Interesting comment. I thought the same thing - this is a very big move. Of course Wall Street loves it. But happens to the dollar? What happens to those who hold US debt?
ChrisWWW
· 9 months ago
Wheee!!!
There are two sides to induced inflation... on the one side you need it if you're trying to encourage economic growth. People won't hold on to their dollars if they are losing value each day, so they spend it or invest it.
On the other side, inflation saps the wealth of people who don't have enough money to invest, or aren't going to see increases in their wages any time soon.
It seems to me that most Americans, now more than before the current crisis, are in that category of people who aren't capable of investing because we're in debt and aren't likely to see wage increases because of a depressed job market.
mikkel
· 9 months ago
I think that's putting it mildly. Which goes back to the point about social acrimony that I've been talking about off and on. Right now people just barely support things because there is still the hope that they lead to recovery, but if inflation starts eating into everything and makes the debt problem worse then I see large scale opt outs because people will have little to lose.
ChrisWWW
· 9 months ago
mikkel, It obviously depends on the strength of the effects of an inflationary policy. If people can't afford gas or food on what used to be modest pay, then I think the social contract could break down. But rather than have people marching for dissolution of the government, you'll have them clamoring for essentially socialist policies.
People aren't going to forget that when times got tough, we emptied the treasury and gave it to Wall Street. They'll wonder why they can't get in on some of that action to pay for their shelter, food and medicine.
mikkel
· 9 months ago
Based on the numbers I find it hard to believe that inflation won't rise to that level if they do this enough to stop deflationary forces. I agree that people will press for collectivist solutions, but it's impossible to know how much pressure will be put on the government and when things get bad. If 1932 had instead had happened 1 year into Hoover's presidency and he still wasn't responsive, who knows what would have happened.
Quite frankly it's why businesses and capitalists should support the government taking over and dismantling the financial system piecemeal. Getting ahead of the curve in a way that would get rid of the deadwood and have the best chance of preserving productive businesses is the best way to avoid more straightforward socialism.
AustinRoth
· 9 months ago
I said it before - the worst is yet to come. The truly foolish monetary moves of the Obama Administration are going to prolong (not shorten) the coming Depression (assuming that you do not believe we are already in one). The Pork Bill, and its coiming sucessors, will drive the debt higher and higher, and the "monetization of debt" (great phrase), will drive an inflationary period, followed by excessive interest rates and a deflationary period. And the demonization of business in general continues unabated as well.
Sorry to sound so negative and paranoid, but if my goal was to completely trash the economic underpinnings of a country and to inflame existing class-warfare tendencies, with an ultimate goal of replacing the entire system with a State-based system, you couldn't do a better job than we are seeing now.
mikkel
· 9 months ago
While Obama bears responsibility because he's the one in charge, I don't think any other mainstream politician would do anything differently. The policies are designed entirely to preserve the status quo and moreover, to delay pain and spread it out over time instead of being experienced in grand shocks that politicians will get blamed for. There isn't the widespread recognition of the problem and until people are willing to embrace a downturn in lifestyle (and those that have any spare resources at all help their friends and neighbors) then we'll keep going down this path.
the best chance of preserving productive businesses is the best way to avoid more straightforward socialism.
So I guess Bush was speaking correctly when he said he had to dismantle capitalism in order to save it.
mikkel
· 9 months ago
Capitalism is just a system for distributing resources amongst the populace...it has little to do with the financial sector. There is a correlation between the make up of the financial sector and the economic system, just as their is a correlation between financial sector growth and economic growth, but they aren't analogous. Canada avoided most of the mess (so far) and has a stronger capitalist economy than us at present because its government was much more heavily involved in regulating the financial sector and is more aggressive in intervening to make sure they are functioning in specific core markets.
I did have a grammatical mistake because I my mind wandered, I meant that stepping in to nationalize the banks is the best chance of preserving other companies, which in turn will lessen pressure for real socialism, i.e. taking over production of industry.
If the government just let everything fail then the whole system would collapse and the economy would shut down as businesses couldn't use credit (unless the Fed started doing everything directly). The only other alternatives are to continue propping them up or do what they are legally required to do, which is to take over and shut down insolvent institutions, sell off the good assets and figure out how to assign losses to the bad.
CStanley
· 9 months ago
Yeah, that makes sense.
D. E.Rodriguez
· 9 months ago
Mikkel:
First, I am not an economist. And perhaps because of that, I do not totally digest or understand all the nuances of the economic crisis we are in as you describe, and all the reasons you provide as to why we got into such a mess and are not getting out of it.
But, more important---and I apologize beforehand if such nuggets are in your article, and I missed them---I would really appreciate hearing from someone who is obviously an expert, in layman terms, what we, the people, the financial institutions, and the administration/Congress ought to be doing differently to get our country out of this mess.
I am being very genuine in asking this, because sure as hell (pardon my language) I have not heard any alternate plans, except for "cutting taxes", from any other experts, critics and pundits.
And, if lowering taxes right now will solve our problems, please don't hesitate to tell me so and how.
All Comments
There are two sides to induced inflation... on the one side you need it if you're trying to encourage economic growth. People won't hold on to their dollars if they are losing value each day, so they spend it or invest it.
On the other side, inflation saps the wealth of people who don't have enough money to invest, or aren't going to see increases in their wages any time soon.
It seems to me that most Americans, now more than before the current crisis, are in that category of people who aren't capable of investing because we're in debt and aren't likely to see wage increases because of a depressed job market.
It obviously depends on the strength of the effects of an inflationary policy. If people can't afford gas or food on what used to be modest pay, then I think the social contract could break down. But rather than have people marching for dissolution of the government, you'll have them clamoring for essentially socialist policies.
People aren't going to forget that when times got tough, we emptied the treasury and gave it to Wall Street. They'll wonder why they can't get in on some of that action to pay for their shelter, food and medicine.
Quite frankly it's why businesses and capitalists should support the government taking over and dismantling the financial system piecemeal. Getting ahead of the curve in a way that would get rid of the deadwood and have the best chance of preserving productive businesses is the best way to avoid more straightforward socialism.
Sorry to sound so negative and paranoid, but if my goal was to completely trash the economic underpinnings of a country and to inflame existing class-warfare tendencies, with an ultimate goal of replacing the entire system with a State-based system, you couldn't do a better job than we are seeing now.
So I guess Bush was speaking correctly when he said he had to dismantle capitalism in order to save it.
I did have a grammatical mistake because I my mind wandered, I meant that stepping in to nationalize the banks is the best chance of preserving other companies, which in turn will lessen pressure for real socialism, i.e. taking over production of industry.
If the government just let everything fail then the whole system would collapse and the economy would shut down as businesses couldn't use credit (unless the Fed started doing everything directly). The only other alternatives are to continue propping them up or do what they are legally required to do, which is to take over and shut down insolvent institutions, sell off the good assets and figure out how to assign losses to the bad.
First, I am not an economist. And perhaps because of that, I do not totally digest or understand all the nuances of the economic crisis we are in as you describe, and all the reasons you provide as to why we got into such a mess and are not getting out of it.
But, more important---and I apologize beforehand if such nuggets are in your article, and I missed them---I would really appreciate hearing from someone who is obviously an expert, in layman terms, what we, the people, the financial institutions, and the administration/Congress ought to be doing differently to get our country out of this mess.
I am being very genuine in asking this, because sure as hell (pardon my language) I have not heard any alternate plans, except for "cutting taxes", from any other experts, critics and pundits.
And, if lowering taxes right now will solve our problems, please don't hesitate to tell me so and how.
Thanking you in advance,
Dorian de Wind
http://themoderatevoice.com/27280/why-the-toxic...
Dorian