21–30 of 61 posts
keep in mind that during the depression we were on the gold standard, thus there was none of the inflationary/deflationary risk of a fiat currency..
Earlier quoted context omitted.
The USA does not have the largest economy in the world by far: http://upload.wikimedia.org/wikipedia/commons/7/70/Nominal_G...
But technically EU isn't a country right?
No, Europe's not a country, but it behaves like one for trade and currency purposes and has no internal tariffs. Nor can Germany (for example) impose a tariff separately from the EU. So in this context, the EU might as well be a country.
Earlier quoted context omitted.
The USA does not have the largest economy in the world by far: http://upload.wikimedia.org/wikipedia/commons/7/70/Nominal_G...
The EU has 2.6 times the population, and isn't a single country.
Earlier quoted context omitted.
The EU has 2.6 times the population, and isn't a single country.
Where did I claim the EU is a single country ? We were comparing economies, not countries.
I just hear it everywhere. I'm sure the whole world has too much at stake if US Dollar loses its value. The economy might stagflate for a while, but I believe it will eventually recover. After all, USA is the largest economy in the world.
What special property does having the largest economy in the world have against it collapsing through the application of poor economic theory? I would hazard a guess that Zimbabwe has massive inflation because of the Mugabe school of economic thought rather than because it is a small economy.
Earlier quoted context omitted.
The USA does not have the largest economy in the world by far: http://upload.wikimedia.org/wikipedia/commons/7/70/Nominal_G...
But technically EU isn't a country right?
Earlier quoted context omitted.
Where did I claim the EU is a single country ? We were comparing economies, not countries.
Honest question: what is an economy?
I think an economy is a region with a 'scope' that depends on the discussion at hand. You could speak about the ecnomy of Colombia in isolation, or you could look at the economy of Latin America as a whole. When comparing you'd compare Latin America as a whole with for instance North America, Europe or Asia.
It is common to compare the US economy vs the EU economy or all of Asia, not to compare the economy of Germany with Texas.
Usually regions that can be lumped together share a border.
To make the comparision more fair I think if you wish to compare 'apples with apples' as much as possible probably the inclusion of the NAFTA region would be more appropriate when comparing with the EU.
To take an oft-used metaphor, suppose the economy is a car or truck and money supply is one part of the steering system. If you notice you're heading for a crash, well you're going to spin the wheel hard or slam on the brakes - there's your discontinuity. The path of the car, on the other hand (which is GDP), will change more slowly. And once you've observed that the new course takes you out of immediate danger, you can then moderate the control system which you had drastically changed. In other words, slamming on the brakes (or accelerating out of danger, or swerving - adjust your metaphor to taste) does not in itself damage the car, but aims to substantially alter its vector.
In the bigger picture, addressing the question of whether the US economy will be in the toilet or at least near to it for years to come, of course it will. Just as the unpleasant effects of a hangover can often go on longer than the drinking party which induced it, so it will take time to unwind and recover from the serious structural imbalances of recent years. Obviously, I have a more sanguine view of this process than you do, as I believe it will still be possible for opportunity and growth to take place in the US. If you find my view dangerously laid-back, I guess the appropriate thing for you would be to invest heavily in defense contractors and raw materials.
The Fed now pays interest on reserves (new as of last fall). When the Fed wants to pull that money out, it can (1) raise the interest rate on reserves, thus encouraging banks to hold the reserves and (2) sell the assets it bought to raise the monetary base. Looking at, for example, the current yield on treasuries shows very little inflation expectations.