I was told that tax cuts DON'T create jobs

[ShcShc11 0]

Speaking of Europe, this is very well summarized about the current situation (and the Euro summit of last Thursday and Friday).

"With this in mind, the most obvious point about the recent summit is that the “fiscal stability union” that it proposed is nothing of the sort. Rather than creating an inter-regional insurance mechanism involving counter-cyclical transfers, the version on offer would constitutionalize pro-cyclical adjustment in recession-hit countries, with no countervailing measures to boost demand elsewhere in the eurozone. Describing this as a “fiscal union,” as some have done, constitutes a near-Orwellian abuse of language.''

[ShcShc11 0]

And one last thing:

'All this gives me an occasion to say more about something: why would I criticize Bush’s deficit-increasing policies, then call for more deficit-increasing policies from Obama?

Part of the answer is the difference in economic conditions. Deficit spending is expansionary when the economy is in a liquidity trap; it does nothing but crowd out other spending when you’re not up against the zero lower bound, and the Fed will just raise rates to offset fiscal expansion.

[billvon 2,400]

>funny - so it's only been three years of it? not 11? or 19? or 23?

Oh, it's been going on for a lot longer than that.

>or are you pointing out how the two parties are absolutely identical in real life

They're pretty similar. Their approaches and planks may be different but the result is generally the same.

[billvon 2,400]

>ECONOMICS IS NOT A MORAL CONCEPT

OK. But then you say:

>Spending sounds evil and immoral, but . . . it is THE way to get out of this slump.

Why bother getting out of this slump if economics is not linked to morality?

[ShcShc11 0]

Quote

>ECONOMICS IS NOT A MORAL CONCEPT

OK. But then you say:

>Spending sounds evil and immoral, but . . . it is THE way to get out of this slump.

Why bother getting out of this slump if economics is not linked to morality?

Understand that if the U.S wants to have a thriving economy, then it has to take the right procedures in order to correct it.

This isin't a long-term structural problem. It is essentially a zero-bound liquidity trap that can be solved through spending.

There are too many misconceptions such as: "You can't print money to solve the debt problem!". People take this at face value rather than judging the situations.

A lot of us (the smart and intelligent ones too) have been wrongly taught and we are collectively suffering the consequences. Whether it is from the extreme left with Occupy Wall Street to the other extreme Tea Party (and most of us in the middle), they don't understand what is happening with the Economy at the moment.

But like I said, what Europe is doing now is far worse than what the U.S has done so far.

[pirana 0]

Quote

Government printing money (spending more money) generates the demand needed and it is THE solution that was needed back in 2008-2009.

Tax cuts on BOTH the rich and the middle class will not work because they will not spend the money. Middle Class will use the tax cuts to bring down their debt level.


and everybody needs to learn this:
ECONOMICS IS NOT A MORAL CONCEPT

So approximately how much do you think the government should print and spend? (Keeping in mind it will be added to the $15 trillion existing debt).

I do agree that tax cuts will largely be used to keep heads above water, and maybe pay down some debt.

Strange statement about Economics as a moral concept. Don't understand what you mean. Economics is more than a - it is a field of study, and a behavioral science at that. It is the study of how people produce and use resources. Elaborate on what you meant by declaring it not a moral concept.

I do not think we are in this situation just because of the government addiction to spending. Plenty of other causes involved, including but not limited to:

1 - An intergenerational system of transferring wealth as a means to ensure nobody is destitute in old age. Seemed like a good idea at the time, but got structured in a way that made it very difficult to adjust when needed - like right now.

2 - Allowing a rich corporatacracy to basically hijack our legal and financial systems for their personal benefit.

3 - The shortcomings of democratic institutions when they are used by voting blocks to essentially steal from others.

4 - The I-want-it-now-and-I-want-it-cheap (or free), flavor-of-the-day, throwaway, conspicuously consuming, wasteful nature of our entitlement society.

5 - An absolute refusal by almost everyone to recognize that our place in the world economy has to change dramatically. Nobody wants to let go of anything and we continue to prop ourselves up with various contrivances of false wealth (.com, real estate).

In earlier times (WWII thru the 70's), when we didn't really have much competition, we got away with numbers 1 thru 4; and probably could have gotten away with just printing trillions of dollars if that were to suit our needs. Not gonna fly today.

So no; it's not that our government does not know how to act responsibly. Almost nobody does.

" . . . the lust for power can be just as completely satisfied by suggesting people into loving their servitude as by flogging them and kicking them into obedience." -- Aldous Huxley

[rehmwa 2]

see reply to from this. I don't know who you are quoting, but that one wasn't me. you're talking to yourself apparently


and you are just funny in that note

"the middle class won't spend their money, they'll just bring down their debt level" - hilarious, paying off a debt is a monetary transaction......

"printing money is the solution"? - funny also, diluting the value of what everybody owns is just as effective as dramatically increasing minimum wage - it's just another form of redisty



as for "economics is not a morality system" that sounds pretty odd when you seem to be coming from a "social justice" set of actions

...
Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants

[billvon 2,400]

>Understand that if the U.S wants to have a thriving economy, then it has to take the
>right procedures in order to correct it.

Agreed. But why is a thriving economy the goal?

[matthewcline 0]

Quote

Quote

>ECONOMICS IS NOT A MORAL CONCEPT

OK. But then you say:

>Spending sounds evil and immoral, but . . . it is THE way to get out of this slump.

Why bother getting out of this slump if economics is not linked to morality?

Understand that if the U.S wants to have a thriving economy, then it has to take the right procedures in order to correct it.

This isin't a long-term structural problem. It is essentially a zero-bound liquidity trap that can be solved through spending.

There are too many misconceptions such as: "You can't print money to solve the debt problem!". People take this at face value rather than judging the situations.

A lot of us (the smart and intelligent ones too) have been wrongly taught and we are collectively suffering the consequences. Whether it is from the extreme left with Occupy Wall Street to the other extreme Tea Party (and most of us in the middle), they don't understand what is happening with the Economy at the moment.

But like I said, what Europe is doing now is far worse than what the U.S has done so far.

Then you describe how NOT to do that. Did you forget the US GOV has no money? And that reality is the efforts of "Spending" has not worked?

Matt

An Instructors first concern is student safety.
So, start being safe, first!!!

[ShcShc11 0]

Quote

Quote

Quote

>ECONOMICS IS NOT A MORAL CONCEPT

OK. But then you say:

>Spending sounds evil and immoral, but . . . it is THE way to get out of this slump.

Why bother getting out of this slump if economics is not linked to morality?

Understand that if the U.S wants to have a thriving economy, then it has to take the right procedures in order to correct it.

This isin't a long-term structural problem. It is essentially a zero-bound liquidity trap that can be solved through spending.

There are too many misconceptions such as: "You can't print money to solve the debt problem!". People take this at face value rather than judging the situations.

A lot of us (the smart and intelligent ones too) have been wrongly taught and we are collectively suffering the consequences. Whether it is from the extreme left with Occupy Wall Street to the other extreme Tea Party (and most of us in the middle), they don't understand what is happening with the Economy at the moment.

But like I said, what Europe is doing now is far worse than what the U.S has done so far.

Then you describe how NOT to do that. Did you forget the US GOV has no money? And that reality is the efforts of "Spending" has not worked?

Matt

Prove to me that the US Gov has no money.
http://www.bloomberg.com/quote/USGG10YR:IND

If you truly understand economics, then you wouldn't say the U.S has "no money" when its 10 years bond is at an all-time low of 2%.

The U.S can afford very easily to borrow more money at very little cost. In fact, the bonds are begging us to take more money.

U.S fiscal problems are 2030 and beyond. Not 2011. Our current problems are a severe lack of growth and persistent unemployment despite zero-bound monetary policies.

This isin't your usual "mom n pop family budget". This isin't about saving money, but restarting the economic engine. The more you think along the lines of "we can't spend anymore because we (the U.S) don't have anymore money)", the more we will suffer because the engine will simply not function as well.

The more time we wait, the longer people are out of work. The longer people are out of work, the more detrimental their skills are.

Get the engine working now and then fix the fiscal debt problems.

[Andrewwhyte 1]

Printing money is in fact a way to solve debt problems. I would contend that it will largely be at the expense of the small freeholders of wealth. The large institutional wealth holders tend to do better than the average when it comes to the turbulent economic times that inevitably follow that sort of behavior, the net debtors either go bankrupt when their payments escalate with the nominal interest rate or actually benefit from the real value of the debt falling.
What printing money will not do is solve a structural deficit problem. This is because the deficit exists in the real economy as well as the financial one. Printing money can soften this year's financial deficit, but not the real one; we are consuming more than we create or borrow. To make a simple analogy, printing money will not put more wheat in the field.

[ShcShc11 0]

Quote

So approximately how much do you think the government should print and spend? (Keeping in mind it will be added to the $15 trillion existing debt).

If we look at the 2009 figures, we should have spent approximately 2 to 2.5 trillion $ in order to cover the gap that was caused by the Great Recession 2008.

We instead got a very small stimulus package of a few hundred billion $. We are still very much in denial on this.

Quote

Strange statement about Economics as a moral concept. Don't understand what you mean. Economics is more than a - it is a field of study, and a behavioral science at that. It is the study of how people produce and use resources. Elaborate on what you meant by declaring it not a moral concept

It means just because a country has a debt doesn't mean the Government should cut, slash and save money (austerity).

This isin't a houshold budget where spending is evil and saving is good.

If we look at Europe right now, Germany is essentially saying:
We are in the surplus thus we should be in control.
Italy is in the debt and they should go into austerity.

Its economically counter-productive and Germans don't want to seem to admit that they too take a large share of the blame in the Euro crisis.

And guess why Europe is very near collapse. They can't print their own currency. Countries such as the U.K and Japan are in worse standing (debt-wise), but their bonds are considered very safe by investors (around 2% 10 years bond). They are considered safe because they can print their money if needed.

[SkyDekker 1,123]

Quote

And guess why Europe is very near collapse. They can't print their own currency. Countries such as the U.K and Japan are in worse standing (debt-wise), but their bonds are considered very safe by investors (around 2% 10 years bond). They are considered safe because they can print their money if needed.

QFT

[Andrewwhyte 1]

Quote

And guess why Europe is very near collapse. They can't print their own currency. Countries such as the U.K and Japan are in worse standing (debt-wise), but their bonds are considered very safe by investors (around 2% 10 years bond). They are considered safe because they can print their money if needed.

Not sure where you are getting your numbers but according to
http://www.economicshelp.org/blog/774/economics/list-of-national-debt-by-country/
UK's national debt is much lower than Italy's or Greece's.
As the page suggests Japan's unreasonably low risk premiums are due to the national savings rate.

[ShcShc11 0]

Quote

Quote

And guess why Europe is very near collapse. They can't print their own currency. Countries such as the U.K and Japan are in worse standing (debt-wise), but their bonds are considered very safe by investors (around 2% 10 years bond). They are considered safe because they can print their money if needed.

Not sure where you are getting your numbers but according to
http://www.economicshelp.org/blog/774/economics/list-of-national-debt-by-country/
UK's national debt is much lower than Italy's or Greece's.
As the page suggests Japan's unreasonably low risk premiums are due to the national savings rate.

It is pretty much economics 101 that the ability to print money can be used as a tool to help against bond attacks.

The U.K national debt has the same U.S issues in that it has fiscal problems 2030 and beyond.

If you need a historical reference why "printing money" can be a good thing, look back in the days when countries were with the Gold Standards. Look at the 1930s and how the gold standard was a major chain on the country's neck.

http://graphics8.nytimes.com/images/2011/11/27/opinion/112711krugman2/112711krugman2-blog480.jpg

Finland is on the Euro (no ability to print money themselves) and Sweden is NOT on the Euro. There's a reason why the interests on bond went up for Finland (hint: ability to print money). Sweden and Finland are not that different economics wise.

France's bond is going up and went up to about 3 to 3.5% while U.K stays around 2%.

This really is Economics 101.
You're not understanding what's happening with economics if you look at country's budget the same way as a family household income. Its not the same. It doesn't function the same.


p-s: Greece is unique in the sense that even if they could have printed money, they would still be near-bankruptcy. If there's a country that truly did spend beyond their means, it is Greece.

The U.S isin't Greece.

[pirana 0]

Quote

U.S fiscal problems are 2030 and beyond. Not 2011. Our current problems are a severe lack of growth and persistent unemployment despite zero-bound monetary policies.

Way off on that one. Just 2 things, interest on the debt plus welfare payments, will exceed total tax revenues by 2030. Then there is all the other stuff, plus the fact we keep increasing spending. A more realistic estimate of when we hit the wall on paper is more like the late 20-teens to early 2020's. I don't think that will happen though because the social pain will become intolerable long before we actually cease to function financially as a whole.

There is no set formula for how fucked up an economy must be before social upheaval sets in. Maybe when 1/10th of a percent own 99.99% of the wealth? Maybe when the debt is 3 times GDP? Maybe when spending is 3 times revenue?

Maybe we should investigate why there is a lack of growth and persistent unemployment despite record corporate profits. We grew up with the bullshit mantra that what was good for GM was good for America. What a fucking crock that turned out to be.

" . . . the lust for power can be just as completely satisfied by suggesting people into loving their servitude as by flogging them and kicking them into obedience." -- Aldous Huxley

[pirana 0]

BTW - who are you going to give the trllions of dollars to once it is printed up?

Corporations - Oh hell yea, they have demonstrated such good financial stewardship. Given the choice they'd probably invest it overseas and send a few million more jobs out of the country.

Government - less corrupt maybe, but also with no incentive in the form of market forces to spend wisely.

Can't believe I just used Government and spend wisely in the same sentence.

" . . . the lust for power can be just as completely satisfied by suggesting people into loving their servitude as by flogging them and kicking them into obedience." -- Aldous Huxley

[Andrewwhyte 1]

Wow, thanks for the education. It really is that simple. I can't understand for the life of me why Germany is so queezy about printing wheelbarrows full of money if has always worked out so well in the past.

[ShcShc11 0]

Quote

Wow, thanks for the education. It really is that simple. I can't understand for the life of me why Germany is so queezy about printing wheelbarrows full of money if has always worked out so well in the past.

It in fact is that simple.
There have been numerous calls for the ECB to become the lender of last resort in order to keep financial attacks away from European bonds and/or make a Euro-bond.

See Italian 10 years bond:
http://www.bloomberg.com/quote/GBTPGR10:IND
if you follow the pattern, everytime there is optimism that Europe will integrate into "1 country", then 10 years Italian bond became cheaper.

When ECB re-affirmed that it was looking only after price stability, Italian bonds went up.


Fact is: I don't blame Germany.
They are the only ones capable of putting the money to save the Euro. But it is HIGHLY (and possibly) catastrophically expensive.

The estimates range from 1.5 to 3 TRILLION Euros.
Trillion. All the EFSF can muster is 400 billion $ if I remember correctly.


And this my friend is why the Euro will very likely to fail within end of 2012 to mid 2013.

But the point is: The Euro was always a mis-conceived concept because each countries did not have full control of their monetary policies (e.g: In other words, PRINTING MONEY).

Countries such as Finland and Italy are relegated to Third World Country's power where their economy is controlled by another country.

That really is the basic summary.


...
Right now, ALL european nations are under austerity (aka cut cut cut spending) and even the most optimistic economists are forecasting a European recession. The more they try to balance the budget through "budget cuts", the more they'l end up missing growth target and have the very possibility of getting into a catastrophic deflation.

This will be a lesson to the U.S too who are also looking to "cut and slash" their budget in the name of expansionary austerity.

...And if the Euro fails. This might as well mean the second Great Depression in the U.S (the major U.S banks are still largely tied to the European countries... if you want I can probably come back later when I have time as to how the U.S banks are tied).

I know, I sound like a pessimist... an alarmist...a whacko. But if a 2nd Great Depression (or Great Recession) do end up happening, it will be because we kept our false economic prejudices alive (cut/slash the budget and somehow we'l find the economy growing again). 1930s and Japanese lost decade (1990s) fallacies come alive again.


Cheers and Hugs!
Shc

[loumeinhart 0]

Quote

A) Hire more workers and increase production, and then incur the expense of warehousing unsold sprockets. Or:
B) Pocket the money.

If Jane wants to invest and grow, pay down debt, maybe update coffee machine, then A

If she wants to simply give herself a raise, B

Last spring I ordered a sprocket kit online. I literally googled "ex500 rear sprocket kit", then sorted results for price+shipping=lowest.

Which of Jane's options would better provide a competitive edge and long-term growth?

[Snowwhite 0]

I used to hold a seat on a Commercial Industrial Revolving Loan Fund. Federal funds came to us and:
Long and short of it was this:
If a person or company came to us with a good idea, we could provide a loan (forgivable) for $10,000.00 if you
A) had a great idea, and
B) had 10,000 dollars of your OWN money to put into a product, or company, provided you employed ONE additional person.
every 10K added one job.
hmm. No poor people applied, but while I was on the team about 120 jobs were created.

skydiveTaylorville.org
[email protected]

[ShcShc11 0]

I'm replying to my own post, but based on the summit:

"High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email [email protected] to buy additional rights. http://www.ft.com/cms/s/0/b7b944a0-24fc-11e1-8bf9-00144feabdc0.html#ixzz1gWTW5u9I


This leaves much the most plausible outcome of the orgy of fiscal austerity: long-term structural recessions in vulnerable countries. To put it bluntly, the single currency will come to stand for wage falls, debt deflation and prolonged economic slumps. Can this stand, however big the costs of a break-up?

The eurozone has no credible plan to fix the flaws of the eurozone, apart from greater fiscal austerity: there is to be no fiscal, financial or political union; and there is to be no balanced mechanism for economic adjustment on both sides of the creditor-debtor divide. The decision is, instead, to try still harder with a stability and growth pact whose failures have been both predictable and persistent"
-From FT


Again, I don't blame the Germans.
1.5 to 2.5 trillion $ transfer into the EFSF is the equivalent of USA to put 7.5 trillion to 12.5 trillion $, which is absolutely ridicilous and unfeasible. (based on a rough estimate tha tthe U.S is approx x5 bigger in economy than Germany).

Imagine having to put 7.5 trillion $ to "bail-out" Mexico or the rest of Latin-America

[ShcShc11 0]

oh and one last thing (quite sorry for the self-replies):

http://www.bloomberg.com/quote/USGGT10Y:IND
10 year U.S Generic

Negative interest rate.
The U.S is farrrrrrr from bankruptcy and they can print and borrow money at the moment with little to no real consequence (except getting us out of the liquidity trap and therefore improving the economy).

Just needed to bury once and for all this whole notion of: "U.S have no money left to borrow/ America is bankrupted blah blah".

[matthewcline 0]

Quote

oh and one last thing (quite sorry for the self-replies):

http://www.bloomberg.com/quote/USGGT10Y:IND
10 year U.S Generic

Negative interest rate.
The U.S is farrrrrrr from bankruptcy and they can print and borrow money at the moment with little to no real consequence (except getting us out of the liquidity trap and therefore improving the economy).

Just needed to bury once and for all this whole notion of: "U.S have no money left to borrow/ America is bankrupted blah blah".

You put apples in the orange basket.
My comment was we (the US) have no money.
You answer was the US can Print and Borrow. Doesn't that mean, there is no, money?

The US has no on hand cash, is in debt up to its eyeballs and it's only staying afloat because of assets it has not sold off to other countries, yet.

Essentially, one step away from bankruptcy.

Matt

An Instructors first concern is student safety.
So, start being safe, first!!!

[ShcShc11 0]

[email]

Quote

Quote

oh and one last thing (quite sorry for the self-replies):

http://www.bloomberg.com/quote/USGGT10Y:IND
10 year U.S Generic

Negative interest rate.
The U.S is farrrrrrr from bankruptcy and they can print and borrow money at the moment with little to no real consequence (except getting us out of the liquidity trap and therefore improving the economy).

Just needed to bury once and for all this whole notion of: "U.S have no money left to borrow/ America is bankrupted blah blah".

You put apples in the orange basket.
My comment was we (the US) have no money.
You answer was the US can Print and Borrow. Doesn't that mean, there is no, money?

The US has no on hand cash, is in debt up to its eyeballs and it's only staying afloat because of assets it has not sold off to other countries, yet.

Essentially, one step away from bankruptcy.

Matt

No. You've got the definition wrong.

Think of it like a student in medicine school. They have to borrow a boat load of money in order to go through the education. Just because he is borrowing money from a financial institution (and a lot of it), does not mean he is anywhere near "bankrupted". He will borrow money at Prime Rate + 0.5% (even if its 100k, its still Prime + 0.5%).

On the other hand, there are other people who can't even get a 1k VISA card or can get 5k loans only at Prime + 11% because they are unable to pay it back.

The U.S (for now) is on the former category rather than the latter.

The treasury bonds are at an extravagantly low % (approx 2% and less) despite Ben Bernanke tripling the monetary supply. Austrian economics said it would have gone through the roof by 2010-now. It hasn't and it won't.

... Just because a country borrows doesn't mean its broke.

Canadian economics is the perfect example. Look up what was happening with 1995 Canada when they extended their debt TOO much to a point where there would be a need for deficits to pay off deficits. They were on the verge to being bankrupted. On the other hand, today 2010-2011, they are still borrowing more than they bring and are deeply in debt (GDP-wise). But they are not bankrupted because their debt is sustainable.

Just like U.S debt is currently sustainable (and their economy needs to expand), but it will become "Canada 1995" for the U.S around 2025-2030 due to entitlements.

The problem right now (which the U.S MUST focus) is to re-energize the economy.


Of course, like I said before, the European crisis probably dwarfs any problems the U.S has at the moment.