PeakTrader.com

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PeakTrader:

Without QE, growth and employment would be much lower.

Wages remain depressed, because there’s still abundant labor.

Without QE, there would’ve been more unemployment, which would’ve depressed wages even more.

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It should be noted, the Fed works in the future economy, because of lags in the adjustment process.

For example, the Fed will begin to tighten the money supply well before growth accelerates and to preempt inflation.

Politicans have plenty of time to shift blame, e.g. to the Fed, for their incompetence. That’s a big part of politics.

The Fed has done its part, and did it brilliantly, since the U.S. went off the (rigid) gold standard.

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The Fed stimulated growth by lowering interest rates for households and firms, along with creating a “Wealth Effect” (in asset markets) to induce demand and reduce saving, in the attempt to generate a self-sustaining cycle of consumption-employment (where consumption generates employment and employment generates consumption, etc.).

Moreover, the Fed raised “animal spirits” to facilitate nominal growth, which facilitates real growth.

However, a virtuous cycle of consumption-employment failed to take hold, because fiscal policy, and policies out of Washington, basically resulted in an economy that has one foot on the accelerator and the other foot on the brake, causing an expensive recoverless expansion.

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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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Edward, you seem to be saying if interest rates were higher, asset prices were lower, and economic growth was slower, U.S. labor would benefit somehow.

The Fed will do too much if it creates too much inflation, e.g. causing a price-wage spiral (where wages will try to catch-up to prices), which will eventually require even more tightening, to compensate, and may tip the country into recession.

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Capital spending not only increases output, it creates higher-skilled jobs, although reduces lower-skilled jobs somewhat, through productivity.

Higher-paying jobs are created, because workers are needed to create, build, ship, install, improve, maintain, operate, and manage those machines.

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PeakTrader:

Federal taxes have become more progressive:

CBO: Top 40% Paid 106.2% of Income Taxes; Bottom 40% Paid -9.1%, Got Average of $18,950 in ‘Transfers’
December 9, 2013

“The top 40 percent of households by before-tax income actually paid 106.2 percent of the nation’s net income taxes in 2010, according to a new study by the Congressional Budget Office.

At the same time, households in the bottom 40 percent took in an average of $18,950 in what the CBO called “government transfers” in 2010.

The households in the top 20 percent by income paid 92.9 percent of net income tax revenues taken in by the federal government in 2010, said CBO.”

http://cnsnews.com/news/article/terence-p-jeffrey/cbotop-40-paid-1062-income-taxes-bottom-40-paid-91-got-average-18950

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Mike, in the 1950s, the U.S. became the dominant world power, with a huge share of world GDP, because Europe and Japan were rebuilding from the massive destruction of WWII.

The U.S. was much less efficient and more wasteful, because it had no major competitors, which eventually caught-up with the U.S. in the 1970s.

Opportunity costs matter.

Of course, when an economy is still developing, an interstate highway system and many other government projects are needed.

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PeakTrader:

So, paying people with their own taxes to destroy their cars was a good economic policy, along with driving-up used car prices.

No wonder we’re in a deep, and now long, depression.

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And, some used cars are less than two years old.

I’m talking about older and cheaper cars. The kind low-income people buy.

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‘Clunkers,’ a classic government folly
September 1, 2010

“Cash for Clunkers…That was the program under which the government paid consumers up to $4,500 when they traded in an old car and bought a new one with better gas mileage. The traded-in cars — which had to be in drivable condition to qualify for the rebate — were then demolished: Dealers were required to chemically wreck each car’s engine, and send the car to be crushed or shredded.

No great insight was needed to realize that Cash for Clunkers would work a hardship on people unable to afford a new car. “All this program did for them,’’ I wrote last August, “was guarantee that used cars will become more expensive. Poorer drivers will be penalized to subsidize new cars for wealthier drivers.’’”

Cash for Clunkers was a deplorable exercise in budgetary wastefulness, asset destruction, environmental irrelevance, and economic idiocy."

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Study: Cash For Clunkers Was A Wash
September 4, 2010

The government's "cash for clunkers" program boosted auto sales by 360,000 during the two months it was in place, according to a new study.

But in the seven months that followed, sales were down by 360,000 compared with what they would have been without the program, the study found.

And a related study:

Used Car Prices Soar
September 03, 2010

A recent study shows prices have soared in the past year.

The price for the average used vehicle is up 10%.

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