Obama Says U.S. Can’t Afford ‘Bubble-and-Bust’ Cycles

[one...two...tree 2,762]

Kim Chipman

March 12 (Bloomberg) -- President Barack Obama warned a group of chief executive officers that the U.S. can't continue with "endless cycles of bubble and bust" and must build a new foundation for future economic growth.

The financial markets crisis is only part of the challenge to the U.S. economy, Obama told the Washington-based Business Roundtable today.

The current turmoil can't be used "as an excuse to keep ignoring the long-term threats to our prosperity" from the rising costs of health care and energy and a faltering education system, Obama said to the group, which is made up of CEOs from U.S. companies including Citigroup Inc., Exxon Mobil Corp. and General Motors Corp.

Obama is campaigning to maintain public support for his economic strategy, which includes new government spending as part of a $787 billion stimulus plan and stabilizing the banking industry and housing, as well as tackling the health-care system, energy and education. He also is defending his plans against critics among congressional Republicans and some Democrats.

'Fundamental' to Growth

"I'm not choosing to address these additional challenges just because I feel like it, or because I'm a glutton for punishment," Obama told the business leaders. "I'm doing so because they are fundamental to our economic growth and to ensuring that we don't have more crises like this in the future."

http://news.yahoo.com/s/bloomberg/20090312...rg/arahxwms43r4

[mRx 16]

Does this mean that Obama will relinquish the government's power to counterfeit our currency?

Because, surely, his economic advisors have advised him that the reason we have 'bubble-and-bust' cycles is because of money creation.

[Dan J 277]

Does this mean that Obama will relinquish the government's power to counterfeit our currency?

Because, surely, his economic advisors have advised him that the reason we have 'bubble-and-bust' cycles is because of money creation.

The last two bubbles had nothing to do with inflation. If the Fed had anything to do with the recent bubbles, it was keeping interest rates low. Which encouraged a lot of investors/banks to invest on credit. But in the end you can only leverage yourself so much before it all falls apart, especially when your investments start failing.

[mRx 16]

Does this mean that Obama will relinquish the government's power to counterfeit our currency?

Because, surely, his economic advisors have advised him that the reason we have 'bubble-and-bust' cycles is because of money creation.

The last two bubbles had nothing to do with inflation. If the Fed had anything to do with the recent bubbles, it was keeping interest rates low. Which encouraged a lot of investors/banks to invest on credit. But in the end you can only leverage yourself so much before it all falls apart, especially when your investments start failing.

Don't you see that in forcing the interest rates down, the Fed had to create money and perpetuate fractional reserve banking? The market errors made by investors/banks was due to the artificially low rate. Now the errors are finally revealed.

[Dan J 277]

Does this mean that Obama will relinquish the government's power to counterfeit our currency?

Because, surely, his economic advisors have advised him that the reason we have 'bubble-and-bust' cycles is because of money creation.

The last two bubbles had nothing to do with inflation. If the Fed had anything to do with the recent bubbles, it was keeping interest rates low. Which encouraged a lot of investors/banks to invest on credit. But in the end you can only leverage yourself so much before it all falls apart, especially when your investments start failing.

Don't you see that in forcing the interest rates down, the Fed had to create money and perpetuate fractional reserve banking? The market errors made by investors/banks was due to the artificially low rate. Now the errors are finally revealed.

What do rates have to do with money supply?

The rate has to do with interbank lending, generally banks don't borrow money from the federal government unless there is a specific reason to do so, like the recent bailout.

The rates were kept low to allow the market to keep growing. It didn't really matter that most of the growth was based on speculation, and would eventually collapse. There was money to be made and everyone was happy.

[mRx 16]

Does this mean that Obama will relinquish the government's power to counterfeit our currency?

Because, surely, his economic advisors have advised him that the reason we have 'bubble-and-bust' cycles is because of money creation.

The last two bubbles had nothing to do with inflation. If the Fed had anything to do with the recent bubbles, it was keeping interest rates low. Which encouraged a lot of investors/banks to invest on credit. But in the end you can only leverage yourself so much before it all falls apart, especially when your investments start failing.

Don't you see that in forcing the interest rates down, the Fed had to create money and perpetuate fractional reserve banking? The market errors made by investors/banks was due to the artificially low rate. Now the errors are finally revealed.

What do rates have to do with money supply?

The rate has to do with interbank lending, generally banks don't borrow money from the federal government unless there is a specific reason to do so, like the recent bailout.

The rates were kept low to allow the market to keep growing. It didn't really matter that most of the growth was based on speculation, and would eventually collapse. There was money to be made and everyone was happy.

Because banks get their money from the Fed, for a certain rate, called the discount rate, and as the rate lowers, it will aggrevate borrowing from depository banks, who then initiate the fractional reserve process, as we've seen as the current bubble has grown; now burst.

[Dan J 277]

Does this mean that Obama will relinquish the government's power to counterfeit our currency?

Because, surely, his economic advisors have advised him that the reason we have 'bubble-and-bust' cycles is because of money creation.

The last two bubbles had nothing to do with inflation. If the Fed had anything to do with the recent bubbles, it was keeping interest rates low. Which encouraged a lot of investors/banks to invest on credit. But in the end you can only leverage yourself so much before it all falls apart, especially when your investments start failing.

Don't you see that in forcing the interest rates down, the Fed had to create money and perpetuate fractional reserve banking? The market errors made by investors/banks was due to the artificially low rate. Now the errors are finally revealed.

What do rates have to do with money supply?

The rate has to do with interbank lending, generally banks don't borrow money from the federal government unless there is a specific reason to do so, like the recent bailout.

The rates were kept low to allow the market to keep growing. It didn't really matter that most of the growth was based on speculation, and would eventually collapse. There was money to be made and everyone was happy.

Because banks get their money from the Fed, for a certain rate, called the discount rate, and as the rate lowers, it will aggrevate borrowing from depository banks, who then initiate the fractional reserve process, as we've seen as the current bubble has grown; now burst.

The fractional reserve process is a basis of our modern banking system. It helps make our financial system much more efficient. Its true that over time it will likely increase the supply of money in the economic system, which will increase inflation. This can be controlled by increasing the rates or increasing the reserve requirements of banks.

I can see how the low rates fed into the bubble, but I can't see how extra money did. Most of the price inflation on particular commodities or properties was primarily driven by an artificial increase in demand. The property market saw an increase in prices due to artificial demand created by lax lending standards. Oil prices went up with artificial demand created by speculative investors.

We probably will see more inflation overall in the near future. If its evenly distributed, its not necessarily a bad thing (If prices increase overall by 3% and salaries across all classes do too, then nothing really changes). But often inflation tends to affect a particular sector or class much more dramatically than others (prices go up, but salaries only go up for the wealthy, which makes everyone else relatively poorer).

[mRx 16]

Does this mean that Obama will relinquish the government's power to counterfeit our currency?

Because, surely, his economic advisors have advised him that the reason we have 'bubble-and-bust' cycles is because of money creation.

The last two bubbles had nothing to do with inflation. If the Fed had anything to do with the recent bubbles, it was keeping interest rates low. Which encouraged a lot of investors/banks to invest on credit. But in the end you can only leverage yourself so much before it all falls apart, especially when your investments start failing.

Don't you see that in forcing the interest rates down, the Fed had to create money and perpetuate fractional reserve banking? The market errors made by investors/banks was due to the artificially low rate. Now the errors are finally revealed.

What do rates have to do with money supply?

The rate has to do with interbank lending, generally banks don't borrow money from the federal government unless there is a specific reason to do so, like the recent bailout.

The rates were kept low to allow the market to keep growing. It didn't really matter that most of the growth was based on speculation, and would eventually collapse. There was money to be made and everyone was happy.

Because banks get their money from the Fed, for a certain rate, called the discount rate, and as the rate lowers, it will aggrevate borrowing from depository banks, who then initiate the fractional reserve process, as we've seen as the current bubble has grown; now burst.

The fractional reserve process is a basis of our modern banking system. It helps make our financial system much more efficient. Its true that over time it will likely increase the supply of money in the economic system, which will increase inflation. This can be controlled by increasing the rates or increasing the reserve requirements of banks.

And that is what sets off the first domino of the recession. Inflation cannot go on perpetually, and the Fed knows this. When credit contracts, the malinvestments made into capital are revealed, as it did with the housing market, and the bubble bursts.

I can see how the low rates fed into the bubble, but I can't see how extra money did. Most of the price inflation on particular commodities or properties was primarily driven by an artificial increase in demand. The property market saw an increase in prices due to artificial demand created by lax lending standards. Oil prices went up with artificial demand created by speculative investors.

I agree with everything that you say here. Just realize that the artificial demand was created by monetary policy. The money had to come from somewhere. Obviously the banks didn't have enough, otherwise they would've been lending at a low enough actual market rate, and the government would've seen no need to adjust the rate to stimulate lending. The money came from the Fed. It fed through FNMA and FRMC, and it restructured the lending market. But the origin leads back to the money creation by the Fed.

We probably will see more inflation overall in the near future. If its evenly distributed, its not necessarily a bad thing (If prices increase overall by 3% and salaries across all classes do too, then nothing really changes). But often inflation tends to affect a particular sector or class much more dramatically than others (prices go up, but salaries only go up for the wealthy, which makes everyone else relatively poorer).

Inflation can never be evenly distributed. The wealthy will always have access to it first; The big borrowers: corporations, big businesses. Prices will have risen before wages do. That's why inflation is the hidden tax on the poor.

Inflation tends to affect the particular industries that are being directly stimulated the most, and first. But it makes it's way eventually thoughout the economy.

[Pinocchio Liberal 268]

Obama is full of shite! you all know it, but because you voted for him your willing to go to the soup line for him! You hired him you can get rid of him n 2010! We got to shut him down now!

[spookyturtle 9,466]

Obama is full of shite! you all know it, but because you voted for him your willing to go to the soup line for him! You hired him you can get rid of him n 2010! We got to shut him down now!

Probably be better to shut you down instead.

[Hilarious Clinton 452]

Obama is full of shite! you all know it, but because you voted for him your willing to go to the soup line for him! You hired him you can get rid of him n 2010! We got to shut him down now!

No honesty among the Obama voters.