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kertch

kertch
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  • The Fuss About Wages Is The Fuss [View article]
    "Instead, those welfare payments were used to buy back stock, corporations ignored their responsibility, ..."

    That just about describes all welfare programs. Economic actors are given money and then are expected to behave according to some preconceived (and usually ill conceived) idea. Corporations were given cheap credit so they "could hire and expand the domestic mass market" just like individual welfare recipients are given money so that that can turn their lives around. Right. I don't blame the corporations, nor do I blame individual welfare recipients. They are only acting in their best interests, i.e., following human nature. Instead I blame the idiots who keep coming up with these unworkable plans that always seem to wrongly predict the motivations of others.
    Aug 4, 2015. 06:11 PM | 1 Like Like |Link to Comment
  • The Last Bubble Standing- Amazon's Same Day Trip Through The Casino [View article]
    Like many here, I love the company. I just don't want to own it.
    Jul 27, 2015. 04:26 PM | 3 Likes Like |Link to Comment
  • We Desperately Need New Banking [View article]
    This seems self evident except for one thing, namely that we have seen significant inflation over the last 40 years. This would imply that ALL the inflation seen during that time is due to credit creation. Is there any due to permanent monetization? If not then the system really is unstable. That being the case, why can't the Fed simply be allowed to extinguish a portion of matured government bonds? There must be a way to expand the PERMANENT money stock to match economic growth, otherwise why even bother to leave the gold standard? Credit money is ultimately unstable and if a transmission mechanism from credit money to permanent money does not already exist, one must be created.
    Jul 27, 2015. 01:29 PM | 1 Like Like |Link to Comment
  • Agitating For A More Informed Inflation [View article]
    David,
    Some trends have indeed been apparent since the late 1970's, but the two he details, full-time labor participation and energy use (as measured by emissions), have not been among them. These two measures have been growing steadily from the 1970's until the crash of 2000-2001.
    Jul 24, 2015. 06:42 PM | 1 Like Like |Link to Comment
  • We Desperately Need New Banking [View article]
    "There's no need for the CBs to lend as long as they invest in gov'ts (which also results in an expansion of the money stock)."

    Isn't this because "investing" in gov'ts is essentially the same as lending to the government? The caveat being that the government bonds can easily be monetized and the new money "reinvested" in gov'ts?
    Jul 24, 2015. 05:07 PM | Likes Like |Link to Comment
  • We Desperately Need New Banking [View article]
    "The connection is that time/savings deposits, rather than being a source of loan-funds, are the indirect consequence of prior bank credit creation. The source of time/savings accounts, is almost exclusively is transaction accounts, and the expansion of transaction accounts can be largely accounted for the expansion of bank credit."

    It appears that what you are saying is that the demise of the NB's has disrupted the traditional savings/investment cycle, and that the new credit money created by the CB's remains "interred" with in transaction accounts, resulting in the increased M/decreased V environment we see today. Just trying to understand it.
    Jul 24, 2015. 05:01 PM | 1 Like Like |Link to Comment
  • We Desperately Need New Banking [View article]
    Salmo,
    You've posted this before, and once again it is a clear, concise statement on what most people believe is the role of commercial banks in the banking system.

    What I would like to see posted is the second part of this explanation, once again posted in such a clear and concise way, of the real function of commercial banks and WHY they don't function as intermediaries. It would help enlighten many of us non-bankers (and possibly bankers as well). Thank you.
    Jul 22, 2015. 02:42 PM | 2 Likes Like |Link to Comment
  • Stock Bubble And Its Buyback Genesis Suddenly Vulnerable [View article]
    "How high you have to be to survive it, is the question."
    As high as the top of your cash pile. Cash is the most hated holding right now. Everyone wants yield no matter what. If even Money Market Funds could break the buck in the last crash, and desperate banks are talking about "bail-ins" today, what interest bearing account could possibly be safe when the next wave hits?
    Jul 17, 2015. 04:07 PM | Likes Like |Link to Comment
  • Yellen: Recovery We Thought Of Past Few Years Wasn't Really There [View article]
    If corporations are Super People, then so are unions and 501c4's, except that corporations are taxed. No one complains that unions are super people. I guess it just depends on who an organization gives it's money to.
    Jul 16, 2015. 02:46 PM | 1 Like Like |Link to Comment
  • Yellen: Recovery We Thought Of Past Few Years Wasn't Really There [View article]
    You are describing the actions of at least half of all human beings. Most humans will choose self interest over social interest if the incentive is strong enough. It's a ridiculous comparison to psychopaths. Entitlement programs might destroy the nations economy. Are all the recipients psychopaths? Are the politicians who create these programs psychopaths, even though they know that the system is unsustainable? I could describe such politicians as you did: "They don't care. The damage is not their problem, as long as they GET REELECTED and MAINTAIN POWER. So, since it is beyond your capabilities to understand the incentives and disincentives associated with the wielding of political and economic power, you simply resort to labeling actions that you do not understand as psychopaths.
    Jul 16, 2015. 02:42 PM | 1 Like Like |Link to Comment
  • Yellen: Recovery We Thought Of Past Few Years Wasn't Really There [View article]
    David,

    "Your argument is basically that interest rates do not matter, growth rates are independent of interest rates. If that is so your point is that Monetary Policy is ineffective at stimulating any growth whatsoever."

    I stated that " ... excessively low interest rates combined with low demand for credit creates deflation." So, there are times and conditions under which monetary policy is ineffective. We are in one of them, and Japan has been in such a state for almost a quarter century. Lowering interest rates only increases growth when an economy is capital constrained. That is not the case today. We have too much money and not enough growth investments to put it in, so it goes into financial investments which are essentially limitless.

    "... since December of 2008 when the Zero Interest Rate Policy (ZIRP) was adopted, the economy of the United States has indeed expanded. Gross Domestic Product has increased, unemployment has decreased, and inflation has occurred."

    Considering the unprecedented scale of the central bank intervention, the results have been sub-par at best, especially compared to previous recessions and recoveries where far less intervention took place.

    "Second, if interest rates do not matter then that is not a reason for increasing interest rates. If interest rates do not stimulate growth by raising or lowering, why change them at all? Most people would, all other things being equal, like to keep interest rates as low as possible."

    You are only talking about one side of the trade. Borrowers may want lower interest rates, while lenders and savers (most savers are lending their money) would like higher interest rates. But most importantly I said: "Debt creates temporary money which is removed from the system when the debt is repaid. Permanent inflation is created by the interest paid". By keeping interest rates very low, the Fed is creating lots of new short term money without creating much new permanent money. Unless another mechanism is used to inject permanent money into the economy, we will require an ever larger amount of debt to keep from going into deflation. This is currently happening in Japan.

    "Third, I think the key point is actually that interest rates are not very far from equilibrium."

    This may be true, but until rates are increased we won't know. However, the real problem is that marginal changes in interest rates are ineffective at either increasing or decreasing credit demand. It's the TERMS of credit, not interest rates that drive demand. Interest rates too far below equilibrium only create rate arbitrage between interest rate regimes (the carry trade), which is a whole other subject.

    The actions of the Fed is like that of a doctor giving a patient antibiotics for an illness. When the patient doesn't promptly recover, they increase the dosage. When the patient still doesn't recover they admit that the patient didn't recover as predicted and that antibiotics won't cure him, but they'll keep administering antibiotics anyway because "it can't hurt". It's time to reassess the diagnosis and treatment.
    Jul 16, 2015. 02:24 PM | Likes Like |Link to Comment
  • Yellen: Recovery We Thought Of Past Few Years Wasn't Really There [View article]
    "How do higher interest rates stimulate more economic growth than lower interest rates?"

    David,
    I answered that question. I even predicted you asking it. I wonder if you actually read my posts carefully or if you just automatically answer. I'm repeating myself for the THIRD time and it's becoming tedious. Here's my quote:

    "If dramatically lowering interest rates did not create growth and inflation, why would raising interest rates back to the equilibrium level halt growth and create deflation?'

    and,

    "Permanent inflation is created by the interest paid. This is why Japan cannot create permanent inflation despite creating an enormous amount of debt. It's interest rates are too low."

    and regarding low interest rates causing growth,

    "However that orthodoxy is false and has been disproven over the past seven years. Currently, the supply of credit greatly exceeds the demand, especially among consumers, thus leading the Fed and other central banks to "push on a string"...."
    Jul 15, 2015. 01:39 PM | Likes Like |Link to Comment
  • Yellen: Recovery We Thought Of Past Few Years Wasn't Really There [View article]
    David,
    I just told you. The interest rate determines not just the cost of credit, but the amount of PERMANENT new money that will enter the economy.
    The federal reserve may have little control over existing debt, but it has a very big influence on the creation of new debt, and whether that debt will create permanent inflation. And when I say debt, I mean total debt, not just government debt. Yelled should not be putting off raising interest rates. The Fed should have at the very least been following something like the Taylor Rule all along.
    Jul 14, 2015. 05:22 PM | 1 Like Like |Link to Comment
  • Why China's Market Isn't Fixed And The Global Bubble Will Keep Imploding [View article]
    Yes, let's remove ideology. Fact, there is no proof that intervention helps. Intervention, as you admit, has lengthened the period between cycles and caused deeper corrections. The panics you talk about in the 19th century were generally swift, but by no means were they free from intervention. Let's take the two biggest economic downturns of the second half of the 19th century.

    1873-79: The Long Depression. Although this depression lasted less than six years, it was the greatest depression seen by the US to that point, yet paled in comparison to the Great Depression of 1930's. Triggered by railroad speculation in the US and Europe much of which was subsidized by governments, and in the US exacerbated by the Coinage act of 1873. Government intervened in the economy by subsidizing a railroad bubble, then through the Coinage Act of 1873, reduced the money supply by eliminating silver as a monetary metal.

    1893: The Panic of 1893 was once again caused by overinvestment in railroads subsidized by the US government. The Sherman Silver Purchase Act of 1890 once again allowed a significant amount of silver to be used to back the currency. This greatly increased money supply, much of which was used to speculate on railroads. The treasury even went so far as to guarantee the bonds of several overextended railroads, thus making their failure a taxpayer obligation - sound familiar? Within three years the bubble burst, but by 1897 the economy had recovered.

    The idea that these things happened in a completely laissez faire environment is not supported by historical fact. The federal government since the civil war has been interventionist in the economy in the key industries that caused most of the crises. It also played lots of games with the money supply even though we were on a gold standard. Without foolish interventionists policies like subsidizing the railroad booms and the various coinage acts, the downturns would have certainly been less severe, and may very well not have happened at all.
    Jul 14, 2015. 04:47 PM | 2 Likes Like |Link to Comment
  • Yellen: Recovery We Thought Of Past Few Years Wasn't Really There [View article]
    "Fair play. So what would an alternative monetary policy be? Higher interest rates?"

    Yes. How is permanent inflation created in a debt-based monetary system? Not by debt. Debt creates temporary money which is removed from the system when the debt is repaid. Permanent inflation is created by the interest paid. This is why Japan cannot create permanent inflation despite creating an enormous amount of debt. It's interest rates are too low. Of course you will respond by saying that higher interest rates will reduce lending and further hurt the economy. However that orthodoxy is false and has been disprove over the past seven years. Currently, the supply of credit greatly exceeds the demand, especially among consumers, thus leading the Fed and other central banks "push on a string". If dramatically lowering interest rates did not create growth and inflation, why would raising interest rates back to the equilibrium level halt growth and create deflation? The example of Japan shows otherwise. No David, excessively low interest rates combined with low demand for credit creates deflation.
    Jul 14, 2015. 12:31 PM | 1 Like Like |Link to Comment
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