Generational Theory Forum: The Fourth Turning Forum: A message board discussing generations and the Strauss Howe generational theory

Agreed.

Hey, you're talking to me as if I wasn't an evil boomer!

(11-14-2016, 12:18 AM)Warren Dew Wrote: [ -> ]Agreed.

Hey, you're talking to me as if I wasn't an evil boomer!

That is because you are not being an idiot or condescending the way most Boomers are.  You must be one of the exceptions to the rule that I encounter occasionally.   My attitude toward Eric the Obtuse and some others is a product of me not suffering fools gladly.

(11-14-2016, 12:14 AM)Galen Wrote: [ -> ]

(11-13-2016, 11:45 PM)Warren Dew Wrote: [ -> ]

(11-13-2016, 10:11 PM)Kinser79 Wrote: [ -> ]In the case of borrowing and taxing the state is taking capital that could be put to work elsewhere and using it it for whatever.  I will grant that not all spending is equal.  A tax cut for the extremely wealthy (and I mean on their take home income, low corporate and capital gains taxes push money into investment and re-investment given a higher personal income tax rate) is a poor way to spend that capital.  The same would be true of a tax cut for the poor.  Or welfare.  Or subsidies for insurance.

Spending that same capital on public infrastructure, either new construction or refurbishing existing infrastructure, while not glamorous has a rate of return much much higher than a mere tax cut or a welfare check.

But even if you don't believe in keynesian deficits, massive government spending on infrastructure is not the way to go.

This is pretty much what happened in the Great Depression.  Obozo did much the same thing that Hoover and FDR did and got the same results.  Not surprising when you think about it and this is perfectly in line with Hayek's business cycle theory.  If Trump is smart he will do what Harding did and I expect that he will get similar results which were a short nasty recession followed by real growth in the economy.

Let people keep and spend their money and the aggregate demand problem, along with some others, will fix themselves.

There's a big problem with the Harding-Coolidge 'miracle' of maintaining Gilded-Age norms of politics and economics. It was the Hoover crash.

...We need remember what Friedrich Hayek says of economic bubbles as in the 1920s and the Double-Zero decade: they devour capital without transforming it into productivity, which is the cause of the subsequent crash. The bubble is the real disaster, and the panic is the mass realization that the investment in the bubble is worthless.

The 2007.3-2009.1 (the number after the decimal point is the quarter of the year) is very close to the first half of the meltdown of 1929.3-1932.2 in severity, suggesting that the economy was not going to return to the pre-Crash pattern. In 2009 the recovery was at a lower level than a projection from 2002-2007.

For an analogy: suppose that you have $500K in assets in a brokerage account and then take $100K out to pay nursing-home bills for a loved one. You will not return quickly to the level of asset growth that you had before the big withdrawal of money. You will see a gap. Asset growth is usually logarithmic and not linear.

So what was so bad about the bubble of the Double-Zero decade? It created an illusion of prosperity as it took capital that might as well have been spent elsewhere, as in public infrastructure and plant-and-equipment. We would have been better off with slow real growth instead of McMansions that have often been demolished.

(11-14-2016, 12:34 AM)pbrower2a Wrote: [ -> ]

(11-14-2016, 12:14 AM)Galen Wrote: [ -> ]

(11-13-2016, 11:45 PM)Warren Dew Wrote: [ -> ]

(11-13-2016, 10:11 PM)Kinser79 Wrote: [ -> ]In the case of borrowing and taxing the state is taking capital that could be put to work elsewhere and using it it for whatever.  I will grant that not all spending is equal.  A tax cut for the extremely wealthy (and I mean on their take home income, low corporate and capital gains taxes push money into investment and re-investment given a higher personal income tax rate) is a poor way to spend that capital.  The same would be true of a tax cut for the poor.  Or welfare.  Or subsidies for insurance.

Spending that same capital on public infrastructure, either new construction or refurbishing existing infrastructure, while not glamorous has a rate of return much much higher than a mere tax cut or a welfare check.

But even if you don't believe in keynesian deficits, massive government spending on infrastructure is not the way to go.

This is pretty much what happened in the Great Depression.  Obozo did much the same thing that Hoover and FDR did and got the same results.  Not surprising when you think about it and this is perfectly in line with Hayek's business cycle theory.  If Trump is smart he will do what Harding did and I expect that he will get similar results which were a short nasty recession followed by real growth in the economy.

Let people keep and spend their money and the aggregate demand problem, along with some others, will fix themselves.

There's a big problem with the Harding-Coolidge 'miracle' of maintaining Gilded-Age norms of politics and economics. It was the Hoover crash.

...We need remember what Friedrich Hayek says of economic bubbles as in the 1920s and the Double-Zero decade: they devour capital without transforming it into productivity, which is the cause of the subsequent crash. The bubble is the real disaster, and the panic is the mass realization that the investment in the bubble is worthless.

The 2007.3-2009.1 (the number after the decimal point is the quarter of the year) is very close to the first half of the meltdown of 1929.3-1932.2 in severity, suggesting that the economy was not going to return to the pre-Crash pattern. In 2009 the recovery was at a lower level than a projection from 2002-2007.

For an analogy: suppose that you have $500K in assets in a brokerage account and then take $100K out to pay nursing-home bills for a loved one. You will not return quickly to the level of asset growth that you had before the big withdrawal of money. You will see a gap. Asset growth is usually logarithmic and not linear.

So what was so bad about the bubble of the Double-Zero decade? It created an illusion of prosperity as it took capital that might as well have been spent elsewhere, as in public infrastructure and plant-and-equipment. We would have been better off with slow real growth instead of McMansions that have often been demolished.

The Fed started inflating the money supply to devalue the dollar relative to the pound to make it possible for the UK to get back on the gold standard at the pre-war rate.  That little bout of monetary inflation started in 1926 about four years after.  The destruction of capital takes place in the boom and is revealed in the bust.  What the Fed, Obama and Congress did was to print a bunch of money to stop the bust part of the cycle.

In short the bust and the necessary clearing of malinvestment was aborted in 2009.  In my opinion the day of reckoning was simply postponed at great cost which will probably be revealed in the next year or so.

(11-14-2016, 12:47 AM)Galen Wrote: [ -> ]

(11-14-2016, 12:34 AM)pbrower2a Wrote: [ -> ]

(11-14-2016, 12:14 AM)Galen Wrote: [ -> ]

(11-13-2016, 11:45 PM)Warren Dew Wrote: [ -> ]

(11-13-2016, 10:11 PM)Kinser79 Wrote: [ -> ]In the case of borrowing and taxing the state is taking capital that could be put to work elsewhere and using it it for whatever.  I will grant that not all spending is equal.  A tax cut for the extremely wealthy (and I mean on their take home income, low corporate and capital gains taxes push money into investment and re-investment given a higher personal income tax rate) is a poor way to spend that capital.  The same would be true of a tax cut for the poor.  Or welfare.  Or subsidies for insurance.

Spending that same capital on public infrastructure, either new construction or refurbishing existing infrastructure, while not glamorous has a rate of return much much higher than a mere tax cut or a welfare check.

But even if you don't believe in keynesian deficits, massive government spending on infrastructure is not the way to go.

This is pretty much what happened in the Great Depression.  Obozo did much the same thing that Hoover and FDR did and got the same results.  Not surprising when you think about it and this is perfectly in line with Hayek's business cycle theory.  If Trump is smart he will do what Harding did and I expect that he will get similar results which were a short nasty recession followed by real growth in the economy.

Let people keep and spend their money and the aggregate demand problem, along with some others, will fix themselves.

There's a big problem with the Harding-Coolidge 'miracle' of maintaining Gilded-Age norms of politics and economics. It was the Hoover crash.

...We need remember what Friedrich Hayek says of economic bubbles as in the 1920s and the Double-Zero decade: they devour capital without transforming it into productivity, which is the cause of the subsequent crash. The bubble is the real disaster, and the panic is the mass realization that the investment in the bubble is worthless.

The 2007.3-2009.1 (the number after the decimal point is the quarter of the year) is very close to the first half of the meltdown of 1929.3-1932.2 in severity, suggesting that the economy was not going to return to the pre-Crash pattern. In 2009 the recovery was at a lower level than a projection from 2002-2007.

For an analogy: suppose that you have $500K in assets in a brokerage account and then take $100K out to pay nursing-home bills for a loved one. You will not return quickly to the level of asset growth that you had before the big withdrawal of money. You will see a gap. Asset growth is usually logarithmic and not linear.

So what was so bad about the bubble of the Double-Zero decade? It created an illusion of prosperity as it took capital that might as well have been spent elsewhere, as in public infrastructure and plant-and-equipment. We would have been better off with slow real growth instead of McMansions that have often been demolished.

The Fed started inflating the money supply to devalue the dollar relative to the pound to make it possible for the UK to get back on the gold standard at the pre-war rate.  That little bout of monetary inflation started in 1926 about four years after.  The destruction of capital takes place in the boom and is revealed in the bust.  What the Fed, Obama and Congress did was to print a bunch of money to stop the bust part of the cycle.

In short the bust and the necessary clearing of malinvestment was aborted in 2009.  In my opinion the day of reckoning was simply postponed at great cost which will probably be revealed in the next year or so.

With his emphasis on enriching the Master Class at the expense of everyone else, we will end up with an economic meltdown as severe as that of 1929-1933. I hope to be elsewhere when such happens, in some country that has some insulation from a self-inflicted American disaster.

...The fault with the Obama recovery was not that Obama got the economy growing before it had a chance to cut out the dead wood. the 1929-1933 meltdown went far beyond that. The fault is that Barack Obama ended up rescuing people who would turn upon him politically.

Donald Trump is Herbert Hoover in his economic ideas but lacking a moral compass. That is even more dangerous. Hoover was a decent person.

(11-14-2016, 12:25 AM)Galen Wrote: [ -> ]

(11-14-2016, 12:18 AM)Warren Dew Wrote: [ -> ]Agreed.

Hey, you're talking to me as if I wasn't an evil boomer!

That is because you are not being an idiot or condescending the way most Boomers are.  You must be one of the exceptions to the rule that I encounter occasionally.   My attitude toward Eric the Obtuse and some others is a product of me not suffering fools gladly.

Plenty of people of all generations are idiots, though boomers may be more insistent about any idiotic positions they hold.

Condescension, yes, though GIs also tended to be condescending.  Specifically, GIs tended to be condescending when taking positions that they knew - or perhaps "knew" - to be true, but when they didn't know the reasons why those positions were true.  Boomers may be condescending even when they do know the reasoning, but just can't be bothered to discuss it.

(11-14-2016, 12:34 AM)pbrower2a Wrote: [ -> ]

(11-14-2016, 12:14 AM)Galen Wrote: [ -> ]

(11-13-2016, 11:45 PM)Warren Dew Wrote: [ -> ]

But even if you don't believe in keynesian deficits, massive government spending on infrastructure is not the way to go.

This is pretty much what happened in the Great Depression.  Obozo did much the same thing that Hoover and FDR did and got the same results.  Not surprising when you think about it and this is perfectly in line with Hayek's business cycle theory.  If Trump is smart he will do what Harding did and I expect that he will get similar results which were a short nasty recession followed by real growth in the economy.

Let people keep and spend their money and the aggregate demand problem, along with some others, will fix themselves.

There's a big problem with the Harding-Coolidge 'miracle' of maintaining Gilded-Age norms of politics and economics. It was the Hoover crash.

The Hoover crash was a result of Hoover's permitting bank failures actually to destroy money.  I think even Hayek would agree that actively and aggressively contracting the money supply is not a good course of action.  Possibly he would have supported it had it been part of a strategy to eliminate fractional reserve banking on a permanent basis, but that was neither what Hoover was doing nor trying to do.

(11-14-2016, 12:47 AM)Galen Wrote: [ -> ]In short the bust and the necessary clearing of malinvestment was aborted in 2009.  In my opinion the day of reckoning was simply postponed at great cost which will probably be revealed in the next year or so.

While they wouldn't put it this way, the Fed was attempting to clear the malinvestment gradually through inflation.  The malinvestment in 2009 was largely in overvalued housing.  Inflation should eventually permit the actual value of housing to reach the nominal value.  This would ease the process of clearing the malinvestment since people could keep their houses and just keep paying inflated mortgages down until the mortgages were no longer inflated.

Obviously this produced other distortions.  I believe the malinvestment has been partially transferred from housing to equities.  But a collapse in equities is less societally damaging, since most people who are heavily invested in the stock market can afford losses without becoming homeless.

I don't think the day of reckoning will be severe.  This is because the natural growth rate of the economy, and thus the natural interest rate, has been declining.  As a result, some of the asset inflation has been turning into a real increase in value.

Correct fiscal policy - as you say, letting people keep their money, by reducing tax rates, and also reverting various forms of welfare benefits to where they were before Obama increased them, if not below that - will of course increase the economic growth rate above the natural growth rate for a time, which would be expected to cause pain with respect to inflated assets.  However, that will be partially or fully compensated for if Trump cuts immigration and increases deportation, as people coming off the welfare rolls or unemployment to work will be compensated for by illegal immigrants leaving.

If Trump follows these policies, I believe the net result will be a fairly rapid and painless rise in wages, but pain in the equity markets for the investor class.  Once the investor class realizes what is going on, they will fight him tooth and nail.  This may end up in a fight between the financial investor elites and the business owning elites, with Trump on the side of the latter.  I'm not sure how that turns out.

Thoughts on any of that?  Am I missing anything?

(11-14-2016, 01:35 AM)Warren Dew Wrote: [ -> ]

(11-14-2016, 12:34 AM)pbrower2a Wrote: [ -> ]There's a big problem with the Harding-Coolidge 'miracle' of maintaining Gilded-Age norms of politics and economics. It was the Hoover crash.

The Hoover crash was a result of Hoover's permitting bank failures actually to destroy money.  I think even Hayek would agree that actively and aggressively contracting the money supply is not a good course of action.  Possibly he would have supported it had it been part of a strategy to eliminate fractional reserve banking on a permanent basis, but that was neither what Hoover was doing nor trying to do.

There really was no mechanism for preventing bank failures at the time.  I don't really think Hoover had much choice in the matter.  My personal take is the bank failures were consequence of the debt implosion and the effects of leverage going into reverse.  Even if the banks were saved the bad debts that disappeared would still have imploded the money supply.

(11-14-2016, 02:03 AM)Warren Dew Wrote: [ -> ]

(11-14-2016, 12:47 AM)Galen Wrote: [ -> ]In short the bust and the necessary clearing of malinvestment was aborted in 2009.  In my opinion the day of reckoning was simply postponed at great cost which will probably be revealed in the next year or so.

While they wouldn't put it this way, the Fed was attempting to clear the malinvestment gradually through inflation.  The malinvestment in 2009 was largely in overvalued housing.  Inflation should eventually permit the actual value of housing to reach the nominal value.  This would ease the process of clearing the malinvestment since people could keep their houses and just keep paying inflated mortgages down until the mortgages were no longer inflated.

Obviously this produced other distortions.  I believe the malinvestment has been partially transferred from housing to equities.  But a collapse in equities is less societally damaging, since most people who are heavily invested in the stock market can afford losses without becoming homeless.

I don't think the day of reckoning will be severe.  This is because the natural growth rate of the economy, and thus the natural interest rate, has been declining.  As a result, some of the asset inflation has been turning into a real increase in value.

Correct fiscal policy - as you say, letting people keep their money, by reducing tax rates, and also reverting various forms of welfare benefits to where they were before Obama increased them, if not below that - will of course increase the economic growth rate above the natural growth rate for a time, which would be expected to cause pain with respect to inflated assets.  However, that will be partially or fully compensated for if Trump cuts immigration and increases deportation, as people coming off the welfare rolls or unemployment to work will be compensated for by illegal immigrants leaving.

If Trump follows these policies, I believe the net result will be a fairly rapid and painless rise in wages, but pain in the equity markets for the investor class.  Once the investor class realizes what is going on, they will fight him tooth and nail.  This may end up in a fight between the financial investor elites and the business owning elites, with Trump on the side of the latter.  I'm not sure how that turns out.

Thoughts on any of that?  Am I missing anything?

Yes, they did attempt to solve the problem through inflation.  Inflation tends to maintain the capital structure that failed rather than let the economy restructure.  The politicians wanted to avoid the pain to stay in office.

Not to bad except that the process will be painful but it won't drag out over many years.  You have a pretty solid grasp of the likely outcome if Trump performs as expected.  Looking at the manufacturing number over the last year it looks like the US is or will soon be in a recession.  That was already baked into the cake.  With Trump there is a chance of getting an actual recovery this time where with Hillary there was none.

(11-14-2016, 01:24 AM)Warren Dew Wrote: [ -> ]

(11-14-2016, 12:25 AM)Galen Wrote: [ -> ]

(11-14-2016, 12:18 AM)Warren Dew Wrote: [ -> ]Agreed.

Hey, you're talking to me as if I wasn't an evil boomer!

That is because you are not being an idiot or condescending the way most Boomers are.  You must be one of the exceptions to the rule that I encounter occasionally.   My attitude toward Eric the Obtuse and some others is a product of me not suffering fools gladly.

Plenty of people of all generations are idiots, though boomers may be more insistent about any idiotic positions they hold.

Condescension, yes, though GIs also tended to be condescending.  Specifically, GIs tended to be condescending when taking positions that they knew - or perhaps "knew" - to be true, but when they didn't know the reasons why those positions were true.  Boomers may be condescending even when they do know the reasoning, but just can't be bothered to discuss it.

The GIs on the other hand were generally very competent and so I have fewer problems with their condescension.  When they were wrong is was rare and very spectacular.  In the end GIs tended respond to reality.  I rather liked them in spite of these flaws because of their basic sanity.

The fed existed already, and could have refrained from raising discount rates.  More speculatively, they could have aggressively added banks to the federal reserve system, and Hoover could have pushed legislation similar to the 1933 banking act.  Deposit insurance would have helped a lot given the large number of banks that failed due to runs rather than to fundamental insolvency.

While FDR's policies were in general counterproductive, it's hard to argue that he didn't do something better than Hoover with respect to the money supply:

(11-14-2016, 02:48 AM)Warren Dew Wrote: [ -> ]The fed existed already, and could have refrained from raising discount rates.  More speculatively, they could have aggressively added banks to the federal reserve system, and Hoover could have pushed legislation similar to the 1933 banking act.  Deposit insurance would have helped a lot given the large number of banks that failed due to runs rather than to fundamental insolvency.

While FDR's policies were in general counterproductive, it's hard to argue that he didn't do something better than Hoover with respect to the money supply:

Remember that banks loan out the majority of demand deposits and if those loans go bad and aren't repaid then the money still disappeared.  As a consequence the money multiplier effect of fractional reserve banking still goes into reverse.  In the early years of the depression the Fed's attempts to reflate the banking system was pushing on a string.  Based on this I would argue that the banks going under was an effect rather than a cause.

Deposit insurance would have helped with the bank runs but the money supply would still have contracted.  It is unclear if the contraction in the money supply wouldn't have as large as a consequence.  That is the problem with economics, it is not possible to run controlled experiments.

Keep in mind that FDR devalued the dollar with his gold confiscation and setting the price to $35/oz.

(11-14-2016, 02:03 AM)Warren Dew Wrote: [ -> ]

(11-14-2016, 12:47 AM)Galen Wrote: [ -> ]In short the bust and the necessary clearing of malinvestment was aborted in 2009.  In my opinion the day of reckoning was simply postponed at great cost which will probably be revealed in the next year or so.

While they wouldn't put it this way, the Fed was attempting to clear the malinvestment gradually through inflation.  The malinvestment in 2009 was largely in overvalued housing.  Inflation should eventually permit the actual value of housing to reach the nominal value.  This would ease the process of clearing the malinvestment since people could keep their houses and just keep paying inflated mortgages down until the mortgages were no longer inflated.

Obviously this produced other distortions.  I believe the malinvestment has been partially transferred from housing to equities.  But a collapse in equities is less societally damaging, since most people who are heavily invested in the stock market can afford losses without becoming homeless.

I don't think the day of reckoning will be severe.  This is because the natural growth rate of the economy, and thus the natural interest rate, has been declining.  As a result, some of the asset inflation has been turning into a real increase in value.

Correct fiscal policy - as you say, letting people keep their money, by reducing tax rates, and also reverting various forms of welfare benefits to where they were before Obama increased them, if not below that - will of course increase the economic growth rate above the natural growth rate for a time, which would be expected to cause pain with respect to inflated assets.  However, that will be partially or fully compensated for if Trump cuts immigration and increases deportation, as people coming off the welfare rolls or unemployment to work will be compensated for by illegal immigrants leaving.

If Trump follows these policies, I believe the net result will be a fairly rapid and painless rise in wages, but pain in the equity markets for the investor class.  Once the investor class realizes what is going on, they will fight him tooth and nail.  This may end up in a fight between the financial investor elites and the business owning elites, with Trump on the side of the latter.  I'm not sure how that turns out.

Thoughts on any of that?  Am I missing anything?

Just about everything, I think.

The price of housing is going up, that's true. But it was too high even when it collapsed in 2007-08. So fewer people can afford a home, or mortgage payments, these days, and another bubble is already in the works, especially with the Trump deregulation. Rents are going up, homelessness is increasing and poverty is magnified.

I don't figure how lower housing prices caused higher stock prices. Where is your evidence that people who own "underwater" homes invested in stocks? They lost equity and can't afford them. The corporate and financial world has recovered quite handsomely, though, and that's whose wealth is traded on Wall St. When Wall St. is deregulated by the Republicans, the danger of crashes will mount quickly. I predicted before that the 2008 crash would not be repeated on that scale, but that prediction is only based on astrology. The financial conditions about to be put in place are perfect for another depression like 2008-09. I expect it to occur at least by 2018.

Interest rate declines were not natural; they were determined by the Fed.

Correct fiscal policy is stimulus for those areas of the economy that are slow. That means higher taxes and more government spending and welfare as needed. Keynes is correct; Ayn Rand is wrong. Trickle-down doesn't trickle. It failed miserably in the 1920s, 1980s and 2000s and will fail again. Inflation may increase, as rich people spend money on themselves, gas prices skyrocket as fossil fuel investments become lucrative again, the national debt balloons fantastically, and resulting higher interest payments gobble up federal spending. Much money may be fiatted and printed. But economic growth will stall and decline. Deportation and immigration cuts will hurt the economy, as fewer workers are available for the jobs that middle class whites do not want and never had anyway.

Trump policies will probably include no minimum wage increase, which will keep wages flat as it always has before, and income will decline relative to the inflation he will cause, thus increasing poverty and a decreasing middle class. Investors will profit from the new deregulation and repeal of Dodd-Frank, thus resulting in rampant speculation and fraud, crashing the economy again.

Yup, you missed it on just-about everything.

(11-14-2016, 03:04 AM)Galen Wrote: [ -> ]

(11-14-2016, 02:48 AM)Warren Dew Wrote: [ -> ]The fed existed already, and could have refrained from raising discount rates.  More speculatively, they could have aggressively added banks to the federal reserve system, and Hoover could have pushed legislation similar to the 1933 banking act.  Deposit insurance would have helped a lot given the large number of banks that failed due to runs rather than to fundamental insolvency.

While FDR's policies were in general counterproductive, it's hard to argue that he didn't do something better than Hoover with respect to the money supply:

Remember that banks loan out the majority of demand deposits and if those loans go bad and aren't repaid then the money still disappeared.  As a consequence the money multiplier effect of fractional reserve banking still goes into reverse.  In the early years of the depression the Fed's attempts to reflate the banking system was pushing on a string.  Based on this I would argue that the banks going under was an effect rather than a cause.

Deposit insurance would have helped with the bank runs but the money supply would still have contracted.  It is unclear if the contraction in the money supply wouldn't have as large as a consequence.  That is the problem with economics, it is not possible to run controlled experiments.

Keep in mind that FDR devalued the dollar with his gold confiscation and setting the price to $35/oz.

I agree some banks were insolvent due to bad loans and would still have failed.  However, many banks were failing due to runs even though they were solvent.  Those banks could have been saved.

Good point about dollar devaluation.

(11-14-2016, 03:10 AM)Eric the Green Wrote: [ -> ]I don't figure how lower housing prices caused higher stock prices. Where is your evidence that people who own "underwater" homes invested in stocks?

Eric, I'm afraid I was using terminology that assumed a context of Austrian economics, which may have caused some misunderstanding.  Let me address this question, since you asked it explicitly.

I'm certainly not claiming that people who owned "underwater" homes invested in stocks.  What I'm saying is that the Fed's easy money policy - QE 1, 2, and 3 - helped keep many homes from going underwater by supporting home prices; however, that same easy money policy also inflated stock prices above where they would otherwise have been.  Eventually the stock prices will need to fall back to their real value, so basically the cost of helping some homeowners avoid bankruptcy is that some different people who are stockholders will eventually face portfolio losses.

(11-14-2016, 03:43 AM)Warren Dew Wrote: [ -> ]

(11-14-2016, 03:10 AM)Eric the Green Wrote: [ -> ]I don't figure how lower housing prices caused higher stock prices. Where is your evidence that people who own "underwater" homes invested in stocks?

Eric, I'm afraid I was using terminology that assumed a context of Austrian economics, which may have caused some misunderstanding.  Let me address this question, since you asked it explicitly.

I'm certainly not claiming that people who owned "underwater" homes invested in stocks.  What I'm saying is that the Fed's easy money policy - QE 1, 2, and 3 - helped keep many homes from going underwater by supporting home prices; however, that same easy money policy also inflated stock prices above where they would otherwise have been.  Eventually the stock prices will need to fall back to their real value, so basically the cost of helping some homeowners avoid bankruptcy is that some different people who are stockholders will eventually face portfolio losses.

OK at least that part makes some sense.

(11-14-2016, 02:35 AM)Galen Wrote: [ -> ]

(11-14-2016, 01:24 AM)Warren Dew Wrote: [ -> ]

(11-14-2016, 12:25 AM)Galen Wrote: [ -> ]

(11-14-2016, 12:18 AM)Warren Dew Wrote: [ -> ]Agreed.

Hey, you're talking to me as if I wasn't an evil boomer!

That is because you are not being an idiot or condescending the way most Boomers are.  You must be one of the exceptions to the rule that I encounter occasionally.   My attitude toward Eric the Obtuse and some others is a product of me not suffering fools gladly.

Plenty of people of all generations are idiots, though boomers may be more insistent about any idiotic positions they hold.

Condescension, yes, though GIs also tended to be condescending.  Specifically, GIs tended to be condescending when taking positions that they knew - or perhaps "knew" - to be true, but when they didn't know the reasons why those positions were true.  Boomers may be condescending even when they do know the reasoning, but just can't be bothered to discuss it.

The GIs on the other hand were generally very competent and so I have fewer problems with their condescension.  When they were wrong is was rare and very spectacular.  In the end GIs tended respond to reality.  I rather liked them in spite of these flaws because of their basic sanity.

I'm curious where you got that impression; that wasn't my experience.  My experience was that GIs understood some things, but failed to understand other things despite their being obvious.  On the whole, they were probably comparably competent on a relative scale as their presidents were.  Johnson, Nixon, and Carter were incompetent to varying degrees; Reagan was exceptionally competent and Kennedy might have been competent had he had more time.  The overall average is probably slightly subpar relative to other generations.

With respect to political leaders, I think the primary difference with boomers was that GI presidents generally tried to improve things for the nation as a whole, even where they failed, and with the possible exception of Johnson; Boomer presidents to date were more interested in improving things for their political party at the cost of political opponents.  But I don't know if you're talking about political leaders or personal acquaintances.

(11-13-2016, 03:02 AM)Bob Butler 54 Wrote: [ -> ]

(11-12-2016, 11:17 PM)Eric the Green Wrote: [ -> ]

(11-12-2016, 08:38 PM)Odin Wrote: [ -> ]The lunatics (Boomers and Xers) are running the asylum...

Do you think when millennials and homelanders "take over" things will be better? I have my doubts. Boomers' own hopes for this in the sixties have been dashed, by the Boomers themselves and the Xers. Things never seem to change in this country; the process of change stopped in 1980 and has not resumed. The USA is sclerotic and shows no sign of changing. I have predicted that this would finally change in the 2020s. Now, it would be a mammoth, wholesale and 180-degree change, as of Tuesday. So, good luck to the USA.

I'd disagree.  If one believes in cyclical history, that certain values tend to fade then return, change is always there.  We've had a long ugly unravelling, a time when selfishness and indulgence trump work, growth and the common good.  It is lingering longer than I ever thought it would.  If Trump goes with another round of borrow and spend trickle down, the unravelling will continue.

But to get a Lincoln or FDR, you might have to endure a Buchanan or Hoover.  Values aren't abandoned until they obviously and spectacularly fail.  This isn't to say that being caught in the middle of an explosion is entirely a good thing.  So, yes, historically, a mammoth wholesale 180 degree change is still possible.  It might be that either the red or blue values must utterly fail before we get a healthy transformation.

There are gentle fourth turnings.  Queen Victoria and Bismarck, conservative leaders who knew they had to give ground to the progressives to avoid an explosion, are the classic examples.  The conservative faction attempting to maintain the old values are not always stubborn and strident enough for a full scale explosion and transformation.  Obama then Hillary might have achieved something similar to a Victoria / Bismarck transformation.  I'm now less inclined to think that likely.  It might have been Bush 43 who got pegged in the Buchanan / Hoover slot.  It seems now that the fourth turning has been pushed back 16 years, that we reset the clock with Trump provisionally in the Buchanan / Hoover slot. 

Or, perhaps, possibly, the Grey Champion slot.  If he really acts like a Washington outsider, if one of his primary goals is to break up the filibuster obstruction mentality and get things done, perhaps he might not be the disaster that his campaign leads many folk to anticipate.  I'm seeing mixed signals on this.  I think we'll have to wait and see.  Talk to me after his 100 days.

What I have noticed is an almost complete lack of change in the USA for 40 years now (that's including the next 4, of course). Some may define "change" as nifty new gadgets. I don't. I mean progress is social equity and opportunity. We have become sclerotic, as far as I can see, and the net result of the cycles and pendulum swings is zero movement forward AT BEST.

So what does that mean? Perhaps unlikelihood of any future progress. The habit of sclerosis is becoming well-set.

The crisis came right on schedule. It's just that it does not jive with the previous 4Ts, because they were successful. The jury is now decidedly out on that project this time. That's true in all 4Ts; victory is not certain. But, it's been likely, and was not (I don't think) preceded by such a long period of stalemate and decline as this one (and which has continued into the 4T). The S&H model for a 4T depends somewhat on successful ones, in which the good guys win. That's been true for Americans so far. But right now, the bad guys are winning. If that's the new model for a 4T, then "getting things done" doesn't mean the same thing. The Republicans are now eager and excited to "get things done" with their new power, but what they want to do is destructive.

Any "regeneracy" happening now is happening in the streets.

(11-14-2016, 03:34 AM)Warren Dew Wrote: [ -> ]

(11-14-2016, 03:04 AM)Galen Wrote: [ -> ]

(11-14-2016, 02:48 AM)Warren Dew Wrote: [ -> ]The fed existed already, and could have refrained from raising discount rates.  More speculatively, they could have aggressively added banks to the federal reserve system, and Hoover could have pushed legislation similar to the 1933 banking act.  Deposit insurance would have helped a lot given the large number of banks that failed due to runs rather than to fundamental insolvency.

While FDR's policies were in general counterproductive, it's hard to argue that he didn't do something better than Hoover with respect to the money supply:

Remember that banks loan out the majority of demand deposits and if those loans go bad and aren't repaid then the money still disappeared.  As a consequence the money multiplier effect of fractional reserve banking still goes into reverse.  In the early years of the depression the Fed's attempts to reflate the banking system was pushing on a string.  Based on this I would argue that the banks going under was an effect rather than a cause.

Deposit insurance would have helped with the bank runs but the money supply would still have contracted.  It is unclear if the contraction in the money supply wouldn't have as large as a consequence.  That is the problem with economics, it is not possible to run controlled experiments.

Keep in mind that FDR devalued the dollar with his gold confiscation and setting the price to $35/oz.

I agree some banks were insolvent due to bad loans and would still have failed.  However, many banks were failing due to runs even though they were solvent.  Those banks could have been saved.

Good point about dollar devaluation.

Perhaps but as Mises would say the first intervention creates problems that have to be solved which leads to further interventions and the sequence never ends.  The bust always makes a big mess.