is what's currently going on a classic example of the u.s. government 'priming the pump'? (2009, credit)

[SouthCali4LifeSD]

anyone remember laissez-faire in the 1930's, or should i say, the lack thereof? didn't the u.s. government intervene by priming the pump of the u.s. economy after the great crash of october 1929? then during the great depression, as the government intervened, things got a lot worse before they got better?

history repeats itself, in my opinion. uhhhh, the dow will reach its bottom at 4,000. hyperinflation will be the highlight of 2009 when these bailouts take full effect. our long and painful recession will be realized by february 2009. HELOC's are devastatingly dried up. this will be a tough holiday shopping season. anyone surprised?

[jimmyP]

I keep looking for positive signs that will help me avoid being a doomer. Unfortunately, I see none. There is no positive signs for employment, currency, markets, or inflation. Everything our beloved Fed has done indicates super inflation in the next 18 months and it's not going to be pretty. The money supply expansion is greater than we have ever seen and it's goin' to get us.
Obama will win the election and a strongly democratic congress will start spending like we've never seen before and increasing taxes that will discourage investment. We are facing a sh*tstorm.

[Buckeye in SC]

Originally Posted by jimmyP

I keep looking for positive signs that will help me avoid being a doomer. Unfortunately, I see none. There is no positive signs for employment, currency, markets, or inflation. Everything our beloved Fed has done indicates super inflation in the next 18 months and it's not going to be pretty. The money supply expansion is greater than we have ever seen and it's goin' to get us.
.

While I agree w/you in part, the peculiar thing is that the dollar has actually been gaining a lot of strength the past couple months against other currencies. I think it's at like a 6 or 7-year high vs. the Euro. Would've thought like you w/the Fed pumping money into the economy, the opposite would have happened. At some point though, something's gotta give, either the Fed will start cranking the interest rates back up or as you said, we'll probably see some pretty substantial inflation in the next year or so. Keep in mind though, this is a global recession, there was a cover story in the USA Today Money section yesterday, that discussed the large effects on China and how literally thousands of factories have already shut down. So the fact that it's not just an isolated thing for our country is somewhat in our favor.

[banger]

Actually, I view this situation as continued evidence that the Government can not properly implement ANY programs.

Apparently their idea of tackling the problem consist of tossing enormous sums of money around and HOPING that some will stick where it's needed.

I ask a rhetorical question: What was the last government program that actually worked as intended?

Apparently by the time the 400 odd "Cooks" in congress get through with anything, the plan gets changed, changed again, painted purple, covered in Gold and dipped in Bronze. It is only at this point that it is declared "perfect", where it is released, and doomed to failure.

But fear not, if the first plan does not work, we can always devise an even MORE PERFECT PLAN, and toss even larger sums of money at it.

By my armature account, we are approx. 1.5 TRILLION dollars poorer, and not one cent closer to success.

Ohhh, the horrors. Someone, anyone, Please, make the madness stop.

[gwynedd1]

Originally Posted by SouthCali4LifeSD

anyone remember laissez-faire in the 1930's, or should i say, the lack thereof? didn't the u.s. government intervene by priming the pump of the u.s. economy after the great crash of october 1929? then during the great depression, as the government intervened, things got a lot worse before they got better?

history repeats itself, in my opinion. uhhhh, the dow will reach its bottom at 4,000. hyperinflation will be the highlight of 2009 when these bailouts take full effect. our long and painful recession will be realized by february 2009. HELOC's are devastatingly dried up. this will be a tough holiday shopping season. anyone surprised?

Hi SouthCali4LifeSD,


If history were to repeat itself as in the 1930's the government would contract the money supply as they did then. There was no hyper inflation. I doubt we will see any anytime soon. Who will be able to go into debt?

This rise in the currency-to-deposit ratio was a key reason why the money supply in the United States declined 31 percent between 1929 and 1933. In addition to allowing the panics to reduce the U.S. money supply, the Federal Reserve also deliberately contracted the money supply and raised interest rates in September 1931, when Britain was forced off the gold standard and investors feared that the United States would devalue as well

-Britannica cite from :A Monetary History of the United States 1867–1960

Also even with a trillion in bailout money it will only replace what was lost in money supply with the side effect of a wealth transfer to the new debtors . Since only those with good credit will be able to borrow this new money will be in fewer hands. By virtue of marginal propensity to consume there will be less aggregate demand even with equal money supply. If the rest of the world was not being impacted then the net debtor status may have had more inflationary pressure however so far that has not been the case. No one is buying.

That is how I see it.

[Philip T]

Originally Posted by gwynedd1

[/indent]Also even with a trillion in bailout money it will only replace what was lost in money supply with the side effect of a wealth transfer to the new debtors . Since only those with good credit will be able to borrow this new money will be in fewer hands. By virtue of marginal propensity to consume there will be less aggregate demand even with equal money supply. If the rest of the world was not being impacted then the net debtor status may have had more inflationary pressure however so far that has not been the case. No one is buying.

That is how I see it.

So then, at least we can be sure that 1st Class has been loaded onto the lifeboats.

All is well.

That is how I see it.

[floridasandy]

Originally Posted by banger

Actually, I view this situation as continued evidence that the Government can not properly implement ANY programs.

Apparently their idea of tackling the problem consist of tossing enormous sums of money around and HOPING that some will stick where it's needed.

I ask a rhetorical question: What was the last government program that actually worked as intended?

Apparently by the time the 400 odd "Cooks" in congress get through with anything, the plan gets changed, changed again, painted purple, covered in Gold and dipped in Bronze. It is only at this point that it is declared "perfect", where it is released, and doomed to failure.

But fear not, if the first plan does not work, we can always devise an even MORE PERFECT PLAN, and toss even larger sums of money at it.

By my armature account, we are approx. 1.5 TRILLION dollars poorer, and not one cent closer to success.

Ohhh, the horrors. Someone, anyone, Please, make the madness stop.

the federal share of the economic pie increased 800%!

Question: What has caused the explosive growth of federal spending faster than the economy?

The BIG CULPRIT (rising red line) is SOCIAL SPENDING, which grew 14 times faster than the economy - - to a new high - - more than eating up the long-term decline of defense spending ratios shown by the black line in the chart.

the entire report is available here:
http://www.financialsense.com/editor...2007/1009.html

[TexianPatriot]

does anyone know what oil went to during the nasdaq bust and where it went as soon as we pulled out of recession? I'm thinking the same thing is going to happen on a much larger scale inflation wise as soon as we see any kind of recovery (summer 2009 maybe?).

[jimhcom]

I think the OP's timeline is a bit off. First of all if you look at the wealth/money destruction, it is easily 10X what governments can print to replace it guaranteeing that deflation will continue until prices come into alignment with actual cash. Secondly unemployment will not begin in earnest until a year after the initial financial crash. After that, count on about 2 more years of declines in all markets, followed by 6 to 9 years of sideways movement.

[jimmyP]

Originally Posted by Buckeye in SC

While I agree w/you in part, the peculiar thing is that the dollar has actually been gaining a lot of strength the past couple months against other currencies. I think it's at like a 6 or 7-year high vs. the Euro. Would've thought like you w/the Fed pumping money into the economy, the opposite would have happened. At some point though, something's gotta give, either the Fed will start cranking the interest rates back up or as you said, we'll probably see some pretty substantial inflation in the next year or so. Keep in mind though, this is a global recession, there was a cover story in the USA Today Money section yesterday, that discussed the large effects on China and how literally thousands of factories have already shut down. So the fact that it's not just an isolated thing for our country is somewhat in our favor.

I believe the dollar is not strengthening as much as the other currencies are weakening. Other countries, I.E China are in much better position to handle a recession than we are with our 10 trillion dollar deficit and 70 trillion dollar contingent liabilities. We also produce very little in this country as the economy is 70% based on consumption. That fact alone makes the recession much more difficult to for US.