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US Inflation Explained
Comments
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The US govt providing the liquidity for GM to trade through the crunch has no doubt prevented huge amounts of personal suffering, the company has still been restructured and will restructure further and is paying back the US govt for the loans provided. How is this intervention a mistake (in the real world of people and jobs not the Gideon Osbourne theoretical world of efficient markets)?
i'm not clear enough to know it is definitely a mistake - or whether it's necessary to prevent mass suffering.
all i know is that the dominant mantra is state intervention bad / markets good when it comes to economies.
so if state intervention is necessary to prevent suffering on a massive scale what does that say about reliance on markets?
if state intervention isn't necessary then why is it happening?Those who will not reason, are bigots, those who cannot, are fools, and those who dare not, are slaves. - Lord Byron0 -
i'm not sure i see it like that. isn't it actually serious state intervention? particularly when you take into account what gen says about it being to bail out specific sectors.
QE is still nothing more or less than an increase in liquidity.
But liquidity has to enter the system somehow....
The bailout factor comes into play when specific sectors are chosen to be the portal for liquidity to enter the system, exchanging less liquid assets for cash on what some would call favourable terms. Or worse, when those sectors choose to absorb the liquidity to rebuild balance sheets, as happened with the UK banks, instead of putting those funds into circulation as was the intent.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
what in any way shape or form is there to respect in a system where this happens? i'm embarrassingly ignorant on many mechanisms of economics but intuitively it feels as if the only way this stuff wouldn't make people really really angry en masse is that there's enough smoke and mirrors and confusing economic lingo going on that most people generally haven't a clue what is happening.
Well the Federal Reserve until very recently was protected by law from ever having its books inspected so there was no way of knowing what was being done by the creator of the world's reserve currency.
American legislators, to their very great credit, recently enacted a law to force the Fed to open its books.
You have mostly right IMO. Stuff like Central Banking, Basle III and so on are far too boring for people to bother themselves with. I would guess that the vast majority of people that post on this board don't know what the base rate is for example despite being pretty cluey and for the most part interested in some way in economics or at least debt financing of housing.
When it all goes wrong they blame the scapegoats. For most people in the UK, that's the Greedy Bankers. In Australia I think they blame Americans for being stupid. The French most likely blame the Anglo Saxon Conspiracy but then they blame most things on that.
The problem I have with QE is the way that it has been done to bail out specific sectors of the economy; to spend public money without properly accounting for it. If the QE money had been used to boost people's finances by temporarily cutting taxes and thus boost the money supply I would have less of a problem with it. The trouble is, it's been used to bail out massive corporations who are crushing the little guys who can no longer afford to compete.
Why haven't small building societies (for example) been able to compete with big banks as a result of the bail out? They're not reliant on securitising mortgages and using the money markets for large-scale long term funding, the areas where financing has been a problem.
You need to understand what the base rate really is and how it's used to know that:D:D:D0 -
HAMISH_MCTAVISH wrote: »QE is still nothing more or less than an increase in liquidity.
But liquidity has to enter the system somehow....
The bailout factor comes into play when specific sectors are chosen to be the portal for liquidity to enter the system, exchanging less liquid assets for cash on what some would call favourable terms. Or worse, when those sectors choose to absorb the liquidity to rebuild balance sheets, as happened with the UK banks, instead of putting those funds into circulation as was the intent.
Nail <=> head. The trouble with QE is the way the money has been put into the system IMO.0 -
Well the Federal Reserve until very recently was protected by law from ever having its books inspected so there was no way of knowing what was being done by the creator of the world's reserve currency.
American legislators, to their very great credit, recently enacted a law to force the Fed to open its books.
You have mostly right IMO. Stuff like Central Banking, Basle III and so on are far too boring for people to bother themselves with. I would guess that the vast majority of people that post on this board don't know what the base rate is for example despite being pretty cluey and for the most part interested in some way in economics or at least debt financing of housing.
When it all goes wrong they blame the scapegoats. For most people in the UK, that's the Greedy Bankers. In Australia I think they blame Americans for being stupid. The French most likely blame the Anglo Saxon Conspiracy but then they blame most things on that.
The problem I have with QE is the way that it has been done to bail out specific sectors of the economy; to spend public money without properly accounting for it. If the QE money had been used to boost people's finances by temporarily cutting taxes and thus boost the money supply I would have less of a problem with it. The trouble is, it's been used to bail out massive corporations who are crushing the little guys who can no longer afford to compete.
Why haven't small building societies (for example) been able to compete with big banks as a result of the bail out? They're not reliant on securitising mortgages and using the money markets for large-scale long term funding, the areas where financing has been a problem.
You need to understand what the base rate really is and how it's used to know that:D:D:D
true, we all love a scapegoat. we like to know where the good and bad is located in our world.
perhaps this is why you would have less problem with the QE if used to cut taxes / boost money supply than used to bail out big corporations? is giving the money to the small guys really more likely to reduce the sum of human hardship / suffering than giving it to the big guys however? and is that why you ultimately would prefer it?
p.s. please enlighten as to what the base rate really is. i thought it was 0.5%:DThose who will not reason, are bigots, those who cannot, are fools, and those who dare not, are slaves. - Lord Byron0 -
true, we all love a scapegoat. we like to know where the good and bad is located in our world.
perhaps this is why you would have less problem with the QE if used to cut taxes / boost money supply than used to bail out big corporations? is giving the money to the small guys really more likely to reduce the sum of human hardship / suffering than giving it to the big guys however? and is that why you ultimately would prefer it?
If you give the money to large companies then you are distorting the market away from financially successful organisations and using their taxes to subsidise politically connected firms.
It is better for all of the people of the UK, excluding the senior management and major shareholders of large corporations, for companies to succeed because they make things that people want to buy at a price that people want to pay than for them to succeed because they went to the right school or put money into the coffers of the right political party.
The reason? Financially successful companies employ people, pay dividends, repay their debts to banks, increase the sum of human happiness and pay taxes. Politically successful companies drive the others out of business so you are buying what the Government are telling you to buy rather than what makes you happy.p.s. please enlighten as to what the base rate really is. i thought it was 0.5%:D
The base rate is 0.5%. It is also, more importantly, the rate of interest at which the Bank of England will lend money to large banks. Slashing the base rate hasn't done a great deal to stimulate the economy as market rates haven't come down by anything like as much for the most part. It has swelled bank coffers considerably however.0 -
If you give the money to large companies then you are distorting the market away from financially successful organisations and using their taxes to subsidise politically connected firms.
i haven't thought this through properly as it's a lovely day here and so have been out running and now off for a bike ride....
but i'm wondering if this is really that different from taking income tax from individuals and using it to support the more powerful in society. the argument for taxing smaller individuals more and giving tax breaks to business is that this will enable business to create wealth which will trickle down. could it not also be argued that giving money to large corporation will create wealth which will trickle down?Those who will not reason, are bigots, those who cannot, are fools, and those who dare not, are slaves. - Lord Byron0 -
This video can be summarised in three words........
.....................INFLATION IS THEFT"The problem with quotes on the internet is that you never know whether they are genuine or not" -
Albert Einstein0 -
Financially successful companies employ people, pay dividends, repay their debts to banks, increase the sum of human happiness and pay taxes. Politically successful companies drive the others out of business so you are buying what the Government are telling you to buy rather than what makes you happy.
okay had a little longer thinking time on this (5 minutes rather than my usual 30 seconds:D)
large corporations are just very financially successful businesses that then become so successful they can wield greater influence. in a competitive sense these guys are the 'winners' and the smaller companies are the 'also rans'. the ability to wield political power and further your position is just part of the prize of being successful. from what i see in a competitive environment this always happens. surely the onus is on the smaller companies to either become more successful so that they can enjoy the same advantages or to somehow club together so that their group might is equal to the large corporations?
it certainly isn't part of the game to do anything other than play your own hand to your advantage. i.e. business does not owe it to us to provide our needs.
perhaps you can see what i'm getting at here. what's good for the goose is surely good for the gander. if it's unfair for corporations to wield their competitive advantage it is also unfair for any player to wield a competitive advantage.
either we accept competition and the consequences of that or we accept that often the playing field needs to be levelled or the horses handicapped to prevent some players from pulling ahead too far.Those who will not reason, are bigots, those who cannot, are fools, and those who dare not, are slaves. - Lord Byron0 -
This video can be summarised in three words........
.....................INFLATION IS THEFT
inflation is also a means of reducing the size of debts. the issue with current state of play seems to be too much debt so on some levels it makes sense to allow inflation to reduce it......so that people can then take out more debt and grow the economy again. and capitalism lives happily ever after. great.Those who will not reason, are bigots, those who cannot, are fools, and those who dare not, are slaves. - Lord Byron0
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