[Aberlour10]

PassedOut, on Mar 26 2009, 10:45 AM, said:

Financial services are truly needed, but the amount of wealth sucked up by people speculating with financial instruments is way out of proportion to their contributions to society. I hope that better regulation will help to correct the situation.

I am afraid nothing really will happen on the global stage in this case. Obama and Brown have a clear strategy for the G20 summit like...to produce a "success" with language that sounds good but contains no commitments. Sarkozy seems to be the only one who wants to introduce real global financial regulations.

Robert

[Al_U_Card]

Winstonm, on Mar 26 2009, 07:28 AM, said:

kenberg, on Mar 25 2009, 07:08 AM, said:

In the last six months or so I have learned a lot of economic terms and possibly even some economic concepts. When I was twelve I used to bicycle to the public library to read about human reproduction. It was similarly confusing.

While fully aware that not everything reduces to simple terms, it seems important to distinguish between creating wealth and creating money. The Fed can create money. Wealth is created through mining, manufacturing, farming, and so on. I guess the Fed is creating money hoping that this will facilitate the creation of wealth. I hope they are right.

You are exactly right, Ken. Creating money to buy assets or government debt actually does the opposite of wealth creation as it dilutes the value of the currency used to make the purchases.

And then, when the Fed can issue 9 times more money for each "asset receipt" how does that help us? Kind of like the ability to borrow on margin (1 gets you 12) to buy (speculate on) stock (asset) purchases....which the big 5 (Fannie Mae, Freddie Mac, Bear Stearns, Lehman Bros. AIG) pushed to 25 to 1 due to underregulation of their practices.....

Why do we even need that? Isn't gambling a sin?? (or at least bad business practice...) Or is that only when you don't have John Q. Public to bail you out???

[Winstonm]

hrothgar, on Mar 26 2009, 07:57 AM, said:

kenberg, on Mar 25 2009, 03:08 PM, said:

While fully aware that not everything reduces to simple terms, it seems important to distinguish between creating wealth and creating money. The Fed can create money. Wealth is created through mining, manufacturing, farming, and so on. I guess the Fed is creating money hoping that this will facilitate the creation of wealth. I hope they are right.

How quaint...
How very, very quaint...

When people talk about thermodynamics they make a lot of effort to differentiate between open and closed systems. The same basic principles can be applied to economics.

It is certainly true that some one, somewhere in the closed system that is the economy of planet earth needs to produce goods. It does not necessary follow that individual societies need to be involved in mining, manufacturing, etc in order to accrue "wealth".

This is true - a country can assemble goods and sell them; however, I do not think you can argue that a country that continuously has a massive trade deficit and must borrow to meet its debt obligations monthly is accumulating wealth.

[jdonn]

Winstonm, on Apr 1 2009, 07:33 PM, said:

This is true - a country can assemble goods and sell them; however, I do not think you can argue that a country that continuously has a massive trade deficit and must borrow to meet its debt obligations monthly is accumulating wealth.

Sure you can. If the government goes 1 trillion dollars further into debt in 2015, but the people of the country gain 2 trillion dollars worth of personal wealth, I would say the country has accumulated wealth.

[Winstonm]

jdonn, on Apr 1 2009, 07:39 PM, said:

Winstonm, on Apr 1 2009, 07:33 PM, said:

This is true - a country can assemble goods and sell them; however, I do not think you can argue that a country that continuously has a massive trade deficit and must borrow to meet its debt obligations monthly is accumulating wealth.

Sure you can. If the government goes 1 trillion dollars further into debt in 2015, but the people of the country gain 2 trillion dollars worth of personal wealth, I would say the country has accumulated wealth.

How do you accumulate the wealth?

Your math is dead on but I fail to understand how you get to point B when starting from point A.

[jdonn]

Any way you want. Grow an ear of corn. Rob a bank in Madagascar. Loan the money to China that the US has to borrow to pay back its debt and get repaid with interest.

The government and the people of the country can operate as completely seperate entities. So I guess it depends what you meant when you talked about the "country" accumulating wealth, but I was taking that to mean the government and people combined.

I do appreciate the affirmation that 2 is greater than 1.

[blackshoe]

well, certainly for large values of 2, anyway.