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Joined: 28 Dec 2005 Posts: 12651
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Posted: Thu Mar 28, 2013 11:05 pm Post subject: Fed & GDP - Oil - China - Brinker |
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PeakTrader:
We can thank monetary policy for the “wealth effect,” in asset markets, along with low interest rates to induce demand and reduce saving, to boost nominal growth, and therefore real growth, in spite of weak fiscal policy, at best.
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Also, I may add, when the U.S. was on the gold standard, a fixed exchange rate system, basically had a closed economy, and a small economy at the height of the Industrial Revolution from 1871-1914, when the U.S. had deflationary growth, per capita real GDP growth averaged 1.56% a year.
However, when the U.S. went off the gold standard, had a flexible exchange rate system, basically had an open economy, and a large economy at the height of the Information Revolution from 1982-2007, when the U.S. had disinflationary growth, per capita real GDP growth averaged 2.22% per year, which doesn’t include up to $800 billion a year trade deficits (i.e. the U.S. consuming more than producing in the global economy).
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Before the Fed, per capita real GDP growth averaged 1.36% a year from 1814-1910, and after the Fed, it averaged 2.13% per year from 1914-2010.
The Fed has smoothed-out business cycles, including long-wave cycles. Economic boom/bust cycles are inefficient, both in the boom and bust phases, because of periods of strain and slack (or feast and famine).
Here’s what Bob Brinker said about the Fed (Dec 2012):
“It’s only because the Federal Reserve has been active that we have any growth at all in the economy….The Federal Reserve is the only operation in Washington doing its job.
The only person that would criticize Ben Bernanke would be a person who is so clueless about monetary policy and (the) role of the Federal Reserve as to have nothing better than the lowest possible education on the subject of economics….Anybody going after Ben Bernanke is a certified, documented fool….”
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http://www.aei-ideas.org/2013/03/factoid-from-todays-case-shiller-home-price-report/#comments
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PeakTrader:
Employing more resources, including labor and capital, for the same barrel of oil doesn’t raise living standards.
However, it was inevitable, because of Peak Oil.
And, with international trade, the U.S. now captures a smaller share of world output.
At least, we’re not an economic disaster like China, where most people work very hard for very little, while politicians become rich.
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Yes, China improving from something like $1,000 to $3,000 is a 200% per capita gain, or $2,000, while the U.S. improved from something like $30,000 to $40,000, i.e. a 33% or $10,000 per capita gain, which excludes huge U.S. trade deficits (with China) and huge Chinese social costs (e.g. pollution, erosion, deforestation, etc.).
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If China’s purchasing power is as high as you say, Americans should exchange dollars for yuans and move to China.
However, it’s more likely “affluent” Chinese will exchange yuans and move to the U.S., and Chinese workers would rather work in the U.S. than in China.
I think, most people would rather shop at Wal-Mart than Wu-Mart, for example.
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http://www.aei-ideas.org/2013/03/saudi-americas-oil-and-gas-revolution-is-providing-a-1-billion-per-day-stimulus-to-the-us-economy/#comments
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