Republican Economic Policies

[degsme]

Misleading at best. The value of money is determined by how much it will buy, as the value of the currency goes up, the price per once of gold goes down, if gold as used as the standard. In other words, the more the dollar is worth the more gold it will buy.

Nope. Not in a Gold Reserve requirement system (ie Specie currency). Because the very definition of this is that $1 == X amount of Gold. Thus the "price" of gold is artificially pegged. So what this means is that if the economy expands (ie there are more assets in the economy) - the value of the ASSETS decreases - simply because you have more assets to divide up using a fixed pool of dollars.

This is the quintessence of what deflation is: $1 today buys LESS than $1 tomorrow. And in a deflationary economy it makes sense to hoard dollars and put off purchases and investments. Which of course causes a crash. But here's the thing. Because such a crash occurs with EXISTING INVENTORIES - and because humans have to create at least something to live on, you get an additional price collapse as the GDP collapses. Which is even MORE deflation. And quickly you end up in a deflationary spiral that is very very very hard to get out of.

Thus specie based currencies have hard deflationary crashes that take a long time to recover from. And that is PRECISELY WHAT THE USA experienced until it came off the Gold Standard

The net result was an AVERAGE business cycle of 4 years (ie an economic panic every 4 years) and each recovery took 2 years to come out of recession.

That is a formulae for becoming a 3rd world nation.

 

[degsme]

which was due to fractional banking, not the gold standard. C'mon degs, there was too a capitalism that funded new activity with accrued funds, it wasn't all via loans, neither is it all via loans today (although damn near).

Days this is a meaningless comment. the "capitalism that funded new activity" - was capital that was expanded using fractional reserve banking. New value was created based on the "booked value" of the loan provided. So when John Hancock signed debenture notes to partners as a way of raising cash to buy Tea in india for import, each of the lenders did not consider themselves "poorer" by the amount of money they lent to Hancock. They considered that debenture note to be AN ASSET. And it was. It was an asset that could be sold, borrowed against etc.

Now within their "locality of reference" when Hancock's ship returned and sold the tea, these notes were paid off with interest by cash taken from the buyers.

This is where it gets complicated.

As I pointed out in my response to SgtStaples - in the aggregate the net assets of the economy had increased, but the money supply had not. So theoretically deflationary spiral should have kicked in immediately. So why did it not?

The answer comes in the notion of the Velocity of Money. I as "paul revere" sell some silver to John Hancock. And then use some of that cash to buy tea from him. He in turn uses some of that cash to pay his debenture notes to say "John Adams". Adams then uses some of that money to buy some pewter plates from me. and I use that cash to buy more tea. And as long as the rate of trade can execute faster than the economy can grow - we are all fine since we all perceive ourselves to be gettng richer and richer.

But here is the catch. The faster the money flows, the more "assets" are being created. The more assets that are created, the faster the money flows. This accelerates. The classic "boom". but pretty quickly in a specie based currency system, the speed of economic growth outpaces the increase in the velocity of money. And shortly after that, you start to have more assets than cash in the system and delfation kicks in. And once deflation kicks in, you have a rapid and deep deep crash.

And if you look at the economy of the USA for the first 130 or so years, the average panic took 2 years to develop and 2 years to recover from. And mostly the net increase in the wealth of the USA came from "westward expansion" and unfettered immigration associated with that. Essentially stealing land from other sovereign entities and people from Europe. There was very little net wealth creation within the FISCAL system. Sure there were fortunes that were made and land in the East kept appreciating in value - but largely because of the assets being added in the west.

 

[degsme]

Government is not bigger? Is that so?

Government has increased. So what? Gov "as a percent of GDP" is going to grow if your population growth stays steady but your GDP growth plateaues. Since fiscal policies of Reagan/GWB DEPRESSED GDP growth vs. Pop. growth, this is an expected result.

Stock market growth is a red herring.

why? because you say so? Market growth paralells GDP growth pretty well. I cited both so you couldn't claim differences. Market grows more on forecast expectations, so it leads and lags actual GDP growth by a bit. but it is a validation

I don't like to use your suspect "leftist meat grinder of logic" type tactics but here is one place where it is relevant.

not a clue what this even means

If you adjust it for the (decreasing) value of the dollar (i.e. price it in gold)

Price of gold has nothing to do with the "value of the dollar". its a meaningless measure since we aren't a specie based currency.

Fewer people working as the cost of government explodes and we have experienced a decline in tax receipts as a percent of GDP. Hmmmm. Duh!

Um coincidence isn't causation - its not even correlation. We have fewer people working after we cut long term investment in the economy and prior investments ran their course. yes and? More indictment of "supply side economics".

I assume no such thing. All I am assuming (and correctly, I might add) is that when people are faced with an uncertain return that ranges from plus 1.5% to minus 2% they will most likely choose to not make any such investment and will instead look for a tax shelter that might present a negative return but throws off huge tax losses with which they can shelter other income.

Um no. Tax shelters - precisely because they are structured to "throw off losses" tend to be poor ROI. It is simply INCORRECT to assume that people forego ROI except in the most extreme circumstances. There simply is no DATA to support your claim. The 'Laffer curve" plateau where this BEGINS to happen is at about 70% marginal income tax rates and LT Cap Gains rates of 50%.

This isn't rocket science and I am presenting nothing here that would look anything other perfectly logical to any sane person.

Actually its a fair bit more complex than rocket science. Rocket science is basically newtonian physics with 4 degrees of freedom. Economics has vastly greater degrees of mathematical freedom.

And since your assumptions are not based in fact - there is nothing "logical" much less "sane" about your assertions.

 

[degsme]

Um, it's "imbecile" not "embicile" (LOL indeed) and those kinds of insults are not tolerated here except in the "Crossfire" board.

You mean like your attempt of "proof by insult" in claiming that your arguements are the only ones that are logical and any sane person could see that?

 

[Woolleybugger]

Correctamundo Degs. Sarge needs to think about this a bit more so he can grasp the fundamental problem with the gold standard. Sarge, the gold standard says that anyone can demand gold for specie at any time. Since the total amount of gold in the world is limited and most of it is not in the hands of central banks, the amount of money you float that is tied to the value of gold MUST have a direct relationship of 10 to 1, 20 to 1 or 100 to 1. All the gold that has ever been found on the planet is mostly still in circulation. It is a cube that would fill an olympic sized swimming pool, that is it Sarge. So, how can you keep the gold standard intact using a reserve ratio that could withstand a run on gold without limiting the amount of dough in circulation? Answer: you have to keep credit and money expansion down in direct proportion to the amount of gold in reserve. What if your economy is producing so many goods and services that the GNP increases faster than the money supply? In other words, you have 1 ton of gold in reserve that is worth say, 1 billion dollars. That 1 ton of gold/one billion dollars is the reserve held at a bank which backs up all the money in circulation in US dollars. Say you allow for 10 to 1 expansion of paper dollars backed by gold. That means all the US dollars that can ever be in existence at any one time is 10 billion US dollars. Not one penny more or you have to give up on the 10 to 1 ratio. What if your economy is now worth more than that and it grows faster than the growth in gold reserves? Lastly, do you realize that if every nation did this we would end up fighting over gold? There is not that much gold on the planet that is accessible....

 

[Woolleybugger]

Excellent. Why is this so hard for them to grasp?

 

[degsme]

Excellent. Why is this so hard for them to grasp?

Because they don't quite grok the "velocity of money" as a major factor in GDP growth. I've had this discussion with other actually interested friends of mine who's exposure to economics has been in the form of accounting classes and running their own businesses. And they cannot seem to get their minds around the idea that money is and always has been - a ficticious marker for human productivity. They somehow believe that because they personally value something like gold - that somehow tangibility of currency only has good consequences.

With my friend we had about a 3 hour drive to a ski area to talk about this. We spent about an hour discussing it. then talked about other things. Then on the drive back he had more questions and we talked about it for about another hour. and this is with a guy who already trusted me as having some insight into how economics works.

Its a bit like Quantum Teleportation and the "Standard Model" of "Schroedinger's Cat"... It runs counter to experiential senses and thus requires an active effort to think abstractly. A skill that most have not developed to much of a level of sophisitication.

 

[degsme]

Yes but that is not what we are doing nor what we did over the last 30 odd years of free trade suicide. Our number one export now is refined gasoline, not very labor intensive is it? We need about 130 million paychecks to keep going...an economy based upon the service sector is what they wanted and that is what we got. But the services they were really talking about were financial services...Check this incredible interview Moyers just had with Bartlett...what happened to the Bartletts of the GOP?

http://billmoyers.com/segment/bruce-bartlett-on-where-the-right-went-wrong/

Bill Moyer's rocks.

But I disagree with Bruce Bartlett. GWB was simply Reagan with a Rubber stamp congress.

Reagan's Supply Side economics failed equally catastrophically. His "proposed balanced budgets" never were. Because he assumed increases in growth rates of GDP and Capital investment that simply never took place. Yes growth did take place - but it actually was ATTENUATED by things like the top marginal rate cuts.

The arguement conservatives make to defend Reagan's deficits is that Congress failed to enact the social program cuts Reagan asked for and that caused the deficits. That simply is not true.

1) the net social program cuts would have made up AT MOST 25% of the deficits Regan ran up. (realistically more like 10%)

2) These social program cuts would have REDUCED GDP growth. Just as they always have and currently are doing in the UK etc.

So realistically, Congressionl failure to cut the programs Reagan wanted to cut as deeply as he wanted to, had NO EFFECT on Reagan's deficts.

 

[Woolleybugger]

Well, I give Bartlett huge props for being so candid. Moyers let him off the hook on the Reagan era deficits, I think he was so amazed at the honesty from Bartlett that he kept his mouth shut out of courtesy. Bartlett says he is an economist and he probably is but most of these economists that become part of an administration end up being more politicians than economists, the job forces them to assimilate. Hey, I still think Keynes and the neo-Keynesians are right. Were I in charge, I would make sure I had Keanes from Australia, Roubini, Rogoff, Krugman, Stiglitz and Nassim on my panel for economic advice. I would never, ever get anyone with Wall Street ties, no sir.

 

[degsme]

Well, I give Bartlett huge props for being so candid. Moyers let him off the hook on the Reagan era deficits, I think he was so amazed at the honesty from Bartlett that he kept his mouth shut out of courtesy. Bartlett says he is an economist and he probably is but most of these economists that become part of an administration end up being more politicians than economists, the job forces them to assimilate. Hey, I still think Keynes and the neo-Keynesians are right. Were I in charge, I would make sure I had Keanes from Australia, Roubini, Rogoff, Krugman, Stiglitz and Nassim on my panel for economic advice. I would never, ever get anyone with Wall Street ties, no sir.

Yup. Pretty much in agreement. I'd also bring in Kahnemann on how to best pitch the resulting policy to the public...

 

[degsme]

I'm not talking about 2005, I'm talking about his chairmanship which preceeded 9/08. [/quote]

9/08 was already unpreventable as of 7/05.. that's the point of the graph. by 7/05 fully 50% of all "non-conforming ARMS" had been written. by the time Frank was sworn in as Chair in 2/07 75% had been written... There was simply nothing Frank could have done to prevent the crash. Unless you ascribe time travel to his skillset

 

[degsme]

THANKS... I found the ' wrap

tags around selected text ' button... now if I could only figure out how to be notified that my post has been replied to

you can set in your profile to have you notified by email... I found myself swamped by that so I turned it off. but I still stay "subscribed" to the threads in which I post. I then use the "settings" tab (top right) which then lists the threads I'm "subscribed" to that have new posts. Then I just click on the most recent and scroll around for any others.

 

[888888]

As Reagen said Degsme, there you go again, stating facts and making a sensible conclusion only to cloud up the beliefs of some.

 

[Lukey]

You mean like your attempt of "proof by insult" in claiming that your arguements are the only ones that are logical and any sane person could see that?

I said they would make sense to any logical and sane person. You are free to make that claim as well (giggle)...

 

[Bruce]

Government is not bigger? Is that so?



Stock market growth is a red herring. I don't like to use your suspect "leftist meat grinder of logic" type tactics but here is one place where it is relevant. If you adjust it for the (decreasing) value of the dollar (i.e. price it in gold) you really have a decline over the past decade. That's a pretty straightforward "adjustment" and one that has a real bearing on the matter at hand (as the rest of the economy has not performed on a nominal basis as well as the stock market so you need to look below the surface for the reason why).

Fewer people working as the cost of government explodes and we have experienced a decline in tax receipts as a percent of GDP. Hmmmm. Duh!

I assume no such thing. All I am assuming (and correctly, I might add) is that when people are faced with an uncertain return that ranges from plus 1.5% to minus 2% they will most likely choose to not make any such investment and will instead look for a tax shelter that might present a negative return but throws off huge tax losses with which they can shelter other income.

This isn't rocket science and I am presenting nothing here that would look anything other perfectly logical to any sane person.

Boeing is one of the biggest tax dodgers around.
Corporate welfare and the scam on the American people is a daily scandal. And it gets obscured sometimes in the rah-rah competition in the marketplace that we get sucked into by the traditional media. So, here's something to think about: you, the taxpayer, are about to shell out our billions of dollars to a corporation that PAYS NOT A DIME IN FEDERAL TAXES. The company is called Boeing.
In a surprise twist to a long-running saga, the Air Force said on Thursday that it would award a $35 billion contract for aerial fueling tankers to Boeing.
The Air Force said the first phase of the contract would be worth $3.5 billion, and it would cover the construction of the first 18 tankers by 2017. Boeing would build 179 tankers in all for about $35 billion.

I am acutely aware that this deal will also mean jobs for a long time for people who work for Boeing, particularly in Washington State--and many of those jobs, for machinists, are still pretty darn good-paying jobs despite the cuts machinists have taken.

But, neither of the above issues is what is at issue here. It's whether a very profitable corporation that does not pay a fair share in taxes should be even allowed to benefit from billions of dollars in taxpayer money.
Despite reporting nearly $10 billion in domestic pre-tax profits between 2008 and 2010, the Boeing Corporation, which was granted a contract worth as much as $35 billion to build airplanes for the federal government earlier this week, did not pay a dime of U.S. federal corporate income taxes during this three-year period.[emphasis added]
For example:In 2009, Boeing reported $1.5 billion in pre-tax profits, but didn’t pay any federal income tax at all on those profits. Instead, the company claimed an outright tax rebate of $132 million
The data, which are based on Boeing’s tax filings with the Securities and Exchange Commission don’t make it clear exactly which tax avoidance mechanisms Boeing used to reduce its tax liabilities in this way. But a 2008 report from the General Accounting Office found that Boeing had 38 subsidiaries located in foreign tax havens.[emphasis added]

 

[Bruce]

Um, it's "imbecile" not "embicile" (LOL indeed) and those kinds of insults are not tolerated here except in the "Crossfire" board.

So sue me.LOL

 

[degsme]

I said they would make sense to any logical and sane person. You are free to make that claim as well (giggle)...

Um I don't engage in logical fallacies without intent.

 

[Lukey]

Boeing is one of the biggest tax dodgers around.
Corporate welfare and the scam on the American people is a daily scandal. And it gets obscured sometimes in the rah-rah competition in the marketplace that we get sucked into by the traditional media. So, here's something to think about: you, the taxpayer, are about to shell out our billions of dollars to a corporation that PAYS NOT A DIME IN FEDERAL TAXES. The company is called Boeing.
In a surprise twist to a long-running saga, the Air Force said on Thursday that it would award a $35 billion contract for aerial fueling tankers to Boeing.
The Air Force said the first phase of the contract would be worth $3.5 billion, and it would cover the construction of the first 18 tankers by 2017. Boeing would build 179 tankers in all for about $35 billion.

I am acutely aware that this deal will also mean jobs for a long time for people who work for Boeing, particularly in Washington State--and many of those jobs, for machinists, are still pretty darn good-paying jobs despite the cuts machinists have taken.

But, neither of the above issues is what is at issue here. It's whether a very profitable corporation that does not pay a fair share in taxes should be even allowed to benefit from billions of dollars in taxpayer money.
Despite reporting nearly $10 billion in domestic pre-tax profits between 2008 and 2010, the Boeing Corporation, which was granted a contract worth as much as $35 billion to build airplanes for the federal government earlier this week, did not pay a dime of U.S. federal corporate income taxes during this three-year period.[emphasis added]
For example:In 2009, Boeing reported $1.5 billion in pre-tax profits, but didn’t pay any federal income tax at all on those profits. Instead, the company claimed an outright tax rebate of $132 million
The data, which are based on Boeing’s tax filings with the Securities and Exchange Commission don’t make it clear exactly which tax avoidance mechanisms Boeing used to reduce its tax liabilities in this way. But a 2008 report from the General Accounting Office found that Boeing had 38 subsidiaries located in foreign tax havens.[emphasis added]

Big government leads to big businesses. One hand washes the other.

 

[Lukey]

Um I don't engage in logical fallacies without intent.

So you only do so WITH intent? Got it! But then, I already knew that...

 

[Bruce]

I said they would make sense to any logical and sane person. You are free to make that claim as well (giggle)...

Chart's and graph's is well and good but the play for this period in time was written long ago. The world will inflate it's way out of any recession (depression) and the winners will remain the same. It started some time ago and will continue for the forseeable future. The middle class and poor may see a raise in dollars but they have already lost it when going to the store. Hope and change still remains the same for the masses. Commodities have soared and if the manufacturer of a product want's to sell it he'll have to pay the worker just enough to buy it.