Happy Thanksgiving! Why is it that the U.S, Recovery is slower than the Rest of the World

It seems as though the U.S is on a much slower pace to recovery than other parts of the world. It may be that many people in general are beginning to learn about the Federal Reserve’s ways of “FIXING” the economy with low interest rate policies, which give those who save very little return on interest and give the illusion that borrowing is easy and affordable because there is more wealth available.  Even businesses, now aware of the dangers of a low inflation- sparked economic bubble, may clearly be refusing to fall for the age-old boom-bust trap.


Then again it could clearly be a lag effect that hasn't quite gone into work yet.  We clearly know the banks have yet to recover from their investment losses and with many homes and properties on foreclosure or short sale its a continued loss on their books just hiding within their balance sheets. For many buyers they have began to notice the hassle with dealing with banked owned homes.  The CPI has not changed significantly but its my prediction that as the PPI continues to go up companies will soon have to raise prices therefore costing us the consumer more.  With FED interests rate still remarkably low people may soon began to take risks with starting up companies and creating jobs.  My only fear is that if things do get better we as Americans will began to follow into the same mail invested traps as the past.  Causing even a larger economic downturn. It will be interesting to see how long interest rates remain relatively low.


Here is a brief article by Peter Schiff explaining his theory on why the Dual Mandate by the Fed doesn't even matter.  


http://www.businessinsider.com/debate-over-dual-mandate-2010-11

Humphrey-Hawkins Full Unemployment Act of 1977 (Full Employment and Balanced Growth Act)

During the 1970s unemployment and inflation levels began to rise, creating fears of an economic recession. In the past, the country's economic policy had been defined by the Employment Act of 1946, which encouraged the federal government to pursue "maximum employment, production, and purchasing power" through cooperation with the private sector. Some Congressmen, dissatisfied with the unclear wording of this act, sought to create an amendment that would strengthen and clarify the country's economic policy…

The Act's sponsors embraced conventional Keynesian economic theory (our country’s favorite theory of economics), which advocates forceful government spending to increase economic demand by impacting GDP. In particular, Keynesian theory asserts that the government can minimize the distress of business fluctuations by compensatory spending, intended to sustain or inflate investment levels by government spending and promote long term growth with the economy.

Consistent with Keynesian theory, the Act provides four measures to create temporary government jobs to reduce unemployment, as was attempted during the Great Depression.

1.     Full employment

2.     Growth in production

3.     Price stability

4.     Balance of trade and budget.

Somewhat contradictorily, the Act also encouraged the government to develop a sound monetary policy, to minimize inflation, and to push toward full employment by managing the amount and liquidity of currency in circulation.  Overall, the Act sought to formalize (and to expand Congress's role in) the economic policy process, as governed by the Federal Reserve and the President.

- Unfortunately inflation and deflation of the money supply and manipulation of interest rates are the Federal Reserves only options to try to meet these strict requirements.  I’m not sure but these options don't sound like there meeting the long term goals of promoting consistent growth for the economy...

Free Lunch theory explained

After talking with a friend and looking over a highly debated question asked in his Economics class I thought it would be good to repost a popular video explained by Milton Friedman on the topic "Free Lunch" explaining there is no such thing as a free lunch.

Big Ben Bernake still defends his decision on the 600 billion dollar pump

Cnn released an statement from Ben Bernake Federal Chairman of the Federal Reserve defending the Fed's decision to buy up to 600 billion dollars in treasuries.  Claiming that it has worked in the past and will create more jobs.

http://money.cnn.com/2010/11/18/news/economy/Bernanke_Frankfurt_defense/index.htm?source=yahoo_app

I'm not sure where Big Ben is getting his statistics from but what happen to the trillions of dollars the Fed already pumped into the system promising the same economic growth and new jobs and what perspective of past years is he looking at.  Cause it’s obvious in the short run things seem find when dot.comers were making tons of money by going public in the stock market and even when housing prices seem to sky rocket up to 4 times their original value but when you look at time from a long run perspective things are always not fine.  These so called mail investments never flatten off like every investor thinks and almost always plummet in value.  And who is left to fix the problems in the end the same group of theorists who hold believe in strict fiscal policy to maintain an economy is needed.  I bet today if John Maynard Keynes were alive he might be appalled at the degree at which government impacts the country’s Gross Domestic Product.  One thing we should all know by now is yes its great when the Government says it wants to subsidize programs for people but in reality it is not.  The Government never gets a good deal out of anything! War contracts for weapons, buildings, spoons, food, Medicare prescription plans, Medicaid etc...  Do you think the government gets quantity discounts, do you think the government gets quality product or services, do you think the government gets bang for its buck.  Your answer should be no because no one individual or company cares about treating the government like a loyal consumer.  Once congress or the Fed have made their decision their business is guaranteed for these programs or companies it becomes a done deal and "nothing is more permanent than temporary government program"- Milton Friedman.  I guess the point I’m getting to is that the Government acts has though it has so much to give but in reality Government has nothing and the only way it gives to you and I is by taking from you and I and in the end causing prices to shoot up! There is no such thing as perfect economic system but let’s just look at history and decide what is best for us.  Less government and more private sectors always leads to better jobs, deals, prices, and stable growth.

Here is hilarious but simple explanation for Quantitative Easing

Here is My favorite rap video on Economics

Fear the Boom and the Bust

Here is a quick link on the Recent announcement of the Federal reserve's plan on stimulating the economy.

http://curiouscapitalist.blogs.time.com/2010/11/03/will-the-feds-600-billion-plan-be-big-enough-to-revive-the-economy/

The fed said last Wednesday that it will buy $600 billion in Treasury bonds over the next eight months in a bid to boost the sluggish recovery by expanding the money supply. The action, known as quantitative easing, is intended to lower long-term interest rates for mortgages and other loans, boost the stock market, and increase inflation to be nearer to the 2 percent level the Fed unofficially targets.

Obama said in defense of this decision "The Fed's mandate, my mandate, is to grow our economy. And that's not just good for the United States, that's good for the world as a whole," Obama said Monday. "The worst thing that could happen to the world economy . . . is if we end up being stuck with no growth or very limited growth. And I think that's the Fed's concern, and that's my concern as well."


What are your thoughts on the Fed's latest decision.??

Cut Spending starting in 2012?

It's hard to believe that President Obama would want to cut spending on anything considering all the healthcare talk these past few years not to mention the bailouts.  But with all things to consider could we have afforded to let the banks fell? You think that by now after 70 years we could truly analyze the problems of the great depression and even though the problems today are not like the ones in the past, we should by now have some idea on how to keep the economy from spiraling down.  However Obama is not going to have a choice but to cut spending we have a deficit we cannot maintain.

Its seems like our only hope of stimulating the economy is by looking to the federal reserve who from there look to one man Ben Bernake and like his predecessor Alan G. his only solution is to create more money..  In itself this is a broken system because no one man should have the power to try to solve such an unpredictable problem.

Fortunately the fiscal commission announced today a proposal by Senator Simpson and Senator Bowls to cut the spending deficit by 4 trillion dollars beginning in 2012.  This kind of talk sounds real familiar oh ya Ron Paul has been talking about this for over twenty years.  Well I guess when you run a credit bill like the U.S. government you have to start thinking when do we run out of money?? Unfortunately both senators are being highly criticized but that is to be expected no one wants their funds cut.

Well here is the link to an article explaining the cuts in spending a few important ones are: cut in defense spending, domestic spending and raising the Social Security age... They even propose changing the tax code to lower percentages including corporate taxes and simplifying tax expenditures... but I’ll just have you read the article.

like always post some feedback very interested on your thoughts on the matter.


http://money.cnn.com/2010/11/10/news/economy/fiscal_commission_prelim_report/index.htm?source=yahoo_app




video links


http://money.cnn.com/video/news/2010/11/10/n_fiscal_comm_simpson.cnnmoney/

Currency Manipulation

Accusations of currency manipulation are causing tension between the U.S and China it will be a hard hitting topic in this week's G-20 gathering in Seoul.

So what is currency manipulation? And why does it matter?“By selling its own currency and buying up foreign reserves like the U.S. dollar, China has essentially pegged the yuan's value to the dollar instead of allowing it to move freely in foreign exchange markets.” 

Here is the rest of the article. 

http://money.cnn.com/2010/11/10/news/economy/what_is_currency_manipulation/index.htm?source=yahoo_app

House fails to extend Unemployment Benifts

Today the House failed to pass a bill that would have given the unemployed three more months to file for extended jobless benefits.  The legislation would have extended the deadline to file for federal unemployment benefits to Feb. 28, sparing 4 million people from falling off the rolls. The deadline is currently Nov. 30.   Congress just this year alone has already extended unemployment benifits 4 times allowing for the unemployed to file into a new tier four consecutive times.  Which cost the Government 34 billion dollars. With our current economic situtiation many Americans have lost their jobs and certainly do need help but when do we draw the line as far as how long benifits should last and at what cost? 

http://money.cnn.com/2010/11/18/news/economy/unemployment_benefits_extension/index.htm?source=yahoo_app

Follow this link to watch CBS interview with Rand Paul

http://www.youtube.com/watch?v=nJ5MvW4PsTE


What do you think about what Rand Paul has to say about fixing the national debt.