TPS

Which is why the other side of the policy coin is being used too. The government, with one hand, is pushing its housing rescue through and handing out checks with the other hand. If the Fed and Govt can stave off the collapse of asset values, and the economy recovers, they can always start siphoning off the liquidity when things improve. The late economist Hyman Minsky wrote an article titled "Can 'IT' Happen Again?" By 'IT' he meant another depression. He believed IT could be prevented through the policy options available to the FED and Government. The current conditions are such that I believe IT would happen now, but policy makers are using everything at their disposal to try to prevent IT. That doesn't mean IT won't.... As for China and the $, I think most people here already know my view (similar to yours). I think I wrote elsewhere in this thread about my views on the $-oil linkage.

This'll take a bit more time than I have right now, but here's a quick response. Some inflation isn't bad; in fact prices rise as a signal of scarcity (either from increased demand or reduced supply), and we all (businesses and consumers) react to those price changes. Rampant inflation is not good because it distorts the price-rationing mechanism, and can therefore destroy a market economy. Who does inflation hurt then? Anyone without the ability to bargain for higher wages/income, and people/institutions who hold financial assets that pay a fixed return. I'd say that bondholders, banks, and other financial institutions are a pretty powerful force. One might look at inflation as a "conflict of interests." Pun intended. If you are a consumer with a 30-year mortgage or a business with a 10-year fixed-interest debt obligation, you won't mind a little (more) inflation, especially if you have the ability to increase your income to the price index, or a firm that can increase its price as its costs rise.

I'm not talking about the ability to obtain financing; I'm talking about the willingness to spend. It's demand that drives the economy. Downswings occur because spending (demand) slows down--either businessess, consumers, or both reduce spending. Government spending never slows down, and in fact speeds up during a downturn. The scope of capital availability means nothing if businesses and consumers "hunker down" and stop spending in a risky environment. In 1929 government spending relative to gdp was 1.2%; it's now almost 20%. Large government has stabilized demand; that's the reason for less severe downturns.

The Fed is never "out of jack," since they supply a fiat currency. Most, if not all, of what they are doing is trying to prevent further asset deflation because that is what can transfer over to the real sector and bring the economy down. The fed can't directly cause inflation unless they started handing out money to those who spend on goods and services--that's the government's job with its tax rebate. The fed can control credit conditions (in the financial sector), but it can't make businesses and consumers borrow and spend.

That contradicts the experience of the last hundred years or so. I'm not justifying the current size and scope of government, but since WWII, as the size of government (relative to gdp) has increased, the severity of downturns has decreased. The downturns aren't severe because there is "more capital in private hands," they are less severe because government spending is a stable source of demand regardless of the "current state of risk" in the economy, and it also goes up when an economy slows down. Private capital, on the other hand, tends to "get liquid" when the "current state of risk" increases--that is, businesses are less willing to spend to expand, and finance is also less willing to lend. Much like the current state of affairs.

That's not the dollar-oil connection. The majority of oil traded around the globe is priced and sold in $s. Since oil is priced in $s, a decline in the value of the $ doesn't impact the price of oil directly. What the declining value of the $ does is reduce the purchasing power of revenues earned by oil exporting countries. One way to counter that is to reduce production and increase the $ price of oil. Another way would be to switch pricing and sales of oil from the $ to the euro.

Will the company need to hire another accountant? Or will they increase executive compensation?

If you are talking about small businesses, especially individually owned, I'd totally agree. On the other hand, large corporations are a different story. Two things: one, the majority of funds invested in markets come from non-taxed sources--pension funds, and other institutional investors; two, if a US corporation borrows $100 million then decides to build a factory in Indonesia, how does that increase American jobs?

Isn't that the entire point, that the relatively recent infusion of money from speculators (in unregulated markets, where there are no contract limits) has caused the price to rise by some 10-30% higher than they should be?

I guess the Fed's interest rate cuts, bail out, and flooding the markets with liquidity have nothing to do with trying to prevent the recession?

One can't guess what the next "event" will be, but I would add that if government(s) do something to regulate the "dark markets," then we'll see a "correction" as well. $4/gal is also radically changing habits in this country, so an unexpected(?) decline in US demand could trigger as well. Btw, be careful about suggesting I might know what I'm talking about, you could get blacklisted around here...

Once you make the statement that it's a long term argument, one can't prove it or disprove it because no one can "prove" what factors caused the ensuing growth. I've showed in a previous post (long ago) that gdp growth has averaged about 3% per year over time regardless of what has happened with marginal tax rates. Btw, how long is "long term?" You gave credit to Bush2's tax cuts for stimulating growth several years after them; what about now?

Here's a little primer for you: http://www.investopedia.com/university/futures/futures2.asp Specifically this part, "Now that you see that a futures contract is really more like a financial position, you can also see that the two parties in the wheat futures contract discussed above could be two speculators rather than a farmer and a bread maker. In such a case, the short speculator would simply have lost $5,000 while the long speculator would have gained that amount. In other words, neither would have to go to the cash market to buy or sell the commodity after the contract expires.) "

I assume this is supposed to counter the point made in the article I posted? If so, I'm a bit shocked that an article in The Economist could have such a glaring error. Futures speculators do not take delivery, nor do they have to "sell" to someone who will. They "close" their position by taking an opposite position in the same contract. The majority of futures contracts are not "delivered."

I think the true test of his argument is if we see the speculative bubble burst in the next 6 months or so. Speculators are betting on the continued rise, and as long as they can find others to make that bet, the game continues. No different than speculation on any other asset.

Thanks for making my point. Care to share with us how much more income those making over $200k earned in 2005 vs. 2000? And what their average tax rate was? You also misunderstand my point. I am in agreement with anyone who believes tax rates are too high for all Americans and government spending is out of control. My argument is focused on the dubious supply side econ claim that tax cuts lead to an increases in tax revenues. Tax revenues fall in the year of tax cuts, then as long as gdp increases, next year's revenues will be higher than the previous year's revenues, but more than likely not higher than the year prior to the tax cut. Simply look at personal federal tax revenues prior to Bush's tax cuts, during, and after at www.cbo.gov. We are over-taxed and spending is out of control, which is why I won't vote repub or dem. I'm on your side on this issue. Where I am not is my focus on the question "do cuts in marginal tax rates increase or decrease tax revenues?" I've answered that in the paragraph above.

Which is why they can also sit back and say, "Gee, it's supply and demand...don't blame us..."

unregulated markets Interesting piece on how unregulated futures markets are contributing to rising oil prices. Regulated markets have a cap on the amount of contracts any single buyer can purchase to prevent speculators from doing exactly what they're doing now in the unregulated markets. As Keynes said, "Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes a bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill done."

SD, It is true that the top 20%'s share of income taxes paid has increased even though their marginal rates have been lowered. But it's one of those "other issues" I said the analysis ignores. The share of income received by the top 20% has increased from 41.1% in 1980 to 48.5% in 2006 (actually, almost the entire gain was made by the top 5%). Personal income (nominal) in 2006 was $11.6 trillion. The changing distribution of income meant that the top 20% received $1.2 trillion more income in 2006 than if their share remained at 41.1%. The so-called rich (top 20%) pay most of the federal INCOME taxes because they "earn" 50% of all income. Again, this is only one part of the picture painted in that article. First, SS revenues have been the most stable source for the government at roughly 6.5% of gdp since the Reagan tax increase. Second, when marginal rates have been lowered, federal income tax revenues are initially lowered; however, over time, as the distribution changes, of course income tax revenues increase again.

Yes, a brilliant piece. A graph that shows a roughly horizontal line at 19.5% because the vertical coordinates are such to make it look like there's virtually no movement. However, when one actually looks at the numbers from the CBO web site, those "little movements" from a $10 trillion base really mean something. For example, revenues as a % of gdp were 20.9% in 2000 and 16.3% in 2004. That change means a drop in revenues by a few hundred billion dollars. One doesn't quite see anything so significant from that graph. Or, the other period when marginal rates were reduced, in 1982 revenues were 19.2% and in 1986 they were 17.5%. Those almost imperceptible dips in the "hoser" graph, mean significant changes in revenues. That's why in both periods we saw the most significant increases in the government budget deficits. Yes GG, spending was NOT held in check, but revenues also dropped. The other big problem with the piece is that he shows the marginal tax rate changes and "total" revenues, which includes corp taxes, social security taxes, and a few other sources. If someone wants to make an argument about the effect marginal personal rates have on revenues, then focus on the individual income tax revenues, not total revenues. For example, while Reagan cut the marginal personal rate in the 1980s, the Greenspan Commission recommended an increase in SS taxes, which also happened under Reagan. There are a few more issues, but it's late...

The best public course for the $$ in the region, IMHO, is the former Hunter's Pointe, now Lochness Links, in Welland (unless you don't like links-style golf). It's about 30 minutes from the Peace Bridge. Of course, it also depends on your skill level. Ivy Ridge was developed by a couple of guys who essentially were copying the HP course. Ivy is a lot easier, but fun, and you don't have to go over the bridge. Harvest Hills is another links-style course. Both (Ivy and HH)are fun, but Lochness still reigns. http://www.hpgolf.ca/

Feingold I don't care who is in the White House, this BS should stop.

I think the Bills had a perfect scenario for their first two picks. CB and WR were the two most glaring needs. They end up getting the #1 CB, then have their pick of the three tallest possible WR R1 picks. They got another need position with the 3rd--they'd be lying if they said they went "bpa" here. The other major area of need was STs, and that's what I expected to see in the remainder of the draft, and it looks like they did that, for the most part. Certainly we can all disagree over various "needs" the Bills had, but I think they did a very good job of addressing most of the holes they had. Now let's see if we can find the next "jason peters" among the udfas! Thanks to all the knuckleheads for posting doom and gloom. Always entertaining!

Meant as sarcasm...