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Fed Ends Zero-Rate Era

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Re: Fed Ends Zero-Rate Era

#191

Post by ZenoArrow »

vezzy-fnord wrote: post #74
toomuchtodo wrote: post #51

Earlier quoted context omitted.

Exactly correct. The Federal Reserve has the knobs and levers to create asset bubbles, but not to stoke consumer demand. Only Congress can do that with legislation increasing the minimum wage, changing corporate taxes so it behooves companies to pay employees more, or legislation increasing entitlements such as social security. Those in lower and middle classes are the ones who govern the velocity of money through th…

increasing the minimum wage Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how... legislation increasing entitlements such as social security Expected to run structural deficits by a certain point. Theoretically speaking, an endogenously determined fiat money system doesn't really have "government debt" what with it being the sovereign issuer of debt to begin with, but in reali…

> "increasing the minimum wage

Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how... "

Let's look at what is being said:

"Unlike most public income support programs, increased earnings from the minimum wage are taxable. Over 25 percent of the increased earnings are collected back as income and payroll taxes"

Is that a problem? The minimum wage should be the minimum needed to live on, that includes taking taxes into consideration.

" Adopting this empirical scenario, the analysis demonstrates that an increase in the national minimum wage produces a value-added tax effect on consumer prices that is more regressive than a typical state sales tax and allocates benefits as higher earnings nearly evenly across the income distribution."

So the argument is that raising the minimum wage increases prices, thereby negating the potential benefits. Here's the thing, competition drives prices down, but if low wage earners have limited options to shop around (because they look towards the big chains to get low prices), then competition can't fulfil this function. This quote would seem to support this view:

"Even after taxes, 27.6 percent of increased earnings go to families in the top 40 percent of the income distribution."

Re: Fed Ends Zero-Rate Era

#193

Post by binarycrusader »

toomuchtodo wrote: post #187
bpodgursky wrote: post #158

Earlier quoted context omitted.

This is super naive. For much of the past decade, congress could have removed the entire discretionary budget (yes, including the military) and still had a deficit. The deficit is driven by social security, medicare, and medicaid. If you want to balance the budget, you have to reform those.

> The deficit is driven by social security, medicare, and medicaid. If you want to balance the budget, you have to reform those. Or increase taxes? Social security taxation is limited to the first ~$120K of someone's income. Why?

Because taxing those people won't solve the real issue? I pay more in taxes every year on my income than many millionaires do because my income is primarily salary instead of stocks, etc.

120k may seem like a lot, but it isn't in several parts of the US now (e.g SF Bay Area, New York).

Re: Fed Ends Zero-Rate Era

#194

Post by drumdance »

jonknee wrote: post #110
PaulWillis wrote: post #61

Earlier quoted context omitted.

Isn't investing in bonds putting money to work in the economy? And how does the government really stimulate demand? Nobody demanded an IPhone before it existed. Good products stimulate demand.

> And how does the government really stimulate demand? Building things (roads, spaceships, bridges, etc), funding things (medical research, education, etc) and other obvious things. Low interest rates make longer term projects much more viable.

Don't forget war. $800 billion to $2.4 trillion spent on the Iraq War depending on who's counting.

https://en.wikipedia.org/wiki/Financial_cost_of_the_Iraq_War

Re: Fed Ends Zero-Rate Era

#195

Post by chc »

jacquesm wrote: post #174
SapphireSun wrote: post #166

Earlier quoted context omitted.

Sort of.... you want more stuff if you have more money, but if you have little money, at one point, your propensity to save increases to avoid poverty, whereas below some point I imagine you spend everything you have (not much) as fast as it comes in.

> you want more stuff if you have more money I don't think that's a valid statement. There is only so much 'stuff' that you can use. Beyond a certain level more money does not translate into a better quality of life or more 'stuff' for most people, there are a few outliers but lots of very wealthy people are actually quite modest. They're so modest you won't read about them in the newspapers.

I don't think GP is saying that the demand you add to the economy increases linearly with income. I think the point is that it's essential to have lots of people with a healthy amount of discretionary income, because non-discretionary income can't really be reallocated no matter how compelling your wares are.

Re: Fed Ends Zero-Rate Era

#196

Post by jusben1369 »

roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

It's great if they work together. But it's also rarely the case historically. Don't feel bad for the Fed. They actually have very real power to influence the economy _indirectly_ History will judge Ben Bernanke as preventing the country (globe?) from a depression via aggressive monetary policy.

Re: Fed Ends Zero-Rate Era

#197

Post by vezzy-fnord »

creshal wrote: post #189
theseatoms wrote: post #179

Earlier quoted context omitted.

A global minimum income. Or the strictly-superior-to-a-minimum-wage Earned Income Tax Credit [1]. [1] https://en.wikipedia.org/wiki/Earned_income_tax_credit

Why is it superior? That looks a lot like making the government subsidize worker exploitation.

How does a negative income tax subsidize any of that? If anything, it's much more neutral regarding wage labor (since it's based on the broader definition of income in tax codes) than, obviously, minimum wage mandates.

Re: Fed Ends Zero-Rate Era

#198

Post by toomuchtodo »

binarycrusader wrote: post #193
toomuchtodo wrote: post #187

Earlier quoted context omitted.

> The deficit is driven by social security, medicare, and medicaid. If you want to balance the budget, you have to reform those. Or increase taxes? Social security taxation is limited to the first ~$120K of someone's income. Why?

Because taxing those people won't solve the real issue? I pay more in taxes every year on my income than many millionaires do because my income is primarily salary instead of stocks, etc. 120k may seem like a lot, but it isn't in several parts of the US now (e.g SF Bay Area, New York).

> 120k may seem like a lot, but it isn't in several parts of the US now (e.g SF Bay Area, New York).

And national tax policy shouldn't be dictated by ~2 major urban metros.

I agree that tax policy needs to encompass more than just the salary of the working class, but let's not joke ourselves. Medicare already taxes your entire wage base, there's no reason Social Security shouldn't.

We keep kicking the can down the road, and its time to own up to the liabilities we've created.

Re: Fed Ends Zero-Rate Era

#199

Post by xxpor »

Shivetya wrote: post #154
jpadkins wrote: post #140

Earlier quoted context omitted.

> We need the Federal government to stimulate aggregate demand at the consumer level. How? Investing tax dollars in a smarter manner. How do you get 535 people (congress) to spend $3 trillion smarter? It's an impossible task. A fools errand. Even if we elected the 500 smartest people to congress, the results wouldn't be much better. We need less of the economy flowing thru the federal government, not more.

The Federal Government's expenditures needs to be a lot lower than it is across the board. It needs a serious dose of efficiency. The borrowing alone impacts all business and individuals simply because it removes money from individuals directly and indirectly which slows the economy, puts pressure on future governments to raise taxes furthering the loss of spending by individuals, and lastly leads to uncertainty in t…

>Look up the term dead weight losses to get an idea of how bad government spending is for the economy versus private spending.

Look up the term Fiscal Multiplier to get an idea how good government spending is for the economy vs private spending.

Re: Fed Ends Zero-Rate Era

#200

Post by PaulWillis »

PaulWillis wrote: post #104
roymurdock wrote: post #83

Earlier quoted context omitted.

Bonds are government debt. When you buy a bond, you are giving the government your money now in order to receive a return on that money later, with the expectation that the government will do something useful with the money in the meantime. So if the government is allocating its budget well, then yes, purchasing bonds is a good thing. If it is not, you are making a bad loan to someone who may not be able to pay you b…

Didn't Jobs quit college because it was too expensive?

> the affordability and draw of public UC Berkley where Jobs and Wozniaki met.

Didn't Jobs quit college because it was too expensive?

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