[QUOTE=literka;292868]Let me write few facts of my fantasy. It was four months ago, when everybody, even educated people were writing about collapse of euro. Not only that value will decrease, but that it will stop to exist. I was the only one person, who wrote that euro will appreciate with respect to a dollar (euro was 1.19 then).
The same was about Greece. I wrote against everybody that there would not be a default. These are facts. You may write that I lack education, I don't care about it, but you cannot deny facts, unless you don't know that Greece still exists.[/QUOTE]In post #107, Ernst was responding to the first two sentences your post #106. Notice what Ernst quoted from your #106 post in his #107 post: only
[quote]"the central bank has supplied the big banks with multiple $trillions"
These banks didn't keep this money in socks, but have lent it to somebody enabling business to strive.[/quote]Ernst's comments about your "fantasy" were about your claim that "These banks didn't keep this money in socks, but have lent it to somebody enabling business to strive." That statement of yours is factually false.

U.S. banks have lent out _very little_ of the money they were given by the central bank -- and that's a fact you can look up if you wish!

Ernst wasn't commenting on anything you said about the euro or Greece, so your boasts there are irrelevant.

Since we're in a mystery economic theater here, let's puncture one of the conservatives' favorite voodoo economics mysteries/fantasies:

"The imaginary connection between tax rates and GDP"

[URL]http://news.yahoo.com/blogs/signal/does-28-top-marginal-tax-rate-mean-175706337.html;_ylt=ApGoIY2qHX.JiDN5umgAVzvDeOd_;_ylu=X3oDMTFrdTZucXNsBG1pdANCbG9nIEluZGV4IGJ5IEJsb2cEcG9zAzEzBHNlYwNNZWRpYUJsb2dJbmRleFRlbXA-;_ylg=X3oDMTFvcGs0cnBnBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANibG9nBHB0A3NlY3Rpb25zBHRlc3QD;_ylv=3[/URL]

[quote=David Rothschild]The richest Americans currently pay a 35 percent tax on income [URL="http://us.lrd.yahoo.com/_ylt=ArH0dXWHnK1wdaOoAf2s08jDeOd_;_ylu=X3oDMTFoNjRmYmZuBG1pdANCbG9nIEJvZHkEcG9zAzEEc2VjA01lZGlhQmxvZ0JvZHlUZW1wQXNzZW1ibHk-;_ylg=X3oDMTNicG9waDBhBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDYTEzNmNkNmUtOGIxYS0zM2I0LWE1NTctYWY1NTI2N2UyN2ExBHBzdGNhdANwb2xpdGljc3x0aGVzaWduYWwEcHQDc3RvcnlwYWdlBHRlc3QD;_ylv=0/SIG=12ueg04ut/EXP=1332894003/**http%3A//www.bargaineering.com/articles/federal-income-irs-tax-brackets.html"]over a certain threshold[/URL]. ...

Proponents of lowering this rate argue that higher marginal tax rates retard productivity for the highest earners, since they are reluctant to work as hard if the bulk of their income is taxed at too high of rate. Lower the rate, the thinking goes, and the rich are incentivized to earn more, thus increasing the total tax revenue and putting more money into the economy.

...

We decided to look at what the data say about the correlation between marginal tax rates and the economy. Here's a simple comparison of the marginal tax rate--that on the highest income brackets--and the rate of GDP growth or decline.
[/quote]

(I've forgotten how to get images to display in-line, which I really regret because this chart is really instructive.)

[img=[URL]http://us.lrd.yahoo.com/_ylt=AohvhiCix.bOxTI_pmYIR0fDeOd_;_ylu=X3oDMTFobDF0N3FnBG1pdANCbG9nIEJvZHkEcG9zAzQEc2VjA01lZGlhQmxvZ0JvZHlUZW1wQXNzZW1ibHk-;_ylg=X3oDMTNicG9waDBhBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDYTEzNmNkNmUtOGIxYS0zM2I0LWE1NTctYWY1NTI2N2UyN2ExBHBzdGNhdANwb2xpdGljc3x0aGVzaWduYWwEcHQDc3RvcnlwYWdlBHRlc3QD;_ylv=0/SIG=136l5tp1t/EXP=1332894003/**http%3A//media.zenfs.com/en/blogs/thesignal/Top-Marginal-Tax-Rate-and-GDP-Growth.png[/URL]][/img]

[quote][B][I]Sources:[/I][/B] BEA and Tax Policy Center of Urban Institute and Brookings Institute

As is clear, GDP growth, the all-important measure of economic strength, does not correlate with the marginal tax rate at all. GDP growth has been both strong and weak with very high and low tax rates.

There is no question that people change their earning behavior when marginal returns vary. Right now we tax the marginal capital gain at 15 percent, a full 20 points lower than the rate for traditional income. Thus, people substitute initiatives that lead to capital gains f0r initiatives that lead to regular income. In short, the highest earners in the country are more likely to [URL="http://us.lrd.yahoo.com/_ylt=Agr_VrC.9cvg7dlrtKtkCR7DeOd_;_ylu=X3oDMTFoNDIwNWM2BG1pdANCbG9nIEJvZHkEcG9zAzUEc2VjA01lZGlhQmxvZ0JvZHlUZW1wQXNzZW1ibHk-;_ylg=X3oDMTNicG9waDBhBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDYTEzNmNkNmUtOGIxYS0zM2I0LWE1NTctYWY1NTI2N2UyN2ExBHBzdGNhdANwb2xpdGljc3x0aGVzaWduYWwEcHQDc3RvcnlwYWdlBHRlc3QD;_ylv=0/SIG=125lkdua3/EXP=1332894003/**http%3A//elsa.berkeley.edu/%257Esaez/creepjpube.pdf"]shift income between tax categories[/URL] than they are to actually substitute leisure for work.

We expect politicians to over simplify the bounty that their proposals will deliver. But the data are very clear on the point that a lower tax margin for the wealthiest earners does not positively affect the GDP in any obvious way.

. . .[/quote]

[QUOTE=Christenson;292846]At what point does all this expansion of *credit* lead to inflation?[/QUOTE]

$5 per gallon gas (a record for the U.S., historically speaking) and record-high food prices don't count for you? ;)

I assume you mean "widespread" inflation ... that won't occur until a significant fraction of the newly-minted credit money makes into the general economy, which as we have said, it hasn't to date because banks are afraid of lending to consumers because that involves some risk of loss (whereas buying government debt and speculating in rigged markets or various kinds does not), and overleveraged consumers are generally unwilling to get deeper into debt except in a few special areas such as student loan debt.

So to find inflation you have to follow where the money is going - and a lot of it isn't going anywhere, it's just sitting on banks' balance sheets, helping give the illusion that said banks are solvent. The rest of it is going into equity and commodities markets, which explains how we can have record gas prices in the face of an actual demand collapse (which is being well-documented on an ongoing basis by Mish, via updates from his petro-industry pen pal Tim Wallace) and how the Dow "this is all the economics you need to know, people" Jones can be only ~10% below its all-time high even though the broader economy, by all objective not-completely-made-up-by-the-government metrics, remains in a deep recession.

Another place you can find inflation is in the prices of those same treasuries the government continues to emit in record quantities - by lending trillions of new-created credit money at 0-0.25% rates the government makes buying even low-yielding debt a surefire moneymaker for the big banks, which creates a bubble in treasury prices, resulting in record-low rates which the neo-Keynesian government-debt-is-good shills like Paul Krugman use to argue that "there is no need to foolishly slash government spending and thus risk a plunge back into recession, since the government is able to borrow at record-low rates." That's the kind of inflation deficit-spending governments love. The fact that it will eventually lead to big-time problems doesn't bother your typical pol, because when it does happen they figure one of two things will be true:

1. They'll be long gone and able to blame 'the current crop of politicians' form their cushy trophy offices on Wall Street or K Street;

2. They all scream "who could have foreseen this?" in unison and use their own created crisis as an excuse for another power-grab and/or more money-printing.

[QUOTE=cheesehead;292939]In post #107, Ernst was responding to the first two sentences your post #106. Notice what Ernst quoted from your #106 post in his #107 post: only
Ernst's comments about your "fantasy" were about your claim that "These banks didn't keep this money in socks, but have lent it to somebody enabling business to strive." That statement of yours is factually false.

U.S. banks have lent out _very little_ of the money they were given by the central bank -- and that's a fact you can look up if you wish!
[/QUOTE]

I think you are wrong. Even if it is true what you wrote and I made a mistake by writing that money was lent, this would be far away from living in fantasyland. I think this "living in fantasyland" refers to my whole activity, where I had a luck to be right at least with respect to the main issues.
As it concerns what I heard about money given to the banks, they were provided with a relief package for the people threatened with foreclosures, to rescue theirs homes. May be I was wrong and it was not that way, but it is irrelevant in a wider context. In the wider context I wanted only to underline that new money was created in the USA, but not in Europe. At least not by Central Bank of Europe.
Who got this money is less important if you consider the expansion of economy.


[QUOTE=cheesehead;292939]
Ernst wasn't commenting on anything you said about the euro or Greece, so your boasts there are irrelevant.
[/QUOTE]

I would never write these "boasts" if was not accused of "national chauvinism". I don't mind it and I don't want to know why it is so. I think EwMayer made a good choice clicking on the button [IGNORE}.

[QUOTE=literka;292946]I think you are wrong. Even if it is true what you wrote and I made a mistake by writing that money was lent, this would be far away from living in fantasyland. I think this "living in fantasyland" refers to my whole activity, where I had a luck to be right at least with respect to the main issues.
As it concerns what I heard about money given to the banks, they were provided with a relief package for the people threatened with foreclosures, to rescue theirs homes. May be I was wrong and it was not that way, but it is irrelevant in a wider context. In the wider context I wanted only to underline that new money was created in the USA, but not in Europe. At least not by Central Bank of Europe.
Who got this money is less important if you consider the expansion of economy.[/QUOTE]
Sigh. Try this article that I found after one minute searching of the phrase: ECB Fractional Reserve Banking

[URL="http://mises.org/daily/5575"]The Fed and the ECB: Two Paths, One Goal[/URL][QUOTE]Both the Federal Reserve (Fed) and the European Central Bank (ECB) are owners of the printing press. They produce base money. On top of the base-money production, the fractional-reserve-banking system can produce money out of thin air. Both central banks produce money in order to finance their respective governments. As a result of their money production, prices will be higher than they would have been otherwise. All money users indirectly pay for the government deficits through a reduction in purchasing power and the reduced quality of their money.

While the ECB's and Fed's functions (to provide liquidity to the banking system in times of crisis and to finance the government together with the banking system) are the same, there exist small differences between them. In the so-called open-market operations (another term for active manipulation of the money supply) the central banks produce or destroy base money.

There are two ways central banks produce base money. By tradition, the Fed uses the produce-money-and-purchase approach (PMP). Normally, the Fed produces money in their computers and uses it to buy US Treasuries from the banking system. In exchange for the US Treasuries, the Fed creates money on the account that the selling bank holds at the Fed.

The ECB, in contrast, uses the produce-money-and-lend (PML) approach. It produces money and lends it to the banking system for one week or three months. The preferred collateral for these loans to banks is government bonds.[1] As a result of PMP and PML, banks receive new base money. They hold more reserves at their account at the central bank. The additional reserves mean that they can now expand credit and create even more money.[/QUOTE] Read the rest of the article too. It is a beautiful compare and contrast exposition of the two systems.

[QUOTE=only_human;292959]Sigh. Try this article that I found after one minute searching of the phrase: ECB Fractional Reserve Banking

[URL="http://mises.org/daily/5575"]The Fed and the ECB: Two Paths, One Goal[/URL] Read the rest of the article too. It is a beautiful compare and contrast exposition of the two systems.[/QUOTE]


Thanks for a reference. Described procedure of course it is money creation by ECB. Well, I haven't heard that small countries of Europe take advantage of this money. It is written "Several independent governments can use one central-banking system to finance their deficits". It is not clear what it means "several independent governments". Whole text looks for me like a commercial of a book "Tragedy of euro". So it must support the assertion that there is a real tragedy. Tragedy of euro of course. I would be seeking tragedy in different things than euro. In Europe, countries of eurozone are gaining power on the cost of countries outside eurozone. The whole idea may fail since Great Britain is not in eurozone. But may be I will write about it some other time.

[QUOTE=literka;292985]Whole text looks for me like a commercial of a book "Tragedy of euro". So it must support the assertion that there is a real tragedy. Tragedy of euro of course.[/QUOTE]Thanks for looking at it. I tend to be a cynic of motives myself too but this guy seems decent; for one thing he makes the PDF version of [URL="mises.org/books/bagus_tragedy_of_euro.pdf"][I]The Tragedy of the Euro[/I][/URL] available for free. Immediately recognizable from the title is an allusion to a seminal work titled [URL="en.wikipedia.org/wiki/Tragedy_of_the_commons"]The Tragedy of the Commons[/URL].

Only about 10% of the US money supply is actually printed. I don't know the corresponding percentage for the Euro, but now you might better understand how such a ratio does exist. Looking at what is happening now, the UK seems to have been prudent to avoid the Euro.

Plenty of tragedy abounds and taking a contrarian position on the word "default" is not visionary itself.

For example, regardless of how future events play out, the Credit Default Swap (CDS) insurance that investors purchased against a Greek default is now going to be paid. The entire principle of CDS investments was jeopardized because "default" was being redefined to avoid invoking them.

Encyclopaedia Britannica to cease print edition
 

A friend sent me the following, with a comment to the effect "The iPad has only been out 2 years". I replied that I suspect this has more to do with Wikipedia and near-universal online access for its (former) customer base that specifically the iPad:

[url=http://www.ft.com/cms/s/0/7382302e-6d1f-11e1-ab1a-00144feab49a.html]Encyclopaedia Britannica to cease print edition | Financial Times[/url]: [i]The company will stop publishing its 32-volume print edition after 244 years and instead focus on its digital efforts[/i]

That FT article is available only to FT-online subscribers - to sign up is "free", but I simply don't need yet another online site-registration to get stuff that is widely available as the EB story surely is. (Now imagine that FT charged a monthly fee to boot and you have in a nutshell the exact dynamic behind EB's demise). So I quickly found the following [i]Time[/i] article on the announcement:

[url=http://techland.time.com/2012/03/14/britannica-print-edition-kicks-the-bucket-so-is-wikipedia-our-new-lord-and-master/]Britannica Print Edition Kicks the Bucket, So Is Wikipedia Our New Lord and Master?[/url]: [i]A moment of silence for the print version of Encyclopaedia Britannica, the world’s longest running fact compendium, which passed away today at the ripe old age of 244.[/i]
[quote]I tend to agree with my colleague Harry McCracken that Britannica’s own worst enemy was always Britannica, not Wikipedia, though Wikipedia played a pretty clear role in recent years and is one of Britannica Online’s chief problems going forward. Where Wikipedia’s info-lode is available to everyone, pro bono, Britannica guards its information closely, allowing only its editors to create or update entries. And it locks most of that information behind a paywall online (yep, I pay the annual $69.65 membership fee), dishing up partial entries but asking you to fork over for the whole enchilada. I’m assuming that’s made it the go-to choice for a minority of online readers who believe they’re getting something more reliable in trade for cash.

But is Britannica really more reliable? A study back in 2005 by the journal Nature that involved selecting articles from both Wikipedia and Britannica and sending them off for vetting by area experts found that Wikipedia was nearly as reliable as Britannica (or, to put it another way, Britannica was nearly as error-prone as Wikipedia). Of the total checked, Britannica averaged about three mistakes per entry, while Wikipedia average about four. The takeaway: time, tradition and reputation may not beat all.[/quote]
The author's article title choice strikes me as bizarre, since "lord and master"-hood much better describes institutions like Britannica than it does open-web collaborations like Wikipedia. The author further notes that the only possible subscriber base for the expensive EB-online edition is folks who need "professional quality" references, but then immediately demolishes the idea that EB has anything special going for it in that regard other than "reputation." Regarding competition in the online-encyclopedia space, I simply don't see how they can compete with Wikipedia - I use Wikipedia every day, most online-savvy folks I know use it all the time as well - but I have yet to hear a single person (aside from the above article author) mention using Britannica online. With the massive head start in online content and user-friendliness, huge contributor base and no-need-to-be-profitable advantages enjoyed by Wikipedia, I expect to see a similar "Britannica will stop publishing" in the next 10 ears, next time unqualified by any specific edition.

Iceland: Former PM Goes on Trial
 

Saved and formatted this last week, but forgot to post it:

[url=www.nytimes.com/2012/03/06/world/europe/geir-haarde-former-iceland-leader-goes-on-trial-for-role-in-financial-crisis.html?ref=world]Former Iceland Leader Tried Over Financial Crisis of 2008[/url]: [i]Iceland opened a criminal trial on Monday against its former prime minister, Geir H. Haarde, becoming the first country to prosecute one of its leaders over the financial crisis of 2008.[/i]
[quote]Mr. Haarde is charged, in effect, with doing too little to protect the country against the depredations of its bankers as they pursued wildly expansionary lending that resulted in financial disaster for the country. He was indicted in 2010 by a sharply divided Parliament, charged with violating the laws of ministerial responsibility.

Public opinion in Iceland about the case is split, according to Hannes Holmsteinn Gissurarson, a professor at the University of Iceland. Some people hope the case will help to shine more light on a traumatic episode, but “many think that Haarde is a sacrificial lamb, and that it is strange to drag him in front of court for something he failed to do,” Mr. Gissurarson said. “He may be a failed politician, but is he a criminal?”

The trial opened a month after a prosecutor indicted the former heads of Kaupthing, one of three failed Icelandic banks, on charges of fraud and market manipulation. Hreidar Mar Sigurdsson, Kaupthing’s former chief executive, and Sigurdur Einarsson, the former chairman, have pleaded not guilty and are due in court later this year.

Iceland was hit harder by the global financial crisis than many other countries because of its inflated banking system. In a matter of weeks after the banks’ collapse, the unemployment rate jumped to 10 percent, house prices fell, the currency plunged and inflation surged.

Mr. Haarde, whose government was ousted after the debacle, has rejected the charges laid against him, saying as he took the stand Monday that there was “no basis” for them.

“None of us realized at the time that there was something fishy within the banking system itself, as now appears to have been the case,” Mr. Haarde told the court on Monday, Reuters reported.

Mr. Haarde, 60, served as prime minister from June 2006 until February 2009, when his center-right Independence Party was ousted in general elections by a coalition of the Social Democrats and the Left-Green Movement under Johanna Sigurdardottir.

The trial raises renewed questions about what really lay at the heart of Iceland’s financial collapse. While the public is still angry at the bankers, the government ministers are a different matter, and even some members of Parliament who voted to indict Mr. Haarde have started to express doubts about their decision.

Perhaps the most prominent of those is Ogmundur Jonasson, the interior minister, who said he has changed his mind and no longer thinks that Mr. Haarde should be singled out to stand trial. [/quote]

[QUOTE=only_human;293009]

Only about 10% of the US money supply is actually printed. I don't know the corresponding percentage for the Euro, but now you might better understand how such a ratio does exist. Looking at what is happening now, the UK seems to have been prudent to avoid the Euro.

[/QUOTE]

I can only express my opinion. I think that it has very little importance if money is printed or created other way (by Central Bank). Only that paper can be saved, hence forests. Concepts of virtual money are as old as concepts of banks. Great Depression was because there was much more virtual money than real money. But then any bank could create virtual money with no limits. May be I am wrong, but this is how I understand it. Printing new bonds is like printing new money. Sellers can accept payments in bonds instead of dollars without loss.
Returning to Europe. I agree with you, accepting euro wouldn't be good for Great Britain. Not because euro will collapse, but because this way Great Britain preserved financial independence. Being outside eurozone it is a problem for EU not for Great Britain.

[QUOTE=literka;293020]I can only express my opinion. I think that it has very little importance if money is printed or created other way[/QUOTE]FAIL
I merely tried to better inform you about specific details that I felt you were discussing in a blithe and mischaracterizing manner that you now say don't matter. They may not be significant but they are relevant.

As for the greater economic picture. I am a rube among rubes. I don't know what's going on. I'm just a peon in the trenches, slogging along.