A hard currency standard is the key to world peace

[josephpalazzo]

If a hurricane hits DC and the government spends a bajillion dollars to rebuild it, then that's a jump in GDP even though in material terms that's a ginormous loss.

It's not a foregone conclusion that the GDP would go up in this case, as one must take into account that many won't be working on account that the factory or the shop at the mall has been destroyed. So, some people are going to work extra - those who will be involved in the reconstruction - but there are others who will be laid off. Also, money spent on reconstruction is NOT money spent on new equipment/buildings, or on reducing government debt, or on tax cuts. The whole effect is usually negative on the GDP, not positive.

If increasing prices causes everything's price to jump 20% but people still buy things at the same rate as before, that's a jump in GDP even though everyone's doing everything the same way.

Prices don't increase on their own. There has to be a cause. And there are two types of GDP that are always measured: real GDP, which has been adjusted to inflation; and nomimal GDP, which is not adjusted to inflation.

And how does one inflate the US dollar, by waving a magic wand???

By printing money/changing a database entry, so yeah, kinda.

The Fed only prints money to replace old bills that have been worn out. It's an old myth that the FED inundates the market by printing more money. Stop watching Fox News. And maybe you'll make more sense. As it is, your knowledge of economics stinks.

[zarus tathra]

It's not a foregone conclusion that the GDP would go up in this case, as one must take into account that many won't be working on account that the factory or the shop at the mall has been destroyed. So, some people are going to work extra - those who will be involved in the reconstruction - but there are others who will be laid off. Also, money spent on reconstruction is NOT money spent on new equipment/buildings, or on reducing government debt, or on tax cuts. The whole effect is usually negative on the GDP, not positive.

If the old buildings are destroyed and they build new buildings, then that's "new economic activity."

Prices don't increase on their own. There has to be a cause. And there are two types of GDP that are always measured: real GDP, which has been adjusted to inflation; and nomimal GDP, which is not adjusted to inflation.

The cause is that some people have more money that was created by the Fed.

The Fed only prints money to replace old bills that have been worn out. It's an old myth that the FED inundates the market by printing more money. Stop watching Fox News. And maybe you'll make more sense. As it is, your knowledge of economics stinks.

here you go

[josephpalazzo]

It's not a foregone conclusion that the GDP would go up in this case, as one must take into account that many won't be working on account that the factory or the shop at the mall has been destroyed. So, some people are going to work extra - those who will be involved in the reconstruction - but there are others who will be laid off. Also, money spent on reconstruction is NOT money spent on new equipment/buildings, or on reducing government debt, or on tax cuts. The whole effect is usually negative on the GDP, not positive.

If the old buildings are destroyed and they build new buildings, then that's "new economic activity."

Which part of "It's not a foregone conclusion that the GDP would go up in this case, as one must take into account that many won't be working on account that the factory or the shop at the mall has been destroyed. So, some people are going to work extra - those who will be involved in the reconstruction - but there are others who will be laid off. Also, money spent on reconstruction is NOT money spent on new equipment/buildings, or on reducing government debt, or on tax cuts. The whole effect is usually negative on the GDP, not positive" don't you understand?

Prices don't increase on their own. There has to be a cause. And there are two types of GDP that are always measured: real GDP, which has been adjusted to inflation; and nomimal GDP, which is not adjusted to inflation.

The cause is that some people have more money that was created by the Fed.

If prices are increasing (inflation up), that's because there is more demand than supply. Business, which provides the supply, can't meet the demand from consumers. Hence prices go up, inflation goes up. Learn the basics before uttering stupidities.

The Fed only prints money to replace old bills that have been worn out. It's an old myth that the FED inundates the market by printing more money. Stop watching Fox News. And maybe you'll make more sense. As it is, your knowledge of economics stinks.

here you go

Yes, indeed, the FED will buy assets from banks to lower their required reserve, hence increasing the banks' excess reserves, thus allowing the banks to make more loans. However, since 2008, the financial crisis, the FED has been buying loads of assets - $4 trillions worth - but the banks have not increased their loans. Hence, the slow recovery. Just to let you know that the FED has only indirect impact on the money supply.

[zarus tathra]

If prices are increasing (inflation up), that's because there is more demand than supply. Business, which provides the supply, can't meet the demand from consumers. Hence prices go up, inflation goes up. Learn the basics before uttering stupidities.

No, it's because the ratio of the amount of money to the amount of actual wealth in the economy is increasing. Ever hear of monetarism?

Yes, indeed, the FED will buy assets from banks to lower their required reserve, hence increasing the banks' excess reserves, thus allowing the banks to make more loans. However, since 2008, the financial crisis, the FED has been buying loads of assets - $4 trillions worth - but the banks have not increased their loans. Hence, the slow recovery. Just to let you know that the FED has only indirect impact on the money supply.

Because the banks realize they don't have to make loans to make money.

[josephpalazzo]

If prices are increasing (inflation up), that's because there is more demand than supply. Business, which provides the supply, can't meet the demand from consumers. Hence prices go up, inflation goes up. Learn the basics before uttering stupidities.

No, it's because the ratio of the amount of money to the amount of actual wealth in the economy is increasing. Ever hear of monetarism?

For your education:

Definition: Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole.
http://economics.about.com/od/helpforec ... lation.htm

As for monetarism, that is a theory that focusses on how the government can affect the money supply. It failed on mainy fronts: (1) it did not stimulate the economy in the period 2001-3 as Greenspan had thought it would; (2) it failed to provide the mechanism to avoid the liquidity trap in 2008.

Yes, indeed, the FED will buy assets from banks to lower their required reserve, hence increasing the banks' excess reserves, thus allowing the banks to make more loans. However, since 2008, the financial crisis, the FED has been buying loads of assets - $4 trillions worth - but the banks have not increased their loans. Hence, the slow recovery. Just to let you know that the FED has only indirect impact on the money supply.

Because the banks realize they don't have to make loans to make money.

How is that related to my point that the FED has only indirect impact on the money supply? Secondly, the banks do make money by making loans, another of your stupid comments that comes from nowhere.

[zarus tathra]

And if the Feds pay people to just sit there, or to scare pigeons away from monuments, or to bury and then dig up bottles of money, like Keynes said, that's an increase in the GDP without anything meaningful produced. Again, GDP is retarded.

As for monetarism, that is a theory that focusses on how the government can affect the money supply. It failed on mainy fronts: (1) it did not stimulate the economy in the period 2001-3 as Greenspan had thought it would; (2) it failed to provide the mechanism to avoid the liquidity trap in 2008.

Okay, so monetarism failed, while Keynesian economics kind of succeeded for a while because it was more direct.

[josephpalazzo]

And if the Feds pay people to just sit there, or to scare pigeons away from monuments, or to bury and then dig up bottles of money, like Keynes said, that's an increase in the GDP without anything meaningful produced. Again, GDP is retarded.

One can spend his/her money foolishly. Who is to say that the production of donuts is useful, considering that eating them makes people obese, in danger of being diabetic? Yet, the production of donuts is counted in the GDP. So the government could in theory spend money on useless projects. But in a democracy, as I have pointed before, it's up to the people to be well informed and vigilant to make sure such wastes are denounced, and hopefully, when they go next time in the ballot box, they will vote out the politicians who waste taxpayer's money.

As far as GDP is concerned, it is the only way to figure what affects employment. The goal of the FED is to reduce unemployment/keep inflation well anchored. It can only do its job properly by knowing how many jobs there are and what is the inflation rate, and to do that, it must know such things as aggregate demand, investments, interest rates, disposable income, and yes, the GDP, which is the total output of the economy.

As for monetarism, that is a theory that focusses on how the government can affect the money supply. It failed on mainy fronts: (1) it did not stimulate the economy in the period 2001-3 as Greenspan had thought it would; (2) it failed to provide the mechanism to avoid the liquidity trap in 2008.

Okay, so monetarism failed, while Keynesian economics kind of succeeded for a while because it was more direct.

Keynesian economics can only succeed if it is applied properly. Unfortunately, many politicians are clueless about economic matters, and they tend to screw up, either deliberately as in the case of the GOP, or unintentionally as they are willfully ignorant, that applies to members of both parties.

[zarus tathra]

One of the basic principles of Keynesian economics is that you're supposed to RAISE taxes when things are booming so that booms and busts are both lower and extremes are never met. I think we all know how that went.

[josephpalazzo]

One of the basic principles of Keynesian economics is that you're supposed to RAISE taxes when things are booming so that booms and busts are both lower and extremes are never met. I think we all know how that went.

If the economy is in the boom phase, then the prescription is to decrease the money supply. Raising taxes is one way to decrease the money supply but it's not the only way. A second option is for the FED to increase the interest rate; and a third option is for the government to cut spending. From 2010, when the GOP took control of the House of Representatives, they were advocating government cuts in the middle of the worst economic downturn since the 1930's - that was an indication that the GOP was either made up of a bunch of ignoramuses, or they were willfully trying to further sabotage the economy.

Note that raising taxes is an impossible task if the GOP controls any of the branches of the government, as raising taxes is a doctrinal taboo in their platform, yet it's a crucial option if ever the government would be faced with an uncontrollable hyperinflation.

[zarus tathra]

Looking at the NYSE and the Federal Reserve Discount rate, I have to conclude that their policy was basically the opposite of what they're supposed to do.

They kept the Discount Rate low all throughout the 50's boom and only sharply increased it once the NYSE was declining in the late 60's. Then they jacked it all through the age of stagflation and brought it back down throughout the Reagan boom.

Everything they do goes against basically every well-established economic theory. I can't think of any economist who believes that we should contract the money supply when things are bad and expand it when irrational exhuberance takes hold. And yet that's exactly what our central bank does.

[josephpalazzo]

I hope you realize that market capitalization is not a good metric indicator of what's happening in the economy. Secondly, the stock market speculates as to what will happen to the economy in 6-to-12 months ahead. Sometimes, it's right, and sometimes it's wrong. So those graphs are not indicative of what was really going on.

[zarus tathra]

It's generally acknowledged that the 50's and the early 80's - late 90's was a boom time for America, and that stagflation took hold in the late 70's, etc.

[josephpalazzo]

Looking at the NYSE and the Federal Reserve Discount rate, I have to conclude that their policy was basically the opposite of what they're supposed to do.

They kept the Discount Rate low all throughout the 50's boom and only sharply increased it once the NYSE was declining in the late 60's. Then they jacked it all through the age of stagflation and brought it back down throughout the Reagan boom.

Everything they do goes against basically every well-established economic theory. I can't think of any economist who believes that we should contract the money supply when things are bad and expand it when irrational exhuberance takes hold. And yet that's exactly what our central bank does.

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to historical inflation rate (Link: http://www.inflation.eu/inflation-rates ... tates.aspx)



There is a correlation between the Fed's discount rate and the inflation rate.

[zarus tathra]

It's weaker, there are two peaks in the inflation rate but not for the discount rate, while the secular rises and falls are very inversely correlated between the discount rate and the NYSE. You have an easing of credit throughout boom periods and the tightening of credit all through bust periods.

[josephpalazzo]

It's weaker, there are two peaks in the inflation rate but not for the discount rate, while the secular rises and falls are very inversely correlated between the discount rate and the NYSE.

Learn to read a graph. Look at the peaks from 71-75, and from 77-83. That's anything but weak. Again, stock exchanges are not good economic indicator. How hard is that to understand?

For your education: http://www.forbes.com/sites/timworstall ... indicator/