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Old 07-12-2012, 01:36 PM
 
Location: Metro Detroit, Michigan
11,920 posts, read 13,270,021 times
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Quote:
Originally Posted by chet everett View Post
Firstly there are no "printing presses" at the Fed. The actual production of paper money is done through the Bureau of Engraving & Printing and the production of coins is done by the US Mint which was made part of the Dept of the Treasury in 1873.

The authority / responsibility of the Federal Reserve Board of governors and the FOMC is to set the monetary policy of the nation by setting the lending rates and cash reserve ratio for member banks. This is pretty effective in make both the cost and quantity of borrowing which is a vital component of the "money supply".

There is currently no mechanism for the FRB/FOMC to directly lend or "gift" money to consumers. The closest that even the US Treasury has done is to rebate taxes. While I don't doubt that the FRB may have done research into the various ways that consumer spending might be spurred it is extremely unlikely that anything so "consumptive" as "gift cards" would have any lasting positive impact on the broad economy of the nation.

The low interest rates that have been in place for an extended period of time have done little to spur investment into either long time personal wealth creation or large expenditures by business on costly capital goods. Most economic researchers and political historians believe this has to do with a lack of confidence on the part of the either consumers that the "wealth creation" processes that traditionally have been available to them are fair AS WELL AS fears of business that the tax policies and tendency to expand promises of expanded entitlements will allow them to operate competitively. These are largely not technically monetary issues but rather those the expose the lack of skill of our current crop of political leaders...
They have really tried everything there is to try up until the point. The only other thing I can think of would be to reduce the amount of $$$ the banks are required to have on reserve. Then you're inviting a very dangerous situation for obvious reasons.

At this point, the free market is basically beating the best efforts of those putting up the fight. Of course consumers can't be given free money. That would basically be communism. At this point, we all have to basically accept that the free market is a powerful force. It's possible to influence it, but controlling the direction of the economy through money supply is not quite that simply. They can gently guide it, but at this point in the game, they are way in over their heads.

The real question is... Where does it go from here? If consumers are not earning enough, the business community is eventually going to face the same problem. If the consumer has no confidence, they are not going to spend much even if they can afford it. If the business community has no confidence, they are not going to hire unless they have to, and they are going to put plenty more effort to get the cheapest labor rates. No sense in hiring more people if your anticipating demand to decrease. This obviously creates a cycle of decline, or at least one of stagnation.

For awhile, everyone was kind of sitting on their hands and waiting to see what's around the corner. Today, people just seem to be anticipating the worst. The psychology of the economic participants is often underplayed, or ignored completely.
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Old 07-12-2012, 01:49 PM
 
28,384 posts, read 68,028,377 times
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As I said, the problem seems to be political. In the US we get to dump our house of representatives every two years and decide whether the leadership in the White House is on the right track every four years. I believe there are things to change...
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Old 07-12-2012, 08:30 PM
 
11,904 posts, read 14,386,346 times
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In fact the practice of keeping interest rates near zero may be deflationary in itself. People who depend on interest income, usually the elderly, have seen their income drop sharply. When interest rates were higher they had a bit of extra spending money.
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Old 07-12-2012, 09:01 PM
 
833 posts, read 1,418,474 times
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What did the fed do about inflation in the 70's ?

Brought it under control with sky high interest rated !
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Old 07-12-2012, 10:16 PM
 
Location: None of your business
5,467 posts, read 3,640,874 times
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Quote:
Originally Posted by montanamom View Post
Exactly. Although, it can't be "on the consumer" until companies realize this and increase hiring and average wages.

Oh, that's right, we can't "compete" if we do this (or so we've been told).

lol montanamom, your just another monday morning quarterback.

If you can do a better job at running a company what is stopping you from starting your own business, hiring people at better wages?
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Old 07-13-2012, 08:10 AM
 
28,384 posts, read 68,028,377 times
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Default Quite true!

I used to get worked up at the ignorance of the crowd (often from Hollywood or some high brow college...) that claim "we need to pay workers better wages". Try this little thought experiment -- a new store is having a grand opening, there is huge banner outside. If the banner says "Our quality goods made by well paid workers, feel good about paying more!" do you think it would really attract any shoppers vs the more familiar banner at most store's grand opening; "Lower Prices!"?

For folks that routinely get "goody bags" of designer goods FOR FREE the theoretical benefits of higher wages is certainly a "feel good". The reality is that even other "elite products" end up in race to the bottom of pricing. Years ago, before Whole Foods, all kinds of little college town co-ops were touting the benefits of "small farmers" and "organic produce". These days the "evil" WalMart sells more "organic produce" than even Whole Foods. The stuff they sell (and Trader Joe's sell for that matter...) is likely grown outside the US. The wages at WalMart or Trader Joe's non-union stores tend to be a signficantly lower than the rates paid at the "big chains" and the the work is such that one minute some worker might be restocking wine the next running a check-out lane and the next giving out samples / recipes. That is lot more flexibility than big unionized chains have where the cashier has to stand on a rubber mat all day and the meat dept. needs three union meat cutters to comply with rules regardless of the fact the meat is no longer sent in primal quarters...

Consumers know when they are being gouged. They also know when they are being lied to. It is abundantly clear that there is no real difference in the bureaucratic nonsense of a "private healthcare provider" and the inefficient efforts of Medicare. Covering bums with out jobs is going to mean that more people with jobs will be expected to cough up more dough and accept less service. That is not going to help restore confidence in government.

So to do people understand that "infratructure" does not help move the economy in a positive way. Big contracting firms that pave the roads, build the bridges, replace the sewers and all the other "infrastructure" may send more dollars to already bloated politicians as "thanks" for the work but the increasingly automated nature of even the most grueling construction really does not engage a huge workforce these days.

Even if you stretch the definations of "investment" to the kinds of efforts that have been tried to keep solar firms and "alternative energy" kick started the record of that providing "new jobs" is pathetic -- firms like Solyndra will never be anything more than scams -- Solyndra - Wikipedia, the free encyclopedia And while there may be a market for six figure "toys" for the tiny number of people that buy Tesla's for the uniqueness of them, regular Joe & Jane families still need space for their kids / pets / sports and they get a lot more of that in nice Kia SUV or minivan for a lot less dough...

Model S Options and Pricing | Tesla Motors

Kia Cars, SUVs, Crossovers, Minivans, & Future Vehicles | Kia Motors America

Maybe the South Korean government could teach the current administration about how to increase exports...


Quote:
Originally Posted by eRayP View Post
lol montanamom, your just another monday morning quarterback.

If you can do a better job at running a company what is stopping you from starting your own business, hiring people at better wages?
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Old 07-14-2012, 09:04 AM
 
Location: None of your business
5,467 posts, read 3,640,874 times
Reputation: 1170
Quote:
Originally Posted by chet everett View Post
As I said, the problem seems to be political. In the US we get to dump our house of representatives every two years and decide whether the leadership in the White House is on the right track every four years. I believe there are things to change...
And if this president gets re-elected he does not have to worry about a 3rd term so there will be no consequences for him the second term, yes, consequences for me and you. There is control for you.
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Old 07-14-2012, 09:08 AM
 
Location: None of your business
5,467 posts, read 3,640,874 times
Reputation: 1170
Quote:
Originally Posted by myrc60 View Post
I agree. We can't keep inflating prices without hurting the masses. Inflated housing prices have helped put us where we are today. This inflated income's as it had to keep up to an extent; but really it didn't! This in turn raised the price of everything we buy. Now many can't afford the bare necessities. How do you go backwards and make it work for all Americans?
Stop subsidizing, its that simple.
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Old 07-16-2012, 04:04 PM
 
Location: San Diego California
6,797 posts, read 6,124,851 times
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Bottom line is so long as the government continues to spend like drunken sailors they have to expand the money supply to match spending and that is inflationary. Whether you call it dollar devaluation or inflation the effect is the same, and anyone who thinks inflation is affected by people’s ability to afford things has never been to a third world country where prices can increase at astronomical amounts regardless of people’s ability to pay. The difference is just made up for in lifestyle, instead of eating meat you eat rice, instead of buying shoes you go barefoot.
Welcome to the wonderful world of globalization.
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Old 07-17-2012, 10:12 PM
 
48,519 posts, read 81,113,623 times
Reputation: 17979
OP is right but only in the short run.Just as we are not seeig the long term effetcs of say FED policies now but ther4
e are effects likely coming as always.Kind of like spending on the credit card has no effect on the person until the debt comes due.
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