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Thread: LA Times: Obama stimulus spending: $246,436 per new job

  1. #121
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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by carlkay58 View Post
    A couple of points:

    MisterMan, in your reply to my posting on economics you replied that the dollar that went to the government was spent over and over again - something that later in my post I admitted it would. HOWEVER, it still loses the 'out of thin air' money growth that is created in the private sector through production of finished goods. This is where keeping money in the private sector is better than giving it to the government first.
    Yet.... As evidenced by the short run psychological impact, it is not spent during recessions (as much). It is referred to as a GDP gap.

    You also stated that since the recession is a failure of the private sector to spend money then the government needs to. This drives up government debt, an investment into a non-productive sector of the economy. Once again, reducing the ability for money to make more 'out of thin air'.
    You forget that during this contraction: "out of thing air" growth is greatly diminished, or even regressive.

    phattonez - the FED is ALL about fractional reserve banking. In fact the entire banking industry is dependent on the existence of fractional reserves. Without that concept, our economy would not be anywhere near what it is and many more people would be poor and un-employed.
    He wants to abolish the Fed not the prosperity that FRB brings with it.
    Last edited by Kushinator; 12-09-09 at 03:37 PM.
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

  2. #122
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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by Goldenboy219 View Post
    Until spillover occurs. Not all banks were failing this time last year, however if we were to let more banks fail, that would have caused even healthy institutions to become insolvent. Ever heard of the term "animal spirits"? I am a little bit confused in your "prop up" statement as i am unsure if it pertains to bailouts or fiscal stimulus (no they are not the same).

    What we do know is this: spending decreases, hiring decreases, and job losses increase. This fall in spending sends ripple effects throughout the economy leading to even greater job loss until economic sentiment improves. Economic sentiment is largely psychological and can be steered by improving demand.
    Or when people save enough and feel comfortable enough spending again because they have saved so much. Do you think that our current rate of saving is sustainable?

    Also, not all forms would fail. This is a key concept here.

    What? Production and investment does shift to the acute percentages of business (who are weathering the storm). Your error comes in the form of proportional expectations. You are assuming that the fall in "others" production is made up proportionally by the "succeeding". It does not work this way. The "aggregate fall" exponentially exceeds the productive capacity of those who succeed. You are using static analysis to explain dynamic economic cycles.
    And so what? The resources previously used in the failing companies need to shift to the succeeding companies.

    But why? Even if income remains the same, there is a serious demand gap of which can be illustrated by increased saving. Therefore the "fail" is not due to consumer sentiment, but fear of future economic expectations.
    And people wanting to save is so terrible? The people will get their comfort somehow, you can't force them not to be as secure as they want.

    Here is the issue Tony: You might be unaware, but your idea draws from the classical case, in which in the LONG RUN markets self correct. I agree, they do self correct in the long run.

    However in the short run, they do not self correct. As we wait for the self correction, many people will suffer in the form of job losses, poverty, poor health (stress), failed marriages, declining birth rates, falling wages, diminished human capital (in the form of skills), etc....

    The question then shifts to: how much suffering are you willing to allow for the economy to self correct? Remember, in the long run we are all dead.
    And what recession prior to government intervention lasted so long as to draw these kinds of conclusions?

    Who shall ascend the hill of the Lord? And who shall stand in his holy place? He who has clean hands and a pure heart, who does not lift up his soul to what is false, and does not swear deceitfully. Psalm 24
    "True law is right reason in agreement with nature . . . Whoever is disobedient is fleeing from himself and denying his human nature [and] will suffer the worst penalties . . ." - Cicero

  3. #123
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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by phattonez View Post

    And what recession prior to government intervention lasted so long as to draw these kinds of conclusions?
    Your government intervention red herring is noted! No begging here: how much suffering are you willing to allow for the economy to self correct?
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by carlkay58 View Post
    MisterMan, in your reply to my posting on economics you replied that the dollar that went to the government was spent over and over again - something that later in my post I admitted it would. HOWEVER, it still loses the 'out of thin air' money growth that is created in the private sector through production of finished goods. This is where keeping money in the private sector is better than giving it to the government first.
    Why? Government spending doesn't produce finished goods? Sure it does. Roads, for instance. And why are finished goods more valuable? Plenty of private sector economic activities produce no finished goods either. Probably half or our jobs are service jobs.

    Value added isn't just about finished goods.

    A note - I'm not claiming the government is better than the private sector. All I'm saying is that when the private sector is in a slump, it needs the government to step in, temporarily, to get it going again. That's a stimulus.

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by Goldenboy219 View Post
    Your government intervention red herring is noted! No begging here: how much suffering are you willing to allow for the economy to self correct?
    I'd rather have no suffering and avoid it by abolishing fractional-reserve banking. However, without intervention like we're seeing now and in the 30's, most recessions last 2 years or less. I'd like to go back to that system of correction.

    Who shall ascend the hill of the Lord? And who shall stand in his holy place? He who has clean hands and a pure heart, who does not lift up his soul to what is false, and does not swear deceitfully. Psalm 24
    "True law is right reason in agreement with nature . . . Whoever is disobedient is fleeing from himself and denying his human nature [and] will suffer the worst penalties . . ." - Cicero

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by phattonez View Post
    I'd rather have no suffering and avoid it by abolishing fractional-reserve banking.
    How does one make any bank loans without fractional-reserve banking?

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by misterman View Post
    How does one make any bank loans without fractional-reserve banking?
    Full-reserve banking - Wikipedia, the free encyclopedia

    Read. Learn.

    Who shall ascend the hill of the Lord? And who shall stand in his holy place? He who has clean hands and a pure heart, who does not lift up his soul to what is false, and does not swear deceitfully. Psalm 24
    "True law is right reason in agreement with nature . . . Whoever is disobedient is fleeing from himself and denying his human nature [and] will suffer the worst penalties . . ." - Cicero

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by phattonez View Post
    I'd rather have no suffering and avoid it by abolishing fractional-reserve banking.
    Fractional reserve banking does not induce recessions. They have been cyclical in nature for hundreds, if not thousands of years. Only a small fringe group of "so called" economists believe this idea; and the most relevant economic theory from that group (to date) revels in socialism.

    However, without intervention like we're seeing now and in the 30's, most recessions last 2 years or less. I'd like to go back to that system of correction.
    Most corrections were never this severe (in terms of wealth evaporation). Laissez faire never existed Tony. Government has been intervening in the economy since the days of Washington.
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by phattonez View Post
    Full reserve leads to stagnated growth.

    The critisism is longer than the article

    The most common criticism of full-reserve banking, and by contrast, argument for fractional reserve banking, is the need for financial intermediation. Small savers often cannot lend or invest their meager savings, for want of knowledge and sufficient capital to make a loan. Likewise, without financial intermediaries, borrowers must seek out someone who can loan them the exact amount they need, instead of being able to draw on several loans from different small savers. Savers also face significant risk as individual investors, since if they lend to a single firm or individual, that entity can collapse, leaving the saver penniless. Furthermore, if they act as individual lenders, savers must wait for their loans to mature before recouping their money; a bank can make their deposits available at any time. There are also significant economies of scale in banks making investment and lending decisions, as they have access to knowledge and expertise which individual investors or lenders generally do not. Under full-reserve banking, a great deal of money would sit idle, as savers stored up their money, while entrepreneurs went without much-needed capital.[28]

    Among criticisms of a full-reserve banking system is the argument that full-reserve banking implicitly means that there is no government-controlled "monetary policy" at all. Critics might also argue that a full-reserve system leaves us with an inelastic currency. Proponents would likely argue that the lack of a government-manipulated currency (the lack of a "monetary policy") and the presence of a sound currency (as opposed to an "elastic" one) are advantages to a full-reserve system. More subtly, since full-reserve banking means that during periods of high demand for money, the prices of other goods must fall, the broader real economy may bear adjustment costs that are (in principle) no different from those it would bear during periods of moderate inflation (that is, if the cost of adjusting to absolute prices is low or negligible, moderate inflation should be no more problematic than moderate deflation).[29] However, this subsequent deflationary effect is likely to have deleterious consequences if some prices are stickier than others; in particular, wages are often significantly stickier than other prices. Most economists, including prominent Austrian Murray Rothbard, believe that given wage stickiness, the adjustment costs of deflation are significantly higher than an equivalent inflation.[30]

    Pascal Salin, former professor at the Université Paris-Dauphine and former Mont Pelerin Society president, opposes such regulation of banking and disputes Murray Rothbard's characterization of fractional-reserve banking as a simple form of recursive embezzlement. He argues that a situation of perfect certainty doesn't exist even in a full-reserve banking system. He also argues that in a perfectly free banking system any customer must be free to choose the kind of notes and the system of payments for services he prefers since optimality cannot be defined independent of the wants of the individual.[31]

    Advocates of full-reserve banking do not necessarily advocate that the government lay down regulations stipulating a full-reserve system. In fact, some economists, such as Murray Rothbard (of the Austrian School) believe that government intervention sustains fractional-reserve banking, as governments have formalized the practice by making it legal and supporting it through the creation of central banks. Murray Rothbard argues that in doing this they have prevented periodic bank runs and other natural checks that would otherwise be placed on banks by astute customers, anti-fractional-reserve consumer groups, and other such organizations. Rothbard expresses this concern, and argues the case for 100% gold or silver-backed money, in his book What Has Government Done to Our Money? and other prominent published works.[32] Austrian monetary theorist George Selgin disputes the Rothbardian account, arguing: "Those self-styled Austrian economists, mostly followers of Murray Rothbard, who insist on its fraudulent nature or inherent instability are, frankly, making poor arguments. I don't think the evidence supports their view, and that they overlook overwhelming proof of the benefits that fractional reserve banking has brought in the way of economic development by fostering investment."[33]
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

  10. #130
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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by phattonez View Post
    I honestly couldn't find any place in this article that explained how you loan out cash when you have to keep 100% of cash in reserve. How is that possible? Perhaps you could point it out or explain it yourself or find another link.

    I did find this quote though:

    Proposals for the restoration of full-reserve banking have been made, but are generally ignored or dismissed by mainstream economists, who believe that the costs of such a change would outweigh any benefits.

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