96-99%'rs ... YOU ARE the 99%

[bush_cheney2004]

You can pretend all you want. Doesn't make it real.

I can pretend to be a millionaire who has an orgy with 5 women every night and is happily married to a woman who participates. Can't be verified.

Interesting response...it tells us a lot...please continue...your hour is never up here.

So I'll still know you for what you are and not the fantasy your attempt to convey, desk job

Well actually it's more of a lab bench with server farm and workstations, and it does have windows. No complaints about it at all.

[cybercoma]

Can we get back on topic?

[Shady]

You can pretend all you want. Doesn't make it real.

I can pretend to be a millionaire who has an orgy with 5 women every night and is happily married to a woman who participates. Can't be verified.

So I'll still know you for what you are and not the fantasy your attempt to convey, desk job

You already do pretend, that you're a centrist.

[MiddleClassCentrist]

Can we get back on topic?

Could discuss the CBC link I suppose.

[Moonlight Graham]

Umm regulations caused it. It was cheap money policies that gov't thought would keep the economy roaring in perpetuity. However, that's not possible and there needs to be corrections. As a result of inflating a bubble, we got the depression, which gov't made worse by trying to distort the natural market by implementing the new deal to try and keep prices high.

There are many causes of the Great Depression. What you're talking about is one major factor. I'm not saying all gov intervention of the economy is good. It's clear that govs mucking around with interest rates has contributed to economic bubbles like 1929 and the housing bubble. But you can't just claim that because the gov screws up in one area that then all government regulation is bad. That's a slippery slope and is illogical.

What you fail to realize is that the free market is a two way street. Those insurance of bank accounts creates the moral hazard for banks to start lending irresponsibly because the gov't will bail out the bad decision. In the free market, depositors would be very wary of how banks lent out there money and would exercise their power to pull money out of said bank and cmease loans from that bank, causing it to fail.

I totally agree that it creates a moral hazard for banks. However, at the same time, there needs to be some kind of fail-safe for people. What happened during the Depression is that there was no fail-safe, so as some banks began to go belly-up it created a panic and a huge run on the banks which resulted in 9000 banks or so going bankrupt, and many lost their savings with these bankruptcies. Another one of the causes of the Depression. Plus collapse in banks = collapse in lending, new businesses, and investment etc.

I think the biggest problem is the financial illiteracy of so many people today that can cause people to make bad decisions regarding the economy, such as bailing out those banks instead of letting them fail.

I really don't know what the answer is. I highly value the efficiency of the free markets, and how it naturally will fail companies that are doing bad business & deserve to fail & reward good companies consumers like with profits. But what do you do with "too big to fail" companies like the huge banks/insurance companies that, if they do fail, will cause a domino effect of collapse like the Depression? Letting those banks & the crappy car companies, that all deserve to fail, could be nice to let fail and maybe would have been better for the economy in the long-term, but it would almost certainly have led to a far worse recession. Kind of damned if you do, damned if you don't.

[dre]

There are many causes of the Great Depression. What you're talking about is one major factor. I'm not saying all gov intervention of the economy is good. It's clear that govs mucking around with interest rates has contributed to economic bubbles like 1929 and the housing bubble. But you can't just claim that because the gov screws up in one area that then all government regulation is bad. That's a slippery slope and is illogical.

I totally agree that it creates a moral hazard for banks. However, at the same time, there needs to be some kind of fail-safe for people. What happened during the Depression is that there was no fail-safe, so as some banks began to go belly-up it created a panic and a huge run on the banks which resulted in 9000 banks or so going bankrupt, and many lost their savings with these bankruptcies. Another one of the causes of the Depression. Plus collapse in banks = collapse in lending, new businesses, and investment etc.

I really don't know what the answer is. I highly value the efficiency of the free markets, and how it naturally will fail companies that are doing bad business & deserve to fail & reward good companies consumers like with profits. But what do you do with "too big to fail" companies like the huge banks/insurance companies that, if they do fail, will cause a domino effect of collapse like the Depression? Letting those banks & the crappy car companies, that all deserve to fail, could be nice to let fail and maybe would have been better for the economy in the long-term, but it would almost certainly have led to a far worse recession. Kind of damned if you do, damned if you don't.

Its the banking system itself that creates the moral hazzard for banks. When you give a small handfull of private corporations the power to create currency out of thin air, and lend it out for usury, and then back that corporate power with the force of government, thats what creates the moral hazzard.

And thats why after we put this brand new system in place during the early seventies the money supply, and borrowing, and spending all started spiraling out of control and never stopped.

http://www.brillig.com/debt_clock/history.gif

Have a look. Between 1945 and 1970 debt was almost flat. Then they closed the gold window and allowed private commercial banks to create an unlimited ammount of money out of thin air and lend it out for usury. See what happened after that?

The moral hazzard here is that when you give private corporations the ability to create unlimited ammounts of currency and lend it out for profit that is EXACTLY WHAT THEY ARE GOING TO DO! The tempation to create money and profit out of thin air is impossible to refuse.

You cant say we werent warned. A number of people inside the system told us exactly what would happen if we allowed banks to create un-anchored deposits.

"Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create deposits." — SIR JOSIAH STAMP, (President of the Bank of England in the 1920's, the second richest man in Britain):

Thats a quote not from some hippy but from the president of the Bank of England.

Heres a quote from Mackenzie King.

Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of sovereignty of Parliament and of democracy is idle and futile... Once a nation parts with control of its credit, it matters not who makes the nation’s laws... Usury once in control will wreck any nation.

William Lyon Mackenzie King

THAT is the real moral hazzard here. There is absolutely ZERO CHANCE of monetary expansion and debt growth stopping while the current system is in place.

If money is backed by real value (goods, and services) then its quite simply impossible to spend more than you take in. But when 95% of the currency in existance is bank credit and the banks make the biggest profits when they create the most credit, this allows you to spend money that hasnt even been earned yet, by placing future generations in servitude. The people of the future are going to spend their whole lives producing real goods and services to fund all this debt and monetary expansion.

Spending imbalances are natural corrected when people or governments run out of money. In the fiat/fractional reserve system though you can just keep spending by stealing money from future generations and robbing holders of currency today.

Edited November 14, 2011 by dre

[blueblood]

There are many causes of the Great Depression. What you're talking about is one major factor. I'm not saying all gov intervention of the economy is good. It's clear that govs mucking around with interest rates has contributed to economic bubbles like 1929 and the housing bubble. But you can't just claim that because the gov screws up in one area that then all government regulation is bad. That's a slippery slope and is illogical.

I totally agree that it creates a moral hazard for banks. However, at the same time, there needs to be some kind of fail-safe for people. What happened during the Depression is that there was no fail-safe, so as some banks began to go belly-up it created a panic and a huge run on the banks which resulted in 9000 banks or so going bankrupt, and many lost their savings with these bankruptcies. Another one of the causes of the Depression. Plus collapse in banks = collapse in lending, new businesses, and investment etc.

I really don't know what the answer is. I highly value the efficiency of the free markets, and how it naturally will fail companies that are doing bad business & deserve to fail & reward good companies consumers like with profits. But what do you do with "too big to fail" companies like the huge banks/insurance companies that, if they do fail, will cause a domino effect of collapse like the Depression? Letting those banks & the crappy car companies, that all deserve to fail, could be nice to let fail and maybe would have been better for the economy in the long-term, but it would almost certainly have led to a far worse recession. Kind of damned if you do, damned if you don't.

My view is that gov't has an obligation to provide a safe environment for the market to work in. It's when gov't gets too large is when there is problems. The thing with gov't regulation is that there is a reaction to what they do and a price to pay.

The fail safe is for people to stuff their money in a treasure chest for saving it. They won't go broke but they won't get the benefit of an interest paying savings account. By guaranteeing the loans, it encourages the banks to create more bad loans because people become more complacent with their money. Don't want the risk of a bank going under, better get that treasure map drawn up.

As for the last statement, buckley's tastes bad but it works.

[dre]

My view is that gov't has an obligation to provide a safe environment for the market to work in. It's when gov't gets too large is when there is problems. The thing with gov't regulation is that there is a reaction to what they do and a price to pay.

The fail safe is for people to stuff their money in a treasure chest for saving it. They won't go broke but they won't get the benefit of an interest paying savings account. By guaranteeing the loans, it encourages the banks to create more bad loans because people become more complacent with their money. Don't want the risk of a bank going under, better get that treasure map drawn up.

As for the last statement, buckley's tastes bad but it works.

It's when gov't gets too large is when there is problems. The thing with gov't regulation is that there is a reaction to what they do and a price to pay.

Right but that growth in government is only possible because we have a monetary system that isnt backed by real value. If the federal reserve system did not create the opportunity for limitless monetary expansion then government could not grow without raising taxes, and its ability to create regulations would be restrained by the fact it costs real money to implement those regulations, and they must implement unpopular tax hikes to pay for them.

But give the goverment unlimited credit at private banks! Now theres no limit to how big they can get.

http://www.brillig.com/debt_clock/history.gif

As you can see... this was not a problem prior to 1971.

And look at what happened to government spending once we switched to un-backed currency.

http://www.artdiamondblog.com/images/SpendingFederalGraph2010-02-28.gif

If you want government to stop growing and spending you need to TAKE AWAY THEIR CREDIT CARD. And that "credit card" is the fractional reserve banking system.

There was a natural mechanism in the economy that used to prevent Government from growing too much or becoming too intrusive and too powerfull. It was pretty simple... when they ran out of money they couldnt spend anymore. Same thing that forces me to balance my household budget.

We removed that natural mechanism when we put the fiat/fraction reserve system in place.

Edited November 14, 2011 by dre

[Bonam]

Have a look. Between 1945 and 1970 debt was almost flat. Then they closed the gold window and allowed private commercial banks to create an unlimited ammount of money out of thin air and lend it out for usury. See what happened after that?

Actually, the first thing I saw on that graph is a nice exponential curve. It was growing at a very similar exponential rate that whole time, right from about 1950 to 2000. It looks like it took off in 1970 just because you're looking at an exponential curve on a linear graph. Plot that on a half-log graph and you'll see something very close to a straight line I'm betting. That would suggest that whatever mechanism was in play causing the exponential growth of the debt was just as much in play prior to 1970 as afterwards. For example, the underlying general growth of the economy, which itself follows an exponential curve.

[dre]

Actually, the first thing I saw on that graph is a nice exponential curve. It was growing at a very similar exponential rate that whole time, right from about 1950 to 2000. It looks like it took off in 1970 just because you're looking at an exponential curve on a linear graph. Plot that on a half-log graph and you'll see something very close to a straight line I'm betting. That would suggest that whatever mechanism was in play causing the exponential growth of the debt was just as much in play prior to 1970 as afterwards. For example, the underlying general growth of the economy, which itself follows an exponential curve.

No sorry, that dog dont hunt. Your attempt to relate debt to economic growth is wrong, and in fact its exactly backwards. When the economy grew rapidly in the 90's the debt actually almost stabilized for a bit. This is because of the phenomenon I described to you before. Since the system MUST expand the money supply each year by at least enough to allow outstanding interest payments on existing debt, debt will exponentially increase UNLESS you have periods of extremely high economic growth.

The growth curve is completely different. On the debt graph its an easy walk until you hit the side of a cliff. On the growth graph youre pretty much just walking up a hill.

http://newsimg.bbc.co.uk/media/images/41437000/gif/_41437267_us_gdp_growth_graph416.gif

The reason why debt increased at the level it did is actually pretty simple. Borrowing became easier. Under the bretton woods system the money supply was loosely based on gold. The dollars required for todays debt levels simply did not exist to be borrowed.

The reality is that both debt and monetary expansion have grown at much higher levels than GDP. In the US the national debt has grown about 300% even though the economy has grow less than 30 percent.

I dont understand why you dont see the basic logic in play here.

Youre a smart guy. Tell me what you think would happen if you removed the constraint that anchors money to real value like the world did in 1971, and as a result allowed commercial banks to issue a virtually limitless ammount of credit not backed by real economic growth. You would expect to see monetary expansion, dramatically increased debt levels, and inflation wouldnt you? Its impossible for that NOT to happen in that scenario.

Edited November 14, 2011 by dre

[Bonam]

Youre a smart guy. Tell me what you think would happen if you removed the constraint that anchors money to real value like the world did in 1971, and as a result allowed commercial banks to issue a virtually limitless ammount of credit not backed by real economic growth. You would expect to see monetary expansion, dramatically increased debt levels, and inflation wouldnt you? Its impossible for that NOT to happen in that scenario.

If removing what "anchors money" to real value caused rapid monetary expansion without a corresponding increase in the real economic output, we would have seen rapid inflation. However, inflation rates since 1970 have been moderate, usually right around their 2% targets. Mathematically, the rate of inflation really just has to be the difference between the rate of increase of the monetary supply and the rate of increase of production of real value in the economy.

Like you said, if what you described was happening, we should see "dramatic" inflation. Where is this inflation though? The only thing that really inflated was the housing bubble. And that burst nicely, though it still has a ways more to drop, particularly in Canada.

[dre]

If removing what "anchors money" to real value caused rapid monetary expansion without a corresponding increase in the real economic output, we would have seen rapid inflation. However, inflation rates since 1970 have been moderate, usually right around their 2% targets. Mathematically, the rate of inflation really just has to be the difference between the rate of increase of the monetary supply and the rate of increase of production of real value in the economy.

Like you said, if what you described was happening, we should see "dramatic" inflation. Where is this inflation though? The only thing that really inflated was the housing bubble. And that burst nicely, though it still has a ways more to drop, particularly in Canada.

Where is this inflation though?

Its all over the place.

Oil: 400% since 2000.

Medical Care: 10% per year.

Energy and food are not included in core CPI and neither is midical care in Canada because its a tax based service... but heres a snippet...

“I would suspect the answer is yes, dependent on market conditions and raw material conditions,” Mr. McCain said on the phone from Hamilton. “It’s a challenge we’ve had to face over the last 18 months, unprecedented food inflation.”

Food prices were up 4.4% in August, including a 5.0% jump at stores, Statistics Canada said.

The price of fuel has tripled in the last decade, and food prices are rising extremely fast right now. So are services like healthcare, and college tuition (both up around 7-10%. And the price of a home has doubled in the last decade even after you take into account devaluation since 2007.

Now... its true that many things have come down in price so if you load enough disposable junk into the basket of goods and services you measure CPI on you can clearly make the numbers say whatever you want. You can buy a chinese DVD player for about $12 bux now that would have cost $300 a decade ago. But if if you measure CPI based on the things people really need to live (food, shelter, energy, healthcare, education) we are already experiencing massive inflation NOW, today. Probably upwards of 10%.

As far as my personal finance goes about 1/2 of my income is spent on food, energy, and shelter. And pricing for all those things has outstripped economic growth.

Like you said, if what you described was happening

Well hold on. Do you deny that what Im saying is true? Is your position that debt and monetary expansion are in step with economic growth? Look at those two graphs again. The national debt is 15X what it was in 1982. GDP has not even doubled.

[Bonam]

Its all over the place.

Oil: 400% since 2000.

Medical Care: 10% per year.

Energy and food are not included in core CPI and neither is midical care in Canada because its a tax based service... but heres a snippet...

The price of fuel has tripled in the last decade, and food prices are rising extremely fast right now. So are services like healthcare, and college tuition (both up around 7-10%. And the price of a home has doubled in the last decade even after you take into account devaluation since 2007.

Now... its true that many things have come down in price so if you load enough disposable junk into the basket of goods and services you measure CPI on you can clearly make the numbers say whatever you want. You can buy a chinese DVD player for about $12 bux now that would have cost $300 a decade ago. But if if you measure CPI based on the things people really need to live (food, shelter, energy, healthcare, education) we are already experiencing massive inflation NOW, today. Probably upwards of 10%.

Housing prices just burst their bubble and came down quite a bit in a lot of places, reversing over a decade of gains. Some Canadian markets still need to pop their bubbles though. As for food, my experience has not been that it's been getting more expensive at the rate you imply. Ten years ago a lunch at an Asian place was 6.95, and it's like 7.95 now. That's right on par with ~2% inflation. Same thing with groceries at the store. As for energy, electricity prices have been sitting around 5c/kWh for a long long time. Where I am now it's just 3.8c/kWh. And yes, deflation when it comes to consumer products like electronics has to be taken into account as well.

Well hold on. Do you deny that what Im saying is true? Is your position that debt and monetary expansion are in step with economic growth? Look at those two graphs again. The national debt is 15X what it was in 1982. GDP has not even doubled.

I think in Canada debt and monetary expansion really are pretty much on par with economic growth. In the US, the last decade has seen a large expansion of debt due to policies under Bush and Obama. Even so, the debt/gdp ratio is still only at about the same peak that it's reached before historically, back in 1948 or so. Prior to 2001, the US debt was actually shrinking.

Edited November 14, 2011 by Bonam

[dre]

Housing prices just burst their bubble and came down quite a bit in a lot of places, reversing over a decade of gains. Some Canadian markets still need to pop their bubbles though. As for food, my experience has not been that it's been getting more expensive at the rate you imply. Ten years ago a lunch at an Asian place was 6.95, and it's like 7.95 now. That's right on par with ~2% inflation. Same thing with groceries at the store. As for energy, electricity prices have been sitting around 5c/kWh for a long long time. Where I am now it's just 3.8c/kWh. And yes, deflation when it comes to consumer products like electronics has to be taken into account as well.

I think in Canada debt and monetary expansion really are pretty much on par with economic growth. In the US, the last decade has seen a large expansion of debt due to policies under Bush and Obama. Even so, the debt/gdp ratio is still only at about the same peak that it's reached before historically, back in 1948 or so. Prior to 2001, the US debt was actually shrinking.

Housing prices just burst their bubble

No prices are still WAY up. The housing bubble didnt burst we just pressed the relief valve on the pressure cooker and let a few PSI out.

http://1.bp.blogspot.com/_ALjox9qs1s8/TPRd5FNiNZI/AAAAAAAAAC4/ypo2lVtApdQ/s1600/canada-us-price-composite.1.jpg

100's of billions of dollars was dumped into the system in an attempt to prevent a natural correction, and stop investors and speculators and homeowners from losing money.

Accoding to the food pricing index prices are up 97% in the last ten years. Thats more than double the reported rate of inflation.

And no the money supply hasnt grown at the same pace as the economy.

http://dollardaze.org/blog/posts/2007/May/29/1/CanadaM1MoneySupply.gif

Its grown much faster. So how can inflation be at 2%? Its not! Thats how The BOC core rate is articificially low because it doesnt include most food, and it doesnt include energy.

Include those things and you get up over 3.3%. Because food prices are increasing at almost 5% per year and transportation costs are increasing almost 8%.

http://www.statcan.gc.ca/subjects-sujets/cpi-ipc/c111021d.gif