Is the recession upon us?

[laughing dog]

Last year, the US gov't issued less new debt than it had in the previous six years. The primary buyer was the Fed, followed by Japan (http://www.nytimes.com/2014/02/22/business/economy/no-surprise-fed-was-biggest-buyer-of-treasuries-in-2013.html?_r=0)

The gold standard inhibited us from creating inflation, but inflation did nothing to get us out of the depression.

No one claimed inflation did get us out of the recession.

We were never faced with a possible currency crisis during the depression. We are now. We voluntarily left the full gold standard during the depression but remained on the gold standard for international trade.

We left the gold standard in order to avoid a currency crisis.

We were FORCED to abandon gold and accept floating rates 1971.

Please show who forced us to abandon the gold standard. Nixon chose to leave it (and made the right decision).

I made no mention of Japanese regulation so what I said still stands in its entirety.

I agree. What you said is wrong in its entirety because you made a false analogy: the US economy cannot be compared with the Japanese economy for a variety reasons, including the fact that the Japanese economy is more rigid due to regulation than the US economy.

Regarding point one, you have simply confirmed my claim. Japanese and Chinese purchases of new debt were negligible. Just barely enough to roll over the old debt. There is a mysterious buyer of US debt this year out of Belgium, but it's way too much to be any Belgian investor. Some people suspect that the true source of those purchases is the Fed which wants to announce a taper without actually tapering.

Wrong, the data was for net debt - it was not rolling over debt, but new debt.

Point two: What other inhibitions did abandoning the gold standard do for us in the GD if not to allow inflation? So what's the point of your point if it isn't that?

What are you talking about? The US left the gold standard so it would not have to devalue the dollar.

Point three: How did abandoning the gold standard avoid a currency crisis when we didn't abandon the gold standard with respect to other currencies? Even if you assume that the devaluation helped, it wasn't necessary to abandon the gold standard to devalue.

Since we did not abandon the gold standard, but suspended participation your observation is moot.

Point four: Nixon didn't abandon the gold standard immediately. He devalued. First he raised the price of gold to $38 and ounce and then to $42 an ounce. But that didn't stop the run on gold. So he let rates float with the intent to fix the price where gold leveled off, but it never leveled off. So he was forced to abandon the gold standard and, in 1973, he cut the deal with Saudi Arabia to create the petro-dollar.

The US could have devalued sufficiently to level the price off, but we didn't.

Point five: Your claim is totally non-germane. I said that Japan is not an exact parallel because they are able to finance their debt domestically. Your point is gratuitous and irrelevant. They also drink tea in Japan. So what?

Of course it is germane, since it is indicates that the Japanese economy cannot respond to policy as quickly or as well as the US economy can. Especially since the Japanese financial system is still saddled with lots of "unperforming" loans. The amount Japanese saving is irrelevant to the issue of the responsiveness of the Japanese economy to stimuli. Japan is not a parallel at ALL to the US economy. And no amount of poor economics and gratuitously irrelevant observations can make it so.

 

[boneyard bill]

laughing dog writes:

Wrong, the data was for net debt - it was not rolling over debt, but new debt.

Right, and the new purchases were negligible.

What are you talking about? The US left the gold standard so it would not have to devalue the dollar.

How do you get it wrong so consistently? FDR abandoned the domestic gold standard AND he devalued. We raised the price of gold from $20.67 an ounce to $35 and ounce.

Since we did not abandon the gold standard, but suspended participation your observation is moot.

I have no idea what you mean by "suspended participation," but my point was that we did NOT go off the gold standard with respect to other currencies so how could that have prevented a currency war?

It seems that you are grasping at straws to avoid admitting that what you are saying is nonsense.

The US could have devalued sufficiently to level the price off, but we didn't

Again, a senseless statement. He let the dollar float and the price of gold, in dollars, soared. It was soon over a hundred dollars an ounce on its way to $850 an ounce by 1979. At what point in this scenario is he decide on a gold price? It never stabilized so any new price would likely lead to a very quick loss in our gold supply.

Of course it is germane, since it is indicates that the Japanese economy cannot respond to policy as quickly or as well as the US economy can. Especially since the Japanese financial system is still saddled with lots of "unperforming" loans. The amount Japanese saving is irrelevant to the issue of the responsiveness of the Japanese economy to stimuli. Japan is not a parallel at ALL to the US economy. And no amount of poor economics and gratuitously irrelevant observations can make it so.

Apparently, what you are saying is that just because the policies that we are following haven't worked in Japan that doesn't prove that they won't work in the US. I suppose I would have to agree that it doesn't absolutely prove that such policies won't work here, but I see no reason to expect that they would and, as far as I can see, we are getting results similar to what the Japanese have gotten. But I agree that the US economy is different and that makes our experiment is Japanese economics all that more dangerous because they could, and probably will, due to the differences in our economy and Japan's, lead to a far more disastrous result than in Japan.

After all, Japan's yen is not the world's reserve currency. It therefore does not derive any of its value from its reserve status. Such is not he case with the US dollar. It is the reserve currency, and if it ever ceases to be the reserve currency it will lose a great deal of value from that fact alone and without regard for other economic fundamentals. So weakening the dollar is a much riskier policy than you would expect from weakening the yen.

 

[laughing dog]

Right, and the new purchases were negligible.

The Japanese were the 2nd largest purchaser of net debt. Whether it was negligible or not depends on your definition.

How do you get it wrong so consistently? FDR abandoned the domestic gold standard AND he devalued. We raised the price of gold from $20.67 an ounce to $35 and ounce.

In usual parlance, "gold standard" refers to international trade. I realize you like to use terms in archaic senses, but that does not mean everyone else does.

I have no idea what you mean by "suspended participation," but my point was that we did NOT go off the gold standard with respect to other currencies so how could that have prevented a currency war?

Why are you babbling about a currency war? A currency crisis might have occurred if the US had devalued internationally.

Again, a senseless statement. He let the dollar float and the price of gold, in dollars, soared. It was soon over a hundred dollars an ounce on its way to $850 an ounce by 1979. At what point in this scenario is he decide on a gold price? It never stabilized so any new price would likely lead to a very quick loss in our gold supply.

One of the reasons it did not stabilize is because we had floating exchange rates. It may have stabilized if we had devalued sufficiently. Now, I think he was right to go off the gold standard.

Apparently, what you are saying is that just because the policies that we are following haven't worked in Japan that doesn't prove that they won't work in the US. I suppose I would have to agree that it doesn't absolutely prove that such policies won't work here, but I see no reason to expect that they would and, as far as I can see, we are getting results similar to what the Japanese have gotten. But I agree that the US economy is different and that makes our experiment is Japanese economics all that more dangerous because they could, and probably will, due to the differences in our economy and Japan's, lead to a far more disastrous result than in Japan.

You have it almost right except for the nonsense about "our experiment in Japanese economics".