Tracking future inflation: Today's careless government spending is tomorrow's inflation

[FRED]

Thread to track sources of future inflation as government spending substitutes for–and competes with–the private sector to boost demand.

Governors Call for Federal Rescue Package for States
October 29, 2008 (NYTimes by JEREMY W. PETERS)

WASHINGTON — Governors David A. Paterson of New York and Jon S. Corzine of New Jersey added their voices to the growing support for a second federal economic stimulus package, saying that state governments will face devastating cutbacks if they do not receive assistance soon.

“We are cutting all we can,” Mr. Paterson told the House Ways and Means Committee. “Therefore, we feel that targeted, sensible actions by the federal government will provide relief for us now.”

Speaking to the House Transportation and Infrastructure Committee, Mr. Corzine implored, “We need federal help to get through these tough times.”

AntiSpin: Here we are at the top of the 1st inning (year) of a nine (inning) year game of sub-par growth punctuated with severe recessions and already all hands are out.

"Cutting all we can" means reducing all expenditures that, if not fulfilled, will result in the election of other than the representative than the one appealing to the federal government for money.

Free advice for politicians: this is not a contest among those who can appeal the most the fastest. This will go on for years and years and years.

All of the purchasing power that we here in the USA thought we had, produced by Wall Street's amazing perpetual motion machine of credit creation, is gone.

Now is the time to position yourself for the future.

Use the following test to vet any new spending requests from your town or city or state from here on out: Will the spending you are requesting make the USA more globally competitive?

If the answer is "no" with respect to return on investment then the answer is "no" to additional spending.

From here on out it's all about ROI.

[pwcmba]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

Fantastic diagram - thanks for the laughs!

[ST]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

Pony Up, America: New Stimulus Package Puts Billions Towards Transportation
By Dave Demerjian
October 29, 2008

Hank Paulson and Ben Bernanke have been racking their brains for something that might give the U.S. economy a bump. Their next try might be good for the nation's transportation system — but it's not going to be cheap.

Bernake is throwing his support behind a gigantic stimulus package that House Speaker Nancy Pelosi and other congressional Democrats are pushing through Congress. If it were to become reality in its current form, it would significantly boost spending on roads, bridges and other public works projects: like a giant toll that everyone in the country has to pay.

The stimulus plan, which would be the second this year, would cost between $150 billion and $300 billion. In addition to allocating funds for traditional infrastructure spending, lawmakers are also considering provisions that would give families and businesses tax credits for investing in green projects like wind and solar.

-continued here-

[SeanO]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

Eric - you never continue to amaze me. It was YEARS ago that you said that the way government would try to get us out of this mess was a new deal type of investment in infrastructure and alt energy.

[labasta]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

Eric - you never continue to amaze me. It was YEARS ago that you said that the way government would try to get us out of this mess was a new deal type of investment in infrastructure and alt energy.

I love the diagrams too. Classic.

So, maybe the only difference between the next "bubble" will be how it is financed. It'll be financed by government spending rather than the FIRE econ, as the gov. is the only engine left standing.

Will this bubble produce econ positive results within the next 10 years or will the econ be shit until the the bubble finally drags us all out? Depends on the politicos I guess.

The ROI is a great idea for politicians. It really puts it in a nutshell. I like that a lot. No froth, just straight to it. Can you please email your politicos this.

On a side note, Brian Cowen (Irish leader) was on the main chat show in Ireland in August. The presenter asked him about the builders being out of work. He replied with a casual and very relaxed smile that they will be fitting out houses with green economy things like solar heaters and insulation and such like in the coming years. And that was the end of that.
I don't think they foresaw the collapse of the FIRE economy (not even Eric did as I recall) which has really taken them by surprise. (Irish banks are insolvent, especially Anglo Irish). I think they believed that the transition from one bubble to another would be smooth, instead we go into unknown territory.

No relaxed smile now then eh Brian?

[grapejelly]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

i don't think there will be another bubble...

there won't be the mechanisms for credit supply and demand to inflate one.

I believe Eric said the same thing recently in the German publication...

[phirang]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

There will be a bad-ideas bubble...

[ST]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

i don't think there will be another bubble...

there won't be the mechanisms for credit supply and demand to inflate one.

I believe Eric said the same thing recently in the German publication...

Personally, I think once the credit system functions again there will be another bubble - it will take a while to form a boom then bubble.

The government can always supply credit if necessary and they will certainly and are already providing incentives for corporations to get on board - everyone loves a good boom. But, this is long term, it will take time.

The U.S. has to find something to offer the world in lieu of finance. Alt. energy technology seems a prime candidate especially if they can get over immigration xenophobia and attract engineers again. If the credit isn't there, the gov't can provide it.... if the demand isn't there the gov't can provide it.

Remember when POOM comes I am assuming oil prices zoom and other currencies also devalue to keep trade going. Therefore, high oil will spurn great demand for alt. energy. And as far as infrastructure, well if you live in NYC like I do, you know the infrastructure is falling apart and has been for a long time.

Devalue the dollar, come up with the best technology enterprise can summon and voila, you have in demand US goods and incentives implemented for the making of another bubble to distract everyone of our problems and wild expenditures.

[bill]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

Personally,
The government can always supply credit if necessary and they will certainly and are already providing incentives for corporations to get on board - everyone loves a good boom. But, this is long term, it will take time.

The U.S. has to find something to offer the world in lieu of finance.

"REAL ASSETS"
It will take new asset ownership and tax incentives.
http://www.ey.com/global/content.nsf...Infrastructure

or we go japan:
http://www.csis.org/component/option...,view/id,1828/

[grapejelly]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

Personally, I think once the credit system functions again there will be another bubble - it will take a while to form a boom then bubble.

The government can always supply credit if necessary and they will certainly and are already providing incentives for corporations to get on board - everyone loves a good boom. But, this is long term, it will take time.

The U.S. has to find something to offer the world in lieu of finance. Alt. energy technology seems a prime candidate especially if they can get over immigration xenophobia and attract engineers again. If the credit isn't there, the gov't can provide it.... if the demand isn't there the gov't can provide it.

Remember when POOM comes I am assuming oil prices zoom and other currencies also devalue to keep trade going. Therefore, high oil will spurn great demand for alt. energy. And as far as infrastructure, well if you live in NYC like I do, you know the infrastructure is falling apart and has been for a long time.

Devalue the dollar, come up with the best technology enterprise can summon and voila, you have in demand US goods and incentives implemented for the making of another bubble to distract everyone of our problems and wild expenditures.

No there won't be another bubble.

Let me give you an analogous situation.

Interest rates had been rising for many, many, many years. Inflation as far as the eye could see. Precious metals at all time highs.

But rather than continue that way, they had turned. A secular bull in bonds had formed. That was 1980-1982, and if you hadn't noticed the change in the trend, you were toast, basically.

There are inflection points. This is one of them. The USD and the US deficits and the US bloodsucking empire is not going to last. This is the end of all that. It will take 2 or 3 years to play out.

Because the next move is very high long rates...runaway currency depreciation...and falling time preferences...I don't see how there will be the finance or the optimism to permit bubbles to form in that case.

Look at it another way...the amount of debt it takes to product another dollar of GDP...5 bucks now...up from 3...next few years it's 20 or 50...you see, there are asymptotic limits.

[Shakespear]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

roads, bridges and other public works projects

The US needs a better mass transit system and more energy efficiency projects. NOT ROADS !!!!

[hoodoo]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

From here on out it's all about ROI.

This last statement becomes quite an interesting one in relationship to the collapse we see all around us.

First, it seems to me that we've got a couple of generations that have learned to calculate ROI from completely incorrect premesis. My assumption is that there will be a long lag as government and business shed their former ideas about finanace and the economy.

Second, the battles are going to be terrible - especially when consideration of ROI plays a minor role in highly emotional issues. Yesterday, Gov. Schwarzenegger called an emergency meeting yesterday and indicated that massive spending cuts are in the pipeline. 2-4 billion are expected to be cut from education and law enforcement this fiscal year. Who's gonna get hammered on that one - the kids or the crooks? ROI isn't part of that discussion at all...

Hoo

[D-Mack]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

Yesterday, Gov. Schwarzenegger called an emergency meeting yesterday and indicated that massive spending cuts are in the pipeline. 2-4 billion are expected to be cut from education and law enforcement this fiscal year. Who's gonna get hammered on that one - the kids or the crooks? ROI isn't part of that discussion at all...

Hoo

The good old Austrian economics......

[GRG55]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

There will be a bad-ideas bubble...

Can hardly wait to trade the associated ETNs...;)

[metalman]

Re: Tracking future inflation: Today's careless government spending is tomorrow's inflation

There will be a bad-ideas bubble...

will be? what do you call the string of crap pouring out of the fed, treasury, and congress for the past year? you think the bad idea bubble can get bigger?