The Sequester

[snapper]

snapper,

this will be my last post on the matter because you just constantly repeat your points.



a bubble by definition IS exuberance and reckless gambling; note that it developed when inflation rates were (until the present day) also at their historic lows.

so the idea that the -Fed- made money cheap doesn't compute.



because there was a recession in 2001-2002.



but the stimulus of war production involved a huge expansion of the manufacturing base, which is not going to happen, by definition, in a developed economy. moreover, the sums spent, given the relative size of the US GDP at the time, were considerably greater, and for considerably longer.

US defense spending went from less than 1% of GDP in 1914 to 15% by 1918. the US alone went from total federal expenditures of $970 million in 1913 to spending 30 billion dollars from the entire war. the UK owed the US a further $4 billion by 1919, which doesn't include the billions which the UK did pay for by cashing in on US investments during the war, as well as the several billion more from other belligerents ($10 billion in loans altogether).

for comparison's sake, the US GDP in 1914 was approximately $36 billion. which means your argument regarding the comparison between WW1 spending and the stimulus would make sense if the stimulus was approximately $15 trillion spent over four years, and if the US had received another $3.5-4 trillion from the UK.

http://www.bloomberg.com/video/is-in...cfAnrEcHg.html

That for the macro theory and P.S as for the current stock market highs here's some input from Saxobank: http://www.tradingfloor.com/posts/ma...ies-1877566080

[Doktor]

doktor,

not "for free". it was an exchange-- UK got weapons and foodstuffs and materiel, US got cold hard cash. this is WWI, when the Brits could still pay...

Check again. I believe they never repaid a part of the loan.

[astralis]

that is true, the UK never did pay for a good chunk of it. hm...if we adjust for inflation and GDP size, that's worth $500+billion now...that'd be a nice chunk of stimulus money

[zraver]

people have been screaming about inflation since 2008 and rates have fallen to historic lows. inflation has dipped and then held steady at these lows despite an extraordinary amount of inflationary action by the fed.

If you count the things that matter to John Q Public inflation has not remained low. Food and fuel inflation and the loss of buying power as the dollar sinks have been brutal. Ditto health care costs and tuition. Althernate methods of inflation monitoring show a 6-9% annual inflation rate.

[DOR]

The US budget defict was 4.5% in Q-1 2013. Spending was down 2% in October-April FY2013, in nominal terms. Subtract 1.8% inflation and that’s -3.8%, give or take a tenth.
—Financial Times, May 13, 2013, p. 2