Home Forums Hunting & Shooting Hunter's Campfire Economy "Should Improve"

It can be argued, very convincingly I might add, that most "stimulus" actually DESTROYS wealth. Since stimulus, in and of it's self, does not create new wealth, what it really does is create a new allocation of existing wealth with a bias toward consumption (wealth destruction) instead of savings, investment future creation. Since this consumption comes out of the savings that would other wise fund our new factory's etc that would create new, real employment, the "stimulus" slows down long term growth.

But the wealth has to exist to start with before a society can become wealthy. We're becoming a poorer society because we're not creating real wealth (we've shipped wealth creation to other countries so corporations can make higher short term profits). Wall Street doesn't create wealth. It just shuffles a shrinking pie around.

In the mushy middle you described above, you are correct. It needs to be high tech /high skills, leading edge areas to create a growth in wealth for the individual contributors.

Yep.

That's just not true. Complex capital markets are an essential element of the wealth creation process. Without Wall Street, how would the money from all those savers every be packaged to finance new factories, plants and equipment? When you walk into a store, most of the inventory you see was purchased on credit. How does that happen without Wall Street, letters of credit, and short term commercial paper? Imports, most are financed via Bankers Acceptance, another wall street product??

And it's exactly that attribute of Wall Street that's the most reviled, the goal to make a profit, the seeking of maximizing returns while minimizing risks (while taking their cut), their cold dedication to the numbers that make them such and important partner in the wealth creation process.

The fly in your ointment is that we don't have millions of "high tech/high skills" people to fill those kinds of jobs and we never will. As an aside, I currently work for a gun company and we have some of the most talented gunsmiths you'd ever want to meet building guns here. It takes years to learn and develop the skillsets to build fine quality firearms yet it doesn't pay for schit. I remain unconvinced that manufacturing will ever do much to boost the financial status of "the individual contributors" ..

WOW, that's absolute BS. I'll bet you still believe in the Laffer Curve too.

"Stimulus" in and of itself is neither good nor bad; the good or bad is dependent upon when and how "stimulus" is done.

So people will still produce at a 100% tax rate?

Really?

I didn't say Wall Street doesn't serve any function in wealth creation. I should have said that Wall Street speculation doesn't create wealth, but rather just shuffles around pieces of a shrinking pie.

Hey you got something right. Wealth is created mostly on credit. Access to credit is absolutely essential for businesses and markets to grow.

The economies of the '90's and 2000's was based on the fact that credit was cheap and available. Now we don't have credit that's cheap and available, so the economy is crawling. Now our economy is actually based on production. And until someone can find a way to make credit cheap and available again, our economy will continue to crawl at a snail's pace.

But understand, we live in an era where we've become addicted to all the benefits of cheap credit. Credit is a wonderful thing for businesses, but we've WAY over done it over the past 20 years. Now we think a US economy that grows by 3-6% every year is "normal".

The good news of our economy right now is...it's mostly real. Yeah there still is some stimulus, but it's been going down every year since 2009, and when we're weaned off; we'll have a real economy for the first time since the 1960's.

And there you go, once you move to extremes and absolutes; any rational discussion is over.

Not at all. But your response just served to prove one point on the curve.

Monetary Policy is only one piece of the puzzle.
Right now, credit is cheap:
[img]http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=CIp[/img]

But as you mentioned the problem lies in the availability. Increased regulations serves as a disincentive to both lend, and borrow. Consequently, despite low rates and an ample money supply, the increased regulatory environment is stifling growth. Perhaps the easiest demonstration of this is the velocity of money:

[img]http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=Cek[/img]

It doesn't matter how cheap the money is when the regulations make it impossible to loan money, or borrow to invest and make a profit.

Again we're in agreement. I'm very pro-Wall Street regulation, but specifically the type of regulation that keeps them honest...not the kind that creates BS busy work, and complicates things for not discernible benefit.

Wall Street has to be regulated because the incentives for dishonesty are just too great for them not to go down roads they shouldn't be going down...so from that standpoint they need to be regulated.

The lending of credit to corporations has never been the problem with Wall Street, so where that is concerned the Government's ONLY role should be to ensure they're not leveraging too far. If anything, they should grease the wheels.

Oh come on!

It was shored up from .gov "shovel ready jobs" which mostly benefited politicians and government workers.

I pretty much said that further along; but I guess you never read the rest. Once we're off the stimulus tit, then it's all real. Right now it's just mostly real with some stimulus.

Be careful how far you push this, you may end up making Obama look good; and I know that's not your intent.

Stimulus is a very small % of our GDP. If you're saying our economy is all stimulus, then you're saying Obama is putting 5% in and getting a 95% return...that would make him a genius.

You. me, and Adam Smith. Even he agreed banks warranted sufficient regulation to insure the public trust in our financial and monetary systems. You mentioned the over leverarge, which was a very real problem, that was the result of a deeper problem from a perverse incentive structure that rewarded "swinging for the fences" and insufficient penalties for "striking out". So part of the solution is insuring those who can benefit from high risk idea's sufficiently share in the risk to properly temper their decision making.

As for the current regulations in this country, as you suggest many of them are "BS". It's not just the financial regulations, just add your list of alphabet soup agencies here, and begin totaling up the incremental costs each add to a selected product, and before long the regulatory costs become a significant portion of your per unit product costs. If you are GE, hey, what's one more lawyer, but, if you are Mom and Pop, or Mr. Enterprise, there are the kind of issues that change the calculus to prevent you from going into business, or expanding your current operations. It's in this way the complex regulatory structure hurts the small to medium business and favors the Mega Box stores etc that everyone likes to vilify.

Re: Bold - AMEN to that!!!

But we found out that for many, even that didn't sufficiently ensure stability. The big investment bank CEO's all lost massive sums of money. Dick Fuld, former CEO of Lehman Bro's lost over 95 million dollars of his own money in a single day. He, like the other CEO's were very invested in their companies.

And that CEO vestment in the companies is why Alan Greenspan thought that the investment banks would always protect themselves. The problem is, they all now make SO much money, that even if they bankrupt a company (like Fuld did to Lehman); they're still VERY rich...it doesn't ruin them.

So to your point...even though they have skin in the game...and even though often it's a LOT of skin; generally it's not ENOUGH skin to make them get nervous.

So that's where the regulation needs to happen; just making sure they're not doing stupid stuff.

But in 2008 the regulators were part of the problem. Government regulators (as we know) have a REALLY bad habit of being way too cozy with the companies they regulate. Just like the Minerals Management rubber stamping of deep water wells in the Gulf, the FDIC allowed companies to leverage to a rate of OVER 30:1. That SOB should have gone to jail for gross negligence.

And that brings me to the subject of jail. No one has gone to jail for 2008 even though there were clear cut cases of fraud. Instead the "justice" department (another "regulator" way in bed with Wall Street) only sought out fines.

If these SOB's knew they'd go to jail for their shenanigans; they may think twice next time.

Retail banking should be recognized and treated as a utility. Highly regulated and not very profitable. Boring even.

AND it should be strictly separated from investment banking. Period. End of story. As long as banks have the ability to take deposits and turn them into casino investments nothing else will ever insulate the government from having to bail them out if they get in trouble. Nothing. The political costs of allowing banks to go under and take people's savings accounts will never allow it.



No it's not.

The reason Wall Street is reviled is because these parasites and their economist lap dogs have created a system that insulates their private fortunes from any risk at all! While creating a dysfunctional casino capitalism that benefits only those who come to the game with fortunes at the start.

Almost EVERYTHING associated with trickle down economics, deregulation, and globalism has turned out to be a disaster. According to this insane theory we should be awash in real wealth and brimming with new entrepreneurs. We've had 30 straight years of Neo-liberalist administrations and congresses with alternating bouts of social conservatism or liberalism.

We tried it. It failed.

Balance. That is the key. Balanced budgets. Balanced regulatory regimes. And balanced trade. All in the context of a mostly self sufficient nation. It takes all 3 to get this shebang to sit upright. And yes, in case you are getting ready to ask, that does mean the end of the dollar as reserve currency. No nation on earth can be trusted with such temptations. And certainly not our coin operated government.

But don't you worry. None of this will happen. Voluntarily turning our backs on this idiocy is the last thing we will do. We're going to ride this horse all the way down. We'll be throwing the spurs to her and slapping her flanks with the reins long after the poor creature has passed on.

The dream dies hard and that's just the way ideologies go under. When you tie your entire economy to a fantasy you take your chances.

Will