I'm intrested to see if anyone will even argue this one.

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I do believe that low and steady inflation, as opposed to stagnation, deflation, or high inflation, is generally not considered a bad thing.

With all the money that the Fed has been printing out of thin air to bail out banks and everything, price inflation is inevitable. TRILLIONS of dollars now has been added to the economy, and more keeps being added. This is how Post-WWI Germany and Yugoslavia destroyed themselves (and how Zimbabwe is currently).

I don't think they've resorted to printing this extra money at this point. It's all been through loans and bonds, etc.

In the world of Electronic "money" that essentially the same thing.

Government intervention during the great depression didn't start until around ~1934 when FDR was elected president with his New Deal program.

I'm well aware of this, but that doesn't address the comparison to Japan in the 90s. Japan poured in massive amounts of money out of thin air, ran up huge deficits, but it still had deflation. I'm not saying that having our economy look like Japan's is exactly a good thing, but I think it is necessary to address Bernanke's comparison.

Yes, I think it will be a great depression, but not like the last one.

Technology is better, we are a wealthier nation. We won't have anyone starve. But lots of jobless, lots of failed businesses. A huge plunge in the personal income and value of real property. Stock Market will drop to 5,000.

I'll say right away I'm no expert in economics that being said....

We have so much debt in this country that technically we are more then broke we are indebted to other country's. our money is not backed by anything! it is monopoly money.

I'm worried that other country's will pull there investments out and the dollar will completely crash.

Isn't it japan that has a lot of money pouring into our economy through some kind of investments or am i getting my info mixed up?

The economy doesn't work like that. Other governments have loaned us money. We give them money in return with interest. Other nations yes, will reduce the number of dollars they invest in the US, simply because they too are making less money because we are giving them less money to give back to us off their investments.

The US is worth something, we just don't know how much. We have to ride the economy all the way down to the bottom. Then we will come back up.

Debt can be good or bad. If it is for investment, it is good. It is on junk, it is bad. What we have to be careful about is how much of our GDP we spend on interest on the debt.

Only with regard to extent and duration. The U.S. entered into an economic depression starting in 1931 and we did not get out until 1940. And this had little to do with the FDR New Deal. It was cranking up to arm Britain against Germany that pulled the U.S. out of the economic doldrums. Hitler had more to do with ending our economic depression than FDR and his cronies.

ruveyn

I really don't know where this piece of disinformation comes from, but I'm going to make one more valiant effort to squash it: THE US's DEBT IS NOT *YET* UNMANAGEABLY HIGH. After this year, yes, we'll probably top out Western Europe, but we're nowhere near Italy, Japan, or even our own record as a percentage of GDP. The problem isn't the raw amount of debt, it's the rate at which it's accumulating. For the time being, the dollar is seen as a fairly good place to have your money (witness the strength of the dollar, and the looming specter of default among the harder hit EU countries).

I'm not saying things are *remotely* honky-dory, but we aren't broke...yet.

A couple points...

Fractional reserve banking is what allows a credit system to be possible.

Money doesn't have to be of intrinsic value- actually, there are very good theoretical reasons why money should not have intrinsic value. Also, the "specie" or metal-based currency you're promoting also has no intrinsic value. Why are you arbitrarily assigning value to gold? It's no better than paper as money. The main different is that gold is harder to obtain in sufficient quantities to be useful as money.

And the article you linked to is complete crap.

I don't think we should have money at all. Large extended families should make most of what they consume themselves, and barter for what they can't. It would be primitive, and could only support a world population of about 300 million, but those 300 million would live pure lives. Life would be hard, but more importantly there would be none of this relying on other people for stuff.

And why i is also inherently unstable and inevetibly leads to collapse.


Gold is but one type of specie. In fact, gold has lost value oon occasion when supply exceeded demand - see Spain in the 1500s...


Please explain why it is complete crap. Your brilliant and expansive 19 y/o economic world view should be able to defeat it point by point...

loan a man a pound, and you are his master
loan a man a million pounds, and he is your master - anon

The problem is that the 'actual' money lost is much less than the 'virtual' money lost. A lot of the 'profits' were illusory.

The money multiplier effect in general would result in inflation (a dollar out is spent several times; say 6; you've in effect created 6 'dollars').

The money being sent out is real. But until the virtual losses are recouped, the money is just vanishing into different accounts.

It's going to be long, hard, and painful; the 2010 elections will be fought over the continuing recession (supposedly it's when we come out of it).

If only the media wasn't so audibly rubbing their hands in glee; I swear there's a 'first news org to call the depression' bet going on out there.

That sounds great in theory, but has already been tried, and failed. After the American Revolution, there were 13 separate currencies, one for each state, as well as a number of privately issued currencies floating around. The situation was fiscal chaos, even in the days when travel was by foot or horse. The new government was forced to grab control of the money supply, and institute what we today would call a gold standard. Gold and silver were made the approved legal tender, and control over them given to the government.

Private currencies persisted for another century, a big reason why the Federal Reserve was created, to force a single standard of paper notes on the country. A loophole in the Federal Reserve Act allows the printing of private currency as long as it is not called a Federal Reserve Note. During the Hoover Administration private currencies reemerged as a local stopgap against massive deflation. In the last decade a handful of small towns have experimented with private currency in order to keep big box retailers like Wal Mart out of their communities. In reality, money is whatever society agrees it is. It is in reality a medium of exchange, not a store of wealth. We've eliminated the distinction in social terms, and are now paying.

Monetary systems operate by social consensus. A good example of this can be found in the history of San Francisco. In the 1860s a local business tycoon named Joshua Norton went insane after one of his deals failed, and he proclaimed himself emperor of the United States (and later, "Protector of Mexico"). He took to marching around in an old European general's uniform.

SF at the time was like a big small town, a big family, so everybody played along with the joke. Norton was served for free at the city's finest restaurants. He eventually printed his own money, and circulated it. This "money" was so widely accepted in SF that for a while gold coins were under serious challenge. Now, a madman's fake money had no real value, but the city, by social consensus, agreed that it was legal tender, so it became so. Norton is also credited with devising a plan to span the area's bays with bridges. The plan became the blueprint for the New Deal built bridges that now exist.

What value does money have? Whatever society says it does. For a while, the Roman Empire paid soldiers in salt, after the denarius had been rendered worthless by hyperinflation. This was called salt money, "salarium" in Latin, which is the origin of the English word salary. The authors of that article are clueless. Do they really think we could ever mine asteroids for gold within the foreseeable future? Space elevators?