What evidence is the recovery based on?

[mrsat_98]

. I keep hearing people say we are headed for recovery but WHY? Based on WHAT???

Recovery is kind of like a hangover, First you throw up, then you gradually get over it. I suspect we are in the throwing up stage at best.

 

[GunnyFreedom]

"Recovering" means things improving- not necessarily back to the "good old days". Are we better off than in 2007/ 2008?

Depends on who you mean by "we".

I'm sure as heck not.

 

[Acala]

I'm sure as heck not.

You should have gone into investment banking. Or Security technology.

 

[Madison320]

"Recovering" means things improving- not necessarily back to the "good old days". Are we better off than in 2007/ 2008?

There's two problems with this statement. One is that it you have to ignore the 10 trillion in debt and QE, to say we are better off. I can max out my credit and buy an expensive home, and an expensive car and finance all the latest gadgets, but does that mean I'm better off? Or does it only appear that I'm better off in the short run, but in the long run I'm worse off.

Second is that just because things are dubiously "improving" doesn't mean they will continue to improve. There is no correlation between past growth and continued future growth, just like a basketball player who makes 5 shots in a row doesn't mean he'll make the next 5.

 

[Madison320]

Velocity is how fast money is rolling over. You get a dollar- how long before you spend it. This is independent of the supply of money. People aren't spending that much so velocity is low. That is why all the money the Fed has pushed out so far has had little impact on price inflation. If people do start spending money faster, then inflation will move higher. How far and how fast inflation rises will depend on how fast people increase their spending.

I not sure velocity is independent of the money supply. I would argue that as money is printed and prices start rising, velocity will increase.

 

[helmuth_hubener]

I am not sure velocity is independent of the money supply.

It is.

Velocity is a completely different stat. You are saying "I would argue that as the number of 3-pointers John Stockton scores goes up, the percentage of rebounds that are gotten by him will increase as well." They are two totally different things, and not correlated in any necessary way. MV=PQ.

Here's another way to look at it that may be simpler than learning that equation: price inflation is when the price of goods generally rise in terms of money. We can state it backwards just as truly: price inflation is when the price of money falls in terms of goods.

What determines the price of money?

Well, what determines the price of anything?

What say you, Madison? What determines a thing's price?

To save time and because you may not reply to me (as is sometimes your wont) let me give my answer: supply and demand!

In this case, supply is the money supply. Demand is the inverse of the money velocity. The more people desire (demand) dollars for their own sake, to hold on to them, the slower the velocity. If, on the other hand, people decide they want to hold fewer dollars, they become kind of like a hot potato. Instead of hanging around in people's wallets or bank accounts, they are getting traded in for other goods the people desire more.

If the central bank inflates at a 50% rate, the price of money could fall by 50% (that is, price inflation could be 50%), but it could also fall by only 10% due to increasing demand. Or it could even increase by 50% due to tremendous growth in demand.

If Tyco increases the number of Tickle-Me-Elmos by 50%, the price of Elmos could fall by 50% (that is, price inflation could be 50%), but it could also fall by only 10% due to increasing demand. Or it could even increase by 50% due to tremendous growth in demand.

Make sense?

 

[Peter4Paul2016]

The Feds want to appear that conditions are improving and that they're steering the economy in the right direction... Really all they can do to HELP the economy is to boost America's confidence in them, hoping that it will boost our confidence in spending, hiring, etc... Inflation will NOT help. Debt and QE are bad for the Dollar... Here's what Peter Schiff has to say about Janet Yellin and the Federal Reserve.

 

[P3ter_Griffin]

Money supply is used to calculate velocity. I'm not sure the actual calculation they use but say for instance we have a money supply of 3 trillion with a GDP of 17 trillion, velocity would be 17T/3T. Then you add 3 or 5 or however many trillions of additional supply the fed has over the last few year with no growth and it looks like 17T/6T, therefore you get a lower velocity.

--
Ron and many others warned about the housing bubble for a decade before the actual event happened. Two things come to mind that can spawn such an event. The numbers no longer work (ie 2009) or that enough people wake up thinking the same as you; that the dollar is worthless and with the realization that the debt can't be repaid. I don't think that they (the fed) can defy reality forever, so its just a matter of time before one of the two happen. And I think it must be said that IF you have the desired currency during/after the collapse opportunity will be abound, but the opportunity to make money to open those same opportunities will be scarce. It pays to work hard now and hope your magic 8-ball leads you to the "right" currency.

 

[oyarde]

What if I told you there was to be no recovery ? Wages will not go up , the housing market cannot drive the economy and the number of people employed is not going to go up . Only thing rising will be food and energy prices .

 

[acptulsa]

You should have gone into investment banking. Or Security technology.

Or better still, insider trading.

 

[seraphson]

Probably based on all the bullshit numbers i.e. GDP, unemployment % etc which all have had their formulas' changed *recently* (and several times over the years) to make the papers looks better than reality.

 

[oyarde]

Work Force Participation is the only number they have that I believe useful .

 

[enoch150]

Money supply is used to calculate velocity. I'm not sure the actual calculation they use but say for instance we have a money supply of 3 trillion with a GDP of 17 trillion, velocity would be 17T/3T. Then you add 3 or 5 or however many trillions of additional supply the fed has over the last few year with no growth and it looks like 17T/6T, therefore you get a lower velocity.

But what if the additional money is just stuck in banks and held as excess reserves while the "old" money circulates at a normal rate? That would make velocity look like it was down even if economic activity was at normal levels.

 

[Ronin Truth]

Same evidence as usual, smoke and spin and mirrors, lies and BS.

 

[P3ter_Griffin]

But what if the additional money is just stuck in banks and held as excess reserves while the "old" money circulates at a normal rate? That would make velocity look like it was down even if economic activity was at normal levels.

That's pretty much what we've seen, I think. Velocity going down because of higher supply and very little GDP growth- which isn't necessarily normal. "Stuck" though, I don't think is the right word. Because of a larger reserve they are willing to take more risk and use more leverage on the money not it reserves, effecting GDP and therefore velocity. Effectively, if losses in trades or other business practices could lead to these banks having to use these reserves, then they are accounted for and already in circulation.

The "excess reserves" not being spent BS got started by some Keynesians in response to... probably Ron.. talking about the unfairness and audacity of stockpiling money into these scumbags' coffers. What I don't get is if, like they say, excess reserves don't get spent, and there is no effect, why the hell would the fed continue feeding the banks excess reserves? The basic premise seems like fed is just doing it to do it?

 

[cbc58]

What I don't get is if, like they say, excess reserves don't get spent, and there is no effect, why the hell would the fed continue feeding the banks excess reserves?

It's likely because the banks use funny accounting to determine their solvency and if they went back to GAAP standards, they'd all be bankrupt. So the FED is playing accounting games to support their bank children.

Looking back on this economy one has to wonder what would it be like if 9/11 did not happen. Think of all the $$ and industries created to support employment and govt. spending.

 

[helmuth_hubener]

The basic premise seems like fed is just doing it to do it?

This is a complex issue that I'm not up to explaining right now, but one short answer: the Federal Reserve doesn't control the actions and decisions of all the banks.