Why are all the longest periods of sustained surplus followed by depressions?


#1

Just looking for some thoughts…

From 1817 - 1821 - Surplus $37,347,506 - Depression 1819
From 1923 - 1836 - Surplus $93,546,676 - Depression 1837
From 1852 - 1857 - Surplus $39,604,965 - Depression 1857
From 1867 - 1873 - Surplus $538,753,180 - Depression 1873
From 1880 - 1893 - Surplus $803,581,796 - Depression 1893
From 1920 - 1930 - Surplus $11,205,660, 282 Depression 1929

Few questions.

If surpluses are good for the economy, why is it every time we’ve run a sustained fiscal surplus the economy crashes in depression?
If a gold backed currency is better, why so many depressions under a gold standard?
If the Fed is bad, why has there been only one depression since the Fed was created?


#2

obama’s fault


#3

Another well reasoned and deeply thought out post from my favorite RO regular. :Thud:

Thanks Sam!


#4

It’s all about cooking the books.


#5

So, we’re the depressions that occurred “cooking the books”?


#6

Your premise makes no sense, surpluses do not cause depressions and deficits do not cause depressions; surpluses and deficits affect the value of the dollar and in so doing inspire inflation/deflation but the “Economy” is an entirely different animal.

There is certainly a point where deficits can threaten the very stability of the dollar but even this will only temporarily handicap the economy as new standards of trading value arise organically. Governments ability to hinder or encourage the “Economy” is primarily done via attempts to “manage” the economy with force (selective regulation/taxation), they use force to try and bend the Market in the direction they want it to go and the Market revolts.


#7

How does the government collect money in a surplus? They increase taxes and decrease spending. Surpluses drain money from the economy. You deny this?


#8

Because the government created to much fake money?


#9

Of course I “deny this” because it is a ridiculous and uninformed comment that reveals a complete lack of understanding as to how the money supply adjusts to Market Forces within a Fiat Currency controlled by a private bank; which is our system.

A government surplus is no different than a citizen surplus in the form of a savings account or mattress full of cash or dormant real estate holdings; it in no way hinders the production of real value in the Marketplace or the Federal Reserves ability to increase the money supply as real value is brought into existence which justifies the creation of new money to facilitate trade.


#10

Whenever the government gets a little “extra” money, what do they do with it? They think it’s a Christmas present, and start figuring out what to spend it on - and, of course, it always winds up that more than that little “extra” bit is spent.


#11

This may be a little “beside the point”, but I read somewhere years ago, that the average lifespan of a Democracy is around 200 years, and there were examples given to support the claim. It also said that this situation is usually followed by a dictatorship. Depressions usually come into play prior to the failure of government.


#12

I am shocked that any Democracy could last 50 years, much less 200.

We are only 3 decades past the point where we traded our Representative Republic for democracy and I have a hard time imagining us lasting 20 more.


#13

We are PAST the tipping point IMO and all my research shows this to be the case, there MAY be some delay if Trump goes right, but at best it will be short lived.

To visualize:

Take a half full glass of water, pour a mound of salt, set the glass into it and balance it on one edge, blow a little of the salt away on the long side and watch how slowly it begins to move and then pickup speed, looking like its moving in slow motion until it finally is overcome by gravity and falls.

Whitmore, you are right on the dictatorship. In fact the FOUNDATION has been laid by Obama and in fact he has functioned as a dictator over his 8 years.

Given that…then what action do we take that are RO. Allow me to make some suggestions that I strongly feel you should consider.

Buy property outside the city limits. Even if you cannot move there now, buy the property and begin to prepare. When the glass begins to move quickly you can expect the govt to come knocking on your door if you live in the city and you are not going to like it when they knock. Cities will fall in line with what ever the State/Feds dictate. They are run by low level political hacks that will follow, few have any leadership at all. By getting out of the city you significantly reduce your chances of the late night knock on the door to discuss your past actions as a Republican and even if you are not, the feds have your voting record and donation record just to name a couple.

You do not want to live in any kind of ‘neighborhood’. Key is if you get city water and or sewage connections. If you do then you might as well stay in the city!

You don’t need a lot of land and acre will do as gardening may become important to you later on and it can also soften the blow of food bills.

Buy guns and ammo, as the glass tilts crime will increase. Those outside the city will be the winners as the society around you transitions from self reliance to govt reliance and socialism.

Whether a depression or inflation rears its ugly head, not sure. But the weight of $19 Trillion in debt and will most likely grow to the point that the nations of the world that are holding big chuncks ($1 T or more) will call and when they do the wall will come tumbling down.

My GUESS: We will fall into a depression and then go into a massive inflationary spiral as the govt pumps money into the freeloaders and goes on a massive hiring binge. The hard line socialists like HildaBeast, Warren, Bernie, etc believe that if the govt becomes the prime employer and there is a small business that fills minor gaps and the rest of the population can ride the happy train.

If Hillary wins, there will never be another Conservative win the White House in most of our lifetimes.

20 years looks to be about right…and we may have already seen the first 8 years of it…


#14

To the premise:

It is not directly correlated; but I can spot the correct pattern: Periods of economic growth, which involve increased tax receipts, are followed by the rise of false-populist demagogue politicians who promise more Free Excrement out of the public coffers.

This disrupts the economy in making for uncertainty, in terms of tax policy, sound-money policy, sustainability of large numbers of idlers living on government. Uncertainty always leads to caution in making economic decisions, expansion, hiring, purchasing, new products. Caution and retreat lead to economic contraction.

All that leads to recession and depression. The economy is, to a large extent, emotionally driven. And those who promise to abuse law by taking from those who produce and own and giving to those who yell and scream and threaten…create FEAR in the productive.


#15

Neither… we are talking about Fiscal surpluses aren’t we?

The only thing to be said, is that a debt ridden government on the brink of collapse is bad for the economy.
Also, the Government was 5% of the economy for most of the 19th century. You’re not going to get anywhere suggesting its spending somehow kept it “afloat” in the in-between years; it was too trivial.

> If a gold backed currency is better, why so many depressions under a gold standard?
>
> If the Fed is bad, why has there been only one depression since the Fed was created?

There’s been equal amounts of downturns in the economy under the Federal Reserve, you’re taking advantage of “typing” here.

Anyway, this video pretty much covers everything I could say here.

It runs down this history as re-analyzed by Christina Romer.


#16

Would we ever have Depressions, recessions or anything else without the govt trying to control our economy, which is process control. The govt does not strive for results, but rather process management. Whenever you do that the results become highs and lows.


#17

We would have corrections and unevenness. The economy is fluid and dynamic; and corrections are just that - large numbers of actors correcting their misjudgments on allocations and investment and prospects.

But they would be short-lived. Had the 2008 correction been allowed to play out; and had all that Porkulus slush been used to declare a corporate year-long Tax Holiday…investment would have POURED into this nation like Niagara and that correction would have been long-forgotten. And the cost of the Tax Holiday as well.

Instead we have this preschool Politics-of-Envy manipulation going on…and we won’t get out of this until they get out of the economy and out of office.


#18

My thinking (as a true capitalist) is that the market is self correcting as long as its governed by results rather than process. What is going on is process (Dodds Frank Bill, EPA regs, etc). As the govt gets larger it controls more and more of the process of business rather than results.

The result of govt management is socialism.

Under a free market system the prime govt role is to keep companies small thus fostering competition while keeping economy of scale in balance. The number 1 rule is no company is “to big to fail”, 2) you cannot have any one company dominate the market to the point that it controls it (AT&T, Std Oil of NJ). By the same token Wal Mart delievers goods and services far cheaper than does the mom and pop brick and mortar.

The results are a market place that can react to any changes rapidly. We are losing this ability quickly and under Obama we find the capitalist crushing rules and regs. We are speeding towards socialism in the USSR model as fast and our govt can push the go pedal.


#19

I would disagree as to the terms - I’m not sure if it’s semantics or substantive. It’s MANIPULATION - CONTROL by an outside force; instead of the economy functioning as it naturally does. An economy is nothing more than the whole of society, as individuals, making personal choices with their time and property and wealth for mutual benefit with other individuals.

Planned economies don’t work. That’s true of Stalin’s Five Year Plans; and that’s true of Mao’s Great Leap; and that’s true of Pol Pot’s crackpot schemes. That’s true of the Fabian Socialists’ stagnant and retracting economic plans. It’s true of the New (raw) Deal; that’s true of the Grate Society; that’s true of whatever it was Carter and Clinton now Soetoro did and are doing.

The economy cannot be manipulated. Doing so caused distortions; it stunts growth; eventually it causes catastrophe.


#20

All very interesting, but so far no one, not even Christina Romer can explain why when the nation runs a sustained period of surplus the economy falls into depression. There was no depression without a surplus and there was no period of surplus without depression. You could call it just a correlation if it happened once or twice, but 5 times?

Far as your video goes. I don’t generally debate videos because I find it a lot of work to debunk them only to have the person posting the video decide not to defend it. I will say, I did watch it. It was full of holes, lots of unsourced charts and graphs and typical cherry picking of data. Now if you want more than that, perhaps I post a video and you watch it?

The subject of the thread had to do with sustained surpluses followed by depressions. Can I assume you have no viable explanation?