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View Poll Results: Economic conditions in the United States in January 2022.
Expansion 56 54.37%
recession 24 23.30%
depression 23 22.33%
Voters: 103. You may not vote on this poll

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Old 05-20-2020, 08:42 AM
 
5,979 posts, read 1,761,770 times
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Quote:
Originally Posted by DaveinMtAiry View Post
Prosperity never lasts. We were long overdue for a pullback if not a recession before COVID.
No data suggests that was true. All the data pointed to bumping up against a limit of too few potential employees to support ongoing business expansion.
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Old 05-20-2020, 08:45 AM
 
5,979 posts, read 1,761,770 times
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Quote:
Originally Posted by TimAZ View Post
There are many today who have never experienced life in an inflationary economy. They cannot grasp how it distorts decision making and pervades even the mundane aspects of daily life.
Very true.

Almost miraculously, there are zero signs of inflation in our system right now. In fact, just the opposite is true: the data point to modest deflation right now. The specter of hypothetical ongoing deflation is very troubling.
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Old 05-20-2020, 08:53 AM
 
3,561 posts, read 2,254,246 times
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Quote:
Originally Posted by TimAZ View Post
My German grandfather fought for the Kaiser in WWI and started a woodworking business after the war. He and my grandmother and their five kids became disillusioned with Germany and planned to emigrate to Brazil. He sold his business and was paid literally with a suitcase of paper Deutschmarks. During the 90 days between the sale of the business and the sailing date of their ship to Brazil, the money lost so much value from inflation, they had to abandon their plans.
I listened to diary entries of citizens fleeing, and I think they required you to pay next years taxes up front.

“THIS is a country to get out of. Even if you have to do it naked.”
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Old 05-20-2020, 09:12 AM
 
Location: Washington Park, Denver
8,082 posts, read 7,509,836 times
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Quote:
Originally Posted by TimAZ View Post
And what is your “quantitative” argument? Because a tree can grow to 50 feet, it can therefore grow to 400 feet?

We’ve had thirty years of debt-fueled “growth” and as a nation all we can say is that some folks have done well in the “markets”. Real (i.e. inflation adjusted) median household incomes tell a different story, they’ve been hovering around $60K since the mid-1990s.
MY quantitative argument is that every data driven model I have seen shows only modest inflation as a result of the increased liquidity. There are significant deflationary pressures right now.

University of Chicago and The Wharton School have economists doing a lot of work around the current situation. I suggest reading their work.

https://budgetmodel.wharton.upenn.edu/

https://bfi.uchicago.edu/covid-19/

Another great source is www.voxeu.org. It’s fairly technical reading, but if you have taken economics classes in the past you should be able to understand most of the papers that are posted there. If you don’t have that baseline understanding, you probably shouldn’t be opining on this stuff anyway. I have never taken an engineering class so I don’t weigh in on engineering issues.

Here are a few papers from that site on this topic:

https://voxeu.org/article/gauging-im...n-expectations

https://voxeu.org/article/need-issue-long-dated-gilts

https://voxeu.org/article/post-covid...-debt-overhang

Last edited by SkyDog77; 05-20-2020 at 09:24 AM..
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Old 05-20-2020, 09:54 AM
 
2,601 posts, read 991,581 times
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Quote:
Originally Posted by Thatsright19 View Post
Does the u.s have a signed treaty of Versailles with 440 provisions, 419 of which are designed to punish it?

U.s debts are in usd. Germany’s debts were not in DMs
Enjoy that sweet deal while it lasts. BTW our federal government has a long list of capital controls (some extrajudicial) in place to prevent average Joes or Janes from moving their assets out of USDs. Producer nations are moving to deprecate the USD and IMO they will eventually succeed in replacing it as the reserve currency. Five years? Ten years? The shift will eventually occur because economies based on expanding debt without any corresponding production growth are doomed to fall behind.
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Old 05-20-2020, 10:12 AM
 
2,601 posts, read 991,581 times
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Quote:
Originally Posted by SkyDog77 View Post
MY quantitative argument is that every data driven model I have seen shows only modest inflation as a result of the increased liquidity. There are significant deflationary pressures right now.
Yes, there is short-term deflation, but the debt “rescue” is setting up a long term dilemma for Central Banks. From the paper by Goodhart and Needham:

Moreover, the massive increase in debt, both in the public sector and with worsening fragility in the non-bank corporate sector, will cause central banks to hesitate before raising interest rates to rein back inflation, should it rise above target. Under these circumstances, it would be foolhardy to rule out the possibility of a resurgence of inflation in coming years.

They can’t raise rates to stifle inflation, so what’s left?
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Old 05-20-2020, 10:16 AM
 
Location: Washington Park, Denver
8,082 posts, read 7,509,836 times
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Quote:
Originally Posted by TimAZ View Post
Enjoy that sweet deal while it lasts. BTW our federal government has a long list of capital controls (some extrajudicial) in place to prevent average Joes or Janes from moving their assets out of USDs. Producer nations are moving to deprecate the USD and IMO they will eventually succeed in replacing it as the reserve currency. Five years? Ten years? The shift will eventually occur because economies based on expanding debt without any corresponding production growth are doomed to fall behind.
Ha! And what will replace the dollar?

Quote:
In order to achieve international status, a currency must fulfill four conditions.

*Its value must be stable, which means low inflation.
*It must belong to a large country that weighs heavily in global trade and finance.
*It must sit on top of deep and efficient financial markets, which are smartly regulated under an independent judiciary.
*It must be seen as a benevolent monopoly.

In order to challenge the existing leading currency, another currency must not just fulfill the same conditions. Its country must be seen on the ascent and, crucially, the current leader must make blunders that undermine the appeal of its currency.

China has not hidden its intent of doing so. Three years ago, after intense lobbying, the renminbi joined four other currencies that define the IMF’s Special Drawing Rights (SDR). The Chinese authorities were elated. They saw this event as a first stage of the long march of the renminbi toward becoming an international currency, possible the international currency. This showed that they misunderstood what an international currency is. The renminbi remains largely an unconvertible currency, the largest Chinese banks are state-owned and the financial markets are neither free from public interference nor backed by effective and transparent regulation and oversight. A currency that is subject to government interference, in a country where there exist few checks and balances, does not stand any chance of becoming an international standard, and there is no indication that matters are about to change.
https://voxeu.org/content/and-dollar-reigns-supreme
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Old 05-20-2020, 10:47 AM
 
Location: Washington Park, Denver
8,082 posts, read 7,509,836 times
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Quote:
Originally Posted by TimAZ View Post
Yes, there is short-term deflation, but the debt “rescue” is setting up a long term dilemma for Central Banks. From the paper by Goodhart and Needham:

Moreover, the massive increase in debt, both in the public sector and with worsening fragility in the non-bank corporate sector, will cause central banks to hesitate before raising interest rates to rein back inflation, should it rise above target. Under these circumstances, it would be foolhardy to rule out the possibility of a resurgence of inflation in coming years.

They can’t raise rates to stifle inflation, so what’s left?
“Hesitate” and “can’t” are two very different things.

Most projections I have seen show The Fed being comfortable with letting inflation hit close to 5% before raising rates. That is far higher than we have seen in a long time, but hardly an out of control number. The current target is ~2% so this would be well in excess as is pointed out in that paper. Get some context man!

Paul Volcker showed how effective raising rates is at curbing inflation. If inflation ever started to get out of control, The Fed can stop it. It will temporarily hurt output though.

Last edited by SkyDog77; 05-20-2020 at 11:00 AM..
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Old 05-20-2020, 11:08 AM
 
3,561 posts, read 2,254,246 times
Reputation: 8026
Quote:
Originally Posted by TimAZ View Post
Enjoy that sweet deal while it lasts. BTW our federal government has a long list of capital controls (some extrajudicial) in place to prevent average Joes or Janes from moving their assets out of USDs. Producer nations are moving to deprecate the USD and IMO they will eventually succeed in replacing it as the reserve currency. Five years? Ten years? The shift will eventually occur because economies based on expanding debt without any corresponding production growth are doomed to fall behind.
80% of the global supply chain is carried out in USD. No big global company is trying to get out of dollars. Demand is soaring. 62% of global reserves are usd. The countries in other reasonable positions of power are our strongest allies, like the pound, yen, and euro. What’s going to replace it? The yuan lol...

Who are these producer nations? Brazil? Russia? Because their currency is toilet paper right now.


The United States passed England in economy in 1890, and it took almost 50 years and 2 horrific world wars to overtake the pound.

The U.S system is much stronger.

5 years? Zero chance.
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Old 05-20-2020, 01:52 PM
 
Location: Las Vegas, Nevada
1,175 posts, read 726,442 times
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Quote:
Originally Posted by SkyDog77 View Post
If there is massive inflation beyond what we want, The Fed’s tool is to raise nominal rates. They have done that before and it works. The US is part of the global economy. IF we raise rates relative to what the rest of the globe is paying, it creates capital inflows to the US. This doom and gloom scenario is not backed by anything more than your fantasy.

You are talking about the 1970's-1980's, not today. The fed could not even get the fed funds rate to 2.5% before crashing the stock market in late 2018. I do not know if we are going to have hyperinflation or not, but I do know that the fed could not raise rates like they did in the past to rein it in if it does occur.






I am also going to post an alternative viewpoint for everyone that you will not find in the mainstream media. I have followed this guy for years, and he has been the most accurate. He is the only guy that I follow who predicted Trump would win in 2016. I did not believe it myself and was shocked when he won. I only include Trump not to discuss politics, but to discuss accuracy in predictions.



Quote:
The phrase “don’t fight the Fed” is an unfortunate but popular delusion. It presupposes that the central bank has limitless power to direct the economy because it can print limitless money. I’m not sure where this idea comes from, but consider the fact that anyone today who is under 30 years old was barely old enough in 2008 to understand or care about the credit collapse. These people spent their formative years knowing only stimulus and QE. In their minds, this is the norm, and they think it always works because they haven’t yet witnessed a collapse.
I would say a better phrase for the 2020s is “The Fed is not going to save you”; the Fed is not a superhero and it does not have the power nor the inclination to protect the little people from economic folly. This should be readily apparent today, as the COVID-19 pandemic continues to spread and the central bank can’t seem to cure it with Quantitative Easing.
My position has always been that the Fed has no intention of saving the economy, only making it appear as if they care. This is evident in the fact that they created the Everything Bubble in the first place with years of near zero interest rates, then abruptly hiked interest rates into economic weakness, just like they did during the Great Depression. All it took was a few rate increases to cause stock markets to plunge in December 2018; liquidity was strangled and repo markets became unstable. Jerome Powell knew perfectly well that this would be the result; he openly discussed it in the minutes of the October 2012 Federal Open Market Committee.

https://www.birchgold.com/news/ensla...nfinite-money/

Last edited by Katie the heartbreaker; 05-20-2020 at 02:08 PM..
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