Obama says, "Spend our way out of this recession..." (New Stimulus)

[pbr87]

Some negative consequences? Are you serious? We are gonna be looking like the currency of Zimbabwe in short order if we keep spending imaginary money.

people are looking at this wrong.

What would happen if you wrote $786,472.34 on upgrades to your home with bad checks, (You have -$12,324.04 in your bank account.) and the note comes due?

Right, you would lose your home. Someone whom you owe money would just come and take it.

Now let's scale this concept up about 10,000%

Yep, US of A, brought to you by the financiers of The Global Economy.

This is a very bleak, sinnacle and extreme view. The likelihood that we will experience hyperinflation to the extent that Zimbabwe has is virtually nil. China, an emerging economic superpower and the largest single holder of U.S. government debt, has an incentive to keep the dollar value high--although they hold a massive amount of U.S. bonds and other securities, if the dollar plummets, so does their stake in the investment. It is essentially a co-dependent relationship. Also, the U.S. dollar is a global currency with a much higher store of value and rate as a medium of exchange than the Zimbabwian currency has ever had. Oil is still priced in dollars, as well as some other commodities. Finally, your analogy to a single individual racking up excessive amounts of debt is not logically sound for the following reason. The U.S. government has (in the eyes of debt issuers) a limit-less lifespan; thus, the U.S. government can continue borrowing money as it pays off interest, rolling over its old debts.

In a nutshell, when one person tries to go into excessive debt: taking out multiple mortgages, using one credit card to pay off interest on several others, etc....banks say: "NO WAY"
Why? Because a single individual has a limited lifespan--so the debt-issuers know that when this person dies, and the estate is liquidated, they will have no way of collecting the remainder of this individual's debt.

When an economic superpower, however, such as the U.S. tries to go into excessive debt: issuing bonds and various securities, debt issuers willingly accept this with interest rates that are beneficial to them. They calculate projected inflation over the period of the loan and index the interest rates accordingly. This is because the U.S. government has a limit-less lifespan....200 years from now, the U.S. government will still be able and willing to make interest payments on its debt.

[Farbin Kaiber]

I thought I broke it down enough. I guess I should have described a group of people upgrading their Granola munching Hippie Commune and not having enough LSD for weekly group sessions, and the biker gangs come to collect?

[mrsleeve]

SO I see you are one of those idiots that believe the economy is getting better huh????? Do you really belie every thing you hear on MSNBC, You have swallowed all the shit this guy is slinging hook line and sinker. I do feel sorry for you, but I hope you are happy with what you have brought down on all of us.


The "depression" is still looming out there. All he has done is stave off doom for a few extra months. At huge cost by throwing good money after bad, when dose it end?????

There has been no job creation but govt jobs. For fucks sakes the "Official U/E" numbers is over 10% and in reality its closer to 25% and getting worse still every month. I suggest you take a few classes in Mandarin your gonna need to get a job in a few years

Real estate has been artificially, held up by the govt buying tons of mortgages of irresponsible burrowers, keeping them in their homes and not allowing the real estate correction that needs to happen to bring it back in line with wages and demand. Yeah happened in the 20 and 30's just like now.

Bail out banks that made equally bad choices, and deserve to fail, its nothing but redistribution of wealth. I make good choices with my money and life, yet I am forced to pay and my children will be forced to pay for the mistakes of others!!!!!!!!!!!!!! How the fuck dose that sit alright with you ????????????

You need to research the history of the great depression, and the 2-3 years leading up to and following black tuesday. We be in the lull with some recovery between the inital crash and when it all went to hell. By FDR sticking his fingers in to and messing with things did nothing, but to make it go on for 10 years. With the exception of Public works projects and food for the people that needed it.


And lastly yeah the health care system needs to be tweaked a little, but what is being purposed is like cutting your arm off at the shoulder to fix a Hang nail on you thumb.

He has his high points, and he has his lows.
I'm surprised at his troop surge in Afghanistan--I was neither for, nor against it, but it did surprise me, since he ran on an anti-war ballot against McCain. Furthermore, he has fallen a bit short on his promises of ending the Iraq war. He did, in my opinion, do a very competent job of staving off a depression--although his initial stimulus package included copious amounts of pork-barrel spending on some meaningless and utterly useless causes. Overall, I think he's trying to accomplish too much, too quickly. Over the course of four years, he wants to:

1) fix the economy ($???trillion and counting)
2) stabilize Afghanistan ($1 million/soldier/yr)x(#of soldiers)= ($????????wtf)
3) fix healthcare ($2 trillion, supposedly...but who really knows?)

If he were sensible, he would choose two of these things--instead, he's choosing three, which I think is hasty, and will have some negative consequences in the future--the scope of which will hold pertinence to our national debt, social security, and the stability of the dollar on the forex markets.

[pbr87]

I thought I broke it down enough. I guess I should have described a group of people upgrading their Granola munching Hippie Commune and not having enough LSD for weekly group sessions, and the biker gangs come to collect?

More synicism? Did you read my entire post? I gave a valid and sound counter-example to your argument. And I'm not a granola-munching hippie. In fact, I dislike hippies. But I have to admit, Obama's approach to economic recovery is markedly better than Bush's simpleton "let's send everyone a $300 check in the mail" plan.

[mrsleeve]

^^^^^^^^^^^^^^^^^^^^^^^

Dose not get it :( too many like you, drop the MSNBC and pick up the WSJ, read and make up your own mind, rather than have all the info spoon fed to you and conclusions all ready drawn

[Farbin Kaiber]

Just Because a "Superpower" can "pay" "forever" does not mean "they" will be around either.

Place your concept on the USSR in 1985. Some may have assumed they would have "limit-less" ability to pay on due debt, but 5 short years later they were falling apart, and in 7 they were dissolved.

[pbr87]

SO I see you are one of those idiots that believe the economy is getting better huh????? Do you really belie every thing you hear on MSNBC, You have swallowed all the shit this guy is slinging hook line and sinker. I do feel sorry for you, but I hope you are happy with what you have brought down on all of us.

I think the basic indicators are there. The stock market has made a recovery, the banking industry has had a resilient rejuvenation. The basic indicators are there. I also doubt that the unemployment rate will continue to accelerate at the rate it did this past year. I am sure we will see more foreclosures, and some more lost jobs. So, I don't think "everything is all better yet", but I do think that "we are off the floor". I don't like MSNBC. I prefer CNBC, Bloomberg or TWSJ for financial news and BBC for world news.

The "depression" is still looming out there. All he has done is stave off doom for a few extra months. At huge cost by throwing good money after bad, when dose it end?????

Do you believe everything you hear on Fox News?

There has been no job creation but govt jobs. For fucks sakes the "Official U/E" numbers is over 10% and in reality its closer to 25% and getting worse still every month. I suggest you take a few classes in Mandarin your gonna need to get a job in a few years

Real estate has been artificially, held up by the govt buying tons of mortgages of irresponsible burrowers, keeping them in their homes and not allowing the real estate correction that needs to happen to bring it back in line with wages and demand. Yeah happened in the 20 and 30's just like now.

Statement 1 is not entirely true. There have been new private-sector jobs created--both in franchise and service industries. The reason that this is deceiving is because the amount of jobs lost in the private sector is greater than the amount of jobs that have been created.
Also, try to remember that some of these "irresponsible borrowers" were victims of predatory mortgage brokers.

Bail out banks that made equally bad choices, and deserve to fail, its nothing but redistribution of wealth. I make good choices with my money and life, yet I am forced to pay and my children will be forced to pay for the mistakes of others!!!!!!!!!!!!!! How the fuck dose that sit alright with you ????????????

Don't bail them out, and risk a systemic collapse of unprecedented proportions. Is this a better option? The bailout is a classic case of choosing the lesser of two evils.
*EDIT: not to mention, many of the banks that received bailout money either have already paid it back or are in the process of doing so*

You need to research the history of the great depression, and the 2-3 years leading up to and following black tuesday. We be in the lull with some recovery between the inital crash and when it all went to hell. By FDR sticking his fingers in to and messing with things did nothing, but to make it go on for 10 years. With the exception of Public works projects and food for the people that needed it.

I've taken ECON 420 (U.S. Economic History at my college). I know what happened in the great depression. I know that spending on WWII is what really helped end it....but the situation we are in now is not the same as the Great Depression--so we cannot aim to solve it in the same way. Also, try to remember, that right now, we have the SEC, FDIC, and a number of other institutions that were not in place prior to the great depression.

And lastly yeah the health care system needs to be tweaked a little, but what is being purposed is like cutting your arm off at the shoulder to fix a Hang nail on you thumb.

I don't fully agree with you on this either, although I can say that Obama chose to fix Afghanistan and fix the economy, so he should temporarily put the health care system in the back seat. My biggest concern is that he is trying to do too much too fast.

[pbr87]

^^^^^^^^^^^^^^^^^^^^^^^

Dose not get it :( too many like you, drop the MSNBC and pick up the WSJ, read and make up your own mind, rather than have all the info spoon fed to you and conclusions all ready drawn

I read TWSJ. Excellent financial reporting! I trust them for anything having to do with emerging markets, investing and financial news. When it comes to political economics, I do not agree with 100% of what they publish. And again, I DO NOT WATCH MSNBC!

[Hallen]

This is a very bleak, sinnacle and extreme view. The likelihood that we will experience hyperinflation to the extent that Zimbabwe has is virtually nil. China, an emerging economic superpower and the largest single holder of U.S. government debt, has an incentive to keep the dollar value high--although they hold a massive amount of U.S. bonds and other securities, if the dollar plummets, so does their stake in the investment. It is essentially a co-dependent relationship. Also, the U.S. dollar is a global currency with a much higher store of value and rate as a medium of exchange than the Zimbabwian currency has ever had. Oil is still priced in dollars, as well as some other commodities. Finally, your analogy to a single individual racking up excessive amounts of debt is not logically sound for the following reason. The U.S. government has (in the eyes of debt issuers) a limit-less lifespan; thus, the U.S. government can continue borrowing money as it pays off interest, rolling over its old debts.

In a nutshell, when one person tries to go into excessive debt: taking out multiple mortgages, using one credit card to pay off interest on several others, etc....banks say: "NO WAY"
Why? Because a single individual has a limited lifespan--so the debt-issuers know that when this person dies, and the estate is liquidated, they will have no way of collecting the remainder of this individual's debt.

When an economic superpower, however, such as the U.S. tries to go into excessive debt: issuing bonds and various securities, debt issuers willingly accept this with interest rates that are beneficial to them. They calculate projected inflation over the period of the loan and index the interest rates accordingly. This is because the U.S. government has a limit-less lifespan....200 years from now, the U.S. government will still be able and willing to make interest payments on its debt.

What you say is in essence true, but that doesn't mean that it is the right way to go.

First, the US enjoys a strong financial position exactly because the dollar is the defacto world currency and because oil is priced in dollars (not the exclusive reason, but a big one). With the monkey business we are doing now, and have been doing for a while, we are risking that status for the dollar. Europe would love nothing more than to supplant the dollar with the euro for the defacto world currency and for pricing oil. That will put us in a much more difficult situation.

China may own a bunch of our debt, but if we keep printing money and devaluing the dollar, then that greatly reduces the value of their debt holdings. Everybody knows this is how the game is played, but there is still profit in it, up to a point. Once inflation hits a high enough rate, then that game changes and China starts losing money on the deal. At that point, the US financial credibility is greatly damaged and that just means more bad stuff will come our way. The debt may be sold at a lower rate or it may be written off. Either way, it would be hugely damaging to our economy if that were to happen. China might be willing to take that kind of risk on for the sole purpose of damaging us.

The Fed basically was designed to keep inflation and deflation in check. However, because the government keeps over spending, the Fed is basically forced to keep a steady rate of inflation going. They do this because it reduces the value of the holding our creditors have so when we pay it back, we pay back less value than what we got in that loan in the first place. It's a good deal, yes?

Well, no. It's a good deal for the government and a great way to justify over spending, but it is a bad deal for us. For every percentage point in inflation, that's one less percentage point your savings are worth and one percentage point less return on your investments you are getting (like in your 401k plan). If inflation goes up to the 14% level that we had during the Carter administration (under much the same conditions as now), then your savings are worth less every day. Your return on investment can't keep up with the inflation rate. You can't ever save enough money to retire on. Just do the calculations on what an extra 5% per year compounded interest would do for your 401k plan. That's what you give up because of government overspending.

Government does not make wealth, it can only take wealth and redistribute wealth (wealth being defined as your salary, not Bill Gate's estate). Government spending to get us out of a recession is just a shell game and in the end, only hurts us. It's a giant ponzi scheme. They either issue debt, or they print more money to make this giant payout happen. They are manufacturing money, they are not creating wealth. There's a huge difference between the two.

The people have to wake up and take interest in this stuff or we are doomed to government ninnies continuing to destroy our country.

[joshh]

Rome once thought it was invincible....

[pbr87]

What you say is in essence true, but that doesn't mean that it is the right way to go.

First, the US enjoys a strong financial position exactly because the dollar is the defacto world currency and because oil is priced in dollars (not the exclusive reason, but a big one). With the monkey business we are doing now, and have been doing for a while, we are risking that status for the dollar. Europe would love nothing more than to supplant the dollar with the euro for the defacto world currency and for pricing oil. That will put us in a much more difficult situation.

Finally, someone who seems to understand economics. Ironically enough, drug cartels, weapons dealers and other black market salesmen are beginning to switch to the euro, both because they see greater long-term stability, and because of the 500 Euro note (meaning a greater amount can be transported in a smaller space). As far as oil being priced in Euros, it could happen, but I think it's a long way off. Such a massive market re-structuring is both costly and time-consuming.

China may own a bunch of our debt, but if we keep printing money and devaluing the dollar, then that greatly reduces the value of their debt holdings. Everybody knows this is how the game is played, but there is still profit in it, up to a point. Once inflation hits a high enough rate, then that game changes and China starts losing money on the deal. At that point, the US financial credibility is greatly damaged and that just means more bad stuff will come our way. The debt may be sold at a lower rate or it may be written off. Either way, it would be hugely damaging to our economy if that were to happen. China might be willing to take that kind of risk on for the sole purpose of damaging us.

This is true, but China has to be extremely careful of how fast they sell off U.S. securities. Flooding the market with the bonds and securities they are holding will cause a rapid increase in the supply side of this market, which would inevitably effect the current value of these assets, thereby reducing their value. So China selling off all the U.S. debt they hold at once is not a viable option. Also, I don't know how intent China is on damaging us. AFter all, there are many Chinese investors that have substantial stakes in U.S. markets and real estate.

The Fed basically was designed to keep inflation and deflation in check. However, because the government keeps over spending, the Fed is basically forced to keep a steady rate of inflation going. They do this because it reduces the value of the holding our creditors have so when we pay it back, we pay back less value than what we got in that loan in the first place. It's a good deal, yes?

The fed can also target unemployment numbers, although it hasn't been proven to be successful. I think people historically place too much faith and too much blame on the Federal Reserve system. Ben Bernanke has a burdensome task, and he only has 3 tools do accomplish it with.

Well, no. It's a good deal for the government and a great way to justify over spending, but it is a bad deal for us. For every percentage point in inflation, that's one less percentage point your savings are worth and one percentage point less return on your investments you are getting (like in your 401k plan). If inflation goes up to the 14% level that we had during the Carter administration (under much the same conditions as now), then your savings are worth less every day. Your return on investment can't keep up with the inflation rate. You can't ever save enough money to retire on. Just do the calculations on what an extra 5% per year compounded interest would do for your 401k plan. That's what you give up because of government overspending.

This is why many people are switching to ETFs and commodities (such as gold and silver) as a way of hedging against potential losses in their retirement portfolios.

Government does not make wealth, it can only take wealth and redistribute wealth (wealth being defined as your salary, not Bill Gate's estate).

What about the money multiplier? How about it's relevance to the required reserve ratio and the Federal Reserve system. Isn't this an example of how wealth can be created? Also, when you look at how much the U.S. economy has grown (in chain-weighted real dollars, of course) in the past hundred years, do you believe all of this is free markets? Was there absolutely no pertinent government intervention in the process?

Government spending to get us out of a recession is just a shell game and in the end, only hurts us. It's a giant ponzi scheme. They either issue debt, or they print more money to make this giant payout happen. They are manufacturing money, they are not creating wealth. There's a huge difference between the two.

The people have to wake up and take interest in this stuff or we are doomed to government ninnies continuing to destroy our country.

It is certainly a "scheme", but if other people and nations continue to use the dollar as a store of value and a medium of exchange, then it is a successful scheme. If they don't, then we could potentially experience hyperinflation (worst-case scenario). If you're worried about this, invest in some gold!

[Hallen]

... AFter all, there are many Chinese investors that have substantial stakes in U.S. markets and real estate.

You are making the assumption that the primary investor in these US holdings are private individuals. I suspect they are not. If the Chinese government wants to take the hit, then they will do it. I don't expect that because it would be somewhat irrational... but it is the Chinese government and they aren't exactly known for being rational.

The fed can also target unemployment numbers, although it hasn't been proven to be successful. I think people historically place too much faith and too much blame on the Federal Reserve system. Ben Bernanke has a burdensome task, and he only has 3 tools do accomplish it with.

Yes he does. It is a fiat system based on trust. Only that trust backs the dollar. It's not an enviable position to be in especially with the constant pressure from short term political reactions.

This is why many people are switching to ETFs and commodities (such as gold and silver) as a way of hedging against potential losses in their retirement portfolios.

Which drives speculation in those commodities which drives erratic pricing and lots of short term profit taking making it a lot more volatile than it should be. The point is, you shouldn't have to take a protective position in the marketplace because of the volatility of our currency due to government activities.

What about the money multiplier? How about it's relevance to the required reserve ratio and the Federal Reserve system. Isn't this an example of how wealth can be created? Also, when you look at how much the U.S. economy has grown (in chain-weighted real dollars, of course) in the past hundred years, do you believe all of this is free markets? Was there absolutely no pertinent government intervention in the process?

In the end, yes, it's all non-governmental individuals and companies. I won't say free market because we haven't had a free market in many years. (I don't know what chain weighted real dollars are, but if you mean a stabilized value then OK.)
The money multiplier is a function of lending institutions that is regulated by the government. It's those institutions that take the risk and because of government insurance backing, people ignore the risks of high levels of fractional banking because they think they are safe from it. It isn't really true, but it mostly works for now.

Still, that isn't government creating wealth. That's government manipulating the rules to channel the wealth and to enhance it's ability to control the monetary supply. I don't pretend to fully understand the machinations of the Fed and the banking industries. But I do know that the government does not make anything. In the end, wealth cannot be generated unless you make something of value. People confuse wealth creation with channeling of wealth. If a product or service has value, it will produce wealth unless the government gets in the way.

Some level of government intervention is inevitable if they are to do their primary job of protecting property rights. I also understand that our modern government is deeply entrenched in the economy via many methods. But that doesn't change the fact that government can only manipulate wealth, it cannot create it. To think otherwise leads the governemnt to more firmly entrench itself into the economy causing more disruptions like this latest fiasco.

It is certainly a "scheme", but if other people and nations continue to use the dollar as a store of value and a medium of exchange, then it is a successful scheme. If they don't, then we could potentially experience hyperinflation (worst-case scenario). If you're worried about this, invest in some gold!

Yep. It's all based on trust. What the current administration is doing is pushing that trust to the breaking point and possibly beyond. Again, I shouldn't have to invest in gold. We should have a stable currency system that shouldn't force me to take my savings and keep moving it around between different speculative ventures to insure it is safe. If I save a dollar worth of value, I should have a dollar worth of value in 100 years.

[pbr87]

You are making the assumption that the primary investor in these US holdings are private individuals. I suspect they are not. If the Chinese government wants to take the hit, then they will do it. I don't expect that because it would be somewhat irrational... but it is the Chinese government and they aren't exactly known for being rational.

Not just individuals; investment banks and multinational corporations as well. I doubt the Chinese goverment wants to take a hit right now. If they take a hit, we take a hit as well, which means that the largest foreign consumer of their goods (the entire reason they fix their ER at 8y/$ with a two-stage system of forex market-flooding and sterilization) upon which they production-based economy is dependent no longer has the consumer purchasing power it once did. Essentially, them hurting us would hurt them two-fold. Still, given the average Marginal Propensity to Save in China, they might be able to weather such a hit.

Yes he does. It is a fiat system based on trust. Only that trust backs the dollar. It's not an enviable position to be in especially with the constant pressure from short term political reactions.

I think every country in the world is on a fiat system. And I don't believe he is under that much pressure from politicians--perhaps at the moment he is--but the federal reserve is historically removed from the rest of the goverment .

Which drives speculation in those commodities which drives erratic pricing and lots of short term profit taking making it a lot more volatile than it should be. The point is, you shouldn't have to take a protective position in the marketplace because of the volatility of our currency due to government activities.

Yes, there is a good deal of speculation amongst these commodities right now--but remember that ETFs are market-indexed, and gold is historically reputed to be one of the most stable commodities with a high store of value. I agree, no one should have to rush to a protective position, but it's the boat we're in right now. Also, people leveraging their portfolios solely on these investments are people who are paranoid about hyperinflation--not everyone is putting faith in these "inflation-proof" investments.

In the end, yes, it's all non-governmental individuals and companies. I won't say free market because we haven't had a free market in many years. (I don't know what chain weighted real dollars are, but if you mean a stabilized value then OK.)

Non-government individuals and companies alone, is free market. If there is some government influence on how they act and how they invest, then it is not free market. There's not much of a middle ground. People that think the government should play a miniscule role, or none at all, with regards to economic policy, are free-market Classical economists. People that believe government intervention and spending is a necessity are Keynesians. And there are a variety of different types of Keynesians and Classicals, but these are essentially the two sides. And yes, chain-weighted basically means stabilized, or inflation-indexed.

The money multiplier is a function of lending institutions that is regulated by the government. It's those institutions that take the risk and because of government insurance backing, people ignore the risks of high levels of fractional banking because they think they are safe from it. It isn't really true, but it mostly works for now.

Still, that isn't government creating wealth. That's government manipulating the rules to channel the wealth and to enhance it's ability to control the monetary supply. I don't pretend to fully understand the machinations of the Fed and the banking industries. But I do know that the government does not make anything. In the end, wealth cannot be generated unless you make something of value. People confuse wealth creation with channeling of wealth. If a product or service has value, it will produce wealth unless the government gets in the way.

No, it is individuals and banks creating wealth, the scope of which is governed by Federal Reserve policy. I'll give you an example, the real equation for the money multiplier, and a link if you want to know a bit more.
Take this example. Let us assume, for the sake of this example, that the Required Reserve Ratio is exactly 10%.
John makes a deposit of 1,000,000 into bank A.
Bank A saves 100,000 of this money in its reserves and loans out $300,000 to Sam, $300,000 to Arthur and $300,000 to Paul.
Sam Deposits $300,000 into Bank B, Arthur $300,000 into bank C, and Paul $300,000 into bank D. Bank B keeps $30,000 of this money in reserves and loans out $270,000 to Jim. Bank C keeps $30,000 in reserves and loans out $270,000 and bank D keeps $30,000 in reserves and loans out $270,000.

Now, the balance sheets all add up properly, and there are a collective total of $190,000 in reserves, and there is a total of $1,700,000 circulating. This is a very limited example of how the money multiplier works. The real equation is m=1/R. So, essentially, a $1,000,000 deposit into a bank when the required reserve ratio is 10%, has the effect of $10,000,000 circulating in the market. This is an important aspect of fractional reserve banking, and IT IS REAL. This wiki article does a decent job of explaining it more in-depth. http://en.wikipedia.org/wiki/Money_m...ney_multiplier

Some level of government intervention is inevitable if they are to do their primary job of protecting property rights. I also understand that our modern government is deeply entrenched in the economy via many methods. But that doesn't change the fact that government can only manipulate wealth, it cannot create it. To think otherwise leads the governemnt to more firmly entrench itself into the economy causing more disruptions like this latest fiasco.




Yep. It's all based on trust. What the current administration is doing is pushing that trust to the breaking point and possibly beyond. Again, I shouldn't have to invest in gold. We should have a stable currency system that shouldn't force me to take my savings and keep moving it around between different speculative ventures to insure it is safe. If I save a dollar worth of value, I should have a dollar worth of value in 100 years.

If forex markets have enough faith in the value of the dollar, the government can create wealth. A classic example of this happened fairly recently (within the last year) when dollar values actually took an upturn and began to appreciate against Euros and GBPs. This happened at a time when our treasury department was printing money out the wazoo. Why did it happen? A few first and more than a few third-world economies held the belief that the dollar, given its history and the size and power of the U.S. economy, has a more stable store of value than the GBP or Euro during a global financial crisis. This pushed up the demand for dollars on the forex market, which increased the value of the dollar--thereby making Americans "wealthier" even though the government was still issuing new currency.

[Hallen]

I'm more inclined towards Von Mises Austrian School than Classicalist, btw.
I know what the definitions of the two are. The two main schools don't mix, I understand that. But what we have now is a Keynesian based system where the government is deeply involved in the economy. A free market is when one in which the government plays no role. So, we don't have a free market now. (Probably a difference in semantics)

The same semantics problem with regards to growing wealth. I'm probably wrong about this, but wealth comes from the creation of real products and actual services (eg, I'll mow your lawn for $10).

The government manipulates the monetary supply for its own reasons, but the fact that people make money selling money is a function of the worldwide market for speculation on monetary value. That isn't the government creating wealth because again, the government hasn't produced anything. All the money being made is going through private entities.


I also understand the fiat money system to an extent and I understand fractional banking. I understand that fractional banking increases the monetary flow without printing more money and without necessarily driving up inflation in a universal way. It does cause localized inflation; just look at the housing market. But it also makes money available for people to buy real goods and services and to finance new business. That's all fine and dandy. But taking it to unreasonable levels with requirements placed on them by the government to make extremely risky loans, then you are looking at disaster. That's exactly why irresponsible government actions put us in this position we are in now. It's almost always irresponsible government actions that does it.

The point is, the government produces nothing. All wealth is generated in the public sector. All government can do is force wealth through certain channels and redistribute wealth. That's all the current spending plans are. It's money they are taking from us to spend now and that's a 0 sum game. No wealth can or will be generated from it.

Now, if you want to talk a socialist government that "owns" a business like Airbus, you could marginally argue that government creates wealth. But still, that's a horribly inefficient and costly way to do things. Wealth is created when money goes from one hand to another in exchange for a product or service. When a government owns everything, then the money never goes from one hand to another. It's all the same hand.

[Pudmunkie]

You live in MI the easiest place to get on Govt entitlements in the country right now.

move to detroit and sign up for section 8 and welfare, food stamps the whole nine yards. Have a few more dependent kids while you are at it

Oh its not free at all, someone has to pay for it

Trust me I know... Im one of those people paying for it.

On the plus side I should be able to score a couple acres with a house on top for ~90k. =)