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We hit the liquidity crisis in mid 2007, acted with stimulus in late 2008 and early 2009 and onwards. If we meet here at this website to talk about liquidity crisis in 2015 there will probably be nothing to talk about. Things change for better due to stimulus, over time.

 

We are still in liquidity crisis. Financial market is not limited to banks, a few banks. Speaking of banks, they took a drastic hit to their reserves over the last three years and they are just now starting to replenish. There are financial institutions struggling still. Even though segments are getting out of it, on the whole we are still in liquidity crisis.

 

AS I said before, you can not take a general rule that zero rate can be dangerous, and generalize that to US economy on the rule alone without analyzing the facts. Gotta look at the facts, can not be an ideologue.

 

I must be misunderstanding your use of the term "liquidity crisis," thinking you meant "limited" liquidity. You seem to apply the term to the glut of liquidity (2007 link) and also the current "liquidity trap" (other links). While the "glut" and the "trap" are different, they are both crises I suppose.

 

re: "Financial market is not limited to banks, a few banks."

I also worked to get links (above, previous) which covered all sectors, from the banks to the financial, housing sales, business and companies, and household consumables sectors.

 

I don't get your third paragraph: You wrote, "AS I said before, you can not take a general rule that zero rate can be dangerous, and generalize that to US economy on the rule alone without analyzing the facts." Am I doing this? I wasn't trying to do that (maybe you could point to...); but whatever....

 

I'm not arguing for any "ideology," but rather against the simplistic libertarian ideology. While I agree with many libertarian descriptions of the problems (I don't think things are fine as they are currently), I wholeheartedly disagree with most of their myopic prescriptions for change.

 

But it's nice to see you think that stimulus is a good idea:

"Things change for better due to stimulus, over time."

 

But I think stimulus needs to be targeted to certain sectors, which make our economy more self-sufficient; rather than just pumping up GDP on more financial speculation (30% of GDP).

 

But that's another thread, about value.

 

~ ;)

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I guess I'm just stupid. I don't understand how a government is any different from a person or corporation either one of which will sooner or later get into a situation of debt they cannot get out of

Yes, the subject is filled with controversy. Still, don't you agree that without more deficit spending now, less money would be in circulation and prices would go down? People would draw down debt an

Blind stimulus won't help in the long run, but targeted and effective stimulus can move us forward into a more sustainable basis for an economy, imho; but I wanted to comment:===   geko, talk about ca

When I say liquidity crisis, I mean there is not enough cash in the financial market--not enough meaning not enough for a healthy booming economy. When I comment on liquidity trap which you brought up in the quote above, I mean over the counter zero percent borrowing rate between the Central Bank, the Fed, and the member banks which causes interest rates to stay low, and I do not consider this liquidity trap a crisis but mere monetary measure that may in some instances perpetuate the crisis as in Japan, as you brought up, but not necessarily in all instances as a general rule.

 

My point is this, we have a liquidity crisis that started with Lehman and AIG and Fanny and Freddy in 2007 and we are still in the crisis due to the unwise monetary policy of keeping rates low in 2004. We had stimulus and we are crawling out of the crisis and we should be out of it in a year or two. It was not the ghost of Carter or Reegan or Chinese or Euro or exported jobs or NAFTA agreement or the War that brought the crisis but the unwise interest rates at the time. US economy is strong and will be when borrowing and expansion commences. Could it be better? Yes, always.

 

I agree. We can argue here for 20 years about whether 1 trillion, or 800 billion, or 10 billion or 20.37546 billion should go to defense and never reach an agreement.

 

A libertarian is an enemy of the state. Their philosophy is inconsistent with our Federal system. They are unfit to participate in political dialogue.

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You're acting like our existing political structure is not also based on ideological pre-set rules of how it should be. As for these facts you speak of where are these facts taking us? And you say i'm an enemy of the state? So i guess statists are enemies of the people? If i'm unfit to participate in political dialogue then statists must be unfit to participate in dialogue that concerns human future. And where is the law that proves our current political structure is the right one based on facts? You imply that politics is a hard science now and argument is no longer needed. You're expecting different output from the same input. You dismiss me and ideology as if ideas aren't important. I guess the conversation is over.

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We are sliding off topic of Charles's thread here.

 

I misspoke. I meant political dialogue in governance. A Libertarian is unfit to govern because from the essence of his beliefs he does not want to govern and is precluded from governing. But then the reality hits. To square his beliefs with reality because he is cornered into absurdity of his beliefs, he must always remind everyone that he believes in "very limited" governance, if you listen to Friedman or Rand or any Libertarian.

 

You are unfit for governance by your own beliefs.

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Yes, but today.... I watch the news and the developments. Liquidity: About.com says "Liquidity is the amount of capital available for investment." Now I know that back when the crisis hit, lending dried up; but that was based on expectations, not liquidity. Look at the history:There is lots of liquidity, but just not much justification (have you seen the future?) to let it to flow. ~

 

I agree. Banks, corporations, and the public are all holding on to their cash and loaning little. They are all afraid of a depression (the so-called "double dip") with prices falling so that cash and liquidity would be at a premium. If you (and the government) are in debt during a deflation, it become increasingly difficult to pay because personal and tax revenue are declining. Deflation feeds on itself in a vicious cycle manner.

 

What business, the public and the banks are waiting for is for government to put in a large infusion (creating money) in order to remove the deflation threat by re-inflating the economy. With prices rising again because everyone has more money, people buy, banks loan, business expands because everyone knows that both income and prices will be higher, so there is no need to wait.

 

Those who hate "Big Government" and think most of its functions can be handled better by business will perhaps explain how honestly and reliable would business handle the following list of government functions:

 

1. The court system

2. The military

3. indigent care and services

4 our national parks, lakes and forests

5. our prisons

6. dealing with air and water pollution

7. the police

8. the CIA

etc. etc. etc.

 

When and if we do re-inflate and recover, then it will be time to raise taxes and cut government expenses to reduce government debt.

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okay, to be clear, i'm not an anarchist, i'm libertarian

 

1. The court system

2. The military

3. indigent care and services

4 our national parks, lakes and forests

5. our prisons

6. dealing with air and water pollution

7. the police

8. the CIA

 

with the exception of #3 and #8, i think those are things government should do. however, i also think government could do a much better job of than its currently doing.

take military. does America really need to be fighting 4 wars simultaneously? does it really need over 100 bases in over 60 countries?

take the court system. we are now a sue happy nation, particularly when it comes to medical care. and the courts seem to like this, as there have been several failed attempts to reign in the problem. it can now take more than a year to even get to trial.

take our prisons. do i even need to state the list of problems, particularly in California?

look, I'm not saying privately owned business would necessary do a better job on these issues, in fact I'd probably argue the opposite. but unless we address and correct these problems, there will never be a recovery.

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okay, to be clear, i'm not an anarchist, i'm libertarian

 

1. The court system

2. The military

3. indigent care and services

4 our national parks, lakes and forests

5. our prisons

6. dealing with air and water pollution

7. the police

8. the CIA

 

with the exception of #3 and #8, i think those are things government should do. however, i also think government could do a much better job of than its currently doing.

take military. does America really need to be fighting 4 wars simultaneously? does it really need over 100 bases in over 60 countries?

take the court system. we are now a sue happy nation, particularly when it comes to medical care. and the courts seem to like this, as there have been several failed attempts to reign in the problem. it can now take more than a year to even get to trial.

take our prisons. do i even need to state the list of problems, particularly in California?

look, I'm not saying privately owned business would necessary do a better job on these issues, in fact I'd probably argue the opposite. but unless we address and correct these problems, there will never be a recovery.

 

I agree that we have too many bases around the world. We have too many lawyers and we were led into two big wars in the Near East we should have avoided. I agree that the government is more inefficient than "Big Busines."

 

But what are we supposed to do with the physically handicapped and the retarded, the struggling unemployed, the dearanged, the aged and the inferm? If they have no families or ones that cannot care for them, are they to be left wandering the streets?

 

To me there is no question but what our govenrment has been spending too much and taxes too little. The federal debt is the result. My problem with your last statement is that it the Congress does effectively cut federal expenditures, the amoung of debt shrinkage would naturally equal a smaller money supply. That means fewer dollars chasing the same goods. In other words, it would cause the same sort of deflation we had between the late 1920s and the early 1930s, that is, the Great Depression. If we had an effective government uninhibited by budget deficits now and bent on a big stimulus, the increase in the money supply would cause prices to rise. People would buy again as waiting would only result in paying a higher price. More sales would mean more production, more jobs and more people going back to work. The end result would be that the tax inflow would increase---and in an ideal economy and society (!), the increased income would be used to reduce the debt!

 

Don't you think we have to have a spy organization? I understand they have prevented terrorist attacks in the US.

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But what are we supposed to do with the physically handicapped and the retarded, the struggling unemployed, the dearanged, the aged and the inferm? If they have no families or ones that cannot care for them, are they to be left wandering the streets?

okay let me ask you a question, how much have you donated to organizations that help people like this? if the answer is nothing, then do you really care what happens to them?

look, the governments job is to ensure freedom, and personal responsibility. The less money is taken in taxes, the more money people have, and the more they are willing to give. You said it your self, the government is inefficient, compared to businesses that have to compete for your money. There are many not for profit businesses as well. so i don't see why the market can't handle the problem. and even for the sake of argument it couldn't, i seriously doubt the government can in such a situation.

Don't you think we have to have a spy organization? I understand they have prevented terrorist attacks in the US.

really? can you point to a specific case where a CIA agent prevented a terrorist attack? i can't think of one. and i can think of several cases where they caused terrorism.

do i think that the government should spy on other governments? no not really. if we deal honestly with everyone, then they are far less likely to attack us in the first place, and more likely to deal honestly with us.

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My problem with your last statement is that it the Congress does effectively cut federal expenditures, the amount of debt shrinkage would naturally equal a smaller money supply. That means fewer dollars chasing the same goods. In other words, it would cause the same sort of deflation we had between the late 1920s and the early 1930s, that is, the Great Depression. If we had an effective government uninhibited by budget deficits now and bent on a big stimulus, the increase in the money supply would cause prices to rise. People would buy again as waiting would only result in paying a higher price. More sales would mean more production, more jobs and more people going back to work. The end result would be that the tax inflow would increase---and in an ideal economy and society (!), the increased income would be used to reduce the debt!

there are so many things wrong with this paragraph i don't even know where to begin.

do some research on the Austrian theory of economics if you want my view of this.

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i really wanted to just let this die, but i couldn't help myself, i had to respond.

if the Congress does effectively cut federal expenditures, the amount of debt shrinkage would naturally equal a smaller money supply.

okay, firstly it doesn't follow that if the debt stops increasing, the money supply will decrease. its more than likely that the money supply will simply remain constant. it might go to other places other than america, and that would shrink the money supply here, but the total currency in the world hasn't decreased in a long time.

That means fewer dollars chasing the same goods. In other words, it would cause the same sort of deflation we had between the late 1920s and the early 1930s, that is, the Great Depression.

point me to a source that claims deflation was the cause of the great depression please.

If we had an effective government uninhibited by budget deficits now and bent on a big stimulus, the increase in the money supply would cause prices to rise. People would buy again as waiting would only result in paying a higher price.

okay: let's take two senarios and you tell me which one is the most favorable to you.

first, let's take inflation. money supply increases, so prices rise. you make the implicit assumption that wage will also increase, which is not neccisarily the case. there have been several occurances throughout history where prices rose, but wages didn't. in the short term, yes, there would be a buying frenzy, but after the dust settles, do you really think that no one able to afford food is good for the economy? even if wages rise along with prices, i don't see how earning a million dollars an hour and paying a hundred thousand dollars for a loaf of bread is neccarilly better than earning 10 dollars an hour and paying 1 dollar for a loaf of bread. espically if the tax brakets stay the same.

 

second let's take deflation. agian if wages remain the same, then how wonderful would that be if instead of 10 dollars buying you a loaf of bread, you can buy tomatoes as well now? how much more would you be able to doanate to charity if 100 dollars buys you everything you need for a month?

how much more prosperous would a nation be if everyone's retirement fund essentially doubles, becuase prices got cut in half? how much more could the goverment spend on the things society needs if its purchacing power increases? sure, you might wait a bit to buy that new tv if you expect to pay less for it a week from now. but everyone still needs food, water, shelter, medicine, and entertianment. no one is going to stop wanting these things simply becuase prices are decreasing.

More sales would mean more production, more jobs and more people going back to work. The end result would be that the tax inflow would increase---and in an ideal economy and society (!), the increased income would be used to reduce the debt!

i agree, more sales do mean more production, and more money for taxes. my question is: which is more valueable, being able to buy more goods, or buying goods because you will soon be unable to?

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"Now project the mentality of a savage, who can grasp nothing but the concretes of the immediate moment, and who finds himself transported into the midst of a modern, industrial civilization. If he is an intelligent savage, he will acquire a smattering of knowledge, but there are two concepts he will not be able to grasp: “credit” and “market.”

 

He observes that people get food, clothes, and all sorts of objects simply by presenting pieces of paper called checks—and he observes that skyscrapers and gigantic factories spring out of the ground at the command of very rich men, whose bookkeepers keep switching magic figures from the ledgers of one to those of another and another and another. This seems to be done faster than he can follow, so he concludes that speed is the secret of the magic power of paper—and that everyone will work and produce and prosper, so long as those checks are passed from hand to hand fast enough. If that savage breaks into print with his discovery, he will find that he has been anticipated by John Maynard Keynes." [Written by Ayn Rand]

 

The quote of Ayn Rand's shows her contempt and disregard for the common man. While there is little doubt but what she makes a telling point and the average person is amazingly ignorant of economics, it is also true that in a true democracy you don't write to put down the common man and hence seek to encourage class division.

 

Von Mises provided the theology of the Libertarian cult, but Ayn Rand provided its classist doctrine. And all this goes under the public banner of "the Tea Party."

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okay let me ask you a question, how much have you donated to organizations that help people like this? if the answer is nothing, then do you really care what happens to them?

 

I prefer to have my taxes support the government's role in helping the destitute. The only reason that government is regarded as inefficient is because business and everything is inefficient. The level of trust and honesty has been dropping for generations. There is more corruption. But at least government is hired by the public to do services for the public. Business is not. Corporations are set up to make money for stockholders and the upper management. The function of serving the nation or general good is subverted by the very legal framework the corporate structure is based on. Corporations are efficient in serving their legal purpose, but that is very often at the cost of the general public. So, we need both. We certainly need business regulations.

 

the governments job is to ensure freedom, and personal responsibility. The less money is taken in taxes, the more money people have, and the more they are willing to give. You said it your self, the government is inefficient, compared to businesses that have to compete for your money. There are many not for profit businesses as well. so i don't see why the market can't handle the problem. and even for the sake of argument it couldn't, i seriously doubt the government can in such a situation.

 

 

You make a good point about non-profit corporations. Perhaps that is the only kind that should exist. I think my point is that there is Big Government and Big Business and that we need both to balance each other. Otherwise, we end up with either a futile effort to establish the Socialism ideal---or the corporate state.

 

 

Can you point to a specific case where a CIA agent prevented a terrorist attack? i can't think of one. and i can think of several cases where they caused terrorism. do i think that the government should spy on other governments? no not really. if we deal honestly with everyone, then they are far less likely to attack us in the first place, and more likely to deal honestly with us.

 

As you say, many terrorist efforts were bungled, but we have had a number of arrests of individuals who were getting ready to cause big damage and CIA efforts have succeeded in eliminating its leaders by directing the drone attacks.

 

I think there is good reason why we have had government for some five thousand years. We have had spy systems for almost that long as well. If other nations are spying on us, we have to spy on them, and given that we exist in an ideologically divided world, there has always been, and will be in the future, spy systems. As social-group primates, we have to think in terms of defending our group. The only way we can get away from that is to find an ideology that will unite us all into a single big group (world-government). Then, we will weaken our group competitive nature and social evolution will come to an end. To me, the challenge is to understand what has happened and is happening well enough to look into the future.

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I prefer to have my taxes support the government's role in helping the destitute.

really? you prefer having your money forcibly taken, rather than voluntarily giving what you can afford?

if that's true then i feel very sorry for you.

The only reason that government is regarded as inefficient is because business and everything is inefficient.

umm no. government is considered inefficient precisely because it doesn't have to answer to profit. it can simply take what it needs from the people. even in a democracy this can be the case.

But at least government is hired by the public to do services for the public. Business is not. Corporations are set up to make money for stockholders and the upper management. The function of serving the nation or general good is subverted by the very legal framework the corporate structure is based on. Corporations are efficient in serving their legal purpose, but that is very often at the cost of the general public. So, we need both. We certainly need business regulations.

:blink: only when corporations use their clout to get laws placed in their favor does the public suffer. which certainly happens more than i would care to admit. we do need regulations, but we need them to prevent this sort of corruption from happening. in short the government needs to regulate itself more that it regulates business. sure, we need anti-pollution laws, and when a business fails we shouldn't bail them out.

but business ultimately answers to money, and what's wrong with that? if people don't want something they wont buy it. if they feel the corporation is dishonest, then they'll boycott it. what's more "efficient" than that?

The only way we can get away from that is to find an ideology that will unite us all into a single big group (world-government).

i seriously hope you're joking.

ultimately i agree we need to unite humanity. but having a one world government would be disastrous in my opinion.

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really? you prefer having your money forcibly taken, rather than voluntarily giving what you can afford?

if that's true then i feel very sorry for you

 

Would you know how much was needed where and whether it was used (or abused, stolen)? And perhaps the stingiest and most selfish people making the most money would be the ones to give the least. And, of course, they would be the people most likely to want all giving to be voluntary. We are not going to get anywhere discussing this point again.

 

umm no. government is considered inefficient precisely because it doesn't have to answer to profit. it can simply take what it needs from the people. even in a democracy this can be the case.

 

Sure, but business is inefficient because it has to answer to profit and that is often at the cost of the people and democracy. We are not going to get anywhere discussing this point again either.

 

:blink: only when corporations use their clout to get laws placed in their favor does the public suffer. which certainly happens more than i would care to admit. we do need regulations, but we need them to prevent this sort of corruption from happening. in short the government needs to regulate itself more that it regulates business. sure, we need anti-pollution laws, and when a business fails we shouldn't bail them out.

but business ultimately answers to money, and what's wrong with that? if people don't want something they wont buy it. if they feel the corporation is dishonest, then they'll boycott it. what's more "efficient" than that?

 

Corporations waste money and waste society in many other ways than just its corrupt buying of government subdsidies and the legal writing of regulatory regulations. It also controls forms of media through the advertising revenue it generates. It wastes money in drug advertising that could be used to cut their excessive costs. The legal profession wastes money promoting lawsuits that overburden the court system, delaying the resolution of suits and crimes, and ups insurance costs for doctors. One of the reasons (not all of them of course) that medical costs are higher and the number uninsured or protected in the US than in about any other nation is that a large part of health insurance costs is due to wasteful competition.

 

seriously hope you're joking. ultimately i agree we need to unite humanity. but having a one world government would be disastrous in my opinion.

 

No joke at all. If states can unite under a single government as they have in the US, there is no reason the same thing cannot happen later on with a united world.

 

It would seem we have "irriconcilable differences" which we won't ever reach a consensus on!!

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Would you know how much was needed where and whether it was used (or abused, stolen)? And perhaps the stingiest and most selfish people making the most money would be the ones to give the least. And, of course, they would be the people most likely to want all giving to be voluntary.

i don't know how much a church need either, what it uses it's money for, or whether it abuses it. do you know how many successful churches there are?

Sure, but business is inefficient because it has to answer to profit and that is often at the cost of the people and democracy.

????

i have no idea what you mean here. say i make bicycles for a living. after 10 years of making them, my business grows to a point i need additional employees. i become the manager and teach them how to make bikes, while i look for new clients to sell them to. they voluntarily agree to the wage per hour, and I pay myself anything left over from the profit. after another 2 years, i even hire employees to acquire clients, while i simply manage the materials needed. then i even hire employees to do that part a year after that, and just manage the wages, make sure the company is in the green, or at least black. i begin an advertizing campaign to bolster sales further. "buy mike's bikes" becomes our slogan. soon we are one of the top 10 sellers of bikes. one of our rivals is interested in our business and offers me 10 million dollars to buy the company. I figured I've had enough bike managing so agree and retire.

 

now what exactly about this scenario do you object to?

everything was voluntary. my wages, my employees, what i spend my time doing, etc. etc. i see no public or democratic harm from any of these actions.

It would seem we have "irriconcilable differences" which we won't ever reach a consensus on!!

 

hmm, i hope not but yes we seem to have very different views of acceptable behavior.

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I can't remember who but someone once said a democracy can not long stand because the electorate will soon learn they can vote themselves gifts from the national treasury and soon bankrupt the nation. I wonder why we are set so hard in our own beliefs that we refuse to see the truth, Keynesian economics could work only if their were no crooks among us. You can't make the weak strong by making the strong weak. You can't make the poor wealthy by making the wealthy poor.

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