2012 August 19 Sunday
Great Recession 5 Years Old And Running

Ambrose Evans-Pritchard looks at the failure of the industrialized countries to recover from the last recession.

The world remains in barely contained slump. Industrial output is still below earlier peaks in Germany (-2), US (-3), Canada (-8) France (-9), Sweden (-10), Britain (-11), Belgium (-12), Japan (-15), Hungary (-15) Italy (-17), Spain (-22), Greece (-27), according to St Louis Fed data. By that gauge this is proving more intractable than the Great Depression.

Evans-Pritchard looks at the huge debt build-up that preceded the recession as a major cause of slow recovery which is unlike recoveries from previous recessions. That debt built up over a period of decades. Check out US household debt as a percentage of GDP over a 50 year period ending in 2010. Corporate, federal, local, and personal debt reached over 3.5 times GDP by the end of 2009.

Find it hard to believe the total public and private debt is some multiple of GDP? Back in December 2009 Federal Reserve chairman Ben Bernanke laid out the basic facts in response to a question from Senator Bunning.

Bernanke: The current ratio of public and private debt to GDP, including not only the debt of the nonfinancial sector but also the debt of the financial sector, is about 350 percent. (Many analysts prefer to focus on the debt of the nonfinancial sectors because, they argue, the debt of the financial sector involves some double-counting--for example, when a finance company funds the loans it provides to nonfinancial companies by issuing bonds. The ratio of total nonfinancial debt to GDP is about 240 percent.)

Since personal bankruptcies have been made more difficult and the financial industry was bailed out by governments a natural liquidation by bankruptcy process has been slowed. So the debt burden has remained high. At the same time, over-promising on entitlements has governments running up more debt and this is made worse because sluggish economic recovery also means slower increases in tax revenues.

What matters about debt: Will profits and tax revenues rise fast enough to service the debt? When huge debts and growing entitlements expenditures exist an absolute decline in economic output is a recipe for disaster. Rising debt requires rising output to service the debt. Otherwise default (whether by official default or inflation) becomes inevitable.

Are the lingering effects of an excessive debt build-up our only problem? I don't think so as I'll explain below. But even if the debt burden is the only root cause of a weak economic recovery the debt burden shows no sign of lightening. Mortgage foreclosures and personal bankruptcies are cutting down consumer debt. But the increase in government debt shows no sign of abating. The US sovereign debt burden is not an isolated problem either.. Japan's 200+% GDP debt burden will cause a financial crisis in about 15 years, possibly sooner if the markets come to understand the approaching crisis. This could cause a US Treasury bond demand crisis. The US already faces a very serious fiscal solvency problem. Outside events (e.g. break up of the Euro zone, a Japanese sovereign debt crisis, much higher oil prices). could cause that developing problem to reach crisis stages much sooner than would otherwise be the case.

Europe might precipitate the next crisis. Europe has very large sovereign debt problems.

Germany can only go so far in bailing out Europe. The cost of recapitalizing European banks (despite overly optimistic stress tests), including those in Germany, is estimated to be €420 billion under an adverse scenario, just for non-performing loans. The cost of marking down — let alone writing off — sovereign debt would be much greater. As of last November, 20 of the largest banks in the European Union carried $4.2 trillion in PIIGS (Portugal, Ireland, Italy, Greece, Spain) sovereign debt, about seven times the amount of their $620 billion in equity.

What enabled debts to get so big? As memories of the Great Depression have faded and financial companies have become more adroit at assessing individual risk the trend has been to grant more consumer credit. Plus, the political class has to keep promising more goodies in each election. So the trend has been so spend more without taxing more. Plus, financial companies have created more complex debt instruments for corporations. The resulting pile of debt becomes a big house of cards.

What made industrialized civilization possible in the first place? Have we gotten so far way from the Malthusian Trap that perhaps we are hurting from loss of the benefits that the Malthusian Trap's selective pressured bestowed on us? Some people look around and see signs that a civilization that has peaked. The Derb and Bruce Charlton see slowing rates of innovation and other signs that our capabilities aren't increasing overall. Sure, we've got fancier smart phones and more powerful computer server farms. But where are the improvements that are as dramatic as electric power or the car or jet airplanes?

Forty-three years! Forty-three years before that, Lindbergh had not yet flown the Atlantic. Forty-three years before that, the only automated forms of transportation were the railroad and the steamship. Bruce Charlton:

That landing of men on the moon and bringing them back alive was the supreme achievement of human capability, the most difficult problem ever solved by humans. 40 years ago we could do it – repeatedly – but since then we have *not* been to the moon, and I suggest the real reason we have not been to the moon since 1972 is that we cannot any longer do it. Humans have lost the capability.

These melancholy thoughts of civilizational decline came to mind again when I heard on a news broadcast that it will take at least a year to bring the Colorado cinema mass murderer to trial. And even when the trial eventually gets underway, says TIME, “the case is shaping up to be a years-long criminal proceeding.”

Is the accumulation of bureaucratic crud and the gumming of government decision-making a major cause of a slowed rate of material progress? Or is the parasitism and imposed inefficiency just more noticeable because we've exhausted our ability to generate growth because the easy ways to cause growth have been basically used up? Tyler Cowen argues in the fast few hundred years we basically harvested the low hanging fruit of natural resources, scientific discoveries with great commercial value, and with mass education to raise skills levels. So progress is now harder to make. I agree with this argument.

I am less optimistic than Tyler about an eventual return of good times. I see three main possible ways that could happen. Maybe artificial intelligence will enable us to resume a sustained period of rising living standards. I'm skeptical on this point because over the last couple of centuries the number of working scientists and engineers has exploded by many orders of magnitude while the rate of discovery of fundamental enabling insights has dropped. This suggests there are fewer things left to discover and that AI won't change this. Name one discovery since 1960 as important as the laser (first proposed by Einstein in 1917 and initial demonstrations in 1947 and for optical pumping in 1952. Similarly, Bardeen, Shockley, and Brattain invented the transistor in 1948. Name an invention after 1960 that is as important.

Perhaps fusion energy will become feasible and also very cheap. With very cheap energy we can concentrate very low concentration elements into high and useful concentrations. Another possibility for enabling a return to a period of lots of low hanging fruit comes from genetic engineering once it becomes much easier to do. But none of these enabling technologies seem like good prospects to reignite growth in the next 10 years.

I see the Peak Oil theorists as addressing a subset of the problems which Tyler addresses (though Tyler doesn't really address how serious a problem we face due to Peak Oil). Writing from a Peak Oil perspective Fabius Maximus thinks our civilization peaked in the 1990s when oil prices fell to $12 per barrel. Since then rising natural resource costs, especially energy costs, have throttled growth. While the 1990s seem like the last good sustained party time that period still seems like a pale shadow to the 25 year period after WWII in terms of yearly sustained changes in quality of life.

UCSD energy economist James Hamilton (who I've linked to a few times above) questions whether we can have economic growth without growth in energy usage. I would extend that question and ask whether we in the industrialized world can have economic growth without growth in our use of assorted minerals such as aluminum, iron, platinum, and other elements.

"The question is, how much can we keep growing without a growing supply of energy?" said James Hamilton, a University of California-San Diego economics professor who has been on the leading edge of research into the impact of high energy costs.

"We've had temporary experiments with (oil supply) disruptions in the Middle East," he said. "We don't really have experience, if worldwide, we produce less oil year after year and have to deal with that on a longer-term basis. Certainly, the transition to dealing with that could be very disruptive."

What's your expectation for the major economies of the world over the next 20 years?

Share |      By Randall Parker at 2012 August 19 09:52 AM  Economics Limits To Growth


Comments
Wolf-Dog said at August 19, 2012 2:09 PM:

" Japan's 200+% GDP debt burden will cause a financial crisis in about 15 years, possibly sooner if the markets come to understand the approaching crisis. This could cause a US Treasury bond demand crisis. The US already faces a very serious fiscal solvency problem. "
---------------------

An important difference between Japan and the United States is that Japan's debt is not to foreigners but to its own citizens. This means that Japan can easily solve this problem by an internal redistribution of wealth, while the United States cannot solve this problem without solving the foreign trade deficit problem.

The cause of the persistence of high unemployment in the United States is the foreign trade deficit. A significant portion of the government deficit spending is used to compensate for the foreign trade deficit and to support unemployed people who cannot find jobs due to the foreign trade deficit that eliminates work in the United States. The balancing of the annual foreign trade deficit would create many millions of jobs in the United States despite the slight increase in inflation due to higher wages. Employed people can afford to pay higher prices for manufactured goods while unemployed people cannot even afford the cheapest goods. The cheaper foreign goods are a boon for people who already have jobs, but not for unemployed people.

Mercer said at August 19, 2012 3:43 PM:

"Will profits and tax revenues rise fast enough to service the debt?"

No. The only way to reduce debt burden is higher inflation. As long as college debt not dis-chargeable in bankruptcy housing prices flat because young people can't afford current prices.


" financial companies have become more adroit at assessing individual "

They thought they were better at assessing risk. The crash in 2008 shows they were wrong.


"The US already faces a very serious fiscal solvency problem"

If Bush tax cuts expire on schedule and another Medicare "doc fix" is not passed the federal budget would be in much better shape. The biggest threat to the federal budget is the result of having the most expensive medical system in the world.


" expectation for the major economies of the world over the next 20 years? "

Slow growth. The US better than Japan, China and EU because slower aging of population.


John said at August 19, 2012 4:02 PM:

Actually most of America's debt is owned by Americans.

America is analogous to Japan because both countries have their own currencies that they borrow in.

Neither country faces a fiscal solvency problem or crisis.

Countries like Greece don't have their own currencies. They're like US states. They can't create money through deficits. Everything they spend has to be taken from taxes or borrowed and paid back.

John said at August 19, 2012 4:12 PM:

“Deficit” and “debt” fool most people, because these words sound negative. But think about it this way:

A federal “deficit” occurs when the federal government creates and spends more dollars than it receives in taxes. Similarly, when the government runs a surplus, the government takes more dollars out of the economy than it sends into the economy. A government surplus is the economy’s deficit.

The added dollars from federal deficit spending go to one of two places:

1. Into the U.S. economy, where they become Net Savings, or

2. To foreign economies to pay for Net Imports

Thus, the equation: Federal Deficits = Net Private Savings + Net Imports

Banks create dollars by lending, but those are not net dollars. For every dollar created by a bank, a loan obligation also is created –- the new dollars are offset by new obligations, so they net to zero. Only the federal government creates net savings dollars.

You can see it in this graph: http://research.stlouisfed.org/fredgraph.png?g=9um

It shows Federal Deficits (red line) and Total Savings Deposits at all Depository Institutions plus Imports of Goods and Services (BOPMGSA).

The graph makes this point clear: The more deficits rise, the more net savings rise.

The misnamed “deficit” is the source of all net dollars, i.e. all net private savings. Cutting deficits cuts private savings, which depresses the economy. Cutting deficits is a prescription for depression.

Randall Parker said at August 19, 2012 6:33 PM:

John,

The US can avoid insolvency by inflating away its debt. The US Federal Reserve could buy up most of the sovereign debt. But the wealthy, pension funds, banks, and other powerful factions do not want the US government to do that as they'd end up getting inflated dollars for their Treasury bills. i.e. they'd lose money. The creditors are powerful and this reduces the range of choices available to the US government.

But regardless of the correlation of forces on the question of use of inflation to cut debt the US government is on course for some sort of crisis.

Wolf-Dog said at August 19, 2012 6:59 PM:

John:"Actually most of America's debt is owned by Americans.
America is analogous to Japan because both countries have their own currencies that they borrow in.'
-------------------------------

I am talking about the foreign trade deficit of the United States that is in the order of $600 billion per year. Cumulatively this is becoming a significant portion of the GDP, and in the long run it is unsustainable. Japan does not have this problem. Without the foreign trade deficit I would have agreed with you.


http://www.americanthinker.com/2009/05/us_foreign_debt_jumps_to_35_of.html

John said at August 19, 2012 7:28 PM:

If the Federal Reserve "buys up most of the sovereign debt", then all that does is change the term structure of those securities.

If "the wealthy, pension funds, banks, and other powerful factions" lose money, why would that lead to inflation? They would have less money with which to bid up prices. They don't spend that much on the real economy, but are a major factor behind asset price inflation. With less money, they'd have less means to bid up assets like land, real estate, securities, commodities, etc. There would be less inflation.

John said at August 19, 2012 7:33 PM:

"Without the foreign trade deficit I would have agreed with you."

Both countries have their own currencies that they borrow in, which is what I was talking about, not trade deficits.

John said at August 19, 2012 7:47 PM:

"The US can avoid insolvency by inflating away its debt. The US Federal Reserve could buy up most of the sovereign debt."

Both dollars and U.S. Treasury debt (securities) are nothing more than “accounts,” which are nothing more than numbers that the government makes on its own books. When they mature, we remove dollars from savings account at the Fed and add them to checking account at the Fed. This is what happens when all U.S. government debt comes due, which happens continuously. The Fed removes dollars from savings accounts and adds dollars to checking accounts on its books. When people buy Treasury securities, the Fed removes dollars from their checking accounts and adds them to their savings accounts.

When a Treasury bill, note or bond is purchased by a bank, for example, the government makes two entries on its spreadsheet that we call the “monetary system.” First, it debits (subtracts from) the buyer’s reserve account (checking account) at the Fed. Then it increases (credits) the buyer’s securities account (savings account) at the Fed. As before, the government simply changes numbers on its own spreadsheet - one number gets changed down and another gets changed up. And when the dreaded day arrives, and the Treasury securities which people hold come due and need to be repaid, the Fed again simply changes two numbers on its own spreadsheet. The Fed debits (subtracts from) a securities account at the Fed. And then it credits (adds to) a reserve (checking) account at the Fed. That’s all - debt paid.

Paying off the entire U.S. national debt is but a matter of subtracting the value of the maturing securities from one account at the Fed, and adding that value to another account at the Fed. These transfers are non-events for the real economy.

Seel said at August 19, 2012 8:18 PM:

"An important difference between Japan and the United States is that Japan's debt is not to foreigners but to its own citizens."

And no NAMs...

John said at August 19, 2012 8:18 PM:

"But regardless of the correlation of forces on the question of use of inflation to cut debt the US government is on course for some sort of crisis."

What crisis? In the future, just like today, whoever is alive will work and produce and consume their real output of goods and services, no matter how many U.S. Treasury securities are outstanding. There is no such thing as giving up current-year output to the past, and sending it back in time to previous generations. Those in the future won’t and can’t pay us back for anything we leave them, even if they wanted to.

When government spends, it just changes numbers up in our bank accounts. More specifically, all the commercial banks we use for our banking have bank accounts at the Fed called reserve accounts. Foreign governments have reserve accounts at the Fed as well. These reserve accounts at the Fed are just like checking accounts at any other bank.

When government spends without taxing, all it does is change the numbers up in the appropriate checking account (reserve account) at the Fed. This means that when the government makes a $2,000 Social Security payment to you, for example, it changes the number up in your bank’s checking account at the Fed by $2,000, which also automatically changes the number up in your account at your bank by $2,000.

You need to know what a U.S. Treasury security actually is. A U.S. Treasury security is nothing more than a savings account at the Fed. When you buy a Treasury security, you send your dollars to the Fed and then some time in the future, they send the dollars back plus interest. The same holds true for any savings account at any bank. You send the bank dollars and you get them back plus interest. Let’s say that your bank decides to buy $2,000 worth of Treasury securities. To pay for those Treasury securities, the Fed reduces the number of dollars that your bank has in its checking account at the Fed by $2,000 and adds $2,000 to your bank’s savings account at the Fed. Treasury securities are just savings accounts.

In other words, when the U.S. government does what’s called “borrowing money,” all it does is move funds from checking accounts at the Fed to savings accounts (Treasury securities) at the Fed. In fact, the entire $13 trillion national debt is nothing more than the economy’s total holdings of savings accounts at the Fed. And what happens when the Treasury securities come due, and that “debt” has to be paid back? Yes, you guessed it, the Fed merely shifts the dollar balances from the savings accounts (Treasury securities) at the Fed to the appropriate checking accounts at the Fed (reserve accounts).

Jason said at August 20, 2012 2:44 AM:

Great article, but I still can't believe the peak oil or limited natural resource thing. There are oceans of resources out there. We have natgas, coal, shale, fraking and probably larger finds of oil waiting to be discovered. I've had to become somewhat familiar with the energy business in last couple years, and it's not so much a supply problem, as a technical/political problem. And if energy ever goes much higher, all those barriers will crumble. It's just a matter of having the brains and the willpower - and that I do believe is a problem in the long run! It's not resource limitations that will create long term stagnation, it is dysgenics.

James Bowery said at August 20, 2012 9:39 AM:

"The average cost to file for Chapter 7 bankruptcy protection, the most common form of consumer bankruptcy, is more than $1,500, according to recent research submitted to the National Bureau of Economic Research."

"As a result, anywhere between 200,000 and one million consumers are estimated to be unable to afford that steep cost this year."

http://finance.yahoo.com/news/americans-too-broke-bankrupt-105500347.html


Awww.... isn't that cute of the rentiers to have essentially gutted the Constitutional provision for personal bankruptcy?

John said at August 20, 2012 12:05 PM:

"The average cost to file for Chapter 7 bankruptcy protection, the most common form of consumer bankruptcy, is more than $1,500, according to recent research submitted to the National Bureau of Economic Research."

"As a result, anywhere between 200,000 and one million consumers are estimated to be unable to afford that steep cost this year."

This illustrates the problem.

These people (and people more generally) are trying to get rid of their private debt via bankruptcy and by reducing consumption spending to pay down debts. Of course by reducing consumption spending, they are reducing the income of other people who are also trying to pay down debts.

The equation is Federal Deficits = Net Private Savings + Net Imports

Private debt is created by lending, but those are not net dollars. For every dollar created by a bank, a loan obligation also is created –- the new dollars are offset by new obligations, so they net to zero. Only the federal government creates net savings dollars.

You can see it in this graph:

http://research.stlouisfed.org/fredgraph.png?g=9um

It shows Federal Deficits (red line) and Total Savings Deposits at all Depository Institutions plus Imports of Goods and Services (BOPMGSA).

The graph makes this point clear: The more deficits rise, the more net savings rise.

Unless deficits rise to create net dollars, people cannot pay down debts without crippling the ability of others to pay down debts.

By charging $1500 to people trying to get rid of debt, the gov is taxing people and draining net dollars from the economy with which debt can be paid down.

The government should be slashing taxes drastically, which would raise the deficit and allow people to save.

Wolf-Dog said at August 20, 2012 1:36 PM:

John,
Basically the equation "Federal Deficits = Net Private Savings + Net Imports" seems to indicate that the current credit system in the world is a constraint that forces everyone to measure the value of any product or service by means of the money that is already owned by a previous person. Thus, in this credit system, in order to start a business it is obligatory to pay a tax to previous people who made money, precisely because money must be borrowed to start or operate a business.
But I believe that an electronic bartering system might be implemented worldwide or nationwide, very much like a very advanced version of Google/Facebook that links various skills and raw materials, so that people can just work and produce and consume every kind of imaginable product and service without using much money. This mechanism itself will be a new form of money.

dearieme said at August 20, 2012 1:55 PM:

"Forty-three years before that, Lindbergh had not yet flown the Atlantic." Happily, lots of other people had.

Paul said at August 20, 2012 3:23 PM:

Off topic, but after watching news like this, I stop wondering why the economy is the way it is, as it becomes clear that the country is falling appart with a justice system like this. I'm seriously thinking about leaving this coutry for good.

http://abcnews.go.com/US/group-sex-scandal-texas-teacher-sentenced-years-prison/story?id=17028716

California kid said at August 20, 2012 4:17 PM:

The group that has been the most inventive in the past is now deliberately demoralized by the whole of official America. This occurs daily in every possible venue. Until this is stopped utterly, and until fruitful conditions are returned, you will not see much out of this group.

Mthson said at August 20, 2012 9:20 PM:

"deliberately demoralized by the whole of official America"


Just show them how stupid and wrong they are by building an awesome career.

The most rational arrangement is for our morale to be at 100% at all times anyway.


And reprogenetics will fix society by the end of the century, so being surrounded by cavemen is temporary.

AMac said at August 21, 2012 8:33 AM:

@ John -- Taking your view of the federal deficit at face value, it seems that it necessarily follows that whether a government's budget is balanced or not does not matter. In cases where the government's debt is in its own currency, e.g. for the U.S.

Taxes are a negative from the point of view of the citizen (i.e. fewer resources for me to use as I see fit). Since receipts from taxes aren't important in any fundamental way to the federal government, it would follow that taxation could (and should) be lower than they are at present, whatever that level happens to be. In fact, they should be zero.

Has any government ever tried this financial strategy? While analogies from the past are never exact, I expect that the answer is 'yes', and I expect that these experiments ended in tears. This suggests that there are important elements that are missing from your analysis.

John said at August 21, 2012 11:22 AM:

AMac,

If you take my view, you should see that it does follow that whether or not a government's budge is in balance, in deficit, or in surplus, does matter.

Taxes are important to a government that issues a currency because by demanding taxes in its currency, it creates demand for the currency. If your town started demanding local property taxes paid in its own currency that it issued, you and other townspeople would demand some of the currency so that you can pay your local property taxes. This establishes some basic value for the currency, and it can circulate. A local shopkeeper might then accept payment for his wares in the currency for its own value and or for the taxes he has to pay.

As for what kind of taxes and what level of taxes there should be, that depends on the situation, values, etc. If inflation were very high, raising taxes would lower it. If you wanted to raise demand, raise net private savings, etc., you could cut income taxes, payroll taxes, etc.

Slashing income taxes and payroll taxes down to zero or close to it would be good right now in my view.

A government that doesn't tax is not a government. If you live by yourself on a remote island and wish to control it exclusively against any other government, then you are the "government" and you must tax yourself in labor, resources, blood, etc. to maintain it.

Zamman said at August 21, 2012 3:25 PM:

Paul wrote> "Off topic, but after watching news like this, I stop wondering why the economy is the way it is, as it becomes clear that the country is falling appart with a justice system like this. I'm seriously thinking about leaving this coutry for good."

http://abcnews.go.com/US/group-sex-scandal-texas-teacher-sentenced-years-prison/story?id=17028716

Good thinking man. I already did!!

So don't take too long. Eventually that American regime you still live in won't even allow you to board a plane or cross the border OUT.

Zamman said at August 21, 2012 4:01 PM:

Really man, don't take too long.

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

Zamman said at August 21, 2012 4:08 PM:

Here's another one for your enjoyment:

http://www.youtube.com/watch?v=bBqkT8lZwys

James Bowery said at August 22, 2012 11:20 AM:

Mthson writes: "And reprogenetics will fix society by the end of the century, so being surrounded by cavemen is temporary."

Yes, broodmate, it is so much better to be surrounded by fellow eusocialists working in unison to end all defection.

There is no place for individualism.

Zamman said at August 22, 2012 3:22 PM:

Un-fucken-believable. Pardon my French.

Mthson said at August 22, 2012 5:57 PM:

Zamman, nobody reads your comments.


James Bowery, I'm an individualist.

I'm just making a prediction: reprogenetics will fix the things we currently dislike about society, like low IQ, and any likely political movements between now and then will be insignificant bumps within that larger narrative.

Randall Parker said at August 22, 2012 8:21 PM:

Zamman,

You bring up trivialities with the high school diploma story and the breastfeeding in a library story. Ditto the (admittedly enraging) story about the top student getting jailed for truancy because she misses school due to studying so much.

You might try learning HTML a href syntax to make it easier for people to click on your links though. Also, links to YouTube with no explanation are just a waste of time. Nobody's going to past them. At least with the other links you can read text in the URL to figure what it is about.

Randall Parker said at August 22, 2012 8:32 PM:

John,

If the US government bought up all its debt that would cause massive inflation and a shift of wealth from creditors to debtors. That would be a really big event in the economy and would distort markets and radically change investment decisions.

Randall Parker said at August 22, 2012 8:38 PM:

Mthson,

You say very constructive and good advice:

Just show them how stupid and wrong they are by building an awesome career.

The most rational arrangement is for our morale to be at 100% at all times anyway.

My response to an increasingly stagnating America is to work much harder on my career. One can still thrive in an economy that is doing poorly. One just must try much harder to make oneself more productive.

James Bowery said at August 22, 2012 9:17 PM:

Mthson, you seem quite certain that Huxley's projection, or its reprogenetic equivalent, will be averted. From what I see, we're living in a world run by morally vain sociopaths. Why the hell wouldn't they turn you into a worker bee and tell you and themselves it was for your own good?

Mthson said at August 23, 2012 1:00 AM:

Thanks for the comment, Randall.
-----------------------------------

James Bowery said: "Why the hell wouldn't they turn you into a worker bee and tell you and themselves it was for your own good?"


There's more attention giving to police abuses, government abuses, and bad work environments than ever before.

Both the left and the right would oppose it.


Current society is terrified of reprogenetics, so we'll likely simply see slow change created by early-adopter parents choosing higher IQ fetuses. Then after attitudes change, governments will make sure poor parents have access to the same improvements.

And this will likely all happen in Asia first, so it will be easier to allay the West's fears. Asia didn't go through a struggle against Nazism, so they have a different intellectual framework. One prominent geneticist called it Hitler's final revenge on the West.

John said at August 23, 2012 2:49 AM:

Randall,

Banks have checking accounts at the Fed. They're called "reserve" accounts. They also have savings accounts at the Fed. They're called Treasuries. The Fed has spreadsheets of these accounts on its books.

The Fed conducts open market operations every day. That is it buys and sells Treasury debt every day.

When it buys bonds it credits (increases) the reserve (checking) accounts and debits (decreases) the Treasury (savings) accounts. It removes dollars from the savings accounts and adds dollars to the checking accounts.

When it sells bonds it debits (decreases) the reserve (checking) accounts and credits (increases) the Treasury (savings) accounts. It removes dollars from the checking accounts and adds dollars to the savings accounts.

If the Fed "bought up all its debt", it would remove all the dollars from the savings accounts and add them to the checking accounts. So now the banks would just have checking accounts and no savings accounts. Of course the Fed could immediately then turn around and offer savings accounts i.e. sell Treasuries.

How does this "cause massive inflation" and represent a "shit of wealth from creditors to debtors"?

James Bowery said at August 23, 2012 8:30 AM:

Mthson hopes: "Both the left and the right would oppose it."

The factor analysis going into "the political compass" is derived from bad questionnaire data. The questionnaires themselves cannot distinguish between centralist vs decentralist views and it is _that_ dimension on which the danger of eusocial engineering must be measured.

The entire political debate that I see is over whether the economy should be public sector trickle-down or private sector trickle-down. The same morally vain sociopaths, with minor tweaks, mediate both golden showers.

Zamman said at August 23, 2012 11:41 AM:

"Zamman, nobody reads your comments."

No shit Mthson!

Then how is it that you answer back to me? You're really sharp!

What a douchebag who reads, but only accepts whichever posts reinforce his beliefs

Zamman said at August 23, 2012 11:46 AM:

"You bring up trivialities with the high school diploma story and the breastfeeding in a library story."

Hello? Is there anybody in there? Think you bit your tongue right there Randall. Some posters here have already told you to get back to the real issues.

Take a look at the shallowness of smany of your posts. Besides this is an OPEN forum in case you yourself haven't noticed. If I'm rally that trivial why bother to reply?

That's what I thouhgt.

faffy said at August 23, 2012 1:39 PM:

"Is the accumulation of bureaucratic crud and the gumming of government decision-making a major cause of a slowed rate of material progress? Or is the parasitism and imposed inefficiency just more noticeable because we've exhausted our ability to generate growth because the easy ways to cause growth have been basically used up?"

I think technological progress was bound to slow down. But the social issues we experience have certainly not helped things along. US culture seems unwilling to deal with the truth without hiding behind layers and layers of bureaucratic red tape. So people like Holmes have to have years-long megatrials before justice can actually be served. Billions of dollars are wasted in feel-good programs. None of our so-called leaders actually demonstrate leadership, and largely just attempt to cash in before their tenure is up. All this corruption has turned a high-trust society where achievement was honored into a low-trust society where "celebrity" is the highest ideal. Pretty hard to imagine that the latter society is going to be producing much technological innovation (unless it's more videogames to waste time on).


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