Are we headed for a world wide meltdown?

[Tiny]

Originally Posted by Chung Tran

I don't spin. I laid blame where it properly lays. You refuse to admit inflation is the congruence of many forces, that take a lot of time to show in the economy. Your Procrustean attempt to lay it on Biden's rescue plan is both shallow and disingenuous.

This might change your mind. It was written by the most prominent Democratic Party economist, when the American Rescue Plan was being debated in February, 2021. Larry Summers would put a big share of the blame on Biden's rescue plan! Please note that, according to Summers, stimulus spending prior to the American Rescue Plan (ARP) hadn't fully covered the output gap or made up for lost wages because of COVID.




Opinion The Biden stimulus is admirably ambitious. But it brings some big risks, too.

By Lawrence H. Summers

President Biden’s $1.9 trillion covid-19 relief plan, added to the stimulus measure Congress passed in December with the incoming administration’s strong support, would represent the boldest act of macroeconomic stabilization policy in U.S. history. Its ambition, its rejection of austerity orthodoxy and its commitment to reducing economic inequality are all admirable. It is imperative that safety-net measures for those suffering and investments in vaccination and testing be undertaken rapidly after the indefensible delays of the last months of the Trump administration.

Yet bold measures need to be accompanied by careful consideration of risks and how they can be mitigated. While the arguments for providing relief to those hurt by the economic fallout of the pandemic, investing in controlling the virus and supporting consumer demand are compelling, much of the policy discussion has not fully reckoned with the magnitude of what is being debated.


I agree with the general consensus of progressive economists that it would have been much better if the Obama administration had been able to legislate a much larger fiscal stimulus in early 2009, in response to the Great Recession. Yet a comparison of the 2009 stimulus and what is now being proposed is instructive. In 2009, the gap between actual and estimated potential output was about $80 billion a month and increasing. The 2009 stimulus measures provided an incremental $30 billion to $40 billion a month during 2009 — an amount equal to about half the output shortfall.

In contrast, recent Congressional Budget Office estimates suggest that with the already enacted $900 billion package — but without any new stimulus — the gap between actual and potential output will decline from about $50 billion a month at the beginning of the year to $20 billion a month at its end. The proposed stimulus will total in the neighborhood of $150 billion a month, even before consideration of any follow-on measures. That is at least three times the size of the output shortfall.


In other words, whereas the Obama stimulus was about half as large as the output shortfall, the proposed Biden stimulus is three times as large as the projected shortfall. Relative to the size of the gap being addressed, it is six times as large.

A calculation like this can only be very approximate for many reasons. Most important, estimates of potential gross domestic product may be inaccurate, and it may be that the CBO is underestimating potential GDP and the output gap. On the other hand, this crude calculation actually underestimates the difference between what was done in 2009 and what is proposed now.

First, unemployment is falling, rather than skyrocketing as it was in 2009, and the economy is likely before too long to receive a major boost as covid-19 comes under control. Second, monetary conditions are far looser today than in 2009 given extraordinary Federal Reserve policies, the booming stock and corporate bond markets, and the weakness of the dollar. Third, there is likely to be further strengthening of demand as consumers spend down the approximately $1.5 trillion they accumulated last year as the pandemic curtailed their ability to spend and as promised further fiscal measures are undertaken.

Looking at incremental deficits relative to GDP gaps is only one way of assessing the scale of a fiscal program. Another is to look at family income losses and compare them to benefit increases and tax credits. Wage and salary incomes are now running about $30 billion a month below pre-covid-19 forecasts, and this gap will likely decline during 2021. Yet increased benefit payments and tax credits in 2021 with proposed stimulus measures would total about $150 billion — a ratio of 5 to 1. The ratio is likely even greater for low-income individuals and families, given the targeting of stimulus measures.

In normal times, a family of four with a pretax income of $1,000 a week would take home about $22,000 over the next six months. Under the Biden proposal, if the breadwinner were laid off, the family’s income over the next six months would likely exceed $30,000 as a result of regular unemployment insurance, the $400-a-week special unemployment insurance benefit and tax credits.

Judged relative to either the macroeconomic output gap or declines in family incomes, the proposed covid-19 relief package appears very large. The Biden administration is right that it will never have a progressive window of opportunity like the present one. And I share its judgment that the risks of insufficient fiscal stimulus are greater than those of excessive fiscal stimulus. In many ways, an overheated economy in which employers are desperate to find workers and push up wages and benefits would be a very positive thing.

Yet as a massive program moves toward enactment and implementation, policymakers need to ensure that they have plans in place to address two possible, and quite serious, problems.

First, while there are enormous uncertainties, there is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability. This will be manageable if monetary and
fiscal policy can be rapidly adjusted to address the problem. But given the commitments the Fed has made, administration officials’ dismissal of even the possibility of inflation, and the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply. Stimulus measures of the magnitude contemplated are steps into the unknown. For credibility, they need to be accompanied by clear statements that the consequences will be monitored closely and, if necessary, there will be the capacity and will to adjust policy quickly.

Second, long before covid-19, the U.S. economy faced fundamental problems of economic injustice, slow growth and inadequate public investment in everything from infrastructure to preschool education to renewable energy. These are at the heart of Biden’s emphasis on building back better.

If the stimulus proposal is enacted, Congress will have committed 15 percent of GDP with essentially no increase in public investment to address these challenges. After resolving the coronavirus crisis, how will political and economic space be found for the public investments that should be the nation’s highest priority?

Is the thinking that deficits can prudently be expanded longer and further? Or that new revenue will be raised? If so, will this be politically feasible?

Fiscal stimulus for covid-19 relief can be a landmark achievement that helps the American economy turn the corner. But despite its scale, the limited scope of the Biden plan means that it must be a beginning and not an end. As its final details are crafted, it will be essential to carefully consider how the choices we make now may constrain what we are able to achieve in the future.

The Biden plan is a vital step forward, but we must make sure that it is enacted in a way that neither threatens future inflation and financial stability nor our ability to build back better through public investment.

https://www.washingtonpost.com/opini...ovid-stimulus/

[Chung Tran]

Good article, but not mind-changing. Summers didn't predict Biden's bill would spark inflation. He said be careful, but he endorsed a stimulus plan done properly.

Was the bill lop-sided to payments for lower income folks? Absolutely. Just as the wealthy grabbed the bulk of the benefits up until then, and shit like the PPP was looted by sophisticated White-Collar Thieves.

But inflation is caused by so many factors, over years. Trump, Biden, Powell, Russia, China all had a role. Why try and reduce something complex to the minimal? I get there is a strong anti-intellectual bias to this Forum, but it would be nice to see it missing from an occasional thread.

[lustylad]

Originally Posted by CaptainMidnight

Could you possibly make an effort to seem more obtuse? (No! Please! That's not a direct challenge! I do believe we've seen enough!)

Sigh ...

I give up. Anyone else want to knock this one out of the ballpark?

Tee it up, CM. Although it looks like chungy keeps teeing himself up!

Originally Posted by Chung Tran

What you conveniently forget is Biden inherited a massive liquidity-induced economy from Trump, that was necessary because the economy collapsed. Powell had been buying bonds for almost a YEAR before Biden's bill.

Hmm, what is a "massive liquidity-induced economy"? What does that even mean? If the economy was already poised to recover due to massive liquidity injections, why would anyone in their right mind want to add trillions more in fiscal stimulus? Whose side are you arguing for? It doesn't sound like Biden's.

Anyone who paid even the slightest bit of attention to the quarterly GDP numbers could see the economy only "collapsed" for a single quarter - that is, Q2 2020. It quickly roared back in Q3 2020, expanding at a record annual rate of 33.8%. This amazing bounce-back slowed to a still rapid and encouraging 4.1% rate in Q4 2020.

Both of those quarterly numbers were available to the dim-retards in the Biden White House in March 2021, but they pretended not to notice. They were too busy making sure the covid crisis didn't "go to waste". What can be more gratifying than turning the deaths of (at the time) a half-million Americans into an excuse to pass a massively destructive spending blowout? That's what Democrats do!

Nobody knew how much stimulus was necessary...

As I just explained, the economy was roaring back. It was obvious to all honest economists that no further stimulus was necessary.

Who is to say what was needed?

Every honest economist in the nation was saying we're in good shape so let's pause this thing. Including prominent Democrats like Larry Summers, who spoke out publicly at the time. Did you read Tiny's reprint from the WaPo? Did you understand it?

You do realize the pandemic resulted in the biggest wealth shift in US history? Thanks to Government policy that benefited YOU.

Really? The "biggest wealth shift in US history"? Where did you hear that? Got a link for us, chungy?

I do know we're now discovering how all those emergency covid relief bills resulted in the most massive fraud/heists of US taxpayer money in our history. We're talking hundreds of billions here. And I've got plenty of links attesting to that fact, if you're interested. Never let a crisis go to waste, eh chungy?

Not sure how you can say with a straight face all that fraud and abuse benefited ME. How does the rampant ripping off of US taxpayers by fraudsters around the globe help me or any of my fellow citizens? One thing is for sure - it helped spike inflation, which has exploded from 1.4% when Biden took office to over 8% now, measured by the 12-month CPI increase.

That's not a beneficial "wealth shift". Quite the contrary. It means wages earned by low-paid workers are shrinking in purchasing power (unlike under Trump), despite a labor shortage that keeps pushing up their nominal pay. But if I had to say one good thing about Joe Biden's inflation fiasco, it would be - IT DOESN'T DISCRIMINATE. Whether you're white, black, brown or yellow - we're all being slammed!

[Chung Tran]

https://www.cnbc.com/2020/09/04/worr...e-wealthy.html

https://www.oxfam.org/en/press-relea...rcent-humanity

https://www.bloomberg.com/news/artic...s-middle-class

That enough?

[Tiny]

Originally Posted by Chung Tran

Good article, but not mind-changing. Summers didn't predict Biden's bill would spark inflation. He said be careful, but he endorsed a stimulus plan done properly.

Was the bill lop-sided to payments for lower income folks? Absolutely. Just as the wealthy grabbed the bulk of the benefits up until then, and shit like the PPP was looted by sophisticated White-Collar Thieves.

But inflation is caused by so many factors, over years. Trump, Biden, Powell, Russia, China all had a role. Why try and reduce something complex to the minimal? I get there is a strong anti-intellectual bias to this Forum, but it would be nice to see it missing from an occasional thread.

Yes, agreed it's complex. My contention isn't that the American Rescue Plan (ARP) is the only cause of 8%+ inflation though. It's that the 10% weighting you give to the ARP as the cause of high inflation is too low.

Having read the rules, and having declined to apply for a PPP loan while many other equally solvent businessmen did, I can tell you that the problem was indeed fraud. You weren't supposed to apply unless your business needed the money to survive and meet payroll. But a lot of businesses who didn't really need the money got loans with no intention of paying them back. And yeah, you can blame that on the Trump administration, a Democratic House, a Republican Senate, and the bureaucracy.

And yes, the ARP payments were targeted more towards lower income people than the previous stimulus payments, but probably not as much as you think -- see the table in the link below. And that was only because Manchin, Sinema and a few other moderate Democratic Senators insisted on dropping the maximum income levels to receive the payments. Biden's proposal was to use the same, higher levels as the first payment (CARES Act.)

https://www.pgpf.org/blog/2021/03/wh...timulus-checks

[Tiny]

Originally Posted by Chung Tran

https://www.cnbc.com/2020/09/04/worr...e-wealthy.html

I don't believe 52% of the market is owned by the top 1% of earners. I'll call bullshit* on that. This number almost certainly ignores pension funds, mutual finds, charitable foundations, and other institutions that own most shares.

Originally Posted by Chung Tran

https://www.oxfam.org/en/press-relea...rcent-humanity

Update that to 5/22/2022, after the bear market in tech and other stocks, and I bet you'd see a lower number than "double". Apparently Oxfam thinks the world would be a better place if Tesla, Amazon, Microsoft, and Google didn't exist. Fuck* Oxfam.

Originally Posted by Chung Tran

https://www.bloomberg.com/news/artic...s-middle-class

That's because most Americans are spendthrifts. Their quality of life is better than the residents of any other large developed country, but they spend every dime they make and don't know how to save. Implement Tiny's forced savings plan, along the lines of what Singapore and Australia have, and you solve the problem.

Originally Posted by Chung Tran

That enough?

Quite.

And hang in there Chung Tran. Except for LL and Captain Midnight you know as much about macroeconomics as anyone on here. More than I do anyway. If you leave the debate to us it's going to get pretty one sided. We'll just have WTF to try to beat up on, and he agrees with us from time to time anyway.

*Using profanity to try to conform with forum's anti-intellectual bias.

[Tiny]

Originally Posted by lustylad

That's not a beneficial "wealth shift". Quite the contrary. It means wages earned by low-paid workers are shrinking in purchasing power (unlike under Trump), despite a labor shortage that keeps pushing up their nominal pay.

Correct. Prices are increasing faster than wages. The working man is losing ground. And that's quite a contrast to 2019, the last year before COVID, when there was a record increase in inflation adjusted median household income.

[lustylad]

Originally Posted by WTF

Now listen up homo...ain't no doctor in the world can cure what ails you and others. Partisan hackery.

You've been excusing Trump and his huge deficits since day one...until you start accepting some of the blame, I'm going to continue to slap the dick out of you.

No - you listen to me, jackass. Everyone knows you're the biggest partisan hack homo in this forum. It's time for you to stop projecting.

Every time you're losing an argument, you try to hijack the discussion by mumbling something about those "huge deficits" under Reagan/Bush/Trump.

Pay attention. The topic is how the dim-retard enactment of the $1.9 trillion "American Rescue Plan" in March 2021 sent our rate of inflation through the roof!

Do you have anything intelligent to say about that?

Didn't think so.

Now go back to licking your gay boyfriend's dick. Is he responsive or still in a coma?

[WTF]

Originally Posted by Tiny

Correct. Prices are increasing faster than wages. The working man is losing ground. And that's quite a contrast to 2019, the last year before COVID, when there was a record increase in inflation adjusted median household income.

Do you think energy prices will ever return back to what they were in 2019?

And do you think Trump was the reason for the low prices?

[Tiny]

Originally Posted by WTF

Do you think energy prices will ever return back to what they were in 2019?

And do you think Trump was the reason for the low prices?

Yes and no, respectively. And I don’t think the price of oil was low in 2019.

[dilbert firestorm]

Originally Posted by dilbert firestorm

actually sir, you are wrong.

quadrillion is thousand billion

Sexagintacentillion is 10-483; Thousand octogintillion

source data is taken from Wikipedia and Britannica.
https://en.wikipedia.org/wiki/Names_of_large_numbers
https://www.britannica.com/topic/large-numbers-1765137
https://simple.wikipedia.org/wiki/Na..._large_numbers

Originally Posted by CaptainMidnight

Actually, a quadrillion is one million billion!

You can easily see that just by glancing at the links you posted.

Sextillion, quintillion, quadrillion, trillion, billion, million.

Each one of those numbers is 1,000X greater than the following one.

Simple as that!

.

you must be using long scale.



however, I cannot find any reference to '1 million billion' calle that.

10^15 = 1,000,000,000,000,000 is million billion which is quadrillion which is also thousand billion.

[Why_Yes_I_Do]

Likewise, might be nice to know when Fauci and the Demonicrats in Congress were loading up on Pfizer and Moderna stocks? Would be extra curious to know if their purchases were in 4th Q of 2019.

Originally Posted by Chung Tran

Looks about right. No disagreement from me.

Might have been helpful to ad the date Trump admitted to Bob Woodard that he knew by (specific date), that the virus was a big fucking deal, but chose to downplay it.

Same time those Republicans in Congress were getting private briefings and dumping stocks. Fucking Thieves.

[Why_Yes_I_Do]

Originally Posted by Chung Tran

No. The Republican Operatives sat on the laptop for a God Damn YEAR. Why?...

Since when was the FBI a Republican operation?!? That guy practically begged the FBI to take the laptop. He went waaaay out of the way to do the right thing. There is your missing year right there. He did not go directly to the Republicans, aka Rudy or even the news outlets. His story has been posted here.


BTW: The laptop seems to have gone the way of their homework at the FBI. Appears the dog ate it as no one there knows where it is.

[Tiny]

Originally Posted by Chung Tran

Looks about right. No disagreement from me.

Might have been helpful to ad the date Trump admitted to Bob Woodard that he knew by (specific date), that the virus was a big fucking deal, but chose to downplay it.

Same time those Republicans in Congress were getting private briefings and dumping stocks. Fucking Thieves.

Originally Posted by Why_Yes_I_Do

Likewise, might be nice to know when Fauci and the Demonicrats in Congress were loading up on Pfizer and Moderna stocks? Would be extra curious to know if their purchases were in 4th Q of 2019.

Selling stock just before the shit hit the fan was a bipartisan exercise. Diane Feinstein, Jeanne Shaheen, and Susan Davis, all Democrats, did it too. So why do the Republicans get all the publicity? Probably bias on the part of the journalists.

Why_Yes_I_Do, Do you really believe Fauci bought Moderna and Pfizer stock? If so, why?

[Why_Yes_I_Do]

Firstly, I had taken Chungy's post as sarcastic. RE: The poor young'un who, as I said, was now living on a street corner in San Fran Nan's district. I talked with a few Millennials (I own quite a few) who were shocked - SHOCKED I say - when the '08-'09 bubble popped and the stock market went down hard. It was the first time in their pseudo-adult life it had happened.

Secondly, I fairly well agree with the Chunger that the Fed should have stepped up much earlier and that is a big part of the problem. IMHO it was full political, i.e. not raising rates in an election year.

Thirdly and the most importantly part - Trump taught us the absolutely most important financial/economic lesson in the entire history of US and World policy - You do NOT, I mean EVER, shutdown a roaring economy by slamming on the brakes - even if some asshat Doctors (Fauci, Birks) and a dipshit fake academic with their bullshit models of carnage (Neil Furguson) and a China aligned WHO says so.

Sure, one can try to reprime the pump (engine) after it shut down, might even be reasonable to expect it could work - for the first time ever. But that has consequences that are based in reality. I posted The Bernank article the other day (Houston we have a problem?). The Fed don't have that many tools and shuttering an entire economy is NOT standard Bill of Fare to have to deal with.

I did not know it at the time, but I see January 15, 2020 as the day of the apocalypse. That's when we got Proper F*cked. How we get un-F*cked, I know not. But I sure hope it involves kicking a shit-tonne of politicos to the same street corner as Chungy's Millennial fellow.

Being the pragmatic person that I am, I am mainly interested in how best to position myself to profit from the opportunity foisted upon us all, as I had managed some reasonable levels of protection during the recent-past economic Greek session.

Essentially, trying to look forward versus in the rear view mirror. Or as Ensio Ferrari once said: That which is behind me does not concern me. And that's all I have to say about that.

Originally Posted by Chung Tran

I got this one!

No shit household balances were (are) too high. I am totally with you. Trump engineered a major stimulus plan, boosted unemployement to absurd levels, and Powell injected ridiculous liquidity into the system, Robinhooders got fast ''wealth'' trading meme stocks. Biden's bill was simp!y the last significant stimulus. He did less than Trump/Powell, but you want him to bear the blame, because he was standing when the music stopped, and all the chairs were occupied. You haven't laid a morsel of blame on Trump or Powell.