# Free market economics vs. Keynesian economics

Discussion in 'Business & Economics' started by Otto9210, Jul 11, 2010.

1. ### joepistoleDeacon BluesValued Senior Member

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22,910
For all of your ranting, the Federal Reserve is and independent agency of the government. And the bottom line is that you have made allegations for which you cannot support and have no evidence.

Two, the Federal Reserve is not a private corporation as you claimed.

http://en.wikipedia.org/wiki/Federal_Reserve_System

1.The presidentially appointed Board of Governors (or Federal Reserve Board), an independent federal government agency located in Washington, D.C.

According to the board of governors of the Federal Reserve, "It is not 'owned' by anyone and is 'not a private, profit-making institution'

Yes, Federal Reserve Governors are appointed by the president and confirmed by the Senate for a term of 14 years.

Now let me ask you, how long it the term of the POTUS? The answer 4 years. And how long can a POTUS stay in office? Answer, 8 years. What is the term of a senator? Answer 6 years.

No I again ask you for evidence to support your claim that politicians routinely lean on (pressure) the Fed governors to manipulate interest rates.

http://www.federalreserve.gov/generalinfo/faq/faqbog.htm#1
Federal Reserve:
"The seven members of the Board of Governors are nominated by the President of the United States and confirmed by the U.S. Senate. By law, the appointments must yield a "fair representation of the financial, agricultural, industrial, and commercial interests and geographical divisions of the country," and no two Governors may come from the same Federal Reserve District.

The full term of a Governor is fourteen years; appointments are staggered so that one term expires on January 31 of each even-numbered year. A Governor who has served a full term may not be reappointed, but a Governor who was appointed to complete an unexpired term may be reappointed to a full fourteen-year term.

Once appointed, Governors may not be removed from office for their policy views. The lengthy terms and staggered appointments are intended to contribute to the insulation of the Board--and the Federal Reserve System as a whole--from day-to-day political pressures to which it might otherwise be subject. If all Governors serve full terms, a President would be able to appoint only two Governors during a four-year presidential term. Moreover, even a President reelected for a second term would not have appointed a majority of the Governors until late in the second term. In reality, many Governors do not complete their fourteen-year terms, and recent Presidents have averaged more than one appointment to the Board every two years.

As stipulated in the Banking Act of 1935, the Chairman and Vice Chairman of the Board are chosen by the President from among the sitting Governors and must be confirmed by the Senate. They serve terms of four years and may be reappointed as Chairman or Vice Chairman until their terms as Governors expire. The Chairman serves as public spokesperson and representative of the Board and manager of the Board's staff and presides at Board meetings. Affirming the apolitical nature of the Board, recent Presidents representing both major political parties have selected the same person as Board Chairman." - Federal Reserve

The Federal Reserve was created to be independent of politics and for good reason. Monetary supply of the nation is far too important of a subject to be left to the shenanigans of the American political system.

I have only seen the video you posted once. And found it totally lacking any meritt and did not in any way support your case for the discredited Austrian School of economics.

Let me summarize the video, it consisted of a bunch of Republican pundits/shills talk about how great the economy was before the crash of 2007and contrasted those rantings with some statements made by Peter Shiff, president of EuroPacific Capital who claims to be a supporter of the Austrian School. One the Republican pundits in the clip were political agents not economists.

Shiff perdicted a collapse of the US housing market because of a perceived housing bubble, not the entire global market system. Shiffs clients took horrible losses in 2008. I wonder why it did not mention that fact in the video montage you referenced. Because Shiff got several things wrong about 2008. And below is a small listing of same.

12 Ways Schiff Was Wrong in 2008

Wrong about commodities except for gold
Wrong about foreign currencies except for the Yen
Wrong in timing
Wrong in risk management
Wrong in buy and hold thesis
Wrong on decoupling
Wrong on China
Wrong on US treasuries
Wrong on interest rates, both foreign and domestic

And most importantly, he missed the issue key reason for the collapse. He was thinking bubble. The collapse was the much more severe because it was not a real estate bubble that caused a near global melt down. The reason for the global melt down was two fold:

- Misrepresentation of packaged CMO's (giving investment grade ratings to junk securities by the security ratings agencies).

- Selling of Credit Default Swaps (CDS's) without reserves to backup potential losses.

So when the bundled mortgages went bad and the organizations holding CDS's went belly up, you had the makings of a global catastrophe. Shiff missed it all.

Two he was no the only one predicting a financial collapse in 2008. I suggest you see some of Billy T's writings. He is on record, in Sciforums for making the forecast. And there are others including Dr. Nouriel Roubini a Keynesian who made similar forecasts.

So let's recount what Shiff was right about, he was right about one thing there was a crisis in 2008. But he missed the causes and the magnitude of the cirisis and his clients suffered heavily as a result.

One more point, I suggest you take people like Shiff with a grain of salt. They are first and foremost salesmen. And by claiming adherence to a discredited economic theory championed by a segement of society, he may be pandering that to that market segement. And it appears obvious to me that is what Shiff is doing.

No, my characterization of the Austrian school is that of a crystal ball and a bunch of mumbo jumbo.

I am confused, you have been an advocate for the Austrian School and now you say you support Keynesian Economics and that Keynesian economics works.

You are right, in this sense that getting government to pay down debt and deficits in good times, it is a hard bullet for politicians to swallow. And that is a problem. And it is true that the nation does face a debt problem that was unnessarily aggrevated by a doubling of the national debt and huge increases in the structural deficits which occured under Republican governmnet. Those issues do need to be addressed. And the best way to address those isssues is to restore growth to the economy.

The second issue, that needs to be addressed is to cut federal costs and increase federal revenues to bring debt down. And the nation needs investment. In the Clinton and Bush II years money was sent overseas instead of being invested in our infrastructure. We desperately need to better use our own domestic resources like natural gas more efficiently. All we need to to that is a little investement. And unfortunately, I am not seeing that investment yet.

3. ### soullustRegistered Senior Member

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1,380
Keynesian economics advocates a mixed economy—predominantly private sector, but with a large role of government and public sector..

Keynesian by far..

It is what Obama and most other centrists want. and is the logical way out of this mess if you damn full Capitalists and Socialists would listen.

Last edited: Jul 18, 2010

5. ### PandaemoniValued Senior Member

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3,634
You are right that I was making a simplifying assumption, but wrong in your overall analysis, I think.

Lowering interests rates does not need to be accompanied by an increase in the money supply. Lowing the Fed Funds Rate does not require open market operations, and it is through open market operations that the money supply is affected. What should happen when the fed lowers interest rates is that other rates of return (as not all capital earns "interest") should remain largely relatively unchanged in the short term, making those investments more attractive.

In short, people do not start making bad investments because they figure "meh, the rate is so low if I lose, I lose," whereas had the rate been higher they'd have avoided the investment entirely. When you invest and "lose", what you lose is the invested capital, not the return on the capital they said they'd pay you.

One of the mistakes you are making here is that you are thinking that the Fed lowering "rates" lowers the rates of return on all investments, but that is not the case. It only lowers the rates on new debt securities you might buy. In fact, if you already own treasuries, then the Fed lowering rates increases the value of your position, since you can sell the bonds/bills you already have for more than you could before the rate decrease. But the broader point is that the Fed's control of debt rates (which is largely indirect) does not affect rates of return on capital invested in equity.

In order for your theory to be true, what you would have to show is that either (i) lowering debt rates (interest rates) depresses equity returns and/or (ii) lowering debt rates somehow chances capital out of the capital markets (debt and equity). In theory lower debt rates simply chases investors into the equity markets, because those rates stay high and because debt is cheap, it is easy to borrow money to fund no capital investments (which is always tied to future equity returns). There is a small negative effect on the amount of capital, but that effect exists whenever the market lowers rates too. That effect is: when interest rates are low, people who want liquid investments "invest" in cash because it is less troublesome that alternative investments in debt, which tend to be the most liquid.

So I did assume that the stock of capital available remains fixed, and it may not, but I see no mechanism and know of evidence that suggests that lowering interest rates chases capital out of the markets to the extent needed to make your theory work.

7. ### Jeff 152Registered Senior Member

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364
I agree that the Fed does not always explicitly increase the money supply. but for all intents and purposes it often does. For example, lowering reserve ratios increase the money supply through the multiplier, and even just decreasing the fed funds rate increases money circulation and causes many of the same effects of increasing money supply (too much money chasing too few goods)

I'm not saying that the fed lowering interest rates decreases the returns on all investments, i'm saying that it sends distortinary signals which leads to bad investments which destroy capital. Think of the interest rate as any other price of a good (because it is simply the price of money). A low price for a good sends the signal that supply of that good is high. Similarly, a low interest rate sends the signal that the supply of loanable funds is high - or that people are saving a lot of money and deferring current consumption for future consumption, so businesses borrow money (as it is cheap) to finance investments which will then pay off in the future. However, this future wealth is an illusion as the interest rate is artificial and the perceived wealth is merely credit. This is how we get a bubble like in housing - we get a huge oversupply of housing because the low interest rates made it easy for people to build houses and they were led o believe there would be a large demand for these houses since it appeared that people had lots of savings but when they didn't then those houses were worthless.

I really don't think the central idea here is so controversial. Why shouldn't the price of money be subject to the forces of supply and demand like every other good. Why shouldn't we create new agencies to regulate the price of cars or computers or books? Higher interest rates discourage speculative investments, which cause bubbles. If interest rates were unregulated, then they would naturally rise as a bubble is forming and people are overinvesting and depleting the supply of loanable funds, preventing the bubble from being inflated further. Conversely, in bad times after a crash, people save more and consume less, increasing the supply of loanable funds, lowering interest rates and encouraging more growth.

The fed attempts to do exactly what the market already can do automatically (except they aren't as quick to raise interest rates to rein in a boom as they are to lower them in a bust, creating an imbalance). And just like other experiments in price control, a central agency simply cannot choose prices more efficiently than the market, and i see no reason why this doesnt apply to the price of money.

8. ### Jeff 152Registered Senior Member

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364
First, I apologize i misspoke. I meant to say that though it's an independent agency on paper, it acts more like a branch of the treasury in how closely it works with the Treasury, or at times like a private corporation, because it issues stock to member banks, and pays 6% dividends on it before transferring the interest profit back to the treasury.

Second, I'll say it again, you have a much more optimistic view of the government than i do in terms of corruption. I'll put it this way, would it really surprise you to find there was some back room deal between the fed and the president, because it wouldnt surprise me because that kind of stuff happens all the time in politics.

And finally, even if there is nothing that explicit, there is nonetheless pressure on the fed to cut rates during a recession, and nobody wants to be the stubborn fed chairman who refuses to lower rates because he's concerned about the long-term consequences, same as how many of the politicians now pushing for balanced budgets by repealing entitlements are demonized for doing this in a bad time when people need those entitlements more than ever.

just google "fed pressured to lower interest rates"

there's plenty of pressure on them, from politicians, the public, and powerful corporations, and even though on paper they are independent from all of that, try to put yourself in their shoes and think about if all that pressure would affect you or not.

Whatever, agree to disagree, i'm just a skeptic when it comes to government officials sticking to their principles, and there is plenty of evidence for that.

I don't diasgree with that and neither does Schiff. You are talking about the kind of "final" cause, whereas he was talking about what conditions caused the factors you mentioned which led to the collapse. Bad lending standards and easy credit led (along with the moral hazard associated with fannie and freddie, which allowed banks to make bad, risky loans without any risk because they could simply sell them to fannie/freddie) led to misrepresentation of CMO's.

You know how those work right? A bundle of mortgages are divided into tranches, which pay out differently according to how many of the mortgages pay out. For example, there may be a safe tranche which pays out as long as at least 25% or more of the mortgages pay out, some intermediate tranches, and then a risky tranche. Now, those safe tranches are almost always given AAA by convention, which is normally accurate, but again, easy credit and poor lending standards caused mostly by fannie and freddie ad other govt incentives towards home ownership made that rating inacccurate as huge amounts of people defaulted.

Finally, most of what he was "wrong" about was due to the interventions (bailouts, stimulus, rate cuts, etc.) He addressed this later when asked about how his dire predictions for the dollar did not come true, and he responded with something to the extent of he could not have predicted how irresponsible the fed and the government would be in response to this crisis. Still, i an only postpone the inevitable.

Well he is running for senate in connecticut, so i suppose we will see just how many followers he has.

I didn't say I supported it, but of course lowering interest rates and injecting money into the economy during a recession will increase growth, employment, and improve standards of living. That is common sense. My argument is that these measures help in the short run and can help heal the hurt fast, but that in the long run, if not counterbalanced by fiscal responsibility in the future, it just makes the next bust even larger. It's like using a credit card to temporarily survive when you lose your income - as long as you pay it down once you have a lot of income again it's fine, but if not, then you are building a mountain of debt, and will just make the next time even worse. And the government does not have a good track record of the counterbalancing (higher interest rates, lower spending, increased taxes, surpluses, paying off debt, etc.).

Finally we can agree on something. I wouldn't singlehandedly place the blame on the republicans as you have, since everyone (except Clinton curiously) has run a huge deficit and been equally bad, but i suppose the republicans are more hypocritical since they claim to be the party of fiscal conservatism.

My final point will just be that I think focusing on restoring growth through all this stimulus and credit might not be the bets thing to do now. As much as it hurts, now might be the time to bite the bullet and radically change how we live. We need to start saving again, producing again. We are living beyond our means on credit. We need to rein that back and begin creating actual wealth again and not just debt-fueled consumption. In 40 years we have gone from teh world's largest creditor to the world's largest debtor. Nearly our entire economy is driven by consumption, and so much of this consumption is driven by credit and debt, and the bill needs to get paid eventually. Bottom line, I don't think taking out another credit card is the best thing to do now - it's time to cut our losses and fix this now.

9. ### Jeff 152Registered Senior Member

Messages:
364
Alright well we will have to continue this next weekend - I'm too busy during the week to do this. So don't post something and accuse me of not responding! I might have time to read it but not time to craft a response. I think we kind of came to a consensus on some stuff anyway

10. ### joepistoleDeacon BluesValued Senior Member

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22,910
LOL, ok I won't. I think we are making progress. Have a good week.

11. ### joepistoleDeacon BluesValued Senior Member

Messages:
22,910
Quite to the contrary, I think corruption runs rampant in American government...especially when under Republican control. I don't think I have ever seen a more corrupt government that what I wittnessed during the George II administration.

But the Federal Reserve being an independent agency is not a corrupt body. The extended terms of fed governors and the difficulty involved in removing them from office, make them pretty immune to political pressures.

So if you have evidence of Federal Reserve corruption please present it. No doubt, congress and other politicos from time to time heap a bunch of trash onto the Fed. But that does not mean the Fed yields to those pressures.

He should have been able to figure out that the Fed was not going to stand idly by like they did during the Great Depression and let things go to hell in a handbag. It didn't take a great brain to figure that one out. The Feds action was very predictable. So I think Shiff's excuses are pretty lame.

As Buffet pointed out long before the collapse the problem was derivate trading...the CMO's and CDS's. High risk mortagages are not a problem for the market if they are correctly branded as such. But that was not the case this time around. You had these time bombs on bank balance sheets around the globe and no one knew the magnitude nor the distribution of these these financial time bombs. That is what scared the hell out of the financaial markets and resulted in a near total shut down of the global banking system. It was not high risk mortgages. It was the misrepresentation of the credit worthiness of those mortgages when bundled and sold in the derivative markets.

As I said, Shiff is not an economist. He is a salesman.

Glad we can agree that stimulus does increase growth and improve employment. But here is what you are missing;

- If the economy contracts, federal revenues decline while federal expenses expand (unemployment, welfare, etc). So the best solution is to keep the economy from contracting even if that means stimulus.

And I suggest you do a little reading on the Paradox of Thrift. Allowing the economy to contract is the last thing one should do to fight a budget deficit and debt problem.

You cannot legitimately compare soverign debt to individual debt as you have done. That is an apples to horse comparison. Individuals do not have the power to print more money when they need cash to pay down their debt. The US government has that power, to print more money to cover its need for more cash.

If you are referring to the Republican government under George II, I would agree with you. We do not have a good record of paying down debt and being fiscally responsible. But you yourself admitted that Clinton produced a budget suplus and decades of projected surplusses.

You have a whole bunch of stuff going on this paragraph. One we need to keep up federal revenues and minimize federal spending. You do that by stimulating the economy and maintaining federal revenues. Declining federal revenues triggers a lot of baked in federal spending (e.g. welfare, unemployment, medicaid, etc.). The next thing thing you know, is your infrastructure is in disrepair and you no longer have the infrastructure needed to have a healthy economy...this is the death spiral and it needs to be avioded at all costs. It took us 10 years to pull out of the last Great Depression, we don't need to repeat the mistakes of the Great Depression...especially since we know better.

Two, once the economy has healed, then you go about fixing the damage to the balance sheet/debt problems. It is important to draw the distinction between short term and long term budgets. On the short term, we really have no realistic alternatives. We need to supplement aggregate demand with government stimulus. That means more deficit spending. On the longer term, it is CRITICAL that we develop a solution to bring our debt more in line with GDP. And I agree with Krugman, I think it is very possible and very likely if we stay with a Democratic government. As Democrats do have a recent track record of fiscal conservatism...a claim Republicans cannot honestly make.

I think the history of the last 20 years shows us that Democrats are willing to step up to the plate and make those difficult decisions. Unfortunately you will not find same on the Republican side of the fence. When in power their tendency is to reward political and financial supporters with federal dollars and with no regard to the average tax payer.

The reason the US is the largest debtor nation is because of our trade deficits. And about half of that is because of oil imports. We need to use our own natural gas resources...something oil and coal interests have been succesful in thwarting...and wipe out our oil trade deficit which will keep more money at home and promote domestic investment and growth.

http://www.pickensplan.com/theplan/

Last edited: Jul 19, 2010
12. ### Buffalo RoamRegistered Senior Member

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16,931
If you are talking about a Free Market Economy, something that doesn't exist at this time, Free Market.

Keynesian works well until you run out of the tax prayers money, you cannot spend your way out of deficit and debt, you can only create more deficits and debt.

Since FDR and the Democrats started us on the Keynesian way, and what has happened to the debts and deficits of the United States, they have only increased.

For Keynesian economics to even have a chance to work, the Government must save during good economic times, and then only spend during bad economic time, the problem as created by our Liberal Friends, is that when the good times came, instead of cutting the deficits, paying off debt, and actually allowing the people to save money, they raised taxes, and spent even more on top of the old debt, increasing the deficits and cost.

Those deficits and debts are charged interest, and as the debt increases and time goes on, the compounding of that interest starts to raise the cost of the debt exponentially, adding even more to the cost and debt.

13. ### joepistoleDeacon BluesValued Senior Member

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22,910
I suggest you read and become familar with "The Paradox of Thrift".

I suggest you look at the history of US debt. This nation was born with debt and has been growing ever since...for more than a century before a man called John Maynard Keynes was even a glimmer is his daddys eye. So you need to get your facts straight mr. buffalo roam.

The trouble here is that you don't know what your are talking about buffalo roam. Show me when a Republican president ever exercised fiscal restraint. Clinton did exercise fiscal restrain by delivering a budget surplus.

Two, the nominal debt is not a problem. Debt as a percent of GDP is a problem. And to advocate fiscal cuts that will generate more fiscal spending (medicaid, unemployment, etc,) and cut federal revenues (by contracting economy or tax cuts for the wealthiest) at the same time is just shear lunacy.

14. ### Buffalo RoamRegistered Senior Member

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16,931
joe, as usual you spin.

Yes, the U.S. was born in debt, but it wasn't until the implementation of Keynesian Theory in our economics by FDR and the Democrats that our deficit and debts started to rise.

The secrete was that the public, the tax payer was saving, and the Government didn't have mountains of social programs that sucked the money out of the saving and economy.

Let look at the actual debt of the country from 1861 to 1999, there was no problems with rising debts, in point of fact they were well in control right up to 1932, and then, FDR and Keynesian Theory.......

From 1861 to 1975, the debt for which the government could be partially or wholly liable would be that of government-sponsored enterprises, railroads, insular possessions and the District of Columbia.

Added together, these categories of debt could be seen as the true national debt which, to according to what I can find, hasn't been calculated.

Robert Sahr.

Yes, it started with FDR, and under Jimmy Carter:

http://eh.net/encyclopedia/article/noll.publicdebt

15. ### joepistoleDeacon BluesValued Senior Member

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22,910
LOL, if spinning is painting an honest picture, then count me guilty.

First, let us recount, you claimed that debt of the United States had been increasing ever since FDR. And I pointed out to you that the nation was born in debt and has had ever increasing amounts of debt. So now you admit that is the case and increasing debt was not new to FDR.

And may I remind you that the big reason why debt soared under FDR was a little thing call World War II. Are you suggesting that The United States should not have responded to the declarations of war issued by Japan and Nazi Germany on The United States?

How would you suggest the Democrats fight WWII and not run up a debt?

This has been explained to you numerous times in numerous threads that nominal debt numbers are nothing by themselves. They need to be put into perspective. And the way that is done is by relating them to the Gross National Product.

So your lovely charts mean nothing. And if you look closely you will note that the Republican icon Ronald Reagan presided over a huge increase in the national debt and expansion of federal government. Carter over saw a very modest increase in national debt.

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17. ### soullustRegistered Senior Member

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1,380
OH buff don't start blaming debt on the Democrats I mean it must be a typo democrat Republican i can see how they mix

..K Ty.

(Millions USD)
% Total debt

Republican Debt Since 1966
Total debt 6408637
% 78.16

Democrat Debt Since 1966
Total debt 1790704
% 21.84

http://www.lewrockwell.com/giles/giles14.html

good little read you might learn something.

Republicans were fucking you guys sence 1966 when they knew the gold standard was going to be dropped, Good ole Nixon Probally the best at being dumb RepublicanPresident that was..

http://en.wikipedia.org/wiki/Nixon_Shock

That wasn't the main cause of it, but it is when The USA adopted fully your current Capitalistic bank sector, screwed the US of A.

Last edited: Jul 19, 2010
18. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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23,198
The US has not had a free market for at least 100 years. Not only are there many desirable governmental interferences with it such as the FDA, speed limits, FDIC, FAA, NBS, mandated MPG averages, EPA and dozens of others but there is the IRS, which is central planning in disguise. I.e. almost all important economic decisions, both for individuals and corporations are strongly influenced by the tax law and their 1000s of special cases such as depletion allowances, solar energy credits, home deductions that favor buying instead of renting etc.

Few who actually consider the effects (instead of just spout ideology) would disagree that when there is a business cycle’s great contraction in the private sector spending and jobs, the government must increase its spending to compensate so that recessions do not progress into depressions. In economies where individuals / companies make the decisions about volume of production there is a natural tendency to boost production when demand and profits are rising, but as all do this, soon there is a surplus of goods and reduction of jobs, buying etc. I.e. “business cycles” are inherent in economies that do not use central direction to control the volume of production. Unfortunately this cure for the business cycle is much worse than the “disease” of the business cycle instability.

The posts relating to the current economic problems, the growing debt as Keynesian policies are applied, are basically correct, but are mainly about how to treat the symptoms, not the fundamental cause of the current problem. That is also inherent in the private, self serving, decisions economy.

For example, liberals wanted to help the poor buy houses and used the government to achieve this goal. Conservatives (especially those with connections to banks and the financial markets) were very happy to assist as great profits were possible with the risk passed on to the tax payers. Thus lending standards for home buying essentially ceased to exist (but not the loan placement commissions, etc.) Home prices rose with the demand, much faster than a sustainable rate. (I pointed this out more than 5 years ago – noting that no established sector of an economy can grow 4 or 5 times faster than the total economy for more than a decade. Also see post my “6L cycle” thread which explained the six phases of the then still coming housing price collapse. I.e. the inherent business cycle instability is usually focused on one sector of the economy, such as the “dot com” or “Florida land” bubble.)

Unfortunately, especially under Republicans, the government tends to ignore the fundamental causes of the economic problems and throw money into the financial system. In this crisis, mainly guaranteed “toxic assets", bail out banks, prop up GM, etc. -- I.e. government aid/ welfare for the already rich, who tend to vote for Republicans who normally decry "welfare spending" (if it is not benefiting them).

The fundamental problem of this crisis was that self interest in the private decisions economy of the US moved far too many into homes that could not actually afford. That was ignored and the economic consequences were treated instead. Even before TARP, Paulson’s plan to cope with toxic assets, help banks etc. was even voted on, I posted why it would fail, as it did, and offered a detailed alternative that would have worked as it did address the fundamental problem. See post “Paulson’s plan, do it or not.”

SUMMARY: Keynesian policy is wise but rarely followed in the “good times” ( Clinton did. Ran surpluses, reduced debt, etc. but he is the exception.)

MY alternative plan, which addressed the fundamental problem is at:
http://www.sciforums.com/showpost.php?p=2197527&postcount=66
And to show that Obama's Geithner, replacement for Paulson, was still treating the symptoms and not the cause, see:
http://www.sciforums.com/showpost.php?p=2197527&postcount=66 (Plus post thru 69 where questions of others are answered.)

While looking for the "6L cycle" thread, I found this plan for ending use of paper money (with many great advantages for the US, including very significant reduction in your tax bill, if you are honest taxpayer, and the essential elimination of imported hard drugs). See:
http://www.sciforums.com/showpost.php?p=937774&postcount=1
Or for those not willing to phase out paper money, there is my "red dollar" plan at:
http://www.sciforums.com/showpost.php?p=2083222&postcount=22
And a simple tax plan to get the IRS out of the disguised central planning business. It fits on a 3 by 5 index card, not in a room full of books, is fair and just. See it at:
http://www.sciforums.com/showpost.php?p=1792841&postcount=1

Finally found the "6L cycle" post, predicting and explaining the housing bubble bursting at:
http://www.sciforums.com/showpost.php?p=1502039&postcount=1

Last edited by a moderator: Jul 25, 2010
19. ### Buffalo RoamRegistered Senior Member

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16,931
You couldn't find a less biased source? plus one other problem, the dollar amounts aren't adjusted for inflation year to year, or against GNP.

From;

http://www.lewrockwell.com/giles/giles14.html

Public debt has been aggregated quarterly since 1966. ​

Lets see the 89th U.S. Congress;
Senate Majority: Democratic
House Majority: Democratic

90th U.S. Congress;
Senate Majority: Democratic Party
House Majority: Democratic Party

91st, U.S. Congress;
Senate Majority: Democratic Party
House Majority: Democratic Party

92nd, U.S. Congress;
Senate Majority: Democratic Party
House Majority: Democratic Party

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Senate Majority: Democratic Party
House Majority: Democratic Party

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Senate Majority: Democratic Party
House Majority: Democratic Party

95th, U.S. Congress;
Senate Majority: Democratic Party
House Majority: Democratic Party

96th U.S. Congress;
Senate Majority: Democratic Party
House Majority: Democratic Party

97th, U.S. Congress;
Senate Majority: Republican Party
House Majority: Democratic Party

98th, U.S. Congress;
Senate Majority: Republican Party
House Majority: Democratic Party

99th, U.S. Congress;
Senate Majority: Republican Party
House Majority: Democratic Party

100th, U.S. Congress;
Senate Majority: Democratic Party
House Majority: Democratic Party

101st, U.S. Congress;
Senate Majority: Democratic Party
House Majority: Democratic Party

102nd, U.S. Congress;
Senate Majority: Democratic Party
House Majority: Democratic Party

103rd, U.S. Congress;
Senate Majority: Democratic Party
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104th, U.S. Congress;
Senate Majority: Republican Party
House Majority: Republican Party

105th, U.S. Congress;
Senate Majority: Republican Party
House Majority: Republican Party

106th, U.S. Congress;
Senate Majority: Republican Party
House Majority: Republican Party

107th, U.S. Congress;
Senate Majority: Democratic Party[2]
Republican Party
House Majority: Republican Party

108th, U.S. Congress;
Senate Majority: Republican Party
House Majority: Republican Party

109th, U.S. Congress;
Senate Majority: Republican Party
House Majority: Republican Party

110th, U.S. Congress;
Senate Majority: Democratic Party
House Majority: Democratic Party

111th, U.S. Congress;
Senate Majority: Democratic Party
House Majority: Democratic Party

So lets see since 1966 the Democrats have controlled the House for 17 terms, and the Republicans for 6, yes I can see the numbers adding up already.

Now for your edification, it is the House who holds the purse strings and writes the Budget, that is according to our Constitution, so, ergo, the Democrats have controlled the budget for 68 quarters vs: the Republicans 24?

Hmmmm?

Now just what don't you understand that the debt is the deficits passed along from one Congress to the next, and that 68 cycles of deficit spending were under Democratic control of the House, and passed by them, the House is where the Budget is written by law as prescribed by Constitution.

And one other little point, this problem is from both parties, mainly the Democrats who haven't slowed down their spending one sinter, and the RINO's of George trying to out democrat the democrats, and buy the masses with social welfare, and the fact that over the years when the Republicans were out of control, they let the Democrats and liberals roll them time and again on budget matters.

Yes, the Democrats had 68 quarters of passed on deficits, which is what makes up the debt, the Republican 24, the numbers speak for themselves, and your citation is bogus because it doesn't account for inflation adjustments, and GNP growth.

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16,931
21. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

Messages:
23,198
Comparison of debt increase to GDP makes sense in that it shows how much of the GDP could be considered to be due to Keynesian government spending debt increase, in quasi normal times, but that is still very crude - little things like WWII make huge increases in debt.

Correction of debt for inflation seems totally pointless - If there is $100,000 of current debt created under George H W Bush (when dollar was more valuable than when his son, GWB, was POTUS) are you saying GWHB's$100,000 is really more debt than $100,000 debt increase by GWB? Most of the debt is in fixed dollar amounts. Paying back$100,000 does not become easier or more difficult now just because it was an increase under GWHB or GWB does it?

What is important and time based is the amount of interest paid on the $100,000 prior to it being paid off. That too is a very difficult factor to evaluate as except for President Clinton, no modern president has paid off even one cent of debt - They pay maturing bonds by printing new ones. ("roll them") Despite your spin efforts it is fact that debt has increased much more under Republican presidents than Democratic ones, especially if WWII debt increase is put aside as a non-political necessity. Has ANY Republican president actually paid off debt as Clinton did? Last edited by a moderator: Jul 25, 2010 22. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member Messages: 23,198 That too is a silly argument. Most of the debt is funding that Congress had to approve. For example Clinton started no wars but the two bushes started three (Iraq twice). Are you suggestion that Congress had some choice in buying bullets & bombs etc for the wars the POTUS started? Most of the budget in mandated, either by laws or urgent necessities, usually created by the POTUS. Again Clinton paid down debt because he had the good sense / intelligence not to start needless (and probably un-winnable) wars. 23. ### Buffalo RoamRegistered Senior Member Messages: 16,931 Billy T, Clinton paid down nothing on the debt, any reduction was forced by the fact that the Republicans controlled congress in Clinton's last term, his best year was 1999 when there was only a$17 billion dollar deficit, but by 2000 that had ballooned back up to $133 billion dollars. There was no budget surplus, there was no reduction in the National Debt. All the supposed savings, and debt reduction, were in the out year budgets, future budget by crystal ball. Let see what the Treasury .gov, shows? http://www.treasurydirect.gov/NP/NPGateway 01/21/1993 ----$4,174,218,594,232.91 to;

12/31/2007 ----$9,229,172,659,218.31 Clintond first term the national debt went up by$5,050.953,623,980.40 Trillion Dollars

Now lets look at what Clinton's second term left George;

The National debt stood at
01/21/1997 --- $5,310,267,076,516.85 and ended at 01/19/2001 ---$5,727,776,738,304.64

a additional $417,509,661,788,.99 Billion Dollars for a grand total increase of$5,472,464,285,769.39 trillion dollars in the national debt under Clinton's watch.

So where did Bill pay down any national debt?

Not according to http://www.treasurydirect.gov/NP/NPGateway, the official Treasury site for up to the minuet numbers??

Now lets be far and see the damage George and the RINO's did;

George started out with a national debt of,

01/19/2001 --- $5,727,776,738,304.64 and ended with, 01/21/2009 ---$10,625,053,544,309.79

not bad, $5.1 Trillion Dollars and change..... Now lets see Obama comes in with; 01/21/2009 ---$10,625,053,544,309.79

and as of 7-23-2010 He and the Democrats have run the tab up to;

07/22/2010 ---$13,249,153,625,870.38 That is in 19 months Obama and the Democrats have added another$2,624,100,081,562.59 trillion dollars to the National Debt.

Now lets see, that is a average of $138,110,530,608.55 dollars of debt a month, and Obama has 29 months left in His Term, so that means that we are on track for Obama and the Democrats to add another$4,005,205,387,648.15 Trillion dollars to the National Debt, in the next 29 months, for a grand total of another $6,629,305,469,210.74 dollars of National Debt. So if Obama get two terms, that number can double at the least, and man does Obama and the Democrats make George look like a piker, under Obama's policies we are looking at adding another$13+ Trillion Dollars of Debt to the \$12+ trillion dollars of Debt we now have.

Last edited: Jul 26, 2010