Hyper Prosperity Will Replace Hyper Inflation 35 comments
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In the 1970's, after a long period of negative real interest rates, the US experienced hyper-inflation. In the past year, our government has inflated its balance sheet while corporations and individuals have worked at paying down debt. The ballooning of the Fed balance sheet has caused many folk to believe a period of hyper inflation is coming. The following chart shows that conditions are not nearly the same as after the 1973-74 recession. Thus we can expect different results.
[click to enlarge]
Much waste is being perpetrated by government. For example, street cars are being added to cities that are successful in obtaining federal grants for 80 to 90% of the construction costs. How many years will we waste tax dollars on under-utilized buses and street cars? The good news for investors is that the American people are upset enough to speak out and to vote against additional wasteful spending. Government will not continue to consume such a high percentage of capital. Money will be available for private enterprise to take us to a new high level of prosperity.
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This article has 35 comments:
Negative prosperity is baked into the cake for a long time.
And Paul Volcker is a statue in the West Wing.
Our fall could be more like Greece's than Rome's.
On Sep 22 09:48 AM commoinsense1211 wrote:
> No more comparison to the past please, for once history will not
> repeat itself, unless you're comparing the US to the Roman Empire.
> We've lost almost all our manfacturing base, millions of under or
> mis educated people are unemployed, our government is corrupted and
> the deficit is beyond repair. hate to be so negative but this article
> brings out the worst in me, step away from the kool-aid.
On Sep 22 10:01 AM Whippet wrote:
> And those millions of mis-, re- and un-educated people can all watch
> mainstream media and read enough words to pull a lever in a voting
> booth.
> Our fall could be more like Greece's than Rome's.
Jack ends with: "Government will not continue to consume such a high percentage of capital. Money will be available for private enterprise to take us to a new high level of prosperity."
Jack. You've gotten to the heart of the matter, but I'm afraid government will continue consuming more capital and "crowding out" the private sector like we used to say in the '70's and '80's.
I also share your aversion to placing choo-choo trains in our cities as the "Progressives" love to do, taking us back into the last century.
Jack: Keep going.
"In the 1970's, after a long period of negative real interest rates, the US experienced hyper-inflation."
What the US experienced in the 1970s was extended period of high inflation. If the US had experienced "Hyper inflation" then prices would have been doubling every few days, or hours.
That 1976 Mustang would have cost around $75k USD as compared to the 1974 Mustang retailing for $2k USD.
I hope that's not the argument the author is trying to assert.
We can't prosper as an atheist nation -- moral relativism, where each picks and chooses "his own right and wrong" means that many do not have a set of "wrongs"...or have a set that includes very few things...to the detriment of the populace at large. We need to return to a recognition of objective truth, and some basic concepts of the classic virtues. It is possible to teach these without endorsing any particular religion. And it must be done in order to form the character that is needed for a stable society. Too many of our youth have lost hope and will become dependents rather than producers. And it will continue until we all wise up in regards to this.
S/DT, VZ and T think there is enough demand for LTE level capacity in 2011; for those of you who think this is a slam-dunk, over-capacity of data has burned a lot of investors twice in the last ten years, beware
On Sep 22 02:01 PM Socialism cannot compete! wrote:
> We can talk economics till h#ll freezes over...but we won't get hyper
> prosperity until we fix some of the character-related issues facing
> this nation. Having a recession has caused many of us to think about
> some of them -- things like too much self-indulgence, etc. But we
> have rampant drug and alcohol misuse, we're in denial about dealing
> with legality of certain types of content and their impact on society
> (i.e., generating perverts), and we have a large class of people
> who have an entitlement mindset.
>
> We can't prosper as an atheist nation -- moral relativism, where
> each picks and chooses "his own right and wrong" means that many
> do not have a set of "wrongs"...or have a set that includes very
> few things...to the detriment of the populace at large. We need
> to return to a recognition of objective truth, and some basic concepts
> of the classic virtues. It is possible to teach these without endorsing
> any particular religion. And it must be done in order to form the
> character that is needed for a stable society. Too many of our youth
> have lost hope and will become dependents rather than producers.
> And it will continue until we all wise up in regards to this.
On Sep 22 07:02 PM Rokjok777 wrote:
> "Socialism Cannot Compete" is the reader who wins the prize: this
> is a crisis of values. Consume today, appear affluent no matter what,
> borrow to do so, delay solving problems until another day, find a
> scam to avoid regular hard work, those are the values in the US today.
> Why is Asia winning? Why is there a tsunami of money rolling over
> the entire region? Why do they have gleaming infrastructure, airports,
> public transport that's cheap and efficient, savings rates of 20,
> 30, even 40% of income? It's their values: save, invest, get educated,
> work hard, family, think about future generations.
In essence, that is why Americans love a split party rule where the President doesn't control the House and Senate. As we see under Bush Jr. and Obama, both parties given the chance are very capable and willing to run the government into long term economic ruin.
We are digging a hole so deep...
Well, there you go! We'll have that tunnel to China in no time!
>But those societies also have gleaming infrastructure because they are willing to use government funds (from taxes) to build that stuff. We aren't doing that. We are cutting taxes on the wealthy so that they can buy more yachts and jets. Brilliant! >
I somehow doubt that most economists, much less people in the street would consider the communist taxation paradigm to be the economically superior one vis a vis the U.S. tax system.
Certainly up until very recently capitalist societies provided much better for their citizenry than the communist ones. It wasn't too long ago socialist countries the world over were lamenting the large "brain drain" to the United States as the best and brightest of their citizens yearned for the freedom and pursuit of the American dream. The ability to keep the bulk of the fruits of their efforts was a large part of that American dream.
In fact many might wonder whether there might be some correlation between the fact that China loosened its hold over the earnings of their citizens just as its economic fortunes took a sharp turn for the better a short while later. Or that as the United States has begun to move in the other direction towards higher taxes and a more socialistic paradigm, its economic fortunes have taken a turn for the worse.
Certainly raising taxes on the wealthy was no economic panacea for California seekingalpha.com/artic... nor apparently was it for Massachussetts online.wsj.com/article...
Of course, there is legitimate room for debate as to where the optimal tax rates should be, but I don't think there is any question that one cannot arbitrarily denounce "cutting taxes on the wealthy" in every situation.
I think President Kennedy was proven right when he championed the cutting of the upper marginal tax rates on the wealthy, when in sharp contrast to the revenue losses experienced in Maryland and California despite raising the taxes on the wealthy, Kennedy's tax cuts helped grow the economy and tax revenues even faster than the economy:
www.heritage.org/resea...
Kennedy's fiscal policy stance made it clear that he believed in pro-growth, supply-side tax measures:
"Tax reduction thus sets off a process that can bring gains for everyone, gains won by marshalling resources that would otherwise stand idle--workers without jobs and farm and factory capacity without markets. Yet many taxpayers seemed prepared to deny the nation the fruits of tax reduction because they question the financial soundness of reducing taxes when the federal budget is already in deficit. Let me make clear why, in today's economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarged the federal deficit--why reducing taxes is the best way open to us to increase revenues.3"
Kennedy reiterated his beliefs in his Tax Message to Congress on January 24, 1963:
"In short, this tax program will increase our wealth far more than it increases our public debt. The actual burden of that debt--as measured in relation to our total output--will decline. To continue to increase our debt as a result of inadequate earnings is a sign of weakness. But to borrow prudently in order to invest in a tax revision that will greatly increase our earning power can be a source of strength."
President Kennedy proposed massive tax-rate reductions, which were passed by Congress and became law after he was assassinated. The 1964 tax cut reduced the top marginal personal income tax rate from 91 percent to 70 percent by 1965. The cut reduced lower-bracket rates as well. In the four years prior to the 1965 tax-rate cuts, federal government income tax revenue--adjusted for inflation--increased at an average annual rate of 2.1 percent, while total government income tax revenue (federal plus state and local) increased by 2.6 percent per year (See Table 4). In the four years following the tax cut, federal government income tax revenue increased by 8.6 percent annually and total government income tax revenue increased by 9.0 percent annually. Government income tax revenue not only increased in the years following the tax cut, it increased at a much faster rate.
-------
Kennedy's tax cuts worked because in the early 60s US wealth was very evenly distributed and the manufacturing based economy was rapidly expanding to meet the needs of the millions of baby boom children. Today an overweight proportion of income and net worth is concentrated among the top 10% of Americans, the economy is based on selling unaffordable houses and cheap Chinese goods to each other--and financing this shuffle, and the portion of the population that is not already on welfare or working for government or collecting unemployment insurance is getting ready to enjoy their entitlement years. America has changed since Kennedy so the same policy of tax cuts would certainly produce very different effects today.
Sorry about the spelling
On Sep 23 12:32 AM johngonole wrote:
> Facism for the rich, socialism for the poor, and capitolism for the
> shrinking middle class. Good buy freedom.......hello fuedalism.
> Kennedy's tax cuts worked because in the early 60s US wealth was very evenly distributed and the manufacturing based economy was rapidly expanding to meet the needs of the millions of baby boom children. Today an overweight proportion of income and net worth is concentrated among the top 10% of Americans, the economy is based on selling unaffordable houses and cheap Chinese goods to each other--and financing this shuffle, and the portion of the population that is not already on welfare or working for government or collecting unemployment insurance is getting ready to enjoy their entitlement years. America has changed since Kennedy so the same policy of tax cuts would certainly produce very different effects today. >
I can go along with most of that. But it still seems to me that there are a few underlying problems that are causing most of our problems, and too little taxation isn't a main culprit.
One is that China artificially sets the price of its currency too low and pegs it to the dollar so that it can never move up to a fair value. That makes their prices permanently too low compared to ours and the rest of the world. That pretty much makes a balanced trade with them impossible.
Another is the Fed trying to create ever more debt in a futile attempt to prevent our economy from ever going into recession. That ends up causing dislocations in the economy including of course the infamous bubbles that have been exploding in our economy. The attempted remedies cause even further problems including some of that disproportionate distribution of wealth as happened when Goldman Sachs gets bailed out in multiple ways and then pays its employees an average of $700,000 bonuses each as unemployment, bankruptcies and foreclosures explode around the country.
I think that seques into another major problem highlighted in an article in the Atlantic:
www.theatlantic.com/do...
"The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time."
---
Matt Taibbi's piece on Goldman Sachs may be a little over the top by mainstream media standards, but I think it still points out some of the problems inherent in having an intermingling of the people from the financial giants employed throughout key positions in government, particularly when they are such major contributors to the political campaigns.
I think the same is true of having a cartel of private banks owning the hybrid Federal Reserve which completely controls the nation's money supply.
Although I think there is plenty of room to reform the tax code, it seems to me that trying to fix our financial mess by increasing the marginal tax rates would be akin to treating skin cancer with a band aid.
Hyper prosperity? Try a little Ritalin. The reason inflation is not soaring like the 70's is that few businesses or individuals can qualify for a loan.
If you don't have a job, how do you ask for a pay raise?
These graphs only show gov inflation which is far different than real inflation. During Bush43 inflation went up 100% average. Not bad in just 8 yrs!!
Best is a taxation like Clinton did, enough to balance the budget and where the rich paid at least the same as the middle class does. Now the rich pay 22% vs 29% for the middle class. Even the poorest pay 13.2% in Fed taxes.
Facts are SS, Medicaid/care are paid almost completely by the poor, middle class. The rate for someone making $35k is 42% before tax breaks, far more than the rich at 36%.
The workers are getting screwed by inflation, immigration, taxes, wars while the rich steal all their money. But by making the lower classes poor, the rich are only screwing themselves with inflation and no one left to make money from.
> Question for JeffDB: The quotation from un-named employees of the IMF really brought me up short, particularly since this is also my opinion. It is my understanding that Timothy Geithner's last employment was with the IMF. But Timmy's close associations and present job suggest he is in the middle of the financial in-crowd. How does this compute? >
---
The excerpt above was from an article written by Simon Johnson. Here is a brief bio at the end of the Atlantic article:
www.theatlantic.com/do...
"Simon Johnson, a professor at MIT’s Sloan School of Management, was the chief economist at the International Monetary Fund during 2007 and 2008. He blogs about the financial crisis at baselinescenario.com, along with James Kwak, who also contributed to this essay."
As to Geithner's connections, here's a site with an interactive map showing most of his known associations and affiliations with some of the "in" crowd:
news.muckety.com/2008/...
BTW, I had intended to include a link to Taibbi's article about Goldman Sachs in my original post, but apparently didn't do so.
www.box.net/shared/lls...
The scanner apparently wasn't the best, but it includes more than the extensive excerpts from the Rolling Stone site:
www.rollingstone.com/p...
Several points for the author -
Real interest rates are still very negative. Look at the "real" inflation rate, not some fantasy number cooked up by Uncle Sam.
Abundant natural resources? What world are you living in? The supply/demand situation in many commodities is very tight, even in a recession. Go to any of the fast-growing emerging markets and ask them if resources are abundant?
"Government will not continue to consume such a high percentage of capital." What planet are living on - Uncle Sam will continue to get fatter and fatter and.....
> You seem to assume that all atheists are moral relativists. That is not true. This assumption is probably based upon some notion that God is necessary for morality. But, to paraphrase Socrates, is something right because God commands it, or does God command it because it is right? >
I can't speak for "Socialism cannot compete", but I agree that not all "atheists are moral relativists". Hopefully it's not going off too far on a tangent, but that has been an issue that has always intrigued me. Well, maybe not always, but for some years now anyway.
Even though I've observed that to the case in real life, I don't quite see how it flows logically from an atheistic worldview. I think that question is a subset of the ultimate question of "What is the meaning of life?" which I wrestled with for quite a few years.
At one point I came up with what I considered to be pretty much the only 3 possibilities.
1. There *is* no meaning to life. Just have as much fun as you can as long as you can. Perhaps best summed up by the bumper sticker "Whoever dies with the most toys wins!"
2. Survival of the fittest. The name of the game is to survive and produce the most offspring who will also survive. I suppose that bumper sticker might read, "Whoever has the most viable descendants wins!"
3. Religious. This one has a lot of subsets but being a Catholic Christian, I would say that the bumper sticker motto for this one would be "Whoever gets to heaven wins!"
I straddled the fence three ways, so to speak, for quite a few years, figuring that I couldn't really know the meaning to life so I figured I'd have as much fun as I could, have some kids and try not to kill anybody or do any other horrible thing.
But it's probably no better trying to reconcile 3 different and at times conflicting goals than it is to try and steer a ship to 3 different destinations.
I don't think it even helps much if one comes to the conclusion that option #2 is ultimately not a viable one. Scientists say that the sun and other stars will eventually burn out and the universe will eventually collapse in on itself, so even though it may take billions or even trillions of years, it won't matter who has the most DNA scattered throughout the universe in the grand scheme of things.
So that brings us back to the only two options I can think of. Either there's a religious meaning to life or there is no meaning at all. Which kinda brings us back to the question at hand, namely whether one needs a God to be moral.
I was undoubtedly more of an agnostic than an atheist, not knowing whether or not there was a God rather than denying that God existed, but I have spoken with several, sometimes at length and never have been able to get a satisfying answer as to where an objective morality could come from if there were no God.
From what I can tell all did have a moral code similar to the Judeo/Christian one that western civilization was birthed in, they were against, rape, murder, stealing, assault etc. I'm sure, but I've not heard *why* those things should necessarily be "immoral" from an atheistic worldview.
For instance, I don't think most people would consider it to be "immoral" for a spider to kill a fly, or a dog to kill a rabbit, or even a tiger to kill a human. We might consider it "bad" from a human standpoint, if it were an outcome we didn't like, but I wouldn't consider the aggressor in any of those situations to be immoral. That's just the way they are.
It seems to me that would be all the more case for someone who felt that the universe was just a random conglomeration of atoms and molecules following the laws of nature and everything in the universe was, in the grand scheme of things, just a product of random chance given an infinite amount of time.
We wouldn't consider a rock that fell and crushed some plant to be immoral, why would it be immoral for some human to rearrange the molecules in some other organism, ie. injure or kill a plant, animal or even another human being? Why should there be any intrinsic moral difference between killing a plant and killing a human being?
I'm willing to be persuaded otherwise, but at this point it seems to me that Nietzsche's idea of the "Ubermensch" or "Superman" flows more logically from an atheistic worldview. It seems to me that if there is no God, there is no objective moral "right" or "wrong", though there might well be things that I "like" or "don't like".
I could see where it might not be in my own best interests to do some action, such as injuring or killing someone else, or stealing their goods, because they or their friends or relatives (or the police in a societal setting) might retaliate against me, but why would stealing be "immoral" if a snake eating the eggs of a bird is not?