Study: U.S. Economic Status: Again, #1 in the World

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If every country in the world uses said system (and economists and other agree with it), then perhaps it does have some merits considering everyone does it. Regardless, because everyone else is doing it, comparisons between countries are still valid. You'd need to backup why the current system that everyone else uses and accepts is B.S. (sure it has flaws, but that does not mean we shouldn't use it).



Remember what was said non-sequtier arguments...your logic here does not follow. Banks get "extra money" and only businesses will use these loans because now the interest rate is slightly cheaper (business don't normally take out loans for that reason; if there are subsidizes involved, maybe they would)? Consumers are usually the ones more sensitive to interest rate changes at any rate (i.e. now that the market has such low rates, it is now time for me to take out a loan to buy my house/car/whatever). In case you are unaware, consumption makes up around 70% of GDP, while investment is 10%. If you are trying to prevent a recession, you'd target consumption.

You talk as if you know how the Fed works, but your words indicate you do not. The Fed does not print money, the Treasury department does. The Fed does not directly affect the money supply. It uses open market operations, changes the discount rate, and changes the reserve requirements to conduct monetary policy. If you've studied anything about the Fed, you should at least know of these three tools and how they work (and the limitations of them).

As for increases in the money supply screwing the average person, even that is not clear. Not everyone experiences "sticky prices" during times of inflation (my paycheck went up 5% recently for example). As long as productivity (and in turn wages) out paces inflation, then there is no problem. Honestly, the inflation we are experiencing right now is fairly mild anyway. I'm not rich, and I don't feel to terribly pinched by our current economic slowdown.



Oil is priced in the US Dollar, however, not every country uses the US Dollar as their currency. If these evil oil countries are raising prices just because of the declining dollar, then prices should not change in Europe where the pound and Euro remain strong vs. the dollar. I never said production decreased, but demand increased (and stability decreased). Basic economics teaches when supply stays the same or decreases and demand rises, you should see increases in price.



I know all about the history of Fed, and like most things in life, it isn't some irrational, massive conspiracy to pursue evil banker's aims (on reasons large conspiracies always fail is because someone talks, don't you think some Fed official would have by now). The Fed does not go unchecked by government (although, if it did, I'd say it is a good thing), it does have strong independence though (Congress can still pass laws affecting it, and government still appoints to the Fed). Again with the non-sequiter arguments....why would the Fed print all the money they want? It isn't to take out loans as inflation kills their returns and it seems unlikely it would be to help the government given your argument. If anything, they have an incentive not to do whatever they want just for prestige (which, unlike other government officials, the economists of the Fed would actually care about; if they do a good job, the rest of the profession would look towards them for future theory/policy). Can you provide any legitimate reasons as to why the Fed would just print money for the hell of it (except for inflation taxing, which we already established the Fed would not do since it would benefit the government only, not them)?

As for later comments...



Just as clarification, the guy only has a B.A. in economics and later acquired a MBA. I'm pretty sure they do not teach the graduate level econ that PhDs. practice when coming up with how to calculate stuff like inflation in his undergraduate courses (or in a MBA course for that matter). I also can't find any legitimate institutions or economists who back his methodology (if you find some, please post them; only blogs seem to reference him to justify their viewpoints so far).

Or rather, he would need to propose a better system, I'm sure everyone would be very interested.


That's my issue with ShadowStats; he's not willing to give the actual analysis that leads to his numbers and explain why his math is better than the math used by all the other economists. I didn't realize that his level of education was so comparatively low, which is probably part of why he can't/won't show his calculations. It's much easier just to post a graph showing his own claims of what inflation/unemployment/GDP are, but he could just as easily be making all that up as far as anyone looking at it is concerned.

Given the FACT that the US Dollar has fallen below BOTH the Canadian dollar AND the Euro, do you really those of us who are EDUCATED to believe this kind of BullSh1t?? Get a F*cking Clue!

You know Damn well that the unabated rises in oil prices which currently show NO sign of falling are having a VERY negative effect on the US Economy. I cant begin to tell you how Angry I am at the American Rights tired tactics of LYING to the public about the Real state of the US these days!

The price of oil has risen far less in terms of euros, pounds, Swiss francs, yens, Canadian dollars, gold ounces, Mexican pesos, etc than it has in terms of US dollars. Yes, some of the increase is real (i.e. not only attributable to the declining value of the dollar, but also reflecting that a barrel of oil is worth more goods and services internationally) but the declining value of the dollar has also contributed to the rising nominal dollar price of oil. It's not the only factor, but it is an important factor.

I agree with you about the Fed, though - if dollars started to be printed like there was no tomorrow (which the Fed alone couldn't do, at least not directly) the US economy would go the way of Zimbabwe's. The Fed's board is government-appointed and its very existence is ultimately subject to the consent of Congress.

Actually, gas is high in Europe (at least England) and is about the same if you control for taxes and the exchange rate. Using PetrolPrices.com, the US Energy Information Administration and an exchange rate calculator, and assuming 1 US gallon = 3.7854 litres, you should be able to see this too. According the previous websites, petrol is about $8.7/gallon in England. The government taxes gas by about $5/gallon in the UK, which places their gas price at $3.71. According to the EIA the average gas price in the United States was $3.72, not much of a difference really. However, the U.S. government taxes gas at .40 cents per gallon, so the U.S. gas price would really be $3.32 (comparing apples to apples), so the U.S. in reality has lower prices than England in this case. I'm pretty sure we could compare other European countries and we'd see similar results. If the declining dollar was responsible for large parts of the price increases, we should expect gas to be significantly cheaper in places like the U.K., which we don't see. Also, you should notice you don't see many economists citing the declining dollar for high gas prices, they tend to talk about demand and future speculation/supply.

yes, the price is similar minus taxes if you convert to dollars - but the change in price minus taxes has been more for the US than for other countries in the actual currencies they use. In other words, if you take a the price of a barrel of oil say, five years ago in both dollars and euros, and compare the prices in dollars and euros today, the barrel of oil would have risen more in dollar terms than in euro terms. In other words, while everyone is paying the same dollars for a barrel of oil (and hence consumers are paying comparable dollar amounts for fuel before taxes), the eurozone countries for example are paying less of an increase in their own money. If the price of a barrel in dollars goes up, but it's cheaper for you to buy dollars (because the dollar is weak), then the increase is not as great as if your currency is the dollar. If you're a consumer that gets paid in euros, what affects you (and hence demand) is the price of fuel in euros, not in dollars. So even if everyone pays, as you point out, a similar amount when converted to dollars, in real terms (in the actual currency they use, get paid in, etc) the cost of fuel has increased by different amounts (because the value of the dollar has not remained fix). Alternatively, you could say that while the price of oil has increased for everyone in dollars by the same amount, the incomes of people in many countries have also rapidly increased in dollar terms. Also, any costs paid by producers, middlemen, etc in a currency other than the dollar have increased in dollar terms, hence requiring higher dollar prices to maintain profit margins.
It is a somewhat similar phenomenon as tourists from the eurozone finding the US, unlike Americans, a much better bargain than a few years ago - they're not actually being charged a different price in dollars than Americans are, but their income is in euros and hence the number of dollars it is equivalent to has risen.
Since a similar analysis holds for just about every currency not pegged to the US dollar other than the Zimbabwean dollar, then it can be said that the weakness of the dollar (and not the particular strength of the euro) has contributed to the rise in the price of oil in dollars (though it clearly hasn't been the only factor).
That a weaker currency makes imports effectively more expensive while a stronger one makes them effectively cheaper is mainstream textbook economic theory.

But, why is gasoline more than twice as expensive in Europe as in the USA? Europe must be only half as good as the USA, if the gasoline is twice as expensive.

Because EUROPE you see has Much higher taxes than the US! The conservative republickin' Punks are going to give their Rich a$$es tax breaks and try to wipe out the middle class by putting the tax burden on THEM!
DEBT my friend, an uncontrolled unabated deficit is what Wiped Out the Soviet Economy. The US still has an enormous trade deficit with China and Japan which was being paid off during Clintons presidency and now is coming back to haunt us with the massive bill for the Iraq war.I am NOT suggesting that the US economy will suffer the fate that Russia's did in the 90s, but there IS the ever-present danger that we will face a major SLUMP like what happened in the 1970s. One of the biggest reasons why gasoline is so expensive in the US is the fact that the Dollar is WEAKENING and has fallen below the Euro! Bear in mind that there are PLENTY of other very efficient ways to get around in densely populated Europe than automobiles!

not politically...he's talking religiously and morally because that's all he knows. other than that, he adopts the fox news neo-conservative stance on issues that his pastor doesn't directly define for him.

you worked for EA too?

Looks like we are talking about different things somewhat. What I interpreted when someone says gas prices are high due to the weak dollar, I was thinking worldwide prices (since the price of oil is determined on the world market after all). You could make the argument that Europeans could be hit less hard due to their stronger currency, but because oil is traded in dollars, Americans still are not seeing higher prices because of the weak dollar (just other countries are hit less hard with stronger currencies). That is one annoying misconception people seem to have. The other is the fact they seem to think the King of Saudi Arabia wakes up one morning and decides "Today the price of oil will be $140 per barrel, bwhahahaa". In reality the price of oil is decided by a number of market factors (most strongly the forward price of oil (i.e. what people believe the price will be 1 year from now) and the spot price (price of delivery for today)). I don't particularly feel like going into how the price of oil works today, but I'm willing to go into it if need be.

As for other posts....

Debt did not wipe out the Soviet Union so much as Communism as a system was inherently flawed and could not be sustained. Also, trade deficits with foreign countries are not necessarily a bad thing considering what we gain. See this post and my previous as to why the dollar weakening is not the main reason for high gas prices.....

I don't quite believe that.




I loled.

Whilst that may be true, this sort of growth is not sustainable. Even if we expand into space, we will have to slow down economic growth and stop throw-away consumerism.
Also, there is massive economic inequality in the US, compared to most European nations and Japan.

The fears of sustainable growth goes back to the Roman Emperors. People all the time keep on predicting that our level of growth is not sustainable and we'll be out of X resources in Y years, yet here we are and resources have not run out. One of the main reasons (aside from flawed logic) is simple prices. Prices encourage people to conserve and businesses to research new and more efficient ways of doing things (which in turn leads to new development/uses of resources). If land becomes more and more scarce in the U.S., we'll start living more like the Japanese for example.

As for income inequality, that does not matter at all. Tell me, why should we be concerned about it to begin with? Fairness does not matter and is not a valid argument in a discussion (at least you'd need to come up with a legitimate reason why fairness matters). In life, people have different families, natural abilities, intelligence, looks, etc, which many would argue are more important in life than income, yet we don't complain about the uneven distribution of good looking people and try and "even it out". Aside from that, isn't it better to focus on growing the economic pie rather than fighting over the distribution of the pie.

One outstanding example of fairness at work was the GI bill after WWII which extended the possibility of higher education to a huge number of veterans who could never have gotten the higher education which resulted in outstanding advancements in all sorts of individual capabilities without it. The whole economic system benefited from that investment as the best resource of any country is the potential capabilities of its citizens.

The are seeing higher prices because they're competing against all other consumers of oil - if others have, in dollars, a greater purchasing power (because of the exchange rate), then demand in dollars is going up and hence price in dollars goes up. Also, costs are rising in dollar terms anywhere not in the US or anywhere currency is pegged to the dollar. The weak dollar directly increases demand in dollars and costs in dollars, hence a higher price in dollars. It is textbook economic analysis that prices of imported goods go up if your currency falls.