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[Joojoobees]

Originally Posted by Bri

How does that work? I've seen members like Vexx and yourself comment on the decline of the middle class in the US. AFAIK trickle down economics is just another word for supply side economics. The lower tax rates, reduced regulation and reduced cost of capital resulting from that type of policy would seem beneficial to starting up new small firms. What is different in the US situation or what makes you say that this policy destroyed the ability of the middle class to start up new companies?

There were plenty of theoreticians who claimed that trickle-down economics would be good for such things but the data is in and the middle class disappeared. The richest of the most richest rich people got richer and everyone else didn't.

If you want an explanation why, consider this: when a poor person has some extra money they spend it. When a middle class person has extra money, they can use it to start a business so they can "be their own boss". When you already have billions of dollars you put the extra money into speculation on commodities, and shares of financials (e.g. Goldman Sachs) and energy companies.

[Bri]

Originally Posted by Joojoobees

If you want an explanation why, consider this: when a poor person has some extra money they spend it. When a middle class person has extra money, they can use it to start a business so they can "be their own boss". When you already have billions of dollars you put the extra money into speculation on commodities, and shares of financials (e.g. Goldman Sachs) and energy companies.

But here lies the problem. The middle class did not become their own boss. Instead they acted like the poor or the rich in your example. They either consumed the extra income, or saved/invested it but they did not start new companies. I wonder what the reason for that is.

Some examples I can think off:
Housing market: House prices kept rising, so it may have been more attractive for the middle class to speculate on real estate instead of starting your own business.

Financial security: Safer to be a professional with fixed income when you have to service a mortgage, car loans and pay tuition fees for the kids

Health Insurance: Employees get subsidized health care so it may be unattractive to become self employed as insurance could be too costly.

Credit Crunch: Banks refuse to lend to small businesses due to high risk of default and their own weak financial positions. Middle class may have too high debts to self finance a firm.

I'm just curious as it is completely counter-intuitive from an economic perspective that lowering taxes and reducing regulation would lead to less incentives for self employment.

[ZephyrLeanne]

Originally Posted by SaintessHeart

We only have fourteen here! Dammit I wish mine was that long!

^^ It's 21 in Singapore. Like, that was when I was working in Singapore - private education industry, at least.

[justsomeguy]

Originally Posted by justinstrife

Meh. This post isn't really worth responding to. Poor people will always be poor. Even if you took all the money in the world and redistributed it equally among everyone, within a few short years, everything would go back to the way it is currently. Those who were wealthy, will build their wealth back up again, and the poor people will piss the money away and be poor again.

You make it sound like this is a bad thing. It's not, it's actually a good thing. If the wealthy just build their wealth "back up," then they really aren't getting hurt at all. (Of course, they never lose their wealth in the first place, so they really aren't getting hurt.) As for poor people "pissing" their money away, at least they get to buy necessities in the meantime. Circulation of money is good for the economy and societal stability, keeping it sequestered in the hands of a few individuals or corporations is not.

[SaintessHeart]

Originally Posted by ZephyrLeanne

^^ It's 21 in Singapore. Like, that was when I was working in Singapore - private education industry, at least.

The period I was working before my army days as a full timer clerk, I only have 14 damned days. It is supposedly a mandated number under the Employment Act.

Originally Posted by justsomeguy

You make it sound like this is a bad thing. It's not, it's actually a good thing. If the wealthy just build their wealth "back up," then they really aren't getting hurt at all. (Of course, they never lose their wealth in the first place, so they really aren't getting hurt.) As for poor people "pissing" their money away, at least they get to buy necessities in the meantime. Circulation of money is good for the economy and societal stability, keeping it sequestered in the hands of a few individuals or corporations is not.

Sometimes it is how the rich or the poor spend their money that gives them the result. Granted the fact that some are born with silver spoons and opportunities, but when a recession comes and people go from riches to rags, it often constitutes to a financial planning flaw.

Or at least it does for majority of the upper-middle or middle class.

[ChainLegacy]

I'm a fiscal conservative who believes Keynesian economics are the worst thing to happen to the United States in its history from an economic point of view. Our current spending policies under Bernanke have a high probability of causing hyperinflation. We should have had a recession in 2008, but because of his artificial propping up of the market by lowering the interest rate to zero, our national debt is now over $13 TRILLION dollars and... the Keynesian solution? Keep spending, keep printing more FIAT currency. Look up Bernanke's views on deflation, he feels that a sensible solution to that problem is just printing more, worthless money.

This is not about democrats vs. republicans. Bernanke served under both Bush and Obama. The two major political parties are one in the same where it counts, economically, and it is only a matter of time before our country starts feeling the unfortunate ramifications.

[justsomeguy]

Originally Posted by SaintessHeart

Sometimes it is how the rich or the poor spend their money that gives them the result. Granted the fact that some are born with silver spoons and opportunities, but when a recession comes and people go from riches to rags, it often constitutes to a financial planning flaw.

Or at least it does for majority of the upper-middle or middle class.

I would argue that those who in such a precarious position that they would suddenly fall to poverty weren't rich or middle class in the first place. Many of the people now who went to rags ran up debts during prosperous times. It's not the fault of those who do so due to medical expenses, but for those who bought homes they couldn't afford (and possibly didn't need), or bought luxury items on credit, it certainly is for not building up any savings.

[Xion Valkyrie]

Also, another thing to consider about 'trickle' down economics is the relative minor amounts of tax decrease for middle class income ranges. The amount they get back is not significant enough to alter spending/investing habits. It's mostly the super rich/corporations that get the benefit. Hence, middle class sees very little benefit from the extra cash, and the government loses out on a lot of money they could be using to build infrastructure and social programs.

[ZephyrLeanne]

Originally Posted by SaintessHeart

The period I was working before my army days as a full timer clerk, I only have 14 damned days. It is supposedly a mandated number under the Employment Act.

For most people, yes. For "expats", apparently 21 is the industry standard. (A 4-figure expat? Who ya kidding? )

Originally Posted by ChainLegacy

I'm a fiscal conservative who believes Keynesian economics are the worst thing to happen to the United States in its history from an economic point of view. Our current spending policies under Bernanke have a high probability of causing hyperinflation. We should have had a recession in 2008, but because of his artificial propping up of the market by lowering the interest rate to zero, our national debt is now over $13 TRILLION dollars and... the Keynesian solution? Keep spending, keep printing more FIAT currency. Look up Bernanke's views on deflation, he feels that a sensible solution to that problem is just printing more, worthless money.

This is not about democrats vs. republicans. Bernanke served under both Bush and Obama. The two major political parties are one in the same where it counts, economically, and it is only a matter of time before our country starts feeling the unfortunate ramifications.

I agree with that. Look at Japan! Porkbarelling in the '80s didn't work for Japan. It was Kakuei Tanaka who started throwing money in that second-most god-forsaken area of Japan, Niigata. (Of course, Yukio Hatoyama's current electoral district, Hokkaido-9 is really out of the way, the only place where Ainus still live as Ainus.)

So Shinzo Abe, Fukuda Jr, Rozen Aso and Hatoyama all had to cut cut cut, like mad. So let's see what Yes we KAN does.

[Kamui4356]

Originally Posted by ChainLegacy

I'm a fiscal conservative who believes Keynesian economics are the worst thing to happen to the United States in its history from an economic point of view. Our current spending policies under Bernanke have a high probability of causing hyperinflation. We should have had a recession in 2008, but because of his artificial propping up of the market by lowering the interest rate to zero, our national debt is now over $13 TRILLION dollars and... the Keynesian solution? Keep spending, keep printing more FIAT currency. Look up Bernanke's views on deflation, he feels that a sensible solution to that problem is just printing more, worthless money.

This is not about democrats vs. republicans. Bernanke served under both Bush and Obama. The two major political parties are one in the same where it counts, economically, and it is only a matter of time before our country starts feeling the unfortunate ramifications.

Ok, you don't think we should have propped up the market? What would you have liked to see happen? Make sure you list both positive and negative effects of this plan too.

[SaintessHeart]

Originally Posted by justsomeguy

I would argue that those who in such a precarious position that they would suddenly fall to poverty weren't rich or middle class in the first place. Many of the people now who went to rags ran up debts during prosperous times. It's not the fault of those who do so due to medical expenses, but for those who bought homes they couldn't afford (and possibly didn't need), or bought luxury items on credit, it certainly is for not building up any savings.

I think that would be a clearer indication of where I am trying to point : those who borrow and use credit and do things they couldn't afford or need.

Originally Posted by Kamui4356

Ok, you don't think we should have propped up the market? What would you have liked to see happen? Make sure you list both positive and negative effects of this plan too.

Logically speaking, the Gold Standard shouldn't be a problem if we have the technology to mine the mineral from meteorites and asteriods at that time.

Apparently we don't, so Keynesian economics is the next best solution we have after the WWII devastation and damage.

[ChainLegacy]

Originally Posted by Kamui4356

Ok, you don't think we should have propped up the market? What would you have liked to see happen? Make sure you list both positive and negative effects of this plan too.

No bailout should have happened. The health care bill shouldn't have been passed. The negative would be a recession/depression back in '07-'08 much stronger than the one that occurred due to the failure of many businesses. The positive is, instead of pushing our problems down the road and making our already ungodly large amount of debt even larger, we would be on the road to recovery by now. Instead, we have made the problem worse and hyperinflation is a very real possibility.

You can't just avoid a recession by printing more money. That's not how economics works. There are up cycles and down cycles that are unavoidable. The big businesses should have failed according to true free market capitalism due to their own inefficiencies, instead the inefficiencies will remain; the free-market is apparently an illusion now. But that's the least of our worries because we have a possibility of becoming the next Wiemar Republic in terms of hyperinflation, due to the said overprinting of money and massive debt...

Originally Posted by SaintessHeart

Logically speaking, the Gold Standard shouldn't be a problem if we have the technology to mine the mineral from meteorites and asteriods at that time.

Apparently we don't, so Keynesian economics is the next best solution we have after the WWII devastation and damage.

The gold standard is based on ratios. You do not need a constant supply of more gold, the amount present in the world right now is just fine.

[Xellos-_^]

Originally Posted by ChainLegacy

No bailout should have happened. The health care bill shouldn't have been passed. The negative would be a recession/depression back in '07-'08 much stronger than the one that occurred due to the failure of many businesses. The positive is, instead of pushing our problems down the road and making our already ungodly large amount of debt even larger, we would be on the road to recovery by now. Instead, we have made the problem worse and hyperinflation is a very real possibility.

You can't just avoid a recession by printing more money. That's not how economics works. There are up cycles and down cycles that are relatively unavoidable. The big businesses should have failed according to true free market capitalism due to their own inefficiencies, instead the inefficiencies will remain; the free-market is apparently an illusion now. But that's the least of our worries because we have a possibility of becoming the next Wiemar Republic in terms of hyperinflation, due to the said overprinting of money and massive debt...

i didn't like the bailing the banks as much as anyone. But seriously, No bail = DEPRESSION not the recession we are having now.


I work as a Insurance agent and at the end of 08 and start of 09, i had client losing their homes left and right. Some of those shouldn't have bought in the first but some of those clients had good solid jobs that disappear on them. I saw how bad the recession has been on the middle class, i can't even begin to imagine how bad it would be if there had been a depression instead of a recession.

[ChainLegacy]

Oh, I understand that. It would have been horrible. It's just that it is unavoidable. It will still happen, only now in 2011-2013 area and even worse than it should have been.

[Xellos-_^]

Originally Posted by ChainLegacy

Oh, I understand that. It would have been horrible. It's just that it is unavoidable. It will still happen, only now in 2011-2013 area and even worse than it should have been.

i always thought my imagination is pretty good but i can't imagine what might happen 2 years form now could have been worst then the abyss we were staring into at the end of 08.

[Bri]

Originally Posted by ChainLegacy

I'm a fiscal conservative who believes Keynesian economics are the worst thing to happen to the United States in its history from an economic point of view. Our current spending policies under Bernanke have a high probability of causing hyperinflation. We should have had a recession in 2008, but because of his artificial propping up of the market by lowering the interest rate to zero, our national debt is now over $13 TRILLION dollars and... the Keynesian solution? Keep spending, keep printing more FIAT currency. Look up Bernanke's views on deflation, he feels that a sensible solution to that problem is just printing more, worthless money.

Bernanke pumped liquidity into the system to prevent a debt-deflation spiral in the aftermath of the banking crisis. As there was a serious risk of system failure, not just single institutions, something often overlooked by free market fundamentalists. This failure would result in the break down of the intermediation function of the financial sector as a whole (see credit crunch). Simply put, cash and deposits become perfect substitutes and no one would be loaning anything. Without credit even profitable and healthy firms would go under and worse, it's extremely hard to get out of this type of situation ( see Japan). Running up public debt is a relative small price to pay to prevent that scenario. Politicians simply need to either cut spending and/or raise taxes (and yes they hate doing that but that is not the Feds problem).

What Bernanke's Fed did was based largely based on monetarist theory and has little to do with the Keynesian trade off between inflation and employment.


Still, Bernanke (and Greenspan) were rightly criticized (for example by Anne Schwartz) on allowing the interest rate to drop to low after the dot-com recession in 2002-2003 allowing a bubble to form in the housing market. Also he was rightly criticized for the lack of transparency of the criteria under which the Fed would bailout failing banks.

Originally Posted by ChainLegacy

You can't just avoid a recession by printing more money. That's not how economics works. There are up cycles and down cycles that are unavoidable. The big businesses should have failed according to true free market capitalism due to their own inefficiencies, instead the inefficiencies will remain; the free-market is apparently an illusion now.

Again, free market principles don't work in case of market failure. That was the whole issue. Laissez faire wont help when the whole market breaks down. That was the point of the liquidity injection, to allow the markets to remain functional.

[ChainLegacy]

It still isn't an even trade off. I'm not denying the potentially catastrophic consequences of the financial collapse (I'm not convinced the entire sector would go out of commission, but I'll leave that aside as it is irrelevant). It is actually quite Keynesian in that the goal is to prevent any economic downturns through interest rate regulation. And the US certainly is going to pay that 'small price' if the dollar collapses. That doesn't sound too equal to me.

[yoropa]

Somali pirate cook saves hostages, then disappears

CONSTANTA, Romania – The pirate cook smuggled food to the terrified hostages held by his gang off the Somali coast. He bought them cell phone cards. And when the pirates started talking about harvesting their organs for cash, he sneaked them guns.

The hostages killed the pirates and escaped. But now the life of the Somali cook, known only as Ahmed, is in danger. Despite actions the crew described as heroic, European Union nations, Syria and nearby Djibouti have all refused to take him, according to an official who was not authorized to talk.

Ahmed has since disappeared. It is thought to be the first time someone working for the pirates has turned against them to help hostages.

I'd like to see more of these mysterious Ahmeds showing up to the rescue.

[Anh_Minh]

Originally Posted by ChainLegacy

No bailout should have happened. The health care bill shouldn't have been passed. The negative would be a recession/depression back in '07-'08 much stronger than the one that occurred due to the failure of many businesses.

Also, all investors take their money and go put it somewhere less risky.

Originally Posted by yoropa

Somali pirate cook saves hostages, then disappears

I'd like to see more of these mysterious Ahmeds showing up to the rescue.

Doesn't look very likely, considering how he was rewarded.

[Kamui4356]

Originally Posted by ChainLegacy

It still isn't an even trade off. I'm not denying the potentially catastrophic consequences of the financial collapse (I'm not convinced the entire sector would go out of commission, but I'll leave that aside as it is irrelevant). It is actually quite Keynesian in that the goal is to prevent any economic downturns through interest rate regulation. And the US certainly is going to pay that 'small price' if the dollar collapses. That doesn't sound too equal to me.

You're misinterpreting keynesian theory there. The goal isn't to stop a market downturn, but to make is as short and painless as possible by stimulating the markets during said downturn, a method that's been historically proven to work I might add.

Also, the dollar isn't going to collapse anytime soon. Too many countries rely on it to let that happen, and while the euro was looking like an attractive alternative for a time, it's showing potential weakness too.