basic economic question

[thefairlaneman]

I admit Im not a capital investor and dont know alot about economics but my question is after the government prints up an additional one trillion dollers to rescue all these bankrupt companys wont it devalue our american doller more? Seems kinda stupid to me to do something that will create even more inflation and raise interest rates in the face of millions who cant afford to pay their home loans now? Whats up with this? They say this is one reason gas is so high now.

 

[DJ]

Re: basic economic question

The short answer is yes.

The second answer is it's easy and somewhat transparent to the average American.

 

[f_inscreenname]

Re: basic economic question

Not necessarily. At the moment the ?bail outs? consist of guarantees on loans. No money. The Gov is also getting large chunks of these companies (about 80% on average) just for those guaranties.

 

[Kiwi Phil]

Re: basic economic question

We have a saying down here in Queensland:
"When you are up to your ars* in crocodiles, always remember you are there to drain the swamp".
I reckon that pretty much sums up what is happening....no one is dealing with the real issue, just fighting off the crocs.
I believe your biggest problem is, your nation has been borrowing heavily throughout the world (IOU's) to support consumption....like a nice holiday, new plasma TV, a bigger house or boat or car....all borrowed....all consumer products that have no lasting value, or depreciating liabilities.
Little has gone into infrastructure to provide future production.

Same thing down here....just just on a smaller scale as there are less of us.
We too have people who get a credit car so they can draw on it to make payments off the others.

The best solution is to pull the plug and let those that can't survive go, but that won't happen.

Cheers
Phillip

 

[ebry710]

Re: basic economic question

Consumerism works in a closed system. Where the US is having problems is that it is working in a open system were China and the oil rich nations are not buying and cannot buy enough American goods to balance trade. So these countries end up with all the cash at the end. The US mint is making more cash but that is causing inflation. Trading partners who are hording cash will find that their money is worth less and unless that reinvest it back into the system their hold on the US economy will slip. Of course the average US consumer will be broke at that time, consumerism will stop, bread lines will start and the balance of trade will correct itself.

On the subject of infrastructure, don't worry that Americas isn't making enough. That is one thing that hasn't stopped.......now useful infrastructure that maybe another thing.

 

[Uraijit]

Re: basic economic question

I admit Im not a capital investor and dont know alot about economics but my question is after the government prints up an additional one trillion dollers to rescue all these bankrupt companys wont it devalue our american doller more? Seems kinda stupid to me to do something that will create even more inflation and raise interest rates in the face of millions who cant afford to pay their home loans now? Whats up with this? They say this is one reason gas is so high now.

Without a doubt. Why do you think the cost of EVERYTHING is rising? Short sighted folk try to blame it on the rising cost of gas. Not so--it's the debased currency. If there's more money, money is then worth less. If it's worth less, then the cost of goods has to rise in order to receive a fair trade in value.

We used to have a system of currency that was actually backed by something (Gold and silver). The central banks duped us out of that a while back, and it was okay for a while. Because at least they still had to run a printing press to make more money.

Now, they literally just "MAKE money" on computers, and do "wire transfers" of this non-existent money to all of the smaller banks.

Need 500,000 for a new house? NO PROBLEM! A few keystrokes, and we have magical "money".

This form of money is called "M3" and it's no longer reported to Congress. The Federal Reserve Bank keeps it a secret from EVERYBODY.

My mother always liked to tell a cute story about me when I was a very young child. I asked her to buy me something, and she responded that she didn't have enough money. I replied "Why don't you just write a check?".

It would seem that our government (and the puppet masters running the PRIVATE bank known as the "Federal Reserve Bank" are still basing their practices on the simple-minded ideas that are normally reserved to the 4-year-old crowd. Cute story when a 4-year-old thinks it. National disaster when the folks who control our money supply think it.

Tough times ahead. Get ready to tighten your belts, folks!

 

[JB]

Re: basic economic question

About ten trillion bux have evaporated in the last year. Those bux were imaginary "equities" in real estate. Lenders and borrowers gambled that the "value" of real estate would not only hold, but continue to rise as it has for the last 27 years. They also gambled that the borrower's income would continue to rise as it has for most of those 27 years. They spent that future value and that future income.

Both gambles failed. The bills are due.

Oil speculators gambled that the value of crude would skyrocket, so they bought on margins and drove the price up a bit over 100% in only a few months. That drove the price of all petroleum based energy and products up and panic spread across our economy.

Just as in 1929 much of the wealth in our country evaporated into thin air because it was based on "futures" that didn't materialize.

Now we are stuck with a goose that laid brass eggs and a cow that gave sour milk.

Do we kill 'em and eat 'em or do we nurse them back to health?

 

[tashasdaddy]

Re: basic economic question

time to buy a bicycle, cow, couple of chickens, and plant a fall garden. become self sufficient again.

 

[gonefishie]

Re: basic economic question

So how did they handled it back then JB? Was welfare a giant part of the puzzle? Was America playing big brother? was there as much infrastructures to support? I am not trying to argue with you, just want to learn the facts.

I wonder how much money they wouldn't have to print if welfare is more restricted (if you don't work, you don't eat) and foreign affair spending get cut drastically.

 

[fdmsiv]

Re: basic economic question

What I am curious about is what happens if the Feds decide to take their 79.9% share of these companies? It makes me very worried! W has done a great job running this country, lets give him a try at AIG

I know that it is probably paranoid but what happens when the people in power decide that everyone should vote for their candidate or bad things will start happening on Wall Street? Far fetched - Yes, but your not paranoid if people really are after you.

 

[mthieme]

Re: basic economic question

Why do you think the cost of EVERYTHING is rising?

True, my Verizon bill and Sierra O/B parts are holding steady.
Everything else -
Electric - up 170%, Food - up about 20% average, Insurance - up 40%, School - up 15%, a friggin quart of HD30 oil - up 70%, Propane - up 30%, taxes - up (haven't figured the percentage but it's double digit)........need I go on?

Pay - up 3%
What's wrong with this picture?

 

[QC]

Re: basic economic question

What's wrong with this picture?

The time period that you painted it across is too short . . .

 

[bootle]

Re: basic economic question

Kiwi Phil has spelled it out in a very concise manner, he is absolutely correct, the problem is, we Americans have become accustomed to eating our cake and still wanting to have it.
The old adage still holds true," No pain,no gain ".
We have either been taxing and spending or borrowing and spending.
The common denominator is "SPENDING", we must cut spending.

 

[JB]

Re: basic economic question

So how did they handled it back then JB? Was welfare a giant part of the puzzle? Was America playing big brother? was there as much infrastructures to support? I am not trying to argue with you, just want to learn the facts.

I wonder how much money they wouldn't have to print if welfare is more restricted (if you don't work, you don't eat) and foreign affair spending get cut drastically.

There was another element back then that really aggravated the situation; drought. It was ten years before recovery really took hold, and that was caused entirely by Adolph Hitler, Benito Mussolini and Hirohito.

What the man on the street or in the field did was pull in his horns and get down to basics. . .survival level basics. The Government helped with programs to put people to work. . .CCC, WPA and others. I guess you could call that welfare, but it was work for the money. Social Security was the one socialist program that survived. Welfare came later. People who had "lost everything" found out, slowly, that they hadn't lost what mattered most. . .will. They applied that will and held on. Then the war came and everyone had work. Work and money (which they used to buy War Bonds to finance the work). Even the millions who put on uniforms and went in harm's way on our behalf bought War Bonds.

Large parts of middle America became much like parts of Africa are today. You couldn't eat the dust and there was no water to wash it down if you could. To get a feel for what the depression of the thirties was like for people in the dust bowl, read The WORST HARD TIME, by Timothy Egan. It will make you weep, but it will make you feel sooooo fortunate and far less a victim.

There will be no quick fix for this fix. Far harder times are ahead for many of us. Our goals will change. We will become much less consumers and much more conservators, and we will prevail. . .stronger and wiser. . .just as our grandparents did.

 

[arboldt]

Re: basic economic question

Similarities to now from 80 years ago:

1) There was a great deal of "irrational exuberance", as people thought the market would always go up, so bought those futures at ever-higher prices. Eventually the bubble burst. There were actually several bubbles.

2) There was a collapse in the money supply. It was not that there were no goods to buy, but there was no money to buy them.

3) There was a series of natural disasters -- floods, dust bowl, multiple crop failures.

3) The driving force of everything was greed. After the collapse, people turned to each other and there was more mutual help. Initially there was little or no government help for individuals.

Differences:

1) There was no bank deposit insurance. If your bank failed, you lost it all.

2) Amortized mortgages were not common. You had to come up with the whole principle or renew it with a new mortgage every few years; with bank failures and collapse of the money supply, you couldn't renew, so you lost it. Now, you pay off your mortgage a little each month, and mortgages typically cover a much longer time period (like 30 years instead of 5 years). People that went with a lot of the "new" mortgages have situations more like 1930 than now.

3) The money supply was based on hard specie. There's only so much gold and silver in the world, and that limited the money supply. Now the money supply is mostly accounting entries in computer databases. Only a miniscule percentage of money is actually physically printed or minted today. Unfortunately accounting entries are easier to wipe out than hard currency.

4) [This is one point where there could be legitimate argument] Government and economic leaders understand the impact of government etc and their action / inaction on the economy. And they really do understand it much better than 80 years ago. The opposing voice is that they really don't understand it well enough, and this is also true.


My grandfather had been working as a caretaker for a wealthy family. They lost everything, and so did my grandparents. Some family friends let them use a house in a rural area rent-free that had been unoccupied. Another family friend let my grandfather cut down trees on his farm to use for heat. Another family friend loaned my grandfather teams of horses to drap those downed trees to the house so he could cut them up for firewood. Very few people today could heat with firewood even if they had access to it. And even fewer have teams of horses to drag the tree trunks. Now there may be some here that would have the work ethic to take advantage of these offerings if they could, but I fear most of our society does not have that ethic.

 

[Uraijit]

Re: basic economic question

True, my Verizon bill and Sierra O/B parts are holding steady.
Everything else -
Electric - up 170%, Food - up about 20% average, Insurance - up 40%, School - up 15%, a friggin quart of HD30 oil - up 70%, Propane - up 30%, taxes - up (haven't figured the percentage but it's double digit)........need I go on?

Pay - up 3%
What's wrong with this picture?

I dunno about your Sierra parts, but the reason for the Verizon bill staying steady, is because you were locked into a rate when you signed up.

My wife's parents property taxes DOUBLED this year!

My food costs have gone down, because we've restricted our eating out to once a week. For a while there, we were eating out almost every meal... It's amazing what a little bit of self-restraint can do for your pocketbook...

Good thing too, cause the company I work for just went belly-up. At the end of the month, I won't have a job anymore. Hopefully the business I've started up will be self-supporting by then, and I can say goodbye to The Man for good.

 

[gonefishie]

Re: basic economic question

Wow! I am getting depressed. Make me wanna start endulging when I still got a chance. Take out a few more loans, max out the cards before poops hit the fan.

 

[modernrocketry]

Re: basic economic question

They say this is one reason gas is so high now.

Crude Oil is traded against the US Dollar in international markets.
The US Dollar is weak at the moment, so it takes more of them to buy that Oil.

 

[mthieme]

Re: basic economic question

The time period that you painted it across is too short . . .

I mentioned a time period?
Here's the time period...the more time this goes on, the less further my dollar goes.

 

[QC]

Re: basic economic question

No you didn't, that was what concerned me . . . I'm just pointing out that if you compare that over a long period of time and include inflationary adjustments, then most of that stuff has been flat or is cheaper . . .