The Future of the United States of America

[Sane Man]

Assassinator:

You actually sound like (somewhat) an Austrian economist rallying against the old German classical economic school of thought. Empiricism and backtesting cannot produce accurate models for the present economy and that it is so very highly improbable mathematically (if not impossible) that to attempt to do so is in vain. I'd be careful if I were you, you could be branded a heretic! =)

The reason it goes against Obama's plan is because this stimulus calls for consumption spending. Hopefully I've made my point enough that I believe spending artificial capital on real capital consumable goods or services is a terrible idea. That it continually is trying to prop up companies or corporations that have no reason to still be in business.

The Keynesian will argue that spending that money will correct those failing companies, and the economy will turn itself around eventually when those companies are required to hire more people, replace sold product, etc. That if this problem arises again, that more consumption spending will get the job done again. It is a vicious cycle of spending and it is why Keynesians cannot explain boom and busts cycles other than "well, that's just the way the economy works".

I've argued that capital accumulation (spending for production) is the foundation of the economy, and consumption spending is a weak 2nd place to that. What Obama is doing (or rather, has done as it was passed into law) is gave 787 billion in artificial capital to try and spend enough money to require companies to hire more labor, or buy more goods. That is market distortion and again, is why we are in this mess in the first place.

 

[Horticulture]

I agree with what you said (except the last part, maybe it is not their goal but it happens that way). However as you have already pointed out, deflation is the only answer at this point.

The government is spending solely for consumption, which compared to capital accumulation (spending for production) is a small part of the economy. What people need right now is buying power that they had previously to this economic downturn. That is only achieved through lowered costs of goods, and wage cuts, and absolutely NOT price controls or consumption spending (although the latter is the recipe for the former).

Investments are made in anticipation of future returns (through sales to fulfill demand).In the absence of sufficient consumption within an economy (aggregate demand), capital accumulation (investment spending) will be reduced as well. While deflation does increase the buying power of a given amount of cash, it also increases the desire to hold cash, as it is appreciating in value. The problem with this is that even though the interaction between economic growth (in this case, the lack thereof) and price level changes (deflation in your example) conspire to create further incentives NOT to spend, which leads us again to the deflationary downward spiral.

An inflationary policy, by contrast, decreases the expected real interest rate by reducing the value of cash in circulation, but, critically, it takes time for prices to catch up. In the interim (which can be quite long)the injection of cash into the economy creates an incentive not to hold cash, which will be reduced in value due to the higher supply. This means banks have a greater incentive to lend (invest) their cash reserves, as do other firms, consumers have an incentive to increase current consumption, and as this cycle proceeds real productivity will rise closer to a full-employment output (optimal sustainable) level.

What's critical to note here is that this doesn't reflect an artificial increase in production, or bubble, but the restoration of previously idle capital and labor to production. There's a good example of this here: http://www.pkarchive.org/theory/baby.html, the story of a real fake recession. And babies.

It's also important to understand, especially due to the origins of the current crisis, that deflationary policy has the effect of increasing the real value of debts. In a crisis which began as a mortgage and lending crisis, this is to exacerbate the fundamental cause. Homeowners in debt for more than the cost of their devalued houses would then owe even more money, in real terms, than they did before, expanding the number of defaults/foreclosures, in turn further savaging the balance sheets of banks and crushing credit even more. If you want to see Great Depression version 2, these are the sort of fiscal policies you'd run.

An example I like that George Reisman put forward is a man named Bill that goes to the supermarket. Each week he buys $10 worth of bottled water, and each bottle of water is worth $1 each. However, now that we have hit this slump, Bill can only afford to spend $5 on bottled water. How do we get Bill to have his reduced capital purchase as much as it did when his capital was larger? The bottles of water must go down in price to 50 cents a bottle. Giving Bill an extra $5 a week instead does not do anything but prolong another downturn when this artificial capital is recognized. You cannot spend forever, so the problem must be addressed and not covered up.

What this model ignores is the reason that Bill now has only $5 a week to spend on bottled water. It's presumably because he is now underemployed, or his wages have been reduced. An increase in his spending on bottled water would fortify the balance sheets of the grocery store and bottler, and the increase in demand (or, rather return to previous $10/week demand from Bill) will encourage them to rehire laid off employees, staffing their capital to the point of equilibrium output.

Remember that while prices are elastic(they can go up or down) in the long run, in the short run they are much less so, if at all. As it's often said, in the long run we're all dead. Obviously we want this recession to end before that happens, and the solution is to bolster the economy before it sees a reduction in real productive capacity (i.e., workers are laid off but the factory remains in good repair) and we haven't settled in to a groove of lower output and lower consumption. To address reduced spending by increasing spending isn't a coverup of the problem, but rather an acknowledgement.

Edit: Consumable goods (water, here) =/= capital, at least in econ jargon.

As I've stated earlier, sellers do not only consume. If that were the case only consumption goods would be available in the market. You cannot control the market. If people are choosing not to buy nonessential items in an economic downturn, then so be it. The market reacts according to the people. If people wish to stop buying DVD Players and PlayStation 3's, it's the companies' fault for not anticipating their consumers' wants. The market will adjust, those items will become more scarce until the demand for more of them happens again.

It might be the companies' fault, but everyone suffers for it. Besides, here on this forum we like DVD players and Playstation 3s.

 

[Horticulture]

Such an arrangement is problematic in nature as Fed will be doing huge mistakes such as lowering the interest rates too low or keeping them too high and hurting the economy as opposed to market determined interest rates and stable money economics. A good example would be lowering interest rates to near 1% for several years after the dot.com bubble which was a huge factor in largening the mortgage bubble.

"Market-Determined Interest Rates" helped lead us into the depressions of the 1880s and 1930s. A prudent fiscal policy can keep recessions like this one from growing into depressions like those. Check out the article I linked in my response to Sane for an illustration of why it works.

 

[Spudgun Man]

Ths US will be fine, this has happened before and the 'crumbling' is nothing new. It will all blow over in a few years so just strap yourself in and ride it out.

It's not like you have a choice anyway as the whole world is feeling shockwaves.

 

[KaZZaP]

Fallout 3 seems about right

 

[Captain Blackout]

You didn't pay attention or chose not to. The capital already included any "new" man hours, as those are already people considered capital. Perhaps it was a bad example, but I intended to imply these were brand new workers found that no one had accounted for as they were unknown to the market.

It does not really matter if Obama's plan is sold to you, it was passed into law. When it fails, just remember the Sane Man told you to stay clear of it, and you ignored him!

I did pay attention because I chose to. Maybe it was a bad example.

Which workers are accounted for varies. We "lose" and "gain" workers all the time per accounting methods i.e. unemployment rates. I'm currently working so I don't fall into the workers without a job category. I'm self-employed so I don't fall into the workers with a job waiting for more hours at a company category. If work shows up, I will be there waiting. I guess I'm currently existing capital but what index keeps track of me?

I am curious as to how new workers constitute new capital if the jobs aren't there for them given the structure of American economy. What are they going to do? Borrow from banks that aren't lending to start a business no one can afford to buy from?

It doesn't matter to you or the future of the plan if I'm sold on it. It does however matter to me for my own reasons. Whether or not it will fail does not affect how clear of it I stay. If it generates work I'll be working more. If it doesn't, I won't. Either way I didn't ignore you. I just disagree with you because politically I belong to the Pirate party and economically I'm a Taoist, neither of which you seem to have as a foundation for your political or economic theories.

 

[Sane Man]

Captain Blackout:

The jobs are there for these brand new "workers", it all depends on the margin. The market also has this in mind. Theoretically we could have zero unemployment if everybody's desire to not work was overcome with the desire to work. That will never happen (especially in a welfare state).

I should of worded it different, but these new "workers" were suppose to imply they were ready and willing to work NOW. I suppose I could of said if an influx of the unemployed decided to get up and work today, it could be the same. Bad example, I now admit, however the first one still applies (new material discovered) or I could add a new one in innovation of some part of the economy.

You are correct, however, in my political and economic theories. Politically, it is too tough for me to label myself, I suppose a "Classical Liberal" would be best. Too conservative to be a libertarian, and too libertarian to really be a modern conservative. Economically, I try to follow the Austrian School as best as I can.

Although I have to admit I'm not familiar with the Pirate party at all, so I have to show my ignorance on that.

 

[bodyklok]

Things will get worse before they get better. But when they get better I'm just wondering who's going to be a the white house, A black man or a asian dude (No I wasn't trying to be racist).

 

[Izakflashman]

It shall exactly the same way the romans did! A moral slump, rape little boys, everyone gets fat, the barbarians will wipe 'em out. Yay for the left wing.

 

[Horticulture]

It shall exactly the same way the romans did! A moral slump, rape little boys, everyone gets fat, the barbarians will wipe 'em out. Yay for the left wing.

Wouldn't replicating a 2,000-year old empire technically be ultraconservative?

 

[Addendum_Forthcoming]

Ha!! O.O Enron FTW ... improper/nonexistent government regulations = all that you said .. and worse.

What did Enron do to california once deregulation of government mandates? Raped her for all that she was worth!

Government control = democratic control of services ... corporate control of services = make as much money, as quickly as possible and tell people that elected governments are evil.

I have no objections to "regulation" (bad word for it) making business more transparent and guarding against scams. I am against price controls, taxes, tariffs and everything else that is only hurting the markets.[

If you're talking government control, you're talking regulations. Regulations are the things that help keep your water and electricity affordable. Keep CPI nominal to the average consumer, maintain a decent standard of corporate liability.

If you privatise all your services as America has, the only thing keeping corporations from raping the average American's wallet is the government telling industry .. "This is a fair price" and a "fair duty of care"

Even then it doesn't work with all industries, medical Insurance firms, or 'HMOs', have allowed the costs of medicine in America to rise excruciatingly high, despite having a CPI half of what Australia has, and 3/4s that of the UK.

Public Health + Education and High Interest rates = only way to save America ... otherwise we're going to see another Soviet Union in 20 years ... selling off trillions of dollars of military equipment around the world which will permanently screw up everybody else.

The US practices solely in Curative medicine ... which is almost as bad as choosing not to help people at all. This is the reason why despite having no public healthcare, your medical costs each year chew up a much larger percentage of GDP as opposed to other countries that offer better working, public healthcare.

Greater focus on preventative medicine (ffee vaccinations, public healthcare initiatives and education) will allow people to keep working, reduce the necessity for surgery, create cheaper and more successful alternatives to highly invasive treatments.

Its better, from both a financial and ethical viewpoint, to prevent people getting sick then having to cure them once they do. No job downtime, greater efficiency, less virulence of workplace and public forums.

This can only be achieved once the government grabs HMO's and pharmaceutical companies by the balls to establish a new system.

The healthier a nation is, the better off the children of the new generation will be. More intelligent, abled and willing a populace will be to produce results in industry and commerce.

 

[Izakflashman]

It shall exactly the same way the romans did! A moral slump, rape little boys, everyone gets fat, the barbarians will wipe 'em out. Yay for the left wing.

Wouldn't replicating a 2,000-year old empire technically be ultraconservative?

Lol, touche! but not if they thought they were being original.

 

[Banana Phone]

It shall exactly the same way the romans did! A moral slump, rape little boys, everyone gets fat, the barbarians will wipe 'em out. Yay for the left wing.

I'll make it short: the U.S. is 100% screwed. If you take a look at the incredible greed, selfishness, hypocrisy, and immorality we've displayed, I don't blame our future conquerors. I wouldn't be surprised if a good portion of the world banded together toward our defeat. It reminds me of the fall of the Roman Empire and the Foundation series by Isaac Asimov (genius, by the way) where a massive empire lapses into decadence and crumbles under pressure from forces previously seen as incompetent.

In other words, I agree.

 

[Superpuff]

Future of the U.S cue picture of arrow pointing down next step sneek into england

 

[Seydaman]

=bombs
/thread

 

[Pimppeter2]

Fuck it all. Hopefully it stays okay at least untill I get out of college. Then the country can go to hell.

 

[Sane Man]

Fuck it all. Hopefully it stays okay at least untill I get out of college. Then the country can go to hell.

So then you can use that worthless piece of paper to get a job that does not exist?

 

[Pimppeter2]

It shall exactly the same way the romans did! A moral slump, rape little boys, everyone gets fat, the barbarians will wipe 'em out. Yay for the left wing.

I'll make it short: the U.S. is 100% screwed. If you take a look at the incredible greed, selfishness, hypocrisy, and immorality we've displayed, I don't blame our future conquerors. I wouldn't be surprised if a good portion of the world banded together toward our defeat. It reminds me of the fall of the Roman Empire and the Foundation series by Isaac Asimov (genius, by the way) where a massive empire lapses into decadence and crumbles under pressure from forces previously seen as incompetent.

In other words, I agree.

Just cause were in an economic rut dosnt mean were gonna get conquered.

Thats how it worked way back in the day, its not like were gonna get taken over, plus our military might is still fucking strong to kick the ass of almost any country, and its not like the world wouldnt help us if shit went down. Either were gonna pull out of this or were just not gonna be as strong as we once were.


And I say good ridence to this "America superpower" thing, let someone else take care of the world

I agree on the greed part though,

 

[samsprinkle]

Well hopefully civil war breaks out. Then I can step up as leader of some rebellion and step in as a third faction and make my own little country. Being king(yes king, NOT dictator) I would be VERY powerful(when set up to other minor rebellions)and with my army of rednecks(my locale makes me very prime for gun toting big rig driving minions)and anybody who opposed me would meet some very angry rednecks. I just hope that Chuck Norris doesn't get involved...or we are all doomed!