The-Hogs.net - Washington Football Discussion, Redskins to Commanders Era

Note to Irn-Bru. So you have been raising issues on the Fed, gold standard and inflation harming the poor. This is my attempt to summarize what I think you are saying. Not trying to put words in your mouth, just repeating it back to see if I get it. Personally I think you're totally right, this does harm the poor far more. First some concepts then the point.l

Nominal versus Real Dollars
Nominal Dollars – Amount in actual dollars. One dollar bill if you keep it will remain one dollar in nominal terms even though you can buy less with it. Real Dollars – The buying power of a dollar. Over time due to inflation the real value of a dollar decreases. So for simplification, let’s assume inflation doubles prices every 10 years. If you put $10,000 under your mattress in 1998 then today you would still have $10,000 in nominal dollars but you would have only $5,000 in 1998 real dollars since it only buys half as much stuff.

Gold Standard
On the gold standard there is actual gold behind the currency. This “fixes” the value of the currency. So for example, if gold is worth $1,000 an ounce, a dollar can buy 1/1000 of an ounce of gold for $1. The government cannot issue more currency unless it acquires more gold. The gold standard therefore enforces strict fiscal discipline on the government because issuing more currency without the gold behind it would devalue the currency, cause a run on the gold reserves of the government and cause the government to go bust. The gold standard is very anti-inflationary because you are really paying 1/1000 of an ounce of gold for every dollar you spend.

No gold standard
The US today has no gold standard. Basically the dollar is backed by the US economy. If there were say ten trillion dollars in circulation, the value of a dollar is one ten trillionth the money in circulation.

Federal Reserve and printing money
The Federal Reserve manufactures money in two ways. It can simply print bills and it puts currency into circulation as low cost loans to banks who loan money to business and individuals putting it in circulation. This doesn’t increase our economy, but it does increase the dollars circulating in it. So let’s say in the example over a year the Fed added 1 trillion in currency.

Last year - $1 was worth 1/10 trillionth the outstanding currency
This year - $1 is worth 1/11 trillionth the outstanding currency

What happens with more currency circulating in the same environment? The value of a dollar goes down. Prices go up because a dollar represents less economic value then it did before the government added more money in circulation. In nominal dollars we have the same as we had, it real dollars we have less. The effect of a dollar being worth less is that it costs more to buy the same thing. In other words, inflation.

So who is hurt?
Non-investors. Investments must make real returns. After tax returns must exceed the erosion of the currency (inflation) in risk adjusted terms. So the more you have invested, the less inflation is harming you.

Low skill workers. Higher skill workers salaries quickly increase with inflation because they are in higher demand. They are not easily replaceable. Low skill workers are and their salaries are going to increase slower.

People on fixed incomes. If your income is fixed, then inflation is by definition going to continue to reduce the purchasing power of their income.

In other words, as Irn-Bru is correctly arguing, it is in fact the poor who disproportionately suffer by the existence of the Fed and the elimination of the Gold Standard.

Allow me, if you will, to add to your assessment, that the uber-wealthy, such as the Bill Gateses and Warren Buffetts of the United States, also drastically hurt the poor. The reason being is that, although these types of people are considered extremely wealthy, the wealth is not usually in liquid assets, and is certainly not being injected into the economy. Between only the two listed, there is approximately $108 Billion U.S. dollars not being spent. Spending is what drives the U.S. economy.

How many ordinary middle class and lower class working Americans have to spend $1000.00 per year on non-essential items to equal the non-economy stimulating $108 Billion Gates and Buffett are sitting on?

The Billionaires of the United States:

http://www.forbes.com/lists/2007/10/07b ... worth.html

405 individuals holding well over $1.0 Trillion U.S. dollars which is not now, nor will it be in the future, spent in the U.S. economy.

To put $1.0 Trillion Dollars into perspective, the 5000 members of THN would each have to earn Two Hundred Million Dollars per year and spend all of it to balance the wealth not being spent by the wealthy.

$1,000,000,000,000.00

+

Well that's a little embarassing. . .but I think you're right on with those assessments, Kazoo.

GSPODS wrote:Allow me, if you will, to add to your assessment, that the uber-wealthy, such as the Bill Gateses and Warren Buffetts of the United States, also drastically hurt the poor. The reason being is that, although these types of people are considered extremely wealthy, the wealth is not usually in liquid assets, and is certainly not being injected into the economy. Between only the two listed, there is approximately $108 Billion U.S. dollars not being spent. Spending is what drives the U.S. economy.

How many ordinary middle class and lower class working Americans have to spend $1000.00 per year on non-essential items to equal the non-economy stimulating $108 Billion Gates and Buffett are sitting on?

The Billionaires of the United States:

http://www.forbes.com/lists/2007/10/07b ... worth.html

405 individuals holding well over $1.0 Trillion U.S. dollars which is not now, nor will it be in the future, spent in the U.S. economy.

To put $1.0 Trillion Dollars into perspective, the 5000 members of THN would each have to earn Two Hundred Million Dollars per year and spend all of it to balance the wealth not being spent by the wealthy.

$1,000,000,000,000.00

+

You learn something new every day. I thought their money was invested and therefore driving the economy. Instead they have it sitting under a mattress doing nothing? So all this time the Democrats were right that confiscating money from people who earned it and giving non-achievers money to buy beer and chips is what actually makes our economy go and people who use their money to do things like fund companies to make products and provide jobs are dead weight?

Wow, you are a DEMON for explaining that Democratic talking points that I thought were idiotic are in fact dead on. Thanks! Appreciate the education.

Irn-Bru wrote:Well that's a little embarassing. . .but I think you're right on with those assessments, Kazoo.

Oh come on. You have something to argue with EVERYTHING I say. That's all you got?

BTW, never say I'm defending the poor. I hate the fracking poor. I just like pointing out to liberals their own hypocrisy in things like that their tax and monetary policies actually hurt the people they claim they to want to help. Unfortunately the liberals don't care because they hate the fracking poor too. The poor are just tools to them to confiscate money from people who earned it and buy power.

KazooSkinsFan wrote::hmm: You learn something new every day. I thought their money was invested and therefore driving the economy. Instead they have it sitting under a mattress doing nothing? So all this time the Democrats were right that confiscating money from people who earned it and giving non-achievers money to buy beer and chips is what actually makes our economy go and people who use their money to do things like fund companies to make products and provide jobs are dead weight?

Wow, you are a DEMON for explaining that Democratic talking points that I thought were idiotic are in fact dead on. Thanks! Appreciate the education.

Would you care to explain how privately held shares of publicly traded "A" stock locked away in vaults and safe-deposit boxes is supposed to stimulate the economy? Money has to be spent in cash form to drive the economy. Trading shares of publicly held stock does not drive the economy. It only affects the same wealthy few who control the majority of the stock to begin with.

If I have $100,000.00 invested in Microsoft and Bill Gates suddenly sells all of his shares in the company, he is going to make money. I am going to lose money because the stock is going to lose market value any time a majority holder sells. In what way does this drive the economy?

I'm obviously not a Wall Street trader or a business tycoon. I am, however, asking a legitimate question. Warren Buffet donating 10% of his assets to a charity didn't stimulate the economy either. It just gave him one hell of a large tax write-off. So, I ask again, how does the wealthy holding or trading with the wealthy stimulate the economy?

How does the stock market dropping 200 points and these select few remaining billionaires stimulate the economy? If they lose $200,000,000.00 most of them are still billionaires. If I lose 1/100th of that amount, I am looking at selling assets to meet a margin call. And most middle and lower class people would be hurting worse than I would to lose $200,000.00. If fact, most of them don't have $200,000.00 to lose.

As far as your referring to this as "a Democratic talking point", it is from the standpoint of Bush's tax cuts for the wealthy, the majority of whom are Republicans, however, there are just as many poor Republicans as there are poor Democrats. Most of the fixed income senior citizens happen to be Republicans.

The point is that the very few extremely wealthy individuals in the United States control enough of the nation's total wealth to affect the economy. If you took 15% of the total wealth of the United States you would have the wealthy. If you took 15% of the wealth of the wealthy, they would still be wealthy. If you took 15% of the wealth of the middle class they would be poor. If you took 15% of the wealth of the poor they would be well below subsistence level.

I reiterate, spending drives the economy. The wealthy have it to spend and don't. The poor don't have it to spend and do anyway because they have to as a matter of survival. The middle class doesn't actually exist. The concept of the middle class is an illusion of smoke and mirrors to make it look like there is not such a huge gap between the wealthy and the poor. The middle class are the upper class poor, not the lower class wealthy.

So, putting your politics aside for the moment, explain how the wealthy sitting on shares of stock drives the economy. I'm all ears.

Well, theft and fraud are wrong, but it's true that I find them particularly vicious when the poor are hurt disproportionately.

However, I think there's a different cause for the problems than what the typical American economic theory says (i.e., Krugman, Greenspan and Bernanke, crazyhorse. . .)

GSPODS wrote:I reiterate, spending drives the economy. The wealthy have it to spend and don't. The poor don't have it to spend and do anyway because they have to as a matter of survival. The middle class doesn't actually exist. The concept of the middle class is an illusion of smoke and mirrors to make it look like there is not such a huge gap between the wealthy and the poor. The middle class are the upper class poor, not the lower class wealthy.

No it doesn't. Production and savings produce wealth. Imagine a world where we're all just. . .spending. . .

Irn-Bru wrote:

GSPODS wrote:I reiterate, spending drives the economy. The wealthy have it to spend and don't. The poor don't have it to spend and do anyway because they have to as a matter of survival. The middle class doesn't actually exist. The concept of the middle class is an illusion of smoke and mirrors to make it look like there is not such a huge gap between the wealthy and the poor. The middle class are the upper class poor, not the lower class wealthy.

No it doesn't. Production and savings produce wealth. Imagine a world where we're all just. . .spending. . .

Spending creates jobs. Jobs create spending. If people were buying Starbucks Coffee, a lousy $4.00 purchase, Starbucks would not be hurting. Multiply that by $1000.00 and you have the Big Three auto manufacturers. People aren't spending $4.00 because they don't have it. And people aren't spending $40,000.00 because they don't have it.

More Demand than Supply creates jobs.
Demand is created by sales (spending)
More Supply than Demand creates unemployment.
Unemployed people don't have money to spend.

Here's a really good study of both school's of thought:

It cover both Keyne's Law - "Demand Creates Its Own Supply"

And Say's Law - "Supply Creates Its Own Demand"

And it bears out that both consumer spending and long-term savings are critical to the economy.

The idea that consumer spending is the largest sector of the economy and therefore represents the driving force behind economic growth comes from Gross Domestic Product (GDP) statistics. Estimated quarterly in the industrial world, GDP represents the value of all final goods and services produced in a country during the year. Mathematically, GDP is represented as follows:

GDP = C + I + G + (X - M), where

C = Personal consumption expenditures
I = Gross private domestic investment
G = Government consumption expenditures and gross investment
X = Exports
M = Imports.

In every nation, personal consumption expenditures represent by far the largest sector of GDP. For example, in the United States, GDP for 2003 is divided as follows:

Personal consumption expenditures (C ) = $7,760.9 billion
Gross private investment (I) = 1,665.8 billion
Government expenditures (G) = 2,075.5 billion
Exports (X) minus Imports (M) = -498.1 billion =

GROSS DOMESTIC PRODUCT (GDP) = $11,004 billion

In the U. S., consumption equals 70% of GDP; 65% in the UK; 58% in Germany; and 57% in Japan. Knowing this fact, reporters often follow retail spending patterns as the key to future economic behavior and the stock market because, they note in the U. S., “consumer spending represents two-thirds of the economy.”

It is vital to have a proper balance in the economy between consumption and saving/investment. Both are necessary to the foundation of wealth and prosperity. But consumer spending should not be promoted at the expense of saving and investment.

Be wary of statements such as:

--“Consumer spending drives the economy.”
--“Consumer spending represents two-thirds of the economy.”
--“Increasing saving won’t help the economy.”

Remember that saving is an important ingredient to economic performance over the long run. Tax cuts that encourage saving and investment more than consumption are not necessarily bad. Avoid statements such as:

-- “Tax cuts won’t stimulate the economy if they are saved.” Or
--“Tax cuts for the wealthy are ineffective because the wealthy spend less than the middle class.”

Remember that business and capital spending play a vital role in revitalizing a slumping economy. Typically the first signs of recovery come from business, not consumer, spending in the form of industrial production, capital formation, and construction, both commercial and residential.

Do not criticize consumers for retrenching and reducing consumer debt during a downturn. It is a natural response to uncertainty over their jobs and the outlook for the economy.

Make sure you understand and use properly your nation’s national income statistics, including Gross Domestic Product (GDP), the new Gross Output (GO) figure, and leading economic indicators. Keep in mind that most leading economic indicators are business and investment related, not consumer related.

http://www2.gsb.columbia.edu/ipd/j_gdp.html

Good Information from both sides of the aisle.

GSPODS wrote:Would you care to explain how privately held shares of publicly traded "A" stock locked away in vaults and safe-deposit boxes is supposed to stimulate the economy?

OK, ATV. I'll explain this one, the rest of your nonsense liberal rant flows from here. The word game here is you are saying the shares are "locked away in vaults" provides the false impression that the assets are unused. It is only the piece of paper that's locked away. Actually there isn't any paper anymore, it's electronic. The "paper" represents ownership in a company. It is not an asset, it represents ownership of an asset, Microsoft.

Microsoft employs thousands and thousands of people. And many more for the peripheral products. And many more for that for PC manufacturers and stuff they drive more sales for. And then they provide all kinds of productivity across other corporations. Productivity is a way of saying that they produce more for less. It is what creates wealth. Now, by doing all this and providing all this wealth and jobs, what do people have? Money. Which they spend some and invest some. Spending driving the economy and investing in companies builds more wealth to fuel more future spending. This is efficiency.

What if Bill Gates sells Microsoft and spends the money? No jobs. And who does he sell the company to or buy stuff from since you think people should spend and not invest? There are no companies, no jobs, only money to buy stuff with that isn't produced. Investment produces economic efficiency which builds wealth which drives spending. Driving the economy with spending drives inefficiency. When you just go spend, do you spend on worthwhile things or junk? There is no economic cycle in that. There is only destruction of wealth and eventually poverty for all.

That we should focus on driving the economy through spending not investing is a stupid liberal trick. It is not reality. Driving the economy though investment creates the wealth to create the spending which will drive efficient markets, efficient companies and efficient spending. Spending first drives waste and inefficiency. Does this make any sense to you at all, ATV?

GSPODS wrote:Spending creates jobs. Jobs create spending. If people were buying Starbucks Coffee, a lousy $4.00 purchase, Starbucks would not be hurting. Multiply that by $1000.00 and you have the Big Three auto manufacturers. People aren't spending $4.00 because they don't have it. And people aren't spending $40,000.00 because they don't have it.

More Demand than Supply creates jobs.
Demand is created by sales (spending)
More Supply than Demand creates unemployment.
Unemployed people don't have money to spend.

Riddle me this, batman. If investment is just paper sitting "in a vault." How exactly are jobs created by spending? Someone needs to recognize the demand and CREATE the supply. Investment!

GSPODS wrote:As far as your referring to this as "a Democratic talking point", it is from the standpoint of Bush's tax cuts for the wealthy, the majority of whom are Republicans, however, there are just as many poor Republicans as there are poor Democrats. Most of the fixed income senior citizens happen to be Republicans.

The point is that the very few extremely wealthy individuals in the United States control enough of the nation's total wealth to affect the economy. If you took 15% of the total wealth of the United States you would have the wealthy. If you took 15% of the wealth of the wealthy, they would still be wealthy. If you took 15% of the wealth of the middle class they would be poor. If you took 15% of the wealth of the poor they would be well below subsistence level.

Right off the desk of Howard Dean, ATV. You spend all this time arguing you're not a liberal, then you write these points that make no sense except from an extreme government loving Left self rationalization wealth redistibution point of view. Russia, 1917, didn't work out so well.

KazooSkinsFan wrote:

GSPODS wrote:Would you care to explain how privately held shares of publicly traded "A" stock locked away in vaults and safe-deposit boxes is supposed to stimulate the economy?

OK, ATV. I'll explain this one, the rest of your nonsense liberal rant flows from here. The word game here is you are saying the shares are "locked away in vaults" provides the false impression that the assets are unused. It is only the piece of paper that's locked away. Actually BTW there isn't any paper anymore, it's electronic. But let's skip that part.

The paper represents ownership in a company. Microsoft employs thousands and thousands of people. And many more for the peripheral products. And many more for that for PC manufacturers and stuff they drive more sales for. And then they provide all kinds of productivity across other corporations. Productivity is a way of saying that they produce more for less. It is what drives wealth.

Now, by doing all this and providing all this wealth and jobs, what do people have? Money. Which they spend some and invest some. Spending driving the economy and investing in companies and stuff to build products. This is efficiency.

What if Bill Gates sells Microsoft and spends the money? No jobs. And who does he sell the company to or buy stuff from since you think people should spend and not invest? There are no companies, no jobs, only money to buy stuff with that doesn't exist.

Investment produces economic efficiency which builds wealth which drives spending.

Spending drives inefficiency. When you just go spend, do you spend on worthwhile things or junk? There is no economic cycle in that. There is only destruction of wealth and eventually poverty for all.

That we should focus on spending not investing is a stupid liberal trick. It is not reality. Wealth will drive efficient markets, efficient companies and efficient spending. Spending first drives waste and inefficiency. Does this make any sense to you at all, ATV?

A couple of things. First of all, I did a little research on the subject and found that there are two schools of thought, both of which are considered crucial to economic growth. I posted the link, which is from Columbia University, and addresses both Demand driving Supply and Supply driving Demand. So I acknowledge I learned something about the economy.

Secondly, no majority shareholder in any corporation is selling their personal shares to fund the corporation. Personal and corporate assets are required to be kept separate unless one wants a visit from the F.T.C. / S.E.C.

Anyway, there is no reason to beat a dead horse on this topic. Both spending and long-term savings / investment are critical to the economy, according to numerous people one hell of a lot smarter than I am about economics.

GSPODS wrote:no majority shareholder in any corporation is selling their personal shares to fund the corporation

Think about what a share is. A share is a percent ownership in a company. The company is an asset. Let's say a company has 1,000,000 shares outstanding and you own 1,000 of them. You own 1/1,000 of the company. Management runs it. Depending on the size you may have a "board of directors" to oversee the interest of the shareholders. A couple of concepts:

Primary market: Have you heard of an IPO? This is the original issuance of shares that funds the company. People are buying it for the first time and the money goes to the company to fund projects and operations.

Secondary market: When you are buying shares already owned from someone or selling shares you already own, you do this trading on the secondary market. This is just trading your percent ownership in the company to someone else. For example, the NYSE is a secondary market. When you sell your used Ford car to someone, does Ford get any money? No, they got it from the dealer (primary market) when they sold it the first time to the public. They get nothing from the resale (secondary market) of one of their cars.

Companies themselves can buy or sell their own shares on the secondary markets as well. If management feels the stock is undervalued, they will buy up shares on the secondary market. That sends money out of the company, but the remaining shareholders own a larger percent of the smaller company. If management feels the stock is overvalued, they may then sell shares on the secondary market. They may be shares they'd bought earlier or they may be shares that the shareholders approved creating for that purpose. By selling those shares on the secondary market there are more shares in circulation, so you own a smaller percent of a bigger company.

When you say "no majority shareholder in any corporation is selling their personal shares to fund the corporation" it doesn't really make any sense. If management sells their shares, they are selling them on the secondary market to another buyer. They are worth what a buyer will pay. If the company wants equity funding, they must issue NEW shares. Or they could borrow the money (debt).

GSPODS wrote:Personal and corporate assets are required to be kept separate unless one wants a visit from the F.T.C.

OK. I don't really get this part in regards to the conversation but it would certainly be true.

GSPODS wrote:Anyway, there is no reason to beat a dead horse on this topic. Both spending and long-term savings / investment are critical to the economy, according to numerous people one hell of a lot smarter than I am about economics.

Certainly in the end you need both. My point is that by focusing on driving the economy through spending, you are driving it inefficiently. Do people who didn't earn money or who are going on a spending binge buy stuff they need or stuff they really don't? If you waste money, you may fund some jobs but you have an economy full of bad choices and waste.

Clearly in my point on driving the economy through creation of wealth I did have both. But by having achievers and earners drive the economy through prudent spending and investment people spend well. They drive the right kind of spending. That is not a "school of thought." It is basic economics. It is only the Democratic party that has this confiscate, redistribute and let people buy beer and potato chips to stimulate the economy nonsense. If that is a "school of thought," it is a low achievement government school.

KazooSkinsFan wrote:

GSPODS wrote:Spending creates jobs. Jobs create spending. If people were buying Starbucks Coffee, a lousy $4.00 purchase, Starbucks would not be hurting. Multiply that by $1000.00 and you have the Big Three auto manufacturers. People aren't spending $4.00 because they don't have it. And people aren't spending $40,000.00 because they don't have it.

More Demand than Supply creates jobs.
Demand is created by sales (spending)
More Supply than Demand creates unemployment.
Unemployed people don't have money to spend.

Riddle me this, batman. If investment is just paper sitting "in a vault." How exactly are jobs created by spending? Someone needs to recognize the demand and CREATE the supply. Investment!

How are jobs created by spending? Let's ask Ford, GM, and Chrysler. If people were buying their vehicles, they would not be cutting jobs.

If I open a business called Chuck's Steaks, and I have five customers per day, I won't need to hire anyone. If, however, I have fifty customers per day I will need help. Demand over supply.

If I open the same business with 10 employees and only have fifty customers per day, I will have to let half of those people go to remain profitable. If consumers aren't spending on Chuck's Steaks, I am both ordering less product due to less demand, and employing fewer people due to the same drop in demand.

Again, both Demand fueling Supply and Supply fueling Demand are important to the economy, according to people much more knowledgeable about economics than I am.

GSPODS wrote:

KazooSkinsFan wrote:

GSPODS wrote:Spending creates jobs. Jobs create spending. If people were buying Starbucks Coffee, a lousy $4.00 purchase, Starbucks would not be hurting. Multiply that by $1000.00 and you have the Big Three auto manufacturers. People aren't spending $4.00 because they don't have it. And people aren't spending $40,000.00 because they don't have it.

More Demand than Supply creates jobs.
Demand is created by sales (spending)
More Supply than Demand creates unemployment.
Unemployed people don't have money to spend.

Riddle me this, batman. If investment is just paper sitting "in a vault." How exactly are jobs created by spending? Someone needs to recognize the demand and CREATE the supply. Investment!

How are jobs created by spending? Let's ask Ford, GM, and Chrysler. If people were buying their vehicles, they would not be cutting jobs.

If I open a business called Chuck's Steaks, and I have five customers per day, I won't need to hire anyone. If, however, I have fifty customers per day I will need help. Demand over supply.

If I open the same business with 10 employees and only have fifty customers per day, I will have to let half of those people go to remain profitable. If consumers aren't spending on Chuck's Steaks, I am both ordering less product due to less demand, and employing fewer people due to the same drop in demand.

Again, both Demand fueling Supply and Supply fueling Demand are important to the economy, according to people much more knowledgeable about economics than I am.

....try reading my point before you respond to it.

KazooSkinsFan wrote::hmm:....try reading my point before you respond to it.

Sorry about that. Either the system hung up or we posted at the same time. I just read your previous post. I think we are on the same page. I never advocated forcing anyone to give up their personal assets as the Howard Dean's of the world would do. More or less what I was getting at was that if there was $1 Trillion in consumer spending it would certainly help the economy. Not wasteful spending, mind you. A consumer has to discriminate. Nobody needs a $25000 Armani Suit.

GSPODS wrote: Nobody needs a $25000 Armani Suit.

Who was dumb enough to do that? Because I could sure use some of their clothing allowance!