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07/30/2010 01:00:10 PM · #1
This is an interesting article that would back up both Judith AND me.

Are the helicopters about to take off?

The summary is that St. Louis' Fed Reserve Bank president James Bulloch is now worried more about deflation than inflation (which is a change from a few months ago) and supports a second round of quantitative easing. However, he admits that this may spur inflation in the future. Overall it's probably also a sign that we are not out of the woods. I think that makes sense because, as I've said, I feel that the government stimulus programs are able to delay pain, but not prevent it.
07/26/2010 05:38:38 AM · #2
Originally posted by DrAchoo:

If everything goes as planned, it will be interesting to compare the US and Britain in 10 years given they are apparently chosing to cut their budget by 20-25%. Even more interesting is that Cameron's approval rating went UP by 5 points after he declared these austerity measures. Can you even fathom that happening in the US? No way. We are soooo soft.


I agree that it is going to be interesting to see what works best. There is a huge gamble in cutting public spending hard. Businesses have placed greater dependency on public spending in the last few years: cutting it too fast will be inconsistent with driving a gradual realignment back to private sector work. There is a careful balance required I hope that each of our leaders finds it (potentially in different ways).

07/25/2010 11:27:31 PM · #3
Originally posted by drew_makeanimpact:

Originally posted by Art Roflmao:

popcorn_beer.gif


I find this to be the most intelligible reply yet!


I agree
07/25/2010 09:01:50 PM · #4
Originally posted by Art Roflmao:

popcorn_beer.gif


I find this to be the most intelligible reply yet!
07/24/2010 02:02:31 PM · #5
Judith, you are arguing and not discussing. Who ever said I made Schiff my guru? Not I. I linked that because I literally stumbled across it on the front page of Yahoo Finance and we had been talking about a) him and b) inflation and c) your declaration that nobody was worried about inflation. Didn't I already declare him not to be "the second coming of Christ"? I'm fully aware that even a broken clock is right twice a day. It's possible that Schiff is a one-trick pony and his trick happened to come up in 2006. BUT, he does serve as a warning and to simply dismiss him as a crackpot is probably imprudent.

I'm just having a discussion here, but you seem so prickly that any disagreement with your stance must be a) wrong and b) ideologic. Are you so certain that things are going to work out?

I happen to agree with you about Schiff's declaration of prices being higher being incorrect. I found your link on my own yesterday and noted that food, for example, has not been greatly inflating. However, his warning that inflation might be around the corner is one to heed. I don't think the fed or the economy turn on a dime. Look, it may have been Greenspan's artificially low interest rates of even the 1990s that sunk us in 2008 (through the housing bubble). What we do today may only come back to bite us a decade from now. The economy is a machine with a thousand knobs, not two or three. We think we understand a few and we turn those, but we cannot forsee how the other knobs affect the outcome. That's my impression and I stick by it and is why I lack faith in ANYBODY who is running things to know what they are doing. The more drastic the turns, the more I worry. On EITHER side. If it was a Red in the office and she was stimulating the economy with massive tax cuts, I'd be freaked out just as much.

If everything goes as planned, it will be interesting to compare the US and Britain in 10 years given they are apparently chosing to cut their budget by 20-25%. Even more interesting is that Cameron's approval rating went UP by 5 points after he declared these austerity measures. Can you even fathom that happening in the US? No way. We are soooo soft.
07/23/2010 10:06:43 PM · #6
Originally posted by DrAchoo:

Originally posted by Judith Polakoff:

12-16-09bud-rev6-28-10-f1.jpg


These graphs go obsolete pretty fast. 2011 looks to have a $1.47 trillion deficit. I wouldn't trust a chart like this at all as nobody can predict these things with any accuracy more than even a year or two out. To think we have an idea on what the budget will be like in 2019 is silly.


The Congressional Budget Office makes these projections for the benefit of policymakers, so they can see the effect their policies will have in the long-term. So they're not intended to be accurate down to the penny and are attempting to hit a moving target. The projections are frequently updated as circumstances warrant. As I stated previously, I posted this chart merely to show the relative contribution to the deficit of the Bush versus Obama policies.
07/23/2010 09:58:22 PM · #7
Originally posted by DrAchoo:

Thanks for the links Judith. I didn't search this at all, but rather found it on the front page of Yahoo Finance this morning. Schiff would provide the counterargument:

Inflation is a comin' if it isn't already here

So the country walks on the knife's edge. You can see why I don't have faith that any of the guys in Washington are smart enough to not fall off.


I really don't understand why you've made Schiff your financial guru. Do you think he's non-ideological? He's not. He used to be Ron Paul's economic adviser, meaning he's a free-markets guy. Do you think he's the only person on earth who predicted the financial collapse? He's not. I recently saw a partial list of about 15 people who predicted the bursting of the housing bubble and the ensuing recession. At least two of the 15 (that I know of personally, because I've been following their work over several years), Robert Shiller and Nouriel Roubini, support the stimulus/deficit spending.

And finally, Schiff's statements about current inflation are just dead wrong. Here's the latest consumer price index summary from the Bureau of Labor Statistics:

Consumer Price Index Summary

I'm not sure how Schiff provides the counter-argument if his numbers are wrong.
07/23/2010 04:22:24 PM · #8
Originally posted by Judith Polakoff:

12-16-09bud-rev6-28-10-f1.jpg


These graphs go obsolete pretty fast. 2011 looks to have a $1.47 trillion deficit. I wouldn't trust a chart like this at all as nobody can predict these things with any accuracy more than even a year or two out. To think we have an idea on what the budget will be like in 2019 is silly.

Message edited by author 2010-07-23 16:23:38.
07/23/2010 12:29:00 PM · #9
Originally posted by pawdrix:

I think Obamas big mistake was not to ask for a lot (and I mean a lot) in return for the TARP money given out. The companies that received aid are in good shape and posting some huge profits while little change occurred in the ways they operated...bonus hand-outs, golden parachutes, stock rewards, overpaid execs etc. On the other side the taxpayers who flipped the bill are still getting shafted some barely keeping their heads above water...if they're lucky.


Ah....now, way after the fact they're complaining about something they should have put into the TARP deal from the word go. What assholes. Didn't it seem obvious at the time to insure that bonuses, stock gifts and golden parachutes were to be cut off. Who'da thunk?

Pay czar: 17 bailed-out banks overpaid executives

Interesting thing is that The Republicans are trying to paint the Bush era of tax cuts for the wealthy and the countries financial slide in a bright way so they can get back to enacting the same shit that brought us down... more deregulation and permanent tax cuts for the wealthy. WTF? After having full control for six solid years and very little resistance from the left pre and post 9/11 haven't they proved once and for all that their policies don't work?

But back to Executive compensation and corporate control of our gov't which was made worse by the Supreme Courts decision to give corporation the same right as individuals...we are getting irrecoverably further from "a Government of the people, by the people, for the people. Republican policy will keep making them stronger and stronger and impossible to protect us against their abuses...which we see day-by-day are so abundant.

Message edited by author 2010-07-23 12:34:36.
07/23/2010 11:44:37 AM · #10
Thanks for the links Judith. I didn't search this at all, but rather found it on the front page of Yahoo Finance this morning. Schiff would provide the counterargument:

Inflation is a comin' if it isn't already here

So the country walks on the knife's edge. You can see why I don't have faith that any of the guys in Washington are smart enough to not fall off.

Message edited by author 2010-07-23 11:45:24.
07/23/2010 09:49:41 AM · #11
Two recent articles about deflation:

Why Deflation is Worse Than Inflation

The Feckless Fed
07/22/2010 09:02:23 PM · #12
Originally posted by yanko:



How about we nuke everyone and then offer to rebuild the world?


we seem to have lost our touch in that method if Afghanistan is any measure, but Im sure it is still being worked on by certain policy think tanks.
07/22/2010 08:38:11 PM · #13
Originally posted by DrAchoo:

Originally posted by BrennanOB:

Originally posted by DrAchoo:


BTW, manufacturing was about 25% of GDP in 1953. It is currently around 6%. If we have "new industries" now, we have far fewer of them.


While the drop in manufature as a percentage of GDP is a real concern, quoting from 1953 is something of a cheat. To compare America's place in the world as an industrial powerhouse when Europe and Asia lay in ruins after WWII and comparing it to where it stands at any other point in history, makes that point in history look weak. 1881, 1935, or 2101; none look good compared to 1953.

There are indeed issues with the economy resulting from political choices we have made in the last half century, but there is a larger trend that has equal or greater force on our place in a global economy, and that is that we are no longer the only mature economy; we must compete on an equal footing with the fully recovered powers of Europe and Japan, and the rising powers of China and Brazil. We are going to have to deal with a smaller piece of a bigger pie.


I mentioned 1953 specifically to show how the Keynesian spending of WWII is within an entirely different context compared to now. Judith thinks it's a good example of why it's all going to work out this time. I agree with you. The 1940-50s were a unique time and the lessons learned do not necessarily apply to now. We could sell goods to get ourselves out of the great depression. Now what do we have to offer? I just don't see it.


How about we nuke everyone and then offer to rebuild the world?
07/22/2010 08:24:53 PM · #14
Originally posted by BrennanOB:

Originally posted by DrAchoo:


BTW, manufacturing was about 25% of GDP in 1953. It is currently around 6%. If we have "new industries" now, we have far fewer of them.


While the drop in manufature as a percentage of GDP is a real concern, quoting from 1953 is something of a cheat. To compare America's place in the world as an industrial powerhouse when Europe and Asia lay in ruins after WWII and comparing it to where it stands at any other point in history, makes that point in history look weak. 1881, 1935, or 2101; none look good compared to 1953.

There are indeed issues with the economy resulting from political choices we have made in the last half century, but there is a larger trend that has equal or greater force on our place in a global economy, and that is that we are no longer the only mature economy; we must compete on an equal footing with the fully recovered powers of Europe and Japan, and the rising powers of China and Brazil. We are going to have to deal with a smaller piece of a bigger pie.


I mentioned 1953 specifically to show how the Keynesian spending of WWII is within an entirely different context compared to now. Judith thinks it's a good example of why it's all going to work out this time. I agree with you. The 1940-50s were a unique time and the lessons learned do not necessarily apply to now. We could sell goods to get ourselves out of the great depression. Now what do we have to offer? I just don't see it.

Message edited by author 2010-07-22 20:25:44.
07/22/2010 08:09:58 PM · #15
Originally posted by DrAchoo:


BTW, manufacturing was about 25% of GDP in 1953. It is currently around 6%. If we have "new industries" now, we have far fewer of them.


While the drop in manufature as a percentage of GDP is a real concern, quoting from 1953 is something of a cheat. To compare America's place in the world as an industrial powerhouse when Europe and Asia lay in ruins after WWII and comparing it to where it stands at any other point in history, makes that point in history look weak. 1881, 1935, or 2101; none look good compared to 1953.

There are indeed issues with the economy resulting from political choices we have made in the last half century, but there is a larger trend that has equal or greater force on our place in a global economy, and that is that we are no longer the only mature economy; we must compete on an equal footing with the fully recovered powers of Europe and Japan, and the rising powers of China and Brazil. We are going to have to deal with a smaller piece of a bigger pie.
07/22/2010 06:32:52 PM · #16
Originally posted by Judith Polakoff:

Well, first of all, I didn't argue there would be a boom coming out of this recession. Yes, our manufacturing base has been decimated, but there are industries that exist now that didn't exist then. I think you're missing the forest for the trees. The fundamental rules of the game haven't changed. The basic economic principles are the same, AND we now have the benefit of having lived through the previous depression and many recessions (so it's not an N of 1). The point is to get back to creating jobs and a period of growth, not necessarily a boom resembling the conditions after WWII. And, by the way, the economy is growing now. Jobs are being created now, although it's a small number at the present time. So (hopefully) the contraction period is over. The job losses of 500,000 to 700,000 a month are over. I think you've set up something of a straw-man argument because nobody that I know of has ever claimed we'd come roaring out of the current crisis and have full employment anytime soon.

Second, I didn't say that the economy shrank by 70 percent! lol! Do you think all consumer spending has ceased?? No! The economy contracted by about 6 percent at its worst point, I think. Nobody, and I mean nobody is worried about inflation right now. If anything, the big fear is deflation. But, that's not to say that responsible economists and politicians aren't aware of the potential for inflation at some later point. They're also aware that the debt must be brought down to a healthier level relative to the GDP, but the argument is that now is not the time to do it (unless you're prepared for more job losses and more economic contraction). Your Zimbabwe example from a previous post is also a straw man. What happened there was hyper-inflation, but we're hardly approaching just ordinary, run-of-the-mill inflation right now. Can the money spigot be turned off? Yes, technically pretty easily, and it doesn't involve helicopters either. lol!


Frankly you are starting to sound a bit ideological. I would much rather have you be right than I get some opportunity down the line to say "I told you so." Let's just say I'm worried and leave it at that. I bought gold on 10/3/2008 for around $850/oz two hours before the Emergency Economic Stabilization Act was passed . Currently it's around $1150. Gold is nothing if not a hedge against inflation and debased fiat money. It appears I'm not the only one worried about it by the interest in gold.

BTW, manufacturing was about 25% of GDP in 1953. It is currently around 6%. If we have "new industries" now, we have far fewer of them.

Message edited by author 2010-07-22 18:36:19.
07/22/2010 04:47:49 PM · #17
Well, first of all, I didn't argue there would be a boom coming out of this recession. Yes, our manufacturing base has been decimated, but there are industries that exist now that didn't exist then. I think you're missing the forest for the trees. The fundamental rules of the game haven't changed. The basic economic principles are the same, AND we now have the benefit of having lived through the previous depression and many recessions (so it's not an N of 1). The point is to get back to creating jobs and a period of growth, not necessarily a boom resembling the conditions after WWII. And, by the way, the economy is growing now. Jobs are being created now, although it's a small number at the present time. So (hopefully) the contraction period is over. The job losses of 500,000 to 700,000 a month are over. I think you've set up something of a straw-man argument because nobody that I know of has ever claimed we'd come roaring out of the current crisis and have full employment anytime soon.

Second, I didn't say that the economy shrank by 70 percent! lol! Do you think all consumer spending has ceased?? No! The economy contracted by about 6 percent at its worst point, I think. Nobody, and I mean nobody is worried about inflation right now. If anything, the big fear is deflation. But, that's not to say that responsible economists and politicians aren't aware of the potential for inflation at some later point. They're also aware that the debt must be brought down to a healthier level relative to the GDP, but the argument is that now is not the time to do it (unless you're prepared for more job losses and more economic contraction). Your Zimbabwe example from a previous post is also a straw man. What happened there was hyper-inflation, but we're hardly approaching just ordinary, run-of-the-mill inflation right now. Can the money spigot be turned off? Yes, technically pretty easily, and it doesn't involve helicopters either. lol!
07/21/2010 11:58:43 PM · #18
Do you know who Peter Schiff is? I don't think he's the second coming of Christ like some do, but man he nailed the recession back in 2006. If you don't know it, it's quite famous by now. YouTube here. THIS WAS 2006 when he called it! He'd agree, I believe, with most of what I'm saying above.

Message edited by author 2010-07-22 00:05:21.
07/21/2010 11:49:55 PM · #19
Originally posted by Judith Polakoff:

Originally posted by DrAchoo:

Basically you drop freshly printed money from the helicopter so people are encouraged to spend. Or that's the plan according to Ben anyway.


I don't know where you got that idea.

In any event, I'm just curious, since you are so obviously hostile to the Keynesian model for recovery, just exactly what you would propose as a solution to the current deep recession? You do realize, don't you, that a functioning capitalist economy depends in large part on consumer spending? With interest rates already approaching zero, how would you spur economic activity?

And for your information, the U.S. inflation rate in June 2010 was about 1 percent. So whatever Bernanke is doing, it has not resulted in a depreciation in the value of the dollar.


I'm sure you know about the nickname "Helicopter Ben" right? You didn't give your financial education, but you talk well enough I can't believe you wouldn't know the idea behind the name. Here's the wiki quote:

"In 2002, when the word "deflation" began appearing in the business news, Bernanke gave a speech about deflation.[52] In that speech, he mentioned that the government in a fiat money system owns the physical means of creating money. Control of the means of production for money implies that the government can always avoid deflation by simply issuing more money. He said "The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost." (He referred to a statement made by Milton Friedman about using a "helicopter drop" of money into the economy to fight deflation.) Bernanke's critics have since referred to him as "Helicopter Ben" or to his "helicopter printing press.""

As far as me being anti-Keynsian, don't get ahead of yourself. I called it a huge gamble. Perhaps it may work, but despite what you may think about WWII, we are dealing with an n of 1. The two situations (great depression vs. today) are so dissimilar in so many ways (as one would expect) that to assume that the guiding principles of the WWII boom applying to us today are tenuous at best. I don't really know what the answer is. I don't think it's simple free market economy either, although some days I wonder. That medicine takes longer to work, but if you live you probably wind up healthier. Look at Japan. They had their "lost decade" while free markets took their effect, but I bet they pull out of all this better than we will.

I do realize that 70% of our GDP is consumer spending. Do I think that's healthy? Hell no. Here is one of the huge differences between WWII and us now. We have virtually no manufacturing base to fall back on. In WWII our best manufacturing competitors (Europe) were lying in smouldering ruins. There WAS no competition. Asia was still in the stone age and Europe was destroyed. If you wanted to rebuild, America was the only country that could do it for you. (Obviously this is slight hyperbole, but only slight.)

Let me ask you this. If 70% of the GDP is consumer spending, and for the last decade the consumer has been treating his home equity as an ATM as well as the "if you have a pulse you qualify" unsecured credit and is now tapped out because they are underwater on their house and their credit score is 620, how are you going to make up that deficit? The government is going to step in and prop up 70% of the economy? For how long? We're going on nearly three years now and unemployment is still above 9.5%. All the money we have been printing, has not made it into the M1 yet. It's been sucked into the black hole of M3 filling all that bad debt. If you can time it perfectly so that you stop the presses just as that hole is filled you might, MIGHT get away with things, but I have very little faith that we are that smart or even that willing once we've suckled at the teat of "quantitative easing". If we don't shut it off at the right time, THAT is when inflation is going to rear its head. We don't have obvious inflation now because the consumer isn't spending because houses are worth less and many people are out of work. However, the government may not truly report inflation. This gets all conspiratorial (and thus I am not sure if I totally buy it), but there are sites like shadowstats.com that would tell you there is a lot more inflation that you think.

Again, I qualify to say I have little, if any, formal economic training. Actually I have none. But I read a lot because I have investments. Seeking alpha is a great site and you can get all sorts of opinions. Sure a bunch of it is crap, but you learn to understand the larger arguments and you also learn to understand what makes sense and what doesn't.

Message edited by author 2010-07-21 23:53:22.
07/21/2010 10:29:27 PM · #20
Originally posted by DrAchoo:

Basically you drop freshly printed money from the helicopter so people are encouraged to spend. Or that's the plan according to Ben anyway.


You might wish to peruse the contents of This Doc.

Personally I have very little gold or silver, but I did listen to my dear old Dad who told me when I was young: " If you ever have some money to spare... buy land... they don't make any more of that" and I have done fairly well by it.

Ray
07/21/2010 10:02:42 PM · #21
Originally posted by DrAchoo:

Basically you drop freshly printed money from the helicopter so people are encouraged to spend. Or that's the plan according to Ben anyway.


I don't know where you got that idea.

In any event, I'm just curious, since you are so obviously hostile to the Keynesian model for recovery, just exactly what you would propose as a solution to the current deep recession? You do realize, don't you, that a functioning capitalist economy depends in large part on consumer spending? With interest rates already approaching zero, how would you spur economic activity?

And for your information, the U.S. inflation rate in June 2010 was about 1 percent. So whatever Bernanke is doing, it has not resulted in a depreciation in the value of the dollar.
07/21/2010 07:38:52 PM · #22
You sound like you have more education on the matter than I do so I'll defer to your expertise. I then mean depreciate, although in the financial press I feel like I see the words used interchangably all the time. Maybe I should just use the term "quantitative easing" since it seems like such politic-speak. :) Basically you drop freshly printed money from the helicopter so people are encouraged to spend. Or that's the plan according to Ben anyway.

EDIT: Actually the word I may be searching for is "debase".

Message edited by author 2010-07-21 19:45:24.
07/21/2010 06:46:22 PM · #23
Originally posted by DrAchoo:

Originally posted by Judith Polakoff:

In 1915, a dollar would buy you 20 bottles of Coca-Cola. Today, not so much! So, should we take into account the fact that a dollar today does not have the same purchasing power as a dollar from roughly 100 years ago (or 50, 25, or even 10 years ago), or are we to consider such details merely lies, damn lies and statistics? Without the inflation adjustment, you're comparing apples to oranges, and that's no way to formulate sound economic policy.


But Judith, you can't expect to change such things without consequences. You can't have 15% inflation annually and expect your economy to work. Just ask Zimbabwe (although they had just a tad more than 15%, eh?).

We don't need to argue about it though. I said that the debt never went down in actual dollars and I have been shown to be correct. Whether that matters, I guess is open to opinion. I go back to my original assertion. We have three ways to remove our current debt. (I'm actually going to switch it to four and separate the two I had included together) 1) Raise taxes massively. 2) Cut spending drastically 3) Devalue or 4) Default. Carter managed to barely lower the effective debt by #3. It pushed the country into recession and he lost his job. It's a potential answer, but is it one we can live with? Personally, I believe the tipping point has been reached and there is no going back. No matter what we do, we're in for some big pain.


Just so you know (and because it's been bugging me), the United States operates under a flexible exchange rate. Only countries that operate under a fixed exchange rate have the option to devalue their currencies. When a country operates under a flexible exchange rate, the value of its currency is determined by market forces. The correct way to identify a deteriorating value in a flexible exchange rate currency is to use the term "depreciate" (as opposed to "devalue").
07/21/2010 08:59:57 AM · #24
Originally posted by scalvert:

Originally posted by eqsite:

Looks like another example of FOX taking things out of context and using it to try to create a political storm. Unfortunately it looks like they succeeded this time and a potentially innocent person gets to suffer. Now FOX can turn around and say how the administration jumped to conclusions (which it looks like they did). Yep, we sure should be proud of FOX. Great journalism.

Fox News is evil. Eventually their deceitful reporting WILL catch up to them.


Unfortunately, the damage is already done. The extent to which FOX already dictates political news cycles is downright frightening.
07/20/2010 11:29:44 PM · #25
Interestingly, and I have no idea what this means, if you look at the debt in ounces of gold it has only doubled since Carter.

In 1977 the debt was $776 billion and gold was about $150/oz meaning you could pay the debt with 5.1 billion ounces.
Currently the debt is $13 trillion and gold is about $1200/oz meaning you could pay the debt with 10.8 billion ounces.

So no matter how you slice it, we owe more than we did. ;)
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