US on the Verge of Another Economic Boom? Or Bubble?

[CB007]

The United States central bank, the Federal Reserve, from their website:

http://www.federalre...money_12852.htm

US monetary base:

US velocity of money:

http://research.stlo...s/M2V?cid=32242

[mdehaan]

My point is, as stated above, inflation/deflation is a product of central bank policy and the velocity of money.

To answer the OP and what has been stated above, booms and bubbles for the most part are the same thing.

[CB007]

My point is, as stated above, inflation/deflation is a product of central bank policy and the velocity of money.

To answer the OP and what has been stated above, booms and bubbles for the most part are the same thing.

[Lancaster]

Worked for the Great Depression. Massive government spending for WW2 brought the US out of the depression. Left them with massive debt of course.

PS I follow the Wikipedia School of Economics. I take no sides.

[Henrik Kesler]

I am a drilling consultant in N Pennsylvaina, and I am obviously pretty familiar with the hype.

The "fluids" found in the Utica shale aren't conventional crude oil like some reports are suggesting, it's a liquid condensate, I have herd rumours that it is so pure that you literally put it in your gas tank and drive.

A similar product is also present in the eagleford in south TX and the potential in the Duvernay shale in NE BC and NW AB.

Very intriguing stuff.

[Ghostsof1915]

The New Deal was humming along for like 8 years before there were any significant impact on unemployment. If that's not inefficient, I dunno what else is.

With those unemployment numbers, a huge factor was how suddenly millions of guys without jobs suddenly signing up to the armed forces and taking themselves off the workforce pool.

Even with debt spending back then, it was all backed by people buying up Liberty Bonds. The government borrowed money from investors, unlike now where the government just borrowed from itself.

If you tried to do the same, you'll be arrested for fraud. A company tries the same tactic and it would be audited so hard by the SEC and CRA.

With WW2, the government didn't just print money out, they mostly lent money to manufacturers. Small struggling automakers were able to borrow money to expand to build tanks, etc. The key point being demand.

Currently, the government have been shelling money at fringe industries where demand has been relatively small like that solar industry fiasco, or forcing automaker to make that overpriced, crappy, originally electric-now hybrid cars that nobody wants.

The most important aspect for any economy is confidence from the private sector. However big a government it, they still have less capital than all the investors combine. The reason there's no confidence is because the bottom still haven't fallen out yet.

[Mr. Ambien]

Any economic "boom" in the last decade plus in the US is not market driven but driven by government policy aimed at artificially stimulating an economy well beyond what a market can provide.

The market would correct itself but as the US government has continued to intervene through the Fed and it's ridiculous policies like QE it's exacerbating the problem, making it so a future generation is going to be stuck with a worthless currency and shoddy economy that government can't stimulus it's way out of.

The US government has used Keynes' model well beyond what was intended.. to provide a mere spark, not to inflate an economy so much it creates a bubble, which then bursts, then instead of letting it burst and allowing the economy to correct itself (mainly on more established credit and risk aversion we see here in Canada, especially out east) from said burst, to where it literally holds up a nation's economy (the Fed cannot take the pedal off on QE and bond interest must stay virtually zero or else you will see what a fiat currency really is) they put the pedal to the metal --- at some point the US government will no longer be able to hold up this facade and the US economy will crash with said government intervention which will make it all that much more painful for Americans.

We should be learning from them in what not to do.

Edit: The Fed has played around with the idea of moving away from QE.. LOL. I'd love to see it. Those of us with an education in macro know exactly what will happen. The US is too reliant upon phony capital to stop now. Pulling back and driving up interest rates will hasten the dollar collapse. Rather than just having a market crisis now there is going to be a currency crisis followed by a market crisis.

[CB007]

The most important aspect for any economy is confidence from the private sector. However big a government it, they still have less capital than all the investors combine. The reason there's no confidence is because the bottom still haven't fallen out yet.

[CB007]

The market would correct itself....

[Mr. Ambien]

Can you provide a recent example of a modern economy correcting itself from a deflationary spiral?

[Lancaster]

Photovoltaics section of Cost of Electricity by Source:

Photovoltaic prices have fallen from $76.67/Watt in 1977 to an estimated $0.74/Watt in 2013, for crystalline silicon solar cells.^[46] This is seen as evidence supporting Swanson's law, an observation similar to the famous Moore's Law that states that solar cell prices fall 20% for every doubling of industry capacity.^[46]

As of 2011, the price of PV modules per MW has fallen by 60% since the summer of 2008, according to Bloomberg New Energy Finance estimates, putting solar power for the first time on a competitive footing with the retail price of electricity in a number of sunny countries; an alternative and consistent price decline figure of 75% from 2007 to 2012 has also been published,^[47] though it is unclear whether these figures are specific to the United States or generally global. The levelised cost of electricity (LCOE) from PV is competitive with conventional electricity sources in an expanding list of geographic regions,^[7] particularly when the time of generation is included, as electricity is worth more during the day than at night.^[48] There has been fierce competition in the supply chain, and further improvements in the levelised cost of energy for solar lie ahead, posing a growing threat to the dominance of fossil fuel generation sources in the next few years.^[49] As time progresses, renewable energy technologies generally get cheaper,^[50][51] while fossil fuels generally get more expensive:

The less solar power costs, the more favorably it compares to conventional power, and the more attractive it becomes to utilities and energy users around the globe. Utility-scale solar power can now be delivered in California at prices well below $100/MWh ($0.10/kWh) less than most other peak generators, even those running on low-cost natural gas. Lower solar module costs also stimulate demand from consumer markets where the cost of solar compares very favorably to retail electric rates.

[52]

As of 2011, the cost of PV has fallen well below that of nuclear power and is set to fall further. The average retail price of solar cells as monitored by the Solarbuzz group fell from $3.50/watt to $2.43/watt over the course of 2011.^[53]

For large-scale installations, prices below $1.00/watt were achieved. A module price of 0.60 Euro/watt (0.78 $/watt) was published for a large scale 5-year deal in April 2012.

[54]

In some locations, PV has reached grid parity, which is usually defined as PV production costs at or below retail electricity prices (though often still above the power station prices for coal or gas-fired generation without their distribution and other costs). Photovoltaic power is also generated during a time of day that is close to peak demand (precedes it) in electricity systems with high use of air conditioning. More generally, it is now evident that, given a carbon price of $50/ton, which would raise the price of coal-fired power by 5c/kWh, solar PV will be cost-competitive in most locations. The declining price of PV has been reflected in rapidly growing installations, totaling about 23 GW in 2011. Although some consolidation is likely in 2012, due to support cuts in the large markets of Germany and Italy, strong growth seems likely to continue for the rest of the decade. Already, by one estimate, total investment in renewables for 2011 exceeded investment in carbon-based electricity generation.^[53]

In the case of self consumption payback time is calculated based on how much electricity is not brought from the grid. Additionally, using PV solar power to charge DC batteries, as used in Plug-in Hybrid Electric Vehicles and Electric Vehicles, leads to greater efficiencies. Traditionally, DC generated electricity from solar PV must be converted to AC for buildings, at an average 10% loss during the conversion. An additional efficiency loss occurs in the transition back to DC for battery driven devices and vehicles, and using various interest rates and energy price changes were calculated to find present values that range from $2,057.13 to $8,213.64 (analysis from 2009). ^[55]

For example in Germany with electricity prices of 0.25 euro/KWh and Insolation of 900 KWh/KW one KWp will save 225 euro per year and with installation cost of 1700 euro/KWp means that the system will pay back in less than 7 years.^[56]

In other words the more research and development gets done, the cheaper and more efficient renewable energy is. Also the greener the grid gets. There is a finite amount of coal, natural gas, and oil on the planet. You can't just hope there's enough to last your lifetime, that's just asking for an economic collapse in the future. People don't avoid electric and hybrids because they don't care. They don't buy them because they are too expensive. If cars like the Tesla S were $20,000 I bet they wouldn't be able to keep up with demand. Considering electric cars and hybrids are behind by 100 years in development, versus the internal combustion engine, they are getting better by leaps and bounds each generation. Once development hits that level of affordability and profit margin, you will see a massive paradigm shift. By the way solar power is the only existing energy source that exceeds projections of world demand for energy. As the National Geographic pointed out, the sun puts out enough energy in one hour on Earth than what we use in energy in a year.

I understand people are frightened by change, but the reality is we don't know when the oil, gas and coal will run out. So the sooner we start looking at alternatives, the better.

[CB007]

Sure, just provide me a recent example of a modern government not excessively interfering with their modern economy.

Oh, darn.. there isn't one.

Oh, but any person well versed in macro as well as history can tell you how limited market bubbles and crashes were before Keynesian economics (which should be classified a government drug) was the modern government economic prototype. That's why we know it works on it's own. However, thanks to government interference in the economy significant deflation has to happen but not only that, it requires a significant change to demand (ie consumption). An even more difficult task because that requires a cultural shift, not just an economic one.

[CanuckClown]

Sure, just provide me a recent example of a modern government not excessively interfering with their modern economy.

Oh, darn.. there isn't one.

Oh, but any person well versed in macro as well as history can tell you how limited market bubbles and crashes were before Keynesian economics (which should be classified a government drug) was the modern government economic prototype. That's why we know it works on it's own. However, thanks to government interference in the economy significant deflation has to happen but not only that, it requires a significant change to demand (ie consumption). An even more difficult task because that requires a cultural shift, not just an economic one.

[mdehaan]

Of course. Most recessionary monetary and fiscal policies are designed and implemented with the aim of driving up demand for private sector's goods and services as well as investments from the private sector. Not sure about back then, but today, government stimulus investments are mostly spent on contracts with the private sector.

[ronthecivil]

Any economic "boom" in the last decade plus in the US is not market driven but driven by government policy aimed at artificially stimulating an economy well beyond what a market can provide.

The market would correct itself but as the US government has continued to intervene through the Fed and it's ridiculous policies like QE it's exacerbating the problem, making it so a future generation is going to be stuck with a worthless currency and shoddy economy that government can't stimulus it's way out of.

The US government has used Keynes' model well beyond what was intended.. to provide a mere spark, not to inflate an economy so much it creates a bubble, which then bursts, then instead of letting it burst and allowing the economy to correct itself (mainly on more established credit and risk aversion we see here in Canada, especially out east) from said burst, to where it literally holds up a nation's economy (the Fed cannot take the pedal off on QE and bond interest must stay virtually zero or else you will see what a fiat currency really is) they put the pedal to the metal --- at some point the US government will no longer be able to hold up this facade and the US economy will crash with said government intervention which will make it all that much more painful for Americans.

We should be learning from them in what not to do.

Edit: The Fed has played around with the idea of moving away from QE.. LOL. I'd love to see it. Those of us with an education in macro know exactly what will happen. The US is too reliant upon phony capital to stop now. Pulling back and driving up interest rates will hasten the dollar collapse. Rather than just having a market crisis now there is going to be a currency crisis followed by a market crisis.

[ronthecivil]

Would you say that the recessions/depressions/crashes we had before the Great Depression were less severe than the ones after 1945?

[ronthecivil]

Of course there is still the small matter of this....

http://www.economist.com/news/leaders/21582258-it-not-just-detroit-american-cities-and-states-must-promise-less-or-face-disaster

BTW, don't be too smug Canadians. We have the exact same issue. Demographics are a bitch.

[mdehaan]

A little history would show you that market crashes, currency crisises, bank runs, and other finacial disastors were much more common and severe before the central banks were even contemplated.

[nuckin_futz]

Ok, lets see it...

[mdehaan]

There are some very specific reasons why they were more severe. For instance in regard to market crashes.

Before the advent of the SEC in 1934, typical margin was 10:1. Today it's 2:1. Leverage in the wrong hands is a killer. Giving 10:1 to the average Joe on the street is insane.

In regard to bank runs. FDIC insurance pretty much put a stop to those however that didn't exist prior to 1934.