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Posted on November 4 at 3:49 p.m.
Chairman Bernanke doesn't know what he is doing but Chairman Marriner Eccles did.
On Americans Deserve Jobs Act
Posted on November 4 at 3:34 p.m.
CommonsenseSB - It is a combination of low interest rates and margin pricing of commodities that is causing relatively high headline inflation. In fact it is probably more the later than the former. Did you know that ETFs were not even in existence 10 years ago? ETFs that can be bought on margin.
Progressive income tax was advocated by none other than Adam Smith also. Just because Marx also advocated it doesn't make it a purely anti-capitalist idea. And if you take all taxes that out there they are pretty flat as they are now. SS tax is regressive, sales taxes are regressive, long term capital gains are flat and lower than income taxes, etc. Even Cain backed away from his pure 9-9-9 plan after it was shown that it hurts the poor. His fix was to make it more progressive.
You are correct in that we cannot tax our way out of this mess (stupid Democratic idea) but incorrect in saying that we cannot spend our way (stupid Republican idea). A cut in spending is the same as the tax increase for that person getting that income from spending. It is a reduction of spending power.
Posted on November 4 at 8:28 a.m.
Cheap money or low interest rates also do not correlate with inflation but you are correct in that they do correlate with bubbles. Some bubble like say the oil bubble can show up in CPI while others like NASDAQ doesn't. The housing bubble was neutral on rents but obviously high on purchases of housing. It doesn't just take low interest rates to create bubbles either. It also takes bad regulation. It seems like government wants it both ways.
If Social Security and Medicare can go bankrupt than the Defense Department is already bankrupted. Except it isn't. The problem with spending too much vertical money is inflation, never solvency.
I am with you in low taxes but I prefer a progressive tax rate or if not that a tax on financial rent transactions. It is also unfair that earned income is taxed at a higher rate than unearned income (capital gains). I am not for raising capital gains tax but rather lowering income tax. I am also not afraid at the moment from deficits because of what I think of them. They are a consequence of economic activity, not a predictor of it. Being afraid of this consequence is killing America and Europe. Republicans want to cut Social Security and Medicare while Democrats want to raise taxes on the rich. Neither will work. It just shuffles money around.
Posted on November 3 at 4:47 p.m.
Yes currency is first added into the economy when the federal government spends. This is called chartalism. It is not a new idea. It is old. MMT is neo-chartalism which combines vertical money aka federal money with horizontal money aka bank money.
The dollar is way more stable than gold which has gone down and up like crazy the past 30 years.
Gold is a leveraged commodity. Or do you think everyone who speculates in gold actually has that said gold in their possession?
Funny thing also. It is actually governments that hoard gold that is giving it value. If it was just commodity traders and wives and girlfriends used there is no way it would be so high priced.
Another funny thing is that you choose to compare it to dollars (USAs currency).
Pre the Housing bubble one could point there too as an asset class that was climbing higher than the dollar index.
Inflation is rising but it is supply side inflation... from oil mainly. But as incomes and credit contracts the demand for oil will be reduced and guess what will happen to that supply side inflation. (It happened in 2008 when inflation was higher than it is now) Correlation of oil price and inflation is way more than deficits and inflation. (which is pretty much non-existent in the long term)
I'll ask you guys again. Are you or are you not for payroll tax elimination? Would you be for higher deficits if it meant working people get a tax break?
Remember higher deficits are the exact equivalent to higher private sector net financial assets.
Posted on November 3 at 1:35 p.m.
Yes money just magically does appear when the federal government spends. And then it disappears when it is taxed.
I have seen surveys with my own eyes that says that it is lack of demand that is killing business. Sure some of the surveyees such as you says it is still government regulation but as a whole it is demand that makes the economy hum.
I also have read Krugman but even he misses the boat. He cannot fathom that money comes from nothing. It is why he has dabbled in MMT (Modern Monetary Theory) although still rejects it.
MMT describes the economy operationally, not ideologically. It explains why even with our so called high deficits interest rates are low, the dollar is strong and inflation is still relatively low. It explains why after years and years of higher and higher deficits interest rates have fallen and inflation rates have fallen. It does this through operational accounting principles that is there for anyone to see. It does not start from the ideological perspective that only private sector creates wealth, so we must leave the private sector alone.
Obama may be threatening to raise taxes for the rich but is also proposing to cut taxes for the working class. MMT tells you the first is not needed but the second is certainly needed and doable to create demand for the private sector.
This article written by Lois Capps is mainly the 2nd with a bit of yes big bad government spending on such things as infrastructure. It has nothing to do with raising taxes on the rich or Obamacare.
Posted on November 3 at 8:35 a.m.
The Fed will not tighten but fiscal policies are tightening the economy. This will can cause a recession which will lower inflation again. Demand being destroyed and all.
We are in a better situation now because of stimulus and the automatic stabilizers like unemployment insurance and food stamps than pre-Keynesian revolution. You are saying by taking away the money that the federal government guarantees will somehow create growth. This would only be true if private sector credit creation grows. However this recession is the destruction of the ponzi private sector debt.
Money does not come from the private sector to the public sector at the federal level. It is actually the opposite. All federal spending adds income and therefore money into the economy. I have said it before and will repeat myself again. Dollars are federal monopoly. It even says so in our constitution. Alexander Hamilton realized this when he guaranteed/ federalized the debts of the states.
Killing local and state employment does not make it easier for private sector to grow. It will immediately create less demand for private sector products and services. This is certain unless the private sector will employ these people at the same income.
If the demand for private services are there then taxes/regulations and the sort will not stop a smart business from growing. There are some rules and regulations that don't make sense but I think most are okay and they are still set up by our democratic governments. They are not decrees from a despot.
My name is MMTSB for a reason. Please look up MMT and try to refute it. Cullen Roche at www.pragcap.com is a good start.
Posted on November 2 at 9:15 a.m.
CommonsenseSB - I take a longer view of inflation. Right before the crash of the economy, headline inflation was higher than it is now and I am convinced that it was due to commodity inflation. This is the same process that is happening now since the rules have not changed. I am not posting out of ignorance but of understanding.
I also understand that the federal government cannot lose money since they are the monopoly issuer of that said money. Only the private sector can lose money. This can be from stupid public sector financed bets like Solyndra or stupid private sector bets like MFGlobal.
It is very easy for the Fed to get rid of the inflation. Just raise interest rates. What do you think will happen if they did that?
You are trying to convince me that the stimulus cause the anemic growth and high unemployment and not say anything about WHY there was a stimulus in the first place.
Posted on November 1 at 9:57 a.m.
Waz - I know you are against bad bets in solar tech but are you for what I said? Payroll tax elimination and a minimum wage ELR program?
The housing bubble and derivative bets pissed away more money than government loan garauntee to Solyndra's creditors. It pissed away so much money that it caused a recession.
Posted on October 30 at 9:20 p.m.
Inflation is relatively high because of speculation. Once the margin calls are called in deflation will hit us again. This has nothing to do with deficit spending at all. Besides that deficit spending is the same thing as private sector savings.
I understand what is going on fine. I will short commodities and buy bonds while you will continue to do your transactions including getting paid in US dollars.
Obviously 4T was not enough and so is this Act. We shouldn't let fraud kill the economy, keep people unemployed and stunt growth.
Eliminate the payroll tax and start a federally financed employee of last resort (ELR) program. This will get the unemployment rate down to 2%.
Posted on October 28 at 10:05 p.m.
It matters what the money does. The equation is MV=PQ, not M=P. There is also no correlation between deficits and inflation. Stimulus was a failure because it was too small because of the ill found fear of private sector savings. What the hell is government deficits but that? Mortgage rates are at record lows and you are fearing inflation? Sorry buddy I understand economics.
Shadow stats is bunk. You know how I know? Shadow stats wants to get paid in dollars. Haha
also the funny thing is gold prices are up because of public sector pension speculation.