Economic Stimulus package?
 

So what do you guys think of the proposed stimulus package. Will we see any money out of it or is it another pipe dream?

“Letting Americans keep more of their money should increase consumer spending” -GWB

Is it just me, or should letting Americans keep more or their money increase consumer savings / investment?

They're quoting figures such as "up to $800 for individuals." I don't know about you, but $800 isn't going to get me to suddenly go out and buy a new house / Ford / etc.

It is true that $800.00 will not allow me to go out and buy a new house, or new car. But the addition of $800 to my bank account would allow me to make purchases that I might not make otherwise. Like a new exhaust system for my car, or a new TV for the house. My purchase, along with others that now have some extra cash to spend, MIGHT allow the retailer I chose to deal with, keep his house, or hire another employee. It’s called the trickle down theory, and it works.

No the trickle down theory is why Multi Billionaires don't pay more in taxes. Thats why they get the tax break.

I think its ignorant to believe that $800 is everyones pocket is going to save the economy. The problems are way bigger than that. $800 will not solve the decrease in consumer confidence, or the manufacturing decrease.

Its a bad time to be hemorrhaging money in a war, decreased taxes, and now this "stimulus package"

That's crap. And if you really, honestly, think that "the rich" get all the breaks, you can't really have any kind of discussion about economics or taxes.

The vast majority of the American population are hand-to-mouth consumers. Maybe the "pennies from heaven" will enable them to chew down debt they have already accumulated, but I doubt it. They're gonna buy a set of fresh Nikes for little Gershawn because won't he be the tightest little G in 2nd grade yo.

I don't necessarily think this is a perfect way to jump start the economy... inflation and all that. Generally, economies are best left to themselves. But face it, this is election year pandering.

And if I can spin that pandering into that 60" plasma or S1 turbo kit, why not go for it.

i wonder how good ol boy bush is going to pay for his next war.

oh and the 800 may not go out and buy a ps3 but it might just make it into a cheap investment in the stock market.

It just really offends me that the assumption is being made by both economists and the administration that if you give the average American $800, the first thing they will do is go and spend it.

And the worst part is that they're probably right- witness the number of companies offering "instant tax refund" services, which basically consist of writing an unsecured loan against the anticipated tax refund of the consumer, generally with an absurdly high rate of interest.

Actually, it scares me to think that for a lot of folks, $800 is actually a meaningful amount of money. We've become such a short-sighted lot...

I'm really tempted to start a grassroots movement urging Americans to spend the economic relief package entirely on gambling, booze, and hookers.

there's a lot folks out there that aren't spending hours on the internet discussing things like this and won't really know why or care why the money showed up.

I don't think the economy NEEDS saving, the Fed can handle most of the economies short term problems w/o the Executive Branch or Legislative Branch intervention. Our economy is big enough to handle most minor problems and hiccups. This package is politics, but the majority of Americans want to see this kind of action from the President/Congress.

I don't think this is exactly hemorrhaging either.

As far as will $800/household help the economy, sure in the short term it will. An increase in money supply will increase money velocity, there will be an increase in the aggregate consumer demand. Not on the scale or with the accuracy that the Fed can do it though, so it boils back down to politics. It is the nature of Washington.

As far as the economy needing saving, we're still at Full Employment. Give me a break.

Chris

Ex. "Yayyy honey, free money. Let's go buy that 32" refurbished LCD TV we wanted but couldn't afford due to our excessive holiday spending!"

I hate that our government thinks something like this is going to help stimulate the economy for more than a week of frivelous spending.

On a side note, Alaska residents get a permanent fund every year. This year it was like $1k, and I know many married couples that live off their permanent fund and something like trapping year round. The use the PF to buy food, and a small trade to buy other things. Who here would like to live off buckets of grain and vitamins as well as the moose and caribou you are able to kill each year?
Just some fun information for people in the lower 48 that have never spent time in Alaska.

Didn't the last Goobermint check for $300 result in LESS consumer spending than they had hoped for? Was W thinking more would make it happen?

I bet you see a large portion of recipients squirrel that shit away like winter nuts.

And then the prime will drop to silly levels again and I'll buy a house for $800 down.

Joe, i dont think you have to, the average american will do that anyways, and some of it will go to scratch off tickets...

How about instead of giving everyone a few hundred measly bucks (and who knows how much to the super-rich and big corporations), they put that into research for alternative energy sources so we can stop sending BILLIONS and BILLIONS every year to the middle east. I'm sure that a few sultans will be able to do without a new Veyron or mega-yacht this year.

Disagree... alternative fuels is not the answer. Not yet.

oh boy, more ads where GM can claim their cars are vegetarian!

(we know they're only 85% vegetarian...)

(we also know that GM is desperate like a toothless whore)

this is all just another political scam meant to take focus away from the real problems...if they really want to help the economy they would lower the ammount of taxes they take out and let people keep more money to begin with...this is just some BS politics scheme

Who did bush give the last tax break to, and why?

But i guess we can't talk about it. Maybe you just like to keep your head in the sand. :fm:

You mean the creation of the 10% income tax bracket? Or the expansion of the 15% tax bracket? Or the child tax credit? Or the retirement savings credit? Or the tax-free dividends and capital gains for people in the 10% tax bracket? Child and dependent care credit? Nobody making much over $100K gets any love there.

The qualified dividends being treated as capital gains for tax purposes is a little sketchy, until you clue into the fact that the LTCG rates for qual divs encourages people to invest in stocks that pay dividends, and encourages corps to pay dividends in order to attract investors.

Go ahead, keep trying. I do this shit for a living and know whereof I speak. :magna:

The government needs to stop trying to help people that are too stupid to help themselves.

Are you telling me that the richest 1% didnt get the largest tax break?

i'm not talking about ethanol.... it is starting to look like no matter how it is produced it is a net energy loss. I'm talking about nuclear, geothermal, etc.

you can pretty much say that about the last four years of Bush's presidency. Go back and look how many things he released to the press on a FRIDAY right before everyone stopped reading the news for a weekend.

Clearly you guys aren't making over $300,000 where the real tax breaks kick in. and what about the deliciously old school AMT?

I'd love a realistic way to produce nuclear power. you just have to overcome two small details: waste disposal and public stigma

the waste disposal is easier then the stigma. lol

Gotcha, I agree with that statement. Trying to reduce our dependency on foreign oil through passenger vehicles is asinine. Due to the bulk of plastic goods and petroleum/gas power plants and industries passenger vehicles really don't count for shit. Of course, the same is true of emissions, but that doesn't stop them from fucking with our cars.

I forgot the name of the company, but they are designing a supersonic commercial aircraft that utilizes hybrid turbofan/ramjet engines that should cross the big pond in 4 hours.

The good part - It runs on Hydrogen = Zero emissions.
Bad part - It doesn't have windows, too much heat due to the high speed. Other bad part - Current technology doesn't allow mass production of hydrogen with low net carbon output.

Check it out in the latest PopSci.

One suggestion, move everything over to electric, cars blah blah blah. Get some algae that releases hydrogren as a byproduct. And then build some fuel cell power plants.

Fuel Cell cars will never work.

AMT is starting to become a serious problem, IMO. I understand the original concept, and it wasn't a completely horrible idea, but when it starts being something that I (a yachtless, non-millionare apartment-dweller) actually have to worry about, then something is wrong.

But to answer all those who blindly chant "The Rich Get All The Breaks" I have just one question. Have you actually looked at the income tax table recently? Here it is for 2007: http://www.irs.gov/pub/irs-pdf/i1040tt.pdf

Notice that Mr. & Mrs. Brown, with their GEDs, their shitty jobs, and their $25,300 income pay less than 12% of their total earnings in Federal tax. By comparison, their neighbors Mr. & Mrs. Rodriguez, who worked their asses off seven nights a week and ate ramen noodles for four years to put themselves through school and thus are now employed as engineers and enjoy a combined income of $170,000 must forfeit nearly 22% of their earnings to the tax man.

Of course, we all know that investing in the stock market is only for the rich, and to help maintain stereotypes the Rodriguez' have historically invested some of that money in the securities market. They decided last week to sell a couple of holdings that they purchased last February. The stocks are up, way up in fact, but look out- they'll be assessed a 28% tax on all those gains as punishment for wisely investing their money rather than spending it as fast as it comes in.

News flash: People with large incomes pay more tax, both in absolute dollars and as a percentage of total income, than people with small incomes do!</rant>

This country rewards stupidity, laziness, and complacency.

If nothing else, this one should bowl you over: My mother, who lives back in Florida, works for a home healthcare agency. She's an RN with a BS, who nowadays spends most of her time doing management shite, filling in occasionally for the field nurses when needed. She related to me a story of a visit she'd made recently- a 30's(ish) couple, the fellow had been injured in a M/C accident (no lid) and was out of work. The wife worked as a waitress. The tiny home where they live was cleanish but old and run-down. At some point during the visit, the wife, while gesturing towards the large, new HDTV set observed "That's the kinda TV ya gotta make payments on."

Whiskey Tango Foxtrot?

Joe, but the fact your just forgot to mention is the minimum cost of living. That doesn't change if your rich or not.

right. a loaf of wonderbread is still a buck 99 whether you make $5/hour or $50/hr.

oh, also, joe. who sells taxes before the lower capital gains rates kick in? ;)

he'll just borrow money from a communist, authoritarian state to spread democracy and freedom across the world.

Anyone else feeling extra chinesey today?

Kung hai fat choi!

There's a misleading statistic out there for every occasion. Here's another that I read in a retail-marketing trade rag - I don't remember the numbers exactly, but they're close enough to get the point across. Basically, something like 88% of all discretionary spending in the US is done by about 6% of the population. This number kind of scares the tits off most retailers, since that means the Walmarts and Kmarts and Targets of the world are cutting each others' throats over the remaining 12%, which is why they keep trying(usually without success) to sell more upscale products in their stores to attract members of that 6% who spend all the money.

It also kind of implies to me that 94% of the population is so busy just maintaining that the $800 is going to mostly toward staples, with the rest likely going toward a little of that discretionary spending, which means it will probably all end up being spent at Walmart.

as soon as the walmarts go out of business and the dollar stores become penny stores, the chinese will start their worker revolution cuz they wont have enough cheap shit to build and they'll be bored.

There's 1.6 Billion people over there. Watch out when they get pissed off over having nothing.

Sure it does. After all, what exactly is the minimum cost of living?

I'll grant you that owning a car is pretty much a necessity in most American cities. A "minimum" car (one with four wheels, an engine, and a seat or two) costs $1,500. For that, you can get a well-used Honda Civic or a VW Rabbit Diesel with a salvage title, damaged body and grungy interior, but otherwise sound-ish mechanicals. Teach yourself how to maintain and repair it. Heck, buy two so you always have a spare.

But do the Smiths actually own a "minimum" car? Nooooo. They pay too much attention to the billboards (as as a radio guy, blaming outdoor advertising is pretty much my last resort) that tell them they need a pre-owned Lexus, or a new pickup truck. After all, it's zero down and only $129 a month! Besides, they deserve a car with a warranty and A/C, don't they? Hell, my 18 year old sister-in-law who has a crappy job, is a total flake, and has zero sense of responsibility, drives a leased 4WD Nissan Titan! Talk about someone who ought to be in the "minimum" segment!

My stepfather Wayne is an absolute guru when it comes to cheap vehicles. Right now he's got a big Dodge pickup and a Lincoln Towncar, and I doubt if he paid $2,000 for either of 'em. He'll bomb around in 'em for a couple years, held together with spit & twine, then junk 'em if anything major happens and find something else. One of his two adult daughters is a three-time recipient of his cheap-car-divining ability. She has never been without wheels. The other daughter is a primma-donna who "needs" a Nissan Murano to replace the Saturn she wrecked back in December (sans collision coverage). She is currently carless. Which one of the two is more "minimum?"


What exactly is a minimum food budget? When I was in college, I had a roommate who lived for a whole year eating absolutely nothing but slices of imitation cheese with either horseradish or BBQ sauce (both stolen from Arby's) on top. He suffered no lasting harm. The Smiths however find that sort of thing beneath them and also find food preparation inconvenient, so they get take-out from Chili's or pop into KFC several times a week. They could probably save $100 a week here and yet still fulfill the FDA's technical dietary requirements, but they don't want to. You know those bagged cereals on the bottom shelf at the supermarket that are like $2 for a 3lb. bag? Those go a long way. So do potatos, cabbage, bulk spaghetti (dried) with salt & butter, rice, the beef in the supermarket's "It Expires Today" rack, and so many other minimum standards of food.

Ok, a gallon of gas is a gallon of gas. Although it isn't is it? The Smiths, if they'd listened to me and bought that VW diesel, would be getting 50 MPG right now. Instead, they bought that nice low-mileage El Camino (cuz that was a bitchin' car back in the day) and are getting 12MPG. And would it kill Mrs. Smith to actually use her feeble little brain to figure out how to consolidate all her shopping into one weekly trip along a planned route? Because heading out to some store or another every single evening because "I forgot X" or "I'm in the mood for Y" doesn't make sense even if you drive an EV1.

And a gallon of milk is a gallon of milk. But you know what, I can't remember the last time I bought a gallon of friggin' milk. It's just not a necessary dietary staple. For that matter, have you priced bulk powdered milk lately? It's astoundingly cheap, has a nearly infinite shelf-life, and is roughly equivalent to the wet stuff in terms of nutritional completeness. When we were kids and went down to Puerto Rico to spend time with the family, real milk was a rare luxury, usually purchased only for the espresso. The powered stuff was good enough for everything else.


We talk about minimum expenses of living, and yet nobody really has a clue what that means.

What it really comes down to is this: You reap what you sow.


Can't find a high-paying job 'cuz you ain't got no education? Bullshit. Take a few night courses at the community college, get certified as a welder or a mechanic, or something for God's sake.

Single mother, two kids, can't afford daycare and therefore can't work? Bullshit. A: shoulda been a bit more careful about the morons who you let stick their dick in 'ya to begin with, and B: you apparently can't afford to maintain the kids anyway, so you might as well offload them into the foster system while you waitress you ass off to pay for an education that'll allow you to land a job that'll come with some basic benefits and cover daycare for the rugrats. Either that, or consider moving to a more rural area where one of your aged neighbors will offer to look after the little ones in the afternoon, no charge. Yes, these towns do still exist.

Maybe you're somebody who is genuinely stuck in a dead-end job with no prospects, no way out? Tough shit. Shoulda paid more attention in High School, maybe stayed outta trouble. But in the end, you're fucked and life ain't fair. Try suicide: Satisfaction guaranteed or your money back.


Let's see. I live in San Diego county, where the "cost of living" is very high. In fact, as an overall state, CA is a close third in cost of living, right below DC and HI. Housing, gasoline, groceries, I pay more for everything. My 1 bedroom apartment is $1,700 a month. 91 octane is $3.50 - $3.60 a gallon. As a result of this, my salary scale is adjusted upwards relative to what it used to be when I lived in Cincinnati OH, working for the same company.

As a reward for this promotion, the Fed placed me in a higher tax bracket. My actual standard of living is lower than it used to be (I don't own a home, I have less surplus income, etc) and yet since I'm in a higher income bracket I pay more tax, both in relative and absolute terms.

I oughta be screaming that the Fed doesn't take into account where I live when deciding what percentage of my income I gotta pay in tax. After all, the difference in housing cost between Joplin, MO and Carlsbad, CA is the same whether you're looking at a condo or a mansion.

But you know what? I don't care. SoCal is worth it. :bigtu:

Bravo.

But good luck selling common sense and personal responsibility to mouthbreathing Nascar fans.

This is nothing new. Heck, it was more unequal back when the Rockefellers and the Carnegies roamed the earth. Look at it this way:
Although 1 in 5 Americans has 0 (or negative) net worth, the mean average net worth for all Americans is $55,000.

Bill Gates is worth $59,000,000,000.

Therefore Bill Gates has 1,072,727 times the spending power of the average American. And remember that Gates himself is included in that $55,000 number, so it's artificially high. And there are a *lot* of wealthy people in this country. Granted, not so many multi-billionaires per se, but enough investors, CEOs, brokers, plastic surgeons, lawyers, and even dot-commers buying multi-million dollar airplanes to fly to the villa where their multi-million dollar beach house is, with the multi-million dollar yacht in the harbor out back.

Every penny of that is discretionary spending and yet Wal-Mart never had a shot at any of it in the first place. If it makes you feel better, neither did Macy's or Brooks Brothers. While I believe the number you quoted is true, it's important to distinguish between discretionary spending and consumer retail spending.

Yup. And if they'd just lay off the discretionary spending at Wal-Mart for a year or two, and save / invest the money instead, then after a while they might find that they've got a little nest egg building up.

And let me be very clear. The Chinese aren't communists. Socialists, maybe. But even that line is blurry these days. Heck, I own stock in a number of Chinese firms. You can't buy stock in a Communist country, remember? That's capitalism.

There is only one proper communist country left in the world. And fuck the true communists. Fuck them right in their lazy, conformist asses.

You guys need to understand money creation and the fiat monetary system. Fiat money is money that is created out of nothing and backed by nothing other than faith, and the fact that our taxes are required to be payed in Federal Reserve notes.

Whenever money is created out of nothing, it dilutes the existing money supply. Whenever the money creation is greater than the expansion of the economy, you get inflation.

The corporations/insiders closest to the creation of money benefit by being able to spend the money before the inflation that follows the creation percolates through the economy.

Read the links I posted in this thread. They are very educational.
http://forum.miata.net/vb/showthread.php?t=264448

OK I'll throw in my few cents.

So $800 might not seem like a lot to most of us but for some people that's 6 months of food or 3 months of rent. I'm not saying that $800 will "stimulate" the economy but what it will do is buy some good will of the people which is what Bush wants. GW has an ego the size Texas and he won't want to leave office with a 61% disapproval rating.

As for nuclear power, the prototype FUSION genernator is set to be built this year in France. Less nuclear waste, shorter life for the nuclear waste produced, and impervious to run-away chain reaction.

Personally my bet is still on solar.

Its the fact that the monye will be used to pay down existing consumerism, instead of sparking new spending.

Look at the fact that my generation, based on current investment, 1 out of 3 will have no retirement fund. That is scary.

JoeP always enjoy your stories; and thats because they are stories. ;) lata playas

Trito, whats being built in France is going to run for 1/100th of a second and never generate power. Its experimental and cool, but completely useless for at least the next 30 years.

I think it's election year politics and won't do shit...you want to help the economy, get control of government spending....basics, stop spending more money than you have!

basically the governments is a direct represntation of the average american consumer

Richest 1% paid 35% of the nation's individual income tax in 2004.

Good information, didnt answer my question. Nor was it put it perspective. What was the top 1% collective income?

1 faffillion dollars :fm:

A bit of light thread hijacking, for which I apologize in advance.

Jason, I read the story of Fabian the Banker (Earth +5%) some time ago, and it raised two interesting points which have challenged my thinking for some time. I want to say first that in general I agree with your views as regards the regulation of economies and trade from a macroeconomic standpoint, however there are certain paradoxes that I find difficult to resolve, and I’d like to hear the opinions of others as regards these conundrums. I ask that you grant me some leeway here, as to an extent I need to play the devil’s advocate.


First off, the story of Fabian assumes that the economy is (or at least should be) a zero sum game, a closed loop essentially, where the money supply is a constant, or is at the very least unrelated to the actual wealth of the community.

In keeping with the microeconomic theme of the story, let us suppose that I maintain a sheep ranch on a large parcel of land on the outskirts of Fabian’s community, at a point in time when the banking system has already been established. I assume that the banking system (or some close analogue) exists because I personally find it inconvenient to carry sheep around in my wallet.

One day while digging a grave near the pond behind my house, I discover a thick, black, oily substance under the soil. I hire my neighbor Brian the well-digger to drill a hole in my field, and discover that there is a large quantity of this substance under my land. I extract some of it, and discover by trial and error that on the stove inside the house I can easily reduce it into a number of liquids of various viscosities, some of which make an excellent substitute for the tallow that we’ve been lubricating our wagon axles with, and others can be easily burned to produce heat.

Across town, Jason, a friend of mine who lives in the mountains discovers that there are large quantities of a grey metallic substance buried in the hills behind his home. He digs up some of this ore and discovers that when heated, purified, and mixed in the right proportions it forms a strong yet easily machineable metal that he calls Steel. Collectively, we formulate a plan to use Jason’s steel to build engines which can produce kinetic energy by burning my fuel in a closed space. We strap a few of these engines onto some old carriage chassis, and invent the automobile. We build several more of these automobiles and offer them to the community, along with the necessary liquids to make them operate.

Ben, the farmer who lives out in the plains, gets word of our invention and takes it one step further. He figures that by fitting oversized studded wheels onto one of our improved carriages and fashioning Jason’s steel into a wide, pointed spade that he could use this contraption to till the soil on his farm, vastly reducing his workload. In fact, his productivity is so greatly improved that Ben finds himself able to cultivate ten times the amount of land that he was previously able to, and thereby increase tenfold the amount of food that he is able to produce and offer to the community.

What has happened here? Collectively, Ben, Jason, Brian and myself have created value. Out of quite literally nothing but the ground beneath our feet we have discovered, invented, and produced numerous things that have added to the total prosperity of the community. They have made our village “worth more” because we now have better transportation, more food, heat in the winter and light in the darkness. Is it wrong in this situation for the money supply to represent all this newfound material wealth?



Second- What is it that makes Gold so darn special, anyway?

Gold is far too soft to make plowheads and crankshafts out of- steel is much better suited for this purpose. Gold is adequate for use in bullets and irrigation pipe, however it has a very high melting temperature and the blacksmith far prefers lead for these applications since it is easier to smelt. Gold is a very good conductor of heat, but it’s quite heavy and tends to place a great deal of stress on CPU sockets when used as a heat-sink. Aluminum is a compromise, but much preferable overall for this task given the reduced risk of damage to the assembly. Gold is an excellent conductor of electricity, however its tensile strength and solderability are quite poor- copper is much preferred for making wires out of. There are three applications where Gold is really quite useful- as an anticorrosive plating (over tin or copper) on electrical interconnects, as an amalgam in dental fillings, and for deposition in a very thin layer over objects which are to be observed inside a scanning electron microscope. Collectively, these applications consume a miniscule proportion of the world’s supply of Gold.

So what, I ask, makes Gold so special? Well, basically the fact that a bunch of desert-dwellers found some lying around a couple of thousand years before the birth of Christ and decided that it looked pretty. A few millennia later a bunch of Europeans traipsed through northern Africa, also decided that it looked pretty, and (after a period of bloodshed) took it with them. When these Europeans stumbled across the Americas some time after that, they discovered that the folks who lived here thought it looked pretty as well, and started trading it, for food and clothing at first, and later in exchange for not murdering everyone and desecrating their corpses.

That’s pretty much it. Gold is valuable for no other reason than because we as the civilized nations of Earth have all agreed that it is valuable. We’ve all basically subscribed to a sort of collective hallucination that this yellowish metal which exists naturally in huge surplus relative to its actual usefulness has some intrinsic and indefinable property about it which makes it far more valuable than, say, Iridium- which is far rarer and at the same time far more useful.

Let me repeat this, so nobody misses my point: Gold has no real value. Its usefulness as a currency hinges upon the fact that a number of people collectively agree that it is a convenient, universal substitute for goods and services which do have real value. Gold is more convenient to carry around in one’s purse than a pallet full of grain, and it is much more easily subdivided into smaller units than is a cow.

In other words, Gold is fiat money! The real value of Gold is no different at all than the real value of a paper note- less in fact if you consider that the paper note can be burned to keep warm, or used to wipe one’s arse in the forest- Gold has no such practical attributes. The key idea here is that both Gold and paper notes have value only because a large number of people collectively agree that they have value. If the entire population of Europe were to wake up one day and realize that this Gold thing they’ve been banking on has got about as much practical value as boron in the grand scheme of things, then the global economy would collapse. No different than a bank note, really. Or even a dollar bill.

Gold isn’t even a stable commodity. The rate of gold mining has tended historically not to track the rate of economic development, on either a global or national scale. While it has the theoretical advantage of not lending itself to deficit spending, it is hardly a practical means for standardizing an economy. Rapid increases in the supply of Gold (such as the relatively recent California gold rush) tend to diminish the value of Gold and produce inflation. Likewise, a sharp decrease in the rate of global Gold production would have a paralyzing effect on the economies of the world, essentially implying that since the Gold supply has ceased to grow, that by definition the overall creation of value and wealth must also cease.


Discuss.

Can i use that as an essay for one of my classes?

In the absence of a cash infusion, in a closed economy zero-sum game, each dollar would be worth more. They'd have to be - no other means of exchange. How does the money actually gets in circulation, assuming there's no central government? Would you invent JoeBux to pay your auto builders, oil refiners, and steelmakers?

As long as everyone agreed on its value.

Fuck i have 60 JoeBux in the market right now. Each JoeBux = 1 billion USD

JoeBux. I like it. "My name is Joe, and I approve of this currency." :bigtu:

kyle242gt, it's an open-ended question really, although I assume that there is indeed a "central government" in the community (as is stated directly in Earth +5%), even if it's nothing more than Fabian and several of his cousins. To contemplate such concepts as centralized banking and the money supply without acknowledging the role of a central government is like creating the recipe for ham & eggs in a world without pigs- it can't actually work in practice.

One option would be to leave the money supply alone. In a fiat-money system with a fixed money supply, we'll assume that $100 worth of notes are in circulation. As productivity increases, the purchasing power of the dollar increases. Instead of 1lb of grain, each dollar now buys 5lbs of grain. So did the value of the dollar increase, or did the grain market collapse? And what happens when the population doubles as a result of improved nutrition? There are now fewer dollars per person in the villiage. Did we all get a little poorer? I honestly don't know. But deflation doesnt "just happen."

What happens when our village (which we'll call Oceania) decides to go to war against the neighboring villiage of Eurasia? Obviously the government of Oceania is going to need to purchase grain from Ben, improved carriages from Jason, and fuel from me. So we all ramp up production to meet the demand. The government levies a war tax on the population, who use their dollars to pay the tax. The government then spends those dollars to pay the three of us for our supplies. But with a fixed money supply, there comes a point (very rapidly) when the war effort has consumed all $100 of the available dollars, and the entire economy gridlocks. After all, the three of us can't really buy candles and shoes fast enough to get that money back into the community at the rate it's coming in, and we're sure as heck not going to start giving it away for free.

One solution would be for the government to turn the crank on the printing press a few times to create additional money to pay Ben, Jason and myself. One could argue that this dilutes the money supply and devalues the currency, but does it really? The three of us are probably just going to sit on the extra cash for a while, spending it at a relatively slow pace. During this time, it's likely that overall productivity in the community will contiue increasing, and by spending our money in this fashion, we're having quite a stabilizing effect on the currency, aren't we? We spend our additional dollars at a rate roughly equal to the rate at which new material wealth is being created, and the value of the dollar remains stable. One dollar still buys one bag of grain, because even though there are more dollars, there's more grain as well. Granted, Ben, Jason and I became "rich" during this process, but is this a problem?

I don't know the answers. And that's really the point of my argument, to illustrate that the economy is a complex organism, with lots of variables and booby-traps. There isn't a single good answer. While I think Ron Paul is a pretty decent guy and I really like his ideas about abolishing damn near everything, his Hard Money policy is pure fantasy. I honestly can't figure out whether he genuinely believes in the concept or if he just realizes that it's an easily buzzworded idea which appeals to the simplistic ideals of Mr. & Mrs. J. Random Voter. Heck, forget about a Gold standard, I've got an idea that'll revolutionize commerce and completely eliminate America's use of fossil fuels at the same time- declare unrefined petroleum to be the monetary standard! No worse than cocoa beans... People need to get over the idea that Gold is the answer to everything.


My take on the matter: Those who claim that "In the end, the banks will own everything" are actually pretty close to the mark. The banks would own everything, were it not for one factor: inflation. So long as the money supply continues to increase at a rate sufficient to cover the interest on the loans that put the original money out there in the first place, the system will continue to operate normally.

Is inflation a problem? Well, it certainly was in Germany right up until the introduction of the Rentenmark (a fiat note) after the German government ran the printing presses night and day to produce enough Papiermarks to pay off its creditor nations at the end of WWI, thus causing the complete and total collapse of its own economy. That was an example of asshat monetary policy, but when the only alternative is foreign occupation, well, Gold wouldn't have helped either...

But that sort of catastrophe doesn't need to happen. The important thing is for the issuing bank to create money at a rate which roughly parallels the rate of the creation of value within the economy. When this balance is struck, the system achieves equilibrium.


Cjernigan, feel free to plagerize. I request a one-time payment of 5 JoeBux for unlimited reproduction rights.

Top 1% earned 17% of the Adjusted Gross Income.

In a zero-sum economy, with a fixed monetary supply, no need for a central anything. Gets to be like gambling, except no house percentage. Only way to achieve wealth is by taking it from someone else. No point to this really, but I liked the ham-n-eggs bit, and figured it deserved a response. :)

To the extent that new currency is introduced at the rate value is added, the government needs to print more money. Fed prints it, banks borrow it at .5%, loan it to your manufacturing concern for 5%, is that how it works? College Econ was a fair number of years ago, so work with me.
:gay:So then, the thesis question: Is Bush's proposal, and Fed policy, roughly in line with the rate of value addition? No, because we're in a slump, value eroding. Is the stimulus package enough to cause significant dilution of the dollar?

Since the above scenario represented direct government spending rather than an indirect adjustment of the money supply, it's much simpler. The government would simply print the appropriate amount of money and then spend it by purchasing goods from the various businesses which produce the supplies that it requires to conduct the war. My manufacturing concern doesn't need a loan, since we're the seller, not the buyer. Ultimately we will get around to spending the money which was given to us, which would result in a dilution of the currency were the other industries around us to stop producing new value.

In peacetime, then yes, your example stands. The Federal Bank would observe that the money supply was too small relative to the value currently in existence, and it would print enough money to cover the spread. That money would be loaned to the member banks at one rate of interest. Then, Charles, a local carpenter, would borrow money from the member banks and give it to Jason in exchange for one of his new Improved Carriages.

Over time, Charles would repay the money to the bank, ultimately giving the bank more money than he originally obtained. This is sustainable because during this time the bank has also made loans to Bob and Alice, both of whom have contracted Charles to construct homes for them. Thus, Charles is able to repay the bank using the money that the bank loaned to Bob and Alice. And on and on the cycle goes.

As the population grows and new products are created, the demand for money will eventually increase once more. The Fed will introduce additional money into the system to allow more people to buy more things. And so long as the Fed exercises good judgment in choosing to print only the amount of money necessary to sustain the banking system and permit for increases in the real value of the community, the system will continue to function.

Thesis defense: That question, to me, suggests overly short-term thinking. Bush's policy is irrelevant, because a few years from now there'll be a different yokel in the White House, enacting a different policy. That too will be irrelevant, because a few years after that it'll be yet a third.

<science content>
When designing a phase-locked loop circuit, it is necessary to make a compromise where the matter of accuracy vs. stability is concerned. A circuit with a very long response time will tend to be very stable, yet it will not quickly adjust itself to rapid changes in the signal it is tracking. A circuit with a very fast response time, on the other hand, may be so twitchy that it will oscillate, or at the very least produce an output so unstable as to be useless.
</science content>

The American economy is pretty big. As a result, its response time is quite slow. I honestly don't believe that, short of starting WWIII, any single politician is capable of “breaking” the economy, nor is any politician capable of “fixing” it. Were congress to eliminate the term limits on the presidency, or establish a hereditary monarchy, then it would be much easier for one person to steer the economy more directly. Even at that, a certain extension of the powers of the executive branch would be necessary, as the president would need the ability to force the hand of the federal reserve, the power to enact unlimited veto against congress, and enough charisma to directly influence the actions of major corporations and the private banking system.

The only real problem that we actually seem to have at the moment is that investors (a much more complex part of the economy) are by and large a bunch of fickle assholes. I just checked my portfolio a few minutes ago, and I have lost slightly over $3,000 in the time since I rolled out of bed this morning. Obviously this number bears more than a passing resemblance to fiction since that money doesn't actually exist, but it scares people to think about and it makes for good “teases” (the sentence or two that the talking head on TV says right before the commercial, to entice you to keep watching.)

Why was this money “lost”? Because a large group of people feel that the short-term earnings potential of the various businesses that I chose to invest in is not quite so good as was believed some time ago. This is not due to a failing on the part of those businesses, but rather a belief that their customers are not as likely to spend money as they might otherwise be. By announcing that the government will reduce the tax burden on consumers, they hope to restore faith in the businesses by making it appear more likely that consumers will spend money after all.

Personally, I hope “they” are right.

From a broader perspective however it's not quite so important to me what happens in the next month, or the next six months. So long as the actual value of the businesses in which I am invested has not significantly decreased, it is probable that at some point in the future the attitudes of both consumers and investors will change, and a large group of people will come to believe that because consumers seem more likely to spend money, and that that businesses' short-term earnings potential is “good.”

That's the thing... How do you define value? When you say “we're in a slump, value eroding” what does that mean exactly? Machinery is not vanishing off of factory floors, warehouses full of inventory are not burning down, so how is value eroding? It isn't really. The problem is that peoples perception of value is eroding.

Speaking of value, I really need to stop writing these dissertations and get some actual work done... :D

Here's a quickie answer.. i will read the long text later.

Do not confuse money and wealth. Money is a means of exchange.

You can have a fiat money system that is NOT DEBT BASED.

You don't have to assume a zero sum game to see the Compound Interest Paradox. If the money supply creation is greater than the growth of the economy, you get INFLATION. Inflation steals from the middle class. Inflation confers a subsidy to those who first receive the newly created money because they get to spend it BEFORE the inflation the money creates, percolates through the economy.

Milton Friedman has proposed a system wherein the fiat money creation is targeted to exactly EQUAL the growth in the economy. This would target 0 inflation. The amount created every quarter would be econometrics based. NO discretionary power anywhere by government, no discretionary power by a bunch of old farts with political connections.

Friedman's proposal is that this money is spent by government on infrastructure, and is NOT DEBT BASED. In other words it does NOT NEED to be repaid, zero, none, no interest payments, no principal payments. It gets spent into the economy, again for the end result that the expansion of the money supply matches the expansion of the economy so that you have 0 inflation.

IN CONTRAST, the money created today by the Federal Reserve, which they created out of NOTHING, needs to be repaid, and, needs to be repaid WITH INTEREST. It is this INTEREST PAYMENT that needs to be repaid FROM THE EXISTING MONEY SUPPLY that creates the Compbound Interest Paradox, ensuring that the only way to prevent a shrinkage of the money supply is to have CONTINUAL DEBT CREATION. This not only creates inflation which steals from us, but it also means that it is very easy to cause a shrinkage of the money supply, resulting in a recession, WHENEVER debt repayment exceeds debt creation. This happens whenever the Fed raises interest rates "in order to control inflation".

Pls watch the 47 minute cartoon "Money as Debt", it explains Friedman's proposal:

http://video.google.com/videoplay?do...74362583451279

Now I'm not anywhere near on par as Joe & K & others, but I think there's a BIG part of the puzzle missing here..

One of the biggest reasons for the economy being how it is, is the housing market. The fraud, inflated values, the taxes, foreclosures, insurances, variable rate loans being due, etc etc etc etc .... WHICH has caused alot (maybe not all) of issues....Huge ripple effect of course..

And this move will do absolutely nothing for almost all the homeowner's that are in trouble. It wont help anyone refi their ARM, it wont fix their credit, it wont pay their taxes/ins(at least not in most places), it wont even cover the deposit on the apaprtment they are gonna try to move into once they get foreclosed on...
And I agree with most of the comments on here about the way most americans spend their money. For a long time, I've been saying that the people are just like the government, living beyond their means...or check by check...This country runs on credit, debt, interest, etc etc etc...

Just my 2cents, subscribing tho!

Anything not clear?

tvaz,

Every decade, the Fed lowers interest rates. This results in cheap loans and "malinvestments". Investments where businesses or individuals wouldn't normally invest if loans weren't so cheap to begin with. A bubble inflates. And every decade, the media trumpets a "HOT new investment area". The corporations first in it make money hand over fist. Then, this bubble pops. Then the Fed raises interest rates. This shrinks the money supply and causes a recession. Then, "to prevent the economy from collapsing", these corporations are bailed out with taxpayer money. During boom times, they keep their money, then when they go bust, you and I and JoeBlow bail them out! And of course, the insiders who know how the bailout will unfold, make more money.

In the 80s it was Savings and Loan. In the 90s, the internet bubble. And now, home real estate and subprime mortgages.

Everything else gets blamed EXCEPT THE FED FOR LOWERING INTEREST RATES TOO LOW FOR TOO LONG, which is what inflated the damn bubble in the first place.

In reality because of this debt based fiat money with interest scheme, the only way to keep the economy chugging is to CONTINUALLY WRITE LOANS AT A FASTER RATE THAN THEY ARE REPAID. And the way to do this is to lower interest rates lower than the free market would set it, if the Fed weren't there.

This is the reason why debt is spiralling out of control.

It's an INHERENTLY UNSTABLE SYSTEM. The Fed has handles to either (a)continue inflating the bubble or (b) make it pop, causing a recession.

During a recession, hard assets (homes, businesses), transfer hands from the middle class to the banks. The big banks can of course ride out the bust, and sell the assets during the next boom.

Then of course, the Fed insiders know in advance if the Fed will raise or lower the rates, and can therefore make lots of money either way.

Joe,

Regarding your PLL.

The fastest response you can get in the economy is to let the free market operate unfettered. In other words, let the GOVERNMENT STAY OUT. The free market can very quickly adjust to situations because every Tom, Dick, and Harry can make a decision that's best for him. It's like distributed processing. A bureaucrat in Washington can't possibly know what's best for everyone.

Do you guys know what country has one of the highest economic freedom indeces in the world? Hong Kong. They have a 15% flat tax, and very little government regulation in the economy. When Hong Kong was taken over by China in 1997, a lot of people thought they were gonna have a recession because all the manufacturing jobs would move the China. What happened? The jobs moved. Recession? Hardly a blip. What happened to all the people whose jobs moved to China? They just found other jobs...

Jay lots of good, intelligent points. And u are right on with the highs and los, being cyclic and all...
However I gotta say this, the housing market crisis while being the current cycle, is a different animal...
While theres alot of things in common w/ the S&L and the .com situations, its a whole other level..The blatant fraud that has been comitted, is in many cases compared to that of organized crime such as mafia.. The investors, the lenders, ect all caught by surprise..and closed down. Y? Prob because like u said everyone has theyre hands out to make money, and no one thinks "what if"....
That would be enough, but there are so many ripple effects because of all this, that are far more widespread than most can/want to believe...Practically everyone has been affected by this issue, whereas I think it was less widespread in the last cycles...

Im in the industry, and have been for 8+yrs, money had never been cheaper, prices had never risen so much or so fast, guidelines for loans had never been so flexible...like u said, things were too "good" for too long...and NO one stopped it. Its one thing for the sales force to go crazy and make bank while they can...but no one up top saw this coming???:nono: