Lets make fun of Obama while he is still relevant.

[David Horn]

(11-19-2016, 03:23 AM)Galen Wrote: There is some truth to this but Japan has always used inflation as a way to devalue their currency in order to make their exports more attractive.  After the stock market crash in 1989 they then explicitly used Keynesian monetary and government fiscal stimulus to try to revive their economy.  Abenomics is simply taking this to extremes.

Japan has never explicitly had a free market economic in the Classical Liberal sense the Europe and the US did.

You have noted the negative effects of this policy on the young who also tend to be poorer and not hold equities.  This has made wealth inequality greater than it otherwise would be just as it has in the US.  I would also maintain that in addition to the taxes that fall more heavily on the poor, the decrease in purchasing power caused by inflation has fallen on the poor and the young.  It seems likely that this is part of the reason why family formation and the lower birthrate has affected Japan more than it has in the US and Europe.

So you believe that negative interest rates are fully compatible with inflation then?  Please elaborate. 

There's an issue here, but calling it inflation is simply wrong.

[Galen]

(11-29-2016, 04:05 PM)David Horn Wrote:

(11-19-2016, 03:23 AM)Galen Wrote: There is some truth to this but Japan has always used inflation as a way to devalue their currency in order to make their exports more attractive.  After the stock market crash in 1989 they then explicitly used Keynesian monetary and government fiscal stimulus to try to revive their economy.  Abenomics is simply taking this to extremes.

Japan has never explicitly had a free market economic in the Classical Liberal sense the Europe and the US did.

You have noted the negative effects of this policy on the young who also tend to be poorer and not hold equities.  This has made wealth inequality greater than it otherwise would be just as it has in the US.  I would also maintain that in addition to the taxes that fall more heavily on the poor, the decrease in purchasing power caused by inflation has fallen on the poor and the young.  It seems likely that this is part of the reason why family formation and the lower birthrate has affected Japan more than it has in the US and Europe.

So you believe that negative interest rates are fully compatible with inflation then?  Please elaborate. 

There's an issue here, but calling it inflation is simply wrong.

Inflation is an increase in the money supply.  It will always show up somewhere, often as an asset bubble as is consumer price inflation.  Negative interest rates are a consequence of this inflation as well because the central banks are using the money created to buy bonds.  Until the current bout of money printing negative nominal interest rates have never been seen before.

[pbrower2a]

(11-29-2016, 04:27 PM)Galen Wrote:

(11-29-2016, 04:05 PM)David Horn Wrote:

(11-19-2016, 03:23 AM)Galen Wrote: There is some truth to this but Japan has always used inflation as a way to devalue their currency in order to make their exports more attractive.  After the stock market crash in 1989 they then explicitly used Keynesian monetary and government fiscal stimulus to try to revive their economy.  Abenomics is simply taking this to extremes.

Japan has never explicitly had a free market economic in the Classical Liberal sense the Europe and the US did.

You have noted the negative effects of this policy on the young who also tend to be poorer and not hold equities.  This has made wealth inequality greater than it otherwise would be just as it has in the US.  I would also maintain that in addition to the taxes that fall more heavily on the poor, the decrease in purchasing power caused by inflation has fallen on the poor and the young.  It seems likely that this is part of the reason why family formation and the lower birthrate has affected Japan more than it has in the US and Europe.

So you believe that negative interest rates are fully compatible with inflation then?  Please elaborate. 

There's an issue here, but calling it inflation is simply wrong.

Inflation is an increase in the money supply.  It will always show up somewhere, often as an asset bubble as is consumer price inflation.  Negative interest rates are a consequence of this inflation as well because the central banks are using the money created to buy bonds.  Until the current bout of money printing negative nominal interest rates have never been seen before.

Inflation results from an increase in the money supply beyond increases in productivity. Failure to keep money growth at the pace of the growth of the work force would be deflationary because there would be less money per person.

[Warren Dew]

(11-29-2016, 03:53 PM)David Horn Wrote:

Warren Wrote:Truth.  But I don't advocate any spending increase at all.  Rather, I advocate increasing the deficit through massive income tax reductions.

Why?  We have objectively among the smallest tax burdens in modern times, and much less than other advanced economies.

Not at all true.  U.S. tax burdens are comparable to western European tax burdens, and tend to be much more progressive.  Marginal rates for even a moderately affluent couple in some states can exceed 60%.  Perhaps you are forgetting that in the U.S., we have state taxes as well as federal taxes.

Quote:More to the point, Thomas Picketty showed how foolish under taxation is if r > g, with r being the rate of return on investments and talent exploitation and g is the growth of the overall economy.  The rich merely get richer, and the net worth of nation steadily flows into fewer and fewer hands.  Oligarchy is why we're in the mess we're in.

From the standpoint of Picketty's theories, taxation of income is misdirected as it does not prevent concentration of wealth.  You might make some sense if you proposed eliminating the income tax and replacing it with a wealth tax.  Somehow the left never actually proposes things like that, though,  as they're in bed with the financial billionaires of the world.

[David Horn]

(11-29-2016, 04:27 PM)Galen Wrote:

(11-29-2016, 04:05 PM)David Horn Wrote: So you believe that negative interest rates are fully compatible with inflation then?  Please elaborate. 

There's an issue here, but calling it inflation is simply wrong.

Inflation is an increase in the money supply.  It will always show up somewhere, often as an asset bubble as is consumer price inflation.  Negative interest rates are a consequence of this inflation as well because the central banks are using the money created to buy bonds.  Until the current bout of money printing negative nominal interest rates have never been seen before.

MV = PQ.  If the PQ side is unchanged, then you can assume that inflation is zero.  Yes, M may have increased, but if V remains low -- actually declining at the same rate M increases -- the quotient remains fixed. In fact, Abe has tried to get money into circulation fast enough to reverse the declining quotient there.  Being frugal isn't all it's cracked up to be.

[David Horn]

(11-29-2016, 05:55 PM)Warren Dew Wrote: Not at all true.  U.S. tax burdens are comparable to western European tax burdens, and tend to be much more progressive.  Marginal rates for even a moderately affluent couple in some states can exceed 60%.  Perhaps you are forgetting that in the U.S., we have state taxes as well as federal taxes.

People in the affected categories tend to have deductions that lower their rates, so even a Manhattanite with a large amount of earned income will not be burdened as much as someone living an equivalent life in London.  Of course, most high earners tend to have unearned income, and that's a sweetheart tax deal that needs to end yesterday.

As to European rates, look here for a reality check.

Warren Wrote:From the standpoint of Picketty's theories, taxation of income is misdirected as it does not prevent concentration of wealth.  You might make some sense if you proposed eliminating the income tax and replacing it with a wealth tax.  Somehow the left never actually proposes things like that, though,  as they're in bed with the financial billionaires of the world.

Until Reagan cut top rates to the bone, this problem was nonexistent.  Very high rates tend to suppress outrageous pay packages in favor of other considerations.  Kennedy cut top marginal rates to 70%.  Prior to that, they were 90%.  No one gives a thought to going back to either, but current rates are too low ... especially for unearned income.

[Warren Dew]

(11-29-2016, 04:02 PM)David Horn Wrote:

(11-18-2016, 10:53 AM)Warren Dew Wrote:

(11-17-2016, 04:43 PM)Galen Wrote:

(11-17-2016, 04:04 PM)Warren Dew Wrote: I suspect I'm the only one who actively wants more debt, because I think it's necessary to the ideal handling of the demographic slowdown.  Japan has shown that a debt level of 3x GDP is sustainable and even good, given that the demographic slowdown causes exceptionally low or even negative natural interest rates.  We're far below that.

I suspect Galen wants to reduce spending to the point that taxes can also be reduced while reducing the deficit, though I'd be interested in hearing from him.

I'd also be interested in hearing from Classic Xer.

Are you insane?  Japan is working on their third lost decade.  No doubt someone will tell me that Fukishima is responsible for their current problems but this has been going on since about 1990.  It will no doubt be someone who, when a Hurricane next levels a city, says  that it is good for the economy because of the rebuilding.

Japan has been following the Keynesian prescription since the early nineties and it has gotten them nowhere.  Abenomics is Keynesianism on steroids.  The only reason their debt appears sustainable is because of the artificially low interest rates caused by the bank of Japan.

The Harding's response to the Depression of 1920 violated all of the rules of modern macroeconomics and it only lasted eighteen months, typical of recessions prior to the Great Depression.  Hoover and Roosevelt borrowed, taxed and spent like most modern economists say should be done and the Depression dragged on for fourteen years.  The only reason the Depression didn't resume is because FDR was dead and Truman vastly reduced spending after World War II.  Keynesian economists were predicting that the Depression would resume and were absolutely shocked when it didn't.  1946 was one of the best years ever in terms of GDP.  Look up Robert Higgs to understand why the GDP measurements during the war years are completely bogus.  Hint:  It involves the US being turned into a command economy.

Completely agreed regarding Harding, Hoover, and Roosevelt.

Japan's situation is not the same.  It's not a business cycle recession.  In fact, it's not fundamentally an economic issue at all, although it manifests that way; it's a political issue.

Japan's baby boom came two decades before ours.  While we were having a depression in the 1930s and corresponding low birth rates, they were conquering resources in southeastern Asia  and had high birth rates.   It was followed by a bust at the same time as our boom after the war since they lost when we won.  As a result, their big generation started retiring in 1990 instead of 2010.

Since Japan allows virtually no immigration, the retirements and low birth rates resulted in a severe shortage of labor, and, of course, a recession.

If market forces had been at work, the price of labor - wages - would have increased and unemployment would have dropped.  The pain of the depression would have fallen primarily on the nonworking retired as the value of labor went up relative to the value of savings.

However, because of the political power of the swollen retired age groups, the opposite happened.  The living standards of the retirees was maintained with less of the economic output going to the workers.  This resulted in less incentive to work and thus higher unemployment.

Japan did not use serious keynesian stimulus until Abenomics in 2012, not that that would have made a difference.

More detail on my thoughts here:

http://psychohist.livejournal.com/73820....iew=261980
http://psychohist.livejournal.com/74190.html

We're entering a period similar to Japan in the 1990s.  What that says for us is that we need to take all possible measures to increase labor participation.  One of the best tools to do that is heavy cuts to income tax rates.  We need that even if it results in bigger deficits.

You explained the problem, then ignored your own argument.  Japan is not growing, because it's short of young people and the elderly tend to live forever.  It's nearly impossible to create growth in that condition ... and Europe is heading that way too.

Unlimited expansion of the population is impossible, and stagnant growth of the population tends to stagnate the economy.  I've seen no model that fixes that state other than agreeing to lower growth and monetizing the debt to keep things in perspective (growth in the monetary side of the equation with enough inflation to make bonds viable). 

I'm sure you hate that to death.

Be as sure as you want; you're still wrong.  Perhaps you should read before jumping to conclusions.

[Warren Dew]

(11-29-2016, 05:29 PM)pbrower2a Wrote:

(11-29-2016, 04:27 PM)Galen Wrote:

(11-29-2016, 04:05 PM)David Horn Wrote:

(11-19-2016, 03:23 AM)Galen Wrote: There is some truth to this but Japan has always used inflation as a way to devalue their currency in order to make their exports more attractive.  After the stock market crash in 1989 they then explicitly used Keynesian monetary and government fiscal stimulus to try to revive their economy.  Abenomics is simply taking this to extremes.

Japan has never explicitly had a free market economic in the Classical Liberal sense the Europe and the US did.

You have noted the negative effects of this policy on the young who also tend to be poorer and not hold equities.  This has made wealth inequality greater than it otherwise would be just as it has in the US.  I would also maintain that in addition to the taxes that fall more heavily on the poor, the decrease in purchasing power caused by inflation has fallen on the poor and the young.  It seems likely that this is part of the reason why family formation and the lower birthrate has affected Japan more than it has in the US and Europe.

So you believe that negative interest rates are fully compatible with inflation then?  Please elaborate. 

There's an issue here, but calling it inflation is simply wrong.

Inflation is an increase in the money supply.  It will always show up somewhere, often as an asset bubble as is consumer price inflation.  Negative interest rates are a consequence of this inflation as well because the central banks are using the money created to buy bonds.  Until the current bout of money printing negative nominal interest rates have never been seen before.

Inflation results from an increase in the money supply beyond increases in productivity. Failure to keep money growth at the pace of the growth of the work force would be deflationary because there would be less money per person.

Out of curiosity, are you expressing agreement or disagreement here?  Can you explain further?

[Warren Dew]

(11-29-2016, 06:20 PM)David Horn Wrote:

(11-29-2016, 05:55 PM)Warren Dew Wrote: Not at all true.  U.S. tax burdens are comparable to western European tax burdens, and tend to be much more progressive.  Marginal rates for even a moderately affluent couple in some states can exceed 60%.  Perhaps you are forgetting that in the U.S., we have state taxes as well as federal taxes.

People in the affected categories tend to have deductions that lower their rates, so even a Manhattanite with a large amount of earned income will not be burdened as much as someone living an equivalent life in London.  Of course, most high earners tend to have unearned income, and that's a sweetheart tax deal that needs to end yesterday.

As to European rates, look here for a reality check.

Did you read your link before you posted it?  It shows that the U.S. has a higher top income tax rate, even excluding self employment tax, than any of Germany, the UK, or France, the big three in western Europe, which are all at 45%.

Quote:

Warren Wrote:From the standpoint of Picketty's theories, taxation of income is misdirected as it does not prevent concentration of wealth.  You might make some sense if you proposed eliminating the income tax and replacing it with a wealth tax.  Somehow the left never actually proposes things like that, though,  as they're in bed with the financial billionaires of the world.

Until Reagan cut top rates to the bone, this problem was nonexistent.  Very high rates tend to suppress outrageous pay packages in favor of other considerations.  Kennedy cut top marginal rates to 70%.  Prior to that, they were 90%.  No one gives a thought to going back to either, but current rates are too low ... especially for unearned income.

So when it's pointed out that your own preferred economist disagrees with you, you discard his position and make a different one up instead?  Good job of ignoring economic facts in favor of political prejudices.

[Ragnarök_62]

X_4AD_84 Wrote:Woooo wooooo! The Creature from Jekyll Island!

So, according to those who are still slinging that particular bit of 3T tin foil, The Fed is EEEEEEEEEvillllllll .... and there is hidden inflation due to QE.

The FED isn't so much EEEEEEEEEEEEEEEEEEEEEEEEEEEEEvillllll, but rather an unnecessary middleman. Just go with MMT/debt free money.

Quote:Even though anyone looking at their lack of pay raise (or even pay cut) cannot in their right mind state that they are not personally caught in a deflationary spiral. Same deal looking at bank interest. Add to that low balance fees.

Yeah, I know, banks = another set of useless middlemen.  Just do what Japan does and let the local post office be a bank.

Quote:Say it with me now.

DEFLATION.

Yeah, bubbles tend to go there when given enough time. If funds injections are done in a fiscal manner, then the extra funds get directed in a more targeted way. The problem of excess inflation has to be done with non targeted interest rates so folks will know there's too much money in circulation.  That's the other problem with the FED. Since it mucks with interest rates, [the price of money], economic participants have no idea what stuff is really worth because the price of money is very, very important as a signal that should not be distorted as it is now, at present.   Finally, we can say good bye to mounting deficits which we also have now, since we do not use interest free money.  Such is not of course sustainable and is a pyramid scheme.

N.B.

Here's some more bullshit FWIW.   Now we should delve into what own means.   The fact is nobody "owns" a house, ever. Rather any joint and several taxing entities always own whatever housing unit you occupy.  NAR never, ever mentions this fact because it fucks up their narrative.  Of course, never mind the fact lots of dolts use their houses, they do not own, as an ATM machine. Now when that happens, there are even more parties that own your house for you. The added entities are those that *own assorted bits and pieces of your sliced and diced mortgage.

*This usage of "own" is of course absolutely correct for the duration of said mortgage.

[David Horn]

(11-29-2016, 06:21 PM)Warren Dew Wrote:

(11-29-2016, 04:02 PM)David Horn Wrote: You explained the problem, then ignored your own argument.  Japan is not growing, because it's short of young people and the elderly tend to live forever.  It's nearly impossible to create growth in that condition ... and Europe is heading that way too.

Unlimited expansion of the population is impossible, and stagnant growth of the population tends to stagnate the economy.  I've seen no model that fixes that state other than agreeing to lower growth and monetizing the debt to keep things in perspective (growth in the monetary side of the equation with enough inflation to make bonds viable). 

I'm sure you hate that to death.

Be as sure as you want; you're still wrong.  Perhaps you should read before jumping to conclusions.

Declining rates of fertility is affecting many nations, and will require a different, non-growth related economic model.  We don't have one yet.  For all of that, Japan, the first to hit the wall hard, is not failing or becoming a third world nation.  We don't know how to talk about zero, to say nothing about negative, growth in a positive way yet, but we better learn.   Worldwide ZPG isn't all that far in the future. 

What's the carrying load of the world?  Can it maintain viable societal functions if the population reaches 10 Billion?  How about 12 or even 15 Billion?

[David Horn]

(11-29-2016, 07:22 PM)Warren Dew Wrote:

(11-29-2016, 06:20 PM)David Horn Wrote:

Warren Dew Wrote:Not at all true.  U.S. tax burdens are comparable to western European tax burdens, and tend to be much more progressive.  Marginal rates for even a moderately affluent couple in some states can exceed 60%.  Perhaps you are forgetting that in the U.S., we have state taxes as well as federal taxes.

People in the affected categories tend to have deductions that lower their rates, so even a Manhattanite with a large amount of earned income will not be burdened as much as someone living an equivalent life in London.  Of course, most high earners tend to have unearned income, and that's a sweetheart tax deal that needs to end yesterday.

As to European rates, look here for a reality check.

Did you read your link before you posted it?  It shows that the U.S. has a higher top income tax rate, even excluding self employment tax, than any of Germany, the UK, or France, the big three in western Europe, which are all at 45%.

If you select for individual maximum, the first five countries are Belgium, Finland, Sweden, Aruba and Canada. All have VAT or sales taxed higher than ours. For the three you cited, all have very high Payroll taxes and VATs as well. Try this link instead, and sort by revenue high to low. Note the US at 26.9% in comparison to France (47.9%), Germany (40.6), and the UK (34.4). The EU as a whole is 35.7% and OECD is 34.8%.

Warren Wrote:

David Wrote:

Warren Wrote:From the standpoint of Picketty's theories, taxation of income is misdirected as it does not prevent concentration of wealth.  You might make some sense if you proposed eliminating the income tax and replacing it with a wealth tax.  Somehow the left never actually proposes things like that, though,  as they're in bed with the financial billionaires of the world.

Until Reagan cut top rates to the bone, this problem was nonexistent.  Very high rates tend to suppress outrageous pay packages in favor of other considerations.  Kennedy cut top marginal rates to 70%.  Prior to that, they were 90%.  No one gives a thought to going back to either, but current rates are too low ... especially for unearned income.

So when it's pointed out that your own preferred economist disagrees with you, you discard his position and make a different one up instead?  Good job of ignoring economic facts in favor of political prejudices.

Did you actually read his book? I did. His point, that you paraphrase imperfectly, discusses the futility of lowing current inequality through income taxation, since the problem is now baked-in. He does favor confiscatory inheritance taxes, which will resolve the issue in time. Short of a second Bolshevik Revolution, nothing fixes the problem immediately. Can I assume that none of us thinks that's a good answer?

So we have a choice: continue letting things get worse until violence erupts, or starting to let the air out of the balloon and hoping for patience while the normal balance in restored. If the latter, then all the GOP tax policies need to be trashed. Every oone of them favors worsening the problem.

[Warren Dew]

In response to me:

(11-29-2016, 06:21 PM)Warren Dew Wrote:

(11-29-2016, 04:02 PM)David Horn Wrote:

(11-18-2016, 10:53 AM)Warren Dew Wrote:

(11-17-2016, 04:43 PM)Galen Wrote:

(11-17-2016, 04:04 PM)Warren Dew Wrote: I suspect I'm the only one who actively wants more debt, because I think it's necessary to the ideal handling of the demographic slowdown.  Japan has shown that a debt level of 3x GDP is sustainable and even good, given that the demographic slowdown causes exceptionally low or even negative natural interest rates.  We're far below that.

I suspect Galen wants to reduce spending to the point that taxes can also be reduced while reducing the deficit, though I'd be interested in hearing from him.

I'd also be interested in hearing from Classic Xer.

Are you insane?  Japan is working on their third lost decade.  No doubt someone will tell me that Fukishima is responsible for their current problems but this has been going on since about 1990.  It will no doubt be someone who, when a Hurricane next levels a city, says  that it is good for the economy because of the rebuilding.

Japan has been following the Keynesian prescription since the early nineties and it has gotten them nowhere.  Abenomics is Keynesianism on steroids.  The only reason their debt appears sustainable is because of the artificially low interest rates caused by the bank of Japan.

The Harding's response to the Depression of 1920 violated all of the rules of modern macroeconomics and it only lasted eighteen months, typical of recessions prior to the Great Depression.  Hoover and Roosevelt borrowed, taxed and spent like most modern economists say should be done and the Depression dragged on for fourteen years.  The only reason the Depression didn't resume is because FDR was dead and Truman vastly reduced spending after World War II.  Keynesian economists were predicting that the Depression would resume and were absolutely shocked when it didn't.  1946 was one of the best years ever in terms of GDP.  Look up Robert Higgs to understand why the GDP measurements during the war years are completely bogus.  Hint:  It involves the US being turned into a command economy.

Completely agreed regarding Harding, Hoover, and Roosevelt.

Japan's situation is not the same.  It's not a business cycle recession.  In fact, it's not fundamentally an economic issue at all, although it manifests that way; it's a political issue.

Japan's baby boom came two decades before ours.  While we were having a depression in the 1930s and corresponding low birth rates, they were conquering resources in southeastern Asia  and had high birth rates.   It was followed by a bust at the same time as our boom after the war since they lost when we won.  As a result, their big generation started retiring in 1990 instead of 2010.

Since Japan allows virtually no immigration, the retirements and low birth rates resulted in a severe shortage of labor, and, of course, a recession.

If market forces had been at work, the price of labor - wages - would have increased and unemployment would have dropped.  The pain of the depression would have fallen primarily on the nonworking retired as the value of labor went up relative to the value of savings.

However, because of the political power of the swollen retired age groups, the opposite happened.  The living standards of the retirees was maintained with less of the economic output going to the workers.  This resulted in less incentive to work and thus higher unemployment.

Japan did not use serious keynesian stimulus until Abenomics in 2012, not that that would have made a difference.

More detail on my thoughts here:

http://psychohist.livejournal.com/73820....iew=261980
http://psychohist.livejournal.com/74190.html

We're entering a period similar to Japan in the 1990s.  What that says for us is that we need to take all possible measures to increase labor participation.  One of the best tools to do that is heavy cuts to income tax rates.  We need that even if it results in bigger deficits.

You explained the problem, then ignored your own argument.  Japan is not growing, because it's short of young people and the elderly tend to live forever.  It's nearly impossible to create growth in that condition ... and Europe is heading that way too.

Unlimited expansion of the population is impossible, and stagnant growth of the population tends to stagnate the economy.  I've seen no model that fixes that state other than agreeing to lower growth and monetizing the debt to keep things in perspective (growth in the monetary side of the equation with enough inflation to make bonds viable). 

I'm sure you hate that to death.

Be as sure as you want; you're still wrong.  Perhaps you should read before jumping to conclusions.

David Horn:

(11-30-2016, 11:22 AM)David Horn Wrote: Declining rates of fertility is affecting many nations, and will require a different, non-growth related economic model.  We don't have one yet.  For all of that, Japan, the first to hit the wall hard, is not failing or becoming a third world nation.  We don't know how to talk about zero, to say nothing about negative, growth in a positive way yet, but we better learn.   Worldwide ZPG isn't all that far in the future.

Exactly what I've been addressing since the beginning of this conversation, as quoted above.  And while no country has yet adopted a successful model for this situation, I've outlined one above; more debt is likely to be a key part of the new economic model, as I pointed out at the beginning of this subthread, as well as the other items I suggest at the links I provide.

That said, the model will be a slow growth model, not a no growth model; we'll still get the benefits of technological improvement, even if the population isn't growing.  If we handle it properly, per capita growth will be as high as ever, and living standards can continue to rise.  We just have to avoid some of the political traps I discuss above to the extent that we can.

[Warren Dew]

(11-30-2016, 12:52 PM)X_4AD_84 Wrote: First mission objective is to stop running companies in a manner that depends on market growth. The pie is shrinking. Opportunities are either making existing enterprises more effective or, a zero sum game where an enterprise wins over market share from others. I predict that at some point, a salvage / reuse economy will become more attractive, since there is no point in sourcing raw materials and expending labor to build new stuff for a shrinking market.

There will still be growth in new markets, where most growth has always been.  The massive growth in wireless communications in the 1990s and 2000s was not primarily due to population growth.  Granted some traditional industries will shrink as well, but that has always happened too.

[playwrite]

Let's see where Obama is leaving to Trump -

Here’s the verdict on that ‘terrible’ Obama economy

Quote:The Obama Economy

Third-quarter 2008
Third-quarter 2016
Verdict
Gross domestic product (2009 dollars)
$14.892 trillion
$16.713 trillion
Up 12%
30-year mortgage loan rate
6.46%
3.54%
Nearly halved
Nonfarm payrolls
136.3 million
145.0 million
Up 8.7 million
Uninsured (health)
45 million
27 million
Down 18 million
Exports (2009 dollars)
$1.766 trillion
$2.163 trillion
Up 22%
Un- and under-employed rate (U6)
11.8%
9.5%
Down 20%
Median household income
$50,303
$57,929
Up 15%
Manufacturing output per worker(2009 dollars)
$382,977
$436,776
Up 14%
Dow Jones Industrial Average
9,319
18,332
Nearly doubled

Bush left Obama with the worst economic contraction and financial meltdown since the Great Depression.

Obama is leaving Trump with an economy that is humming along.  

Let's see  how long before the Orange Anus starts blaming Obama for an economic downturn.  Just remember how much credit President Pussygrabber is now taking for the stock market rally.

The bigger question is how long it will take, if ever, the many Trump Chumps to realize they were conned.

[Eric the Green]

(11-30-2016, 12:14 PM)Warren Dew Wrote: David Horn:

(11-30-2016, 11:22 AM)David Horn Wrote: Declining rates of fertility is affecting many nations, and will require a different, non-growth related economic model.  We don't have one yet.  For all of that, Japan, the first to hit the wall hard, is not failing or becoming a third world nation.  We don't know how to talk about zero, to say nothing about negative, growth in a positive way yet, but we better learn.   Worldwide ZPG isn't all that far in the future.

Exactly what I've been addressing since the beginning of this conversation, as quoted above.  And while no country has yet adopted a successful model for this situation, I've outlined one above; more debt is likely to be a key part of the new economic model, as I pointed out at the beginning of this subthread, as well as the other items I suggest at the links I provide.

That said, the model will be a slow growth model, not a no growth model; we'll still get the benefits of technological improvement, even if the population isn't growing.  If we handle it properly, per capita growth will be as high as ever, and living standards can continue to rise.  We just have to avoid some of the political traps I discuss above to the extent that we can.

I'm sure you will correct me if I am wrong, or try to. But I don't buy the more debt idea. It's not too popular with the left OR the right, either. Maybe others can correct me too.

The only way to deal with more debt by just lowering taxes, is with more QE. Print more money. This will eventually increase inflation and cause more bubbles in the economy, and if interest rates rise because of inflation, more of our tax money will go to cover the debt. That means less money for the things we need from government, and higher taxes to pay for less service. I don't agree with this policy, because I think we need government and what it provides.

I agree, though, that we need policies that take account of slower growth and population stabilization.

The biggest trap to avoid is Reaganomics. Lowering taxes does not necessarily stimulate growth in the economy. We can't factor that in to any policy.

[Warren Dew]

Eric the Green Wrote:I'm sure you will correct me if I am wrong, or try to. But I don't buy the more debt idea. It's not too popular with the left OR the right, either. Maybe others can correct me too.

The only way to deal with more debt by just lowering taxes, is with more QE. Print more money. This will eventually increase inflation and cause more bubbles in the economy, and if interest rates rise because of inflation, more of our tax money will go to cover the debt.

This is not a left/right divide.  You and Galen are wary of debt and the monetization thereof based on a half century of experience with how it has been problematic with respect to inflation and the downstream effects on the economy.  That experience is true, but it happened during a period of demographic growth - population growth - with a low fraction of the population retired.

David and I believe that the equation has changed because the demographics have changed:  the fertility rate has dropped, population growth has been largely eliminated, and retirees make up a larger proportion of the population.  We look at Japan's experience because they are a couple of decades ahead of us in all of these demographic transitions, and they found relative debt levels two or three times higher than ours still sustainable and perhaps even necessary.

In my opinion this is because, with population growth gone, the natural rate of inflation and the natural interest rate are lower, perhaps zero or below.  This means we can borrow more without paying more in interest, and monetize more of that debt without exceeding inflation goals.

[Eric the Green]

It does make some sense, what you say Warren. One concern is that I don't think we have reached the point where population growth has been eliminated. That's a bit of an exaggeration, though it may be true two or three decades from now.

Also, if Trump tries to repeal NAFTA and enforce deportation, confiscating immigrants' payments sent back home to pay for a wall, the question arises whether the Mexican economy will collapse, speeding up immigration legal and illegal to such a point that even Trump can't stop it. Plus, his refusal to do America's part to care for refugees from the Arab Spring Revolution, and more refugees coming because of flooded-out and burned out nations in upheaval, the migrations will only increase as long as climate change continues and population growth continues abroad. So there is a concern about continuing immigration cancelling out the decline in domestic birth rates.

You may have a point that permanent debt and its monetization is manageable with slowing or reversing population growth. I am skeptical however about how such debt makes us vulnerable to being unable to fund the government. That is indeed a concern for those of us on the left, at least; as well as anyone concerned about foreign policy and the military. There's no telling too when some Tea Party might be able to reject raising the debt ceiling, thus creating default. That would be a problem brought on by ourselves rather than the debt per se, but it is a danger out there.

Another concern was voiced in recent posts by Rags and Mr. X_AD. We need a stimulus that raises interest rates because low interest rates wipe out the motivation to work, save and invest. People need a return on investments, and will call for stimulus. Lowering taxes does not work; printing more money or government spending are better (especially the latter). That would mean interest on the debt would also rise, so in that case high debt would come back to bite us.

Where is William Jennings Bryan when you need him? I believe his current reincarnation is, in effect, Janet Yellen. The free silver of our time is called QE. Too bad it doesn't reach the people too well. But that's "monetization" through the only route currently available as far as I know. We have no other government agency able to act.

[Eric the Green]

Warren, you pointed out that tech developments can power economic growth as well as population increase can. And a growth economy will raise interest rates. And we need interest rates to be moderately higher. Bill Clinton's era came closest to the path we should have been on. He was able to get some tax increases and a surplus in the budget. Interest rates rose up to about 6% shortly after his presidency. When he left office the high tech boom of that time was powering economic growth, and the debt started to go down.

We need moderate interest rates to encourage investments and savings, which builds capital and economic activity. Thus we need a smaller debt, I think, so interest rates don't cripple government. And we need government to invest and help the people. Without government, investment remains short term and there's no infrastructure, both soft and hard kinds. Only such government investment allows the economy to expand. Tolls and barriers, as Trump wants, are no basis for a free national commerce that promotes economic activity.

The Clinton tax rates were moderate. It was the right balance to provide a basis for growth. Almost all economic and tech advancement depends on this government investment. Highways and bridges, railroads and ports, scientific research, support for the arts, help to the needy, support for free non-authoritarian and creative education; these are among the things that gave us such economic boons as we still have today. Taxes can't be too high though, as this may discourage entreprenuership and adequate reward for business activity and investment. And unless taxes are raised periodically, lowering them has no stimulus effect at all when we need some of it.

Lowering taxes and increasing the debt alone does not provide enough stimulus, to either ease the deficit OR boost and encourage economic activity. And the record of history for the last 35 years on this is crystal clear. Trickle-down doesn't trickle. Government investment provides for both short and long term growth. This is what we will have to rediscover, when we recover from our amnesia in the 2020s. It will be a long and uphill climb back from the hole we're in, in our declining republic rapidly heading for banana republic status, while other countries, not slaves to Reaganomics as we are, are moving ahead of us.

We will have to grow more slowly, with slower population growth, but we can still grow, and there's plenty of wealth and intelligence in our country to make it vibrant and prosperous. We don't have to settle for a trickle when we can have an ocean of blessings. But it takes a long term point of view and not a narrow one of focusing only on allowing the free market to operate.

[Warren Dew]

(12-01-2016, 08:30 PM)Eric the Green Wrote: Lowering taxes does not work; printing more money or government spending are better (especially the latter). That would mean interest on the debt would also rise, so in that case high debt would come back to bite us.

Actually government spending is the least effective way to try to stimulate the economy.  The problem is that spending stimulus is inflationary, which means that you have to cut back on monetary stimulus to avoid excessive inflation.  In addition, the multiplier on federal spending is less than 1 under all economic conditions, varying between 0.7 and 0.9:

http://www.aeaweb.org/aea/2013conference...?pdfid=373

Supply side stimulus such as cutting tax rates in concert with monetization of the debt is the best form of stimulus; supply side stimulus is deflationary, permitting application of additional monetary stimulus.  Tax rate cuts are especially good as they increase the incentive to work and thus increase the labor market participation rate, which is particularly critical when the economy has a lot of retirees to provide for.

But perhaps the most important issue is that government spending is generally in the form of payments to large corporations, so it adds to wealth inequality.  Across the board tax rate cuts, in contrast, benefit the workers, and thus tend to decrease inequality.