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  1. #21
    Content. Content? DigitalMethod's Avatar
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    Hello Rome 2.0.
    "The life of the individual has meaning only insofar as it aids in making the life of every living thing nobler and more beautiful."
    - Albert Einstein

  2. #22
    ByMySword
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    Quote Originally Posted by Jeffster View Post
    How much money am I getting, Prince Barack?

    STIMULATE MEEEEEEEEEEE!

  3. #23
    Senior Member reason's Avatar
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    Here is another scam to think about.

    Banks have a reserve requirement. That is the percentage of total deposits that must be held available to be withdrawn. For example, if a bank has $100k in deposits and a 10% reserve requirement, then it would have $90k credit to extend, and $10k held in reserve.

    Suppose that bank A lends $90k to its customers, who then buy goods from bank B's depositors. Now bank B has another $90k in deposites. At a 10% reserve ratio, bank B can now extend an additional $81k of credit. But then suppose that bank B lends $81k to its customers, who then buy goods from bank C's depositors. Bank C then has another $81k of deposits, and can then lend $73k, and so on. In total, with a 10% reserve ratio, $100k of deposits in bank A can support up to $900k of loans in the banking system!

    That is bad enough. But imagine if the reserve ratio was 0%, what would then occur? Well, $100k of deposits would suppot $100k of loans at each stage. In other words, a $100k deposit would support infinite lending by the banks. Fortunately, the Federal Reserve would never be so irresponsible, right? In fact, they hardly ever alter the reserve ratio at all, but they have ways of getting around it.

    The Federal Reserve is currently targetting a 0% Federal funds rate. The Federal funds rate is an interest rate which emerges in the market for overnight lending between banks. Sometimes banks have too many or too few reserves to meet their reserve requirements at the end of a day, and so they borrow among each other to offset the differences.

    To lower the Federal funds rate the demand for overnight borrowing must decline. By way of its open-market operations the Fed can achieve this.

    Suppose that our bank loaned $10k to the U.S. treasury in exchange for a bond. To eliminate the demand for overnight borrowing (thereby lowering the Federal funds rate), the Federal Reserve can print money and buy the $10k bond from the bank. The bank then has no difficulty in meeting its reserves. In fact, when targetting a 0% Federal funds rate, banks can loan all of their deposits despite their reserve requirements, because the Federal Reserve will immediately buy up assets (such as government bonds), until the reserve requirements are satisfied. Otherwise demand for overnight borrowing would increase and the Federal funds rate would rise.

    Its like the reserve ratio has been lowered to 0%, but without the controversy and accusations of irresponsibility such a move would spark. Basically, the Federal Reserve pumps banks full of reserves quicker than they can lend them.

    (Fortunately, the banks aren't lending what the Federal Reserve is pumping into them, but I worry what will happen when those trillions of dollars eventually find their way into the economy. Much of it was handed over as a gift, without even the pretense of paying it back someday).

    By increasing the available credit our bank has to borrow, the Federal Reserve pushes down all interest rates. Unfortunately, this "drives a wedge" between real savings and available credit. The stock of available resources to borrow is that which is produced but not consumed. As people consume more and save less interest rates ought to rise, since the stock of available resources to borrow is declining, but the Federal Reserve artificially pads the supply of credit. Booms and busts are the inevitable result. They are politically manufactured; presidents, like George W. Bush, lower interest rates about 18 months before an election to create a boom; presidents that mis-timed or neglected to do this do not get re-elected
    A criticism that can be brought against everything ought not to be brought against anything.

  4. #24
    IRL is not real Cimarron's Avatar
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    Noted this specific part of Risen's quote:
    Quote Originally Posted by Wall Street Journal article
    The larger fiscal issue here is whether this spending bonanza will become part of the annual "budget baseline" that Congress uses as the new floor when calculating how much to increase spending the following year, and into the future. Democrats insist that it will not. But it's hard -- no, impossible -- to believe that Congress will cut spending next year on any of these programs from their new, higher levels. The likelihood is that this allegedly emergency spending will become a permanent addition to federal outlays -- increasing pressure for tax increases in the bargain.
    So is this "budget baseline" the threshold people refer to when talking about "economic surplus," back when there was one?
    Last edited by Cimarron; 01-29-2009 at 10:39 AM. Reason: following question
    You can't spell "justice" without ISTJ.

  5. #25
    Habitual Fi LineStepper JocktheMotie's Avatar
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    Wow, reading the specifics of the money allocation, it seems like the point of the bill is to earmark money for programs Democrats are trying to push, under the guise of an economic stimulus plan.

    The next 4 years are going to awesome.



  6. #26
    Senior Member Lateralus's Avatar
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    Quote Originally Posted by ptgatsby View Post
    Why produce if no one consumes? Or, what can you consume, if you are not producing?

    The catch, which we both know, is that the US didn't produce a tangible marketable good - it "produced" money, which others used as a defacto world currency. Not entirely that - it also produces technology, etc. but enough to be a risk if the world decides not to use it as a reserve.
    People will always consume. And the US isn't the only consumer market. The US might have the largest economy, but we only account for about 5% of the world's population. We used to be a net exporter.
    "We grow up thinking that beliefs are something to be proud of, but they're really nothing but opinions one refuses to reconsider. Beliefs are easy. The stronger your beliefs are, the less open you are to growth and wisdom, because "strength of belief" is only the intensity with which you resist questioning yourself. As soon as you are proud of a belief, as soon as you think it adds something to who you are, then you've made it a part of your ego."

  7. #27
    Senior Member ptgatsby's Avatar
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    From Article:


    Add the roughly $20 billion for business tax cuts, and by our estimate only $90 billion out of $825 billion, or about 12 cents of every $1, is for something that can plausibly be considered a growth stimulus. And even many of these projects aren't likely to help the economy immediately. As Peter Orszag, the President's new budget director, told Congress a year ago, "even those [public works] that are 'on the shelf' generally cannot be undertaken quickly enough to provide timely stimulus to the economy."


    This really shows a horrendous bias. From the original article:

    $275 billion in tax relief ($1,000 tax cut for families, $500 tax cut for individuals through SS payroll deductions)

    And that's without even getting into the basic dynamics of how money is spent into the economy. All of the Jobless benefits, etc. also would count as stimulus, as it would allow those not working to continue spending into the economy.

    There are valid arguments against this, but "12 cents on the dollar" is just hot air. This has a lot of very good things in it, and a lot of pork to get it through. But looking at this compared to the past packages, this is vastly better. And I suspect, is one of many, which is the problem that I see.

  8. #28
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    Remember, everything in this "stimulus" package was considered not important enough to make it into the pre-existing budget (already running a massive deficit i.e. "stimulus").
    A criticism that can be brought against everything ought not to be brought against anything.

  9. #29
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    This is the largest spending (NOT stimulus) bill ever, and guess what, no republicans voted for it, plus 11 democrats voted against it. This is entirely a democrat spending bill, for the expansion of government and just about every leftist agenda they couldn't get passed before, but this IS NOT something that will help the economy. It may help SOME people during the recession/depression, but even the smaller portion that is going to tax cuts and benefits spending (like for unemployment) really only helps at the lowest levels to alleviate the symptoms (people being out of jobs and not having enough money to spend) not addressing the illness itself (lack of liquidity, no credit, businesses failing, and thus JOB LOSSES). In this way, it wont do a darn thing to stimulate the economy in the other direction, especially considering almost nil is being spent this year.

    And even bigger issue is the fact that we will be paying over $300 billion just in interest to pay back this debt; assuming we can pay it off by 2020. That doesn't take into account if we don't pay it off by then or if the country's credit rating drops (which it will), thereby upping the costs. This type of spending cannot be sustained, they are trashing this country's credibility and ability to pick itself up from the ensuing wreckage. The more we spend like this just to slow down the inevitable, the harder it's going to be on everyone and especially future generations.

    Then we have increasing calls by Russia, China, and other nations for a new reserve currency (replacing the U.S. dollar). We're heading into a big storm folks. You'd better get your mind right and focus on what really matters, and even more importantly, put pressure on your elected officials to do what's sensible in this situation, or we are all going to pay the price.

  10. #30
    Seriously Delirious Udog's Avatar
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    If Obama wants to get the Republicans on his side, he's going to have to step on some Democratic toes. I hope he will do it, but his record makes me doubt it.

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