Keynesian Economics and Recession Counter-Measures

Oh totally, the politics don't have to be internal only. The US is as horrible at doing that as Europe was previously. Look at China and Sudan currently too.None of the discussion so far had anything to say about the theft of wealth which is what all that basically is. When people are not properly compensated for the wealth they DO create then that is stealing.Buy Fair Trade all, that is if you can now adays.Edited by Jazzns, : No reason given.

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If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be. --Thomas Jefferson

You know, the only thing I know of that I've bought Fair Trade is some chocolate in London two years ago.I've never seen it in the states (at least, not advertised). And given that I have a somewhat inside peek on the organic industry, I find it completely disappointing.For that matter, I haven't seen it in Sweden. Maybe willy's just doesn't have it.

Thanks again to you and Kerusu for the answers so far. I agree. I would add that it also reduces the direct costs of unemployment (lower tax income and larger welfare bills) in the short term and also seeks to minimise the less direct but very real costs (increased crime, attitudes to economic dependency etc. etc.) that long term unemployment results in.However it seems to me that such investment must be recognised as being incredibly risky. If the investment made does not work out then the nation in question will not generate the wealth required AND will be saddled with huge long term debts.I would suggest that it is as a result of these sorts of investments in times such as these that the world order in terms of prosperity can change significantly in relatively short time periods. Depending on who gets it right and who gets it wrong.Lets hope our respective governments are making the right investments.............But I agree that not to invest is all but guaranteed to fail as a strategy.Edited by Straggler, : No reason given.

I totally disagree. It is far riskier to do nothing. There is a ton of history and analysis on the Pro side of doing something like this.Not only does this need to happen, we need to lock in a percentage of GDP that gets spent every single year on both infastructure building and education to make sure that there is a continual process of restructuring both industry and the workforce.The only thing IMO that is the controverisal part of this is the whole "lower taxes" party of the equation. That is where I for one disagree. Taxes need to be raised and raised significantly on the top incomes. In addition, once we are out of the woods taxes need to be raised accross the board in a progressive manner.And for any conservatives out there who think different, I'll simply point to the previous Republicans who produced beneficial economic policies by raising taxes including Regan (sort of) and Eisenhower.

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If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be. --Thomas Jefferson

Well as I added to my post by edit before seeing your reply I agree that doing nothing is not an option.But that said bad investments and huge debts would seem to be the worst of all worlds. Yes the key is what the money is spent on and how this affects future productivity. In some of my surfing on this topic I was surprised to hear it claimed that Reagan was an unwitting Keynesian in many respects. Massive public investment albeit in the areas generally associated with right wing politics rather than social infrastructure. I.e the military. Is this what you were referring to?Edited by Straggler, : No reason given.

Exactly, and even though he kept the income tax rate low, he raised just about every other tax you can think of. He spent the money in the way that I think you fear, in things that aren't serious investments into the future but make the current economy look "okay".When you go on a credit care binge it IS in fact fun before you get the bill. =)

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If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be. --Thomas Jefferson

I first read the following in Funny Times. Barbara Ehrenreich: How Positive Thinking Wrecked The EconomyThe first paragraph:

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Greed - and its crafty sibling, speculation - are the designated culprits for the ongoing financial crisis, but another, much admired, habit of mind should get its share of the blame: the delusional optimism of mainstream, all-American, positive thinking. As promoted by Oprah, scores of megachurch pastors, and an endless flow of self-help bestsellers, the idea is to firmly belief that you will get what you want, not only because it will make you feel better to do so, but because thinking things, “visualizing” them - ardently and with concentration - actually makes them happen. You will be able to pay that adjustable rate mortgage or, at the other end of the transaction, turn thousands of bad mortgages into giga-profits, the reasoning goes, if only you truly believe that you can.

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Much more at the source.I wanted to get this out, and this topic seems like a good place. If I'm going off-topic, please contact Adminnemooseus and he will slap me down.Moose

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Professor, geology, Whatsamatta U
Evolution - Changes in the environment, caused by the interactions of the components of the environment. "Do not meddle in the affairs of cats, for they are subtle and will piss on your computer." - Bruce Graham

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"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness." - John Kenneth Galbraith

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"As democracy is perfected, the office of president represents, more and more closely, the inner soul of the people. On some great and glorious day the plain folks of the land will reach their heart's desire at last and the White House will be adorned by a downright moron." - H.L. Mencken (1880-1956)

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"Nixon was a professional politician, and I despised everything he stood for ” but if he were running for president this year against the evil Bush-Cheney gang, I would happily vote for him." - Hunter S. Thompson

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"I know a little about a lot of things, and a lot about a few things, but I'm highly ignorant about everything." - Moose

This seems to be too good of a topic to loose.Moose

Depends on the Bond. When you go to the Bank to get a loan, the interest rate paid, and the duration of the loan can vary and the same is true of bonds. Some bonds can be for decades, others for a few months. Meanwhile, interest is paid (often semi-annually) to the person who bought the bond.For general info on matters economic, I found investopedia to be a great resource of information.

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For example, say you buy a bond with a face value of $1,000, a coupon of 8%, and a maturity of 10 years. This means you'll receive a total of $80 ($1,000*8%) of interest per year for the next 10 years. Actually, because most bonds pay interest semi-annually, you'll receive two payments of $40 a year for 10 years. When the bond matures after a decade, you'll get your $1,000 back.

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So if a currency is falling in relation to other currencies, short term bonds in that currency are an obvious money loser? Unless the interest rate on those bonds is truly exorbitant?Is that right?If so buying bonds in a particular currency is little more than currency speculation in the longer term?The UK government is funding it's short term expenditure by selling more bonds but the state of the economy is such that UK bonds must be relatively unattractive.Is this not the case?I freely admit to being utterly confused by the whole international financial system. The more I hear about it the more it seems akin to a badly organised casino.Edited by Straggler, : No reason given.

I don't really see what currency has to do with it. As in, I don't think investors use government bonds in currency speculation. Besides, even if the currency is falling now (like the pound is), what will it be worth in 10 years? What of the effect of inflation? Inflation as much as currency devaluation could wipe out any gains made with bonds.Further, at one point in time, investors in the US were buying bonds that were trading at a negative rate! The situation was so bad investors were actually willing to take a minimal loss as compared to what was happening on the stock market.Bonds are thought of an inherently secure. You won't make much money, you won't lose much money, unless the government goes down in flames and defaults on its debt or something like that.Of course, I'm not sure why american bonds are so much more attractive than british bonds, but then, this entire post is largely guesstimation.

It might be the case that you end up with more money, that is worth less than what you started with - but that applies trebly so for just keeping the money in your back pocket or in a low interest account. The advantage to bonds is that they are more secure than shares, and earn more than sticking the money in your bank or sitting on it. They aren't risk free, of course, and if you feel that the UK government is going to go tits up...well there may be more serious things to worry about than how many numbers you have associated with your name in a database. To extend the analogy - the only confused people in a casino are the punters. If you can't beat 'em, join 'em, etc etc. If you go into a market blind, you are just gambling. If you have a good idea what you are putting your money into, you are investing. Most people do the former because doing the latter is hard work.I'm still trying to figure out even a little bit of it out, I have high confidence in the system, but low confidence in the amount of influence certain people have to affect change onto the system.

Well if a bond is effectively an investment in a nation then it is effectively an investment in the economy of a nation. If that nation has it's own currency then it is effectively an investment in that currency.That was my thinking anyway. It may well be wrong...... Yes. I get that. But that is why I specifically asked about short term bonds.i have no idea if short term bonds are common or even if they exist but Modulus's example seemed to suggest that they might. True. Although unless inflation is at runaway levels this is presumably a longer term concern. On the face of it that sounds mad!! But I get what you are saying about government bonds effectively being safe as compared to other forms of investment. Because the US is considered less likley to go bankrupt than the UK?
Because dollars are more widely user/available/transferrable?I don't know. The above are more questions than any attempt at worthehile answers on my part.Edited by Straggler, : No reason given.

I wouldn't use the word "secure" here. Shares don't really have a measure of security - they are simply a traded commodity. You will always find a buyer willing to pay what he thinks is the fair value for the shares you hold, even if that value is zero And dividend payouts are purely at the discretion of the corporate entity. Bonds on the other hand have a maturity when the principle is returned, plus a pre-agreed level of interest paid at intervals and/or at maturity. The issuer of the bond is thus obligated to pay, and if he will not/cannot, then he is in default. The security of a bond is the assessment of likelihood that the issuer will default. Thus corporate bonds are usually considered less secure than government bonds - but this is by no means universal. Microsoft debt is certainly much more highly rated than South American Debt, for example. Although current accounts typically pay little or no interest, you will find a savings account with a bank that will pay better than the equivalent term government bond. The bank will rarely be better rated than the government, and thus must pay more interest to offset the associated credit risk. The reason the Icelandic banks tempted UK investors with such high rates of interest was not out of their generosity, but because their credit rating was low. Ask me how much sympathy I have for those non-nationals whining about their lost Icelandic investments

No, because you are confusing past (FX) performance with future (FX) performance. Just because the currency has fallen does not mean it will continue to fall - if it did, we'd all be rich (at least those of us trading in the FX markets) - look at the past few days cable (GBP/USD) trading, compared with the past four weeks... Yes, it is future currency speculation (with spots on the interest payment dates and the maturity), but also credit speculation to a greater or lesser degree based on the debt issuer, and also rate speculation (buying a 10yr 4% bond the day before rates leap to 10% is a bit of an arse).