Machiavelli999

If you thought California was a mess, Pew Research has a table of the nine other states (who, remember, can't run a deficit as easily as the federal government can and must slash services) "barreling toward an economic disaster" as tax revenues take a dive.

"Tons of treasuries are held by the banks purchased with 0% interest money from the government. So when the bubble pops, we'll wind up paying $100 for a loaf of bread (if we can find one). "

Nope, this won't happen. I wish economics was like sports. One team wins, and the loser must shut up and go away.

Your prediction will never come true, but you will continue to make it. It could be 2050 and you will still be saying, "Hyperinflation is coming any day now"

If you thought California was a mess, Pew Research has a table of the nine other states (who, remember, can't run a deficit as easily as the federal government can and must slash services) "barreling toward an economic disaster" as tax revenues take a dive.

As usual, you guys here at SA are clinging to your lagging indicators, hoping and wishing that the economy collapses, while the stock market keeps yelling at all of you, "NO! You are all morons!"

And now for some logical analysis of the situation:

So, I know all of you are thinking that all these states have these horrible deficits because of their huge spending, especially California, right? WRONG! Over the past few years all states have cut spending drastically, including California. It is the tax revenues that are falling. California's problem is so acute because its tax base is so heavily tilted towards the rich. When times are good their coffers are overflowing with money, but when times are bad, they REALLY become bad. And so it is not the spending that California must reform, but their tax revenue base.

Second, yes the states and local governments need a bailout. Unless you are OK with them pulling cops off the street and stuffing 100 kids into a classroom? The fact of the matter is that "bailing out" states would be one of the most effective forms of stimulus because it wouldn't require any jobs to be created but would literally save existing jobs. And this state "bailout" was in the original stimulus package actually. It would have avoided what is going on with states right now. But unfortunately, that is the piece of flesh that Olympia Snowe wanted so she could vote for the stimulus.

Oh and yes we can afford it and no youngman that won't cause any of our lenders to stop lending to us because they all depend on us.

THE END

P.S. Stop making economics a morality play!!!

The Unsustainable Lie of Inflation

Well, someone has to stick his head out there into this morass of morality plays and make a case for mild inflation.

First, let's look at the most objective evidence. What happens when we have deflation? We had basically a deflationary spiral during the Great Depression. Everything got cheaper. Was this a great time for the country then guys?

What about Japan? It has had mild deflation for the past 20 years (despite 20 years of 0% interest rates and lots and lots of government spending). Is this a great performing economy?

The answer to both of these questions is NO. The reason? Well, a deflationary spiral creates many problems. The biggest of which is the inability of the private sector to deleverage. For example, in this crisis, everyone agrees that the American private sector is way too overleveraged. And the process of deleveraging is a long one. If everyone tries to deleverage at once, it causes a great drop in demand and hence deflation. The problem with that is that eventhough the private sector might be trying to reduce the nominal value of its debts, if you allow deflation, the real value of its debts will not fall and may even rise. For example, if the private sector pays off 1% of its debts this year but prices are allowed to fall by 2% then effectively the real debt levels have increased. This is what is called a deflationary spiral.

The second piece of evidence for inflation is that it has worked. Yes, prices have gone up a lot since 1932, but incomes have gone up even more. So, again the nominal value of goods have gone up with mild inflation, but with respect to our incomes, prices have gone down and our purchasing power has increased.

Finally, its often cited by the goldbugs and Austrians that the dollar has lost something on the order of 90% of its value since the Fed came to be in 1913. Well, I ask, would you rather be a person in the United States before 1913 with these supposedly more valuable dollars or be you right now in 2009 with your supposedly devalued dollars?

One more thing. Conservative love to blame Keynes for everything. But it is not Keynes who was the main proponent of the mild inflation argument, but the icon of free market economics, Milton Friedman. To appease the Tea Baggers, conservative economic pundits today never mention that had Milton Friedman been alive today he would support pretty much everything the government is doing to battle this recession except for the fiscal stimulus package.

Watching the USD Drop? Here's What You Should Really Be Watching

I am going to quote Paul Krugman because he totally nailed the whole debt/inflation "problem" and how articles like this address it wrongly.

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"Oh, and this particular story did something I’ve noticed more and more in financial reporting: when reporters are assigned to write a story about how bond markets are afraid of debt/deficits/inflation, they have a strange and telling habit of telling readers a lot of scare stories about how markets are nervous, along with something about how interest rates or spreads are at their highest level in x weeks or y months — but strangely fail ever to mention what the spreads or rates actually are. Thus I’ve read scary-sounding articles about Japanese debt that somehow never mention that Japan is currently able to borrow long-term at less than 1.5%.

And in this case you’d never know from the story what the 10-year U.S. inflation rate implied by the TIPS spread is. The answer, as of Friday, was 1.98 percent. But that number sort of wouldn’t match the whole thing about bond vigilantes, I guess, so it was omitted."
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I would also add that many people on this site are free-market absolutists who believe the markets are always right. So, what are the markets telling you right now. That inflation is not a problem nor is government debt.

Q3 Productivity and Costs: Productivity +9.5% vs. +7% expected and +6.6% in Q2. Unit labor costs -5.2% vs. -4.5% expected and -5.9% in Q2.

Labor costs -5.2%. But we are going to have hyperinflation any moment now. Riiiight....

A little volatility after the (largely unsurprising) Fed statement and stocks have given back just a bit of their gains; Dow +0.6% to 9,828; S&P 500 +0.4% to 1,049 and Nasdaq +0.2% to 2,062.

Because there were some rumors that the Fed was thinking about tightening earlier. And this confirmed that they are not.

Oct. ISM Non-Mfg. PMI: 50.6 vs. 52 expected and 50.9 prior. Prices 53 vs. 48.8 prior. New orders 55.6 vs. 54.2 prior. Respondents' comments remained mixed, and are mostly cautious about business conditions and the overall economy.

Because they are not seeing demand...

Buffett: "Our country's future prosperity depends on its having an efficient and well-maintained rail system. Conversely, America must grow and prosper for railroads to do well. Berkshire's $34B investment in BNI is a huge bet on that company, CEO Matt Rose and his team, and the railroad industry. Most important of all, however, it's an all-in wager on the economic future of the U.S. I love these bets." (PR)

montanamark,

And he knows a lot more about economics then you and the rest of the conservative blogs you read to make you feel better about the way you view the world. He also actually puts his money where his mouth is and wins more often the he loses.

I wish politics was like sports. People can argue about which team is best and then the teams play and at the end you can just say "SCOREBOARD" and if your team won the other side just has to shut up.

In politics, what we get is constantly moving the goal posts. First the critics said the stimulus was not going to create any growth. Now the critics are conceding the stimulus caused growth, but its not real growth because it was caused by the stimulus besides there are no jobs. A year from now robust job creation won't be real job creation because it was caused by the stimulus.

House Financial Services Committee signs off (49-14) on legislation aimed at ratings agencies, including barring them from consulting for companies they're also rating, and requiring raters to have outsiders on their boards. The bill also enables investors to sue firms for failing to carry out their duties.

Umm..not really.

At worst, some people can't get financing for their homes.

In return, we avoid horrible financial crises when all of those AAA rate mortgages go bust.

Stop looking to regulation to fix the financial sector and let the unhealthy banks die. "Regulation tends to make problems worse rather than better," analyst Roger Nightingale says. But if we didn't bail out the dying banks, to whom would bank executives turn to reinstate their swollen bonuses?

Right. That's why we should have nationalized the banks which would effectively be the same as putting them through bankruptcy but prevent all of the depositors in the bank from losing their money. You know, kinda like the FDIC has been doing for the past, oh I don't know, 70 years!!

But noooooooooooooo. That would be socialism/communism/death panels/etc.

Recovery? What recovery? The question: "Thinking about your own experience of economic conditions, would you say that from your point of view the recession is over, or not over?" Result: Not over, 82%.

bbro, you just used too much logic for people here at SA.

Start yelling more. And saying how Obama is a socialist and we are all going to die because of death panels. Comeon, get with the program!

Old-fashioned cash has become the benchmark of value around the world, says J.P. Morgan's Jan Loeys, and as long as the returns on it are near zero and uncertainty keeps falling, money will flow from cash to positive-yield assets.

And that is why they dollar is going down. People are leaving cash for riskier assets. This is GOOD NEWS! No matter what the MSM and the majority of people here at SA seem to think.

From Bernanke's introductory remarks last night: "The global financial crisis and the recession of the past two plus years have challenged policy makers and economists and has made us keenly aware of the linkages between America, Europe, and Asia."

No that is not the definition of inflation. But if that's your definition of inflation, then yes I will agree with you the money supply has gone up. However, I can print a quadrillion dollars and bury them under a rock and what effect would that have on prices?

Oil has gone up 100% from depressed levels because demand has returned from depression levels to recessionary levels. The same can be said of stocks.

From Bernanke's introductory remarks last night: "The global financial crisis and the recession of the past two plus years have challenged policy makers and economists and has made us keenly aware of the linkages between America, Europe, and Asia."

Here is another point. All you doomsayers will quickly agree that we have falling incomes right now in this country. But rising nominal incomes is almost a necessary precondition to inflation. And yet you still believe in your inflation argument.

My guess is you just want to believe in whatever scares you. Somehow we are going to have rising prices with no demand. This is going to truly be a fist. We are going to rewrite economic history.

From Bernanke's introductory remarks last night: "The global financial crisis and the recession of the past two plus years have challenged policy makers and economists and has made us keenly aware of the linkages between America, Europe, and Asia."

No, actually you herbert hoover need to take a class on economics.

Here is a newsflash for you...simply printing money does not create inflation. Inflation is rising prices and if supply >>> demand, which is the current case right now, you are going to get falling prices. Now, it is true Bernanke is printing money to stimulate demand, but he has only had limited luck so far. And supply is still much greater than demand. Hence, you have deflation!

This is textbook economics taught at your junior community college.