farmnut1985 (< 20)

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Economic Policy

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November 02, 2012 – Comments (2) | RELATED TICKERS: DE , POT , SHS

My job has changed over the last several years and I have not had the time to follow the changes in the economy as detailed as I should have.

So to make up for this lack of knowledge I wanted to ask the board for its shared knowledge on some questions.

1. Can government policies actually make changes on the economy and has it? I understand trade agreements, taxes and tariffs but don't know the actual effects on changes in GDP and bullish/bearish effects on our general economy and the markets.

2. How much has the inflation and actions of the Fed over the last several years affected our long term health of the economy? I am not just talking about the stock market, however everything is related.

3. Has the economy improved or are there just new bubbles forming like the real estate market bubble has popped but a bubble now seems to have formed in ag markets with record crop prices and land prices?

4. Can economic policies actually create jobs? Tax breaks can help support growth in an area but does this develop sustainable jobs when breaks or benefits disappear?

This is not meant to start a political tirade of argument; I want to better understand how these things work in a manner of cause and effect. Hope this draws some responses and there are others like me wondering the same thing.

2 Comments – Post Your Own

#1) On November 02, 2012 at 4:22 PM, JaysRage (94.10) wrote:

1. Government legislation around taxes and spending can have a significant amount of impact on the economy. Give or take, government spending is expected to be roughly 40% of the 2013 GDP. In addition, government can affect the economy through regulation. Regulatory restrictions can open up or restrict the ability of businesses to create opportunities for profits.

2. Our nation as a whole owes more money than it can possibly pay....private and public....there is too much debt to pay. There are three options....spend less, write-off debt, inflate. There is no quick fix in any scenario. Inflation might be the most "painless" route. There is no pain-free solution to the mass over-consumption that just occurred during the boom times of the late 1990s and early 2000s. When wage increases keep up with and exceed inflation over an extended period of time, we will be close to a real recovery. Both "official" metrics are tainted, so it is difficult to track. Even by the official metrics, we are not there yet.

3. I believe there are portions of the economy that have improved since 2008/2009. However, I also believe that aggregate opinion of the current economy is far more optimistic than is warranted. I do think there are significant seeds of inflation, but I do not necessarily think that is a terrible thing. I think the U.S. economy is still vulnerable to another economic crisis.

4. Ideally, tax breaks create far more economic development and revenue generation than they cost in lost revenue through tax by creating business expansion that might not otherwise be profitable. That isn't always the case. Sometimes subsidies are disguised as tax breaks and industries become dependent on them for profitability. That is not a long term positive for the economy. It allows disfunctional businesses to exist and to grow when more efficient competitors or solutions would normally take their place.

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#2) On November 08, 2012 at 1:48 PM, farmnut1985 (< 20) wrote: