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The Economy Got Off to a Historically Bad Start in 2014

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Re: The Economy Got Off to a Historically Bad Start in 2014

#81

Post by dragonwriter »

wpietri wrote: post #35
dragonwriter wrote: post #4

Earlier quoted context omitted.

> I'm starting to wonder if the Federal Reserve is no longer an effective tool for job creation. The principle purpose of independent central banking is to put government debt on a secure footing by minimizing the risk of the government acting to monetize the debt by separating direct, day-to-day control of the money supply from the government organs responsible for borrowing and repaying debt, setting spending, etc.…

The Federal Reserve has, according to them, three objectives for monetary policy: "maximum employment, stable prices, and moderate long-term interest rates". [1] So actively promoting job growth is indeed part of their remit. [1] http://www.federalreserve.gov/faqs/money_12848.htm

Actively promoting job growth is part of the goal of their monetary policy. The tools they have at their disposal are limited, however, to very narrow monetary policy tools chosen based on the idea of the purpose of having a central bank.

While they are intended to seek those objectives in setting monetary policy, monetary policy isn't the principal, or most effective, method available for acheiving those objectives -- fiscal/program policy, which remains in the hands of the government and can't be combined with monetary policy in the same actor without defeating the fundamental purpose of independent central banking -- remains the principal tool there.

The fact that the government -- and mostly this means Congress -- pursues no coherent policy leaves the Fed as the main actor, but they are by design not equipped to do more than extremely limited action in this domain (notwithstanding that they are tasked with prioritizing it in the actions they do take.)

Re: The Economy Got Off to a Historically Bad Start in 2014

#82

Post by jqm »

mikeyouse wrote: post #80
jqm wrote: post #76

Earlier quoted context omitted.

Very simply, involuntarily appropriated the results of someone's labor is a form of slavery. In this case, one is being caused to labor for the benefit of the state. Pointing out the essence of the practice isn't extreme. And just because it is customary doesn't change the essence. I don't think this is a productive nor a just, way to fund society. The government doesn't (or shouldn't) own us. So I disagree very stro…

> But thanks for your feedback. I appreciate it. This topic is actually very important to me and I feel quite strongly about it and intend to write more in detail about it, so hearing people's perception helps I can add some more color. I find it interesting because I largely agree with your stance on taxation, but could not disagree more strongly about the comparison to slavery. My first reaction is entirely viscera…

Ok. I accept and appreciate your view. After three responses in agreement apparently the rhetoric is somewhat inflammatory, and (although I do feel how I posted), maybe a different approach is better.

Re: The Economy Got Off to a Historically Bad Start in 2014

#83

Post by crazy1van »

jqm wrote: post #67
crazy1van wrote: post #59

Earlier quoted context omitted.

> Getting money out of the hands of accumulators and hoarders (oh, I mean, "investors") and back into the hands of consumers The banking system may be seriously flawed, but I'm not following your critique of accumulators / hoarders / investors. When people acquire excess money, they rarely put in under a mattress. They don't need it right now so they enter into a transaction with someone who does need it in return fo…

Big companies have ridiculous sums of cash on hand right now that they are not investing. People keep wealth in other forms besides banks. There is a lot of hoarding going on and it is one of the primary reasons the economy is not growing. But the point is... as wealth concentrates, consumers lose the ability to purchase. So things grind to a halt. There has to be some mechanism to counter this trend.

> People keep wealth in other forms besides banks.

Where do people keep money that involves the money truly sitting inactive?

Re: The Economy Got Off to a Historically Bad Start in 2014

#84

Post by maxxxxx »

crazy1van wrote: post #83
jqm wrote: post #67

Earlier quoted context omitted.

Big companies have ridiculous sums of cash on hand right now that they are not investing. People keep wealth in other forms besides banks. There is a lot of hoarding going on and it is one of the primary reasons the economy is not growing. But the point is... as wealth concentrates, consumers lose the ability to purchase. So things grind to a halt. There has to be some mechanism to counter this trend.

> People keep wealth in other forms besides banks. Where do people keep money that involves the money truly sitting inactive?

Treasury bonds?

Re: The Economy Got Off to a Historically Bad Start in 2014

#85

Post by Retric »

kaonashi wrote: post #70
Retric wrote: post #66

Earlier quoted context omitted.

Look up hyper inflation and say that again.

I have; it usually is characterized by a collapse in real output (or loss of a war), accompanied by madly buying foreign currency at increasingly poor rates to pay off foreign debt.

Large amounts of Foreign debt is a result of an inability to sell bonds in your currency.

The US has a long history of loan repayment but we still dealt with high levels of inflation fairly recently. As in There where US treasury bonds issued at 17%. Which was vary close to runaway hyperinflation. At current interst rates our debt is sustainable but bump that to 10+% for to long and it would distroy our economy.

Re: The Economy Got Off to a Historically Bad Start in 2014

#86

Post by ChuckMcM »

mikeyouse wrote: post #75
ChuckMcM wrote: post #73

Earlier quoted context omitted.

That would be a much more interesting set of graphs if the Fed would let you in on how they compute the index. That is why looking at newspaper advertisements are actually pretty cool. They don't use, Detroit for example, when computing the cost of suburban housing. Here is an example, I don't know if will work for you. Marysville Washington, a quiet little town, the paper has a 2004 edition online [1] and on page 21…

You're essentially arguing that anecdotal data is more useful than aggregate data. I don't share that belief. > That would be a much more interesting set of graphs if the Fed would let you in on how they compute the index. The Fed doesn't collect either of the data series I linked either, FRED is just a useful tool for displaying various different indices. Here's a 40-page PDF detailing the Case-Shiller Methodology:…

Thanks for the links, what I was actually trying to argue were two things, one was that the larger the data set the more homogenized and useless the data becomes, and two that looking at data for a given city returns different results.

There are lots of ways to come up with insights into what is happening, one way is to take the prices experienced by an individual in a single location over time, then to take the population of each set of locations and compute p(I|L) where I is your experienced inflation rate, give L your location. Then you can ask questions like "What is the likelyhood that a given individual has experienced an inflation rate that differs significantly from the reported rate? (either positively or negatively)"

Charts like http://www.city-data.com/ which can show you housing pricing changes by city for example you can see the wide disparity in changes between coastal vs more central states. Some states would have experienced very little change, others quite a bit. Now overlay that on population. Then you start to get to the answer of "What do 'most' people' experience in terms of inflation." The newspaper archive is a great way to check the numbers.

Thanks again for the links, one of the criticisms for the CPI scale has always been this : "The CPI follows the prices of a sample of items in various categories of consumer spending—such as food, clothing, shelter, and medical services—that people buy for day-to-day living."

Which historically did not include changes in quantity. So a 'can of soup' which went from $1.00 -> $1.25 over 10 years seems like it has a 25% increase in cost, but it went from 16 -> 10 ounces. Which means its actual cost went from $1.00 -> $2.00 when computing the per ounce price. This is another great thing you can see/check with newspaper archives as grocery prices are exceptionally well documented.

Re: The Economy Got Off to a Historically Bad Start in 2014

#87

Post by jqm »

maxxxxx wrote: post #84
crazy1van wrote: post #83

Earlier quoted context omitted.

> People keep wealth in other forms besides banks. Where do people keep money that involves the money truly sitting inactive?

Treasury bonds?

Art. Real estate. Precious metals. Under a mattress.

There are any number of places.

Besides, just because money is in a bank doesn't mean it is actively being lent out. And even if it is, that isn't really relevant to the original point anyway.

Concentration of wealth is bad for a consumer driven economy.

Re: The Economy Got Off to a Historically Bad Start in 2014

#88

Post by Paul_Dessert »

mikeyouse wrote: post #61
Paul_Dessert wrote: post #30

The chart in the articles below paints the picture. I've never really been overly involved in economics up until last year. When I started reading and exploring I was shocked at what I found. I kept struggling, because I knew something wasn't right, I just couldn't put my finger on it. I still can't. All indicators that I can find show the economy slipping into another recession (or simply continuing the previously i…

I sincerely hope Zerohedge isn't your source for economics information, they are desperately alarmist and wrong nearly constantly. The source of your unease might just be your source of news. The world isn't falling apart, there is no 'great lie', poor homebuyers in Topeka aren't to blame for the GFC, and you shouldn't be stockpiling bullets and gold. The world entered a debt-driven recession and we're still climbing…

No, Zerohedge is not my only source. No, I don't think "the world is falling apart", but I DO think it's heading down a dark and ugly road. I read a wide range of news sites. We can debate who is right and who is wrong, but keep in mind that you're quoting government statistics. Those are never wrong or manipulated, are they?

Regarding the work force, look a little deeper. It's widely known that that number is highly inflated by new, low wage jobs.

If you want a more "reliable" source, here's something to consider: http://www.treasurydirect.gov/NP/debt/current

I don't want this to turn into a flame war, so this will be may last reply. However, take a deeper look at the numbers you posted.

Re: The Economy Got Off to a Historically Bad Start in 2014

#89

Post by waps »

maxxxxx wrote: post #10
nostromo wrote: post #7

Earlier quoted context omitted.

Let's put aside the Federal Government (and taxes and spending) for a moment and focus on the Federal Reserve. The Federal Reserve printed a large amount of money in response to the crisis. (That was a silent tax on anyone holding cash.) To inject this money into the economy, they bought a bunch of securities. My question is simply: why use asset buying as a vehicle for injecting money into the economy and not cash t…

I think the 2008 events have shown that the Fed's purpose is to keep the "financial system" happy. Regular citizens don't really count anymore.

But don't you think that if the financial system gets unhappy, you'll quickly follow in that unhappiness ?

2008 was really bad for the financial system. 2009 was really, really bad for everyone else. One was the direct cause of the other.

Re: The Economy Got Off to a Historically Bad Start in 2014

#90

Post by waps »

cpher wrote: post #60
jimmaswell wrote: post #53

Earlier quoted context omitted.

>We even get basic things wrong like promoting home ownership and heavily subsidizing farming. Could you expand on what exactly is wrong with those things?

I'm not GP, but I probably agree with his entire list. I think the home ownership incentives over the past decade may have been well-intentioned from an emotional standpoint, but they were the siren song of Lorelei for many people. "The spirit of America is expressed through owning a piece of property." That sounds awesome. Who wouldn't want to help our food producers ? I worked for years with farmers who got subsidi…

Alternate view : the economy has collapsed for most people simply because we no longer have any (economically) reasonable thing to do for most people.

In the US 30-40% of people are economically useless. In Europe 40-50% (not counting government employees who arguably have a net-negative economic contribution. Note I'm not saying they're useless, but they're not producing stuff). In the middle east 95%+, In Africa 80% or so, In most of Asia it's also 30-40%.

The problem is simply that the economy no longer requires large amounts of human input, yet that is what keeps it going :

1) people work

2) which produces "stuff"

3) then you buy, which enables big firms' existence and profits

4) which provides jobs

repeat

3->4 has broken down a little bit. Only a little bit.

The big puzzle of the 20th century was how to get to 1) to get the cycle started, printing money was the answer : we had lots of things we wanted to do (like highways, hoover dam, the military, fix Europe during WWII, fix what we blew up in Europe after WWII, ...). The big puzzle of the 21th century will be the same. What can we do with people that is economically useful.

There have been periods of history where the same puzzle played : the end of the Roman Empire. Their answer is plain to see in pretty much every European city today : churches. Lots of them. Bigger and huger and heavier and prettyer and bigger still. To the point where the ground could not hold them (a problem for a lot of Cathedrals). Then wars started that would last a millenia and the answer to the question : what are we going to do with this massive population became a very easy one, and then quickly became "how do we get this population more massive ?". But I doubt you'd like the methods, especially the methods of these newfangled "believers" (7th century, and if that doesn't make clear what party I'm referring to, nothing will).

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