Economy, Banks, Gold, and other stuff.

[Parihaka]

The reason to avoid systemic collapse is that we have nothing better with which to replace it.

The system you're referring to is one that post dates the beginnings of "the greatest explosion of wealth and stability the world has ever seen" and was put in place to tap into the wealth created by entrepreneurs on behalf of the ruling class.
The only purpose it serves is to maintain status quo circa the 18th century power structures and prevent private enterprise from becoming more powerful than those state/monarchial structures.
Private enterprise and the flow of capital can get on just fine without government control/tithes.

[DOR]

The system you're referring to is one that post dates the beginnings of "the greatest explosion of wealth and stability the world has ever seen" and was put in place to tap into the wealth created by entrepreneurs on behalf of the ruling class.
The only purpose it serves is to maintain status quo circa the 18th century power structures and prevent private enterprise from becoming more powerful than those state/monarchial structures.
Private enterprise and the flow of capital can get on just fine without government control/tithes.

.

Exactly which part of "the greatest explosion of wealth and stability the world has ever seen" were you planning on jettisoning? Was it the bit about pulling more people out of poverty than all other systems, combined? Or, maybe the part about raising standards of living higher and faster for a larger share of the world's population than ever before in human history?

Do tell.

[Parihaka]

.

Exactly which part of "the greatest explosion of wealth and stability the world has ever seen" were you planning on jettisoning? Was it the bit about pulling more people out of poverty than all other systems, combined? Or, maybe the part about raising standards of living higher and faster for a larger share of the world's population than ever before in human history?

Do tell.

Which part of "The system you're referring to is one that post dates the beginnings of "the greatest explosion of wealth and stability the world has ever seen"" do you not understand.


Do tell.

[snapper]

.

Exactly which part of "the greatest explosion of wealth and stability the world has ever seen" were you planning on jettisoning? Was it the bit about pulling more people out of poverty than all other systems, combined? Or, maybe the part about raising standards of living higher and faster for a larger share of the world's population than ever before in human history?

Do tell.

You are NOT creating more wealth. That is done by finding efficiencies or innovating to produce a product that supplies a need/want. You are just making more debt for the ordinary person... The stock market isn't 'booming', for a start only 1 in 10 people have a stock portfolio anyway and an enormous amount of normal peoples money has been poured into the banks who are now seeking yield (since the Fed is keeping the interest rate artificially low). Don't worry... I imagine the stock market will rise probably for the rest of this year with minor corrections... as long as Bernanke keeps the tap on.

Answer me this David: How does QE help the man on the street and when can it end?

Regarding unemployment the Fed said it would keep up 'Operation Twist' or QEternity until unemployment fell to 6.4%. Well if reducing unemployment to 6.4% is a good idea why isn't 6.3% better? Why have unemployment if it hurts the economy and simply with Bernanke's magic pc we can kill it?

[DOR]

Parihaka,
We seem to be having a problem defining terms.

1. What is the ‘system’ you refer to that post dates the beginnings of what I called "the greatest explosion of wealth and stability the world has ever seen” ?

2. By what measure or logic do you conclude that the ‘system’ which I referred to has been superseded by another?

3. What is the nature of that ‘system’ you allege to have superseded the post-WWII global financial, economic and trading arrangements?

= = = = =

snapper,

Go look at global poverty, literacy, caloric intake and hygiene data (just to keep it simple) for the past 50 years. Then, come back and explain a bit more about what you mean by wealth not being created.

Answer me this David: How does QE help the man on the street

We’re not in deflation.
The banking system has not collapsed.
Unemployment is not 12%.
The economy has grown for 13 straight quarters.

and when can it end?

I don’t know, but why in the world would you want to stop doing the only thing anyone has found that works, and which happens to be the new strategy for those who tried the opposite, and failed?

Regarding unemployment the Fed said it would keep up 'Operation Twist' or QEternity until unemployment fell to 6.4%. Well if reducing unemployment to 6.4% is a good idea why isn't 6.3% better? Why have unemployment if it hurts the economy and simply with Bernanke's magic pc we can kill it?

Seriously? Do you really not understand the nature of employment, transition from job to job, and the simple concepts that guide thinking on macroeconomic policy?

[cyppok]

Parihaka,
We seem to be having a problem defining terms.

1. What is the ‘system’ you refer to that post dates the beginnings of what I called "the greatest explosion of wealth and stability the world has ever seen” ?

2. By what measure or logic do you conclude that the ‘system’ which I referred to has been superseded by another?

3. What is the nature of that ‘system’ you allege to have superseded the post-WWII global financial, economic and trading arrangements?

= = = = =

snapper,

Go look at global poverty, literacy, caloric intake and hygiene data (just to keep it simple) for the past 50 years. Then, come back and explain a bit more about what you mean by wealth not being created.




We’re not in deflation.
The banking system has not collapsed.
Unemployment is not 12%.
The economy has grown for 13 straight quarters.




I don’t know, but why in the world would you want to stop doing the only thing anyone has found that works, and which happens to be the new strategy for those who tried the opposite, and failed?



Seriously? Do you really not understand the nature of employment, transition from job to job, and the simple concepts that guide thinking on macroeconomic policy?

hogwash(nonsense)

[Parihaka]

Parihaka,
We seem to be having a problem defining terms.

Not terms, time scales.
The explosion of wealth you refer to began long before the modern international economic system, to which I bow to your obvious expertise.
Your system however is a product of that explosion, an imposed control of the means of exchange, enabling those in power to divert wealth from the producers to fund whichever romantic notion took and takes their fancy.
Your system, its variations and iterations are a product of romanticism, the counter-enlightenment, and post date the primary cause of this explosion of wealth, the enlightenment and scientific method, by about 150 years.

I am not espousing the removal of an international economic system, but I strongly dispute a claim that those systems are anything other than a bridle and saddle on the growth of wealth.

[Gun Boat]

Parihaka,
We seem to be having a problem defining terms.

1. What is the ‘system’ you refer to that post dates the beginnings of what I called "the greatest explosion of wealth and stability the world has ever seen” ?

2. By what measure or logic do you conclude that the ‘system’ which I referred to has been superseded by another?

3. What is the nature of that ‘system’ you allege to have superseded the post-WWII global financial, economic and trading arrangements?

= = = = =

snapper,

Go look at global poverty, literacy, caloric intake and hygiene data (just to keep it simple) for the past 50 years. Then, come back and explain a bit more about what you mean by wealth not being created.




We’re not in deflation.
The banking system has not collapsed.
Unemployment is not 12%.
The economy has grown for 13 straight quarters.




I don’t know, but why in the world would you want to stop doing the only thing anyone has found that works, and which happens to be the new strategy for those who tried the opposite, and failed?



Seriously? Do you really not understand the nature of employment, transition from job to job, and the simple concepts that guide thinking on macroeconomic policy?

Just a quick question. When you say the economy has grown for 13 straight quarters, are you referring to just the numbers or the value? The reason I ask is that I thought the whole QE purpose was to devalue the dollar. So even if the economy numbers have increased (GDP?) the actual value of the economy could have gone backwards? Therefore an economy, as traditionally measured, may seem to improve in the numbers but due to QE could well be going backwards.

Not making a statement here, its a legitimate question!

[DOR]

cyppok,

To borrow a phrase, ‘hogwash.’

The greatest increase in standards of living, for the largest share of the world’s population, is a post-WWII phenomena. Pre-WWII, China, India, most of the rest of Asia and nearly all of Africa, the Middle East and Latin America did not have significant improvement in standards of living as compared to under the post-WWII global financial, economic and trading regimes.

Many of them hadn't seen increased caloric intake for a very, very long time.

Until and unless someone can convincingly prove to have a better system, I’ll stick with the one that works best. Not perfect, not 100% great every day of the year, but far, far better than anything humankind has seen before.

= = = = =

Gun Boat,

The US has had 13 straight quarters of real growth (volume, constant) rise in GDP (quarter-to-quarter, annualized or year-on-year, your choice). These are the usual measures, and I can’t think of any that would suggest the economy has been moving backwards.

Whether the dollar is devalued (which hasn’t happened), depreciates against something (your choice: gold, oil, yen, euros, Rmb) or not will influence the externally oriented parts of the economy. That may be enough to change growth into recession, but not this time.

From Q-1 2010, when this growth began, until Q-1 2013, the US economy increased by $1.74 trillion, or 12.2% in (cumulative) nominal terms and 6.3% in inflation-adjusted or real terms.

The purpose of QE was to prevent the economy from falling into deflation, and it worked. The economy deflated for 11 out of 12 months in 2008-09, just shy of the 1954-55 post-war record of 12 months. There were, by the way, no months in between 1955 and 2008 when the consumer price index fell. That’s how serious this is.

[Gun Boat]

So, for example, if the GDP for year 1 was 10 trillion and in year 2 the government borrowed 2 trillion and injected that into the economy there by making year 2s GDP 12 trillion. Is that automatically viewed as an economic growth figure of 16.7%? Even though the growth came from government borrowing?

Is the consumer price index the thing that judges the real value of money (ie takes into account inflation etc)? So your if GDP goes up year to year but the CPI falls then you are going backwards? Or is that something different?

If an economy is growing by 3% each year but is falling into deficit and then starts paying back that debt (by the amount equal to the original growth) and records no growth in subsequent years is that economy seen to still be growing or contracting?

The way I understand it is that a country can increase its GDP by spending borrowed money. This borrowed money is added to the GDP which gives the impression of economic growth. When that country stops spending and begins paying back its debt this money is no longer present in the GDP figures which gives the impression of no growth - even though by paying back its debt the country will be better of in the long term.

If you remove the borrowed spendings from the US GDP figures has the US actually grown in the last 15 years?

[astralis]

pari,

Your system however is a product of that explosion, an imposed control of the means of exchange, enabling those in power to divert wealth from the producers to fund whichever romantic notion took and takes their fancy.
Your system, its variations and iterations are a product of romanticism, the counter-enlightenment, and post date the primary cause of this explosion of wealth, the enlightenment and scientific method, by about 150 years.

you need to define the system you're referring to. the rise of the international economic system, the modern system of national political economics, or what?

if the latter, centralized government preceded the development of capitalism, and is in fact necessary to capitalism. ditto the industrial revolution, which started in a combination of private-public interests in the development of coal mines in England as well as british tariffs on indian textiles. a reason why the british developed both capitalism and industrialization faster than the far richer, but feudal france.

if the former, the development of forms of supranational economic systems (such as the IMF, WTO, etc) allowed the reduction of tariffs to levels unknown in all of human history, which represents both an increase in freedom/market choice as well as economic development.

Private enterprise and the flow of capital can get on just fine without government control/tithes.

need to re-read your basic Adam Smith.

[astralis]

Gun Boat,

So, for example, if the GDP for year 1 was 10 trillion and in year 2 the government borrowed 2 trillion and injected that into the economy there by making year 2s GDP 12 trillion. Is that automatically viewed as an economic growth figure of 16.7%? Even though the growth came from government borrowing?

what you said encapsulates much of the misunderstanding about what borrowing entails.

let's take a simple example.

the government borrows $50 million to build a dam. the dam generates an additional $50 million in economic activity per year in the future (the increased power, the increased efficiency, the town that develops around the dam, the increased road network, etc).

1. so does the economy grow as a result of this borrowing? 2. is this increased growth in the economy "fake" because it came from government borrowing?

you CAN make the case that if the government gave back $50 million in tax cuts that would do more for the economy. (whether that is true or not would depend on the situation, of course). but that does not mean that government borrowing necessarily equals "fake economic growth" or "fake development".

[Doktor]

Asty,

Then why the debts increase, not decrease? In general.

I mean there are all those wonderful project made with borrowed money.

Or the borrowed money are spent to cover earlier loans? If this is the case, then those projects are still not feasible.

[astralis]

doktor,

Then why the debts increase, not decrease? In general.

i'm not sure what this means. debt is projected to decrease in the US over the next 10-15 years, for instance.

debts have decreased many times in the past, when the period of high spending (due to a recession/war/etc) ends, or the US economy booms (like in the 90s). we're in the middle of this decrease right now.

in the long term we're projected to stabilize our debt at a relatively higher level, some 70% of GDP vice 50% from earlier, because we have changed demographics-- ie older people on social security/medicare.

in any case, this is getting away from the original argument, this very germanic idea that -all- borrowing is bad. that's just not the case, and in fact, will inevitably occur with any global power as people are willing to lend at cheaper rates to stronger powers. the US is actually far better off economically than the UK was back in its heyday of empire.

[Doktor]

I understand debt decreases periodically, but in general over long period of time it increases.

Why you had that ceiling debate last year?