Federal Reserve: Running short of options?

[RichardAWilson]

Open for debate. Stocks have crashed ($1 trillion in capitalization has been wiped-off this week) because the Federal Reserve said that it's running low on stimulative measures that are available for implementation.

I don't believe the Federal Reserve is running low of methods for reviving growth, even if such methods would be unconventional.

I also think announcing that there isn't much room left to maneuver was irresponsible. We're facing a crisis of confidence and announcing "there's nothing left we can do" isn't going to strengthen the world's confidence.

If nothing else, the Federal Reserve should have claimed that it had more ideas on the table and would exercise those ideas if conditions demanded additional stimulus.

[RGacky3]

I don't think the Federal reserve CAN revive growth, its not gonna work, the stock market IS NOT the real economy, its a mirror, and not a good mirror at that.

we are not facing a crisis of confidence, we're facing a crisis of demand, jobs, and centralization of wealth and a growing gap between the rich and the poor, everything else is just reflective of that.

The Fed is'nt gonna do anything, nor really can they. I think your watching too much CNN money or BBC buisiness report.

[RichardAWilson]

I happen to believe the Federal Reserve (could) stimulate the real economy by weakening our dollar. A weakening dollar would translate into more demand and competitiveness for American manufacturers, farmers and exporters.

How could the Federal Reserve weaken the dollar and revive foreign demand?

Well, we could follow the Japanese, Koreans and Chinese in purchasing foreign currencies to weaken our own.

The Federal Reserve could launch a European Quantitative Easing Program and to absorb Greek and Italian Bonds. A European Easing Program would drive down long-term yields, which would make Greek and Italian obligations more serviceable. Such a solution would also allow European financials to unload Greek and Italian Bonds, which would restore confidence in the European Financial System.

I know this isn't going to happen because Washington and Wall Street are still committed to a "Strong Dollar Policy" and such an approach would be political suicide because it'd be viewed as rescuing Europe at our own expense, even if it would benefit us.

Another idea would be to institute a negative federal funds rate. The federal funds rate is the interest rate the Federal Reserve provides to our commercial banks on their excess reserves. The positive federal funds rate is on reason the commercial banks have refused to lend.

After all, why would those banks make loans when they're guaranteed a small return from the Federal Reserve? A negative federal funds rate would resemble a "tax on surplus reserves." In a sense, a negative federal funds rate would force the commercial banks to begin lending and investing as a means of preserving capital.

Irregardless, the Federal Reserve is going to have to do something, otherwise we could face a Japanese Decade of zero growth and long-term dis-inflation.

Like the European Central Bank, the Bank of Japan was too conservative in driving down long-term interest rates.

By the time the Bank of Japan did become committed to an accommodating approach, it was too late. We're facing the same problem here in America, even though long-term interest rates have been driven to historical lows.

The likelihood of Congress approving another fiscal stimulus bill is bordering on "dream on." The Federal Reserve will have to take the lead if we're going to avoid prolonged stagnation.

[RGacky3]

The Federal reserve can't do anything to affect the demand side, weakening the dollar would help, but its not like thats gonna shift trade THAT much.

I'm not saying another fiscal stimulus, I'm talking a restructuring of the economy.

Negative Federal reserve rates? Are you shitting me? You can't stimulate the economy just by pumping money into the banks, its not gonna happen, commercial banks arn't lending because people arn't borrowing and those that try can't pay it back, lowering rates ain't gonna cut it, what are the banks gonna invest in? Who are they gonna borrow too?

Your playing monetarists somewhat supply side economics, IT DOES"NT WORK.

[RichardAWilson]

A Negative Federal Funds Rate wouldn't pump cash into the banks, it'd force those banks to begin lending their surplus reserves. We're paying the commercial banks not to lend. The problem isn't that consumers aren't going to borrow, it's that lenders aren't willing to lend. You now have to have a fifth down to stand a chance of receiving a mortgage. There are millions of Americans that'd like to purchase a new home. Housing prices and mortgage rates are at historical lows. The issue is that few of them can afford a fifth down. A Negative Federal Funds Rate would force the banks to lend in order to preserve cash.

There's nothing supply-side with monetary policy, which is strictly a demand-sided policy.

A Negative Federal Funds Rate would also weaken our dollar.

A meaningful weakening in our dollar could eliminate our $80 billion trade imbalance with the European Union and our $70 billion trade imbalance with Mexico. It'd also reduce our $60 billion trade imbalance with the Japanese.

[RGacky3]

it's that lenders aren't willing to lend.

They arn't willing to lend because the economy is so unstable, forcing lending is'nt gonna fix that. YOu have a negative rate, then banks stop lending to each other, and it is supply side in the sense that your trying to boost the supply, also what do you think will happen to borrowing rates if banks are forced to make loans that they may not get back?

Also What about the funds that banks HAVE to keep in reserve? They'd be loosing it thus they'd ust have to pump more money into it, also who's to say that banks would'nt loan but instead invest in risky non productive industries (like financial markets) instead.

Weakening the dollar might fix the trade imbalance with the EU, but it won't fix it with China or India, and even with the EU, who says they won't respond with tarriffs or something.

[ComradeMan]

The trouble with quantitative easing is that you run the high risk of weakening confidence in the currency and that the "postive" effects of the weakened currency are outweighed by rapid rises in inflation. The positive idea of QE is all fine as along as the banks go along with the plan and are prepared to lend to money.

The other problem with QE touches on the vested interests and the political- while it may be of benefit to the domestic economy and debtors it is certainly not of benefit to creditors and that's where opposition may arise.

[RichardAWilson]

Dis-inflation is the problem. =)

Quantitative Easing isn't going to create much inflation when the jobless rate is almost 20% and industrial utilization is touching a Post-War low.

[RichardAWilson]

What about the funds that banks have to keep in reserve?

Such a program could be restricted to excess reserves that are above and beyond that which is required by law.


What do you think will happen to borrowing rates if banks are forced to make loans that they may not get back?

The banks know they're insured against such losses because they're now "too big to fail."

The Federal Reserve will be quick to insure them against such plausible losses.

With housing now more affordable than ever and with interest rates lower than ever, middle income households wouldn't have a problem servicing a Fixed Rate Mortgage.

Such lending, to be sure, should be restricted and monitored so that sub-prime loans and adjustable rate mortgages aren't being made to illegal immigrants, the unemployed and leveraged speculators.

However, on the whole, we could afford to create enough serviceable demand to revive the housing sector. There are a number of macro-economists that believe growth will remain sub-par until the housing sector (I.e. Construction, material production, furniture production, etc.) recovers. To be sure, a housing rebound would revive the economy much quicker than will occur if the housing contraction is allowed to continue.


Who's to say that banks wouldn't loan but instead invest in the financial markets?

The law still mandates a separation of investing and commercial banking. To the degree our commercial banks would speculate, they'd be restricted to speculating in corporate and municipal bonds.

Bond speculation could benefit the economy by driving down long-term corporate bond yields. Even if those lower bond yields didn't encourage businesses to borrow and spend, they'd reduce the interest expenses associated with existing obligations.

Municipal bond speculation would make borrowing more affordable for our nation's incorporated cities and towns.


Even with the EU, who says they won't respond with tarriffs or something?

In violation of Treaties and the World Trade Organization? I don't think so. Europe wouldn't like a weaker dollar. Nonetheless, Europe would have no choice in the matter.

P.S. As a Democratic Market-Socialist, I advocate much better long-term solutions to our problems. I'm just stating that the Federal Reserve has a number of alternatives left on the table.

Some of those alternatives, while unconventional, would pack a powerful punch.

[RGacky3]

The trouble with quantitative easing is that you run the high risk of weakening confidence in the currency and that the "postive" effects of the weakened currency are outweighed by rapid rises in inflation

The problem now is deflation, not inflation, inflation only happens when consumption goes up.


The banks know they're insured against such losses because they're now "too big to fail."

The Federal Reserve will be quick to insure them against such plausible losses.


At that point your just forcing the fail part in the to big to fail and ensuring another bailout.

I say too big to fail is an easy fix, threaten to nationalize the banks.


Such lending, to be sure, should be restricted and monitored so that sub-prime loans and adjustable rate mortgages aren't being made to illegal immigrants, the unemployed and leveraged speculators.


You don't see problems with enforcing this?

Banks WILL loan if they know they are gonna get a return, they don't need the government to force them to do it, they WON'T loan if its too risky, in which case why would you want the government to force them?


However, on the whole, we could afford to create enough serviceable demand to revive the housing sector. There are a number of macro-economists that believe growth will remain sub-par until the housing sector (I.e. Construction, material production, furniture production, etc.) recovers. To be sure, a housing rebound would revive the economy much quicker than will occur if the housing contraction is allowed to continue.


I don't buy that, you can have a jobs growth elsewhere, you don't need construction, the problem is'nt that we don't have enough housing, there is no need to re-inflate a bubble, making loans for housing is a shitty way to make demand, first of all because we already HAVE a lot of houses, second because there are simply better ways to use resources than to re-inflate the housing market, through forced lending.

Why not do direct government loans, bypassing commercial banks? Hell, maybe we don't need loans at all to spur demand maybe we need jobs and wages.


The law still mandates a separation of investing and commercial banking. To the degree our commercial banks would speculate, they'd be restricted to speculating in corporate and municipal bonds.


Yeah but both you and I know how thin that line is.


Bond speculation could benefit the economy by driving down long-term corporate bond yields. Even if those lower bond yields didn't encourage businesses to borrow and spend, they'd reduce the interest expenses associated with existing obligations.


That is again top down economics thinking, corporations have tons and tons of cash they are just sitting on, its not like they need more.


In violation of Treaties and the World Trade Organization? I don't think so. Europe wouldn't like a weaker dollar. Nonetheless, Europe would have no choice in the matter.


Of coarse they can raise tarriffs, the WTO does'nt control europe, Europe would'nt like a weeker dollar, and Europe WOULD have a choice in the matter, of coarse they can raise tarriffs, of coarse they can invest in the local ecomonies instead, of coarse they can buy dollars to bring it up.


Some of those alternatives, while unconventional, would pack a powerful punch.

I still just think its nothing more than thinning the blood gushing out of the wound.

[kapitalyst]

Open for debate. Stocks have crashed ($1 trillion in capitalization has been wiped-off this week) because the Federal Reserve said that it's running low on stimulative measures that are available for implementation.

I don't believe the Federal Reserve is running low of methods for reviving growth, even if such methods would be unconventional.

I also think announcing that there isn't much room left to maneuver was irresponsible. We're facing a crisis of confidence and announcing "there's nothing left we can do" isn't going to strengthen the world's confidence.

If nothing else, the Federal Reserve should have claimed that it had more ideas on the table and would exercise those ideas if conditions demanded additional stimulus.

The Fed has helped create this crisis, as have the respective EU institutions. I trade stocks, futures, FOREX and options for a living, so I'm always up-to-date on what's going on. This has simply proven, once again, that Keynesianism is an abject failure. The only people calling this a crisis of "confidence" are those ignoring the serious economic and political problems we're plagued with... Keynesians tend to do that.

The post-2008 uptrend was NOT a "recovery" at all... it was simply an inflationary asset bubble forming. I "went with the flow" while the markets were rising, and focused mostly on gold, silver and other commodities. And I made some considerable gains on it. QE and other Fed "stimulus" made me a fortune... twice... Around May it became obvious the market was toppy and the artificial liquidity drive was fizzling out. I bought a slew of put options against the S&P 500 index... When the bubble burst and the market toppled, I came out of it with over a 1000% net gain. Thanks, Fed! Feel free to wreck the economy again, anytime! I'm kidding, of course... I wish this wasn't happening because it's hurting the average American who lacks "financial sophistication"...

Europe is in even worse shape. GDP is making a cliff dive, and the markets are in secular bear market territory. Germany, once the shining jewel in the EU's crown, is taking the brunt of the beating -- despite being one of the only responsible nations. And I fear this debt crisis is going to wreak further havoc on the world. The EU may very well be drawing its dying breath...

My greatest fear is that the Fed and other central bankers, totally clueless about how economics actually works, run by walking economic fallacies like Ben Bernanke, will interpret this bubble bursting as "deflation" and try to pump for artificial liquidity into the world economy. That would be the coup-d'etat for the Keynesian monster, and we will be the ones to suffer for it.

[kapitalyst]

The problem now is deflation, not inflation, inflation only happens when consumption goes up.


Wow... You really, really don't know what you're talking about... :laugh:

It seems that you, like the Keynesians, are totally clueless about what monetary inflation and deflation is and how it works. And you've bought into the bogus idea that inflation is growth and deflation is recession. This is simply using fallacious thinking to justify the means... This is all the result of a bubble created by the central banks, and a recession created by the central banks and western governments' economic policies. The "deflation" we started experiencing around May is the direct result of this and the beginning of a bear market.

Inflation is NOT growth. In fact, inflation cancels out growth (sometimes even totally erases it) by destroying wealth -- especially that of the working class, who has no idea how to protect their wealth from it and doesn't understand markets and monetary policy. Confusing economic growth and expansion of the currency supply is silly.



At that point your just forcing the fail part in the to big to fail and ensuring another bailout.

I say too big to fail is an easy fix, threaten to nationalize the banks.


Right... let's discourage "too big to fail" by taking it up another notch...



I don't buy that, you can have a jobs growth elsewhere, you don't need construction, the problem is'nt that we don't have enough housing, there is no need to re-inflate a bubble, making loans for housing is a shitty way to make demand, first of all because we already HAVE a lot of houses, second because there are simply better ways to use resources than to re-inflate the housing market, through forced lending.


True... I think there has been a major over-emphasis on home construction. And existing homes aren't selling. I'm trying to sell my home and land, and have been totally unsuccessful in finding a buyer. Nothing the Fed did worked to create a housing boom, and I knew it wouldn't work from day one.



Why not do direct government loans, bypassing commercial banks? Hell, maybe we don't need loans at all to spur demand maybe we need jobs and wages.


Yeah, I'm sure government would do a great job with that...



That is again top down economics thinking, corporations have tons and tons of cash they are just sitting on, its not like they need more.


That is a myth, put forward by people who don't know how business works. Having a reserve of cash is healthy and necessary. And business cannot survive on it. It's there for the purpose of investing when growth is possible, and thus far it hasn't been. Businesses made the right decision by not investing into the Fed bubble.

[RGacky3]

It seems that you, like the Keynesians, are totally clueless about what monetary inflation and deflation is and how it works. And you've bought into the bogus idea that inflation is growth and deflation is recession. This

Inflation is when prices go up deflation is when prices go down.


This is all the result of a bubble created by the central banks, and a recession created by the central banks and western governments' economic policies.

What Bubble created by the central banks? So far the bubbles that are being made are being made by financial institutions speculating.


Inflation is NOT growth. In fact, inflation cancels out growth (sometimes even totally erases it) by destroying wealth -- especially that of the working class, who has no idea how to protect their wealth from it and doesn't understand markets and monetary policy. Confusing economic growth and expansion of the currency supply is silly.


Inflation sometimes destroys wealth, in extreme cases, but thats not close to being the problem here, inflation generally follows growth, and thats healthy.

Right now the problem of the working class is not the devaluation of the dollar, its that they lost their jobs and their wages are flatlined if not falling.

No one is confused here other than you, follow along to whats being written, we never said inflation was growth.

The way the working class protects their wealth is to GET wealth first by organizing and pulling the profits down from the capitalist to them, you need to get wealth first before you protect it.


Right... let's discourage "too big to fail" by taking it up another notch...


Compare nationalized banks and privatized, but the privatized banks are crashing.

To Big to fail is a problem that you'll always get under capitalism, you can never continously break up private banks, so you nationalize them, make them NON PROFIT, meaning they won't fail because they arn't continuously chasing more and more profits (which was the real problem to begin with) and make them publically accountable so that they don't make the people take the hit.


Yeah, I'm sure government would do a great job with that...


... They actually do do a great job with that, if you look at the countries that actually do do it.

Reality my friend, I get that its something libertarians dont' calculate, but sometimes it helps to look out a window.


That is a myth, put forward by people who don't know how business works. Having a reserve of cash is healthy and necessary. And business cannot survive on it. It's there for the purpose of investing when growth is possible, and thus far it hasn't been. Businesses made the right decision by not investing into the Fed bubble.

The Fed Bubble? WHAT BUBBLE ... what is bubbled???

Buisiness made the right decision to not invest in a dying economy with no demand, about the cash reserve ... fine, but its growing and is HUGE now, not because they just need it for back up, but because they arn't investing in the US because the US sucks economically.

But tell me about this mysterious Fed Bubble?

Oh, and how its not a lack of demand.

[kapitalyst]

Inflation is when prices go up deflation is when prices go down.

Erm, no... that's more 1920s Keynesian nonsense...

Inflation is accompanied by price increases, but inflation is actually the diminishing of purchasing power in the medium of exchange (currency).

The price of corn rising because of a drought which caused a shortage is not inflation. The price of oil rising because more people own cars is not inflation. The price of damn near everything going up because of an increased supply of currency is inflation. When you confuse these things you make critical errors of reasoning in trying to understand economics and monetary issues.



What Bubble created by the central banks? So far the bubbles that are being made are being made by financial institutions speculating.


Gacky, I'm sorry, but that is absolute BS... Economists have already studied commodity prices vs net speculative positions and found that there is typically very little correlation, and often inverse correlation. The ultimate maxim of traders, like myself, is "buy low sell high" or "short high, cover low". Long speculation is typically highest when prices are low, when we think they may go up. We liquidate long positions when prices get high, and often take up short positions. There are brief periods in time when a trade gets a bit crowded, but that doesn't last long before prices fall back.

You may want to look at the actual market data before you talk about what's driving prices. The prices of important and large commodity markets are driven almost completely by economic and monetary fundamentals -- not speculation. And in those environments, speculators are typically just liquidity providers nibbling on price changes (like me). In more volatile markets, like the silver market, speculation can have a powerful effect. What we've experienced in the last few years (soaring commodity prices) has been a monetary-driven phenomena. And the speculation itself is monetary-driven, because we already know what the Fed is going to do (devalue the dollar) and want to preserve and grow wealth!



Inflation sometimes destroys wealth, in extreme cases, but thats not close to being the problem here, inflation generally follows growth, and thats healthy.


Inflation always destroys wealth. If you are holding fiat currency (e.g., the dollar or Euro), inflation siphons away your wealth into the hands of central bankers and leaves you with, well... some paper... And what do most people do? They foolishly put all their money into a pathetic savings account, CDs, bonds or a shoebox, and think that they're doing the right thing. Unfortunately, they don't realize that saving doesn't work under Keynesianism. You have to hedge and, yes, speculate to preserve and grow your wealth. You have to stick to money (gold) rather than currency (the dollar). A lot of my friends and family have finally started listening to me about this and are better off financially for it. Those who don't are the ones grumbling the most about things like gas prices because it hurts them pretty badly...



Right now the problem of the working class is not the devaluation of the dollar, its that they lost their jobs and their wages are flatlined if not falling.


And Gacky, why might wages be flat-lined/falling and unemployment rising? Competitive currency devaluation. Prices are rising faster than wages, and there's little even the most altruistic business owner can do about it. The economy, therefore, sucks. And it's going to continue to suck until we embrace some common sense...



No one is confused here other than you, follow along to whats being written, we never said inflation was growth.


Not exactly... you've confused price changes caused by changes in economic fundamentals with inflation and deflation. Shit, you could probably get a job at the Fed! ;)



The way the working class protects their wealth is to GET wealth first by organizing and pulling the profits down from the capitalist to them, you need to get wealth first before you protect it.


That sounds like the words of someone who doesn't know how to create and grow wealth... And even the lower class does have wealth, even if it's a small amount. Inflation hurts them the most. When your hourly wage is stuck at $8 and the price of everything is rising, your life gets a lot shittier...



Compare nationalized banks and privatized, but the privatized banks are crashing.


Governments are crashing too, Gacky... We embraced a foolish ideology in the early 20th century, and it has now gotten us in over our heads...



To Big to fail is a problem that you'll always get under capitalism, you can never continously break up private banks, so you nationalize them, make them NON PROFIT, meaning they won't fail because they arn't continuously chasing more and more profits (which was the real problem to begin with) and make them publically accountable so that they don't make the people take the hit.


Oh, geez... The corporations that got our tax dollars in the wake of 2008 should have simply been left to die... to collapse... It would have been the best thing for us. Instead, we pumped trillions of new dollars into the pockets of dumb corporate leadership and foreign banks. As Ron Paul pointed out, if you really think consumer spending and "stimulus" is good, you could have given EVERY American adult $17,000 instead of saving those corporations and done a much better job of it... Now we just have moral hazard to deal with. There's no reason, now, to think this won't happen again. Oh wait, it already is! *cough*

You might call this "capitalism", but it certainly ain't free enterprise, my friend. And to me, it ain't actually capitalism. But times will be changing soon. In fact, the oncoming economic catastrophe may end up being a good thing for us in the end. We need a wake up call, and have to get a handle on government bloat and autonomy.



... They actually do do a great job with that, if you look at the countries that actually do do it.


Like who?



Reality my friend, I get that its something libertarians dont' calculate, but sometimes it helps to look out a window.


Yeah... "Revolutionary leftists" are soooo in touch with reality... :rolleyes:


The Fed Bubble? WHAT BUBBLE ... what is bubbled???


You're late to the party, Gacky. It's already began bursting. You obviously missed everything that has happened in the markets since the bottom of 2008... I suggest you stick to your day job, and don't try to be a day trader... or even an investor. ;)



Buisiness made the right decision to not invest in a dying economy with no demand, about the cash reserve ... fine, but its growing and is HUGE now, not because they just need it for back up, but because they arn't investing in the US because the US sucks economically.


Yes, and hopefully you now understand why the economy sucks. You've had cause and effect totally mixed up, and you've also jumped on bandwagons.

Cash reserves for businesses are not huge. And too many businesses currently have debt/earnings ratios greater than 1.0. You must have gotten this idea from people who don't know what they're talking about and have never performed fundamental analysis on a business or market indices in their life...



But tell me about this mysterious Fed Bubble? Oh, and how its not a lack of demand.

Gacky, Gacky... it is both a lack of demand and solid fundamentals AND monetary inflation. Again, you need to be looking at market data, bro... I watch the financial news and live market and economic data almost 24/7, Sunday - Friday. And spend over 12hrs a day on ThinkOrSwim (my trading platform). You won't find many people better informed about global financial markets and the economy.

You know who lost money from the market chaos this year and in 2008? People who trusted the Fed and look at economics through the distorted lens of Keynesianism. You know who made money from it? Me... And plenty other people who, like me, actually have a clue about how markets work. I don't expect you to know about these things like I do, because this is my job (and basically, my life) which I am extremely passionate about, and you don't participate. But if you want to debate it, I just have to tell you the truth and be blunt about it.

[Dumb]

Wow... You really, really don't know what you're talking about... :laugh:

It seems that you, like the Keynesians, are totally clueless about what monetary inflation and deflation is and how it works. And you've bought into the bogus idea that inflation is growth and deflation is recession. This is simply using fallacious thinking to justify the means... This is all the result of a bubble created by the central banks, and a recession created by the central banks and western governments' economic policies. The "deflation" we started experiencing around May is the direct result of this and the beginning of a bear market.

So let me get this straight. Loose monetary policy leads to inflation, and our near-deflation comes from loose monetary policy...is there any evil that doesn't come from a loose monetary policy? :confused: Granted, though, you use the term "deflation" in scare quotes for good reason - we've managed to avoid deflation only because of intervention by the Federal Reserve, and prices have instead roughly stagnated as a result.

If the US starts pursuing tight money or a balanced budget soon, though, this will cripple domestic demand, and a decrease in demand tends to drive down prices (and production, and employment). The problem with this is that we're in a consumer debt-driven liquidity trap, and deflation will cause the value of that debt to grow.

There have been warnings about hyperinflation for years now, and so far we keep seeing instead only the signs of stagnation. I am not a Keynesian, but so far everything that's happened the last four years appears to have justified their model from within the capitalist framework.

[RGacky3]

Erm, no... that's more 1920s Keynesian nonsense...

Inflation is accompanied by price increases, but inflation is actually the diminishing of purchasing power in the medium of exchange (currency).

The price of corn rising because of a drought which caused a shortage is not inflation. The price of oil rising because more people own cars is not inflation. The price of damn near everything going up because of an increased supply of currency is inflation. When you confuse these things you make critical errors of reasoning in trying to understand economics and monetary issues.


If the supply of the currency goes up but prices (overall) do not go up (because say the economy grows), you don't have inflation.

The DEFINITION of inflation is the rising of prices.


Economists have already studied commodity prices vs net speculative positions and found that there is typically very little correlation, and often inverse correlation.

Show me, the 2007 food crisis is totally opposite of what your talking about, the same with the housing bubble.


The ultimate maxim of traders, like myself, is "buy low sell high" or "short high, cover low". Long speculation is typically highest when prices are low, when we think they may go up. We liquidate long positions when prices get high, and often take up short positions. There are brief periods in time when a trade gets a bit crowded, but that doesn't last long before prices fall back.


When you have a commodity whos price is determined by sypply and demand, but you then have speculators, those speculators are gonna influence the price BEYOND or BELOW the actual supply and demand.

Many times when you have mass institutional investors speculating on something, you see copycats also speculate trying to ride the wave up, or reverse, then when you have the product in the market the price is affected, and many times you have bubbles based on that.


The prices of important and large commodity markets are driven almost completely by economic and monetary fundamentals -- not speculation.
http://wonkroom.thinkprogress.org/wp-content/uploads/2011/05/oilspecwonk0516.jpg

and

http://www.globalresearch.ca/index.php?aid=8878&context=va


And in those environments, speculators are typically just liquidity providers nibbling on price changes (like me). In more volatile markets, like the silver market, speculation can have a powerful effect. What we've experienced in the last few years (soaring commodity prices) has been a monetary-driven phenomena. And the speculation itself is monetary-driven, because we already know what the Fed is going to do (devalue the dollar) and want to preserve and grow wealth!


What kind of trader are you if you don't mind me asking?


Inflation always destroys wealth. If you are holding fiat currency (e.g., the dollar or Euro), inflation siphons away your wealth into the hands of central bankers and leaves you with, well... some paper... And what do most people do?

Some inflation incentivises spending and investment, leading to growth and a moving ecnomy.

Inflation does'nt siphon the wealth to central bankers ... The richest people in the world are not central bankers, they are corporate executives and private bankers.


And what do most people do? They foolishly put all their money into a pathetic savings account, CDs, bonds or a shoebox, and think that they're doing the right thing.

Most workers live paycheck to pay check, the ones holding the cash and doing most of the purchasing are capitalists, workers get their check and spend it on commodities, most workers are just trying to get by.


You have to stick to money (gold) rather than currency (the dollar).

Gold is'nt money, its a piece of rock that has historical value, a very limited use value and basically is only valued because of percieved value, its not currency and thus not money.

And btw, if we went to a gold standard currency, kiss the value of your gold securities good bye, and say hello to massiave deflation and an economic slowdown.


A lot of my friends and family have finally started listening to me about this and are better off financially for it.

We are not talking about investment strategies here, we are talking about what is better for the economy, what is good economics, those are 2 VERY different things.


And Gacky, why might wages be flat-lined/falling and unemployment rising? Competitive currency devaluation. Prices are rising faster than wages, and there's little even the most altruistic business owner can do about it. The economy, therefore, sucks. And it's going to continue to suck until we embrace some common sense...


If there was altruistic buisiness out there (if such a thing was possible) he could just pay his workers more.

Wages are falling because of union crack downs, and because companies are moving to China, why? partiall low labor costs (variable capital) and also partially currency devaluation when compared to the dollar, The American dollar goes much further in China.

They are also falling becuase of rising unemployment, meaning more labor competition meaning falling wages.

Also because you have lack of demand, meaning profits fall, meaning you gotta cut somewhere, and where is the first place to cut? Labor.


That sounds like the words of someone who doesn't know how to create and grow wealth... And even the lower class does have wealth, even if it's a small amount. Inflation hurts them the most. When your hourly wage is stuck at $8 and the price of everything is rising, your life gets a lot shittier...


Wealth is created by people working and creating it, labor creates wealth.

Inflation does'nt happen in a bubble you have to look at all the other factors in play to see who it hurts, deflation however, crashes economies.

Either way, working people, if they want wages to go up, they have to FORCE them up, the countries with the strongest middle classes are the countries with the strongest unions, inflation aside, thats what helps working people, its comming together and fighting back to bring the money down. Working people create the wealth, and if they want to keep it they have to fight for it.

Capitalists don't create wealth, they just take and distribute it (mostly to themselves), traders like yourself, don't create wealth either, workers create wealth.


Governments are crashing too, Gacky... We embraced a foolish ideology in the early 20th century, and it has now gotten us in over our heads...


Yeah, the governments that privatized, cut taxes and followed neo-liberal ideologies. The ones that did not are fine.


Oh, geez... The corporations that got our tax dollars in the wake of 2008 should have simply been left to die... to collapse... It would have been the best thing for us. Instead, we pumped trillions of new dollars into the pockets of dumb corporate leadership and foreign banks.

I agree, we should'nt have bailed them out, but neither should we have allowed the CEOs to just scrap the assets, sell them off and give themselves a golden parachute while destroying the lives of all the workers that had nothing to do with the problems.

I say their assets should have been siezed, if their crash would have caused major national economic problems, then its a natoinal issue.

Kind of like what Iceland did, and guess what, they're doing better now.


As Ron Paul pointed out, if you really think consumer spending and "stimulus" is good, you could have given EVERY American adult $17,000 instead of saving those corporations and done a much better job of it... Now we just have moral hazard to deal with.

I absolutely agree, we should have never saved those corporations.


You might call this "capitalism", but it certainly ain't free enterprise, my friend. And to me, it ain't actually capitalism. But times will be changing soon. In fact, the oncoming economic catastrophe may end up being a good thing for us in the end. We need a wake up call, and have to get a handle on government bloat and autonomy.


It is capitalism, what do you expect will happen when private capital gains HUGE power? Why would'nt they take over the government? Corporatism is the natural outcome of Capitalism, as wealth centralizes so does power.

Even if you cut government enough, the powers that be the major economic powers will use the government or other entities to give themselves more power and ultimately crash the economy in the process.

We don't live in the dainty 1800s anymore, Capitalism has outdone its usefullness.



Like who?



Well ... take for example the country I live in, Norway, or you have government grants, low interest government loans, micro loans, there are tons of countries that have policies like this.


You're late to the party, Gacky. It's already began bursting. You obviously missed everything that has happened in the markets since the bottom of 2008... I suggest you stick to your day job, and don't try to be a day trader... or even an investor. ;)


Tell me what is bubbled ...

Stock markets? Commodities? I'd argue that gold is bubbled, due to people speculating on it, and using it as a safe haven (thinking some how gold value can never drop, kind of like housing).

But tell me WHAT is bubbled, and how it is the Fed that is causing that bubble.


Yes, and hopefully you now understand why the economy sucks. You've had cause and effect totally mixed up, and you've also jumped on bandwagons

Yeah, the US sucks economically because we followed reagenomics thinking that busting unions, getting rid of financial regulations, and believing in the efficiancy of markets religion.

The US sucks because there is no demand, because wages have flatlined, there is no place to invest, there was before, but mostly in bubbles.

Not becuase of out of control inflation, which is'nt actutaly a reality if you look at the data.


Again, you need to be looking at market data, bro... I watch the financial news and live market and economic data almost 24/7, Sunday - Friday. And spend over 12hrs a day on ThinkOrSwim (my trading platform). You won't find many people better informed about global financial markets and the economy.


Ok your a trader, does'nt mean your a good economist, I tend to believe those with Nobel peace prizes.


Cash reserves for businesses are not huge. And too many businesses currently have debt/earnings ratios greater than 1.0. You must have gotten this idea from people who don't know what they're talking about and have never performed fundamental analysis on a business or market indices in their life...


Really
http://onl?ine.wsj.com/article/SB10001424053111903927204576574720017009568.html
Because its at the highest level since 1963 (percentagewise)


You know who lost money from the market chaos this year and in 2008? People who trusted the Fed and look at economics through the distorted lens of Keynesianism. You know who made money from it? Me... And plenty other people who, like me, actually have a clue about how markets work. I don't expect you to know about these things like I do, because this is my job (and basically, my life) which I am extremely passionate about, and you don't participate. But if you want to debate it, I just have to tell you the truth and be blunt about it.

Your fighting a strawman here, I WAS ARGUING AGAINST RICHARDAWILSON against the Fed, I don't think the Fed can fix the crisis, however the Fed was not responsible for the crisis either.

And again, Keynsianism brought us out of the Great Depression, it was abandoned in the 70s and 80s and now here we are again.

I don't consider myself a Keynsian, or a Marxist, but I take points from Keynsianism, marxism, institutional economics, classical and so on, this is not an ideological thing for me.

As far as your personal investment, good for you, (I do some trading too, and am up, and have been up since I started), but personal investment and economic policy are totally different things, whats good for a personal investor playing around in capital markets IS NOT NECESSARILY what is good for actual economies.

[kapitalyst]

So let me get this straight. Loose monetary policy leads to inflation, and our near-deflation comes from loose monetary policy...is there any evil that doesn't come from a loose monetary policy? :confused: Granted, though, you use the term "deflation" in scare quotes for good reason - we've managed to avoid deflation only because of intervention by the Federal Reserve, and prices have instead roughly stagnated as a result.

If the US starts pursuing tight money or a balanced budget soon, though, this will cripple domestic demand, and a decrease in demand tends to drive down prices (and production, and employment). The problem with this is that we're in a consumer debt-driven liquidity trap, and deflation will cause the value of that debt to grow.

There have been warnings about hyperinflation for years now, and so far we keep seeing instead only the signs of stagnation. I am not a Keynesian, but so far everything that's happened the last four years appears to have justified their model from within the capitalist framework.

Why do you have to distort what I said instead of arguing against what I actually said?

Loose monetary policy causes inflation, yes. It creates a bubble, which is even worse when there is very little or no economic growth at the fundamental level. Eventually, bubbles burst. The global economy either slows down or grinds to a screeching halt. There is severe demand destruction for all commodities, and global liquidation of assets and financial instruments takes place. Liquidation requires the repatriation of currency, and creates a stronger demand for it at home (people want their cash instead of risk assets). Prices fall. And that is not actual monetary deflation. It's simply a crunch... the unraveling of an asset bubble.

Austerity would be the best thing for the global economy. Yes, austerity can be painful. But it actually dresses and heals the wounds, instead of giving the economy another dose of methamphetamine.

[RichardAWilson]

Austerity would be the best thing for the global economy.

The Republicans believed the same thing before the Great-Depression.

The global economy has been liquidated as much as it can be liquidated. The inefficiencies have been purged. Now we're just suffering from a hangover that continues to linger due to insufficient aggregate demand and confidence. Labor has never been more productive.

Businesses have never produced so much with so few workers. Corporate America is more profitable than ever before.

Your solution would just make matters even worse and create a self-perpetuating depression, just as it did during the Hoover Administration and during the Long-Depression (1873 - 1879).

Furthermore, painful isn't the term I'd use. Today's pain will make the future that much worse. During periods of high jobless rates, fewer young people can afford a college education, fewer and fewer young people gain meaningful work experience, which means that the workforce is less productive and prepared once the economy rebounds.

The Great-Depression came close to ruining an entire generation. The Recession of 1982, which was the worst since the Great-Depression, condemned millions of Americans to joblessness, poverty, homelessness, alcoholism, crime and drug abuse.

We need our political and social organizations and institutions to take leadership on the economy to preserve the American Dream and to ensure that this generation isn't condemned to long-term suffering.

[Dumb]

Why do you have to distort what I said instead of arguing against what I actually said?
Solution A: I just get off to frustrating other people by deliberately distorting their arguments to my own ends.

Solution B: I misunderstood what you said, either because I misread/read too hastily or you were unclear.

Take your pick.


Austerity would be the best thing for the global economy. Yes, austerity can be painful. But it actually dresses and heals the wounds, instead of giving the economy another dose of methamphetamine.

The problem with that is, since around Dec. '09, US government fiscal policy has already been in contractionary mode (http://graphics8.nytimes.com/images/2011/09/18/opinion/091811krugman2/091811krugman2-blog480.jpg) - as has been the case in the UK and other parts of the EU - and it hasn't worked. Granted, I'm guessing you're not happy with Fed policy, but there's no data to support any anti-inflation measures right now anyway.

I'm just not seeing any data or current economic conditions justifying austerity right now. I'm seeing a lot of talking about about "contractionary policy = good," but I've yet to see a single proponent of austerity declare that inflationary policy is appropriate for times of good economic times; this causes me to conclude that the argument for austerity has nothing to do with the current economic climate, and everything to do with supporting a predetermined policy preference. Prove me wrong on at least one of the points I've made bold and I'll be pleasantly surprised.

[kapitalyst]

If the supply of the currency goes up but prices (overall) do not go up (because say the economy grows), you don't have inflation.

The DEFINITION of inflation is the rising of prices.


You've just totally contradicted your own view on inflation...



Show me, the 2007 food crisis is totally opposite of what your talking about, the same with the housing bubble.


Erm, what? Inflation started to go parabolic towards the end of the Clinton years and beginning of the Bush years. I have to give Clinton's admin props for keeping inflation relatively under control, and don't blame him for it. Although he did push policy to encourage the MBS bubble. Bush, on the other hand, was a very loose Keynesian, and kicked off the inflationary decade. Obama's admin has let it get ridiculous...

The 2007 food crisis had a lot of factors. Inflation was a major factor in it. Not only does weaker currency hike food prices, but had other consequences... Oil prices began to soar too, thanks to the weaker dollar and other factors. And government wanted ethanol fuel... even though no one else did. So we end up burning lots of food. There was also major population growth, and net demand for food grew (everyone must eat, so food demand is always there). Food stockpiles were also at historical lows, and supply was completely inadequate. Growth in other countries also raised demand for more expensive and resource-intensive foods. The government was even paying farmers to let their farmland sit there, doing nothing. The Japanese government also had policy to discourage export of their rice, and let it rot or fed it to animals. In addition to these other factors, there were natural disasters and climate phenomena which contributed to shortages and reduce harvests.

Financial speculators in the commodities futures market were involved, yes. But we do not cause these trends, we follow them. And we stay well-informed on all of these market factors. And you actually admit that inflation encourages speculation because we want to protect and grow our wealth. Someone like me can benefit from inflation, but most people in this world do not. Even though that means more money in my pocket, I don't approve of it. I'd rather make my money by economic growth, which benefits everyone, than playing off the stupidity of governments and bankers.



When you have a commodity whos price is determined by sypply and demand, but you then have speculators, those speculators are gonna influence the price BEYOND or BELOW the actual supply and demand.


That is completely untrue... Not only are speculators and traders part of supply and demand, we don't typically take delivery of, say, corn futures (/ZC) and definitely don't eat 5,000 bushel lots of corn. Those commodities go to real businesses and people who consume them. If I buy corn contracts, I'm buying corn that someone else will ultimately buy from me and consume. Speculation can move prices, but if the fundamentals aren't behind the price move it doesn't stick. If Goldman-Sachs started buying tons of lean hog contracts and bumping up the price, but the economic fundamentals didn't justify the price, I would short those contracts -- prices would soon fall back, and I'd be the winner.



Many times when you have mass institutional investors speculating on something, you see copycats also speculate trying to ride the wave up, or reverse, then when you have the product in the market the price is affected, and many times you have bubbles based on that.


I don't even know what you're trying to say...



http://wonkroom.thinkprogress.org/wp-content/uploads/2011/05/oilspecwonk0516.jpg

http://www.globalresearch.ca/index.php?aid=8878&context=va


This is one of the most misleading charts I've ever seen. I forget the word for it when you make a chart that intentionally misleads... If you want, I could post correct charts of the actual price vs net speculative positions. You'll see things that will surprise you, like the fact that when oil prices stretched to their peak (above $145) in 2008, most speculators were short on oil.

You also have to look at data which doesn't merely show you how much speculation is going on (trade volume). Traders could either be short or long on futures. If you're not considering that, you can draw totally incorrect conclusions.



What kind of trader are you if you don't mind me asking?


I'm a bit of an "everything trader". I trade stocks, futures & commodities and FOREX (and options contracts on all of the above). But don't really fool with treasuries/bonds so much.



Some inflation incentivises spending and investment, leading to growth and a moving ecnomy.


Yes, so you're admitting that speculation on commodities is more likely to occur in an inflationary environment...

And the problem is, John and Jane Doe don't understand inflation, financial markets or monetary policy. They don't know how to hedge their wealth against inflation, and typically have very limited knowledge of investment. I consider it (this ignorance) a failure of the public school system. But the fact remains that inflation is bad for them. And I simply cannot approve of it...



Inflation does'nt siphon the wealth to central bankers ... The richest people in the world are not central bankers, they are corporate executives and private bankers.


Gacky, it's the central banks who expand credit and increase currency supplies, which they then spend however they so choose. They're creating cash out of thin air, it seems, but it's actually the wealth coming out of the pockets of the average American... people who don't even realize it, and are even prone to praise the central bankers and government -- the very ones kicking them in the teeth!



Most workers live paycheck to pay check, the ones holding the cash and doing most of the purchasing are capitalists, workers get their check and spend it on commodities, most workers are just trying to get by.


I grant you this, to some extent it's true. But most people are middle-class Americans. They're trying to save money and plan for retirement. But everything they try to put away is depreciating, and earnings are not increasing. Plus, everyone is over-taxed. And money is pulled right out of worker's paychecks by the government to put into social programs... Money that individuals could effectively use for retirement and investment, especially with some basic financial education. This simply isn't the right way of doing things...



Gold is'nt money, its a piece of rock that has historical value, a very limited use value and basically is only valued because of percieved value, its not currency and thus not money.


Sorry, you're totally wrong...

http://img37.imageshack.us/img37/6071/goldmu.jpg

Gold and silver have been commodity money throughout the history of human civilization. Still, to this day, and despite legal tender laws, they still remain money.

Currency is not money. Money is a medium of intrinsic value, a store of wealth... currency is something that REPRESENTS money... Your notions of value come purely from utility, which is understandable (since you're a leftist). So while you may think it shouldn't be this, an opinion I can respectfully disagree with, it still is this way...



And btw, if we went to a gold standard currency, kiss the value of your gold securities good bye, and say hello to massiave deflation and an economic slowdown.


That is a complete lie. Gold has always worked as money. And I've had a full-out debate on this before with many people... a debate which is fairly easy to win. However, it doesn't allow monstrous government to exist and manipulate our markets and economic system... nor does it allow global militarist imperialism... nor bloated, wasteful public-sector welfare, never-ending deficits, cheating your way out of loans or other such nonsense.

The dollar price of gold, to me, is not of much importance. The fact that it is a stable unit of wealth is. I am building a stock-pile of both gold and silver for the ultra-long term, and hope I can pass it on to my great grandchildren and future generations. I don't cry if the gold price goes down, as I understand I didn't lose any wealth... I've just forgone a gain in volatile fiat currency. I would, however, lament holding a lot of cash and watching gold prices rise, as that is a loss of wealth.

Again, you simply do not understand the monetary system and things like inflation and deflation...



We are not talking about investment strategies here, we are talking about what is better for the economy, what is good economics, those are 2 VERY different things.


Not really. If you want to be a highly successful trader or investment firm, you must be an economist too. And I've been studying economics since I was 15... I also studied it in college, and continue to study it to this day.

Large investment firms and brokers hire teams of economists. You cannot separate trading and investment from economics. Sure, it's possible to know next to nothing about economics and make some money in the stock market... hell, you buy some Apple stock when the news media has some positive things to say. But if you want to be a professional and make boatloads of money in all market conditions, regardless of the market direction, you'd better embrace economics and hit the books... And you'd better learn to think on your feet and not follow the crowd...



If there was altruistic buisiness out there (if such a thing was possible) he could just pay his workers more.


Unfortunately, it doesn't work that way, Gacky... It's easy to say "just pay workers more", but that is a great way to sink your own ship and leave all your workers unemployed.

If you think "true" or "pure" altruism exists at all or ever will, then you're just mistaken... But there are a lot of businesses which are very kind to both employees and consumers (especially consumers -- that's good business).



Wages are falling because of union crack downs, and because companies are moving to China, why? partiall low labor costs (variable capital) and also partially currency devaluation when compared to the dollar, The American dollar goes much further in China.


Actually, your beloved unions have caused a decrease in real wages. Too much of workers' pay is going into employment benefits and social welfare, and it's hurting their individual financial situations (whether they realize it or not). I experienced it first hand when I was a manual laborer. I wished I could have been paid the money being extracted from my paychecks for Social Security and employment benefits... I desperately needed it.

The Chinese Yuan is appreciating against the dollar... Businesses and investment capital are moving overseas for several reasons. The government has simply made business too expensive. The way to fix it is so obvious that if I think about it too much I'll laugh myself to the point of tears... :crying:



They are also falling becuase of rising unemployment, meaning more labor competition meaning falling wages.


What? You've got to do a better job explaining this...



Also because you have lack of demand, meaning profits fall, meaning you gotta cut somewhere, and where is the first place to cut? Labor.


Because labor has become a massive expense for business. You can't have enough employees and low unemployment when hiring additional workers costs a fortune.



Wealth is created by people working and creating it, labor creates wealth.


Yes, true...



Inflation does'nt happen in a bubble you have to look at all the other factors in play to see who it hurts, deflation however, crashes economies.


Again, you've got cause and effect totally mixed up and you still aren't understanding inflation and deflation...

A bubble doesn't necessarily require inflation to take place. But inflation, if not kept tightly controlled, does cause bubbles.

Deflation, even what you're calling deflation, does not "crash economies". In fact, monetary deflation could be a good and perfectly healthy thing. For one, it would encourage savings and discourages abusing debt (plus, interst rates can naturally trend lower)... the increased buying power of the currency means every person can get more for their money (increased standard of living). Gains on investments become even juicier.

What you call deflation is just lower prices resulting from an economic crisis (what's going on right now). Cause and effect totally reversed.



Either way, working people, if they want wages to go up, they have to FORCE them up, the countries with the strongest middle classes are the countries with the strongest unions, inflation aside, thats what helps working people, its comming together and fighting back to bring the money down. Working people create the wealth, and if they want to keep it they have to fight for it.


This is somewhat true. In a healthy free enterprise system, business would compete for workers -- there would be a bigger demand for workers than the supply. And the way to get workers would be paying them more and offering them greater incentives. Then when wages rise, people spend more and more money is pumped back through the business system. Production increases, and more wealth and capital is created.

Unions, on the other hand, have tended to cause a lot of problems with the big bully with the big stick standing behind them (government). Unions can only work correctly when they aren't state-backed.



Capitalists don't create wealth, they just take and distribute it (mostly to themselves), traders like yourself, don't create wealth either, workers create wealth.


I was talking about creating personal wealth. Yes, wealth that derives its value from utility (actual goods/services) can only be created by production and/or labor. But the only way the business system can work and produce things is by capitalists funding them, and traders like myself keeping the markets liquid. Everyone does it for the rewards. Carrot > stick...



Yeah, the governments that privatized, cut taxes and followed neo-liberal ideologies. The ones that did not are fine.


No one has followed neo-liberal or laissez-faire ideologies since the 20th century... What you call a "tax cut" or "neo-liberal" is what?... reducing corporate tax from 40% to 35% (so that it's still way too high)? And "tax cuts for the wealthy" is reducing everyone's taxes... I cannot comprehend this sort of thinking -- and the idea that higher and higher taxes are good for business and the economy. It's absolute nonsense... totally fallacious thinking...



I agree, we should'nt have bailed them out, but neither should we have allowed the CEOs to just scrap the assets, sell them off and give themselves a golden parachute while destroying the lives of all the workers that had nothing to do with the problems.

I say their assets should have been siezed, if their crash would have caused major national economic problems, then its a natoinal issue.

Kind of like what Iceland did, and guess what, they're doing better now.


We should have simply let the ship sink, instead of using the tax payers as flotation devices. Those corporations would have failed, and the responsible ones would have been left to step up to the plate and satisfy demand. Then new business ventures would have sprung up to fill in supply gaps, and we would have ended up with a healthier system and better, more responsible businesses. And today, we'd be enjoying sustainable economic growth -- provided we embraced free trade and free enterprise. But none of that nonsense should have happened in the first place. We had been warning you all about it long before it happened...



I absolutely agree, we should have never saved those corporations.


+1 point to Gacky!



It is capitalism, what do you expect will happen when private capital gains HUGE power? Why would'nt they take over the government? Corporatism is the natural outcome of Capitalism, as wealth centralizes so does power.


That isn't true... Government should be limited: period. Authority musn't all belong to the state. It should belong to the people, the market and the state for a healthy system to exist. Each one keeps the other in check.



Even if you cut government enough, the powers that be the major economic powers will use the government or other entities to give themselves more power and ultimately crash the economy in the process.


Businesses don't want to crash the economy, and they do a great job of making it grow (in fact, they're the only thing that makes it grow).



We don't live in the dainty 1800s anymore, Capitalism has outdone its usefullness.


Your opinion... and a silly one... Socialism was never useful. And never lives up to what Mr. Marx expected...



Well ... take for example the country I live in, Norway, or you have government grants, low interest government loans, micro loans, there are tons of countries that have policies like this.


You really think Europe is in good shape? :rolleyes:



Tell me what is bubbled ...

Stock markets? Commodities? I'd argue that gold is bubbled, due to people speculating on it, and using it as a safe haven (thinking some how gold value can never drop, kind of like housing).

But tell me WHAT is bubbled, and how it is the Fed that is causing that bubble.


Gacky, I've explained this several times and you either aren't listening or don't understand...

Yes, stocks and commodities... QE was one of the biggest forces in creating the bubble -- the one that is now imploding, wiping out trillions in market cap and individual wealth (of all classes). The Fed also "printed" money to buy our own bonds and artificially peg interest rates near 0%. They've pumped trillions of brand new dollars into financial markets, knocked off the dollar and driven prices up with none of the crucial increases in productivity, consumption or demand.



Yeah, the US sucks economically because we followed reagenomics thinking that busting unions, getting rid of financial regulations, and believing in the efficiancy of markets religion.


That's BS... I have a bucket full of criticism against Reagan and his policies, but it worked much better than this crap. The economy was somewhat healthy under Reaganomics, and the data supports it. It could have been better, and Reagan did plenty things wrong, but he was indeed more successful. "Carter & Obamanomics" has been nothing short of a disaster...



The US sucks because there is no demand, because wages have flatlined, there is no place to invest, there was before, but mostly in bubbles.


And I've explained to you exactly why that is so...



Not becuase of out of control inflation, which is'nt actutaly a reality if you look at the data.


:laugh:

What data? The USDI? CPI? If you really believe in all that Fed-speak crap, then you need a reality check. Even many voices within the Fed are highly critical of it. Their metrics have been intentionally created to make themselves not look so bad.

The only correct measure of inflation is by monitoring the supply of dollars and the costs of goods and services. Everything comes down to that. And gold makes a better benchmark for it than anything. If you think this inflationary problem is not an issue, then I say you're either slap nuts or misinformed. Can you really sit there and consider how much $1 could buy in 1900 and how much it buys today and say the inflation isn't happening? Or even a shorter time-frame -- 2008 - today? :rolleyes:



Ok your a trader, does'nt mean your a good economist, I tend to believe those with Nobel peace prizes.


Doesn't necessarily make someone a "good" economist. However, I am an economist. And I attribute my success in trading and navigating the global financial markets to my understanding of economics.

You want Nobel Prize winners? How about Friedrick Hayek (http://en.wikipedia.org/wiki/Friedrich_Hayek)? ;)



a strawman here, I WAS ARGUING AGAINST RICHARDAWILSON against the Fed, I don't think the Fed can fix the crisis, however the Fed was not responsible for the crisis either.


The Fed is not the only factor, though it is probably the biggest. And you're right, it cannot fix this... it can only make it worse.



And again, Keynsianism brought us out of the Great Depression, it was abandoned in the 70s and 80s and now here we are again.


Myth alert! And let me guess, you think WWII helped end the Great Depression too? :laugh:

The Fed prolonged the Great Depression. It lasted longer here than it did in other countries.



I don't consider myself a Keynsian, or a Marxist, but I take points from Keynsianism, marxism, institutional economics, classical and so on, this is not an ideological thing for me.


If it's not an ideological thing for you, set in stone, then you may want to re-think your views on it?



As far as your personal investment, good for you, (I do some trading too, and am up, and have been up since I started), but personal investment and economic policy are totally different things, whats good for a personal investor playing around in capital markets IS NOT NECESSARILY what is good for actual economies.

This is true, but I've already addressed this notion.

[RGacky3]

I'm gonna just respond with some facts.

http://i.huffpost.com/gen/351742/HOW-BANKS-CAUSE-HUNGER.jpg

http://wonkroom.thinkprogress.org/wp-content/uploads/2011/01/unionincome.jpg

The highest unionized countries are scandanavian social democracies, who also have the best off working class, and germany not only has high unionizatoin, but also worker democracy co-determination laws, they are the 4 largest economy, and the largest in europe, and by far a much better off working class than the US. (http://www.nationmaster.com/graph/lab_tra_uni_mem-labor-trade-union-membership)

In the US, 40% of manufacturing employees have to change jobs in each
year. Only 25% of German workers have to seek out a new job each year,
and only 18% of Swedish and Japanese workers switch jobs.

Unions keep managers from being overpaid relative to average workers:
In the US, a CEO makes 17.5 times as much as the average worker.
In Japan, a CEO makes only 11.6 times as much.
In Germany, a CEO makes only 6.5 times as much.
(http://www.nathannewman.org/EDIN/.labor/.files/.archive/.union-good.html)
About inflation.

http://upload.wikimedia.org/wikipedia/commons/thumb/8/8c/US_Historical_Inflation.svg/800px-US_Historical_Inflation.svg.png (http://upload.wikimedia.org/wikipedia/commons/8/8c/US_Historical_Inflation.svg)

Its not at all that big, its not at all the cause of all the stuff your talking about.


About Gold as a currency ... Deflation? Gold producing countries controlling money supply? hoarding? Shriking of the economy?

About Gold as a holder of value: For much of history civilizations used a grain based economy, also Golds only value is what other people percieve its value being, nothing more, also Gold right now is in a bubble (that might be starting to fall apart), there is nothing special magical or holy about gold, If you try to use gold as money today, all you'll get for it is its dollar value, no more no less.

I'll finish all the shit you wrote later.

[RGacky3]

This is somewhat true. In a healthy free enterprise system, business would compete for workers -- there would be a bigger demand for workers than the supply. And the way to get workers would be paying them more and offering them greater incentives. Then when wages rise, people spend more and more money is pumped back through the business system. Production increases, and more wealth and capital is created.


Not true, workers compete for jobs because we have high unemployment, and as technology growns and the labor/captial variable is more and more in favor of capital, the competition is fiercer.

Also workers are at a disadvantage because they need jobs now, to eat, whereas corporations can wait.


No one has followed neo-liberal or laissez-faire ideologies since the 20th century... What you call a "tax cut" or "neo-liberal" is what?... reducing corporate tax from 40% to 35% (so that it's still way too high)? And "tax cuts for the wealthy" is reducing everyone's taxes... I cannot comprehend this sort of thinking -- and the idea that higher and higher taxes are good for business and the economy. It's absolute nonsense... totally fallacious thinking...


Well, the countries that moved more and more in that direction, Argentina, Iceland and so on, had a shitty time.


That isn't true... Government should be limited: period. Authority musn't all belong to the state. It should belong to the people, the market and the state for a healthy system to exist. Each one keeps the other in check.


NO ... its empirically true, authority should belong to the market? i.e. plutocracy, if your talking about the people, how are they gonna weild poewr? Your juts talking semantics.

Empirically monied power takes over political power.


Businesses don't want to crash the economy, and they do a great job of making it grow (in fact, they're the only thing that makes it grow).


But they act ina a way that in the short term benefits themself but in the long term crashes the economy, by not taking into account externalities.


You really think Europe is in good shape? :rolleyes:


nothing to do with government loans to citizens.


Gacky, I've explained this several times and you either aren't listening or don't understand...

Yes, stocks and commodities... QE was one of the biggest forces in creating the bubble -- the one that is now imploding, wiping out trillions in market cap and individual wealth (of all classes). The Fed also "printed" money to buy our own bonds and artificially peg interest rates near 0%. They've pumped trillions of brand new dollars into financial markets, knocked off the dollar and driven prices up with none of the crucial increases in productivity, consumption or demand.


QE was done after the bubble collapsed in 2007.

So tell me what the bubble is, a bubble means when something's price goes way way way beyond its real value.

So are you saying the dolar right now is over valued? What is over valued and soon gonna collapse in value?


"Carter & Obamanomics" has been nothing short of a disaster...


Obamanomics IS Reagenomics, he's cut taxes (actually Reagen raised them) cut government spending and so on.


:laugh:

What data? The USDI? CPI? If you really believe in all that Fed-speak crap, then you need a reality check. Even many voices within the Fed are highly critical of it. Their metrics have been intentionally created to make themselves not look so bad.

The only correct measure of inflation is by monitoring the supply of dollars and the costs of goods and services. Everything comes down to that. And gold makes a better benchmark for it than anything. If you think this inflationary problem is not an issue, then I say you're either slap nuts or misinformed. Can you really sit there and consider how much $1 could buy in 1900 and how much it buys today and say the inflation isn't happening? Or even a shorter time-frame -- 2008 - today? :rolleyes:


I'm taking about the inflation rate ... http://www.usinflationcalculator.com/inflation/historical-inflation-rates/.


Myth alert! And let me guess, you think WWII helped end the Great Depression too? :laugh:

The Fed prolonged the Great Depression. It lasted longer here than it did in other countries.


Yeah WW2 helped it a lot, you konw what WW2 was? HUGE HUGE government spending.

No one talked about the Fed, keynsianism is'nt just the Fed.

it lasted longer here because you had the idiot Hoover who believed in the efficiency markets.


The Fed is not the only factor, though it is probably the biggest.

No, you had a housing bubble, cause by speculation and vast amounts of derivatives that no one could understand being sold, and you then had that crash, followed by a spiraling effect, it had nothing to do with the Fed, the Fed has been around for ages.


If it's not an ideological thing for you, set in stone, then you may want to re-think your views on it?


I've rethought it many times, and I continue to, but the nonsense your spitting out is clearly just ideological.


And never lives up to what Mr. Marx expected...


Yet Capitalism clearly does, and thats what Marx spent almost all his time on.

[kapitalyst]

Gacky, just to show you that the information you have is bullshit...

The little propaganda poster that appears first in your post about speculation and food prices was obviously made by people who have no idea what they're talking about, and have no business talking about the futures market... :laugh:

Right underneath the header "The Issue", they have those little pictures representing futures contracts for wheat, corn and cocoa. They don't even know what the contracts are. For instance, the corn contracts (traded under the ticker symbol "/ZC") are 5,000 bushel contracts, or 127 metric tons... not 5,000 tons, hahaha... The wheat contracts (/ZW) are also 5,000 bushels, or 136 metric tons. And cocoa futures (/CC) are 10 ton contracts... Plus, they have their prices all totally wrong... Wow...

See the actual contract specifications here:

Wheat (http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/wheat_contract_specifications.html), Corn (http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/corn_contract_specifications.html), Cocoa (http://www.cmegroup.com/trading/agricultural/softs/cocoa_contract_specifications.html)...

And yet these people are going to talk about what's driving the market? Pleaseeeee..... I wouldn't trust them to invest $1 of my money...

"[...] But these alone cannot explain the sudden spikes in food prices we have seen recently." -- Propaganda Poster
No shit, because you named only one of the causes and have totally omitted the biggest factor... This is even subject for debate among economists, and these people really think they have a clue? Give me a fricken' break...

Speculators do not "dominate" the commodities futures market. You think Goldman-Sachs is eating all the corn? It all ends up going to real businesses and real consumers -- the thing that actually decides marginal value. Market fundamentals, simple supply and demand factors, are what determines market trends. Only the stock market is dominated by speculators, because the only purpose of the market is inviting speculators to raise business capital.

And I love how, at the end, they call for "urgent" regulation of the futures market. I guess they don't realize there are already price swing limits in effect, and futures position size limits -- which governments placed there for fear of speculators cornering the markets? :rolleyes:

Your union membership vs wages chart... Where the hell did that come from anyway? And did you know that unions are losing membership because people don't like them and don't believe in them? ;)

Your inflation chart is, to put it simply, bullshit... As I've already told you, Keynesians use BS metrics to measure inflation and almost totally ignore the actual purchasing power of their currency -- something they view as a "minor inconvenience". Sure, "core inflation" and CPI is a great metric so long as you don't need to eat, have electricity, operate a car, wear clothes, etc...

And even though your chart marginalizes the problem of inflation, that would still be huge if it were correct.

Previously, you've tried to claim that inflation didn't cause bubbles and lead to financial crisis. Even your own chart disagrees. Look at the major bubble which burst in 1922, and sent us hurtling into the Great Depression... Look at the inflation it shows during the 70s, during Jimmy Carter's presidency, and how it was pared back during the Reagan years. C'mon, dude... Your arguments aren't even consistent with your bad data... :lol:

I'd think that you, of all people, would care about the inflation problem. One of the reasons the government and Fed lie about it is because of the way they adjust Social Security and entitlement benefits upward for "increased cost of living". When they lie about it, and marginalize inflation, they don't have to boost the amount they're paying out. So all the elderly retirees, who payed into the system their entire lives, are being cheated out of billions of dollars they were supposed to get. But you don't care? It's not a problem? There's no inflation going on?

[RGacky3]

Your union membership vs wages chart... Where the hell did that come from anyway? And did you know that unions are losing membership because people don't like them and don't believe in them? ;)


http://www.epi.org/page/-/old/images/snap20070228.gif

Actually, its because the department of labor does'nt enforce labor laws, and that Union Busting has become a major buisiness, and people get fired for trying to start a union.

But either way, all the facts I stated are the facts.


Gacky, just to show you that the information you have is bullshit...

The little propaganda poster that appears first in your post about speculation and food prices was obviously made by people who have no idea what they're talking about, and have no business talking about the futures market... :laugh:

Right underneath the header "The Issue", they have those little pictures representing futures contracts for wheat, corn and cocoa. They don't even know what the contracts are. For instance, the corn contracts (traded under the ticker symbol "/ZC") are 5,000 bushel contracts, or 127 metric tons... not 5,000 tons, hahaha... The wheat contracts (/ZW) are also 5,000 bushels, or 136 metric tons. And cocoa futures (/CC) are 10 ton contracts... Plus, they have their prices all totally wrong... Wow...


Supply and Demand did VASTY change in 2008, what did change was the derivatives market.


Speculators do not "dominate" the commodities futures market. You think Goldman-Sachs is eating all the corn? It all ends up going to real businesses and real consumers -- the thing that actually decides marginal value. Market fundamentals, simple supply and demand factors, are what determines market trends. Only the stock market is dominated by speculators, because the only purpose of the market is inviting speculators to raise business capital.


No shit they don't eat the corn, but speculation effects the prices, and the people that eat it don't have a choice, they have to eat, thus they have to pay the price.

"Let's say news comes about bad crops and rain somewhere. Normally the price would rise about $1 [a bushel]. [But] when you have a 70-80% speculative market it goes up $2-3 to account for the extra costs. It adds to the volatility. It will end badly as all Wall Street fads do. It's going to blow up." (http://www.globalresearch.ca/index.php?context=va&aid=22948)

"When you looked at the flows there was strong evidence. I know a lot of traders and they confirmed what was happening. Most of the business is now speculation – I would say 70-80%." (http://www.globalresearch.ca/index.php?context=va&aid=22948) (Mike Masters, fund manager at Masters Capital Management).

The study shows that a significant portion of the increases in price and volatility of essential food commodities can only be explained by the emergence of a speculative bubble. In particular, there is a reason to believe that a significant role is played by the entry into markets for derivatives based on food commodities of large, powerful institutional investors such as hedge funds, pension funds and investment banks, all of which are generally unconcerned with agricultural market fundamentals. (http://www.srfood.org/index.php/en/component/content/article/894-food-commodities-speculation-and-food-price-crises) (the UN Special Rapporteur - But then again of coarse the UN is a vast left wing socialist conspiracy).


Your inflation chart is, to put it simply, bullshit... As I've already told you, Keynesians use BS metrics to measure inflation and almost totally ignore the actual purchasing power of their currency -- something they view as a "minor inconvenience". Sure, "core inflation" and CPI is a great metric so long as you don't need to eat, have electricity, operate a car, wear clothes, etc...


Keynsians? Don't mean you ... economists ... its not like the source was some left wing socialist party.

But hey, facts are facts, so far you hav'nt shown any.

Just your not so humble opinion.


Previously, you've tried to claim that inflation didn't cause bubbles and lead to financial crisis. Even your own chart disagrees. Look at the major bubble which burst in 1922, and sent us hurtling into the Great Depression... Look at the inflation it shows during the 70s, during Jimmy Carter's presidency, and how it was pared back during the Reagan years. C'mon, dude... Your arguments aren't even consistent with your bad data... :lol:

Inflation is a result (partially) of economic growth, and economic growth many times can be caused by a bubble.

But please explain to me the mechanics of how inflation causes a bubble.

The Housing market was caused by mortgages becoming securitized.

[kapitalyst]

Not true, workers compete for jobs because we have high unemployment, and as technology growns and the labor/captial variable is more and more in favor of capital, the competition is fiercer.

Also workers are at a disadvantage because they need jobs now, to eat, whereas corporations can wait.


I was not talking about the present day, but what a healthy system would look like. Even though the government is reporting unemployment rates around 9%, this metric is also bullshit. It only takes into account people who have "actively searched for a job". And who draws that line, and where is it? Having a LinkedIn account? Reading the newspaper? Asking Walmart "you hiring"? It doesn't take into account all the people who have given up, or have no clue where to look anymore. More sensible economists estimate the numbers to be well over 20% or higher.



Well, the countries that moved more and more in that direction, Argentina, Iceland and so on, had a shitty time.


Didn't you praise Iceland in another post, just out of curiosity? No one has made any genuine attempt to "move in that direction". If they want to embrace classical liberalism and laissez-faire economics, they might want to ask us how it's done. Doing one thing slightly right and a thousand things totally wrong isn't going to work.

The Keynesians have been firmly in control since the Great Depression. In fact, the ideology was around before Keynes came out with his unified theories, and was already in action in world government decades prior (in a more limited fashion). All they've done is made a mess of things. Blaming classical liberalism is like blaming communists -- neither one of us had anything to do with it and weren't the ruling party.



NO ... its empirically true, authority should belong to the market? i.e. plutocracy, if your talking about the people, how are they gonna weild poewr? Your juts talking semantics.

Empirically monied power takes over political power.


Is that what I said? No...



But they act ina a way that in the short term benefits themself but in the long term crashes the economy, by not taking into account externalities.


I don't think so... Businesses always think about the long term, and they want a healthy economy. It's where they're making their living. Politicians only care about appearances for the 4-8 years of office.



nothing to do with government loans to citizens.


I'm going to have to do some research on this, sir, and get back to you. For I'm at a loss to say any more than with governments' track record, I can't expect anything better of them.



QE was done after the bubble collapsed in 2007.


Duh? QE is what got us here after the bottom of 2008.



So tell me what the bubble is, a bubble means when something's price goes way way way beyond its real value.


Gacky, I've already answered this question about 3 or 4 times...



So are you saying the dolar right now is over valued? What is over valued and soon gonna collapse in value?


That wasn't exactly what I was talking about (I was talking about asset bubbles, not currency), but to answer your question: Yes, the dollar itself is over-valued. There is a very complex phenomena going on with the dollar. And to make matters worse, to offset the effect of competitive currency devaluation, central banks like the Fed are extending multi-billion dollar loans to private financial institutions (e.g., Goldman-Sachs and JP Morgan) for the purpose of shorting commodities futures. A price-suppression effort, in a desperate attempt to offset the consequences of their loose monetary policy. The silver market has come under this onslaught probably more than any other commodity. What they're creating with the dollar is something I call an "inverse bubble"... the value is low, but has been propped up by ultimately unsustainable means. Eventually, it will play "catch up" and there's no telling how badly the dollar will be crushed, especially if we lose the apparent "free lunch" of having the world reserve currency.

By some estimates, the US standard of living will decline around 30-40% when this happens. Maintaining our present course, I am certain of one thing. The dollar will eventually be flattened so badly it will have to be demonetized and replaced. And I think some people actually want this to happen, so North America, like Europe, will have an "excuse" to form a monetary (and possibly fiscal) union.



Obamanomics IS Reagenomics, he's cut taxes (actually Reagen raised them) cut government spending and so on.


See Gacky? Almost all of your "facts" and data are totally wrong...

When Reagan went into office, tax rates were 18% and 70% for the lowest income bracket ($10k and below) and the highest ($250k+) respectively. By the time he left office, it was 15% and 28%, respectively. The truth: he lowered taxes... And Obama has not lowered taxes, and is actively working to raise the. Please consult some real data, instead of repeating what you've been told: US income tax rates (http://en.wikipedia.org/wiki/Income_tax_in_the_United_States).



I'm taking about the inflation rate ... http://www.usinflationcalculator.com/inflation/historical-inflation-rates/.


Yeah, and that's the same bullshit the Fed uses... where'd you think they got it? :rolleyes:



Yeah WW2 helped it a lot, you konw what WW2 was? HUGE HUGE government spending.


Oh... my... God... :laugh:

Gacky... Are you yanking my chain? Trying to fuck with me? Trying to be funny? Or do you really believe that? Explain yourself...



No one talked about the Fed, keynsianism is'nt just the Fed.

it lasted longer here because you had the idiot Hoover who believed in the efficiency markets.


#1, not true...

#2, Hoover was an interventionist president... He was not a laissez-faire president...



No, you had a housing bubble, cause by speculation and vast amounts of derivatives that no one could understand being sold, and you then had that crash, followed by a spiraling effect, it had nothing to do with the Fed, the Fed has been around for ages.


This is one of the few legit things you've said. Yes, that is the primary cause of the 2008 mortgage meltdown. But the Fed actually did have a lot to do with it. But don't you know why we had that stupid mortgage bubble in the first place? Because well-intentioned voices on the left thought banks were discriminating against the poor and not giving them loans to get homes. The government took action to both encourage and force banks to give it to them -- loans that were too risky and amounts that were too high. And then they went even further by claiming they were "guarantee" the loans, and attracted speculators to make up all sorts of stupid MBS derivatives and securities. Thank God me and my family had the sense to stay away from that crap... And you might want to look into the role the Fed played in all this, and see how deep the rabbit hole goes. ;)



I've rethought it many times, and I continue to, but the nonsense your spitting out is clearly just ideological.


Actually, it's not. The egg hatched before I had a chicken. My political ideology comes from my understanding of economics and social sciences, unlike most people, who got it ass-backward.

You're calling it nonsense, but you're the one dragging up awful, skewed and clearly incorrect data, political propaganda posters, myths started and spread by various political factions, etc. I'm talking commonsense economic principles and giving my own political opinions where necessary, which are easy to separate.



Yet Capitalism clearly does, and thats what Marx spent almost all his time on.

That's your opinion, and fair enough... I'll take it, and respectfully disagree as you will with mine.

BTW, very powerful way of wording it! Not being sarcastic. +1pt for Gacky! :lol:

[RGacky3]

It doesn't take into account all the people who have given up, or have no clue where to look anymore. More sensible economists estimate the numbers to be well over 20% or higher.


I agree, but its not as if a more capitalism would drop that, why would it? Why would employers hire more, when they can do more for less and make people work harder for less?


Didn't you praise Iceland in another post, just out of curiosity?

I praised their 180 degrees turnaround and totally abandoning the Milton Friedman style economics and fixing their economy.


No one has made any genuine attempt to "move in that direction". If they want to embrace classical liberalism and laissez-faire economics, they might want to ask us how it's done. Doing one thing slightly right and a thousand things totally wrong isn't going to work.


Privatizing HUGE institutions, cutting down public oversight and regulations, cutting income and capital gains taxes (sometimes the latter to 0), cutting corporate taxes (sometimes to 0), is not moving slightly to the right.

But this is the standard libertarian argument about why countries moving in that direction, i.e. privitizations, deregulations and a more market based economies and ended up sucking, whereas those that moved in the direction of socialization did well.

Liberalizing the economy will make it worse unless you TOTALLY 100% do it.

Right?


he Keynesians have been firmly in control since the Great Depression. In fact, the ideology was around before Keynes came out with his unified theories, and was already in action in world government decades prior (in a more limited fashion). All they've done is made a mess of things. Blaming classical liberalism is like blaming communists -- neither one of us had anything to do with it and weren't the ruling party.


No they hav'nt, since the 1970s it was Friedmans ideology that ruled the world, the neo-liberal, market fundemntalism.

classical liberalism has nothing to do with libertarianism, Marxism was based on classical liberalism btw.


Is that what I said? No...



It should belong to the people, the market and the state for a healthy system to exist. Each one keeps the other in check.

Yes you did.


I don't think so... Businesses always think about the long term, and they want a healthy economy. It's where they're making their living. Politicians only care about appearances for the 4-8 years of office.


No they don't, buisinesses are REQUIRED to maximise profits in the short term. Buisinesses MUST have a good quarterly report.

Buisinesses are thus also required to ignore externalities.


Duh? QE is what got us here after the bottom of 2008.


really ... So it did'nt cause the crash, you admit that, but your saying its what caused the crash to continue? Any evidence of that?


Gacky, I've already answered this question about 3 or 4 times...


not really, your saying right now the dollar is bubbled? That it will collapse?

So are you saying that the reason inflation is so low is because its actually not hit us yet?


That wasn't exactly what I was talking about (I was talking about asset bubbles, not currency), but to answer your question:

You have not explained AT ALL ANY connection between inflation and asset bubbles. How does inflation cause investors to over value assets?


And to make matters worse, to offset the effect of competitive currency devaluation, central banks like the Fed are extending multi-billion dollar loans to private financial institutions (e.g., Goldman-Sachs and JP Morgan) for the purpose of shorting commodities futures.

Ok, so its the Fed thats enabeling financial institutions to speculate more that they normally would ... So your admiting the bubbles are caused by private investors? Just the fact that they borrow money is the problem.


By some estimates, the US standard of living will decline around 30-40% when this happens. Maintaining our present course, I am certain of one thing. The dollar will eventually be flattened so badly it will have to be demonetized and replaced. And I think some people actually want this to happen, so North America, like Europe, will have an "excuse" to form a monetary (and possibly fiscal) union.


Your really into conspiracy theories arn't you, Again I want to see some data. You hav'nt shown me any data.

US living standards WILL decline, but thats because the US style capitalism simply cannot compete, China is protecting their markets while we are not, Chinas labor costs are low, our demand shortage well end up making us loose our place as a consumer economy, you can't prop it up with credit any more.

And whats your solution ... A Gold standard? Getting rid of social security? Medicare? Great, great solution, is that gonna prop up demand?


See Gacky? Almost all of your "facts" and data are totally wrong...

When Reagan went into office, tax rates were 18% and 70% for the lowest income bracket ($10k and below) and the highest ($250k+) respectively. By the time he left office, it was 15% and 28%, respectively. The truth: he lowered taxes... And Obama has not lowered taxes, and is actively working to raise the. Please consult some real data, instead of repeating what you've been told: US income tax rates (http://en.wikipedia.org/wiki/Income_tax_in_the_United_States).
¨

Did you look at the data? Where has Obama raised taxes?

In 1983 Reagan instituted a payroll tax on Social Security and Medicare hospital insurance.

In the tax reform act of 86 he raised taxes.


Yeah, and that's the same bullshit the Fed uses... where'd you think they got it? :rolleyes:


Well tell me whats wrong with it and tell me what the real super secrete inflation rate is, that the experts are missing but you and Peter Schiff have.


Oh... my... God... :laugh:

Gacky... Are you yanking my chain? Trying to fuck with me? Trying to be funny? Or do you really believe that? Explain yourself...


The Military is a government institution moron .... When you throw tons and tons of money into projects hire tons and tons of people, and produce tons and tons to fight a war, THATS GOVERNMENT SPENDING, Jesus Christ, your being extremely smug while saying something extremely stupid.


#1, not true...

#2, Hoover was an interventionist president... He was not a laissez-faire president...


1. yes it is

2. Your using the "no true scottsman" arugment that every libertarian uses, I guesss its not libertarianism unles its Somalia.


But don't you know why we had that stupid mortgage bubble in the first place? Because well-intentioned voices on the left thought banks were discriminating against the poor and not giving them loans to get homes. The government took action to both encourage and force banks to give it to them -- loans that were too risky and amounts that were too high. And then they went even further by claiming they were "guarantee" the loans, and attracted speculators to make up all sorts of stupid MBS derivatives and securities. Thank God me and my family had the sense to stay away from that crap... And you might want to look into the role the Fed played in all this, and see how deep the rabbit hole goes. ;)


Thats rediculous,
1. The Fed is not the government.
2. Fannie mae and Freddie mac were privatized under Clinton
3. Most of those loans were not guarnateed, thats why they bought insurances from AIG.
4. These Banks MADE A KILLING repossessing homes, (basically doubling their money, from payments And getting the home), they did'nt need the government to force them to ge rich.
5. government sponsered housing has been around for decades, it was only when they deregulated the mortgage and derivatives market that this became a problem.
6. The banks had incentives to crash the housing market, because they were selling these Credit default swaps and building CDOs from them, meaning they could make a ton of money if they went bad, no governmen there.
7. There is no evidence that banks were forced to make loans to anyone that could'nt afford it, the law only stated that they could not discriminate based on race, they could still obviously discriminate based on credit, ability to pay and income.
8. They wern't backed by the state, thats why they had to ask for a bail out.


My political ideology comes from my understanding of economics and social sciences, unlike most people, who got it ass-backward.


Like peter stiglitz, like the German or Norwegian economy, yeah, but you and peter schiff have it totally right.


You're calling it nonsense, but you're the one dragging up awful, skewed and clearly incorrect data, political propaganda posters, myths started and spread by various political factions, etc. I'm talking commonsense economic principles and giving my own political opinions where necessary, which are easy to separate.


Its verafiable data ... Its DATA I'm showing, you, Data that can be backed up, your just yelling LIES LIES with no evidence, nothing, you have nothing to back it up.

Your commonsense eocnomic principles were what destroyed the Argeninian economy, the Chinean economy under Pinoche, what destroyed iceland, and what is destroying the US, but I guess its becaus they arn't doing your principles ENOUGH.

Supply side economics, Austrian School economics HAVE ALL BEEN DISPROVEN OVER AND OVER AGAIN.


That's your opinion, and fair enough... I'll take it, and respectfully disagree as you will with mine.


Its not my Opinion, Capitalism works out exactly as Marx explained how it works out, the evidence is all over the place, if you knew anything about Marx you'd see that.

ANd not its not my opinoin that Marx wrote almost entirely about Capitalism, its a fact.

All you've given is opinions so far, are douchy smugness, no fact, no data, no empirical examples not even sound reasoning.

Most of what you've been arguing against is the Fed, and I don't have a dog in that fight.

[Dumb]

Originally Posted by RGacky3
Yeah WW2 helped it a lot, you konw what WW2 was? HUGE HUGE government spending.
Oh... my... God... :laugh:

Gacky... Are you yanking my chain? Trying to fuck with me? Trying to be funny? Or do you really believe that? Explain yourself...

So are you denying that WWII involved huge government spending, which increased aggregate demand and finally ended the Great Depression? Explain that one to me.

[kapitalyst]

Erm... What happened to my post I made earlier today in response to Gacky's last? Damn it, I was late for an appointment for taking the time to do it, and it's gone... Guess I have to totally start over? :crying:


So are you denying that WWII involved huge government spending, which increased aggregate demand and finally ended the Great Depression? Explain that one to me.

I never denied that WWII involved huge government spending. Where the hell did that come from? I wasn't aware that was subject for debate... I do, however, fully reject the popular myth that WWII ended the Great Depression and saved the economy from doom... I'm surprised that you guys really subscribe to this nonsense. After all, the prosperity-through-war myth is one (rightly) attributed to 'neo-conservative' Republicans. This is one of the things Keynesians say, and fully believe, that amuses me the most! :laugh:
"Common sense is right after all: death and destruction do not lead to prosperity. That should be obvious. But as George Orwell once said, 'We have now sunk to a depth at which restatement of the obvious is the first duty of intelligent men.'"
Let's use a bit of reasoning here... Military "wealth" is not actually wealth. People cannot eat .30-cal ammo and families don't drive their kids to school in tanks or live in B-17 bombers. Paying for an army and military weapons is just an unfortunate expense we must tolerate in this world. And what is war? War is destruction, death and terror. War does not create wealth or capital, but instead destroys it... and worst of all, it destroys human life. WWII was a necessary evil, but neither WWII, nor any other war, ever helped the economy. WWII was the most costly, destructive and terrible things to ever happen in the history of mankind. This absurd myth is also applied to natural disaster -- hurricanes, earthquakes, plagues, etc. When a hurricane is heading for land, there is always some clueless reporter or guy at the bar who tells everyone how it will create jobs and provide "economic stimulus". The same claims are advanced about warfare. But what these people have not considered is that while certain industries and individuals may benefit from such dreadful events, the net outcome for the economy is a loss.

This faulty reasoning is called the Broken Window Fallacy. I will explain it again, for the benefit of those who are unfamiliar with it. The parable goes like this:
A little boy playing outside hurls a rock down the street, and it smashes the baker's window. The mayor witnesses this, and approaches the little boy. But instead of scolding him for being reckless, the mayor praises him! He declares that the little boy is a hero because now he has created a job for the glazier: fixing the window. And this, he says, will make money move through the economy and provide "stimulus".
The error in the mayor's reasoning is that he has only focused on what he sees: the obvious benefit for the glazier. However, he has not considered that which is not seen. He has not considered the actual loss of wealth and foregone opportunity -- the net effect for the entire town's economy. Whereas before the baker would have bought new shoes, a new suit, some new china or even food or entertainment, he had to buy a new window. Instead of the tailor making a new suit for the baker or shoemaker producing new shoes, creating more wealth, the baker (and the town) is simply left with a replaced window -- no new shoes, no new suit, no new wealth... The town did not get richer, but indeed it got poorer...

Does it make sense now? Or do you still think destruction (wars and disasters) can help our economy? If you truly think that, then the obvious fix to our economic woes would be to blast our cities with dynamite and rebuild, right? Or maybe we should just produce war weapons, simulate a wartime economy, and destroy it all on a mock battlefield? No, this would not work. It would be wasteful! And by the same token, so are real wars and disasters...

The Great Depression did not end when WWII began. WWII simply took the focus off the depression. It was like a dirty bandage over a deep wound. Despite this being so obvious, some historians and nearly all Keynesian economists will point to some statistics and claim WWII was some sort of "economic miracle". One fact the particularly love to cite is how drastically unemployment dropped. The first thing that's funny about this is that the Keynesians had already credited FDR's "New Deal" for these very things, but have little trouble giving the credit all over again... just this time to the war. But why did unemployment drop? Well, we conscripted almost 1/4 of the labor force into the military... voila, low unemployment! Secondly, our economy was retooled and converted into a war production machine. And the war industry was paid for by the government. This money was simply taken from the private-sector, through taxes and borrowing, and then used to create weapons that were sent to the battlefields to be destroyed and replaced over and over again.

It is also convenient to forget how tough it was to live during the war. Everything was rationed. The production of new cars was forbidden. Building new houses was forbidden. Foods were rationed, and meats, cheese and coffee (among many other things), were considered "luxuries" and heavily restricted. The people, however, did pull together and take it on the chin -- patriotism ran high, and most people felt good about sacrificing for the troops. Though they were worse off than they were before the war, in so many ways, they just became content about it and having something to do. But what definition of "prosperity" includes rationing and restricting access to food and goods? What prosperous country is so starved for metals that they have scrap metal drives to keep the factories running -- many giving up all sorts of dearest possessions? I will tell you: None. The wartime economy was not prosperous and well-off. Even the entertainment of the time, in the US and Europe, reflected the realities of the wartime economy:

http://www.youtube.com/watch?v=j1l9NSzsCIU

Furthermore, there was a curious depression when the war ended. Keynesians believe it was a second economic downturn, which they can only explain as the unwinding of government spending. In reality, it was the tail of the Great Depression. The very same one. Why did it end? Because the government backed off and life had to go on. People were glad of the war being over, the men began coming home and many people had savings they were unable to spend during the war. They began investing, starting new businesses and pigging out on foods they had missed for so long. They also had babies, bought new homes and there was the added benefit that women were out of the homes and working. The government actually tried to run a surplus and start paying back the immense debt of the war and New Deal. However, that did not last long and Keynesian ideology took precedence once again -- the can was "kicked along", and the burden passed on to future generations. This policy decision still plagues us to this day.

But I hope it is quite clear the warfare does not help the economy. The only thing that ended the Great Depression was the behavior of the people who were ready for life to go on after more than a decade of despair and hardship... a time of suffering prolonged by government interventionism and warfare. And it still took many years to replace all the wealth and capital lost in that war... and unfortunately, we never covered the debts...

[RichardAWilson]

Are you smoking crack cocaine?

I find Gold-bug Austrians more amusing than right-wing Christian Republicans. Your time has come and gone.

Even big business (I.e. Capital) has long since abandoned the Austrian View.

The wartime boom can be attributed to wartime spending. No, the tanks didn't revive the economy.

The resources and labor that were employed in wartime preparation allowed the economy to grow. (By increasing the nation's aggregate demand, combating deflation and creating jobs)

People that couldn't find a job could now find a job in industrial manufacturing. Weapons, steel and chemicals had to be made.

The Federal Reserve lowered interest rates and issued new dollars for financing the wartime program.

Fiscal and monetary easing led to the eradication of consumer price deflation, which in turn allowed the economy to stabilize.


As for your misconception that wartime spending crowded the private sector: capital was being wasted during the depression.

Americans were hoarding dollars under the mattress. Financial institutions weren't lending and businesses were sitting on excess cash.

The crowding-out effect, which you're referring to, can't occur during a liquidity-trap.

There was no recorded depression that followed the Second World War. Instead, there was a moderate and brief recession.

American soldiers and women had accumulated large reserves (I.e. Savings) during the war.

After all, there wasn't much during the war for consumers to spend cash on.

After the war, those men and women began using wartime savings to finance peacetime consumption.

The war was, of course, a horrible means of reviving the economy. In the longer-term, it could be said the war did more to damage our economy than it did to benefit our economy. Yes, it liberated us from the depression. However, all that borrowed wartime spending had to be repaid during the fifties and sixties. Tax rates, even on the middle class, remained high.

Had we avoided the Second World War, we could have launched a national infrastructural program on a much larger scale.

We could have followed Nazi-Germany in building the Interstate Highway System during the depression instead of waiting until the Eisenhower Administration.

We could have launched the "Economic Bill of Rights" during a time when it would have passed, instead of waiting until a time when it was condemned to fail.

The money that was wasted on the Second World War could have been used to make America wealthier for generations to come. We could have had a "Real New Deal."

[kapitalyst]

Are you smoking crack cocaine?

I find Gold-bug Austrians more amusing than right-wing Christian Republicans. Your time has come and gone.


What's amusing is that even you admit the war wasted capital and wealth, and was a loss to the economy, yet you still claim it was salvation through government spending. Why don't you take out a paper, and draw a diagram of the flow of money and capital... Something like:

Private-sector --> Government --> Industry --> Weapons --> Battlefield

And that helps the economy? That spending is of benefit to it? If you buy your wife's car (and then go wreck it), you made your family richer? That is truly a comical view of things... :rolleyes:

So "our time" has come and gone? That is truly an amusing statement, considering the fact that our message is spreading like wild fire, and our numbers are growing rapidly... that the public has realized fiat currency is shit, and extremely interested in gold, silver and other investments... that Ron Paul, this time, is a top-tier candidate in the primary race and has raised more money and support than even Obama... that even the Federal Reserve bankers are divided, many beginning to admit we were right and Keynes was wrong...



Even big business (I.e. Capital) has long since abandoned the Austrian View.


You really think so?



The wartime boom can be attributed to wartime spending. No, the tanks didn't revive the economy.


So which is it?



The resources and labor that were employed in wartime preparation allowed the economy to grow. (By increasing the nation's aggregate demand, combating deflation and creating jobs)


And you still cannot explain that one to yourself...



People that couldn't find a job could now find a job in industrial manufacturing. Weapons, steel and chemicals had to be made.


You're indeed a master of self-contradiction! ;)



The Federal Reserve lowered interest rates and issued new dollars for financing the wartime program.

Fiscal and monetary easing led to the eradication of consumer price deflation, which in turn allowed the economy to stabilize.


Even to Keynesians, it's a mystery how that's actually supposed to work...



There was no recorded depression that followed the Second World War. Instead, there was a moderate and brief recession.


If that's what you want to call it. It was just the "tail" of the depression, which only ended when the war was over and people decided to move on.



American soldiers and women had accumulated large reserves (I.e. Savings) during the war.


Which is exactly what I said. But the war prolonged suffering.



After all, there wasn't much during the war for consumers to spend cash on.


Yeah, which is the definition of prosperity, right? C'mon, dude... Even by your view, though you won't admit it, the economy sucked until the war ended and people went back to their daily lives...



After the war, those men and women began using wartime savings to finance peacetime consumption.


And that did no good until when? The years after the end of the war! ;)

Had there been no war, the economy could have been "revived" long before 1946-1948.



The war was, of course, a horrible means of reviving the economy. In the longer-term, it could be said the war did more to damage our economy than it did to benefit our economy. Yes, it liberated us from the depression. However, all that borrowed wartime spending had to be repaid during the fifties and sixties. Tax rates, even on the middle class, remained high.


You can't have it both ways, bro...



Had we avoided the Second World War, we could have launched a national infrastructural program on a much larger scale.

We could have followed Nazi-Germany in building the Interstate Highway System during the depression instead of waiting until the Eisenhower Administration.


So now, again, you're admitting the war had a huge opportunity cost and that we would have been better off without it? :laugh:



We could have launched the "Economic Bill of Rights" during a time when it would have passed, instead of waiting until a time when it was condemned to fail.


What the hell is that?



The money that was wasted on the Second World War could have been used to make America wealthier for generations to come. We could have had a "Real New Deal."

Again... so waste = prosperity? waste = revival? :rolleyes:

[RichardAWilson]

The war was wasteful in the sense it didn't create value. However, it was useful in that it preserved value.

(The Depression was more wasteful than the war and would have continued in the absence of stimulative fiscal spending).

Do you have a problem with comprehension? There is no contradiction. The war did waste valuable resources, which were being wasted and would have been wasted irregardless. At least the wartime waste created jobs and allowed workingmen and women to provide food on the table.

The war allowed Americans to return to everyday living. In the absence of stimulative spending and Central Banking, the economy would have remain mired in the depression for another decade. Have you ever heard of the "Long Depression?"


We could have launched the "Economic Bill of Rights" during a time when it would have passed, instead of waiting until a time when it was condemned to fail.

You should learn a little history, it could do you some good. I'm guessing you're also unfamiliar with the Long Depression? (Circa 1880)


http://en.wikipedia.org/wiki/Second_Bill_of_Rights#.E2.80.9CThe_Economic_Bill_o f_Rights.E2.80.9D

The need for an Economic Bill of Rights is as strong today as it was then.


People who are hungry and out of a job are the stuff of which dictatorships are made.

Hitler, after all, could have been averted with Keynesian macro-economics. It worked in saving Sweden from the depression.

I find it fascinating that the first countries to abandon the Gold Standard were the first to recover from the Great-Depression.

Even the late Milton Friedman, a proud classical libertarian, feared a return to gold.


The U.S. abandoned gold in 1933, after which its dramatic recovery immediately began.

The same happened after Italy dropped the gold standard in 1934, and for Belgium when it went off in 1935.

On the other hand, the three countries that stuck with gold through 1936 (France, Netherlands, and Poland) saw a 6% drop in industrial production in 1935, while the rest of the world was experiencing solid growth.

The growth was brief because deflation persisted and financial institutions still weren't willing to lend. Fiscal stimulus was still needed. In 1936, we made the mistake of axing federal spending to restore balanced budgeting and the economy slipped into another contraction. 1937 was a lesson in the dangers of withdrawing the punch bowl too soon.

Deflation, like too much inflation, is dangerous. Deflation, like too much inflation, undermines confidence and leads to misaligned investing.

[DinodudeEpic]

Screw the federal reserve! (And, NO! I'm not an advocate of the gold standard.) And, screw the gold standard!

We need bimetallism! It actually has real value instead of the artificial value that the corporations and government shove into the people's throats.


(Wait! Richards a market socialist? Well, join the club! But, try to overthrow the corporations, and replace them with cooperatives!)

[kapitalyst]

Screw the federal reserve! (And, NO! I'm not an advocate of the gold standard.) And, screw the gold standard!

We need bimetallism! It actually has real value instead of the artificial value that the corporations and government shove into the people's throats.


(Wait! Richards a market socialist? Well, join the club! But, try to overthrow the corporations, and replace them with cooperatives!)

Wow, I must salute you, comrade! :thumbup1:

Bimetallism, but not fixed bimetallism. In fact, monetary choice is an essential freedom. If you and I want to use, say, donuts as a medium of exchange then it's our choice as two market participants. The problem is legal tender laws and central banks which put control of monetary wealth in the hands of a shady, autonomous branch of government with ZERO accountability (to anyone).

[DinodudeEpic]

I, however, loath libertarianism. As it just thinks that corporations can't do any damage to the freedoms of the people.


Well, I do want a democratic banking system, where there's a public democratically controlled bank, and a private sector filled with cooperative-based banks.

But, of course we should allow people to use whatever as a currency (as long as they don't force it on others.), but the government should only reinforce the official currency, which will be based on bimetallism.

[kapitalyst]

I, however, loath libertarianism. As it just thinks that corporations can't do any damage to the freedoms of the people.


Well, I do want a democratic banking system, where there's a public democratically controlled bank, and a private sector filled with cooperative-based banks.

But, of course we should allow people to use whatever as a currency (as long as they don't force it on others.), but the government should only reinforce the official currency, which will be based on bimetallism.

We actually don't think corporations can't do harm to people and that their shit doesn't stink.

We recognize there are laws already in existence to combat nearly all forms of abuse and aggression. And if our legal system were actually a justice system, civil disputes could almost always be resolved fairly. And we recognize that pleasing consumers, not hurting them, is the way to succeed in business... that the state, especially when in cahoots with chosen businesses and private entities, is the true danger.

I do fully agree with your thoughts on the money markets. The government should stick to the constitutional bounds of only promoting or issuing actual gold and silver as money, and allow the people to choose whatever they so desire. Legal tender laws and monetary central planning is bullshit and oppressive.

[RichardAWilson]

Yes, I believe in Market-Socialism. :cool: I.e.

The State serves to coordinate and provide direction for the economy instead of micromanaging the economy.

The financial system would be socialized so, while certain businesses could still be ran as private endeavors, they'd be owned and held accountable to all of us.

[RGacky3]

And we recognize that pleasing consumers, not hurting them, is the way to succeed in business... that the state, especially when in cahoots with chosen businesses and private entities, is the true danger.


And also screwing people with externalities.

BTW, Just like to point out, Kapytalist has'nt posted ANY facts or figures to back up his claims, I've posted tons, he's never actually refuted them with facts, other than refuting them with smilies its really nothing.

[RichardAWilson]

Furthermore, the Federal Reserve evolved because of the "freedom of exchange." Private banks were issuing currency that was backed with nothing and soon became worthless. The entire financial system was destabilized by these rogue issuers.

None other than J. P. Morgan and John Rockefeller backed the idea of Central Banking following the infamous Panic of 1907.


http://www.bos.frb.org/about/pubs/begin.pdf


http://www.llsdc.org/attachments/files/105/FRA-LH-PL63-43.pdf

American capital wanted the Federal Reserve and American capital created the Federal Reserve.

It just so happens that this is one invention that has also benefited us in the process and would remain useful in a more socialized economy.

[RGacky3]

Great point, if you take away a democratic state, Capitalists will juts make their own institutions that are NOT democratic and act like a state, but only serve the Capitalists.

[RichardAWilson]

Wasn't quite as how I had envisioned this one.

---> Federal Reserve would be useful under a socialized economy.

However, your right that the Federal Reserve would go on even after Washington was closed down.