It really doesn’t matter what the government statistics say, the United States is in a depression/”decession”. The way the stats are calculated have been revised many times over the years, and if you use the old method of calculating unemployment we’re hovering around 18% (vs the 25% peak in 1934). Also, housing prices need to fall just 4% more to exceed the Great Depression decline.
If you still don’t believe me, watch the following video. Some of those grown men are on the verge of crying.
Update - NB: I think those financial ne’er-do-wells should lose their jobs, I am just showing the huge displacement of people that is occurring. Remember, a depression is a 10% contraction in GDP. Financial services and others (FIRE) were a huge contributor to our GDP. Were they productive? No. Finance, Insurance, and Real Estate (FIRE economy) are parasitic in relation to the productive economy, but their loss of jobs and spending will contract the economy as defined by gross domestic product. Perhaps not so if we still used GNP, but I’m talking about GDP here (Hat tip Angry Renter Tom).
Today’s post by Mish is also a must read - he makes a very strong argument for deflation and depression. Update: Added a recent Roubini interview (fast forward to 2:40).
It’s getting bad, but depression probably not. I do agree however, this is not the time to be buying beachfront condos.
if you are one of the millions out of work right now…its a depression
i have to agree with mark to market i don’t think we are in a depression , that this is the most difficult time in our life times yes , but if we look at whats going with the euro and nikkei you can see the light
Inane commentary. No offense.
Well, I don’t think you were addressing me, but just in case, I added more evidence to make my case.
I wasn’t.
The U.S. economy is NOWHERE near a depression….certain segments are such as some areas in real estate sales, new home construction, auto sales, and the like but that is true during a booming economy too. We always have some areas of the economy contracting. You can always cherry pick something doing poorly. Quite frankly, these people should have saved so booo hooo for them. Seriously, what did those bankers and financial advisors really do or contribute to this economy in the first place…..gone like travel agents. The FIRE economy is melting down as Finance, Insurance, and Real Estate jobs become more efficient through technology….which is a good thing as now I earn higher interest rates on my money instead of paying salaries to dead weight….seriously, have you been in a bank in the last 10 years…those people were just stuffed suits anyway. The lesson is, get good grades, at least graduate from high school, live below your means, etc…. I prepared for the downturn and hell if I am going to bailout these people so they can live in their dream homes with 5 stall garages……go to h*ll I say, go to h*ll…..
I COMPLETELY AGREE! You misunderstand. I actually considered not posting the video, but the breaking of his voice and the tears in his eyes are very compelling. I make no judgment on whether he should lose his job (he should). I am just showing that spending and the economy are going to slow down. Depression is a 10% contraction in GDP over a 1 year period (also, it unofficially implies a protracted decline). Financial services were a bubble and huge portion of our GDP (23% I think), this should fall by at least half over the next year. Actually, what the government is doing will PROLONG the recession making it a “depression” like they did in the 1930s (unlike the quick 1907 crash and recovery).
Also, my stupid spam filter keeps catching you. Any other comments not post?
No problem. My anger is not directed at you….it is directed at the stupidity of helping out people who can’t manage their money. It will be the same thing over and over and over again. Don’t we all have a friend or relative who always seems to need help….they never catch up. They are deadbeats that need tough love. Is it the end of the world to lose your house (”dream house” or not)? No, you simply become a renter where you can save up, start over, and buy later if need be. It is not the end of the world for people to be able to stay in a house that they can not afford to own let alone maintain! Affordable housing is a good thing. While we are at it, if I am forced through socialism to help pay for other people’s homes, shouldn’t I be able to use them…or at least their in ground pool or gourmet commercial kitchen??? Seriously, this whole thing is a crook of s**t. I didn’t go out and buy my “dream home” with debt. Even worse is the fact that the worst hit areas will be the ones that get the least help. Think about it, the worst hit areas will have to pay through taxes mortgages of people in the lessor hit areas!!! Crazy and just plain stupid. The most the govt can do is allow refi’s to a low fixed rate 30 year mortgage…and that is ALL, no more.
I agree, read the most recent WSJ story at the very top in the RECENT MIAMI CRASH NEWS.
is getting worse but better days are coming keep it up
Two more points:
(1) Anyone that lied on their mortgage application should get ZERO help….repeat ZERO help from the taxpayers. If you took out a stated income mortgage and you don’t know how is says you make $9K/month when you really make $3K/month….tough, we don’t believe you, and no money…and no home for you!
(2) The 31% of income thing…..what happens if someone gets a pay raise???? Also, what happens if someone has their wife stop working to game the system…. I know someone who did this in November to get the bank to change their mortgage….hasn’t worked yet but would under this new plan!
Time for the silent majority of responsible tax payers to say STOP!
Amen.
In my book, liberals are people who want to help others using other people’s money. I say put your time and your money where your mouth is and just pay your neighbor’s mortgage each month.
Fiscal liberals, are idiots, yes. But George W. Bush et al were certainly not conservatives though. They more than doubled the debt, Cheney repeatedly claimed that deficits don’t matter, corrupt military projects (bunker buster research, F22 raptor etc) exploded in size.
Ron Paul is a true fiscal conservative that I admire.
Social liberals (ie stem cell research is okay) are a different topic that we are not discussing here.
The problem with fiscal conservatives is they don’t exist. We’ve never seen one in office - at least not as President. Ron Paul seems financially prudent, but criticizing from the Floor and actually governing are, as we know, two different things.
Full disclosure: I’m socially liberal, and fiscally rational — which means I skew conservative on that front. I knew the housing market would implode, so I didn’t “invest” in a condo or home. I’m in a high tax bracket, too, so now I’m subsidizing the housing gamblers. And yes, obviously, I’m pissed off, just like Admin and Renter Tom.
But to those two: If you’re so worked up — taxpayer money! — about the housing bailout (which, unless I’m mistaken, is roughly $75 billion), then you should be roughly ten times angrier about the $750 billion Wall Street banking bailout. After all, they too gambled and lost. And you should be apoplectic about the $1 trillion Iraq debacle.
Indeed, you should be twice as angry about the AIG bailout ($150b) then the housing bill.
All tax money, right?
Why so worked up now? Why now, after all that’s been done to help corporations and banks, do Admin and Renter Tom suddenly get on their soap boxes. Was the anger always there — or were you just holding back until this last $75b? Perhaps this last dollop was the straw that broke your backs.
I don’t know. But look, if you’re mad as hell, that’s fine (after all, I’m getting killed myself) — but directing your ire toward a plan that will actually help a few working families while sitting on your hands during TARP seems backwards and a little cruel.
My two cents.
That’s the point I was trying to make to RT. The military industrial complex, FIRE economy which includes the real estate industrial complex, the $54 trillion in entitlement liabilities. This government is running the biggest ponzi scheme in history.
moretroops - “working families” is mostly BS! I don’t care if they are working or not…..they messed up their families finances and they need to lose their house….it isn’t the end of the world to lose one’s house. My goodness, you would think that people that are being foreclosed upon where saints that we are burning at the stack. Get real. They lose their house, bit whoop. We got a tax cheat as the secretary of the treasury. Anyway, I don’t want to get too political but Odrama just authorized a bunch more troops to the middle east while the allies, including one with a major base, aren’t cooperating and perceive Odrama as weak. Oh well. So far, this administration’s meddling is nothing more than a nosy neighbor who wants to get into everyone’s business……crazy.
Dude, if you think that these mass foreclosures don’t affect you too, then your myopic selfishness is beyond help.
Down-trending markets feed on themselves, just as booming market do too. A laid of worker means less demand for good and services, which means more laid off workers, which means more foreclosures, which in turn beget foreclosures. The system feeds on itself and, without intervention, overshoots the correction.
That’s the danger. These foreclosures absolutely affect you. You’re intelligent. Don’t be willfully ignorant.
moretroops - Let the foreclosures happen and clear the market. The MOST the fed govt should do is facilitate refi’s into 30 year fixed at say 5%…but no more. What the heck do foreclosures have to do with unemployment? It is the reverse, unemployment causes foreclosures. I am partisan, so what? The simple fact is the govt intervention and meddling is the root cause of this mess (thanks Freddie and Fannie). More govt intervention is simply causing the rules to change and change and change which will pull money away from business investment as this causes uncertainty in the market. We need real free markets with simple rules that are enforced, just like for taxes…keep it simple and enforce them. Instead we get plan after plan after plan with complication after complication after complication. Odrama is the CDO of the government which no one can understand…..
Your partisan perspective has made you a hypocrite, that’s “so what.” It delegitimizes everything you say — even when you’re making a valid point.
If you hate Obama, that’s fine — but the reasons for you dislike apply doubly to Bush.
All I ask is for pragmatic thinking. You seem capable.
moretroops - Get over it. I don’t like a socialist democrat in the White House, so what? It doesn’t make my arguments any less valid except in your mind where you want to use that close your ears. Grow up. At least I am honest and upfront….I disclose my position. And I am still 100% right. If you want to argue on the bias against Obama and ignore the arguments so be it. All I can say is lame, lame, lame.
Renter Tom, you’re such a partisan hack. Under GWB we gave $150 to a single company — AIG — essentially subsidizing their stupidity. This housing bill is only half that.
Where’s the outrage buddy? What about TARP (GWB), or Iraq! — that alone cost us a Trillion. You mad about those too?
The 18,000 additional troops will prove a mistake. No one has conquered that region since Alexander the Great (and his success was mainly dependent on ethnic cleansing and planting Greek communities into the region. I don’t think most Americans have the appetite for genocide or moving to Afghanistan).
Admin, my name “moretroops” has nothing to do with Iraq, Afghanistan or any other wars we are (or might be) in. Just an fyi.
And please don’t respond with “the housing bailout wont work!” The short answer is that TARP didn’t work, the GM bailout didn’t “work,” and Iraq didn’t work either. So my point about your sanctimonious lament of “taxpayer money” stands. None of that garbage worked. Why are you picking the housing bill to make a stand?
Furthermore, for at least a handful of families that didn’t gamble but rather simply bought a home in the past few years — families who pay taxes, with children — this bill will actually help, a little. Maybe not a lot of families, but a few. So there’s that.
I guess what I’m saying is that I understand the anger. But the moral hazard that this bill presents is only half the story. There’s another hazard that we face by doing absolutely nothing. It’s the hazard of telling working families, for years, that if you play by rules and save up to buy a house, you will be better off. Some of those folks are getting destroyed now, through absolutely no fault of their own. They’ve lost their down payments, are underwater, can’t move, and may have even lost their jobs. If we do nothing (while bailing out the banks!), then what message are we sending them? A big “f*ck you,” that’s what. That’s the message.
So, yes, housing gamblers are lame. We all agree. But not everyone who’s underwater gambled. Some folks played by the rules and worked their asses off. And their downfall is yours, too. I’d rather not sit back and watch those folks die on the vine.
But moretroops, these people are better off defaulting. It’s only their pride, their credit, and the banks that this bill saves. It’s a temporizing measure. The effect will be 6 months max. Studies have shown that 60% of mods redefault within 6 months. This is all insanity. But I agree, that this is small potatoes compared to the crimes of the Bush administration.
Some of them aren’t better off defaulting. And to simply pronounce otherwise is another, equally damaging form of paternalism. Some of them are better off staying in their houses, close to work, where they have roots and their children go to school.
But that’s not really the point. The point is that WE (you and me) are worse off if they default. For the reasons set forth above.
Yup, many of these folks will still default even after this measure (60%). But some wont.
The target for this program is no worse than 40% re-default rate. So they are hoping it will work for 60% of participants. Amazing.
That is why facilitating refi’s into 30 year 5% mortgages is all we can do…..anything else is waste.
I should be clear: My support for this bill is informed by the realization that in many markets (perhaps not Miami), housing has nearly corrected itself back to proper historical levels. Look at the data.
Up until now I’ve been all for defaults and foreclosures.
No longer. There is a real danger now is that we overshoot the correction in a self-perpetuating downward spiral. And that, in essence, is what most of this government spending is about: stopping the snowball.
Overshoot is inevitable as they built 40% more houses in Miami Dade than actual human beings to occupy them (which includes year 2006 demand by tourists). Now that the tourism bubble has popped, they probably built 50-60% too many condos.
Further, Miami now has to compete with much nicer, better located and lower crime bubble areas such as Spain, Italy, and Dubai.
But of course, as you have so ably pointed out, this bill doesn’t affect Miami. It wont help the vast majority of people down here, because they’re more than 105% underwater.
This bill is really aimed at middle America — places like Indiana, where speculation and over-building weren’t nearly as rampant, yet the pain of the correction risks spiraling out of control.
Miami is another matter altogether — we absolutely should let it burn for awhile longer.
You are right. Macro-economic housing affordability metrics are back to where they were many years ago. But it doesn’t mean they can’t go lower.
Policy should not create winners and losers. And the response to this crisis has done that. If anyone should be a winner, it should be the public at large.
Dick Cheney was both right and wrong. Wrong by saying deficits don’t matter. They do matter. Without deficits we would have no economy. Right in that deficits are not a problem.
The problem is bad policy and lack of understanding of reserve accounting. If Policy makers understood it, this crisis would be over in 2 months.
These economic myths that are killing us.
1) That government borrows money to spend.
— no no no. The government never borrows. It spends and creates reserves in the process. After spending, the government swaps those same reserves for treasuries in order to hit interest rate targets.
2) That taxpayers fund government.
— No in a floating fiat money regime.
Government funds taxpayers. All savings come from government spending, this is a mathematical accounting identity. Private sector savings = Government spending. It can be said that taxes “back” currency. Without taxes, fiat currency would become worthless.
3) Trade deficits are bad
– No. If we import more than we export, we are better off. We are trading fiat money for real goods are services and as long as Asians want to be our slaves, we should oblige them as long as it does not interfere with national security.
Policy makers should suspend taxation immediately and indefinitely. The stock market would rally 25% in one day if they announced this. It is the quickest way to restore aggregate demand and full employment.
It got us out of the great depression.
Here “deficits for dummies” by warren.
http://www.moslereconomics.com/2009/02/19/deficit-spending-for-dummies/
bubbleRefuge, I’m going to hire a professional deprogrammer to save you from these theories.
There a better writers than I to express the way a very complex monetary/fiscal regime works.
Ok having said that, its all fact. Tell me where I am not stating a fact.
Conservative(R) columnist David Brooks makes my point for me. Except better written. His point, and mine, is that in a times of crisis, government must act pragmatically. If that means rewarding a few idiots, well, so be it. That’s the reality that we find ourselves in folks.
http://www.nytimes.com/2009/02/20/opinion/20brooks.html
If the govt rewards a “few” idiots it DOES matter when we’re talking about TRILLIONS and that will affect FUTURE behavior for everyone. The moral hazard is FUTURE behavior.
Here’s what you mean by complication after complication after complication:
http://www.calculatedriskblog.com/2009/02/tarp-visualized.html
You mean like TARP — the bailout for billion dollar wall street gamblers? Like that kind of moral hazard? Hypocrite.
The entire line of argument that RT and Admin are making is premised on the assumption that “but for” this Administration’s “meddling,” people would be investing more right now instead of less. The “complications” created by Obama are holding back the market. Do I have that right?
False premise. The downturn has accellerated, drastically, even if the face of gov’t handouts (hardly a “complication”). The very premise of your argument is easily disproven.
But that’s not a surprise. RT, at least, admits he’s partisan. His arguments are results oriented: The result must always be that Obama is wrong and the GOP (I guess?) is right. Whatever assumptions he needs to get to that end result, he makes.
When the market isn’t in free fall, we can step back and start applying the life lessons you guys want to teach everyone. That’ll be sweet. Right now we need to staunch the bleeding.
We should fix the economy, not the housing market. Let the private sector decide how big of a ‘bailout’ it needs by suspending payroll taxes. Taxes can be re-instituted as soon as the private sector has enough money which could be measured by GDP growth.
This is a no-brainer once you get past all of the economic myths associated with deficits.
Crashing house prices are good. It’s very simple actually: housing isn’t an investment, just like cars and plasma tvs and eating food aren’t an investment. The cheaper the housing prices, the more capital that can be formed and placed into true investments. These types of investments such as high speed communications systems, farming machinery and automated factories increase our standard of living. Housing is consumption. An example of housing related investment would be the R and D and eventual development of a automated robot that could dig a foundation or lay brick. This would increase our productive capacity for housing and the overall standard of living would increase as it would cost less resources/money (in the form of human labor) to build a house. The result of such a development would be THE DECREASE in housing values. Just like processing power of a single computer chip from 5 years from now, developed after RandD and investment in advanced chip foundries by Intel would require hundreds of millions of dollars for the govt to build a “supercomputer” equivalent now. The fall in price/required resources is an IMPROVEMENT of the standard of living.
Real housing prices have drastically fallen from the year 30 AD. At that time only a rich man/king could have a shelter made of stone/wood. Peasants lived in something more primitive. As we advanced (a recent example would be mass manufacturing of cinder blocks or cement) housing prices in real terms have decreased. That is why most people don’t have to live in a self made thatch hut.
Ultimately, even cheaper investments are good. If it cost only $100 to build a road, that’s better than it costing $1000 - now we can replace that road more often and also build more roads. Imagine a scenario where you could magically make things like factories, infrastructure, robots, etc….this would be great for humanity as our productive capacity would greatly increase and everyone on the planet could have more things (in a world of infinite raw materials).
Falling housing prices are great on a macro-level, as you point out. And for those (like me) who didn’t buy in during the frenzy, they are welcome.
But if they crash too far, there are some undeniably bad consequences. Houses create certain incentives — for investment, for communities, for families — that renting simply cannot. Add to the fact that precipitous falls in housing prices creates an entire class of (once mobile) workers who can no longer move. That’s terribly inefficient.
You’re preaching to the choir, by and large. I understand that housing isn’t an “investment.” I know that falling prices are good, to a point.
But there’s more to it than that. I wish it were as simple as your model.
Those things you mention are inevitable as we return to normalcy. What you advocate is akin to keeping a heroin addict on narcotics because withdrawal is painful and unpleasant for the patient. Unfortunately the DISEASE is high home prices. The fall in prices is the only CURE. Those things you mention are unfortunate, but a small price to pay so that our children do not have to take on massive debt just for a roof over their heads.
Yes, Admin, in some markets, prices need to fall further. Miami for example.
But not in all markets. And I don’t advocate a housing plan because I want to help the “addict.” I advocate it because I want the free fall to stabilize — because I want to help us all.
Besides, again, not everyone who bought a house in the past few years was a greedy gambler. Some of them were prudent, level headed folks who just got whipsawed. Miami, perhaps, has your vision skewed. Not everyone is a douchebag.
Bubblerefuge is mistaken when he says that government spending is not borrowing. The federal reserve lends out printed money to the government which we then owe in the form of government debt. It’s important for you to realize that the federal reserve is an entity seperate from the government in that it is a business partner that expects compensation for it’s complex services (printing money). You are brainwashed if you don’t realize this simple fact. Mostly you’re a decent smart guy/girl otherwise. Most of you except for the administration are missing the boat. We understand the harm with prices overshooting downward. We know it hurts innocent people as well as more blameworthy people. By and large however, more good will come of the consequences. We cannot continue to overprice housing and we can’t support an economy that is dependent on overpriced housing.
No. Government spends first. Then sells the bonds afterward. You need to educate yourself. That is not borrowing.
Borrowing is making a contract. Acquiring the money, then spend it.
So why doesn’t the government just spend 10 trillion dollars tomorrow? Wouldn’t that make the economy awesome?
1) Because policy makers are out of paradigm. They think money actually costs something as it once did in the era of commodity money or fix exchange rate regimes.
2) Yes. It would make the economy awesome. I think a smarter way to do it is via tax elimination till the deficit is large enough to stimulate demand and close the output gap. That way we don’t over do it.
Wouldn’t a $15 billion stimulus package create extreme inflationary pressure and (correct me if I’m wrong, please) force the US to spend considerable treasure servicing the debt going forward?
It can’t be as simple as you propose. Where’s Krugman?
Er, I said “billion” in my post — I meant “trillion.” Apparently it’s the new billion anyway.
1)Krugman is half-way there. He doesn’t seem to understand reserve accounting that well but
he is getting there.
Here is warren’s critique of him.
http://www.moslereconomics.com/2009/02/09/krugman-stimulus-package-is-now-way-inadequate-2/
2) Yes it might create inflation after all of the slack is sucked up in the economy.
It depends on how much of the 15 trillion is hoarded vs spend. Saving is bad for the economy.
3)It is literally that simple. Not enough gov policy makers understand how money is created. Perhaps because they are political appointees.
And the whole bill from the bailout of the banks to the bail out of homebuyers who went in over their head (and the innocent bystanders that were taken in by the wave of desperate buying) sucks. It’s that simple. Bush and his republicans are just as much responsible as the new adminstration is now. The republicans were so willing to follow his orders and now they are trying to be good guys but really it was a gimmick to make it appear that they weren’t for bailing out these companies when in reality they just wanted a few details of the bill so their friends could make more cash from it. Everyone from the republicans to the democrats is wrong in their approach and yes I totally believe Ron Paul can lead from the position of president as well as from the floor of the house.
moretroops,
Not sure why you are wasting electrons by responding to Renter Troll.
We have a powerful banking industry that has mismanaged its way into deep trouble. Yet these banks obtained an initial bailout - the Troubled Asset Relief Program, or TARP - on generous terms, and have consistently failed to use the opportunity provided by this government support to turn their operations around. Not only that, but they have flaunted their power - and their arrogance - through paying themselves large and largely inappropriate bonuses.
http://www.capitalismgonewild.com/
The question isn’t whether we should help pay for our neighbor’s mortgage and allow them to stay in a home they can not afford. Rather the question is should our children, grand children, and great grand children pay for our neighbor’s mortgage through federal debts?
Realist Bob - You are the lamest troll of them all.
Did you ask that question when Cheney said deficits don’t matter? Or when GWB cut taxes while starting a $1 trillion war in Iraq? Or when they authorized TARP?
Don’t answer hypocrite.
moretroops - Yes I did however the trend was the federal debt was declining as a % of GDP, that is not the case here and Odumbo says he will run up trillions each year…insanity. Moreover, it is an Internet rumor that Cheney said deficits don’t matter. What he was referring to was spending money on anti-terror and national defense made deficits irrelevant since if we don’t have a protected homeland deficits wouldn’t matter. If the country is dead, then who cares. As far as spending $1T in anti-terror war you can argue that is was not wisely spent however we’ll never know since continued terrorist attacks on the US would have done a lot more damage. Why don’t you take a critical view of Odumbo? They say they will create or save 3M jobs……well, the $1T in anti-terror spending (we’d have spent money on the military anyway so the number is off regardless) saved 100 million US lives…..same logic.
Odumbo may push the US over the edge…he really really might.
I do take a critical view of our President. He’s not infallible. No question.
But I’d rather point out that you’re a naked partisan with absolutely no credibility. Really, Iraq — Iraq! — actually saved 100 million US lives?! W.T.F. You’re insane. I’m done with you.
You misunderstand government debt and the purpose for its existence. Government debt doesn’t exist to finance government. It exist to execute interest rate policy. That’s it.
Our grand-children do not pay it back.
This is how it works:
1)Gov spends money ( reserves) on goods and services to private sector.
2)Private sector ( of which china is a big part) has now increased its savings by that amount.
3) Private sector trades this money for government bonds from treasury/fed. Fed
holds money.
4) Private sector can then later exchange bonds for money.
5) Money doesn’t come from taxpayers. The money comes from the same government spending that created the money.
Listen people, drop your political affiliations. Both parties = big government, theft, destruction of the middle class and upward mobility in the United States. The Romans used politics and “bread and circuses” to keep the masses distracted from the real issues. The destruction of the United States over the last 30 years has been bipartisan. Read your history and stop being so stubborn.
Agreed — as I’ve pointed out here, this crisis was truly a group effort. That said, I will not abide hypocrisy and intellectual dishonesty. And I’ll continue to call it out whenever I see it. Let’s not confuse honesty with partisanship.
The two parties obviously work for the same damn people. Renter Tom is deluding himself if he thinks that Obama is worse than Bush. It’s actually hilarious. They have the same handlers genius. And then he brings in terrorism and homeland security. As if we’ll actually be able to maintain “homeland security” when we are bankrupt or we have no rights left to defend. Ridiculous. Look buddy, if you want to make republican talk points go to a website with idiots who actually believe that crap. Partisanship is for ignorant/blind sheep and cattle. We are talking business here.
“Generational theft.” That’s the new buzzword among a certain political demographic. Let’s explore that concept, shall we?
According to the Congressional Budget Office, Reagan — the archetype for fiscal conservatives — never balanced a budget. Total debt outstanding increased from $1.2 trillion in 1981 to a little under $3 trillion in 1989.
Those are facts. Look them up if you doubt me.
Bush I continued the trend. He too never balanced a budget. And total debt outstanding also continued to increase, from 3.2 trillion to 4.4 trillion at the end of fiscal 1993.
And then there is Bush II. Surprise! He never balanced a budget. According to the Bureau of Public Debt, total debt outstanding increased by $500 billion/year starting in fiscal 2003.
So when I hear folks like Renter Tom complain about generational theft, I have to wonder: Where he hell were you all these years?
Does that mean the stimulus plan and the housing bill are perfect? Abso-freakin-lutely not. There are many provisions that I don’t like. Who wants to bail out stupid greedy housing debtors? And the idea of giving any more money to BofA sickens me - who in their right mind thought it was a good idea to acquire Countrywide?
But the point remains: hypocrisy has no place in this debate. Renter Tom and folks like him are either stunningly ignorant or dishonest. Either way, we need to call them out if we hope to advance the ball.
Both parties are wrong. In the history of this country, there have been scant time periods where we didn’t have deficits of some size. By definition, decreasing the size of the budget deficit == reducing the savings of the private sector. This removes demand from the economy.
Everybody read this. From CEO of
James River Capital Corp.
“Everyone, including our public officials running this country, think in terms of the private sector and not the public sector. They are so used to running their own businesses or their own lives, that they are unable to think in terms of how the government works. The private sector, you and me, needs to borrow money or earn money in order to spend. The public sector never needs to earn money or borrow money. The Government prints US dollars and only the Government is able to print US dollars making the US Government the monopoly producer of US dollars. It is strange that so many smart people struggle with this concept. Every dollar that the government spends ends up in the private sector. The only way that those dollars are reduced is if the government taxes those dollars back from you. If the government taxes more than it spends then the Government runs a surplus and the private sector is depleted of its savings which eventually leads to a contraction in the economy. If they spend more than they tax then they run a deficit and the private sector increases its financial savings and this is stimulative to the economy.”
Bush and Reagan were actually the worst as far as saddling us with debt. You’re preaching to the choir.
Bubblerefuge–the government of the United States does NOT print their own dollars. You have a serious defective misunderstanding of how money is created. The FEDERAL RESERVE prints money and loans it out to the government of the United States with an attached interest rate. Therefore all money that is brought into our circulatory system is pure debt that must be paid back. The last president that tried to print dollars created by the United States of America was JFK. I think you know what happened to him.
No, the treasury prints money via a set of accounts the treasury department has at the Federal reserve. The government spends first by crediting bank accounts with reserves. Later the fed sells treasury bonds(so called open market operations) to drain these spent reserves from the system in order to hit interest rate targets.
Spare me the black helicopter hysteria.
“the treasury prints money via a set of accounts the treasury department has at the Federal reserve” I don’t understand what this means exactly. Could you explain this in laymens terms since you’re an expert? As far as I can tell, what you’re saying (unless you can correct me) basically confirmed what I said above. That the federal reserve is the issuer of dollars to us, the people of the United States. When we take this money into circulation by government spending, the federal reserve is given securities by the U.S. treasury on which it reaps interest. That interest is payed by our tax dollars. The federal reserve, a private conglomerate of banks reaps profit via the interest it collects on these securities.
Here’s a link to a pie chart showing estimated ownership of all U.S Treasury securities:
http://en.wikipedia.org/wiki/File:Estimated_ownership_of_US_Treasury_securities_by_category_0608.jpg
Here’s a link to Executive Order 11110 in which the authority to issue new silver certificates (and specify denominations) was returned back to the U.S. Treasury Secretary C. Douglas Dillon by John F. Kennedy.
http://en.wikipedia.org/wiki/Executive_Order_11110
Please explain what black helicopters you are referring to because I’m extremely confused by this strange reference….if you want to avoid hysteria, stop acting like a rabid dog.
Firstly, I’m not an expert. Just an engineer with an econ/compsci degree who spends lots of time reading/analyzing finance/economics.
The federal reserve is the clearing house for the US banking system. Its job is to regulate banks,clear checks, and execute interest rate policy (ie. the cost of reserves ). Every bank has a special reserve account at the federal reserve where it has reserves on deposit. Reserves are used for interbank check clearing. It can, however, lend reserves to member banks whom are short reserves. This is called the federal funds market. Interest rate policy is executed by the FED via the buying and selling of treasury bonds to drain or supply reserves to balance the system. It is extremely important to distinguish reserves from bank deposits (so called bank money). These are two forms of money. The federal funds rate is the rate banks charge each other to loan out reserves which they may need to do as balances fluctuate. Banks need reserves to operate( to clear checks + cash withdrawals from customers).
Now, the treasury department, which has an account at the FED, is the arm of government which actually spends money that gets to people. Whenever the treasury spends more money than it takes in via taxation it creates new reserves. It can spend money by crediting accounts at member banks with reserves. We pay taxes to the treasury department. Taxes may only be paid in reserves.
If you’re an engineer then you should realize that there is no such thing as a perpetual motion machine (violates the first law of thermodynamics) in either physics or economics!
not in a vacuum!
Black helicopters is a joke. There are conspiracy theories abound on black helicopters:
http://zapatopi.net/blackhelicopters/
Wow that’s some crazy S***. Thanks for the link. First time I ever heard of this stuff…..did you investigate the links I provided to you? I hope you don’t believe the official line on JFK.
Apparently the Federal reserve is allowed to make a certain flat profit off of their services to the United States and anything beyond that goes back to the treasury. I found this out last night…
Sorry, wrong topic. :ups:
Interesting. Thanks!