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[The Headliner]

I'll be honest, I've never really taken much heed of the doomsayers who fill the news with warnings about economic downturns and double dip recessions. Recent developments in the Eurozone have been a mild diversion, but other than the possibility of a whole currency collapsing, financial talk is a topic that has bored me to tears for years.

But now that I'm looking to get on the property ladder, I've had my head filled with scare stories about the risk of impending disaster in the months ahead. The issue is finally having a real and direct effect on me, beyond raising the price of a loaf of bread.

So now that it's got my attention, what about you? Do you worry about the economy? Has it had an impact on your life, and are you feeling cautious about making big commitments in the near future? Or do you still feel like it's someone else's problem and it'll all come out in the wash?

[Advocate]

I am lucky that I live in Canada where we weathered the storm of the recession pretty well.  However, if the Euro or the US go down, we are in trouble.  I work for the government, so the government is always looking to cut back in times of recession, so my job could go.

I am somewhat confident that we will emerge out of the current recession without heading in deeper (double dip recession or a collapse).  I am not confident in the ability that we will be avoiding one again in the next coming years.  Economic downturns are part of our economy, but I am talking major recession.  I think Europe can get its ducks in the row and clean up their mess.  But I am not sure about the United States. 

I find the politicians in the US unable to make the decisions needed to tackle the problem.  I look at all Republican candidates for President who's sole economic platform is reducing taxes on the rich and removing regulations.  Even John Huntsman who is somewhat reasonable has fallen into that pit.  First, lowering taxes on the rich will not do much.  The issues with the American economy are structural.  It does not encourage entrepreneurship anymore, and just props up old, inefficient industry.  In addition, these issues will do nothing more than increase the American debt until it comes crashing down.

It is actually pretty scary, because unless there are MAJOR political changes, nothing will happen.  By major political changes, I am talking things like:
- Increase the parties to at least four major ones
- Removing many of the powers of President (should be House and Senate.  I prefer a parliamentary system)
- Strict campaign financing laws.  IE: no person can donate more than $500 a year.  No party can receive donations from organizations or companies.

[Ethan]

I don't worry about it, yes I am trying to leave my career to be an IT. However I am in the business of doom saying, so as more people look to the news, the more money I make. I'm good either way personally.


The truth that many people do not want to face, atleast in the US, is that taxes will need to be raised. So for the last 12 years, as this debt has been growing, the government on both sides have been looking for creative solutions. Meh, creativity only goes so far. The plan of giving more money to the poor, only works if they equally spend that money on garbage.

However they have been saving and paying the bills, so thus problem.

[Hazzy]

There's nothing that can be done so long as we live in a money-based system, especially a capitalist/free market one. Money is created WITH debt attached. There's no way to escape debt. Like Advo said, the system is designed to boom and bust. You can do whatever you want - increase taxes, encourage more business, fire free money balloons from cannons - the fact is, there will always be debt. The government creates money through loans, which have to be paid back with interest on top. As the money supply grows, the national debt grows with it.



So all this bailing countries out and saving the economy talk, I just let it go over my head. It's all pointless. My attitude at the moment is that I just want to make enough to live on comfortably, which for me will be about £6000 a year (based on sharing a flat with Illy, also making that amount). To get that I need to be earning £50 a week more than I currently am. And I try and do it in the most ethical way possible, as close to the bottom of the ladder as I can get basically. I clean up after people, so I'm not exploiting anyone or getting more than I deserve for nothing, I just do the manual labour and get paid and that's that.

[Advocate]

I don't worry about it, yes I am trying to leave my career to be an IT. However I am in the business of doom saying, so as more people look to the news, the more money I make. I'm good either way personally.


The truth that many people do not want to face, atleast in the US, is that taxes will need to be raised. So for the last 12 years, as this debt has been growing, the government on both sides have been looking for creative solutions. Meh, creativity only goes so far. The plan of giving more money to the poor, only works if they equally spend that money on garbage.

However they have been saving and paying the bills, so thus problem.

Economics 101 proves that giving more money to the poor is far more efficient than to the rich, as far as taxes go.  I am no socialist, but right now, the favour is in the rich.  Thing is, every proposal right now has things being taken away from the poor, while giving more to the rich.  Health care costs increasing, limiting welfare, raising the costs of education, etc, so that someone making $1 million a year can have his taxes reduced.  From a practical point of view, it just does not make sense.

Keep in mind something too.  You only pay the higher tax rates on the addition money you make.  Everyone pays the same tax rate on $40k.  If you make $40k, you pay the same tax rate on the first $40k as someone who makes $1 million.  Anything you make after the next tax bracket is taxed at a higher rate, but not your whole income.

[Advocate]

There's nothing that can be done so long as we live in a money-based system, especially a capitalist/free market one. Money is created WITH debt attached. There's no way to escape debt. Like Advo said, the system is designed to boom and bust. You can do whatever you want - increase taxes, encourage more business, fire free money balloons from cannons - the fact is, there will always be debt. The government creates money through loans, which have to be paid back with interest on top. As the money supply grows, the national debt grows with it.

This, this is just not true.  We lowered our debt in Canada, but did not lower our money supply.  You can eliminate Federal debt and still have money.  It is printed and valued at a supply and demand rate. 

[Hazzy]

I don't know how it works in Canada, I just assumed it was the same worldwide. Which is why when any country in the Middle East tries to shake the status quo, America goes to war with them.

If it's printed at a supply and demand rate, then... surely everyone is demanding money. Everyone wants more money. Why aren't they supplying it? Because limiting the supply of money is what gives it the value it has. It's only through restricting money from the poor that the rich can brag about how wealthy they are. It's completely unethical.

How is money made if it isn't from debt? And how did Canada eliminate its Federal debt?

[Advocate]

Please do not take this as being rude, because I am glad we are having a discussion here.  But never use youtube as a source.  Unfortunately, some people, like the ones who created the video, learn a little bit about some things, and then think they are authorities.

When I talk about the value of money, and supply & demand, I am talking about currency.  Most nations have a floating currency.  Some have others, but I am not going to get into that right now.  The more that currency is used without printing any addition dollars, the more it is worth.  So take the American dollar.  The American dollar was higher than it is now, because many nations used it and much of the world business is done in American dollars.  It has been decreasing in value, because the US market is not as well used. 

Printing money devalues it.  It increases inflation.  After World War I, the Germans tried to print money to pay for its reparations.  All it did was devalued the currency and people then needed grocery bags of money to pay for bread.

Now, the idea that the value of currency holds people down and keeps the poor poor, is not accurate.  The poor are poor not because the value of currency.  You can change that value and the poor will still be poor and the rich will still be rich.  The difference in wealth are not due to a value on a bill, but instead in assets.  Essentially, the rich just have more.  If you printed more money and gave it to the poor, it would just devalue the dollar and they would need more dollars to buy the same things that they did before.  Pretty much, if it now costs $1 for a litre of milk, you print more money and the poor may have twice as much, but now the milk is $2 for a litre.

Canada did not eliminate its deficit.  It lowered it.  It lowered it by raising taxes, not lowering them in good times, cutting spending.  Then, when things were good, it was able to increase spending and lower taxes.  Government has mainly two sources of revenue, 1) taxes, 2) loans.  When it cannot pay for its budget with the current taxes, it must borrow to make up the short fall.  It could print money to do it, but since it creates inflation, you really are not going to be able to pay for anything on it. 

[Hazzy]

Printing money devalues it.  It increases inflation.  After World War I, the Germans tried to print money to pay for its reparations.  All it did was devalued the currency and people then needed grocery bags of money to pay for bread.

Now, the idea that the value of currency holds people down and keeps the poor poor, is not accurate.  The poor are poor not because the value of currency.  You can change that value and the poor will still be poor and the rich will still be rich.  The difference in wealth are not due to a value on a bill, but instead in assets.  Essentially, the rich just have more.  If you printed more money and gave it to the poor, it would just devalue the dollar and they would need more dollars to buy the same things that they did before.  Pretty much, if it now costs $1 for a litre of milk, you print more money and the poor may have twice as much, but now the milk is $2 for a litre.

Canada did not eliminate its deficit.  It lowered it.  It lowered it by raising taxes, not lowering them in good times, cutting spending.  Then, when things were good, it was able to increase spending and lower taxes.  Government has mainly two sources of revenue, 1) taxes, 2) loans.  When it cannot pay for its budget with the current taxes, it must borrow to make up the short fall.  It could print money to do it, but since it creates inflation, you really are not going to be able to pay for anything on it.

That's what I meant. I didn't mean give money to the poor so they're not poor anymore. I was saying exactly what you just said. The poor will always be poor. There's no way to solve poverty in a money-based system like this. You can raise the standard of living for the poorest of society, but there will always be the gap between poor and rich. If the poor got richer then the rich would get poorer until everyone had the same amount of money and it would be meaningless.

And you didn't answer my question about where money comes from. You said they tax the people or take a loan from the central bank. Well, when they take that loan they have to pay it back with interest. And then most tax money actually goes to paying for this inevitable debt. And where do the public get their money? Commercial banks, who don't actually have to have the money in order to loan out money, it's credited to the account. It doesn't exist. It's something like 10% of all loans are cash, the rest is deposited into the central bank, and then they can create 10-fold of money out of thin air with no backing other than the circulation of already existing 'money'.

The only way to keep the economy stable is to take out more loans, to avoid deflation where no one has money to spend or inflation where the value of money is...devalued. When they take the loan, interest is created, hence, more debt.


(And the YouTube video was just an illustration.)

[Advocate]

Printing money devalues it.  It increases inflation.  After World War I, the Germans tried to print money to pay for its reparations.  All it did was devalued the currency and people then needed grocery bags of money to pay for bread.

Now, the idea that the value of currency holds people down and keeps the poor poor, is not accurate.  The poor are poor not because the value of currency.  You can change that value and the poor will still be poor and the rich will still be rich.  The difference in wealth are not due to a value on a bill, but instead in assets.  Essentially, the rich just have more.  If you printed more money and gave it to the poor, it would just devalue the dollar and they would need more dollars to buy the same things that they did before.  Pretty much, if it now costs $1 for a litre of milk, you print more money and the poor may have twice as much, but now the milk is $2 for a litre.

Canada did not eliminate its deficit.  It lowered it.  It lowered it by raising taxes, not lowering them in good times, cutting spending.  Then, when things were good, it was able to increase spending and lower taxes.  Government has mainly two sources of revenue, 1) taxes, 2) loans.  When it cannot pay for its budget with the current taxes, it must borrow to make up the short fall.  It could print money to do it, but since it creates inflation, you really are not going to be able to pay for anything on it.

That's what I meant. I didn't mean give money to the poor so they're not poor anymore. I was saying exactly what you just said. The poor will always be poor. There's no way to solve poverty in a money-based system like this. You can raise the standard of living for the poorest of society, but there will always be the gap between poor and rich. If the poor got richer then the rich would get poorer until everyone had the same amount of money and it would be meaningless.

And you didn't answer my question about where money comes from. You said they tax the people or take a loan from the central bank. Well, when they take that loan they have to pay it back with interest. And then most tax money actually goes to paying for this inevitable debt. And where do the public get their money? Commercial banks, who don't actually have to have the money in order to loan out money, it's credited to the account. It doesn't exist. It's something like 10% of all loans are cash, the rest is deposited into the central bank, and then they can create 10-fold of money out of thin air with no backing other than the circulation of already existing 'money'.

The only way to keep the economy stable is to take out more loans, to avoid deflation where no one has money to spend or inflation where the value of money is...devalued. When they take the loan, interest is created, hence, more debt.


(And the YouTube video was just an illustration.)

In Canada, the Bank of Canada creates and maintains the money supply.  It is governed as a Crown Corporation.  It does not charge interest on that money, however, it does set interest rates out for the nation.

When Canada goes to the US to fund its deficit, you are right that the US will charge interest on it.

Now, you are right that banks only have a certain amount of cash on reserves.  But you are incorrect that Chartered Banks create money.  They do not.  What they do is they take other people's cash and they loan it out and charge interest.  So my money in the bank is borrowed from me and lent to you from the bank.   Traditionally, banks paid me interest to use my money.

Deflation and inflation are relative to the situation.  The government has Monetary Policy that controls the interest rates for the nation.  It has been found and has been practiced (rather efficiently) that raising interest rates discourage spending.  By discouraging spending, the government slows inflation.  This is done to keep inflation around the ideal 1% to 3% rate.  During recession, the government can lower interest rates to encourage spending.  This is done to help avoid deflation.  Monetary Policy has matured to this in the early 90s and has been very efficient.

Ideally, what should happen is that during bad times, the government should lower interest rates and either lower taxes and/or increase spending.  During good times, the government should raise interest rates, and raise taxes or cut spending.  The idea behind this is if done, it will help create flatter economic cycles.  So less of a boom and less of a recession.  This also helps, because during the recession, revenues for the government drop (people are making less, so less taxes are coming in).  Because of that, budget deficits tend to happen.  Then during good times, you pay off that deficit.

Unfortunately, most governments do not follow through with the interest rate increases and tax raises/spending cuts in good times, because they are politically unpopular moves.

[Ethan]

I don't worry about it, yes I am trying to leave my career to be an IT. However I am in the business of doom saying, so as more people look to the news, the more money I make. I'm good either way personally.


The truth that many people do not want to face, atleast in the US, is that taxes will need to be raised. So for the last 12 years, as this debt has been growing, the government on both sides have been looking for creative solutions. Meh, creativity only goes so far. The plan of giving more money to the poor, only works if they equally spend that money on garbage.

However they have been saving and paying the bills, so thus problem.

Economics 101 proves that giving more money to the poor is far more efficient than to the rich, as far as taxes go.  I am no socialist, but right now, the favour is in the rich.  Thing is, every proposal right now has things being taken away from the poor, while giving more to the rich.  Health care costs increasing, limiting welfare, raising the costs of education, etc, so that someone making $1 million a year can have his taxes reduced.  From a practical point of view, it just does not make sense.

Keep in mind something too.  You only pay the higher tax rates on the addition money you make.  Everyone pays the same tax rate on $40k.  If you make $40k, you pay the same tax rate on the first $40k as someone who makes $1 million.  Anything you make after the next tax bracket is taxed at a higher rate, but not your whole income.

Don't get me wrong either, I agree with you. However people didn't spend which is means we were burning money at two ends. I agree taxing the rich more than the poor, by way of paying a higher rate. As you said, they pay more through the rate, but they should pay a higher rate. Food is the same in terms of cost for everyone.

[Advocate]

Well part of the reason why people did not spend was that the money did not go to the groups that would spend it.  Even so, tax cuts still are not as efficient in stimulating the economy.

What Obama should have done (but didn't, because he was trying to compromise with the Republicans), is put more money into spending projects.  If he took the people that were laid off in the factories and put them to work on infrastructure projects, these people would have had jobs.  They then would spend the money they had from those jobs.  This would increase retail demand and encourage other businesses to hire.  Then when the projects are done, these people would have private sector jobs to go to. 

Plus, the added benefit of improving the infrastructure.

[The Gopher]

I wish that everyone who chose to speak about the economy or have an opinion on it would at least be open to hearing the other side of the argument, as you all have been so willing to do. What scares me is the mentality of Americans who think that they are 100% right with their opinion, which just leads to a whole lot of yelling. (As is the case for our whole political structure.)

If you were to turn on the news here, you'd see Republicans and Democrats just flat out refusing to recognize when the other side makes a valid argument, or when they have a good idea. We're so fundamentally separated in the good/bad mentality of politics and we're fucking up the rest of the world as a result of it...

[Advocate]

I think the issue is that these guys fall into a political ideology.  So they will listen and agree to anything that falls into that ideology. 

This is why I do not like labelling myself as a party supporter.

[The Gopher]

^ I use to be really heavy into the labeling, but now there's just no point. Sure, I tend to agree with Democrats and liberals more, but I'm not going to shut my ears to what everyone else has to say... as much as I enjoy politics as a fiasco, it's all very disheartening to follow.