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August 25, 2015 at 6:48 AM #788912August 25, 2015 at 9:50 AM #788914FlyerInHiGuest
CAr, who are “they”? “They”,the power that be, don’t all act together.
Paul Krugman has a good new article about the glut of money chasing returns around the world that creates boom and bust cycles.
They, meaning governments, should develop policies to put that money to productive uses. But it’s not like “they” are all in agreement and all act in unison.
So what are central bankers to do? They can only act within their domain.
CAr, the “they” that you refer to requires coordination between monetary and fiscal policy. Not possible because of politics and ideology. It also requires a new world order.
August 25, 2015 at 10:29 AM #788915livinincaliParticipant[quote=FlyerInHi]
They, meaning governments, should develop policies to put that money to productive uses. But it’s not like “they” are all in agreement and all act in unison.So what are central bankers to do? They can only act within their domain.
CAr, the “they” that you refer to requires coordination between monetary and fiscal policy. Not possible because of politics and ideology. It also requires a new world order.[/quote]
They, meaning the central bank, should do nothing for exactly the reason you state above. Since, they can’t control where the money goes, they should let the bad debt liquidate. They can lower the interest rates but they can’t make people borrow it for productive uses. As the rate of interest approaches 0 there’s an increased incentive to speculate rather than invest. If you have to borrow at 10% you aren’t going to be using the money to buy back stock, but you will borrow if you actually have a smart productive idea.
Granted there’s a ton of people via various retirement accounts that really really need asset prices to remain inflated.
August 25, 2015 at 12:29 PM #788925FlyerInHiGuestCentral banks can act without the burden of the political process.
Would you rather they didn’t act to stabilize the economy and allow an economic depression? Millions of jobs lost, human capital evaporated, dreams not realized, more suicides, more malnutrition, more death, more crime, etc… all that would set back human advancement.Money is just a concept and a tool for us to use. There are no natural laws governing money.
August 27, 2015 at 8:21 AM #788965CA renterParticipant[quote=FlyerInHi]Central banks can act without the burden of the political process.
Would you rather they didn’t act to stabilize the economy and allow an economic depression? Millions of jobs lost, human capital evaporated, dreams not realized, more suicides, more malnutrition, more death, more crime, etc… all that would set back human advancement.Money is just a concept and a tool for us to use. There are no natural laws governing money.[/quote]
Livin’ gets it, Brian. Sorry, but the Fed did not save the day. They’ve only prolonged the recession and will end up making it worse because the problems are continuing to pile up with every passing year.
The Federal Reserve is independent of the U.S. govt only in theory. If you think that politicians and high-ranking Fed officials (and high-ranking executives from the financial industry, among others) don’t discuss things and coordinate activities, I have a bridge to sell you…
August 27, 2015 at 8:31 AM #788967The-ShovelerParticipantI would agree the Head of the Fed works for the and is replaced by the current executive administration.
They are only employed at the pleasure of the current prez.
That said, I don’t see them raising rates significantly until there is clear wage inflation occurring (and I expect they will let that run awhile before raising as well).
The general population has to be able to afford the current home prices at 7-9% interest before they will raise or even let the market crash.
Anyway IMO.
August 27, 2015 at 10:14 AM #788968fun4vnay2ParticipantRightly said CAR.
Central bank is not independent at all.
But the good thing is: People never learn and have short term memory. They always think rising prices of assets are always good
In the next recession, FED won’t have any ammo to deal with unless they increase the rate soon. It is possible, they may not increase.. Let’s wait n watch.
August 27, 2015 at 10:45 AM #788969The-ShovelerParticipantIn theory the Fed is NEVER out of ammo,
They have the ability to endless do QE.
The Prez can even order the Treasury to print Trillion dollar coins and mail out checks.
Not that it would be a good Idea, its just possible.
I think even one Idea that was floated was to print a Trillion dollar coin to pay for infrastructure projects.
August 27, 2015 at 1:29 PM #788970FlyerInHiGuestHuman capital is perishable and constantly needs nourishment. When people are jobless, and children go hungry, what’s the point of saving ammo?
If the Fed runs out of ammo for the next recession, Congress will have to act. We can make more ammo.
To simply say that we are constrained by money, itself a human invention, is to doubt human ingenuity to come up with new solutions.
August 27, 2015 at 1:46 PM #788971moneymakerParticipantIt seems to me there are 2 options for the government for stimulus, lower rates or create jobs. Ok already tried to lower rates, now can’t go any lower. So time to create jobs soon, 2 ways to do that also. Hire more government workers/create infrastructure jobs or the Trump strategy (deport the illegals). Neither of these strategies increases GDP so will also ultimately fail. The lowering of rates was suppose to increase jobs by getting businesses to invest with new start ups and such. Problem is most investment has been overseas. Maybe the China problem will stop this, but I doubt it. Ultimately China will start an economic war by dumping dollars and the US will respond with protectionism. Just my 2¢
August 27, 2015 at 2:03 PM #788972The-ShovelerParticipantI would argue that improving and creating infrastructure is increasing GDP.
Yes the Horror if China no longer accepts the US dollar,
We would have to make our own stuff.
Just kidding, In reality, China would never dump US treasuries, it would only be shooting itself in the foot LOL, it’s banking on those.
The fed would just print more money and buy them back on the cheap.
August 27, 2015 at 2:27 PM #788973AnonymousGuest[quote=CA renter]
Livin’ gets it, Brian. Sorry, but the Fed did not save the day. They’ve only prolonged the recession and will end up making it worse because the problems are continuing to pile up with every passing year.[/quote]Uh, the recession ended in 2009, when the Black Eyed Peas are at the top of the charts and “octomom” was in the headlines.
You might want to tune in some OMI and check the business section of the newspaper.
Oh wait … newspapers went away years ago, just like the recession. This works too:
U.S. second-quarter GDP growth revised sharply higher to 3.7 percent
http://www.reuters.com/article/2015/08/27/us-usa-economy-idUSKCN0QW1IF20150827August 28, 2015 at 7:04 PM #789002utcsoxParticipant[quote=moneymaker]It seems to me there are 2 options for the government for stimulus, lower rates or create jobs. Ok already tried to lower rates, now can’t go any lower. So time to create jobs soon, 2 ways to do that also. Hire more government workers/create infrastructure jobs or the Trump strategy (deport the illegals). Neither of these strategies increases GDP so will also ultimately fail. The lowering of rates was suppose to increase jobs by getting businesses to invest with new start ups and such. Problem is most investment has been overseas. Maybe the China problem will stop this, but I doubt it. Ultimately China will start an economic war by dumping dollars and the US will respond with protectionism. Just my 2¢[/quote]
To increase the GDP, you can either
1. Increase the number of workers or
2. Increase the productivity of the workers..I really don’t know where you get the ideas that you can increase GDP by deporting illegal immigrants. Or are you suggesting by deporting the illegal immigrants, the overall productivity of legal workers will suddenly increase?
August 30, 2015 at 3:28 AM #789017CA renterParticipant[quote=harvey][quote=CA renter]
Livin’ gets it, Brian. Sorry, but the Fed did not save the day. They’ve only prolonged the recession and will end up making it worse because the problems are continuing to pile up with every passing year.[/quote]Uh, the recession ended in 2009, when the Black Eyed Peas are at the top of the charts and “octomom” was in the headlines.
You might want to tune in some OMI and check the business section of the newspaper.
Oh wait … newspapers went away years ago, just like the recession. This works too:
U.S. second-quarter GDP growth revised sharply higher to 3.7 percent
http://www.reuters.com/article/2015/08/27/us-usa-economy-idUSKCN0QW1IF20150827%5B/quote%5DGDP is a very clumsy way to measure how well the economy is functioning. It doesn’t address whether or not the money is being spent wisely or sustainably, and it doesn’t address the allocation of the benefits of production.
I prefer to look at real wage growth and purchasing power, in particular. This is how growth and recessions are defined by people who live in the real economy, not economists in ivory towers.
http://www.advisorperspectives.com/dshort/updates/Household-Income-Distribution.php
Here is a chart of the official unemployment rates (U3 and U6), and the ShadowStats numbers:
http://www.shadowstats.com/alternate_data/unemployment-charts
Of course, we must also look at debt levels — and how that money is being spent — since that will often help determine how the economy will do in the future. Self-liquidating debt is usually good, but consumer debt is usually bad, especially if it’s being used to offset declining wages/purchasing power.
http://www.tradingeconomics.com/united-states/government-debt-to-gdp
August 30, 2015 at 3:45 AM #789018CA renterParticipant[quote=moneymaker]It seems to me there are 2 options for the government for stimulus, lower rates or create jobs. Ok already tried to lower rates, now can’t go any lower. So time to create jobs soon, 2 ways to do that also. Hire more government workers/create infrastructure jobs or the Trump strategy (deport the illegals). Neither of these strategies increases GDP so will also ultimately fail. The lowering of rates was suppose to increase jobs by getting businesses to invest with new start ups and such. Problem is most investment has been overseas. Maybe the China problem will stop this, but I doubt it. Ultimately China will start an economic war by dumping dollars and the US will respond with protectionism. Just my 2¢[/quote]
Government spending can indeed increase GDP.
“Gross domestic product can be calculated using the following formula:
GDP = C + G + I + NX
where
“C” is equal to all private consumption, or consumer spending, in a nation’s economy, “G” is the sum of government spending, “I” is the sum of all the country’s businesses spending on capital and “NX” is the nation’s total net exports, calculated as total exports minus total imports (NX = Exports – Imports).”
Read more: Gross Domestic Product (GDP) Definition | Investopedia http://www.investopedia.com/terms/g/gdp.asp#ixzz3kIF7Y5A6
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