Can It Happen Here?

Re: Can It Happen Here?

PostBy: coaledsweat On: Wed Apr 22, 2009 6:46 pm

stockingfull wrote:The thesis behind the stimulus is that the economy is an engine that, when operating at a high level, creates wealth, employs people and generates tax revenue. If it is allowed to "cool off," all those things will be lost and we'll have a worldwide Depression. So the stimulus is exactly the same as stoking your fire when it's going out. We're spending tax money to keep the fire going until the weak housing/banking sectors start coming back.

Reaganomics was a similar deficit approach, only from the other direction. It was based on the assumption that first cutting taxes would bring more investment by leaving more capital in the hands of the "investor class," which they'd then invest, with the result that new businesses would be started or existing ones enlarged and the benefits of that expansion would "trickle down" to the working class in the form of employment and wages. And the gov't would be richer in the end due to the higher tax revenues generated by a bigger economy, even at lower rates.


The difference is who's money is being spent and where it's going.
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Re: Can It Happen Here?

PostBy: KLook On: Wed Apr 22, 2009 6:52 pm

I think both models work if government reduces its size. But we know that gov. only increases in size. When the economy recovers from its present funk, we will have an insurmountable deficit. Once the tax money is coming in, we will begin spending on new programs, not scaling them down to get the deficit in order. See the last 75 years or so for an example.

Kevin
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Re: Can It Happen Here?

PostBy: cokehead On: Wed Apr 22, 2009 7:01 pm

The goverment has been finacially irresponsible so long that it has been accepted as the norm. I don't believe they (big government supporters) think they have a problem. They are just in denial.
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Re: Can It Happen Here?

PostBy: Richard S. On: Wed Apr 22, 2009 7:34 pm

coaledsweat wrote: and where it's going.


That's the biggest question of them all. I know this isn't the plan that passed but here's a pretty good layout:

http://www.washingtonpost.com/wp-dyn/co ... 00154.html

Let's take the biggest chunk which was a little over $91 billion to Health, Labor and Education.

$20.2 Billion to the Departpment od Helath and Human Services = Bigger government

$4.4 Billion to Employment and Job Training = More Big Government

$20 Billion to School Renovations = :idea: What a novel idea, we'll have construction projects that will employ people and provide a direct benefit to the community.

$17 Billion to Pell Grants and other student aid. = More big Government

$29 Billion to education programs = ????

Certainly many of these programs are worthy causes and some will stimulate the economy to some degree. I'm sure the "Education Programs" probably includes grants to schools for many things where they will need to make purchases however the majority of the money is going to what amounts to welfare and other government run programs that really have nothing to do with stimulating the economy.
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Re: Can It Happen Here?

PostBy: jpete On: Wed Apr 22, 2009 9:06 pm

stockingfull wrote:
jpete wrote:
stockingfull wrote:Answer: Reaganomics.

Aren't you one of the people running around trying to discredit Reaganomics? Besides, while I agree with cutting taxes(tax rates) it means nothing without an equal cut in spending. And Reagan certainly didn't do that. He expanded the debt and put us in a deeper hole. That answer=FAIL.

So you agree that Reaganomics was bunk? That's a start.

The thesis behind the stimulus is that the economy is an engine that, when operating at a high level, creates wealth, employs people and generates tax revenue. If it is allowed to "cool off," all those things will be lost and we'll have a worldwide Depression. So the stimulus is exactly the same as stoking your fire when it's going out. We're spending tax money to keep the fire going until the weak housing/banking sectors start coming back.


Except when I stoke my fire, I don't have to steal the air from some one else, or print it out of, well.....thin air. ;)

stockingfull wrote: Reaganomics was a similar deficit approach, only from the other direction. It was based on the assumption that first cutting taxes would bring more investment by leaving more capital in the hands of the "investor class," which they'd then invest, with the result that new businesses would be started or existing ones enlarged and the benefits of that expansion would "trickle down" to the working class in the form of employment and wages. And the gov't would be richer in the end due to the higher tax revenues generated by a bigger economy, even at lower rates.

What Reagan actually grew, of course, was the deficit.

Now tell me, how does Ron Paul's "tiny gov't" approach stave off a World Depression?


The problem now is, everything is overvalued. To return to normalcy, everything must be allowed to find it's correct level. Yes that involves pain now. But it's either take the pain now, or continue to borrow/spend which props up the abnormally high value of everything, but sets you up for a bigger crash in the end.

The common definition of inflation is rising prices. But that is incorrect. Inflation is literally, the "inflating" of the money supply. The more dollars there are, the less each of them is worth. So it requires more of those devalued dollars to buy the same thing. That's why prices rise.

So, to answer your question, the "tiny government" approach doesn't necessarily have to result in a world depression but it would probably result in at least a recession. The answer to too much money supply is to pull dollars out of the economy. The Federal Reserve can do this by raising interest rates. Again, I know it's unpopular, but it is required. Less dollars equals more value for each dollar.

We used to be able to track the money supply, first by M1(total number of dollars) then M2(which adds in checking/savings accounts and other types of accounts) and now the total amount of money is M3. The Fed doesn't publish M3 because that number would scare the hell out of most people.
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Re: Can It Happen Here?

PostBy: jpete On: Thu Apr 23, 2009 8:39 pm

And just to continue this, a dollar(as opposed to a Federal Reserve Note) is defined as one ounce of silver. This is because a trusted silver coin in Europe was known as the "Thaler"

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

Thaler became daler(daaler) and eventually "dollar". So a dollar=one ounce of silver.

And to illustrate price vs. value, I like to use this example. It was one of a few that was first explained to me.

Ask the typical “man on the street” if he thinks he could buy a gallon of gas these days for a quarter. If you’re lucky, he’ll just laugh at you. If you’re not so lucky, he’ll launch into a tirade about high gas prices, greedy oil companies, and what government needs to do to “fix” the problem. Wait for him to calm down, then show him a 1964 quarter. In 1964, a gallon of gas cost about $0.30/gallon, but it is my contention that the same quarter that wouldn’t quite buy a gallon of gas in 1964 could now be used to buy gas at today’s price of about $2.85/gallon. Impossible, you say? Let’s take a closer look.

In 1964 U.S. coins were still made of silver, not the copper/nickel “sandwich” found in modern coins. The 1964 quarter contains roughly .2 ounces of silver. At today’s silver price, that .2 ounces is worth about $3.28 - enough to buy a gallon of gas and even get some change back. So is the pain at the pump really caused by a cabal of evil oil companies, or is it more likely that it is primarily a reflection of inflation? Certainly there are real factors driving gas prices (such as increased global demand and artificially constrained supply), but we should not lose sight of the role inflation plays. Inflation, of course, is the increase in the money supply which causes prices to rise across the board. Say what you want about the “greedy oil companies,” but they’re not the ones responsible for doubling the money supply in the U.S. over the past decade.



http://abeginnersguidetofreedom.blogspot.com/2008/01/gas-25gallon.html
This link is broken, either the page no longer exists or there is some other issue like a typo.


So in terms of the value of a 1/4 oz of silver to one gallon of gas, they are unchanged. Only the fact that the money supply has exploded has forced the "price" to rise.

It is the government engaging in counterfeiting that causes the business cycle. It creates the wage/price spiral and recessions and depressions. The ONLY way to avoid these things, is to stop printing money out of thin air.
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