"Is the U.S. Economy Headed for Depression?"

[dmcauliffe09]

I read this article on the BBC website:

http://news.bbc.co.uk/2/hi/business/7860965.stm

One of the general ideas I'd like to point out is the obvious flaw in capitalism here: spending money would help the economy out, but people are saving because they fear an approaching depression. Supply-and-demand doesn't work when there is no demand. And when there is no demand, there is surplus, and surplus yields the ultimate despicable act in capitalism: fire the workers who are already being oppressed in order to make up for profits that were not gained.
What are some possible remedies for this situation?

[cyu]

As far as abandoning capitalism goes, I would do it with a combination of anarcho-syndicalism and free banking. Anarcho-syndicalism in the sense that everyone has the right to assume democratic control over their workplace (thus they can vote on their CEO's salary or fire him if they choose). Free banking in the sense that all producers will be allowed to issue notes representing what they produce.

If a farmer produces a bushel of wheat, then he issues a bushel note and takes it down the road, where he buys some books from the bookstore. What does the guy at the bookstore do with the note? Well, if he actually wants the wheat, then he can take it back to the farmer, and redeem it for the wheat. If not, then he can take the note(s) to the restaurant and eat a few meals. Eventually, someone will take the note back to the farmer and get their wheat. This is in fact a "wheat standard" - the value of the note with respect to the wheat never changes - no relative inflation.

If you wanted to get fancy, you could have organizations issue notes backed by a basket of goods (like those used to calculate the consumer price index).

In this way, your economy can produce as much as it wants - the money in circulation will always match what has been produced, you don't have to worry much about inflation or deflation, and you don't have to wait all day for the bank execs to do what you want them to do.

Anyway, how potentially irreversible is the current recession? Well, the more nations that follow the advice here http://www.infoshop.org/rants/yu1.html (http://www.infoshop.org/rants/yu1.html), the more likely capitalism will be finished.

[MMIKEYJ]

We're already in a depression. We are headed for a great depression as long as the govt keeps doing all these stupid bailouts.

[dmcauliffe09]

We're already in a depression. We are headed for a great depression as long as the govt keeps doing all these stupid bailouts.
We are in a recession on the verge of a depression. The bailouts are a final attempt to curb a great depression.

[MMIKEYJ]

We are in a recession on the verge of a depression. The bailouts are a final attempt to curb a great depression.
UNfortunately, it is the bailouts which will ensure a great depression.

[bailey_187]

UNfortunately, it is the bailouts which will ensure a great depression.

I hear all the free market fanatics (not saying you are) say this but no one has explained why

would you care to explain?

[cyu]

What's the deal with Restriction these days? According to http://www.revleft.com/vb/faq.php?faq=restrictions#faq_whatisrestrict they're still supposed to limit their stupidity to Opposing Ideologies.

[Hyacinth]

What's the deal with Restriction these days? According to http://www.revleft.com/vb/faq.php?faq=restrictions#faq_whatisrestrict they're still supposed to limit their stupidity to Opposing Ideologies.
Ditto. I find it odd that they are allowed access to this subforum. I wouldn't mind it so much if actual arguments were provided, but unsupported assertion belongs in OI, if anywhere.

[MMIKEYJ]

I hear all the free market fanatics (not saying you are) say this but no one has explained why

would you care to explain?
Basically the govt is trying to cure the problem of too much spending with more spending.

because the government doesnt have any money of its own. For it to spend a dollar somewhere it has to take a dollar from a productive force in the economy.

the money it gets is spent very innefficiently and its doing nothing but trying to prop up nonproductive companies, industries, etc.

it would be much better for the govt to cut spending, put more money into the peoples' pockets and then when the people spend their own money theyll be very smart about it,.

In 1920 we had a depression that was worse at the outset than the one in 1929, however because the govt didnt get involved in bailouts and trying to spend its way out of it, after one year it was over and the economy took off.

[MMIKEYJ]

What's the deal with Restriction these days? According to http://www.revleft.com/vb/faq.php?faq=restrictions#faq_whatisrestrict they're still supposed to limit their stupidity to Opposing Ideologies.

That's pretty rude. I suppose you have a problem with tolerance and/or expanding your mind?

[MMIKEYJ]

Ditto. I find it odd that they are allowed access to this subforum. I wouldn't mind it so much if actual arguments were provided, but unsupported assertion belongs in OI, if anywhere.
Well lets discuss it then.. Whats on your mind?

[bailey_187]

Basically the govt is trying to cure the problem of too much spending with more spending.

because the government doesnt have any money of its own. For it to spend a dollar somewhere it has to take a dollar from a productive force in the economy.

the money it gets is spent very innefficiently and its doing nothing but trying to prop up nonproductive companies, industries, etc.

it would be much better for the govt to cut spending, put more money into the peoples' pockets and then when the people spend their own money theyll be very smart about it,.

In 1920 we had a depression that was worse at the outset than the one in 1929, however because the govt didnt get involved in bailouts and trying to spend its way out of it, after one year it was over and the economy took off.

That doesnt make sense

The money is borrowed and then (in theory) taxes should be raised after the economy picks up again (which is usually done when the economy is booming to prevent inflation)

This problem wasn't caused by too much spending either. What spending has caused this?

I think you need to go to OI

[MMIKEYJ]

That doesnt make sense

The money is borrowed and then (in theory) taxes should be raised after the economy picks up again (which is usually done when the economy is booming to prevent inflation)

This problem wasn't caused by too much spending either. What spending has caused this?

I think you need to go to OI
Think about it this way.. When the govt buys a hammer it pays $600, and a bunch of other stupid stuff.. Now if they get rid of the income tax and lose that trillion dollars a year in revenue, the money will be in your pocket (and everyone elses) and youre going to buy things with it, except youre not oging to pay $600 for a hammer... Youll buy products and services that are competitive and productive.

The key here though is that govt has got to cut spending.. Else all tax cuts are moot because everybody will wind up paying tax through inflation.

SPENDING: Well, Bush has spent more money in his 8 years than every other president in American History combined.. Obama looks like hes going to outspend Bush in his first 4 years. Our debt is $12 Trillion, and the value of the dollar is now worth about 3 cents since the govt started this tax and spend mentality in 1913.

[bailey_187]

Think about it this way.. When the govt buys a hammer it pays $600, and a bunch of other stupid stuff.. Now if they get rid of the income tax and lose that trillion dollars a year in revenue, the money will be in your pocket (and everyone elses) and youre going to buy things with it, except youre not oging to pay $600 for a hammer... Youll buy products and services that are competitive and productive.

The key here though is that govt has got to cut spending.. Else all tax cuts are moot because everybody will wind up paying tax through inflation.

SPENDING: Well, Bush has spent more money in his 8 years than every other president in American History combined.. Obama looks like hes going to outspend Bush in his first 4 years. Our debt is $12 Trillion, and the value of the dollar is now worth about 3 cents since the govt started this tax and spend mentality in 1913.

So all the spending is the same? What did Bush (prior to the bail outs) spend money on?

People arent buying things though! thats the problem. People are scared they will loose their job(or already have done) so they saving, not spending. (in theory) The money will mean people have more to spend, creating more jobs

LMAO @ getting rid of income tax, i suppose your one of this 'fair tax' idiots

You still havnt explained how the stimulus will lead to a depression

[MMIKEYJ]

So all the spending is the same? What did Bush (prior to the bail outs) spend money on?

People arent buying things though! thats the problem. People are scared they will loose their job(or already have done) so they saving, not spending. (in theory) The money will mean people have more to spend, creating more jobs

LMAO @ getting rid of income tax, i suppose your one of this 'fair tax' idiots

You still havnt explained how the stimulus will lead to a depression
I couldnt tell you exactly what Bush spent money on other than alot of crap.

People arent buying things because theyre tapped out.
We are told that the economy is 2/3 driven by consumer spending, but thats really a fallacy, because an economy needs production. ANy idiot can sit there and consume.. And we just dont have a healthy economy because we've developed this habit to borrow and spend and be lazy - just like our government.

Im not a fan of the fair tax because we dont need to replace the income tax with anything. The fairtax does not solve the federal reserve problem, but Ill take it as a temporary measure to get us to where we need to go.

STIMULUS: Everybody gets $1,000 in benefits with the stimulus plan but also owes an extra debt of $4,700. So everybody automatically is in the hole for an extra $3,700. It puts us in reverse. Now we have even more debt to climb out of.

[Plagueround]

While I disagree with the free marketeer rhetoric and their solutions to the problem, the right wing "libertarian" critique of why the US government's economic policies are terrible and disastrous are generally spot on. But then, it's a pretty easy thing to figure out unless you only believe what the mainstream parties are telling you...I don't know many socialists that would defend much of anything the US government is doing these days.

That being said, I am still going to find out why MMIKEYJ can post in this forum and have that corrected.

[bailey_187]

STIMULUS: Everybody gets $1,000 in benefits with the stimulus plan but also owes an extra debt of $4,700. So everybody automatically is in the hole for an extra $3,700. It puts us in reverse. Now we have even more debt to climb out of.


Yes but that $1000 is spent now, to boost consumption and production - two components of Aggregate demand, making the economy grow

When the economy has recovered (if it does), the government will raise taxes to pay back the $4700

[cyu]

I suppose you have a problem with tolerance and/or expanding your mind?


Nope, I'd be perfectly fine if you were retitled "Approved Troll" or something like that and allowed to post here, rather than "Restricted" - either change the official policy on "Restricted" users, or stop marking people who can post anywhere "Restricted".

As far as "tolerance and expanding your mind" goes, yes, I spend plenty of time debating Mises fans at http://reddit.com/r/economics - if you want to join in, you can find me there.

However, I don't come to this subform to debate pro-capitalists - I also don't come here to look at pictures of cats or ascii art either - which is basically what a pro-capitalist posting is here. I would prefer this forum stays on topic.

[cyu]

it would be much better for the govt to cut spending, put more money into the peoples' pockets and then when the people spend their own money theyll be very smart about it,.


I'm no fan of Keynes either. After all, he said "How can I adopt a creed which, preferring the mud to the fish, exalts the boorish proletariat above the bourgeoisie and the intelligentsia, who with all their faults, are the quality of life and surely carry the seeds of all human achievement?"

Anyway, it will be stimulus when unemployed Americans are allowed to assume control of unused resources to start businesses, whether they "own" it or not. What government spending is needed? Only enough to protect these new businesses from armed pro-capitalist thugs.

[Communist Theory]

Free banking in the sense that all producers will be allowed to issue notes representing what they produce.

If a farmer produces a bushel of wheat, then he issues a bushel note and takes it down the road, where he buys some books from the bookstore. What does the guy at the bookstore do with the note? Well, if he actually wants the wheat, then he can take it back to the farmer, and redeem it for the wheat. If not, then he can take the note(s) to the restaurant and eat a few meals. Eventually, someone will take the note back to the farmer and get their wheat. This is in fact a "wheat standard" - the value of the note with respect to the wheat never changes - no relative inflation.
Comrade I apologize but isn't that called a barter system?

[cyu]

isn't that called a barter system?


It would be barter if the farmer actually carried his bushel of wheat to the bookstore. Since he is instead carrying notes (ie. "currency") that represent the bushels of wheat he produced, it is not barter.