Krugman heralds start of next depression

[pjwal]

Krugman, Obama and other Keynesians suffer from a misguided principal toward dividing the existing economic pie rather than growing the pie for everyone.

Too many people equate tax cuts with loss of federal revenue when history has always shown the opposite to be true. The current administration could provide an immediate boost to the economy simply by saying they would support another year of the tax cuts that are set to expire, but instead they are focusing on some Utopian fallacy of ending homelessness, paying people not to work and taxing financial institutions. Dividend taxes are set to quadruple, the death tax is going to go up to 53% and include assets that it has never before (homes and life insurance benefits), and income taxes on those that can afford to invest. Corporations are in a stand still with the looming tax increases and a fear of the not knowing what industry this current administration is going to target next.

The Fed never “prints” money, the US government sells bonds and that is only cheap in the context of the present. It is borrowing against our future and if it is always an economically beneficial policy, than why shouldn’t we do it all the time? We have never spent our way out of a recession.

We don’t need a collapse to bring back us back to prosperity, but we don’t need a quadrupling of our deficit as a percentage of GDP (the measurement that counts) to avoid a collapse. Both can be true as the historical data show Keynesian spending policies delay recovery, not initiate it. We have a 13 trillion dollar GDP and, while our federal spending has increased to a staggering 13% of it, what have we shown for it? The latest estimation of the upcoming bailout cost for Fannie and Freddie? 1 Trillion! It’s not enough for you to save 20% for your house, make your payments…now you have to produce enough goods and services and wealth to effectively subsidize the cost of a house for someone else and as far as anyone can tell, this is the “new reality” that this administration wants.

Federal spending (with borrowed money or not) can only serve to divert resources and capital in an economy, it does not add to them. Europe and the other economies of this world have begun to learn this and I’d never thought I’d actually be wanting our country to follow their lead.

[pjwal]

[quote=drboom][quote=jeeman]The only reason we had a surplus in 1998-2000 was because of massive capital gains tax revenues from the stock market bubble. When this went away, the deficits returned. Bush cut tax *rates*, but if you look at tax *revenue* charts, the revenues climbed after the rate cuts.[/quote]

This is a widely-held belief (that a surplus existed), but it’s not true.

A change in accounting lumped Social Security contributions into the government’s “income” category. It was a dishonest change and was done for obvious political reasons. There was in fact a substantial (though laughably low by 2010 standards) deficit throughout that period.[/quote]

Not too mention, what so many conveniently forget, we were IN A RECESSION at the end of the Clinton administration.

[pjwal]

[quote=drboom][quote=jeeman]The only reason we had a surplus in 1998-2000 was because of massive capital gains tax revenues from the stock market bubble. When this went away, the deficits returned. Bush cut tax *rates*, but if you look at tax *revenue* charts, the revenues climbed after the rate cuts.[/quote]

This is a widely-held belief (that a surplus existed), but it’s not true.

A change in accounting lumped Social Security contributions into the government’s “income” category. It was a dishonest change and was done for obvious political reasons. There was in fact a substantial (though laughably low by 2010 standards) deficit throughout that period.[/quote]

Not too mention, what so many conveniently forget, we were IN A RECESSION at the end of the Clinton administration.

[pjwal]

[quote=drboom][quote=jeeman]The only reason we had a surplus in 1998-2000 was because of massive capital gains tax revenues from the stock market bubble. When this went away, the deficits returned. Bush cut tax *rates*, but if you look at tax *revenue* charts, the revenues climbed after the rate cuts.[/quote]

This is a widely-held belief (that a surplus existed), but it’s not true.

A change in accounting lumped Social Security contributions into the government’s “income” category. It was a dishonest change and was done for obvious political reasons. There was in fact a substantial (though laughably low by 2010 standards) deficit throughout that period.[/quote]

Not too mention, what so many conveniently forget, we were IN A RECESSION at the end of the Clinton administration.

[pjwal]

[quote=drboom][quote=jeeman]The only reason we had a surplus in 1998-2000 was because of massive capital gains tax revenues from the stock market bubble. When this went away, the deficits returned. Bush cut tax *rates*, but if you look at tax *revenue* charts, the revenues climbed after the rate cuts.[/quote]

This is a widely-held belief (that a surplus existed), but it’s not true.

A change in accounting lumped Social Security contributions into the government’s “income” category. It was a dishonest change and was done for obvious political reasons. There was in fact a substantial (though laughably low by 2010 standards) deficit throughout that period.[/quote]

Not too mention, what so many conveniently forget, we were IN A RECESSION at the end of the Clinton administration.

[pjwal]

[quote=drboom][quote=jeeman]The only reason we had a surplus in 1998-2000 was because of massive capital gains tax revenues from the stock market bubble. When this went away, the deficits returned. Bush cut tax *rates*, but if you look at tax *revenue* charts, the revenues climbed after the rate cuts.[/quote]

This is a widely-held belief (that a surplus existed), but it’s not true.

A change in accounting lumped Social Security contributions into the government’s “income” category. It was a dishonest change and was done for obvious political reasons. There was in fact a substantial (though laughably low by 2010 standards) deficit throughout that period.[/quote]

Not too mention, what so many conveniently forget, we were IN A RECESSION at the end of the Clinton administration.

[ucodegen]

[quote pjwal]
The Fed never “prints” money, the US government sells bonds and that is only cheap in the context of the present.
[/quote]

Actually it does print money. The only problem is that it is highly inflationary when it increases M0.

M0 = Notes and coins in circulation + Notes and coins in bank vaults.

What makes the difference between something like a gold currency standard and a fiat currency standard, is that on a fiat currency standard, more ‘currency’ can be created at will by the government.

The selling of bonds does not increase the money supply. Someone gave up currency to buy the bond (exchanged money for a bond/IOU). The net is 0.

–sorry Nor-LA-SD-guy, I didn’t see you get in there…

[ucodegen]

[quote pjwal]
The Fed never “prints” money, the US government sells bonds and that is only cheap in the context of the present.
[/quote]

Actually it does print money. The only problem is that it is highly inflationary when it increases M0.

M0 = Notes and coins in circulation + Notes and coins in bank vaults.

What makes the difference between something like a gold currency standard and a fiat currency standard, is that on a fiat currency standard, more ‘currency’ can be created at will by the government.

The selling of bonds does not increase the money supply. Someone gave up currency to buy the bond (exchanged money for a bond/IOU). The net is 0.

–sorry Nor-LA-SD-guy, I didn’t see you get in there…

[ucodegen]

[quote pjwal]
The Fed never “prints” money, the US government sells bonds and that is only cheap in the context of the present.
[/quote]

Actually it does print money. The only problem is that it is highly inflationary when it increases M0.

M0 = Notes and coins in circulation + Notes and coins in bank vaults.

What makes the difference between something like a gold currency standard and a fiat currency standard, is that on a fiat currency standard, more ‘currency’ can be created at will by the government.

The selling of bonds does not increase the money supply. Someone gave up currency to buy the bond (exchanged money for a bond/IOU). The net is 0.

–sorry Nor-LA-SD-guy, I didn’t see you get in there…

[ucodegen]

[quote pjwal]
The Fed never “prints” money, the US government sells bonds and that is only cheap in the context of the present.
[/quote]

Actually it does print money. The only problem is that it is highly inflationary when it increases M0.

M0 = Notes and coins in circulation + Notes and coins in bank vaults.

What makes the difference between something like a gold currency standard and a fiat currency standard, is that on a fiat currency standard, more ‘currency’ can be created at will by the government.

The selling of bonds does not increase the money supply. Someone gave up currency to buy the bond (exchanged money for a bond/IOU). The net is 0.

–sorry Nor-LA-SD-guy, I didn’t see you get in there…

[ucodegen]

[quote pjwal]
The Fed never “prints” money, the US government sells bonds and that is only cheap in the context of the present.
[/quote]

Actually it does print money. The only problem is that it is highly inflationary when it increases M0.

M0 = Notes and coins in circulation + Notes and coins in bank vaults.

What makes the difference between something like a gold currency standard and a fiat currency standard, is that on a fiat currency standard, more ‘currency’ can be created at will by the government.

The selling of bonds does not increase the money supply. Someone gave up currency to buy the bond (exchanged money for a bond/IOU). The net is 0.

–sorry Nor-LA-SD-guy, I didn’t see you get in there…

[Nor-LA-SD-guy]

Why Yes, yes they can (Print Money),

Fed may buy Treasury notes and bonds, and/or agency bonds, in an effort to push interest rates even lower and “spur aggregate demand.”

“Although conventional interest rate policy is constrained by the fact that nominal interest rates cannot fall below zero, the second arrow in the Federal Reserve’s quiver — the provision of liquidity — remains effective,” Bernanke said in a speech Monday in Texas. “The Fed could purchase longer-term Treasury or agency securities on the open market in substantial quantities. This approach might influence the yields on these securities, thus helping to spur aggregate demand.”

Fed deploying unconventional tools

Bernanke’s comments are the Fed’s latest hint that the world’s most powerful central bank will deploy a ‘new tool box’ and unconventional techniques that Bernanke has previously said most likely would be needed to help the nation cope with its most serious financial crisis since the Great Depression.

Moreover, although the potential actions announced Monday technically are not quantitative easing, they will have that effect, says economist David H. Wang. Quantitative easing involves increasing the reserves in the banking system after the Fed loses the ability to lower the cost of money from an interest rate standpoint.

[Nor-LA-SD-guy]

Why Yes, yes they can (Print Money),

Fed may buy Treasury notes and bonds, and/or agency bonds, in an effort to push interest rates even lower and “spur aggregate demand.”

“Although conventional interest rate policy is constrained by the fact that nominal interest rates cannot fall below zero, the second arrow in the Federal Reserve’s quiver — the provision of liquidity — remains effective,” Bernanke said in a speech Monday in Texas. “The Fed could purchase longer-term Treasury or agency securities on the open market in substantial quantities. This approach might influence the yields on these securities, thus helping to spur aggregate demand.”

Fed deploying unconventional tools

Bernanke’s comments are the Fed’s latest hint that the world’s most powerful central bank will deploy a ‘new tool box’ and unconventional techniques that Bernanke has previously said most likely would be needed to help the nation cope with its most serious financial crisis since the Great Depression.

Moreover, although the potential actions announced Monday technically are not quantitative easing, they will have that effect, says economist David H. Wang. Quantitative easing involves increasing the reserves in the banking system after the Fed loses the ability to lower the cost of money from an interest rate standpoint.

[Nor-LA-SD-guy]

Why Yes, yes they can (Print Money),

Fed may buy Treasury notes and bonds, and/or agency bonds, in an effort to push interest rates even lower and “spur aggregate demand.”

“Although conventional interest rate policy is constrained by the fact that nominal interest rates cannot fall below zero, the second arrow in the Federal Reserve’s quiver — the provision of liquidity — remains effective,” Bernanke said in a speech Monday in Texas. “The Fed could purchase longer-term Treasury or agency securities on the open market in substantial quantities. This approach might influence the yields on these securities, thus helping to spur aggregate demand.”

Fed deploying unconventional tools

Bernanke’s comments are the Fed’s latest hint that the world’s most powerful central bank will deploy a ‘new tool box’ and unconventional techniques that Bernanke has previously said most likely would be needed to help the nation cope with its most serious financial crisis since the Great Depression.

Moreover, although the potential actions announced Monday technically are not quantitative easing, they will have that effect, says economist David H. Wang. Quantitative easing involves increasing the reserves in the banking system after the Fed loses the ability to lower the cost of money from an interest rate standpoint.

[Nor-LA-SD-guy]

Why Yes, yes they can (Print Money),

Fed may buy Treasury notes and bonds, and/or agency bonds, in an effort to push interest rates even lower and “spur aggregate demand.”

“Although conventional interest rate policy is constrained by the fact that nominal interest rates cannot fall below zero, the second arrow in the Federal Reserve’s quiver — the provision of liquidity — remains effective,” Bernanke said in a speech Monday in Texas. “The Fed could purchase longer-term Treasury or agency securities on the open market in substantial quantities. This approach might influence the yields on these securities, thus helping to spur aggregate demand.”

Fed deploying unconventional tools

Bernanke’s comments are the Fed’s latest hint that the world’s most powerful central bank will deploy a ‘new tool box’ and unconventional techniques that Bernanke has previously said most likely would be needed to help the nation cope with its most serious financial crisis since the Great Depression.

Moreover, although the potential actions announced Monday technically are not quantitative easing, they will have that effect, says economist David H. Wang. Quantitative easing involves increasing the reserves in the banking system after the Fed loses the ability to lower the cost of money from an interest rate standpoint.

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