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The chance congress will ever get their timing right on fiscal policy is approximately zero.

Rclosch,

A great history lesson, thanks.

I respectfully disagree here. While both sides of the aisle spin things, behind the scenes they agree wholeheartedly much of the time.

The American Taxpayer Relief Act of 2013
The enacted Sequestration Process
The Affordable Care Act
The massive deficits
The lack of a new Savings and Loan program

All of these things and more are agreed upon behind closed doors. They are purposely done. And they wont give you or I any say about it. There are some detractors in Congress crying that somethings should not happen. But over all those critters in Congress agree on what to do.

It is de facto that they agree. If any of it was the wrong thing to do then it would stop.

After WW II ended we entered the modern political era. The mistakes made by FDR and Truman were huge. Those mistakes are being seen to in this repeat of a Great Recession/Depression. For instance the Savings and Loans created in the Great Depression locked in interest rates as inflation rose in the 1970s and bond yields rose. That created more inflation and havoc. Purposefully this time free markets will decide interest rates.

We have a massive deficit much of which is being held by the FED. The FED can sell bonds much later in the cycle to take up the liquidity in the economy stifling inflation later on.

The American Taxpayer Relief Act keeps capital gains taxes low. Correct me if I am wrong, but the top bracket for capital gains might have moved up to 20%. Later in the cycle comes inflation. That inflation will be met with higher capital gains taxes to stifle inflation at that time. In Truman's time capital was taxed at the income tax rate which for the upper bracket was 92%. Capital gains rates had nowhere to go but down later in the cycle as inflation crept into the economy. In the late 60s and 1970s labor rates rising did not directly cause inflation, but the laborers' ability to borrow en mas upped the money supply by definition and created huge amounts of inflation. The borrowing was the culprit.

Truman decided the relation between industry and health insurance as opposed to society and universal care. In Japan and German the USA too a large degree decided to allow their societies something closer to universal care. Those countries have had a large leg up on us every since. They constantly gained in economic growth until Japan stalled in the early 1990s as China entered the picture.

The lack of political will to do anything about the Sequestration Process is purposeful. The powers that be are taking liquidity out of the economy stifling inflation and allowing for a recession. I am not saying any of this is fun, but you think that the elected officials dont know what is going on in the economy? They know and have a good idea of what they need to allow and do. I am not saying all of them are on the same page mind you. Allowing the sequestration to go forward is like taking the training wheels of a bike and seeing if the rider will stay up and go. This economy will be okay. When in RR's first term the corner was turned regarding inflation, there was a good sized recession. The ship was turning fiscal policy was being reset. Today with the ACA and American Taxpayer Relief Act the ship is turning.

Dave
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