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Honored Advisor

A new, old economy

Well the experts are saying all pretty much inflation is coming and more interest rate hikes coming sooner than later. Interest rate hikes will kill land values pretty quickly, which has been the source of "equity" that some of us have used to guarantee loans and opp notes.  The experts are also in that neo-con camp of "If you crack down on illegal immigration, then with lower labor supply you`ll have wage inflation" ...that has been the problem all along. 

 

US wages have been stagnant.  We have housing shortages, the workers can`t afford new housing on 1989 wages and McDonalds can`t seem to get away from the "dollar menu".   With these low wages the only salvation has been the Walmart and Dollar General stores and $5 t-shirts.  I see 2 worlds, the one my Son`s friend tells me of his family`s fabulous Christmas vacation to Patagonia and on the flipside the next morning at work the mechanic is working 55hrs a week with a wrecked back and can`t afford to see a doctor.  So, yes definitely that mechanic needs a wage that better allows him to survive in this economy, but I don`t know if chasing inflation will be a race that he can win. 

 

As far as grains and commodities, I`ve been waiting for Janet Yellen to bail us out with inflation for years now, perhaps the chickens come home to roost with the new fed chairman.   Interest rates will be tough with a $20 Trillion national debt.   But I`ll mention the one "expert" by name David Kruse says we stop illegal immigration and cheap consumer goods go away....well yeah, they WERE cheap, but unsustainable hope everyone is good on washers and dryers for a few years.  But that`d really be a kiss of death to have a over supply of labor and inflating prices to cope with, McDonalds would have a "2 for $20 menu" and $12/hr factory wages, but I suppose those that don`t work at a factory don`t care either. 

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13 Replies
Veteran Advisor

Re: A new, old economy

So then how to afford a $10 hamburgers at
McDonald's ?
Since your on the truck you seem to have
Forgot what crop budgets look like.

The key is not high interest rates and artificial
Wage hikes.

The first thing we have to do is have a WH in touch
With America

They are doing so many things wrong, I don't even
Know where to start.

If we see high interest rates return, with depressed
Commodity prices and inflation, it will mean
The end of rural America and agriculture as we
Know it.
I worked with folks in 70's and early 80's...things
Are already getting bad
..and now you talk of the other !!

And what is the white house focus....high speed
Internet

To go back to a political slogan of a few years
Back.....

ITS THE ECONOMY STUPID !!

You figure out the rural economy, small towns stabilize, more employment, healthcare will
Not be such a big issue because people can
Afford it

The key is not pay workers $12 hr at McDonald's

I worry about my family and community first

Think labor unions worry about farmers

Dream on
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Honored Advisor

Re: A new, old economy

Well, too many foreign workers brought in and US factories moved overseas or across the border has created artificially LOW wages...now if we do go through inflation, it will simply be "water finding it`s level".  Unless seen as a management career, working at a fast food joint isn`t a job to aspire to and if those wages get too out of whack, robots will be flipping burgers.

 

But no it unfortunately hasn`t been "the economy stupid" if it was President Trump would have 90% approval.   Instead the low info crowd gets their "news" from Jimmy Kimmel`s monolog and think it`s all about phony "Russia" items.   Heck of it is half the country is brain dead and riding in the wagon, I don`t see how we`ll stay out of a recession/depression with that handicap....I wish they`d kept their promise and moved to Canada after the election.

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Honored Advisor

Re: A new, old economy

BA  the longer the feds keep the boots on the economy through interest control, selective subsidy, or unnecessary regulation, the more difficult to know what the private economy will look like or if it can be recovered.

For instance, can we be sure that interest rates will go up if feds stop controling them?  Or can we be sure that the Fed can live without the power of control?

Or have we gone down this road of replacing a free economy with subsidized monopoly to far.

 

Or does the fed allow interest to rise, then when the economy won't support a rise in interest rates,,, raise them by decree.  Remember there are folks out there that doubt the sudoscience of the ruling class.  Can they actually be trusted with their economy...???

 

We live in times when the low info needs guarantees.... that is not conducive to open market competition.

 

I am not sure we will get higher interest rates or inflation.... after controled interest rates and cash stimulation for the last 10 years.

 

Fair chance that we get more government controled interest rates forced upward until the bureaucratic favored politics is back in control.

 

We are not smart enough for open democracy...............Look what happened in the last election....... the public not smart enough to make those kind of decisions...

Don't kid yourself It is not just what the media progressives think..... they might be right.

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Honored Advisor

Re: A new, old economy

We went down a very dangerous road of bureaucratic empowerment ... for over 45 years...... beginning with the endangered species act.....IMO....if not before that..... not sure we can make a u-turn through the ballot box....

 

We are being allowed the illusion of change...  maybe  ??

Veteran Advisor

Re: A new, old economy

Question ? ? which industrialized country's don't have a ''Fed. $$$$ policy'' equivalent ---    

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Veteran Advisor

Re: A new, old economy

Also - it would be interesting to see how many ''' long to short position E T F's '' have increased the past week ?  

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Honored Advisor

Re: A new, old economy

I think it`s the short term rates that the Fed has a little control over, but are we at the point where macro events are over ruling the Fed`s power?   There are some Fed banks, I think Atlanta predicting a 5.5% GDP growth rate!   Well, that would be inflation.  The irony is the only conventional way out of our debt dilemma is "growth" but you get that needed growth and it`s inflationary, so interest rates rise which increases the debt.  Talk about a catch-22.

 

 

Here`s something interesting about other countries different monetary guidance compared to the US.

 

https://www.quora.com/In-what-ways-is-the-Federal-Reserve-different-than-other-countries-central-ban...  

 

 

This piece on Wikipedia, Money creation, does a pretty good job of explaining how the money supply is increased with debt, and decreased when debt is repaid.  That's the way all central banks work.  What perhaps makes the Federal Reserve of the United States a bit different are a couple of things: (1) Section 4 of the 14th Amendment requires that the National Debt be paid (default or bankruptcy isn't an option); and (2) the power to "print money" has been delegated to the Fed by Congress.  Not all other central banks have that option.  While the actual physical printing of money, except to replace lost or damaged currency, has not been abused because we are aware of the inflationary consequences of doing that, the fact that we can print money to pay our debts and that our Constitution requires us to do it makes US debt a "safe" investment in the eyes of the entire world.

However, in the Wikipedia piece, one major difference between the Fed and other central banks is noted here:

Monetary finance

In principle, central banks can create money and deliver it to the treasury. This is what some people call monetary financing for government. However the use of monetary finance has been forbidden in many countries, and especially in the Eurozone where the Article 123 from the Lisbon Treaty explicitly prohibits the ECB to finance public institutions.

What is not discussed in the Wikipedia are the many other factors that impact on the economy that are beyond the purview of the Federal Reserve:

  1. International currency exchange rates.  As Fed policy has increased the value of the dollar relative to foreign currencies, it has made our exports more expensive on the world markets, and our imports cheaper, contributing heavily on our trade deficits and our negative balance of payments.
  2. Fiscal policy issues have slowed our economy, particularly in the realm of tax policy and regulatory compliance costs, which make the cost of doing business in the US higher than in other countries, which is why we see so much outsourcing of labor; the creation of foreign subsidiaries to legally avoid taxes and regulations; and, in a growing number of cases, entire companies re-locating to other countries.

The main thing I think it's important to understand is that all debts are "contracts" enforceable by the Rule of Law.  The money isn't owed to a bank or a government -- it's owed ultimately to an individual who invested it in a retirement plan, and insurance contract, or some other form of investment, and is depending on that money being paid back. Banks and governments are just "middle men."  If the Rule of Law isn't enforced and if defaults -- sovereign, corporate, or personal -- become more than the system can absorb, the whole world wide economic system comes crashing down.

As of March 31, 2016, the market value of the US stock market (aka "Wall Street") was $23.7 Trillion.  At that same point, the value of the qualified retirement plans of the American people was $24 Trillion.  If Bernie Sanders is going to pay for free college by taxing "Wall Street," he will do so by destroying the retirement plans of the American people

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Honored Advisor

Re: A new, old economy

Policy is what we should have 289

We have a dictated interest rate and therefore it has lost it's governing inflation function..... as the fed is encouraging inflation with increasing money supply

a dangerous game that requires a lid on commodity prices  maybe....??  And of course a public that will believe what we say ..."there is no inflation" .. it's china's fault if you pay more.......shop at walmart.

question is how do we exit the game.  

This is why I doubt political change changes anything....... it will just be easier to expand governments authority and set prices and lease out public lands to "growers"

Often wonder if we are in that brakes locked, all 4 wheels sliding sideways euphoric place before hitting the event that begins the rollover.

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Senior Contributor

Re: A new, old economy

There is at this time only ONE world currency. Comparing other countries monetary policy to ours is like comparing apples to oranges. 

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