We are on the Verge of Economic Catastrophe

[Elixir]

It's not clear what system of money RVonse would prefer.

If you read between the lines it’s evident that he’s advocating for a formalized barter system where currency only fills the role of a promise, outside of which exchanges of goods and services hold to constant relative values. The model is a thing of beauty. So are MC Escher sketches. But the naïveté is charming.

 

[Jason Harvestdancer]

Of course the US economy is in bad shape. It has been in a worrisome condition ever since the 2001 recession was "fixed" with stimulus instead of being allowed to run its course. When you suppress the symptoms they come back stronger later, which happened in 2008. The economy since 2008 has been queasy, and the 2020 lockdowns were a disaster. Ending the lockdowns "created growth" according to some measures, but the stimulus during the lockdowns has made an inflation disaster that is only now easing.

Inflation disaster? It didn't even approach the 1970s. The global economy was jostled in the pandemic. Inflation began as a supply side issue, not stimulus problems. Stimulus would be on the down end. Stuff got more expensive because supply dropped and it rippled. Inflation we experienced was hardly a "disaster".

The current situation has been building since 2001.
The can got larger every time it got kicked down the road. We're running out of road to kick it down.

The current situation has been developing since 1981 with trickle down economics and the GOP embracing deficit spending to starve the beast. You say "kicking the can", this is the GOP's whole plan.

Interesting you mention 1981. It is also interesting that you mention "trickle down" as I've seen many people oppose it but none support it.

Now Carter and Reagan had a problem they had to deal with - stagflation. According to the standard economic model at the time you really couldn't have both at once, it was a trade-off. If the economy is too strong you get inflation, but if it is too weak you get unemployment. Stagflation upended the Keynesian paradigm for a while. Not for long though. That cancer never goes away.

During Carter and early Reagan, the federal reserve chairman was Paul Volker. He recognized that if inflation wasn't gotten under control it would create a huge problem, so he kept raising interest rates until he finally defeated the inflation of the time. That led to some hardship at the very beginning of Reagan's first term.

Anything that may be considered part of Reagan's lasting legacy wouldn't have been in 1981, he as facing other issues at the time.

 

[Jason Harvestdancer]

I don't see any of the resident trumpers criticizing this obvious cooking of the books.

I don't think there are any.

 

[RVonse]

It's not clear what system of money RVonse would prefer.

Fiat currency that was backed by gold and gold by itself wasn't perfect but it worked for hundreds of years. That kind of money was good enough for the central banks in the past and gold is still desired by the modern central banks today.

But if you don't like gold, than your fiat currency can be tied to some other commodity like oil, uranium, or group of commodities that will always have value. That way if someone like myself does not trust his government, that fiat currency can be redeemed for the real commodities of value. That would be honest money where no one gets screwed. Rather than making huge sums by financial manipulation and shorting dollars to buy real assets intelligent people would otherwise be motivated to earn a living by providing real goods and services.

Such an honest unit of exchange for society would help the middle class to flourish,. Lets say you earn the equivalent to a barrel of oil in currency today and put that currency in a retirement savings account with no interest. In 50 years when you retire, your currency will still purchase the barrel of oil in the future. It won't be like putting your money in a leaking bucket because of a corrupt government.

 

[bilby]

Fiat currency that was backed by gold

I presume you mean representative currency - eg notes that can be exchanged freely for the commodity they represent; Or perhaps fiduciary money, in which the notes can theoretically be traded for the commodity with a specified person or organisation, and whose value depends upon how trustworthy that person or organisation is thought to be.

Fiat currency is defined by the fact that it is not backed by a commodity, so "Fiat currency that was backed by gold" is a contradiction - a logical impossibility.

and gold by itself wasn't perfect but it worked for hundreds of years.

...until the industrial revolution turned a formerly static and agrarian economy with very low social mobility, into a rapidly changing urban economy with lots of opportunities for advancement, innovation, invention, and personal improvement.

If you pine for the good old days, when most people did the exact same job as their grandfather, in the same way, with the same tools; And when, for the vast majority, that meant back-breaking work in muddy fields, which barely made enough to keep most of their family alive, in a good year; With no light at night, no plumbing, no healthcare, and no say in how society should be ordered (unless you were one of a tiny number of nobles) - if that's the world you long to live in, then a gold-based currency will probably work fairly well for you, most of the time.

You can buy livestock or land or grain with gold; But you can't buy a flatscreen TV with gold, because it is impossible to have both a commodity money economy and a flatscreen TV producing economy in the same time and place.

The sort of civilisation that can use gold as money is not the same sort of civilisation thet can mass produce consumer electronics.

 

[RVonse]

Fiat currency that was backed by gold

I presume you mean representative currency - eg notes that can be exchanged freely for the commodity they represent; Or perhaps fiduciary money, in which the notes can theoretically be traded for the commodity with a specified person or organisation, and whose value depends upon how trustworthy that person or organisation is thought to be.

Fiat currency is defined by the fact that it is not backed by a commodity, so "Fiat currency that was backed by gold" is a contradiction - a logical impossibility.

and gold by itself wasn't perfect but it worked for hundreds of years.

...until the industrial revolution turned a formerly static and agrarian economy with very low social mobility, into a rapidly changing urban economy with lots of opportunities for advancement, innovation, invention, and personal improvement.

If you pine for the good old days, when most people did the exact same job as their grandfather, in the same way, with the same tools; And when, for the vast majority, that meant back-breaking work in muddy fields, which barely made enough to keep most of their family alive, in a good year; With no light at night, no plumbing, no healthcare, and no say in how society should be ordered (unless you were one of a tiny number of nobles) - if that's the world you long to live in, then a gold-based currency will probably work fairly well for you, most of the time.

You can buy livestock or land or grain with gold; But you can't buy a flatscreen TV with gold, because it is impossible to have both a commodity money economy and a flatscreen TV producing economy in the same time and place.

The sort of civilisation that can use gold as money is not the same sort of civilisation thet can mass produce consumer electronics.

I presume you mean representative currency
Exactly what the US had and was using before 1971 when Nixon took the dollar off the gold standard. The currency looked the same but it could be redeemed with gold if that is what you wanted to do.

You can buy livestock or land or grain with gold; But you can't buy a flatscreen TV with gold, because it is impossible to have both a commodity money economy and a flatscreen TV producing economy in the same time and place.
The US sent men to the moon in 1969. And we were using currency that was backed by real gold while making these advancements in science and technology.

 

[bilby]

The US sent men to the moon in 1969.

They didn't have any flatscreen TVs though.

 

[SLD]

The US is unlikely to drop into recession

With the job market softening and economists hammering on about the negative consequences of tariffs, some people expect the US economy to slow down and eventually drop into recession.

klementoninvesting.substack.com

Slowing growth and continued inflation, but not an outright recession. Trump of course has walked back a lot of his tariffs. But I think the real issue is a massive increase in the deficit caused by his tax policies. If the U.S. loses its credit rating that could threaten the dollar as the world’s reserve currency. The consequences would be catastrophic. Increases in inequality also caused by tax policies and cuts to various programs will have a longer term impact.

 

[Jimmy Higgins]

One thing I heard was that tariffs should inflate costs, but it'd be a singular increase, so the market could live with that. And the Fed, who is being berated by Trump every day would also handwave that concern as well. The other issue, however, is the TACO issue. The tariffs have a real impact on construction. Bidding construction right now is a very dangerous thing for contractors, as Trump has out of the blue announced a tariff on this metal or another metal and pricing that into the cost is very difficult. Then there is investment. Hard to plan out factories, power plants, etc... if the price of metals is being used a jousting weapon against foreign countries. Finally, tariffs also have a built in delay, where TACO Don keeps doing, undoing... so importers or exporters or retailers might temporarily eat the costs so as to not lose market share, but if the increase remains for long enough, they'll stop eating it, which likely means the increase in pricing due to tariffs will be in steps, so the inflation will take a bit to build in. .

 

[Elixir]

Then there is investment. Hard to plan out factories, power plants, etc...

No worries for Trump. He'll be long dead by the time those chickens are home to roost.
But the rest of the country will suffer for decades and Republicans will blame "the left" no matter what.