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Old 01-31-2009, 11:10 AM   #81
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Come on alex..it's just another payout to a constituency, the UAW, it's just disguised as environmental.
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Old 01-31-2009, 11:38 AM   #82
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Come on alex..it's just another payout to a constituency, the UAW, it's just disguised as environmental.
no doubt...
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Old 01-31-2009, 01:03 PM   #83
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This may make some sense......do this and can the "porkimulus package" and we might do some good. If they just purchased up bad mortgage debt it would probably do more good than what's going on now.

http://www.reuters.com/article/topNe...090131?sp=true
Quote:
WASHINGTON (Reuters) - President Barack Obama promised on Saturday to help lower Americans' mortgage costs with a new plan, coming soon, that would revive the financial system and "get credit flowing again."

Obama, who has made fighting the country's economic and financial crises the top priority of his young administration, called on the U.S. Senate to approve an economic stimulus bill that the House of Representatives passed this week.

But as economic conditions get worse the president said new strategies were coming to address the country's ills.

"Soon my Treasury secretary, Tim Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families," Obama, a Democrat, said in his weekly radio address.

"We'll help lower mortgage costs and extend loans to small businesses so they can create jobs."

Obama did not offer specifics about the new plan or say when it would be unveiled. His chief spokesman, Robert Gibbs, said on Friday that the White House would hold meetings next week about financial industry regulation.
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Old 01-31-2009, 07:55 PM   #84
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Shit we don't learn from history....

New Deal v. 1.0 brought us some classic stuff--like the notion of enforced scarcity whereby the wise men in the government would cut supply of a thing in order to prop up prices....things like killing baby pigs and plowing up crops while people were going hungry. How stupid is that? If people have a problem being hungry, who other than a keynesian politician would think cutting the supply of food is a good idea?

anyhoo....

the hits just keep on coming...a new new deal plan may be on the way:

link

in addition to subsidizing new cars, the government is going to pay to slaughter the trade-ins:



so....the situation in the auto market is such that supplies are abundant -- way abundant to the point where some autoworkers need to find another way to make a living and auto buyers ought to see prices dropping...especially in the used car market.

But the government, in their infinite wisdom, wants to rectify an entirely tolerable situation by destroying economic resources. This is classic 'person a digs the hole and person b fills it up' kind of stuff.
hyperbole doesn't quite describe your comparing poor, starving people to buying old, polluting cars.

the texas program removed thousands of vehicles that spewed the highest amounts into our atmosphere. the cars that could be bought must have failed the pollution tests.

let me ask you, do you like elevated dangerous levels of ozone in our air? how about unhealthy particulates, sulphur dioxide and lead? do you like those getting in your lungs?

that ius what these "economic resources" are doing, they are harming our health.

this program has much more value than most of what is in the drunken stimulus bill.

this program acheives several goals: cleaner air, better fuel efficiency/less oil consumption, assistance to lower income people by reducing their transportation costs, and also economic stimulus. btw the vast majority of foreign label vehicles are now built in america, and contain mostly american parts.

and the uaw doesn't make those vehicles.

Quote:
A Modest Proposal: Eco-Friendly Stimulus
By ALAN S. BLINDER

ECONOMISTS and members of Congress are now on the prowl for new ways to stimulate spending in our dreary economy. Here’s my humble suggestion: “Cash for Clunkers,” the best stimulus idea you’ve never heard of.

Cash for Clunkers is a generic name for a variety of programs under which the government buys up some of the oldest, most polluting vehicles and scraps them. If done successfully, it holds the promise of performing a remarkable public policy trifecta — stimulating the economy, improving the environment and reducing income inequality all at the same time. Here’s how.

A CLEANER ENVIRONMENT The oldest cars, especially those in poor condition, pollute far more per mile driven than newer cars with better emission controls. A California study estimated that cars 13 years old and older accounted for 25 percent of the miles driven but 75 percent of all pollution from cars. So we can reduce pollution by pulling some of these wrecks off the road. Several pilot programs have found that doing so is a cost-effective way to reduce emissions.

MORE EQUAL INCOME DISTRIBUTION It won’t surprise you to learn that the well-to-do own relatively few clunkers. Most are owned, instead, by low-income people. So if the government bought some of these vehicles at above-market prices, it would transfer a little purchasing power to the poor.

AN EFFECTIVE ECONOMIC STIMULUS With almost all the income tax rebates paid out, and the economy weakening, Cash for Clunkers would be a timely stimulus in 2009. As was made clear during the Congressional debate last winter, prompt spending is critical to an effective stimulus program. And the quickest, surest way to get more consumer spending is to put more cash into the hands of people who live hand-to-mouth.

Here’s an example of how a Cash for Clunkers program might work. The government would post buying prices, perhaps set at a 20 percent premium over something like Kelley Blue Book prices, for cars and trucks above a certain age (say, 15 years) and below a certain maximum value (perhaps $5,000). A special premium might even be offered for the worst gas guzzlers and the worst polluters. An income ceiling for sellers might also be imposed — say, family income below $60,000 a year — to make sure the money goes to lower-income households.

The numbers in this example are purely illustrative. By raising the 20 percent premium, lowering the 15-year minimum age, or raising the $5,000 maximum price or the $60,000 income ceiling, you make the program broader and costlier — and create a bigger stimulus. By moving any of these in the opposite direction, you make the program narrower, cheaper and smaller.

People who sell their clunkers would receive government checks, perhaps paid to them at the motor vehicle bureau office where they turn in their old vehicles. They would be free to spend this money as they see fit, whether on a new car or truck or some other form of transportation — or anything else. To ensure that the program really pulls clunkers off the roads, only vehicles that had been registered and driven for, say, the past year would be eligible.

The government can either sell the cars it buys to licensed recyclers for scrap, or refit them with new emissions controls and resell them. But the government must not ship the cars to poor countries, where they would continue to belch pollutants.

Cash for Clunkers is not the pipe dream of some academic scribblers. Local variants are either now in operation or have been tested in California, Colorado, Delaware, Illinois, Texas, Virginia and several Canadian provinces. So there is no need for a “proof of concept.” Rather, a national Cash for Clunkers program could learn from all this experience in building a better system.

THE big need to date has been money, which is why the scope of Cash for Clunkers programs has been limited. And that, of course, is where the need for stimulus comes in. We now want intelligent ways for the federal government to spend money.

Here’s a high-end cost calculation for a national program. Suppose we took two million cars off the road a year, at an average purchase price of $3,500 (the top price in the Texas program today). Including all the administrative costs of running the program, that would probably cost about $8 billion. Compared with other nationwide income-transfer or environmental policies, that’s a pretty small bill. For stimulus purposes, it would, of course, be better to run the program on a larger scale, if possible. There are over 250 million cars and light trucks on American roads, and some 30 percent are 15 years old or older. That’s at least 75 million clunkers. At five million cars a year — an ambitious target, to be sure — the program would cost less than $20 billion, still cheap compared with the $168 billion stimulus enacted in February.

And what would all this money buy? First, less pollution. The Texas program estimated that clunkers spew 10 to 30 times as much pollution as newer cars. Second, the subsidy value (the 20 percent premium in my example) is a direct income transfer to the owners of clunkers, who are mostly low-income people. Third, these folks would almost certainly spend the cash they receive — not just the subsidy, but the entire payment, giving the economy a much-needed boost.

Oh, and I left out a fourth possible goal. By pulling millions of old cars off the road, Cash for Clunkers would stimulate the demand for new cars as people trade up. It need hardly be pointed out that our ailing auto industry, like our ailing economy, could use a shot in the arm right now. Scrapping two million or more clunkers a year should help.

With today’s concerns over stimulus, inequality and greenhouse gases, as well as an aging vehicle fleet, Cash for Clunkers is an idea whose time may finally have come. Write your congressman.

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Old 02-06-2009, 03:28 PM   #85
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Speaking of s___ we don't learn from history....

Quote:
Obama must get Fortune 500 to delay job cuts: economist
Prominent economist suggests a White House-endorsed national freeze in job cuts

By Greg Robb, MarketWatch

(MarketWatch) - It is fine for the White House to limit bank CEO pay, but the real urgency is for President Obama to get corporate chief executives to stop slashing their payrolls, says a prominent economist.

Layoffs at America's largest companies are only weakening the economy at a perilous time, said Lawrence Chimerine, who was chairman of the economic firm WEFA Group and prior to that was manager of economic research at IBM Corp.

Chimerine is proposing that the White House call for a "national initiative" in which Corporate America would agree to temporarily put a freeze on further job cuts - probably for three or four months - which he says would allow the Obama stimulus package to take hold.

Chimerine spoke on a conference call this week supporting the Obama stimulus plan. He said he was "in the process" of raising his idea with Obama and his economic team.
Seems reasonable enough -- I'd argue against the economics, but really the reason I put this in "Wackonomics" is because I'm willing to bet that this guy doesn't have a clue that this sort of "initiative" that he wants to shoot to Obama was a key part of Hoover's plan....

We're still on the front end of the depression, Bush/Obama are still making Hoover's mistakes -- they haven't even started to repeat FDR's mistakes yet.
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Old 02-06-2009, 05:12 PM   #86
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Any ticker news i read start with cut, down, loss, bn. mn. or so. It´s a horror.
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Old 02-06-2009, 10:41 PM   #87
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Please make it stop.
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Old 02-07-2009, 12:59 AM   #88
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I think I read there are 11.6 million unemployed people in the US. If the government set up a system whereby businesses could apply for $50,000 to legitimately employ an additional person, they could employ every unemployed person for only $580 billion.
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Old 02-07-2009, 07:04 AM   #89
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I think I read there are 11.6 million unemployed people in the US. If the government set up a system whereby businesses could apply for $50,000 to legitimately employ an additional person, they could employ every unemployed person for only $580 billion.
Which businesses should get the subsidies? After all, even I would hire a person in the $50,000 dollar rate if the government paid for it. He could wash my clothes or something...

Where does the money come from? After all, government is a redistributor of wealth. It has to take from someone either through:
- taking out loans (passing the debt on to our grandchildren... yep, that worked out just fine during the last 30 years or something)
- creating money out of thin air (stealing purchasing power from those who cannot increase their income immediately after this money is entered into the economy - that is: the poor and the middle class)
- taxing people which is very unlikely
The most probably scenario is the creation of new money (in your scenario and in the stimulus scenario of Obama), which is only going to make the real endgame crisis that much worse - that is: the dollar crisis.

Government has and will never stop a recession. It can only create them or prolong them. If they reduced their burden on society they might even stop a recession - but that is what they never do.
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Old 02-07-2009, 09:13 AM   #90
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the zimbabwe school of economic thought
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Old 02-07-2009, 07:21 PM   #91
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Originally Posted by Arne View Post
Which businesses should get the subsidies? After all, even I would hire a person in the $50,000 dollar rate if the government paid for it. He could wash my clothes or something...

Where does the money come from? After all, government is a redistributor of wealth. It has to take from someone either through:
- taking out loans (passing the debt on to our grandchildren... yep, that worked out just fine during the last 30 years or something)
- creating money out of thin air (stealing purchasing power from those who cannot increase their income immediately after this money is entered into the economy - that is: the poor and the middle class)
- taxing people which is very unlikely
The most probably scenario is the creation of new money (in your scenario and in the stimulus scenario of Obama), which is only going to make the real endgame crisis that much worse - that is: the dollar crisis.

Government has and will never stop a recession. It can only create them or prolong them. If they reduced their burden on society they might even stop a recession - but that is what they never do.
Dude you totally missed my point, which was it'd be cheaper -by $200 billion- to just give every unemployed person a $50,000-backed job. It's not a recommendation, it's a critique of the current stimulus. If it takes $780 billion to not create enough jobs for everyone in America, then what the heck is it for?

Not to mention, my plan would freaking work tomorrow as opposed to 2011. And I came up with it at 11 PM on a Friday night while scratching my ass.
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Old 02-07-2009, 07:42 PM   #92
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...Not to mention, my plan would freaking work tomorrow as opposed to 2011. And I came up with it at 11 PM on a Friday night while scratching my ass.
Which means you're over-qualified to be a US Congressman.
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Old 02-10-2009, 02:21 AM   #93
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Dang. UBS loss 13 bn. € wtf
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Old 02-10-2009, 05:49 PM   #94
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Dude you totally missed my point, which was it'd be cheaper -by $200 billion- to just give every unemployed person a $50,000-backed job. It's not a recommendation, it's a critique of the current stimulus. If it takes $780 billion to not create enough jobs for everyone in America, then what the heck is it for?

Not to mention, my plan would freaking work tomorrow as opposed to 2011. And I came up with it at 11 PM on a Friday night while scratching my ass.
I'm sorry for that. It still bugs me that people are only criticizing the way this bill is carried out. It's a lonely few people who disagree with it on principle.
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Old 02-11-2009, 10:53 AM   #95
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ya know arne.....you and I both know that the central banking/fiat currency thing is a house of cards that will crumble...the question is when not whether.

I'm reading this morning that Mickey Mouse (the new Sec. Treas., whatever his name is) is getting ready to raise (&print) about $2 T (T is the new B) of funds for his banker buddies, and I'm also reading that big banks across Eur-Asia are $23 T in the hole. It really struck me this morning--maybe this is it.

I've kind of thought all along that these guys would wise up and pull out of the tailspin, but I'm not so sure any more. Maybe we've already crossed the Rubicon, to mix a metaphor, and maybe this is what the beginning of the end looks like. Hmm....I honestly don't know...

....guess what I'm saying is that I've still enough reason to believe that this isn't the beginning of the end that I'd bet one hundred $100 federal reserve notes that the fiat/feds won't crumble if I could get anyone to take me up on the bet.
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Old 02-11-2009, 11:16 AM   #96
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What's going to replace the Dollar once the bottom completely falls out - the Amero (N. America), or are we just going to skip that and adopt a single world-wide currency(/government)?
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Old 02-11-2009, 11:27 AM   #97
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What's going to replace the Dollar once the bottom completely falls out - the Amero (N. America), or are we just going to skip that and adopt a single world-wide currency(/government)?
Goats, tobacco leaves...personally I think condoms would work well as a medium of exchange--they're durable, they have value in use as well as value in exchange, and they already fit into wallets.

In all seriousness, I don't have a friggin' clue. Predictions are tough, especially when they're about the future.
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Old 02-11-2009, 11:36 AM   #98
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Goats, tobacco leaves...personally I think condoms would work well as a medium of exchange--they're durable, they have value in use as well as value in exchange, and they already fit into wallets.

In all seriousness, I don't have a friggin' clue. Predictions are tough, especially when they're about the future.
Kind of a tough position we've put ourselves into with globalism - not only is this country failing, but the entire concept of capitalism is failing along with it (which is somewhat shocking, considering how much older one is than the other...)

I guess that's what happens when you let the alchemists convince you that a currency-based economy makes more sense than a resource-based economy... Looks like they were finally able to make gold out of "nothing" after all - too bad illusions aren't sustainable...


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Old 02-11-2009, 12:17 PM   #99
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With a caveat that my facts concerning international currency are always questionable....

Back in the day, exchange rates were fairly constant for good reason -- a "Dollar" was not money per se, nor was "Pound Sterling" or a "Yen"....these terms all signified fixed amounts of gold or silver--a "dollar" literally meant exchangeable for a fixed weight of gold, and hence the exchange rates between currencies were whatever got you the same amount of gold....the money was gold and silver, the manner in which money traded hands was through promisary notes called "dollars" and "yen", etc...

The big-dog governments didn't like this arrangement because every time they pissed away large sums of money or fought costly wars they had to go directly to their peeps for more money, and the peeps never were happy about this and this threatened big dogs.

so naturally and inevitably...along comes Nixon and he says 'screw all this, you aren't getting any gold for a dollar'. Now all "dollar" means is green piece of paper -- a "dollar" ceases to mean a certain weight of gold (redeemable from Ft. Knox), and came to mean "a green piece of paper which says in god we trust, because we sure as hell can't trust the people who manage the money supply".

but I digress...if can't get any gold for the dollar, then I sure as hell ain't going to exchange yens or pounds sterlings or anything else that is redeemable in gold for something that isn't, hence other currencies were gradually de-coupled from gold and silver....

So....what we've got now is about a 40 year old international economic system where Country A trades worthless pieces of paper to Country B for worthless pieces of paper, the perceived value of these worthless pieces of paper backed only by the trustiworthiness of bankers meeting in secret.

Amazingly this system is starting to break down. Who'd of thunk it?

Historically, 40 years is a pretty good run for a fiat currency, so the surprise isn't so much that it's breaking down as that it has lasted this long. If you stop and think about a little US history, the Federal Reserve Note is actually the 3rd fiat currency we've had in a couple of hundred years...the Continental being the first and the Confederate dollar being the second (ok, so not all of us had the Confederate dollar, but the point is the same)....both of these met swift ends, unsurprisingly.
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Old 02-11-2009, 01:09 PM   #100
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I'm sorry for that. It still bugs me that people are only criticizing the way this bill is carried out. It's a lonely few people who disagree with it on principle.
Oh, I too disagree with it on principle. But it looks like we've already lost that argument. The government was dead set on passing this monstrosity from the start.
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Old 02-11-2009, 06:14 PM   #101
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fwiw...a few notes on the semantic evolution of the Dollar...

The Dollar became the official currency of the US Government in 1792 and was, by definition, about 1/15th of an ounce of gold. The punishment for debasing the Dollar was death, and if this law were intact today we'd have a lot of dead bankers -- a Dollar today is worth about 1/1000th of an ounce of gold.

The big green piece of paper with a pic of Geo. Washington, aka the Federal Reserve Note, was introduced in the early twentieth century (along with the introduction of the Federal Reserve, not too coincidentally). At the time, this Federal Reserve Note would not have read "ONE DOLLAR", but instead something to the effect of "Payable in gold on demand, pay to the bearer ONE DOLLAR."

This, in my estimation, is an important thing to grasp firmly -- what we call a dollar today was once not considered a Dollar but a promise to hand over a Dollar. Somewhere along the way it's like somebody made a promise in writing and then later said...
"ummmm...you know what...that promise I made in writing...well instead of me making good on that promise, you just keep the piece of paper and we'll call it all square. See ya."
I don't know about you, but I think that's quite a leap--it's hugely beneficial to the guy writing the promise but a real kick in the crotch to the guy bearing the note.

Let's bear in mind that if you've got a chunk of gold, whether it's a coin or a ring or whatever, you can go just about anywhere on earth and exchange it for something. The transaction may be tedious, but there's no question that the value of that thing doesn't depend on whether Timothy Geither and Ben Bernanke keep their stuff together. Gold has value which is not dependent up on the decree and (even less reliably) the prudence of the king. This has been the case with gold for the last few thousand years and it'll likely be the case for a few thousand more (unless the robots take over).

Anyway....I suppose one could argue that the evolution of "Dollar" in the US from a certain amount of gold to a promise to pay a certain amount of gold to a useless piece of paper is a good thing, but there's not much arguing that this is the history.
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Old 02-12-2009, 08:41 AM   #102
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so... what you are saying is that "the dollar" as we know it today was a technological advance, much in the same way that a demand deposit (checking account) and a credit card was.

amen to that.
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Old 02-12-2009, 09:08 AM   #103
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so... what you are saying is that "the dollar" as we know it today was a technological advance, much in the same way that a demand deposit (checking account) and a credit card was.

amen to that.
Actually, that'd be what you are saying.

I wouldn't call it a technological advance -- the chinese had paper (or rather, fiat) money 1,000 years ago. I would say that fiat currencies are a "technology" that have been tried and tested many times in history, and the answer is always the same.
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Old 02-12-2009, 10:56 AM   #104
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yup, and the first bunch of people that tried to make mushroom stew probably didn't fare too well... but I love me a portabella sandwich
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Old 02-12-2009, 11:07 AM   #105
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yup, and the first bunch of people that tried to make mushroom stew probably didn't fare too well...
likewise, the alchemists have never quite figured out how to make gold out of common materials....but that doesn't keep them from trying!
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Old 02-12-2009, 01:30 PM   #106
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true but over the years people HAVE managed to develop some very nice modern materials as well. I find the cotton shirts much more comfortable than the old hair kind.
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Old 02-12-2009, 02:18 PM   #107
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true but over the years people HAVE managed to develop some very nice modern materials as well. I find the cotton shirts much more comfortable than the old hair kind.
Certainly...the thing about cotton, or old hair, or paper for that matter is that the value of a thing tends toward the marginal cost of production....

Speaking of the marginal cost of paper, I understand that the marginal cost of a $100 bill is about 5 cents....
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Old 02-12-2009, 02:19 PM   #108
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Speaking of the marginal cost of paper, I understand that the marginal cost of a $100 bill is about 5 cents....
BS!








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Old 02-12-2009, 03:32 PM   #109
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true enough... assuming that all the preconditions of "perfect competition" exist.


so when you and I are able to start cranking our own printing presses and crank out $100 bills, the price will eventually drop down to 5cents (see Zimbabwe)
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Old 02-12-2009, 04:35 PM   #110
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Government has and will never stop a recession. It can only create them or prolong them. If they reduced their burden on society they might even stop a recession - but that is what they never do.
Whoa my friend, you might want to go back and take a microeconomic class at a local community college... fiscal policies can be proven mathmatically to help minimize the swings of a capitalist economy.
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Old 02-13-2009, 09:18 AM   #111
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true enough... assuming that all the preconditions of "perfect competition" exist.

so when you and I are able to start cranking our own printing presses and crank out $100 bills, the price will eventually drop down to 5cents (see Zimbabwe)
Zimbabwe's currency didn't go to hell because the central bank there had competition....it went to hell because they thought the solution to their economic problems was to print more money.

(and if fiat currency is a technological advance, then Zimbabwe is one of the most technologically advanced countries on earth).

“The US government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many US dollars as it wishes at essentially no cost" -- Helicopter Ben


Alchemists contributed more to chemistry than our modern bankers will contribute to the field of printing. Let's note that $100 1971 dollars is worth $17 dollars today, so the Fed is steadily moving the value of the currency towards it's production cost, even in the absence of competition.

If you give politicians and bankers a printing press and a fiat currency, they'll print themselves into oblivion. (I know this in the same way that I can guess the outcome of giving a 16 year old boy a box of porn, a bottle of hand lotion and a house to himself). Maybe not Volcker, or Greenspan, and maybe not Helicopter Ben....but it only takes one to make that mistake to send the currency on a death-spiral -- the likelihood of finding that one in the long-run is about certain. That is, the long-run value of a fiat currency is zero. The question is not whether the Federal Reserve Note will one day be worthless, the question is when.
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Old 02-13-2009, 09:21 AM   #112
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Whoa my friend, you might want to go back and take a microeconomic class at a local community college... fiscal policies can be proven mathmatically to help minimize the swings of a capitalist economy.
Whoa my friend....that class you're describing is not micro-economics, but macro-economics....what is commonly called "macro-economics" and taught at local community colleges is actually Keynesian Economics, and what Keynesianism proves is that over-simplified mathematical models based on flawed assumptions can lead one to a lot of faulty conclusions.
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Old 02-13-2009, 09:51 AM   #113
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The dollar is losing value over time. By construction. (on the other hand, it lost a LOT of value in the late 70s, also by construction, but not planned construction in that case!)

a little bit of inflation isn't a bad thing... it allows adjustments and lets steam out of the economy without forcing as much pain as a reduction in real prices would entail with hard fixed nomnal prices ... PLUS it keeps a little bit of a buffer from a deflationary environment, which IS painful, and has a more vicious self feeding cycle than the self feeding inflationary cycle.

Yup, economists (most) got it wrong in the late 50s to mid 70s... and thought there was a fixed tradeoff between inflation and growth. That led the fed chairmen under Eisenhower, Kennedy, Johnson, Nixon and Ford to conclude that if you accepted 5% inflation rather than 2% inflation you could permanantly push up growth rates by 1% a year.

whoops, they got that one wrong.

Carter appointed Volker EXPLICITLY to correct that mistake. Volker's major role was to be a credible "inflation hawk" and it cost the country a deeeeeep recession for Volker to sufficiently prove his point and crush inflation expectations... but it worked, and Reagan got the dividend checks to prove it.

THere will be more mistakes, true. (Greenspan not viewing asset prices in a "broader inflation index" is a good example)... but the Austrian idea that all bubbles and all misalignments in the economy are caused exclusively by government or monetary authority mistakes (or more to point --- ANY action they take) is pure crap. THere have always been business cycles, ups and downs, an crashes... always.

Credible monetary authorities can diminish the amplitude of the deviations, but not eliminate them. And then they make mistakes, also. Big ones sometimes. REALLY big ones ocassionally (like Winston Churchill's decision to attempt to restore the pound to its pre WWI parity after the end of the war (with some heavily Austrian sounding logic, btw). The pound lost its pre-eminent position in world finance... and we Americans can say "thank you very much" (the German monetary authorities also made EVEN WORSE mistakes at the same time... with decided UN-Austrian logic)

Will the same thing happen to the dollar eventually? Probably. Some day.

Will it be replaced by gold? (or some other specie) I hope not. But then I am a pinkocommie-dirtmunching-treehugging-flagburning-marriagekilling-palinhating-liberal.
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Old 02-13-2009, 11:37 AM   #114
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....PLUS it keeps a little bit of a buffer from a deflationary environment, which IS painful, and has a more vicious self feeding cycle than the self feeding inflationary cycle.
The idea that a deflationary environment is a "viscious self-feeding cycle" is something upon which we'll have to agree to disagree.

There isn't any logical, theoretical reason to believe this to be the case, and to the best of my knowledge severe economic downturns have happened in inflationary environments as often or more often than in deflationary environments (one notable downturn in a deflationary environment was our own Great Depression, the cause of which was wrongly attributed to the symptom of falling prices).

Moreover, the 19th century was basically a sustained period of deflation--it was also a period of two industrial revolutions and sustained growth in GDP/capita notwithstanding the fact that half of the country's industry and infrastructure was destroyed by a war. That is, if deflation causes an economy to spiral downward, then the 19th century should have been a long period of economic stagnation at best.

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...but the Austrian idea that all bubbles and all misalignments in the economy are caused exclusively by government or monetary authority mistakes (or more to point --- ANY action they take) is pure crap. THere have always been business cycles, ups and downs, an crashes... always.
1. It's not quite accurate to say that Austians believe that bubbles and misalignments are caused by government or monetary authority mistakes. More accurate would be to say that Austrians believe that macro-bubbles and mislalignments are caused by inflationary credit-expansion--fractional reserve lending with smaller and smaller fractions--and that governments (especially central banks) enable or actively encourge inflationary credit expansion, and moreover that 'very bad' misallocations occur when the gubmint tries to correct cycles by encouraging more of the behavior that caused the boom in the first place.

Amongst themselves, Austrians debate whether the government should outlaw fractional reserve banking as fraud (Rothbard) or allow the market to let banks that lend money they don't have go belly-up (Von Mises). I suspect we'll have to agree to disagree on whether fractional reserve banking is necessary or good or whatever, but the point is that the Austrian position doesn't depend upon government intervention per se, but rather that government's often have a vested interest in encouraging credit expansion, and thereby cause inflationary bubbles and misalignments.

2. Sure, there have 'always' been business booms and busts, just like there has 'always' been banks loaning money that they don't have and governments who are happy to print and borrow and spend money. By this I mean it is not a refutation to cite the persistent nature of booms and busts as a refutation of the Austrian school. This is kind of like saying, "people have always gotten sick, the idea that this sickness is causd by germs is pure crap."
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Old 02-13-2009, 12:56 PM   #115
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The idea that a deflationary environment is a "viscious self-feeding cycle" is something upon which we'll have to agree to disagree.

There isn't any logical, theoretical reason to believe this to be the case, and to the best of my knowledge severe economic downturns have happened in inflationary environments as often or more often than in deflationary environments (one notable downturn in a deflationary environment was our own Great Depression, the cause of which was wrongly attributed to the symptom of falling prices).

Moreover, the 19th century was basically a sustained period of deflation--it was also a period of two industrial revolutions and sustained growth in GDP/capita notwithstanding the fact that half of the country's industry and infrastructure was destroyed by a war. That is, if deflation causes an economy to spiral downward, then the 19th century should have been a long period of economic stagnation at best.
and Jim Thorpe and Babe Ruth smoked cigarettes and drank like sailors on shore leave, whereas Shawn Bradley was a teetotaler... we can draw our own conclusions about the effects of cigarettes on athleticism.

I think you are right... we will just have to disagree on deflation

(an a aside, I just typed that as defellation before I fixed it.... i wonder what the hell would be involved to de-fellate somebody?)

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1. It's not quite accurate to say that Austians believe that bubbles and misalignments are caused by government or monetary authority mistakes. More accurate would be to say that Austrians believe that macro-bubbles and mislalignments are caused by inflationary credit-expansion--fractional reserve lending with smaller and smaller fractions--and that governments (especially central banks) enable or actively encourge inflationary credit expansion, and moreover that 'very bad' misallocations occur when the gubmint tries to correct cycles by encouraging more of the behavior that caused the boom in the first place.

Amongst themselves, Austrians debate whether the government should outlaw fractional reserve banking as fraud (Rothbard) or allow the market to let banks that lend money they don't have go belly-up (Von Mises). I suspect we'll have to agree to disagree on whether fractional reserve banking is necessary or good or whatever, but the point is that the Austrian position doesn't depend upon government intervention per se, but rather that government's often have a vested interest in encouraging credit expansion, and thereby cause inflationary bubbles and misalignments.
whoah! 100% reserves for banks is the prescription? $1 in their vault for every dollar that they lend out? So entirely abolishing credit is the answer to eliminating business cycles?

That would certainly work partially... by ensuring that there was barely any growth to turn into bubbles in the first place. (no way it would entirely, though--- people are fully capable of burying themselves in shit, even without leverage... it would just take longer)

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2. Sure, there have 'always' been business booms and busts, just like there has 'always' been banks loaning money that they don't have and governments who are happy to print and borrow and spend money. By this I mean it is not a refutation to cite the persistent nature of booms and busts as a refutation of the Austrian school. This is kind of like saying, "people have always gotten sick, the idea that this sickness is causd by germs is pure crap."
ah, but the austrians are often pointing to the good old days, before the fed and its ilk detached the economy from its sound gold foundation (eventually) and overall started to meddle into the smooth working affairs of the economy.

a closer analogy would be to a group that wanted to claim that without all this pesky economic progress (and the pollution that comes with it) we would all be pollutant free and healthy, like back in the days of King Richard II.



now excuse me... i have to figure a way to get my own personal portion of the economy re-fellated
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Old 02-13-2009, 07:27 PM   #116
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whoah! 100% reserves for banks is the prescription? $1 in their vault for every dollar that they lend out? So entirely abolishing credit is the answer to eliminating business cycles?
You sure have no idea what Rothbard was talking about. A little hint: time deposits. - If you want interest on your money you have to give it to a bank for a predefined period of time, or you have to make a loan yourself.

The basic principle lies in property rights. Either you believe in property rights or you don't.
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Old 02-15-2009, 11:04 AM   #117
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yeah arne, also....what isn't saved can't really be lent. Fractional reserves, I think, give the illusion that we can have our cake and eat it too.
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Old 02-15-2009, 11:28 AM   #118
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and Jim Thorpe and Babe Ruth smoked cigarettes and drank like sailors on shore leave, whereas Shawn Bradley was a teetotaler... we can draw our own conclusions about the effects of cigarettes on athleticism.
if one were to argue that cigarettes causes people's heads to explode, thereby rendering them unfit for competition, then I think the examples of Jim Thorpe and Babe Ruth would rebut that argument pretty effectively.

by way of analogy....this is pretty much the argument against deflation -- that it feeds a viscious cycle downward....

...but it doesn't, and the 19th century gives us about a hundred years of evidence that the fears stoked about deflation are a bit of reefer madness.

(btw.... I believe "Fiscal Stimulus" = "Re-fellating the Economy")
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Old 02-17-2009, 03:54 PM   #119
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Originally Posted by Arne View Post
You sure have no idea what Rothbard was talking about. A little hint: time deposits. - If you want interest on your money you have to give it to a bank for a predefined period of time, or you have to make a loan yourself.

The basic principle lies in property rights. Either you believe in property rights or you don't.
I wasn't quoting Rothbard, I was quoting Alex. Fractional reserves are what enable a bank to lend out money.

CDs already are figured differently... a bank does not have to reserve as much against a CD as they do against a demand deposit. But in both cases they do have to reserve SOME, but not 100 percent. Somewhere in between 0% and 100% is the optimal reserve amount. I am willing to accept arguments that the current (recent) level was too low, PARTICULARLY in the face of all the the technical innovation that was taking place. CDOs and the like DID in fact help to diversify risk, but they were not really stress tested (until now) so HOW MUCH they diversified risk was uncertain... PARTICULARLY because they fundementally altered the behavior of both borrowers and lenders, rendering historical statistical analysis basically useless.

BUT the fact remains, some reserve level between 0 and 100 is optimal...

I find it shocking that it is the libertarians of the group that want the government to essentially universally outlaw banking as we know it (by mandating 100% reserves) in the face of a market misallocation. Do the Austrian theorists really know THAT MUCH better than the individuals that have actually put their $$$ on the line?
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Old 02-17-2009, 03:56 PM   #120
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and property rights in this case are exactly whatever they are negotiated as. You sign a contract when you borrow or lend that lays out the acceptable usage of the borrowed/lent funds. Property rights are perfectly well defined in a lending agreement.
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fluffonomics, got a bit fluffy in here, price-to-fluff ratio

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