Return to Article 1 Section 8 of the United States Constitution, and the absolute limits placed on the Federal Government by it.

It served us well until 1930, when FDR and the New Deal Democrats set in motion the destruction of the X Amendment, and Article 1 Section 8, we had survived depressions and other disasters in this country with out the Federal Government, and actually came out in better shape.

This mess has been long in the making, it wasn't just the last 8 years that lead us to this point, the problems have their basis in the New Deal of FDR, The Great Society of LBJ, and a steady departure from the strict limits on the Federal Government as enumerated by Article 1 Section 8 of the United States Constitution.

Mod hat While politics and economics are very interrelated, especially in these "Keynesian times," there is a slow drift towards too much politics, including casting of blame, and too little economics in recent posts. If the balance does not return to be more economic and less political, I will need to do something.

I am not sure what is the subject of this thread. The title is more like a news bulletin. Perhaps more discussion of whether or not it is true US is out of recession (as some of first posts did, citing flaws in using only the GDP etc. can keep the thread going - not locked)

Anyway let’s let thread die or get it more onto economics. Thank you.

Between 1933 and 1983, a fifty year span, it built the richest and most economically powerful country the world had ever seen.

Starting around 1983 it stopped working so well, for some reason.

Many know my more than seven year old POV / posted predictions that GWB, Greenspan & and Republican "trickle down" economics made the worst ever depression inevitable (before Halloween 2014) but now a few others are beginning to state this too:

"... While all the talk at present is about economic corners turned and markets charging ahead, no one {Well almost no one other than Billy T} is paying much notice to an American economy that’s deteriorating right before our eyes.*

These myopic commentators seem to be simply moving past the now almost-universally held conclusion that, before the crash of 2008, our economy was on an unsustainable course. ... evidence abounds that we have not veered at all from that dangerous path.

The U.S. Bureau of Economic Analysis just reported that consumer spending as a percentage of U.S. gross domestic product (GDP) has risen to 71%, a post-World War II record. This level is notably higher than other wealthy industrialized countries, and vastly higher than the levels sustained by China and other emerging economies. At the same time, our industrial output is contracting, our trade deficit is expanding once again (after contracting earlier in the year), and our savings rate is plummeting (after an early year surge).

The data confirms that government stimuli are worsening the structural imbalances underlying our economy. The recent “rebound” in GDP is not resulting from increased economic output, but merely from the fact that we are borrowing more than ever. That is precisely how we got ourselves into this mess. An economy cannot grow indefinitely by borrowing more than it produces. Not only is such a course untenable, but the added debt ensures a deeper recession when the bills finally come due – as they ultimately must.

This soon-to-be-called depression will not end until the pendulum of consumer spending habits swings violently in the other direction. ..."

From: http://www.moneymorning.com/2009/11/...chiff-economy/
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*10.2% unemployed, drub tight credit markets, and 50 times more than normal bank failures may open a few eyes, especially if they know the true un employment number (from US Dept of Labor) is 17.5% when the under emloyeed and too discouraged to look for job are included. Also now the average time without a job of those who do find a new one has passed half a year.

Perhaps Sandy should again start her "good news" thread and give "praying instructions" too? (Sort of like the band playing on the Titanic to keep up moral / hope, until all understood the ship was sinking.)

I agree with most of your well reasoned assesment Billy T. However, I see a few opportunities for the current adminstration to correct the issues which you have described. First, if healthcare reform is implemented, it will create a number of jobs fueling a building spurt (new hospitals and medical facilities, new service providers, prescription drugs, etc). It will be a fundamental change to the US economy.

The second plank which could mitigate if not reverse the trend you see is Cap and Trade. Thus far I am not impressed with Cap and Trade as it is being considered in the House. In the Senate, I am more optimistic that substancial, needed reform can take root.

Elimination of our dependence on foriegn oil would eliminate the US trade deficit and create a huge spurt in US investment in natural gas production and distribution. It remains to be seen if the Obama administration will effectively use these opportunities.

Economies swing up and down. I do think we will see a recovery in the near term. The question is wither the coming recovery will be sustainable. And unless fundamental changes are made to the economy, you are dead on in your assessment.

You keep forgetting that the government is spectacularly BROKE.

Borrowing money does not create wealth.

It creates more debt...debt is the *opposite* of wealth.

One might as well say the government should blow up hospitals and then borrow money from the Chinese to build new ones.

Just think of the great boost to the US explosives industry!!!

Ahh yes, I keep forgetting the US government is broke. Governments cannot go broke. Comparing the finances of a government to the finances of an individual is just flat out wrong.

Goverments can print money, something the individual cannot do. Additionally, the government in this case is acting as an investor. If the investment is made which resulted in increased economic value, the government will then reap higher taxes with which it can recoup the investment made. Good investment will also help keep government expenditures under control, lessening the need for government services.

I think we need to make a distinction here between wasteful government spending (e.g. tax breaks for the highest income individuals, wars, etc, no bid government contracts, etc) and sound government investments in the economy.

By the way for all the talk from the right wing about Obama printing money right and left, the money supply is up less than 7 percent year over year. Last year the money supply was up about six percent. So the economy, contrary to some public opinion is not be flooded with excessive dollars.

No the US governement cannot print money..unless they want to follow Zimbabwe.

What it can do is borrow money from the Federal Reserve.

The Federal Reserve can print money, but when this money is handed over to the government its in the form of T-bill purchases which is DEBT.

Yes, the government gets back *SOME* of it stimulus money in the form of taxes.

This is called 'circulating' wealth.

Not 'creating' wealth.

Well a couple of things Carcano, first the Federal Reserve is the US government. And the Federal Reserve has been increasing the money supply (printing more money, expanding the money supply) for several decades with no Zimbabwe effect. As I pointed out in my last post, the money supply growth in the US even in these distressed times is relatively low...no Zimbabwe effect.

You are correct Treasury would issue debt and that debt could be funded (printed) by the Federal Reserve or other non US Federal government investors.

No bottom line here is that governments cannot go broke because they can print money. The issue you raise with Zimbabwe is one of currency worth not that the country goes broke. In the Zimbbwe situation where a currency becomes worthless, the goverment can declare a currency void and creat new currency. So governments can never go broke as they say what is and is not currency and they create currency and debt is denominated in currency.

Even without that industry’s boost, just the restoration expense adds to the GDP. - A good example why Quadraphonics and Pandaemoni are wrong to argue that maintance, repair, and restoration should be in the GDP as they add to the nation's wealth. (These activities do NOT ADD, but only restore what was lost from the wealth of the nation. They should not be part of the GDP if is to measure how well a nation is doing. ) I also used Katrina to show that restoration does not add to the nation’s wealth but falsely is part of the GDP if that is intended to show the increase of the nation’s wealth.

I gave an extreme example (A $500 ice sculpture that melted every day and was restored every night does not add >3million dollars to the nations wealth in less than two decades as their principles claims.) See more details of my proof of their mistake here:
http://www.sciforums.com/showpost.ph...5&postcount=49

Neither has posted any replay, not even to admit their error.

Now you are mixing TARP and the other programs I referenced. They are two distinctly different investments. TARP was necessary to keep banks and businesses functioning. And it was necessary to prevent a disaster.

Some of the TARP money has already been paid back with interest. The government is receiving interest on the outstanding TARP money (money not paid back, less CITI Bank). So it is possible that the Federal government will recover enough principal and interest to make a nice little profit from interest (dividends) not taxes.

But keeping people employed and off social support programs does support government income streams and reduce spending on social support programs.

Actually the dollar has lost 95% of it buying power since the Fed was established in 1913.

Slower than Zimbabwe yes...but the same effect.

And no the Federal Reserve and the Federal Treasury are two different accounts...not ONE.

Your economic ideal boils down to a lawless state in which the government simply creates a new currency every time it gets maxed out.

Excellent...well said.

What percentage of modern economists dont understand the difference between creation and circulation???

Where did I say the Treasury and the Fed were not different? They are different with different rolls and responsibilities. However, that does not change the fact that the Treasury and the Federal Reserve are all agencies of the federal governement.

No one is arguing that inflation has not occured. Modern economic thinking holds that a moderate rate of inflation is a good thing. If you want to go backto the standard of living when the Federal Reserve was created, great. But I think most Americans would have an issue with that life style.

If you still think that the Federal Reserve is not an agency of the federal government, I think you need to pick up a good book (not right wing whacko books) on the Federal Reserve and the US banking system.

http://www.youtube.com/watch?v=hmKbCagPXP0&feature=sub

http://www.youtube.com/watch?v=x9KQ5YfOElU&feature=sub

This means you think devaluing the currency is the source of economic prosperity.

LOL!!!

The Federal Reserve System is subject to the Administrative Procedure Act.
It is not owned by anyone and is 'not a private, profit-making institution'.
It describes itself as "an independent entity within the government, having both public purposes and private aspects". In particular, neither the Federal Reserve System nor its component banks are owned by the US Federal Government.

http://en.wikipedia.org/wiki/Federal_Reserve_System

No. a modest < 5% inflation is very beneficial to society. Brazil's inflation targeting goal is 4.5%.

For one thing, inflation is a built-in stimulus to the economy / to economic activity / job creation / etc. - buy now, not next year, as prices will be higher then.

Much more important is the fact that it is a hidden tax on wealth, which tends to help keep wealth from becoming too concentrated.

Compound interest gives more wealth increase to the already wealthy. Thus, in a few 100 years without inflation (or some other form of wealth redistribution) >99% of the wealth would be in the hands of <1% of the population. The modern efficient mass producion / consumption society would be impossible without some modest inflation.

I.e. society would be like in England under King Henry VIII. There was no inflation in that gold based economy and all the wealth was concentrated in the hands of the king and which ever Lords pleased him.

That type of society is the mathematically true result of compound interest without some form of taking from the rich to give to the poor. This can be done via progressive income taxes and inhertance taxes as well as inflation, but inflation is a tax on wealth which is much harder for the wealthy to avoid.

SUMMARY: a modest inflation rate is highly desirable. As Brazil has little need of economic stimulus (many people moving into the middle class now buying their first refrigerator or car, etc) I think the optimium inflation goal for Brazil should be about 2.5%, not 4.5%, however, if Brazil were to drop its socal equalization programs, then 5% might be better inflation rate.

These programs not only pay for themselves in economic growth (and make Brazilian economy less than 13% dependent on exports)* they also do a lot of the work needed to offset the wealth concentrating effects of compound interest. For more on them see:

http://www.sciforums.com/showpost.ph...7&postcount=10

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*Henry Ford understood well (much better than many "conservatives" today) the importance of his (and others) workers gaining purchasing power every year. Henry did NOT invent the mass production line - that was more than 100 years old before Henry was born. - He invented the mass production / mass consumption / society we enjoy by paying his workers well. Those conservatives who think getting the most work for the least pay is the best policy are not conserving anything. - They are destroying the efficient mass production society. (Just look at what is now happening in the USA.)

It is little wonder the US is now headed for depression after GWB's 8 years of shrinking Joe American's purchasing power and his tax relief to the already wealthy, which concentrated wealth.

It is true that increased economic value does reap higher taxes which can be used to mop up excess money supply thus reducing inflation.

The problem is either the Republicans do not understand that mathematics or know that because they are the party of NO, there will be no policies passed that will create economic value thus creating massive inflation due to the persistent deficit.

Not a single Republican has articulated how to increase the economic value of the country.

Besides, there are bigger problems. Most of our Congressmen are Lawyers so they have no idea what is the right policy to boost Production. A large number of Business CEOs in the Engineered Products Companies (Harley, GE, GM, Boeing, Pfizer etc) are anything but engineers.

The media and the government say we have the highest productivity (output/input) in the world and therefore there is high unemployment, but they use wrong calculations like adding outsourcing value as output and reducing labor input by not counting the foreign operations, H1-Bs etc.

Since our leaders are not competent in Technology, it is as if, we have Cavemen in charge of the 21st Century society. So, unless these systemic issues are addressed, we are going nowhere fast.