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

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

    I know there's going to be a lot of disagreement on where a recession starts, so let's just start somewhere where we can all agree: banks are not lending money. Also in the current situation we have high unemployment and a lot of uncertainty. So this means that people start saving more money. This pushes banks to start lending (Goldenboy says that banks are lush with reserves, but are they anywhere near 100%?), and so companies will start to grow again once credit becomes more easily available. It's like we're reconciling the lost loans with more savings, like whatever was defaulted on is now keeping us back from progressing. The faster we fix that problem, the faster we can move on.

    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 know there's going to be a lot of disagreement on where a recession starts, so let's just start somewhere where we can all agree: banks are not lending money. Also in the current situation we have high unemployment and a lot of uncertainty. So this means that people start saving more money. This pushes banks to start lending (Goldenboy says that banks are lush with reserves, but are they anywhere near 100%?), and so companies will start to grow again once credit becomes more easily available. It's like we're reconciling the lost loans with more savings, like whatever was defaulted on is now keeping us back from progressing. The faster we fix that problem, the faster we can move on.
    I totally agree.

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

    Quote Originally Posted by phattonez View Post
    This pushes banks to start lending (Goldenboy says that banks are lush with reserves, but are they anywhere near 100%?),
    Liquidity is not the issue; it is the psychology that persists in this environment.

    FRB: H.3 Release--Aggregate Reserves of Depository Institutions--December 10, 2009

    You might find this link interesting....
    Last edited by Kushinator; 12-10-09 at 11:46 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

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

    Just because they are above the required reserve ratio does not mean that it is high enough for them to start lending.

    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
    Just because they are above the required reserve ratio does not mean that it is high enough for them to start lending.
    You make yourself look foolish at times. What does a zero bound federal funds rate signify?

    During a very expansive year in 1997, the total to required ratio was very close to 1:1. Meaning banks were meeting their reserve ratios. Now, the total to required ratio is 17:1! Meaning, banks are holding 17 times the amount of reserves they need. Can you tell me other times in history when this has happened?

    When is it enough? I have stated before this is not a liquidity issue and short term savings will not lead to growth (time frame error).
    Last edited by Kushinator; 12-11-09 at 02:23 AM.
    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

    17 times the amount that they legally need. It doesn't mean that they will feel comfortable lending yet, especially since there are still government programs trying to encourage spending and so decrease savings.

    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
    17 times the amount that they legally need.
    The amount not loaned is 4 times the required reserve ratio. If you do not understand the significance, why continue to bring up savings (as if liquidity is an issue)?

    It doesn't mean that they will feel comfortable lending yet, especially since there are still government programs trying to encourage spending and so decrease savings.
    Once again, savings has nothing to do with growth in the short run; there is no need to continue to mention it. Banks are flushed with liquidity, and rates will not be going up until sometime next year (so says the chairman). Its about jobs! Job creation improves credit availability.
    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 Goldenboy219 View Post
    The amount not loaned is 4 times the required reserve ratio. If you do not understand the significance, why continue to bring up savings (as if liquidity is an issue)?

    Once again, savings has nothing to do with growth in the short run; there is no need to continue to mention it. Banks are flushed with liquidity, and rates will not be going up until sometime next year (so says the chairman). Its about jobs! Job creation improves credit availability.
    My point is that the required reserve ratio is completely arbitrary and has nothing to do with when banks will be comfortable with lending again. If there were no required reserve ratio, do you think that banks would still lend to get to a ratio of 0%?

    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 Grim17 View Post
    This colossal waste of taxpayer money is a classic example of the inefficiency of the federal government, and the number 1 reason why we need to keep the government out of the health care industry.

    Do you people realize, that if the Obama administration would have taken that $157 billion, split it up, and simply given it to the 3 million people who have lost their jobs since Obama took office, that would have given each of them $52,600 a piece... That's an entire years wages.

    .
    The figures presented are misleading because they do not reflect the new bridges and roads that will be built with that money.

    Our infrastructure is failing because of our previous priority of optional wars and tax cuts for the rich. I for one am glad to see my tax money being used for more productive purposes, in addition to creating new jobs!
    Treat the earth well: it was not given to you by your parents, it was loaned to you by your children. We do not inherit the Earth from our Ancestors, we borrow it from our Children. ~ Ancient American Indian Proverb

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

    Quote Originally Posted by phattonez View Post
    My point is that the required reserve ratio is completely arbitrary and has nothing to do with when banks will be comfortable with lending again.
    Ok, never did i make a point in regards to required reserve ratios. Excess reserves as a percentage what is required however is telling indeed. For someone who claims to "hate the Fed", you are not too familiar with how the system actually operates. And for this reason i cannot take your criticisms seriously; they are riddled with error.

    If there were no required reserve ratio, do you think that banks would still lend to get to a ratio of 0%?
    That depends on their ability to loan in the first place; i.e. the bank reserves. A bank with very little reserves will have quite a bit of trouble making loans. The more a bank has in its reserves, the cheaper it can offer financing and therefore lower potential interest throughout the life of the loan is essential in attracting customers.

    But jobs are falling. People without jobs cannot take out loans (anymore), and therefore the entire argument shifts back to unemployment. It is future job growth (if any) that will determine the future volume of lending, not necessarily savings. FDI can become a vital source of capital during periods of high consumption, although such behavior is unsustainable in the long run. As savings picks up during economic expansion will it begin to drive future investment.

    Which brings us back to fiscal stimulus.
    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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