this just in - hard STOP in CA

[touchring]

Re: this just in - hard STOP in CA

As for those saying that the government can/cannot reflate - ultimately it still comes down to will: will the US tell its creditors to f**k off when its citizens are faced with massive falls in standards of living?

I certainly think so. A voter in your district is worth 10,000 outside - doubly so for nations.

Will this really work in practice? How will rapidly rising food prices benefits citizens, especially the retired and unemployed?

[ThePythonicCow]

Re: this just in - hard STOP in CA

Your description is reasonable, but I would like to point out that economic activity can be artificial as well. Why then should the amount of money rise to compensate?

Yes - excellent point. As we've seen with the recent dot.com and real estate mortgage securitization bubbles, the level of economic activity can be artificially inflated, on a massive scale.

The only way to prevent depressions is to prevent the bubbles - and politically this is extremely unlikely barring a near and painful memory in the minds of the voters.

Yes. The only way to prevent the boom-bust cycle is to prevent the booms. Humans have not yet figured how to manage wisely the political and economic affairs of billions of people. The will of the voters in democracies holds the ultimate power in theory. However in practice that too is usually subverted by sufficient power, money, propaganda and dumbing down of the masses.

We simply don't know how to do it well yet.

[lurker]

Re: this just in - hard STOP in CA

Thanks for the update.

I lived in the southern end of Alameda County, California, until 2007. Oakland is in the northern end of Alameda.

I moved out, to Texas. I'm sure glad I did.

Small world. I lived in Fremont until 2003. Moved to Boston, MA, where taxes were lower (!) and schools better. I'm really not sure how CA manages to spend so much and have such poor services.

[lurker]

Re: this just in - hard STOP in CA

As for those saying that the government can/cannot reflate - ultimately it still comes down to will: will the US tell its creditors to f**k off when its citizens are faced with massive falls in standards of living?

I certainly think so. A voter in your district is worth 10,000 outside - doubly so for nations.

How does this work ? If the US tells it's creditors to take a hike then the dollar price of imports (most notably oil) would likely rocket higher.

So the gov. might be able to dole out more dollars to its citizens, but it wouldn't improve their standard of living.

The way I see it we've really no way of dodging the bullet this time. We either consume less or we produce more or both, but life will not be the same as it was in the 90s for decades if ever.

[vinoveri]

Re: this just in - hard STOP in CA

...
But they don't want to. They don't want to because it would destroy the dollar, which is the Fed's principle stock in trade.

...
If the worlds money lenders, including central banks, ever became convinced that the Fed had become trapped into "printing" its way out of a collapse, with no choice left to it other than to print more money to avoid debt default, then five or ten trillion dollars worth of Treasuries could arrive the next morning at the front door of the United States Treasury, demanding conversion to Dollars, which Dollars would be spent (if and when obtained) on buying stuff as fast as possible, all trying to unload Dollars and Dollar denominated debt before its value collapsed to zero.

and there's the rub ...
print openly just as much as you can while jawboning a strong dollar - that will not spook the foreign debt holders BUT

How do the foreign debt holders keep track of how much monetization is occurring? They have to "trust" the fed.
How does one track pallets, truckloads or boatloads of greenbacks?
These boys sure know how to money launder.

(OK, so I stepped out into conspiracy nutland for a moment)

[zoog]

Re: this just in - hard STOP in CA

more bad news from the Golden State

Oakland considering bankruptcy:

http://www.sfgate.com/cgi-bin/articl...3DJB.DTL&tsp=1

From that article. This will be no surprise to iTulipers...

"We are in the worst recession since 1981," said UC Berkeley Professor John Ellwood, an economist who worked in the Congressional Budget Office. "This recession is a bit different in that it's being driven by the housing bubble, but as more and more people ask for property-tax reassessments, it's going to leave a huge funding gap for cities," Ellwood said.

It's already begun. Alameda County Assessor Ron Thomsen said tax assessments fell $13.6 billion in the fiscal year that will end June 30. "Our assessment roll will go down 2 percent, and we've never had a year-to-year drop ever in stats going back to 1958," he said.

[c1ue]

Re: this just in - hard STOP in CA

Will this really work in practice? How will rapidly rising food prices benefits citizens, especially the retired and unemployed?

The way I see it we've really no way of dodging the bullet this time. We either consume less or we produce more or both, but life will not be the same as it was in the 90s for decades if ever.

Sure it can. For one thing, actual benefit is not as important as perceived benefit. Price controls/tax cuts on gasoline for example...

Secondly food and fuel prices are small compared to income paid for housing purposes. A nominally rising stock market and/or housing market served to distract from falls in real income in the past 10 years, why would you suppose that would change?

As for standards of living - I've been on record for a long time saying that the US' standard of living going to converge with Poland's - i.e. 2nd world.

But it doesn't mean that per capita income won't be $60K or $100K at that time.

Yes. The only way to prevent the boom-bust cycle is to prevent the booms. Humans have not yet figured how to manage wisely the political and economic affairs of billions of people. The will of the voters in democracies holds the ultimate power in theory. However in practice that too is usually subverted by sufficient power, money, propaganda and dumbing down of the masses.

We simply don't know how to do it well yet.

Oh, I think we know very well how to prevent bubbles, if not necessarily the business cycle.

My view is that we won't - because it is too profitable for those on the make.

To take a page from Sapiens: if they didn't do it, someone else would kick them out and do it anyway.

The good thing about the American system is that it takes a lot to affect fundamental changes - unlike in a dictatorship. The bad thing I fear that we'll all learn the hard way is that once the system goes awry, it will equally be difficult to change back.

[Starving Steve]

Re: this just in - hard STOP in CA

The Putz from Princeton is convinced that he can print his way to prospertity; that is his entire thesis. He is the inflationist of the inflationists. He is exactly the Putz that the Americans deserve.:p

[mcgurme]

Re: this just in - hard STOP in CA

Far be it from me to try to swing the increasingly libertarian/idealistic thinking around here, but I just have to say something.

Taxes are the way that government services get paid for. The only alternatives are: 1) racking up debt; 2) default; 3) printing. The alternatives are not really alternatives, because they lead to problems like we see today.

The very rich in our country have swindled us to think that all taxes are bad. 30 years of neocon rhetoric has done a good job with sinking that message in. And if you're talking about taxing someone in the middle class (what middle class? it is disappearing), then keeping tax rates reasonable is a good thing.

But is someone like Bill Gates going to miss an extra few million if he was taxed? The top tax rate used to be 90% for income above $2 million. How many people really need that extra income above $2 mil? Yeah, buying that second luxury yacht is a dire need.

Do we really have our priorities straight? On the one hand we have the "liberty of the rich man" to buy the yacht. On the other hand we have education for the populace to produce a functioning democracy. Hmmm. I think the liberty of the rich man to buy that yacht is way more important than educated kids. I really want the USA to become like all the other countries that have a small, wealthy elite and poor people everywhere else. (Hint: that's deridingly called the "third world", and we are rapidly going in that direction).

America used to have a large middle class. Now it is hanging on by a tenuous thread. We had a middle class because we supported its existence with inexpensive college education; with the GI bill; with good schools for all kids; with a world leading road system. Nearly every economic transaction that occurs relies on these systems created by government (before someone goes off on yet another libertarian rant about "big government", please name the last economic transaction you had that wasn't somehow facilitated by government - either the road that got you there, the money that you used, the contract that was enforced by the legal system, etc).

Supporting a middle class meant that the wealthy paid more than their fair share in taxes. They didn't like paying, they never have, and they never will. I'm sure when I am wealthy one day, I won't like it either. But there is a bigger issue here than likes or dislikes.

Without a middle class, America is stratified into the poor and the rich. The poor can't pay for much of anything; they are scraping by, and if they get desperate, crime becomes rampant. Meanwhile, the rich hide out in gated communities. Future USA? Anyone ever seen the TV series Dark Angel? That is the future we are headed for, and it won't take an EMP to get us there at this rate.

I don't like many things that government does. And it absolutely needs to figure out how to balance its budgets like households and businesses do. But the squeeze that government is in now is only partly due to overspending, but also in large part due to constant reductions in taxes due to the "taxes are bad" mantra. Is it any coincidence that the greatest deficits in our country's history started under the Republican Ronald Reagan, and got far worse under the Republican George Bush? People here complain about Obama as if he is some out of control spender. But Obama didn't get us in this mess, and I sure wouldn't want to be in his position right now to try to get us out.

We all want something for free, don't we?

Here's a simple, local example. Everyone is up in arms about their property tax increases in our county. So the commissioners said they would close one of the branch libraries. Well, a bunch of people don't want the library closed, and so now we're back to square one. Either we pay for the service we use, or we don't pay for the service and it goes away. That bit of very basic mathematics seems lost on most people nowadays.

And how does what we pay for get arbitrated? Elections. Those elections rely on a functioning democracy. A functioning democracy relies on an educated populace. Is our populace educated? Not if you compare our kids test scores to those around the world. We are falling way behind, and No Child Left Behind left many more children behind. Oh, wait, it costs money to do a good job of educating kids. I know several teachers who retired very early (in 30's and 40's) to find alternative careers with more respect and comparable or better pay. Hey, all the smart people I know work at the University or at companies, because a teaching job pays so poorly. I sure as H*ll wouldn't take a teaching job, though I love educating and think it is important. But as long as the populace is convinced that teachers are being "paid too much" due to the evil teachers unions, you can fuggedaboutit. Why spend 6 years getting a master's degree to earn under $30k, when I could get an MBA and earn twice as much? Oh yeah, producing business majors is a "more important societal function" than teaching our kids. Those MBA's sure have done a fine job running America's healthy companies and economy. They are a fine example of our free market at work. We got a free market in toxic assets, banking oligarchs, wall street run amok, low taxes, government debt, and now states collapsing.

You can complain about welfare moms and their likes to try to change the subject. The welfare moms aren't the problem. The problem is that the rich are accumulating ever more, and the poor population is growing. There will be more welfare moms as all those jobs at McDonalds and WalMart disappear (because nobody will be able to afford to eat or shop there as the dollar weakens and Chinese imports get more expensive).

Is this the America of your libertarian ideals? An America fully stratified between rich and poor (with the rich being only those who are accepted into the club by dint of rearing or malfeasance)? An America that cares not about a great education for all its citizens? This is an America that is far from its Founders ideals.

So California collapses, and soon to follow may be many other states. It's not like people like me (who happens to work at a State University) do anything anyway. I don't work 80 hour weeks researching how our genomes work to figure out cures for problems like cancer. I don't spend countless hours writing grant proposals to get support for research on antibiotic resistant bacteria (that will soon be coming to an open flesh wound near you). And of course I don't spend any late nights or early mornings preparing classes to train the next generation of young scientists in the latest techniques. No, I just sit around all day reading libertarian rants on iTulip about how this is all caused by bad, evil government, and that Grover Norquist was right, we need to drown it in the bathtub. We might as well drown ourselves too, it would be a more quick and pleasant death than the hellhole that our country is going to become if this continues.

I figure that by sitting around doing nothing, I am helping collapse the system more quickly, because all government is bad, and who needs new antibiotics anyway? (For humor impaired, here's a hint: finding solutions to problems like antibiotic resistant bacteria and cancer is EXPENSIVE and takes many years. It ain't gonna happen by private enterprise, sorry).

California started taking on debt big time when Prop 13 was passed. I am all for moving away from regressive property taxes and to something more progressive. But taking away a tax base, then expecting the services to continue (e.g. what used to be one of the best State University systems) is a case of faulty thinking, led by the neocons who convinced everyone that "taxes are bad". A while back, someone posted here the debts that Cali has racked up, and it is no coincidence that those debts got going in the late 70's. You can't have a world-class university system, AND low taxes, at the same time. Those are not compatible goals. Pick one. I know which one I'd pick. But hey, I'm biased, because I happen to think that people should still value things like longer lifespans due to the research and learning that comes out of our Universities. But hey, if you pick low taxes, that's fine. We might as well revert back to bloodletting with leeches to solve all our diseases. That was an effective cure, right?

We, the people of the US, have let our government get out of control. But that is not an equal statement to "government is bad". Yet many seem confused by the simple difference. The difference is that government can and must play a role in a properly functioning system of commerce. Government becomes "bad" when it increasingly responds only to wealthy oligarchs who've convinced us that all taxes are bad and that government should be drowned in the bathtub (because once government is gone, nobody will stand in between the Oligarch and the rest of us). It becomes bad when the populace asks for services they don't want to pay for, and the politicians don't have the guts to raise taxes (because the Bullhorn controlled by the rich has propagandized so effectively on that point). It becomes bad when it puts its nose in private affairs, like what goes on in one's bedroom. But it is not inherently bad. The alternative to government is anarchy.

I see a lot of posts around here about how "American Labor is too expensive". It is unbelievable that so-called patriotic Americans are saying that. Our labor is not expensive - labor in other "developing" nations is cheap. And labor there is cheap because they work around the clock, there is no worker's safety, there is no worker's protection. I've seen it firsthand. We went through that same phase, it was called the Gilded Age. Kids working in factories and all that. The only way we will get labor as cheap as in China is to implement the same labor practices they implement in China. Is that what we want? Or perhaps a better goal would be to try to help raise the standards in places like that to match our standards (by, e.g., taxing imports based on how workers are treated). Oh, no, they decry, that would be government interference in Business! Liberty of the business owner to abuse his employees or ship his jobs to somewhere else is paramount! Damn the long term costs, we want maximal profit NOW.

You want to know what is wrong with California and America? Hint: it is not government. It is the lack of any type of long-term thinking whatsoever on the part of the populace, companies, AND politicians. Give us our quick fix now and forget about the future.

Well, the future is here, and there is H*ll to pay.

[flintlock]

Re: this just in - hard STOP in CA

I agree there's plenty of blame to go around. But if you think a society can go on indefinitely with fewer and fewer productive citizens and more and more on the dole, then vote for more government. Government will take as much as you allow it to take. It is insatiable. The very process of giving the unproductive a free ride only encourages more of the same. And by free loaders I include a lot of government workers in make-work jobs, some unions, any other hack who can't make it on their own without using the power of the state to stick a gun in my face and take forcibly what I have earned honestly in order to pay them. :eek: The question isn't about whether government is necessary, its the size of government. As it stands now, a huge portion of its reason for existence is to provide "jobs" to otherwise unnecessary people.

[mfyahya]

Re: this just in - hard STOP in CA

In part, yes. We really were seeing deflationary depressions in the late 1800's because of a shortage of money. This was especially a problem in America, which was growing rapidly.

If there is a shortage of gold backed money, why can't the supply of money be augmented by using silver backed money as well. Or money based on any other commodity that also has intrinsic value such as copper, food grain etc?

[ThePythonicCow]

Re: this just in - hard STOP in CA

Oh, I think we know very well how to prevent bubbles, ...

In theory, perhaps. But not in practice.

[ThePythonicCow]

Re: this just in - hard STOP in CA

If there is a shortage of gold backed money, why can't the supply of money be augmented by using silver backed money as well.

It can be, and frequently has been. Both gold and silver backed US Dollars in various ways at various times. The basic problems and the basic opportunities for increasing corruption remain and eventually dominate.

[jwonks]

Re: this just in - hard STOP in CA

http://www.miamiherald.com/news/poli...y/1084527.html

SACRAMENTO — Gov. Arnold Schwarzenegger on Friday disputed claims that illegal immigrants caused California's $24.3 billion deficit, while he praised their economic contributions and said he is "happy" they have access to services.
The Republican governor, answering wide-ranging questions from The Bee's editorial board and its readers, also vented about roadblocks to his authority posed by political foes and warned that government can't sustain the current level of "unbelievable benefits" for public-sector workers.
In response to dozens of questions from readers who say the state ought to wipe out the deficit by eliminating services for illegal immigrants, the governor said it is a "myth" that those immigrants are to blame.
He said the cost of services to illegal immigrants, which has been estimated at $4 billion to $5 billion annually, is a "small percentage" of the deficit California faces.

Cutting government services for all legal citizens in order to continue to, among other things, pay government services for illegals in the billions. Wow. Even "Socialist" countries like Canada, Sweden and Spain don't do this. You have to have some king of legal status to be eligible for benefits in those countries. And let's not even talk about the hoops you have to jump through to have permanent or even temporary residency or be able to work there.

I also find unbelievable how Ahnuld can describe these expenses as "small" when taxpayer funded services to illegals--if we take the 5 billion at face value--make up over 20% of said budget shortfall in California.

California still has a long way to go in "terminating" costs. Continuing to providing health care, education, welfare and other services to illegal immigrants in the excess of billions, especially when you're experiencing a 25 billion budget shortfall and as a result are cutting the health care, education and welfare services of all legal residents/citizens is a grave issue all Californians have to question.

[mcgurme]

Re: this just in - hard STOP in CA

But if you think a society can go on indefinitely with fewer and fewer productive citizens and more and more on the dole, then vote for more government.

Funny thing that. I don't recall saying that having more and more people on the dole was a good thing. I do recall saying that it was a consequence of the destruction of the middle class (and not a good nor sustainable consequence).

So, no, I don't think that "a society can go on indefinitely with fewer and fewer productive citizens and more and more on the dole"

I just don't think that government is the underlying problem.