PDA

View Full Version : What Ended the Great Depression



NickF
10-27-2009, 10:39 PM
After a rather stimulating debate here in the forums regarding monetary policy, I think this is a great topic to start a discussion about.
Popular thoughts are that FDR's New Deal are what ended it. Another popular idea is that WWII ended it. I happen to think neither are the direct cause of the end of the depression, but I will get into my opinion later into this thread. I want to know what you think ended the depression, why, and be as specific as possible.

stopthe_bomb
10-28-2009, 05:41 AM
The government did a conspiracy and gave's lot's of money's to everyone. Who knows, it was a long time ago, and I believe no one thing did it. I believe a lot of things combined ended it.

What the question really is: Why do we keep letting ourselves sink economically every 20 years? Shouldn't we be smarter than this by now?

JeweyK
10-28-2009, 05:53 AM
FDR created more government jobs, reducing unemployment and stimulating the economy. Obama is trying to do this, but the new opportunities that FDR had such as expanding roads and such across the country aren't available to him.

Dyndrilliac
10-28-2009, 07:24 AM
After a rather stimulating debate here in the forums regarding monetary policy, I think this is a great topic to start a discussion about.
Popular thoughts are that FDR's New Deal are what ended it. Another popular idea is that WWII ended it. I happen to think neither are the direct cause of the end of the depression, but I will get into my opinion later into this thread. I want to know what you think ended the depression, why, and be as specific as possible.Just as a point of reference, I have never believed that FDR's policies ended The Great Depression (henceforth referred to as "TGD"); I believe they merely helped weather the storm (by stemming unemployment, the primary cause of hardship during TGD). I believe wholeheartedly that it was WWII that allowed TGD to end. The most obvious and straightforward reasoning is that it completely eliminated any possibility of unemployment. Anyone who couldn't get a job as a soldier could get a job making weapons in a factory, or manufacturing lighters / canteens / utility-knives / other-useful-accessories (and let's not forget uniforms, medicine, etc) for the soldiers in the field. As a matter of fact, this is the period in history where women got their first real taste of being equal in importance to men in the work place because most of the men were off fighting the war. Rosy the Riveter FTW.

Edit: It's a fact that during WWII the industrialized manufacturing power of the U.S. easily trounced every other super power on the globe by an outrageous amount. For example, shortly after WWII Russia got real uppity and tried to keep up from supplying West Berlin (because ironically, even our side of Berlin was located deep in the Russian controlled part of the country), spawning the infamous Berlin Air Lift - we delivered supplies by air every single day until the Russians were properly embarassed that they had gotten so wtfpwnt.

disco
10-28-2009, 11:07 AM
World war II AND the New Deal.

Well that was easy.

Ares
10-28-2009, 11:41 AM
big people raise the product with 0 value behind it while they climb up the ladder getting insane profits, sometimes 100:1 GDP if not more, they they selectively crash it. Make trades etc according to and when they are raising the ladder. Then lay low and do nothing when they decide to burst the bubble.
And so it happens over and over.
The people that got us into this mess, are still in office under Obamas admin, and hes not going a thing about it.
Hyperinflation is on its way.
Once the people we owe trillions of dollars dump that money, up up up up up goes inflation.
in comes a world bank.









lool

Dyndrilliac
10-28-2009, 12:48 PM
Wow Ares, I'm glad you took the time to distract us all from the topic of the thread so we could enjoy that excellent non-sequitur (http://en.wikipedia.org/wiki/Non_sequitur). :wanker:

Too bad the subject of the discussion in this thread took place decades before Obama was even born.

Ares
10-28-2009, 01:05 PM
Wow Ares, I'm glad you took the time to distract us all from the topic of the thread so we could enjoy that excellent non-sequitur (http://en.wikipedia.org/wiki/Non_sequitur). :wanker:

Too bad the subject of the discussion in this thread took place decades before Obama was even born.

Nope, it was the plan from the start.
Helloooo......

But if you want to get serious about the economic situation we are in look at what was discussed when the Reserve was created.
They K N E W it was going to fail(and now it did fail) they were looking for a exit strategy that would give back to the tax payer but....

fire1337331
10-28-2009, 02:31 PM
Meh.
People started hiring more, people created jobs, people were fired less...
Metaphor: Your car got a dent in it, but you sent it to the Auto-Repair shop to get repaired, and everything worked out.

bat
10-28-2009, 06:03 PM
all of the above certainly contributed, but i would have to say one of the largest factors was ww2 + us being the only country not bombed to **** after it was all said and done.

that was when the U.S. rose to its number one spot that it's been holding ever since, because nearly everyone borrowed from the U.S. to repair all the damage the war had done on them.

3mbry0n1kF3c3s
10-31-2009, 01:26 PM
And strangely England is the still real ruler of the majority of the world. With the United States as her flaming arrow.

xChinChillax
10-31-2009, 06:52 PM
And strangely England is the still real ruler of the majority of the world. With the United States as her flaming arrow.
tard
Anyways back to bussiness, WW2 drafted men leaving NUMEROUS jobs and worked the war required materials steel food and other war items we need people to make those hence jobs they had money to spend from the jobs people were a lil more trusting in banks with the new deal and the goverment wasnt as ****ing retarded
to help keep the situation nowa days sane is politicians dont need to be payed much and get a allowed budget so companies cant aquire favors and it eliminates the need for super spending example hilliary clinton spent 1k one day on sandwhichs thats retarded they need to learn how to use money give them 35k a year pay and be like most americans so they have a link with reality because they get paid too much and dont know what a hard days work is and you should only be abel to be selected a certain amount of times so theres no elected-in-the-70's senate members because they dont know whats going on any more we need new fresh ideas and not some old fart deciding whats happening far beyond his comprehension

kokokoko
11-05-2009, 02:05 PM
The central banker crooks which collapsed the boom-bust economy with inflation decided to take money out of the money supply so the money would gain in value. What caused the collapse was the amount of money in circulation. There was more money in circulation than actually existed because the central bankers decided to ruin the economy by the constant print of money. Benefiting no one but themselves and the government(which is controlled by central bankers).

Ludwig Von Mises: Greatest economicist to ever live. He talks about getting rid of the corruption that is the federal reserve, and going to the gold standard, so the money is actually worth something.

Orchidomegaly
11-05-2009, 03:24 PM
What ended the great depression? The nature economic cycle ran its course. The purpose of monetary and fiscal policy by the government (ie. the new deal and wwII which would be considered fiscal policies) is not to end economic downturns, but to make them less sever.

The economy will always come back on its own, as long as the society remains in tact. Without government intervention, however, the economic cycles would be much more sever.

In the great depression, the new deal did create more demand, as well as did wwII. This helped make the depress less sever, but did not significantly adjust the time of the recovery.

Kenshyn
11-05-2009, 03:50 PM
World war II AND the New Deal.

Well that was easy.

Dyndrilliac
11-05-2009, 04:07 PM
The central banker crooks which collapsed the boom-bust economy with inflation decided to take money out of the money supply so the money would gain in value. What caused the collapse was the amount of money in circulation. There was more money in circulation than actually existed because the central bankers decided to ruin the economy by the constant print of money. Benefiting no one but themselves and the government(which is controlled by central bankers).

Ludwig Von Mises: Greatest economicist to ever live. He talks about getting rid of the corruption that is the federal reserve, and going to the gold standard, so the money is actually worth something.What you describe really did happen - But in Germany (among other European countries, but Germany is the most widely remembered as the worst), not in the United States.

Hyperinflation in Post World War I Germany (http://hubpages.com/hub/Hyperinflation_in_Post_World_War_I_Germany)

As the article mentions the exchange rate for German currency to American currency was in the range of one trillion to one (in favor of the American currency). That doesn't sound like an American inflation problem to me. Also consider the fact that The Great Depression is generally considered by most economic analysts and historians began in the United States years after it had been raging in Europe. Factor in the worldwide economic crisis with the rising unemployment in America at the time and you have a perfect storm. Throw in the fiscal irresponsibility that a lack of regulation allows to happen (marked by the infamous stock market crash of 1929, when most historians and economic analysts mark as the beginning of The Great Depression in America) and voila, you have The Great Depression. However, I digress; this thread is about how The Great Depression ended. If you want to make a separate thread that investigates the causes, then go ahead. But try to stay on topic and respect Nick's thread.

Someone needs to learn their U.S. History, methinks. While it's true that the United States should have never left the gold standard, suggesting that something happened historically when it really didn't happen, and using relative and subjective terms like "greatest <insert job or title here> ever," is monumentally stupid. Also, how does a plot to artificially lower the value of currency benefit the "central banker crooks," when presumably it is their goal to make money? How does earning worthless money benefit them at all? Your reasoning does not a logical argument make.

Unless you have a serious post and some kind of real, peer-reviewed, source material or physical evidence to prove it, please refrain from wasting everyone's time with nonsensical bashing of the so called "bourgeois" establishment just to further your political agenda. Misinformation serves no purpose other than to deceive and manipulate. With as many stupid people that post here, the last thing we need is usurpers of truth spreading their beliefs that they have no evidence to support.

NickF
11-05-2009, 09:32 PM
I'm sorry for taking so long to respond to my own thread, been busy.
Neither "solution" ended the great depression.

What Caused the depression should be the first goal of this post:
Three factors I'm too lazy to get into:
1. Debasing of our currency, and subsequently the creaion of the federal reserve- Monetary supply increases, gold dives, inflation begins to rise.
2. Smoot-Hawley Tarriff - highest tariff ever; trading plummets
3. Unpayable European WWI debt- Don't need to go into adverse affects of unpaid loans.


Now, although you are all correct about one thing: the what provided a massive surge in spending which in turn created all-but full employment of US citizens. Unemployment, however, is only an indicator of a healthy economy, and not a contributing factor of one. The war cannot have ended the Depression, thats simply illogical. As Henry Hazlitt put it, "No man burns down his own house on the theory that the need to rebuild it will stimulate his energies". So why do historians and many very smart economists believe that with massive destruction reap endless benefits? Hazlitt again sets out to prove tjhem wrong. He asserts that the US merely shifted capitol from private markets, where it could have created consumer goods, to instead support the war effort making bombs and tanks.

The New Deal obviously did not end the depression either, in fact, it prolonged it. Roosevelt attacked business, raised income tax, corporate tax, and excise taxes to fund his New Deal programs, some of which were even destructive in nature. The AAA condoned burning crops and slaughtering pigs. The NRA and TVA stole jobs from legitimate private companies. But Roosevelts bias grew stronger each year. He eventually created a 100% income tax for all people making over $25,000. How did Roosevelt expect companies to hire people when he was literally destroying them?

So if not WWII, or the New Deal, what did end the depression?
Well, according to economist Robert Higgs, Roosevelt eased the pressure on the rich. He allowed large corporations to monopolize war contracts. Then, when Truman took office businessmen were further optimistic, allowing them to expand, creating employment for the soldiers coming home. His thesis is this. The federal reserve created an artificial bubble which lead to the crash of 1929. If, at this point, Hoover and FDR kept their hands off, the problem wuld have been solved by 1934 and things would have gotten back to normal. Instead, the presidents' yearning for a power grab lead to an increase in taxes, and drastic increase in regulations stifled businesses to the breaking point, which coupled with the economic downturn were disastrous. What changed things were FDR's war monopolies which transitioned into Truman's more laxed business policy. In March 1939, the American Institute of Public Opinion did a solid polling of attitudes on business. Its findings point the finger and say FDR failed. They polled and said: "Do You think that the Roosevelt administration towards business is delaying business recovery? " More than twice as many participants responded "YES" than those who responded "NO". After FDR had died, in April 1945 another poll was taken in May. They asked: "Do you think Truman will be more favorable or less favorable towars business than Roosevelt was?" In this poll, Truman got 8 times more "YES"s than "NO"s. Educated people of even that time saw this, so why is it that its so hard to grasp today?

We have to understand that government spending and interventionism is not the answer to our problems. Trying to spend our way out of a problem just leads to more spending. Although it may appear to solve things, we must learn to heed Mr Hazlitts wise words. That is, recognizing the secondary consequences of our actions.

Edit: I'm sorry if I'm rambling tonight- im really tired and just worked a split and went to school in between. Added causes

EDIT 2: Orchidomegaly, that uis the most BULL**** comment I've ever read. You buy into the **** they feed you on the news and are incable of performing obvious logic.

@ kokoko I'm not very well versed in Mises's works yet, I'll quote him more as I read his books. But seriously, if you are going to post, don't throw your bull**** at anyone. Argue it.

Orchidomegaly
11-06-2009, 12:18 AM
EDIT 2: Orchidomegaly, that uis the most BULL**** comment I've ever read. You buy into the **** they feed you on the news and are incable of performing obvious logic.

Logical fallacie:

Appeal to ridicule

Examples:

"Sure my worthy opponent claims that we should lower tuition, but that is just laughable."
"Support the ERA? Sure, when the women start paying for the drinks! Hah! Hah!"
"Those wacky conservatives! They think a strong military is the key to peace!"

No actual reasons are given. No attempt for logic is really even put forth.

I'm not sure why you thought that I got that information from the news. I've never heard that from the news. That is just a basic principle that could be taught in an intro to economics class.

The principle I described is found in Keynesian economics. Economics is not a pure sciences, and obviously not everybody agrees completely with what Keynesian economics teaches. There are a few assumptions made (like in all economic theories), but other than that it is free of logical fallacies. Overall, it is well respected and is far from being "BULL****"

http://en.wikipedia.org/wiki/Keynesian_economics

NickF
11-06-2009, 08:42 AM
Logical fallacie:

Appeal to ridicule

Examples:

"Sure my worthy opponent claims that we should lower tuition, but that is just laughable."
"Support the ERA? Sure, when the women start paying for the drinks! Hah! Hah!"
"Those wacky conservatives! They think a strong military is the key to peace!"

No actual reasons are given. No attempt for logic is really even put forth.

I'm not sure why you thought that I got that information from the news. I've never heard that from the news. That is just a basic principle that could be taught in an intro to economics class.

The principle I described is found in Keynesian economics. Economics is not a pure sciences, and obviously not everybody agrees completely with what Keynesian economics teaches. There are a few assumptions made (like in all economic theories), but other than that it is free of logical fallacies. Overall, it is well respected and is far from being "BULL****"

Keynesian economics - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Keynesian_economics)
Because Keynesian economics is taught as fact, it is talked about in the news and it is discussed on the radio, when Keynesian economics is the source of all of the economic fallacies we see today. Austrian economists, Mises, FA Hayak, and Hazlitt directly debunk these fallacies put forward by the Keynesians, many of whom who fail to acknowledge one basic principal. Indirect consequences.

Indirect consequences are the absolute source of our problems. Whether it be economics, foreign or even domestic policy, we have grown ignorant to look past the direct result of our action. That is why what you said was out of ignorance.

Not only is it ignorant, its completely wrong. Its government intervention that make them much mroe severe, as I've shown you in my previous post. Business has every intention get get back on its feet, the government only make that more difficult through restricitons and taxes along with harmful programs like the AAA and NRA.

Edit: Since government intervention bagan, in 1913, with the destruction of the gold standard and creation of the FED inflation has grown to enormous levels. As you can see, in 1971 when our last tie to gold was destroyed, inflation skyrocketed.
http://i24.photobucket.com/albums/c49/IgnoranceIsntbliss/Federal%20Reserve/Cumulative_Inflation_by_Decade.jpg
http://www.norfed.org/graphics/home/purchasepower.jpg
http://static.seekingalpha.com/uploads/2009/6/5/saupload_j4.jpg
http://thefalconpost.com/wp-content/uploads/2009/07/Monetary-Base-1913.png

These are just some graphs that prove that government interventionism is destroying out currency, and just because our neighbors are doing equal harm to their own currencies, making it appear that the dollar is still strong, does not make it the right thing to do. The government created the depression themselves by destroying the gold standard adn letting the fed run rampid. Then it tried to end it and prolonged it because it hurt business, and then WWII came around and they let business's expand and monopolize the defense industry because they were helping the government. This only lead to a shift from the private sector to the military industrial complex, which is inherently wrong.

Dyndrilliac
11-06-2009, 09:00 AM
Nick, that data only concerns U.S. inflation, correct? I would be interested in seeing that data compared to inflation over the same time span for any other two world super powers that are still using the gold standard. My point is two-fold: (a) inflation is a natural part of economics - it is partially inevitable as demand and supplies grow, and (b) the vast majority of the inflation that occurred between the time we left the gold standard and 2008 occurred between 1970 and 2008 - nearly 60 years after leaving the gold standard. How do you account for the massive delay if the problems you cite were early enough to contribute to The Great Depression? Why don't we see a steady near-constant rise as opposed to a fairly decent baseline and then a massive surge?

NickF
11-06-2009, 09:45 AM
Nick, that data only concerns U.S. inflation, correct? I would be interested in seeing that data compared to inflation over the same time span for any other two world super powers that are still using the gold standard. My point is two-fold: (a) inflation is a natural part of economics - it is partially inevitable as demand and supplies grow, and (b) the vast majority of the inflation that occurred between the time we left the gold standard and 2008 occurred between 1970 and 2008 - nearly 60 years after leaving the gold standard. How do you account for the massive delay if the problems you cite were early enough to contribute to The Great Depression? Why don't we see a steady near-constant rise as opposed to a fairly decent baseline and then a massive surge?

Inflation is a natural part of central banking, however when tied to gold or something of true value, other than a baseless currency like our own, inflation is controlled. The confusion here is created by a confusion between money and actual wealth, these terms are used interchangeably when that is not the case. Real wealth does not have a dollar sign. It consists in what is produced and what is consumed. The food we eat, the clothes we wear and the houses we live in. People think that having money is to have wealth, if i were to have 3 times as much money I am to have 3 times as much wealth. So the government thinks that by printing 3 times as much money, we will all by richer. This is the notion of Keynesians, as long as we keep up with inflation we can print money. But printing money is the creation of inflation, and destruction of purchasing power. its argued that this policy helps poor debtors like farmers and the like, or will stimulate exports and discourage imports. Or more on topic, that it will stimulate the economy and "start the industry going again" to achieve "full employment" By this logic, Keynesians actually LIKE inflation, or more so central bankers actually LIKE inflation because it allows them to lend more money. But what they don't realize is that people cannot collectively buy three times as much as they did before, unless 3 times as many goods are produced. They fail to see that an increase in production is limited by much more than money supply; not a shortage in manpower or productive capacity.

My point is that gold essentially prevents this vicious cycle by limiting the monetary supply. With a limit of the quantity of a monetary base, inflation is essentially under control. The only thing that would be to worry about is DEFLATION, as the monetary base SHRINKS from people hording it. But is an increase in the buying power of a dollar something to be afraid of?

As per your second point, the gold standard was not fully destroyed until 1971, when all ties to gold were destroyed and the US dollar became the world reserve currency. In 1913, gold still had ties to our money, but the fed controlled how many dollars were worth per gold unit.
Bretton Woods system - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Bretton_Woods_system)


Even Greenspan recognizes this:
Alan Greenspan - Gold and Economic Freedom (http://www.usagold.com/gildedopinion/greenspan.html)

Orchidomegaly
11-06-2009, 10:04 AM
Keynesian economics is the source of all of the economic fallacies we see today.

Could you go into more detail here? How exactly has it caused economic failures? I know that it is a popular belief that too much deregulation of the securities market triggered the current downturn, but I haven't looked into it very much.


Austrian economists, Mises, FA Hayak, and Hazlitt directly debunk these fallacies put forward by the Keynesians, many of whom who fail to acknowledge one basic principal. Indirect consequences.

You didn't say exactly what his criticisms were so I'll take the liberty of stating them.

from wikipedia:

1. Hayak says that Keynesian economics only studies aggregate relations, and this is wrong because recessions are caused by micro-economic factors.
(wiki doesn't reasoning to this claim, and i'm to lazy to look further.)

2. He says "that what starts as temporary governmental fixes usually become permanent and expanding government programs, which stifle the private sector and civil society".

Too True! In my opinion this is illustrates how Keynesian economics is abused.
ex
Government: "we are in an economic down turn. we must spend more to maintain GDP and employment! Lets start social programs that won't ever be discontinued! Good examples of this would be social security and public option health care. "never let a good crisis go to waste"

For Keynesian economics to work properly the government must stop its additional spending when the aggregate demand shock is over.



Not only is it ignorant, its completely wrong. Its government intervention that make them much mroe severe, as I've shown you in my previous post.

i'm not sure that you showed me. You definitely told me, and said that this economist agrees. Then you backed it up with public opinion polls. Popular belief doesn't make anything true.

Inflation

Keynesian economics doesn't always cause inflation. The good old tax and spend actually doesn't contribute to inflation. The monetary policies are what causes inflation (ie, print and spend, sell t-bonds and spend, and adjusting the federal reserve rate)

Inflation is not a bad thing at all when it is at a predictable rate. When it is predicable interests rates rise accordingly, wages are adjusted, and prices rise at the same rate. When it is not predictable those three things (among many others i'm sure) also become unstable.

The projected high inflation of the united states is not necessarily a bad thing. Many of the T-bonds that people have purchased from the US from around the world (especially china) have fixed interest rates that won't be adjusted for inflation. The highest interest rate on any t-bond (the 30-year bond) has an interest rate of around 4.20-4.50% If inflation were maintained about that amount for the whole length of the bond then the US government wins big.

Think of it this way. I know this is an extreme example but it illustrates the point.

US: "china I know we own you 3 trillion dollars so we have doubled our money supply, the value of the dollar has been cut in half. This was predictable so wages, prices and inflation rates have been doubled as well. (the buying power of our citizens is the same as before). Okay we will now pay you your 3 trillion dollars which is now worth half of what it was worth when you bought our bonds."

sorry i guess that last part was a bit off topic, but i think its an interesting idea.

good read on the matter: China frets about U.S. Treasury holdings - World business- msnbc.com (http://www.msnbc.msn.com/id/29675114/)

NickF
11-06-2009, 10:41 AM
Could you go into more detail here? How exactly has it caused economic failures? I know that it is a popular belief that too much deregulation of the securities market triggered the current downturn, but I haven't looked into it very much.

See post above your last, I think i discuss it rather thoroughly.


Government: "we are in an economic down turn. we must spend more to maintain GDP and employment! Lets start social programs that won't ever be discontinued! Good examples of this would be social security and public option health care. "never let a good crisis go to waste"

Welfare projects that are created by the government are inefficient and only serve to fund the bureaucracy. In fact, an entire 72 percent of the federal tax money that goes to welfare projects stays within Washington(Cleveland Clyde: Restoring the Heart of America)! So only 28 percent of the money is reaching the hands of those who need it. Is that what you call a good, efficient program? On the other hand 75-80 percent of the money from local charties go directly to those who need it. (see charitynavigator.org) This just goes to show you that government is wholly inefficient.

This is going to get off topic. As per socializing health care, they are further degrading of our health system. It would increase costs of health care and destroy jobs, and therefore increasing taxes and unemployment even further than we initially see. The irony of this is that the US government currently spends 2.4 trillion in health care spending, spending 17% of our GDP. Despire the fact that 46 million americans are uninsured. We are spending 6 times more, per capita, than European states that have already socialized medicine. Can you imagine the implications of entirely socialized medicine? It would be disastrous.

This is not to say that our system is working by any means. The system is geared against what is logical. Instead of a system that is designed to help an individual remain healthy, it is focused on taking care of problems afte rthey've already arisen. This system is good for no one but the pharmaceutical and medical industries, who have immense lobbying power.

Individuals should be ultimately responsible for their own health, and families should be responsible for family members who are unwilling/unable to take care of themselves. But that aside, the first step should be to restructure Medicare/Medicade to give its receipiants the ability to private health care. Secondly, the elimination of the FDA. The FDA has protected fewer people than it has let die waiting for new therapies to come to the market. Bringing a new drug to the market costs more tahn $200 million just to get trough the FDA. http://www.phrma.org/files/Cost_of_Prescription_Drugs.pdf)The FDA should be replaced with a voluntary, private based certification program which increase quality and choice.


Keynesian economics doesn't always cause inflation. The good old tax and spend actually doesn't contribute to inflation. The monetary policies are what causes inflation (ie, print and spend, sell t-bonds and spend, and adjusting the federal reserve rate)

Inflation is not a bad thing at all when it is at a predictable rate. When it is predicable interests rates rise accordingly, wages are adjusted, and prices rise at the same rate. When it is not predictable those three things (among many others i'm sure) also become unstable.

The projected high inflation of the united states is not necessarily a bad thing. Many of the T-bonds that people have purchased from the US from around the world (especially china) have fixed interest rates that won't be adjusted for inflation. The highest interest rate on any t-bond (the 30-year bond) has an interest rate of around 4.20-4.50% If inflation were maintained about that amount for the whole length of the bond then the US government wins big.

Let me get what you are saying here straight. The decrease of money value by printing new money, coupled with price and wage adjustment that also increases inflation is a good idea? That is an endless cycle of destroying our currency over time. How could you be so ignorant to not see what a BAD idea that is?



US: "china I know we own you 3 trillion dollars so we have doubled our money supply, the value of the dollar has been cut in half. This was predictable so wages, prices and inflation rates have been doubled as well. (the buying power of our citizens is the same as before). Okay we will now pay you your 3 trillion dollars which is now worth half of what it was worth when you bought our bonds."

That's a completely incorrect statement in every sense. Forcing business to double wages and increasing interest rates would destroy our economy. It would cause business to move to China, our industry would shrivel and our unemployment rates would skyrocket. You are missing the mark by not seeing unforeseen secondary consequences this would encumber the economy with. Prices would rise. people would lose their jobs. The government cannot simply print its oway out of a problem, in some cases it may fix the problem temporarily, but as with the booming 20s and the depression the bubble has to burst sooner or later.

Orchidomegaly
11-07-2009, 12:01 PM
See post above your last, I think i discuss it rather thoroughly.

Welfare projects that are created by the government are inefficient and only serve to fund the bureaucracy. In fact, an entire 72 percent of the federal tax money that goes to welfare projects stays within Washington(Cleveland Clyde: Restoring the Heart of America)! So only 28 percent of the money is reaching the hands of those who need it. Is that what you call a good, efficient program? On the other hand 75-80 percent of the money from local charties go directly to those who need it. (see charitynavigator.org) This just goes to show you that government is wholly inefficient.

This is going to get off topic. As per socializing health care, they are further degrading of our health system. It would increase costs of health care and destroy jobs, and therefore increasing taxes and unemployment even further than we initially see. The irony of this is that the US government currently spends 2.4 trillion in health care spending, spending 17% of our GDP. Despire the fact that 46 million americans are uninsured. We are spending 6 times more, per capita, than European states that have already socialized medicine. Can you imagine the implications of entirely socialized medicine? It would be disastrous.

This is not to say that our system is working by any means. The system is geared against what is logical. Instead of a system that is designed to help an individual remain healthy, it is focused on taking care of problems afte rthey've already arisen. This system is good for no one but the pharmaceutical and medical industries, who have immense lobbying power.

Individuals should be ultimately responsible for their own health, and families should be responsible for family members who are unwilling/unable to take care of themselves. But that aside, the first step should be to restructure Medicare/Medicade to give its receipiants the ability to private health care. Secondly, the elimination of the FDA. The FDA has protected fewer people than it has let die waiting for new therapies to come to the market. Bringing a new drug to the market costs more tahn $200 million just to get trough the FDA. http://www.phrma.org/files/Cost_of_Prescription_Drugs.pdf)The FDA should be replaced with a voluntary, private based certification program which increase quality and choice.

I completely agree with that. Well said.


Let me get what you are saying here straight. The decrease of money value by printing new money, coupled with price and wage adjustment that also increases inflation is a good idea? That is an endless cycle of destroying our currency over time. How could you be so ignorant to not see what a BAD idea that is?

I'm sorry but i really don't know what to say. All you are doing is just stating stuff.

"That is an endless cycle of destroying our currency over time" without saying why you believe that is true, all i can really say is "i disagree"

I guess i can just reiterate. Inflation is not destroying our currency. As i said before, unpredictable and extreme inflation destroys currency.

Also, just because we aren't on the gold standard doesn't mean that the government can't control it. There are nations (such as Argentina before its recession) that set their currency to a specific ratio to the dollar. This is easily done with monetary policies. It is usually not in the best interest of their economy though.



That's a completely incorrect statement in every sense. Forcing business to double wages and increasing interest rates would destroy our economy. It would cause business to move to China, our industry would shrivel and our unemployment rates would skyrocket. You are missing the mark by not seeing unforeseen secondary consequences this would encumber the economy with. Prices would rise. people would lose their jobs. The government cannot simply print its oway out of a problem, in some cases it may fix the problem temporarily, but as with the booming 20s and the depression the bubble has to burst sooner or later.

This was to be an extreme example to illustrate a point. Yes, you are right that if the United States suddenly doubled its money supply there would be economic disasters. However, it is true that when the money supply, wages, prices, interest rates, and investment rates all rise together there is no real change in an economy.

Ex. I work at McDonald earning $7.25/hour to start, and i can buy a big mac for $3.00. The government increases the money supply, inflation occurs, prices rise as well as wages. Lets say I now get paid $14.50/hour, and i can buy a big mac for $6.00. My buying power is exactly the same.

This is just an example. In reality inflation, prices, investment and interest rates, and wages do not increase all at the same rate even when inflation is predictable. Interest and investment rates adjust rather quickly, raw material prices soon follow, then retail prices and last wages.

A moderate inflation actually lowers unemployment because wages are sticky (ie they adjust slower than prices do.)

Example

Company A sells widgets for $100 dollars, and pays its employs $10/hour. Inflation raise prices so company A can sell the same number of widgets, but for $110. Wages are stick so they continue to pay their employees $10/hour. To optimize profits company a will want to sell more widgets for $110 dollars so they will hire more employees at $10/hour to produce more. Wages will catch up later. Inflation comes again. the economy grows. That is why an inflation of 3-4% a year is the target inflation. It helps the economy grow.

"How could you be so ignorant to not see what a BAD idea that is?"

appeal to ridicule again. I guess that is the most respected form of logic on this site so who cares what I say?

Edit: btw I forgot to mention. There is a flaw in my plan to screw china which will cause it to never come to pass. If the United States did that it would cause them to lose credibility on their 'safest investment in the world' (t-bonds). It would be forfeiting a lot of power. For the last few months there has actually been a deflation in our economy. No wonder we are above 10% unemployment. Inflation will grow because of our deficit and other factors, but i doubt it will ever go above 6-7%.

kokokoko
11-07-2009, 05:43 PM
What you describe really did happen - But in Germany (among other European countries, but Germany is the most widely remembered as the worst), not in the United States.

Hyperinflation in Post World War I Germany

As the article mentions the exchange rate for German currency to American currency was in the range of one trillion to one (in favor of the American currency). That doesn't sound like an American inflation problem to me. Also consider the fact that The Great Depression is generally considered by most economic analysts and historians began in the United States years after it had been raging in Europe. Factor in the worldwide economic crisis with the rising unemployment in America at the time and you have a perfect storm. Throw in the fiscal irresponsibility that a lack of regulation allows to happen (marked by the infamous stock market crash of 1929, when most historians and economic analysts mark as the beginning of The Great Depression in America) and voila, you have The Great Depression. However, I digress; this thread is about how The Great Depression ended. If you want to make a separate thread that investigates the causes, then go ahead. But try to stay on topic and respect Nick's thread.

Someone needs to learn their U.S. History, methinks. While it's true that the United States should have never left the gold standard, suggesting that something happened historically when it really didn't happen, and using relative and subjective terms like "greatest <insert job or title here> ever," is monumentally stupid. Also, how does a plot to artificially lower the value of currency benefit the "central banker crooks," when presumably it is their goal to make money? How does earning worthless money benefit them at all? Your reasoning does not a logical argument make.

Unless you have a serious post and some kind of real, peer-reviewed, source material or physical evidence to prove it, please refrain from wasting everyone's time with nonsensical bashing of the so called "bourgeois" establishment just to further your political agenda. Misinformation serves no purpose other than to deceive and manipulate. With as many stupid people that post here, the last thing we need is usurpers of truth spreading their beliefs that they have no evidence to support.

I will prove everything I have said in time. Things I say may not go along with your textbook version of history but did non the less happen. Since more than one person has complained about my "bs", I will get sources. I do not find it odd you somewhat reject my opinions since they go against the status quo and go against the power structures. You have to be part of some institution like a school, always wanting sources. Understand this I over my lifetime have gone through so many different sources and read and seen so many things that it gets hard to piece back together the wealth of information I have gone through, as many of my books I have lent out to friends. So to get you some "proof" will not be easy but is doable. What is "proof", if you call proof a history book; which is in and of it self a fragment of the real story and or an all and out lie. Is that much of proof any way? What I give you as proof might be some "controversial" person's book; will you read it or will you merely disregard my opinion? Thanks for you input, I will before posting in these threads will get sources. Sorry I forgot I was dealing with people who watch t.v. all day(not u Dyndrilliac), I don't watch much t.v. at all. So I can understand your need for sources as people on here don't know what I am talking about and may not understand.

But seriously what is the point if I get sources and you might still be offended by my opinion even if it is the truth? (not saying you will) I guess the truth is too hard a burden to bear.

How is a central banker not a crook if they create money out of thin air? Is that acceptable?, As clearly we have gone through many depressions and recessions since we are off the gold standard. In the real world fiat currency is not a long term solution. Money must be backed by gold or a precious metal like silver because if its not then that economy will not be stable. And if you use the fiat currency you allow banks to practice unsound monetary policies. You said in your own words they "manage inflation" that in it self says they are crooks, I am sorry that you are so downright mind controlled to see blatant usury. By "managing inflation" they control the amount of money that is in circulation. Also you said that they would be creating a monetary system that would be undesirable to them because the money would be worthless? This is countered on my part by saying that the private company you call the federal reserve has confiscated the real money (gold) that is at fort Knox and at different locations. Plus they know what real money is; it is power; what is power? Knowledge is power.

What you did wrong is you thought.


You win. :D

NickF
11-07-2009, 10:18 PM
I'm sorry but i really don't know what to say. All you are doing is just stating stuff.

"That is an endless cycle of destroying our currency over time" without saying why you believe that is true, all i can really say is "i disagree"

I guess i can just reiterate. Inflation is not destroying our currency. As i said before, unpredictable and extreme inflation destroys currency.

I'm not trying to start stuff, but what you fail to see is that inflation is uncontrollable, especially in a system where our money is based on nothing.



Also, just because we aren't on the gold standard doesn't mean that the government can't control it. There are nations (such as Argentina before its recession) that set their currency to a specific ratio to the dollar. This is easily done with monetary policies. It is usually not in the best interest of their economy though.

Basing one's economy on a dollar is exactly what many countries are doing post bretton-woods. It's obviously not working as we're in a worldwide recession. But basing a currency on something that has no real value, let alone controllable value, is an illogical idea.



This was to be an extreme example to illustrate a point. Yes, you are right that if the United States suddenly doubled its money supply there would be economic disasters. However, it is true that when the money supply, wages, prices, interest rates, and investment rates all rise together there is no real change in an economy.

Ex. I work at McDonald earning $7.25/hour to start, and i can buy a big mac for $3.00. The government increases the money supply, inflation occurs, prices rise as well as wages. Lets say I now get paid $14.50/hour, and i can buy a big mac for $6.00. My buying power is exactly the same.

This is just an example. In reality inflation, prices, investment and interest rates, and wages do not increase all at the same rate even when inflation is predictable. Interest and investment rates adjust rather quickly, raw material prices soon follow, then retail prices and last wages.


No. You are still wrong. In what interest would we have in playing this game, if buying power will remain the same? Its an illogical system of circles that will, undoubtedly, fail in the long run. You are assuming that the dollar is the only currency in the world and that doubling monetary supply and then doubling wages will not affect the dollar exchange. You are assuming that other countries will import goods at the same dollar cost instead of jacking them up to cope with inflation. You are assuming that price is the only factor that is changing, rather than a cut in work force. You are assuming that buying power is the same, but when suddenly all the money you had saved is worth half of what it was you realize you are broke. You are also assuming that the price of Big Macs rise directly according to wages. You are assuming way too many factors to remain constant when they are completely and utterly dynamic by nature. Like you, the government does not have the ability to control so many difficult to see secondary consequences of its actions.

Since you are unable to understand elementary economics, I'm going to paint the picture for you. Once again with the wonderful allusions created by Henry Hazlitt.

A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Two hundred and fifty dollars? That will be quite a sun. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $250 more to spend with other merchants, and these in turn will have $250 more to spend with still other merchants, and so ad infinitum. The smashed window will go on providing money and employment in ever-widening circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.

Now let us take another look. The crowd is at least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will be out $250 that he was planning to spend for a new suit. Because he has had to replace the window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $250 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.

The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.*



Example

Company A sells widgets for $100 dollars, and pays its employs $10/hour. Inflation raise prices so company A can sell the same number of widgets, but for $110. Wages are stick so they continue to pay their employees $10/hour. To optimize profits company a will want to sell more widgets for $110 dollars so they will hire more employees at $10/hour to produce more. Wages will catch up later. Inflation comes again. the economy grows. That is why an inflation of 3-4% a year is the target inflation. It helps the economy grow.

Ok first let me point a few things out.
Inflation is an increase in the quantity of money and credit. Its chief consequence is the rise of prices. So if we misuse the term to mean the rising prices themselves, the sole cause is printing more money. The government’s monetary policies are entirely responsible for this. Despite what you seem to think, Prolonged inflation never “stimulates” the economy. The end result is quite the opposite, it unbalances, disrupts, and misdirects production and employment. To further my point, unemployment is mainly caused by excessive wage rates in some industries. These are created minimum-wage laws (which keep teenagers and the unskilledout of jobs), or by prolonged and over-generous unemployment insurance.
To direct conversation back to your example, you are once again making wild assumptions. If inflation were to rise, and therefore the company is selling widgets at a higher price, even if they are employing workers at the same cost, are they really making more money? No, they are not. They are adjusting their price because material prices have gone up, shippers have begun to charge more, ect. Company A is breaking even, and yet the workers for Company A just lost 10% of their buying power in relation to widgets.





Edit: btw I forgot to mention. There is a flaw in my plan to screw china which will cause it to never come to pass. If the United States did that it would cause them to lose credibility on their 'safest investment in the world' (t-bonds). It would be forfeiting a lot of power. For the last few months there has actually been a deflation in our economy. No wonder we are above 10% unemployment. Inflation will grow because of our deficit and other factors, but i doubt it will ever go above 6-7%.
There are flaws in all of your plans because they are short sighted, as with most monetary policy.

Raistlin
11-10-2009, 09:41 AM
Good discussion going in here, a couple points:


"That is an endless cycle of destroying our currency over time" without saying why you believe that is true, all i can really say is "i disagree"

I guess i can just reiterate. Inflation is not destroying our currency. As i said before, unpredictable and extreme inflation destroys currency.

Also, just because we aren't on the gold standard doesn't mean that the government can't control it. There are nations (such as Argentina before its recession) that set their currency to a specific ratio to the dollar. This is easily done with monetary policies. It is usually not in the best interest of their economy though.

First, it seems like our currency has already been destroyed. A dollar today is worth what a nickel was worth within just the last 100 years.

Second, one only has to look at the history of printing money to see that we are in for some real hurt here. Under Carter we increased the money supply by 13% and the result was that interest rates topped 20%. In the past year we have increased the money supply by 120%. I haven't heard anyone that is able to put a number on exactly what kind of interests rates this would lead to if there isn't some other plan at work here, but suffice it to say it would likely be a death blow to our economy.

So is there another plan at work here? Perhaps. Look at what has historically been done in this situation, for example in the Weimar Republic. They simply allowed their currency to collapse, paid off their debt in worthless currency (that is the currency in which they owed it - clever) and started a new currency. And that new currency had to be backed by something for other nations to take it seriously since their nation was bankrupt. So what did they use to back their currency? Their resources and land.

So what's the problem? Can't our government simply do the same thing? Sure. But first, they have to own the resources and land. Which would be crazy in a free country!

Oh, wait. We are now being ruled by a Marxist regime. They are already taking over industry after industry. They already own half the mortgages in the US. They are already taking more and more land under the auspices of parks and environmentalism. They are already refusing to allow precious resources to be tapped, presumably setting them aside for some future purpose. Unfortunately, it does fit.

NickF
11-10-2009, 11:53 AM
Good discussion going in here, a couple points:


Second, one only has to look at the history of printing money to see that we are in for some real hurt here. Under Carter we increased the money supply by 13% and the result was that interest rates topped 20%. In the past year we have increased the money supply by 120%. I haven't heard anyone that is able to put a number on exactly what kind of interests rates this would lead to if there isn't some other plan at work here, but suffice it to say it would likely be a death blow to our economy.

Agree.


So is there another plan at work here? Perhaps. Look at what has historically been done in this situation, for example in the Weimar Republic. They simply allowed their currency to collapse, paid off their debt in worthless currency (that is the currency in which they owed it - clever) and started a new currency. And that new currency had to be backed by something for other nations to take it seriously since their nation was bankrupt. So what did they use to back their currency? Their resources and land.

So what's the problem? Can't our government simply do the same thing? Sure. But first, they have to own the resources and land. Which would be crazy in a free country!

Further destroying our economy to build it back up again like the Weimer Rebublic did is a dreadful way of going about it. It would push millions of Americans to the point of starvation. Backing it with resources and land they don't own would be an insult to our freedoms. I agree. However, backing it with materials and resources it actually owns (e.g. gold, silver) would be a legitamate way of stabalizing it.


Oh, wait. We are now being ruled by a Marxist regime. They are already taking over industry after industry. They already own half the mortgages in the US. They are already taking more and more land under the auspices of parks and environmentalism. They are already refusing to allow precious resources to be tapped, presumably setting them aside for some future purpose. Unfortunately, it does fit.

As Mises once said:

"Capitalism and socialism are two distinct patterns of social organization. Private control of the means of production and public control are contradictory notions and not merely contrary notions. There is no such thing as a mixed economy, a system that would stand midway between capitalism and socialism."

"There is simply no other choice than this: either to abstain from interference in the free play of the market, or to delegate the entire management of production and distribution to the government. Either capitalism or socialism: there exists no middle way."

"In the socialist commonwealth every economic change becomes an undertaking whose success can be neither appraised in advance nor later retrospectively determined. There is only groping in the dark. Socialism is the abolition of rational economy."

kokokoko
11-27-2009, 04:52 AM
I'm not trying to start stuff, but what you fail to see is that inflation is uncontrollable, especially in a system where our money is based on nothing.

Inflation is not uncontrollable, the FED detremins how much money they will print in their meetings. They also determine the interest rate on our own money we have to buy from them. Under the constitution money is to be printed by congress at no cost to any one. By determining the amount of money they will print they determine the worth of the money in the boom bust cycles. Which of course they and the government are the only ones who benefit from inflation. Inflation is not uncontrollable because the FED determines how much money they print therefor determining the rate of inflation. The central bankers rely on wiles and deception cause they know that only one in one million will see through their complex monetary systems.

NickF
12-01-2009, 08:19 PM
Inflation is not uncontrollable, the FED detremins how much money they will print in their meetings. They also determine the interest rate on our own money we have to buy from them. Under the constitution money is to be printed by congress at no cost to any one. By determining the amount of money they will print they determine the worth of the money in the boom bust cycles. Which of course they and the government are the only ones who benefit from inflation. Inflation is not uncontrollable because the FED determines how much money they print therefor determining the rate of inflation. The central bankers rely on wiles and deception cause they know that only one in one million will see through their complex monetary systems.

I don't think you quite understand how the system works.
First off let me point out that no bank benefits from inflation, not even the Fed. The government, however, does benefit from it. More money= more spending. More spending=more government programs and a bigger military state.

Second off, inflation IS NOT controllable, it's this fallacy that keeps people supporting the central banks. As I've said you're confusing money with REAL wealth. Real wealth cannot be describe with a dollar sign. Real wealth is what is produced, and what is consumed. It's the food we eat and cars we drive. However, people see it as if they had 2x the money, they would have 2x the wealth. So if they had 2x the money they could buy 2x the things. If that were so, the government could simply just print money.
But that's obviously not true. So where's the catch? Some say we can only print enough money to get us by, to make up for a "gap" somewhere in our economy. We never have enough purchasing power- so we need to print enough money to enable producer's to "buy back", as consumers, the product that they've made. They make up some silly equation that counts things only once, or counts the same thing many times. They fail to see the fallacy that money does not equal purchasing power, therefore they too are wrong.
Some of the more knowledgeable people recognize that an increase in monetary supply decreases the power per unit, but they fail to see this as a bad thing. Kokoko, this is your group. Some of these people argue that poor debtors, like farmers, will live improved lives compared to the rich. You see the increase of monetary supply as an increase in purchasing power. You're failing to remind yourself that people cannot collectively buy twice as much as before, unless twice the amount of goods are produced. You're failing to recognize that prices caused by not only by a shortage in money, but a shortage in manpower, working hours, or productive capacity. You're assuming that the good are automatically produced.

So by this logic, printing money creates inflation. You say the fed determines how much money it will print? This is only partially true. So long as the government spends money, the fed needs to print it. So long as banks oans money to irresponsible Americans, the fed needs to increase it. So long as there is any demand for money, and there always will be, the fed needs to print it. The fed has no control over the demand for money, and it will bend the rules every which way to make money for itself, even if that means an insane amount of inflation in the process. so it may be true that the fed thinks it has the power to control inflation, but since it cannot control the demand for money, it cannot control inflation.

kokokoko
12-02-2009, 03:23 AM
Straight up nonsense nick sorry.

NickF
12-03-2009, 08:53 PM
Straight up nonsense nick sorry.

You're obviously just upset that you fail to understand what's going on and I do. You even fail to bring up a single flaw in what I've said anywhere in this thread.