WatchLots of arguments, charts showing that gold could already be in a bubble.
Now, I know for sure that we're not there yet, its a long way to go before we reach the bubble state in gold and it will be turbulent way, rest assured.
I thought I'd post two links to show why gold has a lot of potential upside.
What we have today is a debt-based monetary system. How money gets created in such a system will really surprise a lot of people.
Death by debt: http://www.chrismartenson.com/blog/death-debt/58941
Why gold has a lot of upside (directly ties in with how the system is impacted by debt): http://dailycapitalist.com/2011/06/07/why-gold-above-15000-per-ounce-by-2020-is-realistic-without-hyperinflation/
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theoakman says
lol. Really? That's what you think I'm saying?
No, the problem with your thinking is that the intervention made it last longer. FDR's policies were clearly working. Iwog has posted GDP charts, unemployment charts, etc., and they all say the same thing. And it exactly the opposite of what you're saying.
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tatupu70 says
You can't explain why the one deflation in which they tried to inflate their way out resulted in a recession more than twice as long as any other recession. FDRs policies were not working. In fact, the GDP charts, albeit, they come from official data, but they are horse crap. Those charts claim real GDP in 1937 was higher than real GDP in 1929, which was the height of a bubble. Real GDP was supposedly back to bubble levels yet unemployment was still 10%. The real story is that the GDP numbers were fudged and real GDP cannot be calculated because you cannot calculate real GDP using inflation numbers when your inflation numbers were completely biased by the fact that the government was heavily involved in price fixing goods and services.
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theoakman says
Ahhh. Now I see how it works. Numbers are real if they agree with you. But they are fake or fudged if they don't.
I guess you never have to admit that you're wrong that way, huh?
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tatupu70 says
i can actually play with the real numbers based on what the argument is....that is
tatupu70 says
The argument is that FDR's policies lengthened the depression stems from the following:
His polices did NOT END the depression they simply caused it begin to reverse, that is GDP went up and unemployment went down but they never reached what would be considered non depression level growth and unemployment. ie a full recovery never happened the progression out of depression just started.
That is not contested as it can be seen in simple charts, and the theory of government overspending to bring out of a depression is a valid one and is directly seen in the great depression.
However as is REQUIRED government spending must slow and begin to tax for payment of that recovery. FDR let this happen in 1937 and caused a second crash.
If u look at something like
the argument is that as government had not started spending the graph MAY not have of had such a fast decline in unemployment BUT there would be no second crash AND the government wouldn't of gone into as much debt. thus a possibly SHORTER depression AND less government debt.
Im not saying i agree with this theory, but it is one that doesnt claim false numbers.
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The only problem with that theory is that the alternative of "not doing anything" clearly did NOT cause things to ever get better.
Any rational person would look at the data and claim FDR's policies were working. And that if anything, there should have been more intervention.
When the intervention stopped, things got worse. Not sure how anyone could see this and think that not doing anything was a better solution. When not doing anything clearly made things worse in 1937.
Finally, WWII got us out of the depression. That was one huge government intervention. Intervention worked. Non-intervention didn't. Any other explanation is just BS.
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tatupu70 says
No, the fact that you think you can adjust for inflation when prices are being artificially fixed explains why you cannot trust the numbers. I don't expect you to understand any of this because it goes way over your head.
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theoakman says
lol--is it your contention then that GDP did NOT improve during FDR's term? And unemployment did not go down?
And that things didn't get worse when government intervention stopped?
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tatupu70 says
Like, I said, you have trouble following a single argument. It results in you stuck in perpetual arguments with everyone. As a high school teacher, I would compare you to the students that needs everything written out and underlined so you they can follow it.
Let me try.
GDP did not improve nearly as much as the numbers reported claim. If it did, unemployment would have improved beyond 10%.
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theoakman says
OK let me get this straight--
Oak: FDR's government intervention made the Great Depression longer.
Tatu: Actually, if you look at the numbers, government intervention improved things. GDP rose, unemployment fell.
Oak: You can't believe the government numbers
Tatu: So GDP didn't rise? Unemployment didn't fall?
Oak: Well, GDP didn't rise that much.
The point is government intervention WORKED. No intervention (1937) DIDN'T WORK. History is very definitive.
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tatupu70 says
The fact that you think that economic intervention ended in 1937 shows you have no knowledge of the Great Depression. The fact that you think it started in 1932 also shows you have no knowledge of the great depression.
Achieving 10% unemployment is hardly what I would call a success story.
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theoakman says
If I thought the Great Depression started in 1932 you might have a point.
So do you have any real basis to your theory that FDR's policies extended the Great Depression? So far you've offered nothing.
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For all practical purposes, the recovery from the Great Depression was V-shaped with the bottom at EXACTLY the point where FDR devalued our currency and took us off the gold standard.
http://www.housingbubblebust.com/GDP/Depression.html
Tatupu is absolutely correct that in 1937 the depression got worse due to a very ill advised attempt to balance the budget too early. However there's absolutely no doubt that the policies of FDR made things much better.
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iwog says
This is more of a narrative than actual detailed analysis. Once again, if the events were as simple as "spending vs cuts", you would see a 100% correlation. Instead, people like to tell stories.
Government spending in 1937 was higher than any year from 32 to 35. There was no drastic cut in spending.
Btw...Hoover increased spending and ran large deficits too. We saw unemployment rise under him. Care to explain that one?
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tatupu70 says
"It" referred to economic intervention.
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theoakman says
Right--I forgot. The government is ALWAYS intervening and is ALWAYS the cause of whatever problem we are experiencing. No matter what it is.
But, again, how's about you present a case for why FDR made the Depression longer?
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tatupu70 says
I've already done it for you 2 or 3 times over the years. It never sticks so I won't bother.
You're main problem is you always inadvertently create a straw man argument because you either don't read carefully or you refuse to understand what anyone is ever arguing. Half the time, I give up with you simply because every other post requires me to clarify what a pronoun was referring to.
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theoakman says
I understand that 1937 was a lot more complicated than a cut in government spending, however as a % of GDP and a % of revenues, spending was cut significantly. The nominal total was $600 million. (which was pushed back up $1 billion in 1938)
The real force behind the Great Depression wasn't addressed until after the war and it was wealth disparity. To the extent that a floating fiat currency can be used to send more money to the consumer class, it will prevent or mitigate recessions and depressions.
In fact the argument about the gold standard is entirely besides the point.
theoakman says
Hoover was fighting a large contraction in the money supply. He was a victim of the gold standard and the fed.
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theoakman says
I've never seen a legitimate argument on how FDR supposedly extended the depression. Most explanations inevitably begin with "here's what should have happened" which is totally corrupt reasoning.
I'd be interested in seeing someone explain it or at least provide a link.
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theoakman says
lol--that's why you give up? Perhaps you might learn to write more effectively.. Just a thought.
(tip 1: learn the difference between your and you're)
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tatupu70 says
lol. No, even when I write a coherent sentence, you misconstrue it.
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theoakman says
How about you link to it then if it's too much trouble to write it again?
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theoakman says
I'll stop now, but if you said this sentence to 100 people, 100 of them would say "it" referred to the Great Depression.
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iwog says
Well, I'll try. But beyond that, the simple textbook narrative of a Laissez-fair Hoover administration is categorically false. Hoover was actively engaged in propping up wages, increasing government spending, running perpetual deficits. The idea that Hoover took the Laissez-faire approach and FDR did the opposite is a complete lie. For all intents and purposes, Hoover appears to be FDR lite. As far as the FDR narrative goes, I've never understood how 4 years of deficit spending was considered a success with unemployment still at 11% and a treasury secretary admitting that they've failed.
I've pinpointed a few points that I think should resonate:
1. Agricultural Adjustment Administration.
This program was designed to increase farmers wages to prevent their farm from going under. We paid them to burn crops, slaughter livestock, and dump milk down the drain in an effort to prop up agriculture prices. First off, this type of solution is completely insane from an economic perspective. Beyond that, it was a crime given the amount of people starving in the country at the time. The end result was more starvation and those that didn't had to pay much more for food.
2. National Industrial Recovery Act of 1933 - This was probably the most business unfriendly creation in American history. Lowering prices for services was viewed as treason by this organization. Their is the infamous event of them jailing a tailor for charging too much. The rules of business were constantly changed and were never clear or universally applied. Similar problems were brought forth in the National Labor Relations Act of 1935 and the Fair Labor Standards Act of 1938, which ultimately were glorified attempts to prop up wages (ala Herbert Hoover).
3. Commodity Price fixing. This was seen in the coal/oil industries and led to chaos.
Like I said, I can totally sympathize with programs like the WPA and CCC which led to some good building of infrastructure and put unemployed people like my Grandfather to work. However, a few good programs/policies are no excuse for the other nonsense that went on and anyone that likes to glorify FDR severely ignores some of the stupid policies he put forth.
You want my opinion? Running deficits absolutely would not prolong a depression. In fact, Austrian Business Cycle Theory predicts that it generates a recovery in employment and asset prices faster than a free market approach would. They simply argue that the recovery comes with structural imbalances from market distortions which materialize in the future. FDR's unemployment rate would have gone down to 5% had he simply employed the WPA, CCC, and withheld the temptation to price fix. Every recession is ultimately solved by the revaluing of assets/wages and shifts in the structures of production. A free market approach yields a revaluing of assets/wages in the downward direction until they bottom out (and yes, they always bottom out). There is no such thing as an indefinite deflationary spiral. The Keynesian/Monetarist approach prefers to depreciate the currency to allow the nominal value of assets/wages to stay unchanged while the real value of the two falls due to inflation. The problem with the second approach is that it can (not always) cause distortions within the structure of production.
Hoover's problems can be explained in simple terms. The Fed contracted the money supply and a bubble was collapsing, therefore, wages needed to fall back to equilibrium. Hoover tried to prevent that by price fixing. The result, 25% unemployment. Had he allowed wages to fall, it wouldn't have gotten nearly as bad. Had the fed inflated away, the price fixing of wages would not have had the negative affect it did.
All in all, FDR's biggest problems were his insistence to fix prices and regulate industry. Deficits, while not the best course of action, IMO, were not the cause. Ultimately, the negative affects of price fixing became negated with enough expansion of the money supply and recovery ensued. If you ask me, FDR could have ran his deficits and a full recovery by 1937 would have been realized had he simply not engaged in price fixing/regulation of any sort. My opinion is that the results from FDRs first two terms were a complete disaster. Unemployment was way too high and could have been achieved much faster without increasing deficit spending.
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theoakman says
That is as precise as it can be. Structural imbalances is the root-cause problem of the central planning. The banking cartel loves central planning and money supply control because they can get bailed out, EVEN THOUGH they were responsible for the structural imbalance in the first place. Housing bubble being the latest example. Fed's artificial suppression of interest rates lead to the expansive boom in housing, which eventually is still busting.
theoakman says
And I think they have won, because they have intellectually conquered the minds of people like iwog/tatupu, who believe in statistical mirages created by the illusion of wealth, the trick used by the central planners is inflation.
I think a wage-induced inflation will help even now, because it will accelerate the de-leveraging process as people try to pay down their debts with inflated money -- however in the long run, they won't be able to control the run-away inflation, because raising interest rates is not really an option.
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austrian_man says
The problem with Keynesianism is that academia took the ideas of Keynes and went batshit with them. Academia has really lost touch with reality in economics. They get away with everything because people have short memories. I'm sure no one remembers this figure from Obama's economic team. This forecast received the stamp of approval from Krugman and Stiglitz. Yet, over 2 years later, its clear that their methodology & resulting forecasts were complete jokes. In fact, the results are worse than what they predicted absent any action.
Another laughable aspect of this graphic is that it is completely clear by the shape of the curve that this was not based on any mathematical model/formula. In fact, the shape of the curve pretty much indicates that whoever constructed it was simply inputting numbers at each point and manually constructing it.
There is some logic to dealing with a major fallout. There is no point in letting idle resources sit. I would be all for temporary infrastructure jobs to close the unemployment gap to prevent a demand shock.
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The problem is that there's no good way to estimate future unemployment numbers so they just made a guess. The graph is correct in that it shows unemployment would be worse without government intervention, however Obama should not have tried to be so specific.
This is not an indictment of Keynesian economic theory, in fact Krugman and others have argued the stimulus wasn't nearly enough.
You'll have to do better than that. Assuming the omnipotent view and claiming the stimulus failed because you know what would have happened without it is just as arrogant as someone who claims to know unemployment numbers years into the future. This isn't proof.
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iwog says
When that forecast came out, Krugman argued that he was getting the same exact estimates. See, this is classic Krugman. He predicted it would work, and he also predicted it wouldn't because it was not enough. Regardless of the outcome, he can claim he's right by ignoring the prediction that was wrong. I know for a fact that unemployment would have been larger absent stimulus. I'm not arguing that point. I believe the lack of structure, thought, and oversight put into the stimulus will ultimately render it a loss because we won't get our return on investment.
Regardless, the stimulus package was a complete joke that had no structure and thought put into it. It was an $800 billion dollar gift to special interests and no one bothered to orchestrate how the money was really spent. When the package passed, our congressman and former Princeton Professor, Rush Holt, marched around my campus playing Santa Clause to each department. He spent a half day on campus and basically, he lined up each department head and said "$15 million to each of you". I watched how that money got spent. It was used to hire a bunch of hacks who don't show up to work half the time. You can't create an $800 billion piggy bank and expect it to be spent wisely.
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theoakman says
I think 'Inside Job' documentary did an excellent job exposing the jokers that run economics courses in universities these days. They expose all the fraud in the financial system, but when you peel the layers -- you see there is a constant link between fraudulent activities and high-level academic members endorsing the game and playing along, while increasing their bank balances as well.. e.g., Larry Summers, Frederick Mishkin, Martin Feldstein etc. Mishkin in fact changed his paper title on Iceland from financial stability to financial instability after he realized Iceland is screwed. Academic dishonesty at worst.
iwog says
iwog - your argument is: see government intervention worked and here's the statistics. our argument is that in the long run, it will be an EPIC FAIL, because they did not correct the fundamental problem, which is misallocation of capital and labor . Structural imbalances.
theoakman says
Krugman is the biggest doofus on the planet and he will flip-flop according to the indicators. Look at this link: http://www.economicpolicyjournal.com/2011/04/krugman-boldly-dumb.html
He is saying inflation is not a problem. The people from Manhattan really live in a different planet. Food and energy costs are rising through the roof and the joker says there is no inflation. Brilliant.
theoakman says
Structure and thought was put into it oakman. The thought was to save the banks, who made the mal-investments in the first place. banks are never punished for the mess they created. Look at how tatupu and iwog evade this question/concern in all their arguments. They are stuck in the Keynesian rut, just like most of the world. Only a huge catastrophe can wake the masses.
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austrian_man says
You are referring to the TARP. I was talking about the stimulus.
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theoakman says
Ah I see...the ARRA you mean? First-time home buyer tax credit being a part of it....that worked very well right?
Keynesian economics says that the government ought to replace a drop in private spending with an increase in public spending to save jobs and stop further economic decline. What Keynesian economics doesn't realize is that the public spending itself comes from the private tax payers, so in some senses - the government is essentially a machinery to take money from one pocket to put it to another pocket. Whether the government is doing this efficiently better than the market participants is a question that can be answered easily. There is no recovery after what the government has done, which means it has done a useless job.
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austrian_man says
Totally incorrect. My argument is that we will NEVER have a decent economy with such a huge gap between wealth held by the consumers and wealth held by the leeches. (you call them producers but it's a crock) FDR didn't fully realize this either, which is why it took a war before consumers got their money back.
Nothing is fixed which is why we're not going to see a strong recovery and might well double dip. The stimulus helped a little, but there was no tax reform to carry the economy forward. This is one of Obama's greatest flaws. He's not willing to force the issue and fix the tax code.
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iwog says
iwog - the wealth disparity problem is obvious. But the wealth disparity itself is a result of government intervention favoring some industries, and thereby converting them to giants. This is a self-reinforcing feedback loop which leads to these giants become even larger giants. The cause is always some kind of favoritism and the market by itself does not favor anyone with a bias. It favors the producer who can produce it at the lowest cost to the consumer.
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austrian_man says
So why does the wealth disparity problem show up in a pure capitalism simulation without any government interference? A Monopoly game perhaps?
In fact why does your ideal society not exist in history? Why was 1946 to 1980 so successful when it broke every economic rule you believe in? Why did a WAR, the absolute pinnacle of government intervention, lead to prosperity? Not just here, but in Japan and Germany after they were totally decimated and rebuilt under the strongest economic controls conceivable?
You really don't have answers for any of these questions. They are all exceptions with ready excuses. In fact when we examine the period MOST resembling what you believe the perfect economy should look like, sans national bank and near pure laissez faire after Andrew Jackson, we getTWO massive Depressions and squalor and misery so bad that Dickens would have winced.
I see far too many contradictions, exceptions, and downright falsifications of Austrian economic theory in history and elsewhere to give it even a betting chance of being right.
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Austrian theory isn't about pure laissez fair capitalism. Most people who spout off about it are ideologues who've never read a word of Mises or Hayek. On the flipside, those that criticize it have also never read Mises or Hayek. As per your Andrew Jackson argument. Austrian theory clearly states that a massive deflationary recession depression will naturally follow in the face of a collapse of an inflationary boom induced by a central bank. Any Austrian economist would naturally predict a depression to follow such actions as abolishing a central bank in the face of an overheated economy that was stimulated through expansion of the money supply.
Iwog seems to be representing Austrian theory in that it predicts an instant recovery from an inflationary bubble (like the housing bubble) by doing nothing. It doesn't. It does state that the bust in unavoidable. It also states the bust is a result of the fallout from the distortions within the structure of production. You cannot blame a bust on the free market economy when all the events prior were the result of a central bank fueled boom.
Austrian theory shows how a non-ideal recovery is achieved when inflation is the policy to prevent/respond to a recession. That's where they are right. In fact, Austrian economists have been the most accurate in identifying bubbles, forecasting their collapse, and predicting the negative affects of the fallout. They are years ahead of the curve and the most accurate school in terms of economic forecasting. Back in 2001, they were warning about the inflation of the housing market.
In short, Austrian theory predicts that any attempt to use inflation to solve a recession yields a larger recession in the future that requires a larger dose of inflation. Ultimately, the malinvestments become so large that the currency can fail after decades of inflationary response.
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iwog says
Its already well explained that the free market is not a stupid monopoly game but it doesnt seem to get into your duck brain - lol.
iwog says
Why the hell are you blind to inflation? inflation is stealing, plain and simple. People who saved were eroded of their savings, they suffered. All you see is the construction happening after the destruction, you cannot see what could have happened had the destruction not taken place at all.
For example, let's say the government puts people to work by building a bridge. Now it is good those jobs are created IF AND ONLY IF that bridge is actually necessary and serves the entire society. It shouldn't be built FOR THE SAKE OF CREATING JOBS, because if creating jobs is the goal -- then the goal itself becomes a secondary factor in consideration. This is a problem because the government is not spending its own money, its spending the tax payers money. So it should bloody well make sure its spent wisely.
iwog says
This is an absolutely disgusting question that I cannot even get myself to answer. So wars are good, huh? Destruction and eventual re-construction is not a boom. The capital allocated for reconstruction could have done something even better for the overall standard of living, had the destruction not taken place at all. I don't think this is SO HARD TO SEE. Japan suffered an earthquake - that's good huh? You'd be dead meat if you tell someone who lost a near and dear one.
iwog says
I think oakman answers this well. The banks freaking create money out of thin air and create fake prosperity, after which there is bound to be a bust. What Andrew Jackson did was to heal the market on its own, without doing anything. It will eventually, and that's the best way to heal. Not prolong the problem by more inflation. Clearly you are in love with the misguided policies such as first-time home buyer tax credit. All it did is to spur artificial demand which went away as soon as the tax credit expired.
iwog says
thats because you've been brainwashed beyond belief in your Keynesian rut. So you cannot get yourself to accept that the history as you understand it, is not what it really is. The Austrian model of business cycle is the only way to explain booms and busts. All depressions including the great depression and the great recession can be explained through the business cycle theory.
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austrian_man says
If that's true, then why do you fail time after time to explain the fundamental differences? I keep asking questions, you keep failing to provide answers.
austrian_man says
Using an employee to create wealth, then taking some of that wealth for no other reason than you own some of the capital is stealing.
This is called canceling out bullshit.
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iwog says
already did, duck brain...you are asking the same thing again and again. Free market is not pure chance. That's one hell of a fundamental difference for you.
iwog says
lol - I don't even get a penny trying to convince to your duck brain why Austrian economics works. So I'm gonna quit trying, because obviously I have better things to do. you can continue parroting around your stupid theories on great depression and advise for more socialism and government spending for a country that's already filled with debt up to its eyeballs. Everything will work out okay, as 14 trillion is just a number.
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iwog says
the fundamental difference between a PURE free market and monopoly is at some point before the last person is broke there is a revolt and a killing off of the guy winning the game. either in taxes or murder ;)
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I don't know. I intend to keep my GLD until $250
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iwog says
Somaaaaalia, fuck yeah:
http://www.youtube.com/watch?v=7QDv4sYwjO0
Somalia, it's Libertarian Paradise (TM).
iwog says
It actually does exist in history. We called it feudalism. In modern times, it's how mafias and cartels work -- by force. Instead of government taking taxes by "force," you would have mafias and cartels using real actual force on you.