What if interest rates go to 13%?

[EconProf]

The first year or two of the Reagan presidency was clearly recessionary, in fact it was deliberately induced by chockingly tight monetary policy.
Reagan and the then-ascendent supply-siders cut marginal tax rates in two steps (1981 & 1983), and the punishingly high capital gains tax rates. The economy roared ahead, tax revenues went way up in response and “paid for” the tax cuts. Supply-siders have ever since pointed to those years as vindication.
Also helping was the public’s becoming convinced that we were not in for runaway inflation. All those inflation hedges fell, cost-push inflation receded, and real investment in productive activities grew. The dragon of inflationary psychology had to be slayed.

[kewp]

Borrowing is just a way to temporarily export your inflation.

Of course.

So stop borrowing and raise taxes for the wealthy to make up the difference.

They can afford it.

[kewp]

Borrowing is just a way to temporarily export your inflation.

Of course.

So stop borrowing and raise taxes for the wealthy to make up the difference.

They can afford it.

[kewp]

Borrowing is just a way to temporarily export your inflation.

Of course.

So stop borrowing and raise taxes for the wealthy to make up the difference.

They can afford it.

[kewp]

Borrowing is just a way to temporarily export your inflation.

Of course.

So stop borrowing and raise taxes for the wealthy to make up the difference.

They can afford it.

[kewp]

Borrowing is just a way to temporarily export your inflation.

Of course.

So stop borrowing and raise taxes for the wealthy to make up the difference.

They can afford it.

[capeman]

[quote=kewp]The 70’s prove that the Fed can overpower recessionary deflation and cause something worse. Oddly, I hope I’m wrong.

You almost certainly are.

The dominant economic trends are all deflationary. All the Fed printing is doing is keeping the banks *barely* operational. There isn’t enough excess liquidity available for price/salary inflation.

All our past over-consumption basically amounted to money-burning. Foreclosures, bankruptcies, unemployment, credit card defaults etc. are all the equivalent of dollar destruction and ultimately deflationary. The Fed printing isn’t even close to keeping up.

[/quote]

Right on the money.

Anyone who still believes in printing outpacing debt/asset value destruction should go buy a house or follow the hyperinflationary attitude of acquiring lots of debt. We’ll see how that works out for you in the next few years.

[capeman]

[quote=kewp]The 70’s prove that the Fed can overpower recessionary deflation and cause something worse. Oddly, I hope I’m wrong.

You almost certainly are.

The dominant economic trends are all deflationary. All the Fed printing is doing is keeping the banks *barely* operational. There isn’t enough excess liquidity available for price/salary inflation.

All our past over-consumption basically amounted to money-burning. Foreclosures, bankruptcies, unemployment, credit card defaults etc. are all the equivalent of dollar destruction and ultimately deflationary. The Fed printing isn’t even close to keeping up.

[/quote]

Right on the money.

Anyone who still believes in printing outpacing debt/asset value destruction should go buy a house or follow the hyperinflationary attitude of acquiring lots of debt. We’ll see how that works out for you in the next few years.

[capeman]

[quote=kewp]The 70’s prove that the Fed can overpower recessionary deflation and cause something worse. Oddly, I hope I’m wrong.

You almost certainly are.

The dominant economic trends are all deflationary. All the Fed printing is doing is keeping the banks *barely* operational. There isn’t enough excess liquidity available for price/salary inflation.

All our past over-consumption basically amounted to money-burning. Foreclosures, bankruptcies, unemployment, credit card defaults etc. are all the equivalent of dollar destruction and ultimately deflationary. The Fed printing isn’t even close to keeping up.

[/quote]

Right on the money.

Anyone who still believes in printing outpacing debt/asset value destruction should go buy a house or follow the hyperinflationary attitude of acquiring lots of debt. We’ll see how that works out for you in the next few years.

[capeman]

[quote=kewp]The 70’s prove that the Fed can overpower recessionary deflation and cause something worse. Oddly, I hope I’m wrong.

You almost certainly are.

The dominant economic trends are all deflationary. All the Fed printing is doing is keeping the banks *barely* operational. There isn’t enough excess liquidity available for price/salary inflation.

All our past over-consumption basically amounted to money-burning. Foreclosures, bankruptcies, unemployment, credit card defaults etc. are all the equivalent of dollar destruction and ultimately deflationary. The Fed printing isn’t even close to keeping up.

[/quote]

Right on the money.

Anyone who still believes in printing outpacing debt/asset value destruction should go buy a house or follow the hyperinflationary attitude of acquiring lots of debt. We’ll see how that works out for you in the next few years.

[capeman]

[quote=kewp]The 70’s prove that the Fed can overpower recessionary deflation and cause something worse. Oddly, I hope I’m wrong.

You almost certainly are.

The dominant economic trends are all deflationary. All the Fed printing is doing is keeping the banks *barely* operational. There isn’t enough excess liquidity available for price/salary inflation.

All our past over-consumption basically amounted to money-burning. Foreclosures, bankruptcies, unemployment, credit card defaults etc. are all the equivalent of dollar destruction and ultimately deflationary. The Fed printing isn’t even close to keeping up.

[/quote]

Right on the money.

Anyone who still believes in printing outpacing debt/asset value destruction should go buy a house or follow the hyperinflationary attitude of acquiring lots of debt. We’ll see how that works out for you in the next few years.

[barnaby33]

The first year or two of the Reagan presidency was clearly recessionary, in fact it was deliberately induced by chockingly tight monetary policy.
Reagan and the then-ascendent supply-siders cut marginal tax rates in two steps (1981 & 1983), and the punishingly high capital gains tax rates. The economy roared ahead, tax revenues went way up in response and “paid for” the tax cuts. Supply-siders have ever since pointed to those years as vindication.

As to the tax cuts, I’m not sure what effect they had (I was 8 in 1983.) On the other hand, if they actually made up for the reduction in collections (which is possible) why the need to borrow 50 billion a year from 83 onwards? In my opinion it was spending increases. That is what got the economy expanding. Capital gains decreases only explain in increase in economic activity if you actually believe that money goes into some sort of production based economy. We’ve spent the last 25 years destroying ours and replacing it with the FIRE economy. Now you can blame a Democratic congress if you want to, but Reagan was just as interested to spend all that lovely new cash on defense. Ultimately the borrowing is inflationary though its mostly showed up in things that cannot be imported like health care and education.

[barnaby33]

The first year or two of the Reagan presidency was clearly recessionary, in fact it was deliberately induced by chockingly tight monetary policy.
Reagan and the then-ascendent supply-siders cut marginal tax rates in two steps (1981 & 1983), and the punishingly high capital gains tax rates. The economy roared ahead, tax revenues went way up in response and “paid for” the tax cuts. Supply-siders have ever since pointed to those years as vindication.

As to the tax cuts, I’m not sure what effect they had (I was 8 in 1983.) On the other hand, if they actually made up for the reduction in collections (which is possible) why the need to borrow 50 billion a year from 83 onwards? In my opinion it was spending increases. That is what got the economy expanding. Capital gains decreases only explain in increase in economic activity if you actually believe that money goes into some sort of production based economy. We’ve spent the last 25 years destroying ours and replacing it with the FIRE economy. Now you can blame a Democratic congress if you want to, but Reagan was just as interested to spend all that lovely new cash on defense. Ultimately the borrowing is inflationary though its mostly showed up in things that cannot be imported like health care and education.

[barnaby33]

The first year or two of the Reagan presidency was clearly recessionary, in fact it was deliberately induced by chockingly tight monetary policy.
Reagan and the then-ascendent supply-siders cut marginal tax rates in two steps (1981 & 1983), and the punishingly high capital gains tax rates. The economy roared ahead, tax revenues went way up in response and “paid for” the tax cuts. Supply-siders have ever since pointed to those years as vindication.

As to the tax cuts, I’m not sure what effect they had (I was 8 in 1983.) On the other hand, if they actually made up for the reduction in collections (which is possible) why the need to borrow 50 billion a year from 83 onwards? In my opinion it was spending increases. That is what got the economy expanding. Capital gains decreases only explain in increase in economic activity if you actually believe that money goes into some sort of production based economy. We’ve spent the last 25 years destroying ours and replacing it with the FIRE economy. Now you can blame a Democratic congress if you want to, but Reagan was just as interested to spend all that lovely new cash on defense. Ultimately the borrowing is inflationary though its mostly showed up in things that cannot be imported like health care and education.

[barnaby33]

The first year or two of the Reagan presidency was clearly recessionary, in fact it was deliberately induced by chockingly tight monetary policy.
Reagan and the then-ascendent supply-siders cut marginal tax rates in two steps (1981 & 1983), and the punishingly high capital gains tax rates. The economy roared ahead, tax revenues went way up in response and “paid for” the tax cuts. Supply-siders have ever since pointed to those years as vindication.

As to the tax cuts, I’m not sure what effect they had (I was 8 in 1983.) On the other hand, if they actually made up for the reduction in collections (which is possible) why the need to borrow 50 billion a year from 83 onwards? In my opinion it was spending increases. That is what got the economy expanding. Capital gains decreases only explain in increase in economic activity if you actually believe that money goes into some sort of production based economy. We’ve spent the last 25 years destroying ours and replacing it with the FIRE economy. Now you can blame a Democratic congress if you want to, but Reagan was just as interested to spend all that lovely new cash on defense. Ultimately the borrowing is inflationary though its mostly showed up in things that cannot be imported like health care and education.

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