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Topic: Are we in a depression? (Read 141 times) previous topic - next topic

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  • ken 
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Are we in a depression?
Good article. The GDP of this nation has been a big lie since the 2007-2008 crash.
http://www.zerohedge.com/news/2017-09-28/we-are-already-depression-if-borrowing-money-not-income

Re: Are we in a depression?
Reply #1
Good article. The GDP of this nation has been a big lie since the 2007-2008 crash.
http://www.zerohedge.com/news/2017-09-28/we-are-already-depression-if-borrowing-money-not-income

This article is exactly what I have posted here and elsewhere many times, but I used net GDP for the real economic growth rate, not actual GDP, doing exactly what the author is doing, subtracting debt. If he wanted to get more accurate, he would also subtract state and local debt as well, the difference being governments other than federal can not print funds, but they can borrow at zero rates. In both cases it encourages more government. I have also referred to this as bringing economic activity forward at the expense of future activity.

I carry the analysis further by identifying that all government spend is essentially 100% consumption and consumption by definition consumes wealth. It is reinvested wealth, not money, in wealth producing ventures that increase our standard of living and congruently our actual or net GDP. I say invested wealth, because the Fed cannot print wealth. The money printed by the fed steals its value from existing holders of dollars. It is simple, increased supply, decreased value. We cannot identify the wealth generating ventures that were not funded by existing dollar holders as a result of the lost dollar purchasing power. Another bad outcome is concentrating investment decisions into a few well connected banks, companies and government, the result being more bad decisions, remember Solyndra? This further concentrates wealth into the already rich and connected at the expense of middle America. Also, think about the dollars transferred to government, they will go to consumption; if left in private hands, a portion will go to consumption, but a portion will also go to generating wealth.

The above paragraph is exactly why big government fails. Their priority is to divert resources for the most part to consumption at the expense of wealth generating investment. We must have consumption as we must eat, shelter, and provide basic services, but when wealth generating investments do not cover the cost of our consumption plus provide extra for additional investment, standard of living contracts as does GDP, along with the collective wealth of the nation. One more point in connection with the tax plan being discussed now, it is fine but it is only part of the story. The other part is to shrink government so more wealth is directed toward wealth generating ventures and away from consumption. Think about it this way, you can not consume your way to prosperity, and you cannot consume your way to a healthy employment market.

There is so much more to say, but I am glad the story has reached a larger audience at Zero Hedge.

  • ken 
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  • Global Moderator
Re: Are we in a depression?
Reply #2
Quote
The money printed by the fed steals its value from existing holders of dollars. It is simple, increased supply, decreased value.
As I understand it, the deficit of value is made up by the petro dollar. The Saudis buy our bonds and we buy their oil, etc. The rest of the world that plays the petro dollar game also get screwed, but what's the alternative? Quit and you land up like Muammar and Saddam .  

Re: Are we in a depression?
Reply #3
Quote
The money printed by the fed steals its value from existing holders of dollars. It is simple, increased supply, decreased value.
As I understand it, the deficit of value is made up by the petro dollar. The Saudis buy our bonds and we buy their oil, etc. The rest of the world that plays the petro dollar game also get screwed, but what's the alternative? Quit and you land up like Muammar and Saddam .  

I believe that is partially correct, but not totally. It is referred to as exporting our inflating. If it were, the dollar would not have lost 98% or 99% over the last 100 plus years of fed malfeasance. By the way, run the math; that is overall a 4% per annum approximately decrease is the dollars purchasing power; so much for a 2% inflation target.

When Nixon decreed the dollar's separation from the last ties to precious metals, his treasury secretary, Bob McFarlane if I remember the name correctly, stated in some big wig meeting of country finance officials, when they complained about the arrangement of the reserve currency not being backed and getting the shaft, he stated to the effect, it is our policy and your problem. Now it is our problem and more citizens are figuring it out. You never hear the phrase, "Good as money in the bank" anymore.

This post may be the worst grammar I have ever posted, but you get the idea.

  • ken 
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  • Global Moderator
Re: Are we in a depression?
Reply #4
Another thing that gets me about the GDP is the Q1-3 where they count that as production. Again, as I understand it, for every trillion of 'stimulus' one point is added to the GDP. What a joke, not to mention dishonest. They smile when they screw you.