What happened to all of the doom and gloom economic threads?

[firespin]

And they're on record for condoning offshore corporate tax loopholes that were never meant to exist.

Like expatriates who get a free ride on their federal income taxes.

 

[Beco]

http://www.thestockmasters.com/images/mcdonalds-fat.jpg

http://ihateyfatbody.info/wp-content/uploads/2010/05/mcdonalds-disgusting-looking-burger.jpg

http://media1.reak.com/dnet/media/2007/6/jun06gal49.jpg

Do you really think introducing Tofu and Arugula Lettuce in schools is going to stop obesity? So how is it, most of Americans my age ate the same crap in school, yet remained thin? The sad thing about the above photo of this Michelin Boy is his parents

 

[koalabear]

More homeowners who got federal mortgage aid fall behind
Obama administration acknowledges problem was underestimated



http://www.msnbc.msn.com/id/38603412/ns/business-real_estate

 

[unregistered]

 

[mercury14]

Like expatriates who get a free ride on their federal income taxes.

No nothing like it actually. For one, I'm not an expat. I'm a military spouse living and working on a USAF base. Calling military families expats is pretty insulting.

Go to a bar near a base and start accusing people of being expat tax cheats and see what happens...

 

[firespin]

No nothing like it actually. For one, I'm not an expat. I'm a military spouse living and working on a USAF base. Calling military families expats is pretty insulting.

Go to a bar near a base and start accusing people of being expat tax cheats and see what happens...

Expatriate means you live outside the country, doofus.

If your argument that something makes good economic sense is determined by bar fights, that's not such a good argument, methinks.

 

[Frisco_Slug_Esq]

Fed Chair Ben Bernanke has clearly been trying to inflate the economy. He and other supposed experts regard inflation as the way out. Only Mr Bernanke's ineffectiveness explains why we don't have inflation. The hypothetical measure is nothing more than the preferred strategy compressed in time. The effects, other than timing, would be identical. Lew Rockwell's thief analogy is appropriate. What is the difference between a thief that breaks into your house every night and steals a little versus the one who backs up a moving truck and takes everything? Eventually you end up with an empty house. Only the timing differs.

As economic and political matters become more desperate, so will what the government considers acceptable. If a debt default cannot be engineered via continuous inflation, it will occur via a direct repudiation of obligations or a quasi-surreptitious one like the hypothetical presented. Viewed from this perspective, I don't think such a move or something approximating it is out of the question.

The political class' survival is at stake. Eventually anything that extends their rule will be tried. It is not concern for you or the economy that is driving policy, but the preservation of power of an increasingly wounded power elite. Their survival is now driving policy. Unfortunately what benefits them is generally harmful for the economy.

It is improbable that Bernanke's strategy will gain enough traction fast enough. Two years have gone by and inflation is decreasing rather than increasing. Mr. Bernanke has thrown more than anyone dreamed at the problem with no results. Thus, a home-run pass somewhat like the one discussed becomes more likely. It will be a surprise when it comes.

Nothing discussed here or tried by the Administration will solve the economic problems of the country. What I have suggested is what I could happen. It is not to be confused with good economic policy. Both the hypothetical measure and the more conventional inflationary strategy will lead to hyperinflation.

Inflation is not an economic event. Short of an inept Central Bank, inflation is always a political event. It is never a solution to an economic problem. It is employed out of desperation. When economic and political problems are intractable, the political class is apt to do anything to retain power.

Protect yourself, your family and your wealth in that order. Do not expect any help from Washington. The political class is not your friend, especially when their survival is at stake. Women, children and other citizens will have lifeboats, only if there are any left after the rats have escaped the sinking ship.

Monty Pelerin is a recovering economist

 

[unregistered]

 

[unregistered]

 

[Slowlane]

What happened to all the Joy and Happiness economic upturn threads?

 

[Frisco_Slug_Esq]

That was quite a bundle of good news we got yesterday.





Now we're buying our own debt...




That's why we're suddenly passionate about defending Michelle.

 

[Byron In Exile]

That was quite a bundle of good news we got yesterday.

Now we're buying our own debt...

That's why we're suddenly passionate about defending Michelle.

We???

You seriously don't understand the money system.

 

[Frisco_Slug_Esq]

I'm not saying I dug up my gold or anything, just noticing the ants at the top of the heap beginning to scurry like THEY were the ones in some sort of trouble here...




Hell, some are even fleeing the mound.

 

[Frisco_Slug_Esq]

The Monetizing the Debt Scam

This guy seems to know how it works,
Money for nuttin'
Checks for free...

FRIDAY, JANUARY 18, 2008

I've mentioned this topic in other posts. After seeing people Google searching for "How does monetizing the debt work?", I decided to make a post dedicated to this topic.

Money is continually destroyed due to the Compound Interest Paradox. Almost every day, the Federal Reserve needs to create new bank reserves so that the Fed Funds Rate equals the target rate.

The Fed Funds Rate is the rate that banks charge each other when they lend each other surplus reserves. Banks with surplus reserves loan them out to other banks. Banks with a shortage of reserves borrow reserves from other banks. Only the Federal Reserve has the power to create new reserves, via its "Monetizing the Debt" trick.

Suppose the Federal Reserve decides that it needs to increase bank reserves by $1B so that the Fed Funds Rate target is at its target rate. The Federal Reserve buys Treasury Notes that are nearly expired. Suppose these Treasury Notes have a market value of $999M. The Federal Reserve creates $999M of new money in the account of the bank that sold the Federal Reserve the Treasury Notes. The Federal Reserve's account looks like:

debit: -$999 million (money just created)
asset: $999 million (Treasury Notes with a market value of $999M)

A few days later, those Treasury Notes expire. The Federal Reserve redeems them with the government for $1B, the face amount. Now, the Federal Reserve's account looks like:

debit: -$999 million (money just created)
credit: $1 billion (redeemed Treasury Notes)

In other words, the Federal Reserve has a profit of $1M. The Federal Reserve makes a guaranteed riskless profit as long as interest rates are positive. The scam is that the Federal Reserve has no cost of capital. It was able to create the $999M out of thin air. The $1M that the Federal Reserve collected in interest payments was never created. It came from other loans that were taken out.

There is now a PERMANENT money supply shortfall of $1M. Every time the Federal Reserve "monetizes the debt", it puts society in a deeper and deeper debt hole. The $1M required to pay the interest was NEVER CREATED or put into circulation.

Instead of an outright purchase of Treasury Notes, the Federal Reserve sometimes does a "repurchase agreement". The Federal Reserve agrees to buy Treasury Notes for a few days, creating reserves, and then sell them back in a few days, destroying reserves. The interest accrued in those few days is subject to the Compound Interest Paradox, just like when the Federal Reserve makes an outright Treasury Note purchase.

It is only at this step in the money creation process, when the Federal Reserve "monetizes the debt", that the Compound Interest Paradox operates with the full force of law. When a bank loans out customer deposits, all the loan revenue is recycled as interest payments and bank expenses and profits. However, banks in aggregate need to borrow from the Federal Reserve every day. The Federal Reserve keeps creating new money to subsidize negative real interest rates.

Whenever someone gives you a hard time about the Compound Interest Paradox, construct an example. Once you see an example of debt-based money in action, the Paradox stands out. If you look at the books of any individual bank, their books balance. If you look at the books of "society as a whole", the Paradox is obvious.

http://fskrealityguide.blogspot.com/2008/01/monetizing-debt-scam.html

The bolded part is for U_D...

 

[unregistered]

 

[unregistered]

 

[Beco]

Market drops 269 five minutes before closing, but we know it means the recovery is here because UD told us so.

I'm sure Michelle is too busy shopping in Spain to notice.....

 

[unregistered]

 

[Byron In Exile]

Where does Obama get his money?

"Why are you here?"

"To get some money."

"What kind of money?"

"Obama money."

"Where's it coming from?

"Obama."

"And where did Obama get it?"

"I don't know... his stash, I don't know. I don't know where he got it from, but he's givin' it t'us to help us. We love him. That's why we voted for him... Obama! Obama!"

"Do you know today how much money you're getting?"

"No, I won't, but I'll be waiting for a phone call."

"Where's the money coming from?"

"I believe it's coming from the um... City of Detroit, or the State..."

"Where did they get it from?"

"Some funds that was given by Obama."

"And where did Obama get the funds?"

"Oh, Obama got the funds from... um... I have no idea, to tell you the truth. He's the President."

 

[jeninflorida]

Market drops 269 five minutes before closing, but we know it means the recovery is here because UD told us so.

when will the obama nightmare end?

 

[Frisco_Slug_Esq]

You guys, ease up.





You have to have a little patience. It's really working. The economy is just a lagging indicator.

You'll see, by election time, Democrats are going to be rewarded for their bold new changes and America's new-found prosperity...

 

[unregistered]

 

[Frisco_Slug_Esq]

I'm shocked to find that we are not rolling in saved health-care dollars...

 

[Byron In Exile]

You guys, ease up.

You have to have a little patience. It's really working. The economy is just a lagging indicator.

You'll see, by election time, Democrats are going to be rewarded for their bold new changes and America's new-found prosperity...

Well, Bush made such a mess of things, it'll be at least ten years before Obama can fix it.

Oh, wait... he doesn't have that long, does he?

 

[Frisco_Slug_Esq]

Do we not remember the phrase "CRONY CAPITALISM" leveled at Bush?

One answer comes from economist Arnold Kling. Writing for The American, Kling argues that the collapse of the housing market and the financial crisis disrupted what had been “a sustainable pattern of specialization and trade” and that we need to let the market economy develop a new one.

Instead, the policies of the Obama Democrats have been aimed at propping up the old order — holding up housing prices and the mortgage market, keeping the Detroit auto companies in place, maintaining the lush standard of living of public-employee-union members (the purpose of the $26 billion the House was summoned back to Washington to approve Tuesday).

Unsustainable patterns of production, Kling writes, prevent the trial-and-error process of private investment that creates new jobs and new patterns of production that will be sustainable.

Across the Atlantic, Marc De Vos, director of the Itinera Institute, a Brussels think tank, advances similar arguments in his book After the Meltdown. The financial crisis, he argues, has brought a revival of “state capitalism,” in which governments “have an increased and distorting role in economics.”

“The state should be the partner of the market, not the owner or manipulator of the market,” he writes. “Governments should not pick economic winners and losers. The state may be back, but the politicians should be modest.”

Modesty, unfortunately, is not the dominant character trait of a president who predicted that his election would be seen as “the moment when the rise of the oceans began to slow and our planet began to heal.”

But facts are stubborn things. The fact that the private-sector economy has not responded as administration economists expected and confidently predicted should be a wake-up call.

It shows the limits of expert knowledge and of the ability of political actors to make optimal economic choices.

The intellectual firepower of this administration may be high. But so was the intellectual firepower of the postwar British Labour governments that nationalized steel, auto companies, and the railroads.

That didn’t turn out so well, and for decades, the British economy lagged behind those of America and its European neighbors. State capitalism has been tried before. It didn’t work.

Market capitalism works better because it doesn’t depend on one set of actors to make all the choices. Entrepreneurs with a vision for the future can take their chances, and most may fail. But some will turn out to be Bill Gates or Steve Jobs, who change our world in ways that 99 percent of economic experts were unable to predict.

In the meantime, American voters seem prepared to return a negative verdict on the Obama Democrats’ version of state capitalism. Bailout favoritism and crony capitalism, it turns out, are not vote-winners.

Michael Barone
NRO
__________________
"The more communal enterprise extends, the more attention is drawn to the bad business results of nationalized and municipalized undertakings. It is impossible to miss the cause of the difficulty: a child could see where something was lacking. So that it cannot be said that this problem has not been tackled. But the way in which it has been tackled has been deplorably inadequate. Its organic connection with the essential nature of socialist enterprise has been regarded as merely a question of better selection of persons. It has not been realized that even exceptionally gifted men of high character cannot solve the problems created by socialist control of industry."
Ludwig Heinrich Edler von Mises

"[W]hat limits ought to be set to the activity of the state," is "that the provision of security, against both external enemies and internal dissensions must constitute the purpose of the state, and occupy the circle of its activity."
–*Wilhelm von Humboldt