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Paul Kasriel is always worth reading. I don't necessarily always agree, but like EJ and iTulip, the data he presents is worthwhile.
http://web-xp2a-pws.ntrs.com/content...ent/us1208.pdf
Some excerpts: (underline emphasis mine)
All of which brings us to back to the current economic environment. In the two months ended November, commodity prices have fallen by 10.0%. Prior to this, the largest decline was 9.7% in the two months ended March 1921 (see Chart 6). During the 1930s, the largest decline in commodity prices was only 5.2% in the two months ended July 1930.
So, are we likely to see persistent declining prices for commodities, goods and services in the next couple of years? Not if the Fed has anything to do with it. The rate at which the Fed has been increasing bank reserves is ten times that at which it was doing so in 1934.
As Chart 7 shows, the year-over-year increase in bank reserves was 603.6% in November 2008. The Fed’s seasonally-adjusted net acquisition of assets – primarily securities, commercial paper and loans to financial institutions – represented 100% of the seasonally-adjusted total borrowing by the U.S. nonfinancial sector in the third quarter of 2008 (see Chart 8). Talk about monetizing debt!
The incoming Obama administration is reported to be busy planning a two-year increased government spending program – spending on goods and services, above what will be spent on replacing "depreciated" financial capital – perhaps as much as $1 trillion. As Chart 9 shows, total government spending on goods and services – federal, state and local – was 19.4% in 2007. The highest this ratio was during the 1930s was 16.1% in 1939. Let’s assume that nominal total government spending on goods and services in 2009 is $500 billion over its average for the first three quarters of 2008 ($2,871.9 billion). That would put nominal total government spending at $3,371.9 billion for 2009. Let’s also assume that 2009 nominal GDP is the same as its average over the first three quarters of 2008, or $14,288.6 billion. (We think there is a good chance that nominal GDP could decrease in 2009, which has not happened since 1949.) With these assumptions, the ratio of nominal total government expenditures to nominal GDP would rise 23.6% in 2009 – considerably higher than it was during Roosevelt’s New Deal era, slightly higher than Johnson’s Great Society era and the highest since 1953.
http://web-xp2a-pws.ntrs.com/content...ent/us1208.pdf
Some excerpts: (underline emphasis mine)
All of which brings us to back to the current economic environment. In the two months ended November, commodity prices have fallen by 10.0%. Prior to this, the largest decline was 9.7% in the two months ended March 1921 (see Chart 6). During the 1930s, the largest decline in commodity prices was only 5.2% in the two months ended July 1930.
So, are we likely to see persistent declining prices for commodities, goods and services in the next couple of years? Not if the Fed has anything to do with it. The rate at which the Fed has been increasing bank reserves is ten times that at which it was doing so in 1934.
As Chart 7 shows, the year-over-year increase in bank reserves was 603.6% in November 2008. The Fed’s seasonally-adjusted net acquisition of assets – primarily securities, commercial paper and loans to financial institutions – represented 100% of the seasonally-adjusted total borrowing by the U.S. nonfinancial sector in the third quarter of 2008 (see Chart 8). Talk about monetizing debt!
The incoming Obama administration is reported to be busy planning a two-year increased government spending program – spending on goods and services, above what will be spent on replacing "depreciated" financial capital – perhaps as much as $1 trillion. As Chart 9 shows, total government spending on goods and services – federal, state and local – was 19.4% in 2007. The highest this ratio was during the 1930s was 16.1% in 1939. Let’s assume that nominal total government spending on goods and services in 2009 is $500 billion over its average for the first three quarters of 2008 ($2,871.9 billion). That would put nominal total government spending at $3,371.9 billion for 2009. Let’s also assume that 2009 nominal GDP is the same as its average over the first three quarters of 2008, or $14,288.6 billion. (We think there is a good chance that nominal GDP could decrease in 2009, which has not happened since 1949.) With these assumptions, the ratio of nominal total government expenditures to nominal GDP would rise 23.6% in 2009 – considerably higher than it was during Roosevelt’s New Deal era, slightly higher than Johnson’s Great Society era and the highest since 1953.
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