ZenLunatic

Do we have a big inflation problem? Hadn't really noticed.

Well the prices arent rising at this point, but we are pumping tons of money into our system now and plan to for awhile. Price of living will shoot up. There is still alot of liqudating at this point causes low prices, once it that ends, watch what happens. Those who hold cash will lose out.

Also, it is possible to have inflation without collapse. It is also possible to fight inflation. I expect that this country is headed down that path. I am not ready to accept that we are headed for collapse.

So you accept we will have a big inflation problem. The only way to fight inflation is to reduce the money supply. When and how will we do that? How can we reduce the supply when the govt cant even function right now without borrowed money?

We are creating the dollar bubble and once that pops, goodbye.....

The end is coming.....

Not after the government throws $700B at the Cirrus and Plus Networks to keep them from going under.

I cant see electronic money going away. In this age, money is created electronically more than printed. Electonic money is the same as paper money in any case, they both flood the money supply the exact same.

I have it on good authority that this is untrue.

What... good authority?

I dont believe we are doomed with no end but I do believe we are headed for a big hit much worse than this recession at the pace we are going. An inflationatory depression. I have hope before it gets really really bad, Obama and our government will do the right things. But as for now, they are not.

Which is...?

Extinction of the human race.

The government doesnt care about things that far into the future. They care about the next election.

This recession is nothing compared to what is to come.

AIG was bailed out, in large part, to prevent a domino effect. It was very clear, very early on, that this was about more than AIG, and I think most people knew that we'd never see the money again. Which doesn't mean it was wasted. If it prevented a domino effect, it worked in that sense.

 

Doesn't make me happy about it.

So if the dollar collapses, then was the money wasted? Just a matter of time.

What about the billions we gave the auto industry and now the govt thinks the best method is bankruptcy. Hmm..... Couldnt we have saved all that money if they just let them go into bankruptcy to start with?

The govt doesnt know what its doing. Just constantly doing the wrong things.

Glad that futureage was here while I was away. I think we are on the same page. I like some of what Obama is doing, but when it comes to our economy, he's got it wrong. Just hoping he can realize this sooner than later. I think he is a huge part in correcting oursleves before it gets too late.

I think salaries can be whatever they want if the system was left to the open market. If a company does very well, than why not let the CEO's make millions. If not, the company should fall and company go under. CEO's getting blamed and losing their jobs. The problem is the companies are being run poorly and getting bailed out. CEOs and management still getting paid big bucks for failed actions. Where is the logic in that?

The infrastructure needs work. There are some shitty roads where I live that can rattle parts off your vehicle. of course that creates work for parts suppliers and maintenance types. But inreality new roads and highways are needed as our population expands. Roads are built for a certain capacity and are usually over that capacity as they get opened. More use of public transportation might ease the loads, but this is America and no one can tell us not to drive. It's just how we are.

Maybe the problem is our population and we need it to stop expanding.

Right the shareholders are wiped out. That is a FAIR and FREE market. The shareholders deserve to pay the consequences for bad business decisions, not the tax payer. It really is black and white and that simple, but for some reason you seem to put your trust in the same people who got us here. Believe whatever you have to but these guys should be in jail and Sweden is the exact model we should be following for recovery.

I agree with that shares being wiped out is fair and just. So why not let the banks just die. I dont know the details but why do you sugguest the govt run the banks? Why not get private businessmen to run them? The banks will be forced to liquidate, someone will eventually buy them up.

Dude, everybody knows to grow the economy you have to grow infrastructure so the goods that a growing economy needs and produces can be moved to where they need to be. Geez.

What about all the roads that exists? Why do we need more? It was different back when we borrowed to build industuries and roads to build America. Our industuries were making money. We are now borrowing to build roads just to create jobs to stabilize a fake economy.

That is not a very clear picture of the stimulus package as I understand it. It is most likely a very nasty side-effect of it. Sort of, as Barney Frank put it "Collateral benefit." Normally we call it damage, but its doing what we need to be doing, and unfortunately it benefits some real jerks. Meanwhile, there is a European model for putting public money into infrastructure that works very well. It has worked incredibly well for the high speed rail infrastructure built up in western Europe. The government hires competing bidders to do the job. When a company is selected government dollars put thousands of citizens to work building an over-do necessity. This benefits the private sector and public transportation (or energy, or health etc.) It seems Obama has his eye on this kind of hybrid public/private innovation.

 

Inevitably the U.S. government is going to stop giving money to failing banks, and is going to start owning them. Once they have the banks under their wing they can restructure them, separate the secure branches of the company (savings, credit cards, fixed mortgages, safer 401k's) from the bad (toxic assets, mortgage backed securities) and cut the functional part of the bank loose as a private entity that can succeed, while sitting on the nasty stuff until the market can find something to do with it. Which, probably means selling it for cents on the dollar.

New roads and bridges dont make us money, we cant afford it to build it. We are spending money building this when we are dead broke. When all is said and done and built, we will have nice roads and rails, but completely up to our eyes in debt. How does that help? How does this make money? Its a short term solution.

The only thing about the govt taking over the banks is that they arent bankers. Why not let real bankers who will be totally responsible for their own business run the banks.

It is wise to be cautious of creating a bubble (toxic assets, adjustable rate mortgages etc) but a government stimulus package does not do that (if it works right). Think of it this way: Joe blow just got a job doing a 'shovel-ready' project. He's giving us a good of sorts, and definitely a service. He is being paid by borrowed money. But he can use that money to buy other goods and services, thereby creating fractions of jobs and demand for manufacturing with every dollar he spends. When this kind of stimulus gains momentum the benefits, and profit become greater than the initial cost.

 

It is like a mega-fragmented, meta-model for the 'you have to spend money to make money' idea.

All depends where the money is spent. Just spending money doesnt equal good economy. American companies need to make the money. It does us no good when we borrow the money and create jobs so people can have money to spend on foreign products or services. It does us no good when American companies are so inefficient that they lose tons of billions. We spend money, but that money is going to finance executives in companies and government that run horrible plans that lose billions and trillions. How does that help?

Are you taking Econ 101 right now?

Im in Econ 102 now.

what's your solution?

Just to start. Let the companies go through normal process of the market. No more bailouts, no mortgage plan. Cut government spending, lets start by reducing our military force. I do think Obama is doing good with some of his plans and ideas just not all.

Come on, man. Now you are changing your argument. I never would (or could) argue with anything you said that I quoted above. My argument was with your dismissal of using borrowed money to create wealth.

I understand there needs to be a level or credit for business and governments to run. I just think our government has taken our credit to its limit and soon will be out high and dry from our creditors. We lived a more than comfortable life because we borrowed the money instead of making it. Now its time to face reality and we are not doing it. We keep trying to reinflate the bubble when we need to deflate.

Look I actually agree with you that we are too dependent on credit (both individually and as a country), but to dismiss borrowing money as a form of wealth generation out of hand is ridiculous. Of course you can create wealth with borrowed money. What is your distinction about services (such as the landlord example)? You seem to be saying that you can't borrow money and then piss it away. If that's the case, that gets a big ole "well duh!" from me.

Just saying now, we dont need to be borrowing billions to fund all these bailouts and propping of failed industries and even build roads and bridges just to create jobs. How could we be doing all that and say lets spend responsibly. Feels contradictory.

I am not missing your point. I promise. I was using broad brush strokes to illustrate how govts can borrow money in an effort to create wealth that can be taxed. Since you said it couldn't be done. Of course all this depends on what jobs are created and what industries. We want to create something sustainable. I never suggested otherwise.

 

Maybe my money is in the bank now and I am renting? Why are you making these assumptions? Not to mention, if the money borrowed and spent to create jobs ends up creating wealth, what's to say that the "inflated market" isn't a true indication of what people are willing to spend to live in houses? Are you telling me that you don't believe that assets can appreciate in value because they aren't goods and services? By definition they are inflated?

Well what plan is there to create something sustainable? Just more talk about creating jobs right now.

I make assumptions cause you made alot of them too. Assets can appreciate or depreciate according to the value it provides. When it comes to real estate and stocks in companies, housing has been totally way overflated and there are alot of bad businesses that need to go under. Alot of what we have in America has been totally inflated. We need to deflate.

What if I buy an apartment building as a secondary investment (i.e. not my residence), have a mortgage that is $2K/month and rent the four units for $1K each? How is that $2K profit not real?

You are providing a service. You are a landlord.

I am not missing your point. I do agree 100% with your bolded statement above, but this isn't the only way.

It really is the only way to make real money. Of course you can invest in things, but the investments are of companies making products and services.

No one's missing your point. Your point is wrong. You dont need to produce goods and services to make money. You can also make money by buying low and selling high. Or if you are a government, by borrowing money to create jobs, thereby creating wealth, and then taxing the wealth to pay off your debt. This has nothing to do with bubbles.

Just saying create jobs and create wealth is too generic. All depends on what jobs they are and what industry. If you borrow billions to create jobs that lead to nothing, you substain a way of life till the borrowed money runs out. This the trend our country has been on for a long time and still on. You have to create an indusrty and jobs that will actually make money for the country. You are missing my point.

Why do I have to do that?

In any way, you need a place to stay and you will have to buy in an inflated market, then watch it deflate.

What are you talking about? I have $150 in my pocket. How is that not real?

So from there you had to buy a new home at 170 but its now worth 100. You lose.

Do you agree that it is possible to borrow money (mortgage) to buy a house, consequently sell that house and make money on it?

You can always make money by buying low and selling high. Ive done it many times. You are missing the point I am trying to make. You need to produce value goods and services to make money. You cant inflate value of things from borrowing lots of money and say we are making money.