The State of the Economy

[engelbach]

Interesting that you've revived this thread.

Of course a household budget is nothing like a national budget. Or even like a business budget, for that matter.

The only point of similarity among the three is debt. The whole world runs on debt. Mortgages, capital investments, etc. — it's all based on borrowing.

But the United States has the strongest currency in the world, and right now its bonds are at zero interest. It can borrow and print money to cover its obligations at little or no cost except possibly for negligible inflation. A household cannot do that.

If the so-called "fiscal cliff" happens (it's actually just a little curb), in January the Democrats can introduce bills to restore the tax cuts on the working class and extend unemployment benefits. The GOP would not dare to oppose these popular measures at its peril — if the cowardly and impotent Democrats would stand firm for once.

The greatest challenge is to get everybody back to work, to get people off the government dole and back to spending money and paying taxes. That will create demand for hiring in the private sector and start to make up for the trillion dollars lost by the Bush/Obama tax cuts and the three trillion spent on the illegal wars.

The "big government-small government" argument is baseless. The government has not grown out of proportion to the size of the population. In the past four years three-quarters of a million government jobs have been eliminated by attrition. And federal employees have been under a wage freeze for two and a half years.

Unfortunately, both parties are playing the voodoo deficit devil game instead of focussing on restarting the economy. With only a few exceptions, all the bastards need to be thrown out and replaced by a party that fights for working people.

[Jeffrey Wozniak]

Originally Posted by engelbach

the United States has the strongest currency in the world

This is like saying my D student is smarter than your F student, considering everyone's currency is in shambles. The purchasing power of the US dollar has declined sharply in real terms over the past century.

Also, the Fed can only hold interest rates artificially low and print money like it's going out of style for so long before the pressure cooker explodes. Then your so-called "negligible inflation" will make the US look like Zimbabwe.

Lastly, borrowing money at little or no cost does not take care of the problem. This is like saying you have things under control because you paid off your MasterCard with your Visa. Contrary to popular Keynesian (and Krugman) opinions, being in debt is not a good thing.

[jazzbluescat]

I NEVER carry a month to month balance on my credit cards. Fucking HATE being in debt. If I can't pay cash I do without, or save until I can pay. That's partially good luck and partially being fiscally responsible.

[jkelman]

Originally Posted by Jeffrey Wozniak

This is like saying my D student is smarter than your F student, considering everyone's currency is in shambles. The purchasing power of the US dollar has declined sharply in real terms over the past century.

Also, while the Canadian economy is doing relatively (operative word: relatively) well, what I will say is that five years or so ago, the USD was worth about 30-35% more than the CDN. Now, we're largely on par - there have even been days where our dollar has been worth more than the USD - and it ain't because ours has gotten so strong; it's because the American dollar has weakened significantly.

So I don't know how anyone can say (sorry, Jer) that "the United States has the strongest currency in the world."

Happy New Year, folks!
John

[engelbach]

Originally Posted by jkelman

Also, while the Canadian economy is doing relatively (operative word: relatively) well, what I will say is that five years or so ago, the USD was worth about 30-35% more than the CDN. Now, we're largely on par - there have even been days where our dollar has been worth more than the USD - and it ain't because ours has gotten so strong; it's because the American dollar has weakened significantly.

So I don't know how anyone can say (sorry, Jer) that "the United States has the strongest currency in the world."

Happy New Year, folks!
John

Don't confuse the exchange rate with the real strength of the dollar. We're not talking about currency speculators, but about how other nations regard the dollar.

In fact, the U.S. would do well to devalue the dollar slightly to improve its export position. That will not change the position of the dollar as the preferred currency for reserves in the world market.

http://useconomy.about.com/od/glossa...l_currency.htm

[engelbach]

Originally Posted by Jeffrey Wozniak

This is like saying my D student is smarter than your F student, considering everyone's currency is in shambles. The purchasing power of the US dollar has declined sharply in real terms over the past century.

Also, the Fed can only hold interest rates artificially low and print money like it's going out of style for so long before the pressure cooker explodes. Then your so-called "negligible inflation" will make the US look like Zimbabwe.

Lastly, borrowing money at little or no cost does not take care of the problem. This is like saying you have things under control because you paid off your MasterCard with your Visa. Contrary to popular Keynesian (and Krugman) opinions, being in debt is not a good thing.

Not at all. The dollar is the basis for reserves in every major country. The U.S. government, more than any other, is trusted to maintain its ability to back its commitments. The Euro is a far second, with the pound following.

The relative strength of the dollar was my point, and why the U.S. -- unless the government utterly fails or austerity measures reach undreamed of depths, as the GOP seems to want -- can never become another Greece.

Being in debt is the natural condition of economic systems. Households generally rely on physical collateral against debt, such as in a mortgage. But credit card debt? That's backed by nothing but the trust of the lender.

Governments are not constrained by the need for physical collateral at all. We are not on a gold or silver standard anymore.

When a household cannot meet its bills, the wage earner must either take a second job or go bankrupt. A business, however, can raise capital by issuing more stock and using the investment to promote its product.

Similarly, the government can invest in an infrastructure jobs program to increase consumer spending power, which builds demand and impels hiring in the private sector. This widens the tax base and brings back more revenue. It also cuts expenditures for welfare and unemployment and forestalls even higher future expenditures on a continually worsening infrastructure.

What is needed is not austerity, but investment to create full employment.

Of course out of control inflation is not desirable. But modest inflation does not necessarily lead there, and could benefit the economy as a whole.

http://money.msn.com/personal-financ...more-inflation

Flat statements like "debt is not good," worst-case predictions based on fear, and misinterpretations of Keynes and Krugman are not arguments.