Confed999

I'm all for cutting spending too, I'd start with all forms of non-emergency welfare, but I'll take what I can get.

__________________
No man is free until all men are free - John Hossack
I agree completely with this Administration’s goal of a regime change in Iraq-John Kerry
even if that enforcement is mostly at the hands of the United States, a right we retain even if the Security Council fails to act-John Kerry
He may even miscalculate and slide these weapons off to terrorist groups to invite them to be a surrogate to use them against the United States. It’s the miscalculation that poses the greatest threat-John Kerry

bonehead

When I graduated High school in 1983 a huge portion of the graduating class chose the military. There were no jobs and most could not go to college. They had two choices, life of crime or military.

Fast forward 22 years later... looks like dejavu.

I have a bachelors degree and am a skilled tradesman yet have a difficult time getting gainfull employment with todays economy coupled with Bushes vicious anti labor policies. Without unemployment insurance I would be screwed as there is no way I could support my wife and family with a Bushes "manufacturing" sic burger flipping min wage job.
I would rather have a job, but the welfare feeds the kids between jobs.

People go into the military for tradition, civic duty/ patriotism, or they have few other options. Keep people unemployed long enough and a military carreer looks rather good.

Julie

So which did you choose when you graduated Bonehead, life of crime, or the military?

Rhodan

Common misconception.

Inflation was miniscule and basically a non-issue between WWII and the late 60s - this is the period in which government was creating a large portion of the new money created every year. In Canada, the money supply went from approximately 10 billion to 30 billion from 1946 to 1967. About 50% of that was created by government and the other 50% by banks.

In 1967 the Canada Bank Act was changed to give banks greater access to consumer credit. Consumer mortgages were the big change and have had the biggest effect on our economy. The foundation for today's credit cards were laid and that has also had a big effect - though much smaller than real-estate. Pretty well all "western" countries adopted these same banking changes in the late 60s.

From 1967 to 1976 the money supply rocketed from ~$30 billion to !$320 billion dollars. A small portion was created by government but the bulk was created by banks through mortgage and credit card lending. The process continues today and is the source of both our big inflation and our massive total debt.

For those not familiar with it - every time a "bank" makes a loan, the money for that loan is created out of thin air. Example - I deposit $1000 in a bank then you come along and want to take out a loan. In Canada, there is NO reserve so you can borrow the entire $1000. Once the loan is made though, I STILL HAVE $1000! There is now $2000 in the bank. $1000 was created by the bank, out of nothing, and the money supply has now been inflated by 100%

Predictably, the >tenfold increase in money supply had a huge effect on inflation - thus the world-wide great-inflation that affected ALL western countries who adopted these banking changes. Monetarism in the mid 70s(Friedman) was an attempt to get the money supply under control - it failed miserably because it only curtailed government creation of money - which was a tiny portion of the new money each year.

Today inflation is controlled by two things: Interest rates (make money more expensive to borrow - limit the amount borrowed) and NAIRU (Non Accelerating Inflation Rate of Unemployment).

You have to remember that extra money does not cause rising prices directly. Its only when this extra money is SPENT that pressure is exerted on prices. If a large chunk of the new money can be kept out of the retail sector and into investments etc then that money has little effect on prices.

NAIRU is the mechanism by which much of the bank created money is kept out of the hands of the working class. Full employment is attained at roughly 3-4% unemployment. The number of people looking for work roughly equaling the number of job openings. At full employment levels, wages are reasonable and working class folks have good buying power. This was the western world situation for a good portion of the three decades after WWII. Full employment does not cause long term inflation - only new money can do that.

NAIRU for the US is usually 5.5% (its a sliding scale based partly on the phillips curve). THis is about 2% higher than full employment (3.5% avg). Whenever unemployment in the US drops below 5.5%, interest rates are raised to increase unemployment.

By keeping this 2% extra unemployment (about 6 million people for the US labour force IIRC - might be 3 million), two effects are created.

1) Fewer working class people are earning a living - keep more of the new money out of working class hands
2) Downward pressure on wages. When there's 1.5 people looking for every 1 job - wages are pressured downwards. Still more restriction on obtaining part of the new money supply AND allowing MORE of the new money supply to stay in the hands of those who aren't likely to spend it in the retail sector.

So, don't believe this hogwash about inflation being caused by government creating too much money. Governments haven't made more than 5% of new money each year since the 70s. Its banks creating money by making loans that have created this inflation/debt monster we've been living with for the past 3 decades.

Another fallacy is that Government monetizing the debt will create hyper-inflation. This debt is in the form of investments by others. If they were paid off, do you really think the investor will suddenly run down to wallmart and blow thier wad? NO - they'll re-invest someplace else. This money will NOT suddenly appear in the retail sector and push inflation - it will remain in the investments sector.

Another point about the debt - if it is not monetized then paying it off would cause massive deflation. Remember, a huge of the money supply is DEBT created by banks. When that debt is paid - that money disappears back into nothingness. By paying the debt you DEFLATE the currency.

"If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless situation is almost incredible -- but there it is."

- -- Robert H. Hemphill, former Credit Manager The Federal Reserve Bank of Atlanta, Senate Document #23, page 102, January 24,1939

So, monetizing the debt is not only a viable option - it is the only REAL option. Though without monetary reform to curtail bank created money and an INCREASE in the share of new money that government creates - it would only be a stopgap and useless in the long term.