Is economic collapse in the United States imminent?

[tchitt]

http://www.nytimes.com/2009/08/26/business/economy/26deficit.html

http://www.americanbankingnews.com/...predicts-1-6-trillion-dollar-deficit-in-2009/

If you need more stories then google it. (I posted the New York Times article because they're notorious for liberal spin and I figured I'd preclude any "FOX LIES" type comments.) Anyway... I'm having trouble wrapping my head around how any of this could be anything but unimaginably disastrous. I'm also wondering why people aren't urinating themselves in fear over the idea of having an $18,000,000,000,000 national debt along with a GDP of $14,000,000,000,000.

Isn't the only possible outcome of this that nearly every nation in the world decides to stop investing in the United States and effectively destroy the dollar? The USSR had the second largest economy in the world at one time... now it's almost a stretch to describe them (by "them" I mean the nation that currently occupies the piece of land formerly known as the USSR) as a second world country.

What am I missing here? Why is no one talking about this?

Please, discuss and enlighten me for my own sanity.

 

[tchitt]

Also, not sure who wrote this and when (I know I heard it long before all the current economic chaos, but like everything else I'm aware it could be a complete fabrication by modern day idealogues.)... perhaps someone can tell me. Either way, it's pertinent.

"A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy,(which is) always followed by a dictatorship."

"The average age of the worlds greatest civilizations from the beginning of history, has been about 200 years. During those 200 years,
these nations always progressed through the following sequence:

From Bondage to spiritual faith;
From spiritual faith to great courage;
From courage to liberty;
From liberty to abundance;
From abundance to complacency;
From complacency to apathy;
From apathy to dependence;
From dependence back into bondage."

 

[xxChrisxx]

No it doesn't mean collapse of the economy, debt is actually the way the economy works. If there were no debt there would be no economy, as a captalist economy needs continual growth to survive.

Thats the reason why governments borrow money as opposed to juset making it themselves (well that and hyperinflation which DOES kill economies).

Many countries after the recession have debts approaching GDP (UK is in the same position). This isn't a problem however as they arent required to pay it all back at once. So as long as they can keep paying back interest on the loan there is no problem. You only need to worry when the govt can't repay what it absolutly has to (like Iceland when the govt went bankrupt this year).

It also may interest you that reason why debts can get so high, (more than all the money availalble) is that banks can literally magic money into existence. Captial requirement ratio allows them to lend more moeny than they actually have, on the promise of payment.
Theres bound to be someone more knowledgeable of the situation on here that can explain both why I am so wrong about it.

 

[tchitt]

I don't understand what you mean when you say "If there were no debt there would be no economy." I'm sure that we haven't had a deficit every year since America's conception. In fact we had a $69 billion surplus in 2001. Why is it impossible to create growth without losing money on your investment?

Yes, I'm completely ignorant when it comes to economics... but debt as a goal doesn't make sense in any universe. And is the time when our interest payments exceed our GDP really that far off? If you go doubling your debt every decade (as we're doing this decade) it won't take long to catch up with your income.

 

[xxChrisxx]

also watch the 'moeny as debt' series on youtube (its 5 parts). It's cartoony but informative.#


linky:
http://www.youtube.com/watch?v=vVkFb26u9g8&feature=fvw


There is a deficit simply becuase they spend more than they get in from taxes. However they are the government, they are the only people who can mint their own moeny. By extension of that can you thnik of any logical reason why they would choose to borrow their own moeny from a bank and pay interest as opposed to make themselves some more?

It's all explained in the link.

 

[tchitt]

Yes, they can print their own money but that doesn't make it worth anything. If everyone were to print themselves a million dollars no one would have any more wealth. Currency becomes worthless when you destroy its value... which in turn destroys economies.

Won't this debt cause our debtors to slowly lose faith in our ability to repay debt thereby making them more apprehensive about loaning the money in the first place?

(Watching your link now, quite interesting.)

 

[xxChrisxx]

Just watch the linky.

 

[tchitt]

If there's truth to all of that then I suppose I'm alright with being a wage slave to line the pockets of fat cats for the simple fact that that particular problem is well above my pay grade ( :P ). I've always been open to conspiracy theories and whatnot as I feel it's just stupid not to keep an open mind to any and all possibilities. History has shown us that people will always try to screw other people. (I don't mean to dismiss you as a nut, it's just that I've been lied to before.)

Either way your perspective is noted and I plan on investigating this matter further. Though, I'm beginning to think I'll need a primer in actual economics to formulate any real opinion on anything.

 

[xxChrisxx]

If there's truth to all of that then I suppose I'm alright with being a wage slave to line the pockets of fat cats for the simple fact that that particular problem is well above my pay grade ( :P ). I've always been open to conspiracy theories and whatnot as I feel it's just stupid not to keep an open mind to any and all possibilities. History has shown us that people will always try to screw other people. (I don't mean to dismiss you as a nut, it's just that I've been lied to before.)

Either way your perspective is noted and I plan on investigating this matter further. Though, I'm beginning to think I'll need a primer in actual economics to formulate any real opinion on anything.

It's not a conspiracy theory video, it may seem counter intuative, but that's how captialism and banking acutally work.

By all means look into this deeper, that set of viedos is mega simplified for the layman (such as you and I), the acutal mechanics of an economy are beyond my comprehension.

 

[xxChrisxx]

What the hell has that got to do with anything regarding economcs?

Check the forum guidelines regarding conspiracy theorys. We don't deal with them here.

 

[tchitt]

nirax: How about not being a troll and derailing the topic with crap that's against the rules in the first place? You won't last long here.

Chris: I got a bit of a conspiracy theory vibe when they started quoting assassinated presidents as if they were making the insinuation that they were snuffed out by powerful banks lest they tear down the whole house of cards and destroy their scam.

I understand that this country was built on money that doesn't exist (yet?) but as the video pointed out it's unreasonable to think that it can continue forever.

 

[xxChrisxx]

I'll disagree that the 'vibe' is there,0 if you are determined to see ione you will, the quotes are innocent and are there merely for social commentary. in vids i tend to just ignore and make my own judgement abou that.

The important aspect of the video is the mechanics of lending and borrowing are correct, as is the way banks make money.

It also shows that if everyone was stupidly rich and didnt borrow from banks, banks would not need to exist as they wouldn't be profitable. Whech them leads to the spiral, that no new money would be created unless it was dug out of the ground. Basically if people just deposited in banks, and iddnt borrow, we would go back to having a huge vault with the cash just sat there. As an interesting note, there isn't enough cash in the world if everyone wanted to close their accounts and withdraw their funds.

It also comments about how 'spending your way out of a recession' is the thing that is done. Although it seems counter intuative, this is what they have done with stimulus packages and encouraging peopel to borrow money again.

As the general public doesn't understand, they just think 'Wasnt it debt that got us into this mess in the first place, borrowing would be stupid??". The answer is yes and no, for the individual it would be very bad, for the economy very good. Just like alcohol for the humans, debt is the casue of and solution to all economy problems.

 

[xxChrisxx]

I understand that this country was built on money that doesn't exist (yet?) but as the video pointed out it's unreasonable to think that it can continue forever.

Like one of the quotes said it's like a game of musical chairs. So long as the music keeps going nobody loses. The key with a capitalist system is to keep the music going at all costs.This is also why communism (well the true verson of communism of stateless common ownership and people doing things for the general good) is technically a better system, its more sustainable longterm as it doesn't require constant growth to operate. It's just a shame it'll never ever work with humans being the greedy self serving bastards they are.

 

[Ivan Seeking]

The budget reports underscored another factor that increasingly is driving up deficits: the cost of interest on the expanding federal debt, which is the accumulation of all annual deficits. The debt, which was 33 percent of the G.D.P. when the decade began, would reach 68 percent by 2019.

From your first link

I don't know where you get the 23 trillion. Also, right now we are probably close to 80%.

After WWII, our debt to GDP ratio was at 122%. This was followed by a period that produced the highest standard of living, and the greatest wealth, the world had ever seen.

Imo: We need to restructure and prepare for a new century, but we will be fine as long as the American people keep their eye on the ball. Electing Obama was key to getting this all straightened out. We are increasing the debt now, but instead of simply spending on foreign wars and a cold war with the Soviet, we are FINALLY beginning to invest in our own country again.

 

[rootX]

What am I missing here? Why is no one talking about this?

http://www.nytimes.com/2009/08/26/business/economy/26deficit.html

http://www.americanbankingnews.com/...predicts-1-6-trillion-dollar-deficit-in-2009/

If you need more stories then google it. (I posted the New York Times article because they're notorious for liberal spin and I figured I'd preclude any "FOX LIES" type comments.)

Fox must also have discussed it the way you want since they don't like Obama policies much. So what kind of panic you are looking for?

 

[Ivan Seeking]

It's just a shame it'll never ever work with humans being the greedy self serving bastards they are.

It's kind of like all of the ideal wires, ideal voltmeters, ideal mechanism etc, that we deal with in physics. They may look great on paper, but the real world is far more complicated.

 

[Wax]

The deficit is a problem but we are safe as long as the dollar is the largest reserve currency in the world. Being the largest reserve currency in the world means that countries like China have an invested interest in keeping the dollar value high. China artificially undervalue their currency so they can sell goods and services to Americans and other countires at a cheaper price. If China one day decided to dump the dollar then it would be worthless, causing the value of the dollar to drop and China's own currency to rise. If China's currency rises then they would no longer be able to export their goods and services at a cheaper price. Their economy would literally stop. However, this can not go on forever.

In order for countries with surpluses to break away from the American dollar, they must get their people to spend but this process doesn't happen over night. It has been estimated to take a period of 10 years for China to economically break away from the dollar. So, the Americans have roughly 10 years to get their financial mess in order. The only way I see this happening is if America can turn itself into the leader of alternative energy.

 

[xxChrisxx]

It's kind of like all of the ideal wires, ideal voltmeters, ideal mechanism etc, that we deal with in physics. They may look great on paper, but the real world is far more complicated.

Alas! for the moment tis true.

I like to think that in the future though we'll be able to get rid of greed and the self serving nature, the day we start living for the community is the day our problems will melt away.


How idealistic do I sound... urgh.

 

[Ivan Seeking]

Alas! for the moment tis true.

I like to think that in the future though we'll be able to get rid of greed and the self serving nature, the day we start living for the community is the day our problems will melt away.


How idealistic do I sound... urgh.

I wouldn't bet on human nature changing any time soon. But, just as we have plenty of greed and selfishness, we also have many great philanthropists and humanitarians who help to take up the slack. The list of these people includes Bill Gates, Warren Buffet... many more, up to and including the man or woman who runs the local Boy Scout troop or soup kitchen, and the coach of the nearest little-league team.

One might even include people like PF members who spend an untold number of hours assisting with homework problems, for free.

 

[Pinu7]

I wouldn't bet on human nature changing any time soon.

Native Americans?

 

[Ivan Seeking]

Native Americans?

I don't understand your point. Do you mean that now we would never treat people the way Native American's were treated?

Also, I added an "Imo" to my original post to make it clear when I am stating my opinon.

 

[WheelsRCool]

After WWII, our debt to GDP ratio was at 122%. This was followed by a period that produced the highest standard of living, and the greatest wealth, the world had ever seen.

That debt did not cause the economic growth. It had to be paid down. At the time, we did not have an enormous, bloated entitlement structure to deal with however.

The only reason the U.S. economy boomed after World War II is because everyone else had been bombed out, meanwhile the U.S. had all this infrastructure built up. The U.S. economy thus dominated during the 1950s, although by the 1960s, the economy was stalled again. In the 1970s, we went into stagflation because the economy was far too hamstrung.

Imo: We need to restructure and prepare for a new century, but we will be fine as long as the American people keep their eye on the ball. Electing Obama was key to getting this all straightened out.

Barack Obama is not going to straighten anything out, because not a single one of his policies has ever shown success anywhere. Right now, he seems hellbent on castrating our intelligence capabilities, and driving our economy into fiscal oblivion.

We are increasing the debt now, but instead of simply spending on foreign wars and a cold war with the Soviet, we are FINALLY beginning to invest in our own country again.

We do not need to spend money on the economy. It is cutting spending that will allow our economy to grow. Government spending does not grow the economy.

A national debt is fine as long as it is kept manageable, and at a reasonable level.

These other nations with enormous national debts have rather lousy economies, and their debt and entitlement levels are so high that they cannot afford a military worth anything. The only reason the European nations have been able to invest so much of their national economies into their entitlement systems is because the United States has essentially been subsidizing their security for the past 60+ years.

Remember, interest has to be paid on the debt.

 

[xxChrisxx]

We do not need to spend money on the economy. It is cutting spending that will allow our economy to grow. Government spending does not grow the economy.

A national debt is fine as long as it is kept manageable, and at a reasonable level.

These other nations with enormous national debts have rather lousy economies, and their debt and entitlement levels are so high that they cannot afford a military worth anything. The only reason the European nations have been able to invest so much of their national economies into their entitlement systems is because the United States has essentially been subsidizing their security for the past 60+ years.

Remember, interest has to be paid on the debt.

Thats just the point, governments DO spend their ways out of recession. By doing so it injects money back into the economy, which is why it's usually spent on infrastructure. So the debt tis then used for something useful after the recession.

Cutting spending at the widescale economy level HARMS the economy as it reduces borrowing and thus the total money available.

This is the critical leap that people don't make, what is good at the individual level is harmful for the wider economy. As all money is debt, the government borrowing from banks has actually created money.

You are correct about interest, and that's the point on a government loan from a bank, the interest acually for outweighs the borrowed amount in the end. It's also why they shouldn't spend like mad during a boom.

 

[Wax]

T he global economy is starting to bottom out from the worst recession and financial crisis since the Great Depression. In the fourth quarter of 2008 and first quarter of 2009 the rate at which most advanced economies were contracting was similar to the gross domestic product free-fall in the early stage of the Depression. Then, late last year, policymakers who had been behind the curve finally started to use most of the weapons in their arsenal.

That effort worked and the free-fall of economic activity eased. There are three open questions now on the outlook. When will the global recession be over? What will be the shape of the economic recovery? Are there risks of a relapse?

On the first question it looks like the global economy will bottom out in the second half of 2009. In many advanced economies (the US, UK, Spain, Italy and other eurozone members) and some emerging market economies (mostly in Europe) the recession will not be formally over before the end of the year, as green shoots are still mixed with weeds. In some other advanced economies (Australia, Germany, France and Japan) and most emerging markets (China, India, Brazil and other parts of Asia and Latin America) the recovery has already started.

On the second issue the debate is between those – most of the economic consensus – who expect a V-shaped recovery with a rapid return to growth and those – like myself – who believe it will be U-shaped, anaemic and below trend for at least a couple of years, after a couple of quarters of rapid growth driven by the restocking of inventories and a recovery of production from near Depression levels.

There are several arguments for a weak U-shaped recovery. Employment is still falling sharply in the US and elsewhere – in advanced economies, unemployment will be above 10 per cent by 2010. This is bad news for demand and bank losses, but also for workers’ skills, a key factor behind long-term labour productivity growth.

Second, this is a crisis of solvency, not just liquidity, but true deleveraging has not begun yet because the losses of financial institutions have been socialised and put on government balance sheets. This limits the ability of banks to lend, households to spend and companies to invest.

Third, in countries running current account deficits, consumers need to cut spending and save much more, yet debt-burdened consumers face a wealth shock from falling home prices and stock markets and shrinking incomes and employment.

Fourth, the financial system – despite the policy support – is still severely damaged. Most of the shadow banking system has disappeared, and traditional banks are saddled with trillions of dollars in expected losses on loans and securities while still being seriously undercapitalised.

Fifth, weak profitability – owing to high debts and default risks, low growth and persistent deflationary pressures on corporate margins – will constrain companies’ willingness to produce, hire workers and invest.

Sixth, the releveraging of the public sector through its build-up of large fiscal deficits risks crowding out a recovery in private sector spending. The effects of the policy stimulus, moreover, will fizzle out by early next year, requiring greater private demand to support continued growth.

Seventh, the reduction of global imbalances implies that the current account deficits of profligate economies, such as the US, will narrow the surpluses of countries that over-save (China and other emerging markets, Germany and Japan). But if domestic demand does not grow fast enough in surplus countries, this will lead to a weaker recovery in global growth.

There are also now two reasons why there is a rising risk of a double-dip W-shaped recession. For a start, there are risks associated with exit strategies from the massive monetary and fiscal easing: policymakers are damned if they do and damned if they don’t. If they take large fiscal deficits seriously and raise taxes, cut spending and mop up excess liquidity soon, they would undermine recovery and tip the economy back into stag-deflation (recession and deflation).

But if they maintain large budget deficits, bond market vigilantes will punish policymakers. Then, inflationary expectations will increase, long-term government bond yields would rise and borrowing rates will go up sharply, leading to stagflation.

Another reason to fear a double-dip recession is that oil, energy and food prices are now rising faster than economic fundamentals warrant, and could be driven higher by excessive liquidity chasing assets and by speculative demand. Last year, oil at $145 a barrel was a tipping point for the global economy, as it created negative terms of trade and a disposable income shock for oil importing economies. The global economy could not withstand another contractionary shock if similar speculation drives oil rapidly towards $100 a barrel.

In summary, the recovery is likely to be anaemic and below trend in advanced economies and there is a big risk of a double-dip recession.

This was a good read.

 

[WheelsRCool]

Thats just the point, governments DO spend their ways out of recession. By doing so it injects money back into the economy, which is why it's usually spent on infrastructure. So the debt tis then used for something useful after the recession.

No, that's the theory of how to recover an economy, on paper. In practice, it has never worked. The people who advocate it simply say we never have spent enough money. Europe told President Obama "No" when he asked them to stimulate their economies because they have experience with it increasing their debts and deficits and increasing inflation.

The Japanese tried ten separate stimulus packages, all of which failed.

Cutting spending at the widescale economy level HARMS the economy as it reduces borrowing and thus the total money available.

On paper perhaps, in practice, not so. You are going by the discredited Keynesian-style economics. The government did just this during the great depression of 1920, upon which the economy quickly recovered.

This is the critical leap that people don't make, what is good at the individual level is harmful for the wider economy. As all money is debt, the government borrowing from banks has actually created money.

You are correct about interest, and that's the point on a government loan from a bank, the interest acually for outweighs the borrowed amount in the end. It's also why they shouldn't spend like mad during a boom.

Yes, government should never spend like a madman at any time. But that doesn't make for good politics:

Questioner: "Mr. Candidate, what will you do as President of the United States?"

Candidate: "Well, technically I'd like to do nothing. I will keep government spending in line, leave the People alone to live their lives, handle international affairs and the national defense, otherwise, the economy is the economy, it regulates itself for the most part. All I can do is keep spending in check and hope the Federal Reserve sets interest rates right."

That just doesn't go over well. Yes, if the entire financial system is going to collapse unless bailed out, government should act, but because if the financial system collapses, you grind the economy to a halt. But otherwise, the economy is for the most part self-regulating, and interest rates that are centrally controlled are controlled by the Federal reserve, which is accountable, but still independent, of the government.

Notice, all the areas where a president can do work, are areas the government has already screwed up, such as healthcare, education, energy, Medicare, Medicaid, and Social Security.

 

[xxChrisxx]

Well I'm going to bow out of this for the moment, economics is a mind bending subject at the best of times, and there are so many schools of thought that its amazing we get anywhere.I'll leave this little discussion to you boys.

 

[Wax]

No, that's the theory of how to recover an economy, on paper. In practice, it has never worked. The people who advocate it simply say we never have spent enough money. Europe told President Obama "No" when he asked them to stimulate their economies because they have experience with it increasing their debts and deficits and increasing inflation.

The Japanese tried ten separate stimulus packages, all of which failed..

I'd argue that you are wrong and proof of that is the current recession. Bank bail out, housing stimulus, and the general stimulus package turned this into a U shaped recession. Take all of those stimulus packages away and you'd have a depression.

 

[SticksandStones]

No, that's the theory of how to recover an economy, on paper. In practice, it has never worked. The people who advocate it simply say we never have spent enough money. Europe told President Obama "No" when he asked them to stimulate their economies because they have experience with it increasing their debts and deficits and increasing inflation.

The great depression? If you'll remember, the new deal and later the government spending during and after world war II ended the disaster.

 

[WheelsRCool]

I'd argue that you are wrong and proof of that is the current recession. Bank bail out, housing stimulus, and the general stimulus package turned this into a U shaped recession. Take all of those stimulus packages away and you'd have a depression.

The bank bailout was necessary to keep the flow of credit from freezing up. But it is highly debateable, from my understanding, that any deficit spending was needed to stop the economy from going into any depression.

Even if this is the case however, this does not justify the ultra-huge spending on entitlement programs that the political Left seem bent on (California for example).

John Maynard Keynes advocated that in good economic times, you balance the budget and run a surplus (which means restricting government spending), and then if a recession occurs, you run a deficit to cushion or pull out of it. You are not supposed to run chronic deficits (which is always the result of massive government), which both the establishment "compassionate conservative" Republicans and big-government Democrats seem in favor of right now.

 

[Wax]

The bank bailout was necessary to keep the flow of credit from freezing up. But it is highly debateable, from my understanding, that any deficit spending was needed to stop the economy from going into any depression.

Even if this is the case however, this does not justify the ultra-huge spending on entitlement programs that the political Left seem bent on (California for example).

John Maynard Keynes advocated that in good economic times, you balance the budget and run a surplus (which means restricting government spending), and then if a recession occurs, you run a deficit to cushion or pull out of it. You are not supposed to run chronic deficits (which is always the result of massive government), which both the establishment "compassionate conservative" Republicans and big-government Democrats seem in favor of right now.

This is not good economic times with a job loss rate of 500k a month. The American economy might have reached the bottom but it's still not clear yet and any cut backs at this time would undermine any type of recovery.

 

[WheelsRCool]

The great depression? If you'll remember, the new deal and later the government spending during and after world war II ended the disaster.

That's one view, one which is hotly debated among Ph.D economists. Some say that the deficit spending under FDR helped the economy recover and that trying to balance the budget in 1937-38 is what drove the economy back into a major recession then.

Others say this view is complete nonsense, because Herbert Hoover took the economy into very large deficit spending during the Depression and yet the economy went into a massive depression anyway. Hoover also infringed greatly on free-trade and raised taxes. FDR upped the spending a bit more, but not by much, and infringed even more on the economy. If Hoover upped spending a great deal, and had a full-on depression, yet FDR upped spending by only a small margin more and suddenly got enormous economic growth, well that doesn't seem to make sense.

FDR also instituted price and wage controls, which had a harrowing effect.

Even if the deficit spending did good, much of the New Deal was very bad. FDR's Treasury Secretary Morganthau also commented that the deficit spending, as far as he saw it, was not working at all, in I think 1937.

I think what is certain about the Great Depression and the causes and fixes are that:

1) Government infringment on free trade was horrendous
2) Government tax increases were bad
3) Government deficit spending might have had a positive effect
4) Government price and wage controls were bad
5) The Federal Reserve letting the banking system collapse was very bad

As for World War II, that is another debate.

You have the folks who say, "FDR and his New Deal got us out of the Great Depression."

Then there are those who say, "No, FDR's New Deal didn't do it, it was World War II that got us out of the Great Depression."

And then those who say, "It wasn't either of those things."

For example some say that World War II was finally the MASSIVE fiscal stimulus needed to pull the economy out of depression, as the unemployment rate began declining greatly (but how much faster would the economy have recovered if the huge infringements on free-trade had been lifted or never implemented in the first place and the massive tax increases had been slashed or never implemented? also what if the Federal Reserve had increased the money supply to save the financial system?).

Others say that it is an illusion that World War II did this because with the U.S. entry into WWII, a whole bunch of the nation's young men were sent off to war. That automatically decreased the unemployed population, as much of them were "employed" in the war. I mean if you have a huge amount of unemployed people, and send a whole bunch off to a massive war, well your unemployment rate will decrease.

Because of the men leaving, women took over much of the work in industry at home.

The other thing is that during WWII, the U.S. ran a deficit of something like 40% of the economy. Does that mean for this crises, we run a deficit that massive?

If so, would we ever be able to pay it off in time for the next big recession? Any plans for big-government programs would need to be put off completely to pay that off, to bring it back down.

The national DEBT at 40% of GDP is okay, but you only take the deficit there if you absolutely must.

And unlike after World War II, this time Europe and Japan would not be bombed out, thus providing no competition. Also after WWII, most of Asia and China were not even on the scope as economic powers, but now you have the Asian Tigers, China, India, etc...in addition to Europe and Japan.

 

[WheelsRCool]

This is not good economic times with a job loss rate of 500k a month. The American economy might have reached the bottom but it's still not clear yet and any cut backs at this time would undermine any type of recovery.

True; but as said, historically, deficit spending seems to not work, as the Europeans have shown, instead oftentimes resulting in inflation, which is why they told President Obama no when he asked them to stimulate their own economies while the U.S. enacted a big stimulus.

So I wouldn't say cutbacks right now will undermine recovery.

Another big problem is that since no one really read the stimulus, no one knows per se how the money will be spent. When you write a stimulus that big to enact very quickly, no one has the time to read it before signing it.

And since the money of it goes out in increments each year, IMO it might have been smarter, for a stimulus, to have enacted a $100 billion stimulus for this year perhaps, then next year another stimulus, and so forth, so legislators had time to read each one and see where the money was going. But that wouldn't be politically feasible I guess, so they had to rush it.

 

[Wax]

True; but as said, historically, deficit spending seems to not work, as the Europeans have shown, instead oftentimes resulting in inflation, which is why they told President Obama no when he asked them to stimulate their own economies while the U.S. enacted a big stimulus.

So I wouldn't say cutbacks right now will undermine recovery.

Another big problem is that since no one really read the stimulus, no one knows per se how the money will be spent. When you write a stimulus that big to enact very quickly, no one has the time to read it before signing it.

And since the money of it goes out in increments each year, IMO it might have been smarter, for a stimulus, to have enacted a $100 billion stimulus for this year perhaps, then next year another stimulus, and so forth, so legislators had time to read each one and see where the money was going. But that wouldn't be politically feasible I guess, so they had to rush it.

Deficit spending is the only option when all areas of the free market has stopped spending. The economy is based on spending, if the consumer doesn't spend then how will it grow?

Only 9% of the stimulus is being spent right now. Most of it will be spent in the next two years. It is believed that if you spend money during the upturn of the economy then you have a chance to grow it two fold. Creating a new bill every year will not work because of politics. It had to go out all in one big lump some. If there was anything that was ever truly wrong with the bill, congress can always have an emergency session to stop stimulus spending but they would never get a chance to vote for another stimulus bill. The conservatives wouldn't allow it. They make up false accusations that "the first stimulus didn't work so why another stimulus bill?" It's funny because the average American doesn't take 1 second to think about the fact that only 9% of the stimulus was spent. If only 9% of the stimulus was spent then how in the world do you know that it didn't work?

As for the no one reading the bill, it all comes down to politics again. The stimulus package is not targeted spending, as in it's not going only to construction jobs. Targeted spending in one sector of the economy only leads to stagflation, which is what we learned from Japan. Spending has to be in all areas of the economy to show some growth. This is why you will see a lot of people claiming pork or wasteful spending in the bill when it's not. That's just politics and conservative talk. The more people play politics, the less work that is actually done and the one who suffers is the American people.

Will it work? It seems to be working just fine right now. The free fall in the economy seems to be slowing down and it is predicted to turn into a U shaped economy. If you see job growth two years from now then you know it worked. Don't believe everything you watch on TV, even if it's the news. They only give you snap shots of what's happening and never the full story. If you watch Fox news, you certainly shouldn't believe 90% of what they talk about. Fox news is the biggest propaganda news station around.

 

[WheelsRCool]

Deficit spending is the only option when all areas of the free market has stopped spending. The economy is based on spending, if the consumer doesn't spend then how will it grow?

In order to "stimulate" the economy, the money must be taken out of the economy in some way first, either through taxes or debt or whatnot.

Only 9% of the stimulus is being spent right now. Most of it will be spent in the next two years. It is believed that if you spend money during the upturn of the economy then you have a chance to grow it two fold. Creating a new bill every year will not work because of politics. It had to go out all in one big lump some.

Yup.

If there was anything that was ever truly wrong with the bill, congress can always have an emergency session to stop stimulus spending but they would never get a chance to vote for another stimulus bill. The conservatives wouldn't allow it. They make up false accusations that "the first stimulus didn't work so why another stimulus bill?" It's funny because the average American doesn't take 1 second to think about the fact that only 9% of the stimulus was spent. If only 9% of the stimulus was spent then how in the world do you know that it didn't work?

I never said it didn't work. I said in an earlier post some weeks back that I thought it was wrong to criticize whether the stimulus was working yet, because under Ronald Reagan, the Volcker Recession lasted from July 1981 to September 1982 (more than a year). It has only been months right now.

The problem is that the Obama administration claimed the stimulus would have immediate effects and unemployment wouldn't go above 8% and would create a bunch of new jobs. Then unemployment flew right by 8%, so the administration refined its rhetoric to claim that they had "saved" a bunch of jobs, and that without the stimulus, the economy would be far worse than it currently is.

As for the no one reading the bill, it all comes down to politics again. The stimulus package is not targeted spending, as in it's not going only to construction jobs. Targeted spending in one sector of the economy only leads to stagflation, which is what we learned from Japan. Spending has to be in all areas of the economy to show some growth. This is why you will see a lot of people claiming pork or wasteful spending in the bill when it's not. That's just politics and conservative talk. The more people play politics, the less work that is actually done and the one who suffers is the American people.

It isn't all politics if you believe that stimulus spending does not work and could create inflation.

Will it work? It seems to be working just fine right now. The free fall in the economy seems to be slowing down and it is predicted to turn into a U shaped economy. If you see job growth two years from now then you know it worked.

That doesn't mean it's the stimulus, that could just be the natural movements of the economy.

Don't believe everything you watch on TV, even if it's the news. They only give you snap shots of what's happening and never the full story. If you watch Fox news, you certainly shouldn't believe 90% of what they talk about. Fox news is the biggest propaganda news station around.

On this I disagree. Fox is in fact the only news station not to have been caught in some kind of scandal thus far and was the only one that did not try to cover up that whole Reverand Wright thing regarding Barack Obama.

They serve as a more conservative/libertarian-leaning counterpoint to the other mainstream news networks.

You also have to consider who you're watching on that channel. The news part itself is standard news; people like Glenn Beck (hardcore libertarian), O'Reilly (traditional independent), and Sean Hannity (textbook Reagan conservative), are not news shows. They cover the issues in their own ways, and usually have people from opposing views whom they debate.

 

[Wax]

It isn't all politics if you believe that stimulus spending does not work and could create inflation.



That doesn't mean it's the stimulus, that could just be the natural movements of the economy.



On this I disagree. Fox is in fact the only news station not to have been caught in some kind of scandal thus far and was the only one that did not try to cover up that whole Reverand Wright thing regarding Barack Obama.

They serve as a more conservative/libertarian-leaning counterpoint to the other mainstream news networks.

You also have to consider who you're watching on that channel. The news part itself is standard news; people like Glenn Beck (hardcore libertarian), O'Reilly (traditional independent), and Sean Hannity (textbook Reagan conservative), are not news shows. They cover the issues in their own ways, and usually have people from opposing views whom they debate.

Glenn Beck is all propaganda. He's the one who started the Nazi movement and death panels. How can that not be propaganda? He even believes Obama is a racists with no proof. Hannity is stubborn and wouldn't give a democrat credit even if he saved his mom.

As I said earlier, the natural movement of the economy was going down. Take away the bank bailout, housing stimulus, and the general stimulus plan. What do you think would have happened?

It's all politics when the only thing you can do is call people names and never provide a solution.