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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Steve Lokness who wrote (71301)	6/9/2008 6:42:23 PM
From: Sam	Read Replies (1) \| Respond to of 542201

You can thank Bush and Greenspan for higher prices - because our dollar has crumbled under this administration and because of the insane deficit spending to pay for the war. I fear the economy has been managed about the same as the Iraq war - disastrously. A very succinct expression of my opinion, Steve, thanks.

To: Steve Lokness who wrote (71301)	6/10/2008 10:53:57 AM
From: Katelew	Read Replies (1) \| Respond to of 542201

No single thing drives higher prices than the printing of money Hmmmm.....yes and no. I should have been more specific and said in reference to the current economy, oil prices are driving inflation more than any single thing. The reality is that it is the prices of all raw materials....nat gas, steel, copper, etc.....driving inflation. The expansion of the money supply as a driver of inflation is basic economic theory....taught in every school....and was a focal point for Ron Paul's campaign, which you followed closely. So I understand what you are saying. But one has to look at the facts at hand when dealing with the economy and forming opinions. The textbook theories don't always fit or prove that helpful in making decisions. The fact is that in spite of the expansion of money supply we're in a period of credit contraction, not expansion. Consumers and businesses are borrowing and spending less. Another fact is that the expansion of a country's money supply can lead people to buy more only if the new money is spread evenly across the classes of people. We, however, have had and still have a long period (25 yrs.) where the top brackets of income earners have cornered a disproportionate amount of that 'new' money. Middle class incomes and wealth formation have been relatively stagnant. What has grown is the middle class willingness to use debt to finance lifestyles, i.e. credit cards and home equity loans. Our current economy doesn't fit neatly into any historical models or economic principles. We have both inflation and deflation occuring simultaneously which is unprecedented as far as I know. Also, we have inflation being imposed on us by rising prices of raw materials delivered by foreign companies and driven by growth in foreign countries. The USA is only tangentially involved, and we have little ability to check things in the traditional ways, such as the Fed raising interest rates. In other words, if the Fed raises rates to fight inflation, will that slow the growth in China and India? Or will it just weaken an already unstable US economy? As for Greenspan...yes, interest rates were probably kept too low for too long....maybe. His greater failing, IMO, was giving Bush the green light to cut taxes and bleed the Treasury. His second greatest failing, perhaps, was to do nothing to check lenders abilities to securitize loans, sell them off and thus avoid traditional reserve requirements. The securitizing of loans in the deregulated banking system greatly expanded the money supply. To tinker with reserve requirements is out of the Fed's purview, but Greenspan should have spoken up loudly and often. He had Bush's ear. Also, the weakness in the dollar, IMO, more reflects the 'weakness' of the US Treasury. By weakness, I mean the amount of US government debt relative to GDP plus the unfunded future liabilities of SS and Medicare. The rest of the world can see our debt constraints and thus trust our currency less. At any rate, I don't disagree with you but I don't fully agree. Yes, Bush is a fiscal disaster for the country, but our inflation is coming, to a great extent, from factors out of his control.