Generational Dynamics World View

[David Horn]

(08-30-2019, 10:05 AM)Warren Dew Wrote:

(08-30-2019, 08:25 AM)David Horn Wrote:

(08-29-2019, 09:25 PM)Warren Dew Wrote: If interest rates are below zero because the economy is shrinking, commodities like gold are likely to be decreasing in value too.  Really only storing cash works in that situation.

I would hope that we're not going to copy Germany, and pretend that we can't inflate our way past this.  I think we've proven that handing money to the rich is a non-starter, so  next time, it will be massive public works … as it should have been under Obama.  Frankly, under Trump, programs like that would be hand-outs --  both ineffectual and impoverishing.

Neither public works nor handing money to the "rich", which from the left generally means "anyone who works for their money", have anything to do with inflation.  Inflation is controlled by monetary policy, not fiscal policy.

Nonsense on every point! First, handing money to the rich is exemplified by the last tax bill, that cut corporate rates (helping stock holders primarily), cutting rates on capital gains (ditto, in spades) and removing many deductions that are typically used by "anyone who works for a living". Second, the idea that monetary policy alone drives inflation is simply wrong. Putting money into circulation through borrowing or spending is little different, and $1T a year deficits simply aren't sustainable over a time period longer than a few years. They are unjustified in what is supposed to be a god economy.

Warren Dew Wrote:Jerome Powell is doing a good job of shifting the fed from a policy of erring on the conservative side on inflation - keeping inflation below 2% - to actually targeting a small amount of inflation - keeping inflation at or near 2%.  As long as he manages that, I don't think we'll get into the situation Germany has.

Even Quantitative Easing, involving vast additions to the Fed balance sheet, didn't push inflation to 2%. We have low unemployment that is composed of far too many crappy jobs, with the crappy-jobs to good-jobs ratio steadily rising. If you want good jobs, at least until we figure out how to run the economy with few if any jobs, then big non-military spending programs are a must. We need infrastructure of all kinds everywhere. This should be a no-brainer.

Warren Dew Wrote:Of course, Germany's fertility rate of 1.47 provides strong pressure for a shrinking economy, so that makes their job harder.  The US is at a near replacement level of 1.89, so we don't have as big a problem to deal with.

Germany has chosen to run surpluses on a continuous basis. Everyone else pays for that, and the pressure on them to back off, stimulate their economy with borrowing and fix their depleted infrastructure is getting louder. When Angela Merkle departs, who replaces her will determine whether the EU continues. The Germans are stubborn. I'm betting against.