I see deflation everywhere..

[blazespinnaker]

http://noir.bloomberg.com/apps/news?...TL4TgM1Q&pos=9

Schwarzenegger Minimum-Wage Plan Legal, Court Rules (Update1)

A California court ruled that state Controller John Chiang must comply with an order by Governor Arnold Schwarzenegger to slash the pay of almost 200,000 state workers to minimum wage until a budget is passed.

What I think we should do:

Cut spending dramatically (similar to what Arnold is doing), cut taxes dramatically, and charge banks interest when they don't loan out money.

Everyone should be forced find jobs but should be lent money at zero interest rates. Hopefully banks realizing they have to lend out money would start finding innovative ways to lend out money and make sure they get a return on it.

For example, they could set up accountants that you have to use when your borrow money to make sure you're not defrauding the banks.

I believe in Keynesian, but not via government spending.

[Ghent12]

Re: I see deflation everywhere..

I don't agree with your plan at all! If burdensome debt is considered a problem, how can any meaningful solution involve more debt?

[jtabeb]

Re: I see deflation everywhere..

B-i-n-g-o!

[c1ue]

Re: I see deflation everywhere..

I don't agree with your plan at all! If burdensome debt is considered a problem, how can any meaningful solution involve more debt?

Ditto.

And more importantly, if I can borrow money for 0% interest - do you think I'll spend it wisely?

[blazespinnaker]

Re: I see deflation everywhere..

Debt isn't so burdensome at 0% interest. I don't think business debt is the problem as much as government spending.

We need to get rid of government employees and taxes. They're causing more problems then they're solving. I agree to clever government RULES, I just don't agree to government EMPLOYEEs.

Government employees and over taxation damage the economy. Rules do not. Rules protect people, improve standard of living, close the gap between the rich and the poor, and a lot of other great things.


C1ue has the best point .. but I suggest need more innovative ways to ensure that people are borrowing wisely. Wouldn't you rather that small local banks and small business owners try to figure this out rather than the government?

The fact is.. we've seen this tune before during the great depression. Unless we want things to get worse or stay bad we need to do things differently than just austerity.

Austerity just leads to deflation which leads to more deflation which leads to a downward spiral and potentially war as people get so damn unhappy.

I agree though that we might not want to be too enthusiastic about consumer / credit card debt. We can leave the interest rate on that stuff alone.

[blazespinnaker]

Re: I see deflation everywhere..

Basically all the banks in the USA need to become venture capitalists / angel investors and they need to given the liquidity to do so very very cheaply.

On top of that, we need to cut taxes and then government spending very very hard.

[we_are_toast]

Re: I see deflation everywhere..

Basically all the banks in the USA need to become venture capitalists / angel investors and they need to given the liquidity to do so very very cheaply.

On top of that, we need to cut taxes and then government spending very very hard.

Before you even start talking about cutting taxes, tell me where you'll cut $1.2 Trillion from this;



By the way, many would argue the huge tax cuts of the 80's and 2000's got us into this mess in the 1st place.

[marvenger]

Re: I see deflation everywhere..

So you're a supply sider. I think theres a supply and a demand story and right now there's already overcapacity, what you need to do increase is demand. I vouch for debt forgiveness to do this, but obviously those in power don't. And that's just considering the economic situation, not the environmental.....we have a lot of problems. Unintended consequences of markets too.

[lsa420]

Re: I see deflation everywhere..

I will submit yet again that the best possible "stimulus" for the economy would be a dramatic reduction in government spending. Why? Because every penny the government spends is either taxed or borrowed. In the case of taxes, that is money sucked directly out of the private sector today. Not good for the private sector. In the case of borrowed money, that is money sucked out of the private economy in the future....with interest. Also not good. So how is government spending a good thing? It's not like they spend our money wisely. Unless you consider blowing up and rebuilding Baghdad a wise use of your tax money.

The US federal budget in 2000 was $1.8T. In 2010, the US federal budget is $3.8T. We have increased the size of government by $2T in 10 years!!

And what do we have to show for nearly doubling the size of government? I pose several questions.

What was the price of gold in 2000? What was the price of oil in 2000? What was the value of the Nasdaq in 2000? What was unemployment rate in 2000? What was the value of the Dollar Index in 2000? How many wars were we fighting in 2000? What was our budget deficit in 2000? And how about these same questions in 2010??

There is absolutely a correlation between the massive growth in government, and the destruction of our economy and possibly country. Government chokes the private sector of capital, resources and credit. Regulations inhibit investment, production and savings. To me it is entirely too clear that government is the cause of ALL of our ails, and the only cure is to shrink its size drastically.

[blazespinnaker]

Re: I see deflation everywhere..

I will submit yet again that the best possible "stimulus" for the economy would be a dramatic reduction in government spending.

I totally agree with this and it is precisely what I am saying. Governments are OK for generating rules but they suck at spending money.

And their ability to create rules get WORSE the bigger they get because they start thinking that private enterprises should just act like mini governments.

HOWEVER .. as marvenge said the problem is over capacity in areas that are *not* in demand.

Our economy needs to become radically restructured. The way to do that is to turn every bank into a VC company that can loan out all money at 0%.

I do NOT agree with debt forgiveness .. that would be a crime of the first order. I do believe however in turning everyone's debt repayment into 0% interest rates Or at least the ones that are on variable rates at the very least..

[Starving Steve]

Re: I see deflation everywhere..

LOWER THE DARN PRICES OF EVERYTHING, and I would be darn happy with the current economic mess. In fact, I would respect Bernanke, Treshet, Marc Carney, and the other central bankers in this world.

But to let prices rise while I earn nothing and starve makes me very upset, to put it mildly. This mess is far worse than any mess in the 1930s, and that is not hyperbole. That is fact.

[lsa420]

Re: I see deflation everywhere..

I totally agree with this and it is precisely what I am saying. Governments are OK for generating rules but they suck at spending money.

And their ability to create rules get WORSE the bigger they get because they start thinking that private enterprises should just act like mini governments.

HOWEVER .. as marvenge said the problem is over capacity in areas that are *not* in demand.

Our economy needs to become radically restructured. The way to do that is to turn every bank into a VC company that can loan out all money at 0%.

I do NOT agree with debt forgiveness .. that would be a crime of the first order. I do believe however in turning everyone's debt repayment into 0% interest rates Or at least the ones that are on variable rates at the very least..

I honestly think that the most important thing that we as a nation could do, and the ONLY thing that the government should be promoting, is to rebuild our savings. The paradox of thrift/savings is a total farce! All good things economic come from savings. Ample savings allow low interest rates. "Credit" also comes from savings, and until we have ample savings, we will never have enough "credit" for the private sector, ie, banks loaning money to businesses for investment. That and the Federal government is borrowing a couple $Trillion every year from the private markets. I wonder why small businesses can't get any loans? It's because we have been crowded out by a bloated and inefficient government.

So while this will be entirely antithetical to what you have suggested, blaze, the solution in my opinion is for interest rates to rise dramatically so that we actually have an incentive to save money. This is probably impossible as it would crash the economy and cause a run on the dollar as the interest on our debt would go through the roof among other things which EJ talked about in some of the Argentina posts.

If, however, we had the large decrease in government spending and started paying down debt, then we would be able to raise interest rates and rebuild our savings as a nation. That is the economic boost we need. The economy would restructure rapidly I think, if the government would just get the hell out of the way.

[Jay]

Re: I see deflation everywhere..

http://noir.bloomberg.com/apps/news?...TL4TgM1Q&pos=9

Schwarzenegger Minimum-Wage Plan Legal, Court Rules (Update1)



What I think we should do:

Cut spending dramatically (similar to what Arnold is doing), cut taxes dramatically, and charge banks interest when they don't loan out money.

Everyone should be forced find jobs but should be lent money at zero interest rates. Hopefully banks realizing they have to lend out money would start finding innovative ways to lend out money and make sure they get a return on it.

For example, they could set up accountants that you have to use when your borrow money to make sure you're not defrauding the banks.

I believe in Keynesian, but not via government spending.

The most important point is not whether at this juncture public or what has become of private finance is better. You can run around in circles until you are blue trying to sort it out. The most important issue is that both public and private finance are THE SAME BEAST! Debt has created a massive top heavy monopoly structure with finance on one hand and government on the other. They both shake each others hands. Every one else is on the outside looking in! There is no room for VC. There is no room for anyone but the very few and they are not interested in competition, they are interested in setting up the largest barrier possible to keep their massive wealth from the rest of the world... from you and me. And the economy will not start again until the apple cart is kicked. This is a one way street until things get messy. Those that have that advantage of debt generation will ride it into the sunset; what ever that sunset may be. And it doesn't look good from my chair, apple cart spilt or upright.

The nature of compound interest makes wealth consolidation an eventuality until you have confrontation or jubilee.

[blazespinnaker]

Re: I see deflation everywhere..

Raising interest rates leads to less economic activity, more over capacity, more layoffs and unemployment, which leads to less consumption and economic activity, which leads to even MORE over capacity which leads to MORE unemployment which leads to ..

Deflationary Spiral.

The mass unemployment at the end of all that will lead to mass unrest which will lead to war.

The key to breaking the back of this is Reaganomics++. Cut taxes super hard but also cut government spending, cushion it with negative interest rates at least for business loans.

Specifically, what I'd do, is get rid of income tax totally (or at least massive cuts to it) and slowly replace it with carbon taxes and consumption taxes.

[lsa420]

Re: I see deflation everywhere..

Raising interest rates leads to less economic activity, more over capacity, more layoffs and unemployment, which leads to less consumption and economic activity, which leads to even MORE over capacity which leads to MORE unemployment which leads to ..

Deflationary Spiral.

The mass unemployment at the end of all this will lead to mass unrest which will lead to war.

This did not happen in 1920, when the government got out of the way and followed the path of the "liquidationists". Why no deflation spiral? (P.S. We were on a gold standard)

http://mises.org/daily/3788