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Blockhead confidence
Joined: 02 Apr 2008
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 Posted: Mon Feb 09, 2009 11:59 pm Post subject: |
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Hypothesis:
Taxes are cut.
People save the money, put it in the bank (not under the matress).
Banks become cashed up. But banks are competitive and in a terrible bear market are concerned only with hoarding cash. The result is the money is unspent.
Doing nothing is equal to or better than cutting taxes. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Feb 10, 2009 6:06 am Post subject: |
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| Ya-ta Boy wrote: |
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| It also means the stimulus is unnecessary. |
Shhhhhhhhhhhhhhhhh!
With 1.5 million jobs being lost in the last couple of months, I suspect things are not going to be all peppy by the end of the year. But it's fun to fantasize. |
No, 2009 will be terrible. You're right. But I believe the mass layoffs will taper off in mid q2. |
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Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
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| Posted: Tue Feb 10, 2009 7:48 am Post subject: |
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Both you and I, in different threads, have said employment--and by extension, the US economy--have fallen off a cliff recently. The sites you link to indicate a recovery starting later this year. I hope they are right. I don't believe they are, but I'm just a schmuck English teacher. What do I know?
What I remember is that for 30 years we have had periodic 'downturns' and the only thing the gov't was willing to do was to declare ketchup a vegetable so they wouldn't have to actually do anything for the people actually suffering for the poor decisions other people had made. That was the version of capitalism being marketed during my adult life.
I am anti- keep your friggin' hands off me when things are going good but give me a bail out when I screw up capitalism. I am against the idea that gov't bailouts are only for the rich and capitalism (suffering builds character) for the rest.
I do think things are worse this time around since no loans seem to be going out. The other week I saw a TV clip of empty ports. SOMETHING is wrong. Deeper and more serious than other 'downturns' in my memory. I do think a stimulus is needed. I don't think it can solve all the problems. But I do think it has a chance to kick start things. Part (but only a part) of a recession/depression is psychological and gov't can't do much to change that except to try. It may work. It may fail. The object is to try. The alternative is to sit back for 2 years, 10 years, 400 years and wait for things to improve.
As you said a couple of months ago, economics is 20% objective fact and 80% theory....I'd like to amend that. Some significant portion of it is psychological. People have to believe that things will get better soon. If they do, then they begin to spend. Some of it is predictability. Business has to know what the rules are so they can plan ahead. I agree. But some other part of it is on the consumer level. The public in general has to have some faith in their future. Only government has the ability to speak to the public and address those fears and dreams.
IF, IF, IF the sudden plunge in employment were a short-term thing, it wouldn't be worrisome, but it doesn't appear to be that. That is if I were looking at it from a safe place with a decent bank account and a steady income coming in, but IF I were a 35-year old father of two and have just lost my job and have to figure out how to feed the kids and pay for the mortgage on the house in the suburbs, I'd be pretty much panicking at this point.
But that is not my station in life at this point. I'm 59 and single. What I'm looking for is a gov't policy that will a) stabilize the economy b) get people back to work c) figure out a way to support me in my retirement so I'm not living in a cardboard box d) build a future for the next generation...and don't scare me with crypto-nazi fantasies of 3rd Century economic delusions from Austria. Arg! [The Austrian Hapsburgs were a bunch of losers. OK. Anyone can get a bad family. But when you add that dude with the funny mustache, you are getting into the realm of chronic wackydom. Maybe it's just a coincidence, but if there isn't something to balance it, it's time to give up. Austrians should stick to music.] |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Tue Feb 10, 2009 8:11 am Post subject: |
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| Ya-ta Boy wrote: |
| I hope ... I don't believe ... I'm just a schmuck English teacher. What do I know? |
This is why you should listen to those who are not just schmuck English teachers.
The Austrian School of economics is the newest of all Economic schools of thought. It is currently the ONLY school of economics that can explain what has happened and is happening in the economy. It is the only school that predicted the current crisis.
The Austrian School of economics is now the only school of economics. Austrian Economics can just be called Economics.
The others are all Ponzi Economics. It's like comparing alchemy to chemisty, they are so far out of touch with the current science.
Yata, your loyalty to the Democratic Party has cost you your ability to reason and learn. |
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caniff
Joined: 03 Feb 2004
Location: All over the map
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| Posted: Tue Feb 10, 2009 8:55 am Post subject: |
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| ontheway wrote: |
Yata, your loyalty to the Democratic Party has cost you your ability to reason and learn. |
The Republicans have been hammering away trying to maximize tax cuts. Is that a better idea, do you think? |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Tue Feb 10, 2009 9:48 am Post subject: |
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| caniff wrote: |
| ontheway wrote: |
Yata, your loyalty to the Democratic Party has cost you your ability to reason and learn. |
The Republicans have been hammering away trying to maximize tax cuts. Is that a better idea, do you think? |
Since taxes are ALWAYS a drag on an economy, then cutting taxes will always help an economy. That is true, but unfortunately, in this case, it fails to address the current economic crisis. The Democrats and the Republicans are both in the process of looting the national treasury and robbing the average Americans of their present chances for work, investment, savings and a decent life. They are robbing future generations of years of economic growth and burdening present and future generations with a crushing debt that ultimately can never be repaid.
Obama's campaign of "Hope" has become the next step in an era of hopelessness.
The current economic crisis was caused by the Federal Reserve. It was caused by debasing the currency - printing more money that was not backed by gold. This creates financial bubbles that pop and wreak havoc on the country.
This depression was caused by the government, specifically the Federal Reserve, just like all the other recessions since the Fed was created.
Of course, this is exactly what caused the first great depression and its amazing that so many people haven't learned yet.
Now, although we went off the gold standard under Nixon, we are not quite in a pure fiat money situation. That is because the US Government still has very large gold reserves. It is the existence of those gold reserves that has slowed the fall of the dollar to zero. Without the presence of that decoupled gold backing, the current dollar would have already ceased to exist.
Our most recent crisis is not really a separate event from the 1929 to 1943 Great Depression. It is really one continuing roller coaster ride downward due to the Fed.
The Federal Government keeps running huge deficits and borrowing huge sums. This is a major problem that must end.
The Federal Reserve keeps expanding the money supply which debases the currency. This is how we get the "financial bubbles" which means "malinvestment" in economic terms.
Our economy has for too long suffered from massive government subsidies, incentives, disincentives and wrongheaded government programs - the free land for the railroads, the free roads and highways, subsidized nuclear power, rural electrification, TVA, RFD ... that have caused massive malinvestment at the infrastructural level, which is the most incidious kind of economic distortion as it causes huge losses for generations, even hundreds of years.
Social Security and the other government entitlements that have brought the total Federal Government debt to over $71,000,000,000,000 (that's 71 trillion dollars) and growing. These programs have also destroyed a similar amount in investment that would have occurred and hundreds of millions, perhaps over 1 billion new, good, permanent jobs that would have been created worldwide if FDR's evil programs had never been created.
We can essentially lay all world poverty today on the shoulders of FDR and his fascist-socialist New Deal.
So, what we need to do:
1) Abolish the Federal Reserve and go on a 100% gold standard immediately. Eventually, we will have to divide the dollar by 100 as well (you will receive 1 cent in new currency for each dollar of the old) to reset the dollar at nominal levels that are more comprehensible. This will also force us all to recognize that the Fed looted the nation of 99% of its monetary wealth.
2) Pass Constitutional Amendments to prohibit deficit spending and to prohibit net new borrowing (only refinancing allowed) by any level of government for any purpose at any time.
3) Pass Constitutional Amendments to prohibit taxes on income and property by any level of government.
4) Institute a national sales tax to replace all other taxes that have been repealed. This tax will be collected and shared by the Federal, State and Local governments. No other taxes will be allowed.
The national sales tax must have a cap of 10% for the total tax collected and shared.
5) Eliminate all subsidies and all government involvement in the transportation and energy markets, privatize all highways, roads, bridges, airports, waterways. We must end the massive market distortions that have plagued our nation's infrastructure development and set back our living standards, created our foolish, wasteful and environmentally disasterous dependence on roads, cars and oil and with it all the ensuing problems with the oil rich regions of the earth.
6) Repeal most entitlements, fund those that can be financed with government assets and are essential for the most dependent, and then privatize those funds and payments.
These steps would end our current downturn almost immediately and prevent a recurrence as long as the government is never allowed to get out of control again. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Feb 10, 2009 10:04 am Post subject: |
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| I am anti- keep your friggin' hands off me when things are going good but give me a bail out when I screw up capitalism. I am against the idea that gov't bailouts are only for the rich and capitalism (suffering builds character) for the rest. |
Of course, I agree with you.
| Quote: |
| I do think things are worse this time around since no loans seem to be going out. The other week I saw a TV clip of empty ports. SOMETHING is wrong. Deeper and more serious than other 'downturns' in my memory. I do think a stimulus is needed. I don't think it can solve all the problems. But I do think it has a chance to kick start things. Part (but only a part) of a recession/depression is psychological and gov't can't do much to change that except to try. It may work. It may fail. The object is to try. The alternative is to sit back for 2 years, 10 years, 400 years and wait for things to improve. |
You have to look at how that trade expanded. Americans (and others...like Canadians) took on huge debt to import from Asia. They are now not willing to take more debt, so the trade slows down. This is not something that a stimulus can change. The direction of the economy needs to shift.
| Quote: |
| As you said a couple of months ago, economics is 20% objective fact and 80% theory....I'd like to amend that. Some significant portion of it is psychological. People have to believe that things will get better soon. If they do, then they begin to spend. Some of it is predictability. Business has to know what the rules are so they can plan ahead. I agree. But some other part of it is on the consumer level. The public in general has to have some faith in their future. Only government has the ability to speak to the public and address those fears and dreams. |
In usual circumstances, I would agree with you. However, what we've reached is "peak demand" in the United States. Many people (millions of people) have no more money to borrow to spend. So this time around, the psycology factor is largely not relevant. The average American (Canadian, Spaniard, Brit etc) needs to get savings back up to 8%.
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| What I'm looking for is a gov't policy that will a) stabilize the economy b) get people back to work c) figure out a way to support me in my retirement so I'm not living in a cardboard box d) build a future for the next generation... |
I don't disagree. What I do disagree with is the idea that borrowing a trillion dollars from tomorrow to make today more tolerable doesn't seriously impact the economic future.
| Quote: |
| and don't scare me with crypto-nazi fantasies of 3rd Century economic delusions from Austria. Arg! [The Austrian Hapsburgs were a bunch of losers. OK. Anyone can get a bad family. But when you add that dude with the funny mustache, you are getting into the realm of chronic wackydom. Maybe it's just a coincidence, but if there isn't something to balance it, it's time to give up. Austrians should stick to music. |
When you hear "Austrian economics" don't think of Austria. It is just a reference to where a couple dudes came from (L.V.Mises, for one).
Essentially, what AE is, is micro-economics made large. It is a very useful way of looking at the economy.
...I just found (took me a while) the quote that best summarizes our situation. It is from David Rosenberg, from Merrill.
'This is an epic event; we're talking about the end of a 20-year secular credit expansion that went absolutely parabolic from 2001-2007. 'Before the US economy can truly begin to expand again, the savings rate must rise to pre-bubble levels of 8pc, that the US housing stocks must fall to below eight months' supply, and that the household interest coverage ratio must fall from 14pc to 10.5pc. 'It's important to note what sort of surgery that is going to require. We will probably have to eliminate $2 trillion of household debt to get there,' he predicts, saying this will happen either through debt being written off, as major financial institutions continue to do, or for consumers themselves to shrink their own 'balance sheets'.
In no way does a stimulus help the problems. None. It will just decrease aggregate wealth in the future. | | |
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