When Quantitative Easing Finally Fails

While markets await details on the next round of quantitative easing (QE) -- whether refreshed bond buying from the Fed or sovereign debt buying from the European Central Bank (ECB) -- it's important to ask, What can we expect from further heroic attempts to reflate the OECD economies?

The 2009 and 2010 QE programs from the Fed, and the 2011 operations from the ECB, were intended as shock treatment to hopefully set economies on a more typical, post-recession, recovery pathway. Here in 2012, QE was supposed to be well behind us. Instead, parts of Southern Europe are in outright depression, the United Kingdom is in double-dip recession, and the US is sweltering through its weakest “recovery” since the Great Depression.

It wasn’t supposed to be this way.

Recently-released data from all these regions now confirm that previous QE, at best, merely bought time against even more grueling outcomes. Spain's unemployment, for example, has just hit a new post-Franco high of 24.6%, and the forecast for this crucially important EU economy remains negative. Recently revised US figures on GDP show that the post-2009 recovery was even weaker than previously estimated, with the first year post-crisis crisis clocking in at 2.5% vs. the expected 3.3%.

Plodding, slow growth in the aftermath of a global financial crisis is a recipe for stagnation. The inability of the US economy to work off its surplus of labor appears to have finally stirred OECD policymakers into action. This is, of course, a great and humbling disappointment to the recoverists, who keep mistaking various economic oscillations around a bottom for the start of a typical post-war, V-shaped recovery. Housing, autos, jobs, Internet IPOs, state tax revenues, and train traffic have all been called upon by optimists to sound the clarion call for a broad economic recovery. Yet the US economy still is only able to produce sector-specific or selected regional strength that never adds up to quite enough to restore national growth.

When we look at national GDP, at 1.5% in the most recent quarter, it is not clear the US economy has enough forward speed to statistically distinguish between slow growth and no growth. Large states like California, for example, are already seeing the return of declining state revenues. Meanwhile, national poverty -- one of the best measures of aggregate economic health -- continues to soar.

There is no doubt that any new round of QE -- especially a double shot from both the Fed and the ECB -- will have psychological impact. For Europe, QE would once again allay systemic risk. And for the US, QE will surely find its way to the stock market; which is not an insignificant outcome as America increasingly relies on the stock market to produce retirement income. However, the question arises, What series of radical measures policy makers will turn to after the next round of QE wears off?

Before we answer that question, let’s review the poor economic conditions leading to the next (and final) round of QE.


House prices in the US have done an excellent job of adjusting downward over the past 5 years to reflect the stagnation in US wages, the overhang of private debt, structural unemployment, and the rising cost of energy.

But there has been a recent media celebration of sorts over this story, as it now appears that housing is bottoming. To be sure, certain housing markets like Miami and Las Vegas continue to recover from completely bombed-out levels. Additionally, construction of new homes, especially multi-family homes, is off the bottom. For now.

The problem is that housing is a result, not a cause, of economic expansion. And unless housing is to work in tandem with wage and job growth, housing alone cannot power the US economy. Did the US not already learn that lesson already over the past decade?

Let’s take a look at fifteen years of home prices, from the US Census Bureau:


The unsustainable peak in 2006, when single-family homes reached a median sales price of $222,000, marked a near-doubling of price over the ten-year period from 1995. But as we now understand, not only were wages (in real terms) not rising during this period, but a new bull market in commodities was getting underway, robbing Americans of discretionary income.

The result is that house prices were able to keep up with the loss of purchasing power until slightly past mid-decade. Then they collapsed. Worse, the phase transition in rising energy prices kept going (and continues through today), which had an outsized impact because the topography of US housing, largely dependent on roads and highways, is quite exposed to transportation costs.

We can think of housing as facing several key constraints that will be sustained for at least another five years:

  • First, there is the tremendous overhang of personal debt in the US. Much of this is still carried within the mortgage market itself. (Additionally, student loan debt has also emerged as an enormous barrier to home buying.)
  • Second, there is the lack of wage growth and the problem of structural unemployment. The surplus of labor prevents the broad, marginal pressure needed to force national house prices upward.
  • Third, the constraint of oil prices will not ease. This means that urban real estate may do well on a relative basis, but the majority of US homes will continue to adjust downward to reflect the permanent repricing of oil (and hence gasoline).
  • Finally, the notion that real estate prices have bottomed with mortgage rates near all-time lows seems a very risky call. Is it more prudent to presume that a new advance in national real estate prices will be carried on the back of rates going even lower -- or higher? Which is it? The view that real estate has bottomed appears to assert that no matter where interest rates go from here, real estate is going higher. That is the mark of hope and belief; not analysis.

It seems very unlikely only five years into such enormous, structural shifts in the US economy that the repricing process is over in housing.

At minimum, I expect the median price of single-family existing homes to revert to the 2000 level of $147,000, with the strong possibility of an overshoot to the $125,000 level. This process will take several more years.


As early as 2009, many of us understood that this was not a normal economic decline and therefore would not be followed by a normal economic recovery. Here's the lead paragraph to a New York Times piece, covering the latest GDP data:

U.S. Growth Falls to 1.5%; a Recovery Seems Mired

The United States economy has lost the momentum it appeared to be building earlier this year, as the latest government statistics showed that it expanded by a mere 1.5 percent annual rate in the second quarter.

This is precisely the kind of news flow that the business press can expect to report for years to come.

Sure, the stock market may advance from points of low valuation. Certain regions of the country, especially those tied to exports, may thrive for a while. But nationally, a long secular contraction is now in place that will combine stagnant wages, contraction in government payrolls, flat tax revenues, and the shift to a cultural preference for much lower consumption. In addition to the fact that young people will not buy cars, will not buy houses, and in general will not secure high-paying jobs (if they can secure jobs at all), the nature of work in the US has entered a degrading period. Low wages, part-time work, poor benefits, and higher health-care costs all serve to further squeeze consumption.

Let’s take a look at the structural shift from full-time to part-time work in the US.

At an inflection point in a normal recovery, US workers would quickly be hired back to full-time jobs. But a full-time job with benefits is a cost that US corporations no longer wish to bear. This is partly why US corporate earnings and their accumulation of cash has been so robust. Sited in the US but acquiring labor abroad, US corporations are having their finest hour as they sell products to non-OECD markets that benefit from wave after wave of stimulus from the OECD, while the economy and labor force in their home countries languish.

Here in the US, we have effectively stripped out an entire tranche of the full-time US workforce, with no plausible scenario currently in place for adding it back. America used to have nearly five full-time jobs for every part-time job. Now we have four. Meanwhile, Washington, characterized by professional normalcy bias, has finally started figure this out. More importantly, this is why the economy will veer continually towards recession absent some form of stimulus in the years to come.

While the jobs market is surely the primary reason why QE 3 will be attempted, it’s also the reason why more radical measures are likely thereafter, as opposed to QE 4. Many of the prognostications for QE’s impact on the labor market, especially from the Fed and Fed-connected economists, simply never came true. That will become even clearer after QE 3 fails.


After leveling off in late 2011 and early 2012, the number of persons taking Food Stamps (Supplemental Nutrition Assistance Program, or SNAP) in the US is starting to push higher again. Given that food prices are set to make their next move higher as well, it’s reasonable to expect SNAP participation to reflect that pressure on household budgets. The annual cost of the program, which rose in the three years 2009-2011 from $50 billion to $64 billion and then to $71 billion, is quickly becoming a significant budget item. For comparison, should SNAP program costs reach $75 billion this current fiscal year, this amount is almost exactly equal to the most recent Department of Transportation Budget, at $74 billion.

While SNAP tracks the growth of poverty well, it's not the only measure. And the breadth and scale of US poverty continues to grow. This autumn, the Census Bureau is expected to release its latest figures on the growth in US poverty:

Poverty rate nears worst mark since 1965

The ranks of America's poor are on track to climb to levels unseen in nearly half a century, erasing gains from the war on poverty in the 1960s amid a weak economy and a fraying government safety net. Census figures for 2011 will be released this fall in the critical weeks ahead of the November elections. The Associated Press surveyed more than a dozen economists, think tanks and academics, both nonpartisan and those with known liberal or conservative leanings, and found a broad consensus: The official poverty rate will rise from 15.1 percent in 2010, climbing as high as 15.7 percent. Several predicted a more modest gain, but even a 0.1 percentage point increase would put poverty at the highest level since 1965. Poverty is spreading at record levels across many groups, from underemployed workers and suburban families to the poorest poor. More discouraged workers are giving up on the job market, leaving them vulnerable as unemployment aid begins to run out.

The Diminishing Marginal Utility of Quantitative Easing

QE is a poor transmission mechanism for creating jobs.

While there has certainly been a recovery of sorts in US jobs since the deep lows of 2009, in which total employment has risen from 139 million to 142 million jobs, this has been insufficient to keep up with population growth. Accordingly, if the US job market cannot aggregate the number of new workers into its system, then it cannot work off the structural labor surplus. Indeed, the rather narrow targets that QE aims for are exactly the reason why the US and the OECD are fated to try more unconventional solutions once the next round of QE fails.

In Part II: What Radical Measures to Expect in the Post-QE Era, we forecast that policies to revive stagnant Western economies (and the US, in particular) will swing sharply away from central banks towards elective bodies. Such programs will involve various forms of debt jubilee and massive infrastructure programs. More unconventional is that some of these programs may be initiated using new forms of government scrip, equity participation, or other methods that allow the government to “spend” without incurring new debt.

Contrary to the deflationist view, which holds that governments will eventually turn to austerity, the examples of such failed efforts in the United Kingdom (which has entered a double dip recession) suggest that austerity will be nothing more than a brief, economic dalliance of Western policy makers -- recall that the Works Progress Administration (WPA) of the 1930’s was considered radical in its time.

We should expect no less this time around, as governments decide to pursue WPA 2.0.

Click here to access Part II of this report (free executive summary; paid enrollment required for full access).

This is a companion discussion topic for the original entry at https://peakprosperity.com/when-quantitative-easing-finally-fails/

I thought Mr. Macdonald's proposals for the future were interesting.  I have a son who is working very hard to pay his student loans.  I think one of the reasons college tuitions have become so high is that loans are so available, students do not have to make market choices based on affordability.  If tuition becomes free and government paid, I predict tuition will continue to rise faster than the rate of inflation much like healthcare costs.

Why should currency issued by a government institution, theoretically constrained by some sort of democratic control, be inferrior to bank scrip or what we euphemistically call Federal Reserve Notes and credits?  By all means, employ the Treasury to increase the stock of money by the issueance of interest free dollars!  This is money unconstrained by the profit motive.  It can be used where the need is greatest regardless of the anticipated returns on investment.  We have a nation where the gun related deaths approach 10,000 per year, we have no national healthcare available to all citizens, we fritter away the last of our petroleum endowment on private passenger cars, but our money mediated relationships remain sacred at the expense of all else.  Isn't it time we ask just what kind of society we want?

Where did the article's image come from?   Did a CGI person wireframe "The Thinker" and create "The Bummer"?

gregor is correct. the next and last lsap is one that is like precious droplets of water needed to traverse across the vast expanses of the desert. bernanke will absolutely not use it until he has to…and that certainly wont be before elections…after that, all fingers will point to congress to clean up their mess…

The power of the oligarchs is just amazing.  In the face of the wholesale corruption of the free capital markets by the banksters and the resulting thud of the economy, we find our so-called leaders wringing their hands over QE, should we or shouldn't we?  For some reason big capital is so afraid of losing a penny of their wealth to "redistribution" by the government and has such a stranglehold on electoral politics that they've managed to rewrite history and ignore the straightforward and obvious Keynesian solution to restarting the economy and overcoming the depression psychology, now referred to rather impersonally and abstractly as "the liquidity trap."  They've got their think tanks and economists putting out a constant stream of anti-Keynesian blather framing their arguments in ideology that ranges from "a Marxist threat to the free enterprise system" to simply "unwise … and I know because, well, I'm rich and you're not."  
As the author says … the country simply borrows some money (at record low interest) and invests in our infrastructure and future.  A lack of investment there over the past 30-40 years is a result of the complete dominance of personal and corporate self-interest over national self interest.   It's a no brainer … but the problem we have is that our leaders have "no brains" and even less courage.  Dorothy, where are you when we need you?  

Long term, I agree with the economic realities pointed out on this website … we have to learn to restructure our economy to deal with reality including the national debt.  But austerity, particularly as practiced against the middle class, is an unneccesary and even tragic step in the wrong direction.  It will make that restructuring even more difficult and actually increase the national debt.   

Welcome Seattle Billy Bob,

I think you are missing the true problem is that we have been needing austerity for a very very long time (decades - at least before we went off the gold window) but have continued down the Keynesian path instead.

You seem to view this as a temporary issue caused by the near collapse in 2008 that if we can just kick the can one more time we will then figure out how to solve it.  The problem is we have been kicking the can for a long time and another kick requires major growth and the associated energy consumption to support it.  However, we do not have the energy to support such growth and the second we try to grow we will hit the wall of increasing energy prices when supply can not keep up with the demand from the new growth.

If you haven't watched the Crash Course yet, I highly recommend doing so as it shows the relationship between energy and the economy and nicely explains why things just don't seem to be working with QE and are unlikely to work even if more QE is tried. 

While it's easy to scapegoat the rich, the problem is much much much bigger.  We are so far beyond fixing the current system that even taxing the rich 100% doesn't even come close to fixing things.   (see Eat the Rich for a nice take on it).  Note, that in video, he only talks about the deficit that is commonly reported, not the real deficit when using GAAP, which is running $5-7T/year.  No amount of taxing or redistributing of wealth can cover the promises made by governments.  They will be broken - plan accordingly.

Some other things to think about.  Most of the wealth that those rich people have is in paper assets, stocks, bonds, houses, land.  So say you decide your going to confiscate it.  What are you going to do with it?  Sell it to pay for things like health care, welfare, food?  Who is going to buy those assets?  It's the same problem the US treasury and other governments are having around the world, who is going to buy all those new bonds?  For the last couple of years the only solution is central banks and other governments printing money to pretend they are solvent - which simply raises prices for necessities, which hits the middle class and poor disproportionately.  The point is when the government borrows/prints to help the poor - they are doing the opposite - they are making their lives harder - it's why we have a pretty tight correlation between government spending and inflation - Chris had a great graph showing that at the Lowesville seminar a few years ago.  Chris if your reading this do you have a newer version of that graph?



What is the argument against public works projects – that money will have to be printed?  Plenty of money was printed to pay for the recent wars and bank bailouts.  The difference is that with public works projects, at we the people actually get something for our money – new roads, bridges, maybe even some new hospitals and schools for places that need them.  And JOBS building the stuff.  If we are going to have socialism for bankers and the military then we ought to have it for everyone.  The money is going to be printed anyway, why not do some good with it before the dollar is completely useless?

What is the argument against public works projects – that money will have to be printed?  Plenty of money was printed to pay for the recent wars and bank bailouts.  At least with public works projects, we the people actually get something for our money – new roads, bridges, maybe even some new hospitals and schools for places that need them. And JOBS building the stuff. Maybe we could even get the government to support our postal service instead of starving it!  If we are going to have socialism for bankers and the military then we ought to have it for everyone.  The money is going to be printed anyway, why not do some good with it instead of pissing it away on banks.

Public works 

What is the argument against public works projects – that money will have to be printed?

No, it's that the money will have to be paid back (with interest), and the money that is eventually used to pay it back could have been used by entrepreneurs to create productive, cost-effective jobs in the private sector. It shouldn't be government's job to decide the winners and losers by authorizing a project in the south that the people in the north will be paying for later. Also, you are robbing the economy of the future to do your project today. A project which BTW most likely could be and would be done cheaper and faster without federal government intervention if it is truly needed.
Plenty of money was printed to pay for the recent wars and bank bailouts.
And it will have to be paid back (with interest) by people that may not even be born yet. It's also known as generational theft.
At least with public works projects, we the people actually get something for our money
"we the (connected) people", or "we the (chosen) people", or "we the (union) people". The rest of us get the debt to be paid back (with interest).
-- new roads, bridges, maybe even some new hospitals and schools for places that need them.
All of these things can be built and have always been built when and if they are needed, when the money becomes available. And it can be done and has been done without theft.
Maybe we could even get the government to support our postal service instead of starving it!
Or maybe it will be replaced by a business that actually produces a profit, unless you prefer stealing money from future generations to keep an obsolete business on life support. If that's the case, let's bring back the Pony Express. Talk about full employment, we'd need riders, horses, saddles, whips, etc. Now there's a jobs program for ya!
If we are going to have socialism for bankers and the military then we ought to have it for everyone.  The money is going to be printed anyway, why not do some good with it instead of pissing it away on banks.
First of all it's not money, it's currency. Secondly, how about we legalize an alternative currency, maybe even gold backed, so that we can have the choice to use a currency that cannot be "legally" counterfeited? SS  

The definition of insanity is doing the same thing over again and expecting different results.

RE; I think you are missing the true problem is that we have been needing austerity for a very very long time (decades - at least before we went off the gold window) but have continued down the Keynesian path instead.

I love this argument that we will have to sit down and either make a plan or DO something real soon. The problems can be easily solved if we put our minds to it.

Reminds me of the heavy smoker for 40 years. Diagnosed cancer of the lungs so he is going to plan to quit in the next 12 years. That will fix his cancer won't it?


I actually don't believe we will stop until the patient is dead - our currency destroyed, economy in shambles, and fewer resources with which to rebuild.  I hope I'm wrong, but… what I do worry more about is that as things fall apart (the patient is dying), those that have become dependent on the system will do everything to try to keep it alive, including handing over any last bit of liberty they have.  The reason I push so hard on the Libertarian view is that hopefully people will wake up and understand that the state (government) does not provide safety or prosperity, but just the opposite.  I consider it the part of the "Crash Course" emphasis on self reliance and community (local).  A community is not something that can be created by force - it like capitalism and the economy only works when it is voluntary.

Unlike a cancer patient, when the economy and our currency dies there will be a lot of people left around to deal with the pain.  To continue with this metaphor, the message of liberty is not aimed at the cancer patient, but their children.

It is too bad that americans seem to be allergic to cooperation of any kind.  It is always that rugged individual in his garage inventing the next nuclear reactor prototype with parts from a couple of old pickup trucks unencumbered by onerous government regulations that will save us all.
The military consumes the majority of our taxes dollars, most of the rest goes to corporate welfare. A few bits and pieces wind up in public works, and fractions of that get used for the social safety net.  Yet any time there is any discussion for public works spending, everybody get hyperbolic, oh my god, you are proposing stealing from my children!

All legislation gets written by special intrests, bad governance is now baked into the cake. We no more have a democracy than we have a functioning free enterprise system, but should you throw either system out based on current living examples in the US?  Why do we call the recentlly passed "healthcare" legislation Obamacare and not Pfizercare, no craven public servants were remotely involved in writing the legislation?

Let's fire all the teachers, cops and fire fighters, turn off the traffic lights (we'll use our individual ingenuity to get through the intersections in the morning ride to work, that will be much more efficient), stop paving the roads, cancel all the social security checks, close the post office, close all the public schools and universities, any regulatory agency of any kind, we don't need those. Courts, judges, who needs those either.  Get rid of the militry…opps I forgot, I was getting carried away, that is the one part  of the government that is a perfect well oiled machine that is the picture of efficiency that suffers none of the bureaucratic inefficiencies and corruption that seem to plauge all the other parts of the government.  No need to touch their budget.  We'll talk about reducing the rate of growth of their spending and call it devastating budget cuts.

We can bring the guys from MF Global, Enron, World Com, Goldman Sach, HSBC, Wachovia to run our world and our lives. And on top of that we can have a private banking cartel run our monitary system, we'll call them the Ferderal Reserve so that when things go wrong we can blame the government.  That will work out great.  Uh, this is what we are doing, doesn't seem to be going so well…

Actually I am a supporter of Ron Paul, probably vote for Gary Johnson if that is the only other option.  But the libertarian rhetoric gets a little extreme and ridiculous sometimes.  We do need the rule of law, and a functioning democray, which means a functioning government of some kind, all be it much smaller than we have now.  Yes, the choice between upgrading our 3rd world infrastructure and a balanced budget is a false one.  Free markets can be very short sighted and self destructive even sometimes.  The desire to make money is not the cure all for human civilization.  There was a guy who lived around 2,000 years ago, they wrote a popular book about him, didn't he have something to say about that…  

And what country are you talking about?  Military consumes 19% of the US budget, it's not even top as far as expenses.  Here are the top 10 (source):

  1. Social Security - $779B
  2. National Defense (Including the wars) - $716B
  3. Income Security  (welfare/disability/etc) - $580B
  4. Medicare - $484B
  5. Health - $362B
  6. Interest on debt - $225B
  7. Education, Employment, Social Services - $139B
  8. Veterans Benefits and Services - $130B
  9. Transportation - $103B
  10. Commerce and Housing Credit - $80B
If I look at that list, sure looks like at least 4 (perhaps 7) of those are social safety net or  58% of the budget....  Note - thats the $3.8T budget of which only $2.6T is actually paid for with taxes.

I don't think we get hyperbolic, rather some of us have the ability to do math and logical reasoning.  Exactly how would you describe your post about military spending?  Logical?  Rational?  Don't get me wrong, I think we need to cut that spending as well, but saying the government is funding only the military is just flat out wrong!

So which is it, government is doing a good job and we need them or it's all written by special interests.  You can't seem to make up your mind.

Agreed, we need government to protect individual rights, and your right we can probably upgrade our infrastructure and have a balanced budget, but certainly not on the path that has been undertaken for the last century.

How would you know free markets can be short sighted.  You went on a long rant about corruption - do you not understand corruption means their is no free market?  That because government interferes on behalf of all the special interests that we get exactly what you are complaining about.

Exactly how is pushing for us to live within our means, to rely on community and free (read voluntary) trade ridiculous?  I find the people like you that rant about all the corruption, lack of democracy, military spending, corporate welfare, … but then blast anyone that suggests just maybe that the government might just have something to do with the issue.  That perhaps if individuals had a bit more choice and control over how their labor and savings is being used we might just have a bit better outcome.

So who's extreme and ridiculous?

So why would you vote for someone (either of them) when you clearly oppose their ideals - they are both strong Libertarians?  By the way, Johnson was a great governor and would make a great president if Ron Paul doesn't show up on the ballot.


I agree with all your points, but we are not even talking about the same thing,  this has turned into a conversation about apples and oranges. I think we agree, but our use of language gives the appearance of more disagreement than is actuallly the case.  I did not express myself well in the original "rant", but I think our goals are indentical.
My comments about spending were related to discretionary spending, and that is an important distinction. Social Security is not a "tax" in the conventional sense of the word. It is a forced retirement savings plan.  The idea is that you pay the money in but then in retirement you get all that money back.  This is not money that government takes from you and spends theoreticallly on our behalf, which is an entirely different matter.  Discretionary spending is money that we will never see again, which is why it needs to be treated differnetly.

We both agree I'm sure that the government should not be in the retirement savings business.  The reasons that the current generation will never see any of their money are many, but that is a whole other discussion which can't be had until until some other fundemental issues are discussed.  But you can't throw this in the same bucket as discretionary spending.

I believe that our major disagreement stems form this, and I would really appreciate feed back if my assumptions are worng: You have a much better opinion of government as it is currently configured than I do.  I believe that the general perception (including yours) is that the government consists of welll intentioned bungling fools who have a theorhetical and philosophical difference with libertarian approach to governance.  They try to good, but because they have a flawed understanding of free markets and the role of government, they make a mess of things.  I believe the real role of government as currnetly configured is much more sinister. The real purpose of government is to maintain the status quo, to maintain the property, wealth and status of a small minority of the population.  "Social spending" is there purely as a measure to maintain societal stability, and for no other reason.  It is not intended as a ladder up out of poverty, the purpose is dysfunction and depnedency.

Things like immegration never get "fixed" because if immegrants were either thrown out of the country or given more rights, that would cause a rise in the working wages in either case and that will not happen. Things work very nicely just they way they are, thank you very much, depending on your point of view. This is one example of many, which as a rule, why I stay out of political "debtes". Debates constructed to create divisoin, that give the false face of legitimacy to why things don't change.  I let my passions get the better of me this time.

Vote with your money and your life style, it is the only option that we have left.

BTW If you look at discetionary spending, the military (which includes the veterans benefits because that is part of the cost of maintaining the military) using your numbers is at 28%.  A lot of the "social safety net" spending you put in other buckets is retirement and medical benefits for military personnel. Based on those numbers alone we are well north of 30%, I believe it is worse because much of the spending is hinden in other ways as well.  If I can find the numbers, I will post them.  But then again, why spend the time in "political" debates.

I don't see a difference because SS is not a savings plan of any kind.  Money is taken and either immediately spent for current benefits or used to purchase special treasury bonds, which is simply an accounting gimmick, and then spent.  Pretending it's different is dishonest.  SS is a tax.  It is the fruits of your labor being taken without your consent with a promise that they will give it back in the future by taking with force from someone else.

One of the key components of Libertarian thinking is that force (violence) should not be used other than for defending oneself or property from force by another.  Pretty simple, right?  Once you realize that taxation is taking from someone by force to give to another (stealing) then how can you morally defend any of this?  The discussions in politics are simply deciding who will be the victim of such force - are they richer, from another country, simply in the minority, etc.

Actually I don't have a better opinion, just different.  I believe that all living things are innately programmed to seek out advantages in their environments - this includes people.  When you give a person power over others, no matter how well intentioned, their natural tendencies will influence (to more or lesser degrees) them to make decisions that benefit themselves over others.   I don't think there is anything necessarily evil or sinister about this, it's just natural.  Overtime the distortions from all these decisions become greater and greater.  Lot's of small decisions adding up to big problems.

Big government is bad because it gives the people in government (including non-elected bureaucrats) power over others.  It transitions a voluntary exchange to a forced exchange which is why free markets are much more ethical.  In a free market you are voluntarily entering into an agreement, if both parties do not feel they are receiving a benefit then the transaction does not occur.  Large distortions are self limiting because once an exchange becomes too lopsided, the party receiving less benefit will not enter into the transaction.

So I don't see this as the case, I see the result of millions of smaller decisions each with just a little bit of bias eventually ending up to where we are today.  Yes, I believe some people in government are evil but primarily because it attracts those who covet control over others.

That is exactly what I believe, the problem is we are not allowed to do so because we are forced (with threat of violence) into  transactions against our will by government.

I don't really view this as a political debate, rather more of philosophical debate.  Discussing politics in today's environment means you agree with "big government" and accepting that force is the right way versus voluntary participation.  I believe, as a Libertarian, that the individual making decisions voluntarily on their behalf leads to the most fair and ethical system.  That government should exist to protect the individual and their voluntary participation in society.  Once you accept that some people are  better than others and should have control over others you are far down the path to tyranny. 

How many times do you see people saying "They should make a law to stop me from …" versus "They should make a law to stop them from …".  It's easy to force your will on others when you have a government backing you up.  If your making the law it's progress, if your the victim of the law it's oppression.


Just curious as to exactly how you know that QE1/QE2 did not help?  You don't "think" it helped, but clearly you have no certain way of knowing just what the economy would have looked like without QE. Isn't it at least possible that the economy would have been far worse (something like the 1930's) without the QE that was implemented?  And that the real problem was that the QE amounts were simply too low to support a full recovery.  Events do point in this direction (the recovery did seem to falter right at the end of QE2) and there are many economists who think this was the case.  And plain logic supports the possibility.
There is too much hand-wringing over deficits by the GOP.  Deficit spending is very much needed and desirable in times of recession - that much is clear from history of the great depression.  And such deficits will naturally tend to resolve themselves by increasing incomes (therefore taxes) and by reduced safety net-related spending in times of prosperity.  Of course, it helps if the President in charge can refrain from starting an optional, trillion dollar war, while at the same time greatly cutting taxes for the wealthiest Americans (at first time in American history for that strange combination of policy).

And let's not forget who was in power when the current recession started (after several years of Republicans calling the shots) - and the world-threatening 2008 crisis was largely thanks to a newly less regulated banking and finance sector in the USA (the direct result of some of those "called shots").

Welcome LTJX,

It's clear you have not watched the Crash Course.  I suggest you do so and it will answer your question about the real problems being created by the debt and not the partisan crap coming out of the MSM from the Repubocrats.   Both are just as guilty.

I also suggest you research the depression of 1920-21 which had a considerable different outcome from the great depression.  Based on the 1920-21 depression (history) it appears that things would have been much less worse had no intervention been taken.  See the same argument…

It's pointless to say "look it might have been worse had we not taken such and such course of action".  That's the scam/excuse of politicians from both sides.  Good sound bytes but not much else.

Watch the crash course, it may give you a whole different perspective.  I would also suggest reading some of Tom Woods books, Meltdown is really well written with lots of references you can check out.  Keep in mind, those that are telling you how we have to fix the problems are the same ones that caused them in the first place.

Open your mind and pay less attention to the partisan commentary.  You will quickly learn that this crisis has been in the making for a 100 years… Saying the republicans caused it is just scapegoating.  Both parties are equally guilty of making promises that can never be fulfilled, politicians lie - math doesn't.

LTJX,Welcome aboard. Baptism by fire is the most sincere form of welcome on this site. You had to know this challenge was coming … I wanted to give rhare a chance at the response before I stepped up. I've enjoyed the banter on this thread, but I can't stand by any longer.

As rhare noted, there is no way to find out what other scenarios would have performed better. We got what we got. I would have preferred that the politicians would have remained on the sidelines and let the market answer the quest, but they needed to keep their contributors minimally placated …

Wow! Where do we start? Are these the same economisseds (sic) that thought that the recovery from 2001 was sustainable? Who didn't see the housing bubble or the financial crisis of 2008? The only reason we had a semi-recovery was due to the federal reserve artificially setting interest rates too low. That induces rational people to borrow more than what is rational and subsequently spend their cheap money. This had the effect of making rational people think that demand was high and that more products needed to be produced. It was a virtuous cycle built on a faulty foundation. When it failed, the same group of economisseds (sic) came to the faulty conclusion that more needed to be done. "Plain logic" suggests that one look at the underlying principles that fostered the illusion of prosperity and ask if those are sustainable.

[quote=LTJX]There is too much hand-wringing over deficits by the GOP.  Deficit spending is very much needed and desirable in times of recession - that much is clear from history of the great depression.  
Why exactly is deficit spending needed? It distorts the very market that is needed to clear the ill advised "investments" that were made because of the distortions (caused by market manipulators) in the market. An argument can be made that the great depression ended in June 1932. Unfortunately, FDR changed the focus from the future to the past. He asked citizens whether they were better off now or in 1928. The majority voted for him. Now, we're paying for that lapse in common sense.
History shows that FDR's policies didn't work. The depression didn't end until WWII exhausted the competition. That is the true legacy of Keynsianism.

When have deficits ever decreased? You may think that deficits decreased during Clinton's reign, but realize that we've had a Unified Budget since LBJ. As such, politicians use either the unified, or the separated budget depending on which supports their current argument. Clinton was able to use the largess from social security taxes to pretend that we actually had a surplus. If we required GAAP (Generally Accepted Accounting Principles) at the federal level, the supposed surplus never would have seemed to occur. Most of the people in America are totally unaware of the differences and as such support "feel good" politics that aren't supported by the actual facts.

I agree that it was a strange combination. If politicians had to raise official taxes in order to prosecute a war (a necessary condition of honest money,) the public would quickly vote the politicians out of office if they felt the war were unnecessary. By borrowing money (from the federal reserve and others,) congress and the president were able to hide the true cost of the wars.
If you know about the fiat currency that we've had since 1913, you know that it must constantly increase its base or it fails. On a macro scale, any way to constantly increase the amount works as well as any other. If you remember the economic situation at the time, the stock market peaked in March and was sliding lower. For the people who owned stocks, it was apparent wealth destruction. Eventually, the deflation would have trickled to the working class. The powers-that-be needed a way to boost the money supply and they found one. Why would they increase taxes and undermine their goals?

The parties are two sides of the same coin. Whatever happened to the "hope and change" that we were promised during the campaign 4 years ago? The only change I've seen is bigger bailouts, larger deficits, and more legislation that can be used to keep the citizens in check.
The 2008 crisis was the result of faulty regulation. (In my opinion, any non-banning regulation is faulty.) Let the individuals "invest" as they see fit and let them gain the spoils or suffer the consequences. Let the public companies invest as they have disclosed to their shareholders and let the shareholders gain the spoils or suffer the consequences. If a public company acts contrary to their stated limitations, the government should provide a platform (court) where grievances can be aired and remedies can be enforced.