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Krugman & The Mighty Keynesians

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Mike

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Krugman is just like some on here. You prove him wrong and he still argues stupidly. :roll:


http://mises.org/daily/5489/The-Deepening-Depression

Stimulus: Fail
The U.S. economy (by official statistics) is not growing with the rate of increase in the population, which means that we are slipping further and further. The NYT quotes many people to the effect that this is both shocking and disastrous. This has to be one of the greatest failures ever for Keynesian stimulus policies. It would be interesting to compare this failure with the New Deal itself.

One can't but reflect on the four years of government/media/establishment promises – backed by ghastly actions – that recovery is right around the corner. This rhetoric probably helped forestall the pace of liquidation and hence delay recovery more. The latest news will probably set the liquidation in motion at a faster rate as factories, homeowners, banks, and many other institutions finally throw in the towel and realize that their inventories, assets, and balance sheets need to reflect reality. And those young people who have put off taking the low-paying job in hopes of finding that high-paying job they were promised will similarly make new adjustments.
 
Mike said:
Krugman is just like some on here. You prove him wrong and he still argues stupidly. :roll:


http://mises.org/daily/5489/The-Deepening-Depression

Stimulus: Fail
The U.S. economy (by official statistics) is not growing with the rate of increase in the population, which means that we are slipping further and further. The NYT quotes many people to the effect that this is both shocking and disastrous. This has to be one of the greatest failures ever for Keynesian stimulus policies. It would be interesting to compare this failure with the New Deal itself.

One can't but reflect on the four years of government/media/establishment promises – backed by ghastly actions – that recovery is right around the corner. This rhetoric probably helped forestall the pace of liquidation and hence delay recovery more. The latest news will probably set the liquidation in motion at a faster rate as factories, homeowners, banks, and many other institutions finally throw in the towel and realize that their inventories, assets, and balance sheets need to reflect reality. And those young people who have put off taking the low-paying job in hopes of finding that high-paying job they were promised will similarly make new adjustments.

In Krugman's defense, he said the stimulus was not near enough.

I think the Keynesian stimulus was needed but it wasn't going to be effective when money was still going to be trucked to China because they had bought many of our industries.

Keynesian spending when the economy falters is but one tool the government has. The structural problems still have to be fixed, which they are not, and Keynesian spending only buys time so you have time to fix the structural things.

We can not continue to believe that an economy based on importing Chinese goods in exchange for them buying our debt while businesses have to suffer through govt. subsidized competition via the Chinese fixed exchange rate is a little ridiculous.

I don't think any of this has anything to do with very successful Roosevelt Era reforms, which succeeded for a long time until Congress and the courts decided to forgo the economic wisdom in the laws that were passed back then. That was a direct cause of the fraud that Wall Street imposed on the country for their cut of phantom profits.

Not everything should be put in such terms as failure especially when they were not completely followed. It is like blaming the person who gave you directions for getting lost when you didn't follow them.

This de leveraging is not over and it will be a drag on the economy until it is over. The structural changes needed are also a drag on the economy that are not being fixed.

That is what happens when you have a bunch of politicians who don't know how to competently run government and then blame government for its incompetence once the other party is in power. Both parties have been focused on campaigning, not working together to fix the economy.

I find it very interesting that Rupert Murdoch can get in so much trouble for doing illegal things just because someone from the House of Commons called him out. I don't think we have that kind of courage here in the U.S. except maybe with Bernie Sanders. It is a pretty pathetic commentary on both republicans and democrats.

Tex
 
Keynesian policies did not work in the Roosevelt era, they did not work in Japan, and they did not work in the U.S.

WE TOLD THEM SO!!!!!!!!!!!!!!!!!
 
Mike said:
Keynesian policies did not work in the Roosevelt era, they did not work in Japan, and they did not work in the U.S.

WE TOLD THEM SO!!!!!!!!!!!!!!!!!

Keynesian policies do help. They just are not the whole answer. Underlying structural policies and practices that take the economy into a crisis still have to be corrected. Money going into D.C. makes sure that doesn't happen.

When there is a concentration of wealth and a concentration of income, demand, the driver of the U.S. economy takes the hit. Keynesian policies or spending can help during those times. If we had high interest rates right after the recession started or we had less spending, we would surely see a larger dip in the economy.

Keynesian policies are meant to level out economic output and be a counter to the business cycle, not to actually do anything more than that. It is kind of like having a hundred dollar bill in your pocket when you are traveling. When you run out of money, you reach into your pocket and get it out. The problem has been that we have taken that 100 dollar bill out when we borrowed it from China during "good times" and spent it.



By the way, here is an interesting article on Keynesian economics and major critics. Monetary policy and Keynesian economics has its place as a tool in the tool box but the structural changes that cause concentration of wealth or economic scams in the economy have to be corrected. They are not. We still have politicians selling themselves to the highest bidder and the right an left fighting over who will represent the spin view they are pushing.

A REVIEW OF KEYNESIAN THEORY

Keynesian theory is central to understanding the Great Depression. We'll review just the theory here, and reserve for other sections the opportunity to see if the events of the 1930s bear out the theory.

Keynesianism is named after John Maynard Keynes, a British economist who lived from 1883 to 1946. He was a man of many contradictions: an elitist whose economic theories would be embraced by liberals the world over; a bisexual who enjoyed a happy and lifelong marriage to a Russian ballerina; a genius with an uncanny ability to predict the future, but whose works were often badly organized and sometimes very wrong. I mention this only because many of Keynes' critics try to refute his theories by pointing to the man himself. This is worse than irrelevant, of course; such criticisms are often prejudiced.

What is not in contention is that even Keynes' critics call him the greatest and most influential economist of the 20th century. For this reason, he is known as "the father of modern economics."

When the Great Depression hit worldwide, it fell on economists to explain it and devise a cure. Most economists were convinced that something as large and intractable as the Great Depression must have complicated causes. Keynes, however, came up with an explanation of economic slumps that was surprisingly simple. In fact, when he shared his theory and proposed solution with Franklin Roosevelt, the President is said to have dismissed them with the words: "Too easy."

Keynes explanations of slumps ran something like this: in a normal economy, there is a high level of employment, and everyone is spending their earnings as usual. This means there is a circular flow of money in the economy, as my spending becomes part of your earnings, and your spending becomes part of my earnings. But suppose something happens to shake consumer confidence in the economy. (There are many possible reasons for this, which we'll cover in a moment.) Worried consumers may then try to weather the coming economic hardship by saving their money. But because my spending is part of your earnings, my decision to hoard money makes things worse for you. And you, responding to your own difficult times, will start hoarding money too, making things even worse for me. So there's a vicious circle at work here: people hoard money in difficult times, but times become more difficult when people hoard money.

The cure for this, Keynes said, was for the central bank to expand the money supply. By putting more bills in people's hands, consumer confidence would return, people would spend, and the circular flow of money would be reestablished. Just that simple! Too simple, in fact, for the policy-makers of that time.

If this is the proposed definition and cure for recessions, then what about depressions? Keynes believed that depressions were recessions that had fallen into a "liquidity trap." A liquidity trap is when people hoard money and refuse to spend no matter how much the government tries to expand the money supply. In these dire circumstances, Keynes believed that the government should do what individuals were not, namely, spend. In his memorable phrase, Keynes called this "priming the pump" of the economy, a final government effort to reestablish the circular flow of money.

Let's return now to the reasons why people start hoarding money in the first place. There are many possible explanations, all of which are open to argument. It may be a consumer loss of confidence in the economy, perhaps triggered by a visible event like a stock market crash. It may be a natural disaster, such as a drought, earthquake or hurricane. It may be a sudden loss of jobs, or a weak sector of the economy. It may be inequality of wealth, which results in the rich producing a surplus of goods, but leaving the poor too poor to buy them. It may be something intrinsic within the economy which causes it to go through a natural cycle of recessions and recoveries. Or the Federal Reserve may tighten the money supply too much, compelling people to hang on to their disappearing dollars. This last point is especially important, since many critics of activist government believe that is how the Great Depression started.

As mentioned above, Keynes' advice on ending the Great Depression was rejected. President Roosevelt tried countless other approaches, all of which failed. Almost all economists agree that World War II cured the Great Depression; Keynesians believe this was so because the U.S. finally began massive public spending on defense. This is a large part of the reason why "wars are good for the economy." Although no one knows the full secret to economic growth (the world's top economists are still working on this mystery), wars are an economic boon in part because governments always resort to Keynesian spending during them. Of course, such spending need not be directed only towards war -- social programs are much more preferable.

In seven short years, under massive Keynesian spending, the U.S. went from the greatest depression it has ever known to the greatest economic boom it has ever known. The success of Keynesian economics was so resounding that almost all capitalist governments around the world adopted its policies. And the result seems to be nothing less than the extinction of the economic depression! Before World War II, eight U.S. recessions worsened into depressions (as happened in 1807, 1837, 1873, 1882, 1893, 1920, 1933, and 1937). Since World War II, under Keynesian policies, there have been nine recessions (1945-46, 1949, 1954, 1956, 1960-61, 1970, 1973-75, 1980-83, 1990-92 ), and not one has turned into a depression. The success of Keynesian economics was such that even Richard Nixon once declared, "We are all Keynesians now."

Keynesianism in the Postwar Era

After the war, economists found Keynesianism a useful tool in controlling unemployment and inflation. And this set up a theoretical war between liberals and conservatives that continues to this day, although it appears that Keynesianism has survived the conservatives' attacks and has emerged the predominant theory among economists. Before describing this battle, however, we should take a look at how the money supply is expanded or contracted.

In the U.S., there are several ways to expand the money supply. The most common is for Federal Reserve banks to buy U.S. debt from commercial banks. The money that commercial banks collect from the sale of these government securities increases the amount they can lend. A second way is to loosen credit requirements, thereby increasing the amount of money generated by the banking system. A third way is to cut the prime lending rate, which is the rate the Federal Reserve loans to commercial banks. To reduce money in the economy, the Fed commits all the opposite actions.

To fight unemployment, the Fed traditionally expands the money supply. This creates more spending in the economy, which creates more jobs.

But what would happen if the Fed expanded the money supply too much? For example, let's suppose the Treasury printed so much money that it made every American a millionaire. After everyone retired, they would notice there would be no more workers or servants left to do their bidding… so they would attract them by raising their wages, sky-high if necessary. This, of course, is the essence of inflation. Eventually, prices would rise so much that it would no longer mean anything to be a millionaire. Soon, everyone would be back working at their same old jobs.

To fight inflation, then, the Fed contracts the money supply.

The Federal Reserve thus has an important role in balancing the economy. Too little money in the economy means crushing unemployment; too much money means runaway inflation. Finding the right balance is the job of the Federal Reserve Board, a job which calls for considerable discretion -- hence the term discretionary monetary policy. Making the correct decisions depends on reading the economy correctly, and some Boards have been better at it than others. In the early days especially, the Fed had a tendency to overreact to developments, sometimes causing more harm than good. But the art of discretionary policy has improved over time. And the effects of monetary policy, even when handled poorly, are immediate, profound and easily measurable. No serious economist claims otherwise -- supply-siders aside.

Milton Friedman's attack on Keynesianism

Of course, Keynesianism has its critics, most of them conservatives who loathe the idea that government could ever play a beneficial role in the economy. One of the first major critics was Milton Friedman. Although he accepted Keynes' definition of recessions, he rejected the cure. Government should butt out of the business of expanding or contracting the money supply, he argued. It should keep the money supply steady, expanding it slightly each year only to allow for the growth of the economy and a few other basic factors. Inflation, unemployment and output would adjust themselves according to market demands. This policy he named monetarism.

During the 70s, monetarism reached the peak of its popularity among conservative economists. Today, however, Friedman stands virtually alone among top economists in his belief that it contains any merit. Monetarism was tried in Great Britain during the 80s and it proved to be a disaster. For almost seven years, the Bank of England tried its best to make it work. According to monetarist theory, the British economy should have enjoyed low inflation and high stability. But in fact, it went berserk. The economy sank into a deep recession, while the lead economic indicators zigged and zagged. Although inflation came down, this was at the price of rising unemployment, which soared from 5.4 to 11.8 percent. Between 1979 and 1984, manufacturing output fell 10 percent, and manufacturing investment fell 30 percent. Eventually, the Bank of England came under overwhelming pressure to abandon monetarism, which it did in 1986. The experiment was such a failure that not even conservatives abroad wish to repeat it.

Along with Great Britain, President Reagan announced that the U.S. would also follow a monetarist policy. However, this was simply a cover story, meant for public consumption only. In reality, the government's policies were thoroughly Keynesian. Government borrowing and spending exploded under Reagan, with the national debt climbing to $3 trillion by the time he left office. Paul Volcker, Chairman of the Federal Reserve Board, battled inflation during the severe recession of 1980-82 through the Keynesian method of raising interest rates and tightening the money supply. When inflation looked defeated in 1982, he abruptly slashed the prime rate and flooded the economy with money. A few months later, the economy roared to life, in a recovery that would last over seven years. The American experience was in direct contrast to Great Britain's. As a result, most economists abandoned monetarist theory.

Friedman is also famous for a second theory, this one containing much more merit. It's called the natural rate of unemployment, and it goes something like this:

Imagine an economy where the cost of everything doubles. You have to pay twice as much for your groceries, but you don't mind, because your paycheck is also twice as large. Economists call this the neutrality of money. If inflation worked this way, then it would be harmless. Indeed, most presidents after World War II decided to accept high inflation if it meant low unemployment, and therefore urged the Federal Reserve to conduct an expansionary monetary policy. But why is it that when the Fed expands money by, say, 5 percent, that all prices and wages everywhere do not go up by 5 percent as well? Why is it that the neutrality of money does not make this expansion meaningless? Friedman argued that it was because the public was unaware of the expansion, or what it meant, or by how much if it did. In other words, they didn't know that they should raise their prices by 5 percent. When the extra money was pumped into the economy, therefore, it was unwittingly translated into more economic activity, not higher prices.

Of course, if businessmen knew that a 5 percent increase was coming, it would be in their best interest to just raise their prices 5 percent. That way, they would make the same increased profits without having to work for them. If everyone did this, then the Fed's monetary increases would become meaningless -- instead of resulting in more jobs, it would just create higher inflation. Friedman and others argued that as businessmen became savvier and learned to follow the Fed's actions, they would build their inflationary expectations into their prices. Not only would this make inflation worse, but the nation would be left with no tool to fight unemployment, which would eventually rise as well. The twin dragons of inflation and unemployment would therefore grow together, forming "stagflation."

Friedman showed that monetary policy could not be used to wipe out unemployment, one of the optimistic goals of the Keynesians shortly after World War II. Instead, the most monetary policy could do was keep unemployment at about 6 percent, which is the rate normally achieved when the inflation rate is what the market expects it to be. Friedman called this the "natural rate of unemployment," and it secured his fame. But Keynesian policies are still useful in keeping the unemployment rate as close to 6 percent as possible.

Robert Lucas' attack on Keynesianism

An even bigger attack on Keynesianism came from Robert Lucas, the founder of a theory called rational expectations. Although one aspect of this theory won Lucas the Nobel Prize in 1995, history has not been kind to the rest of it. Lucas himself has abandoned work on rational expectations, devoting himself nowadays to other economic problems, and his once broad following has almost completely dissipated.

There are two main parts to rational expectations. First, Lucas believed that recessions are self-correcting. Once people start hoarding money, it may take several quarters before everyone notices that a recession is occurring. That's because individual businessmen may know that they are making less money, but it may take awhile to realize that the same thing is happening to everyone else. Once they do recognize the recession, however, the market quickly takes steps to recover. Producers will cut their prices to attract business, and workers will cut their wage demands to attract work. As prices fall, the purchasing power of the dollar is strengthened, which has the same effect as increasing the money supply. Therefore, government should do nothing but wait the correction out.

Second, government intervention ranges from ineffectualness to harm. Suppose the Fed, looking at the leading economic indicators, learns that a recession has hit. But this information is also available to any businessman in any good newspaper. Therefore, any government attempt to expand the money supply cannot happen before a businessman's decision to cut prices anyway. Keynesians are therefore robbed of the argument that perhaps the Fed might be useful in hastening a recovery, since Lucas showed that the Fed is not much faster than anyone else in discovering the problem.

Lucas then gave a slightly fuller version of the Milton Friedman argument outlined above. Suppose the Fed established a predictable anti-recession policy: for every point the unemployment rate climbs, it increases the money supply by a certain percent. Businesses would come to expect these increases -- hence the term, rational expectations -- and would simply raise their prices by the anticipated amount. In order to be effective, monetary policy would have to surprise businesses with random increases. But true randomness would make the economy less stable, not more so. The only logical conclusion is that the government's efforts to control the economy can actually be harmful.

Lucas' work enjoyed incredible prestige in the 70s. But today we know there are at least two major flaws in the theory.

First, it is not reasonable to believe that business owners determine their prices by following macroeconomic trends. Can you cite the Federal Reserve's rates and policies at the moment? The inflation and unemployment rates? Growth in the GDP? Even more improbably, do you set your prices and wage demands by these indicators? Only an economist (who knows all these statistics anyway) would think this is natural behavior.

Second, recessions last for years, which is far longer than people's ignorance of their onset. Lucas and his followers searched for every model imaginable that would keep businessmen aware of the leading economic indicators and yet ignorant of the fact that they were in a recession. Needless to say, they failed.

The recessions of 80-82 and 90-92 were clear refutations of Lucas' theory. Jimmy Carter was explicitly voted out of office for a misery index (unemployment plus inflation) that crested 20 percent. Yet it was not until 1987 that the unemployment rate fell back to 1979 levels. It is ludicrous to believe that it took the public eight years to figure out that they were in a recession and that they needed to cut prices back to the required level. And voters were highly aware that they were in a slump for most of the 90-92 recession; James Carville found a resonating campaign slogan for an entire election season with "It's the economy, stupid." Yet the economy did not even start to recover until the summer of 92, with employment taking even longer to rebound.

By the mid-80s, it was already apparent that neither monetarism nor rational expectations were adequate theories, and neo-Keynesianism started making a comeback. (Lucas won the Nobel Prize for that part of his theory which states that businessmen can compensate for expected monetary increases by raising their prices accordingly. Which is true in principle, but not often in practice.) One of the basic problems of conservative theories is that they place an almost religious faith in the belief that leaving markets alone always results in the best. How, in that case, does one explain recessions and depressions? Or the fact that depressions have disappeared since government started taking an active role? Besides, the belief that we should let national disasters like the Great Depression run unchecked for years while waiting for the economy to correct itself borders on the immoral.

The rise of the New Keynesians

Today, neo-Keynesianism has returned to prominence. At the heart of this updated version is the theory that people are not perfectly rational, but nearly rational. That is, they do not carefully weigh the unemployment rate, inflation rate and monetary policy before deciding to cut their monthly prices by, say, $24.13. Instead, people have only a fuzzy idea of where their prices should be, and make their best guesses. But because people are self-interested animals, they tend to err in their own favor, underestimating how much they really need to cut. This results in a long lag between the recognition of a recession and the decision to cut prices in earnest. In fact, the lag is so long that discretionary monetary policy is warranted in cutting the recession short.

But won't a businessman's rational expectations negate the Fed's actions? The answer, it turns out, is not completely. The Fed's decision to expand the money supply in 1982 was widely debated and highly publicized. Yet businessmen generally did not compensate for the Fed's announced moves by raising their prices. There are many reasons: a large percentage of businessmen could still be expected to remain unaware of the Fed's actions, or what they mean. For many, raising prices incurs certain costs (reprinting, recalculating, reprogramming, etc., not to mention a dip in business) that eat into the increases and may not make them worth it. And even if they do deem the price hikes worth it, it takes many companies quite some time to put them into effect. (Sears, for example, has to reprint and remail all its catalogues.) Also, remember that the impulse to raise prices cancels out the impulse to lower them, which is also how Lucas believed markets cured recessions. Others may be engaged in price wars with their competitors. So, for these and other reasons, expanding the money supply still results in job-creation, despite the counter-effect of rational expectations.

The re-emergence of Keynesianism is testimony of its staying power. Almost certainly, future economic theories will incorporate its findings.
 
It's absolutely assisine to think that financing a Stimulus with fiat currency help's anything except to stimulate inflation and the de-valuation of the dollar which hurts the poor absolutely.

FDR's New Deal policies also hurt the poor by raising taxes astronomically.

Doesn't anyone care about anyone except the wealthy?

How FDR's New Deal Harmed Millions of Poor People

by Jim Powell

This article appeared on cato.org on December 29, 2003.

Democratic presidential candidates as well as some conservative intellectuals, are suggesting that Franklin Delano Roosevelt's New Deal is a good model for government policy today.

Mounting evidence, however, makes clear that poor people were principal victims of the New Deal. The evidence has been developed by dozens of economists -- including two Nobel Prize winners -- at Brown, Columbia, Princeton, Johns Hopkins, the University of California (Berkeley) and University of Chicago, among other universities.

New Deal programs were financed by tripling federal taxes from $1.6 billion in 1933 to $5.3 billion in 1940. Excise taxes, personal income taxes, inheritance taxes, corporate income taxes, holding company taxes and so-called "excess profits" taxes all went up.



Jim Powell, senior fellow at the Cato Institute, is author of FDR's Folly, How Roosevelt and His New Deal Prolonged the Great Depression (Crown Forum, 2003).

More by Jim Powell

The most important source of New Deal revenue were excise taxes levied on alcoholic beverages, cigarettes, matches, candy, chewing gum, margarine, fruit juice, soft drinks, cars, tires (including tires on wheelchairs), telephone calls, movie tickets, playing cards, electricity, radios -- these and many other everyday things were subject to New Deal excise taxes, which meant that the New Deal was substantially financed by the middle class and poor people. Yes, to hear FDR's "Fireside Chats," one had to pay FDR excise taxes for a radio and electricity! A Treasury Department report acknowledged that excise taxes "often fell disproportionately on the less affluent."

Until 1937, New Deal revenue from excise taxes exceeded the combined revenue from both personal income taxes and corporate income taxes. It wasn't until 1942, in the midst of World War II, that income taxes exceeded excise taxes for the first time under FDR. Consumers had less money to spend, and employers had less money for growth and jobs.

New Deal taxes were major job destroyers during the 1930s, prolonging unemployment that averaged 17%. Higher business taxes meant that employers had less money for growth and jobs. Social Security excise taxes on payrolls made it more expensive for employers to hire people, which discouraged hiring.

Other New Deal programs destroyed jobs, too. For example, the National Industrial Recovery Act (1933) cut back production and forced wages above market levels, making it more expensive for employers to hire people - blacks alone were estimated to have lost some 500,000 jobs because of the National Industrial Recovery Act. The Agricultural Adjustment Act (1933) cut back farm production and devastated black tenant farmers who needed work. The National Labor Relations Act (1935) gave unions monopoly bargaining power in workplaces and led to violent strikes and compulsory unionization of mass production industries. Unions secured above-market wages, triggering big layoffs and helping to usher in the depression of 1938.

What about the good supposedly done by New Deal spending programs? These didn't increase the number of jobs in the economy, because the money spent on New Deal projects came from taxpayers who consequently had less money to spend on food, coats, cars, books and other things that would have stimulated the economy. This is a classic case of the seen versus the unseen -- we can see the jobs created by New Deal spending, but we cannot see jobs destroyed by New Deal taxing.

For defenders of the New Deal, perhaps the most embarrassing revelation about New Deal spending programs is they channeled money AWAY from the South, the poorest region in the United States. The largest share of New Deal spending and loan programs went to political "swing" states in the West and East - where incomes were at least 60% higher than in the South. As an incumbent, FDR didn't see any point giving much money to the South where voters were already overwhelmingly on his side.

Americans needed bargains, but FDR hammered consumers -- and millions had little money. His National Industrial Recovery Act forced consumers to pay above-market prices for goods and services, and the Agricultural Adjustment Act forced Americans to pay more for food. Moreover, FDR banned discounting by signing the Anti-Chain Store Act (1936) and the Retail Price Maintenance Act (1937).

Poor people suffered from other high-minded New Deal policies like the Tennessee Valley Authority monopoly. Its dams flooded an estimated 750,000 acres, an area about the size of Rhode Island, and TVA agents dispossessed thousands of people. Poor black sharecroppers, who didn't own property, got no compensation.

FDR might not have intended to harm millions of poor people, but that's what happened. We should evaluate government policies according to their actual consequences, not their good intentions.
 
Mike said:
It's absolutely assisine to think that financing a Stimulus with fiat currency help's anything except to stimulate inflation and the de-valuation of the dollar which hurts the poor absolutely.

FDR's New Deal policies also hurt the poor by raising taxes astronomically.

Doesn't anyone care about anyone except the wealthy?

How FDR's New Deal Harmed Millions of Poor People

by Jim Powell

This article appeared on cato.org on December 29, 2003.

Democratic presidential candidates as well as some conservative intellectuals, are suggesting that Franklin Delano Roosevelt's New Deal is a good model for government policy today.

Mounting evidence, however, makes clear that poor people were principal victims of the New Deal. The evidence has been developed by dozens of economists -- including two Nobel Prize winners -- at Brown, Columbia, Princeton, Johns Hopkins, the University of California (Berkeley) and University of Chicago, among other universities.

New Deal programs were financed by tripling federal taxes from $1.6 billion in 1933 to $5.3 billion in 1940. Excise taxes, personal income taxes, inheritance taxes, corporate income taxes, holding company taxes and so-called "excess profits" taxes all went up.



Jim Powell, senior fellow at the Cato Institute, is author of FDR's Folly, How Roosevelt and His New Deal Prolonged the Great Depression (Crown Forum, 2003).

More by Jim Powell

The most important source of New Deal revenue were excise taxes levied on alcoholic beverages, cigarettes, matches, candy, chewing gum, margarine, fruit juice, soft drinks, cars, tires (including tires on wheelchairs), telephone calls, movie tickets, playing cards, electricity, radios -- these and many other everyday things were subject to New Deal excise taxes, which meant that the New Deal was substantially financed by the middle class and poor people. Yes, to hear FDR's "Fireside Chats," one had to pay FDR excise taxes for a radio and electricity! A Treasury Department report acknowledged that excise taxes "often fell disproportionately on the less affluent."

Until 1937, New Deal revenue from excise taxes exceeded the combined revenue from both personal income taxes and corporate income taxes. It wasn't until 1942, in the midst of World War II, that income taxes exceeded excise taxes for the first time under FDR. Consumers had less money to spend, and employers had less money for growth and jobs.

New Deal taxes were major job destroyers during the 1930s, prolonging unemployment that averaged 17%. Higher business taxes meant that employers had less money for growth and jobs. Social Security excise taxes on payrolls made it more expensive for employers to hire people, which discouraged hiring.

Other New Deal programs destroyed jobs, too. For example, the National Industrial Recovery Act (1933) cut back production and forced wages above market levels, making it more expensive for employers to hire people - blacks alone were estimated to have lost some 500,000 jobs because of the National Industrial Recovery Act. The Agricultural Adjustment Act (1933) cut back farm production and devastated black tenant farmers who needed work. The National Labor Relations Act (1935) gave unions monopoly bargaining power in workplaces and led to violent strikes and compulsory unionization of mass production industries. Unions secured above-market wages, triggering big layoffs and helping to usher in the depression of 1938.

What about the good supposedly done by New Deal spending programs? These didn't increase the number of jobs in the economy, because the money spent on New Deal projects came from taxpayers who consequently had less money to spend on food, coats, cars, books and other things that would have stimulated the economy. This is a classic case of the seen versus the unseen -- we can see the jobs created by New Deal spending, but we cannot see jobs destroyed by New Deal taxing.

For defenders of the New Deal, perhaps the most embarrassing revelation about New Deal spending programs is they channeled money AWAY from the South, the poorest region in the United States. The largest share of New Deal spending and loan programs went to political "swing" states in the West and East - where incomes were at least 60% higher than in the South. As an incumbent, FDR didn't see any point giving much money to the South where voters were already overwhelmingly on his side.

Americans needed bargains, but FDR hammered consumers -- and millions had little money. His National Industrial Recovery Act forced consumers to pay above-market prices for goods and services, and the Agricultural Adjustment Act forced Americans to pay more for food. Moreover, FDR banned discounting by signing the Anti-Chain Store Act (1936) and the Retail Price Maintenance Act (1937).

Poor people suffered from other high-minded New Deal policies like the Tennessee Valley Authority monopoly. Its dams flooded an estimated 750,000 acres, an area about the size of Rhode Island, and TVA agents dispossessed thousands of people. Poor black sharecroppers, who didn't own property, got no compensation.

FDR might not have intended to harm millions of poor people, but that's what happened. We should evaluate government policies according to their actual consequences, not their good intentions.


With all due respect, Mike, this is Koch funded spin.

The Cato Institute is a libertarian think tank headquartered in Washington, D.C. It was founded in 1977 by Edward H. Crane, who remains president and CEO, and Charles Koch, chairman of the board and chief executive officer of the conglomerate Koch Industries, Inc., the second largest privately held company (after Cargill) by revenue in the United States.[2][3]

Koch Industries is active in the economic frauds being perpetrated in the meats industry. These are the structural problems I was talking about that needed to be fixed. This is more of the Kochs spreading the idea that taxes and spending are bad for the economy. They made their billions in this economy. Do they just want more?

I would settle for the people like the Kochs paying their share of the frauds they are perpetrating on the economy. It gives them barriers to entry and control that is against the plain reading of the Packers and Stockyards Act.

The Kochs are about as bad as Walmart but in our industry, more damaging.

The CATO institute is their spin think tank.

You can believe these super rich and their spinster stories if you want. What happened prior to the Great Depression was that companies bought each other out and concentrated the industries where they could then use their economic power to extract larger profits or create a barrier to entry for anyone wishing to compete with them in the market. Standard Oil was the most notable example of this and they basically used their power to steal value from other oil finds through a variety of means. We got the anti trust laws put into place because of these kind of business practices. The wealth has been concentrated and financialized in our country while they kill the golden goose of demand creation through their economic frauds.

I don't know a lot about their other industries, but this is how their poultry industry operates.

Tex
 
HAAAAAHAAAAAAAHAAAA!!!!!!!!!!!!!!!!

I figured some sort of diversion tactics were coming.

I suppose all those other Nobel prize economists are in the pockets of Koch too????????

How about the Heritage Foundation and the Ludwig von Mises Institute of Austrian Economics?

You're a funny guy.

Truth is Keynesian economic techiniques don't work. Period.

"If anything describes the Keynesian mindset, it is this: spend, spend, spend."

BUt let me tell you a little something about the Koch company. When they bought out Sylvest Foods (the chicken processor in this are) several years ago and the chicken growers signed on with them they were hesitant at first.

Now they are ALL satisfied and happy in their agreements and making nearly double the money they were with Sylvest.

In other words, the Koch Bros. are fair and honest folks to work with and they take care of their growers......... I know this for fact. I might even build a few houses myself with complete confidence.

Too bad some believe that there are no honest people left today.
 
Mike said:
HAAAAAHAAAAAAAHAAAA!!!!!!!!!!!!!!!!

I figured some sort of diversion tactics were coming.

I suppose all those other Nobel prize economists are in the pockets of Koch too????????

How about the Heritage Foundation and the Ludwig von Mises Institute of Austrian Economics?

You're a funny guy.

Truth is Keynesian economic techiniques don't work. Period.

"If anything describes the Keynesian mindset, it is this: spend, spend, spend."

BUt let me tell you a little something about the Koch company. When they bought out Sylvest Foods (the chicken processor in this are) several years ago and the chicken growers signed on with them they were hesitant at first.

Now they are ALL satisfied and happy in their agreements and making nearly double the money they were with Sylvest.

In other words, the Koch Bros. are fair and honest folks to work with and they take care of their growers......... I know this for fact. I might even build a few houses myself with complete confidence.

Too bad some believe that there are no honest people left today.


I hope you do build some of those chicken houses, Mike. The best way to learn is the hard way.

The article did touch on a few things and those were the kind of taxes FDR relied on. I would agree that all of those could be regressive taxes just as the sales tax is regressive. Of course the article does imply if not state that progressive income taxes hurt the poor less, and yes, the economy. It would be nice if we didn't even have to pay any taxes and the federal government wouldn't have to be funded at all. It would be better for the economy and better for businesses but the fact is that a federal government (minus the corruption) allows businesses to actually flourish and make a profit. Without it, we would not have a good country and probably economy at all.

I do know that in at least one complex Koch did use fraud to compensate some of its growers more than others. This was a dated contract I read so maybe things have changed. They have stuck with the National Chicken Council when it comes to enforcing laws against their competition, perhaps it is because they have been just as guilty.

The article didn't have a whole lot to do with Keynes, it seems. Keynesian spending is not just spend spend spend. It is that when the business cycle goes into a recession, it is best for the govt. to have a loose monetary policy. Perhaps you don't really understand this. Roosevelt didn't get it either until later on. Perhaps you believe that all Keynes believed in was a spendy govt. That isn't it at all.

The spending during a recession will still have to be paid for even if it sucks up capital that isn't being used for business. This is my greatest gripe about deficit spending when times are good. It is the reason why I am not happy about republicans raising the debt limit 7 times under Bush when we didn't have a recession:

http://www.perrspectives.com/blog/archives/002018.htm

Reagan lifted it too but did increase taxes afterwards.

I don't like excessive government spending but it seems that the politicians will not stop. They pass out the public purse money like it is candy. For this reason I believe that we do have to hold them accountable when they deficit spend. If they don't deficit spend and still spend and tax, we can hold them accountable for that too. I am not too worried about spending during a recession (Keynesian) but in the long term we need to reduce the debt, not increase it.

Meanwhile, the structural mistakes need to be fixed. We need to stop giving money to the very wealthy. We need to means test EVERY program and make programs like the ethanol credit need to not continue when energy is pushing the price of corn. These are the structural changes that are not being made and instead we get threats to SS. How about increasing SS taxes all the way up the tax scale instead of limiting it to about 150K of earned income? Why are we not SS taxing hedge fund managers and allowing them to pay at just capital gains rates? It is the financialization of main street where Wall Street captures the value of these industries instead of the people working in them.

Go build some chicken houses, Mike. It will be good for you.

Tex
 
The Congressional Budget Office estimates that the U.S. budget deficit will reach $1.85 trillion this year and $1.38 trillion in 2010, 13.1% and 9.6% of gross domestic product respectively. Much more worrying is that they project deficits averaging over $1 trillion a year for the next 10 years, which will raise the U.S. public debt-to-GDP ratio to over 80% by 2019.

The Obama administration and Congress have justified the vast new government borrowing and spending by asserting that it constitutes "fiscal stimulus." Not only would each dollar the government borrowed and spent produce a dollar of GDP that would never have been created had the dollar been left in private hands (a fiscal "multiplier" of 1.0), but it would stimulate a wave of new private sector spending, investment and employment that would generate 30, 40, 50 cents or more of additional new wealth per dollar (a multiplier above 1.0).

It is no wonder then that when President Obama told the public last month that stimulus projects were under budget, Nobel economist Paul Krugman cried "boo," pointing out that this meant "less stimulus." He backed his point with a quote from the 1936 General Theory of Employment, Interest and Money, in which John Maynard Keynes suggested that the government could raise employment, real income and capital wealth merely by burying money under rubbish heaps and inviting private enterprise to dig it up.

One of the many attractions of Keynes is that, like a good magician, he makes you think twice about what you think you see and know. And the General Theory is full of great tricks. Most people vaguely familiar with Keynes' economics associate his counter-laissez-faire views with the observation that nominal wages are "sticky" downward (that is, workers resist wage cuts), and that, in consequence, the free play of the price mechanism fails to steer the economy toward full employment.

But he goes well beyond this in the General Theory, arguing, contrary to classical economics, that even without assuming any fixing of prices there can be a stable, persistent equilibrium with chronic, large-scale unemployment.

How is this possible? Keynes said that the answer lies in the community's propensity to under-consume: "The psychology of the community is such that when aggregate real income is increased, aggregate consumption is increased, but not by so much as income. Hence employers would make a loss if the whole of increased employment were to be devoted to satisfying the increased demand for immediate consumption."

That is, employers will only hire if the increased demand (which would be brought about by the hiring) would be directed at either consumption or investment. What economists before Keynes had missed, explains Krugman, is the significance of the fact that "individuals have the option of accumulating money rather than purchasing real goods and services." Or, as Keynes biographer Robert Skidelsky observes, "Money is the root of all evil." This, he writes, is "almost a sub-text of the General Theory."

A demand for money, in Keynes' thinking, is the equivalent of a demand for nothingness--in the sense that, when people want to hold money, the extra production arising from hiring a new worker would fail to find any market. Keynesians call it "ineffective demand."

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So unless the government steps in to stimulate investment spending equivalent to the income aspiring workers would hoard, their aspirations would go unfulfilled and they would remain unemployed. Keynes' theory is therefore preternaturally consistent with good, humanist sentiments, as it implies that labor is manifestly not a commodity: Lowering its price will not increase demand.

But is this true? Does holding money really mean that part of the income required for the absorption of the production associated with it is permanently lost, which is what is required to create a permanent state of under-employment?

No. This is most easily seen using the model of a commodity money system, such as one based on gold. When people demand more money, rather than consumer or investment goods, it increases the demand for labor to mine, move and monetize gold. Unemployment rises, of course, when demand shifts from any product to another, as it takes time for labor to shift from one sector to another. But the demand for money is not "ineffective demand": It is no different from the demand for anything else.

The argument for the case of money that isn't convertible into gold, such as our own, is analogous. The public sells securities, instead of gold, to the central bank in order to increase their cash holdings. Securities are the counterpart to valuable goods stored or sold on credit.

Again, there is no "ineffective demand": To demand money is to demand real wealth capable of being monetized within the framework of the existing monetary system. So just as increased demand for gold does not itself diminish the purchasing power of the market, an increased demand for money does not itself do so.

The skeptical reader will rightly conclude that the Keynesians must have a riposte to this argument. Indeed, they have many. But all of them are founded on ad hoc "sticky wages" type assumptions. Nobel economist James Tobin, for example, in a spirited 1948 defense of the General Theory, offered observations such as "the supply of money is assumed constant." Explain that to Ben Bernanke.

What does all this matter? That is, what should we do or not do today to get ourselves onto a sustainable path out of recession?

Well, there are two brands of remedy. The first are government measures intended to eliminate obstacles to the adaptation of supply to changing demand. This is the now much-maligned classical brand of remedy. The second are fiscal and other government measures designed to force demand to adapt to supply. This is the Keynesian brand of remedy, now beloved in Washington, based on the belief that under-employment is a congenital defect of the economic system.

Each huge dose of this second remedy serves to further obliterate the functioning of the price mechanism, thus necessitating another huge dose. In the long run, this almost certainly means crippling debt, inflation or both. But Keynes, of course, advised against thinking too much about the long run.

Benn Steil is director of international economics at the Council on Foreign Relations, author of Lessons of the Financial Crisis (CFR) and co-author of Money, Markets, and Sovereignty (Yale University Press, 2009).
 
Mike said:
The Congressional Budget Office estimates that the U.S. budget deficit will reach $1.85 trillion this year and $1.38 trillion in 2010, 13.1% and 9.6% of gross domestic product respectively. Much more worrying is that they project deficits averaging over $1 trillion a year for the next 10 years, which will raise the U.S. public debt-to-GDP ratio to over 80% by 2019.

The Obama administration and Congress have justified the vast new government borrowing and spending by asserting that it constitutes "fiscal stimulus." Not only would each dollar the government borrowed and spent produce a dollar of GDP that would never have been created had the dollar been left in private hands (a fiscal "multiplier" of 1.0), but it would stimulate a wave of new private sector spending, investment and employment that would generate 30, 40, 50 cents or more of additional new wealth per dollar (a multiplier above 1.0).

It is no wonder then that when President Obama told the public last month that stimulus projects were under budget, Nobel economist Paul Krugman cried "boo," pointing out that this meant "less stimulus." He backed his point with a quote from the 1936 General Theory of Employment, Interest and Money, in which John Maynard Keynes suggested that the government could raise employment, real income and capital wealth merely by burying money under rubbish heaps and inviting private enterprise to dig it up.

One of the many attractions of Keynes is that, like a good magician, he makes you think twice about what you think you see and know. And the General Theory is full of great tricks. Most people vaguely familiar with Keynes' economics associate his counter-laissez-faire views with the observation that nominal wages are "sticky" downward (that is, workers resist wage cuts), and that, in consequence, the free play of the price mechanism fails to steer the economy toward full employment.

But he goes well beyond this in the General Theory, arguing, contrary to classical economics, that even without assuming any fixing of prices there can be a stable, persistent equilibrium with chronic, large-scale unemployment.

How is this possible? Keynes said that the answer lies in the community's propensity to under-consume: "The psychology of the community is such that when aggregate real income is increased, aggregate consumption is increased, but not by so much as income. Hence employers would make a loss if the whole of increased employment were to be devoted to satisfying the increased demand for immediate consumption."

That is, employers will only hire if the increased demand (which would be brought about by the hiring) would be directed at either consumption or investment. What economists before Keynes had missed, explains Krugman, is the significance of the fact that "individuals have the option of accumulating money rather than purchasing real goods and services." Or, as Keynes biographer Robert Skidelsky observes, "Money is the root of all evil." This, he writes, is "almost a sub-text of the General Theory."

A demand for money, in Keynes' thinking, is the equivalent of a demand for nothingness--in the sense that, when people want to hold money, the extra production arising from hiring a new worker would fail to find any market. Keynesians call it "ineffective demand."

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So unless the government steps in to stimulate investment spending equivalent to the income aspiring workers would hoard, their aspirations would go unfulfilled and they would remain unemployed. Keynes' theory is therefore preternaturally consistent with good, humanist sentiments, as it implies that labor is manifestly not a commodity: Lowering its price will not increase demand.

But is this true? Does holding money really mean that part of the income required for the absorption of the production associated with it is permanently lost, which is what is required to create a permanent state of under-employment?

No. This is most easily seen using the model of a commodity money system, such as one based on gold. When people demand more money, rather than consumer or investment goods, it increases the demand for labor to mine, move and monetize gold. Unemployment rises, of course, when demand shifts from any product to another, as it takes time for labor to shift from one sector to another. But the demand for money is not "ineffective demand": It is no different from the demand for anything else.

The argument for the case of money that isn't convertible into gold, such as our own, is analogous. The public sells securities, instead of gold, to the central bank in order to increase their cash holdings. Securities are the counterpart to valuable goods stored or sold on credit.

Again, there is no "ineffective demand": To demand money is to demand real wealth capable of being monetized within the framework of the existing monetary system. So just as increased demand for gold does not itself diminish the purchasing power of the market, an increased demand for money does not itself do so.

The skeptical reader will rightly conclude that the Keynesians must have a riposte to this argument. Indeed, they have many. But all of them are founded on ad hoc "sticky wages" type assumptions. Nobel economist James Tobin, for example, in a spirited 1948 defense of the General Theory, offered observations such as "the supply of money is assumed constant." Explain that to Ben Bernanke.

What does all this matter? That is, what should we do or not do today to get ourselves onto a sustainable path out of recession?

Well, there are two brands of remedy. The first are government measures intended to eliminate obstacles to the adaptation of supply to changing demand. This is the now much-maligned classical brand of remedy. The second are fiscal and other government measures designed to force demand to adapt to supply. This is the Keynesian brand of remedy, now beloved in Washington, based on the belief that under-employment is a congenital defect of the economic system.

Each huge dose of this second remedy serves to further obliterate the functioning of the price mechanism, thus necessitating another huge dose. In the long run, this almost certainly means crippling debt, inflation or both. But Keynes, of course, advised against thinking too much about the long run.

Benn Steil is director of international economics at the Council on Foreign Relations, author of Lessons of the Financial Crisis (CFR) and co-author of Money, Markets, and Sovereignty (Yale University Press, 2009).

Let me tell you what happened in our area. We had a democrat in our district and he held meetings shortly after and during the wost of the crisis. My mother in law and I both attended. She has a degree in economics and actually worked for the one of the spy agencies years ago. We listened to the speakers and they were handing out non recourse loans to small businesses to keep employees or to expand. These non recourse loans, they said, were NON RECOURSE LOANS which meant you didn't have to pay them back. They in essence, were giving money away.

Both my mother in law and I are conservatives and after sitting through the presentation we were both pretty disgusted. Sure, we both knew they were trying to inject money into the economy to prevent it from a huge downward spiral. Sure, we could both come up with some figures, numbers and paper work to get those free dollars. The presenters made it sound easy. One didn't even have to produce extra or anything. It was a a straight shot stimulus right into the artery of the economy.

As I said, we were both disgusted over the program. Neither one of us had any interest in gaming the system for Keynesian dollars, as you put it. It was just wrong. I am sure some did.

I don't believe that sort of thing is the answer to our economic woes although Keynesian stimulus certainly is. What was offered was meth, not help.

By the way, we voted that democrat out of office. My mother in law is a bit more politically active as she has the time. I am not so sure the republican we have is doing much better. He is one of what, 454, and doesn't get how broken the system is. It isn't a democrat and republican right or left issue, it is an issue of corruption and cronyism. Politicians from both sides of the aisle have been playing fast and loose with taxpayer money and it seems either party and their members will turn into whores for campaign dollars instead of trying to figure out what is the right thing to do. The horse trading in D.C. has been done WITH OUR MONEY AND OUR ECONOMY. These political leaders, with few exceptions, can not tell right from wrong.

I believe that the quote from Keynes on hiding money to be found was an exaggeration by him to drive the point home that actual stimulus is sometimes needed. We were on the brink of world financial meltdown and it was serious. Depressions have been avoided largely because of Keynesian economics and even President Reagan tapped into it. He did the right thing by increasing taxes after the pump was primed, as they say.

Keynesian economics will not change the trajectory of economic growth based on good economics but it can soften the bumps. The real work is not with limiting the federal debt as a whole, but doing so in the details.

I would totally agree with you that politicians on both sides of the aisle have not been able to govern with good policy but instead have whored out their power to people who have constructed elaborate systems of political patronage and news media manipulation, just as the Cato and other institutions have done. These people hired in these places are smart and can make an argument. Unfortunately the argument is bought by the very rich who are paying them.

I am sorry I could not watch the utube, Mike. Perhaps when I get to a public library I will have the necessary internet speed and can watch it then.

Keynesian economics will get you so far but it will not supersede the necessity for good policy. Having a trade deficit with China or the world along with perpetual fiscal deficits (because the Chinese make debt spending cheap) is not structurally sound economics. It is the slow death of our economy.

What I do see potentially happening is the fed stepping in and monetizing the debt if Congress can't get the budget deficit done. As you know, monetizing the debt will make our currency less valuable to others holding our debt like the Chinese, but may make our gas and other imports more expensive. It is what is needed and will make China think twice about their mercantilist policy. If only we could get Congress to thing the same way about companies like Walmart----oh, the monetizing of the debt will do that anyway.

My biggest problem with what has happened is that Larry Summers has been able to once again get the big money off the hook and still allowed them to keep the profits they generated through financial risk of our banking system. Once again, the wrong people are paying the price for these misdeeds and the moneyed people get off the hook. That is one of those structural changes that HAS to take place.


Tex
 
Keynesian economics did not work that well during the depression and it works less so with the socialist globalization of today.

the government spending that would be needed to stimulate the "Global" economy, would do more harm than good.

If you don't have the manufacturing capability or demand for labour domestically, then any stimulus would need to work it's way through the whole global market, to be of any benefit.

That amount of money printing would ellipse any benefit, through inflation.

How are those commodity prices doing?
 
It's very simple though Tex wants to make it complicated:

Money that is used in an attempt to stimulate an economy comes from the same economy you're trying to stimulate!!!! :roll:

But the big bust is that the money goes to the wealthy first then down to the peons. That is, after the gov't gets it's 25-30% cut to administrate it!!!


What part of those 50 words is hard to understand?
:lol: :lol: :lol: :lol: :lol: :lol:
 
Mike said:
It's very simple though Tex wants to make it complicated:

Money that is used in an attempt to stimulate an economy comes from the same economy you're trying to stimulate!!!! :roll:

But the big bust is that the money goes to the wealthy first then down to the peons. That is, after the gov't gets it's 25-30% cut to administrate it!!!


What part of those 50 words is hard to understand?
:lol: :lol: :lol: :lol: :lol: :lol:


I'll tell you what I'll do for you Mike. I had a few hundred that I was going to spend on consumer goods, here in Canada to try to help stimulate the economy....why don't I send you the money and you can spend it in the US, to stimulate your economy.

1:1 stimulus, I'm sure....... :lol:


Maybe I should send it to the IMF, it would probably do more for the World economy, than what it would do in Canada. :lol:
 
hypocritexposer said:
Mike said:
It's very simple though Tex wants to make it complicated:

Money that is used in an attempt to stimulate an economy comes from the same economy you're trying to stimulate!!!! :roll:

But the big bust is that the money goes to the wealthy first then down to the peons. That is, after the gov't gets it's 25-30% cut to administrate it!!!


What part of those 50 words is hard to understand?
:lol: :lol: :lol: :lol: :lol: :lol:


I'll tell you what I'll do for you Mike. I had a few hundred that I was going to spend on consumer goods, here in Canada to try to help stimulate the economy....why don't I send you the money and you can spend it in the US, to stimulate your economy.

1:1 stimulus, I'm sure....... :lol:


Maybe I should send it to the IMF, it would probably do more for the World economy, than what it would do in Canada. :lol:

You'd better keep it and spend it at home. By the time Zer0 gets his cut down here there'll be nothing left to trickle back up there. :lol:
 
Mike said:
hypocritexposer said:
Mike said:
It's very simple though Tex wants to make it complicated:

Money that is used in an attempt to stimulate an economy comes from the same economy you're trying to stimulate!!!! :roll:

But the big bust is that the money goes to the wealthy first then down to the peons. That is, after the gov't gets it's 25-30% cut to administrate it!!!


What part of those 50 words is hard to understand?
:lol: :lol: :lol: :lol: :lol: :lol:


I'll tell you what I'll do for you Mike. I had a few hundred that I was going to spend on consumer goods, here in Canada to try to help stimulate the economy....why don't I send you the money and you can spend it in the US, to stimulate your economy.

1:1 stimulus, I'm sure....... :lol:


Maybe I should send it to the IMF, it would probably do more for the World economy, than what it would do in Canada. :lol:

You'd better keep it and spend it at home. By the time Zer0 gets his cut down here there'll be nothing left to trickle back up there. :lol:


They'd be frozen before they reached our "fresh air"

We'll stimulate our own economy.....it's going pretty good so far. Must be the added government money hitting the system, but I sure wish these corporations were taxed a little more so we could have "free Health care"



The corporate tax rate will decrease as follows:

21% before January 1, 2008
19.5% effective January 1, 2008
19% effective January 1, 2009
18% effective January 1, 2010
16.5% effective January 1, 2011
15% effective January 1, 2012
 
hypocritexposer said:
Mike said:
hypocritexposer said:
I'll tell you what I'll do for you Mike. I had a few hundred that I was going to spend on consumer goods, here in Canada to try to help stimulate the economy....why don't I send you the money and you can spend it in the US, to stimulate your economy.

1:1 stimulus, I'm sure....... :lol:


Maybe I should send it to the IMF, it would probably do more for the World economy, than what it would do in Canada. :lol:

You'd better keep it and spend it at home. By the time Zer0 gets his cut down here there'll be nothing left to trickle back up there. :lol:


They'd be frozen before they reached our "fresh air"

We'll stimulate our own economy.....it's going pretty good so far. Must be the added government money hitting the system, but I sure wish these corporations were taxed a little more so we could have "free Health care"



The corporate tax rate will decrease as follows:

21% before January 1, 2008
19.5% effective January 1, 2008
19% effective January 1, 2009
18% effective January 1, 2010
16.5% effective January 1, 2011
15% effective January 1, 2012

Rub it in, will ya? :lol: That Corp tax is still too high. But dropping rates is a good start.
 
hypocritexposer said:
Keynesian economics did not work that well during the depression and it works less so with the socialist globalization of today.

the government spending that would be needed to stimulate the "Global" economy, would do more harm than good.

If you don't have the manufacturing capability or demand for labour domestically, then any stimulus would need to work it's way through the whole global market, to be of any benefit.

That amount of money printing would ellipse any benefit, through inflation.

How are those commodity prices doing?

Our problem has been the trade deficits.

Tex
 
Mike said:
It's very simple though Tex wants to make it complicated:

Money that is used in an attempt to stimulate an economy comes from the same economy you're trying to stimulate!!!! :roll:

But the big bust is that the money goes to the wealthy first then down to the peons. That is, after the gov't gets it's 25-30% cut to administrate it!!!


What part of those 50 words is hard to understand?
:lol: :lol: :lol: :lol: :lol: :lol:

Money should not have to go to the wealthy class first. Trickle down doesn't always happen. We have seen businesses go to other countries to invest in their labor with technology developed here and then sell back to the U.S. When you have an economy where you have sold off major industries for the demand you have to other nations, when you put money in the hands of the regular people, the money just goes over seas. This is a direct result of China's manipulating their currency to buy our industries and our nation's leaders allowing them to do it. All of the manufacturing that we did have was sold to the globalists to a communist country. Now I like trade with China, but not if it is so unbalanced.

Most people don't know that the money multiplier effect means. It is undermined by a major trading partner who is tied to us with a manipulated currency.

This is why I said that Keynesian economics will not solve our problems alone. If all money inserted into the domestic economy finds its way to other countries instead of staying here, the fed will not be able to control the downward deflationary spiral that this and economic frauds have imposed on the economy. It was a problem before the Great Depression and it is a problem now because we are not following the economic rules we knew had to be in place to have a strong economy. We have a corporate agenda not an economic agenda for the nation.

Here is a pretty good discussion on the M1 money multiplier and its effects on velocity (turnover of money). I read the first 4 or 6 pages and none of it talks about the structural changes of siphoning off that increase of money supply in the form of perpetual trade deficits. It should. The money multiplier has been going down and this is a big reason. (The money multiplier effect is the idea that one extra dollar inserted into the economy is in turn spent and banked, loaned, and spent again in a cycle where the speed of turnover --- it being spent, earned, banked, spent etc. is called the velocity).

http://www.elitetrader.com/vb/showthread.php?s=9ac54f26d22fd290f4664c1dad46b952&threadid=149887&perpage=6&pagenumber=4

Mike, I think the discussion here does have some of your points in it.

Money made up by the fed is not borrowed, but monetized debt. In other words, to keep from going in the deflationary cycle, they pump more money in the economy to inflate the economy while other areas are being de-leverage(housing market). This money is not made up by borrowing, but by printing more of a fiat currency. There are some implications to foreign trading partners and the the Chinese have been pretty loud about it. It is what they get for manipulating their currency. We will have to pay for de-leveraging our trade deficits but in the long run it will be good for the economy.

Tex
 
Our problem has been the trade deficits

I will not argue that our trade deficits have not been problematic.

But the Keynesian "Porkulus" Stimulus Bill pushed down our throats by Buckwheat & the Democrats at nearly a $TRILLION$ that obviously didn't work dwarfs the annual trade deficit by HOW MUCH?

When the Democrats piled this wasteful spending spree on top of the trade deficit things could only go one way. Downhill.

We told you so.

Let me be so kind to correct your above statement:

ONE of our problems has been the trade deficits. :wink:

Plus, our poor exchange rates (caused by borrowing money for Porkulus Projects) is driving them to worse proportions!
 

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