Didn't you get the memo?

But apparently the "borrow" part of your equation is not out there anymore. Banks took all the Fed money and are hoarding it. Sure glad we stuck to our "free" market principles and gave them that money with no strings attached.

Are Americans going to suffer quietly, like the Russians did? Or are we going to get somewhat more violent on an organized scale? One thing I can tell you, if the U.S. Army can't control a country of 25 million, there's no way they're going to control 300 million. Assuming enough people get pissed enough.

we're not Iraqi or Afghans (they're tough as hell); we're soft American's; spoiled by easy living. There is a small group of hard core in America (I've met them, and I'm not talking White Supremacists) but; they're not going to win against a serious military. It's really that simple. This will only be settled by political astuteness and economic intelligence.

I am told that during the great depression the real effects weren't fully appreciated here in Texas until '31 or so. By '34 it got really bad. On top of the financial disaster, we the dust bowl to contend with.

History rarely repeats but it often rhymes (borrowed from Jim Kunster who borrowed it from...

We've had the 2nd lowest recorded yearly rainful since they began measuring.

I did inhale.

Global Warming is the well-known anthrogenic source of climate change, but Global Dimming is probably more of an issue in the short run.

History rarely repeats but it often rhymes (borrowed from Jim Kunster who borrowed it from...

Mark Twain

That's deflation at work.

isn't it? :-)

Don't see what's scary about prices going down. It's a good thing as far as I can see, and a sign of economic recovery. Prices in the US have been unrealistic for a very long time, and it's good that they're finally coming back to earth. Housing prices especially. I think most people who care about this country are glad to see housing coming down to a level that working people can't afford. I have to assume that people who are bothered by prices coming down have never had to work for a living, and have never known what it's like not to be able to afford groceries. But for those of us who work and pay our bills, it's a great feeling to go to the store and see things have come down a little. Means more money in our pockets, and more money to invest in other things, which also helps the economy.

Falling asset prices primarily hurt the rich, who control the media. But don't believe them folks. Nothing wrong with a little deflation.

Here's what's scary: How Keynesian Stimulus Works

A deflationary spiral begins with the expectation of future earnings drops, and people both defer buying and businesses defer investing. In Keynesian terms the economy's liquidity preference rises, and becomes a vicious circle. People want to be liquid, because they see everyone else wanting to be liquid. Money disappears under the mattress of the economy, the velocity of money drops. Keynes observed that "one man's expenditure is another man's income." That means if everyone stops buying, businesses don't expand capacity, but wait for capacity to fall in price so they can buy it cheaply, and that means fewer jobs, which means less income, which means less buying, which means even more incentive for businesses to wait for cheaper labor and production. Prices never fall enough to get buying going again.

And here: Depressed Lately?:

And there you have it – the hallmark of a depression – the lack of cash. Everyone suddenly realizes they need to hoard their cash because asset values are declining, cash flow is receding, and no one can get a loan to generate new cash. Cash becomes more valuable as well because prices are falling as deflation sets in. Besides the evidence that is beginning to accumulate that prices are falling throughout the economy, the Fed itself is exhibiting concern about deflation. It has begun to implement its last-ditch defense against deflation, something it calls “quantitative easing.” This is nothing more than buying huge chunks of bad assets from banks and corporations and even consumers, because the Fed can no longer lower interest rates to jump-start the economy (rates are already close to zero percent).

WARNING: if you're in debt, be very cautious! employers might be encouraged to cut salaries and/or replace workers with cheaper ones. so those of you who pay things off monthly might find yourself suddenly in trouble. IBM, for example, has been transferring workers out of the US-- as fast as possible, to lower wage havens.

and, if folks can't pay back debt, then pensions and personal savings would be at risk.

california is already saying that bond interest has to be paid off first (it's in their constitution) before they pay their bills!

so deflation gets messy when the revenue side (salary, taxes, etc...) takes a dive!

That's what I love about economists, we're all entirely rational disembodied types - with no actual needs...

Yes, precisely, that was my point. The only people who are hurt by prices coming down to reasonable levels are those who got in debt and those who gambled that prices would rise forever (which they have never, ever done at any time in world history). But people who borrow and gamble aren't financially prudent, so it's inevitable that sooner or later they're going to get into trouble. Prudent people don't ever borrow. Borrowing is the definitive sign of an incompetent businessperson. Sorry, but the idea that higher prices is a good thing just because it means that people who mismanage their money get bailed out doesn't make much sense to me. As far as lack of cash goes, well, when prices go down that means I have more cash, not less. Which means I can buy more things, which helps the economy.

People seem to be making the claim that housing prices coming down is a bad thing, and bad for the economy. No, it's not. It's a very, very good thing. Best thing that's happened to working people in a long while. It means more people can afford to buy homes, which promotes the middle class and social and financial stability. Just the opposite of what rising prices have done to this country in the past decades.

The major problem with the American economy is excessive debt and a practice of financing everything through borrowing. That is not economically sound, and nowhere does Keynes say that it is (I've actually read Keynes). Interest on the debt is becoming the largest national expense, and that's where the money for infrastructure, health care and everything else is going. I really suggest that people reread Keynes and other economists. But maybe I'm missing something. Am I really supposed to be upset that it only cost me $30 to fill up my tank yesterday, rather than the $80 it cost a few months ago? This is a problem?

people who produce things are faced with having to sell them for less than it cost them to produce those things-- because their customers can't or won't pay more than the cost of production. That in turn means that they stop producing. Demand for their supplies and distribution collapses, and prices fall more. And so forth.

That is deflation. It's all fun and games from the consumer viewpoint, until you are out of a job, or taking a pay cut, or nobody's buying what you sell to make a living.

The drawbacks of inflation are often understated, but inflation being a bad thing doesn't make deflation a good thing.

"The reason this is so dangerous is because we've never been here before and nobody in charge quite knows what to do."

Nobody in charge seems yet to be willing to admit what went wrong, why, who was responsible, and to crack some heads. We bought into market fundamentalism big time, let the banksters go crazy, and they killed the economy. Until we admit that and act on it we will have problems.

Look what they are still doing: we drop hundreds of billions in the banksters laps and do they lend? No they hoard and purchase other banks and still pay bonuses. And with all those who were part of creating this mess on Obama's team (and I am an Obama supporter), a solution does not look imminent.

We need to indict several of them, purge others who made horrible decisions, and break up the banks. NO MORE TOO BIG TO FAIL. Too big to fail is too big to exist.

http://www.nytimes.com/2008/12/07/opinion/07rich.html

07, 2008 7:06 am
My worry about Volcker is that his reputation is based on breaking inflation. The problem is that higher interest rates caused a economic recession that reduced capital demand as much or more than capital supply. It was Reagan running up the deficit which both absorbed surplus capital and increased demand for it. Though this only compounded the problem of a bloated monetary system.
Until we become enlightened enough to understand that large reservoirs of encrusted wealth are an economic inefficiency, we will only paper over the real problems.

It's # 127, if anyone wants to boost my "recommend" count;
http://community.nytimes.com/article/comments/2008/12/07/opinion/07rich.html?s=1&pg=6

Some parallel, supporting data lies in Glenn Greenwald's recent post on how widespread nepotism has become in government.

Interesting idea on how individual voices need to be effectively orchestrated, which parallels the former atomization of the politically left a few years ago. The encrusted hierarchy and their media will blunt this anyway they can, as they did before.

Isn't this what is going on in business as well?

Hollywood has become a major breeding experiment: www.hollywoodnepotism.net

Sports not so much: generally you have to be hungry to make it in sports, thus the African-American dominance!

The ruling class: yes. Harvard has N percentage of admissions earmarked for "legacy" applications: the children of Harvard alumni. Exactly why are they classed as a non-profit? Exactly why is this not racial discrimination?

“The Playboy reader invites a female acquaintance in for a quiet discussion of Picasso, Nietzsche, jazz, sex.” - Hugh Hefner

There are also slots for the rich and famous too. In any case, it is part of the business. Wealthy alumni contribute to the endowment, sometime with large gifts. Presumably, their sons and daughters would continue the tradition, after they are accepted at Harvard. Nothing wrong with that.

- eom

cause cream and sugar come free with coffee! a piece of pie with some cream costs quite a bit more! ;-)

and their factories just don't need the workers and, when they do need workers, they become the target of being optimized out of the process ASAP.