Monetary Tsunami In America!!

A quick thought from someone who is definitely a non-expert and a non-American.It seems to me that the only way the US is going to get any kind of a handle on its debt is to raise interest rates and create an economic climate where inflation runs rampant.I can't see any other way of eliminating the deficit, and then starting on the debt, other than with highly inflated dollars. Even then government spending is going to have to be massively reined in, which for one thing is going to require stopping huge amounts of money being spent on military ventures in other parts of the world.

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Everybody is entitled to my opinion.

The third way is to print it, and from what is being said, they are printing quite a lot now. (figuratively speaking) They are increasing the money supply which will eventually lead to inflation as we pull out of the recession.

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And yet something feels different this time. Technology and globalization are working together at warp speed, creating a powerful new reality. Many more goods and services can now be produced anywhere on the globe. China and India have added literally hundreds of millions of new workers to the global labor pool, producing the same goods and services as Western workers at a fraction of the price. Far from being basket-case economies and banana republics, many developing economies are now stable and well managed, and companies can do business in them with ease. At some point, all these differences add up to mean that global competition is having quite a new impact on life in the U.S.

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It all adds up to bad news for the Americans.

Print it, and drop it from helicopters.Printing money doesn't cause inflation until aggregate demand catches up with production. Only then does the increased demand for goods and services cause inflation in the price of goods and services. As long as there are unemployed service providers (there are, 12-15% of Americans are unemployed but willing to work) and unsold goods (1.5 trillion dollars worth of goods, languishing in warehouses or on store shelves) then extra dollars won't raise the price of anything. Who gives a shit about the national debt? We should be increasing the debt to counteract the recession. The recession is more important than the debt. Why? People aren't not buying things because they're spending their money overseas, instead; people aren't buying things because they don't have any money to spend on things. 1.5 trillion dollar shortfall in aggregate demand, remember? I posted the chart about it. Did you look at it? Why do you think that Americans are buying 1.5 trillion dollars less stuff?It's because about a trillion dollars of their money completely disappeared. They invested that money, or had it invested on their behalf, in home equity. But when home prices fell, all that equity disappeared, and the money along with it (because it was the money.)People are a trillion dollars poorer, because their money disappeared. So what the government should do is give people about a trillion dollars and have them spend it. The government should raise this money simply by printing it, and it won't cause inflation because unemployment is high and aggregate demand is artificially depressed.It really just could not be any simpler.

The only way the US is going to get a handle on its debts is when the economy starts growing again, and the national debt becomes less and less of a fraction of GDP.The only way out of debt for a government is to grow its way out. You can't model a nation's economy as a function of kitchen table finances.

I don't disagree with that but I just don't see that happening without having an economy where the dollar will buy considerably less than it will today.I don't see this as a good thing at all but I think that it is something that will happen regardless.

We want the dollar to buy less in the future than it will today. That's something we want to happen - it's better for people who have debt, which is basically everyone, and it promotes investment and the flow of capital instead of people simply hoarding dollars in a Scrooge McDuck-style money pool.Inflation is a good thing.

Except that high inflation means high interest rates and then they feed on each other. (Bit like a dog chasing its tail)It didn't work out well in the 80's. If you look at the current housing crisis in most of the US and then have the current interest rate increased 2, 3 or 4 times the amount it is now and then consider the consquences.

Whose high interest rates? It didn't work out in the 80's because the economy was hit by a supply shock - the capacity of the American economy to produce was diminished (by oil price manipulation.) The situation we have now is the exact opposite - the cause of this recession is that the capacity of the American economy to consume has been reduced. Our ability to produce has never been better, but the factories are idle, and the workers are furloughed.

LOL. Because whenever the government otherwise gives money out to people, they always spend it on domestic goods.

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Check out No webpage found at provided URL: Apollo's Temple!
Ignorance is temporary; you should be able to overcome it. - nwr

It's certainly the case that when you give money to people who can't afford airline tickets, the bulk of their spending is going to be domestic. Where else would they spend it?How much of that can even be foreign spending? Nobody in Peoria is going to buy a house in Phuket.

That depends on the people and the form in which they get the money.Edited by Dr Adequate, : No reason given.

LOL. Look only to these maps (from Worldmapper) to see how wrong you are about the causes behind stagnate U.S. production: Negative Savings
Goods Exports/Imports
Manufacturing Imports/ExportsThere's clearly plenty of money to be spent; no one's buying the lame shit made in America, thoughnot even the Americans.JonEdited by Jon, : clarity

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Check out No webpage found at provided URL: Apollo's Temple!
Ignorance is temporary; you should be able to overcome it. - nwr

You keep LOL'ing, which I guess makes you a joker because the things you say aren't true. US production is about as high as it's ever been: it's aggregate demand that has fallen: This is a demand-driven recession. If you don't believe me or the data, there's always Washington Post contributor Ezra Klein:

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The problem with the American economy isn’t that business isn’t profitable or that workers aren’t productive. The problem is that people are buying far less than they used to, and that means that businesses are employing fewer people.

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Or Paul Krugman:

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The key to Keynes’s contribution was his realization that liquidity preference the desire of individuals to hold liquid monetary assets can lead to situations in which effective demand isn’t enough to employ all the economy’s resources.

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If you're trapped in the neoclassical paradigm, of course, then the very notion of a demand-driven recession is inconceivable. But Keynes proved that it not only could happen, but that it did happen. And by the exact same criteria, it is happening. There's been no external shock that torpedoed our manufacturing capacity - nobody bombed our factories or killed thousands of our workers. The shock to the economy was money disappearing from the pockets of the middle class:

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Educated middle-class households have suffered the biggest financial losses from the recent economic downturn and many people could be forced to delay retirement as a result, new research has shown.

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http://www.telegraph.co.uk/...ses-from-financial-crisis.htmlNo, there's not - even according to your own sources.Edited by Admin, : Reduce image width.

Tell it to the Germans who swept billions in mark bills up in the streets when the sheeple caught on to the government's policy of inflating the sheeple's marks until their savings became worthless and everyone became broke.Way back in the 1960s and 70s Howard Ruff and Gary North etc were warning that sooner or later that unbacked paper $$ would inflate via the printing presses and lead to what is happening today as the sheeple's 401ks and other $$ savings are evaporating.Inflation becomes a form of insidious taxation as the government lessens it's debt obligation via inflating the debt so as for the sheeple to pay for the government fat cats who spend like money grows on trees, who pass oppressive laws on the sheeple while they and their cronies are exempt from them. The monstrous health care bill is a good example where Obama's union buds and other special interests who help keep Democrats elected are exempt.Crashfrog, what you are proposing is similar to pyramid scams that work for awhile and then leave the investors in the lurch.Having read things like "None Dare Call It Treason" by John Stormer, 1964 and similar books, I have been predicting runaway inflation and been called a conspiratist wing nut ever since.Way back in 1965 after you could no longer take your paper into banks and trade for silver coinage, I've been predicting eventual runaway inflation. Unbacked money, historically always eventually crashes. Edited by Buzsaw, : correct a word

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BUZSAW B 4 U 2 C Y BUZ SAW.
The Immeasurable Present Eternally Extends the Infinite Past And Infinitely Consumes The Eternal Future.

Someone has to be really, really stupid to think that the guy who is glad to accept $$ for his services today will not invest those $$ in something of real value before the $$ evaporate away.

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BUZSAW B 4 U 2 C Y BUZ SAW.
The Immeasurable Present Eternally Extends the Infinite Past And Infinitely Consumes The Eternal Future.