fed had a monetary policy, and then there was The Greatest Depression Known To Man," which appears to be the extent of your argument, isn't terribly convincing.

Amusingly if we replace the words "Fed" and "monetary" with "Government" and "financial" you basicly have the Keynesian defensive argument for existance of interventionistic state.

Speaking about your position, I still have no idea what it is. My basis that Fed makes the market more volatile and more unstable than market-determined interest rates through errors in monetary policy caused by human error is still the same. You on the other hand seem to gone from "Fed doesnt do mistakes" to "Okay Fed did mistakes but doesnt do them now" to "Okay Fed still does mistakes but it still is important".
What exactly is your position?


(Edit: Fondant, if you see a flaw go ahead and press on it and make the whole thing fall apart like I did to your "saving is evil" -argument. Not pointing out the obvious flaws in our arguments is counter-productive)

 

[Rolling Thunder]

High inflation can be curbed by means of governmental preassure/aid on the private sector to improve supply. Ergo- with nationalised banks, it should be explained to the bankers that business loans are to be given more favourable conditions that personal loans, it should also be explained to petrol retailers that unless they cut their prices considerably more the they will be made to suffer.


High inflation can be curbed not just by means of monetary policy. Monetary policy is hardly "the be-all and the end-all" (recognise the quote and win a cookie!).

 

[Dele]

High inflation can be curbed by means of governmental preassure/aid on the private sector to improve supply. Ergo- with nationalised banks, it should be explained to the bankers that business loans are to be given more favourable conditions that personal loans, it should also be explained to petrol retailers that unless they cut their prices considerably more the they will be made to suffer.


High inflation can be curbed not just by means of monetary policy. Monetary policy is hardly "the be-all and the end-all" (recognise the quote and win a cookie!).

So you would lead a futile combat against high inflation with price controls (leading to rationing) and other destructive socialistic methods while not touching the true source of inflation, the monetary policy? O villain, villain, smiling, damned villain!

 

[Bulletinmybrain]

How about we just kill Wall. St executives? They aren't helping the situation, infact they are most likely hurting it with there complete and utter retardation.

Oh yeah, and corporations, need to get their own shit together and stop begging the government for money when just a week ago, a executive got plane trips and such while the common worker was having a shit taken on their head.

 

[Rolling Thunder]

High inflation can be curbed by means of governmental preassure/aid on the private sector to improve supply. Ergo- with nationalised banks, it should be explained to the bankers that business loans are to be given more favourable conditions that personal loans, it should also be explained to petrol retailers that unless they cut their prices considerably more the they will be made to suffer.


High inflation can be curbed not just by means of monetary policy. Monetary policy is hardly "the be-all and the end-all" (recognise the quote and win a cookie!).

So you would lead a futile combat against high inflation with price controls (leading to rationing) and other destructive socialistic methods while not touching the true source of inflation, the monetary policy? O villain, villain, smiling, damned villain!

"Better a witty fool than a foolish wit". And, since you clearly have never read an economics textbook, I will educate you on the causes of inflation:

Demand pull: Where an excess of consumer demand results in the prices increasing due to the fact supply cannot keep up with demand.

Cost-push: When the costs of businesses go up. The most classic example of this was the oil price spike, where stock speculation resulted in massive rises in the price of petrol, causing the transit costs of every business to rise and causing them to pass the costs on to the customers, blah, blah, blah.

Monetary: codified by Friedman, who claimed 'Inflation is everywhere a monetary phenomenon", he linked a type of inflation to expansions in the money supply, though in my opinion this is just demand-pull inflation caused by expansionary fiscal policy. But since the expansive fiscal policy here is to correct a deficet in consumer demand, one will not have that problem until the recession is well and truly dead'ed.

And I find myself admiring the irony of a man living in Norway critiquing socialism.

And I see no need for rationing, frankly. In my opinion, we simply need to use the power of the state to break down certain companies, in particularly those such as the supermarkets, and petroleum distributors, into smaller components to encourage them to actually compete instead of cartel-ising.

 

[Dele]

How about we just kill Wall. St executives? They aren't helping the situation, infact they are most likely hurting it with there complete and utter retardation.

Oh yeah, and corporations, need to get their own shit together and stop begging the government for money when just a week ago, a executive got plane trips and such while the common worker was having a shit taken on their head.

Your avatar no longer gives me a massive headache. Thank you.

"Better a witty fool than a foolish wit". And, since you clearly have never read an economics textbook, I will educate you on the causes of inflation:

Demand pull: Where an excess of consumer demand results in the prices increasing due to the fact supply cannot keep up with demand.

Cost-push: When the costs of businesses go up. The most classic example of this was the oil price spike, where stock speculation resulted in massive rises in the price of petrol, causing the transit costs of every business to rise and causing them to pass the costs on to the customers, blah, blah, blah.

Monetary: codified by Friedman, who claimed 'Inflation is everywhere a monetary phenomenon", he linked a type of inflation to expansions in the money supply, though in my opinion this is just demand-pull inflation caused by expansionary fiscal policy. But since the expansive fiscal policy here is to correct a deficet in consumer demand, one will not have that problem until the recession is well and truly dead'ed.

And I find myself admiring the irony of a man living in Norway (???)critiquing socialism.

And I see no need for rationing, frankly. In my opinion, we simply need to use the power of the state to break down certain companies, in particularly those such as the supermarkets, and petroleum distributors, into smaller components to encourage them to actually compete instead of cartel-ising.

"Wisely, and slow. They stumble that run fast." Monetary inflation was the only kind of inflation before Keynesians messed the terms and started calling short term changes in prices due supply and demand "inflation", which is problematic as it doesn't tell anything about the real source of constantly rising prices which is expansions of money supply.

I must also say that claiming "monetary inflation" to be "demand-pull inflation" is completely wrong and is not supported by any graph. Take a good look at Zimbabwe for example. Why it is the only country to have hyperinflation in Africa when people of Angola and Congo and Sudan have the same demand, if not more for basic goods such as food and water?

Breaking down companies has little to no effect on higher levels of inflation and is not a solution when facing runaway inflation and cartels are illegal. Instead of socialism all there needs to be is more competion and the prices will be pushed down.

 

[Rolling Thunder]

1. Actually, you are utterly wrong about Zimbabwae. It has, and at the time Mugabwe began to print too much money had, not enough food, because Mugabwe forced the white farmers off their lands. I know this, because one of those white farmers taught me biology.

So tell, me why is Keynes wrong aside from your rather petty, continual whining that 'Keynes is teh wrongz, 1eleventy11'. Please try and back it up with appreciable facts.

 

[Horticulture]

The potential for the Fed to make mistakes strikes me as a poor reason to forgo a coherent monetary policy. The effects of this policy are pretty well understood, and, before you continue to accuse me of delusional thinking, they've been thoroughly analyzed over decades upon decades. I'm honestly insulted, having taken great pains to explain the basis for my positions, to be accused of wishful thinking, especially when such accusations are delivered along with positions for which no coherent explanation is offered. "The Fed had a monetary policy, and then there was The Greatest Depression Known To Man," which appears to be the extent of your argument, isn't terribly convincing.

Amusingly if we replace the words "Fed" and "monetary" with "Government" and "financial" you basicly have the Keynesian defensive argument for existance of interventionistic state.

Speaking about your position, I still have no idea what it is. My basis that Fed makes the market more volatile and more unstable than market-determined interest rates through errors in monetary policy caused by human error is still the same. You on the other hand seem to gone from "Fed doesnt do mistakes" to "Okay Fed did mistakes but doesnt do them now" to "Okay Fed still does mistakes but it still is important".
What exactly is your position?

Shocking. An economic argument based in mainstream economic thought. You might think I'd even read a textbook or two.

Here's the bumper-sticker edition of my argument: The Fed can make mistakes, but is essential to a properly functioning financial system.

 

[Dele]

1. Actually, you are utterly wrong about Zimbabwae. It has, and at the time Mugabwe began to print too much money had, not enough food, because Mugabwe forced the white farmers off their lands. I know this, because one of those white farmers taught me biology.

So tell, me why is Keynes wrong aside from your rather petty, continual whining that 'Keynes is teh wrongz, 1eleventy11'. Please try and back it up with appreciable facts.

How did you manage to turn that one around? I criticized your claim that there is no monetary inflation, but it is all caused by demand, by taking Zimbabwe as an example. I completely agree that Zimbabwe started having problems (larger than usual) after Mugabe went forward with his racist policies.

Since you did not specify any Keynesian theory, it seems that I cant do anything but say what is generally wrong with Keynesian economics. Keynesians lack faith on the good old free market. They believe that there is something inheritly wrong with it and they must overcome these problems with their superior intelligence or theories. To some, it may be the plain old need to be in control. Other than that they dont have any microeconomic theories and nothing proving that they can essentially beat the laissez-faire economy with their policies.
Of course, this is only the tip of the iceberg.

Shocking. An economic theory based in mainstream economic thought. You might think I'd even read a textbook or two.

Here's the bumper-sticker edition of my argument: The Fed can make mistakes, but is essential to a properly functioning financial system.

Alright, lets see you prove that. Now, remember that economics strive for maximum effiency and not just "working systems".

 

[Horticulture]

Shocking. An economic theory based in mainstream economic thought. You might think I'd even read a textbook or two.

Here's the bumper-sticker edition of my argument: The Fed can make mistakes, but is essential to a properly functioning financial system.

Alright, lets see you prove that. Now, remember that economics strive for maximum effiency and not just "working systems".

Read the Krugman article that I linked, it shows the value of monetary policy in combating a recession. Beyond that, you, with your fixation upon the Great Depression, surely appreciate the value of a reserve banking system.

Economics is a field of study, not an ideology.

 

[Horticulture]

Keynesians lack faith on the good old free market.

Our markets are not perfectly free. They will never be perfectly free. Invoking the 'free market' as an excuse to avoid explaining your position is not a terribly convincing argument. In general terms, increased economic freedom typically increases efficiency. However, economic efficiency is not the cardinal goal of modern societies (and god forbid that becomes the case). Efficiency has virtually no bearing on measures of quality of life and says nothing about the work-leisure tradeoff. Income equality? Irrelevant. Education becomes valuable only for its role in human capital formation.

Furthermore, the very idea of government of any form is antithetical to a perfectly free market. As soon as one cent of tax is levied and spent, markets become 'distorted.' Even before the rise of the welfare state, activities such as maintaining an army created entire industries and stimulated incredible volumes of international trade (one need look only to Europe before the Great War to see the extent to which obsession over mobilization schedules and cutting-edge weaponry impacted its markets). In the modern era this is even more pronounced (the term 'military-industrial complex' springs immediately to mind.)

Other enormous government expenditures (social security, medicare/aid, etc.) influence markets as well. This is not a bad thing. It's worth a small decrease in efficiency to know that our elderly will be supported, that the sick can receive care, that children will be educated. In the face of a massive (in historical terms, though rather small when compared with other developed nations) government, blaming monetary policy for 'increasing the volatility of the free market' is ludicrous.

The Federal Reserve is also the mechanism through which debts are brokered. The prerogative to manipulate interest rates and the money supply is essential to maneuvering the United States in the international trade and financial systems, neither of which is a market best described by the term 'free.' In addition to questions of valuation vis-a-vis other currencies, pursuing an obsessive stable price policy also leaves a currency open to speculation attacks. Look at the experience of eurozone countries in the 1990s as they tried to peg their currencies to one another in the 'snake' system. Britain's financial markets were devastated by a speculatory attack, causing it to drop from the monetary union entirely, and galvanizing anti-Union sentiment there.

The fed tries to strike a balance between growth and inflation, guiding the economy towards full-employment output and attempting to deflate bubbles, controlling inflation (example: the engineered recessions of the 1980s and 90s) and stimulate growth when it lags (Example: business page of a newspaper). You've asserted repeatedly that these actions 'increase volatility,' but in the absence of a model to illustrate your assertion it's impossible for me, or anyone else not so immediately inclined, to sympathize with your point of view.

 

[Acid Armageddon]

I just wish we could see right NOW what this trillion dollar stimulus package will do, say, ten years down the road...



It would make life so much easier....

 

[FragKrag]

I just wish we could see right NOW what this trillion dollar stimulus package will do, say, ten years down the road...



It would make life so much easier....

Oh, it's pretty obvious really. Money doesn't come out of nowhere. We get it as a loan, and by the time the generation that is in high school is out of college, they'll be inheriting the debt that Mr. Obama and Mr. Bush made.

And of course, the president at that time will be crucified and blamed for the debt...

 

[Raven_Letters]

I know you obama supporters will flame me, but I dont care. I'm sick of seeing my country torn down around me.

Nothing Obama or his administration does will help us, he is a failure, an empty suit, a commie in disguise, he wants to ruin our country, give ALL the power to the government. He wants the country to be dependant on the government, that is not how America works. We are not in a depression but under his reign we will enter a depression before his term is up. The more he spends, the more we sink. You think Bush's spending was bad? HA! In just 1 month in office he has increased the deficit 5 times more than Bush ever spent in his 8 years and 2 wars. You have seen NOTHING yet. Next thing Obama is targeting is oil prices, and how he can drive them up, because thats really what we need, $4+ at the pump again. Have you forgotten the reason why the economy is the way it is now? Lets go back to 2006 when the democrats gained the majority, leading us into this economic crisis.

Mr Obama, you have failed as a president only 1 month into your term. You are hearby the WORST president of all time. As Rush Limbaugh said, "I hope Obama fails" because I do not want what Obama wants for the country to work.

I'm sorry if you people fail to see that. Hate me all you want. I've spoken and nothing you can say will make me change my view.

Yes, this is definitely change I can believe in.

Awww...everyone give Darkside a hug!

/hug

 

[Rolling Thunder]

I'm arguing, Dele, that monetary inflation is not the be-all and the end-all. If I may use the example of Russia- we see that the nation's inability to supply it's consumers with goods, even basic goods, has resulted in massive demand-pull inflation simply because of the inefficeny of it's factors of production.


It also seems that you confuse deficet finance with printing money. In his 'Economic consequences of Peace', Keynes points out the severe folly of doing so, as it causes economic stagnation and hyperinflation. Deficet finance is facilitated by means of the state selling tradeable government bonds to banks and financial instituions for cash. This means the government gains a supply of currency, and the banks still possess a medium of exchange. It results in the creation of money, but since the actual currency quantities stay the same, one experiences less inflation than one would due to printing cash.

 

[Dele]

Oh, it's pretty obvious really. Money doesn't come out of nowhere. We get it as a loan, and by the time the generation that is in high school is out of college, they'll be inheriting the debt that Mr. Obama and Mr. Bush made.

And of course, the president at that time will be crucified and blamed for the debt...

Actually money does come out of nowhere and youre paying that new money through inflation.

I'm arguing, Dele, that monetary inflation is not the be-all and the end-all. If I may use the example of Russia- we see that the nation's inability to supply it's consumers with goods, even basic goods, has resulted in massive demand-pull inflation simply because of the inefficeny of it's factors of production.


It also seems that you confuse deficet finance with printing money. In his 'Economic consequences of Peace', Keynes points out the severe folly of doing so, as it causes economic stagnation and hyperinflation. Deficet finance is facilitated by means of the state selling tradeable government bonds to banks and financial instituions for cash. This means the government gains a supply of currency, and the banks still possess a medium of exchange. It results in the creation of money, but since the actual currency quantities stay the same, one experiences less inflation than one would due to printing cash.

I would say that devaluation of currency and huge tariffs do more to raise the prices than more demand. Frankly I thought you argued that there is LESS demand during recessions.

I dont understand why you think I confuse such things. Decifit finance can be financed through money buffers, debt, and printing money. Your claim is a little bit wrong as banks buying financial bonds doesnt create new money per se, but only if such is financed with fractional-reserve money. Of course if financial institutions and private people buy bonds, no money is created.

Read the Krugman article that I linked, it shows the value of monetary policy in combating a recession. Beyond that, you, with your fixation upon the Great Depression, surely appreciate the value of a reserve banking system.

Economics is a field of study, not an ideology.

I find it a bad trade if such monetary policies are the cause of such recessions. I was expecting more of a complete theory why the cental bank beats the free markets.

Keynesians lack faith on the good old free market.

Our markets are not perfectly free. They will never be perfectly free. Invoking the 'free market' as an excuse to avoid explaining your position is not a terribly convincing argument. In general terms, increased economic freedom typically increases efficiency. However, economic efficiency is not the cardinal goal of modern societies (and god forbid that becomes the case). Efficiency has virtually no bearing on measures of quality of life and says nothing about the work-leisure tradeoff. Income equality? Irrelevant. Education becomes valuable only for its role in human capital formation.

Furthermore, the very idea of government of any form is antithetical to a perfectly free market. As soon as one cent of tax is levied and spent, markets become 'distorted.' Even before the rise of the welfare state, activities such as maintaining an army created entire industries and stimulated incredible volumes of international trade (one need look only to Europe before the Great War to see the extent to which obsession over mobilization schedules and cutting-edge weaponry impacted its markets). In the modern era this is even more pronounced (the term 'military-industrial complex' springs immediately to mind.)

Other enormous government expenditures (social security, medicare/aid, etc.) influence markets as well. This is not a bad thing. It's worth a small decrease in efficiency to know that our elderly will be supported, that the sick can receive care, that children will be educated. In the face of a massive (in historical terms, though rather small when compared with other developed nations) government, blaming monetary policy for 'increasing the volatility of the free market' is ludicrous.

The Federal Reserve is also the mechanism through which debts are brokered. The prerogative to manipulate interest rates and the money supply is essential to maneuvering the United States in the international trade and financial systems, neither of which is a market best described by the term 'free.' In addition to questions of valuation vis-a-vis other currencies, pursuing an obsessive stable price policy also leaves a currency open to speculation attacks. Look at the experience of eurozone countries in the 1990s as they tried to peg their currencies to one another in the 'snake' system. Britain's financial markets were devastated by a speculatory attack, causing it to drop from the monetary union entirely, and galvanizing anti-Union sentiment there.

The fed tries to strike a balance between growth and inflation, guiding the economy towards full-employment output and attempting to deflate bubbles, controlling inflation (example: the engineered recessions of the 1980s and 90s) and stimulate growth when it lags (Example: business page of a newspaper). You've asserted repeatedly that these actions 'increase volatility,' but in the absence of a model to illustrate your assertion it's impossible for me, or anyone else not so immediately inclined, to sympathize with your point of view.

Youre right, income equality is irrevelant. Real wages will rise as technology and increased capita will make the work more productive. If your productivity stays the same (unlikely), your real wage stays the same. That is essentially what we like to call justice. Education is only valuable in human capital formation. Encouraging freedom in education as opposed to centrally planned forced education improves effiency greatly, while not stopping anyone from studying "unvaluable" subjects if he chooses to.

Fondant said that it is ironic for me to live in a wellfare state and complain about public sector. I agree and so is worker criticizing Soviet Union ironic. Let me tell you a bit about worlds least corrupted wellfare state with the best education in the world. I was depressed at one point so I applied to psychiatrist. After waiting three weeks I got one hour session and after that she told me that if I am lucky I could get another one hour appoitment in one month and she suggested that I just take anti-depressants since these appoitments are propably not going to help me anyway. I refused and luckily could get better on my own. My cousin recently had a brain paralysis. At first, he could monger some simple words but since it took him 5(!) months to get into rehab, he regressed and to this day cant speak a word. Oh you propably wanna know what they do to elderly folks. Due manpower shortage caused by state refusing to train enough people, all they can do is keep elders heavily drugged so they just lie on bed like vegetables. Afterall it makes the job much more easier. If your organs are failing, youre too old and not worth having organs transferred so they just let you die. If you can get an appoitment to doctor, you can effectively lie about being ill and get one or two weeks sickleave from work in just one minute. Theyre too busy to check you out or care.

Then people like you come telling me that "it's worth it coz now we can stop worrying since state is gonna take care of everything". Often naive people like that look at the shiny outside and dont see the rotten inside. Also for some reason I cant understand there is a fallacy going on with the supporters and they often tell me "But with private healthcare and education, the poor are not going to get any education and healthcare" "Why not?" "Well gee I dont know, I guess I was just being a regular stupid commie again". There is nothing stopping the government from subsidizing the poor, while everyone wins from improved effiency aka making the system work again. You might say that I am not completely objective and that working public systems do exist. You might be right there but as longer time elapses and governments change, the system will become more inefficient and inefficient as it lacks mechanisms that guide private companies.

My model is modified Austrian Business Cycle [http://en.wikipedia.org/wiki/Austrian_Business_Cycle_Theory]. It is a huge problem that Fed doesnt adjust it's discounting rate with demand and also the temptation by politicians to finance their screwed up budgets with printing money will cause problems. Not to mention if Keynesians (and other socialists) get their hands on such institutions.