$127 Trillion in Unfunded Liabilities? Maybe... Maybe Not

[Ad Orientem]

http://www.washingtonpost.com/blogs/fac ... abilities/

[Libertarian666]

http://www.washingtonpost.com/blogs/fac ... abilities/

There's no problem, as they can just refuse to pay when the liabilities come due!

[Kshartle]

http://www.washingtonpost.com/blogs/fac ... abilities/

There's no problem, as they can just refuse to pay when the liabilities come due!

The problem will be all the distortion in production and consumption patterns made by people who believed in the fairy tale promises. They never saved....and many have been stolen from and it's been hard for them to save because of the theft. All the violence has screwed it all up.

The government created the poverty problem and it sure as hell isn't going to be able to solve it.

[moda0306]

Let's be honest here, on a macro-level, these liabilities aren't "funded" by securities "saved" by the government, but by the productivity currently ("currently" meaning at that time, not today... 10/23/2013) happening by the working-age Americans.

Without that productivity, no pieces of paper, whether a stock or a bond or a treausury, or even GOLD itself, would be able to "fund" the retirement and healthcare of our seniors.

This goes back to my assertion that our financial assets, wether there's an offsetting liability in the private sector (loan from bank to borrower), or no such liability (cash, t-bills), is just the lubrication that helps real value get produced.

I don't worry about "funds" for these liabilities, I worry about there being enough motivated, smart, productive, young people to provide for both themselves, and the safety net for the elderly.

The problem is, inducing a depression/recession today with higher taxes or lower spending isn't going to help those young people be more motivated, smart or productive, just as it didn't when the government "fixed" Social Security in the 1980's.

[Kshartle]

The problem is, inducing a depression/recession today with higher taxes or lower spending isn't going to help those young people be more motivated, smart or productive, just as it didn't when the government "fixed" Social Security in the 1980's.

How does higher government spending motivate them? Where does the money come from to spend? What do you think the government spends on? Handouts. This is not motivating.

People don't need additional motivation from government to produce. The slaves would have produced a lot more if they could have kept the value of their labor rather than have it taken. They only needed whips to motivate them because it was all getting stolen. They were not very productive. As government (massa) grows, the slaves are getting less motivated.

Pushing around paper in a bureaucrat government job does not help the economy one drop.

[moda0306]

The problem is, inducing a depression/recession today with higher taxes or lower spending isn't going to help those young people be more motivated, smart or productive, just as it didn't when the government "fixed" Social Security in the 1980's.

How does higher government spending motivate them? Where does the money come from to spend? What do you think the government spends on? Handouts. This is not motivating.

People don't need additional motivation from government to produce. The slaves would have produced a lot more if they could have kept the value of their labor rather than have it taken. They only needed whips to motivate them because it was all getting stolen. They were not very productive. As government (massa) grows, the slaves are getting less motivated.

Pushing around paper in a bureaucrat government job does not help the economy one drop.

Notice I mentioned raising taxes too... which was the "solution" to the SS problem in the 1980's. Just to be clear, I'm not a raging communist that hates the rich and business .

The slaves were productive enough for the South to secede at the cost of a war.  http://sunsite.utk.edu/civil-war/reasons.html

Even if we're talking spending on "handouts" rather than infastructure, it drives demand, which is the ONLY thing that's going to drive investment in the current environment.

We have a demand shortage.  No tax cut or reg cut is going to make a business man hire if there's not enough demand for him to project needing to hire more people to meet said demand.

Our problem isn't the ability to produce, but the inclination to naturally demand productive capacity, given the quantity of nominal financial assets and liabilities on our balance sheets.


But this is neither here nor their.  "Funds" don't "fund" those liabilties.  Productive capacity does.  Whether you prefer tax cuts or stimulus spending is a different debate.

[Pointedstick]

Food for thought: if we have a demand shortage, maybe that presages a deeper problem in our society that we can't just paper over with demand-goosing cash handouts or infrastructure projects. If that demand can only exist when government gives people the monetary means to express it, maybe it was never really there to begin with.

Not to say that a lack of demand means that everybody's satisfied. But what if there's a lack of demand for what we're actually producing because we're slipping into poverty and our advanced economy has been optimized to produce luxury goods?

[moda0306]

PS,

I've thought of that for a while now.  Is a lack of demand due to structural mistakes about what our productive capacity is geared for, or is it due to a financial crisis and problems with a debt-based, monetized economy with (temporarily) too few financial assets to service debts, maintain a healthy balance-sheet, and demand what we have the capacity to produce.

Paul Krugman makes a good point when he explains that if this was just about housing, or over-consumption of X vs Y, then we wouldn't have such a devastating ripple-effect through other areas of the economy.  It's not just about us consuming different things, and there being an adjustment, it's about a problem with the nominal financial status of the country.

[Kshartle]

Food for thought: if we have a demand shortage, maybe that presages a deeper problem in our society that we can't just paper over with demand-goosing cash handouts or infrastructure projects. If that demand can only exist when government gives people the monetary means to express it, maybe it was never really there to begin with.

Not to say that a lack of demand means that everybody's satisfied. But what if there's a lack of demand for what we're actually producing because we're slipping into poverty and our advanced economy has been optimized to produce luxury goods?

Everything is desired, but we can only demand what is produced or can be produced. We can't produce lots of things because the government cages you or shoots you if you try. In many cases it will do this if you can't afford the licenses and other pay-offs they demand. Many things aren't produced because after taxes and crushing regulations there is no way to profit.

Getting people to produce without being able to profit is slavery. Humans don't like it.

[moda0306]

Food for thought: if we have a demand shortage, maybe that presages a deeper problem in our society that we can't just paper over with demand-goosing cash handouts or infrastructure projects. If that demand can only exist when government gives people the monetary means to express it, maybe it was never really there to begin with.

Not to say that a lack of demand means that everybody's satisfied. But what if there's a lack of demand for what we're actually producing because we're slipping into poverty and our advanced economy has been optimized to produce luxury goods?

Everything is desired, but we can only demand what is produced or can be produced. We can't produce lots of things because the government cages you or shoots you if you try. In many cases it will do this if you can't afford the licenses and other pay-offs they demand. Many things aren't produced because after taxes and crushing regulations there is no way to profit.

Getting people to produce without being able to profit is slavery. Humans don't like it.

Desires are unlimited, unless desires can only be expressed (for the most part) by a given amount of currency.  Then you can put a cap on desires.

We can't produce lots of things?  Really?  We have a absolutely MASSIVE productive capacity, too much of which is being unused due to a Mexican Standoff caused by a monetized economy.

Things aren't being produced because there is inadequate demand.  This is evidenced by the fact that aggregate demand is down from what our productive capacity can produce.

Seriously, man.  This idea has been utterly disproven.  I mean look at the great depression... that wasn't a supply problem... it was a demand crisis!  We all had the same ability to produce, but went year after year with collapsing GDP, because our economy couldn't barter its way back to stability, and our debts stayed denominated in a fixed currency that people couldn't get there hands on.

If there is a supply problem anywhere... it's of our currency.

[Kshartle]

Food for thought: if we have a demand shortage, maybe that presages a deeper problem in our society that we can't just paper over with demand-goosing cash handouts or infrastructure projects. If that demand can only exist when government gives people the monetary means to express it, maybe it was never really there to begin with.

Not to say that a lack of demand means that everybody's satisfied. But what if there's a lack of demand for what we're actually producing because we're slipping into poverty and our advanced economy has been optimized to produce luxury goods?

Everything is desired, but we can only demand what is produced or can be produced. We can't produce lots of things because the government cages you or shoots you if you try. In many cases it will do this if you can't afford the licenses and other pay-offs they demand. Many things aren't produced because after taxes and crushing regulations there is no way to profit.

Getting people to produce without being able to profit is slavery. Humans don't like it.

Desires are unlimited, unless desires can only be expressed (for the most part) by a given amount of currency.  Then you can put a cap on desires.

We can't produce lots of things?  Really?  We have a absolutely MASSIVE productive capacity, too much of which is being unused due to a Mexican Standoff caused by a monetized economy.

Things aren't being produced because there is inadequate demand.  This is evidenced by the fact that aggregate demand is down from what our productive capacity can produce.

Seriously, man.  This idea has been utterly disproven.  I mean look at the great depression... that wasn't a supply problem... it was a demand crisis!  We all had the same ability to produce, but went year after year with collapsing GDP, because our economy couldn't barter its way back to stability, and our debts stayed denominated in a fixed currency that people couldn't get there hands on.

If there is a supply problem anywhere... it's of our currency.

Not being produced for lack of demand huh. Boy ohhh boy......we have been over and over and over again.....if 100 trillion was suddenly dumped on the country all that would happen is prices would go up.

If you could print a good economy there would never be any depression just massive prosperity, everywhere. There is nothing easier than to print slips of paper.

This is a fantasy that you can print a good economy. I don't mean this part offensively, I truly don't, but this is a belief like when you're a kid and you don't see what has to happen for food to get on the table and have all the good stuff your parents provide. Kids don't comprehend the cost and sacrifice and think that something can come from nothing.

Forget about mechanics, forget about all the Krugman, and MR and Austrian and everything else. Just think about this one concept.....printing slips of paper and that actually making humans produce more than would otherwise. Doesn't that seem insane? That printing slips of paper can somehow improve our lives? Do you truly believe this can happen? - sincere and honest question, no insult, no nothing other than trying to understand where you're coming from.

[Kshartle]

Food for thought: if we have a demand shortage, maybe that presages a deeper problem in our society that we can't just paper over with demand-goosing cash handouts or infrastructure projects. If that demand can only exist when government gives people the monetary means to express it, maybe it was never really there to begin with.

Not to say that a lack of demand means that everybody's satisfied. But what if there's a lack of demand for what we're actually producing because we're slipping into poverty and our advanced economy has been optimized to produce luxury goods?

Everything is desired, but we can only demand what is produced or can be produced. We can't produce lots of things because the government cages you or shoots you if you try. In many cases it will do this if you can't afford the licenses and other pay-offs they demand. Many things aren't produced because after taxes and crushing regulations there is no way to profit.

Getting people to produce without being able to profit is slavery. Humans don't like it.

Desires are unlimited, unless desires can only be expressed (for the most part) by a given amount of currency.  Then you can put a cap on desires.

We can't produce lots of things?  Really?  We have a absolutely MASSIVE productive capacity, too much of which is being unused due to a Mexican Standoff caused by a monetized economy.

Things aren't being produced because there is inadequate demand.  This is evidenced by the fact that aggregate demand is down from what our productive capacity can produce.

Seriously, man.  This idea has been utterly disproven.  I mean look at the great depression... that wasn't a supply problem... it was a demand crisis!  We all had the same ability to produce, but went year after year with collapsing GDP, because our economy couldn't barter its way back to stability, and our debts stayed denominated in a fixed currency that people couldn't get there hands on.

If there is a supply problem anywhere... it's of our currency.

You've said you think they should print more than it takes to get prices up 2% per year......you've said 3% is better if I remember. Honest and sincere question.....would 4% not be better than 3%?

[Kshartle]

Things aren't being produced because there is inadequate demand.  This is evidenced by the fact that aggregate demand is down from what our productive capacity can produce.

I personally have many ideas for businesses. To even attempt them requires so much research and start-up cost related due to government red-tape it's unbelievable. For millions of people it's the same. For millions more that can't work in trades because government requires them to buy liscenses they can't afford. For others the taxes they would have to pay eat up any hope of making enough to survive on with their business. For millions others they don't have the skills neccessary to meet the minimum compensation government requires them to be paid. For millions others they could never afford to comply with all the government agencies that will cage them if they don't.

Goes on and on and on.

The government is the constraint on productin.

It's also sucking up all the credit. There is a major lack of savings because people are pushed into over consumption by inflation, hence the government is turning to printing because it can't acution off enough of it's bonds to borrow at an interest rate it can afford (there are other reasons for this of course).

[Pointedstick]

I personally have many ideas for businesses. To even attempt them requires so much research and start-up cost related due to government red-tape it's unbelievable. For millions of people it's the same. For millions more that can't work in trades because government requires them to buy liscenses they can't afford. For others the taxes they would have to pay eat up any hope of making enough to survive on with their business. For millions others they don't have the skills neccessary to meet the minimum compensation government requires them to be paid. For millions others they could never afford to comply with all the government agencies that will cage them if they don't.

Goes on and on and on.

I used to think exactly like this. I know exactly how you feel.

A few years ago, I started a business. I didn't get a license. I didn't follow the rules. I felt like a rebel!

Then once day I got a scary letter from the government saying they had audited one of my suppliers and needed my business license number.

I freaked out. I've been caught, I thought. They're going to put me in a small box for the rest of my life! SWAT troopers are going to batter down my door and throw flashbangs into my apartment and shoot my dog and cause my pregnant wife to miscarry!

I was falling apart. My mind was going in overdrive imagining all the ways that agents of the state could destroy my life.

I called a lawyer and explained the situation. The lawyer laughed so hard. He told me to just get the license.

"If I apply for a business license now," I asked, "wouldn't that be admitting that I didn't have one before and had been illegally operating without a license?"

He explained that they didn't give a shit. That they really had no interest in jailing me unless I was doing something like embezzling millions of dollars. That they just wanted me to get the license and pay the taxes.

I went downtown to the government office. I applied for the license. It asked when I was planning to start my business. I explained to the bored bureaucrat lady that I had already started, so I couldn't answer truthfully. She gave me the most bored, uninterested look I've ever seen. "Just put today's date on it" she said. So I did. She approved the license right then and there. As the lawyer said, she didn't give a shit. She didn't want to put me in a cage. She just wanted the tax money.

The license was free, in the end. Not only that, the license allowed me to avoid paying sales tax on goods I resold to my customers. That was nice.

At the end of the year, I paid them the sales taxes I had collected from my customers and I paid the income taxes I owed. It was about 25% of my profit. But I still kept the other 75% of that profit. I was pissed that I had to give them 25%. But then I realized that if I'd let me fear stop me from starting and running that business, the 75% that I got to keep would never have been mine at all. In the end, it made more sense to keep operating the business despite the taxes. I still wound up wealthier than I would have been if I'd never tried.

[Pointedstick]

That's another way of saying, "start one of those businesses." The state doesn't want to shoot you. It just wants a cut of your profits. If you let your umbrage at this prevent you from starting that business, they'll never have that extra income to tax because you'll be no richer. You can't have 100% of the profits, sure. But 50-75% sure beats 0% because you were too afraid to do it at all.

[Kshartle]

That's another way of saying, "start one of those businesses." The state doesn't want to shoot you. It just wants a cut of your profits. If you let your umbrage at this prevent you from starting that business, they'll never have that extra income to tax because you'll be no richer. You can't have 100% of the profits, sure. But 50-75% sure beats 0% because you were too afraid to do it at all.

Ok guys, Kshartle's Marijuana Express is open for business!

My point was yes I can figure ways to make it work. But there are millions of people who aren't doing economically productive work because it's illegal or they can't make it profitable due to government costs. This a tremendous drag on productivity. No way to even come close to measuring how destructive.

[moda0306]

Kshartle,

What kind of work are we really talking about here?  And if it's so valuable, why not present your ideas to businesses that have already dealth with the compliance issues, or apply for an SBA loan and partner with someone willing to handle them?

Unless, of course, you're actually serious about the marijuana business.

[Kshartle]

Kshartle,

What kind of work are we really talking about here?  And if it's so valuable, why not present your ideas to businesses that have already dealth with the compliance issues, or apply for an SBA loan and partner with someone willing to handle them?

Unless, of course, you're actually serious about the marijuana business.

We're talking about tens of millions or more of humans who want to trade property or labor to make both parties better off and they can't do it. Let's not pretend it's about me.

Who knows.....I might be serious if I wasn't going to get thrown in a cage....I think that biz has potential. 

[moda0306]

Kshartle, I think that asking ourselves what is truly keeping us from being successful (per HB's advice) is a huge part of the issue for many Americans... or would be if we had the financial tools to generate proper demand .

What about the tens of millions of people with skills that are reduced to bartering with each other (or, more likely, sit unemployed) because we don't have enough money in our economy for us to trade amongst each other adequately and pay down our debts.

You realize that unemployment isn't possible in a barter economy, right?  A monetized/debt-based economy results in structural issues when the economy adjusts that simply don't occur in a barter system.  In a barter system, if I malinvest, my "debts" are denominated in stuff and labor.  That means I can just simply work off my debts.  That doesn't really work so well in monetary economies, where only one thing can extinguish almost all debts in an economy.  This means the butcher, the baker, and the candle-stick maker, all with valuable skills to help each other, as well as desire for the other person's products, actually suffer from the lack of demand from their counterparts... not because of any other reason than all three of them owe the bank $1,000 per month, and only think they'll bring in about $1,200.


This gets to the core of everything.  Money is a social construct with MASSIVE benefits, but a couple very unfortunate fragilities that it inserts into an economy.

[Kshartle]

Kshartle, I think that asking ourselves what is truly keeping us from being successful (per HB's advice) is a huge part of the issue for many Americans... or would be if we had the financial tools to generate proper demand .

What about the tens of millions of people with skills that are reduced to bartering with each other (or, more likely, sit unemployed) because we don't have enough money in our economy for us to trade amongst each other adequately and pay down our debts.

You realize that unemployment isn't possible in a barter economy, right?  A monetized/debt-based economy results in structural issues when the economy adjusts that simply don't occur in a barter system.  In a barter system, if I malinvest, my "debts" are denominated in stuff and labor.  That means I can just simply work off my debts.  That doesn't really work so well in monetary economies, where only one thing can extinguish almost all debts in an economy.  This means the butcher, the baker, and the candle-stick maker, all with valuable skills to help each other, as well as desire for the other person's products, actually suffer from the lack of demand from their counterparts... not because of any other reason than all three of them owe the bank $1,000 per month, and only think they'll bring in about $1,200.


This gets to the core of everything.  Money is a social construct with MASSIVE benefits, but a couple very unfortunate fragilities that it inserts into an economy.

If you could print 10 trillion in your basement tomorrow and only tomorrow, and spend it however you want with no way of ever getting caught for counterfitting, what do you think would happen to the economy? Now that's a lot of money! Think of what you could and would buy.....let's make it really move. Say you have one year to spend it, you can't keep a single dollar in the bank. You have to buy something with it or invest it, it can't stay as cash you hold.

Would you agree this would be a big infusion of cash into society? What would happen to the economy in the next year, 3 years, etc.

If 10 trillion isn't enough go with 20 trillion. The amount doesn't matter to me, just imagine whatever number you think we need to get things rolling.

I'm not trying to set you up, I just want us all to think about what happens when more paper money is injected.

[moda0306]

Kshartle,

Before I answer your specific question, I just want to be clear that all I'm saying is that the domestic paper on our balance sheets has to be adequately growing to continue servicing our debt AND to demand fresh goods/services.  It's simple math. If we make $1,500, and have a debt payment of $1,000, we can only spend/save the rest.  Now adding trillions and trillions to an economy at full capacity would not only generate inflation, but could have people lose faith in the soundness of the dollar (unlike today, where only a few are screaming about it but we don't have the quantity on our balance/sheets to actually generate inflation).

But if I, personally, had a printing press, and could print $10 trillion, I literally don't know how I'd ever spend it all.  However, if you spread tht amongst the country's population, And wrote a check to every man, woman and child for $30,000 or so, you'd probably have a good chunk of inflation.  That would go a long way, if not too far (on a macro-level) to repairing balance-sheets.  I know if I had $30,000 it wouldn't affect my spending all that much. 

While I cringe at some of the things Krugman says, I agree with him that a huge piece of our problem today is simply a demand crisis.  I think we'd be in a FAR better place if we'd done a full payroll tax holiday in 2009 on top of the other stimulus, which, given the crisis we faced, was mathmatically certain to be inadequate.

If I HAD to choose between the malaise we have now, and $10 Trillion of stimulus (to everyone, not just me haha), I'd be pretty torn.  Lower that number to $3 Trillion and I'd sign that bill in a heartbeat.  That's $10k about for every man/woman/child in the country, and in the face of a balance-sheet recession and an economy under full capacity, IMO it would work amazingly well at repairing some of the problems.  Business owners would benefit, too!  In fact, most of my economic suggestions aren't just hippie day-dreams, but actually wanting to create a balance so everyone can bring their skills to the economic/monetary table efficiently, including business owners.  Obiously you still have structural issues, so maybe save $1 Trillion of that for job-retraining education/support so we don't get to this point where a massive segment of society is not so disgustingly unemployable that we fracture far more than we are now.

But we've talked about this before.  I think MT mentioned sending $5,000 checks out to people until unemployment fell below 6% or something like that.  As people start to spend more, and businesses earn more revenue and want to expand more, and employees become more difficult to find, you'll get inflation.  But until then, especially if the market thinks we'll stop the stimulus after full employment ensues, we won't get much inflation from it, but instead real economic growth.  Real GDP growth.  Real wealth being created.

[Kshartle]

Kshartle,

Before I answer your specific question, I just want to be clear that all I'm saying is that the domestic paper on our balance sheets has to be adequately growing to continue servicing our debt AND to demand fresh goods/services.  It's simple math. If we make $1,500, and have a debt payment of $1,000, we can only spend/save the rest.  Now adding trillions and trillions to an economy at full capacity would not only generate inflation, but could have people lose faith in the soundness of the dollar (unlike today, where only a few are screaming about it but we don't have the quantity on our balance/sheets to actually generate inflation).

But if I, personally, had a printing press, and could print $10 trillion, I literally don't know how I'd ever spend it all.  However, if you spread tht amongst the country's population, And wrote a check to every man, woman and child for $30,000 or so, you'd probably have a good chunk of inflation.  That would go a long way, if not too far (on a macro-level) to repairing balance-sheets.  I know if I had $30,000 it wouldn't affect my spending all that much. 

While I cringe at some of the things Krugman says, I agree with him that a huge piece of our problem today is simply a demand crisis.  I think we'd be in a FAR better place if we'd done a full payroll tax holiday in 2009 on top of the other stimulus, which, given the crisis we faced, was mathmatically certain to be inadequate.

If I HAD to choose between the malaise we have now, and $10 Trillion of stimulus (to everyone, not just me haha), I'd be pretty torn.  Lower that number to $3 Trillion and I'd sign that bill in a heartbeat.  That's $10k about for every man/woman/child in the country, and in the face of a balance-sheet recession and an economy under full capacity, IMO it would work amazingly well at repairing some of the problems.  Business owners would benefit, too!  In fact, most of my economic suggestions aren't just hippie day-dreams, but actually wanting to create a balance so everyone can bring their skills to the economic/monetary table efficiently, including business owners.  Obiously you still have structural issues, so maybe save $1 Trillion of that for job-retraining education/support so we don't get to this point where a massive segment of society is not so disgustingly unemployable that we fracture far more than we are now.

But we've talked about this before.  I think MT mentioned sending $5,000 checks out to people until unemployment fell below 6% or something like that.  As people start to spend more, and businesses earn more revenue and want to expand more, and employees become more difficult to find, you'll get inflation.  But until then, especially if the market thinks we'll stop the stimulus after full employment ensues, we won't get much inflation from it, but instead real economic growth.  Real GDP growth.  Real wealth being created.

More paper money will just cause everyone to go out and bid for things. the price of those things will go up as people bid for them. Producers will take the price rises as a signal to ramp up production. They will expend resources creating more of what is being demanded. The production will be at the expense of using resources in another way. Once the money is all spent by the original holders in the way they want the producers will be stuck with all this productive capacity and long-term plans for producing things that are no longer demanded. Recession follows as all the misallocation has to be un-done and all the workers are now unemployed and have to find something sustainable.

The inflation economy that comes from inflation can only be sustained by more inflation. It cannot go on forever because it will result in the destruction of the money and reduce us to barter. Inflation booms always leave us poorer than we otherwise would be because of the wasted resources.

Price stability or slowly declining prices over time would encourage the right production and savings that would spur more production, lower prices, more jobs and more stuff for everyone.

Yes prices for a lot of things have not risen much. They should have dropped though to reflect the depression we are in. Do you think you'd be better off or worse off if everything you needed to buy was 30-40% less? How would it be for the poor?

Inflation is the cruelest tax because it hits the poor and elderly on fixed income and the young who have no assets. It is the tax that wealthy prefer because they have the assets. Inflation is cruel and destructive.

[Pointedstick]

More paper money will just cause everyone to go out and bid for things. the price of those things will go up as people bid for them. Producers will take the price rises as a signal to ramp up production. They will expend resources creating more of what is being demanded. The production will be at the expense of using resources in another way. Once the money is all spent by the original holders in the way they want the producers will be stuck with all this productive capacity and long-term plans for producing things that are no longer demanded. Recession follows as all the misallocation has to be un-done and all the workers are now unemployed and have to find something sustainable.

The question inherent in this philosophical disagreement is: "would those hypothetical checks sent out to people help us get back to a sustainable level of economic activity, or unsustainably increase it beyond the current level of economic activity?"

Everything Kshartle says is correct if the latter case is the one we're facing, and everything Moda says is correct if it's the former.

So which one is it? Are we underproducing due to a lack of liquidity, or are we just poorer than we thought and papering over it with extra liquidity will won't solve the underlying cause?


Personally, if I could wave a wand, I would have the government forgive all the debt that its own citizens owe it in the form of undischargeable Dept. of Ed. student loans and unsustainable FHA mortgages, and then I would have them get out of the business of lending money to uncreditworthy people to begin with. Let the banks take on those kinds of risks.

[Pointedstick]

That graph doesn't necessarily scream "moda's correct!" to me. Could it be that capacity utilization is decreasing because advances in automation have increased productive capacity so rapidly that we're truly overproducing relative to our own ability to consume all that stuff?

[doodle]

The question inherent in this philosophical disagreement is: "would those hypothetical checks sent out to people help us get back to a sustainable level of economic activity, or unsustainably increase it beyond the current level of economic activity?"

What is an unsustainable level of economic activity? Is this an environmental question? I'm confused by the question.


Kshartle,

More paper money will just cause everyone to go out and bid for things. the price of those things will go up as people bid for them.

But people are not bidding for a static amount of things...production reacts to demand creating a virtuous cycle which leads to employment and further demand.

When the great depression happened why is it that people went from having food on the table and heat in their houses to starving and freezing? Did all of the crops die, did our energy resources dry up? Did people just decide that they didn't want to work anymore and they wanted to sit at home and starve and freeze to death? What precipitated this drastic decline in real material wealth and well being during this time? Why did average hardworking productive Americans go from having full stomachs and warm houses to standing in bread lines?