Preparing for the double dip recession.

Status
Not open for further replies.
Here you go. MMT in a nutshell.

http://johnsville.blogspot.com/2011/06/modern-monetary-theory-mmt-in-nutshell.html

Quote:
A rampaging mutant macroeconomic theory called Modern Monetary Theory, or MMT for short, is kicking keisters and smacking down conventional wisdom in economic circles these days. This is because an energized group of MMT economists, bloggers, and their loyal foot soldiers, lead by economists Warren Mosler, Bill Michell, and L. Randall Wray are swarming on the internet. New MMT disciples are hatching out everywhere. They are like a school of fresh-faced paramedics surrounding a gasping heart attack victim. They seek to present their economic worldview as the definitive first aid for understanding and dealing with the critical issues of growth, unemployment, inflation, budget deficits, and national debt.
 
buster,

Very interesting theory on the balance sheet recession. However I don't think this is similar to the US situation right now because:

1) The US is a consumption driven economy and other nations peg their currency against ours, and when we try to devalue our currency to reduce import or pay down debt (devalue currency jobs at the expense of other nations), the export driven nations like Japan devalue their currencies as well, and we end up with hyper inflation.

2) A huge portion of Japan's private sector debt was financed from the 80s economic boom and the money they earn from export, but a huge portion of our debt is foreign owned, so in the end if we walk away and let the banks and foreign sovereign fund collapse, it wouldn't impact us as much as Japan would have. A lot of investment banks made huge amount of money (i.e. Goldman) by buying CDS that they think would collapse. These CDS liability got transferred into US debt directly (through bailout or government guarantee) or indirectly (through banks loss and unpaid CDS claim that bankrupt investors and banks). In the end, Japan was on her own paying off the hidden debt but the US have the whole Latin America, Taiwan, China, Hong Kong, and India to bail us out, so we end up better off than Japan was.

3) The net value of Yen isn't considered because much of its investment is in the foreign nations (Brazilian government bond is a popular housewife saving bond), and they are probably the only nation on earth that would rise in currency value during a huge disaster. The tsunami and nuclear crisis revealed how much indirect dumping they have been doing to the rest of the world.


I think the US situation is more of a overpriced currency being propped up by the exporting nation. A gradual devaluation would have improve the economy by increase in employment and export / import ratio, but due to the recession and the sudden Euro sovereign bond collapse the devaluation (via debt rating and etc) is sudden. There are still lots of debt in the US: foreclosed home that is put off to avoid market shock, bailed out AIG or its CDS exposure (if not bailed out), banks balance sheet due to exposure to sovereign debts, etc, and that would not really be paid off unless the import/export ratio is reduced and the living standard in other export nations caught up and their government decided to drive their own consumption rather than relying on our consumption.

Politicians are trying to drag it out for as long as possible (at their opponents expense), but some investors are trying to shorten the process (via pricing collapse and inflation) which would be good for the population in debt (via foreclosure or default by inflation) but not to those who own the debt (foreign government, banks, retirement funds, hidden money in Swiss/Bermuda/Bahamas accounts, hedge funds, etc). Capitalism do work, just not always in your favor.

No matter how we reach the eventual stability, the US labor will be cheaper, standard of living lowered (to afford the reduced labor cost), China will be richer and they would demand higher standard of living and increased salary. The golden rule will still apply across the world with rich, middle, and lower income caste doing what they have been doing since civilization started.
 
Originally Posted By: CivicFan
Originally Posted By: Drew99GT
Why don't you call the white house and tell them to spend some of that 787 billion in shovel ready jobs NOW. It seems to me they're waiting to spend it until right before the 2012 election. Who'd a thunk it.


Actually, my organization has two small grants by ARRA and they push us all the time to quickly ramp up and finish them. The problem is that we cannot find qualified personnel to hire. When we won those infrastructure grants, the goal was to hire people and finish the project within a year.

That was 10 months ago.


Agreed. We have too much sloppy, rude, dumbed down population, so we are starting to be deservant of a third world status unfortunately.
 
Originally Posted By: PandaBear

Agree, we as a nation already have enough education on the higher end and there is not enough demand for too much of that (yes I do have enough education for what I need to do and what the industry is paying people to do).

We've enjoyed a great ride since WWII and now the rest of the destroyed world in WWII is finally recovered, and they are going to enjoy life just like we do, with the resource that we used to get around the world for peanuts, and they'll be satisfied with just a fraction of what we enjoyed since then. The only way to stabilize the difference is to either keep steady increase in resources (energy, minerals, agricultural products, forestry, etc) while letting the developing nations catch up and the developed nations tough it out. Scenario like you'll end up living with within your mean but the mean cost what you used to pay for a comfortable lifestyle.

Technology will improve efficiency and productivity but they will be eaten up just to keep the developed world surviving, things like what we have that's called jobless recovery and a lot of the future productivity improvement will be in taking care of aging population, or freeing up productivity elsewhere to compensate for an aging population. 55mpg car is very achievable, because by the time they arrive you'll still be paying the same amount of money per mile for fuel because fuel cost increase will eat that up. No government involvement is necessary, the consumer will do it for themselves (see how the 10 year old econo boxes went up in valve).


This is very insightful, and echoes in a different way what Ive been saying for a while. There is too much population. Bringing three billion people up in the world requires resources and infrastructure, which competes for what we are used to doing/getting dirt cheap. While they were good for cheap labor for a time, bringing too many of the three billion up has created a critical mass which now means that there is too much competition for everything.

It is like the rabbits and foxes problem, or perhaps like a plague of locusts. We did it to ourselves.
 
You guys worry to much, a little market correction and its over.

FYI the markets had a bad day today because of whats going on in Europe, but no one was really paying to much attention on this side of the pond.
 
Originally Posted By: buster
http://www.economist.com/blogs/freeexchange/2011/08/fiscal-policy

Stimulus wasn't large enough from the start. Too much money went to banks. I'm tired of the pandering to the top 1%. Im tired of hearing they are the job creators. Demand drives job growth. You can argue about the fairness of taxing them more but you won't get any sympathy from me, sorry. Tax unearned income as income . We need strong tax relief for middle class workers. We also need more spending . It wasn't until WWII that we got out if it. We don't need a war but we need something as substantial.


To compare the financial collapse to the one in the early '30s is over simplified. In the early '30s we didn't have the entitlements ALREADY in place that we have today. We didn't have the destruction of the nuclear family that we have today. We didn't have the subsidized everything and red tape and regulation that we have today.We did not have the life expectancy that we have today. We had not been kicking a can down the road for 40 years as we have at this point in time. We compensated people more for working than for not working.
 
Originally Posted By: Brian Barnhart
It's not a double dip. It's not even a single big dip. Rather, it's the new norm.


Exactly!

Remember when Bernake said we'd have a JOBLESS recovery?

It's the jobs! Actually the LACK of good paying jobs!
 
Perhaps a better thread title for the now locked previous thread would have been, 'what happens to the stock market when the debt ceiling is finally raised after being unnecessarily dragged out to the last moment.'? You now have the answer.
 
Originally Posted By: sayjac
Perhaps a better thread title for the now locked previous thread would have been, 'what happens to the stock market when the debt ceiling is finally raised after being unnecessarily dragged out to the last moment.'? You now have the answer.


The market has tanked because investors have realized the bill that Congress passed was grossly inadequate to address the debt problem. The can was kicked down the street yet again.
 
Quote:
Quote:
Perhaps a better thread title for the now locked previous thread would have been, 'what happens to the stock market when the debt ceiling is finally raised after being unnecessarily dragged out to the last moment.'? You now have the answer.


The market has tanked because investors have realized the bill that Congress passed was grossly inadequate to address the debt problem. The can was kicked down the street yet again.
Thanks for 'your opinion' on the topic. Note, my post unlike your's pointed no finger at a group, or individual, simply posted the events as they occured.

Also unlike you, I won't post my opinion as to the cause of debt ceiling not being raised sooner so as not to get this thread locked for violating the 'P' prohibition here.

You have great day.
 
What was all that about????
Anyway, I totally agree with rshaw. It wasn't enough and investors are looking down the road, akin to the street, and they aren't seeing anything remotely positive at this point. Now today's news was good, unemployment dipped .1%, but geesh, we got a long way to go and look at all the proposed layoffs that are forthcoming. Those numbers will surely rise when all this comes to fruitation. Face it, there was already bad news out there and congress dropped the ball in trying to fix it. Basically, what they passed was more layoffs. The trillions they have to cut will ultimately come down to jobs. That's a LOT of jobs folks. Even I'm worried and I work for Uncle Sam, in the defense department no less. Why yes, I'm not sleeping all that great lately!!!!
 
Originally Posted By: buster
It's funny how many small business owners don't understand macro economics.


Buster, true enough, probably, but most do have a bit of knowledge about how to create jobs, something I think most macro economists, and economists in general, have little real world experience with.

What do you think will get us out of this recession / depression? Jobs? Or macro economic gobbeldy gook that counsels to just pull money out of thin air and spend it on something, anything?

Just because an idea or theory is new or novel does not make it right. Especially when there seems to be abundant and compelling evidence to the contrary.
 
I think demand creates jobs and as long as wealth accumulates more to the top, in higher concentration, the majority of us will continue to see our living standards erode.

This crisis should not be paid for on the backs of middle class Americans. Trickle down economics is a joke. The wealthy have never had it so good.

My point about small business owners is that some think they are economic wizards because they run a business but most don't understand the monetary system and how it all works at macro level.
 
Originally Posted By: buster
I think demand creates jobs and as long as wealth accumulates more to the top, in higher concentration, the majority of us will continue to see our living standards erode.

This crisis should not be paid for on the backs of middle class Americans. Trickle down economics is a joke. The wealthy have never had it so good.


wink.gif
I think trickle down works for the panhandlers who manage to beg in front of luxury retail outlets. The problem is that even though the sales of luxury items have been steadily increasing, the wealthy are not known for giving money away easily.

All jokes aside, the only good news about the current economic situation is that the illegal immigrants seem to be going back to their home countries. I think this is the secret goal of the teabaggers in Congress.
 
LOL true. I'm for a balanced approach. The GOP and tea party want to dismantle government. They hate all things government but fail to offer alternatives and fail to acknowledge the role it must play to create a strong private sector.
 
Originally Posted By: buster
they are economic wizards because they run a business but most don't understand the monetary system and how it all works at macro level.


I don't think Ben Bernanke or Alan Greenspan understand how our monetary system and economy fundamentally works!

I'd honestly give a small to medium sized successful business owner a better shot at running our country than an over-educated book smart puppet that's never run a business and employed people at the local level.
 
Originally Posted By: rshaw125
Originally Posted By: sayjac
Perhaps a better thread title for the now locked previous thread would have been, 'what happens to the stock market when the debt ceiling is finally raised after being unnecessarily dragged out to the last moment.'? You now have the answer.


The market has tanked because investors have realized the bill that Congress passed was grossly inadequate to address the debt problem. The can was kicked down the street yet again.


Disagree. Rates are at all time lows. Investors are concerned about growth and where it will come from. The GOP thinks giving the wealthy more will magically create jobs.
 
Status
Not open for further replies.
Back
Top