Obama: Worst President Ever? Topic

MikeT23
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Seems pretty risky.   8%+ unemployment, unknown number of fixed income seniors, who knows how many people have just stopped looking for jobs that aren't counted as unemployed and an equal number of small businesses that are just hanging on who probably don't have the funds to wait for the upside of inflation. 

I think 30-50% of the population would be downside victims and they would disagree about inflation being a good thing.
6/14/2012 5:06 PM
jrd_x
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Those fixed income seniors were also affected to the same degree by lower interest rates.

Loosening capital at a time when the economy is slumping due to a lack of demand is necessary.  Inflation is just an extension of lowered interest rates.  As things get better, the fed can tighten things up, backing off the inflation and raising rates.
6/14/2012 5:17 PM
tecwrg
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Posted by jrd_x on 6/14/2012 4:47:00 PM (view original):
Posted by tecwrg on 6/14/2012 3:15:00 PM (view original):
Posted by jrd_x on 6/14/2012 2:06:00 PM (view original):
And what can the fed do if it lowers interest rates to zero (or essentially zero) and capital is still not moving enough to recover the economy?
Enlighten me, please.
Inflation is essentially lowering interest rates to negative.  Now, capital is encouraged to move, not because it doesn't make money sitting still, but because it actually losses money sitting still.

Lowering interest rates encourages capital to move, which increases demand, which helps improve the economy.  Increasing inflation has more downside than just lowering rates and if it exceeds a certain level, the upside is completely wiped out by the downside.  But right now, while we are in a prolonged slump and inflation has been historically low (~2%), increasing it a few percentage points has more positive than negative.
"Inflation is essentially lowering interest rates to negative."

You'll have to explain that to me.  Because my understanding of the definition of inflation is that it's the general rise in prices of good or services such that the purchasing power of money is decreased.
6/14/2012 5:24 PM
jrd_x
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This is from 2009, but he explains it better than I can.  The author is a Harvard economics professor and was an adviser to to GW Bush:

http://www.nytimes.com/2009/04/19/business/economy/19view.html


If all of this seems too outlandish, there is a more prosaic way of obtaining negative interest rates: through inflation. Suppose that, looking ahead, the Fed commits itself to producing significant inflation. In this case, while nominal interest rates could remain at zero, real interest rates — interest rates measured in purchasing power — could become negative. If people were confident that they could repay their zero-interest loans in devalued dollars, they would have significant incentive to borrow and spend.
6/14/2012 5:40 PM (edited)
tecwrg
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Posted by jrd_x on 6/14/2012 5:40:00 PM (view original):
This is from 2009, but he explains it better than I can.  The author is a Harvard economics professor and was an adviser to to GW Bush:

http://www.nytimes.com/2009/04/19/business/economy/19view.html


If all of this seems too outlandish, there is a more prosaic way of obtaining negative interest rates: through inflation. Suppose that, looking ahead, the Fed commits itself to producing significant inflation. In this case, while nominal interest rates could remain at zero, real interest rates — interest rates measured in purchasing power — could become negative. If people were confident that they could repay their zero-interest loans in devalued dollars, they would have significant incentive to borrow and spend.

You neglected to quote this, at the end of the article:

"The idea of negative interest rates may strike some people as absurd, the concoction of some impractical theorist. Perhaps it is."

6/14/2012 6:39 PM
jrd_x
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You didn't include the entire quote:

The idea of negative interest rates may strike some people as absurd, the concoction of some impractical theorist. Perhaps it is. But remember this: Early mathematicians thought that the idea of negative numbers was absurd. Today, these numbers are commonplace. Even children can be taught that some problems (such as 2x + 6 = 0) have no solution unless you are ready to invoke negative numbers.
6/14/2012 6:45 PM
jrd_x
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But anyway, do you now understand how inflation functions as a negative interest rate?
6/14/2012 6:46 PM
tecwrg
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So your entire argument for today comes down to a three year old article on the internet in which is writer admits than maybe his idea is absurd.

You're really not capable of independent thought, are you?
6/14/2012 6:49 PM
jrd_x
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This is what Bernanke said in February:

It is arguable that interest rates are too high, that they are being constrained by the fact that interest rates can't go below zero. We have an economy where demand falls far short of the capacity of the economy to produce. We have an economy where the amount of investment in durable goods spending is far less than the capacity of the economy to produce. That suggests that interest rates in some sense should be lower rather than higher. We can't make interest rates lower, of course. (They) only can go down to zero. And again I would argue that a healthy economy with good returns is the best way to get returns to savers.
6/14/2012 6:55 PM (edited)
jrd_x
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Posted by tecwrg on 6/14/2012 6:49:00 PM (view original):
So your entire argument for today comes down to a three year old article on the internet in which is writer admits than maybe his idea is absurd.

You're really not capable of independent thought, are you?
What exactly do you disagree with?
6/14/2012 6:55 PM
tecwrg
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BTW, this was your "jump the shark" moment.
6/14/2012 6:58 PM
jrd_x
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We agreed on everything except the idea that inflation is just an extension of interest rates into the negative.

What about that do you not get?
6/14/2012 7:03 PM
tecwrg
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That.
6/14/2012 7:05 PM
tecwrg
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If somebody wrote in a blog that the economy would be jump started if we were to sacrifice one virgin a week on the steps of the U.S. Capitol, would you quote that and make that part of your argument too?
6/14/2012 7:07 PM
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