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Originally posted by pkcRAISTLIN well, its good to see you're making progress!

Capitalizt--you ever read Jim Grant? Brilliant and a gold bug of sorts. The current issue was particularly good, discussing going from a true classical gold standard to a "gold-exchange" standard, to the fast & loose fiat currency we have now.

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"...A self-respecting central bank refrained from printing an excess of currency as well as from monetizing its government's debts. Neither did it buy, to excess, assets denominated in currencies not its own (compare today's stockpiling of Treasurys by Asian central banks). The everyday business of a central bank was to exchange its currency for gold and gold for its currency at the stipulated, fixed rate. It was monetary minimalism. In this long departed Age of Taboos--roughly 1815-1914--currencies were stable, interest rates low and business cycles volatile. Prices rose in wartime and fell in peacetime, and they weren't much higher at the end of the 100 years than they were at the start. Reciprocity was a hallmark of that system but not of any successor system, most especially the one in place in 2009. Deficit countries remitted money; surplus countries received it. But the remittance and the acceptance also corrected the preceding imbalance. The following description of the process of adjustment, dating from 1932 (thank you Bank for International Settlements) not only explains how the classical gold standard worked, but also why other standards, or non-standards, have not worked. "If for reasons connected with the exchange rate, country A is compelled to surrender gold to country B, it not only equalizes an unfavorable balance of payments by the export of gold, but also--and this is far more important--influences the component parts of that balance. Gold exports normally entail a curtailment of the domestic volume of credit, higher interest rates, a tendency for prices to drop, increased exports and restricted imports, that is, the elimination of those factors which normally led to the efflux of gold. Inversely, country B does not merely collect a favorable balance of payments in gold, since a gold inflow normally entails credit expansion, lower interest rates, a tendency for prices to rise, reduced exports and augmented imports. Gold movements thus have a reciprocal effect: they not only tend to cause a restriction of credit with all the attendant consequences in the country surrendering gold, but also tend to produce a corresponding credit expansion in the country receiving gold. Country B may be said to meet country A halfway in adjusting the balance of payments." A moment of silence, please, for this system, nobody's creation but everyone's helpmeet. Nevertheless, it ended. Conscripted into the Great War, central banks printed money without reference to their gold reserves, and they monetized their governments' enormous borrowings. Four years after the Armistice, in 1922, the taboo-constrained prewar monetary system got a modern makeover. In place of the delicate, remarkably self-regulating machinery of the true-blue gold standard, the monetary engineers partly substituted the discretion of central bankers. It was called the gold-exchange standard, and we linger over its memory because it has never really gone away. At a glance, the gold-exchange standard was not so radically different from its predecessor. Yet, though the forms of the prewar system remained in place, the substance was gone. Yes, currencies were still defined as a weight of gold and were exchangeable into gold, or into other currencies that themselves were anchored by gold. But the coins and ingots were immobilized. No longer did spontaneous movements of gold and credit regulate the flow of funds among gold-standard nations. More and more, the central bankers took it upon themselves to steer money hither and yon. Why bother at all with gold? It was a question that apparently never came up as politicians and economists tried to put the international financial order back together again. American populists for decades had demanded fiat money, i.e., greenbacks, in place of the scarcer, gold-backed kind. In Europe, however, and in the United States, too, investors of the early 20th century could not imagine a gold-less, taboo-free system. Still, they raised no recorded rumpus over the shucking off of one of the key strictures of the classical gold standard. Under the newfangled gold-exchange standard, central banks began to accumulate heavy volumes of foreign exchange, or securities denominated in foreign exchange, rather than gold. What this practically meant was that a country suffering a monetary drain did not have to tighten credit in order to restore itself to competitive trim. Or, a clarification: It meant that a privileged country suffering an external monetary drain did not have to tighten credit. In the 1920s, Britain was that privileged country. It was still the financial center of the world, though no longer its top industrial power. When money left Britain for greener, more remunerative pastures--France, for instance--the Bank of France did not now automatically convert the pounds it received into bullion, which would have shrunk Britain's monetary base. Rather, the French invested the funds in British securities. It was as if the money never left the City of London. Here was the signal monetary innovation of the 1920s. A deficit country could lose gold, yet not lose it, even though the creditor did actually gain it. The same pound note could support credit growth at home and abroad. It was the dawn of "deficits without tears." One war later, the United States assumed the mantle of the privileged nation, printer of the world's reserve currency, a role it has yet to relinquish. For the past 25 years, America's deficits on current account have piled up, yet--behold!--the dollars have returned to the 50 states in the shape of creditor-nation investments in Treasurys and mortgage-backed securities. We lose dollars, but we really don't lose them. Yet, though we really don't lose them, China really does gain them. It's on this double-duty dollar base that the world has built its tower of leverage. If the immediate cause of today's crack-up is excessive lending and borrowing, the remote cause is the falling away of taboos. It is worth pausing to reflect just how many have tumbled in the past 80 or 90 years. Let us imagine the prewar gold standard as a blue suit, white shirt and necktie. Then the gold-exchange standard would be slacks, a blazer and open-neck shirt--it did retain some starch and structure. Next came the post-WWII Bretton Woods system (of which more in a moment). Call it business casual without the blazer and no socks, either. The post-Bretton Woods arrangements, starting in 1971 and still in place, would be jeans, a T-shirt and flip-flops..."

Last edited by Shakka on Feb-06-2009 at 01:08

The debate continues in the Senate, though it looks like Collins and Nelson will continue their grandstanding in order to "find a solution" - if anybody has figured out the logic behind their proposed cuts, please clue me in.

In the meantime, Republicans are arming up to defeat the bill. And Robert Reich is calling them out for it.

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Senate Republicans and the Stimulus: Playing Politics When the Economy Burns February 5, 2009, 11:54AM Tomorrow's job report is likely to be awful. January's job losses could easily top half a million. We're deep into the most vicious of economic cycles: Consumers are slashing their spending because they're perilously in debt and worried about keeping their jobs. But as a result, businesses are facing shrinking sales of goods and services, so they're slashing payrolls, which of course makes consumers even more anxious and further reduces their spending power. Meanwhile, businesses are cutting way back on new investments in equipment, which hurts upstream suppliers, who are now slashing their payrolls. And so it goes, downward. The gap between what the economy could produce if it were running near full capacity and what it's now producing continues to widen. The shortfall is projected to be over a trillion dollars this year. How do we get out of this downward plunge? Regardless of your ideological stripe, you've got to see that when consumers and businesses stop spending and investing, there's only entity left to step into the breach. It's government. Major increases in government spending are necessary, and the spending must be on a very large scale. In the last several weeks the President has put forward the outlines of a stimulus plan, and has left it to the House and Senate to fill in the details. A tiny portion of the details that made it into the House version should be stripped away because they seem like old-fashioned pork. But most spending in the bill is absolutely appropriate. My worry is there's not nearly enough of spending to fill the shortfall in overall demand. Yet at this very moment, Senate Republicans are seeking to strip the President's stimulus package of many of its spending provisions and substitute tax cuts. Part of this is pure pander: They know tax cuts are more popular with the public than government spending, even though spending is a far more effective way to stimulate the economy (more on this in a moment). Another part is pure partisan politics: Republicans are emboldened by Obama's willingness to court Republicans (taking three Republicans into his cabinet, bringing Republican leaders into the White House for consultations, putting all those business tax cuts into the stimulus bill in order to gain Republican favor) without getting anything at all back from the GOP. House Republicans snubbed the bill entirely. So, Senate Republicans say to themselves, what's to lose? Plenty. Millions more jobs and a full-fledged Depression, for example. Can we get real for a moment? Take a look at this chart, which comes from calculations by Mark Zandy and his colleagues at economy.com. You see that each dollar of spending has much more impact than each dollar of tax cut. There are three reasons for this. First, most people who receive a tax cut don't spend all of it. They use part of it to pay down their debts or they save it. Most of us did one or the other last spring with that tax rebate. From the standpoint of any particular individual, paying down debts or saving may be smart behavior -- even commendable. But what's intelligent for an individual does not necessarily translate into what's good for the economy as a whole. The only way to get businesses to create or preserve jobs is through additional spending. And unlike tax cuts used to pay down personal debt or add to savings, every dollar of government spending flows directly into the economy and adds to overall demand. Second, even that portion of a tax cut we might actually spend doesn't necessarily go into the American economy. It goes all over the world. I have nothing against creating or preserving the jobs of Asians who assemble those flat-panel TVs you see at the mall, for example, but right now we're trying to create or preserve jobs here in America. Sure, the retail workers at the mall who sell the flat-panel TV's might benefit, but remember we're talking about how to get the biggest bang for every dollar. When government spends to repair a highway or build a school or help pay for medical services, the money and the jobs stay here in America. Finally, those who say cutting taxes on businesses is the best way to create or preserve jobs forget about the demand side. Even with a tax cut, businesses won't hire workers unless there are customers to buy what those workers produce. A government stimulus that creates jobs is a necessary precondition. This isn't a matter of more or less government, however much Republicans and conservatives would like to wedge it in that old ideological box. The issue is how to revive the economy. When consumers and businesses can't or won't spend enough to keep the economy going, government has to be the spender of last resort. Period.

http://tpmcafe.talkingpointsmemo.co...and-the-sti.php

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sometimes we got to laugh

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February 7, 2009, 5:36 pm What the centrists have wrought I’m still working on the numbers, but I’ve gotten a fair number of requests for comment on the Senate version of the stimulus. The short answer: to appease the centrists, a plan that was already too small and too focused on ineffective tax cuts has been made significantly smaller, and even more focused on tax cuts. According to the CBO’s estimates, we’re facing an output shortfall of almost 14% of GDP over the next two years, or around $2 trillion. Others, such as Goldman Sachs, are even more pessimistic. So the original $800 billion plan was too small, especially because a substantial share consisted of tax cuts that probably would have added little to demand. The plan should have been at least 50% larger. Now the centrists have shaved off $86 billion in spending — much of it among the most effective and most needed parts of the plan. In particular, aid to state governments, which are in desperate straits, is both fast — because it prevents spending cuts rather than having to start up new projects — and effective, because it would in fact be spent; plus state and local governments are cutting back on essentials, so the social value of this spending would be high. But in the name of mighty centrism, $40 billion of that aid has been cut out. My first cut says that the changes to the Senate bill will ensure that we have at least 600,000 fewer Americans employed over the next two years. The real question now is whether Obama will be able to come back for more once it’s clear that the plan is way inadequate. My guess is no. This is really, really bad.

http://krugman.blogs.nytimes.com/20...s-have-wrought/

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Originally posted by Shakka Capitalizt--you ever read Jim Grant? Brilliant and a gold bug of sorts. The current issue was particularly good, discussing going from a true classical gold standard to a "gold-exchange" standard, to the fast & loose fiat currency we have now.

Interesting and accurate article.. I've heard Ron Paul and others talk of going to a "new" gold standard but I've never seen a proper explanation of what that would look like and how it would be different from the gold exchange standard. If you can find an article on that, let me know.

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Originally posted by Lebezniatnikov http://krugman.blogs.nytimes.com/20...s-have-wrought/

Fuck, thats terrible.


The states really need this money...

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Originally posted by ******** Seplling don't demonstrate intelligence and educatoin - knowing does.

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Originally posted by Clovis Fuck, thats terrible. The states really need this money...

Especially California, from the look of it.

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My, what a change in tone.

Democrats strike a different tone on Katrina

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Democrats strike different tone on Katrina By BEN EVANS – 1 day ago WASHINGTON (AP) — The economic stimulus signed by President Barack Obama will spread billions of dollars across the country to spruce up aging roads and bridges. But there's not a dime specifically dedicated to fixing leftover damage from Hurricane Katrina. And there's no outrage about it. Democrats who routinely criticized President George W. Bush for not sending more money to the Gulf Coast appear to be giving Obama the benefit of the doubt in his first major spending initiative. Even the Gulf's fiercest advocates say they're happy with the stimulus package, and their states have enough money for now to address their needs. "I'm not saying there won't be a need in the future, but right now the focus is not on more money, it's on using what we have," said Sen. Mary Landrieu, D-La., who has criticized Democrats and Republicans alike over Katrina funding. It's a significant change in tone from the Bush years, when any perceived slight of Katrina victims was met with charges that the Republican president who bungled the initial response to the disaster continued to callously ignore the Gulf's needs years later. Just last summer, Democrats accused Bush of putting Iraq before New Orleans when he sought to block Gulf Coast reconstruction money from a $162 billion war spending bill. Bush was pilloried for not mentioning the disaster in back-to-back State of the Union addresses. Former Rep. Jim McCrery, R-La., who helped lead the fight for Gulf aid before retiring last year, said he was surprised over the lack of Katrina money in the bill, but figures lawmakers may be granting Obama leniency due to the magnitude of the country's current economic challenges. "Any new president is going to have a little honeymoon," said McCrery, who is now a lobbyist. "I'd like to think that the tone would have been the same with any new president." Thomas Langston, a Tulane University political scientist, said Democrats may be "playing nice" to keep in good favor. But dire needs remain, he said. "Hopefully they've gotten some promises behind the scenes about longer-term commitments," Langston said. "Like most people down here, I would hate for anybody to get the impression that, 'We're good, thank you.'" The federal government has devoted more than $175 billion to the region since Katrina ripped through New Orleans in 2005, and billions remain unspent. It's unclear how much more money will be needed, but nearly everyone agrees that the federal government should continue investing heavily in the region's levees and other infrastructure to prevent a repeat of Katrina's devastation. Under the $787 billion stimulus bill, states will share more than $90 billion in infrastructure money. Gulf states such as Louisiana, Mississippi and Alabama can use their funds for Katrina-related projects, but they'll get the same formula-based share that other states receive. There was hardly a complaint as Obama and other Democratic leaders pieced together the package. Members of the all-Democratic Congressional Black Caucus, who have called Bush's Katrina funding a moral failure, said they were thrilled with the stimulus. Landrieu won several provisions that do not allocate new money but are aimed at cutting through red tape to free up existing funds. "I think people looked at how generous Congress has been in the past," said Rep. Bennie Thompson, a Mississippi Democrat who chairs the House Homeland Security Committee. "(The states) have to demonstrate that they can be good custodians of the money." Thompson and others say new funding wasn't necessary in the stimulus largely because billions of federal dollars remain bogged down in bureaucracy or tied up in planning. As a result, they said, Katrina funding doesn't fit with the quick-spending purpose of the stimulus bill, which is aimed at kick-starting the economy. Ironically, Bush made similar arguments in recent years as Gulf advocates latched on to nearly any legislation they could find to pursue reconstruction money. For example, he routinely argued that Katrina funding didn't belong in war spending bills and that new funding wasn't urgent because unspent billions were already in the pipeline. In part, the lack of criticism this year could reflect a stronger trust by fellow Democrats that Obama will follow through with his campaign pledge to rebuild levees and "keep the broken promises" to the Gulf. Whether the grace period continues could hinge on how Obama addresses the issue in future spending bills. Without discussing specific funding plans, White House spokeswoman Gannet Tseggai said Obama is "dedicated to rebuilding New Orleans and the Gulf Coast and looks forward to working with Congress to ensure they get the help they so desperately need."

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Originally posted by Clovis Fuck, thats terrible. The states really need this money...

don't worry..they are getting it..



Congress doesn't need to write any checks when the fed can just create money for free.

I don't understand how that chart correlates with states getting targeted assistance from the stimulus package.

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Originally posted by ******** Seplling don't demonstrate intelligence and educatoin - knowing does.