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08/09/2009

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Anonymous

What theory should guide policy makers in navigating between the rocks of laissez-faire bubbles and crashes and the shoals of government paternalism?

Anonymous

I hope you're right.

Anonymous

What happens next?

As soon as the flag is waved on the present recession, capital will start to flood the financial markets again along with rising interest rates. When this happens though, problems will start to arise. In exponential numbers.

Anonymous

What worries me is that the government has created a humongous debt overnight, which it may not be able to repay or service without creating a severe inflation that will render the owed money near-worthless. What do you think about that prospect?

Anonymous

On this debate, at the risk of sounding a note of uninformed optimism, I must side with the celebrated economist over the celebrated lawyer, if for no other reason than the plain fact that lawyers earn their keep on bad news.

Anonymous

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Anonymous

Not if you're listening to the American media. Everyone is still screaming about the recession and how it's bound to get worse any second now. Maybe they're just trying to keep us tuned in...

Anonymous

Well ..., I'm glad to see and hear from Gary Becker some optimism along with the Federal Reserve in regards to economic activity. As for the Financial Industry in regards to their creation of exotic financial instruments, such as, derivatives based on the Black-Roach equation, unstable mortgage backed securities, hedging funds, credit/default swaps and the like, all taking place Over The Counter or in the backrooms and hallways of Wall Street. Creating huge "black pools" of money, debt and credit all out of the sight of the Public and Governments. We have a real problem!

Recession or Depression? Definitely a Depression in the making until the massive cash influx. Now a Recession on the rebound? Hopefully, but we can always still backslide into that abyss of Depression. Remember, there are still 15 million Americans deprived of their livelihoods and the number is climbing, Forecosures on the rise, Bankruptcies on the rise. Tent Cities developng around the country. Hunger rising in the Land. Remember, "it ain't over till it's over" and 15 million plus Americans are returned to their livelihoods and once again meeting their financial obligations.

And I always thought that the reason for the existence of the Financial Industry was to provide credit and financial resources for the development of productive Industries that actually added value to materials and so created profit. Not only for the Capitalist, but Labor as well. Guess I was wrong. Welcome to the new Economic paradigm.

Anonymous

Whenever someone complains about "tent cities developng [sic] around the country," why do I get this crazy suspicion they did not grow up in the days when folks only had 2 or 3 stations to tune into on the TV? Economic hardship is a concept that exists in relative terms alone. My parents and grandparents would have spit on such whiners.

Anonymous

Anon, 12 2009 8:39pm,

I take it you were standing at the California border along with all the other thugs and helped to beat hell out of the Okies as they tried to cross. And I won't even mention the massive destruction of the family farm across the Nation by the Banking System, nor will I raise the issue of massive bread and soup lines that developed as well. As for your "spitting" on such "Whiners", you sir or madam as the case may be, the Nation has no need of the likes of you.

Anonymous

That's NICE!!!

Anonymous

Fortunately for you, Anonymous at 8:43 a.m., my ancestors fought in General Washington's army, thus guaranteeing your ability to make cheap and impudent comments. Assuming you had any ancestors around at the time, mine undoubtedly would have spit on them. Now, please go out and get a job. If necessary, go stand on a street corner and hire out for day labor. It won't kill you to actually try being a proletarian, as opposed to spending your days in a darkened room littered with old pizza boxes and candy bar wrappers, whining about how tough life is.

Anonymous

Thank you Dr. Becker,

This site coupled with your insight continues to be a source of excellent perspective on matters economic.

Tom Philbeck

Anonymous

Anon. Aug.13, 2009 10:07pm,

Only as far back as the Revolution? My, My, you are a new comer. My 5-6 Great Grandfather was only a Subaltern in the Pa. Militia during the French and Indian Wars and after moving on down to the New Middle River in the Shenandoah, wild Indian country at the time, later became a scout for General Daniel Morgan and Nathanial Greene all of Continental Army fame. As a matter of fact, two family members were killed in action at Cowpens and Guilford Court House. Later he and his and family helped Danial Boone and Company open up the Cumberland Gap settling Kentucky. They later moved on up into the Northwest Territory carrying Congress's Ordinance for the Territory with them. This Ordinance later become the basis of all the State Constitutions throughout the Midwest and the Western States as well. We were Federalists then and are Federalists now. What happened to you? Become subverted and corrupted by the the Anarcho-Capitalist propoganda? Dumping its hatred and filth across this fair land.

You sir or madam, are the true Anti-American and threat to the continued existence of this Nation.

Anonymous

In fact, Anonymous at 10:07 p.m., 8/13/09, based on what you say (assuming its truth), my ancestors preceded yours on this continent by at least a century. My ancestors possibly could be forgiven for allowing yours to enter.

Our Republic was founded upon reason. Give reason a try.

Anonymous

Anon. Aug.14, 2009 8:27pm

Well..., so we're finally getting around to fact, reason and truth/falsity, that's a good sign. Now it's time to let the B.S. fall to the wayside and as a great American once commented, "...it has come time to think anew and act anew." For we are caught in times that may very well destroy the Nation and its People.

Anonymous

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Anonymous

When China passes the U.S. as the world's dominant economy, you can blame our politicians who combine timidity with the single-minded goal of winning elections rather than improving America.

You also can blame the economists, who sell the notion federal debts are unsustainable and cause recessions, inflations, high taxes and high interest rates. Sadly, no evidence supports these beliefs.

--Fact: The U.S. government has the unlimited ability to print money, thus the unlimited ability to "sustain" any size debt.

--Fact; In only 15 years, from 1979 through 1994, taxes were cut and the federal debt grew an astounding 500%. It did not cause inflation or high taxes. Instead, we entered a long period of economic growth, low taxes and moderate interest rates. An identical 500% growth would yield a $72 trillion debt in 2024, and an average deficit of $4 trillion -- and the same kind of economic growth, low taxes and moderate interest rates.

--Fact: All six depressions in U.S. history immediately followed several years of federal surpluses. All recoveries coincided with increases in debt growth.

--Fact: All nine recessions in the past 50 years immediately followed reductions in federal debt growth. All recoveries coincided with increases in debt growth, such as we are seeing, today.
--Fact: There is no historical relationship between high interest rates and slow economic growth. Similarly, low interest rates have not stimulated growth.

--Fact: There is no historical relationship between deficits and tax rates. Without tax increases, there is no mechanism for our grandchildren to pay for deficits.

Email me for data to support each of the above, counter-intuitive facts.

The unsupported fear of federal deficits in the U.S., when compared with the lack of such fear in China, is why we will fail and they will succeed.

Rodger Malcolm Mitchell
rmmadvertising@yahoo.com
http://www.rodgermitchell.com

Anonymous

You said, "The 1930s had a fast recovery for a couple of years during 1934-36 before it fell back into another severe depression."
In the period 1929 - 1934, the federal government ran a deficit (i.e., pumped money into the economy). In 1935 deficit growth began to be reduced, actually becoming a surplus (i.e. removed money from the economy). In 1937, the "2nd depression" began. This depression ended with the resumption of deficit growth in 1939.
More recently, every recession in the past 50 years (there have been nine), began with a series of years having reduced deficit growth, and ended with increased deficit growth.
By planning to reduce the deficit when the current recession is "cured," the Obama administration duplicates the errors that extended and worsened the Great Depression.
Because a growing economy requires a growing supply of money, growing deficits are necessary for economic growth.

Rodger Malcolm Mitchell
rmmadvertising@yahoo.com
http://www.rodgermitchell.com

Anonymous

First, following the thread on ancestral ties to the Revolution, my ancestors moved from Massachusetts to Georgia at the time of the Revolution. The Graves side of my family came to the colonies in the early 17th Century. I have to wonder if they were loyalists. I hope not since I support the Revolution, but I don't know. My family has been in the South ever since.

Second, here is the key problem resulting from the interventionist efforts by the Fed identified but under-emphasized by Professor Becker: "...the enormous excess reserves that have a considerable inflation potential...."

Yes, we have dodged a bullet because of the aggressive actions of the Fed to re-inflate the money supply after the potential for a staggering correction loomed over the economy after decades of artificially stimulating the economy through excessively low interest rates. That on-going policy by Alan Greenspan set us up for last year's meltdown. The Greenspan strategy operated under the false assumption that as long as the general price level did not rise dramatically the economy was not being inflated by loose credit. What Greenspan and monetarists missed was that inflation is possible without a noticeable rise in the general price level as bubbles are created. That is what we are in the process of repeating.

The increase in credit has been so great in the past few months that it is likely that within the next two years that we will see the price level spike. But even if we do not, bubbles are in the process of developing as we speak and write. Then it will be deja vu all over again.

Anonymous

Dear Dr. Becker,

I know you are not generally in the habit of answering questions, but I have one to ask you anyway. Is there any relationship between level of education and unemployment other than a simple inverse correlation? I understand the value of education (my father came to America from Europe to complete his medical training), and agreed when I heard you comment on NPR once that, 'if you don't get an education, you are going to be a loser,' but I think there is a compelling argument that smarter, more capable people tend to become more educated by virtue of their talent (think of it as rational specialization), which is a lurking variable behind both their education and socioeconomic success.

The detailed breakdown of the economic data is interesting, but I am surprised that you failed to specifically mention that the number of people without jobs actually increased by over 200,000;the unemployment rate dropped because of discouraged workers. Also, I think equity markets are a bit over-valued and poised for a pullback, but that's just me trying to beat the market.

Sincerely,


Luca

Anonymous

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Anonymous

The world may rebound, but the US is headed for a steady decay. We are now a socialist nation headed towards our president's communist ideology, a total pop in this artificial mess is inevitable. We haven't seen the worst boys and girls. There is going to be chaos on our streets. A tax revolt is right around the corner.

Our govt. is bankrupt and the communist in the white house now wants to make more BS promises in a govt. healthcare system? Why not, let's just start the revolution now...!

Anonymous

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