Third Party & Independents Archives

September 10, 2007

U.S. Passes $9 Trillion National Debt

Responsible economic policy, should safeguard the financial status of Americans today, and their children tomorrow. If it meant only today, the Treasury could print money and hand out a million to every man, woman, and child. And for a day, everyone would be well off. Of course, in the ensuing days, America would plunge into a depression and inflation spiral worse than in the 1930’s.

There are many portals through which one can view the economy, and depending on which portal, the economy may look robust or failing. If one looks at the number of hours of work it takes achieve middle class status, there is no question that our parents generation were much better off than we are today. In the 1960's one parent could work, the other stay home and raise kids, keep house, and entertain and network with neighbors. Today, it takes two parents working and nearly double the work hours to achieve middle class quality living for most American families.

On the other hand, if one looks at the net asset wealth of Americans today as in homeownership, the economy looks like a windfall for Americans compared to the 1960's when homeownership was beyond the means of a much larger percentage of workers. Or, if one looks at the percentage of workers in the upper middle class and beyond today as compared to the 1960's, or the percentage of poverty, again it would appear America has grown wealthier, on average.

But, as pointed out in the introductory paragraph, a responsible economy provides for its citizens in the present and future, insuring an ability to withstand market shocks, calamities, and emergencies while keeping the nation's workers and family providers employed, solvent, and able to continue providing for their families, overall.

The past is no guarantor of the future.

America learned this in the most painful and suffering kind of way in 1929, as capitalists tied up so much of the nation's money into so few hands, investing and speculating on the next great profit venture, that the worker - consumers who had supported the rise of the industrial barons of industry, were left out of the wealth distribution loop, and when the stock market crashed, the consumers living from paycheck to paycheck, could not continue purchasing and consuming, and suppliers collapsed, laying off workers, cutting production, and closing retail shops.

By the time the worst had arrived in 1932, the Dow Jones Industrial market lost 89%, before bottoming out. Investors in mid-1929 who held onto their stocks, would not see their stocks recover the losses until 1954. Most would have been in their retirement years by then, only to have broken even on their stock investments in 1929.

Just months before the 1929 crash, few would have said America's economy was not in great shape. But, it wasn't, regardless of popular opinion on Oct. 28, 1929, the day before Black Thursday. The 'roaring twenties' was a decade of celebration of technological innovation and production, from radio, to autos, to aviation, telephone, and expanding electrical power grids. Finding work was so easy, that a mass migration from rural farm communities was underway, ballooning once small towns and cities into major metropolitan areas like Chicago, Detroit and Dallas. And within 5 days, the celebration was over. The economy failed to insure its 'tomorrows', mesmerized by its gains 'today'. The past was no guarantor of the future.

The Present

Today, America has tools to fight what happened in 1929 and prevent it from happening again. The greatest of these tools are statistical forecasting and economic measurements. Trained and objective people armed with these weapons can peer into the future of our children and forecast their economic fate, and issue warnings when the statistics and measures begin painting dark clouds on the economic horizon. But, what if no one heeds the warnings?

This is what is occurring today. The warnings have been issued repeatedly by economic forecasters for more than a decade, now. In fact, it is almost becoming a case similar to crying wolf, in the sense that politicians have begun to turn a deaf ear. In 1995, the Labor Department said it is worried that the retirement prospects for the huge baby boomer cohort could be grim. "Boomers are now between the ages of 30 and 50, and there are 60 million of them. They aren't saving enough for retirement and won't be able to rely on Social Security or traditional pension plans to bail them out", it said. That 60 million number is now 77 million.

These warnings continued, coming from then Federal Reserve Chief, Alan Greenspan in the 1990's and early in this decade. But, the politicians turned a deaf ear. Greenspan's successor, Ben Bernanke continues the warning in Oct. of 2006:

Unless Social Security and Medicare are revamped, the massive burden from retiring baby boomers will place major strains on the nation's budget and the economy, Federal Reserve Chairman Ben Bernanke said Wednesday.

"Reform of our unsustainable entitlement programs" should be a priority, he said in prepared remarks to the Economics Club of Washington. "The imperative to undertake reform earlier rather than later is great," Bernanke added.

The Future

Take a moment and think about what it is they are warning. The vast majority of now 77 million Americans falling into poverty and bankruptcy, largely from enormous medical expenses incurred at the most expensive time of life for needed medical care. These 10's of millions will be the parents and grandparents of perhaps 100 million, or more, working Americans. What will happen if their children and grandchildren refuse, or are unable to bail them out of their medical debts?

If the government attempts to float the debt needed to save them from poverty and bankruptcy, and loss of homes, our current $9 trillion dollar national debt, already a concern, will have to grow to 20 trillion, and then even higher to $40 trillion. That is of course, if investors would even consider buying American treasury bonds given the near certainty of economic collapse such debt would cause.

And what happens if the children and grandchildren of these retirees bail them out with their own earnings? Well, that clearly leads to a contraction in consumption and sales of all goods and services in our economy, except medical care and medical insurance. How large a contraction are we talking about?

In 2000 Medicare cost 196.3 billion dollars or 2% of GDP.
In 2030, the amount will grow to $1 trillion 244 billion, or 7% of GDP. (assuming 2% GDP growth)

Needless to say, the economy would collapse long before the government incurred a near 1.25 trillion dollar a year annual deficit. But, so too, will the economy collapse if our children working in 2030 are diverting nearly 1.5 trillion dollars a year from other purchases of goods and services to their parent's and grandparent's health care debts. But this is not the worst of it.

By 2080 the end of the boomers generation, again assuming 2% GDP growth, Medicare will spend 6.8 trillion dollars, or 14% of GDP. Now, of course, our economy collapses long, long before Medicare spending reaches anything close to these levels. The same is true if workers are diverting 14% of all their purchasing dollars to alleviating the debts of their parents, especially if real wages continue to fall, as they have since the 1960's, as it now takes 2 parents working near full time to stay in the middle class.

Also, the above scenarios assume either Medicare spending growth, or, consumers diverting purchase dollars to medical care. In reality, both will occur, consumers will purchase less and less on other consumption to help parents with medical care debt, and Medicare spending will grow precipitously, but, not as fast as the above scenarios due to our children of today buying their parents medical debts in the future.

Why isn't something being done?

The reasons none of these scenarios can be prevented from collapsing the economy are three fold. First, because American savings are negative. Which means Americans are spending more than they are making in income. It is called a negative savings rate. Americans are not saving and using compound interest to grow their savings to meet the growing health care inflation costs moving forward. Debt and increased future costs are a deadly economic scenario, whether it be for a family or, our government, and both are in the same boat. Workers and politicians are accumulating debt which reduces the amount they can borrow in the future to meet future needs.

Second, is the rise of third world nations to first world industrial and technological preeminence. China, Malaysia, India, and other nations have vast untapped cheap (by our standards) labor resources with which to draw upon to grow their economies. This is very similar to what America tapped in WWII as it put millions of women into the work force, and growing percentages of women continued to move into the work force for decades afterward, which in turn, increased American productivity, without having to incur commensurate growth in labor costs. This resulted in the greatest economic boom in American history from 1947 to the present. It is now other nations' turn to tap similar productivity potential and expand their economic growth, as the U.S. begins to experience intense competition for market share, contraction in consumption, and increasing debt, and interest on that debt, for the next 70 years.

The third, and lynch pin, reason the dire economic scenarios painted above are not salvageable is purely political. Contraction now, or, contraction later, is the issue. Politicians campaign on economic stimulus and growth every 2 years to win election. Greenspan, Bernanke, and many other economists say we must stop consuming so much, and start saving much more, if we are to hope to deal with the gross human suffering and losses in America which will result, if we do nothing substantial now to turn the future of this Titanic economy around.

But, what politician is going to get elected telling the public the truth that:

  • consumers have to stop spending so much
  • stop borrowing so much so that they can
  • dramatically increase savings so that
  • the government can cut back on entitlement spending while
  • raising taxes on the wealthy and middle class for Soc. Sec. and Medicare in order to
  • pay down the national debt with annual surpluses while workers get squeezed in their checking accounts?
It is a political reality that neither Americans nor their politicians really want to remedy the future for their children. If it were true that they did, they would not vote to return incumbents to Congress who refuse en masse to address the issues facing our children in their adult work lives. Voters would recognize that the national debt is, in fact, an increase in taxation upon their children's future earnings to allow us working Americans today to enjoy the last days of the good times, just like the Roaring 20's before the terrible suffering of the 1930's.

Oh, sure, there are a few politicians who speak some of the truth, but, they do so within the context of their political parties and fellow politicians who insure that Americans will not have to sacrifice today for the future, which would risk their reelection chances. It is easy to speak the truth when you know no one is listening. Something else again when painful consequences result from your truth saying, and those suffering the consequences, ignorantly come after the messenger of truth for having caused it. Sen. Kent Conrad (D) of North Dakota, one of the most ardent spokespersons of the truth on this issue for many years, knows the security blanket of speaking the truth to a deaf audience.

The last real debate in the Congress over the entitlement crisis, which had any chance of addressing it occurred in 1996. That was the year the impasse between the divided party Congress' and Pres. Clinton over the budget shut down government 3 times, before reconciliation was achieved. Many issues were being fought but, entitlement spending was chief among them. Republican proposals ranged from raising Medicare taxes and cutting benefits, to privatizing all medical insurance and ending the Medicare program at some point in the future. Democrats were fighting raising taxes on the middle class, cutting Medicare benefits, and definitely opposed to eventually ending the Medicare safety net program which at the time, was rescuing 37 million Americans from preventable death and poverty resulting from bankrupting medical bills. In the end, the reconciliation of that budget which put government back to work, essentially dropped the topic altogether.

When Republicans acquired full control of Congress, they had no political incentive to resurrect the issue on Medicare, choosing instead to take the far less threatening entitlement program of Soc. Sec. and move to privatize it, instead. The public would have none of that. Pres. Bush again tried to move privatization of Soc. Sec. and the backlash against Republicans was scary.

It is too soon to know if Democrats in the Congress will take on the issue after Bush's veto threats leave office. But, it is probably a safe bet, that Democrats too will refuse to address, in any significant way, the long term bankrupting effects of inaction, preferring instead band aid approaches which will neither scare today's public nor solve the problem in the long term. It is about elections in Congress, not about saving the nation.

The Remedy

Which leaves the issue in voter's hands to address, by way of an anti-incumbent vote that shakes the foundations of the Republican and Democratic Parties. Or not. Iraq does not pose near the long term threat to the people of the United States as inaction on entitlements does. Yet, it appears at this time from the polls, that the 2008 elections will be about Iraq, and not the long term solvency of our children, their aging parents - us, and our economy in ever growing peril. Such is the Achille's Heel of America's republic political system, and the ignorance of the democratic electorate, to the major economic issues hanging like a dark asteroid in space aimed directly at their futures.

There is a bright side however. For those with the where-with-all to invest $10,000 now in major medical stocks in their child's name, to be redeemed on their child's 50th birthday when a 9 trillion dollar national debt will be remembered as peanuts, there's a reasonable chance their children may retire in the middle to upper middle class; in Brazil or China.

(Author's note: Future value of GDP was computed based on 2000 GDP, assuming 2% average GDP growth, and using Medicare percentages of GDP provided by NewRetirement.Com's excellent article on Rising Medical Costs.)

Posted by David R. Remer at September 10, 2007 08:04 AM
Comments
Comment #232413

While I, or anyone with a brain, can see the writing on the wall, I fail to see what good an anti-incumbent vote would do. First, new politicians would do no better winning office on such a platform than an incumbent would do trying to stay in office with the same. Americans do not want to tighten their belts that much, and that is the real problem.

Our only real chance, assuming it would have happened, was to have elected Gore in 2000, since he had a plan to use the budget surplus to start paying down the national debt. Would he really have done it? Maybe, hard to say, what with 9/11 and all. Would he have done a better job of it than Dubya has? A trained chimp could have. If the economy really does collapse, history will look back at this administration and point the blame.

Does something need to be done about this? God, yes, but politics is not where to start. Educating the American public is the only answer. Your anti-incumbent idea, while well-meaning, falls terribly short.

L

Posted by: leatherankh at September 10, 2007 09:45 AM
Comment #232414

Leatherankh, the anti-incumbent idea is the only thing that will move politicians to act, but, you are quite right, such an action can only result from an education by the public as to how dire the situation is becoming, and how close we are to a point of no return.

But, let’s assume enough of the public does acquire that education. What difference will it make to politicians if the public doesn’t vote them out of office? Why would politician incumbents choose to make painful policy decisions for the public, if the public were not demanding it by voting them out of office, in which case they would no longer be incumbents.

Seeing incumbents being voted out left and right over the economic future, their replacement freshman would choose to avoid the same fate, and make the tough decisions. You can’t put the chicken before the egg.

Education, yes. Then anti-incumbent voting. Then Freshman politicians willing to do what the incumbents wouldn’t in order to become incumbents themselves.

Posted by: David R. Remer at September 10, 2007 10:00 AM
Comment #232415

And that’s not even all of the debt.

  • Social Security, $12.8 Trillion in debt, has been plundered for decades. Shortfalls for the appoaching 77 million baby-boomer bubble would not have exist had it not been for the pilfering of Social Security almost from the day it started.

  • The Pension Benefit Guaranty Corp. is $450 Billion in the hole.

  • Nationwide personal debt is over $20 Trillion

  • Add that all up, and that’s over $42 Trillion of nation-wide debt. Some estimates place it higher (e.g. $48 Trillion)

  • Net worth may still exceed the total debt, but only a very few own most of that wealth. A tiny 1% of the U.S. population owns 40% of all wealth. The disparity has never been worse since the Great Depression. Even the rosiest of the rose-colored glasses crowd acknowledges the growing disparity, as concentrated wealth grows wealthier, and the middle class shrinks.
    • Year 1929: 1% of population had 40% of all wealth

    • Year 1976: 1% of population had 20% of all wealth

    • Year 1983: 1% of population had 30% of all wealth

    • Year 2007: 1% of population has 40% of all wealth (see: Year 1929 above)

    • 60% of the U.S. population has only 5% of all wealth.

    • 40% of the U.S. population has a net worth of only $2,000.

    • 20% of the U.S. population has a negative net worth of -$9,000.

  • Inflation will be the probable outcome for so much debt, as more money is created out of thin air to bail out banks that try to loan out money to everyone possible; making interest on new money created a a 9-to-1 ratio for every new loan. In 2007:
    • a 1997 dollar is now worth only 77 cents?

    • a 1987 dollar is now worth only 55 cents?

    • a 1957 dollar is now worth only 16 cents?

    • a 1937 dollar is now worth only 07 cents?

    • a 1913 dollar is now worth only 05 cents?

  • And now, we may be entering a recession; not a good thing while trying to fight two wars in Iraq and Afghanistan.

The tax system is regressive and needs to be reformed (along with many things Do-Nothing Congress ignores). Warren Buffet, 2nd wealthiest person in the country, pays a lower percentage of tax (relative to income) than a secretary making $60K annually. That’s primarily because capital gains are taxed at 15%. But most Americans (i.e. middle and lower income groups) pay an average tax rate of over 20%.

But taxes alone can’t help if government continues to spend and print money so irresponsibly, and grow government larger and larger to nightmare proportions.

And the continued occupation of Iraq due to Bush and Other Occupationist Proponents (OOPs) continues to grow the debt ever larger.

The federal government takes over 20% of GDP. And for the trillions bilked from tax payers annually for national defense, the Pentagon can’t even keep jets from flying into their own building, and the federal government continues to fail at one of its most fundamental duties to secure the nation’s borders and ports.

What do we have to look forward to?

  • If you are wealthy, you’ll probably get wealthier.

  • If you are poor, you’ll probably stay poor or get poorer.

  • If you are a middle-income earner, you’ll probably see your income decline and your taxes grow.

  • Getting an education will become more expensive, while declining in quality.

  • If you are over 65, you’ll have to work longer … competing with younger Americans and illegal aliens for fewer and fewer jobs for less and less income, because the retirement age (i..e. eligibility age for already stressed Social Security and Medicare systems) will be raised to age 70.

  • Manufacturing will continue to move out of the country.

  • Getting healthcare will become more expensive (unaffordable), while declining in quality and becoming more dangerous (already killing 195,000 people annually; 106,000 annually due to Adverse Drug Reactions).

  • If you are young, you will have the astronomical debt of past generations dumped on you. Thus, expect higher taxes on the middle class to pay for the $12.8 Trillion plundered from the Social Security system over many decades.

  • The wealth distribution will grow more extreme.

  • For most people, things will get worse because of so much nation-wide debt, and government that grows more bloated, arrogant, irresponsible, wasteful, and corrupt.

  • Recessions, occuring every 2 to 11 years for the past 46 years, will become deeper and more difficult to recover from.

So, perhaps you should ask yourself:

    What will my life be like in the next Great Depression?
Sound ridiculous? At the rate things are going, that is not at all far fetched.

While I, or anyone with a brain, can see the writing on the wall, I fail to see what good an anti-incumbent vote would do.
What good will repeatedly rewarding irresponsible incumbment politicians with re-election accomplish, except to make them more corrupt and irresponsible?
Educating the American public is the only answer. Your anti-incumbent idea, while well-meaning, falls terribly short.
Yes, in a voting nation, education is very important. Americans can choose to learn:
  • the smart, responsible, peaceful way
  • or, the hard, painful way (again). Pain is a good teacher too.
As long as voters still have the right to vote, then voters have the government they deserve. When will voters stop rewarding corrupt politicians with 90% to 95% re-election rates since 1996? When it becomes too painful. And we are well on our way. Some painful consequences are already in the pipeline, but voters only have themselves to thank for it. Only they can change it, and they will when they have finally had enouugh. Posted by: d.a.n at September 10, 2007 10:47 AM
Comment #232421

$9,000,000,000,000.00 My calculator doesn’t even go that high. So I can’t figure how much my grandyoungins owe. The thing that really frosts my butt is that at between 5 months and 13 years old none of them are old enough to hold a full time job. None of them have any credit. And none of them were able to vote for or against the irresponsible politicians that have run this debt up. But they sure as hell owe the money. And are expected to pay it. And at almost 61 years old I won’t be around long enough to pay my share of this outrageous debt. That means that my share will be passed down to my grandyoungins.
What kind of future are our youngins facing? It can’t be a very good one.
There’s plenty of blame for this to go around. No one particular person or party is 100% responsible for this country being $9,000,000,000,000.00 in debt. Every politicians that has held office. Every voter that has blindly voted the party line. Every voter that has ignored the irresponsibility, corruption, and ineptness coming out of DC. And every person that has wanted government to do more than it could afford is responsible for the this outrageous debt. And yes, that does include you. And to my shame, it also includes me.
Everyone of us need to beg the forgiveness of our children for the mess we’re leaving them.


Posted by: Ron Brown at September 10, 2007 12:33 PM
Comment #232427

Add up all the $22 Trillion of federal debt, and that comes to:

  • about $72,848 per person (for 302 million Americans).

  • For people under age 60 (about 223 million), that’s about $98,654 per person.

  • For all 200 million eligible voters, that’s about $110,000 per voter

  • For about 100 million households (based on 3 persons per household, that’s about $220,000 per household.

Ron Brow, You are right. All voters are responsible. Those too young to vote are the only innocent individuals that must suffer the consequences.

Currently, we have 77 million baby boomers that will soon be demanding their Social Security and Medicare. Since $12.8 Trillion was plundered from Social Security, should future generations be burdened with that? Especially when most of the young workers now entering the work force had no responsibility for creating that debt since they were not even of voting age yet? I think the resentment is going to create a generational storm. All of the economic factors and decades of fiscal irresponsibility are getting closer and closer every day. How long can it be propped up with excessive money printing? A few more years perhaps, but it could easily collapse when 77 million baby boomers meets $22 Trillion of total federal debt.

I think most people know its doomed to collapse.
It’s just a waiting game.
Congress can’t address it because it’s too late.
Therefore, incumbent politicians are now in a mad dash to get theirs, give themselves fat raises every year (9 of the last 10 years while troops go without body armor, medical care, and promised benefits) build up their own bank accounts and assets before the $#!+ hits the fan.

Posted by: d.a.n at September 10, 2007 01:13 PM
Comment #232429

Blaming the voters does little to rectify the fact that there were no alternatives to vote for, in either party. What is a voter to do?

Posted by: womanmarine at September 10, 2007 01:27 PM
Comment #232432


It would never get passed, but the way to start paying down the national debt and educate the public about how serious the problem is at the same time is a national debt tax.

You want to buy some shares of stock, national debt tax.

You want a 20,000 dollar car, $20,500

The $40,000 model is $42,500 and in big bold red letters is $2,500 NATIONAL DEBT TAX.

You want to know what the NATIONAL DEBT TAX is on the 3000 horse power Fasassombichi GT? Just give me a minute while I check your credit score.

Posted by: jlw at September 10, 2007 01:56 PM
Comment #232434

David,

While I do not see absolute destiny of doom and gloom on the horizon, there are certainly dangers with soaring national debt and trade deficits.

I think resolving the health care crisis by implementing a national health care agency, like most civilized industrial nations have, will go a long way towards that end.

The use of illegal immigrant labor and poor trade policies that encourage shipping jobs off shore are other issues that damage the economy.

I don’t quite share in your explanation of the Great Depression, however. The Laissez Faire extremes of Hoover and the Smoot Halley tarrifs coupled with an ignorance of money supply economics led to, and prolonged the depression.


The one problem with many Libertarians is that they ignore the lack of economic restraints that led to a crisis in confidence and a credit crunch which is why the market crashed. They continue to aver that Laissez Faire is the solution to economic cycles. It isn’t and is a return to a thinking pattern that DID lead us into the Great Depression.

The economic situation with poor quality home loans , while based on the same lack of good business sense and governmental oversite, is not anything like the economics of the twenties. We’re not at all in the same boat.

While the Fed does have issues, it has been a stabilizing factor since the 30’s. The problem lies more in a Congress that spends imaginary money that the American people have to work out with real sweat. True conservatism in Congress would go a long way to resolving that.

Posted by: alien from the planet zorg at September 10, 2007 02:17 PM
Comment #232435
womanmarine wrote: Blaming the voters does little to rectify the fact that there were no alternatives to vote for, in either party.
Who should we blame? Voters elect them.
womanmaring wrote: What is a voter to do?
Stop Repeat Offenders. Don’t Re-Elect Them.

womanmarine,
OK, so you say your all of choices stink?
Then why reward the incumbent with re-election?
Doesn’t that simply condition them to become more corrupt?
Doesn’t that simply condition them to become more arrogant?
Doesn’t that simply condition them to become more irresponsible?
Doesn’t that simply condition them to become more powerful?
Doesn’t that simply condition them to become more difficult to oust?
Doesn’t that simply condition them to become more FOR-SALE?

The logic is simply this:

  • Don’t reward irresponsible incumbent politicians with re-election.

What is wrong with this logic?
How can something so simple be so elusive?
Well, the answer to that requires an understanding of human psychology. Humans tend to be complacent, apathetic, lazy, disinterested and irresponsible until painful consequences provides the motivation to become more responsible. That laziness is why voters pull the party lever. They choose to believe the clever assertions that THEIR party is the best choice. Little do they know that it would eventually lead to BOTH parties being so corrupt that the few differences they do have are meaningless.

Why is it, after two years now, no one can answer this question:

    Can you name 10, 20, 50, 100, 200, or even 268 (half of 535) in Congress that are accountable and responsible?

Unless you can name at least 268, then what can you conclude about Congress as a whole?

Lastly, Congress is elected by the voters.
So Congress is a reflection of the voters.
So the voters have the government they deserve.
That is, as long as they can vote.
But if they vote irresponsibly, then they can expect those they elect to be irresponsible too.

So, if voters elect the politicians, and voters have continually rewarded incumbent politicians with 90% to 95% re-election rates (since 1996), then who else is to blame for it?

As long as voters can vote, politicians are not to blame for all of the corruption, irresponsibility, and unaccountability.

How are voters holding their elected politicians accountable by repeatedly rewarding them with re-election and life-long terms?

The highest anti-incumbent voting (with 50% turn over in Congress) was during the Great Depression.
Thus, it’s quite likely that it will take a similar situation to finally make voters stop blindly pulling the party-lever, and stop rewarding irresponsible incumbent politicians with re-election.

It is sad that it has to be that way, but humans don’t seem to care until things become too painful, and then it is usually too late.

Already, the debt is so huge, it is probably too late. The painful consequences of so much fiscal irresponsibility is probably unavoidable now. The debt must be paid or the economic consequences of defaulting will be even worse. What were also likely to see is higher inflation as the government and FED are forced to print more money just to stay ahead of the billions needed every day just to pay the interest alone on the $9 Trillion National Debt.

Just stopping the debt from growing larger would be difficult, much less reducing it. As it is now, it would literally take two centuries to pay off $22 trillion of federal debt. Just the $9 Trillion of federal debt would take over 140 years. The interest on that debt is astronomical (even if the interest never exceeds 4.5%).

It is already out of control.
The discipline it would require to deal with such massive debt does not exist. And it won’t until its absence becomes too painful.

In a voting nation, education is paramount, and that education is already on the way, and few (if any) are gonna like it, as the deterioration we see now is just the beginning of what will most likely get much, much worse.

Posted by: d.a.n at September 10, 2007 02:38 PM
Comment #232436

Dan:

Simply this. Had anyone run from either party that I believed would tackle this honestly, they would have had my vote. Since none addressed it in a manner that gave me any positive inclination that they would do the right thing, I cast my vote between the choices available based on what I felt I knew about those running. Sometimes the incumbent, sometimes not. To just say vote out incumbents is to over-simplify the problem and the supposed fix.

Posted by: womanmarine at September 10, 2007 02:41 PM
Comment #232437
alien from planet zorg wrote: David, While I do not see absolute destiny of doom and gloom on the horizon, there are certainly dangers with soaring national debt and trade deficits.
It’s a lot more serious than just debt.

The most important factor, the thing we lack at the moment, that will most likely bring about the next Great Depression is:

    discipline and virtue

It’s not that all of these pressing problems can’t be fixed. It’s that we lack the will to fix them … that is, until the consequences become too painful. Look through our history. We repeat the same mistakes over and over. There is sometimes progress, but it is 2.000 steps forward and 1.999 steps backward. Progress is slow indeed. And we have not yet learned our lesson. Where there is a lack of virtue and conscience, follows a lack of transparency, education, responsibility, and accountability. The only thing that finally trumps this dark side of human nature is pain. It’s a good teacher. It is our built-in self-correction mechanism. There is a danger though. The longer things are allowed to deteriorate, the more difficult it is to correct it (if at all).

Posted by: d.a.n at September 10, 2007 02:50 PM
Comment #232439
womanmarine wrote: Dan: Simply this. Had anyone run from either party that I believed would tackle this honestly, they would have had my vote. Since none addressed it in a manner that gave me any positive inclination that they would do the right thing, I cast my vote between the choices available based on what I felt I knew about those running. Sometimes the incumbent, sometimes not. To just say vote out incumbents is to over-simplify the problem and the supposed fix.
Not true. Especially since Congress has enjoyed a very cu$hy 90% to 95% re-election rate since year 1996.

Perhaps you are better than most voters. Perhaps you are not like the average voter.
However:

  • most voters don’t even know who their state and federal senators and representatives are, much less their voting records.

  • 40% to 50% of voters don’t even bother to vote at all.

  • most voters pull the party-lever (i.e. vote straight ticket); many not even knowing who they are voting for … just that they are in THEIR party (abdicating the responsibility to vote wisely to THEIR party).

  • most voters, 90% of the time, elect the candidate that spends the most money.

  • 99.85% of all 200 million eligible voters donate $2 per person (on average) to a federal campaign, while a tiny 0.15% makes 83% of all federal campaign donations (of $200 or more).

  • most voter have no idea what Article V of the Constitution is, or that it is being violated, despite 567 requests to make amendments by ALL 50 states

  • 20% of students in American public schools can’t identify the United States on a world map.

  • most voters think the problem is the OTHER party.

  • most voters think THEIR politician is grand. Most voters believe MOST politicians are crooked, but they think that THEIR politician is great. Look at the voters that re-elected Rep. William Jefferson. And it wouldn’t surprise me if the voters of Idaho re-elect Larry Craig … giving new meaning the the meaning of Idaho .

  • most voters bitch and complain and give Congress a low approval rating, but repeatedly re-elect and reward the same incumbents, giving them a cu$hy 90% to 95% re-election rate since 1996.

  • most voters are easily bribed with their own tax dollars; especially the older voters lobbying for entitlements. Too many voters have fallen for the myth that we can all live at the expense of everyone else.

  • most voters don’t know what the National Debt is, much less the total federal debt, Social Security debt, or the nationwide personal debt.

  • most voters fall for the partisan warfare, because it is easier to blame the OTHER party than work to solve prolbems; foolishly emphasizing minor differences rather than working on unity to solve the many things most of us all already agree upon (the problem and the solution).

  • most voters (if not all) can not name 10, 20, 50, 100, or 268 (half of 535) in Congress that are responsible and accountable. But then, perhaps that’s because there aren’t any?

  • most voters blame Congress and the President, but fail to understand that the voters (the largest group of 200 million eligible voters) have the government that they repeatedly re-elect and reward. The voters are the one largest group responsible for their own problems. But, again, it’s easier to blame politicians, rather than take responsibility themselves.

  • too many voters are one-issue voters, making them easy to manipulate.

  • most voters think the nation is on the wrong track, but most voters reward incumbent politicians with re-election for keeping us on the wrong track.

  • most voters simply don’t care … at least, not until the consequences of that disinterest motivates them to become more interested. Voters will become much less complacent, apathetic, and lazy when they are jobless, homeless, and hungry.

Therefore, all I (and David R. Remer and Ron Brown and VOID) suggesting is for enough voters to do what voters will be forced to do eventually anyway (when the painful consequences provides the motivation). It will happen again. One of the highest anti-incumbent voting periods ever was during the Great Depression. Are we going to wait of the next Great Depression? Or are we going to learn from history and finally make progress?

That doesn’t mean we should always vote out incumbents. But as long as incubments are irresponsible, they do not deserve and should not be rewarded with re-election. The only way that logic can be refuted is only if you think they are responsible and deserve to be re-elected. Even if you think all of them are irresponsible, that is all the more reason not to reward them with re-election.

Voting Guidelines

Posted by: d.a.n at September 10, 2007 03:03 PM
Comment #232443

Dan:

You have yet to show me any non-incumbents worthy of being voted in based on what you want to happen. I am interested in who you think they would be.

Posted by: womanmarine at September 10, 2007 03:47 PM
Comment #232444

d.a.n. said: “It’s not that all of these pressing problems can’t be fixed. It’s that we lack the will to fix them … that is, until the consequences become too painful.”

That was the prophetic fundamental point of the article and research. And alien and womanmarine and the hundreds of millions of others in this country who don’t want to believe Greenspan and Bernanke, and don’t want to assume the responsibility for educating their politicians by voting them out, inadvertently compound the problem.

As long as the human mind can rationalize away the difficult ability to respond appropriately, it will, until it becomes a fight or flight situation. The wealthy will flee, leaving the rest to fight for the scraps of the American economy left behind.

My daughter is learning Japanese on the internet, Spanish in high school, and will take Chinese in College. And yes, $10,000 invested in health care stocks will be put in her name next year. It is the only hopeful plan I can see for her, given the response many Americans give to articles such as these. But, it shouldn’t have to be this way.

Posted by: David R. Remer at September 10, 2007 03:48 PM
Comment #232445
And alien and womanmarine and the hundreds of millions of others in this country who don’t want to believe Greenspan and Bernanke, and don’t want to assume the responsibility for educating their politicians by voting them out, inadvertently compound the problem.

Um, excuse me? What gives you the idea, or the right to post that I don’t believe Greenspan or Bernanke? Please. And I take full responsibility for my votes, I try to make informed votes.

Lets not go overboard.

Posted by: womanmarine at September 10, 2007 03:53 PM
Comment #232449

womanmarine, it doesn’t matter if the current lot of challengers will be better, most likely they won’t. But, if voters refuse to allow incompetence and irresponsibility to serve more than one term, there will quickly be competent and responsible challengers stepping forward, upon realizing voters are holding them responsible.

Americans are psyched by their culture to expect and demand an immediate fulfillment of their desires. Our negative savings rate is insurmountable testament to that fact. But, this political problem cannot and will not be solved in one election. It will take growing numbers of voters voting anti-incumbent for 3 or 4 election cycles before everyone contemplating running for office finally grasp that reelection depends on results, not excuses and finger-pointing.

Posted by: David R. Remer at September 10, 2007 04:16 PM
Comment #232450

womanmarine, please note the word AND in my statement: it should have been OR. My apology. My error, for you clearly are not in the group that doesn’t take to heart Greenspan’s and Bernanke’s warnings.

Posted by: David R. Remer at September 10, 2007 04:20 PM
Comment #232451

INFINITY minus ONE is STILL INFINITY

woman marine wrote: Dan: You have yet to show me any non-incumbents worthy of being voted in based on what you want to happen. I am interested in who you think they would be.
  • (1) Until they have served, how do you know the challenger is more irresponsible?
  • (2) If you already know the incumbnet is irresponsible, why reward them with re-election?
  • (3) IF we keep rewarding irresponsible incumbents with re-election, how will they ever get the message that Congress (as a whole) is irresponsible and failing to get anything done?
  • (4) Who should you vote for? Vote for challengers that will note what happens to incumbents that are irresponsible.
  • (5) Why be so concerned with the possibility of a good politician not getting re-elected ? Is that more important ?
  • (6) You asked me is is responsible? I don’t know yet, but it’s not hard to show who is irresponsible.
  • (7) Unless we can name 268 (half of 535) in Congress that are responsible and accountable, then Congress as a whole is irresponsible and perhaps voters should start treating Congress as a single entity? Perhaps it will then get the message? Perpahs then, they will have some peer pressure? As it is now, no one is even calling for the resignation of William Jefferson, despite getting caught red-handed taking bribes. In fact, what’s utterly ridiculous are the voters of Louisianna that re-elected him anyway.
  • (8) So, is what we’re doing working. Should we keep rewarding Congress with 90% to 95% re-election rates and expect anything to get better? There’s a term for that. They call it insanity.
  • (9)If Congress’ dismal approval rating is only 18%, why do most voters reward them with 90% to 95% re-election rates? Congress’ approval ratings just before 7-NOV-2006 were dismal too. Not quite as low as the 18% now. Yet, 90% of Congress was re-elected. There appears to be a misconception that DEMs took a huge lead. They didn’t The have a small majority. Voters will have to do a lot better than re-electing 90% of all incumbnets (as in the last election) if voters ever hope to really get Congress’ attention.
  • (10) Does it make sense for voters to give Congress such dismal ratings, complain endlessly about the corruption, waste, unnecessary wars, etc., but then reward it with 90% to 95% re-election rates? No, it doesn’t.
  • (11) Why does that happen? It’s not really that complicated. It happens because most voters (the 60% that bother to vote) have been convinced that the best way to vote is to pull the party-lever. The reason that does not work is because most (if not all) incumbent politicians in BOTH are so irresponsible, FOR-SALE, corrupt, and unaccountable that it doesn’t matter which is more or less corrupt. Likewise with the two-party duopoly. And that is why so little gets accomplished. That’s why the call it Do-Nothing Congress. Politicians can give themselves a raise in a heart-beat (like the 9 times in the last 10 years while our soldiers go without body armor, medical care, and promised beneifts), but they can’t solve the growing problems with Social Security, Medicare, healthcare, illegal immigration, Iraq, capture Bin Laden, inflation, tax reform, National Debt, $450 Billion pension debt (PGBC), violating Article V, spying without civil oversight, other constitutional violations, eminent domain abuse, corpocrisy, corporate welfare, waste, corruption, campaign finance reform, energy vulnerability, declining public education, etc., etc., etc
  • (12) BOTH parties are just about equally corrupt. There’s a lot of argument over WHICH party is more corrupt, but when BOTH are so corrupt, does it matter?
… millions of others in this country who don’t want to believe Greenspan and Bernanke, and don’t want to assume the responsibility for educating their politicians by voting them out, inadvertently compound the problem.
Yes, it is up to the voters. There is no one else to blame. Government is a reflection of the voters. As long as voters have the right to voter, the voters have what they deserve. They voters only have themselves to thank for it. But they have to stop being lazy and stop wallowing in the divisive, distracting partisan warfare, stop blindly pulling the party-lever, stop believing the lies that THEIR party is the more responsible party, because BOTH are so corrupt and irresponsible, it does not matter which is more or less corrupt.

That is, if you subtract one from infinity, it is still infinity.

Posted by: d.a.n at September 10, 2007 04:21 PM
Comment #232458

David and Dan:

You really still don’t get it. Don’t pick me out because I don’t ascribe 100% to your philosophy. I HAVE voted for non-incumbents and will in the future. I just don’t buy it as an all or nothing strategy, I don’t think you will convince anyone that it will work.

I plan to work within my party to make my feelings known quite vociferously. Were I free to travel, I would be knocking on congressional doors. You really need to give up the all or nothing stance and use more persuasive tactics than talking down to the folks you are trying so hard to convince. You put people off.

Posted by: womanmarine at September 10, 2007 04:52 PM
Comment #232460

David,

I like your analysis above in “THE FUTURE”.
You broke it down to a family and individual.
One or two parents could impact their childrens’ financial situation. That means different spending habits for the children of the elderly too.

Now multiply it times 77 million.

It’s good that Greenspan and Bernanke are finally sounding the alarm, but they should have been sounding the alarm a long, long time ago. Truly, it may be too late now. I just don’t think voters will think about the way they vote (for the 60% of eligible that even bother to voter) until it affects them directly in a very painful way. That’s a few years away still. It could come on slowly at first. Successive recessions will get deeper and longer, until eventually, one possibly turns into a depression that lasts about as long as it took to create it.

Also, 77 million baby boomers (i.e. senior citizens) are the biggest group that is good about getting out to vote. This could mean higher taxes on everyone else (younger workers) to keep Social Security and Medicare going, but it won’t be enough. The Social Security fund has already been plundered, and the so-called surplus in Social Security is nothing more than a worthless piece of paper.

Sad that it has to be this way, but the voters truly are the only ones that can change it, and until they finally become unhappy enough to hold Congress accountable (i.e. stop re-electing them), Congress will continue to grow more corrupt as the severely bloated government continues to grow to nightmare proportions. It’s already lasted far too long, and it will now take many decades to undo the damage. Just the $9 Trillion National Debt could take over 140 years to pay off. Add the $12.8 Trillion plundered from Social Security and 77 million baby boomers (26% of the nation’s population) when that money is needed most, and you have a recipe for economic instability (to say the least). But somehow, some people don’t think so. I wish I could look at the huge list of worsening ecnomic factors and believe the same thing. Where can I get some of those rose-colored glasses?

Posted by: d.a.n at September 10, 2007 04:56 PM
Comment #232462

D.a.n, Bernanke said earlier this year, ‘The time to act on the coming entitlement crisis in 10 years ago’, or words very similar.

Greenspan said earlier this year, the debt and entitlement crises threaten the very existence of democratic capitalism around the world.

The warnings don’t get more dire than these. Still, which politicians want to hear it, let alone act on them? Damn few, indeed. And the American public, even if they hear such warnings, simply don’t understand their meaning or import, due to their woefully inadequate education in economics and politics. They know things are not right. But, they don’t know how they are wrong and how they can be corrected. And politicians don’t want them to know either for election reasons.

Posted by: David R. Remer at September 10, 2007 05:05 PM
Comment #232463

womanmarine said: “I plan to work within my party to make my feelings known quite vociferously.”

Many voters have been doing that all along, womanmarine, and yet, here we are! The Party’s are not the solution. The politicians are not the solution. The voters are the solution using the only weapon and power the Constitution gives them, the VOTE! Which was always intended to be used first, and foremost, to remove politicians from power. No one needs to vote to allow politicians
to remain, they will take care of that all on their own.

The vote was the founding fathers answer to King George’s perpetual office for life. It was there answer to any politician who would use their power to keep their power (precisely what political parties first and foremost objective is), instead of solving the nation’s problems which they campaigned to do.

Posted by: David R. Remer at September 10, 2007 05:11 PM
Comment #232464
womanmarine wrote: David and Dan: You really still don’t get it.
Get what? You asked a question and I answered it. I have not singled you out or picked on you at all.
womanmarine wrote: Don’t pick me out because I don’t ascribe 100% to your philosophy.
That’s fine. But again, I have not picked on you, or been rude to you at all.
womanmarine wrote: I HAVE voted for non-incumbents and will in the future.
Good. Like I said, you may not be in the huge majority of the 60% of voters that even bother to vote.
womanmarine wrote: I just don’t buy it as an all or nothing strategy,
Fine. You have that right. No one said you didn’t.
womanmarine wrote: I don’t think you will convince anyone that it will work.
Others are already convinced. And that number will grow as the consequences of the voters’ own making grow more painful. Just like in the last Great Depression, when anti-incumbent voting was at one of the highest levels ever. David and I are merely saying sooner would be better than later.
womanmarine wrote: I plan to work within my party to make my feelings known quite vociferously.
OK. Good luck. Because parties don’t have the answers. Just look at Congress’ 18% approval rating. Look at the Main Strea Media calling Congress the Do-Nothing Congress. It appears to be well deserved when one looks at all what has been accomplished and what continueally goes ignored.
womanmarine wrote: Were I free to travel, I would be knocking on congressional doors. You really need to give up the all or nothing stance and use more persuasive tactics than talking down to the folks you are trying so hard to convince. You put people off.
I did not talk down to you. You asked a question and I answered it with no rudeness whatsoever. Others are free to relate their beliefs, and that alone does not equate to “talking down”. Please cut and paste from anywhere in this thread where I was rude to you.

Yes, I’m sure some people are put off. But many agree with VOID.
But the question is, how can anyone refute not rewarding irresponsible incumbent politicians with re-election?
No one said good politicians should be voted out (something there is very little danger of since Congress enjoys a 90% ot 95% re-election rate).
Those that probably get the most upset are the strong party loyalists that truly think THEIR party is better.
The problem with belief is history, and the overwhelming evidence of corruption and irresponsibility by BOTH parties.
When BOTH are so corrupt, what difference does it make which is the least corrupt.
Infinity minus one is still infinity.

Posted by: d.a.n at September 10, 2007 05:15 PM
Comment #232466
But the question is, how can anyone refute not rewarding irresponsible incumbent politicians with re-election?

This is the attitude I’m talking about. How can anyone dispute what you say is right? This leaves no room for discussion and puts others off.

Dan:

Just one example:

They voters only have themselves to thank for it. But they have to stop being lazy and stop wallowing in the divisive, distracting partisan warfare, stop blindly pulling the party-lever, stop believing the lies that THEIR party is the more responsible party, because BOTH are so corrupt and irresponsible, it does not matter which is more or less corrupt.
Posted by: womanmarine at September 10, 2007 05:29 PM
Comment #232467

The warnings don’t get more dire than these.
AAaaahhh…yes, you are right about that. However, why aren’t they more vocal about it? I suppose it wouldn’t do much good anyway. Most voters don’t even know who Bernanke and Greenspan are.

Still, which politicians want to hear it, let alone act on them? Damn few, indeed. And the American public, even if they hear such warnings,
I think most (if not all) know what is coming and many are in a mad rush to get theirs, pad their own cu$hy multimillion dollar retirement plans, and make sure they can ride out the rough times ahead.

…simply don’t understand their meaning or import, due to their woefully inadequate education in economics and politics.
True. 40% to 50% don’t even vote, know who their Congress persons are, much less their voting records, or that new money is created at a ration of 9-to-1 for every new bank loan; perpetuating inflation, bubbles, and the economic instability it creates.
They know things are not right. But, they don’t know how they are wrong and how they can be corrected. And politicians don’t want them to know either for election reasons.
That’s all the more reason to consider Congress as a whole perhaps? Like two teams on the football field. The losing team all shares in the loss. Perhaps that should apply to Congress persons? The sooner the better. At any rate, the voters will eventually arrive at that very conclusion when they are finally motivated by their joblessnes, homelessness, and hunger.
  • Posted by: d.a.n at September 10, 2007 05:30 PM
    Comment #232468

    Funny, I haven’t heard Greenspan or Bernake predict a depression. You guys have that documented? I suggest you forward it to CNN,FOX, the NYT and the Wash Post, because it will be a worldwide headline, and you both will up for Pulitzers if you author it.

    d.a.n.

    Discipline and virtue are great subjects for Sunday school, but I nor any other American needs you, OBL or anyone else preaching to the choir. We know what it takes to function.

    Yes, there is irresponsibility in government and people on a personal level, but we aren’t the slackers that you and David wish to cast us as. 300 million heads are better than one and have repeatedly shown that throughout our history. We may stumble along, but we mostly get it right, or at least as well or better than the rest of the world has. Stop counting us out before the bell.

    David, That’s great advice for your daughter, giving her as many options as she can handle. I just don’t think screaming the world is coming to an end serves anything but sensationalism. There’s a popular game of predicting the next depression every 5 or 10 years. Whatever happened to that depression that SMU professor Ravi Batra was selling back in the eighties? Oh. He was wrong.

    You don’t stop an over heated consumerism society that is created by Hollywood, Madison Avenue, and Wall Street, with full backing of a bloated pork barrel government by yelling at Voters or Joe Shmoe America. Jimmy Carter looked like an idiot when he did it. You educate with a campaign that enlists the grudging aid of Hollywood and the like that resets the goals of the American Dream. That’s leadership.

    I’m totally with Woman Marine on this. The world isn’t going to hell in a hand basket any faster than it was in the Greatest Generation or any other generation. You guys are just getting old and cranky. Eat some oatmeal.

    Posted by: alien from the planet zorg at September 10, 2007 05:31 PM
    Comment #232469

    I would like to echo Womanmarine in that sometimes there is a drowning effect rather than a dialog. I apprecate the simplification of her position, that she sees grey on the incumbants, not black or white. Having someone representing “some” of your interestes is better than voting them out and getting none of your interestes represented.

    Posted by: Edge at September 10, 2007 05:34 PM
    Comment #232470
    womanmarine wrote: d.a.n wrote: But the question is, how can anyone refute not rewarding irresponsible incumbent politicians with re-election?
    This is the attitude I’m talking about. How can anyone dispute what you say is right? This leaves no room for discussion and puts others off. womanmarine,

    Notice the bolded word “irresponsible” above. Surely you not advocating that we should re-elect irresponsible incumbent politicians are you?


    womanmarine wrote:
    Dan:
    Just one example:
    They voters only have themselves to thank for it. But they have to stop being lazy and stop wallowing in the divisive, distracting partisan warfare, stop blindly pulling the party-lever, stop believing the lies that THEIR party is the more responsible party, because BOTH are so corrupt and irresponsible, it does not matter which is more or less corrupt.

    How did I single you out?
    That is a statement about blind loyalties.
    I did not address you in that sentence.
    Are you saying misplaced partisan loyalties do not exist?
    Because they do.
    Surely, you are not saying blind loyalt it good are you?
    Thus, you assertions are unsubstantiated.

    Posted by: d.a.n at September 10, 2007 05:35 PM
    Comment #232471

    Dan:

    Your bolded word “irresponsible” gives pause as to who decides? You?

    And, Dan, you are addressing everyone in that sentence that doesn’t subscribe to VOID.

    Posted by: womanmarine at September 10, 2007 05:37 PM
    Comment #232472
    I’m totally with Woman Marine on this. The world isn’t going to hell in a hand basket any faster than it was in the Greatest Generation or any other generation. You guys are just getting old and cranky. Eat some oatmeal.
    You’re entitled to your opinion. Time will tell. Anyone that thinks $22 Trillion of federal debt is nothing to worry about could be in for a surprise.

    As for calling people old and cranky (and I’m only 49), that’s typical. No facts, no data, just name calling.

    Posted by: d.a.n at September 10, 2007 05:42 PM
    Comment #232473
    Dan: Your bolded word “irresponsible” gives pause as to who decides? You?
    Of course not. The voters decide. I wrote that above.
    Dan: And, Dan, you are addressing everyone in that sentence that doesn’t subscribe to VOID.
    Not true. We all have a choice. We are entitled to our own opinions. We still have freedoms. I’ve never supposed otherwise. Thus, that argument has no substance. Posted by: d.a.n at September 10, 2007 05:46 PM
    Comment #232474
    I would like to echo Womanmarine in that sometimes there is a drowning effect rather than a dialog. I apprecate the simplification of her position, that she sees grey on the incumbants, not black or white. Having someone representing “some” of your interestes is better than voting them out and getting none of your interestes represented.
    And that is fine.

    We are entitled to our opinions.

    While we may not agree, that does not justify turning it into a personal attack and resorting to name calling (as alien from planet zorg did above).

    Again, above, I wrote (in my opinion):

    • (1) we shouldn’t re-elect irresponsible incumbents.

    • (2) blind loyalty is a bad thing.

    Few (if any) are going to disagree with those two statements. But even if they do, that’s fine. So we disagree. But resorting to personal attacks, accusing others of being old and cranky, or rude, or “talking down”, or condescending isn’t justified. Why not debate the reasons rather than resorting to personal attacks?

    Posted by: d.a.n at September 10, 2007 05:59 PM
    Comment #232476

    alien said: “Funny, I haven’t heard Greenspan or Bernake predict a depression. You guys have that documented?”

    Guess you have to read between Greenspan’s lines when he says we may face the end of democratic capitalism?

    Damn, man! What the hell do you think he means by that? A minor setback?

    Google search “Greenspan democratic capitalism”. Why is it funny you haven’t heard this? I think it is very sad that you haven’t read this in the media or here at WB where it has been recited several times by myself.

    Posted by: David R. Remer at September 10, 2007 06:34 PM
    Comment #232479
    Having someone representing “some” of your interestes is better than voting them out and getting none of your interestes represented.
    And why would a challenger not represent “some” of your interests?
    alien from planet zorg wrote:any faster than it was in the Greatest Generation or any other generation. You guys are just getting old and cranky. Eat some oatmeal.
    Any faster?

    Does “any faster” that mean the world is going to hell in a hand basket at a slower rate or at the same rate?

    And who said the world was going to hell in a hand basket?

    As for economic downturns, they come and go. Recessions occur every 2 to 11 years for the last 46 years. We are probably entering a recesion now. No one can perfectly predict if and when another recession or depression will occur.

    However, many economic factors can certainly give us an idea of the probability of it. We have not had a depression since the Great Depression of 1929, but that does not mean it can’t happen again. In fact, that sort of thinking could be dangerous.

    David R. Remer gave many good reasons for concern.
    Here’s some more.

    So, why don’t you think these could possibly add up to economic instability. Recessions? Possibly even a depression? It’s not that far fetched. It’s happened before. It could happen again.

    David truly believes there is reason for concern.
    Bernanke and Greenspan do too.
    David Walker (U.S. Comptroller) strongly agrees.
    Lots of people agree.
    I happen to agree with David.

    At any rate, things could be much better.
    One thing can be said with considerable certainty.
    Things are likely to worsen if we don’t start addressing some of the nation’s most pressing problems, now growing in number and severity.

    The following have the potential to create significant economic instability:

    • $9 Trillion National Debt

    • $12.8 Trillion Social Security debt

    • $450 Billion pension debt

    • 77 million baby boomers (13,175 per day) becoming eligible for entitlements

    • manufacturing leaving the country; there are now more jobs in government than all manufacturing

    • corpocrisy, corporatism, and their influence on elected officials (83% of all federal campaign donations come from a mere 0.15% of all 200 million eligible voters

    • trade deficits

    • energy vulnerabilities; this one should not be underestimated

    • inflation; this erodes savings; not a good thing with 77 million baby boomers with insufficient retirement savings

    • Ongoing occupation of Iraq and war in Afghanistan

    • $20 Trillion of nation-wide personal debt

    • Billions per day in interest due each day on the $9 Trillion National Debt alone.

    • China holds over $1 Trillion of federal debt. This is a security issue too. That gives China power over our economy.

    • Increasing cost and declining quality of healthcare

    • Increasing cost and declining quality of education

    • Medicare shortfalls; hundreds of billions of unfunded liabilities

    • illegal immigration; pitting American citiens and illegal aliens against each other for fewer and fewer jobs as older Americans are forced to work longer

    These are growing and serious issues.
    No one said the world is coming to an end.
    But there are valid reasons for concern about the nation’s economic future.
    Bernanke, Greenspan, and David Walker agree.
    We should listen to them.

    Posted by: d.a.n at September 10, 2007 06:56 PM
    Comment #232481

    Dan/David:

    Ok. So there is $100 Trillion of assets our there owned by individual americans and corporations.

    This figure grows at about 6% a year. According to the rule of 72 that means that these assets should double every 12 years. That means that in 12 years there will be $200 Trillion in assets and in 24 years $400 Trillion in assets.

    Does that relate to the problem at all?

    Second, Bernanke says that if we do nothing, our children’s standard of living will fall 14% over ours.

    That putst them at about the same level as Canada. That is if we do nothing.

    What is so horrible about that?

    Craig

    Posted by: Craig Holmes at September 10, 2007 07:08 PM
    Comment #232482

    David,

    Guess you have to read between Greenspan’s lines when he says we may face the end of democratic capitalism?

    Damn, man! What the hell do you think he means by that? A minor setback?

    Google search “Greenspan democratic capitalism”. Why is it funny you haven’t heard this? I think it is very sad that you haven’t read this in the media or here at WB where it has been recited several times by myself.

    I have been away from the computer for a couple of months, but I had heard Greenspan’s comments on economic disparity. How exactly you get from that to a Great Depression, I’m not sure. I wonder what Greenspan means when he says things like eventually and in the long run? Maybe he is talking about long term consequences, not a looming Depression. It’s funny Greenspan talks about education as a solution, I wasn’t thinking of him in my response.

    Posted by: alien from the planet zorg at September 10, 2007 07:24 PM
    Comment #232483

    Craig, good questions?

    I tried to make the clear implication more than once, that before 2030 and long, long before 2080, economic contraction, unemployment, bankruptcies, homeownership losses, all increase on average year after year as the boomer’s children spend on parents health care, and investors grow more reticent to invest in U.S. treasuries as the national debt hits 12, 14, even 16 trillion dollars in the 2020’s.

    This is not an environment in which assets will double on a schedule based on the past productivity and consumer growth patterns. Also, Large percentages of those assets cannot be converted to cash for paying medical debts and supplementing retirement incomes.

    You said: “Second, Bernanke says that if we do nothing, our children’s standard of living will fall 14% over ours.”

    I missed that. Where does Bernanke say this?

    If you are referring to NewRetirement.com’s prediction of 14% of GDP spent on medical care by 2080, clearly, our economy will collapse long before that. The assumptions upon which that prediction was made, were that there would be no recessions or depressions between now and 2080, and that a sustained GDP growth kept the work force employed at the rate of 2000’s employment percentage, which was the baseline year for the projections.

    Those assumptions will not be valid going forward, as the 2/3 of the economy supported by consumption constricts and the wide basket of products and services shrinks, in deference to rising medical expenses.

    So, the outcome is not par with Canada, but, closer to what Greenspan says may be the collapse of democratic capitalism. Remember, Canada and Western Europe are facing similar demographic dilemmas, affecting the global economy as well in a negative fashion, save those up and coming economies with huge untapped productivity reserves in un- and under-employed populations today, like China, India, and Malaysia.

    Posted by: David R. Remer at September 10, 2007 07:31 PM
    Comment #232484

    alien, do the google search I recommended. It is pointless to respond to you until you are on the same page. You asked for documentation of what I say Greenspan said. I am not going to do your legwork for you. Look it up. Or, don’t, and act as if it was never said, because you never read it.

    The “end of democratic capitalism” will not happen without an economic collapse, which should be logically obvious.

    Posted by: David R. Remer at September 10, 2007 07:37 PM
    Comment #232485

    d.a.n.,

    While we may not agree, that does not justify turning it into a personal attack and resorting to name calling (as alien from planet zorg did above).

    I apologize if I offended you d.a.n. It was not intended as a personal attack. It was levity. A sense of humor often helps keep one from getting overly serious in these debates. I do not think you are old (I have no idea of your age). I don’t know if you are cranky ( I don’t live or work with you). Oatmeal is nutritious and tasty with cinnamon and sugar. I was characterizing your doom and gloom outlook. It IS old, cranky and in need of oatmeal.

    Perhaps I should use a smiley symbol more. Perhaps we all need to take a break from the internet.

    Posted by: alien from the planet zorg at September 10, 2007 07:52 PM
    Comment #232486

    Craig,

    Ahhh … but who owns those assets?

    Tell it to 90% of Americans who are in debt upto their eyeballs ($20 Trillion of personal debt; $22 Trillion federal Debt).

    A tiny 1% of the U.S. population owns 40% of all that wealth (up from 20% of all wealth in 1980).

    • Year 1929: 1% of population had 40% of all wealth

    • Year 1976: 1% of population had 20% of all wealth

    • Year 1983: 1% of population had 30% of all wealth

    • Year 2007: 1% of population has 40% of all wealth (see: Year 1929 above)

    • 60% of the U.S. population has only 5% of all wealth.

    • 40% of the U.S. population has a net worth of only $2,000.

    • 20% of the U.S. population has a negative net worth of -$9,000.

    Also, how do you know it will result in only a 14% drop in the standard of living is as far as the deterioration will go? That’s a really hard prediction to make. And how can it be 14% across the board? If that includes the upper wealthiest 1% of the U.S. population again, then it’s not very meaningful to 90% of the U.S. population whose standard of living dropped 50% (or more).

    An economic meltdown may not be so orderly either.
    And what makes you think Congress will do anything soon (or in time)? If we go by history, they will wait until the last minute, and it will be too late (again).

    See what the following people have to say about it:

    • David Walker (U.S. Comptroller)

    • Douglas Holtz-Eakin, director of the non-partisan Congressional Budget Office

    • Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget

    • Kent Conrad, a Democratic senator from North Dakota

    • Stuart Butler of the conservative Heritage Foundation

    • Alice Rivlin ; first director of the Congressional Budget Office

    • Leon Panetta, former White House budget director and chief of staff to President Clinton

    You have to look at the big picture.

    However, Craig, I’m encouraged that you are at least seeing a 14% fall in the standard of living if nothing is done (in time). However, how that fall of the standard of living breaks down in the quintiles would be interesting to see. As usual, the lower and middle income groups are going to suffer the majority of that decline in the standard of living. Also, does it account for the destabilizing bubbles along the way? Like the 1999 bubble where people lost trillions; many lost a large portion of their retirement savings? Like Black Monday, 1987? Like the current foreclosure meltdown (which isn’t over yet).

    Remember I predicted a recession in late 2006 that would occur in late 2007. You wrote:


    I will be still saying, we are average. The economy should perform at near historical norms. Then instead of an optimist I will be called a pesimist.
    Now, it looks a recession could be starting now. Some more jobs are going to be lost by this foreclosure meltdown, and inflation can’t be helped by the FED pumping $38 billion of new money into the banks. But the war in Iraq and Afghanistan, and the many other factors doesn’t make that a terribly hard prediction to make. And it doesn’t look like we’ll be leaving Iraq until after 2009 (when Bush is finally gone from office … unless someone replaces him that thinks we should stay there (e.g. John McCain, Fred Thompson, etc.)).

    Posted by: d.a.n at September 10, 2007 07:57 PM
    Comment #232487

    I did, David.

    My comments stand.

    You’ve already admitted that you “read between the lines”

    You are stating the obvious. A Nuclear War could also spell the end of democratic capitalism, as well as pestilence. He wasn’t channeling Nostra Damas. What exactly was the timeline and thrust in Greenspan’s remarks? That’s the problem in your analysis.

    Posted by: alien from the planet zorg at September 10, 2007 08:05 PM
    Comment #232488

    alien, if in fact you did look it up, then you reading it should have provided you with Greenspan’s timeline and thrust.

    So, did you look it up and read it? Or, do you have a question about the context of the article in which his comments appear?

    Posted by: David R. Remer at September 10, 2007 08:37 PM
    Comment #232496

    David,

    Google’s top result is a USA article on Greenspan’s comments before the Joint Economic Committee in 1995 or late 1994, about the disparity in wages at the top and bottom of the economic ladder.

    If you are referring to something else, you’ll have to be more specific and less Alan Greenspan-like by saying what you mean.

    I still don’t see him touting economic disaster anywhere, except in very long trendlines and generalities…IF NOTHING ELSE HAPPENS OR IS DONE.

    Having what I think of as a grasp of his outlook, I seriously doubt there is such a quote without liberal doses of “reading between the lines”

    Posted by: alien from the planet zorg at September 10, 2007 09:17 PM
    Comment #232497

    alien, just chalk it up to my dissemination of liberal misinformation then. The link is in one or more of previous economy articles, so, I already did my leg and homework. I will leave it to others to do theirs.

    Posted by: David R. Remer at September 10, 2007 09:38 PM
    Comment #232502

    alien from planet zorg,

    The following applies to credibility.
    You write above you don’t know how old I am, yet it was written above (e.g. 49).

    You don’t know the timeline and thrust of Greenspan’s and Bernanke’s, yet it is within their statements. And I’d add that the U.S. Comptroller, David Walker, is in agreement.

    In a previous thread, you incorrectly assumed I was a 911 Conspiracy demolition theorist. I am not.

    And then you challenged and/or questioned my comments on the definitions of momentum (momentum = mass x velocity) and acceleration (a = F/m).
    Yet, you seemingly withdrew later those assertions.

    That’s not a very good record.
    Sorry, but it was almost impossible not to notice.
    Note … smiley face —-> : )

    alien from planet zorg wrote:
    Perhaps I should use a smiley symbol more.

    Posted by: d.a.n at September 10, 2007 10:29 PM
    Comment #232503

    I come to this forum and scan the VOID webpage almost every day because I believe change is necessary. There are two ways change happens: 1) someone gains power within the system who answers to a panel (local or national, doesn’t matter) and to what they feel is right. Then they act on these admirable goals and try to improve the future, mostly not for themselves, but for everyone else. You’ve heard of these people. They are famous. That’s because the system doesn’t like a mover and a shaker. The system doesn’t like change. When one of them succeeds the fate of mankind is changed. 2) Revolution. A rapid change is put into effect that is usually initiated by the defeat or destruction of the system and a strong leader emerges who is popular among the unsatisfied crowds. The costs of this change are almost always higher than type 1 and damages are offset by a new system that inherits the mess the whole process created.

    Doomsday articles are not uncommon online. In fact, they are rather noxious and pervasive. The viperous tongues who put them in the media, it is my experience, seek dissent and attention. What suprised me was to find one on Watchblog. David, I understand that you put in lots of time to inform yourself to the best of your ability, but you should know better. To proclaim that it’s already too late and merely spew astounding numbers citing the incompetence of the nation’s leadership is something anyone can do. Such depressing and rabble rousing claims as the end of America do get people’s attention, and their negative attention at that. This thread degenerated into a doomsday dispute like any other. Hmm do we go out theorizing about these bad signs it was coming or these other bad signs. Or even better, to question someone’s ability as a voter. Madison did not trust the populace to control his new nation and shunned Greek democracy. Therefore to criticize the little influence every citizen is given in the future of thier country and how they choose to use this meager tool is disgusting. Education is needed, but not education that speaks of the end.

    I believe in never posting without suggesting a better method and asking a question, so here goes. Perhaps this thread would stimulate ideas and innovative efforts in the right direction if the topic had been opened in a more welcoming manner. I am not asking anyone to relinquish their passion for America’s future. Rather I’m asking them to take that energy and direct it towards something constructive. It’s not too late. I would forever respect Watchblog’s leading participants and managers, many of whom shared their thoughts here, to start a new forum with an acknowledgment that there is a problem, and it’ll take new ideas to fix it. In a Socratic form open-ended questions could be made instead of statements. You all know lots of numbers but it takes more than four or five brains to save a country. The next president of the United States is going to be a Democrat or Republican. Let’s start there.

    Questions: 1)Who has addressed this issue and HOW?
    Don’t just say no one has, find multiple people’s views.
    2)What are the current ways of addressing the debt, which seems to be at the core of this problem, and how can they be expanded, implemented, and capitalized?

    Posted by: Alastor's Heaven at September 10, 2007 10:34 PM
    Comment #232504

    p.s. Don’t quote the above comments in the thread as answers to my questions please. I have the determination and respect to read all of your opinions, and know what’s already been said.

    Posted by: Alastor's Heaven at September 10, 2007 10:37 PM
    Comment #232509

    Alastor’s Heaven,

    David R. Remer goes farther than simply asking a question such as yours that we have already heard a million times before. David R. Remer recommends action. Simply what he thinks voters will eventually do anyway; sooner than later would be better. That is his opinion and he is entitled to it. For you to say he “should know better” disrepects that, and borders on a personal assessment, rather than debating the reasons. If you disagree, then debate with reaons your why it can’t work rather than resorting to personal remarks such as “you should know better”.

    Again, David R. Remer is someone who takes action, and has inspired many more people all across the nation; more than you will ever know about. And those people have inspired others, and so on, and so on. Not because they were coerced and manipulated. Because they agreed with a very simple premise. Government is a reflection of the voters. It depends on the voters. You yourself, as many others, stress education. How many people do you know that have done as much or more?

    Alastor’s Heaven wrote: I believe in never posting without suggesting a better method and asking a question, so here goes.
    What method? Reformatting a web-page? It’s going to take much, much more than that to transform America (or a web-site).
    Alastor’s Heaven wrote: Perhaps this thread would stimulate ideas and innovative efforts in the right direction if the topic had been opened in a more welcoming manner.
    How? How is it not welcoming. Just because people disagree does not mean it is not welcoming. David R. Remer does not own WatchBlog. The format is not entirely up to him. Undoubtedly, you may have observed the terribly partisan layout. It does seem to fuel partisan warfare. But, that is simultaneously part of its problem and popularity.
    Alastor’s Heaven wrote: I am not asking anyone to relinquish their passion for America’s future. Rather I’m asking them to take that energy and direct it towards something constructive.
    That’s very nebuluos. What exactly do you have in mind? And can you lend the time and money to make it happen? This site offers debate on many topics from many perspectives. The three column nature appears to fuel partisan warfare, but it also appears to attract a lot of readers and writers.
    Alastor’s Heaven wrote: It’s not too late. I would forever respect Watchblog’s leading participants and managers, many of whom shared their thoughts here, to start a new forum with an acknowledgment that there is a problem,
    Too late? For this blog, or America? Do you expect, based on this one comment, WatchBlog will transform into something else that has not been very well defined? Seriously?
    Alastor’s Heaven wrote: It’s not too late. I would forever respect Watchblog’s leading participants and managers, many of whom shared their thoughts here, to start a new forum with an acknowledgment that there is a problem,
    What problem? With the forum, or with the nation?
    Alastor’s Heaven wrote: and it’ll take new ideas to fix it. In a Socratic form open-ended questions could be made instead of statements.
    Questions, and statements, and answers are all important and valuable. Questions alone are pointless without answers and statements, and somebody willing to research them.
    Alastor’s Heaven wrote: You all know lots of numbers but it takes more than four or five brains to save a country.
    And that is a good thing. That is what we have here. You seem to make it sound like a bad thing. Few are willing to do that sort of homework. Especially knowing it will be challenged. Thus, we have many brains debating many sides of an issue. What you are suggesting appears to already exist.
    Alastor’s Heaven wrote: The next president of the United States is going to be a Democrat or Republican. Let’s start there.
    Maybe. Not necessarily. Though unlikely, it could be an independent. Remember Perot. While he didn’t stand much of a chance of winning, he influenced the outcome and debate.

    I’m not at all sure what you are suggesting, but it isn’t likely to be well received when you are telling those that you hope to agree with you that they “should know better”, and completely forget or ignore that they are entitled to their opinion too.

    Now, what are the specifics of your “method”? Could you please elaborate in more detail?

    Posted by: d.a.n at September 10, 2007 11:42 PM
    Comment #232513

    I think there are six reason why voters keep reelecting irresponsible incumbents.
    1.They are party faithful and don’t question anything the party says.
    2.They either don’t know the incumbents voting record or don’t care about it.
    3.They rather stay with the known evil than chance electing a worse evil.
    4.They like the pork the incumbent brings to their state.
    5.They just don’t like the challenger.
    6.The challenger has a proven record of being even more irresponsible than the incumbent.
    Of the six only #6 is close to a valid reason to vote for an irresponsible incumbent. And it’s on very shaky ground.

    BTW, David and d.a.n, A little off the subject. But I’m in the running again for school board seat I ran for last election. The incumbent had a major stroke and had to resign his position. Let ya know 3 Oct 07 how it comes out.

    Posted by: Ron Brown at September 11, 2007 12:08 AM
    Comment #232516

    David:

    Sorry for the long quote. I did this because it is Bernanke (October 2006 speech found on the Fed’s website) and because it is so central to one your basic thesis:

    In recent work, economists at the Board of Governors have used a stylized model to get a rough estimate of the magnitudes of the intergenerational tradeoffs that we face.1 Their analysis takes as a starting point a baseline scenario in which U.S. demographics remain (hypothetically) the same in the future as they are today. In this counterfactual scenario, the ratio of workers to the overall population is assumed to remain at its current level over time and per capita consumption grows with productivity. Now in reality, as I have noted, an aging population will reduce labor force participation, so the likely future trajectory of per capita consumption over time lies below that implied by the baseline scenario that assumes away the demographic change. The shape of the actual consumption trajectory depends, however, on the saving behavior of the current generation. If today’s saving rate is low, then the current generation can enjoy consumption close to what it would have been if the aging issue did not exist. However, in this case, the burden on future generations will be relatively great. Alternatively, the current generation could consume less and save more, which would allow the consumption of future generations to be closer to what it would have been in the absence of population aging.

    How big are these effects? To assess magnitudes, the Board economists first examined the case in which the nation saves at its current rate for the next twenty years, thereby largely insulating the baby-boom generation from the effects of the coming demographic transition. After that, they assumed, consumption falls and saving rates rise, with all future generations experiencing the same percentage reduction in consumption relative to the baseline in which no population aging occurs. Their rough calculations suggest that, in this case, the per capita consumption of future generations would be about 14 percent less than what it would have been in the absence of demographic change.

    For comparison, they next considered the case in which the burden of demographic change is shared more equally among current and future generations. They considered a case in which the national saving rate, instead of staying at its current level for the next twenty years, rises immediately. Further, they asked by how much today’s saving rate would have to increase to lead to equal burden-sharing among current and future generations. (“Equal burden-sharing” is interpreted to mean that the current generation and all future generations experience the same percentage reduction in per capita consumption relative to the baseline scenario without population aging.) They found that equal burden-sharing across generations could be achieved by an immediate reduction in per capita consumption on the order of 4 percent (or, since consumption is about two-thirds of output, by an increase in national saving of about 3 percentage points.) This case obviously involves greater sacrifice by the current generation, but the payoff is that all future generations enjoy per capita consumption that is only 4 percent, rather than 14 percent, below what it would have been in the absence of population aging. The large improvement in the estimated living standards of future generations arises because of the extra capital bequeathed to them by virtue of the current generation’s assumed higher rate of saving.

    These numbers shouldn’t be taken literally but the basic lesson is surely right—that the decisions that we make over the next few decades will matter greatly for the living standards of our children and grandchildren. If we don’t begin soon to provide for the coming demographic transition, the relative burden on future generations may be significantly greater than it otherwise could have been.2


    From this data I looked for a country whose standard of living was about 14% lower than ours. I found Canada. It could be Europe as well. If we do nothing our children could have a standard of living like that of today’s Europeans.

    I’m all for “doing something” but even if we do nothing, it could be worse.

    Craig

    Posted by: Craig Holmes at September 11, 2007 12:33 AM
    Comment #232517

    Hey Ron, Great!
    I wish you luck on the School Board race.

    BTW, your six reasons are pretty darn accurate.
    It is bad for voters when the challenger is worse. Then you are pretty much stuck with the least worse of the worst. Still, I might still consider a challenger just to keep the incumbent from growing more powerful and corrupt.

    Posted by: d.a.n at September 11, 2007 12:33 AM
    Comment #232518
    I’m all for “doing something” but even if we do nothing, it could be worse.
    Yes, it can always be worse. That’s what worries me. This type of thing may undermine what checks and balances we have at the moment. With the growing disparity and government is essentially FOR-SALE, there is very good reason for concern. I think we will be very lucky if a 14% fall in the standard of living is the worst of it. Again, that 14% is not homogeneous. The lower income and middle income groups could be looking at more that 14% in the decline of their standard of living. Posted by: d.a.n at September 11, 2007 12:40 AM
    Comment #232523

    Craig, it is important to take Bernanke’s words to heart: “These numbers shouldn’t be taken literally but the basic lesson is surely right—that the decisions that we make over the next few decades will matter greatly for the living standards of our children and grandchildren.”

    This very hypothetical model DOES NOT incorporate the national debt or its growth and possible attending recessions, calamities, or emergencies which could dramatically increase national debt to GDP, raise interest rates, and cause unemployment, loss of Medicare and SS benefits, and the many other consequences I mention in my article.

    In fact, this model appears to assume demographic aging medical and retirement costs will come from private savings alone. His scenario 1 is not even in the realm of possibility, used only for comparison, and his scenario 2 assumes private savings increase right away, which of course is opposite to what is happening in reality, a negative savings rate.

    I appreciate your citing the passage, as it eliminates my confusion over the 14% rate which is coincidentally the same number used by the link I provided as percent of GDP in 2080 (all other things being equal) of medical care spending.

    Posted by: David R. Remer at September 11, 2007 03:34 AM
    Comment #232525

    Alastor’s, the Socratic method was limited to an examination of assumptions and definitional terms of language in conjunction with the exercise of logic. When discussing economics, there is a limit to what one can accomplish with the Socratic method. At some point, real numbers and data have to enter into the debate and evidence the merits and pitfalls of inaction and various actions.

    Reality trumps the Socratic Dialectic outcomes of what should have been, everytime. There is a reason Aristotle was so incredibly wrong about the universe about him, he lacked real world measurement and data in those areas in which he was so very wrong. This does not detract from his genius for his time, or the volume of ideas and discovery which were very accurate. But, Aristotle’s knowledge and inquiry stood on the shoulders of only several centuries of empirical thought and investigation and inquiry.

    And economics today has the benefit of several more centuries of inquiry, empirical thought and investigation, as well as a couple decades of that miraculous tool called computers.

    It would be a marvel however, if we could turn on the Tele and watch a debate over economics between Aristotle and Adam Smith, moderated by Alan Greenspan. Now that would be a show worth TIVO or a DVR for posterity. :-)

    My article assumed our political - economic system would continue until it couldn’t. A debate over economic systems is a worthy debate, but, not the subject of this article I wrote. This article pays somber homage to the passing of the 9 Trillion dollar (and growing) national debt mark in the face of immense shortfalls in retirement savings to meet the needs of some 70 million plus retiring and aging Americans.

    Since I published this article less than 19 hours ago, about 3/4 of a million dollars have been added to the debt for every minute that has passed. 19 hours or, 1,140 minutes have passed, raising the national debt by about 855 Million Dollars since this article was published. I think this warrants a discussion and projection of our future using real numbers, don’t you? Or, do you think I am just being alarmist without a cause?

    Has kind of a ring to it, Alarmist without a cause! Too bad there is more than ample cause for alarm, and no answers forthcoming from our government’s political hacks.

    Posted by: David R. Remer at September 11, 2007 04:13 AM
    Comment #232534

    David,

    To go WAYYYYYYYY back to the beginning of the thread, all I was trying to say (badly, mind you. Sleep dep and crying babies do not make for good blogging) was that it seemed like you were putting the cart before the horse. You can vote all the incumbents out of office you like, but until the American public realizes just how bad our economic situation is, no elected official, incumbent or freshman, will do anything about it because to do so would be political suicide.

    Sadly, most people prefer to keep their heads in the sand. That is why social and moral issues are always at the top of everyone’s list why voters vote as they do. It’s far simpler and more satisfying to vote based on emotional ideas such as abortion, war, or homosexuality than it is to vote on financial issues, and facing up to this country’s economic irresponsibility would mean having to face up to their own. As long as the credit card companies keep raising their limits, the American consumer will continue to spend spend spend. Big screen TVs, $600 video games systems and $500 phones do a great job of keeping people busy so they don’t really think about the consequences of their actions, or inactions for that matter.

    Craig,
    If the economy of the US contracted by 14%, it would do far worse things than simply reduce our comfort level to that of Canadians. As goes our economy, so goes the world, and if that happened to the US it would have a ripple effect that would make the Great Depression look like a bad mood. China, since it carries so much of our debt and trades so much with us, would get sucked down the rabbit hole right behind, and with that, so would S. Korea and Japan. Ditto India. And the sheer gravitational force of such an occurance would knock the EU for a loop as well, since a great many countries in it, especially in Eastern Europe, keep a lot of liquidity in US dollars. 14% would not be Canada, 14% would be a nightmare.

    This is not a problem we can just wish away, ladies and gentlemen. Until the American Consumers change their habits, this spiral will continue. We are addicted to debt spending, and, like any good addict wishing to sober up, we first need to admit there is a problem. Until that happens, it will only get worse.

    L

    Posted by: leatherankh at September 11, 2007 09:01 AM
    Comment #232539

    womanmarine
    Blaming the voters does little to rectify the fact that there were no alternatives to vote for, in either party. What is a voter to do?

    last time i checked there where more than two parties that could be elected into office. the failure of us the voters to remove them from our government has led to this debacle. stop voting for either of the two evil parties.


    Posted by: john at September 11, 2007 09:40 AM
    Comment #232542

    the only way we as voters can definitivly stop pandering to multi-billion dollar coorperations and millionaire & billionaire elite intrests is to stop voting them into ploitical offices.

    such politicians will constantly and consistantly pass legislation that predominantly supports their peersnot their majority middle income and poor constituants.

    a voter revolution must take place to remove corrupt influence in state and federal ploitics. Is a government of the wealthy truely of the people by the people or for the people????

    we live in a country where the elite wealthy determine policies for their contemporaries not for the majority of americans. A very large percentage of our elected officials make much much more personal income than their salaries as representatives provide. wouldnt it be nice if the pay our government officials recieved was actually more than their “other” income, an actual financial incentive to do their job??

    Stop electing officials that dont need the income then politics will cease to be a hobby of the elite and will become a true job that the politicians will do because their livlihood depends on it.


    Placing the blame of our current crisis in government is simplistic and honestly stupid. It is like blaming a parent for the poor decisions of their adult children since after all we put them on tis planet. the blame falls squarely on the politicians. We give them power and trust and they constantly betray that confidence. it is time to put a stop to this and remove the elite infesting our government.

    i love my country with my whole heart, i fear and distrust my government.

    Posted by: john at September 11, 2007 10:15 AM
    Comment #232543

    the only way we as voters can definitivly stop pandering to multi-billion dollar coorperations and millionaire & billionaire elite intrests is to stop voting them into ploitical offices.

    such politicians will constantly and consistantly pass legislation that predominantly supports their peersnot their majority middle income and poor constituants.

    a voter revolution must take place to remove corrupt influence in state and federal ploitics. Is a government of the wealthy truely of the people by the people or for the people????

    we live in a country where the elite wealthy determine policies for their contemporaries not for the majority of americans. A very large percentage of our elected officials make much much more personal income than their salaries as representatives provide. wouldnt it be nice if the pay our government officials recieved was actually more than their “other” income, an actual financial incentive to do their job??

    Stop electing officials that dont need the income then politics will cease to be a hobby of the elite and will become a true job that the politicians will do because their livlihood depends on it.


    Placing the blame of our current crisis in government on the voters is simplistic and honestly stupid. It is like blaming a parent for the poor decisions of their adult children since after all we put them on tis planet. the blame falls squarely on the politicians. We give them power and trust and they constantly betray that confidence. it is time to put a stop to this and remove the elite infesting our government.

    i love my country with my whole heart, i fear and distrust my government.

    Posted by: john at September 11, 2007 10:17 AM
    Comment #232545
    If the economy of the US contracted by 14%, it would do far worse things than simply reduce our comfort level to that of Canadians. As goes our economy, so goes the world, and if that happened to the US it would have a ripple effect that would make the Great Depression look like a bad mood.
    Possibly. An economic melt-down is not all that far fetched.

    It could happen like T H I S.

    Yet, those that believe so are often labeled “alarmist”, “chicken little”, “dooms-dayer”, “pessimist”, etc. It does not seem to matter that two FED Chairmen and the U.S. Comptroller are making dire warnings too (people that know quite a lot about economics).

    I really hope that the growing number of worsening economic FACTORs don’t lead to economic instability, but it is valid reason for concern. Especially when Do-Nothing Congress continues to let the most serious problems to grow in number and severity.

    John wrote: the only way we as voters can definitivly stop pandering to multi-billion dollar coorperations and millionaire & billionaire elite intrests is to stop voting them into ploitical offices.
    John, I agree. Rewarding corruption simply begets more of it. It doesn’t make a bit of sense does it? But there is is. Why?

    Did you know that 83% of all federal campaign donations come from only 0.1% of the 302 million people in the U.S. ?
    That is one tenth of one percent.
    That is essentially 300,000 people donating $6667 per person (on average).
    The remaining 99.9% of the U.S. population only donates $2 per person (on average).
    So, how can the remaining 99.9% of the U.S. population compete with that?
    Few (if any) politicians will address campaign finance reform.
    Most (if not all) are FOR-SALE.
    But most voters repeatedly reward them with 90% to 95% re-election rates.
    How is it Congress has a dismal 18% approval rating, but a 90% to 95% re-election rate since 1996?
    This seems very inconsistent.
    What is causing it?
    Could it be partisan loyalties.
    When most voters go to vote, do most still pull the party-lever?
    That appears to be the only thing that can explain why Congress enjoys a 90% to 95% re-election rate when the voters simultaneously give them one of the lowest (18%) approval ratings ever recorded.
    The two-party duopoly has a powerful influence on the voters, and it will probably continue until the voters finally have a different motivation (i.e. painful consequences) to question their partisan loyalties. However, that is very hard to do, because of the fear fueled by EACH party to fear the OTHER party. Thus, voters are distracted by their fear of the OTHER party winning seats from recognizing that BOTH parties are so corrupt and irresponsible, it simply doesn’t matter which is worse.

  • Posted by: d.a.n at September 11, 2007 10:47 AM
    Comment #232546

    d.a.n.

    Your age is now noted. It escaped me before. It was, however, irrelevant as it was a comment on the character of yours and David’s arguments, not a personal attack, as I’ve already stated.

    I do not know what speech David is refering to since he has not linked it, refused to cite it, but used it to buttress his argument that we need to be concerned that we are headed for the end of democratic capitalism or a depression. So your statement about a timeline is off the mark. I know that Greenspan only made comments about Education being an important part of responsible consummerism in a very long term approach to dealing with the problem of a low savings rate.

    If you and David believe that either Greenspan or Bernake have said that we are approaching a depression, as David’s piece makes a case for, It is your beliefs that are incredible. That is the argument I made and stand by.

    As to the debate on the 911 conspiracy, you have mischaracterized my arguments, but that discussion is best left for that thread.

    Keep on smiling, and thanks for the challenges. They make me smile.


    As to the 911 conspiracy theory, you are mischaractering my positions, but that discussion is best kept in that thread.

    Posted by: alien from the planet zorg at September 11, 2007 11:14 AM
    Comment #232549
    John wrote: Placing the blame of our current crisis in government on the voters is simplistic and honestly stupid.
    It is NOT only voters OR only politicians.

    It is BOTH.
    That is everyone that votes.
    Who else can we blame?
    In a voting nation, government is a reflection of the voters. 200 million Americans are of voting age. Only a small fraction of one percent of all Americans are politicians. Voters choose them. Unfortunately, voters choose (90% of the time) the candidate that spends the most money on the campaign. Voters allow themselves to be influenced by money. So it is no wonder politicians are trolling everywhere for money for their campaign war chests. Unfortunately, 83% of that money comes from a tiny 0.15% of all 200 million eligible voters. Yet, the remaining 99.85% of the voters elect (90% of the time) the candidates essentially supported by a tiny percentage of the population.

    So it appears that too many voters are too easily manipulated. Thus, voters have to bear some of the responsibility for that. And they will … they will suffer the painful consequences. And those consequences are what will hopefully lead to real reform. If not, then the oppression will eventually lead to civil war and revolution.

    But revolation does not seem likely at the moment when most voters seem to be happy enough to reward politicians with 90% to 95% re-election rates.

    John wrote: The blame falls squarely on the politicians. We [voters] give them power and trust and they constantly betray that confidence.
    Those two sentences are inconsistent.

    The voters elected the politicians.
    So how can voters not bear some of the responsibility?
    How can most voters be excuses from repeatedly rewarding irresponsible incumbent politicians with 90% to 95% re-election rates?

    Again, it is BOTH politicians and the voters that elect repeatedly re-elect them.
    Even if all of your choices stink, that’s still the voters fault too for not running candidates with more integrity, and for repeatedly rewarding incumbents with re-election; letting them grow more powerful and more corrupt, and more difficult to remove from office, since voters also have a bad habit of voting for the candidate that spends the most money in 90% of elections.

    As long as the voters have the right to vote, they are equally culpable.
    Voters have the government they deserve.
    Congress has a 90%-to-95% re-election rate (since 1996). How are voters not also responsible for that? How about the 40% to 50% of voters that don’t even bother to vote? 90% of elections are won by the candidate that spends the most moeny. You are correct in recommending that voters stop rewarding bad politicians with re-election, but only the voters can change it. That means the voters responsible for the way they vote too.
    ___________

    alien from planet zorg wrote: d.a.n. Your age is now noted. It escaped me before. It was, however, irrelevant as it was a comment on the character of yours and David’s arguments, not a personal attack, as I’ve already stated.
    That’s debatable. Calling two people “cranky old men” is difficult to interpret as anything but that. And name calling like that is usually the first sign of a weak argument; a substitute for a strong argument. Also, that along with the misinterpreations in the other thread support the lack of thoroughness in reading what people have written, and then mischaracterizing it. You already admitted to that mischaracterization in the other thread (after it was clearly dissected and proven as a mischaracterization).
    alien from planet zorg wrote: I do not know what speech David is refering to since he has not linked it, refused to cite it,
    Well, if you Googled it, you’d find the timeline and thrust of their many statements. Greenspan and Bernanke, and David Walker (U.S. Comptroller) have been warning us for a couple of years now. They understand how dangerous the debt is. Unfortunately, the Main Stream Media (MSM) doesn’t give it much publicity. It gets VERY little attention. Only some financial channels report on it, and it is then only snippets. Most Americans are not even aware of the $9 Trillion National Debt. But 40% to 50% of voters don’t even know who their Congress persons are, and 20% of children in public schools can’t even point to the U.S.A. on a world map.
    alien from planet zorg wrote: So your statement about a timeline is off the mark.
    Not true. You even asked above:
    alien from planet zorg wrote: What exactly was the timeline and thrust in Greenspan’s remarks? That’s the problem in your analysis.
    So how it is off the mark is another mystery. You would know the answer if you simply looked for it. You don’t even know, yet claim it as a problem with the analysis. That’s a complete non-sequitur. And then you blame David for not doing your research for you?
    alien from planet zorg wrote: If you and David believe that either Greenspan or Bernake have said that we are approaching a depression, as David’s piece makes a case for, It is your beliefs that are incredible. That is the argument I made and stand by.
    To ignore the potential for an economic meltdown is foolish. Especially when the current and former FED chairmen, and the U.S. Comptroller are warning us of the potential for serious economic instability. Another Great Depression is not far fetched when you examine history and the many FACTORS. While others offer supporting facts, data, commentary, and analysis, you only offer opinion. It’s not too hard to shoot that full of holes.
    alien from planet zorg wrote: (NOTE#1)As to the debate on the 911 conspiracy, you have mischaracterized my arguments, but that discussion is best left for that thread.
    Not true. I invite anyone to go read it and judge for themselves. You finally backpedaled and wrote:
    alien from planet zorg wrote: d.a.n., Perhaps the problem is one of communication.
    Both of the supposed Holes you presented were both discredited.
    alien from planet zorg wrote: Keep on smiling, and thanks for the challenges. They make me smile.
    Me too. It is good that you can still find humor in it after all that.
    alien from planet zorg wrote: As to the 911 conspiracy theory, you are mischaractering my positions, but that discussion is best kept in that thread.
    Hmmmm … Didn’t we just cover that? See (NOTE#1) above.
  • Posted by: d.a.n at September 11, 2007 11:59 AM
    Comment #232553

    John:

    last time i checked there where more than two parties that could be elected into office. the failure of us the voters to remove them from our government has led to this debacle. stop voting for either of the two evil parties.

    And if they are not on the ballot? What then?

    Posted by: womanmarine at September 11, 2007 12:46 PM
    Comment #232555
    John: last time i checked there where more than two parties that could be elected into office. the failure of us the voters to remove them from our government has led to this debacle. stop voting for either of the two evil parties.
    womanmarine wrote: And if they are not on the ballot? What then?
    Then it’s a tough choice. And it may take more than one election to make things better. But there are guidelines (a four step process). See [3] below.
    • [1] Research the candidates. Look at their voting records (not just what they say). Avoid being seduced into the circular, divisive, distracting, petty, partisan warfare that pits voters against each other, and allows irresponsible incumbent politicians to enjoy their cu$hy, coveted incumbencies while ignoring the nation’s pressing problems, that are growing in number and severity. The partisan warfare is how irresponsible incumbent politicians tap-into your laziness to distract you from more substantive issues and the politicians’ failure to do their job to adequately address those issues.
    • [2] Presidential elections usually have many candidates, so the likelihood of all candidates being equally unacceptable is unlikely. However, for an election of any office in which there are no good candidates and no incumbent (i.e. all candidates are equally unacceptable), then why give any of them your valuable vote? If a write-in is allowed, do that instead. It is perfectly acceptable to refuse to give your vote to any candidate if you believe none are acceptable. However, voters that simply don’t care enough to vote at all, or adequately research their choices, are doing themselves and others a disservice. But, please do not vote merely for the sake of voting. An uninformed voter is worse than a non-voter.
    • [3] If there are no good candidates (i.e. all candidates are about equally unacceptable), it is best to vote for a non-incumbent (i.e. challenger) rather than reward the irresponsible incumbent by re-electing them, and allowing them to grow more powerful and more irresponsible. We were never supposed to re-elect irresponsible incumbents. Unfortunately, that happens often, merely because of blind party loyalty. Blind party loyalty merely empowers both main parties to keep taking turns being irresponsible, and keeps their incumbency rates high (e.g. 90% or higher); essentially rewarding Congress and telling Congress to continue being irresponsible, FOR-SALE, and corrupt. Parties encourage straight-ticket voting, but that is the lazy way. That is how parties tap-into your laziness to trick you into pulling the party-lever, instead of doing your own thinking for yourself.
    • [4] If there is a good candidate, vote for that candidate. Don’t just vote for the lesser of two evils. If all of the candidates are bad, then vote for the non-incumbent instead of rewarding the incumbent (or if there is no incumbent, then don’t give your vote to any of them). And, do not rely on party alone. Don’t blindly pull the party-lever (i.e. straight-ticket). Study each candidates’ voting records, philosophies, and/or platform. While you may be tempted to merely vote for a candidate merely because they belong to a particular party, they may not even remotely represent your beliefs. An uninformed vote is worse than no vote.
    Posted by: d.a.n at September 11, 2007 01:21 PM
    Comment #232564

    d.a.n,
    You are certainly argumentative, but alas, so am I.

    Again, to those with a sense of humor and a good grasp of english, I think it is evident that my statement was not a personal attack. I’ve told you in even more plain english that it wasn’t, yet you persist.

    My point regarding David’s post, as much as you continue to ignore it, is that he overreached when he attempted to change concern by Bernake and Greenspan with consumerism, into a path towards a major economic meltdown and recession. It was overblown, continues to be overblown, and your attempts to reinterpret their remarks doesn’t make it less so.

    If that USA article I refered to WAS the link he was refering to, David never confirmed it. It doesn’t support his overstatement nor yours.

    My asking the question was Socratic in nature, not ignorance. The timeline was extremely long. His approach was education…which would imply a generation or more…IF NOTHING CHANGED…which is unlikely.

    Rather than taking an overly literal interpretation of my remarks, for the purpose of a silly defense of your argument, perhaps you should stick to literal interpretations of the Fed chiefs remarks rather than defending a “between the lines” reading by David.

    Again, I see no reason to sidetrack this post to argue another thread in this thread. If you wish to do so, invite me to that thread where I’ll be happy to defend my questions of your post.

    As always, I enjoy the intellectual jousts.

    Posted by: alien from the planet zorg at September 11, 2007 02:16 PM
    Comment #232566

    john, your argument contradicts itself. First you say: “Stop electing officials that dont need the income then politics will cease to be a hobby of the elite and will become a true job that the politicians will do because their livlihood depends on it.”

    You are telling voters to stop doing something as a remedy. Which clearly puts the responsibility for change in the hands of the voters. But, then you entirely contradict your statement above by saying:

    “Placing the blame of our current crisis in government on the voters is simplistic and honestly stupid.”

    Posted by: David R. Remer at September 11, 2007 02:25 PM
    Comment #232567

    Alien, your entire argument about this article overreaching is invalid, because your response is that debt doesn’t matter and can’t undermine the economy to the point of collapse which are the main arguments put forth in my article, which makes your argument pure and utter nonsense as any student of economics knows from a cursory reading of the history of economic meltdowns in places like Brazil and the USSR.

    Posted by: David R. Remer at September 11, 2007 02:29 PM
    Comment #232576

    David,

    No, that isn’t my response. My response is that it’s not an impending crisis. There are no Economics of Mass Destruction about to explode at the door. My response is that we can resolve these issues and likely will.

    You make several valid points in this article, but the opening tone IS overreaching. When you stated that Greenspan and Bernake supported this dire tone, I immediately recognized the weakness of the post. That statement simply isn’t true.

    The problem really isn’t entitlements, it’s how they have been implemented. We need to look at another entitlement..Healthcare,in fact.

    Tax structures are something else we need to look at. The criminal diversion of the Social Security Fund is another issue. Trade policy matters.

    I don’t believe it helps to press the panic button on the economy, it’s simply not realistic to say we have an unstable economy. Could we get there? Sure.

    Educating people that living like characters in the movies is both often unrealistic and driven by product placement monies bent on getting people to overspend. Teaching basic economics and expanding networks like C-span to actually inform the electorate are also prime issues at the heart of this problem.

    We entered the 20th century by changing slowly from an agricultural, rural society to an urban, industrial society. We went from a mostly illiterate electorate to free education for the masses. We need to likewise invest in deepening the education we give to our children to meet the 21st century.

    Posted by: alien from the planet zorg at September 11, 2007 03:16 PM
    Comment #232579
    alien from planet zorg wrote: d.a.n, You are certainly argumentative, but alas, so am I.
    That too is personal. Any time the word “you” is used, it’s usually (not always) a personal attack, criticism, slight, etc.

    Now, let me show what the U.S. Comptroller wrote:

      Drawing parallels with the end of the Roman empire, Mr Walker warned there were “striking similarities” between America’s current situation and the factors that brought down Rome, including “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government”.

    How about them apples, eh?

    Do you still want to downplay the seriousness?

    Mr. David Walker’s views carry weight because he is a non-partisan figure in charge of the Government Accountability Office (GAO), often described as the investigative arm of the U.S. Congress. Care to explain this away too? Or continue down a path (again), as in the other thread, where back-pedaling and crawfishing is the final outcome?

    Want to read more of what the U.S. Comptroller said? READ THIS

    And, as if that weren’t enough, Bernanke and Greenspan warned:

      August 14 2007: Federal Reserve Chairman Ben S. Bernanke warned Congress yesterday of a “fiscal crisis” if it doesn’t curb the projected growth of federal spending on retirement and health-care programs.
      Echoing similar warnings by his predecessor, Alan Greenspan, Bernanke told the Senate Budget Committee that “the effects on the U.S. economy would be severe” if the government’s debt were allowed to balloon as forecast.

    Unfortunately, they are ignored. After all, Greenspan has been warning us several years now, and the debt just gets bigger and bigger.

      Friday, November 4, 2005: Federal Reserve Chairman Alan Greenspan said yesterday that the U.S. economy is in generally good health but will suffer in coming years unless Congress slows the growth of federal budget deficits.

    And the U.S. Comptroller went on to say:

      “Virtually no one foresaw the Great Depression of the 1930s, or the crises
      (that) affected Japan and Southeast Asia in the early and late 1990s, respectively. In fact, each downturn was preceded by a period of non-inflationary growth exuberant enough to lead many commentators to suggest that a ‘new era’ had arrived,” the bank said in its latest annual report.
      :
      “They need to make fiscal responsibility and inter-generational equity one of their top priorities. If they do, I think we have a chance to turn this around but if they don’t, I think the risk of a serious crisis rises considerably”.

    And on 13-Aug-2007, David Walker said:

      The US government is on a “burning platform” of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon, the country’s top government inspector has warned.

    Personally, I think it may be too late already, but the sooner we get back on the right track, the less time it will take to avert a crisis. And anyone that doesn’t look at the big picture and see the potential for a economic crisis needs to take off their rose-colored glasses.

    But then Greenspan, Bernanke, Walker and the rest of us so-called doomsdayers don’t have the rose-colored crystal ball like the one from planet zorg, where the sun is rose colored, and all zorgians wear rose-colored glasses, and drink rose-colored koolaide.

    Posted by: d.a.n at September 11, 2007 03:39 PM
    Comment #232587

    David:

    My read on the Fed’s comments is that first of all ANY projection that far into the future has a huge margin of error.

    It is really true. The Fed can’t possibly account for so many things beyond their control.

    I think the basic idea is that if we do nothing our children will see a reduction in standard of living. On that I agree with you and Dan.

    I differ on two fronts.

    1. I believe we are going to do something. If you look at medical spending as a commodity. Price cures price. When prices rise people conserve. For some time price increases (thinking corporately) in medical expenses have been off set by productivity increases. When that changes, and unit labor costs rise because of medical inflation change will come.

    2. Even if we don’t do ANYTHING I don’t see collapse of our system. I simply see a decline in our chilren’s standard of living to that of other industrial nations who have national health care systems. Taxes will go up one way or another. Either through marginal rates increasing or increases in interest rates because of a higher debt load reduces attractiveness of our countries debt.

    Although the latter is to be avoided, it is not like it will be horrible. I would offer Japan as an example of a high debt society that has an aging population like ours will be and is far from collapse.

    Actually I can point to many such economies that have made different choices without terrible things happening. Look at Germany. Their choice is higher taxes. They have a much older population than we do. They are ok. We will be ok.

    I think we should have a healthy debate without fear. We need to reform health care, probably increase taxes and increase our debt over time to get this “pig through the python.”

    We will be fine,

    Craig

    Posted by: Craig Holmes at September 11, 2007 06:15 PM
    Comment #232588

    David/Dan:

    Not that I want us to follow. Several European governments function fine with 50% of GDP going to government expenses. They have slow growth for sure. However they are a long way from poverty. Certainly there is no collapse.

    What might be instructive is to debate Germany. At one point they collapsed and brought in Hitler after hyper inflation. Today they spend roughly (very roughly) 50% more as a percentage of GDP on government spending.

    I will argue not for these increases, but for the case that collapse is not coming by saying thay in Germany we will handle the aging of Americal more like the current Germany than like the Germany after WWI.

    Craig

    Posted by: Craig Holmes at September 11, 2007 06:56 PM
    Comment #232589

    Alien said: “When you stated that Greenspan and Bernake supported this dire tone, I immediately recognized the weakness of the post. That statement simply isn’t true.”

    It is the height of ignorance to make such a claim without having researched whether it is true or not. I have researched it. It is true. D.a.n has just given you more evidence that it is true. If your ego prevents you from acknowledging it, I understand. Many debaters deny facts and evidence presented, in order to preserve the dignity of their ignorance. It is nothing new.

    Personally, I respect those like myself, who upon receiving evidence their opinion or view is insufficient to accommodate new evidence and facts, change their opinion to make room for the new evidence. Your mileage may vary.

    Posted by: David R. Remer at September 11, 2007 07:22 PM
    Comment #232591

    Craig said: “Even if we don’t do ANYTHING I don’t see collapse of our system.”

    As David Walker and I have both pointed out, and Greenspan has warned, collapse is usually preceded by the popular belief that collapse is not possible. Whether it be a bridge in Minnesota, or the US economy of 1929, or the economy of the USSR, collapse occurs despite refusals to believe it is possible.

    In some ways, that very denial helps usher on a collapse in the making. If one or many deny that a collapse is possible, no amount of evidence to the contrary will make sense to them.

    Just last year I wrote that the housing market was poised for retrenching the markets. You denied that was possible citing then economic and market statistics assuring you it would not happen. Yet, it happened, is happening, and markets around the world have retrenched to varying degrees in response to our housing bubble burst and sub-prime mortgage industry partially bankrupting.

    I should think that would be a pertinent lesson in the context of this article.

    Posted by: David R. Remer at September 11, 2007 07:25 PM
    Comment #232595
    Craig wrote: We will be fine.

    Maybe. No one knows for certain.

    But, based on probabilities, I believe the 14% decline (on average) in the standard of living is a good estimate, IF we change course soon.

    But it is more likely to be worse, because we probably won’t change course in time, because:

    • corruption in a severely bloated government will continue; perhaps worsen

    • high re-election rates for incumbents will continue, but fail to fall fast enough to get the message across in time.

    • because Iraq will drag on for a few more years

    • Afghanistan

    • healthcare will bankrupt many baby boomers

    • inflation will continue to rise (too much easy credit)

    • jobs will continue to leave the country

    • energy vulnerabilities and costs will rise significantly as 2.4 Billion people in China and India compete for oil resources

    • the Middle East will continue to drain resources

    • illegal immigation won’t be addressed and the $70 Billion in annual net losses to tax payers will grow larger

    • the myth of the richest nation in the world and a sense of invulnerability could hasten our demise

    • the wealth disparity will widen

    • taxes will increase across the board

    • the money system abuses will continue; maybe worsen (i.e. incessant inflation continues)

    • … more …

    It’s not that problems can be fixed. It’s that Congress and voters will fail to change sooner than later … until it is more painful.

    Still, I would not characterize David’s article as anything close to fear mongering. Especially in view of Bernanke’s, Greenspans, Walker’s, and others comments.

    The scenarios are not far fetched.
    A Great Depression is not far fetched if the total federal debt continues to grow even at a fraction of the current rate. The National Debt has got to stop growing. And Social Security surpluses must stop being spent on other things.

    If we don’t act soon, I don’t think we’ll be fine. I think we will see far worse than 14% reduction in the standard of living.

    Again, David’s article is not fear mongering, since the National debt is getting ridiculous ($9 Trillion), Social Security really has no surpluses ($12.8 Trillion has actually been taken from it and spent on other things), nationwide personal debt is over $20 Trillion.

    Yes, you point to assets, but most of those assets belong to the upper 5% of the population.
    That’s an very BIG detail to leave out.

    20% of the population has a negative net worth.

    40% of the population is essentially broke (no net worth).

    And 60% of the population only has 5% of all wealth.

    You have acknowledged the lop-sidedness, but I’m not sure that has been factored in. If 20% of the population is jobless, homeless, and hungry, there could be trouble (as there was in the Great Depression when unemployment was over 25%).

    Craig wrote: Even if we don’t do ANYTHING I don’t see collapse of our system.
    That’s a bit of a stretch. We already see what the results of a Do-Nothing Congress can be. And it’s not just “doing nothing” to worry about. We’d better hope we don’t get into another war (some where in the Middle East or elsewhere).
    Craig wrote: Not that I want us to follow. Several European governments function fine with 50% of GDP going to government expenses.
    Those nations are not as big. The Titanic couldn’t change couse in time either, and we know what happened to it. Posted by: d.a.n at September 11, 2007 07:39 PM
    Comment #232599

    David,

    You keep saying you and d.a.n. have provided evidence. I must be blind then because all I see is conjecture on you and d.a.n’s part.

    If I were to provide evidence, I would provide a direct quote and cite a source. You haven’t, it doesn’t exist as far as I can see. You keep telling me you’ve researched it and I haven’t. How do you know what I have done? If you’ve researched it, why can’t you provide a quote?

    Seriously, this has gone to the point of absurdity. All I need is a quote and I’ll bow to your superior research. Otherwise, I think it’s all about reading something into Greenspan’s speech that wasn’t there.

    Posted by: alien from the planet zorg at September 11, 2007 08:00 PM
    Comment #232601

    alien, d.a.n. provided you many. I provided some in the article. A blind man can be lead to the theater but cannot be made to see the play.

    Posted by: David R. Remer at September 11, 2007 08:14 PM
    Comment #232602

    David,

    Sorry, I missed d.a.n’s most recent response.

    I guess I have to emphasize the limit of my remarks so that we don’t include every governmental body and economic commentator on the planet.

    David, you said:

    Today, America has tools to fight what happened in 1929 and prevent it from happening again. The greatest of these tools are statistical forecasting and economic measurements. Trained and objective people armed with these weapons can peer into the future of our children and forecast their economic fate, and issue warnings when the statistics and measures begin painting dark clouds on the economic horizon. But, what if no one heeds the warnings?

    You then went on to bolster that with this:

    These warnings continued, coming from then Federal Reserve Chief, Alan Greenspan in the 1990’s and early in this decade. But, the politicians turned a deaf ear. Greenspan’s successor, Ben Bernanke continues the warning in Oct. of 2006:


    Agreed. There are problems in the economy, we in fact are probably entering a recession. Yes there are long term issues that must be addressed. But pulling out the 1929 crash, is akin to comparing G W Bush to Hitler. Yes’ there are some vague similarities, but it is inherently disingenuous to say that the economy is poised for another depression. Could a worldwide depression occur? Sure. A volcanoe could erupt in Manhatten tomorrow, or a tidal wave could wipe the east coast off the face of the earth. None are truly likely.

    That was the thrust of my comments. Greenspan nor Bernake predicted a pending Depression. They spoke about long term issues in the economy.

    I guess you don’t like my addressing this overstatement, but you have yet to disprove my point.

    I don’t want to get into the comptrollers or others statements until we address the point of my argument, shifting the debate is also a tried a true technique, but I am dogged.

    d.a.n.

    As important as you are to you and I am to me, I don’t care a whit about you personally. If you aren’t argumentative, then why in the hell are you on a debate site? I suppose you’ll argue with that point….proving my point? Don’t you ever recognize a joke?

    As far as the comptrollers statement, frankly the piece you quoted seems quite bizarre. I have not read it, but will. But again this sidesteps my point about what Greenspan said or didn’t say.

    Posted by: alien from the planet zorg at September 11, 2007 08:35 PM
    Comment #232604

    One more important thing to consider.

    Entitlements spending has to be curbed.
    These are the warnings by Bernanke and Greenspan.

    However, guess what age range about half of the voters in the country are?

    77 Million are already near retirement age.

    30+ million are already retirement age.

    That is over half of all eligible voters.

    And the older voters are conscientious voters.
    Do you think they will readily allow cuts in benefits and raises to the eligibity age?

    There will be resistance to change … at least until the abscence of it becomes too painful.
    _____________

    alien from planet zorg wrote: As far as the comptrollers statement, frankly the piece you quoted seems quite bizarre. I have not read it, but will.
    Have not read it?

    But it is bizarre?

    Fascinating. The U.S. Comptroller’s statements are bizzare, yet you have not read the article?
    Did you even bother to Google David Walker?
    Or Greenspan? Or Bernanke? Do you know how many years it would take to pay off the National debt? Have you calculated it? We have. It would take centuries. But there’s nothing to worry about on planet Zorg where everyone drinks pink-colored Koolaide.

    That’s really doin’ your homework, eh?
    From your own statements, the most basic facts are constantly missed, overlooked, or can’t be found via a simple Google search.

    Do you read anything? Or simply skim everything and think you know everything?

    alien, you only offer opinion, but no data, no supporting articles or analysis. Just your opinion. While we are all entitled to our opinion, it doesn’t mean much unless there is some inkling of credibility to back it up.

    Posted by: d.a.n at September 11, 2007 08:52 PM
    Comment #232605

    d.a.n. OK I’ve done little more research on David Walker and his statement.

    The next paragraph down David also says this:

    “Please don’t misunderstand my message today. Things are far from hopeless. Yes, it’s going to take some difficult choices on a range of issues. But I’m convinced America will rise to the challenge, just as we did during World War II and other difficult times.”

    Not quite so doom and gloomy.

    It appears David is quite a history buff and uses these allusion quite often in his “Transforming Government to Meet the Demands of the 21st Century”

    later on he says:

    This doesn’t mean we stick our finger in the wind and bend to popular sentiment. As Harry Truman once asked, “How far would Moses have gone if he had taken a poll in Egypt?”

    and yet again,

    One person clearly can make a difference in today’s world. My favorite 20th century president, Theodore Roosevelt, is proof of that. TR, as he’s often called, was someone with character, conscience, and conviction.

    Frankly, knowing he was appointed in the Clinton years, I see his comments as an indictment of Bush. I did not see any other reference to our moral decline, and he simply may have been quoting the commonly cited reasons for the fall of Rome rather than making a statement about America in that aspect.

    I suspect his point is about Iraq, and taxes, and spending, the triad of Bush failures.

    Posted by: alien from the planet zorg at September 11, 2007 09:03 PM
    Comment #232606

    d.a.n.,

    Don’t jump the gun or the shark.

    Posted by: alien from the planet zorg at September 11, 2007 09:06 PM
    Comment #232608

    d.a.n.

    “Frankly the piece you quoted seems quite bizarre”

    Yes it does. I had not read the entire statement. I have now.

    Quoting that bit of hyperbole without the following paragragh is deceptive and misleading, but that’s O.K., I’m up for those kind of tricks.

    BTW, d.a.n. , I’m still waiting for the Greenspan quote. You know, facts.

    Changing the issue, or dissing my reading skills won’t work either.


    Posted by: alien from the planet zorg at September 11, 2007 09:19 PM
    Comment #232612

    David:

    I’m not sure what you are refering to on housing. Not much is happening that isn’t predictable. Look up the quote for me if you will and I will respond to it.

    I read a publication from PMI insurance. They have a great way of determining risk. (they are the people that sell insurance to new homeowners with low equity). They have been predicting what is happening for a long time.

    Basically housing on a national average scale should be flat for a while until the “slack in the chain” is gone.

    I would also predict one more stage in this current mortgage situation. It’s called “the cockroaches leaving the ship”. Basically the problem we have now is that loans were written that should never have been written. (bad judgment).

    The next phase will be when fraud is uncovered. Watch for charges coming next.

    It’s not much to “worry” about in that it is a normal part of economic cycles.

    This current “crisis” (if that is what you want to call it), will be a distant memory a year from now. We will be arguing about something else.

    Craig

    Posted by: Craig Holmes at September 11, 2007 10:00 PM
    Comment #232614

    David:

    Back to the main point of your thread. I do think “something will be done”. It will be a combination of reforming entitlements, tax increases, and additional debt.

    Watch for reform when unit labor costs rise do to health insurance premium paid by corporations. When medical premiums start hurting corporate profits reform will come.

    Right now Corporate profits are near all time highs as a percent of GDP.

    craig

    Posted by: Craig Holmes at September 11, 2007 10:13 PM
    Comment #232621

    Craig, here are your replies in June last year to my article, now is no time to be in stocks.

    David:

    I think you are wrong about recommending people sell stocks for the following reasons:

    1. The market has an upward bias. In general the Stock Market increases over time.

    2. Stock valuations are extremely low, as measured by the Federal Reserve. (About 30% undervalued). Earnings on the S&P are about 7% of stock price. Investors can “borrow” at lower rates and buy companies through stock purchaces. This arbitrage will balance out over time with either higher interest rates or a higher stock market. In the meantime it will act as a floor on the stock market.

    3. Pessimism. When pessimism of high, (after 9/11) it is a great time to buy into the stock market. Conversely when optimism reigns (Like in the last part of the last decade) it’s time to sell. Right now stock investors are pessimistic.

    4. We have a strong economy with corporate earnings surprizing on the upside. When earnings reports surpize on the upside usually the market goes up.

    5. The Fed is near ending it’s rate hike schedule. The Fed is clearly saying that increases in interest rates are “data dependent”.

    6. Commodity prices have moderated. The front cover of Barron’s magazine is bragging about commidities. It’s a sure sign we are at or near a peak.

    7. There is no sign of a recession.

    I would like you to write down the date and what the indexes are saying. I believe in a year or two those who fallow your advice will regret it.

    Craig, it is 14 months later, and those who stayed in have lost half or more of their their gains since then, and if they remain in, they do so facing a very real potential 5% more correction if recession is not in the cards, and as much as another 15% if recession does arrive in a few months, Jan to Mar.

    You were so sure it would not happen. Just as you are so sure now, that our economy will continue positive regardless of debt being amassed at a faster rate than at any time in our history, national, trade, and personal debt, which combined is also unprecedented.

    But you weren’t alone in your sureness of optimism, which is why these bubbles and over extensions occur, precisely because the majority deny when things appear good that anything negative can follow. It is a psychology that precedes nearly all economic collapses and downturns.

    The market has priced in a .5% cut by the Fed. Ain’t going to happen. If the Fed cuts on the 18th, it will be a quarter point, and the markets will drop. If the Fed doesn’t cut at all, (real possibility in light of inflationary pressures still pressing against the door), the stock market investors will take the other 5% drop to complete the 10% correction which is standard in receding economy.

    Oil is setting new highs. The fallen dollar has driven import prices up, housing has lost value against millions of new mortgages and refi’s at the peak of housing valuation, between 1 and 2 million defaults on mortgages have and are going to occur, credit card debt defaults are rising, medical cost inflation has outpaced real wage growth an average of 2% per year for the last 20 years, and that rate is now increasing. All these and more are leaning on the Federal Reserve to refrain from bailing out market investors, which they don’t see as their responsibility in the first place.

    And here is what you wrote on Mar. 14 of this year, Craig:

    Here are my predictions 8 months later. Go ahead and right them down.

    1. This recent sell of is a buying opportunity. Stock prices will be substancially higher 12 months to two years from now. Just like last summer, if investors buy when you say sell, they will be well rewarded.

    2. The fed will begin to ease rates before the end of this year. (probably late summer).

    3. The economy will continue to slow. There will be no recession in 2007.

    4. What I would now change from last time we had this exchange is that I now see signs of a recession, most likely in 2008. This recession will not be caused by debt as you say but by the fed. The fed is a new group of people who are want to make their mark as inflation hawks. There is a good probablilty that they will leave interest rates high too long and will cause a minor recession. I am not yet predicting a recession in 2008, but am concerned about one.


    It’s a great time to buy,

    It was interesting how you cleverly denied the Fed’s primary role as inflation fighter, and blame the fed for not interfering to bolster capital markets and low interest rates. Of course, though it appears to CYA in light of the Fed’s actions, your take on what the Fed’s role is, is very wrong. The primary reason for giving the FED the power of controlling interest rates was from the beginning and remains first and foremost to prevent inflation which has destroyed other nation’s economies. It’s role to free up capital through lowering rates is secondary to inflation prevention role.

    Your take also appears to be somewhat contradictory. On the one hand you advocate for free markets, on the other, you charge this government - banking agency with the responsibility to interfere with markets by expanding liquidity and lowering interest rates to allow business to profit. Such a view totally ignores inflation and the history of the suffering and losses and despair unchecked inflation causes.

    The reason the middle class is experiencing real wage stagnation is because of inflation, health care inflation, housing inflation, energy inflation, used auto pricing inflation, auto maintenance inflation, and credit card interest rate inflation, up from 21% to 32% in just over 10 years. That is a 50% increase or roughly 5% per year.

    It’s why voters lost faith with Republicans on economic issues. They were promised they would keep more money in their wallets through lower taxes. But, it never materialized because wage increases and tax cuts were eaten away by inflation in basic necessities for middle class living, homes, energy, transportation, and credit interest rates which btw, rescued the economy from the last recession. They aren’t in nearly as good a position to rescue another recession, as personal debt has been increasing substantially for the middle and lower middle classes.

    Posted by: David R. Remer at September 12, 2007 02:33 AM
    Comment #232622

    May 10, 2006 S&P went from 1325 to 1250 by June 27. Your comments above were on June 10. The S&P closed today at 1471. Another 5% correction drops it to 1397, assuming a quarter point fed cut is in the offing. If the Fed doesn’t cut on 9/18, the S&P will have wiped out the gains made since June of 06. For 401K investors, as I said in June of 06, this is not getting ahead.

    These comments are not to demonstrate my stock forecasting abilities, they aren’t that great when it comes to short term predictions and dates, at all. The point I am making here, is that there are longer term trends that are more predictable, if one is willing to accept the signs and warnings by the experts whose Ph.D’s and lives have been spent on monitoring and predicting these trends, like Greenspan and Bernanke.

    You say Congress will act. Bernanke says the time to act was 10 years ago. Greenspan says a point of no return is coming after which, action will be futile and some even counterproductive. I think it is foolish for folks without their experience and knowledge in the calculus of economic trends to deny their warnings and maintain an optimism which does not motivate corrective action.

    Congress is denying the warnings, and view the entitlement crisis as one which can be dealt with WHEN people begin to suffer from it. But, when people have begun to suffer the crisis, the time to have acted to prevent it, will have long passed by.

    Which is precisely why Greenspan warns this could mean the end of democratic capitalism in the world. The implication being that mixed command and capitalist economies like China’s and Japan’s could fill the void as the engine and template for global economies for the next century with a feature our western economies don’t have, the ability to chart a course, and stick to it regardless of public sentiment, until it pays off in the long term.

    Our economies are now entirely built around short term returns, and are incapable of the kind of long term investment discipline displayed by Toyota to sacrifice short term gains for decades of growth in market share, which now are paying them profits and dividends of lasting value over what they could have reaped following our model while failing to acquire world market share.

    It is precisely why our democratic capitalist system is incapable of addressing the entitlement crisis and health care inflation until it is too late to take an alternate course and stick to it. Our politicians and corporations will not sacrifice the next quarter’s or next elections’s gains, for the sake of increasing gains years or decades down the road. In our western democratic capitalist systems, that kind of thinking is heresy and traitorous in the boardroom and political party headquarters.

    Posted by: David R. Remer at September 12, 2007 03:12 AM
    Comment #232642
    alien from planet zorg wrote: BTW, d.a.n. , I’m still waiting for the Greenspan quote. You know, facts.
    Don’t you know how to find anything yourself?

    Just Google “greenspan warning” and “greenspan warning 2006”. You’ll get 4,140 hits. Here’s just a few.

    • August 2005: The world’s most powerful economist has this cautionary message for those figuring their home values will keep right on rising: What goes up often comes down. Hard. : Federal Reserve Chairman Alan Greenspan, who has spent a half-century observing financial conditions, says “history has not dealt kindly” with those who figure the good times won’t end. And in a message aimed more at policy-makers, he said bloated trade and budget deficits threaten the long-term health of the U.S. economy.
      • Feb-2007: Alan Greenspan sent shivers through the US markets yesterday with a warning that the US economy could slip into recession by the end of the year. Although the former head of the US Federal Reserve said it was difficult to predict the timing of any recession, he said the budget deficit in particular remained a “significant concern” when trying to forecast global growth. Mr. Greenspan said the US economy had been expanding since 2001 and that there were signs the current economic cycle is coming to an end. “When you get this far away from a recession, invariably forces build up for the next recession, and indeed we are beginning to see that sign, for example, in the US profit margins have begun to stabilise, which is an early sign we are in the later stages of a cycle,” he said.
      • May 2007: The former Federal Reserve chairman Alan Greenspan says China’s stock market is heading for a crash, threatening to ruin millions of middle-class investors.
      alien from planet zorg wrote: Changing the issue, or dissing my reading skills won’t work either.
      Would you like someone to read it for you too?

      Would you like fries with that?

      Posted by: d.a.n at September 12, 2007 02:26 PM
      Comment #232667

      Dan, since you seem to think I don’t know how to google, I have to presume likewise that you nor
      David are capable of reading.

      There IS NO Greenspan speech saying were headed for a depression. I cannot prove it doesn’t exist, that is proving a negative.

      There are speeches discussing long term problems in the economy. The stretch David made is invalid and he early on admitted that he was reading between the lines. Then he continued to defend it and insulted my ability to do research or read. He was reading things into it, in my opinion, that weren’t there.

      I made no other points, raised no other issues.

      Now that I’ve sunk to the level of making insulting comments, in kind,
      I get that you can’t respond to my request, again, because it doesn’t exist.

      I just don’t get why you can’t admit it doesn’t exist. You certainly can argue that YOU and DAVID believe were headed for a depression. You may be right. You made valid points about problems in the economy, which I acknowledged.

      Stubbornness won’t win an argument with me.

      Is that simple enough for you?

      Posted by: alien from the planet zorg at September 12, 2007 08:41 PM
      Comment #232670

      David,

      I strongly disagree that:

      Our economies are now entirely built around short term returns, and are incapable of the kind of long term investment discipline displayed by Toyota to sacrifice short term gains for decades of growth in market share, which now are paying them profits and dividends of lasting value over what they could have reaped following our model while failing to acquire world market share.

      It is precisely why our democratic capitalist system is incapable of addressing the entitlement crisis and health care inflation until it is too late to take an alternate course and stick to it. Our politicians and corporations will not sacrifice the next quarter’s or next elections’s gains, for the sake of increasing gains years or decades down the road. In our western democratic capitalist systems, that kind of thinking is heresy and traitorous in the boardroom and political party headquarters.

      Toyota’s success is largely due to an attention to quality, a protectionist government and poor trade deals the U.S. has made. Detroit is also guilty of simple poor management.

      Democratic Capitalism is also what Japan’s economy is based upon. I agree there are biases against a savings rate in our tax structure and culture as compared to Japan.

      While you make many valid points, you are mixing economic ideas and causations, that I frankly find confusing and seemingly disjointed.

      I’ll leave Craig to defend his predictions, but I find your statement that people from a year ago have lost half their gains. First, you don’t have a gain or loss until you sell. If you bought at 10 it went to 20 and you sold at 15 on the way back down, I’d find it curious accounting to call that a loss.

      Equities are traded, that’s why they focus on the short term. They are competing for funds. That is a sector of the economy, not the entire economy, and not all equities are short term. Blue chips are not short term based equities. Some stocks are pharmacueticals and other research type related companies, including automobiles. They have long term horizons. They don’t simply react quarter to quarter.

      I think healthcare is a prime issue which we will begin to deal with in the very near future.(Post Bush) We will eventually deal with entitlements. It’s much like an equity. Until there is a demand for a solution driven by a cost savings, there will be no takers. Yeah, people will be hurt. They always are.

      Clinton, resolved the Budget deficit in short order. Well, not really, because the economy solved it for him. Making economic projections is dicey. Don’t underestimate Americans, David. We’re a resilient lot.

      If Greenspan or Bernake were as negative as you make them out to be, they would not hold the post of Fed Chairman long. Wall Street would hang them. Their words must be taken in context, they don’t give sound bites. They both preach economically responsible behavior, as they should.

      Posted by: alien from the planet zorg at September 12, 2007 09:28 PM
      Comment #232676
      alien from planet zorg wrote: There IS NO Greenspan speech saying were headed for a depression.

      If you had been paying closer attention, I never said Greenspan said a depression was going to happen.

      No body knows that for certain.

      But then we don’t have a rose-colored crystal ball and rose-colored glasses like the have on planet zorg.

      However, you seem certain that it can not happen. Yet you wrote:

      alien from planet zorg wrote:You made valid points about problems in the economy

      alien from planet zorg wrote:…insulted my ability to do research or read
      Insult? Are you sure? Well, come to think of it, it is quite understandable.

      So your entire argument is a complete non-sequitur. Please review the thread and find exactly where I EVER claimed Greenspan claimed a depression was coming.

      You accuse others of stubborness and argumentativeness, yet you are arguing a point of contention that really does not exist. And if David R. Remer already said he was reading between the lines, then why and what are you arguing about still?

      Also, David R. Remer is making a prediction; an educated guess. He knows full well that no one knows for certain. Hell, a 10 mile-wide comet could hit the planet and none of this would matter one bit. No, no, no! … Don’t get excited again, Greenspan nor David are saying a comet will hit Earth (at least, not likely any time soon).

      But Bernanke, Greenspan, and David Walker are saying is that the likelihood of serious economic consequences are possible. The potential is there, as was stated over and over; the potential.

      alien from planet zorg wrote:If Greenspan or Bernake were as negative as you make them out to be, they would not hold the post of Fed Chairman long. Wall Street would hang them. Their words must be taken in context, they don’t give sound bites. They both preach economically responsible behavior, as they should.
      Responsible behavior? Think so? Do you revere the Federal Reserve? Do you know what causes inflation? Bubble after bubble?
      alien from planet zorg wrote: Stubbornness won’t win an argument with me.
      Well then you are in trouble since you seem to be arguing with yourself and creating arguments that don’t exist.
      alien from planet zorg wrote: Is that simple enough for you?
      Yes, it is very simple. People from planet zorg can’t (or don’t) read, can’t (or don’t) Google, can’t keep up, invent arguments where none exist, and create imaginary holes in peoples’ arguments, and then backpedal and crawfish while stubbornly refusing to admit a mistake about alleged holes and inventing imaginary points to argue about (e.g. Hole#1 and Hole#2 in the other thread). Life on planet zorg must be a real delight.
    • Posted by: d.a.n at September 12, 2007 10:31 PM
      Comment #232691

      Ahhh, d.a.n.

      Backpedaling and crawfishing and arguing with one’s self.

      Classic.

      What other point that I made were you then arguing with? And then you question My reading abilities.

      It’s good that Greenspan and Bernanke are finally sounding the alarm, but they should have been sounding the alarm a long, long time ago. Truly, it may be too late now. I just don’t think voters will think about the way they vote (for the 60% of eligible that even bother to voter) until it affects them directly in a very painful way. That’s a few years away still. It could come on slowly at first. Successive recessions will get deeper and longer, until eventually, one possibly turns into a depression that lasts about as long as it took to create it.

      However, many economic factors can certainly give us an idea of the probability of it. We have not had a depression since the Great Depression of 1929, but that does not mean it can’t happen again. In fact, that sort of thinking could be dangerous.

      and then…..

      David R. Remer gave many good reasons for concern.
      Here’s some more.

      So, why don’t you think these could possibly add up to economic instability. Recessions? Possibly even a depression? It’s not that far fetched. It’s happened before. It could happen again.

      David truly believes there is reason for concern.
      Bernanke and Greenspan do too.

      and then…

      However, many economic factors can certainly give us an idea of the probability of it. We have not had a depression since the Great Depression of 1929, but that does not mean it can’t happen again. In fact, that sort of thinking could be dangerous.

      David R. Remer gave many good reasons for concern.
      Here’s some more.

      So, why don’t you think these could possibly add up to economic instability. Recessions? Possibly even a depression? It’s not that far fetched. It’s happened before. It could happen again.

      David truly believes there is reason for concern.
      Bernanke and Greenspan do too.

      O.K. you never mentioned Greenspan or the Great Depression, or any depression when refering to Greenspan’s remarks.

      Now, you’ll quote that as my crawfishing. Creative, but not very accurate. It’s a sarcastic joke, but jumping in front of that bus and playing the victim while insulting me about my ability to read is really effective argument.

      It’s a jump from reading and comprehending their remarks to saying they are talking about a pending depression. It was at the start, and still is.

      The only non-sequiter’s are yours.

      Posted by: alien from the planet zorg at September 13, 2007 02:48 AM
      Comment #232693

      d.a.n.

      BTW, the remarks that David referred to, without actually referring to them, were made in 1994 by Greenspan. He has since repeated these type comments. I would classify that as a long, long time ago, especially in terms of his service as Fed Chairman. Amazingly, we haven’t suffered a depression in the ensuing thirteen years.(Again, sarcasm)

      I hope we can come to agree on the facts. As I have stated all along, there ARE issues with our long term economic health if these problems aren’t dealt with.

      It is my intent to discuss these things rather than waste time in personal spats.

      While I don’t think candidates like Bush, or Gingrich will ever effectively deal with these issues, Hilary likely will win the 08 election and will with a Democratic majority make some attempt at dealing with healthcare. I fear she will not go far enough, to completely refocus a priority due to the enormous influence of lobbyists. A complete refocus on this issue will go a long way towards improving our economic outlook. I think we can find a model in other industrial nations to follow and improve upon.

      As to the savings rate, I think Greenspan while warning us, is somewhat a hypocrite since his Ayn Rand, Laissez Faire philosophies about economics are a contributor to the economic disparities in this country that are part and parcel to a poor savings rate.

      Again the thrust of my posts are simply that neither Greenspan’s nor Bernake’s remarks support David’s pessimistic view of a pending depression. Yes, there should be concern over things like excessive consumerism and savings rates, but our economy, while likely headed for a recession, is still basically stable. I would worry much more about a world war type conflict happening before a US depression. That is where I part from your’s and David’s viewpoints, which I consider somewhat alarmist.

      Posted by: alien from the planet zorg at September 13, 2007 03:44 AM
      Comment #232705

      alien said: “Yes, there should be concern over things like excessive consumerism and savings rates, but our economy, while likely headed for a recession, is still basically stable.”

      Only in the short term. The long term depends very much on whether Congress and the President can act soon enough and with sufficient consensus and adequate reforms to avert the calamity ahead. That’s a lot of if’s.

      If Hillary is elected, I guarantee America will be politically incapable of addressing this issue of the convergence of national and personal debt and the 77 million retiring boomers. Republicans know this all too well, and they have built up a tremendous arsenal of torpedoes custom built for Hillary, partner of Bill Clinton, for whom such torpedo designs were first drafted and honed and refined for accuracy and effect.

      Posted by: David R. Remer at September 13, 2007 08:35 AM
      Comment #232706

      First you say: “Toyota’s success is largely due to an attention to quality, a protectionist government…”

      Then you say: “Democratic Capitalism is also what Japan’s economy is based upon.”

      Are protectionism and government subsidies to corporations democratic capitalism? These are the hallmarks of China and the former Soviet Union which were far from democratic capitalism. In fact, America no longer practices pure democratic capitalism either, but, the difference between America and Japan is one of large degree. The Japanese government partners with its corporations and (punishes them severely for violating compacts), in fostering long term agendas and sacrifices of short term profits for much larger long term profitability. This does NOT occur readily in our system.

      Some would argue this is a necessity by virtue of their extremely small homeland and population and near total absence of non-agricultural natural resources forcing them to achieve competitive advantage in other ways.

      Posted by: David R. Remer at September 13, 2007 08:46 AM
      Comment #232713
      alien from planet zorg wrote: O.K. you never mentioned Greenspan or the Great Depression, or any depression when refering to Greenspan’s remarks. Now, you’ll quote that as my crawfishing.
      Yet you immediately follow that with …
      alien from planet zorg wrote: The only non-sequiter’s are yours.
      That’s some fascinating logic. Once again, you backpedal and somehow turn it into others’ non-sequiturs? Is that right out of the Zorgian manual of “Circular Logic”?
      alien from planet zorg wrote: I hope we can come to agree on the facts. As I have stated all along, there ARE issues with our long term economic health if these problems aren’t dealt with.
      All along? By inventing Holes and arguments that don’t exist, finally admitting it and backpedaling, and then saying? :
      alien from planet zorg wrote: The only non-sequiter’s are yours.
      Hmmmmm … yeah, that makes a lot of sense … if you are from the planet zorg maybe?
      alien from planet zorg wrote: d.a.n, You are certainly argumentative
      … yet was followed by …
      alien from planet zorg wrote: It is my intent to discuss these things rather than waste time in personal spats.
      … after writing previously …
      alien from planet zorg wrote: You guys are just getting old and cranky. Eat some oatmeal.
      … and …
      alien from planet zorg wrote: I don’t care a whit about you personally. If you aren’t argumentative, then why in the hell are you on a debate site?
      Hmmmmmm … no contradictions there, eh?
      alien from planet zorg wrote: Again the thrust of my posts are simply that neither Greenspan’s nor Bernake’s remarks support David’s pessimistic view of a pending depression.
      Possibility. Not pending.

      We don’t have a Zorgian crystal ball, so we can only theorize.
      “Pending” means inevitable.
      That is the problem with your entire argument.
      No one said or knows for certain.
      No one said Greenspan, Bernanke, or David Walker said a depression was inevitable.
      At least they backed up their opinions for the potential for economic instability with data, articles, and facts rather than merely resorting to calling others “old and cranky” and “pessimistic” …

      alien from planet zorg wrote:
      You guys are just getting old and cranky. Eat some oatmeal.

      … usually a clear sign of a weak argument.

      The key is whether Do-Nothing Congress will take steps in time to lessen the consequences of so much debt, excessive money printing, and general fiscal and moral irresponsibility. If not, the reports (as indicated above by Craig Holmes above) show the potential for an average 14% drop in the standard of living for future generations. If you exclude the top wealthiest 10% of the U.S. population, that drop in the standard of living will be much worse than 14% for 90% of Americans. Again, this calculation of 14% is being passed on from Craig Holmes who almost always optimistically contends that “We will be fine”. I hope so, but with so much crushing debt, growing disparity, shrinking middle-class, and unresponsiveness of Congress to tackle tough issues, it is not at all far fetched that an economic decline of the U.S. economy could be more severe. It’s not far fetched when you factor-in the MASSIVE debt, 77 million baby boomers, unfunded liabilites and shortfalls in Social Security and Medicare, ridiculously high healthcare costs (and increasingly dangerous; 195,000 deaths annually by preventable mistakes), decling quality and rising cost of education, growing corpocrisy and corporatism, government that is increasingly corrupt and FOR-SALE, growing disparity of wealth (1% of U.S. population has 40% of all wealth; up from 20% of all wealth in 1980; never worse since the Great Depression of 1929), growing number of Constitutional violations (including Article V), wars in Iraq and Afghanistan, jobs still leaving the country, bubble after bubble caused by bad fiscal policies, growing inflation, a ridiculously expensive, complex and regressive tax system, declining quality and rising cost of education, growing foreign competition (China, with 1.3 billion people, and India, with 1.1 billion people), growing energy vulnerabilities (despite the D.O.E.’s $26 Billion annual budget), oil just reached $80 per barrel yesterday (not good for the economy), electricity costs have increased 50% in only a few years, and a growing distrust of the federal government (40% of Americans polled believe 911 was a conspiracy from within the federal government).

      Other than that, everything “is fine”. Certainly no need to be worried, eh?

      Posted by: d.a.n at September 13, 2007 10:51 AM
      Comment #232721

      Alien, please quote where I said a depression is pending. I made the argument a depression is possible if the the conditions I stated years down the road, were met.

      It is not appropriate to mischaracterize other person’s comments. Try using their words, it will help keep your statements accurate when issued out of context of what the other person wrote or said.

      Posted by: David R. Remer at September 13, 2007 01:02 PM
      Comment #232776

      David,
      Waving the flag of the Great Depression and then saying, in essense, that is what Greenspan was talking about is misleading, at best.

      It is not unlike when Republicans defend Dick Cheney and Bush by saying they never really said they went to war with Iraq over 911 or WMD.

      Your arguments have shifted from my dog doesn’t bite, to you can’t read because it says it right there, to I don’t have a dog.

      I think that makes it clear that you now want to distance yourself from the extremity of the stretch you made at the outset. That WAS my point. You made valid points about problems in the economy, there was no need to drag in the specter of depression, and it was dishonest to characterize the Fed Chiefs comments as supportive of your image of pending depression.

      d.a.n.,

      Your clever use of an argument that was labeled as sarcasm, as I predicted you would, as a reason to name call demonstrates the silliness of your arguments. Nuff said. This is clearly lost on you.

      Posted by: alien from the planet zorg at September 13, 2007 10:03 PM
      Comment #232779

      David:

      Here is your quote:

      Craig, here are your replies in June last year to my article, now is no time to be in stocks.

      David:


      I think you are wrong about recommending people sell stocks for the following reasons:

      1. The market has an upward bias. In general the Stock Market increases over time.

      2. Stock valuations are extremely low, as measured by the Federal Reserve. (About 30% undervalued). Earnings on the S&P are about 7% of stock price. Investors can “borrow” at lower rates and buy companies through stock purchaces. This arbitrage will balance out over time with either higher interest rates or a higher stock market. In the meantime it will act as a floor on the stock market.

      3. Pessimism. When pessimism of high, (after 9/11) it is a great time to buy into the stock market. Conversely when optimism reigns (Like in the last part of the last decade) it’s time to sell. Right now stock investors are pessimistic.

      4. We have a strong economy with corporate earnings surprizing on the upside. When earnings reports surpize on the upside usually the market goes up.

      5. The Fed is near ending it’s rate hike schedule. The Fed is clearly saying that increases in interest rates are “data dependent”.

      6. Commodity prices have moderated. The front cover of Barron’s magazine is bragging about commidities. It’s a sure sign we are at or near a peak.

      7. There is no sign of a recession.

      I would like you to write down the date and what the indexes are saying. I believe in a year or two those who fallow your advice will regret it.

      Craig, it is 14 months later, and those who stayed in have lost half or more of their their gains since then, and if they remain in, they do so facing a very real potential 5% more correction if recession is not in the cards, and as much as another 15% if recession does arrive in a few months, Jan to Mar.

      Craig, here are your replies in June last year to my article, now is no time to be in stocks.

      David:


      I think you are wrong about recommending people sell stocks for the following reasons:

      1. The market has an upward bias. In general the Stock Market increases over time.

      2. Stock valuations are extremely low, as measured by the Federal Reserve. (About 30% undervalued). Earnings on the S&P are about 7% of stock price. Investors can “borrow” at lower rates and buy companies through stock purchaces. This arbitrage will balance out over time with either higher interest rates or a higher stock market. In the meantime it will act as a floor on the stock market.

      3. Pessimism. When pessimism of high, (after 9/11) it is a great time to buy into the stock market. Conversely when optimism reigns (Like in the last part of the last decade) it’s time to sell. Right now stock investors are pessimistic.

      4. We have a strong economy with corporate earnings surprizing on the upside. When earnings reports surpize on the upside usually the market goes up.

      5. The Fed is near ending it’s rate hike schedule. The Fed is clearly saying that increases in interest rates are “data dependent”.

      6. Commodity prices have moderated. The front cover of Barron’s magazine is bragging about commidities. It’s a sure sign we are at or near a peak.

      7. There is no sign of a recession.

      I would like you to write down the date and what the indexes are saying. I believe in a year or two those who fallow your advice will regret it.

      Craig, it is 14 months later, and those who stayed in have lost half or more of their their gains since then, and if they remain in, they do so facing a very real potential 5% more correction if recession is not in the cards, and as much as another 15% if recession does arrive in a few months, Jan to Mar.

      You wrote that article on Saturday June 10, 2006. The S&P 500 closed on friday June 9, 2006 at 1252.03. Today the S&P 500 closed at 1483.95. That is an increase of over 230 points are closing in on 20%.

      I have no clue your point in bringing this up. I was so clearly correct. Note that I said
      that those who took your advice would regret it in a year or two. Well here we are at a year and the index you are quoting is up over 230 points. I was right. June of 06 was a horrible time to sell as you suggested.

      Here is round two:


      And here is what you wrote on Mar. 14 of this year, Craig:

      Here are my predictions 8 months later. Go ahead and right them down.


      1. This recent sell of is a buying opportunity. Stock prices will be substancially higher 12 months to two years from now. Just like last summer, if investors buy when you say sell, they will be well rewarded.

      2. The fed will begin to ease rates before the end of this year. (probably late summer).

      3. The economy will continue to slow. There will be no recession in 2007.

      4. What I would now change from last time we had this exchange is that I now see signs of a recession, most likely in 2008. This recession will not be caused by debt as you say but by the fed. The fed is a new group of people who are want to make their mark as inflation hawks. There is a good probablilty that they will leave interest rates high too long and will cause a minor recession. I am not yet predicting a recession in 2008, but am concerned about one.


      It’s a great time to buy,

      I stand by these projections. So now we are out five months. Six months to 18 months from now equities will be higher than they were in march of 2007.

      Let’s take a look at March 14 2007. S&P 500 closed at 1387.17. Again today’s close what 1483.95. So the market is up 100 points since you said it would fall and I said it would rise and I am to defend something.

      I am sooooooooooo confused. I have nothing to defend. I said the market would rise and it did. You said it would fall and it didn’t.

      HELP!! What am I suppose to defend here.

      Craig


      Posted by: Craig Holmes at September 13, 2007 10:33 PM
      Comment #232781

      David:

      I am totally confused by what you said. The market is doing exactly what I have said. I even got the timing of the fed rate cut correct.

      I said the fed would begin cutting interest rates this year probably late summer. Their meeting next week will be the last summer meeting!! I hit a bulls eye.

      You wrote your article “market meltdown” on March 13, 2007. The market is up substancially since then.

      David, help me here. What point are you making.

      Craig

      Posted by: Craig Holmes at September 13, 2007 10:39 PM
      Comment #232783

      David:

      Sorry about the cut and paste issues above.

      Here are the closing prices for the S&P 500 on various dates:


      Aritcle one was written on June 10, 2006. This was a saturday. Closing price for S&P 500 on friday June 9, 2006 was 1252.03.

      Your second article titled “market meltdown” was written on March 13, 2007. S&P 500 closed at 1387.17.

      Today the S&P 500 closed at 1483.95.

      I am confused by your point because my predictions are coming true.

      Craig

      Posted by: Craig Holmes at September 13, 2007 11:18 PM
      Comment #232791

      I think the stock market is largely a lagging indicator. It took a while for the DOW to recently fall from 14,000 to 13,200, even though the mortgage foreclosures was known far in advance. And what did the FED do? Pumped $38 Billion into the banks. They mustn’t stop creating money of of thin air and getting everyone deep into debt, or this one-sided game of Monopoly will end.

      How about a recession before the year is over? Or in 2008?
      Recessions occur every 2 to 11 years for the last 46 years. We’re about due for one. With a war in Iraq and Afghanistan, some much federal debt, so much personal debt, and a lop-sided distribution, Congress that can’t seem to pull it’s head out of its butt, 77 million baby boomers approaching eligibility ages, how easy will it be to recover from recessions in the next decade?

      BUSINESS CYCLE REFERENCE - Recessions/Expansions
      (Quarterly dates are in parentheses)
      Peak _____________ Trough
      June_1857(II)______December_1858_(IV)
      October_1860(III)__June_1861_(III)
      April_1865(I)______December_1867_(I)
      June_1869(II)______December_1870_(IV)
      October_1873(III)__March_1879_(I)
      March_1882(I)______May_1885_(II)
      March_1887(II)_____April_1888_(I)
      July_1890(III)______May_1891_(II)
      January_1893(I)____June_1894_(II)
      December_1895(IV)__June_1897_(II)
      June_1899(III)_____December_1900_(IV)
      September_1902(IV)_August_1904_(III)
      May_1907(II)_______June_1908_(II)
      January_1910(I)____January_1912_(IV)
      January_1913(I)____December_1914_(IV)
      August_1918(III)___March_1919_(I)
      January_1920(I)____July_1921_(III)
      May_1923(II)_______July_1924_(III)
      October_1926(III)___November_1927_(IV)
      August_1929(III)____March_1933_(I)
      May_1937(II)_______June_1938_(II)
      February_1945(I)___October_1945_(IV)
      November_1948(IV)__October_1949_(IV)
      July_1953(II)_______May_1954_(II)
      August_1957(III)___April_1958_(II)
      April_1960(II)_______February_1961_(I)
      December_1969(IV)__November_1970_(IV)
      November_1973(IV)__March_1975_(I)
      January_1980(I)____July_1980_(III)
      July_1981(III)______November_1982_(IV)
      July_1990(III)______March_1991(I)
      March_2001(I)______November_2001_(IV)

      Posted by: d.a.n at September 14, 2007 01:42 AM
      Comment #232796

      alien, since your comments have yet to provide evidence you have even read the FORMER Fed Chief’s comments on the end of democratic capitalism, the rest of your comments aren’t worthy of consideration, since, they have all the appearances of arguing from a position of ignorance of the topic matter under discussion.

      Your error of referring to the Fed Chief, as in current, reveals your commentary’s ignorance of the information which they attempt to critique. I will leave you to your comment’s illusions, they seem to be all that are left you.

      If you would care to quote the former Fed Chief’s comments on the end of democratic capitalism as evidence you have read them, I would then consider re-engaging debate of any arguments you may make based on his actual comments.

      Posted by: David R. Remer at September 14, 2007 07:32 AM
      Comment #232797

      Craig, the date of my articles have nothing to do with the dates referred to as market closing numbers. I specified the date ranges of the market closings independently of the dates of my articles. One has little if anything to do with the other.

      Posted by: David R. Remer at September 14, 2007 07:34 AM
      Comment #232799

      Craig said: “I have no clue your point in bringing this up. I was so clearly correct. Note that I said
      that those who took your advice would regret it in a year or two. Well here we are at a year and the index you are quoting is up over 230 points. I was right. June of 06 was a horrible time to sell as you suggested.”

      Craig, I hope you are inadvertently overlooking the fact that I was discussing 401K investors in my previous article, NOT DAY TRADERS. None of my arguments make sense for day traders or short term investors, and I specified clearly that I was referring to 401K investors who typically do NOT alter their investments in stocks downward or the mix of those investments in the various market index groups, small cap, large cap, international, etc.

      I assumed we were on the same page when I quoted your reference to noting you for reference a year later. My article referred to a significant downturn in the marketplace, timing of such things can not be pinned down to a week or even month. The downturn is occurring, 401K investors, long term investors without much market or economic saavy, are losing the gains accrued since last summer. If the FED does not drop interest rates by 50 basis points next Tuesday, the markets will erase nearly if not all of 401K investors gains since last summer.

      Which directly refutes your prediction that the markets would favor 401K investors a year or so later. I offered those quotes NOT as the topic of debate, but, as evidence that your previous optimism has not panned out, as I pointed out last year and this month. The glass is half full folks deny downturns even when they are inevitable. That was the point I was making in this article.

      If people were prone to acknowledging the signs of collapses, recessions, depressions, even the demise of entire societies and nations, such things would not occur, for they would take preventive action. The very fact that the Roman Empire, Ancient Greek civilization, the USSR, no longer exist, and the very fact that investors lost so very much in 1929, 2001, makes my argument that perpetual optimists wouldn’t recognize a demise if it smacked them in the chops a year ahead of time.

      There are no signs of Greenspan’s and Bernanke’s warnings that you would accept as evidence their warnings should be heeded. Precisely because you argue from the position that your past is template of the future.

      It is a fundamental flaw of human group psychology which handicaps nations, societies, and groups from recognizing the signs, even evidence, that tomorrow may not be nearly as well endowed as today. And cognitive dissonance plays a major role in discounting evidence and signs: the greater the cost of averting a negative tomorrow, the greater the denial of the evidence. Which explains why Congress has refused to take up meaningful and effective action on Medicare.

      Cognitive Dissonance ran rampant in the Bush administration and Republican and Democrat parties as they pushed ahead with expanding and deepening the costs of the Medicare program in the face of Greenspan’s warnings, as if doing so would prove Greenspan’s predictions were wrong. When in fact, they long jumped this nation toward a self-fulfilling prophecy of the very fear they had that Greenspan might be right. That is classic self-fulfilling prophecy, actually acting to bring about the very thing one fears, by denying the evidence for the fear even exists.

      It is hilarious in a perverse sort of way, that our government would react to Greenspan’s decade old warnings by vastly increasing entitlement spending and cutting taxes to dramatically increase the national debt, the very reserves for borrowing which would be needed to diminish the effect of boomer retirements.

      This ranks with classic Greek Tragedy. Only difference is, it is not the gods playing games with humans lives, it is the undisciplined minds of humans playing games with their futures, causing them to hallucinate fresh water lakes on the horizon of vast waterless deserts of the future. We will meet the future entitlement crisis by cutting taxation and increasing entitlement spending. The comedy of it is the only silver lining of this tragedy unfolding.

      Posted by: David R. Remer at September 14, 2007 08:04 AM
      Comment #232802

      David,

      Your comments are nearly as lost as d.a.n’s comments.

      I understand you don’t like being compared to Bush’s false linkage of Iraq and 911, but it is exactly the same switch and bait.

      I’m curious why a solution that Greenspan offered was education? I wonder why he didn’t say there needed to be immediate action. He didn’t suggest changes to the tax structure or summon committes to explore how to bail us out, why? Because he was talking about long term trends, which are subject to unknown events in the future.

      The absurdity of saying that eventually we may have a depression, is like saying if you eat too much broccoli that you may die. True, but useless information.

      I don’t need to quote Greenspan, I didn’t proffer the connection. I don’t wish to do your research for you.

      All I can say, if you believe either of the Fed Chiefs (that’s plural, eagle-eye) spoke about the end of democracy or a looming depression except in the longest of terms, you would be laughed off of any discussion of Fed commentary. Given that the comments about the end of democracy were given in 1994, I’d say your post was a bit off the mark. It hasn’t ended yet. A lot of things could end democracy, given enough time. Yelling about the sky falling isn’t effective discourse, it’s pandering.

      Since you’ve apparently forgotten that you referred to both Fed Chiefs (again, plural), I don’t expect you to admit to the absurdity of making the link between your fantasy (or nightmare) and an active Fed Chief’s public remarks. Some people never think they are wrong.

      I guess it’s easier to call me ignorant than actually rethink anything.

      To paraphrase you, I believe, from a fairly long time ago….Calling someone ignorant is risky because in some things, we all are ignorant.

      Posted by: alien from the planet zorg at September 14, 2007 08:55 AM
      Comment #232803

      Craig,

      It seems David wishes to talk the market down, whether it goes there or not. Even a stopped clock is right twice a day.

      I just wish David would stick to subjects he understands.

      Posted by: alien from the planet zorg at September 14, 2007 09:01 AM
      Comment #232805
      I guess it’s easier to call me ignorant than actually rethink anything.
      No one called you ignorant.

      But, if the shoe fits.
      So name-calling wasn’t working, so now you are inventing instances of being called names.
      How revealing.

      alien from planet zorg wrote: David, Your comments are nearly as lost as d.a.n’s comments.
      Such as? Care to provide specifics, or just continue to draw lame and unsubstantiated conclusions?

      Name-calling and drawing unsubstantiated conclusions is easy. For example, I could say all “aliens from the planet zorg” are rude and arrogant (a bad combination when combined with ignorance), but then, I don’t know that for certain since I’ve never been to the planet Zorg. I can only surmise that possibility from what one alien from planet zorg writes.

      So specifically, how are my comments lost? Are you sure you want to go there, where you will have to start backpedaling and crawfishing again? After all, you have already done it (and admitted it) three times in a few days.

      You appear to be upset, but you only have yourself to thank for it with so many non-sequiturs, backpedaling, crawfishing, inventing Holes that don’t exist, and personal attacks (a common indication of a weak argument; a common substitute for a substantive argument).

      alien from planet zorg wrote: Calling someone ignorant is risky because in some things, we all are ignorant.
      To all readers, press Control-F and search for the word ignorant to see all occurrences of the word ignorant within this thread. Once again, the alien from planet zorg is inventing an argument that does not exist. Hmmmmm … so why these feelings of being accused of being ignorant? Who knows … a course in Zorgian psychology may help?
      alien from planet zorg wrote:David, While I do not see absolute destiny of doom and gloom on the horizon, there are certainly dangers with soaring national debt and trade deficits.
      So, you admit dangers, but not “doom and gloom”. Again, no one said a depression was a “absolute destiny”. And you already admitted that above when you wrote:
      alien from planet zorg wrote: O.K. you never mentioned Greenspan or the Great Depression, or any depression when refering to Greenspan’s remarks.
      Then we have …
      alien from planet zorg wrote: I just wish David would stick to subjects he understands.
      I dare say aliens from the planet zorg know a lot more than most people about U.S. economics? At least David R. Remer backs up his opinion with research, facts, and data. About all the alien from planet zorg provides is name-calling, backpedaling, crawfishing, admissions, and inventing imaginary arguments that don’t exist (such as Hole#1 and Hole#2 in this other thread and the subsequent backpedaling, where an alien from planet zorg demonstrates their vast knowledge of physics, momentum, and acceleration). Now we are getting a demonstration of a Zorgian’s knowledge of economics? What have we heard so far? Things like:
      alien from planet zorg wrote: You guys are just getting old and cranky. Eat some oatmeal.

      I suppose the final outcome will be as it was before, as … :

      alien from planet zorg wrote:
      d.a.n.,
      Perhaps the problem is one of communication.
      Obviously. Earthlings have not yet become fluent in Zorgian, or the art of Zorgian Circular Logic.

      Posted by: d.a.n at September 14, 2007 10:42 AM
      Comment #232808

      David:

      Your argument is coming across as follows.

      You predicted the market would be up in one to two years 14 months ago.

      The market is up 18% since you made that prediction.

      You are wrong because the market might decline.

      401k investors who did not take your advice from 14 months ago are doing FAR better than those who did.

      I will go out on another limb so get your pen out.

      Within two years the S&P 500 will go over 1650.

      The economy is not in decline. It is middle aged showing signs of middle age. There is nothing abnormal about it.

      Every recovery comes to an end. When one comes it will be normal an have nothing to do with the signs of doom you refer to.

      I will go out on a limb further. Within four years we will have a normal recession.

      You consistently reclassify normal bumbs in the road as proof of doom. The 1990’s had the same things happen.

      Further predictions:

      1. Scandal will break out from the subprime loan issue and warrants for arrest will be made.

      2. In a year from now the subprime issue will be gone and you and I will be debating another issue taking the same stance. I will be saying that the new economic issue is normal and you will be taking the position that it is yet another sign of doom.

      Craig

      Posted by: Craig Holmes at September 14, 2007 11:33 AM
      Comment #232809

      Craig, now you are not making sense with: “Every recovery comes to an end. When one comes it will be normal an have nothing to do with the signs of doom you refer to.”

      Recessions and recoveries are short term economic events. And you know very well that this article’s discussion of economic problems are focused on a decade and more from now.

      As for your 2008 predictions, only a foolish prognosticator would predict a market top a year from now. Trends can be supported by economic data, not market tops or bottoms.

      As for your predictions this year, get back to me next week after the Fed responds at its FOMC meeting. And we will see how your prediction a year ago held up. And again early in 2009, as the spill over from the housing slump and sub-prime problems take a more substantial hold on economic data.

      Posted by: David R. Remer at September 14, 2007 11:40 AM
      Comment #232810

      alien, I retired at 44, so I think I understand pretty well. My 401K total earnings this year is at 5.9% as of yesterday and moved to a total cash position this morning ahead of the FOMC. But, if it makes you feel better to think of me as ignorant, you are very welcome to. Debate is easier when one’s adversary underestimates the other’s abilities.

      Posted by: David R. Remer at September 14, 2007 11:46 AM
      Comment #232819

      David:

      As for your predictions this year, get back to me next week after the Fed responds at its FOMC meeting. And we will see how your prediction a year ago held up. And again early in 2009, as the spill over from the housing slump and sub-prime problems take a more substantial hold on economic data.

      I will leave that to you. You are the one bringing up my predictions. My predictions in this thread are your issue not mine. You are welcome to bring them up anytime.

      As for your 2008 predictions, only a foolish prognosticator would predict a market top a year from now. Trends can be supported by economic data, not market tops or bottoms.

      Which is what you did with those two articles.

      For the record I am predicting no top of the market. I am only predicting that the market will rise from here and somewhere between a year from now and two years from now the S&P 500 will be over 1650. I have no clue if that is a top. The word “top” is your word now mine.

      Next week will be interesting with the Fed.

      We will be fine. No disaster is upon us.

      Craig

      Posted by: Craig Holmes at September 14, 2007 12:58 PM
      Comment #232820
      Craig wrote: In a year from now the subprime issue will be gone and you and I will be debating another issue taking the same stance. I will be saying that the new economic issue is normal and you will be taking the position that it is yet another sign of doom.
      Possibly. Probably.

      But the important issue is not really a mere year from now.

      The issue is what does the long term future hold?

      Craig Holmes wrote: … Bernanke says that if we do nothing, our children’s standard of living will fall 14% over ours. That puts them at about the same level as Canada. That is if we do nothing. What is so horrible about that?
      And the possibility of an average 14% decline in the standard of living (if we do nothing) isn’t good (especially since they probably won’t only do-nothing, but will probably exacerbate it), when you consider that the lower-income and middle-income groups will experience more than a 14% decline. Remember, 60% of Americans have only 5% of all wealth in the U.S., 40% currently have ZERO net worth, and 20% of Americans have about $10K of debt (not even including the $9 Trillion National Debt which is an additional $30K of debt per person). Thus, 60% of the U.S. population is in debt at least $30K. And most (40%) of the nationwide assets belong to the wealthiest 1% of the U.S. population.

      $Billions: M3 Money Supply:
      $11 … … … … . .[2007]
      $10 … … … …[2005]
      $ 9 … … … . [2003]
      $ 8 … … . [2001]
      $ 7 … …[2000]
      $ 6 …[1998]

      Why so much inflation?
      Economists (i.e. not paid by the FED or government) have been warning about this for years.
      The best analogy of it is like playing Monopoly in which one person can print all the money they want.
      How this can’t lead to insolvency is a mystery. The FED and the money system is dishonest. 89% of every new bank loan is new money. Banks make interest on money printed out of thin air. And capital gains are taxed at less than the average tax rate, making the tax system regressive.
      Unfortunately, the economists (i.e. not paid by the FED or government) don’t get heard by the Main Stream Media (MSM).
      This subject is not being discussed, despite its potential to exacerbate the economic situation.
      This one rarely discussed thing, inflation and excessive money printing, as the FED and government (in league) try to keep stock prices high and banks solvent, makes the U.S. dollar less attractive to foreigners (e.g. like China’s announcement to reduce exposure to the U.S. dollar), and the massive nation-wide personal debt.
      There will be consequences.
      It is just a matter of time.
      It may take a decade; maybe longer; but there will be consequences.
      That is a certainty.
      We can argue about when and how severe, but there will be consequences. That is, unless the planet is first destroyed by a 10 mile-wide comet. Maybe we should all move to plant Zorg?

      To make matters worse, there is the continued costly (lives and money) occupation of Iraq and the war in Afghanistan.

      Energy is another major vulnerability. Especially as China (population 1.3 Billion) and India (population 1.1 Billion) compete for oil and much of that oil coming from a very unstable region (i.e. middle east).

      But, other than that, and these other pressing problems, growing in number and severity, things “are fine”.

      Posted by: d.a.n at September 14, 2007 12:59 PM
      Comment #232821

      Craig said: “Which is what you did with those two articles.”

      Care to back that up with a quote? I ask because I know you can’t. I don’t and never did predict an S&P number by a certain date. I am not that foolish, and haven’t been for decades. Twas a time though back in the 1980’s.

      Posted by: David R. Remer at September 14, 2007 01:07 PM
      Comment #232832

      David:

      Just last year I wrote that the housing market was poised for retrenching the markets. You denied that was possible citing then economic and market statistics assuring you it would not happen. Yet, it happened, is happening, and markets around the world have retrenched to varying degrees in response to our housing bubble burst and sub-prime mortgage industry partially bankrupting.

      Provide me some quotes that I have made about housing first.

      We will be fine,

      Craig

      Posted by: Craig Holmes at September 14, 2007 02:28 PM
      Comment #232840

      David:

      alien, I retired at 44, so I think I understand pretty well. My 401K total earnings this year is at 5.9% as of yesterday and moved to a total cash position this morning ahead of the FOMC. But, if it makes you feel better to think of me as ignorant, you are very welcome to. Debate is easier when one’s adversary underestimates the other’s abilities.

      I believe you moved them out in June of 2006.

      WOW!!! Long term that will hurt your earnings.

      Craig

      Posted by: Craig Holmes at September 14, 2007 03:12 PM
      Comment #232867

      d.a.n.,

      I will no longer respond to your posts. You prove nothing except an oddly obsessive need to ignore what anyone else says, and become abusive in your responses. Your posts are monologues without the entertainment value of a play or comedy bit. They offer only whatever stretch of facts you choose to ignore and fit into your preconcieved ideas. Good luck convincing anyone.


      Posted by: alien from the planet zorg at September 14, 2007 07:41 PM
      Comment #232870
      alien from planet zorg wrote: d.a.n., I will no longer respond to your posts. You prove nothing except an oddly obsessive need to ignore what anyone else says, and become abusive in your responses.
      Really?

      Yet …

      alien from planet zorg wrote:
      You guys are just getting old and cranky. Eat some oatmeal.

      … and …
      alien from planet zorg wrote:
      I don’t care a whit about you personally. If you aren’t argumentative, then why in the hell are you on a debate site?

      This is the typical. You only have yourself to thank for it. You can use data, facts, logic, or you can do as you did, and resort to name calling and unsubstantiated conclusions. These lend to credibility. Inventing Holes that don’t exist, backpedaling, crawfishing, and then resorting to name calling didn’t help your arguments. You never research or posted supporting data, you never posted articles and data, you never backed up your conclusions. When thoroughly trounced, you finally resorted to name calling.

      Are you returning to planet Zorg, or will you finally present some data and facts to refute the potential for an economic melt-down?

      After all, that’s what this is all about.

      Some have a rosy outlook. Some don’t.

      You have acknowledged serious problems, but don’t see the potential for an economic meltdown.

      Why?

      Have you really examined history, the money system, debt (personal and federal), demographic factors, etc.

      Do some home work. Prove your case. Or don’t. It’s up to you. If you have a strong argument, fight for it. Explain it. Support it. Or don’t. Give up. That’s your choice.

      Posted by: d.a.n at September 14, 2007 08:14 PM
      Comment #232874

      Alien:

      It seems David wishes to talk the market down, whether it goes there or not. Even a stopped clock is right twice a day.

      I just wish David would stick to subjects he understands.

      I have debated David and Dan for quite some time. Both do a great service by reminding us of our problems.

      I think they minimize the positives and are out of balance. For instance, just try to get a discussing going about ANY positive finanicial situation. Low unemployment, strong GDP, lower deficit, strong stock market. (you name it), and you will get a long argument of dismisal.

      All in all they are worthy debating opponents.

      It gets very frustrating that they wont admit a single posiive economic event!!

      Craig

      :

      Posted by: Craig Holmes at September 14, 2007 08:52 PM
      Comment #232878

      David,

      What you are failing to acknowledge is quite simple for me to see. You are not necessarily wrong in what you say about the economy. You are wrong if you sincerely believe that your post represents Greenspans comments.

      Often people talk at cross purposes, and speak past each other. I believe that is what is happening here. I hope we can both drop the vituperative tone and each learn something.

      MY analysis:

      In the first part of the piece you talk about economic perception, even though you then go about stating unequivocally that our parents generation WAS better off and cite hours worked. You also discuss net asset wealth. Why are these two examples opposites? If we work longer and harder, shouldn’t our assets be higher? That is the first disconnect I noted.

      My parents were raised on a farm in the 30’s, as children they were very poor. We had no air conditioning, no color tv, My father built his own stereo. My mother couldn’t drive, she walked. Our house was modest. I think this was true for many Americans. The problem with perception of the economy and the actual economy may be two very separate things. When you are unemployed, things look bad. When you have found a good job or business, things look great.

      This is your first reference to the Depression.

      Next you trot out a full blown scene of the Depression spattered with Robber Barons and Flappers. While a monetary contraction was the phenomenon that precipitated the crash, it wasn’t the Robber Barons who caused the crash. Speculation and Margin trading was rampant. It was that very volatility, that everyone in the market was aware of, that probably led to a contractionary psychology, that gained momentum. Most of the Baron’s didn’t lose their fortunes. They knew, or some did.

      Then you jump to present day, and bring up retiree’s and Social Security. You talk about dire warning’s that the same thing is happening today.
      No. Wrong. Economically there is little similarity between today’s economy, the stock market, and 1929.

      You then say Bernake and Greenspan and the labor department spoke about the savings rate and unsustainable expanding entitlements. proceeded by the phrase“This is what is occurring today. The warnings have been issued repeatedly by economic forecasters for more than a decade, now.

      The only way I can interpret that is that you are saying that Bernake, Greenspan and the labor department are warning about a depression. They weren’t. They were talking about the difference between an early and late response, as you accurately quoted. Interestingly the Labor department “warning” contains this line “Asset allocation matters. Stocks have traditionally outperformed bonds and money market instruments over the long haul. For inflation-beating returns, long-term investors shouldn’t be too conservative.”

      None of these comments are about the vision of impending disaster that you paint in the first two sections. They are about dealing with a long term deficit spending government, not economic instability. Perhaps they are not linked to your previous scenarios. Maybe Saddam didn’t really fund 911.( wait, I’ll get to the end of democratic capitalism) Except you said they were linked. (see the bold sentence above)

      Next you discuss the future making speculations about medicare and GDP that are not unreasonable, except that things do change as pressure rises.
      One of the major problems is healthcare. It’s costs are rising because it’s a for profit industry with powerful lobbies. Secondly, if somewhat morbid, this will work itself out to some degree, as the elderly population dies off. With worse medical care they’ll die sooner. Sorry, we can’t live forever. No one can stop that suffering and loss.

      SS retirement age will be raised. We all know it will likely be. Presto chango…it’s solvent!!!! Not magic, just the way reality works sometimes. Or maybe not. Crystal balls really don’t work well for anyone.

      Next come your dour conclusions:

      “The reasons none of these scenarios can be prevented from collapsing the economy are three fold.”

      1. People don’t save. Well, that’s true enough, but when did they? There’s a reason most of us aren’t trust babies.

      2. Cheap labor is what ended the depression and the economic boom of the 60’s. Ummm, Nope it was an expansion of the money supply through deficit spending, for the war effort, not because Rosie worked cheap. Credit confidence was restored through more responsible credit and market rules. Oh yeah, we had great trade deals at the point of our guns worldwide now, as well. And since we helped blow up most of the world, who better to sell our goods to?

      3.It’s those damn politicians. Well, they sir, are us. Why would a third party be less pandering and corrupt as the two we have now? Yes, it’s up to the voters.

      Funny thing, though there was a real threat that communism or Nazism had a chance during a real crisis, the depression and WWII, democracy won out, well sorta. Amazing!! Those damn Americans knock ‘em down, and they get right back up.


      As I said before, every few years there is someone predicting a looming Depression, and I’m sure you believe it’s coming. Maybe it is, but there are always problems, and yes, ballooning government spending is one. A Depression is a trade linked, credit linked, money supply linked phenomenon. War’s cause real damage when they occur in your terrritory and can destroy an economy. Riots and lack of justice destroy economy’s. Stupidity on the part of government and laissez faire, in my opinon, led to the Depression. That memory is not yet gone from our consciousness.

      On a point about your curious “loss” math

      We may or may not have a recession. The market has not declined to one year lows. Here is a link to a one year Dow chart or S&P.

      The Christian Science monitor did a story on Greenspan’s speech. Their tone was entirely different from yours. Did they not understand him? Are they the “height of ignorance”? Please note the closing quote:
      “So you can look at the system and say it’s got a lot of problems to it, and sure it does. It always has,” Greenspan told the JEC last week. “But you can’t get around the fact that this is the most extraordinarily successful economy in history.”


      Posted by: alien from the planet zorg at September 14, 2007 09:50 PM
      Comment #232893
      Craig wrote: I think they minimize the positives and are out of balance. For instance, just try to get a discussing going about ANY positive finanicial situation. Low unemployment, strong GDP, lower deficit, strong stock market. (you name it), and you will get a long argument of dismisal.
      Craig, those stats do look OK. I’ve acknowledged that many times. But what is avoided is the debt adn money printing that prop it up. How long can that last? Week before last, the FED pumped $61 BILLION of new money into the failing banks. Incessant inflation is like a REGRESSIVE tax.
      alien from planet zorg wrote: War’s cause real damage when they occur in your terrritory and can destroy an economy.
      Very true.. And we have two protracted wars now in Iraq and Afghanistan. Not as severe as WWII. But still costly.
    • Posted by: d.a.n at September 15, 2007 12:04 AM
      Comment #232895

      Dan:

      You really over simplify things. In general if the money supply increases at the same rate as GDP that is not inflationary.

      Putting $61 Billion into a $14,000 billion dollar economy is a drop in the bucket. It is about a half a percent of gdp. It is a very minor issue.

      The debt and money printing will last well after you and I are dead and gone. It’s a fine money system. It works very well. We have the greatest economy the world has ever known.

      There is absolutely nothing wrong with debt and “printing money”. There is only wise and unwise uses of those commodities (money and debt). Of course if a nation is foolish with them we will have problems. those problems are self correcting. Look at the subprime issue. Some people wrote some bad loans. The economy is correcting the issue.

      Actually what is going to happen is that those homes will be sold and a greatly reduced price and some wise investors will do very nicely in purchacing them. Money is going to be made. A great deal of money.

      I was talking to a portfolio manager of a fixed income mutual fund about a month ago. They were SO EXCITED. They were buyers and were going to go and offer to buy some paper with a coupon of 9.5%. Good paper.

      So much money is going to be made as these homes and this paper that is issued moves from those who borrowed too much to those who are now buying. In the latter case about, the mutual fund investors should do very well. I don’t have any money in bonds right now or I certainly would consider this person’s fund.

      The assets are simply moving from one group who will loose money to those who will gain. Of course the sad part is that these are americans with homes. Economics can be a hard lesson to learn

      Craig

      Posted by: Craig Holmes at September 15, 2007 12:21 AM
      Comment #232950
      Craig wrote: It’s a fine money system.
      Think so, eh?
      Craig wrote: You really over simplify things. In general if the money supply increases at the same rate as GDP that is not inflationary.
      Here’s the flaw in that statement.

      M3 Money Supply increased from:

      • 135 Billion in 1950

      • to 10.15 Trillion in 2005

      That is a factor of 75.2 .
      In addition, the population doubled.
      We did not become 75.2 times wealthier between 1959 and 2005.
      That is inflation, as can see HERE (scroll down to see chart).

      So that is what you call:

      Craig wrote:
      It’s a fine money system. It works very well. We have the greatest economy the world has ever known.

      Craig, you appear to be a pro-inflationist.
      You have already stated before in previous threads that inflation is bad. Yet incessant inflation is now being downplayed and you characterize the money system as?

      Craig wrote:
      It’s a fine money system. It works very well. We have the greatest economy the world has ever known.

      Yet, Craig, you have already admitted that inflation is bad. So how is incessant inflation now translate into “It’s a fine money system”?

      • Why do we accept 3% to 4% (or more) inflation as normal?

        • Why, now in 2007, is:
        • a 1997 dollar now worth only 77 cents?

        • a 1987 dollar now worth only 55 cents?

        • a 1967 dollar now worth only 29 cents?

        • a 1957 dollar now worth only 16 cents?

        • a 1947 dollar now worth only 11 cents?

        • a 1937 dollar now worth only 07 cents?

        • a 1927 dollar now worth only 08 cents?

        • a 1913 dollar now worth only 05 cents?
      • Why so many foreclosures now if everything is so rosy?

      • Why so many credit card applications in the mail?

      • Why is 89% of every new bank loan new money invented out of thin air (see 47 minute video; you’ll be amazed) ?

      • Why is it the bank can earn interest on money printed out of thin air?

      • Why did the FED just pump $61 billion of new money into the banks (liquidity, eh?) in Aug-2007 ?

      • Isn’t it astounding how everyone can be in debt to bankers?

      • How can everyone that produces the wealth be in debt to banks?

      • Why is there $10.15 Trillion of M3 Money Supply in year 2005 when it was only $135 Billion (75 times less) in the year 1950 (and that’s with double the population now)?

      • How can everyone be in debt to banks, when 89% of the money is printed out of thin air? And they get to collect the interest? You don’t see anything wrong with that? You call that a “fine money system” ?

      • Most people think banks are loaning out money from deposits. They don’t realize that 89% of each new bank loan is new money created out of thin air.

      • Where will the interest for all the debt come from when the money for that much interest does not even exist yet? Care to explain that? Yes, you know where? It will be printed out of thin air. What does that cause? Duh! More inflation. Inflation that erodes savings and income. Inflation is like a REGRESSIVE tax. Care to explain that away?

      • Why is the government spending money like crazy when we already have so much federal debt ($9 Trillion National Debt and Social Security is $12.8 Trillion in debt)?

      Craig wrote: The assets are simply moving from one group who will loose money to those who will gain.
      Yes, and the trend continues as the wealthiest 1% of the U.S. population with 40% of all wealth grows even wealthier (up from 20% of all wealth in 1980).

      Never mind the predatory lending.
      Never mind the greedy 23% interest rates.
      Never mind the greedy ARMs raised to 14% .
      Never mind banks making money on interest on money printed out of thin air.
      And you, Craig, say to those being foreclosed on as “Economics can be a hard lesson to learn”.
      Never mind $20 Trillion of nation-wide personal debt and $22 Trillion of total federal debt.
      Never mind 60% of working Americans only have 5% of all wealth (and you, Craig, have already admitted the lop-sidedness).

      Craig, Thank you for your last (and very enlightening) comment. You wrote that the current money system is a “fine money” system. And you now revel in the opportunities resulting from economic instabilities and fallout created by this “fine money system”. You condone and downplay pumping $61 Billion of new money into the banks to compensate for bad loans; i.e. bailing out the bankers. You even call it “EXCITING”. How revealing. Thank you. It all makes sense now.

      Posted by: d.a.n at September 15, 2007 10:34 AM
      Comment #232970

      Dan:

      M3 Money Supply increased from:

      135 Billion in 1950

      to 10.15 Trillion in 2005

      That is a factor of 75.2 .


      We are back to one of my main issues with your methodogy. The onld one legged stool thing. Your factor is irrelevant because it doesn’t compare itself to anything.

      You have a point if you present your facts in another manner. Compare them relative to how much the economy has grown since 1950. Obviously with a much higher population (close to double?) and a much higher standard of living there is a need for more money is circulation.

      What you want is a net figure that shows M3 increse because of inflation. You are showing the whole works. You are showing increase in money supply do to population increases and productivity increases for the last 57 years.

      Can I ask you to recalabrate and make the same point? All you need to do is find out how much of the 75.2 is do to GDP increase.

      Take 2007 nominal GDP and divide by 1950 GDP. It should give you a figure less than 75.2. Compare the difference and that should be the amount do to “funny money”. (I think that is your term).

      See my point?

      Craig

      Posted by: Craig Holmes at September 15, 2007 11:30 AM
      Comment #232973

      Dan:

      Back to my point to you that the sky is not in fact falling.

      Somewhere up there I think you say there are unfunded mandates (debts plus commitments) of somewhere around $50 trillion. It really doensn’t matter to be exact.

      These are present value commitments of our government over the next 70 years or so.

      Back to comparing figures against something. You have to make that relavant by looking at the present value of the tax base to compare it to. For instance you have to look at the growth rate of household plus corporate assets (roughly $100 Trillion) and their growth rate (6%) minus the long term inflation rate (2.5%) and come up with a present value to compare them to. (Assets minus liabilities lets you know how well you are off)

      At six percent growth rates in assets, (long term average), by the rule of 72, that means assets should double every 12 years. In the year 2019 US assets should be $200 trillion, in 2031 $400 trillion, in 2043 $800 Trillion. That is just using historical averages!! (By the way your $50 Trillion is based on historical averages as well).

      So we have a problem ahead of us of entitlements basically based on demographics.

      I am going to prove to you right here, so pay attention, why doomsday is not coming.

      THERE ARE ECONOMIES THAT HAVE DEMOGRAPHICS LIKE OUR FUTURE THAT ARE DOING FINE RIGHT NOW. SINCE WE ARE NOT GOING THROUGH THE AGE WAVE FIRST WE CAN SEE WHAT THEY ARE DOING AND LEARN FROM THEM.

      1. Germany. Germany has a much older population that we do. Their choice is to increase taxes. They have a government that is close to 50% of gdp. Their debt to GDP is close to ourse. We can argue at the fringe but, NO DOOMSDAY.

      2. Japan. Japan is way further down the road that we are in an aging population. Evern worse that Germany!! They have chosen high debt. Their debt to GDP is over 100%!! They have their issues, but they are FINE. (All economies have issues).

      Here is my premise for you to tear into.

      DOOMSDAY IS NOT COMING TO AMERICA BECAUSE OF ENTITLEMENTS. WE ARE FORTUNATE IN THAT SEVERAL EUROPEAN COUNTIES AS WELL AS JAPAN ARE AHEAD OF US IN THE AGE WAVE. ALREADY WE CAN SEE THAT NEITHER ECONOMY IS COLAPSING. INFACT ALL ARE STILL GROWING. WE CAN LEARN FROM THEM, AND BASED ON THEIR EXPERIENCES IMPROVE ON WHAT THEY DO. IN EITHER CASE THEY ARE LIVING PROOF THAT WE HAVE NO REASON TO FEAR ECONOMIC COLLAPSE.

      Craig

      Posted by: Craig Holmes at September 15, 2007 11:46 AM
      Comment #232980

      Dan, David, Alien:

      I want to build on my thesis that we can look to both Germany and Japan who are far ahead of us (older) and see that the future is fine.

      I came across a study by concord group. In it that say that in 1995 (I admit that this first figure is a bit old), In the US we had 4.2 people contibuting to our public pension systems for ever participant. This is expected to fall to 2.3 contribtors by 2050. This is of course the age wave and baby boomer argument we have been having.

      Guess what? Japan, Germany and France are already there. These economies are already living what we are arguing about.

      This basic debate here in the independent section has been about future projections and entitlement spending and whether or not America is doomed.

      Europe and Japan are living our future. They are societies that already have the the issues we are debating about.

      At the very beginning what I would say is that they appear to be stable growing ecnomies. They are not growing as fast as we are here in the United States. None seem to be in collapse, or even near the breaking point.

      As America hits those same pecentages of elderly, we can do so without fear. Workers may need to work longer. (In Japan workers work about 4 years longer than in US). Our taxes may need to rise, or we may need to borrow a bit more money. We do not need to fear much at all!!

      Craig

      Posted by: Craig Holmes at September 15, 2007 01:11 PM
      Comment #232990
      We are back to one of my main issues with your methodogy. The onld one legged stool thing. Your factor is irrelevant because it doesn’t compare itself to anything.
      Not true.

      We did not become 75.2 times wealthier from 1950 to 2005.
      Especially when the population also doubled since 1950.
      The point is to show inflation and excessive money creation, and the increase of the M3 Money Supply by 75.2 times proves there has been a lot of inflation since 1950.

      Yet you call that a one-legged stool?

      What more proof of inflation. Why, now in 2007, is:

      • a 1997 dollar now worth only 77 cents?

      • a 1987 dollar now worth only 55 cents?

      • a 1967 dollar now worth only 29 cents?

      • a 1957 dollar now worth only 16 cents?

      • a 1947 dollar now worth only 11 cents?

      • a 1937 dollar now worth only 07 cents?

      • a 1927 dollar now worth only 08 cents?

      • a 1913 dollar now worth only 05 cents?

      You skipped right over the issues:

      • of the FED, government, and banks creating new money at a 9-to-1 ratio with every new bank loan

      • banks making interest on new money (89% of each new bank loan is new money).

      • you didn’t explain where all the interest on all that debt will come from (i.e. more money creation)

      • you didn’t address the predatory, greedy lending habits; I agree borrowers should be more careful, but that does not justify the greed and careless lending, and a system that wants to get everyone possible into debt.

      • you ignored the incessant inflation that erodes savings, incomes, creates bubbles, adn destabilizes the economy.

      You even called it a “fine money system”.
      Thus, you support a dishonest money system.

      Please tell us why the following analogy is wrong …

      Our money system is analogous to playing the game of Monopoly in which one person can print all the money they want. Before long, everyone else is broke or in debt to that one person (e.g. banks).

      Please explain how our money-system isn’t exactly like that?

      Please tell us why our money-system is a “fine money system”.

      Also, if this economy is being propped up with massive debt, spending, borrowing, and money printing, please explain how that can continue? This current illusion of what you call the “greatest economy in the world” can not last by trying to create more and more debt. Before long, like in the Monopoly game analogy, everyone is deep in debt. How can everyone that produces be in debt to the banks?

      How about some honest answers to these questions?

      And please don’t tell me about net assets, when you alread know (and have admitted the lop-sidedness) that most (60%) of that wealth (net worth nationwide) is owned by a tiny 5% of the U.S. population, and 60% of the U.S. population only has a tiny 5% of all wealth.

      You have already admitted in the past that inflation is a problem, the lop-sidedness of wealth is a problem, the trend of that lop-sidedness is a problem, debt is a problem, wars are a problem … yet you characterize the current state of things as:

      • “the greatest economy of the world”,

      • “we have a fine money system”,

      • “we will be fine”,

      • things are “very good”,

      • and now “EXCITEMENT” {about capitalizing on the foreclosures and deals to be made … as banks turn money printed out of thin air into real assets}.

      No moral issues with any of that?

      Your response is simply:

      Craig wrote:Of course the sad part is that these are americans with homes. Economics can be a hard lesson to learn.

      Craig wrote: I was talking to a portfolio manager of a fixed income mutual fund about a month ago. They were SO EXCITED. They were buyers and were going to go and offer to buy some paper with a coupon of 9.5%. Good paper.

      So much money is going to be made as these homes and this paper that is issued moves from those who borrowed too much to those who are now buying. In the latter case about, the mutual fund investors should do very well. I don’t have any money in bonds right now or I certainly would consider this person’s fund.

      Is it just me, or is there something fundamentally wrong with this picture?

      Posted by: d.a.n at September 15, 2007 02:16 PM
      Comment #232996

      Dan:

      Here is a quote from Greenspan’s new book:

      It is not an accident that human beings persevere and advance in the face of adversity. Adaptation is in our nature, a fact that leads me to be deeply optimistic about our future. Seers from the oracle of Delphi to today’s Wall Street futurists have sought to ride this long-term positive trend that human nature directs. The Enlightenment’s legacy of individual rights and economic freedom has unleashed billions of people to pursue the imperatives of their nature—to work toward better lives for themselves and their families. Progress is not automatic, however; it will demand future adaptations as yet unimaginable. But the frontier of hope that we all innately pursue will never close.

      Wow what an optimist!!!

      Ok on your website the US economy in 1950 was $293,800,000,000. That was the Gross Domestic Product of the United States at that time. Today the United States Economy is $14,000,000,000,000,000. ($14 Trillion).

      Divide $14 Trillion by $293.8 billion is about 48. The economy is 48 times as large as it was in 1950 but the money supply is 75.2 times. The point you are making is that money supply is growning faster than the economy. Certainly you have no gripe (I hope not) that the money supply grows as fast as GDP. If it doesn’t GDP will not grow!! Now one will get richer only poorer as more people have to compete for the same amount of money.

      Is it just me, or is there something fundamentally wrong with this picture?

      No because all the information is public knowledge. It is called capitalism. When people make mistakes as in buying a home, or in lending money to people they shouldn’t, the market takes care of it.

      There are going to be some wonderful people who unfortunately are going to loose their homes. that is a deep tragedy. There are going to be some other wonderful people who will buy those homes at a good discount. For them it they will do very well finacially.

      For corporations that signed leverage buy out deals and now can’t sell their paper, they will see their profits decline as they have to “eat” some losses. For those investors who buy the paper at a great discount, they will do very well.

      It is simply capitalism.

      You have already admitted in the past that inflation is a problem, the lop-sidedness of wealth is a problem, the trend of that lop-sidedness is a problem, debt is a problem, wars are a problem … yet you characterize the current state of things as:

      “the greatest economy of the world”,

      “we have a fine money system”,

      “we will be fine”,

      things are “very good”,

      and now “EXCITEMENT” {about capitalizing on the foreclosures and deals to be made … as banks turn money printed out of thin air into real assets}.

      No moral issues with any of that?

      First of all the word excited was in reference to the people I was talking to.

      In the end however, I think you need to refine your point.

      Yes I am excited that some people will get some good deals and prosper greatly. I am saddened that some people will have to sell and take a financial loss.

      In terms of morality, I am morally outraged where preditory lenders convinced first timers to borrow when they should not have. The morality comes in where there is dishonesty. Being excited about getting a good buy is not immoral it is human. Go to any garage sale.

      Craig


      Posted by: Craig Holmes at September 15, 2007 03:09 PM
      Comment #232998

      Dan:

      Our money system is analogous to playing the game of Monopoly in which one person can print all the money they want. Before long, everyone else is broke or in debt to that one person (e.g. banks).

      Please explain how our money-system isn’t exactly like that?

      Please tell us why our money-system is a “fine money system”.

      It is very much like monopoly in that there are winners and loosers. It is unlike monopoly in that monopolies are not allowed by law. Courts can and will split up monopolies over time. (Remember Ma bell?).

      Also, if this economy is being propped up with massive debt, spending, borrowing, and money printing, please explain how that can continue? This current illusion of what you call the “greatest economy in the world” can not last by trying to create more and more debt. Before long, like in the Monopoly game analogy, everyone is deep in debt. How can everyone that produces be in debt to the banks?

      I don’t accept your premise. The economy is “propped up” by a three legged stoole, Assets liabilities and Income. (Just like your personal economy).

      Please tell us why our money-system is a “fine money system”.

      Show me a better one. Where in the world is there a better system currently in use? Show me a better system that is getting better results than ours.

      Craig


      Posted by: Craig Holmes at September 15, 2007 03:19 PM
      Comment #232999

      Dan:

      Why are you so vested in America’s decline?

      Know what Greenspan’s 30 projection is for the economy? 2.5%/year real growth.

      Explain to me why that is so horrible.

      Craig

      Posted by: Craig Holmes at September 15, 2007 03:21 PM
      Comment #233005

      Dan:

      You brought up the issue of economic inequality. I want to agree with you that it is an important issue that needs to be address.

      I want to repeat something that I have said before in this debate. There is only one remedy that I am aware of that really works and that is education.

      The only real way to help those under the median income levels inprove their standing is through education and job training.

      I think there is a push to “tax the rich”. The rich are already taxed pretty good. They pay by far the largest share of taxes. And they might be able to be taxed more. However if they are taxed so much that they loose incentive then our growth rate will fall and unemployment will rise and who really gets hurt?

      I am not preaching this point. If someone has another real answer I am open. It’s just simply the only answer I know of that really works.

      JOB SKILLS!!

      Craig

      Posted by: Craig Holmes at September 15, 2007 03:51 PM
      Comment #233015

      Craig Holmes, you are so busted. Please read the following. I can’t wait to hear the explantions and excuses that will likely follow.

      • VESTED: Law Settled, fixed, or absolute; being without contingency: a vested right.
      Craig Holmes wrote: Dan: Why are you so vested in America’s decline?
      Not true.

      I am speaking about probabilities and raising valid issues that have the real potential to unravel the economy.
      You seem to think another Great Depression is very unlikely.
      I am contending that massive debt (government and personal), the dishonest money system, wars, corruption, and a combination of many factors hold a better than 50% probability to bring about an economic melt-down.
      Our own American history is strewn with economic meltdowns.
      The last one was the Great Depression.

      Craig Holmes wrote: Know what Greenspan’s 30 projection is for the economy? 2.5%/year real growth. Explain to me why that is so horrible.
      Uhhhhmmmmmm … What happened to that 14% decline in the standard of living. Ohhhhh … right … if we do nothing.

      Also, you are still avoiding the question and morality of interest on loans invented out of thin air. So I will take that to mean that the way that works is OK with you.

      You glossed right over the inflation with a real work of art in gobbledy gook and circular logic.

      Craig Holmes wrote: Divide $14 Trillion GDP [year 2007] by $293.8 billion [year 1950] is about 48.
      First of all, 2007 GDP is not available yet since 2007 is not over yet.

      So let’s use 2006 GDP.
      Also, that does not mean real GDP increased by a factor of 48.

      Nominal GDP in year 2006 was $13.2 Trillion in 2006 dollars.
      Mominal GDP in year 1950 is $293.8 Billion in 1950 dollars.
      GDP in year 1950 is $2.46 Trillion 2006 dollars.
      $13.2 Trillion / $293.8 Billion (1950 GDP in 1950 dollars) = 44.9
      $13.2 Trillion / $2.46 Trillion (1950 GDP in 2006 dollars) = 5.37

      So the real GDP growth is only 5.37 .
      44.9 / 5.37 = 8.36
      And guess what? $1 dollar in 1950 is $8.37 in 2006.
      What that means is inflation is more than the growth of GDP.

      And I have now proven my case that inflation has outpaced GDP growth.
      And guess what else?
      That increase of GDP by 5.37 times did not even take into account that the population doubled between 1950 and 2006.
      U.S. Population in year 1950: 152,271,417
      U.S. Population in year 2006: 300,000,000
      300,000,000 / 152,271,417 = 1.97 (i.e. population almost doubled between 1950 and 2006).
      Thus, you could say GDP per capita only increase by a factor of 5.37 / 1.97 = 2.73 times.
      However, the Money Supply increase by 75.2 times and inflation increased by a factor of 8.37 times.

      Craig Holmes wrote: The economy is 48 times as large as it was in 1950 but the money supply is 75.2 times.
      False.

      Your math is so messed up it’s not funny. You failed to adjust for inflation. (See explanation above)

      Again, GDP is 5.37 times larger in 2006 than in 1950 (not 48 times; that’s just truly ridiculous), and that is for twice the population.

      Craig Holmes wrote: The point you are making is that money supply is growning faster than the economy.
      That is correct. I just proved it.
      Craig Holmes wrote: Certainly you have no gripe (I hope not) that the money supply grows as fast as GDP.
      False.

      I just proved that wrong beyond a shadow of a doubt (see above).
      You’ve just been busted.

      Craig Holmes wrote: If it doesn’t GDP will not grow!!
      Money Supply should not be allowed to grow too fast. And it has, as evidenced by the simple calculations above.
      Craig Holmes wrote: No one will get richer, only poorer as more people have to compete for the same amount of money.
      Money Supply must increase, but not so quickly that it causes inflation.

      Inflation is economically destabilizing, but more importantly, it is like a REGRESSIVE tax.
      The poor get poorer, and the rich get richer.
      I would think you would know and understand all of this, but evidentely not.

      Craig, Up until now, I thought you knew a thing or two. Not any more.

      Craig Holmes wrote: Dan: You brought up the issue of economic inequality. I want to agree with you that it is an important issue that needs to be address.
      Thank you for that at least.

      NOTE: There is NOTHING wrong with being wealthy.
      But an inflationist money system that is essentially a REGRESSIVE tax is unfair and dishonest. If you study it as closely as I have, you should conclude the same thing.
      To make matters worse, we also have a REGRESSIVE tax system due to abused tax loopholes, and this is why Warren Buffet paid a lower income tax rate than a secretary making $60,000 gross per year.
      To make matters worse, the wealthy are not taxed above $97,500 on Social Security and Medicare.
      To make matters worse, sales taxes all over the place are REGRESSIVE.
      All of this is unfair. Not by accident. By design.

      Craig Holmes wrote: I want to repeat something that I have said before in this debate. There is only one remedy that I am aware of that really works and that is education.
      That is not the issue of this debate, nor the only solution, but I agree that education is VERY important.

      Why?
      So that people can understand how they are being cheated by a REGRESSIVE tax system, a REGRESSIVE money system, and politicians that despicably pit Americans and illegal aliens against each other, and how too many voters do the unthinkable … and actually reward bought-and-paid-for politicians for it with repeated re-election.

      Craig Holmes wrote: The only real way to help those under the median income levels inprove their standing is through education and job training.
      Yes, again, education is very important.

      But those (not all) that abuse vast wealth and power are thwarting that at every turn. I see it. I can prove it. So I plan to educate as many people as I possibly can. And one of those ways is debunking (as I just did above) myths and lies spread willing and/or unwittingly.

      Craig Holmes wrote: I think there is a push to “tax the rich”. The rich are already taxed pretty good.
      And the rest are taxed less as a percentage of gross income.

      Our tax system is essentially REGRESSIVE (because of tax loop holes, 15% capital gains tax rates that are lower than the average rate paid by most Americans).

      Craig Holmes wrote: They pay by far the largest share of taxes.
      Not as a percentage of gross income.
      Craig Holmes wrote: And they might be able to be taxed more. However if they are taxed so much that they loose incentive then our growth rate will fall and unemployment will rise and who really gets hurt?
      They should pay their fair PERCENTAGE. They are NOT, because the tax system is perverted and REGRESSIVE, the money system is like a REGRESSIVE tax, sales taxes are REGRESSIVE, and politicians are selling out the majority of Americans.
      Craig Holmes wrote: I am not preaching this point. If someone has another real answer I am open. It’s just simply the only answer I know of that really works. JOB SKILLS!! Craig
      Education, yes. Not just job skills.

      People need to know enough to know when they are geting screwed.
      And they are getting screwed now with REGRESSIVE taxes, a REGRESSIVE money system, predatory lending practices, predatory banks, and the evidence of it is the growing disparity.

      I know these things.
      I’m not wealthy, but I’m not stupid.
      I paid off my house in 6 years.
      30 year loans on a primary residence is smart at all.
      Paying 23% interest on credit cards is plain stupid.
      In fact, 23% interest is immoral and usurious.
      People should be smarter, but that does not justify cheating them.

      Yes, education is important. That’s about the only think you wrote that I agree with completely 100%.

      Posted by: d.a.n at September 15, 2007 05:32 PM
      Comment #233016

      NOTE: $1 dollar in year 1950 is $8.37 in year 2006.
      QUALIFICATION: $1 dollar in year 1950 has the buying power of $8.37 in year 2006.
      Inflation would erode a $1 dollar in year 1950 to only a measely $0.12 (twelve cents) in the year 2006.
      That is, inflation has reduced the value of the U.S. dollar by a factor of 8.37 between year 1950 and 2006.

      Posted by: d.a.n at September 15, 2007 05:46 PM
      Comment #233017

      CORRECTION: 30 year loans on a primary residence is NOTE smart at all.

      Posted by: d.a.n at September 15, 2007 05:53 PM
      Comment #233022

      Dan:

      Uhhhhmmmmmm … What happened to that 14% decline in the standard of living. Ohhhhh … right … if we do nothing

      that is not my quote but Bernanke. I am using it to refute your and David’s contention of doom. Even if we do nothing doom doesn’t arrive. If we do nothing the next generation will live like Canadians. FAR FROM DOOM!!

      If we do something, they may have a higher standard of living.

      Also, you are still avoiding the question and morality of interest on loans invented out of thin air. So I will take that to mean that the way that works is OK with you.

      I have never spoken of loans “made out of thin air”. I was referring to notes used to purchase corporations. That is what a leveraged buy out is. (leverage = debt) They borrow money to buy a company.

      Money Supply should not be allowed to grow too fast. And it has, as evidenced by the simple calculations above.

      Money Supply must increase, but not so quickly that it causes inflation.

      I disagree here. I think Bernanke’s target of 1 to 2% is just fine. Small inflation is healthy.

      Craig Holmes wrote: Certainly you have no gripe (I hope not) that the money supply grows as fast as GDP. False. I just proved that wrong beyond a shadow of a doubt (see above). You’ve just been busted.

      You can be so dense. For the third time here is my point.

      When you through out a number comparing M3 of 1950 to now it is irrelevant unless you comnpare it next to something. I am trying (wow you are dense) to help you make your argument in a more credible way.

      If you say M3 has increased 10,000 times over since 1950 it means nothing unless you compare it to population growth and productivity growth. You really want to smash us back down into a $200 billion dollar economy? I haven’t even gotten to discussing what I think of your argument. I am saying that your presentation of your argument is irrelevant. Tell me that M3 has increased a million time over, I don’t care.

      On the other hand tell me that real gdp has only doubled in that same amount of time, and now you have an argument because I can see that m3 is way out of wack compared to the growth in the economy.

      You do this all the time. You do it with Debt. Of course debt is going to increase. Debt increased on the gold standard as well. Think about it. The population grew from a few million to how many by the time we went off the gold standard? Of course borrowing increased. With your presentation you would say that is horrible even though borrowing per person probably remained about the same. Double the population, double the borrowing.

      If you take away short term fluctuations in the federal debt for recessions, wars etc and look at long term trends, basically, if debt grows faster than the economy not so good, If it grows at the same rate as the economy it’s fine. If it GROWS slower than the economy excellent. If it remains constant ok. If it decines over a long time it’s ok. If it declines sharply not so good because it will cause a recession depression.

      Today we are in the “fine” mode moving over to good and excellent. Right now if you look at your chart on your website federal debt is growing according to your calculations at about the same rate as the economy.

      I would like to do better than fine. We need to have a lower deficit or balanced budget for a while to build some borrowing room for later.

      So if you want to fine another way of presenting your M3 data I will be happy do debate it with you. The figure you are using is irrelevant as far as I am concerned.

      Craig


      Posted by: Craig Holmes at September 15, 2007 07:39 PM
      Comment #233024

      As I expected, you can’t admit your mistake.

      Craig Holmes wrote: So if you want to fine another way of presenting your M3 data I will be happy do debate it with you.

      You bet. Go for it. This should be interesting indeed.

      Are you going to still try to tell us GDP grew by a factor of 48 times?

      I can’t wait. Please proceed.

      Posted by: d.a.n at September 15, 2007 07:48 PM
      Comment #233027

      Dan:

      If I have your very basic argument, you say that because we went off the gold standard, we have a fiat or “funny money” system that is corrupt. This corruption has caused great heartship on our economy. If we don’t change it then we are heading for economic collapse.

      The biggest problem you are going to have is that the system has been so successful.

      Look at America when on the last year of the gold standard and look at america today. Has America prospered? It has prospered greatly.
      We went from a power to a super power to the worlds only super power.

      We changed from the gold standard to our fiat system for a reason. the gold standard wasn’t working. There were problems.

      Recessions getting further and further apart and shallower and shallower, in not an argument for change!!

      Craig

      Posted by: Craig Holmes at September 15, 2007 08:08 PM
      Comment #233057
      Craig Holmes wrote: You can be so dense. For the third time here is my point.
      How typical.

      When one’s argument is falling apart (and completely false in your case), they alway resort to personal attacks and name-calling.

      The issue GDP and inflation.

      Craig Holmes wrote:
      Divide $14 Trillion GDP [year 2007] by $293.8 billion [year 1950] is about 48.
      The economy is 48 times as large as it was in 1950 but the money supply is 75.2 times.
      Craig Holmes wrote: Certainly you have no gripe (I hope not) that the money supply grows as fast as GDP.

      GDP did not grow by a factor of 48 (as you claim).
      GDP did not grow as fast as inflation (as you claim)

      I proved it above. Now you are trying to change the subject, cloud the issues, and resort to name calling.

      So, are you still contending that GDP grew by a factor of 48 and that GDP grew as fast as inflation?

      All that requires is a YES or NO question.

      Then we can discuss the gold standard, recessions, history, and money systems.

      Posted by: d.a.n at September 16, 2007 10:11 AM
      Comment #233065

      Declaring victory, in spite of the facts on the ground. Remind anyone of a Shrub?

      Posted by: alien from the planet zorg at September 16, 2007 11:35 AM
      Comment #233070
      alien from the planet zorg wrote: So, are you still contending that GDP grew by a factor of 48 and that GDP grew as fast as inflation?
      Does that mean you also believe that GDP grew by a factor of 48 and that GDP grew as fast as inflation (from year 1950 to 2006)?

      It is easy to resort to name-calling rather than debate the facts.

      alien from the planet zorg wrote: Declaring victory, in spite of the facts on the ground. Remind anyone of a Shrub?
      Care to point out which facts? Or, as usual, just call people names (e.g. shrub).

      Do you really think calling me (or any one) names is hurting me?
      Not at all.
      In fact, it merely proves the weakness of your own arguments.

      It is also interesting that you and Craig have buddied-up. Way to go. Please continue to substitute name-calling for the lack of facts and valid arguments.

      Posted by: d.a.n at September 16, 2007 12:17 PM
      Comment #233079

      D.a.n. and Craig, stop critiquing the messenger. This debate is not worth losing access to WatchBlog over. If I return and this continues, I will begin cutting access.

      Posted by: Watchblog Managing Editor at September 16, 2007 12:58 PM
      Comment #233092

      Watchblog Managing Editor,

      At first, I was not sure what you were referring to, since I know I did not ever resort to out-right name-calling as some have.

      But, upon review of this entire thread, I do see that I did indeed critique the messenger in a few places (instead of the message). Not nearly as blatantly as some of the names I’ve been called (e.g. “old cranky men”, “dense”), but still wrong.

      But, for my violation, I apologize to Craig, Watchblog, and others, and will strive to be much more careful in the future.

      Posted by: d.a.n at September 16, 2007 03:35 PM
      Comment #233093

      Dan:

      I apologize for calling you dense.

      Nominal GDP in year 2006 was $13.2 Trillion in 2006 dollars. Mominal GDP in year 1950 is $293.8 Billion in 1950 dollars. GDP in year 1950 is $2.46 Trillion 2006 dollars. $13.2 Trillion / $293.8 Billion (1950 GDP in 1950 dollars) = 44.9 $13.2 Trillion / $2.46 Trillion (1950 GDP in 2006 dollars) = 5.37

      So the real GDP growth is only 5.37 .
      44.9 / 5.37 = 8.36
      And guess what? $1 dollar in 1950 is $8.37 in 2006.
      What that means is inflation is more than the growth of GDP.


      Let me four the fourth time try to make my point.

      Above you said that M3 has grown by 73.2 times. I called you on it and said that it is meaningless to state figures like that without reference to anything else.

      To illustrate I used your logic. I came up with the fact that GDP has grown by 45 times or whatever.

      You jumped on me and said I am wrong and cannot use figures the way you do, (in nominal terms).

      Then you appropriately corrected me above.

      You used logic that was great. The problem I have is that you and David use nominal language all the time! Look at the title of this thread.

      U.S. Passes $9 Trillion National Debt


      Watch this close:

      U.S. Passes $9 Trillion National Debt

      M3 has increased 72.3 times since 1950

      GDP has increased 45 times since 1950

      All three of the above use the same logic.


      Your correction is exactly appropriate to my statement. Now it is true in nominal terms that GDP has grown by 45 times. But it is misleadig.

      Let me correct the above by putting them in balanced terms

      U.S. debt remains at 63% of gdp

      GDP has increased by 5.37 times in constant dollars since 1950.


      I ask you to correct your term saying that M3 has increased by 73.2 times since 1950 by putting in in relative terms.

      That is my point.

      Craig

      Posted by: Craig Holmes at September 16, 2007 04:43 PM
      Comment #233099

      Dan:

      Using this logic that you have given me:

      Federal Debt has increased to $9 Trillion dollars

      M3 has increased by 73.2 times since 1950

      GDP has increased 45 time since 1950


      Now watch this from your website:

      Federal Debt as a percentage of GDP has decresed from 88% in 1950 to 63% today.

      Craig

      Posted by: Craig Holmes at September 16, 2007 05:37 PM
      Comment #233102
      Craig wrote: I ask you to correct your term saying that M3 has increased by 73.2 times since 1950 by putting in in relative terms.
      Craig, the issue is not the alleged issue of nominal versus real. Commonly, unless stated otherwise, nominal is implied. Especially since I showed the corresponding years (1950 and 2006). Thus, it is not necessary, but there is nothing wrong with specificity and clarity. Besides, I followed labeled it specifically as Nominal when I wrote above:
      Nominal GDP in year 2006 was $13.2 Trillion in 2006 dollars. Nominal GDP in year 1950 is $293.8 Billion in 1950 dollars.
      … before the issue of Nominal and Real ever arose.

      For example, above, I wrote (the first time I presented the year 1950 GDP):

        M3 Money Supply increased from:
        • $135 Billion in 1950

        • to $10.15 Trillion in 2005

        • Thus, the factor of 75.2 is based on nominal M3 Money Supply (between the two dates provided).
          Again, Nominal versus Real was never really the issue.

      Subsequently, I wrote:

        First of all, 2007 GDP is not available yet since 2007 is not over yet.
        So let’s use 2006 GDP.
        Also, that does not mean real GDP increased by a factor of 48. [I assumed you meant Nominal, but just wanted to be clear on that]
        |
        Nominal GDP in year 2006 was $13.2 Trillion in 2006 dollars.
        Nominal GDP in year 1950 is $293.8 Billion in 1950 dollars.
        GDP in year 1950 is $2.46 Trillion 2006 dollars [that is clearly adjusted for inflation].
        $13.2 Trillion / $293.8 Billion (1950 GDP in 1950 dollars) = 44.9
        $13.2 Trillion / $2.46 Trillion (1950 GDP in 2006 dollars) = 5.37
        |
        So the real GDP growth is only 5.37 .
        44.9 / 5.37 = 8.36
        And guess what? $1 dollar in 1950 is $8.37 in 2006.
        What that means is inflation is more than the growth of GDP.
        :
        That increase of GDP by 5.37 times did not even take into account that the population doubled between 1950 and 2006.
        U.S. Population in year 1950: 152,271,417
        U.S. Population in year 2006: 300,000,000
        300,000,000 / 152,271,417 = 1.97 (i.e. population almost doubled between 1950 and 2006).
        Thus, one could say GDP per capita only increased by a factor of 5.37 / 1.97 = 2.73 times per capita.
        However, the [nominal] Money Supply increased by a factor 75.2 times, and inflation increased by a factor of 8.37 times.

      Thus, if population is included (which increased by a factor of 1.97), then the real GDP increase (per capita) was really 2.73 from year 1950 to 2006.

      However, inflation (which affects everyone, regardless of population) incresased by a factor of 8.37

      The real issue is this, which is not confusion about Nominal versus Real:

      Craig Holmes wrote:
      Certainly you have no gripe (I hope not) that the money supply grows as fast as GDP.

      No, I would not gripe if it grew as fast. That would be great.

      But Money Supply (BOTH nominal and real) grew MUCH faster than GDP, and created a lot of inflation (a factor of 8.37).
      The statement above Craig Holmes wrote: “the money supply grows as fast as GDP” is implying they grew at the same rate.
      They did not.
      That is, $8.37 in year 1950 is now only worth $1.00.
      Or a $1 in year 1950 is now worth only $0.12 (twelve cents).
      Inflation increased by a factor of 8.37
      Nominal M3 Money Supply increased by a factor of 75.2
      Real GDP increased by a factor of 5.37
      Real GDP per capita increased by a factor of 2.73 (since the population increased by a factor of 1.97)
      Thus, inflation grew 1.559 times larger than real GDP (i.e. 8.37 / 5.35 ).
      And , inflation grew 3.066 times larger than real GDP per capita (i.e. 8.37 / 2.73 ) due to doubling of the population.

      Thus, the statement …

      Craig Holmes wrote:
      Divide $14 Trillion by $293.8 billion is about 48. The economy is 48 times as large as it was in 1950 but the money supply is 75.2 times. The point you are making is that money supply is growning faster than the economy. Certainly you have no gripe (I hope not) that the money supply grows as fast as GDP. If it doesn’t GDP will not grow!! No one will get richer only poorer as more people have to compete for the same amount of money.
      The statement: Craig Holmes wrote: The economy is 48 times as large as it was in 1950, is far more misleading than anything else. Why? Because of the word “economy”. Not the word GDP, which could be interpreted as “Nominal” unless specified otherwise. If any statement should clarify with the word “NOMINAL”, it is that sentence. Especially since it contains the words “48 times as large”.
      That sentence, without the specificity of the word “Nominal” is extremely misleading.
      See the words: Craig Holmes wrote: “the money supply grows as fast as GDP” ?
      It implies that Money Supply grew at the same rate as GDP.
      It does not.
      Especially since, regardless of whether it is nominal or real numbers, inflation (i.e. money supply) grew much faster than GDP.
      And that is why $8.37 in the year 1950 would only be worth a measely $1.00 today. That is Real. That is inflation. And it is damaging. It erodes savings, senior citizens on fixed incomes, creates bubbles, and economic instability. If that were not true, then why not have MORE inflation?

      The issue was never about Nominal versus Real.
      The issue was the statement and elaborate lengths to claim: Craig Holmes wrote: “the money supply grows as fast as GDP”.

      Craig Holmes wrote: Federal Debt as a percentage of GDP has decresed from 88% in 1950 to 63% today.
      Clever, but no cigar.

      Why? Because GDP fell during WWII (see my graph).
      You have to be careful when you look at ratios.
      You have to look carefully at the numerator and denominator.
      The high percentage of DEBT as a percentage of GDP is largely because of DEBT, but also largely because of reduced GDP.

      Good try though.
      That probably would have fooled most people.

      Posted by: d.a.n at September 16, 2007 06:46 PM
      Comment #233103

      Also, the $9 Trillion National debt is not all federal debt.

      $12.8 Trillion has been borrowed from Social Security, which is going to be badly needed in the next decade.

      Medicare is a train wreck.

      And the PBGC (pensions) is $450 Billion in the hole.

      Add that all up, and total federal debt is $22 Trillion, which is an alarming 167% of the $13.2 Trillion GDP (end of 2006).

      With the approaching baby boomer bubble (77 million baby boomers becoming eligible for benefits at a rate of 13,175 persons per day for about a decade), it all reads like a book on: “HOW TO DESTROY AMERICA - FOR DUMMIES”.

      Posted by: d.a.n at September 16, 2007 07:00 PM
      Comment #233117

      Dan:

      The issue was never about Nominal versus Real. The issue was the statement and elaborate lengths to claim: Craig Holmes wrote: “the money supply grows as fast as GDP”.

      Ok, back to my point for the fifth time to make my point. I am not discussing GDP. I am discussing M3.

      Here is my original post on this subject:


      Dan:

      M3 Money Supply increased from:
      135 Billion in 1950

      to 10.15 Trillion in 2005

      That is a factor of 75.2 .


      We are back to one of my main issues with your methodogy. The onld one legged stool thing. Your factor is irrelevant because it doesn’t compare itself to anything.

      You have a point if you present your facts in another manner. Compare them relative to how much the economy has grown since 1950. Obviously with a much higher population (close to double?) and a much higher standard of living there is a need for more money is circulation.

      What you want is a net figure that shows M3 increse because of inflation. You are showing the whole works. You are showing increase in money supply do to population increases and productivity increases for the last 57 years.

      Can I ask you to recalabrate and make the same point? All you need to do is find out how much of the 75.2 is do to GDP increase.

      Take 2007 nominal GDP and divide by 1950 GDP. It should give you a figure less than 75.2. Compare the difference and that should be the amount do to “funny money”. (I think that is your term).

      See my point?

      Craig

      Certainly you have no gripe (I hope not) that the money supply grows as fast as GDP.

      I think I see what you might be fixed on.

      The above should read:

      Certainly you have no gripe (I hope not) when the money supply grows as fast as GDP.

      I am using GDP as an illustration to show you that throwing out numbers like M3 growing 75.3 times is meaningless.

      You said:

      Also, the $9 Trillion National debt is not all federal debt.

      $12.8 Trillion has been borrowed from Social Security, which is going to be badly needed in the next decade.

      Again you are completly and totally missing my point. I am not discussing National debt. I am discusing the irrelavancy of how certain numbers are presented. That number is from the title of this thread. You can argue that with the author.

      I only used it to illustrate that when you use numbers like M3 increasing by 75 times since 1950 it is misleading.

      Craig


      Posted by: Craig Holmes at September 16, 2007 09:05 PM
      Comment #233138

      Craig said: “Federal Debt as a percentage of GDP has decresed from 88% in 1950 to 63% today.”

      Craig, in 1950 America’s productive capacity growth was ahead of it, and tapping that productive growth increased our capacity to shoulder debt obligations to be paid by that future productive growth.

      Today, we are at our peak of productive capacity, unless we want to put children into the work force or, gratuitously increase our already overpopulated society which is creating problems larger than our ability to solve, with lower wage immigration which will only compound the problems we already are failing to deal with.

      Having reached our productive capacity limits, our capacity to meet future debt obligations has diminished significantly compared to 1950, when the bulk of women were yet to enter the work force.

      Future debt repayment must be met by future productivity gains to meet or exceed the debt obligations already incurred in the present plus new debt to be incurred. The boomer retirement situation has already exceeded future productivity capacity since, future productivity capacity is little, if any, greater than current productivity capacity.

      If this were 1950 dealing with the current boomer retirement situation, there would be no crisis at all. Future productivity gains and labor force growth would match the growth in entitlement spending. But, this is not the 1950’s. And low wage immigration that increases both our population and labor force numbers creates far more problems than it solves, not to mention re-creating another demographic crisis in 45 to 60 years from now, to piggy back the impending one.

      Posted by: David R. Remer at September 17, 2007 05:33 AM
      Comment #233140
      Craig wrote: We are back to one of my main issues with your methodogy. The onld one legged stool thing. Your factor is irrelevant because it doesn’t compare itself to anything.
      False.

      Because I presented real and nomial GDP, real and nominal M3 Money Supply, and then compared both to prove that we have inflation that grew faster than GDP, and that is why $8.37 in year 1950 is worth only $1.00 in year 2006. That is a comparison of GDP and M3 Money Supply, because each are less meaningful alone, but more meaningful when compared to each other. A also included that fact that the population increased by a factor of 1.97 (i.e. almost doubled from year 1950 to year 2006). So I did the very thing you repeatedly allege that I failed to do.

      Craig wrote: You have a point if you present your facts in another manner. Compare them relative to how much the economy has grown since 1950. Obviously with a much higher population (close to double?) and a much higher standard of living there is a need for more money is circulation.
      False.

      I did that very exact thing. Please review the thread above. Again, I did take population into account when I broke down GDP to GDP per capita (i.e. per person). Since the population doubled, GDP per capita is more meaningful. So, once again I did the very thing you are repeatedly allege that I failed to do.

      Craig wrote: What you want is a net figure that shows M3 increse because of inflation. You are showing the whole works. You are showing increase in money supply do to population increases and productivity increases for the last 57 years. Can I ask you to recalabrate and make the same point? All you need to do is find out how much of the 75.2 is do to GDP increase.
      Not necessary.

      The whole point was to disprove your statement: Craig Holmes wrote: money supply grows as fast as GDP (which is false).
      There is no argument whatsoever that a portion of Money Supply is a result of other factors, such as productivity, wealth creation, and population.
      That is why it is necessary to calculate inflation, and use numbers adjusted for inflation, which I did by using GDP in year 1950 adjusted for inflation:

      • Nominal GDP in year 2006 was $13.2 Trillion in 2006 dollars.

      • Nominal GDP in year 1950 is $293.8 Billion in 1950 dollars.

      • GDP in year 1950 is $2.46 Trillion 2006 dollars [that is clearly adjusted for inflation].

      • $13.2 Trillion (2006 Nominal GDP) / $293.8 Billion (1950 GDP in 1950 dollars) = 44.9

      • $13.2 Trillion (2006 Nominal GDP) / $2.46 Trillion (1950 GDP in 2006 dollars) = 5.37

      • $13.2 Trillion (2006 Nominal GDP) / $2.46 Trillion (1950 GDP in 2006 dollars) / 1.97 (ratio of population increase) = 2.73

      • $10.8 Trillion (2006 Money Supply) / $135 Billion (1950 Nominal M3 Money Supply) = 80.0 (ratio of nominal M3 Money Supply)

      • $10.8 Trillion (2006 Money Supply) / $1.13 Trillion (1950 M3 Money Supply in 2006 dollars) = 9.56 (which is the M3 Money Supply ratio)

      • $8.37 in 1950 dollars is eroded by inflation to only $1.00 in year 2006 which is a factor of 8.37 (which is the inflation ratio)
      Thus, the M3 Money Supply factor and Inflation factors are not that different (e.g. 9.56 versus 8.37 respectively).

      Why? Because of inflation, which has increased between year 1950 and year 2006 by a factor of 8.37
      That is why $8.37 in year 1950 is only worth a measely $1.00 in year 2006.

      Craig Holmes wrote: Take 2007 nominal GDP and divide by 1950 GDP. It should give you a figure less than 75.2. Compare the difference and that should be the amount do to “funny money”. (I think that is your term). See my point?
      I did that. See ratios above within this thread two or three times. Are you actually reading any of this?

      I also did it using values adjusted for inflation (which is more meaningful).

      Craig Holmes wrote: Certainly you have no gripe (I hope not) THAT the money supply grows as fast as GDP.
      I think I see what you might be fixed on.
      Finally. That is precisely the point. Money Supply grew faster than GDP (not “as fast” as you wrote above).
      Craig Holmes wrote: The above should read:
      Certainly you have no gripe (I hope not) WHEN the money supply grows as fast as GDP.
      That is much different.

      The difference between “THAT” and “WHEN” drastically changes the meaning of your statement.
      And now, finally, that is acknowledged.

      But, on top of that you also wrote …

      Craig Holmes wrote:
      You really over simplify things. In general if the money supply increases at the same rate as GDP that is not inflationary.

      So, pardon me, but I keep see these statements that imply the two rates are the same.

      Craig Holmes wrote: I am using GDP as an illustration to show you that throwing out numbers like M3 growing 75.3 times is meaningless.
      Not entirely, but it has much more meaning when compared to GDP growth, GDP per capita, and inflation (which is exactly what I did above).

      That is why I adjusted for inflation, and population. And the end result confirms inflation. Inflation is erosive.

      Craig Holmes wrote:
      d.a.n wrote: Also, the $9 Trillion National debt is not all federal debt. $12.8 Trillion has been borrowed from Social Security, which is going to be badly needed in the next decade.
      Again you are completly and totally missing my point. I am not discussing National debt.
      Not true, regardless of the number of times that is repeated.

      After all, you just wrote above:

      Federal Debt as a percentage of GDP has decresed from 88% in 1950 to 63% today.

      Hmmmmm … that looks a whole lot like a discussion of debt (and compared to GDP).

      Also, it is a yet another false statement.
      Why?
      Because Federal Debt and National Debt are two different things.
      National Debt never includes the $12.8 Trillion borrowed from Social Security.
      And, as I pointed out (using a ratio as you did), Total Federal Debt is 167% of the $13.2 Trillion GDP of year 2006.

      On top of that, your statement about National Debt as a percentage of GDP overlooks an important factor.
      GDP (see diagram) fell from 1945 to 1950.
      That is partly why the ratio of National Debt to GDP was large after World War II.
      The attempt to show National Debt as a percentage of GDP is not meaningful when you fail to include all Federal Debt.

      • National Debt = $9.02 Trillion

      • $12.8 Trillion borrowed (and spent) from Social Security

      • PBGC (pensions) are $450 Billion in the hole.
      Thus, total Federal Debt is over $22 Trillion.
      And that $22 Trillion of total federal debt is 167% of the $13.2 Trillion GDP (as of end of year 2006).

      Craig Holmes wrote: I am discusing the irrelavancy of how certain numbers are presented.
      Me too. And the improper use words that change the meanings of things significantly.
      Craig Holmes wrote: That number is from the title of this thread. You can argue that with the author.
      Why? Why would I want to argue the title: “U.S. Passes $9 Trillion National Debt”
      Craig Holmes wrote: I only used it to illustrate that when you use numbers like M3 increasing by 75 times since 1950 it is misleading.
      False.

      It is relevant.
      Especially when compared to GDP.
      And the whole point is that excessive money creation causes inflation.
      And inflation has occured, eroding $8.37 in year 1950 to a measely $1.00 in year 2006.
      Excessive inflation is erosive and economically destabilizing.

      Craig Holmes wrote: I think Bernanke’s target of 1 to 2% is just fine. Small inflation is healthy.
      Why? Why not as close to ZERO as possible?

      And how about banks making interest on that money created from thin air?
      How about 23% interest rates on credit cards?
      How about ARMs being hiked up from 6% to 14%?
      How about predatory lending practices and other manifestations of unchecked greed?

      Posted by: d.a.n at September 17, 2007 06:58 AM
      Comment #233176

      Dan:

      Ok Great. Now I understand that you heard my point that stating M3 at 75 times 1950 is misleading.

      Now I would like to make another point.

      You have said that:

      Real GDP per capita increased by a factor of 2.73

      I am satisfied with that rate of progress. The average american earns 2.73 times as much income after inflation than an average american did in 1950.

      Sounds good to me.

      Obviously we are going great things in the country. That is reason to celebrate. It is proof that our economic system is working well.

      What I would ask of you is to find one that has worked better. Let’s examine those systems that have had greater increases in personal percapita income since 1950.

      If you can provide that list, we can have a great debate.

      Here is my question to you. What economies have increased their real income per capita by more than 2.73 times in the last 57 years?

      This number you provided is proof to me that we have a great system.

      Craig

      Posted by: Craig Holmes at September 17, 2007 12:26 PM
      Comment #233194

      Craig,

      That 2.73 per capita increase is an average.

      But who got most of that wealth?

      That’s the problem and that trend is still worsening.

      Who got most of that increase in GDP?

      Since year 1980, the wealthiest 1% (see pie chart) of the U.S. population increased in wealth from 20% to 40%.

      • 1% of U.S. population has 40% of all wealth.

      • 5% of U.S. population has 60% of all wealth.

      • 10% of U.S. population has 70% of all wealth.

      • 20% of U.S. population has 83% of all wealth.

      • 60% of the U.S. population only has 5% of all wealth.

      • 40% of the U.S. population only has 0% of all wealth.

      • 20% of the U.S. population only has $9K of debt.
      And that disturbing trend (see inflation too) has been growing steaddily worse since 1980.

      Thus, a very few got richer while most went side-ways. I’ll have to find a break down of GDP per capita and history of wealth distribution (by quintiles). But one thing is for certain. Most Americans did not reap the from the looks of it, I don’t think most Americans have experienced full benefit of that 273% increase in Real GDP from 1950 to 2006.

      Sure, other nations have it worse, but that does not mean we should emulate them.

      Posted by: d.a.n at September 17, 2007 01:44 PM
      Comment #233199

      David:

      First of all 1950 is Dan’s date of choice not mine.

      I think however that it is a useful date in which our economic system can be measured in relation to other systems. There have been some winners and loosers.

      I would disagree a bit on what you say about industrial production. You imply that economies cannot be as successful with a small portion of the economy tied to inductrial production. That just simply is not true.

      As a matter of fact productivity is rising in America. I believe this is because we lead the world in technology.

      In terms of looking at the future from 1950 going forward. I of course don’t accept your premise out of hand. Of course we have the issue of entitlements that you and I have debated for some times.

      I would offer on the other side, the cold war which accounted for a large percentage of GDP. In addition I would offer the beginning off issues related to the babyboomers. Most of the funding for raising our generation was in front of the country. Drmatic increases in social spending were in front of our country.

      I am not dismissing your arguement. I think we would need to do the math. Cold war and social spending for the young baby boomers on one hand and growth of entitlement spending on the other.

      In the end I think each generation has it’s challenges.

      What I liked about Dan’s math is that he clearly demonstrated that incomes for average americans have almost tripled after inflation in the US since 1950.

      I would enjoy seeing a list of coutries who have done better.

      Craig

      Posted by: Craig Holmes at September 17, 2007 01:55 PM
      Comment #233206
      Craig wrote:The average American earns 2.73 times as much income after inflation than an average american did in 1950.
      False.
      Craig wrote:What I liked about Dan’s math is that he clearly demonstrated that incomes for average americans have almost tripled after inflation in the US since 1950.
      Thank you, but your conclusion is false.

      To say the Average American is earning 2.73 times more is not just VERY misleading, but inaccurate.

      First of all, how do you define an Average American’s earnings when the distribution of income and wealth is so lop-sided?

      The use of the term “Average American’s earnings” is very inappropriate because the wealth is very unevenly distrubuted.

      Again, that is another good try, but no cigar.

      You should simply stick to the statement that the GDP increased by a factor of 2.73 between year 1950 and year 2006.

      Dan: Ok Great. Now I understand that you heard my point that stating M3 at 75 times 1950 is misleading.
      Not true.

      This has been alleged many times by you, but it is a red herring. I was never confused about it, and it is not misleading as you allege, because unless specified different, Nominal is assumed. M3 Money Supply increased from year 1950 from $135 Billion to $10.15 Billion in year 2006 (increased by a factor of 80). It does not even make sense for that to be anything but Nominal M3 Money Supply.

      The issue was never about Nominal.
      It was about your choice of words that implied GDP was growing as fast as the Money Supply (which is false):

      Craig Holmes wrote:
      You really over simplify things. In general if the money supply increases at the same rate as GDP that is not inflationary.
      … and …
      Craig Holmes wrote: Certainly you have no gripe (I hope not) THAT the money supply grows as fast as GDP.
      … which you later corrected “THAT” to: “WHEN” (which is very different).

      And we have established that inflation (873%) did result from excessive creation of new money between year 1950 and year 2006, which is why $8.37 in year 1950 is only worth $1.00 in year 2006. This is corroborated by the charts above. Look at the inflation after year 1950.

      And excessive inflation is erosive and causes economic instability.

      Craig Holmes wrote: I think Bernanke’s target of 1 to 2% is just fine. Small inflation is healthy.

      Why?
      Why not target inflation as close to ZERO as possible?
      Do you know who benefits most from inflation?
      Do you know who is harmed most from inflation?
      And how about banks making interest on new money created from thin air?
      And how about 23% interest rates on credit cards, ARMs being hiked up from 6% to 14%, predatory lending practices, and other manifestations of unchecked greed?

      Posted by: d.a.n at September 17, 2007 02:25 PM
      Comment #233210

      Dan:

      Thus, a very few got richer while most went side-ways. I’ll have to find a break down of GDP per capita and history of wealth distribution (by quintiles). But one thing is for certain. Most Americans did not reap the from the looks of it, I don’t think most Americans have experienced full benefit of that 273% increase in Real GDP from 1950 to 2006.

      Sure, other nations have it worse, but that does not mean we should emulate them.

      I think it would be useful information. I am sure that more did not get 273% since that is the average. Actually very few get exactly that.

      Here is what I would expect you to find. I would expect you to uncover that yes the higher incomes were above 273% and lower in comes below 273%. However when you compare numbers across the globe, I would expect you to find that lower income americans did better than their counter parts around the world.

      I can stick with percapita income increased by 273%. It still shows that America if a far richer country now than in 1950. If you look at household balance sheets you will see the same issue.

      Do you want to change arguments? Before you have been arguing that we are on the way to ruin because of fiscal policy, when infact as your numbers clearly state America is getting richer under our current system after inflation.

      I sense now you want to abandon that argument line and instead argue, well, America is in fact getting richer, but the lower classes are not getting their fair share.

      This is an entirely different arguemnt. It would mean you would abandon the belief that America is doomed and collapse is just around the corner, and instead argue that no in fact America is strong and getting stronger, but we are an unjust society.

      Craig

      Posted by: Craig Holmes at September 17, 2007 02:55 PM
      Comment #233211

      Dan:

      Remember, my only premise is that economically we are fine and will continue to be fine. You are the one arguing that America is about to fall.

      Craig

      Posted by: Craig Holmes at September 17, 2007 02:56 PM
      Comment #233217
      Craig Holmes wrote:Remember, my only premise is that economically we are fine and will continue to be fine.
      “fine” is very subjective.

      I’m not sure I’d call a 14% decline in the standard of living “fine”. Especially when that 14% is only an average (due to the lop-sidedness of wealth; 60% owned by only 5% of the population), and many Americans will quite likely see much larger declines in their standard of living.

      Craig Holmes wrote: You are the one arguing that America is about to fall.
      Not true.

      I’ve never said it would fall.
      And again, the word “fall” is very subjective.
      In fact, such simpleton one-liners are almost worthless.

      I am saying the trend is worsening, and an economic meltdown (like the Great Depression of 1929 is not far fetched). It is not impossible. The last time 1% of the population owned 40% of all wealth was during the Great Depression. $9 Trillion National Debt represents a lot of interest. Wars in Iraq and Afghanistan are costly. $12.8 Trillion borrowed from Social Security means future generations will have to pay for the baby boomers. Taxes will have to increase, benefits will have to be cut, and everyone will have to work longer. Energy vulnerabilities and a population double what it used to be exacerbate the problems. Also, total federal debt ($22 Trillion) as a percent (167%) of GDP ($13.2 Trillion in 2006) has never been worse ever (not even in WWII). And inflationist practices and population growth (especially less educated and impoverished) will continue to also exacerbate all problems.

      Even Greenspan predicts a 14% drop in the standard of living (if nothing is done soon). But that 14% is an average. Lower and middle income groups will probably see a larger drop in the standard of living. And that 14% is probably an optimistic prediction.

      So, the prediction was never that the world is coming to an end or “America is about to fall”. Such wild extrapolations are clever, but are really false substitutes for a better argument.

      Craig Holmes wrote: I sense now you want to abandon that argument line and instead argue, well, America is in fact getting richer, but the lower classes are not getting their fair share.
      Real GDP in the U.S. increase by 273%. But most certainly not for most Americans. Especially when 60% of all Americans have only 5% of all wealth, 40% of Americans have ZERO net worth, 20% of Americans have negative net worth (debt), and a tiny 5% of all Americans has 60% of all wealth.
      Craig Holmes wrote: I sense now you want to abandon that argument line and instead argue, well, America is in fact getting richer, but the lower classes are not getting their fair share.
      Not true. Craig, I’m not arguing just for the sake of it. I’m just stating facts, and noting where the facts are wrong, and/or misleading. Saying the Average American is 2.73 times wealthier in 2006 than in 1950 is so flawed and misleading, it is useless.
      Craig Holmes wrote: America is in fact getting richer, but the lower classes are not getting their fair share.
      That is true, but that is an over-simplification.

      Not just lower income levels are stagnant or moving backward, but the middle income levels are stagnant or moving backwards too, because 60% of the U.S. population only has a tiny 5% of all wealth. And concentrated wealth grows wealth.

      Most Americans (e.g. the 60% with only 5% of all wealth) are going backwards because we have many systems that are REGRESSIVE (i.e. punishing people as their income decreases):

      • (1) an abused and complex system that is essentially REGRESSIVE; that’s how Warren Buffet can pay a lower income tax rate than a secretary making $60K annually.

      • (2) Inflationist practices are like a REGRESSIVE TAX. It hammers the poor who spend most (or all) of what they earn, elderly on fixed incomes, erodes savings, creates bubbles, and destabilizes the economy. But the Banks make interest on the new money created out of thin air, and the governemnt reaps the benefit of spending the new money early in the cycle before it erodes, and also reduces the debt. It’s not only destabiliizing; it is unethical.

      • (3) Illegal immigration is like a REGRESSIVE tax on the tax payers who primarily fund social services (e.g. schools, hospitals, ERs, law enforcement, etc.). It also causes job loss for Americans, and despicably pits Americans and illegal aliens against each other.

      I would not characterize that as “fine”.

      I would not characterize that as “America is about to fall.”

      Posted by: d.a.n at September 17, 2007 03:36 PM
      Comment #233231

      Dan:

      Even Greenspan predicts a 14% drop in the standard of living (if nothing is done soon). But that 14% is an average. Lower and middle income groups will probably see a larger drop in the standard of living. And that 14% is probably an optimistic prediction.

      It looks like you are going to be using that figurre a great deal from now on so let’s discuss that a bit.

      Here is the link:

      http://www.federalreserve.gov/newsevents/speech/bernanke20061004a.htm

      It is from Ben Bernanke’s speech on October 4, 2006.

      Here is the key part:

      For comparison, they next considered the case in which the burden of demographic change is shared more equally among current and future generations. They considered a case in which the national saving rate, instead of staying at its current level for the next twenty years, rises immediately. Further, they asked by how much today’s saving rate would have to increase to lead to equal burden-sharing among current and future generations. (“Equal burden-sharing” is interpreted to mean that the current generation and all future generations experience the same percentage reduction in per capita consumption relative to the baseline scenario without population aging.) They found that equal burden-sharing across generations could be achieved by an immediate reduction in per capita consumption on the order of 4 percent (or, since consumption is about two-thirds of output, by an increase in national saving of about 3 percentage points.) This case obviously involves greater sacrifice by the current generation, but the payoff is that all future generations enjoy per capita consumption that is only 4 percent, rather than 14 percent, below what it would have been in the absence of population aging. The large improvement in the estimated living standards of future generations arises because of the extra capital bequeathed to them by virtue of the current generation’s assumed higher rate of saving.

      These numbers shouldn’t be taken literally but the basic lesson is surely right—that the decisions that we make over the next few decades will matter greatly for the living standards of our children and grandchildren. If we don’t begin soon to provide for the coming demographic transition, the relative burden on future generations may be significantly greater than it otherwise could have been.2

      I know you are David are looking for negative news. If you look at countries around the world it basically means if nothing is done our children will live like canadians or europeans.

      My point in bringing this up, is that this is far from emergency. Western Europeans are fine as are canadians. There is no economic collapse coming because of these demographic changes.

      You and David are making the case that ecnomic collapse is around the corner because of entitlement spending.

      I think it is a serious problem that will be dealt with. In fact Bernanke gives us the answer in simply increasing the savings rate by 3%.

      Now there is a specific target. If equal sharing of burden is our value then we need to increase the savings rate from zero to 3%. I think that is a great goal. Actually, I would hope we would do better than that. but not from a postition of fear and alarm like you and David propose. Rather, from a position of our most cherished values. It is a deep american value to leave our children in better position than we were. That is a movement that I can support. Not one based on fear and alarm.

      Craig

      Posted by: Craig Holmes at September 17, 2007 06:08 PM
      Comment #233242
      Craig Holmes wrote:There is no economic collapse coming because of these demographic changes
      Craig, no one can know with that sort of certainty.
      Craig Holmes wrote: I know you are David are looking for negative news.
      Not true. Caring and concern do not equate to “looking for negative news”. Negative news is not the fault of the messenger.
      Craig Holmes wrote: You and David are making the case that ecnomic collapse is around the corner because of entitlement spending.
      Not true.

      Never did either of us ever conclude that entiltements is the lone factor.

      Have you ever clicked on my FACTORS link ?

      It is much more than one, or even two, or even three things. It is many things.

      You have to look at the big picture.

      I believe:

      • it is overly optimistic to believe Congress will respond quickly enough.

      • the $9 Trillion National debt represents quadruple that (or more) in current dollars in interest.

      • Total $22 Federal Debt has never been worse.

      • The growing disparaity (the wealthiest 5% of the population has 60% of all wealth) has never been worse since the Great Depression.

      • Wars are destabilizing and costly, and we have two going on now in Afghannistan and Iraq, and it looks like we’ll be there a couple of years longer at least.

      • The 77 million baby boomer bubble is serious since their Social Security funds have already been spent, and the $22 Trillion federal debt is already larger than ever before (as a percentage of GDP; 167%).

      • Illegal immigration is costing $70 Billion to $350 Billion annually in net losses.

      • Healthcare costs?

      • Eduation?

      • jobs leaving the U.S.; corpocrisy; corporatism; FOR-SALE government; and other manifestations of unchecked greed.

      • increasing foreign competition and much cheaper labor (China, India, etc.)

      • Medicare; major cuts may be necessary

      • The current REGRESSIVE tax system and the inflationist practices will continue to exacerbate the situation

      Craig Holmes wrote: Actually, I would hope we would do better than that. but not from a postition of fear and alarm like you and David propose.
      Right. We are fear mongers.

      I really hope you are right.
      But I seriously doubt it.

      Why?

      The main reason is this: I do not think government will make corrections in time, because Congress has is too corrupt, FOR-SALE, too irresponsible, too selfish, too elitist, and too occupied with re-election and partisan warfare.

      It is not that we can not solve our problems.

      It is that we lack the will to solve our problems.

      I do not think voters will stop rewarding irresponsible incumbent politicians with re-election 90%-to-95% of the time until the painful consequences of that are already upon them.

      It happpened before (The Great Depression, The Civil War, 9/11), and there is really no convincing reason to believe it can not happen again. Especially when the Executive Branch has grown so huge and powerful (2 million people) while fumbling, stumbling Congress persons spend most of their time and efforts trolling for big-money donors, padding their own pockets, votin’ themselves more raises and cu$hy perks and benefits, and being manipulated and controlled by the Executive Branch.

      If you think the Federal Government is up to the task, then fine. I hope you are right. But I seriously doubt it, because I do not think they really care, and merely want to get theirs and make sure they can weather the storm along with the other wealthy and elitists. The simply do not care enough. Congress can’t get much of anything done, except to make things worse. The problems on their list continue to grow as the continue to be ignored. Laws are being ignored too on a massive scale (e.g. illegal immigration, eminent domain abuse, Article V of the Constitution).

      Craig Holmes wrote:I think it is a serious problem that will be dealt with. In fact Bernanke gives us the answer in simply increasing the savings rate by 3%.
      It’s going to take a LOT more that that. The nation currently has a negative savings rate. It is no wonder when 40% of Americans have a net worth of ZERO, and 60% have a measely 5% of all wealth. I simply do not see government (and voters) becoming more responsible, until after they suffer the consequences that will provide the motivation they now lack.

      This entire situation hinges largely on the human factor. You think “we will be fine”. Based on history and current factors, I seriously doubt it. I think there is less than a 45% chance that we will come out of this situation without more than a 14% drop in the standard of living for the 60% of the population that now only has a measely 5% of all wealth. And the 40% of the current U.S. population that currently have ZERO net worth will suffer much worse than a 14% drop in the standard of living.

      Posted by: d.a.n at September 17, 2007 07:10 PM
      Comment #233252

      Dan:

      Not true. Caring and concern do not equate to “looking for negative news”. Negative news is not the fault of the messenger. Craig Holmes wrote: You and David are making the case that ecnomic collapse is around the corner because of entitlement spending. Not true. Never did either of us ever conclude that entiltements is the lone factor.

      Have you ever clicked on my FACTORS link ?

      Your fear factor’s link?

      This entire situation hinges largely on the human factor. You think “we will be fine”. Based on history and current factors, I seriously doubt it. I think there is less than a 45% chance that we will come out of this situation without more than a 14% drop in the standard of living for the 60% of the population that now only has a measely 5% of all wealth. And the 40% of the current U.S. population that currently have ZERO net worth will suffer much worse than a 14% drop in the standard of living

      Where do you get the figure that 40% of americans have zero net worth? I am looking at a census Bureau report that shows that not only do the bottom 40% have a net worth, but the bottom 20% does as well!!

      Craig

      Posted by: Craig Holmes at September 17, 2007 08:33 PM
      Comment #233255

      Craig, the bottom 20% have debt.
      That is negative net worth.
      The lower 20% have essentially nothing.
      The lower 40% have a ver low net worth.
      The lower 60% have a mere 5% of all wealth.

      If you have proof of something different, please show us.

      Posted by: d.a.n at September 17, 2007 08:52 PM
      Comment #233258

      Dan:

      http://www.census.gov/prod/2003pubs/p70-88.pdf

      Here it is,

      Craig

      Posted by: Craig Holmes at September 17, 2007 09:27 PM
      Comment #233268

      Craig, I’ve already done this analysis before for the 1998 time frame. 1998/1999 was when things were actually better than now. That is, the percentages I’ve stated were from 1998. Those percentages have worsened, because 1998/1999 was a high point compared to now.

      Posted by: d.a.n at September 17, 2007 11:23 PM
      Comment #233271

      Wealth Distribution

      Wealth Distribution, Income, Inflation, Debt

      Posted by: d.a.n at September 17, 2007 11:31 PM
      Comment #233272

      Dan:

      What was your sourse?

      Craig

      Posted by: Craig Holmes at September 17, 2007 11:41 PM
      Comment #233291

      Just GOOGLE “wealth distribution”
      Most sources are from 1998.
      There was a minor improvement in 2001 (1% with 37% of all wealth), but quickly erase and worsened by now.
      I’ll get back to you later with more data, but I am 99% certain that the disparity has grown worse between 2002 to 2007 (probably worse than 1% with 40% of all wealth). 40$ was a conservative figure from 1998. Any one that can prove it is now better in 2007, please do.

      Posted by: d.a.n at September 18, 2007 10:05 AM
      Comment #233297

      “Right. We are fear mongers.”

      Thanks, Craig.

      D.a.n. finally admits defeat and “crawfishes”.

      It’s so much fun watching someone so obssessed on winning hang themselves on their own pitard.

      You’re a much more patient man than I.

      Sorry, d.a.n. couldn’t resist using your own argument. Rather silly isn’t it?

      Posted by: alien from the planet zorg at September 18, 2007 11:33 AM
      Comment #233302

      Dan:

      I am not challenging your wealth distribution. Your main point about wealth distribution in America (and most of the world for that matter) is right on.

      I’m making a small point. I don’t find the negative networth for the bottom percentages. My source is the US Census. Don’t worry much about it. Your main thesis about the world basically is that the wealth have a huge percentage of the wealth.

      In terms of winning, we will all know over time as the economy will let us know.

      I remain very optimistic that our country will continue to have problems and overcome them. That is what Americans do.

      I think you and David do a service of point out our countries problems.

      Craig

      Posted by: Craig Holmes at September 18, 2007 12:00 PM
      Comment #233309
      Craig Holmes wrote:Where do you get the figure that 40% of americans have zero net worth? I am looking at a census Bureau report that shows that not only do the bottom 40% have a net worth, but the bottom 20% does as well!!
      Craig, you are overlooking a huge factor. The $22 Trillion debt. And there is also $20 Trillion of nation-wide personal debt.

      The Census Bureau report does not include the federal debt, which clearly falls on the tax payers (under a REGRESSIVE tax system).

      Remember the $9 Trillion National Debt?
      The $12.8 Trillion Social Security Debt?
      The $450 Billion PBGC (pension) debt?

      The Census Bureau report you are referring to didn’t include any of that, nor hundreds of billions of unfunded liabilities for Medicare and the wars in the next 12 months.

      • The $9 Trillion National Debt is $30K of debt per person (U.S. population = 302 Million); or $45K per person over age 18.

      • The $12.8 Trillion Social Security debt is $42.4K of more debt per person (or $64K per person over age 18). This will fall on the shoulders of many future generations.

      • The $450 Billion of PGBC (pension) debt is $1490 of more debt per person (or $2250 per person over age 18).

      • Thus, the total $22 Trillion of federal debt is $72,849.00 per person (or $110K per person over age 18).

      • And that does not even include the unfunded liabilities (many hundreds of billions more) for unfunded Medicare liabilities, the wars in Iraq, Afghanistan, and Katrina.

      Now you say the U.S. has $100 Trillion in net worth (a number I have not verified, but let’s run with it for a moment).

      60% of the U.S. population has 5% of all wealth.
      So 5% of $100 Trillion is $5 Trillion.
      60% of 302 Million people is 181,200,000 people.
      That means those 60% of people have (on average) $27.6K per person.
      That’s about the price of an automobile. That makes sense. 67% of Americans are over age 18.
      But this is not the whole picture, since the distribution is so lop-sided.

      40% of the U.S. population has less than 1% of all wealth.
      So 1% of $100 Trillion is $1 Trillion.
      40% of 302 Million people is 120,800,000 people.
      That means (on average) those 40% average $8.3K per person.
      That’s not much.

      20% of the U.S. population has less than ZERO percent of all wealth. They actually have debt (about $9K in 1998 dollars).
      20% of 302 Million people is 60,400,000 people.
      Obviously, that means those 20% average $0 per person (they actually have personal debt).

      The average income tax rate for most Americans is 20% (actually lower than Warren Buffet’s tax rate since the tax system is REGRESSIVE as a result of a myriad of tax loop holes).

      And the inflationist money system is also like a REGRESSIVE tax.

      And illegal immigration is also like another REGRESSIVE tax.

      So, no matter which way you slice it, several REGRESSIVE systems are systematically reducing the percentage of total wealth for most Americans.
      Have you not acknowledged this too?

      Even though the U.S. Real GDP increased by a factor of 2.73 between 1950 and 2006, it does most Americans little good, since most American individuals did not receive anywhere near 2.73 times of that increase of GDP.

      Craig Holmes wrote:I think you and David do a service of point out our countries problems.
      Thank you.

      David and I don’t enjoy it, despite some who believe that. After all, I think most agree that there is a possibility that these issues do have the potential (not certainty) for painful consequences. And there are historical similarities too. You’ve pointed out analogs with Japan and Germany, but those are much smaller nations, and both had a lot of help from the U.S. to rebuild and support them. No one knows the future. I think Bernanke’s 14% decline in the standard-of-living should be heeded. I think there’s a possibility it could be worse. But we are all theorizing.

      None of us have a crystal ball (except perhaps the rose-colored crystal ball on planet Zorg). I do not see David R. Remer’s, Bernanke’s, Greenspan’s, or David Walker’s comments as alarmist or dooms-dayish. I think we would all be wise to heed their warnings. A 14% decline in the standard-of-living is not a trivial thing, and that 14% will not be evenly distributed.

      alien from planet zorg wrote: It’s so much fun watching someone so obssessed on winning hang themselves on their own pitard.
      I agree. But it is quite entertaining. Could you please continue to do so?
      alien from planet zorg wrote: Sorry, d.a.n. couldn’t resist using your own argument. Rather silly isn’t it?
      Yes, that is very funny. Thank you so much for that, and all other similar, stellar contributions. They are so substantive and fact filled. Yes, aliens from the planet zorg are obviously skilled at substituting empty remarks, name-calling, and mere opinion for facts, reason and logic. Well done! Yes, that deserves a pat on the back and a gold star. Touché! (that’s French I think. I’m not sure how they say it on planet Zorg).
    • Posted by: d.a.n at September 18, 2007 01:31 PM
      Comment #233315

      Dan:

      The $100 Trillion in assets can be found at the Federal Reserve website. It is not net worth but assets. It includes private assets plus those of corporations.

      You almost always present debt without reference to income or assets. I am presenting the same.


      I don’t accept your logic on networth that is “funny money” addition. I need to see a reference to the networth of lower income americans. Right now I will stay with the Census Report.

      Craig

      Posted by: Craig Holmes at September 18, 2007 02:32 PM
      Comment #233320
      Craig wrote: I don’t accept your logic on networth that is “funny money” addition.
      Craig, That is yet another invented argument that that does not exist. I wouldn’t recommend following in Zorgian’s footsteps.

      I never said networth is “funny money” ?

      What I stated (and David too) is that the value of assets can change in real value in a recession or depression, and that the real value of some things (e.g. real estate, stocks, gold) can be affected. Surely you are not disputing that?

      I have said “Funny Money” is excessive money creation. Excessive money creation has existed in this country for a long time and fuels bubbles, erodes savings, and acts like a REGRESSIVE tax. It erodes incomes (especially those on fixed incomes).

      Excessive money creation causes inflation. That is why $8.37 in year 1950 is worth only $1.00 in 2006 .

      People try not to leave their wealth in the form of money. With inflation, that would make them poor very quickly. Thus, inflation has everyone with any money to invest, running around like chickens-with-their-head-cut-off, looking for a place to invest their money so that it is not eroded by incessant inflation.

      Craig, You said some inflation is good?
      Why? I’ve asked that question 3 times and still fail to see an explanation. If inflation is bad, and deflation is bad, why not target ZERO inflation (or deflation)?

      Craig wrote: Right now I will stay with the Census Report.
      Again, that report excluded debt.

      You still question the wealth distribution? But you have not disproved the wealth distribution, since the Census Bureau Report failed to include debt. Just do a GOOGLE search for “wealth distribution” if you question the wealth distribution.

      Posted by: d.a.n at September 18, 2007 03:02 PM
      Comment #233321

      Craig, do you agree with the Fed bailing out investors in lieu of fighting inflation, in light of its .50% discount and rate cuts today?

      My take, lenders are helped and lured to loan on higher interest rates, not lower. I don’t see this move as reducing the credit crunch which is clamping economic growth in the housing and credit sectors. The move doesn’t affect loan demand, which was high before and will remain so after the cut. Hammering down the dollar, raising the cost of imports, while not affecting loan originator’s reluctance to extend credit, seems to me to be a bailout of investors in the short term at the expense of the economy in the longer time both in terms of inflation and looming consumption and demand declines, domestically do to personal debt rising, still.

      Posted by: David R. Remer at September 18, 2007 03:08 PM
      Comment #233327

      Dan:

      You still question the wealth distribution?

      I don’t believe I have ever question the wealth distribution. At least the premise of your argument.

      Craig

      Posted by: Craig Holmes at September 18, 2007 04:16 PM
      Comment #233329

      David:

      The decision today is “ok.” Sometimes psychology is important. (Look to England with a run on the back for instance).

      I think the credit crunch is overdone. It is a pig in the python that can be measured. There wre a certain number of loans written that should not have been. A certain fixed numbers. As these loans work their way through the system this “crisis” will have a begining and an end.

      The market currently disagrees. There is quite a bit of “agast”. There is a flight to quality. lower quality interest rates have risen and higher quality interest rates have fallen.

      The fed move should be effective in reversing this trend as it will show that the fed is “doing something.” The markets should resond well.

      I think the dollar should remain soft. soft currency is the correct response to trade imbalance. Exports are going up through the roof and should continue.

      Equity prices should continue to rise as the forward earnings yield on the S&P 500 is substancially higher than that of 10 year treasuries. They should trade at par.

      To answer your question a bit more directly, once the psychology problems have been addressed, (the run on the bank metaphor), the fed can return to looking at the economy through more long term eyes.

      On a long term basis Bernanke is correct to clamp down on inflation. This plays into your argument on entitlements very well. If you read Bernanke he if very concerned about generational equity. (We have had this discussing before). On of the things he can do is to keep inflation low. Low inflationary environments reduce debt both on government and private levels as leveraging makes less and less sense. It is Bernake’s way of increasing the savings rate. He has no legislative power but he can influence interest rates!

      In future I would expect Bernanke to lead the fed to generally being too tight for Wall Street’s liking. That is a position I support.

      Craig

      Posted by: Craig Holmes at September 18, 2007 04:27 PM
      Comment #233331

      Dan:

      Craig, You said some inflation is good? Why? I’ve asked that question 3 times and still fail to see an explanation. If inflation is bad, and deflation is bad, why not target ZERO inflation (or deflation)?

      Most inflation is good because over time it allows average people to create funds in their assets. Some leveraging is good and healthy. For instance if a young family buys a home for $200,000, and it apprecites at say 2% a year, in 10 years there is an additional $20-30,000 in equity they can used for a larger home.

      On the other hand too much inflation makes them buy homes for speculation. Then when the bubble bursts they get slammed like now.

      Low infation is better than zero inflation for most folks.

      Craig

      Posted by: Craig Holmes at September 18, 2007 04:39 PM
      Comment #233335

      Dan:

      My take, lenders are helped and lured to loan on higher interest rates, not lower.

      Lenders are attracted by the spread between their deposites and what they can loan money out at. It is more important to a lender that the yield curve is positive. When the yild curve is flat there is little incentive to take risk on a loan.

      When short term rates are lowered that lowers the cost of short term money. This increases the spread between funds coming in from repayment of loans and money going out in the form of interest payments to depositors. It puts money directly in their pockets by lowering their cost of doing business.

      Craig

      Posted by: Craig Holmes at September 18, 2007 05:15 PM
      Comment #233340
      Craig wrote: Most inflation is good …
      Really? But not too much, eh? I’m still waiting for a credible explanation.
      Craig wrote: Most inflation is good because over time it allows average people to create funds in their assets.
      Hmmmmmm … “Create funds”?

      “Average people”?
      Versus other kinds of people?

      That makes no sense at all.

      Craig wrote: Some leveraging is good and healthy.
      Think so? Good for who? How?
      Craig wrote: For instance if a young family buys a home for $200,000, and it apprecites at say 2% a year, in 10 years there is an additional $20-30,000 in equity they can used for a larger home.
      False.

      Inflation does not create real wealth or real equity. Just because inflation causes the price to rise does not mean the value increased.
      The only way a person can make more money is by being lucky enough to buy a home at fair value and sell it when it is over-valued.
      But that is a flawed system.
      Surely you are not saying that is a good system and a good thing?
      That’s a lot like stock manipulations to artificially manipulation prices to buy low and sell high.
      And those sorts of things have short time windows too.
      That’s a risky game, self defeating on the whole, and overall, unproductive.
      But I am well aware of these games.
      How they are a good thing is a mystery, and still fail to see how inflation is good.

      There is a big difference between the rise in price of a home due to inflation, and the real worth of the home due to reasons other than inflation.
      A larger (or better) home can only be purchased by the sale of a current home if the real value of the property increased for other reasons that have absolutely NOTHING to do with inflation.

      So, that still fails to prove, as you allege, why inflation is good.

      Craig wrote: On the other hand too much inflation makes them buy homes for speculation.
      False.

      Remember, you are trying to explain why inflation is good.
      Not why real appreciation is good.
      While investments can be protected from inflation, inflation does not create real value appreciation.
      Real wealth can not grow unless the:

      • the real value increases, having nothing to do with inflation

      • the price becomes artificially inflated by speculation, which may be good for a seller, but equally bad for the buyer; so that is still not a good thing;

      Craig wrote: Then when the bubble bursts they get slammed like now.
      True, but not strictly or only due to inflation.

      Greed and careless lending is to blame too.
      Excessive inflation is bad most (if not all) of the time.
      The bubble bursting now is because of foreclosures, irresponsible lending, ARMS hiked way up (e.g. 6% to 14% or higher) by greedy banks, over-valued properties caused by greedy speculation, foolish investments, predatory lending practices, and out-right fraud.
      Greed and unethical lending practices to get more people in debt is more to blame.
      Why does this happen?
      Well, you have to understand how money is created and who benefits from it the most.
      Governments and banks love it.
      Banks get to earn interest on money created out of thin air.
      Governments use it to shrink debt, but it erodes incomes and savings and acts like a REGRESSIVE tax since the lower income levels are less invested in assets that have real value.
      The speculation causing inflated home prices is only indirectly linked to inflation.
      In this instance (the mortgage and foreclosure meltdown), greed is a bigger cause and factor.
      Inflation is indirectly to blame, because it causes everyone with money to run all about like crazy searching for places to invest money to avoid the erosion of their wealth.
      Again, there is a more sinister force at work.
      The banks get to make interest on money created out of thin air.
      So they want to loan money.
      Some are too eager to loan money.
      But how big is the risk really when 89% of the money was created out of thin air?
      That is, new bank loans are created a a 9-to-1 ratio.
      Thus, the objective is to loan money to make money, and 89% of every new loan is money created out of thin air.
      Ultimately, the root problem is greed, and inflation is just one of many symptoms of that greed.

      Inflation could be ZERO.
      There is no good reason why inflation can’t be ZERO.
      But you have to understand who benefits from inflation and excessive money printing to understand the true reasons why incessant inflation is always with us.

      Craig wrote: Low infation is better than zero inflation for most folks.
      Hmmmm … for most folks?

      I still have not seen a credible reason why inflation is good.
      Your example above fails to explain why inflation is good, but does explain why it is bad.
      Your example above fails since the real value of the home has nothing to do with inflation.
      And if low inflation is better, why is ZERO inflation not better?

      Craig wrote:
      Dan: My take, lenders are helped and lured to loan on higher interest rates, not lower.
      Craid, David wrote that, not me.
    • Posted by: d.a.n at September 18, 2007 06:48 PM
      Comment #233345

      Dan:

      I need to proof read better. I meant “Modest inflation is good.”

      If someone buys that home of $200,000.00 and put a 20% down payment of $40,000 and take out a 30 year loan. Their princ and Interesst payments would be at 6% $959.00/month.

      After 10 years they will have paid their loan down to 134,000 or they will have increased their equity by $160,000 - 134,000 or $26,000.

      On the other hand with modest inflation of 1.5% their home will now be worth $232,000 or $32,000.

      Total equity is $40,000 original down payment
      plus $26,000 debt reduction, and $32,000 appreciation for a total of $98,000.

      This working capital can be used to buy a larger home for more kids.

      Modest inflation helps new homeowners create capital to move from starter homes to larger homes.

      It helps people moving into the market.

      Craig

      Posted by: Craig Holmes at September 18, 2007 07:15 PM
      Comment #233351
      Craig wrote: Dan: If someone buys that home of $200,000.00 and put a 20% down payment of $40,000 and take out a 30 year loan. Their princ and Interesst payments would be at 6% $959.00/month. After 10 years they will have paid their loan down to 134,000 or they will have increased their equity by $160,000 - 134,000 or $26,000. On the other hand with modest inflation of 1.5% their home will now be worth $232,000 or $32,000. Total equity is $40,000 original down payment plus $26,000 debt reduction, and $32,000 appreciation for a total of $98,000.
      Craig, That does not prove inflation is a good thing.

      A home can preserve wealth, but that does not prove inflation is a good thing.
      A home price might increase due to speculation, but if sold, while a seller may benefit from an inflated price, the seller does not. That’s a wash.
      So either way, you have not proven how inflation is good.

      I have read article about it, but they also fail to prove it.
      In my opinion, it is a myth.

      Craig wrote: This working capital can be used to buy a larger home for more kids.
      That still does not prove inflation is a good thing.

      Remember, you are trying to prove inflation is a good thing.
      Even if a home is sold for more due to speculation, that’s not good for the buyer.
      And if it sold more due to inflation, that still did not change real wealth adjusted for inflation.
      Like in the stock market, there are winners and losers.


      Craig wrote:
      Modest inflation helps new homeowners create capital to move from starter homes to larger homes.

      How? Those are conclusions. Now reasons.

      Again, that example does not prove that inflation is good.

      Craig wrote: It helps people moving into the market.
      How? Posted by: d.a.n at September 18, 2007 07:47 PM
      Comment #233352

      CORRECTION: A home price might increase due to speculation, but if sold, while a seller may benefit from an inflated price, the seller buyer does not. That’s a wash.

      Posted by: d.a.n at September 18, 2007 07:48 PM
      Comment #233354

      Dan:

      Craig, That does not prove inflation is a good thing.

      Homeownership is a good thing. Since the FDR homeowndership has increased dramatically. This would not have happened without the fed and without modest inflation.

      On the other hand, high inflation is very destructive.

      Craig

      Posted by: Craig Holmes at September 18, 2007 08:39 PM
      Comment #233355

      Craig,
      Yes, homeownership is nice.
      But how is inflation a good thing?
      If it is such a good thing, it shouldn’t be so hard to explain.

      Posted by: d.a.n at September 18, 2007 08:41 PM
      Comment #233357

      Craig,

      So far, as to home ownership, you have only explained that a home increased price by inflation, or price by speculation, which is just a wash between the seller/buyer.

      How did inflation increase the real value of the home?

      Posted by: d.a.n at September 18, 2007 08:43 PM
      Comment #233358

      Dan:

      A home can preserve wealth, but that does not prove inflation is a good thing. A home price might increase due to speculation, but if sold, while a seller may benefit from an inflated price, the seller does not. That’s a wash. So either way, you have not proven how inflation is good.

      Modest inflation allows the use of leverage.

      Let me give you an extreme example.

      Let’s say someone buys a home with NO Downpayment for the same $200,000. With modest inflation of 1.5% after one year the new homeowner has made $3,000. This is not speculation but rather policy. It is the policy of the Fed!!

      Over time this “equity” allows the young homeowner to buy a larger home as their family grows.

      Modest inflation is a good thing.

      Craig

      Posted by: Craig Holmes at September 18, 2007 08:45 PM
      Comment #233365

      Craig,
      Sorry, but that explanation proves nothing.
      Remember, you are trying to explain why inflation is good.
      The rise in cost due to inflation does not prove inflation is good. And that increase does not mean the owner can buy a bigger house.
      You repeat the same nonsense.
      That in no way whatsoever proves that inflation is good.

      Why?
      Because the rise in cost is due to inflation (which is not a real increase in wealth), or speculation (which is a wash for the buyer and seller), or the real value of the house increase (which has nothing to do with inflation).

      You explanations don’t explain anything.

      Again, if inflation is a good thing (as you allege), then why?

      You know why you are having so much trouble prooving why inflation is good?

      Because it isn’t. It’s a myth. Obviously one you bought into, but have no idea how to explain.

      Posted by: d.a.n at September 18, 2007 09:42 PM
      Comment #233377

      Dan:

      Because the rise in cost is due to inflation (which is not a real increase in wealth),

      Hogwash. When an investor is leveraged in real estate and the asset rises the homeowner increases their wealth.

      If a homeowner borrows money and buys a home, an dthat investor puts down 5%, and the home goes up 5% due to inflation the investor has double their “wealth”.

      The investor has enjoyed a 100% return because of 5% inflation.

      If an investor puts 55 down on a home and the home goes up 1% the home owner has a 20% increase in wealth from a 1% increase in inflation.

      That is a good thing.

      Craig

      Posted by: Craig Holmes at September 18, 2007 10:46 PM
      Comment #233383

      Dan:

      http://www.indexmundi.com/japan/inflation_rate_(consumer_prices).html

      What do you think of this?

      Craig

      Posted by: Craig Holmes at September 18, 2007 11:12 PM
      Comment #233388
      Craig wrote: Dan: Because the rise in cost is due to inflation (which is not a real increase in wealth),
      Hogwash. When an investor is leveraged in real estate and the asset rises the homeowner increases their wealth. False.

      Inflation is NOT a real increase in value.
      If I bought a house for $100K and 20 years later it will sell for $170K is not because it increased in value.
      It is inflation.
      And if that house is sold, it won’t buy any bigger or better house.
      Not unless other factors come into play, and they still have to do with other things other than inflation.

      Craig wrote: If a homeowner borrows money and buys a home, an dthat investor puts down 5%, and the home goes up 5% due to inflation the investor has double their “wealth”.
      False.

      I’m actually amazed.
      Since you gave no timeline, it is truly ridiculous.
      But let’s run with this truly pathetic example.
      So, a person pays $5K down on a $100K house.
      Inflation rises the price 5% to $105,000.
      You say the investor now has double their wealth.

      Craign wrote:…due to inflation the investor has double their “wealth”

      First of all, you did not give a time period.
      But let’s say it happened overnight.
      Let’s say he then sells it and receives $105,000.
      He put down $5000.
      So he nets $100,000.
      But, since inflation went up $5K, he is in the very same place where he started.
      It’s a wash.
      Yet you say he doubled his wealth:
      Craign wrote:…due to inflation the investor has double their “wealth”

      False. The person broke even overnight.

      Are you seriously going to dispute that?

      Craign wrote: The investor has enjoyed a 100% return because of 5% inflation.
      100% return?

      Wow, 100% return would mean a 5% down of 5,000 turned into a 10,000 profit.

      Unfortunately, due to 5% inflation, it is reduced by the equal amount it increased nominally (i.e. the $5,000 the down payment).

      So, again, it is a wash. There was no increase in wealth.

      Craign wrote: If an investor puts 55 down on a home and the home goes up 1% the home owner has a 20% increase in wealth from a 1% increase in inflation. That is a good thing. Craig
      False.

      Those statements are pure nonsense.
      1% of 55 is 0.55
      0.55 is is still 1% of 55.
      Where you get 20% is a true mystery.
      20% of 55 is 11.
      So which is it?
      20% or 1% ?

      Seriously, the comments above have no credibility at all.

      It still does not explain why infation is good.
      There is no doubt that inflation can increase the nominal value.
      Inflation and a bubbel might inflate a price, but the profit by the seller is offset by the inflated price to the buyer. That’s a wash, and usually the result of speculation and instability. It is certainly not proof that inflation is good.

      Inflation NEVER increases real value without massive price changes (e.g. speculation), which are still a wash between seller and buyer.
      Over all networth between the two is a wash.

      Thus, that explanation is truly pathetic.

      Once again, you say inflation is good, but have yet to explain how.
      Your examples of home values is not cutting it.
      Inflation does not equate to real net worth.
      Even an increase in price due to speculation is a wash (or worse, a loss) to the buyer. A wash at best.
      Tne only way a house increases in value is if the value of the property actually increases, and that has nothing to do with inflation.

      Try again, because all of your examples of how inflation is good (thus far) make no sense at all.

      You know why I am so confident of that? Because it is mathematically impossible.

      It is similar to the arugment by the FairTax.org proponents that a 30% Sales Tax is a good thing.
      Nevermind that ALL sales taxes are REGRESSIVE.
      And inflation is the same.
      It is REGRESSIVE in nature.
      The belief that INFLATION is good is a complete myth, and no amount of gobbledygook can change it.
      It is quite simply a mathematical impossibility.

      Please prove it wrong if you can.

      If you can, I will be the first to admit it.

      But what you have provided so far does not even remotely stand up to a logical or mathematical analysis. Not even remmotely. After all, I have not seen anyone yet prove that inflation is a godo thing. Many say it. Many believe it. But none can prove it. At least not to my knowledge. But, I will keep an open mind. But proof is required. I will not simply take someone’s word for it simply because they say “because”. “Because” doesn’t cut it. Proof requires a simply model based on everyday life that shows how inflation increases net wealth for the nation as a whole. Not just one person on one end of a sale where the buyer equally offsets the transfer of wealth.

      INFLATION
      more inflation
      more inflation and debt

      Posted by: d.a.n at September 18, 2007 11:59 PM
      Comment #233390

      Dan:

      How do you want to get to zero inflation?

      Craig

      Posted by: Craig Holmes at September 19, 2007 12:12 AM
      Comment #233407

      d.a.n.,

      I’m curious, do you consider yourself a Monetarist, Austrian School- Laissez faire, or Keynsian, or belonging to any particular school of thought?

      I suspect what Craig is trying to say is that modest inflation is a consequence of a money supply that allows the economy to grow, without spiraling out of control. An overly tight money supply may stop inflation, but kills the economy.

      Posted by: alien from the planet zorg at September 19, 2007 06:28 AM
      Comment #233476
      alien from planet zorg wrote: d.a.n., I’m curious, do you consider yourself a Monetarist, Austrian School- Laissez faire, or Keynsian, or belonging to any particular school of thought?
      I do not belong or coincide with any of those schools of thought. Greenspan is basically a Monetarist. Milton Friedman supported Keynesian theories. I do agree in general with Monetartists (and late Milton Friedman) that excessive money supply causes inflation. Also, I do not think a gold or silver standard is necessary or wise. A commodity backed currency has some advantages, but some disadvantages too. Money supply can’t easily grow if it must be backed by property somewhere that can’t be put to good use, but must exist to back the money. Also, it presents problems when that property (e.g. gold) is demanded in exchange for that currency (as was occuring before the domestic and international gold standards were eliminated).

      Money is just a tool.

      And I think the money supply is over-manipulated.
      Essentially, people play with their money too much.
      Greenspan overmanipulated money supply.
      Bernanke is overmanipulating it.
      Both are constantly pressured to increase money supply. Why?
      Almost all agree that excessive inflation is bad.
      Almost all agree that excessive deflation is bad.
      So why not target ZERO inflation (see graph) (or deflation)? Why so much continual inflation since 1975?
      Is deflation really worse than inflation?
      Or is that a myth too?
      Are we so afraid of deflation that we run in the other direction (to inflation)?
      Seems to me the best thing for money is to have a constant value.
      What’s wrong with that?
      So, naturally, people should wonder, who profits from inflation?
      Why do they say inflation is good?
      Where is this unseen magic that proves that some inflation is good?
      The money system is mismanaged.
      The evidence of it is excessive inflation (which is why $8.63 in year 1950 is now only worth $1.00 in year 2007. So how can that be good?
      Also, the argument was raised that GDP increased, but only by a factor of 2.73 per capita and that wealth (especially since 1980) was very poorly distributed. The rich got a lot richer and the rest got barely better (on average). So how was it good, and who was it good for?
      It appears that the monetary system is essentially like a REGRESSIVE tax.
      Who does a regressive tax help? Or hurt?

      alien from planet zorg wrote: I suspect what Craig is trying to say is that modest inflation is a consequence of a money supply that allows the economy to grow, without spiraling out of control.
      Yes. But the home value example wasn’t working to explain why inflation is good. I’ve heard a lot of people and article say in flation is good, but I have not yet seen a convincing argument to show why it is good.
      alien from planet zorg wrote: An overly tight money supply may stop inflation, but kills the economy.
      Yes, if “overly tight” means “deflation” from insufficient money supply.

      But I still see no proof yet that to stop inflaiton, that it kills the economy.
      More likely, I can understand how inflation (even small) can create economic instabilities, speculation, and scrambling to avoid erosion of wealth.
      So, are we to assume that erosion of wealth is a good thing? Surely not?

      I can provide many examples of how inflation is bad:

      • It discourages saving since it is eroding in value daily.

      • For those not wishing to spend it, they look everywhere for ways to invest it in assets that will not lose value (e.g. homes, gold, property), but this creates speculation, bubbles, and economic instability.

      • Inflation erodes savings unless those savings can earn more than inflation and the tax on the earnings combined.

      • Inflation is why $8.63 in year 1950 is now only worth $1.00

      • Inflation is why bubbles migrate form stocks, to bonds, to real-estate, to gold, and starts all over again … as people run around like crazy looking for a place to stop the erosion of their wealth.

      • Inflation is linked to easy credit, which leads to debt. And we have a lot of it. The interest on a $9 Trillion National Debt represents possibly $40 Trillion in interest (in 2007 dollars).

      • Federal Debt fuel more inflation to reduce the value of the debt. Seems like an obvious conflict of interest. Have you ever wondered (for about the past three decades) why loans are easy to get and credit card applications are everywhere? Because the banks want to make interest on the money they loan. And the banks (and Fed) get to create 89% of the new money from thin air (see 47 minute video). Since 89% of the loan is new money, the banks’ risk is small.

      • Inflation hammers the poor.

      • How is it possible that everyone that produces the wealth is in debt to the banks who get to earn interest on money created from thin air?

      • There is something dishonest going on that most people don’t understand. Banks are making interest on money created out of thin air at a 9-to-1 ratio. Thus, each new bank loan is 89% new money. The Money supply must increase, but how did it come about that the banks get to earn interest from the new money? How convenient.

      • Inflaiton is like a REGRESSIVE tax, because those with less wealth and assets (property, real estate, etc.) have money that is eroded daily by excessive inflation. This erodes savings and hits the poor and elderly living on fixed incomes. This is why a home can be a good investment. A home may not increase in real value, but it will not erode in value like a dollar that is eroding more year after year; resulting in a real loss of value and buying power.

      • Inflation causes economic instability. Not just domestically, but internationally. As the U.S. dollar continues to fall, the EURO starts looking more attractive, which is why China announced last year that they will start reducing their exposure to the U.S. dollar.

      • Inflation can shrink federal debt, but people that invested in that debt will be the losers. Again, that’s why China announced the decision to reduce their exposure to the U.S. dollar.

      • It isn’t really that complicated. It is like playing Monopoly in which one person can print all the money they want. Before long, they own almost everything, and everyone else is in debt (or broke). This is what is happening nation-wide. Nation-wide personal debt is $20 Trillion. Total Federal debt is $22 Trillion. And the interest alone on the $9 Trillion National Debt is over $1 Billion per day!

      So, if inflation is good, there should be at least one or two examples of why, eh?
      Do a GOOGLE on “Why is inflation good?” and “Why is inflation bad?”.
      If inflation is good, why all the talk about taming inflation?
      Should we take notice at who is saying inflation it good? Are they connected with the Federal Reserve (a privately owned bank)?

      Here is what some so-called expert wrote:

      Why does inflation matter that much? What is the “real” deal? Inflation isn’t necessarily bad if it is contained to around 2-3 per cent. Obviously, anything above it isn’t desirable because it can affect the economy. A case in point is Zimbabwe. In fact, a low inflation rate is desirable.

      So, which is it? And why?
      There are lots of people saying inflation is good, or not a bad thing, or OK, but they rarely say why?

      This same person goes on to say:

      The reason is that inflation can lower the value of a currency and this can be a bit of a problem for investors when they need to repatriate profits.
      Seems like a vicious circle.

      Here’s what another person writes (in the United Kingdom):

      Is your capital worth 50% of what you thought it was? Current official inflation – even at around just 2.5% – will halve your purchasing power in less than 30 years.

      Ahhhhh … is he just a simpleton? Does he realize how many other people are saying some inflation is good?
      Hmmmmm … it is quite a mystery, eh?
      Even now in this thread, the answer seems elusive.

      Perhaps the way to get to the real bottom of this question is to start looking at WHO says inflation is good, and WHO says it is bad.

      So the question still is, why is inflation good?
      How?
      Can anyone provide an example?
      Why is ZERO inflation (or deflation) bad?

      Posted by: d.a.n at September 19, 2007 03:14 PM
      Comment #233487

      Dan:

      You are making sweeping generalizations about inflation. You want it to be “good” or “bad”.

      If fire good or bad? Is debt good or bad? Is the stockmarket good or bad?

      For first time homeowners inflation is good.

      For someone on a fixed in come without a cola, inflation is bad.

      For a gold owner inflation is good.

      For a bond holder inflation is bad.

      For a debt holder inflation is good.

      For a stock holder generally inflation is bad.

      Again this is modest inflation.

      Hyper or high inflation is bad for a number of reasons just as deflation is bad for a number of reasons.

      You have already stated that GDP per capita has increased 2.73 since 1950.

      OBVIOUSLY if standard of living has gone up that much since 1950 inflation is not ALL bad.

      Look at home ownership numbers before 1950 verses after 1950. Homeownership has increased during the time of the fed. That is a GOOD THING. And modest infation had a part in that.

      Craig

      Posted by: Craig Holmes at September 19, 2007 04:10 PM
      Comment #233511

      Dan:

      Why is ZERO inflation (or deflation) bad?

      I don’t recall anyone saying it was bad. I don’t think it is bad.

      ZERO inflation has not been good in Japan. They have high debt and a stagnant economy.

      I believe lesser inflation is better as long as it doesnot choke off economic growth. (our previous debate about how deprressions have disapeared since we went off the gold standard).


      ZERO inflation is a bad thing when it chokes of economic growth. It’s a good thing when it does not.

      Craig

      Posted by: Craig Holmes at September 19, 2007 06:01 PM
      Comment #233517
      Craig Holmes wrote: Dan: You are making sweeping generalizations about inflation. You want it to be “good” or “bad”.
      Not true. I simply asked why some inflation is good and have yet to get an answer that makes sense.
      Craig Holmes wrote: Is fire good or bad? Is debt good or bad? Is the stockmarket good or bad?
      Clever, but that still doesn’t answer the simple question: Why is some inflation good?
      Craig Holmes wrote: For first time homeowners inflation is good.
      Of course is can be, since real property can preserve real wealth while while money erodes in real value. But that still does not answer the simple question: Why is some inflation good?
      Craig Holmes wrote: For someone on a fixed in come without a cola, inflation is bad.
      Yes, of course. I wrote that very thing above more than once. But that still does not answer the simple question: Why is some inflation good?
      Craig Holmes wrote: For a gold owner inflation is good.
      Of course it does, because real property can preserve real wealth while while money erodes in real value. But how about the question? Why is some inflation good??
      Craig Holmes wrote: For a bond holder inflation is bad.
      Yes, and that is partly why China announced a decision to start reducing exposure to the U.S. dollar. But again, that still does not answer the simple question: Why is some inflation good?
      Craig Holmes wrote: For a stock holder generally inflation is bad.
      Usually. Not always. It depends on many other factors and choices. Especially since cash is worse. It can be bad if foolish speculation result from the inflation. At any rate, that still does not answer the simple question: Why is some inflation good?
      Craig Holmes wrote: For a debt holder inflation is good.
      Yes, which is one of the nefarious reasons why the government is fueling inflation ($9 Trillion National Debt). Yet, that still does not answer the simple question: Why is some inflation good?
      Craig Holmes wrote: Again this is modest inflation. Hyper or high inflation is bad for a number of reasons just as deflation is bad for a number of reasons.
      No argument there. But why is some inflation good?
      Craig Holmes wrote: You have already stated that GDP per capita has increased 2.73 since 1950.
      True, but that is still not proof that inflation is good. It only means we survived it. Things could conceivably have been much better had it not been for 837% inflation between years 1950 and 2006. And that wealth was very unevenly distributed because inflation is like a REGRESSIVE tax (not to mention other REGRESSIVE systems at work too). Most Americans saw very little of that increase in weatlh. 40% of most Americans are essentially broke. 20% have debt only (no net worth). 60% of Americans only have 5% of all wealth. 90% of all Americans only have 17% of all wealth. Divy it all up, and those 56 years did not help much. The rich got richer, and most Americans barely got better. Real Median Incomes only increased from $35K in 1967 to $44.3K in 2004 (in 2004 dollars).

      Also, I forgot to include another important factor: There are now more workers per household, since most households now require two or more workers to achieve the near-same standard of living.

      Craig Holmes wrote: OBVIOUSLY if standard of living has gone up that much since 1950 inflation is not ALL bad.
      Again, that is still not proof that inflation is good. It only means we survived it.
      Craig Holmes wrote: Look at home ownership numbers before 1950 verses after 1950. Homeownership has increased during the time of the fed. That is a GOOD THING. And modest infation had a part in that.
      Of course home ownership is good since they can protect against inflation. Again, that still does not answer the simple question: Why is some inflation good?

      That question got danced all around like nothing I’ve ever seen before.

      QUESTION: Why is some inflation good?

      BECAUSE: ___________________________________ (fill in blank).

      Home ownership is not proof that some inflation is good. Home ownership can be protection against inflation.
      A rise in GDP is not proof that some inflation is good. There are many other factors.
      Debt is not a good reason to grow inflation, because it erodes income, savings, drives up prices, and is economically destabilizing.
      That is, only 4.5% inflation, $100.00 becomes only:

      $96.35 in 01 year
      $92.70 in 02 years
      $89.05 in 03 years
      $81.75 in 05 years
      $63.50 in 10 years
      $45.25 in 15 years
      $35.43 in 20 years

      Posted by: d.a.n at September 19, 2007 06:25 PM
      Comment #233534

      Dan:

      It’s not that I wont answer, it is that you wont accept my answer.

      Modest inflation is neither good nor bad. It provides some benefits and denies others.

      It is exactly the same as no inflation. no inflation is neither good nor bad. It is bad in situations where economic growth is stagnated in order to achieve this idea.

      Let me try one more example:

      Japan Inflation rates:

      1998 -0.6
      1999 -0.3
      2000 -0.7
      2001 -0.7
      2002 -0.9
      2003 -0.3
      2004 -0.3
      2005 -0.1
      2006 -0.3
      2007 0.3

      Japan has been as near to zero inflation as anyoen realistically could get it, and yet america has out performed the Japanese economy over this same period of time.

      For Japan, zero inflation has been a bad thing.

      I don’t have a clue what you are up to Dan with this line of questioning.

      Here is the answer. Modest inflation is neither good nor bad in and of itself. Neither is zero inflation. These concepts are only good or bad if they help further the goals of a society.

      Craig

      Posted by: Craig Holmes at September 19, 2007 07:47 PM
      Comment #233537

      Dan:

      Home ownership is not proof that some inflation is good. Home ownership can be protection against inflation.

      Home ownership is proof that modest inflation can be good. New home purchasers benefit from inflation because for only a modest amount of downpayment they receive growth on the whole amount of the home. This is called leverage.

      It is very important to young families.

      Craig

      Posted by: Craig Holmes at September 19, 2007 08:07 PM
      Comment #233538
      Craig Holmes wrote: Japan has been as near to zero inflation as anyoen realistically could get it, and yet america has out performed the Japanese economy over this same period of time.
      Bad example. Apples to Oranges.

      Japan is a much smaller nation in resources and population. That example is even worse than the home ownership example.

      Craig Holmes wrote: Here is the answer. Modest inflation is neither good nor bad in and of itself. Neither is zero inflation. These concepts are only good or bad if they help further the goals of a society.

      But Craig, you already wrote:

      Craig wrote:
      Most inflation is good

      Again, you wrote …

      Craig wrote:
      Most inflation is good because over time it allows average people to create funds in their assets.

      Are you now disavowing that statement?

      Craig Holmes wrote: Here is the answer. Modest inflation is neither good nor bad in and of itself. Neither is zero inflation. These concepts are only good or bad if they help further the goals of a society.
      If you are saying modest inflation is good, fine. But I still have not seen an explanation as to “why” or how it helps further the goals of society.
    • Posted by: d.a.n at September 19, 2007 08:10 PM
      Comment #233539

      Dan:

      A rise in GDP is not proof that some inflation is good.

      A rise in real gdp is proof that America has prospered greatly since 1950. During this time we experienced the greated inflation in our history as a country. Also one of the greatest increases in home ownership.

      Craig

      Posted by: Craig Holmes at September 19, 2007 08:11 PM
      Comment #233546

      Craig, that still does not prove some inflation is good.

      Posted by: d.a.n at September 19, 2007 08:43 PM
      Comment #233555

      Dan:

      Bad example. Apples to Oranges. Japan is a much smaller nation in resources and population. That example is even worse than the home ownership example.

      Well then you will be happy with none. Japan is the second largest economy in the world.

      Craig

      Posted by: Craig Holmes at September 19, 2007 10:16 PM
      Comment #233559

      Dan:

      If you are saying modest inflation is good, fine. But I still have not seen an explanation as to “why” or how it helps further the goals of society.

      Alright, I will give it a try. In our ZERO inflation past, when we were on the gold standard, there were several panics and depressions. For instance from a previous debate we discussed many depressions of the 1800’s. THERE HAVE BEEN NONE SINCE INFLATION STARTED.

      There is a reason for this. When the economy starts to “fall”, it “falls” from inflation to much lower inflation instead of from no inflation to deflation and depression.

      The key I think is to find a sweet spot because inflation even near 4% according to Greenspan over a long period is bad.

      There is no doubt about it that since the fed was created AND we went off the gold standard the economy has been less volitile. Recessions have replaced depressions and have over time gotten longer between them.

      Some inflation or printing of money provides liquidity and options to the fed to smooth out the ride.

      2. Inflation stimulates the economy.

      When you target zero as an inflation rate, that means half the time you will have inflation and half disinflation. disinflation encourages people to hoard money as they wait for prices to fall. Money moves out of circulation. That is bad for economic growth. It is far better for money to circulate.

      With modest inflation we are encouraged to use be involved in the financial system and allow money to circulate. That stimulates economic growth.

      In the end though I think modest inflation allows for more economic stability. You can show our graphs about how much purchasing power has been eroded, but if we were to go back to the gold standard and adopt a zero inflation policy we would again see the wild swings of boom and bust of the 1800’s that was soo very hard.

      You use inflation numbers from 1950 to the present. We have already discussed that GDP per capita increased by 2.73 times. What we did not discus was volitility. The standard deviation of the economy from 1950 to now is much less when measuring real GDP growth. What that means is that since 1950 WITH inflation we have had a less bumpy ride. This makes for a better economy because people can plan their future’s with more confidence.

      With the fed involved and keeping inflation at the sweet spot it allows for smother growth and less risk of depression.

      Craig

      Posted by: Craig Holmes at September 20, 2007 12:28 AM
      Comment #233588

      D.a.n.

      Thank you for your response. You and I are not that far apart. I still don’t see a pending depression, even with the stats you have provided.

      I better understand your position. I had thought you were for a gold standard. What do you prefer to a fiat money system?

      It is my understanding that Friedman who originally was a supporter of Keynesian economics, later became much more a supporter of Laissez Faire policies.

      I do think Inflation is a negative consequence of monetary policy as practiced in this country and of course others. It isn’t a good thing. It is not only a consequence of monetarism though. Inflation is a real thing as well…in that sense I am more along the lines of Keynes.

      I don’t think that zero inflation is easy to achieve due to the danger of over constricting money supply as Craig is discussing.

      Is there a conflict of interest (no pun intended) in the Fed? Sure there is.

      Thanks again for the discussion.

      Posted by: alien from the planet zorg at September 20, 2007 11:35 AM
      Comment #233611
      Craig wrote:
      Bad example. Apples to Oranges. Japan is a much smaller nation in resources and population. That example is even worse than the home ownership example. Dan: Well then you will be happy with none. Japan is the second largest economy in the world.
      And in 2003, China is 6th largest. Mexico is 9th largest. So the size of the economy clearly does not tell the whole picture. Rank _ Country _ GDP _ $US billions:

      1 _ USA _ 10,208
      2 _ Japan _ 4,149
      3 _ Germany _ 1,847
      4 _ United Kingdom _ 1,424
      5 _ France _ 1,307
      6 _ China (exc.HK) _ 1,159
      7 _ Italy _ 1,089
      8 _ Canada _ 700
      9 _ Mexico _ 618
      10 _ Spain _ 582
      11 _ Brazil _ 504
      12 _ India _ 481
      13 _ Korea _ 422
      14 _ Netherlands _ 380
      15 _ Australia _ 357
      16 _ Russian Federation _ 310
      17 _ Taiwan _ 282
      18 _ Argentina _ 269
      19 _ Switzerland _ 247
      20 _ Belgium _ 227

      Craig wrote:
      If you are saying modest inflation is good, fine. But I still have not seen an explanation as to “why” or how it helps further the goals of society.
      Alright, I will give it a try. In our ZERO inflation past, when we were on the gold standard, there were several panics and depressions. For instance from a previous debate we discussed many depressions of the 1800’s. THERE HAVE BEEN NONE SINCE INFLATION STARTED.
      There are many other reasons for those panics (see my list here). The gold standard is not the answer. And the absence of a major panic since the Great Depression is not proof that inflation is good, because those panics can be explained by wars, mismanagement of money systems domestically and internationally, mismanangement of banking systems, technological advances since after World War II that did not exist in the 1930s, and a lack of regulation and laws that allowed abuses and wild speculation and manipulations that created many of the panics and market crashes.

      Most panics are due mostly to:
      (1) wars
      (2) speculation
      (3) mismanagement of banks, markets, and money systems
      The reduction of panics is not proven to be because some infaltion is good.

      Craig wrote: There is a reason for this. When the economy starts to “fall”, it “falls” from inflation to much lower inflation instead of from no inflation to deflation and depression.
      That argument only applies if the inflation and deflation swings are large. Otherwise, ZERO inflation and deflation is a wash. Money is preserved. And the preservation of money does not inhibit investment in things that can yield profit. Interest on loans would still exist even if low. Production is a more responsible and ethical way to produce wealth than speculation and manipulation of money systems.
      Craig wrote: The key I think is to find a sweet spot because inflation even near 4% according to Greenspan over a long period is bad.
      Yes, 4% inflation is too high and it will turn $100 into only $66.48 in 10 years. YEAR ___ AVERAGE
      • 1995 ___ 2.81%
      • 1996 ___ 2.93% 1997 ___ 2.34% 1998 ___ 1.55% 1999 ___ 2.19% 2000 ___ 3.38% 2001 ___ 2.83% 2002 ___ 1.59% 2003 ___ 2.27% 2004 ___ 2.68% 2005 ___ 3.39% 2006 ___ 3.43%
      How do we really know that these games and manipulations are not the result of economic instability?
      Craig wrote: There is no doubt about it that since the fed was created AND we went off the gold standard the economy has been less volitile. Recessions have replaced depressions and have over time gotten longer between them.
      The Gold Standard wasn’t necessary, and the reduction in economic instability can also be explained by other things (e.g. less mismanagement of banks, mismanagement of money systems, mismanagement of stock markets, and technological advances). The reduction of panics is not proven to be because some infaltion is good.
      Craig wrote: Some inflation or printing of money provides liquidity and options to the fed to smooth out the ride.
      I don’t agree. I think the games and playing with and manipulation the money supply (for some nefarious reasons too) are what causes the bumpy ride.
      Craig wrote: Inflation stimulates the economy.
      How? Again, that is a conclusion. I still have not seen sufficient evidence to support the conclusion that some inflation is good.
      Craig wrote: When you target zero as an inflation rate, that means half the time you will have inflation and half disinflation. disinflation encourages people to hoard money as they wait for prices to fall.
      So? Unless the swings are drastic, why is that bad? Seems to me, targeting ZERO inflaiton/deflation should be the goal of any money system.
      Craig wrote: Money moves out of circulation. That is bad for economic growth. It is far better for money to circulate.
      But inflation discourages saving. And deflatin discourages spending and circulation. So, again, why not target ZERO inflation and deflation and solve BOTH problems?
      Craig wrote: With modest inflation we are encouraged to use be involved in the financial system and allow money to circulate. That stimulates economic growth.
      That is a conclusion. Not a proof.

      Large inflation causes instability, discourages saving, encourages speculation, and encourages spending (before the value erodes further).
      Small inflation just encourages smaller amounts of the same bad.
      I have seen nothing to date, not a mathematical proof, not one believable real-life example, or anything yet to convince me that some inflation is good.
      I can list many reasons why inflation is bad.
      I can list many reasons why deflation is bad.
      But I can not find any reasons why a little bad is good.

      Craig wrote: In the end though I think modest inflation allows for more economic stability.
      And I think ZERO infaltion and deflation will provide the most economic stability.
      Craig wrote: You can show our graphs about how much purchasing power has been eroded, but if we were to go back to the gold standard and adopt a zero inflation policy we would again see the wild swings of boom and bust of the 1800’s that was soo very hard.
      I am not suggesting we should return to a Gold Standard.

      I am merely suggesting ZERO inflation and deflation to increase economic stability.

      I realize we have all been told for many years that some inflation is good, but have you really questioned it and received a convincing answer?

      Craig wrote: You use inflation numbers from 1950 to the present. We have already discussed that GDP per capita increased by 2.73 times.
      Again, the distribution of that wealth is very lop-sided. Real Median Incomes only increased from $35K in year 1967 to $44.3K in 2004 (in 2004 dollars). Between 1980 and now, the weatlht of the wealthiest 1% of population increased from 20% to 40%, and 90% of Americans now only have 17% of all wealth. Don’t forget the debt too. We will be paying for it a long time. In fact, it is so ridiculous ($22 Trillion), we may be paying on just the $9 Trillion National Debt (of the total $22 Trillion federal debt) for 153 years (representing $53 Trillion in interest in 2007 dollars; if the interest rates don’t exceed 4.5%).
      Craig wrote: What we did not discus was volitility.
      I have shown that many times here (see my charts). There has actually been volatility since 1913 (the creation of the Federal Reserve). Look at the 1970s and 1980s.
      Craig wrote: The standard deviation of the economy from 1950 to now is much less when measuring real GDP growth.
      But it is also very inflationary for that entire period. Inflation only occurred.
      Craig wrote: What that means is that since 1950 WITH inflation we have had a less bumpy ride.
      Again, there are many other factors for a less bumpy ride (e.g. less mismanagement of banks, mismanagement of money systems, mismanagement of stock markets, and technological advances). The reduction of panics is not proven to be because some infaltion is good.
      Craig wrote: This makes for a better economy because people can plan their future’s with more confidence.
      That is yet another conclusion. Not proof that some inflation is good.
      Craig wrote: With the fed involved and keeping inflation at the sweet spot it allows for smother growth and less risk of depression.
      I do not think 3% to 4% (or higher) inflation is a sweet spot.

      You state that some inflation is good.

      • (1) Good for who?

      • (2) Who benefits the most from inflation?

      • (3) I believe ZERO inflation (and ZERO deflation) is good.

      • (4) I can give many, many reasons why inflation is bad, and the bad increases as inflation increases.

      • (5) I can give many, many reasons why deflation is bad, and the bad increases as deflation increases.

      • So if inflation is bad, and if deflation is bad, how is a little bad ever good?

      OK. We’ve beat this dead horse about all we can.
      You believe some inflaiton is good and I don’t and haven’t a reason that convinces me that any inflation or deflation is good.
      We’ll simply have to gree to disagree.

      alien from planet zorg wrote: D.a.n. Thank you for your response. You and I are not that far apart.
      Thank you, and Craig too.
      alien from planet zorg wrote: I still don’t see a pending depression, even with the stats you have provided.
      That’s OK. It is simply a difference in opinion. It is a complex matter. It is not as simple as saying famine is bad and survival is good.
      alien from planet zorg wrote: I better understand your position. I had thought you were for a gold standard. What do you prefer to a fiat money system?
      The fiat system is OK if managed correctly to target ZERO inflation and deflation. Some say ZERO inflation will cause people to hoard money, but I think that is a myth. I think people will still spend and still invest, and probably invest more wisely when they are not being motivated by the erosion of money by inflation. I also think there are sinister reasons why the FED and government perpetuate inflation. After all, who profits the most from inflation? Especially if one has massive debt (e.g. $9 Trillion National Debt). Especially if you own a bank that gets to charge interest on new money created out of thin are (at a ratio of 9-to-1; each new bank loan is 89% new money). Especially if you own corporations and want people to spend their money for fear of that money eroding each day due to inflation.
      alien from planet zorg wrote: It is my understanding that Friedman who originally was a supporter of Keynesian economics, later became much more a supporter of Laissez Faire policies.
      Milton Friedman and Anna Schwartz argued that the Great Depression was the consequence of an incredible and unlikely sequence of blunders in monetary policy. Friedman did support a fiat money system. But later in life he started to recognize the problems with fiat funny money. In one of Friedman’s own books, he cites many harsh lessons from postwar hyperinflation in many countries. He also claims that Roosevelt’s confiscation of gold and silver (1933) may have skewed China’s silver-based economy toward eventual communism. It is this sort of meddling and tinkering (playing with money) that is at the root of many economic problems. When Franklin Roosevelt was asked to deal with silver, he had already confiscated all gold at $20.67 an ounce, and then subsequently raised the price to $35 ! FDR then said: “All right. I experimented with gold and that was a flop. Why shouldn’t I experiment a little with silver?” I think what Friedman realized late in life that there was one major problem with the fiat-monetary-systems. The lack of discipline to manage it responsibly. A lack of transparency and accountability inevitable leads abuse. A fiat monetary system does not theoretically require it be backed up by anything but faith, but the fiat money system encourages infaltion. One of Friedman’s most sinister deeds was his proud role in the Treasury Department, in creating the system of the withholding income tax from payroll. Before that, people paid their annual income tax in a lump sum on March 15th, and tax payers total tax bill very visible to tax-payers. So, to get around that, a little smoke-and-mirrors was required. Friedmen suggested the payroll tax, so that MORE tax could be extracted; a little bit at a time, making the total tax larger, but less noticeable. So, the Friedman “payroll tax” has given the government the power to use every employer as a tax collector, extracting the tax quietly and less noticably from each payroll. So, Milton Friedman, thank you very much for that monster, paving the way to a government that continues to grow and grow to nightmare proportions. At any rate, I don’t think withholding of taxes by employers is a bad thing, but that it reduced the visibility of the tax bill to tax payers was part of the motive. Friedman advocated manipulative monetary and fiscal policy, with an increase of money-supply by the Federal Reserve at a rate of 3%-to-4% annually, even though he later learned that those manipulations had inevitable time lags, and are therefore bound to exacerbate, rather than help things. Friedman states in his book (in 1994) that uncontrolled money growth (i.e. excessive money-printing) is the cause of inflation, and has many bad side-effects, such as eventual economic instability and unemployment. In his book “Money Mischief”, Friedman devotes a large art of the book to the problems of a excessive money creation.
      alien from planet zorg wrote: I don’t think that zero inflation is easy to achieve due to the danger of over constricting money supply as Craig is discussing.
      Maybe, but if we can target 3% to 4% , why can’t we also (just as effectively) target 0% inflation? Posted by: d.a.n at September 20, 2007 03:16 PM
      Comment #233626

      Dear fellow dead horse beater:

      I mean Dan:

      I hear your points, but I have a few more on inflation. Inflation is an effect of the fiat money system. that is very easy to prove.
      It is a secondary occurance. Inflation could be defeated today if we went on the gold standard.

      I think we agree that ECONOMIC growth rates have stabalized over the last 60 years and that recessions are more and more infrequent.

      Your charts show INFLATION volitility not GDP volitility.

      You said above that there were several other reason for this stability:

      Again, there are many other factors for a less bumpy ride (e.g. less mismanagement of banks, mismanagement of money systems, mismanagement of stock markets, and technological advances). The reduction of panics is not proven to be because some infaltion is good.

      No. The reason for the less bumpy ride is the Fed using the Fiat monetary systems. We bail out banks etc before the collapse goes to far. The fed does exactly what it is doing right now. It is the old “a stitch in time saves nine” issue.

      The benefit of the FED is a less bumpy ride. The effect is inflation.

      You are arguing your side way to hard. All you have to say is that “price stability” is in the fed charter. It is their job to keep prices stable.

      I favor modest inflation because i fear the negative consequences of the gold stadard. My hope would be that the fed can achieve the lowest inflation rate consistent with this healthy pattern of a lower standard of deviation for the US economy. I think this lower standard deviation is a huge new skill that modern society has learned that benefits all of us.

      So one benefit to me of modest inflation is that I don’t have to fear depressions in our future.

      I enjoyed this debate,

      Craig


      P.S. With the fed’s recent move, it looks like the housing this is going to go away. As I predicted we will have something else to argue about. Now of course the dollar has fallen, oil reached a new high and Saudi Arabia is considering depeging to the dollar. We will be fine

      Posted by: Craig Holmes at September 20, 2007 04:41 PM
      Comment #233707
      Craig wrote: I hear your points, but I have a few more on inflation. Inflation is an effect of the fiat money system. that is very easy to prove.
      I agree with that mostly. However, there are other factors that may affect it (e.g. technology, interest rates, etc.)
      Craig wrote: Inflation could be defeated today if we went on the gold standard.
      I doubt that, and doubt that a gold standard is the only thing that would work to defeat inflation.

      Inflation can be controlle by simply not creating too much new money.
      There was inflation and deflation even with the Gold Standard.
      There was inflation even after the Federal Reserve was created in 1913.
      There was inflation before the domsetic Gold Standard was eliminated in 1933 (but before the international Gold Standard was eliminated)
      There was inflation before the international Gold Standard was eliminated in 1971.
      We have seen double digit inflation in the late 1970s and early 1980s.

      Craig wrote: I think we agree that ECONOMIC growth rates have stabalized over the last 60 years and that recessions are more and more infrequent.
      Not true. I would not call double digit inflation (in the late 1970s and early 1980s) stable.
      Craig wrote: Your charts show INFLATION volitility, not GDP volitility.
      And?
      Craig wrote: You said above that there were several other reason for this stability:
      d.a.n wrote: Again, there are many other factors for a less bumpy ride (e.g. less mismanagement of banks, mismanagement of money systems, mismanagement of stock markets, and technological advances). The reduction of panics is not proven to be because some infaltion is good.
      Craig wrote: No. The reason for the less bumpy ride is the Fed using the Fiat monetary systems.
      If that were true, then why double digit inflation (in the late 1970s and early 1980s). Look at my graph. How is less bumpy except that it is all inflationary only? Then look at the CPI Index in the smaller graph. How is that good. That is why $8.63 in year 1950 is now worth a measely $1.00 . I don’t think the system has really improved much since we clearly now have nothing but incessant inflation. In addition, the panics and volatility of the past were also a result of other things such as wars, poor monetary policies, mismanagement of many systems.
      Craig wrote: We bail out banks etc before the collapse goes to far.
      Bailing them out may be why they are so irresponsible with easy credit, fueled by their risk that is small when 89% of every new bank loan is money created from thin air (a detail yet to addressed).
      Craig wrote: The fed does exactly what it is doing right now. It is the old “a stitch in time saves nine” issue. The benefit of the FED is a less bumpy ride. The effect is inflation.
      I think the Fed is doing it wrong by creating to much money, which creates bubbles, erodes money, causes the falling dollar, encourages debt and spending.

      Again, if inflation is bad and deflation is bad, why is a little bad good?
      The only real argument that everyone uses is that it encourages investment and spending, and I am not convinced that encouraging spending is good, or that investmenting would be harmed by ZERO inflation.

      Craig wrote: You are arguing your side way to hard.
      Not true. And why is arguing one’s beliefs improper? I would hope everyone stays true to what they believe rather than give up or give in.
      Craig wrote: All you have to say is that “price stability” is in the fed charter. It is their job to keep prices stable.
      I believe the Fed’s job should be to target ZERO inflation, and there are suspicious reasons for not doing so, perpetuating incessant inflation, and discourage saving (i.e. debt and greed).
      Craig wrote: I favor modest inflation because i fear the negative consequences of the gold stadard.
      No one here is advocating a return to the gold standard. Targeting ZERO inflation does not equate to the “Gold Standard”.
      Craig wrote: My hope would be that the fed can achieve the lowest inflation rate consistent with this healthy pattern of a lower standard of deviation for the US economy.
      I would hope they would shoot for ZERO inflation, but I know they will not and I think Americans should know this, and ask why not? Please show me the proof that some inflation is good. And why? Thus far, all that I’ve seen is some fuzzy, circular logic that does not stand up to close scrutiny. Just saying it encourages investment and spending does not convince me, since I’m not sure that ZERO inflation would hurt investment and I don’t think encouraging spending is a good thing.
      Craig wrote: I think this lower standard deviation is a huge new skill that modern society has learned that benefits all of us.
      Again, that is not solely the result of inflationist practices. More regulation, laws prohibiting manipulation of markets, and technology helped. And I wouldn’t call double digit inflaiton of the 1970s and 1980s a good thing.
      Craig wrote: So one benefit to me of modest inflation is that I don’t have to fear depressions in our future.
      So you think inflation prevents depressions?

      I don’t. Deflation causes depressions. Not ZERO inflation / deflation.

      So, my question stands and I invite others to answer the following if they can:

      • (01) Some say modest inflation is good. Why?

      • (02) If some inflation is good (as some say), then why is some deflation bad?

      • (03) Why is ZERO inflation bad?

      • (04) If too much inflation is bad, and too much deflation is bad, why is ZERO amount of either bad?

      • (05) If too much inflation is bad, why is a little inflation good? Isn’t that like saying a little bad is good?

      • (06) Who benefits from inflation? Clearly, those in debt do. So, is that why there is so much debt? So how is inflation good if it encourages debt? And is debt good when it is owned by all Americans (e.g. $9 Trillion National Debt; $22 Trillion Social Security Debt; $450 Billion PGBC pension debt)?

      • (07) Who owns the Federal Reserve ? It Federal Reserve is NOT owned by the Federal government.

      • (08) For every new bank loan, 89% (a 9 to 1 ratio) of each loan is new money created out of thin air. Money Supply is increased. But why do banks get to earn interest on that new money? Is that right? Is that ethical? Or is that a manifestation of unchecked greed?

      • (09) Why should banks be responsible when the can be bailed out by the Fed by creating more money, as recently occurred; the Fed gave the banks %61 Billion and called it the preservation of liquidity? Is that right? Doesn’t that create more inflation? Of course it does. Seems to me the innocent people are paying the price for others’ mistakes (and/or crimes).

      • (10) If some inflation is good (as some say), then why is China and Saudi Arabia reducing exposure to the U.S. dollar? Why would anyone want to loan money to the U.S. when their investment will be eroded by inflation? Why are other nations starting to find other currencies more attractive? Obviously, the falling dollar is a result of what we’ve been doing for a long time: a little inflation (ranging from 1.5% to 3.43% for over a decade; see below). You say the dollar is falling. Is that (below) too much inflation? Where is the proof that ZERO inflation is bad? Where is the proof that ZERO inflation will cause a depression? How can you have a depression if inflation and deflation are both ZERO?

      • YEAR ___ AVERAGE INFLATION
        1995 ___ 2.81%
        1996 ___ 2.93%
        1997 ___ 2.34%
        1998 ___ 1.55%
        1999 ___ 2.19%
        2000 ___ 3.38%
        2001 ___ 2.83%
        2002 ___ 1.59%
        2003 ___ 2.27%
        2004 ___ 2.68%
        2005 ___ 3.39%
        2006 ___ 3.43%

      Craig wrote: P.S. With the fed’s recent move, it looks like the housing this is going to go away. As I predicted we will have something else to argue about. Now of course the dollar has fallen, oil reached a new high and Saudi Arabia is considering depeging to the dollar. We will be fine
      “We will be fine” is too nebulous. You just said “the dollar has fallen” and “Saudi Arabia is considering depeging to the dollar”. Can you blame them? Why do that do that? Why did China also say that it was going to reduce exposure to the falling dollar? Why would they want to loan us money when it will be eroded away so quickly. Didn’t you write above that 1% to 2% inflation was good? I’m not so sure about that Look at what even 2% inflation does to $100 in 10 years (erodes it to $76.02):

      Inflation: 1% ____ 2% ____ 3% ____ 4% ____ 5% ____6% ____ 7% ___ 10% ___ 12% ___14%
      YEAR:$100.00_$100.00_$100.00_$100.00_$100.00_ $100.00_$100.00_$100.00_ $100.00_$100.00
      01 __ $99.00 _ $98.00 _ $97.00 _ $96.00 _ $95.00 _ $94.00 _ $93.00 _ $90.00 _ $88.00 _ $86.00
      02 __ $98.01 _ $96.04 _ $94.09 _ $92.16 _ $90.25 _ $88.36 _ $86.49 _ $81.00 _ $77.44 _ $73.96
      03 __ $97.03 _ $94.12 _ $91.27 _ $88.47 _ $85.74 _ $83.06 _ $80.44 _ $72.90 _ $68.15 _ $63.61
      04 __ $96.06 _ $92.24 _ $88.53 _ $84.93 _ $81.45 _ $78.07 _ $74.81 _ $65.61 _ $59.97 _ $54.70
      05 __ $95.10 _ $90.39 _ $85.87 _ $81.54 _ $77.38 _ $73.39 _ $69.57 _ $59.05 _ $52.77 _ $47.04
      10 __ $90.44 _ $81.71 _ $73.74 _ $66.48 _ $59.87 _ $53.86 _ $48.40 _ $34.87 _ $27.85 _ $22.13
      15 __ $86.01 _ $73.86 _ $63.33 _ $54.21 _ $46.33 _ $39.53 _ $33.67 _ $20.59 _ $14.70 _ $10.41
      20 __ $81.79 _ $66.76 _ $54.38 _ $44.20 _ $35.85 _ $29.01 _ $23.42 _ $12.16 _ $07.76 _ $04.90
      25 __ $77.78 _ $60.35 _ $46.70 _ $36.04 _ $27.74 _ $21.29 _ $16.30 _ $07.18 _ $04.09 _ $02.30
      30 __ $73.97 _ $54.55 _ $40.10 _ $29.39 _ $21.46 _ $15.63 _ $11.34 _ $04.24 _ $02.16 _ $01.08

      And that is why _ $1.00 in 1950 is now only worth 11.59 cents in year 2007.
      Inflation between 1950 and 2006 is 837% (i.e. _ $8.37 in 1950 eroded to _ $1.00 in year 2006).
      If a little inflation is good, why not make it very little (like ZERO)?

      Craig, We’ll just have agree to disagree.

      I still have not seen a convincing reason to prove why “some” inflation is good.
      Especially when human nature is factored in to the equation.
      Especially when greed is factored in.
      Do you really think the Fed is doing what is best for everyone?

      But please let me know if you think of other reasons why some inflation is good.
      Inquiring minds want to know. : )

      Posted by: d.a.n at September 21, 2007 06:53 AM
      Comment #233708

      CORRECTION: Look at what even 2% inflation does to $100 in 10 years (erodes it to $76.02 $81.71):

      Posted by: d.a.n at September 21, 2007 06:55 AM
      Comment #233747

      Dan:

      Not true. I would not call double digit inflation (in the late 1970s and early 1980s) stable

      Let me establish a facts

      I. Standard deviation of the growth rate of real gdp has gone down over the years since the creation of the federal reserve and the removal of the gold standard.


      Recessions have become more infrequent and shallower since the fed came into existance.

      Both of these are good things.

      II. The overall growth rate of the economy has declined since the fed was created and the gold standard was removed. I attribute this to higher taxes and social programs. (many of which I support) because social servants do not produce as much as employees of private corporations.

      III. Inflation rose to a peak in early 1980’s and has been declining since.

      You and I value different things, or we emphasis different things. I really don’t care in theory what the inflation rate is as long as real gdp is on it’s way up. Inflation is far more important to you than to me. I care only when it impacts what I view as important which is long term GDP growth and stability.

      With my value of emphasis on Real longterm GDP growth WITH STABILITY, modest inflation is a good thing because it tells me that the fed is in place managing the economy WITHOUT harming what my eye is on (real gdp). Inflation equals the fed.

      So you think inflation prevents depressions?

      No. The Fed and Congress prevent depressions. A biproduct of their work is inflation. We are seeing it at work right today. The fed lowered interest rates which is inflationary, however it also might prevent a recession thus creating more economic stability.

      A very valid point you bring up is the government “bailing out” wall steet. The answer is yes. The fed “put” it is called. There is an important reason. If a company goes bankrupt, of course the shareholders loose it all which is bad, but the workers to do!! A part of the fed mandate is a stable work force. The answer is yes, the fed is there to bail out incompetant bankers.

      Craig

      Posted by: Craig Holmesq at September 21, 2007 01:02 PM
      Comment #233796

      Dan:

      “We will be fine” is too nebulous.

      “fine” means that real GDP grow will continue at or near historical norms.

      It means that the economy is not going to collapse as you and david fear.

      There will always be issues. There will always be “Pressing problems” but in the end solutions will be found and the economy will continue to expand.

      Craig

      Posted by: Craig Holmes at September 21, 2007 04:16 PM
      Comment #233828
      Craig wrote: I think we agree that ECONOMIC growth rates have stabalized over the last 60 years and that recessions are more and more infrequent.
      d.a.n wrote:Not true. I would not call double digit inflation (in the late 1970s and early 1980s) stable.
      Again, that is not true on two counts. Recession are not more and more infrequent. See proof here. Also, I would not call ALL inflation and some of it still wild as so much more stable to matter. That statement above does not mention standard deviation, and standard deviation is not useful when the reduction in the standard deviation is only because of constant inflation (and sometimes double-digit inflation).
      Craig wrote: Let me establish a facts I. Standard deviation of the growth rate of real gdp has gone down over the years since the creation of the federal reserve and the removal of the gold standard.
      That is not very relevant. Standard deviation is not useful when the reduction in the standard deviation is only because of constant inflation (and sometimes double-digit).
      Craig wrote: Recessions have become more infrequent and shallower since the fed came into existance.
      Not less frequent. See link to chart of proof above. Less shallow is very subjective but I’ll grant that point. But it is not an important point when we now have constant inflation (and sometimes double-digit inflation).
      Craig wrote: Both of these are good things.
      I don’t think 863% inflation since 1950 to now can be characterized as good. And GDP growth per capita since 1950 was poorly distributed. The rich got richer, the poor got poorer, the middle group went sideways.
      Craig wrote: II. The overall growth rate of the economy has declined since the fed was created and the gold standard was removed. I attribute this to higher taxes and social programs. (many of which I support) because social servants do not produce as much as employees of private corporations.
      I think it is because of constant inflation. It is economically destabilizing and hinders growth.
      Craig wrote: III. Inflation rose to a peak in early 1980’s and has been declining since.
      Yes, but even 3% or 4% can be damaging. Even a mere 3.4% inflation (average for year 2006) can turn $100 into only $90.14 in 3 years, $78.49 in 7 years, and $70.76 in 10 years.
      Craig wrote: You and I value different things, or we emphasis different things. I really don’t care in theory what the inflation rate is as long as real gdp is on it’s way up.
      How do you know ZERO inflation won’t improve that?
      Craig wrote: Inflation is far more important to you than to me. I care only when it impacts what I view as important which is long term GDP growth and stability.
      But inflation affects GDP. So that should be as important if inflation is harming GDP. And the reduction in the growth of GDP could very well be due to the constant incessant inflation since 1950.
      Craig wrote: With my value of emphasis on Real longterm GDP growth WITH STABILITY, modest inflation is a good thing because it tells me that the fed is in place managing the economy WITHOUT harming what my eye is on (real gdp). Inflation equals the fed.
      That is a non-sequitur.

      That is like saying the sky is blue, so therefore sunflowers are yellow.
      There is no correlation or proof yet that some inflation is good.
      Inflation since 1950 turned $1.00 into 11.59 cents (863% inflation).
      What’s good about that?
      I can list many reasons why inflation is bad.
      I can list many reasons why deflation is bad.
      I can not find any reasons why ZERO inflation is bad.
      Almost everyone says deflation is bad and inflation is bad. So why is some bad good?

      Craig wrote:
      d.a.n wrote: So you think inflation prevents depressions?
      No. The Fed and Congress prevent depressions.
      Maybe. But they may have actually caused the last depression. The Fed was created in 1913. If the Fed is so wonderful, why did a Great Depression occur in 1929? It wasn’t all to blame on the Gold Standard. To be fair, there was a lot of mismanagement of banks and markets and post-World War 1 debt and economic problems in Europe too. However, I think the incessant inflation, and the debt it encourages (and discourages saving) could cause the next depression. $22 Trillion federal debt and $20 Trillion personal debt is no small problem. Especially when most weatlh it is concentrated among the wealthy (1% of the population has 40% of all wealth, 5% of the population has 70% of all wealth; 80% of the population has only 17% of all wealth).
      Craig wrote: A biproduct of their work is inflation.
      No kidding! ?

      863% since year 1950.
      3% or 4% year after year after year is bad.
      You know about the power of compounded interest.
      Incessant inflation is the reverse.

      Craig wrote: We are seeing it at work right today. The fed lowered interest rates which is inflationary, however it also might prevent a recession thus creating more economic stability.
      I do not think the damage the Fed and government has done (with incessant inflation, easy credit, massive debt) can be fixed; only delayed. The consequences can be smoothed out over several years into the future maybe, but there will still be a price. This is probably what Benanke theorizing with the 14% drop in the standard of living over the coming decades.
      Craig wrote: however it also might prevent a recession thus creating more economic stability.
      I do not think there is much the Fed can do but delay the inevitable. At best, future generations will have a lot of crap dumped onto them. A 14% drop in the standard of living will spell larger than 14% declines for the majority of the population (since 80% of the population only has 17% of all wealth). The big picture and long term does not look encouraging. In fact, an economic meltdown more serious than a long and gradual decline of the standard of living by 14% is not at all far fetched. The U.S. Comptroller has stated stronger warnings than Bernanke or Greenspan.
      Craig wrote: A very valid point you bring up is the government “bailing out” wall steet. The answer is yes. The fed “put” it is called. There is an important reason. If a company goes bankrupt, of course the shareholders loose it all which is bad, but the workers to do!! A part of the fed mandate is a stable work force. The answer is yes, the fed is there to bail out incompetant bankers.
      And I think that, along with the banks getting the interest from new money created at a 9-to-1 ratio, easy money, easy credit, massive debt fueled by it, and then getting bailed out will make it worse.

      Again, a very good analogy is the game of Monopoly where one player can print all the money they want, and then collect interest on that new money. Before long, everyone else is broke or in debt to the one person. Similarly, it is interesting how everyone that produces wealth is in debt to these banks that get the interest on the new money. Hell of system, eh? Why is it no one ever talks about that? Do you think that is right?

      Craig wrote: “fine” means that real GDP grow will continue at or near historical norms.
      With the declining rate of GDP growth, massive federal debt, and even Bernanke’s predicitons and warnings, growing corruption and increasingly FOR-SALE politicians, and incessant inflation, I think the outlook will be a decline in the standard of living as Bernanke described, becaause I don’t think Congress will take action soon enough.
      Craig wrote: It means that the economy is not going to collapse as you and david fear.
      But it is a growing possibility.

      Especially if you factor in the attitudes in Congress.
      It isn’t that we can not fix the many problems.
      It is that we lack the will to fix them.
      Voters lack the will to make politicians fix them.
      Voters repeatedly give Congress very low approval ratings (as low as 18%).
      But the voters keep rewarding the politicians with 90% to 95% re-election rates.
      That trend is difficult to change, and won’t until the painful consequences finally make it necessary … but I doubt that will be in time.

      Therefore, I think:

      • (1) BEST CASE: As predicted by Bernanke, 14% decline in standard of living for several decades (because Congress will fail to act soon enough).

      • (2) MOST PROBABLE CASE: The decline in standard of living predicted by Bernanke happens more quickly and creates a larger decline in the standard of living 30%, because Congress not only fails to act, but exacerbates the situation with continued spending, inflation, massive debt, and failure to curb entitlements, and the cost of a federal heatlhcare system, and the continued cost of war/occupation in Iraq and Afghanistan.

      • (3) WORST CASE: Number (2) above, along with some natural catastrophe or war(s) that we are now not prepared for since we have already been fiscally irresponsible for so long.

      Posted by: d.a.n at September 21, 2007 05:37 PM
      Comment #233887

      Dan:

      That is not very relevant. Standard deviation is not useful when the reduction in the standard deviation is only because of constant inflation (and sometimes double-digit).

      Let me define some terms. GDP growth is nominal growth which includes inflation. I am not speaking of nominal GDP. Real GDP growth is with inflation excluded. Standard deviation of real gdp growth WITH INFLATION EXCLUDED is lower since the creation of the fed.

      GDP growth per capita since 1950 was poorly distributed. The rich got richer, the poor got poorer, the middle group went sideways.

      You have’t demonstrated this. What you have demonstrated is that life is not fair. That the wealthy have a disproportionate amount of wealth. This has always been true in America. It has always been true in Europe. the only place this was not true was under communism.

      To make your point, you need to compare wealth distribution in 1950 and today. I think you will find data to support your premise. I think you will find that the the bottom to top has spread since 1950 although in 1950 the same problem existed. I also think you will find this trend to be happening worldwide. (ie globalization).

      I do not think the damage the Fed and government has done (with incessant inflation, easy credit, massive debt) can be fixed; only delayed. The consequences can be smoothed out over several years into the future maybe, but there will still be a price. This is probably what Benanke theorizing with the 14% drop in the standard of living over the coming decades.

      Not at all. Bernanke’s point is that the younger generation will have more old folks (us) to support and their taxes will rise to do so. You use that number a great deal. You are too fixed on it. He simply used it as a example of what might happen if nothing is done. It was not a “Bernanke prediction” as you are using the term.

      With the declining rate of GDP growth, massive federal debt, and even Bernanke’s predicitons and warnings, growing corruption and increasingly FOR-SALE politicians, and incessant inflation, I think the outlook will be a decline in the standard of living as Bernanke described, becaause I don’t think Congress will take action soon enough.

      Bernanke has never predicted a lowering of standard of living. He is saying it will be 14% lower than it would have been. Rememeber your number that per capita GDP has grown since 1950 by 173%? Bernanke is saying that instead the increase would be 159% or 14% less.

      You are saying standard of living for our children is going to decline. Beranke is saying no it’s going to rise, just not as much as it would without the demographic issues. BIG DIFFERENCE.

      Here is Bernanke’s quote:

      Their rough calculations suggest that, in this case, the per capita consumption of future generations would be about 14 percent less than what it would have been in the absence of demographic change.

      So the most probable case is not really a big deal.

      If you put this with Greenspan’s prediction, he is saying that through 2030, REAL gdp (after inflation) will be about 2.5%. Not bad at all. A bit under the mean but “fine”.

      Craig

      Posted by: Craig Holmes at September 21, 2007 11:05 PM
      Comment #233890

      Dan:

      Let me define by “not really a big deal”.

      Let’s just take some numbers from David above:

      In 2000 Medicare cost 196.3 billion dollars or 2% of GDP. In 2000 Medicare cost 196.3 billion dollars or 2% of GDP. In 2030, the amount will grow to $1 trillion 244 billion, or 7% of GDP. (assuming 2% GDP growth)

      Needless to say, the economy would collapse long before the government incurred a near 1.25 trillion dollar a year annual deficit. But, so too, will the economy collapse if our children working in 2030 are diverting nearly 1.5 trillion dollars a year from other purchases of goods and services to their parent’s and grandparent’s health care debts. But this is not the worst of it.

      As I say these things I am not accepting David’s premise that medicare will grow to 7% of GDP. What I am saying is EVEN IF IT DOES, that doesn’t mean doomsday as David sermises.

      The reason is that many economies have government expenditures much higher than ours. Take for instance the entire EU on average!! What this means is that our economy will function more like Europes than ours. We will be a bit slower growing. THAT IS IF NOTHING IS DONE WITH ENTITLEMENTS.

      Big deal is David’s argument that collapse is coming. No the British are coming, the Germans are coming, the French are coming.

      Your arguments should be that if we don’t change we will look like europe.

      Craig

      Posted by: Craig Holmes at September 21, 2007 11:23 PM
      Comment #233984
      Craig Holmes wrote: Let me define some terms. GDP growth is nominal growth which includes inflation. I am not speaking of nominal GDP. Real GDP growth is with inflation excluded. Standard deviation of real gdp growth WITH INFLATION EXCLUDED is lower since the creation of the fed.
      Again, standard deviation is not useful.

      Here is why. If inflation jumped to 30% and stayed there for 50 years, the standard deviation is ZERO.
      That does not prove some inflation is good.
      Saying some inflation is good is like saying some bad is good.
      And since 1955, we have had constant inflation.

      Craig Holmes wrote:
      d.a.n wrote:GDP growth per capita since 1950 was poorly distributed. The rich got richer, the poor got poorer, the middle group went sideways.
      You have’t demonstrated this. What you have demonstrated is that life is not fair. That the wealthy have a disproportionate amount of wealth. This has always been true in America. It has always been true in Europe. the only place this was not true was under communism.
      Yes I have. That is quite accurate. Disprove it if you can. I’ll admit the middle income group moved up a little (e.g. real median incomes rose from $33K in 1967 to $44K in 2005). Other than that, the wealthy became much wealthier. The majority of wealth went to the wealthy. Currently, 80% of the U.S. population only has 17% of all wealth. The trend has worsened considerably since 1980 (see graphs). In fact, the last time 1% of the population had 40% of all wealth (as is now the case) was in the Great Depression.
      Craig Holmes wrote: To make your point, you need to compare wealth distribution in 1950 and today. I think you will find data to support your premise.
      Support? I thought you were saying my point was false.
      Craig Holmes wrote: I think you will find that the the bottom to top has spread since 1950 although in 1950 the same problem existed. I also think you will find this trend to be happening worldwide. (ie globalization).
      Yes, I knew that. The wealthiest 2% of the world population own over half of all wealth. I believe it is because some (not all) wealthy abuse their wealth to exploit other and control government. I could give you many examples here now but it would probably crash the web-server.

      And there is nothing wrong with being wealthy.
      I am not trying (as some) to disguise jealousy and envy as claims for equality.
      I just want fairness and that is not what we have when some (not all) wealthy use wealth to exploit others and control government. And that is largely how the wealthy get wealthier.
      So please do not try to paint me as fueling class warfare.

      Craig Holmes wrote:
      d.a.n wrote: I do not think the damage the Fed and government has done (with incessant inflation, easy credit, massive debt) can be fixed; only delayed. The consequences can be smoothed out over several years into the future maybe, but there will still be a price. This is probably what Benanke theorizing with the 14% drop in the standard of living over the coming decades.
      Not at all. Bernanke’s point is that the younger generation will have more old folks (us) to support and their taxes will rise to do so. You use that number a great deal. You are too fixed on it. He simply used it as a example of what might happen if nothing is done. It was not a “Bernanke prediction” as you are using the term.
      But Craig, it was you that wrote …
      Craig Holmes wrote: Second, Bernanke says that if we do nothing, our children’s standard of living will fall 14% over ours.

      So, are you recanting it?

      Craig Holmes wrote: Bernanke has never predicted a lowering of standard of living. He is saying it [standard of living] will be 14% lower than it would have been.
      Huh? Ha ha. That’s funny. Really. : ) That’s some of the most circular logic I’ve ever seen it.

      Craig, it was you that wrote …

      Craig Holmes wrote: Second, Bernanke says that if we do nothing, our children’s standard of living will fall 14% over ours.

      Now

      Craig Holmes wrote: You are saying standard of living for our children is going to decline. Beranke is saying no it’s going to rise, just not as much as it would without the demographic issues. BIG DIFFERENCE.
      Ohhh … yes, that is different. But I was just going on what you said.

      Still, it does not matter, because if the trend continues, the GDP growth will go to the wealthiest, and the standard of living for lower and middle income groups will still not rise.

      Craig Holmes wrote: Here is Bernanke’s quote:
      Bernanke: Their rough calculations suggest that, in this case, the per capita consumption of future generations would be about 14 percent less than what it would have been in the absence of demographic change.

      So I see. But that is not what you said above before. Again, that shows how carefully you must choose your words … such as …

      Craig Holmes wrote:
      Certainly you have no gripe (I hope not) THAT the money supply grows as fast as GDP.

      The above should read:
      Certainly you have no gripe (I hope not) WHEN the money supply grows as fast as GDP.

      The difference between “THAT” and “WHEN” drastically changes the meaning of your statement.

      Craig Holmes wrote: If you put this with Greenspan’s prediction, he is saying that through 2030, REAL gdp (after inflation) will be about 2.5%. Not bad at all. A bit under the mean but “fine”.
      Not for most people. Now as the rich get most of it. And there is nothing wrong with being wealthy, but it is wrong when some (not all) wealthy use wealth to exploit others and control government. And that is largely how the wealthy get wealthier.
      Craig Holmes wrote: Dan: Let me define by “not really a big deal”… . Big deal is David’s argument that collapse is coming. No the British are coming, the Germans are coming, the French are coming. Your arguments should be that if we don’t change we will look like europe.
      I don’t have a crystal ball, so I don’t know for certain, but I believe it is worse than most realize.

      I think that $20 Trillion nationwide personal debt, $22 Trillion total federal debt, and the current trends will continue to make things worse, and risk more volatility (i.e. a very few receiving most of the wealth; manipulating money systems, taxes, immigration, laws for legal plunder, corporate welfare, corruption, government FOR-SALE, graft, numerous REGRESSIVE systems all working simultaneously, etc.).
      Also, the human factor is important to recognize.
      Unfortunately, pain and misery is a lagging factor.
      Hind sight isn’t very useful for avoiding what has already happened.
      We also repeat the same mistakes many times before finally getting it.
      And that is the big picture.
      That is why I think things will be worse than you think.
      Things will not “be just fine”.
      The trend we see now has been going on for 30 years.
      The concentration of so much wealth used to control and influence government and exploit others will exacerbate the many pressing problems we already face.
      The Fed will continue the incessant inflation which is like a REGRESSIVE tax.
      Masive debt is a motivation for inflation.
      The tax system is REGRESSIVE and will continue to exacerbate the situation.
      Our politicians and wealthy corporations will continue to pit Americans and immigrants against each other.
      The government and incumbent politicians will continue to sell out Americans.
      And the voters will reward them for it with re-election, which breeds more corruption and manifestations of unchecked greed.
      You have to look at the big picture and that includes the human factor.
      I can’t plug that into a formula, but history can be our guide.
      Just look at the last 90 years.
      Look at the 7 wars in the last 90 years ((1)WWI, (2)WWII, (3)Korea, (4)Vietnam, (5)Afghanistan, (6)Iraq-1990, (7)Iraq-2003).
      I do not think change will come in time to avoid painful lessons, and think we are looking at a decline in the standard of living from what we have now over the next 20 years.
      That’s my prediction, and really hope I am wrong.

      Posted by: d.a.n at September 22, 2007 08:16 PM
      Comment #234020

      Dan:

      Again, standard deviation is not useful.

      You pick what ever measuring device you want. Real GDP is far more stable that it was before the fed. That is a good thing.

      Support? I thought you were saying my point was false.

      I agree that wealth is not evenly distributed. It is a world wide event. It has been that way for generations.

      I also agree that wealth is getting more uneven and that this is a problem. Well sort of. I think it swings back and forth. Look at the income tax rates from the 1940’s and 1950’s. We have swung this way about long enough, we will swing back the other way. we are about do.

      So I see. But that is not what you said above before. Again, that shows how carefully you must choose your words … such as …

      Yes I should. I had no idea you were going to jump on that commment. I was using that statement to make the opposite point. David and you are looklng at doomsday coming, and Benanke is saying nothing of the sort.

      It was when you were using my comment about Bernanke’s quote in the opposite way, (saying that doomsday is coming even Bernanke says it), that I got more specific.

      It’s also important for you to read the quote. It’s above somewhere.

      I think that $20 Trillion nationwide personal debt, $22 Trillion total federal debt, and the current trends will continue to make things worse, and risk more volatilit

      I understand you would feel that way because you will not view debts in relation to assets or income. When you view it with Assets and income in mind, the fear goes away.

      I do not think change will come in time to avoid painful lessons, and think we are looking at a decline in the standard of living from what we have now over the next 20 years. That’s my prediction, and really hope I am wrong.

      I think you are wrong. From here it is so obvious to see it. Taking the easiest way to solve this problem, as a default, we could allow the federal budget to increase as a percent of GDP, and raise tax rates as we go. We would begin to look like EU in terms of governement as a percentage of GDP. That will slow down are increases in standard of living.

      I would like you to respond to my easy solution. (I am not recommending this as a solution by any means but using this to illustrate doomsday is not coming). We allow social spending to increase and allow government to look more like Europe. We adopt their tax system and rates. With that approach we could have entitlements double as a percentage of GDP and still be as solvant as our european neighbors.

      What is wrong with living like europeans?

      Craig

      p.s. the answer is that we can do better.

      Posted by: Craig Holmes at September 23, 2007 12:50 AM
      Comment #234077

      Yes, we should do much better.
      I’m not sure politicians in Europe (on the whole) are quite as FOR-SALE as they are in the U.S.
      For one thing, those nations are much smaller.

      Using wealth to control and influence government should be illegal, but it isn’t.

      Your solution (above; more entitlement spending) might make things worse.
      After all, the $12.8 Trillion borrowed from Social Security is gone.
      Medicare promises are not realistic.
      There will have to be major cuts some where.
      Senior citizens are going to have to work longer.

      Part of the solution is to simply eliminate a number of REGRESSIVE systems:

      • the ridiculous federal tax system which is effectively REGRESSIVE
      • ,
      • inflation is like a REGRESSIVE tax, since the poor are limited in ways of preserving wealth with property, gold, stocks, homes, etc.; the mismanaged money system (i.e. the Fed gets to earn interest on money created out of thin air; how did this ever come about?) creates inflation; predatory interest rates and lending practices (raising ARMs from 6% to 14%);

      • all sales taxes are REGRESSIVE

      • corporate income taxes are like hidden REGRESSIVE taxes passed on to consumers; I doubt the owners of corporations absorbed that tax?

      • property taxes in many cases since are REGRESSIVE

      • caps on Social Security taxes is a REGRESSIVE tax

      • illegal immigration is like REGRESSIVE tax, causing job displacement and many cost burdens on tax payers that already pay REGRESSIVE sales taxes and REGRESSIVE income taxes for the burdened social servcies.

      Here’s the biggest reason why I don’t think problems will be addressed in time:

      • (1) Corruption, and government is FOR-SALE.

      • (2) 90% of the time, voters elect the candidate (usually the incumbent) that spends the most money; rewarding incumbent politicians for corruption;

      • (3) Congress hasn’t had the discipline to cut spending, debt, and corruption. Why should they if voters keep rewarding them for it?

      • (4) 40% to 50% of voters don’t vote. Most don’t know or care who their Congress persons are. Of the voters that do vote, most pull the party-lever and reward the politicians with 90% to 95% re-election rates.

      That’s the big picture.
      Not just numbers.
      The human factor must be considered.
      Based on trends, and history, it doesn’t provide much reason to believe most voters will come to care in time to avoid the painful consequences.
      That is, people usually don’t change bad habits until the consequences become too painful.
      I can’t prove it, or plug it into a formula, but the history of the last 40+ years is not encouraging.

      QUESTION: Who gets the interest on the new money from new bank loans (i.e. 89% of each new bank loan is new money)?

      Posted by: d.a.n at September 23, 2007 06:49 PM
      Comment #234095

      Dan:

      Using wealth to control and influence government should be illegal, but it isn’t.

      A little thing called freedom of speech is in your way. Although what you suggest was banned in the USSR!!

      Your solution (above; more entitlement spending) might make things worse.

      First of all, it is not my solution. I am arguing against your point that disaster is upon us. My point is that even if entitlements went unchecked, we can keep our promises through higher taxation without disaster. Europeans do this regularly. All it means is slower growth of GDP. Many European economies have federal expenditures of more than 40%.

      I am not at all suggesting that we increase federal spending. I am saying that you and David are wrong headed in believing doom is our desitiny because many ecnomies still grow (but with lower growth rates) making payments like those projected now. Of course they have much higher tax rates.

      QUESTION: Who gets the interest on the new money from new bank loans (i.e. 89% of each new bank loan is new money)?

      The current holder of the note.

      That’s the big picture.

      Not just numbers. The human factor must be considered. Based on trends, and history, it doesn’t provide much reason to believe most voters will come to care in time to avoid the painful consequences. That is, people usually don’t change bad habits until the consequences become too painful. I can’t prove it, or plug it into a formula, but the history of the last 40+ years is not encouraging.

      Ok so 2007 - 40 equals 1967. You are obviously locked on the inflation issue.

      This is a concern of choice. Let me explain. If you choose another time period say 1982 to present what you see is very good.

      You say that the last 40 years is not encouraging. I counter iwth the last 25 years is very enouraging because it shows a declining trend in inflation.

      You consistently pick the worst time frames.

      Craig

      in the seventies and early 1980’s. If you look at the trend line


      Posted by: Craig Holmes at September 23, 2007 08:51 PM
      Comment #234169
      Craig wrote:
      d.a.n wrote: Using wealth to control and influence government should be illegal, but it isn’t.
      A little thing called freedom of speech is in your way. Although what you suggest was banned in the USSR!!
      Where does it say in the Constitution that government FOR-SALE is protected by freedom of speech?
      Craig wrote: I am arguing against your point that disaster is upon us. My point is that even if entitlements went unchecked, we can keep our promises through higher taxation without disaster. Europeans do this regularly. All it means is slower growth of GDP. Many European economies have federal expenditures of more than 40%.
      Who said anything about disaster? That is your word. Not mine.

      Apples and oranges. Much smaller nations. And few have governments that are as FOR-SALE and have so many manifestations of unchecked greed.

      Craig wrote: I am not at all suggesting that we increase federal spending. I am saying that you and David are wrong headed in believing doom is our desitiny because many ecnomies still grow (but with lower growth rates) making payments like those projected now. Of course they have much higher tax rates.
      Who said anthing about doom. That is your word. Not mine. And you don’t have a crystal ball. I don’t see your predictions any better than David’s or mine.
      Craig wrote:
      d.a.n wrote: QUESTION: Who gets the interest on the new money from new bank loans (i.e. 89% of each new bank loan is new money)?
      The current holder of the note.
      Why dance around the question. The holder is the Federal Reserve. Why should the Federal Reserve get interest on money created out of thin air?
      Craig wrote: Ok so 2007 - 40 equals 1967. You are obviously locked on the inflation issue.
      Inflation is why $100 in 1950 is now only worth $11.59 today. What’s good about that?
      Craig wrote: This is a concern of choice. Let me explain. If you choose another time period say 1982 to present what you see is very good.
      Inflation in 1982 was 6.16% What’s good about that. $1 in year 1982 is now only worth 46 cents today.
      Craig wrote: You say that the last 40 years is not encouraging. I counter iwth the last 25 years is very enouraging because it shows a declining trend in inflation.
      863% inflation is not good. 5 wars in the last 54 years is not good (many probabl unnecessary). Double-digit inflation isn’t good. $1 in year 1997 is now only worth 77 cents today. $1 in year 1987 is now only worth 55 cents today. 25 years ago was 1982. $1 in year 1982 is now only worth 46 cents today.
      Craig wrote: You consistently pick the worst time frames.
      Not true.

      We have been discussing things since 1950.
      And things since then have been far from perfect.
      There are too many (not all) that abuse wealth and power to control and influence government, and inflict numerous REGRESSIVE systems onto the unwitting (but complicit) voters, increasing the disparity (a trend since the 1970s). Such as:

      • [01] the ridiculous federal tax system which is effectively REGRESSIVE
      • ,
      • [02] inflation is like a REGRESSIVE tax, since the poor are limited in ways of preserving wealth with property, gold, stocks, homes, etc.; the mismanaged money system creates inflation; predatory interest rates and lending practices (raising ARMs from 6% to 14%); and the Fed gets to earn interest on money created out of thin air; how did this ever come about?

      • [03] dozens and dozens of REGRESSIVE sales taxes (city, state, county sales taxes, fuel taxes, telephone excise taxes and fees, etc.)

      • [04] some think corporate income taxes are good for the people, but they are more like hidden REGRESSIVE taxes passed on to consumers; the owners of corporations didn’t cut their salaries; they increased them drastically instead.

      • [05] property taxes in many cases are REGRESSIVE, since like sales taxes, as income decreases, the property tax as a percentage of income increases.

      • [06] caps on Social Security taxes is a REGRESSIVE tax.

      • [07] illegal immigration is like a REGRESSIVE tax, causing job displacement and many burdens and costs to be shifted to tax payers that already pay REGRESSIVE sales taxes and REGRESSIVE income taxes for the burdened social servcies.

      What is good about inflation; excessive money printing; usurious & predatory banking systems; regressive taxation and regressive systems (above); illegal immigration; 5 wars in 54 years; S&L bail-out, the disparity trend since the 1970s; most weatlh belongs to a mere 2% of the U.S. population; 863% inflation; $9 Trillion National Debt; $12.8 Trillion Social Security debt; $450 Billion PGBC debt; $20 Trillion nation-wide debt; entitlements and 77 million baby boomer bubble; government FOR-SALE, corruption, incompetence; corpocrisy, corporate welfare, and other manifestations of unchecked greed; etc., etc., etc.?

      If you think “we will be fine”, then that’s your choice. We look at the same data and see different things and probable outcomes.

      Posted by: d.a.n at September 24, 2007 04:01 PM
      Comment #234202

      Dan:

      Why dance around the question. The holder is the Federal Reserve. Why should the Federal Reserve get interest on money created out of thin air?

      If I invest in a GNMA fund who pays me the interest?

      Where does it say in the Constitution that government FOR-SALE is protected by freedom of speech?

      Government for sale is bribery which is against the law. Using wealth to influence government is fine. It costs money to buy advertizing.
      (unless you are moveon.org and working with the NY TIMES, then you get a steep discount).

      Inflation is why $100 in 1950 is now only worth $11.59 today. What’s good about that?
      there you go focusing on the negative. Well in that time we won the cold war, we are far more prosperous than in 1950. Since 1950 America has had a wonderful economic run. You are choosing again to highlight the negative.

      If you want to roll the clock back and live like 1950 you can, but what a pay cut!!! Of course back then only 55% of americans graduated from high school (85% now!!).

      Yes I think we “will be fine”. By fine I mean GDP growth will be near the mean.

      Craig

      Posted by: Craig Holmes at September 24, 2007 09:55 PM
      Comment #234232
      Craig wrote: Yes I think we will be fine.
      That’s your prediction.

      You are entitled to it.
      I hope you are right.
      But history doesn’t support that.
      We could easily see things similar to the following happen again (which have happened over the last 90 years):

      • double digit inflation as in the late 1970s and early 1980s

      • A dishonest money system that perpetuates incessant inflation (863% since year 1950)

      • we could see more wars like the seven wars in the last 90 years (one every 13 years on average):
        • (1) World War 1 (1914-1918)

        • (2) World War 2 (1941-1945)

        • (3) Korea (1950-1953; which never really ended yet)

        • (4) Vietnam (1961-1975)

        • (5) Iraq Gulf War (1990)

        • (6) Afghanistan (2001 to present)

        • (7) Iraq War 2 (2003 to present)

      • We could have another energy shortage like the one in 1973 and 1979 (i.e. energy vulnderabilities). All warning signs that existed prior to the energy crises of 1973 and 1979 exist today.

      • The Great Depession of 1929 (78 years ago)

      • Another terrorist attack should be expected.

      • Growing corpocrisy, corporatism, selling out Americans, and other manifestations of unchecked greed.

      • Massive $9 Trillion National Debt

      • Massive $12.8 Trillion Social Security debt heaped on future generations.

      • $450 Billion PBGC debt (pensions)

      • Trillions of unfunded Medicare liabilities.

      • Illegal immigration (costing American tax payers $70 Billion to $338 Billion annually in net losses)

      • The disparity trend since the 1970s; most weatlh belongs to a mere 2% of the U.S. population.

      • Total Nation-wide debt growing faster than income.

      • Increasing global competition

      • Increasing cost and declining quality of education

      • Increasing cost and declining quality of healthcare

      • The 77 million baby boomer bubble

      • The following 7 growing REGRESSIVE systems causing the disparity trend; increasingly oppressive:
        • [1] the ridiculous federal tax system which is effectively REGRESSIVE
        • ,
        • [2] inflation is like a REGRESSIVE tax, since the poor are limited in ways of preserving wealth with property, gold, stocks, homes, etc.; the mismanaged money system creates inflation; predatory interest rates and lending practices (raising ARMs from 6% to 14%); and the Fed gets to earn interest on money created out of thin air; how did this ever come about?

        • [3] dozens and dozens of REGRESSIVE sales taxes (city, state, county sales taxes, fuel taxes, telephone excise taxes and fees, etc.)

        • [4] some think corporate income taxes are good for the people, but they are more like hidden REGRESSIVE taxes passed on to consumers; the owners of corporations didn’t cut their salaries; they increased them drastically instead.

        • [5] property taxes in many cases are REGRESSIVE, since like sales taxes, as income decreases, the property tax as a percentage of income increases.

        • [6] caps on Social Security taxes is a REGRESSIVE tax.

        • [7] illegal immigration is like a REGRESSIVE tax, causing job displacement and many burdens and costs to be shifted to tax payers that already pay REGRESSIVE sales taxes and REGRESSIVE income taxes for the burdened social servcies.

      • growth in GDP doesn’t mean much when the disparity trend shows that the wealthy are getting an increasingly large share of it; a trend that has now been going on since the mide 1970s.

      • another war, or continuation of the two current wars in Afghanistan and Iraq; Iraq may deteriorate and fall under the control of Iran.

      • another natural disaster (such as Katrina)

      • another terrorist attack

      • And the biggest factor: human nature; human psychology; a worsening trend of government that is growing increasingly corrupt, greedy, ineffective, FOR-SALE, corporatism, Constitutional violations (e.g. Article V), incompetent, and irresponsible

      So you think “we will be fine”.
      Maybe.
      Maybe not.
      Based on history and ALL of the above (especially the growing corruption), human nature, not just cherry picking the data, another economic meltdown is not far fetched.
      In fact, I’d say the probabilty of it is better than 50%/50% chance of it.
      We look at the same history (which repeats itself often), data, and human psychology, and see a different outcome.
      I can’t change your mind, and you can’t change mine.
      But I think you underestimate the human factor and the ability of humans to repeat the same mistakes again and again.
      There may be progress, but it is slow (2.000 steps forward, 1.999 steps backward); very slow; much like evolution.

      Posted by: d.a.n at September 25, 2007 12:50 AM
      Comment #234233

    • Some history of economic instability.

    • Growing corruption, corpocrisy, many systems that are effectively regressive tax systems

    • Americans selling out each other for profit.
    • Posted by: d.a.n at September 25, 2007 12:55 AM
      Comment #234360

      Dan:

      You are entitled to it. I hope you are right. But history doesn’t support that. We could easily see things similar to the following happen again (which have happened over the last 90 years):

      Think about this Dan, I have been saying for some time “we will be fine, GDP growth will continue at or near the mean”.

      You are countering with past history saying, “No, because of our past, we will not grow according to the mean”. That is the definition.

      We will be above the mean part of the time and below the mean a part of the time. That is our long term prognosis.

      I also want to make a point about your list of problems. The case you have not made is that our current problems are any more serious than at any other time in our nations history.

      You are pessimistic about the future in that you believe there is:

      Based on history and ALL of the above (especially the growing corruption), human nature, not just cherry picking the data, another economic meltdown is not far fetched. In fact, I’d say the probabilty of it is better than 50%/50% chance of it.

      ie doomsday = meltdown

      You have not defined meltdown/doomsday well, and you have not shown inspite of your length list of problems, that our problems today are greater than problems at any other point in our history.

      I don’t need a list of the problems again, as I agree that problems exist and that they are serious.

      What I need from you is proof that our problems are anymore serious than they were say in 1950.

      Craig

      Posted by: Craig Holmes at September 25, 2007 08:54 PM
      Comment #234412
      Craig Holmes wrote:Think about this Dan, I have been saying for some time “we will be fine, GDP growth will continue at or near the mean”.
      You don’t know that. And again, GDP growth alone doesn’t mean squat if the wealth only goes to a very few; a trend that has been worsening for over 30 years.
      Craig Holmes wrote:You are countering with past history saying, “No, because of our past, we will not grow according to the mean”. That is the definition.
      False.

      I never wrote what you quoted above.
      That is also another clever way to change the subject (i.e. “grow according to the mean”) to cloud the issue.
      Again, even if GDP grows, it doesn’t mean squat if the wealth only goes to a very few; a trend that has been worsening for over 30 years.

      As for history, here are examples that should not be ignored for the capacity to cause economic pain:

      • (1) Great Depression (1929-late 1930s)

      • (2) Double-digit inflation of late 1970s to early 1980s

      • (3) Korea (1950-1953 truce only)

      • (4) Vietnam (1961-1975)

      • (5) Afghanistan (2001-present)

      • (6) Iraq (2003-present)

      • (N) … more …

      Do you think things like that can not happen again (or continue for decades as did Vietnam)?
      Do you think another Great Depression is impossible?
      I would not be so certain of that based on the this list which is worsening; not improving.

      Craig Holmes wrote:You have not defined meltdown/doomsday well, and you have not shown inspite of your length list of problems, that our problems today are greater than problems at any other point in our history.
      False.

      First of all, I never said doomsday was eminent.

      As for economic meltdown, you just quoted me above, and it is quite specific:

      d.a.n wrote:
      Based on history and ALL of the above (especially the growing corruption), human nature, not just cherry picking the data, another economic meltdown is not far fetched. In fact, I’d say the probabilty of it is better than 50%/50% chance of it.

      Craig Holmes wrote:ie doomsday = meltdown
      False.

      I never wrote that. That is your belittleing characterization. Not mine.

      To me, doomsday is:

    • a 15 mile wide comet or asteroid strikes the planet.

    • global warming causes mass extinction.

    • a global nuclear or biological world war causes mass extinction.

    • a combination of the above near simultaneously.
    • Economic meltdown is:

      • The Great Depression of 1929 (which lasted into the late 1930s).

      • Double-digit inflation as in the late 1970s and early 1980s; and high inflaiton until the 1990s.

      • the Panic of 1785 (1785-1788); caused by post American Revolutionary War problems; speculation; currency confusion and mismanagement of banking and currency system; over-expansion and debts, competition in the manufacturing sector from Great Britain, lack of significant interstate trade; the British refused to conclude a commercial treaty; the panic among business and propertied groups led to the demand for a stronger federal government;

      • The Panic of 1792 the panic of 1792; caused by banking mismanagement and speculation; the panic of 1792 arose from speculative activity following the adoption of the Federal Constitution, the founding of the First Bank of the United States (BUS), and the emergence of securities markets for bank shares and other government securities in New York City; almost immediately after its establishment in 1791, the BUS over-extended notes and discounts, and then sharply reversed course; speculators holding bank’s shares quickly sold their holdings, which had risen markedly over previous months, creating the nation’s first true securities market panic;

      • The panic of 1819 (1815 1814,1818,1819) caused by post War of 1812 problems;

      • The Panic of 1836 caused by banking and currency mismanagement; excessive money-printing;

      • The panic of 1837 (1837-1843); caused by banking and currency mismanagement; excessive money-printing; speculation and inflation; a six year depression resulted;

      • The panic of 1857 caused by a downturn in agricultural exports brought on by the end of the Crimean War in Europe and reduced U.S. exports, the failure of the Ohio Life Insurance and Trust Co., panic selling, over-speculation in railroads and real estate, and banking mismanagement;

      • The American Civil War (1861-1865)

      • The panic of 1869-1871; caused by post war problems; banking mismanagement (not on the Gold Standard); unscrupulous speculation (James Fisk, Jr. and Jay Gould, attempted to corner gold market 24-SEP-1869); 1861-1865

      • The panic of 1873; caused by banking mismanagement, over-expansion, over-production (particularly in railroad construction), Jay Cooke and Company (bank), which helped the U.S. Government finance the Civil War and also underwrote the construction of the Northern Pacific Railroad declares bankruptcy 08-SEP-1873, which precipitates the “Panic of 1873” and the ensuing three year depression during which more than 10,000 businesses fail; European investors, where a depression is already underway in Europe, begin to call in American loans, and the The New York Stock Exchange closes its doors for 10 days;

      • The panic of 1893; caused by banking mismanagement and speculation in industrial stocks; Reading Railroad files bankruptcy 10 days before Grover Cleveland takes office. The chief fear among Eastern financiers and businessmen is that in a panic the United States could easily be forced off the Gold Standard. Railroads go broke; many of the great financial trusts begin to collapse; European banks begin selling their American stocks and bonds, and a huge run on banks ensues, until more than 500 Banks have failed; the mistake of businesses was trying to do too big a business on insufficient working capital; they borrowed until borrowing became impossible, through the general contraction of credits forced on the banks, and then came the crash;

      • World War 1 (1914-1918)

      • The Great Depression & Crash of 1929 (which lasted into the late 1930s); banking mismanagement; speculation; excesses of the Roaring 1920s

      • World War 2 (1941-1945)

      • Korean War (1950-1953)

      • Vietnam War (1961-1975); double-digit inflation;

      • Savings and Loan Bail-Out (1985-1995) double-digit and high inflation;

      • War in Afghanistan (2001-present) and War in Iraq (2003-present); the full consequences of these have probably not yet occurred, but are resulting in massive debt growing ever larger; not good with the 77 million baby boomer bubble and the continued the plunder of $12.8 Trillion from Social Security; and growing corruption within the federal government which is also growing to nightmare proportions;

      So, based on history, and the growing list of serious problems facing the nation now, you believe:

      Craig Holmes wrote: “We will be just fine”.

      That’s your opinion, and you are entitled to it.

      Again, I repeat myself since you claim I didn’t define meltdown:

      d.a.n wrote: Based on history and ALL of the above (especially the growing corruption), human nature, not just cherry picking the data, another economic meltdown is not far fetched. In fact, I’d say the probabilty of it is better than 50%/50% chance of it.

      How severe?
      Probably somewhere between:

      • (a)the double-digit inflation period of the late 1970s and early 1980, but worse, resulting in a continuation of the disparity trend of the last 30 years, and a decline in the standard of living due the current disparity that is much worse now than in 1980, because of massive debt, the approaching 77 million baby boomer bubble, worsening REGRESSIVE systems, ongoing wars, continued constitutional violations, and rampant corruption and incompetence in a severely bloated federal government.

      • (b)or as severe as the Great Depression of 1929. If we get into another war in the next decade or so, the debt from it and the two current wars will increase the likelihood of it. It is not far fetched. In fact, to discount the possibility may contribute to bringing it about and learning the hard way (again). After all, history often repeats itself in many ways. Like those that dangerously refuse to believe 6.7 billion people (growing in world population by 249,000 per day) pumping 24 billion metric tons of Carbon Dioxide into the atmosphere annually is nothting to worry about. Keep it up and see where it gets all of us.

      Posted by: d.a.n at September 26, 2007 11:23 AM
      Comment #234438

      Dan:

      We are making progress. Ok, so I will not use doomsday, but rather your term meltdown. And you have defined it.

      So you believe there is over a 50% change the following will happen:

      How severe? Probably somewhere between:

      (a)the double-digit inflation period of the late 1970s and early 1980, but worse, resulting in a continuation of the disparity trend of the last 30 years, and a decline in the standard of living due the current disparity that is much worse now than in 1980, because of massive debt, the approaching 77 million baby boomer bubble, worsening REGRESSIVE systems, ongoing wars, continued constitutional violations, and rampant corruption and incompetence in a severely bloated federal government.

      (b)or as severe as the Great Depression of 1929. If we get into another war in the next decade or so, the debt from it and the two current wars will increase the likelihood of it. It is not far fetched. In fact, to discount the possibility may contribute to bringing it about and learning the hard way (again). After all, history often repeats itself in many ways. Like those that dangerously refuse to believe 6.7 billion people (growing in world population by 249,000 per day) pumping 24 billion metric tons of Carbon Dioxide into the atmosphere annually is nothting to worry about. Keep it up and see where it gets all of us.


      Can you give me a time frame?

      Craig


      Posted by: Craig Holmes at September 26, 2007 02:24 PM
      Comment #234440

      Dan:

      You are going to hate me for this but look at this website:

      http://www.buildingteamforecast.com/article/CA6315318.html

      real gdp growth rates from 1970 to 1982 were reasonably close to the mean AFTER inflation. America probably will go through another period like that at some point since that is within the range of normal. I don’t see that as a meltdown at all, just a crappy period of time.

      Craig

      Posted by: Craig Holmes at September 26, 2007 02:31 PM
      Comment #234452

      Craig, the past is not prologue. At no time in our past did we face the debt and maximum labor productivity levels of our labor force as we do now and in the next couple of decades. It is a different stage and play unfolding on this stage than ever played in the past.

      Moving women into the work force to effectively bring down the national debt of WWII, saved our bacon. That life preserver is no longer available. The debt has no place to go but ever and ever higher with the entitlement consumption crisis before us. If you think the people are going to permit the politicians to say sorry, out of money, please go suffer without medical care in your cardboard boxes in the alleyways, to 77 million grandparents and parents of retirement age, you are sadly mistaken. It is like Iraq. There are no longer any exits from the problem that will satisfy.

      Posted by: David R. Remer at September 26, 2007 04:07 PM
      Comment #234470

      David:

      Moving women into the work force to effectively bring down the national debt of WWII, saved our bacon. That life preserver is no longer available. The debt has no place to go but ever and ever higher with the entitlement consumption crisis before us. If you think the people are going to permit the politicians to say sorry, out of money, please go suffer without medical care in your cardboard boxes in the alleyways, to 77 million grandparents and parents of retirement age, you are sadly mistaken. It is like Iraq. There are no longer any exits from the problem that will satisfy.

      Of course I fundamentally disagree. In very simple terms, (I am not advocating this as a solution, only using it to uillustrate that their are solutions and that financial ruin is not before us). If you take your numbers above, with entitlements as a percentage of GDP spending, there are many economies that function
      with spending that high. Most are in Europe.

      Am I suggesting that we follow their route? No, I think we can do better. What should give us great hope is that both Japan and Europe are far ahead of us in the entitlement problem.

      We can see into the future by watching the Japanese and European economies. As they reach the agewave before us, no disaster has come.

      Craig


      Posted by: Craig Holmes at September 26, 2007 05:18 PM
      Comment #234482

      David:

      Moving women into the work force to effectively bring down the national debt of WWII, saved our bacon. That life preserver is no longer available.

      That didn’t “save our bacon”. What “saved our bacon” was lowering deficits to where the growth of federal debt grew slower than the economy as a whole.

      It is a different stage and play unfolding on this stage than ever played in the past.

      Yes I know, it’s very exciting. We successfully transitioned from an agricture economy to and industrial economy. Now we are successfully transitioning from industrial to informational.

      The debt has no place to go but ever and ever higher with the entitlement consumption crisis before us.

      That is not true. Many economies function with higher entitlement spending than ours as a percentage of GDP. Your above estimates assume no change. Even with no change (your estimates) there are many positive examples of economies funtioning short of collapse and crisis.

      If you think the people are going to permit the politicians to say sorry, out of money, please go suffer without medical care in your cardboard boxes in the alleyways, to 77 million grandparents and parents of retirement age, you are sadly mistaken.

      I don’t think that at all. Nor do I believe they will vote to bankrupt themselves. Nor do they need to.

      Craig

      Posted by: Craig Holmes at September 26, 2007 06:44 PM
      Comment #234495
      Craig Holmes wrote: You are going to hate me for this but look at this website [i.e. GDP since 1970]:
      Not at all. It doesn’t prove much of anything.

      The nation got wealthier, but the population doubled, there are more workers per household, and median incomes are stagnant (falling in fact since 1999). We’ve already had this discussion, and I already showed GDP grew.
      GDP is not the issue.
      The issue is the big picture, which includes history, trends, debt, 77 million baby boomer bubble, bankruptcies from massive gouging and ridiculously high healthcare costs, inflation declining education, corruption, blind partisan loyalties, corpocrisy, corruption, government FOR-SALE, inflation, and human nature.

      Yeah, things “will be fine” if you are rich enough to buy and control government, get the lower income tax percentages, and avoid the following 7 following increasingly REGRESSIVE systems causing the worsening disparity trend:

      • [1] the ridiculous federal tax system which is effectively REGRESSIVE
      • ,
      • [2] inflation is like a REGRESSIVE tax, since the poor are limited in ways of preserving wealth with property, gold, stocks, homes, etc.; the mismanaged money system creates inflation; predatory interest rates and lending practices (raising ARMs from 6% to 14%); and the Fed gets to earn interest on money created out of thin air; how did this ever come about?

      • [3] dozens and dozens of REGRESSIVE sales taxes (city, state, county sales taxes, fuel taxes, telephone excise taxes and fees, etc.)

      • [4] some think corporate income taxes are good for the people, but they are more like hidden REGRESSIVE taxes passed on to consumers; the owners of corporations didn’t cut their salaries; they increased them drastically instead.

      • [5] property taxes in many cases are REGRESSIVE, since like sales taxes, as income decreases, the property tax as a percentage of income increases.

      • [6] caps on Social Security taxes is a REGRESSIVE tax.

      • [7] illegal immigration is like a REGRESSIVE tax, causing job displacement and many burdens and costs to be shifted to tax payers that already pay REGRESSIVE sales taxes and REGRESSIVE income taxes for the burdened social servcies.

      Something like the Great Depression is not far fetched.
      You can disagree, and that’s fine.

      Craig Holmes wrote:real gdp growth rates from 1970 to 1982 were reasonably close to the mean AFTER inflation. America probably will go through another period like that at some point since that is within the range of normal. I don’t see that as a meltdown at all, just a crappy period of time.
      Craig, Again, GDP is not the only measure of things (graph of Real GDP from 1950).

      Especially when most of it is going to the wealthy, as it has for the last 30 years (i.e. worsening disparity trend; see graph).

      Real Median household income has not increased much in the last 40 years (from 40K in 1978 to to 46K in 2006).
      And Real Median household income has been falling over the last 7 years.

      Yet, the wealthiest 1% of the population increased their 20% share of all wealth in 1980 to 40% of all wealth in 2006.

      Craig Holmes wrote: Can you give me a time frame?
      In the next decade. It may be delayed with inflation and excessive money printing, but that will simply make things worse later.

      In year 2006 I said there would probably be a recession in 2007.
      That’s not a hard prediction when you consider that recessions occur every 2 to 11 years for the last 46 years.
      It certainly looks like we’re slowing down now, eh?
      Some are saying we are already in a recession now.
      A few more layoffs here and there, spending is down, foreclosures are way up, debt is high and growing, fuel costs are high, and we have two ongoing wars.
      Consumers have been keeping the numbers up, but how long can that last when consumers have $20 Trillion in personal debt, not to mention $22 Trillion of federal debt (and total assets is an empty argument when 80% of the U.S. population has only 17% of all wealth, and 20% of the U.S. population have negative net worth (i.e. debt)).
      With such crappy numbers and conditions in so many areas, it may become increasingly difficult to recoever from future recessions.
      In fact, I suspect one of them sometime in the next decade will become worse then just a recession.
      And the main reason for it isn’t because we can’t solve problems.
      It will happen because we lack the will to solve problems, and have allowed government to grow to corrupt and incompetent.

      Craig, Just wondering what you do for a living? Are you retired, a financial consultant, or broker, or something along those lines?

      Posted by: d.a.n at September 26, 2007 10:22 PM
      Comment #234501

      Dan:

      Not at all. It doesn’t prove much of anything. The nation got wealthier, but the population doubled, there are more workers per household, and median incomes are stagnant (falling in fact since 1999). We’ve already had this discussion, and I already showed GDP grew. GDP is not the issue.

      GDP is exactly the issue. That is where the funds come from to pay income taxes!!!

      Assets are important because that is where taxes come from!!!

      When looking at the entitlement “crisis” GDP growth and asset growth are absolutely the issue if we want to pay for them.

      Yeah, things “will be fine” if you are rich enough to buy and control government, get the lower income tax percentages, and avoid the following 7 following increasingly REGRESSIVE systems causing the worsening disparity trend:

      At a minimum the rich represent a taxable sourse. They have the assets but not the votes.

      Something like the Great Depression is not far fetched.

      It is far fetched according to your list of problems. We could have another great depression. If we do it will be not because of something we know, like the agewave, but because of something out of the blue that we haven’t faced before. For instance in the 29 crash with people buying on margin.

      We do well with what we know is coming. (Like Y2K).

      Craig


      Posted by: Craig Holmes at September 26, 2007 11:22 PM
      Comment #234515
      Criag Holmes wrote:
      d.a.n wrote: Not at all. It doesn’t prove much of anything. The nation got wealthier, but the population doubled, there are more workers per household, and median incomes are stagnant (falling in fact since 1999). We’ve already had this discussion, and I already showed GDP grew. GDP is not the issue.
      Dan: GDP is exactly the issue. That is where the funds come from to pay income taxes!!!
      Not true, since the tax system is REGRESSIVE, ridiculous, and very abused and costly too.

      I seriously doubt the wealthy will pony-up.
      And Congress is FOR-SALE.

      Again, GDP don’t mean squat when 80% of the U.S. population has a mere 17% of all wealth (and the trend is worsening).

      Criag Holmes wrote: Assets are important because that is where taxes come from!!!
      Sure, if you are rich.

      That doesn’t do much to help the 80% of Americans with only 17% of all wealth.
      That doesn’t do much to help the 40% of Americans that have ZERO net worth.
      That doesn’t do much to help the 20% of Americans that have negative net worth (i.e. debt).

      Criag Holmes wrote: When looking at the entitlement “crisis” GDP growth and asset growth are absolutely the issue if we want to pay for them.
      False, since only a very few own most or the wealth in the nation, and the tax system is REGRESSIVE (among other REGRESSIVE systems).

      And haven’t you ever noticed that $97,500 cap on Social Security taxes? That’s REGRESSIVE too.
      Social Security is BROKE. It has NO money. $12.8 Trillion has been borrowed from it.
      And Medicare is way out of control and driving up massive debt.
      And income tax and Social Security tax is only 5 of 7 REGRESSIVE systems that are causing the disparity trend.

      There are many REGRESSIVE systems working against the majority of Americans:

      • [1] the ridiculous federal tax system which is effectively REGRESSIVE
      • ,
      • [2] inflation is like a REGRESSIVE tax, since the poor are limited in ways of preserving wealth with property, gold, stocks, homes, etc.; the mismanaged money system creates inflation; predatory interest rates and lending practices (raising ARMs from 6% to 14%); and the Fed gets to earn interest on money created out of thin air; how did this ever come about?

      • [3] dozens and dozens of REGRESSIVE sales taxes (city, state, county sales taxes, fuel taxes, telephone excise taxes and fees, etc.)

      • [4] some think corporate income taxes are good for the people, but they are more like hidden REGRESSIVE taxes passed on to consumers; the owners of corporations didn’t cut their salaries; they increased them drastically instead.

      • [5] property taxes in many cases are REGRESSIVE, since like sales taxes, as income decreases, the property tax as a percentage of income increases.

      • [6] caps on Social Security taxes is a REGRESSIVE tax.

      • [7] illegal immigration is like a REGRESSIVE tax, causing job displacement and many burdens and costs to be shifted to tax payers that already pay REGRESSIVE sales taxes and REGRESSIVE income taxes for the burdened social servcies.

      Criag Holmes wrote: At a minimum the rich represent a taxable sourse. They have the assets but not the votes.
      Right. Like were going to get a vote by the puppets in Congress to vote against their puppeteers? Please.
      Criag Holmes wrote:
      d.a.n wrote: Something like the Great Depression is not far fetched.
      It is far fetched according to your list of problems. We could have another great depression. If we do it will be not because of something we know, like the agewave, but because of something out of the blue that we haven’t faced before. For instance in the 29 crash with people buying on margin.
      I disagree completely. You underestimate the human factor. David (having a backrground in psychology) understands it.
      Criag Holmes wrote: We do well with what we know is coming. (Like Y2K).
      That is a terribly lame example. I’m a programmer. I fixed a lot of those bugs. They are extremely easy to fix. There was never an emergency; just a bunch of unnecessary hype, and far, far different than all of this.
    • Posted by: d.a.n at September 27, 2007 02:04 AM
      Post a comment