39 replies to this topic

[wjfox]

You could solve the crisis practically overnight if you just invested in new infrastructure, clean energy, electric cars and charging points, energy efficiency improvements for homes, etc. You could employ literally tens of millions of people to get America moving again, upgrade its infrastructure and bring the country into the 21st century - whilst simultaneously helping the environment, reducing health costs associated with pollution, and reducing dependence on Middle East oil. Instead, it just seems like endless bailouts that don't really achieve much.

[jjf3]

Leaving my views on Green Energy aside for a moment Let's consider your proposal. Investing in one industry (except I think technology) isn't really going to change that much.

You say invest in electric cars:

But the companies making electric cars can only produce so much so fast, and not everybody can afford to buy them or wants to buy them and a lot of people aren't buying new cars in this economy anyway, and most electric cars are new. If someone were to buy a car it would a used car.

You say invest in charging points:

I assume you mean the charging points for the electric cars themselves. While this will create jobs what about when they are all installed in every street in every road? What about then? And again, Why build millions of Charging points when electric cars are only selling slowly?

Invest in new infrastructure:

let's take schools as the President has suggested. The following scenario I am going through outlines clearly the problem with investing in new infrastructure like schools and teaching jobs.

Grants and scholarships are extremely helpful, but not always enough to support the students (and their families) while they complete a degree. So they also have to find jobs... part-time jobs that allow them to schedule around school and still pay enough to eat, Those are even rarer than manufacturing jobs. Not everyone is smart enough or 'special' enough to receive full rides to colleges. In addition to this, school budgets are being cut. At my college you need to come up with some excuse why you need a job on campus. They need to check your records, if you are dependent on your parents than they consider you 'rich', you can't apply for these jobs, because your parents will gladly pay you $150 a week so you can eat??? What? My parents are not doing that! I approached one of my teachers about being a student assistant, a part-time job helping out and he told me that he would love to hire me but there was no money for him to hire anyone. And to make matters worse, they are expecting serious budget cuts next year because they had just spend loads amount of money building a new building, this has been in the planning stages for years, and now they can't keep spending money on infrastructure. They need to pay off that building first

You say get off oil:

While I agree with your point on this more so than most of my friends or colleagues would, nobody is getting off oil as long as the oil families control the majority of the world's resources hence the world's money. Oil isn't called Black Gold for nothing.

You say invest...:

The problem with this is we have NO money!

I'm afraid we'll all have to suffer through this circus until it all comes crashing down. Personally, I'll welcome that day. if it happens soon!

[Prolite]

Actually, this problem could be solved quite easily in two ways: 1) reinstate the Glass-Steagall act in it's original entirety. None of this Dodd/Frank crap. Get the oil speculators off the damn market and you'll see gasoline prices drop below 2 dollars a gallon. 2) End ALL of these wars we're in and just leave counter-terrorism teams in place. Than we'll have more money to invest in stimulating the economy.

[Roh234]

Actually, this problem could be solved quite easily in two ways: 1) reinstate the Glass-Steagall act in it's original entirety. None of this Dodd/Frank crap. Get the oil speculators off the damn market and you'll see gasoline prices drop below 2 dollars a gallon. 2) End ALL of these wars we're in and just leave counter-terrorism teams in place. Than we'll have more money to invest in stimulating the economy.

+1

[jjf3]

But...But wasn't that something the non-science GOP presidential candidate Michelle Bachmann was talking about??? Something about $2 gas??? Hm.... Could she actually have a point about something?

[wjfox]

Michelle Bachmann is a lunatic.

http://thinkprogress...raziest-quotes/

[jjf3]

Yes, but even crazy people can make good points sometimes. And that is exactly what we are talking about here. She's the only one talking about $2 gas and yes, it is possible. I was just stating a point.

[Innsertnamehere]

2 dollar gas might be possible, but it isn't good.

[Unrequited Lust]

Capitalism.

Not in the slightest, but this will be the prevailing attitude after the imminent financial collapse. I think the timeline is quite correct in estimating it around 2015.

America is mostly in this mess because of corporatism, which is something so wholly different than capitalism that I have to label such public "intellectuals" like Noam Chomsky for daring to compare the two. Corporatism is really just fascism, without all the restrictions on free speech and whatnot. It's been going on since the Gilded Age, when Morgan and Rockefeller founded the Federal Reserve (seriously), but post-WW2 it really kicked up.

There is a fundamental difference between capitalism and corporatism. Capitalism is private property and free markets. Corporatism is private property and no free markets. Corporations, mostly those who jointly monopolize the military, medicine, food, and energy (but prisons get their fair share too), fund politician's campaigns and then politician's pass certain laws so that those corporations are the only "private" enterprises who have control over their product. Bill Clinton pushes NAFTA (food companies). Nixon pushes the HMO (obviously medicine companies). Prisons outsource labor to certain corporations. Eisenhower warned about the military industrial complex and look where we ended up. And every president since him has happily entered America into needless wars.

I don't think deficit spending will do much of anything because there is no empirical evidence to say it has done anything other than give us more debt and weaken the dollar which is already crippled due to the Fed's corrupt handling of it. This is based on the purely theoretical conjectures of John Maynard Keynes who soon became celebrated by governments because he gave them an excuse to spend like drunken sailors. Keynesian doesn't work if the New Deal, stagflation in the 70's, Japan's lost decade, or Obama's recent stimulus are any indication. But we continue to do it anyway because the Keynesians' mantra is "The only reason it didn't work is because we didn't spend enough."

Usually the opposite happens. After Bush Sr. raised taxes and caused a recession so bad that he lost the reelection after attaining the highest recorded approval rating in the history of the United States (89%) after the Gulf War, Clinton came into power and was happy to deficit spend until America was bathed in a bloated fiat currency. But Gingrich stepped up to the plate and said no, they battled and the government eventually shut down, but in the end the budget was balanced. The Keynesians said this would be catastrophic. But then unexpectedly (to anyone who isn't a Keynesian) the economy picked up and soared. Clinton was celebrated and he aptly took credit for balancing the budget. He left office a hero and Gingrich a right wing nut job who cheated on his terminally ill wife.

The reason Keynesianism doesn't work is because the money the government spends comes from somewhere. Well there are three ways a government can do this. It can tax, it can borrow, or it can print (quantitative easing). Taxing usually worsens everything because the wealth extracted doesn't equal the wealth inputted because there's a shit load of bureaucracies in between and the government is generally too stupid to know where to invest things properly unlike the entrepreneurs from which they took the money in the first place. Borrowing weakens the faith in the dollar so foreign investors aren't as keen to invest in the country. Quantitative easing causes mass inflation that will sometimes rise to hyperinflation. Really the only way to "stimulate" the economy is to cut taxes. The government does nothing and the free market, where pretty much all wealth comes from, does its job.

Really the only way to get out of this mess it cut taxes drastically. An 18% flat rate would probably do the job as the Laffer Curve prevents the government from getting more than this anyway. We need to end all this corporate welfare crap so we can end the literally trillions in subsidies that goes to these companies PLUS all the legislation that gives them monopoly over the market so the wealth can go to some place else other than the few dozen or so CEO's and board of directors. We need to end the Fed or at least audit it so we can put faith back in the dollar. We need to end all the wars in Libya, Afghanistan, and Iraq, we need to close down the 150+ military bases all over the world (in places as strategically stupid as Germany or Japan), we need to stop bombing Yemen, Pakistan, or any other Middle Eastern country that went under my nose, we need to stop ALL foreign aid, especially to Israel, and while we're add it we might as well pull out of NATO, tell them to go fuck themselves in they're hegemonic assholes, and apologize to the world for killing and ruining the lives of so many millions worldwide for the past 60 years. We need to cut the federal government back to its constitutional limits, meaning giving a test on Article 1 Section 8 to everyone in the white house and automatically kicking them out if they think the federal government has any business outside of these explicit enumerated powers, meaning getting rid of the Department of Education, the Department of Transportation, and all the other superfluous crap FDR pulled out of his ass during his borderline dictatorial reign.

At this point we can get on track. Medicare and medicaid should stop growing to unsustainable sizes because the government can finally stop paying 10 times more than every other country for the same exact drugs and in the long run probably phase out these programs along with social security. Put the capital gains tax to 0%. Put the estate tax to 0%. Put the income tax at a flat rate of 18% or get rid of it and replace it with an 18% fair tax.

But all of this won't happen. We'll hit that financial collapse, the dollar might become practically worthless, and there will be massive reforms. But they will have your state of mind. They will blame capitalism. We will see a new progressive era. We will adopt a social democracy, but probably a more "conservative" one like England. Fraud on wall street will end as will corporate welfare. And this will be the cause of the new economic growth. And we will continue to get back on track, probably around 2020, until the inherent damages (i.e. see any current social democracy right now) make themselves known, but I'm guessing by that time technological progress will be fast enough that we'll grow out of it. I don't envision post-scarcity in the 21st century nor the radical metaphysical change Ray Kurzweil ignorantly predicts, but I do see economic growth fast enough that things will be generally okay.

[jjf3]

Are you Ron Paul? Lolz. But seriously thanks for typing that all out. But a couple questions about your theory about economic rebound?

You seem to be libertarian up until the point where you say blaming capitalism will somehow regenerate the economy? I don't understand, if the dollar collapses how will blaming capitalism restart economic growth? Fraud and welfare ending are some good points but, you need something else to replace the dollar right? How will people trusting the government that money is worth something, if they say capitalism is bad and there is no dollar to speak of? The problem I see in your theory is from 2015-2020 we magically come back as a new England or something and you didn't really explain how that would happen.

Although good job on the rest of the post. That's exactly what I learned in economics classes.

[Prolite]

Really the only way to get out of this mess it cut taxes drastically. An 18% flat rate would probably do the job as the Laffer Curve prevents the government from getting more than this anyway. We need to end all this corporate welfare crap so we can end the literally trillions in subsidies that goes to these companies PLUS all the legislation that gives them monopoly over the market so the wealth can go to some place else other than the few dozen or so CEO's and board of directors.

If cutting taxes was the answer, than how come it's not working? Bush tax cuts are STILL in place. And second of all: the housing market is keeping the economy from recovering. The housing market boosts the economy bit time. Want to know why? Ok I'll tell you. It's because people can refinance their homes and take equity out. They can than use that money to buy whatever they want, which stimulates local businesses. Oh boy, you're not going to like that, because that's keynsian economics; putting money into the hands of the consumer. Listen my friend, it's all about the CONSUMER in a bad economy. The more money they have, the more they spend, the more money businesses make in the economy. Cutting taxes doesn't do crap because it doesn't increase the customers that walk in the door. You're putting money into the wrong hands.

[Unrequited Lust]

Are you Ron Paul? Lolz. But seriously thanks for typing that all out. But a couple questions about your theory about economic rebound?

You seem to be libertarian up until the point where you say blaming capitalism will somehow regenerate the economy? I don't understand, if the dollar collapses how will blaming capitalism restart economic growth? Fraud and welfare ending are some good points but, you need something else to replace the dollar right? How will people trusting the government that money is worth something, if they say capitalism is bad and there is no dollar to speak of? The problem I see in your theory is from 2015-2020 we magically come back as a new England or something and you didn't really explain how that would happen.

Although good job on the rest of the post. That's exactly what I learned in economics classes.

I think people will wrongly blame capitalism for what's going on. Buying politicians isn't capitalism. But everyone seems to think it is. It's such a meaningless word at this point that I hardly even use it anymore. But in their condemnation of capitalism, they will get rid of all the corporatism, and that will let the market breathe easier. Plus, nothing helps an economy better than a people united. Our economy got back on track in WW2 because people were motivated to work their asses off so as not to get invaded by Hitler.

I don't think the dollar will be completely worthless, but I do think it will lose its status as the world's most eminent currency. Which isn't too much of a problem, we'll just have much less foreign investment and we'll in all likelihood lose the GDP race to China and India.

I predict that after this financial crisis, which is pretty much inevitable unless we miraculously change within the next couple of years, we will switch to a social democracy like the European model, but we won't be as "socialist" as the Nordic countries, but more "conservative" like England or Germany. Meaning health care for all, paid for education going into grad school, and all that standard social democratic junk.

But I'm just speculating. I'm pretty damn sure that the financial crisis WILL happen, but I don't know for sure what will happen afterward. The above is just my best guess.

If cutting taxes was the answer, than how come it's not working? Bush tax cuts are STILL in place. And second of all: the housing market is keeping the economy from recovering. The housing market boosts the economy bit time. Want to know why? Ok I'll tell you. It's because people can refinance their homes and take equity out. They can than use that money to buy whatever they want, which stimulates local businesses. Oh boy, you're not going to like that, because that's keynsian economics; putting money into the hands of the consumer. Listen my friend, it's all about the CONSUMER in a bad economy. The more money they have, the more they spend, the more money businesses make in the economy. Cutting taxes doesn't do crap because it doesn't increase the customers that walk in the door. You're putting money into the wrong hands.

The Bush tax cuts were offset by 9/11. 9/11 hurt our economy bad, and we never really recovered from it. Plus, tax cuts don't pay for themselves until a few years down the line, so Bush invading Iraq and Afghanistan, making medical prices non-negotiable, and all the other stupid shit he zealously spent on put us into further debt.

The basis of Keynesian economics, giving people more money so they can buy things, isn't correct, it's just the method by which they try to do it that blows in their face. I already explained why Keynesian fiscal policy is doomed. But you're talking about monetary policy.

Your suggestion sounds like exactly like what caused the 2007-2008 recession in the first place: the Austrian business cycle. "business cycles are the inevitable consequence of excessive growth in bank credit, exacerbated by inherently damaging and ineffective central bank policies, which cause interest rates to remain too low for too long, resulting in excessive credit creation, speculative economic bubbles and lowered savings." And until we understand that, the economy will continue to fail every once in a while. It happened in 1929 stocks, and it happened again in 2007 with the housing market.

[Prolite]

Your suggestion sounds like exactly like what caused the 2007-2008 recession in the first place: the Austrian business cycle. "business cycles are the inevitable consequence of excessive growth in bank credit, exacerbated by inherently damaging and ineffective central bank policies, which cause interest rates to remain too low for too long, resulting in excessive credit creation, speculative economic bubbles and lowered savings." And until we understand that, the economy will continue to fail every once in a while. It happened in 1929 stocks, and it happened again in 2007 with the housing market.

In regards to the housing market, I was stating a fact of the economy and one of the major forces which drives it upward. Your comment about "your suggestion sounds exactly like what caused... recession" has nothing to do with what I said. What caused The Great Recession was lack of regulation. Simple as that. Reinstate Glass/Steagall act in it's entirety from 1933 exactly as written.

Secondly, to use 9/11 and the wars as an "excuse" that the tax cuts didn't work is like arguing FOR or AGAINST any policy no matter what the material is or what it's relevancy bares. Here's the truth that no Republican wants Americans to know: tax cuts to businesses HURT the economy. The bush tax cuts added to the debt. Why do people making 500 thousand dollars a year and up need a tax cut? Like they're going to spend that money on top of the yacht they already own? Gimme a break. Your policies are foolish and you ignore history and the facts. You are clearly a Tea-bagging Republican. Tea-baggers love to ignore facts and tout their own policies as "god-like", and than blame someone else's policies on something that has nothing to do with the subject whatsoever.

Let me make your own political picture more clearer for you:

[Roh234]

The buying of politicans with a department in the US government that is paid to lie.

What if it’s true, as Kevin Phillips recently stated in an article in Harpers’, that “[e]ver since the 1960s, Washington has gulled its citizens and creditors by debasing official statistics, the vital instruments with which the vigor and muscle of the American economy are measured?”
What if it turned out that our individual, corporate, and government decision-making was based on deeply misleading, if not provably false, data?
That’s what we’re going to take a look at here, by examining the ways that inflation and Gross Domestic Product, or GDP, are measured.
As you now know, inflation is a matter of active policy. Too little and our current banking system risks failure. Too much and the majority of people noticeably lose their savings, which makes them politically restive. So keeping inflation at a "goldilocks" temperature – not too hot and not too cold – is the name of the game.
Inflation has two components. The first is the simple pressure on prices due to too much money floating around. The second component lies with people’s expectations of future inflation. If expectations are that inflation will be tame, they are said to be well-anchored. If people expect prices to rise, they tend to spend their money now, while the getting is still good, and this serves to fuel further inflation in a self-reinforcing manner. The faster people spend, the faster inflation rises. Zimbabwe is a perfect modern example of this dynamic in play.
Accordingly, official inflation policy has two components – the first is regulating the money supply and the second is anchoring your expectations.
And how exactly is this anchoring accomplished? Over time, this has evolved into little more than telling you that inflation is a bit lower, or even a lot lower, than it actually is.
The details of how this is done are more complicated but worthy of your attention. Let me be clear, the tricks and subversions we will examine did not arise with any particular administration or political party. Rather, they arose incrementally during every administration you care to examine over the past 40 years.
Under Kennedy, who disliked high unemployment numbers, a new classification was developed that scrubbed so-called ‘discouraged workers’ from the headline data, causing unemployment figures to drop.
Johnson created the “unified budget” that we currently enjoy, which rolls surplus Social Security funds into the general budget, where they are spent but then not reported as part of the deficit you read about.
Richard Nixon bequeathed us the so-called “core inflation” measure, which strips out food and fuel, which, as Barry Ritholtz says, is like reporting inflation ex-inflation, while it was Bill Clinton who left us with the current tangled statistical morass that is now our official method of inflation measurement.
At every turn, a new way of measuring and reporting was derived that invariably served to make things seem a bit rosier than they actually were. Economic activity was higher, inflation was lower (a lot lower), and jobs were more plentiful. Unfortunately, the cumulative impact of all this data manipulation is that our measurements no longer match reality. We are, in effect, telling ourselves lies, and these fibs serve to distort our decisions and jeopardize our economic future.
Let’s begin with inflation, which is reported to us by the Bureau of Labor Statistics, or BLS, in the form of the Consumer Price Index, or CPI.
If you were to measure inflation, you’d probably track the cost of a basket of goods from one year to the next, subtract the two, and measure the difference. And your method would, in fact, be the way inflation was officially measured right on up through the early 1980s.
But In 1996, Clinton implemented the Boskin Commission findings, which now have us measuring inflation using three oddities: substitution, weighting, and hedonics. To begin with this list, we no longer simply measure the cost of goods and services from one year to the next, because of something called the "substitution effect." Thanks to the Boskin Commission, it is now assumed that when the price of something rises, people will switch to something cheaper. So any time, say, that the price of salmon goes up too much, it is removed from the basket of goods and substituted with something cheaper, like hot dogs. By this methodology, the BLS says that food costs rose 4.1% from 2007 to 2008.
However according to the Farm Bureau, which does not do this and simply tracks the exact same shopping basket of thirty goods from one year to the next, food prices rose 11.3% over the past year, compared to the BLS which says they only rose 4.1%. That’s a huge difference. In my household, our experience is better matched by the Farm Bureau.
One impact of using substitution is that our measure of inflation no longer measures the cost of living, but the cost of survival.
Next, anything that rises too quickly in price is now subjected to so-called “geometric weighting,” in which goods and services that are rising most rapidly in price get a lower weighting in the CPI basket, under the assumption that people will use less of those things. Using the government’s own statistics from two different sources, we find that health care is about 17% of our total economy, but it is weighted as only 6% of the CPI basket.
Because healthcare costs are rising extremely rapidly, the impact of including a much smaller healthcare weighting is a reduction in reported inflation. By simply reinstating the actual level of healthcare spending, our reported CPI would be several percent higher.
But the most outlandish adjustment of them all goes by the name “hedonics,” the Greek root of which means “for the pleasure of.” This adjustment is supposed to adjust for quality improvements, especially those that lead to greater enjoyment or utility of the product, but it has been badly overused.
Here’s an example. Tim LaFleur is a commodity specialist for televisions at the Bureau of Labor Statistics, where the CPI is calculated. I’m guessing he works in a place that looks like this. In 2004, he noted that a 27-inch television selling for $329.99 was selling for the same price as last year, but was now equipped with a better screen. After taking this subjective improvement into account, he adjusted the price of the TV downwards by $135, concluding that the screen improvement was the same as if the price of the TV had fallen by 29%. The price reflected in the CPI was not the actual retail store cost of $329.99, which is what it would cost you to buy, but $195. Bingo! At the BLS, TeeVees cost less and inflation is heading down. At the store, they’re still selling for $329.99.
Hedonics are a one-way trip. If I get a new phone this year and it has some new buttons, the BLS will say the price has dropped. But if it only lasts eight months instead of 30 years, like my old phone, no adjustment will be made for that loss. In short, hedonics rests on the improbable assumption that new features are always beneficial and are synonymous with falling prices.
Over the years, the BLS has expanded the use of hedonic adjustments and now applies these adjustments to everything from DVDs, automobiles, washers, dryers, refrigerators, and even to college textbooks. Hedonics are now used to adjust as much as 46% of the total CPI.
What would happen if you were to strip out all the fuzzy statistical manipulations and calculate inflation like we used to do it? Luckily, John Williams of shadowstats.com has done exactly that, painstakingly following each statistical modification over time and reversing their effects.
If inflation were calculated today, the exact same way it was in the early 1980’s, Mr. Williams finds that it would be running at closer to 13% than the currently reported 5%. This is a stunning 8% difference, which explains much that we see around us. It explains why people have had to borrow more and save less – their real income was actually a lot lower than reported. A higher rate of inflation is consistent with weak labor markets and growing levels of debt. It fits the monetary growth data better. So many things that were difficult to explain under a low-inflation reading suddenly make sense.
The social cost to this self-deception is enormous. For starters, if inflation were calculated like it used to be, Social Security payments, whose increases are based on the CPI, would be 70% higher today than they actually are. Because Medicare increases are also tied to the CPI, hospitals are increasingly unable to balance their budgets, forcing many communities to lose services. These are real impacts.
But besides paying out less in entitlement checks, by understating inflation, politicians gain in another very important way.
Gross Domestic Product, or GDP, is how we tell ourselves that our economy is either doing well or doing poorly. In theory, the GDP is the sum total of all value-added transactions within our country in any given year.
Here’s an example, though, of how far from reality GDP has strayed. The reported number for 2003 was a GDP of $11 trillion, implying that $11 trillion of money-based, value-added economic transactions had occurred.
However, nothing of the sort happened.
First, that 11 trillion included $1.6 trillion of imputations, where it was assumed that economic value had been created but no actual transactions took place.
The largest of these imputations was the “value” that the owner of a house receives by not having to pay themselves rent. Get that? If you own your house free and clear, the government adds how much they think you should be paying yourself rent to live there and adds that amount to the GDP.
Another is the benefit you receive from the “free checking” provided by your bank, which is imputed to have a value, because if it weren’t free, then you’d have to pay for it. So that value is guesstimated and added to the GDP as well. Together, just these two imputations add up to over a trillion dollars of our reported GDP.
Next, the GDP has many elements that are hedonically adjusted. For instance, computers are hedonically adjusted to account for the idea that, because they are faster and more feature-rich than in past years, they must be more additive to our economic output.
So if a thousand dollar computer were sold, it would be recorded as contributing more than a thousand dollars to the GDP. Of course, that extra money is fictitious, in the sense that it never traded hands and doesn’t exist.
What’s interesting is that for the purposes of inflation measurements, hedonic adjustments are used to reduce the apparent price of computers, but for GDP calculations, hedonic adjustments are used to boost their apparent price. Hedonics, therefore, are used to maneuver prices higher or lower, depending on which outcome makes thing look more favorable.
So what were the total hedonic adjustments in 2003? An additional, whopping $2.3 trillion. Taken together, these mean that $3.9 trillion, or fully 35% of our reported GDP, was NOT BASED on transactions that you could witness, record, or touch. They were guessed at, modeled, or imputed, but they did not show up in any bank accounts, because no cash ever changed hands.
As an aside, when you hear people say things like “our debt to GDP is still quite low” or “income taxes as a percentage of GDP are historically low,” it’s important to remember that because GDP is artificially high, any ratio where GDP is the denominator will be artificially low.
Now let’s tie in inflation to the GDP story. The GDP you read about is always inflation-adjusted and reported after inflation is subtracted out. This is called the real GDP, while the pre-inflation adjusted number is called nominal GDP. This is an important thing to do, because GDP is supposed to measure real output, not the impact of inflation.
For example, if our entire economy consisted of producing lava lamps, and we produced one of them in one year and one of them the next year, we’d want to record our GDP growth rate as zero because our output is exactly the same.
So if we sold a lava lamp for $100 one year but $110 the next, we’d accidentally record 10% GDP growth if we didn’t back out the price increase. So in this example, the real lava lamp economy has a value of $100, while the nominal lava lamp economy is $110. But all we care about is the real economy, because we’re trying to measure what we actually produced.
Ah! Now we can begin to understand the second powerful reason that DC loves a low inflation reading. It’s because GDP is expressed in real terms. In the 3rd quarter of 2007, it was reported that we experienced a very surprising and strong 4.9% rate of GDP growth. At the time, there were many proud officials declaring that certain tax cuts were responsible for this excellent news, and so forth. Less well reported was the fact that nominal GDP was 5.9%, from which was deducted the jaw-droppingly low inflation reading of 1%, giving us the final result of 4.9%.
In order to believe the 4.9% figure, you have to first believe that our nation was experiencing a 1% rate of inflation during the same period that oil was approaching $100/barrel and inflation was obviously and irrefutably exploding all over the globe.
Lest you think I’ve cherry picked an accidental one-time embarrassing statistical moment, here’s a chart of the so-called GDP deflator, which is the specific measure of inflation that is subtracted from the nominal GDP to yield the reported real GDP. As you can see, for the past fifteen quarters the Bureau of Economic Analysis has been serenely and systematically subtracting lower and lower amounts of inflation, which simply flies in the face of both real-world inflation data and common sense. Remember, each percent that inflation is understated equals a full percent that GDP is overstated.
If this is not lying to ourselves, then delusional is the next word that comes to mind. I want you to keep this deception in mind when you next read about how “our robust economy is still expanding.”
If, instead, we make our own assumptions about inflation, or use those of John Williams, then we find that we’ve been in a solid recession for quite a while now. Ahhhhhhh…!
Suddenly a lot of things that were difficult to understand make perfect sense. Contracting businesses, rising foreclosures, job losses, rising budget deficits, falling tax revenues, declining auto sales; all of these are consistent with recession and not expansion.
The same sort of statistical wizardry that we’ve explored here is performed on income, unemployment figures, house prices, budget deficits, and virtually every other government supplied economic statistic you can think of. Each is laced with a long series of lopsided imperfections that inevitably paint a rosier picture than is warranted.
We are now in the midst of a fearful credit crisis, a bursting bubble, and the first wave of boomer retirements, and solid, credible information is what we need as a beacon to find our way out. To close with Kevin Phillips again, “…our nation may truly regret losing sight of history, risk, and common sense.”
And that’s why you should care about something as yawn-inducing as how the inflation and GDP numbers are calculated.

[jjf3]

Excuse me for being liberal here for a minute, but that's the freedom us independents get. We don't hang on to any ideology without looking at all the sides and using basic COMMON SENSE!!!!!. The only way for us to "survive" the 21st century is to stop whining and bitching and blaming and start working together. Isn't that what a current president ran his campaign under???? Oh wait that was Bush's fault too!

But liberals love to claim how evil the other side is when faced with facts they deny it or blame Bush.

The Conservatives aren't necessarily evil for wanting businesses to succeed are they? What makes all of these products that you liberals love to share so much? Big Businesses! Who funds your schools and non-profits that you work for? Big Businesses. Without Businesses I doubt society could last long.

However, the liberals are quite right about the need for certain government and environmental regulations. They have their minds and hearts in the right place when they talk about peace and love and whatever else. But they forget that the top Liberals are the Hollywood a--holes who spend all day just thinking about stuff and creating entertainment for everyone else. Now this is a good thing too and not necessarily evil or lazy as some republicans bark. Without Entertainment well, we wouldn't be much of a society now we would we?

Both are forms of elite control and that is why I do not belong to any political party. And if you think about it, the top two political parties are not really friendly to other third party systems here in America. Even though, that's how the government was initially created for. Us independents are a small group and I am tired of both parties bickering away at the same damn thing! I am sick of having to pick a side or being insulted and having people put me on a side that I do not belong!

[Unrequited Lust]

Your suggestion sounds like exactly like what caused the 2007-2008 recession in the first place: the Austrian business cycle. "business cycles are the inevitable consequence of excessive growth in bank credit, exacerbated by inherently damaging and ineffective central bank policies, which cause interest rates to remain too low for too long, resulting in excessive credit creation, speculative economic bubbles and lowered savings." And until we understand that, the economy will continue to fail every once in a while. It happened in 1929 stocks, and it happened again in 2007 with the housing market.

In regards to the housing market, I was stating a fact of the economy and one of the major forces which drives it upward. Your comment about "your suggestion sounds exactly like what caused... recession" has nothing to do with what I said. What caused The Great Recession was lack of regulation. Simple as that. Reinstate Glass/Steagall act in it's entirety from 1933 exactly as written.

Secondly, to use 9/11 and the wars as an "excuse" that the tax cuts didn't work is like arguing FOR or AGAINST any policy no matter what the material is or what it's relevancy bares. Here's the truth that no Republican wants Americans to know: tax cuts to businesses HURT the economy. The bush tax cuts added to the debt. Why do people making 500 thousand dollars a year and up need a tax cut? Like they're going to spend that money on top of the yacht they already own? Gimme a break. Your policies are foolish and you ignore history and the facts. You are clearly a Tea-bagging Republican. Tea-baggers love to ignore facts and tout their own policies as "god-like", and than blame someone else's policies on something that has nothing to do with the subject whatsoever.

Let me make your own political picture more clearer for you:

The recession was caused by Freddie Mac and Fannie Mae subprime mortgage derivatives based on credit promised the Federal Reserve - in other words, a classic Austrian business cycle. Austrian enthusiasts like Ron Paul and Peter Schiff were warning in 2002 that the housing market was going to inevitably crash because of the Austrian business cycle. They were laughed at. Barney Frank proudly claimed, "There is no bubble!" But they were right. Giving people middle class homes who couldn't afford them sounded like such a noble cause. So in a way, yeah, the recession was caused by a lack of regulation, but it was a lack of regulation in government sponsored programs. The Fed wouldn't exist without direct intrusion on the free market. Same with Freddie Mac and Fannie Mae.

Ideologically, I see no reason to arbitrarily tell someone they have "too much money." They got that money because people voluntarily gave it to them because they wanted to use their product. Both parties feel that they are benefiting. Peter Thiel is a billionaire because so many people voluntarily gave him money because they wanted to use PayPal. I don't see anything wrong with that. It's voluntary exchange. Taxation is involuntary exchange. The government says give me your money our we will put you in jail. It's extortion and theft made legal.

And no, I'm not a Tea Party republican lol. I'd never vote for Bachmann and I make a point to call her crazy on a daily basis. I do appreciate the Tea Party because we need a hoard of mindless uneducated individuals who unconditionally vote against Obama for literally no reason whatsoever because Obama's fanbase is largely composed of the same likeminded people. Most people have no idea how politics or economics works. The majority of people who voted for Obama had no idea what his policies were. They were swept up in the propaganda of "Change" and "Hope." Basically Obama said "I am not Bush" and people didn't investigate further, not like they could understand it either.

I like to consider myself an independent. I don't vote along party lines. I'm vote for Bernie Sanders or Dennis Kucinich over any Republican except for Ron Paul or Gary Johnson.

[Prolite]

The recession was caused by Freddie Mac and Fannie Mae subprime mortgage derivatives based on credit promised the Federal Reserve - in other words, a classic Austrian business cycle.

Wrong. Freddie and Fannie were only symptoms of a much bigger problem: The Great Recession was caused by lack of regulation over banks.
http://en.wikipedia....ss–Steagall_Act

I like to consider myself an independent. I don't vote along party lines. I'm vote for Bernie Sanders or Dennis Kucinich over any Republican except for Ron Paul or Gary Johnson.

Saying you'd vote for both Bernie Sanders and for Ron Paul is like being a vegetarian and being obsessed with eating red meat at the same time. You're a liar, and someone needs to call you out on your political bullcrap that's ripping my country a part.

[jjf3]

Why can't he vote for whoever he likes? You don't know that he is a liar? Your not in his mind! I have conservative viewpoints when it comes to the government because I want a smaller government but that doesn't mean I'll even think about voting tea party, I like Jon Huntsman so does that make me a liar?

[Unrequited Lust]

The recession was caused by Freddie Mac and Fannie Mae subprime mortgage derivatives based on credit promised the Federal Reserve - in other words, a classic Austrian business cycle.

Wrong. Freddie and Fannie were only symptoms of a much bigger problem: The Great Recession was caused by lack of regulation over banks.
http://en.wikipedia....%93Steagall_Act

I like to consider myself an independent. I don't vote along party lines. I'm vote for Bernie Sanders or Dennis Kucinich over any Republican except for Ron Paul or Gary Johnson.

Saying you'd vote for both Bernie Sanders and for Ron Paul is like being a vegetarian and being obsessed with eating red meat at the same time. You're a liar, and someone needs to call you out on your political bullcrap that's ripping my country a part.

Banks aren't independent. They're under the direct jurisdiction of the Federal Reserve. So yeah, the Glass-Steagall act is a good thing, but if the market were freer, it wouldn't be necessary in the first place.

And this stupidly perceived dichotomy, this "us vs. them" mentality, is what is really destroying the nation. This dumbass 2 party system is focused more on getting rid of the other side rather than cooperation. The left and the right aren't mutually exclusive. There is so much common ground but neither side is willing to admit it because they're so focused on the conviction that the opposing side's ideology is evil.

[GNR Rvolution]

I predict that after this financial crisis, which is pretty much inevitable unless we miraculously change within the next couple of years, we will switch to a social democracy like the European model, but we won't be as "socialist" as the Nordic countries, but more "conservative" like England or Germany. Meaning health care for all, paid for education going into grad school, and all that standard social democratic junk.

And this stupidly perceived dichotomy, this "us vs. them" mentality, is what is really destroying the nation. This dumbass 2 party system is focused more on getting rid of the other side rather than cooperation. The left and the right aren't mutually exclusive. There is so much common ground but neither side is willing to admit it because they're so focused on the conviction that the opposing side's ideology is evil.

Err, that's kind of what happens over in the UK now, it's always been Labour vs Conservative, with the main emphasis being put the other side down. Parliament is like a school playground