Bailout/Economic Incentive Spending Limits Reached?
We may have hit the point where any further spending will end up pushing the USA into both inflation and a continuing recession, especially if Obama gets his way on infrastructure spending, tax credits for non-taxpayers, and ignoring the upcoming Social Security and Medicarte crisis, using borrowed money for all his spending. And unlike GW Bush, also a big spender, Obama will tack on huge tax increases for the same people who usually save and invest the most, the only thing that really digs us out of recessions.
I'm getting the distinct feeling that the successful financial rescue phase is over, the economy has been saved if the politicians will only give it time to repair itself, and the Democrats are going to wreck it by a reenactment of the New Deal.
Contrary to the Liberal mythology the New Deal was a massive failure. All the massive government spending, industrial policy and union work rule meddling, tax increases by both Hoover and FDR, restrictive tariffs, and Hoover's initial policy to let bad banks go under hindered recovery for years and caused FDR's recession of 1937. Keynesian economics nearly wrecked the US and world economy and now they want to repeat the whole sad story.
The differences, due to much higher production and lower unemployment, will mean inflation instead of the 1930's deflation, but the same recession and stagnation we saw under Carter and that Japan experienced in the 1990's when it tried the same economic policy.
Dollar's Slump Erases Months Of Solid Gains
By Anthony Faiola
Washington Post Staff Writer
Thursday, December 18, 2008; A01
The dollar yesterday staged one of its biggest one-day drops against the euro and fell to a 13-year low against the Japanese yen as near-zero interest rates and the Federal Reserve's plan to print vast sums of cash dilute the value of the greenback.
The drops dramatically accelerated the dollar's reversal of fortune over the past three weeks after months of solid gains. The slide underscores the risks the Federal Reserve is taking to jump-start the U.S. economy through aggressive monetary policy.
On Monday, the Fed cut its target for the federal funds rate, at which banks lend to each other, from 1 percent to a target range of 0 percent to 0.25 percent, and effectively vowed to print as much money as it needs to try to pull the United States from a worsening recession.
While that policy may ultimately aid an economic recovery, it is robbing the dollar of value as investors anticipate less interest on their dollar-denominated investments and more bills in circulation, making each one worth a bit less. In response, investors are dumping the dollar and buying up other currencies.
If the dollar's fall is unchecked, it could jeopardize the long-term faith of foreign investors in the value of the American currency and could cause foreign investors to dump U.S. stocks and other assets, whose value would be worth less in euros or yen. The Dow Jones industrial average fell 1.1 percent yesterday.
A sharp rise in the value of foreign currencies could slow economic recovery in Europe and Japan because it would make their exports more expensive in the United States. A steep, sustained fall in the dollar could force the Fed to abruptly raise interest rates to prop it up. That would drive up costs for the U.S. Treasury as it seeks to raise cash for bailouts by issuing billions of dollars worth of new debt to investors.
"The risk is that the deceleration of the dollar could cascade, and push interest rates up as the rest of the world demands a higher return on U.S. investments," said C. Fred Bergsten, director of the Peterson Institute for International Economics.
But higher interest rates could weaken demand even more. The deteriorating economic outlook helped send oil prices down yesterday to $40.06 on the New York Mercantile Exchange, despite production cuts by the Organization of the Petroleum Exporting Countries, and the falling dollar, which should help drive up oil prices because they are denominated in dollars.
The dollar shed about 3 percent against the euro yesterday, falling to $1.44. It lost 1.3 percent against the Japanese yen, dropping to 87.93, the lowest since July 1995.
The slide marks another turn on the dollar's roller coaster year, which it began at multiyear lows when the U.S. economy slowed even as much of the rest of world was still growing. But as investors began to grasp that Europe and Japan were facing recessions as bad, if not worse, than the one in the United States, the dollar staged a rally. Between July and November, the dollar climbed about 24 percent against a basket of six major world currencies.
The Fed's aggressive interest rate policy, coupled with a sense that the United States may face dire problems in the auto industry, have erased about half those gains in the past three weeks. Up until recently, emerging market currencies were also losing ground against the dollar. The Chinese, analysts say, have been massively intervening in currency markets in recent months to weaken the yuan and make Chinese exports more competitive overseas. But the yuan has jumped 0.7 percent against the dollar this month, despite continued Chinese intervention.
That is good news for U.S. exporters. The cheaper dollar earlier this year had boosted overseas sales of American-made products from airplanes to soybeans, making exports a rare bright spot of the economy. In recent months, however, the export boom has faded as the dollar strengthened and the global economy waned. The suddenly weaker dollar may now help put U.S. exports back on track, just when the economy needs all the help it can get.
The dollar's fall, however, is making it far harder for Europe and Japan in particular to export their way out of recession.
Japan, which already has near-zero interest rates, has little room to lower them further to weaken the yen. But analysts say Tokyo is likely buy more dollars in an attempt to drive the yen down in value.
The dollar's fall is putting particular pressure on the European Central Bank to follow the Federal Reserve and the Bank of Japan and dramatically cut interest rates, according to analysts. The ECB has been reluctant to slash rates too deeply, partly because it fears that inflation will reemerge in major countries like France should rates fall too low.
Yet analysts say the weakened dollar may force the ECB to cut rates, fearing the steep climb in the euro could make it far harder for export-driven economies like Germany to stage a recovery. Some in Europe are responding aggressively. The Central Bank in Norway, which does not use the euro, dramatically slashed key interest rates yesterday by 1.75 percent to 3 percent.
"This really puts the Europeans in a corner," said Simon Johnson, former chief economist at the International Monetary Fund and an economist at the Massachusetts Institute of Technology. "They can't just sit there and watch the euro climb."
Other analysts argue that the dollar may surge again in the weeks ahead, particularly if the Fed's aggressive moves begin to show signs of lifting the U.S. economy.
"I'm a little skeptical that this is the end of the dollar's rebound," said John Shin, currency strategist at Merrill Lynch in New York. "Investors are reacting to the anticipation and the actuality of the Fed's plan to flood the world with dollars. But the U.S. is not alone in its problems, and you're seeing particular stress on the European economy. You have to think that the Fed is ahead of the curve, and by the time the Europeans get there, the U.S. economy may be better positioned for recovery."
I'm getting the distinct feeling that the successful financial rescue phase is over, the economy has been saved if the politicians will only give it time to repair itself, and the Democrats are going to wreck it by a reenactment of the New Deal.
Contrary to the Liberal mythology the New Deal was a massive failure. All the massive government spending, industrial policy and union work rule meddling, tax increases by both Hoover and FDR, restrictive tariffs, and Hoover's initial policy to let bad banks go under hindered recovery for years and caused FDR's recession of 1937. Keynesian economics nearly wrecked the US and world economy and now they want to repeat the whole sad story.
The differences, due to much higher production and lower unemployment, will mean inflation instead of the 1930's deflation, but the same recession and stagnation we saw under Carter and that Japan experienced in the 1990's when it tried the same economic policy.
Dollar's Slump Erases Months Of Solid Gains
By Anthony Faiola
Washington Post Staff Writer
Thursday, December 18, 2008; A01
The dollar yesterday staged one of its biggest one-day drops against the euro and fell to a 13-year low against the Japanese yen as near-zero interest rates and the Federal Reserve's plan to print vast sums of cash dilute the value of the greenback.
The drops dramatically accelerated the dollar's reversal of fortune over the past three weeks after months of solid gains. The slide underscores the risks the Federal Reserve is taking to jump-start the U.S. economy through aggressive monetary policy.
On Monday, the Fed cut its target for the federal funds rate, at which banks lend to each other, from 1 percent to a target range of 0 percent to 0.25 percent, and effectively vowed to print as much money as it needs to try to pull the United States from a worsening recession.
While that policy may ultimately aid an economic recovery, it is robbing the dollar of value as investors anticipate less interest on their dollar-denominated investments and more bills in circulation, making each one worth a bit less. In response, investors are dumping the dollar and buying up other currencies.
If the dollar's fall is unchecked, it could jeopardize the long-term faith of foreign investors in the value of the American currency and could cause foreign investors to dump U.S. stocks and other assets, whose value would be worth less in euros or yen. The Dow Jones industrial average fell 1.1 percent yesterday.
A sharp rise in the value of foreign currencies could slow economic recovery in Europe and Japan because it would make their exports more expensive in the United States. A steep, sustained fall in the dollar could force the Fed to abruptly raise interest rates to prop it up. That would drive up costs for the U.S. Treasury as it seeks to raise cash for bailouts by issuing billions of dollars worth of new debt to investors.
"The risk is that the deceleration of the dollar could cascade, and push interest rates up as the rest of the world demands a higher return on U.S. investments," said C. Fred Bergsten, director of the Peterson Institute for International Economics.
But higher interest rates could weaken demand even more. The deteriorating economic outlook helped send oil prices down yesterday to $40.06 on the New York Mercantile Exchange, despite production cuts by the Organization of the Petroleum Exporting Countries, and the falling dollar, which should help drive up oil prices because they are denominated in dollars.
The dollar shed about 3 percent against the euro yesterday, falling to $1.44. It lost 1.3 percent against the Japanese yen, dropping to 87.93, the lowest since July 1995.
The slide marks another turn on the dollar's roller coaster year, which it began at multiyear lows when the U.S. economy slowed even as much of the rest of world was still growing. But as investors began to grasp that Europe and Japan were facing recessions as bad, if not worse, than the one in the United States, the dollar staged a rally. Between July and November, the dollar climbed about 24 percent against a basket of six major world currencies.
The Fed's aggressive interest rate policy, coupled with a sense that the United States may face dire problems in the auto industry, have erased about half those gains in the past three weeks. Up until recently, emerging market currencies were also losing ground against the dollar. The Chinese, analysts say, have been massively intervening in currency markets in recent months to weaken the yuan and make Chinese exports more competitive overseas. But the yuan has jumped 0.7 percent against the dollar this month, despite continued Chinese intervention.
That is good news for U.S. exporters. The cheaper dollar earlier this year had boosted overseas sales of American-made products from airplanes to soybeans, making exports a rare bright spot of the economy. In recent months, however, the export boom has faded as the dollar strengthened and the global economy waned. The suddenly weaker dollar may now help put U.S. exports back on track, just when the economy needs all the help it can get.
The dollar's fall, however, is making it far harder for Europe and Japan in particular to export their way out of recession.
Japan, which already has near-zero interest rates, has little room to lower them further to weaken the yen. But analysts say Tokyo is likely buy more dollars in an attempt to drive the yen down in value.
The dollar's fall is putting particular pressure on the European Central Bank to follow the Federal Reserve and the Bank of Japan and dramatically cut interest rates, according to analysts. The ECB has been reluctant to slash rates too deeply, partly because it fears that inflation will reemerge in major countries like France should rates fall too low.
Yet analysts say the weakened dollar may force the ECB to cut rates, fearing the steep climb in the euro could make it far harder for export-driven economies like Germany to stage a recovery. Some in Europe are responding aggressively. The Central Bank in Norway, which does not use the euro, dramatically slashed key interest rates yesterday by 1.75 percent to 3 percent.
"This really puts the Europeans in a corner," said Simon Johnson, former chief economist at the International Monetary Fund and an economist at the Massachusetts Institute of Technology. "They can't just sit there and watch the euro climb."
Other analysts argue that the dollar may surge again in the weeks ahead, particularly if the Fed's aggressive moves begin to show signs of lifting the U.S. economy.
"I'm a little skeptical that this is the end of the dollar's rebound," said John Shin, currency strategist at Merrill Lynch in New York. "Investors are reacting to the anticipation and the actuality of the Fed's plan to flood the world with dollars. But the U.S. is not alone in its problems, and you're seeing particular stress on the European economy. You have to think that the Fed is ahead of the curve, and by the time the Europeans get there, the U.S. economy may be better positioned for recovery."
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I'll give Obama one thing, our infrastructure needs some attention. Don't really like how he's planning on fixing it, but that's another story.
I can think of a few better places we could could be pumping money into instead of bank bailouts.
I can think of a few better places we could could be pumping money into instead of bank bailouts.
We don't have any of this money that they have bailed out the banks with, its newly created money by the central bank (Fed).I'll give Obama one thing, our infrastructure needs some attention. Don't really like how he's planning on fixing it, but that's another story.
I can think of a few better places we could could be pumping money into instead of bank bailouts.
Yeah I know. Next time I'll call it "fake" money, so you can save yourself the trouble of correcting me.
As usual Mauserboy's complete lack of cognition prevents his contributing anything. I'm going back to my theory that he's not a human being but a fairly simple computer program.
Obama Team Assembling $850 Billion Stimulus
By Lori Montgomery
Washington Post Staff Writer
Friday, December 19, 2008; A01
President-elect Barack Obama and congressional Democrats have entered discussions over an economic stimulus package that could grow to include $850 billion in new spending and tax cuts over the next two years, a gigantic sum that some Democrats say could prove difficult to push rapidly through Congress.
A package of that size -- which would include at least $100 billion for cash-strapped state governments and more than $350 billion for investments in infrastructure, alternative energy and other priorities -- is a significant increase over the numbers previously contemplated by Democrats. It would exceed the $700 billion bailout of the U.S. financial system, as well as the annual budget for the Pentagon.
The potential for massive new spending has touched off a frenzy among interest groups eager to claim their share of the expanding stimulus pie. The profusion of requests from governors, transportation groups, environmental activists and business organizations is spawning fears that the package could be loaded with provisions that satisfy important Democratic constituencies but fail to provide the jolt needed to pull the nation out of a deepening recession.
"It's everybody's wish list, everybody's favorite program. And I think that's a big mistake," said Alice Rivlin, a Brookings Institute economist and former budget director for President Bill Clinton who has been advising Democrats. "I agree with the Obama team that we need a big increase in public investment, but it should be done very, very wisely," rather than through a rushed process that risks being "seen as scattering money to the wind."
An Obama adviser involved in crafting the stimulus package said the transition team was keenly aware of the potential pitfalls and was focused on funding ideas that would quickly pump money into the sagging economy, fulfilling Obama's promise to create or preserve 2.5 million jobs by 2011. Because many ideas probably won't meet that standard, the adviser said, the team is developing a screen to keep them out.
Yesterday, Obama economic adviser Jason Furman and congressional liaison Phil Schiliro met on Capitol Hill with key congressional staff to lay out the plan Obama expects to present to lawmakers. According to notes taken by a participant and shared by a senior congressional aide on the condition of anonymity, the pair said Obama is putting together a package of $670 billion to $770 billion but that he expects additions by Congress to jack up the total to about $850 billion, or 6 percent of the nation's economy.
While that figure is larger than any previously discussed by Democratic leaders, it is within the range of recommendations from economists. Some, such as Nobel Prize-winning economist Joseph Stiglitz, have called on the government to spend as much as $1 trillion to combat rising unemployment and spur economic activity.
Furman and Schiliro said the package would include $100 billion to help states cover the expanding cost of Medicaid, the federal health program for the poor. With more than half of states reporting budget shortfalls this year, the package also could include big increases in state block grants and other programs intended to help local governments avoid layoffs or tax increases.
At least $350 billion would be devoted to investments, including public works projects such as roads and bridges. That category also would cover funding for alternative energy, health-care technology, school modernization and "protecting the most vulnerable" by expanding unemployment insurance and food-stamp benefits, according to a memo sent to Senate Democrats yesterday by Senate Majority Leader Harry M. Reid's (D-Nev.) chief of staff, as well as other congressional aides.
Obama also expects to include significant new tax cuts for the middle class, probably modeled on his campaign promise to lower the tax burden on workers, students, the elderly and families. The package could also include his proposal to offer tax credits to companies that create jobs, according to sources.
Congressional aides said Obama is soliciting additional ideas from lawmakers with the aim of building support for a package that he hopes will be ready for him to sign soon after he takes office Jan. 20. In yesterday's meeting, however, Furman and Schiliro acknowledged that Jan. 30 may be a more realistic goal.
But even that date may be optimistic for a package of the magnitude under discussion.
Sen. Daniel K. Inouye (D-Hawaii), the incoming chairman of the Senate Appropriations Committee, said yesterday that there was no agreement on the size of the package, adding that he is skeptical of reports that it could approach $1 trillion.
"We're a country that's used to saying 'a million' or 'billion'. 'Trillion' is something that's very seldomly used," Inouye said.
The $850 billion figure is also meeting resistance from House Democrats, who say anything beyond the $600 billion House Speaker Nancy Pelosi (D-Calif.) has mentioned would probably lose votes among fiscally conservative Democrats known as Blue Dogs.
Concerns about the political viability of the package are compounded by fears that its economic effectiveness could be diluted. Rivlin said she would prefer quick approval of a much smaller package that contains only items that would rapidly push cash into the economy, such as aid to states and the poor and perhaps a payroll tax holiday. That could be followed, she said, by a larger spending package with investments thoughtfully crafted to achieve Obama's broader economic goals.
"Mass transit, the high-tech stuff, investment in health IT. Those are all good ideas. But they aren't stimulus," Rivlin said.
Simon Johnson, an economist at the Massachusetts Institute of Technology, said he shares Rivlin's concern that such a huge pot of money would probably be misspent.
"My personal opinion is you can spend $450 billion quite sensibly," Simon said. "But if you start raising it up, you have to ask whether you're getting good value for the money."
Acknowledging the tough task ahead, a coalition of 20 liberal organizations and unions -- including the Sierra Club, AFSCME, the AFL-CIO and ACORN -- yesterday launched a $5 million grass-roots and public relations campaign to support the evolving package and avert a filibuster in the Senate.
"Our goal is to help move it along as fast as humanly possible so Obama doesn't have to waste a lot of his capital on it as president," said Brad Woodhouse, president of Americans United for Change, which is coordinating the effort. "There are going to be big fights ahead on health care and completely trying to revamp our approach to energy. If you have to do a lot of horse-trading on this thing, it makes what comes afterward a lot more difficult."
Obama Team Assembling $850 Billion Stimulus
By Lori Montgomery
Washington Post Staff Writer
Friday, December 19, 2008; A01
President-elect Barack Obama and congressional Democrats have entered discussions over an economic stimulus package that could grow to include $850 billion in new spending and tax cuts over the next two years, a gigantic sum that some Democrats say could prove difficult to push rapidly through Congress.
A package of that size -- which would include at least $100 billion for cash-strapped state governments and more than $350 billion for investments in infrastructure, alternative energy and other priorities -- is a significant increase over the numbers previously contemplated by Democrats. It would exceed the $700 billion bailout of the U.S. financial system, as well as the annual budget for the Pentagon.
The potential for massive new spending has touched off a frenzy among interest groups eager to claim their share of the expanding stimulus pie. The profusion of requests from governors, transportation groups, environmental activists and business organizations is spawning fears that the package could be loaded with provisions that satisfy important Democratic constituencies but fail to provide the jolt needed to pull the nation out of a deepening recession.
"It's everybody's wish list, everybody's favorite program. And I think that's a big mistake," said Alice Rivlin, a Brookings Institute economist and former budget director for President Bill Clinton who has been advising Democrats. "I agree with the Obama team that we need a big increase in public investment, but it should be done very, very wisely," rather than through a rushed process that risks being "seen as scattering money to the wind."
An Obama adviser involved in crafting the stimulus package said the transition team was keenly aware of the potential pitfalls and was focused on funding ideas that would quickly pump money into the sagging economy, fulfilling Obama's promise to create or preserve 2.5 million jobs by 2011. Because many ideas probably won't meet that standard, the adviser said, the team is developing a screen to keep them out.
Yesterday, Obama economic adviser Jason Furman and congressional liaison Phil Schiliro met on Capitol Hill with key congressional staff to lay out the plan Obama expects to present to lawmakers. According to notes taken by a participant and shared by a senior congressional aide on the condition of anonymity, the pair said Obama is putting together a package of $670 billion to $770 billion but that he expects additions by Congress to jack up the total to about $850 billion, or 6 percent of the nation's economy.
While that figure is larger than any previously discussed by Democratic leaders, it is within the range of recommendations from economists. Some, such as Nobel Prize-winning economist Joseph Stiglitz, have called on the government to spend as much as $1 trillion to combat rising unemployment and spur economic activity.
Furman and Schiliro said the package would include $100 billion to help states cover the expanding cost of Medicaid, the federal health program for the poor. With more than half of states reporting budget shortfalls this year, the package also could include big increases in state block grants and other programs intended to help local governments avoid layoffs or tax increases.
At least $350 billion would be devoted to investments, including public works projects such as roads and bridges. That category also would cover funding for alternative energy, health-care technology, school modernization and "protecting the most vulnerable" by expanding unemployment insurance and food-stamp benefits, according to a memo sent to Senate Democrats yesterday by Senate Majority Leader Harry M. Reid's (D-Nev.) chief of staff, as well as other congressional aides.
Obama also expects to include significant new tax cuts for the middle class, probably modeled on his campaign promise to lower the tax burden on workers, students, the elderly and families. The package could also include his proposal to offer tax credits to companies that create jobs, according to sources.
Congressional aides said Obama is soliciting additional ideas from lawmakers with the aim of building support for a package that he hopes will be ready for him to sign soon after he takes office Jan. 20. In yesterday's meeting, however, Furman and Schiliro acknowledged that Jan. 30 may be a more realistic goal.
But even that date may be optimistic for a package of the magnitude under discussion.
Sen. Daniel K. Inouye (D-Hawaii), the incoming chairman of the Senate Appropriations Committee, said yesterday that there was no agreement on the size of the package, adding that he is skeptical of reports that it could approach $1 trillion.
"We're a country that's used to saying 'a million' or 'billion'. 'Trillion' is something that's very seldomly used," Inouye said.
The $850 billion figure is also meeting resistance from House Democrats, who say anything beyond the $600 billion House Speaker Nancy Pelosi (D-Calif.) has mentioned would probably lose votes among fiscally conservative Democrats known as Blue Dogs.
Concerns about the political viability of the package are compounded by fears that its economic effectiveness could be diluted. Rivlin said she would prefer quick approval of a much smaller package that contains only items that would rapidly push cash into the economy, such as aid to states and the poor and perhaps a payroll tax holiday. That could be followed, she said, by a larger spending package with investments thoughtfully crafted to achieve Obama's broader economic goals.
"Mass transit, the high-tech stuff, investment in health IT. Those are all good ideas. But they aren't stimulus," Rivlin said.
Simon Johnson, an economist at the Massachusetts Institute of Technology, said he shares Rivlin's concern that such a huge pot of money would probably be misspent.
"My personal opinion is you can spend $450 billion quite sensibly," Simon said. "But if you start raising it up, you have to ask whether you're getting good value for the money."
Acknowledging the tough task ahead, a coalition of 20 liberal organizations and unions -- including the Sierra Club, AFSCME, the AFL-CIO and ACORN -- yesterday launched a $5 million grass-roots and public relations campaign to support the evolving package and avert a filibuster in the Senate.
"Our goal is to help move it along as fast as humanly possible so Obama doesn't have to waste a lot of his capital on it as president," said Brad Woodhouse, president of Americans United for Change, which is coordinating the effort. "There are going to be big fights ahead on health care and completely trying to revamp our approach to energy. If you have to do a lot of horse-trading on this thing, it makes what comes afterward a lot more difficult."
"Nine Tenths of Socialism is a Central Bank that will print paper money"
Lenin
Lenin would be very proud!
Lenin
Lenin would be very proud!
And Socialism PREVAILED during the Bush Administration!!!!!!.......you Bush lovers must be soooooo proud!!!!!...."Nine Tenths of Socialism is a Central Bank that will print paper money"
Lenin
Lenin would be very proud!
"Nine Tenths of Socialism is a Central Bank that will print paper money"
Lenin
QUOTE]
Couldn't find the source of that Lenin quote except that some of his torrent of writing include the statement that inflation could help prepare the path to revolution. But he seems to have though that concentrations of power and money in central banks were part and parcel of the capitalist oppression of the workers.
You are making the mistake that if printing too much money is bad, printing any must also be bad. Paper money isn't cyanide or plutonium.
In effect 2 trillion dollars plus of money disappeared when the financial credit markets collapsed. If it wasn't replaced and the financial institutions encouraged to continue lending the entire economy would collapse also, and it would be years before a return to normal conditions. This is basic monetary theory.
But keeping the flow of money to prop up employment as Obama is planning is something that has never worked. Not in the New Deal, not in the 1970's, not in the Japanese recession of the 90's, and it wont work now, especially in conjunction with Obama's higher taxes and tighter regulations and environmentalism. Government projects and spending are so wasteful and the overhead so great that there's a net loss to the economy that comes into play after a few years and then another downturn and possibly simultaneous inflation occurr. It may be particularly bad in Obama's case as his "green" projects are especially expensive and uneconomic.
As for infrastructure needs - that twin cities bridge that collapsed was under repair. Unknown to anyone the design was defective. All too much of the supposed backlog are "Big Digs" and "bridges to nowhere". For decades the lobbyists for the construction and cement industries have been trying to push the erroneous belief that our infrastructure is falling apart when its just not true.
Too much of this and the dollar will drop like a rock, oil and other commodity prices shoot up from their lows - and they may well already have overshot the reaction to the recent speculative increases and economic problems. With this a period of stagflation may start up.
Wikipedia - Stagflation
Although it is clearly too early at this writing to draw conclusions, some economists and commentators suggest stagflation may be unfolding in the 21st Century. Many people adhering to this view suggest the condition may be the result of a prolonged maintenance of low, even non-economically low, interest rates by the U. S. Federal Reserve, starting in the Fall of 2001. Low interest rates elevated housing values, triggering an enormous increase in credit activity worldwide which ended with the beginning of the Credit Crisis in 2007.
A series of dramatic rate lowerings by the U. S. Federal Reserve designed to fight the Credit Crisis caused commodity prices to soar. For example, there was a one-year gain in the price of oil from about $70 per barrel to about $145 per barrel at the July, 2008 peak, depending on market and grade. Agricultural commodities, many base metals, precious metals and most major currencies also appreciated significantly against the U.S. dollar during or before this rise in the price of oil, even provoking some government and inter-governmental agency action in currency and commodity markets.
Economic growth slowed as watchers saw hope fade that a "post-Credit-Crisis period" had dawned, resulting in a recognition that recession had begun in the developed economies. The major developed economies almost universally reacted by "printing money"; in the United States alone, permanent funding approaches a total of one trillion dollars and temporary funding is nearly double that much. In parallel the U. S. central bank again lowered interest rates to a further non-economic low in parallel with similar moves across Europe. European central banks also put forth nearly two trillion dollars to recapitalize crippled banks. There is wide-spread recognition in the economic community that periods of intense monetary inflation are invariably followed sooner or later by intense price inflation. As a result long-term interest rates edged upward, with the cost of a 30-year mortgage in the U.S. rising from 5.75% to 6.25%. These are classic causes of inflation during recesion, i.e., stagflation.
Prelimnary to having a classic stagflation situation settled in, short-term price declines often occur across the spectrum of industry, This results because producers and manufacturers respond to the declining demand associated with the recession component of stagflation by slashing prices to non-economically low levels. "Deflation" is then hailed by policymakers as an excuse to further stimulate the economy, as occurred in late 2008 on both sides of the Atlantic Ocean. Attrition within individual industries then occurs as the stronger firms survive and the weaker firms are unable to bear periods of losses. Such an event is the step which compels surviving firms to seek to re-enter the supply-demand curve based on smaller projected sales volume expectations, less competition and with the higher prices which restore profitability.
However, in tandem with or somewhat before the July, 2008 peak price in oil, most major exchange-traded commodities began to fall rapidly in price, suggesting to yet other economists and commentators that a trend of deflation - rather than inflation or stagflation - might occur.
jjk083, He reportedly said that, it cannot be confirmed or denied. But it certain makes it believable considering The Fifth Plank of the communist Manifesto calls for centralization of credit in the hands of the state, by means of a national bank, with state capital and exclusive monopoly.
http://www.anu.edu.au/polsci/marx/classics/manifesto.html
I do not have a problem with printing money, as long as it is backed by Gold and Silver(only legal tender authorized in the Constitution).
http://www.anu.edu.au/polsci/marx/classics/manifesto.html
I do not have a problem with printing money, as long as it is backed by Gold and Silver(only legal tender authorized in the Constitution).
That would make it WORTH something then, Patriot......we can't have that!!!!I do not have a problem with printing money, as long as it is backed by Gold and Silver(only legal tender authorized in the Constitution).
...and it would be TOO HARD to make that Transition back to a sound monetary system using Gold because the country will collapse on itself......
Those are the Excuses we hear on this Board.......I say, this country is doing a good enough job Collapsing all by itself.....With or without a re-vamp of the Monetary policy......might as well Get-R-Done while we can.....This FIAT money system aint gonna work long term.
Well the fact is, most people think those in favor of a Gold Standard just want to get rid of it overnight, no one is suggesting that. The first thing we need to do is get control of the Federal Reserve, get congressional oversight, and control the amount of money they print. Right now, we don't even know how much they print. We need to do this before anything else, it would only seem rational we take these steps. Then we can demonetize that currency and create a currency somewhat backed by metal. Silver is also legal tender and America produces tons of silver, until a while back, our dollar was backed by silver certificate. Now we don't have to immediately back all the currency with a metal, it will have to be gradual. And the more silver we mine over time, the more it can be backed by silver, then we can eventually back it by gold.That would make it WORTH something then, Patriot......we can't have that!!!!
...and it would be TOO HARD to make that Transition back to a sound monetary system using Gold because the country will collapse on itself......
Those are the Excuses we hear on this Board.......I say, this country is doing a good enough job Collapsing all by itself.....With or without a re-vamp of the Monetary policy......might as well Get-R-Done while we can.....This FIAT money system aint gonna work long term.
One can reason that although the government has created Trillions of dollars by selling bonds to buyers like the Chinese, that those dollars are merely replacing the dollars that were lost when the stock market crashed, so the world doesn't actually have a dulition of dollars but the ownership of those dollars changed.
Now the bond buyers own the debt, the bankers have the money, and we, the citizens get to repay it all.. Neat huh?
Now the bond buyers own the debt, the bankers have the money, and we, the citizens get to repay it all.. Neat huh?
jjk083, He reportedly said that, it cannot be confirmed or denied. But it certain makes it believable considering The Fifth Plank of the communist Manifesto calls for centralization of credit in the hands of the state, by means of a national bank, with state capital and exclusive monopoly.
http://www.anu.edu.au/polsci/marx/classics/manifesto.html
I do not have a problem with printing money, as long as it is backed by Gold and Silver(only legal tender authorized in the Constitution).
Wow, way to source your quote. It can't be confirmed nor denied. So we can just go around making up quotes from dead people and treat them like they're the honest truth.
I do agree with you on the need to back the currency with gold/silver.
Well the fact is, most people think those in favor of a Gold Standard just want to get rid of it overnight, no one is suggesting that. The first thing we need to do is get control of the Federal Reserve, get congressional oversight, and control the amount of money they print. .
You lost me after "congressional oversight..."
You honestly think the likes of Chris Dodd and Barney Frank would do a better job, given that they failed in every form of oversight w/r/t the banking system.
You honestly think a Democratic Congress would pass such a thing?You lost me after "congressional oversight..."
You honestly think the likes of Chris Dodd and Barney Frank would do a better job, given that they failed in every form of oversight w/r/t the banking system.
The key word in my post is he reportedly said it. You need to learn to read old man, maybe a new pair of spectacles. But it certain makes it believable considering The Fifth Plank of the communist Manifesto calls for centralization of credit in the hands of the state, by means of a national bank, with state capital and exclusive monopoly.Wow, way to source your quote. It can't be confirmed nor denied. So we can just go around making up quotes from dead people and treat them like they're the honest truth.
I do agree with you on the need to back the currency with gold/silver.
So is it your contention, Mr. "Adult", that the only way to get credit in the US is from a FDIC protected institution?The key word in my post is he reportedly said it. You need to learn to read old man, maybe a new pair of spectacles. But it certain makes it believable considering The Fifth Plank of the communist Manifesto calls for centralization of credit in the hands of the state, by means of a national bank, with state capital and exclusive monopoly.
I used to be something of a history buff. The Roman civilization fascinated me, primarily because it lasted so long. At various times it had fiat money, not always, but mostly economic decline resulted. When the government was placed again on a precious metals system the Roman Impire prospered. Unfortunately mostly we don't learn from history.
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