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Thread: Where is the fed going

  1. #1
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    Where is the fed going

    Whether you agree with the assessment that Obama "fired" Bernanke or not, he did make clear that Bernanke will not be serving another term. Personally I don't think he is firing him...Bernanke is running away as the inevitable fruits of his ludicrous policies start to show up.

    It seems clear that the fed is going to have to start some kind of tightening. Currently the US government either directly owns or is providing 100% backing for over 90% of us mortgages. The fed has been directly monetizing our debt via bond purchases for over a year now. Large banks are actually charging customers who keep big account balances. Stock and bond markets are both in massive bubbles due to excess liquidity, false demand (the fed buying up bonds) and the fact that with yields as low as they are there is nowhere to put your money for a decent return.

    Any thoughts on what is likely to happen going forward?
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    Bernanke is running away as the inevitable fruits of his ludicrous policies start to show up.
    And before I could cash in. This motherf*cker pulls the money plug literally the day I file for refinance (had to wait for my home value to go up).

    It all boils down to the fundamental problem I have with massive government intervention in the economy. If one entity controls 60+% of the economy it creates a dependency that, in this case, is not sustainable. Once this is realized it can only cause withdrawal symptoms. It is no different from a crack addict.

    It seems clear that the fed is going to have to start some kind of tightening. Currently the US government either directly owns or is providing 100% backing for over 90% of us mortgages. The fed has been directly monetizing our debt via bond purchases for over a year now. Large banks are actually charging customers who keep big account balances. Stock and bond markets are both in massive bubbles due to excess liquidity, false demand (the fed buying up bonds) and the fact that with yields as low as they are there is nowhere to put your money for a decent return.

    Any thoughts on what is likely to happen going forward?
    I hope it stays in the stock market. If you think about it, all this money creation is not being funneled into productive use such as factories, new ventures, etc; it is being thrown into assets that have a higher return for less effort. Luckily for us, if they stay there they really don't do much other than create paper with high numbers on them (or in our case a computer screen with high numbers). This is basically a retirement of the money. Now, if, or rather when, they pull that money we are basically screwed.

    As for the housing market. I was 100% wrong on what would happened. I felt for sure we would never see the days of fast appreciation again. We literally didn't learn a single thing from the "great recession". Home prices in my area went from averaging $110-125 a sq ft to $175+ in the span of a year. New homes are going for $190 sq ft with 4000 sq ft minimums and maximum amount of land at .3 acres. Who has 3/4 million to plop a POS house on a 1/3 of an acre? Apparently a lot of people. And I filled out my refinance form, they ask for proof of a lot. So are the banks lending to people that qualify and if so how did they store all this money and what will happen when it floods the economy?

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    Quote Originally Posted by Steeeeve View Post
    And before I could cash in. This motherf*cker pulls the money plug literally the day I file for refinance (had to wait for my home value to go up).

    It all boils down to the fundamental problem I have with massive government intervention in the economy. If one entity controls 60+% of the economy it creates a dependency that, in this case, is not sustainable. Once this is realized it can only cause withdrawal symptoms. It is no different from a crack addict.
    I agree with you in this circumstance. Obviously intervention in the form of regulation is required (especially in a fiat money system) but functional intervention like they have done here is insane.

    I hope it stays in the stock market. If you think about it, all this money creation is not being funneled into productive use such as factories, new ventures, etc; it is being thrown into assets that have a higher return for less effort. Luckily for us, if they stay there they really don't do much other than create paper with high numbers on them (or in our case a computer screen with high numbers). This is basically a retirement of the money. Now, if, or rather when, they pull that money we are basically screwed.
    In theory, but that is not the way the world works. You tell somebody they have an asset worth X and they immediately start looking at things that cost X. Look at the housing market prior to the crash. Everybody was cashing out their equity to buy junk.

    As for the housing market. I was 100% wrong on what would happened. I felt for sure we would never see the days of fast appreciation again. We literally didn't learn a single thing from the "great recession". Home prices in my area went from averaging $110-125 a sq ft to $175+ in the span of a year. New homes are going for $190 sq ft with 4000 sq ft minimums and maximum amount of land at .3 acres. Who has 3/4 million to plop a POS house on a 1/3 of an acre? Apparently a lot of people. And I filled out my refinance form, they ask for proof of a lot. So are the banks lending to people that qualify and if so how did they store all this money and what will happen when it floods the economy?

    I was also wrong. I would never have imagined that the government would just say "OK, we will buy all the mortgages" and I certainly would never have thought that they would then sell all the foreclosed properties to be major banks at $0.15 on the dollar to turn into rentals WHILE they were suing the same banks for fraud for selling the government bad mortgages. I have to admit, that takes guts. If the American public was not a bunch of sheep who don't bother to pay attention to the world around them the politicians who made that call would have been tossed up against the nearest wall and shot.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    I agree with you in this circumstance. Obviously intervention in the form of regulation is required (especially in a fiat money system) but functional intervention like they have done here is insane.
    People don't understand the difference between regulation and manipulation by intervention. Regulation would be "You can't sell 99 homes to crack whores and 1 home to a wealthy family, bundle those mortgages together, and sell them on an exchange as grade A prime mortgages. That's a fair regulation because it is basically fraud. Regulation is meant to support the entire purpose of the constitution; to leave most of the power with the people. Regulation such as "you can't have soda, it's bad for you" is intervention and is just wrong. So is regulation that says "well, you guys can't be trusted to sell mortgages fairly so we will just buy them all to prevent anyone from getting hurt". Aside from being totally retarded, it manipulates a market by having only one limitless customer.

    If you look at Dodd Frank it attempts to do the former but in reality does nothing but allow large banks to game the system and small banks to fail. A for effort I suppose.

    It still comes down to a fundamental difference in how our legislatures think. If you are Nancy Pelosi you think everyone deserves a home and therefore you make regulation that gets everyone a home consequence be damned. The Ron and Rand Paul's of the word think that is not a federal government issue but regulating security exchanges is. I prefer the latter.

    In theory, but that is not the way the world works. You tell somebody they have an asset worth X and they immediately start looking at things that cost X. Look at the housing market prior to the crash. Everybody was cashing out their equity to buy junk.
    I agree but I count that as "taking it out". This is what is happening now for a lot of folks. In other areas, such as 401ks, they haven't taken the money out just yet. Further, many of the businesses that benefited from the fed literally have nothing else to invest in. The second they said the money train is going to a stop they started pulling out money as a hedge until they see what becomes of all of this. This explains the 2% drop this week.

    I was also wrong. I would never have imagined that the government would just say "OK, we will buy all the mortgages" and I certainly would never have thought that they would then sell all the foreclosed properties to be major banks at $0.15 on the dollar to turn into rentals WHILE they were suing the same banks for fraud for selling the government bad mortgages. I have to admit, that takes guts. If the American public was not a bunch of sheep who don't bother to pay attention to the world around them the politicians who made that call would have been tossed up against the nearest wall and shot.
    This is a bit astonishing. I have a friend who tries to buy up properties and rent them out but it is impossible most of the time because some large bank will come in and buy up 100s at a time for next to nothing.

    I talk about this almost every day with my wife. She asks how are we going to invest for the future and I tell her I have no damn clue because I just don't see the fundamentals lining up like they should during a recovery. I was right about holding on a refinance until it hit rock-bottom but that doesn't matter if the same day that plug is pulled (takes 30-45 days to refinance). But how people can think we are "good" now is beyond me. The way it looks to me is that we aren't getting worse, we just aren't really going anywhere. It's like we are ok with mediocrity. Do you see it differently?

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    Quote Originally Posted by Steeeeve View Post
    People don't understand the difference between regulation and manipulation by intervention. Regulation would be "You can't sell 99 homes to crack whores and 1 home to a wealthy family, bundle those mortgages together, and sell them on an exchange as grade A prime mortgages. That's a fair regulation because it is basically fraud. Regulation is meant to support the entire purpose of the constitution; to leave most of the power with the people. Regulation such as "you can't have soda, it's bad for you" is intervention and is just wrong. So is regulation that says "well, you guys can't be trusted to sell mortgages fairly so we will just buy them all to prevent anyone from getting hurt". Aside from being totally retarded, it manipulates a market by having only one limitless customer.
    People not understanding that difference is a HUGE problem. For some reason people hear "financial regulation" and immediately come to the conclusion that the government is meddling where they don't belong. It like they immediately equate financial regulation with the government messing with their personal checking account...apparently without realizing that the only reason the bank is not allowed to bet everything in their checking account on a blackjack hand is the fact that there are regulations controlling what kind of "investments" the bank can make with their money.

    It still comes down to a fundamental difference in how our legislatures think. If you are Nancy Pelosi you think everyone deserves a home and therefore you make regulation that gets everyone a home consequence be damned. The Ron and Rand Paul's of the word think that is not a federal government issue but regulating security exchanges is. I prefer the latter.
    I agree.

    I agree but I count that as "taking it out". This is what is happening now for a lot of folks. In other areas, such as 401ks, they haven't taken the money out just yet. Further, many of the businesses that benefited from the fed literally have nothing else to invest in. The second they said the money train is going to a stop they started pulling out money as a hedge until they see what becomes of all of this. This explains the 2% drop this week.
    This is just another symptom of our systemic problem. The reason people were choosing to buy sub prime mortgage securities even when the tiniest bit of research and a little application of logic showed that they were clearly bad investments is because there was nothing else out there that provided any kind of yield. We are trying to run a mass market economy where they consumers don't have any money. That makes it pretty tough to find decent investment opportunities.

    This is a bit astonishing. I have a friend who tries to buy up properties and rent them out but it is impossible most of the time because some large bank will come in and buy up 100s at a time for next to nothing.
    A bit astonishing? I think it goes beyond a bit. We bailed out the banks by buying up all their junk securities. Then we sold them millions of homes at pennies on the dollar, which they immediately get to put on the books at fair market value, realizing billions in profits overnight. Then they turn the properties into rentals which they will turn around and rent to all the people who were "displaced" due to the massive mess they made of the housing market, ensuring billions more in profits.

    The housing bubble and bust has turned into a trillion dollar windfall FOR THE BANKS THAT CAUSED IT. And the American public just took their anal raping without protest.

    I talk about this almost every day with my wife. She asks how are we going to invest for the future and I tell her I have no damn clue because I just don't see the fundamentals lining up like they should during a recovery. I was right about holding on a refinance until it hit rock-bottom but that doesn't matter if the same day that plug is pulled (takes 30-45 days to refinance). But how people can think we are "good" now is beyond me. The way it looks to me is that we aren't getting worse, we just aren't really going anywhere. It's like we are ok with mediocrity. Do you see it differently?
    Nope. I have the exact same problem when it comes to investment. Under your mattress....possibly in precious metals and gems. The reality is that until we solve our systemic problems pretty much everything is a high risk investment.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    On a side note-

    I love seeing all the "Selling now would be a HUGE mistake" articles in the media. It is clear that the fed is going to have to back off the presses a bit. The rumor that they MIGHT do it fairly soon caused a huge drop in the market. What is going to happen when they actually do it? A lot of those same articles suggest that this is a GREAT time to buy INTO the market since there was just that big drop so you can buy in cheaper.

    You have to mentally handicapped to buy into that line of thought. These must be the same people who thought it was a good idea to get an ARM when the prime rate was at 1% and mortgage rates were at a 30 year low.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    People not understanding that difference is a HUGE problem. For some reason people hear "financial regulation" and immediately come to the conclusion that the government is meddling where they don't belong. It like they immediately equate financial regulation with the government messing with their personal checking account...apparently without realizing that the only reason the bank is not allowed to bet everything in their checking account on a blackjack hand is the fact that there are regulations controlling what kind of "investments" the bank can make with their money.
    Looking at the regulation over accounting it is no wonder people have a distaste for the term "regulation". You ever try to read a fair value footnote in a companies financial statements? No, you don't, because it makes no sense and no one looks at the footnotes in that detail anyway. So why do we have regulation (non-government regulation) over it? Who the hell knows. Further, during my refinance with the same bank I currently have my mortgage with they require about 15 different pieces of data to verify I can pay my soon to be cheaper loan. It isn't because the bank wants this information, they already want to give me the loan and KNOW I can pay it (because I already am paying a higher rate). They have to comply with regulations that make no damn sense for them. And at the same time I'm getting anal searched for my refinance a large bank (not my credit union) can still bet my money on various financing instruments which have no valuation basis nor any underlying assets to back them. Basically doing what they did prior to 2008.

    You say regulation prevents them from betting my checking account on a blackjack hand but I have to admit that sometimes I wish they would so my odds would improve. In all seriousness, when you read the WSJ or whatever financial newspaper you always hear them refer to things as a bet on this or a bet on that; more so than you did in the 80s and 90s in my opinion. It's a proper term as well. An investment is buying a building and equipment and making t-shirts to sell. Betting is putting money in a future contract for corn in the hopes that prices rise or fall based upon your position. I personally think "betting" should either be banned or put into a separate market and taxed at 50%.

    This is just another symptom of our systemic problem. The reason people were choosing to buy sub prime mortgage securities even when the tiniest bit of research and a little application of logic showed that they were clearly bad investments is because there was nothing else out there that provided any kind of yield. We are trying to run a mass market economy where they consumers don't have any money. That makes it pretty tough to find decent investment opportunities.
    Oddly enough this may be because we regulate and tax the wrong things. I know I've said it before but I still don't understand why you are taxed 15% or less (20% for a select few) on pushing a few buttons on etrade resulting in literally no economic gain but 7-10% returns while building a grocery store will yield you 1-2% after 20 years and be taxed at 30-35%. Not to mention with the grocery store you have to worry about permits, labor law, food safety, local/state/federal taxes, among other things.

    No one wants this changed. Who wants the music to stop before they could cash out? I surely don't.

    A bit astonishing? I think it goes beyond a bit. We bailed out the banks by buying up all their junk securities. Then we sold them millions of homes at pennies on the dollar, which they immediately get to put on the books at fair market value, realizing billions in profits overnight. Then they turn the properties into rentals which they will turn around and rent to all the people who were "displaced" due to the massive mess they made of the housing market, ensuring billions more in profits.

    The housing bubble and bust has turned into a trillion dollar windfall FOR THE BANKS THAT CAUSED IT. And the American public just took their anal raping without protest.
    Rinse and repeat. The only difference we see now is that banks have more paperwork to fill out. It's only a matter of time before we hear the cries of "home affordability".

    Nope. I have the exact same problem when it comes to investment. Under your mattress....possibly in precious metals and gems. The reality is that until we solve our systemic problems pretty much everything is a high risk investment.
    But we still haven't answered your question. Where is the fed going next. Honestly, I should give up predicting. I mean I suggested a few years ago that the music has to stop at some point and when it does things crash. It's what any manipulation would cause. So does the fed do the right thing and let the pieces fall where they may or do they continue the falsehood a little longer? How long before that idle money gets circulated (Velocity of M2 is still at record lows)?

  8. #8
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    Quote Originally Posted by Steeeeve View Post
    Looking at the regulation over accounting it is no wonder people have a distaste for the term "regulation". You ever try to read a fair value footnote in a companies financial statements? No, you don't, because it makes no sense and no one looks at the footnotes in that detail anyway. So why do we have regulation (non-government regulation) over it? Who the hell knows. Further, during my refinance with the same bank I currently have my mortgage with they require about 15 different pieces of data to verify I can pay my soon to be cheaper loan. It isn't because the bank wants this information, they already want to give me the loan and KNOW I can pay it (because I already am paying a higher rate). They have to comply with regulations that make no damn sense for them. And at the same time I'm getting anal searched for my refinance a large bank (not my credit union) can still bet my money on various financing instruments which have no valuation basis nor any underlying assets to back them. Basically doing what they did prior to 2008.
    That has to do with the secondary market. The GSEs just got totally screwed by trusting the banks and the markets to keep mortgages sane. Now they have decided that before they put hundreds of thousands of dollars on the line, they want some actual verification. Right now the GSEs are pretty much the only sure game in town when it comes to the secondary mortgage market.

    If the bank is willing to hold the mortgage to maturity, there are basically no rules. That is the bank risking their own money and uncle sam is willing to let them do it. All the new regulation and verification is related to securitizing the loans.

    You say regulation prevents them from betting my checking account on a blackjack hand but I have to admit that sometimes I wish they would so my odds would improve. In all seriousness, when you read the WSJ or whatever financial newspaper you always hear them refer to things as a bet on this or a bet on that; more so than you did in the 80s and 90s in my opinion. It's a proper term as well. An investment is buying a building and equipment and making t-shirts to sell. Betting is putting money in a future contract for corn in the hopes that prices rise or fall based upon your position. I personally think "betting" should either be banned or put into a separate market and taxed at 50%.
    I am with you 100% on that...especially when it comes to food. What idiot decided to let grain markets be driven by people who never actually intend to take possession of the commodity being traded?

    Oddly enough this may be because we regulate and tax the wrong things. I know I've said it before but I still don't understand why you are taxed 15% or less (20% for a select few) on pushing a few buttons on etrade resulting in literally no economic gain but 7-10% returns while building a grocery store will yield you 1-2% after 20 years and be taxed at 30-35%. Not to mention with the grocery store you have to worry about permits, labor law, food safety, local/state/federal taxes, among other things.
    I agree. Unfortunately you cant fix stupid, and that is what that boils down to. We have capital gains taxes set where they are because people are dumb and cant seem to understand that the capital gains rate, if anything, slows real business investment. How long did we have to bash freedom over the head with that before he ended up going away? I doubt he changed his opinion just because it was proved that it was illogical and incorrect, he just went away with his illogical and incorrect opinion intact.

    This is a lot of the reason I have gone from being a strong republican supporter to "they dont really represent my views all that well" to just flat out loathing the republican party. Republican "leaders" are pushing these economic ideals that they KNOW are wrong because it benefits them to do so. Then when somebody has the nerve to suggest that billionaires should be taxed at a higher rate than McDonalds employees, the republicans yell "CLASS WARFARE!!!" Unfortunately there seem to actually be Americans who believe that BS and completely miss the fact that YES, we have class warfare in this country...the republicans and their financial backers have been winning it for years.

    No one wants this changed. Who wants the music to stop before they could cash out? I surely don't.
    I do. Because the alternative it horrifying.

    But we still haven't answered your question. Where is the fed going next. Honestly, I should give up predicting. I mean I suggested a few years ago that the music has to stop at some point and when it does things crash. It's what any manipulation would cause. So does the fed do the right thing and let the pieces fall where they may or do they continue the falsehood a little longer? How long before that idle money gets circulated (Velocity of M2 is still at record lows)?


    It seems clear that they are going to have to take a new tack. The problem is that I am having trouble imagining a scenario at this point where they do so and we dont fall right back into the financial hell we were trying to get out of. As the BIS pointed out in their annual report (worth reading...http://www.bis.org/publ/arpdf/ar2013e.htm) central banks have done everything they can to buy as much time as possible to make the economic reforms that need to be made, but nobody has bothered making the reforms. Now we are at the point where the central banks "support" is turning harmful (think...supported by a spear up your rear end) but nobody has done anything to fix the underlying problems. If anything we have compounded the problems.
    Last edited by daewoo; 07-01-2013 at 04:23 PM.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    I am with you 100% on that...especially when it comes to food. What idiot decided to let grain markets be driven by people who never actually intend to take possession of the commodity being traded?
    Yeah, that is incredibly dangerous. I'm also not a fan of 1920s farmer subsidizes. These are outdated.

    I agree. Unfortunately you cant fix stupid, and that is what that boils down to. We have capital gains taxes set where they are because people are dumb and cant seem to understand that the capital gains rate, if anything, slows real business investment. How long did we have to bash freedom over the head with that before he ended up going away? I doubt he changed his opinion just because it was proved that it was illogical and incorrect, he just went away with his illogical and incorrect opinion intact.

    This is a lot of the reason I have gone from being a strong republican supporter to "they dont really represent my views all that well" to just flat out loathing the republican party. Republican "leaders" are pushing these economic ideals that they KNOW are wrong because it benefits them to do so. Then when somebody has the nerve to suggest that billionaires should be taxed at a higher rate than McDonalds employees, the republicans yell "CLASS WARFARE!!!" Unfortunately there seem to actually be Americans who believe that BS and completely miss the fact that YES, we have class warfare in this country...the republicans and their financial backers have been winning it for years.
    I share your thoughts on the republican party but I don't see the democrats having a much better thought process. In kind of a weird twist the democrats have the right answer but their reasoning is terrible; in fact, they probably want class warfare. Oddly enough, their solution puts "class warfare" to rest.

    I've asked around and no one seems to be able to sell me on why making business tax 0% (for domestic sales) is a bad thing. More to the point, how business tax is nothing more than a transfer tax to the poor in most cases. Google stows billions in cash overseas. They don't do this because they want to keep it for the rich people, they do it because they have no use for it and it is cheaper to put it in some Ireland bank account (it defers the tax). This, in turn, causes the tax bill to be lower and profits look good therefore the stock price goes up and they have a bunch of cash should they need it one day. It is more advantageous for them to have that money churn in a bank account in another country than try and build something here in the USA. Why don't you only tax it if you export the money (or sales) and push the tax onto the rich via the individual income tax and capital gains tax? The only way the rich could get richer at that point is by doing ACTUAL investment.

    But that will never happen because saying the corporate tax rate should be 0% or near 0% would spark a "class warfare" reaction from the democrat side. They seem to think the CEO of Google cuts a personal check to the tax man for Google's profits.

    I do. Because the alternative it horrifying.
    Lies, you said you took advantage of the dot com mess

    It seems clear that they are going to have to take a new tack. The problem is that I am having trouble imagining a scenario at this point where they do so and we dont fall right back into the financial hell we were trying to get out of. As the BIS pointed out in their annual report (worth reading...83rd BIS Annual Report 2012/2013) central banks have done everything they can to buy as much time as possible to make the economic reforms that need to be made, but nobody has bothered making the reforms. Now we are at the point where the central banks "support" is turning harmful (think...supported by a spear up your rear end) but nobody has done anything to fix the underlying problems. If anything we have compounded the problems.
    Not a surprising report but thanks for the link. It basically spells out the flaws of Keynesian economics; it only delays the inevitable.

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    Quote Originally Posted by Steeeeve View Post
    Yeah, that is incredibly dangerous. I'm also not a fan of 1920s farmer subsidizes. These are outdated.
    No kidding.

    I do not understand how they get away with the ag bills that they keep passing. The recent one that died in the house would have cut cash subsidies, which is good, but would have broadened crop insurance, so it would not have actually saved us any money on that side of things.

    In the 1920s things like federally subsidized crop insurance actually made sense as a food security measure. When a farm went under back then, there was no guarantee that it would be purchased and put back into production anytime soon. We essentially had a manpower shortage in the farming industry.

    They were also plowing with horses...right up till WWII.
    Today that problem does not exist. Farms go under and they get bought up and immediately put back into production. There is no manpower shortage because technology has boosted productivity so much.

    I live in Kansas...this is farm country. I live in a rural area. I am surrounded by farmers and ranchers. I have investments in both. Most of the farmers I know only work about 3 months out of the year. Most of the cattlemen work FAR less. This is not like the old days when ranchers were running cow/calf operations. I am in the flint hills which has a lot of cattle country. You bring in your feeder cattle in the spring, feed them out on the pastures during grass season, then ship them to a feedlot when pasture season is over. I have 2 sections of pastureland. Run cattle every year. Takes up about 6 days of my time...yes...6 days a year. Last year I got a check from the government for drought relief assistance. Why in the hell would they do that? That is cushy, easy money, and for some reason we have decided to make it cushy, easy, risk free money.

    The farm ground I have is farmed on shares...I dont do anything with it. A farmer comes and puts in crops, sprays them, harvests them, we split the money. I get a cash subsidy from the government.

    WHY???

    There does seem to be an image of the american farmer as a hard working individual. I have certainly never met one who was, and I know a LOT of farmers. I call them tractor driving welfare whores. The ones who think they work really hard have apparently never had a real job.

    I've asked around and no one seems to be able to sell me on why making business tax 0% (for domestic sales) is a bad thing. More to the point, how business tax is nothing more than a transfer tax to the poor in most cases. Google stows billions in cash overseas. They don't do this because they want to keep it for the rich people, they do it because they have no use for it and it is cheaper to put it in some Ireland bank account (it defers the tax). This, in turn, causes the tax bill to be lower and profits look good therefore the stock price goes up and they have a bunch of cash should they need it one day. It is more advantageous for them to have that money churn in a bank account in another country than try and build something here in the USA. Why don't you only tax it if you export the money (or sales) and push the tax onto the rich via the individual income tax and capital gains tax? The only way the rich could get richer at that point is by doing ACTUAL investment.

    But that will never happen because saying the corporate tax rate should be 0% or near 0% would spark a "class warfare" reaction from the democrat side. They seem to think the CEO of Google cuts a personal check to the tax man for Google's profits.
    Yep. One of those things that takes some effort to understand, so nobody bothers.

    Lies, you said you took advantage of the dot com mess
    And when Greenspan cut interest rates to nothing to keep the correction from happening then I was irate. Yes...I would have lost money in the recession that would have followed if he had not done it, but we would be in a lot better shape than we are today.

    Not a surprising report but thanks for the link. It basically spells out the flaws of Keynesian economics; it only delays the inevitable.
    Keynesian economics has a fatal flaw...namely that it assumes that people will behave responsibly. At its core it boils down to "borrow money to get through the bad years". There is nothing wrong with that. I am not sure it is even a controversial strategy in most cases....unless you never pay it back....and borrow even more money on the good years....
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  11. #11
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    Quote Originally Posted by daewoo View Post
    Keynesian economics has a fatal flaw...namely that it assumes that people will behave responsibly. At its core it boils down to "borrow money to get through the bad years".
    Bingo. If it was thought of as only "borrow money to get through the bad years" and we followed that it would be perfect. It's basically income smoothing which for a government is a good thing (creates predictability). This is the entire idea behind the "debt brake" Switzerland has. Unfortunately you have a number of Noble Prize winning economists who work at the NYT that think Keynesian economics means the government should not only borrow during the bad times but run MORE of the economy in the bad times (in terms of responsibility). When the good times come back they should not relinquish control. This is a perversion of the economic theory in my opinion. I think government should just borrow in the bad times only to cover what they are already providing (i.e. don't shut down schools, etc). If you think of it like we should borrow money to pump into, for example, the automotive industry then you end up creating a dependency and possibly a false demand that otherwise wouldn't have existed. The thought that the private economy will "catch up" and take over is stupid at best. In other words, borrowing to bail out certain sectors is a very bad idea (as a government you're better off buying the company and selling it off assuming no other buyers). Borrowing in general to keep things moving buys you enough time to make the necessary changes so the economy can get going again. Sadly our banking reform was not the change we needed. Dodd-Frank merely requires more filling out of paper and needlessly complicated regulations. The only positive was regulation of credit-rating agencies and from what I've seen the regulations are meaningless at best.

    There is nothing wrong with that. I am not sure it is even a controversial strategy in most cases....unless you never pay it back....and borrow even more money on the good years....
    It's not wrong, it is incredibly smart. You want a government to be predictable.

  12. #12
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    Quote Originally Posted by Steeeeve View Post
    Bingo. If it was thought of as only "borrow money to get through the bad years" and we followed that it would be perfect. It's basically income smoothing which for a government is a good thing (creates predictability). This is the entire idea behind the "debt brake" Switzerland has. Unfortunately you have a number of Noble Prize winning economists who work at the NYT that think Keynesian economics means the government should not only borrow during the bad times but run MORE of the economy in the bad times (in terms of responsibility). When the good times come back they should not relinquish control. This is a perversion of the economic theory in my opinion. I think government should just borrow in the bad times only to cover what they are already providing (i.e. don't shut down schools, etc). If you think of it like we should borrow money to pump into, for example, the automotive industry then you end up creating a dependency and possibly a false demand that otherwise wouldn't have existed. The thought that the private economy will "catch up" and take over is stupid at best. In other words, borrowing to bail out certain sectors is a very bad idea (as a government you're better off buying the company and selling it off assuming no other buyers). Borrowing in general to keep things moving buys you enough time to make the necessary changes so the economy can get going again. Sadly our banking reform was not the change we needed. Dodd-Frank merely requires more filling out of paper and needlessly complicated regulations. The only positive was regulation of credit-rating agencies and from what I've seen the regulations are meaningless at best.
    For the most part I agree, though I would say that during economic down times is probably a good time to do things like infrastructure projects in order to help spur the economy. I am not saying that they should invent ways to spend money or invent projects to spend it on but, for example, if you have a crumbling interstate highway system the middle of a recession is probably a good time to do something about it.

    Unfortunately we seem to end up with a lot of folks in congress who are not capable of thinking past the end of the next quarter. Instead of going "we have to fix this anyway, we may as well do it now and create some jobs" they say "We cant spend the money NOW...we are in the middle of a recession!!"

    They seem to miss the fact that the government is supposed to take a broader view than a private company would. If they fix the highways now and the payback is 10 years...or even 20 years....so what?
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    For the most part I agree, though I would say that during economic down times is probably a good time to do things like infrastructure projects in order to help spur the economy.
    But that is typically a governmental function anyway. If anything, it is probably better to do in a downtime because it is cheaper. I think the impact on the economy is fairly limited in the short run but it does set up a long term benefit.

    Unfortunately we seem to end up with a lot of folks in congress who are not capable of thinking past the end of the next quarter. Instead of going "we have to fix this anyway, we may as well do it now and create some jobs" they say "We cant spend the money NOW...we are in the middle of a recession!!"
    That is the other side of the dumb way to think. I'd agree you don't want to ramp up debt to the point where you can't pay it off but it would be wise of a government to spend money on projects when they are cheaper. I would also argue that it is not a bad idea to either limit or cut day to day government spending (meaning non-project type spending) as it is a perfect time to figure out what you need and don't need. Several states did this and it worked out nicely.

    They seem to miss the fact that the government is supposed to take a broader view than a private company would. If they fix the highways now and the payback is 10 years...or even 20 years....so what?
    This is exactly why government SHOULD do most infrastructure projects. No business is going to wait 30 years for a payback yet every infrastructure project takes around that long to realize benefits. Hell, the interstate system took about 25 years to payback.

  14. #14
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    Quote Originally Posted by Steeeeve View Post
    But that is typically a governmental function anyway. If anything, it is probably better to do in a downtime because it is cheaper. I think the impact on the economy is fairly limited in the short run but it does set up a long term benefit.
    IMO this is where people misunderstand Keynesian economics. Embarking on projects like these during a recession or serious downturn makes absolutely perfect sense. You end up getting your project done cheaper, you stimulate the economy, and you significantly increase your asset base.

    IMO people completely missed the biggest economic lesson from the great depression. Without the great depression I am not sure we would have an interstate highway system at all, and CERTAINLY would not have the extensive one we do today. The projects carried out by the CCC, mostly state and national park construction, would likely have never happened. The hoover dam....really this nations first mega project...essentially led to the west coast growth explosion.

    This time around the government was basically divided between the "hand out free money" school of thought and the "stop spending at all" camp. It is insane.

    That is the other side of the dumb way to think. I'd agree you don't want to ramp up debt to the point where you can't pay it off but it would be wise of a government to spend money on projects when they are cheaper. I would also argue that it is not a bad idea to either limit or cut day to day government spending (meaning non-project type spending) as it is a perfect time to figure out what you need and don't need. Several states did this and it worked out nicely.
    Agreed...though this is a LOT harder to do with federal employee unions. The other problem with cutting back day to day spending during a recession is that obviously they don't want to exasperate the situation by creating a bunch more unemployment. If, however, they are doing large scale infrastructure jobs there is at least the possibility that those displaced workers would have somewhere to go.

    This is exactly why government SHOULD do most infrastructure projects. No business is going to wait 30 years for a payback yet every infrastructure project takes around that long to realize benefits. Hell, the interstate system took about 25 years to payback.
    Unfortunately we have a bunch of folks running around thinking that government should be run like a business. That is my biggest gripe with the baby boomers. Every US generation up to the boomers built with an eye to the future. They built to make America a greater nation, not just to fill their immediate needs. The boomers basically ran the place like a cut throat hedge fund manager. They only spent what they absolutely had to for their immediate needs and screw anything past the end of the next quarter....or past the end of their generation.

    I really kind of hoped that the recent depression would put us back on the right track. Unfortunately it didn't happen.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    This time around the government was basically divided between the "hand out free money" school of thought and the "stop spending at all" camp. It is insane.
    And what an odd outcome. Just look at the arguments: "Deficit spending during a recession can help keep the economy going until it picks up again" This is true. "Spending more money than you have on non-productive activities is bad for the economy and causes inefficient processes" This is true. Now look at the conclusions: "...therefore we should give out money via cash for clunkers, bail out banks, increase unemployment to 2+ years, etc" and "...therefore we should slash the budget on all non-mandatory non-defense spending". Both of those conclusions literally have nothing to do with the correct assumption earlier and are both stupid.

    Agreed...though this is a LOT harder to do with federal employee unions. The other problem with cutting back day to day spending during a recession is that obviously they don't want to exasperate the situation by creating a bunch more unemployment. If, however, they are doing large scale infrastructure jobs there is at least the possibility that those displaced workers would have somewhere to go.
    Meh, the unemployment is more minor than you think. Virginia was able to slash 10-15% of the non-mandatory type stuff while only laying off a handfull of workers. Generally you can absorb most of the cuts with retirements and people leaving for other jobs. Virginia actually cut out entire departments that were useless and ended up providing BETTER service (Correctional Education is a good example). The state would not have known about this if it weren't for the recession and VA actually looking into what sucks. Virginia is probably in the top 3 best run states as well.

    The federal level has a lot more challenges that they created themselves and the sequester cuts highlighted most of these. For one, the federal government has probably the worst budgeting process you could imagine. Not much more I can say about that. Two, the federal government thinks it is wise to have a massive amount of the budget be used for things statutorily required (while not being considered mandatory spending) or are grants already agreed upon. So when you say "cut 2% of your entire budget" you limit what you can cut because it didn't allow for cuts of contracts already made or stopping federal requirements written in law. You combine that with lazy budget managers and you get what we got...stupid decision making. I mean how embarrassing is it that you have to lay off workers 1 day a week for half a year because your budget went UP 1% instead of 5%. Meanwhile Virginia cut 5-15% year over year...real cuts...for THREE years and managed just fine.

    Unfortunately we have a bunch of folks running around thinking that government should be run like a business. That is my biggest gripe with the baby boomers. Every US generation up to the boomers built with an eye to the future. They built to make America a greater nation, not just to fill their immediate needs. The boomers basically ran the place like a cut throat hedge fund manager. They only spent what they absolutely had to for their immediate needs and screw anything past the end of the next quarter....or past the end of their generation.
    I HATE this. If government were run like a business we'd be f*cked. Businesses have stakeholders that risk money and want returns (unless you are GM). I am always telling people "government should be run like a government".

    I really kind of hoped that the recent depression would put us back on the right track. Unfortunately it didn't happen.
    Yeah, and I fully admit I didn't see that coming. I felt for sure we learned a lesson...or at least the millennium generation learned a lesson. All we really learned was how to better pass the tab down the line.

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