High Debt/GDP ratios = lower growth, contrary to what the Paul Krugmans and keynesian fanbois of the world preach....

Why U.S. debt matters to you (http://money.cnn.com/2010/06/03/news/economy/U.S._debt_impact/index.htm)

NEW YORK (CNNMoney.com) -- Letting U.S. debt grow unabated is often framed as an unforgivable burden to heap on one's grandchildren.

But there are plenty of reasons today's parents might be concerned for themselves and their kids.

If Congress doesn't craft a plan to address long-term fiscal shortfalls after the economy recovers, potential problems could arise sooner rather than later, debt experts say.

Slower economic growth: After examining data from dozens of countries over the past two centuries, economists Carmen Reinhart and Kenneth Rogoff found a connection between high debt and reduced economic growth. Specifically, they found that when a nation's gross debt reaches 90% of its economy, it often loses about one percentage point of growth a year.

U.S. gross debt -- currently $13 trillion -- will hit the 90% threshold this year. Gross debt includes money owed to those who hold U.S. bonds and money owed to government trust funds such as Social Security.

Reinhart has said the relationship between high debt and low growth is "self-feeding." Low growth ravishes government revenue and increases the need to borrow. More borrowing builds debt. Higher debt increases pressure to tighten fiscal policies in order to reduce the risk that investors lose confidence in the country. But tighter policies can slow economic growth.

One percentage point lower growth may not seem huge. But it's equal to roughly a third of the average annual GDP forecast over the next decade.

And slower growth can reduce the number of jobs created, which in turn can hold down household incomes.

High interest payments: Interest rates are still very low and may continue to be as the debt crisis in Europe makes the United States a more attractive safe haven for investors.

That means the government can borrow on the cheap right now. But rates will rise as the world economy recovers. By 2020, annual interest owed on U.S. debt will approach $1 trillion, or roughly 21% of projected federal revenue for that year, according to Congressional Budget Office estimates.

Interest rates may rise further than expected if credit rating agencies or investors start to doubt U.S. resolve to rein in the growth in debt. And that would jack up the cost of borrowing for businesses and consumers.

Ironically, some debt experts would almost prefer that rates rise so there will be more urgency to deal with the debt situation. It might hurt, but not as much as if rates stay very low for a long time -- planting the seeds for the next credit bubble and bust when U.S. debt levels are that much higher.

Less government support: The more debt the government accrues, the more it will pay in interest and the less it will have to spend on the basic services Americans expect from their government.

Spending for everything from education to infrastructure and defense could be compromised. And, many argue, not being able to make strategic investments in these areas can weaken the country competitively.

Also, the government will be hamstrung in responding to emergencies such as natural or man-made disasters, terrorist attacks or future economic downturns.

Inflation: There don't appear to be any official signs of inflation brewing today. But throughout U.S. history, high levels of debt have usually brought high rates of inflation, Reinhart and Rogoff found.

Some economists -- including Kansas City Federal Reserve Bank President Thomas Hoenig -- have said they are concerned about what could happen if the United States faces a debt crisis. In such a case, the Federal Reserve may cave to political pressure to let inflation rise, which reduces the real value of the country's debt but also devalues people's savings and income.

Harsh choices: No one can say when or even if a debt crisis will occur. But lawmakers will tempt fate if they wait too long to address the imbalances on the U.S. balance sheet, fiscal experts say.

Fiscal experts believe it's entirely possible that, absent action, the United States would experience a debt crisis within the next 10 to 20 years.

"Most believe it would happen much sooner than 20 years," said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. Many believe it could happen within the next five to 10 years, she said.

And waiting too long would force lawmakers to make much more draconian and abrupt changes than they would otherwise.

Experts are increasingly convinced that Congress won't act until a true crisis is on the U.S. doorstep -- for two reasons. The first is the sharp partisan divide. The second is that no politician likes to run on promises to implement difficult and unpopular measures.

So until there's sufficient public support for debt reduction, don't expect to see much political will for it.

"Like the proverbial frog that fails to jump out of the soup pot as the temperature slowly rises, Americans seem terrifyingly unwilling to act until the pain of debt can no longer be ignored," Syracuse University professor Len Burman wrote in a recent essay. "As the frog learns in its final moments, by then, it's too late."

You missed the option where we pass simple laws to disallow future wars except where foreign military actually invades the US or its territories. If we didn't have conservatives starting wars as a ruse to cut taxes on the top 1% and deregulating everything to the point where cities start to fall apart, we would have very few, if any economic problems.

Spend that money on an overhaul of the education system and investment in American manufacturer and suddenly the economy is in excellent condition again.

Naw, we need the option of protecting our interests. And unless you're talking about the specialty manufacturing sector, America will never be a manufacturing power again. Why would I pay someone in the US $13-$25 per hour when I can simply send that job to Mexico/China/Brazil/etc/etc and pay far less for the simple stuff. I would think we'd be better off putting that money into energy research than manufacturing. A clean, renewable, plentiful source of energy would do a lot more to benefit our economy in the long run than throwing money at something where we cannot hope to compete.

You missed the option where we pass simple laws to disallow future wars except where foreign military actually invades the US or its territories. If we didn't have conservatives starting wars as a ruse to cut taxes on the top 1% and deregulating everything to the point where cities start to fall apart, we would have very few, if any economic problems.

Your rant made no sense, sorry. You can't connect deregulation, war, and tax cuts (unless you're deliberately trying to hijack this thread and turn it into partisan BS, instead of focusing on the topic at hand).

Spend that money on an overhaul of the education system and investment in American manufacturer and suddenly the economy is in excellent condition again.

Sorry, but overpaid UAW jobs aren't coming back.

Your rant made no sense, sorry. You can't connect deregulation, war, and tax cuts (unless you're deliberately trying to hijack this thread and turn it into partisan BS, instead of focusing on the topic at hand).



Sorry, but overpaid UAW jobs aren't coming back.

Historically, Democrats have been the party of foreign wars. Apparently compguy has forgotten the Kennedy/Johnson rampage in Vietnam.

Your rant made no sense, sorry. You can't connect deregulation, war, and tax cuts (unless you're deliberately trying to hijack this thread and turn it into partisan BS, instead of focusing on the topic at hand).



Sorry, but overpaid UAW jobs aren't coming back.

The majority of the younger people here don't realize is all these entitlements that they expecting to get from the government will cost them dearly. "THEY' are going to pay this enormous debt through their pay checks by more and more taxes. "THEY" defend all these entitlements without looking as to who is paying for them. Well the surprise is they will bare the brunt of it for the rest of their lives. I would ask all of them to please think about where all the money is coming from and where are the high paying jobs their hoping for coming from to make a living? Look at the debt we're in look at the unemployed including those that unemployment ran out on and tell me it's getting better. We need to rein in government spending and get people in there that are qualified to represent the people.

Inflation and happiness? Imagined one day when we sold/lost all our industries and borrow to spend. Sure we have the physical resources but do we have the human capital to restart an industry? It take time too, you know. In the meanwhile, most of you chumps will be in misery.

You seen it in the inner city, it could spread nation wide. People don't want to compete and lower their income or their standard of living so they rely on hand outs or try another less competitive field which does not exist. Most lack any specialization, their products become non-existence. Population are full of dependents, the system get bigger and laissez-faire disappear. It's already happened.

The majority of the younger people here don't realize is all these entitlements that they expecting to get from the government will cost them dearly. "THEY' are going to pay this enormous debt through their pay checks by more and more taxes. "THEY" defend all these entitlements without looking as to who is paying for them. Well the surprise is they will bare the brunt of it for the rest of their lives. I would ask all of them to please think about where all the money is coming from and where are the high paying jobs their hoping for coming from to make a living? Look at the debt we're in look at the unemployed including those that unemployment ran out on and tell me it's getting better. We need to rein in government spending and get people in there that are qualified to represent the people.

Can you be more specific on what you consider entitlements?

My taxes went down this year...

If you want this to change over the long run then stop voting for Conservatives that always put us in the hole after a recovery. Jobs???.. Then complain when a Conservative Administration give tax breaks to corporations that encourage outsourcing our jobs...

You missed the option where we pass simple laws to disallow future wars except where foreign military actually invades the US or its territories. If we didn't have conservatives starting wars as a ruse to cut taxes on the top 1% and deregulating everything to the point where cities start to fall apart, we would have very few, if any economic problems.

Spend that money on an overhaul of the education system and investment in American manufacturer and suddenly the economy is in excellent condition again.

Umm, amazing how simply not spending the money never occurs to some people.

Jobs???.. Then complain when a Conservative Administration give tax breaks to corporations that encourage outsourcing our jobs...

And Democrats like Obama are willing put all sorts of punitive taxes on corporations, which also (ding ding ding!) outsorce jobs. Remember, tbe US has one of the highest corporate tax rates in the world (http://www.taxfoundation.org/blog/show/1277.html). The loopholes are the only thing that keep it reasonable. I would have no problem with getting rid of the loopholes if the tax rate itself also comes down.

My taxes went down this year...

They went down for a lot of people. It's a recession. That's also why federal revenue is down, and the deficits are exploding.

Your rant made no sense, sorry. You can't connect deregulation, war, and tax cuts (unless you're deliberately trying to hijack this thread and turn it into partisan BS, instead of focusing on the topic at hand).


You think there's no connection between wars and tax cuts, and the debt?

And deregulation causes instability in the economy. Instability exacerbates inefficiency when recessions cause under-utilization of resources.

You think there's no connection between wars and tax cuts, and the debt?

The wars certainly weren't a "ruse" cut taxes on the top 1%. Besides, compguy is being flat out dishonest by claiming that, considering EVERYONE got a tax cut under Bush (he added millions of zero-tax filers to the rolls).

Deregulation didn't make cities fall apart. Detroit, the prime example of urban decay and blight, can thank mismanagement of the part of the big 3 and the UAW for that.

And deregulation causes instability in the economy.

Actually, greed did that (greed on the part of borrowers and lenders during the boom).

Deregulation didn't make cities fall apart. Detroit, the prime example of urban decay and blight, can thank mismanagement of the part of the big 3 and the UAW for that.


Also contributing was the dismantling of import restrictions, effectively outsourcing US jobs.

The Japanese were so grateful they gave Reagan $2M for one speech.

Actually, greed did that (greed on the part of borrowers and lenders during the boom).

Greed is a constant. It's when it is unleashed by deregulation that it causes instability.

Greed is a constant. It's when it is unleashed by deregulation that it causes instability.

It wasn't unleashed by deregulation (something that started well before Bush during the Clinton era), but rather extremely low interest rates from the Federal reserve.

It wasn't unleashed by deregulation (something that started well before Bush during the Clinton era), but rather extremely low interest rates from the Federal reserve.

Clinton shares the blame..... for not fighting the 30 year deregulation trend that began with Reagan.

But Bush continued it, and did not fight those low interest rates.

It seems they were part of Rove's plan for a "permanent Republican majority."

Can you be more specific on what you consider entitlements?

My taxes went down this year...

If you want this to change over the long run then stop voting for Conservatives that always put us in the hole after a recovery. Jobs???.. Then complain when a Conservative Administration give tax breaks to corporations that encourage outsourcing our jobs...

Who paid for the auto,insurance and bank bailouts. Who will pay for obamacare? Who going to pay for cap and trade that BO continues to push, Who is going to pay for all the illegal aliens living off our health and welfare programs? All theses are government entitlements it doesn't matter if their used by business or the public because the money is not there because we're in billions of dollars in debt. This is what the younger generation does not understand "Where's all the money coming from if we're in deep deep debt" I don't see the "Conservatives" putting us farther in debt do you. But I will ask you a question who's been in charge for the last 5 1/2 or so years and why haven't they controlled the spending in this time frame?

Lemme see - companies flee the US because the cost to manufacture here is too high. So, the logical conclusion is to INCREASE taxes on business? Yep that's sound logic.

Most people voted wrong because a vote against deficits now is a vote for higher deficits in the future, and if you want to shrink government, get the economy going and people back to work.

America can be a manufacturing power in the future, but that's not where the jobs will be because manufacturing improves productivity faster than it increases sales, and even China has seen a drop in manufacturing jobs over the past 10-20 years.

Why should we care about the national debt ?

Wasn't it Reagan the republican hero who started the trend in spending with credit...

And here's someone else who think debt don't matter, also a republican ( well admired by the right too )
http://www.ontheissues.org/2004/Dick_Cheney_Budget_+_Economy.htm
Video: http://www.google.com/url?sa=t&source=web&cd=3&ved=0CB0QFjAC&url=http%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DmAwAY0LH9hg&rct=j&q=dick+cheney+deficits+don%27t+matter+youtube&ei=Q5QMTM_VIca78gaAnc3JAQ&usg=AFQjCNG0L5QzaQ7IxwOQxpP8AUe6N5rqxw

But we get it Democrat spend....boooooo!!! Republican spend.... yaaaa !!!!

Lemme see - companies flee the US because the cost to manufacture here is too high. So, the logical conclusion is to INCREASE taxes on business? Yep that's sound logic.

http://i259.photobucket.com/albums/hh293/JRamptastic/brilliant.jpg

Most people voted wrong because a vote against deficits now is a vote for higher deficits in the future

sorry, but the last jobs report was painfully obvious as to how the "stimulus" has done over the past year. The recovery will not come from heavy government spending, but rather from the private sector.

Most people voted wrong because a vote against deficits now is a vote for higher deficits in the future, and if you want to shrink government, get the economy going and people back to work.

America can be a manufacturing power in the future, but that's not where the jobs will be because manufacturing improves productivity faster than it increases sales, and even China has seen a drop in manufacturing jobs over the past 10-20 years.

I would agree with you IFF government deficits now meant surpluses in the future (you know, to actually PAY DOWN that accumulated debt). But we all know that that will never happen. It's like giving a gambling addict $20 for "just one last pull".

Also contributing was the dismantling of import restrictions, effectively outsourcing US jobs.

The Japanese were so grateful they gave Reagan $2M for one speech.



Greed is a constant. It's when it is unleashed by deregulation that it causes instability.

You sure have an unique view of economics and what happened over the past 40 years. Most of which isn't backed up by reputable econ professors or economists.

You sure have an unique view of economics and what happened over the past 40 years. Most of which isn't backed up by reputable econ professors or economists.

Only cause you haven't granted the economists who back my views your coveted status of "reputable." :rolleyes:

I would agree with you IFF government deficits now meant surpluses in the future (you know, to actually PAY DOWN that accumulated debt). But we all know that that will never happen..

Actually I think Obama is one guy who might try to make that happen.

But if it were left up to Congress, you might be right.....

sorry, but the last jobs report was painfully obvious as to how the "stimulus" has done over the past year. The recovery will not come from heavy government spending, but rather from the private sector.

Sooooo..... wait for one less than stellar jobs report and then claim that characterizes the whole effort.....

The trend is still positive.

The trend is still positive.

21 K private-sector jobs? 411 K from census workers??

are you being serious? :lmao:

21 K private-sector jobs? 411 K from census workers??


Wrong: (http://finance.yahoo.com/news/Job-growth-disappoints-on-rb-3972278328.html?x=0)
Nonfarm payrolls rose by 431,000 jobs, as private employment, a barometer of underlying labor market strength, climbed just 41,000, the Labor Department said on Friday.

are you being serious? :lmao:

Yes.

Even 41K added private sector jobs continues the positive trend of MORE jobs gained than lost.

Surely you knew that......

Just cause it was below expectations does not change the direction of the trend.

Even one month of negative jobs would not mean that much if the upward trend continues the next month.

Who paid for the auto,insurance and bank bailouts. Who will pay for obamacare? Who going to pay for cap and trade that BO continues to push?How aboutif we cut our defense budget to $400 billion? That will still be FOUR TIMES LARGER than the next-largest.

Wrong: (http://finance.yahoo.com/news/Job-growth-disappoints-on-rb-3972278328.html?x=0)

Yes.

Even 41K added private sector jobs continues the positive trend of MORE jobs gained than lost.

Surely you knew that......

Just cause it was below expectations does not change the direction of the trend.

Even one month of negative jobs would not mean that much if the upward trend continues the next month.

An upward trend? That's not even enough jobs to keep up with the growing population.

Whether it's 41 K or 21 K, it's a terrible report, plain and simple.

An upward trend? That's not even enough jobs to keep up with the growing population.

Whether it's 41 K or 21 K, it's a terrible report, plain and simple.

And yet we'd have been thrilled with +41K jobs instead of -700K in Jan, 2009.

The only way this is "terrible" is compared to the previous 3 months.

Way to move the goal posts!

http://www.washingtonmonthly.com/mayjobs.jpg

How aboutif we cut our defense budget to $400 billion? That will still be FOUR TIMES LARGER than the next-largest.

What good would that do? The defense department produces more useful stuff than the obamacare folks.

What good would that do? The defense department produces more useful stuff than the obamacare folks.

Not surprising that you'd say that since you think so many people are "useless."

Lemme see - companies flee the US because the cost to manufacture here is too high. So, the logical conclusion is to INCREASE taxes on business? Yep that's sound logic.

sigh....... yeah right...

You want to talk about the biggest entitlement whiners, look at corporations. They pay less taxes now they most any time in the last 100 years, yet their defenders keep shouting from the rooftops they are being taxed to death. Let's rollback corporate taxes to the 1964!

http://www.taxpolicycenter.org/legislation/1960.cfm
Revenue Act of 1964

Individual Tax Rates. Reduced individual tax rates (top rate dropped from 91% to 70%).
Corporate Tax Rates. Reduced top corporate tax rate from 52% to 48%.

The main reason why outsourcing is happening are..
1) Removal/lowering of tariffs and other free trade bullpucky
2) Technology and increased infrastructure
3) US military domination and a period of sustained global stability.
4) The goal of paying even less in taxes then the record low they currently are at.

I swear as much as i hate the welfare entitlement whiners, I hate these corporate "i am being taxed to death" entitlement whiners just as much.

sorry, but the last jobs report was painfully obvious as to how the "stimulus" has done over the past year. The recovery will not come from heavy government spending, but rather from the private sector.

The private sector doesn't "wave it's magic wand" and creates jobs. While government "frakulous" spending is not the answer neither is the private sector.

The private sector depends on consumer spending, however people are making less, so consumer spending is down, so the private sector can't expand creating jobs. No company is going to hire 2 full time employees when 1 can keep up with the work.


I used this site because i can easily copy/paste the information, this is the GDP for the past decade..

http://www.usgovernmentspending.com/us_gdp_history

2000 9951.5
2001 10286.2
2002 10642.3
2003 11142.1
2004 11867.8
2005 12638.4
2006 13398.9
2007 14077.6
2008 14441.4
2009 14258.2
2010 14623.9

Looks impressive doesn't it, until you look at the national debt increase per year...
http://en.wikipedia.org/wiki/United_States_public_debt
[QUOTE]
2000 5,628.7
2001 5,769.9
2002 6,198.4
2003 6,760.0
2004 7,354.7
2005 7,905.3
2006 8,451.4
2007 8,950.7
2008 9,985.8
2009 12,311.4
2010 13,050.8 [/QUOT1E]

The conclussion I draw (and hopefully someone can correct me) is that, our economy has been shrinking for the past decade. Our government borrowing and spending is the only reason our economy looks like it is growing. For example,

In 2002 our GDP went from 9951.5b to 10286.2b an increase of (334.7 billion) while our national debt went from 5,769.9b to 6,198.4b (428.5 billion)

If you look at the course of a decade... 2000-2010 our gdp went from 9951.5b to 14623.9b an increase of 4672.4b while the debt increased 7422.1b.. Thats right! If you took out all the government borrowing and spending our economy shrank almost 3 trillion dollars over the past decade (this doesn't even account for inflation).

In conclussion, our economy has been shrinking for the past decade and it's only the borrowing that has kept up the illusion of growth. Please tell me that I am wrong.

Please tell me that I am wrong.

Dead wrong. ;)

Now please tune into one of the proper channels listed below:

http://i718.photobucket.com/albums/ww183/youxgivexmexbutterflies/wash_dees.jpg



Update:

I voted in favor of #2. Option #1 - Reigning in the debt is a fantasy at this juncture.

Run Lemming Run.

In conclussion, our economy has been shrinking for the past decade and it's only the borrowing that has kept up the illusion of growth. Please tell me that I am wrong.

Alternatively, one could say that such borrowing/government spending over the past decade has constrained the economy from realizing its full potential, particularly in the context of the fed and its creation of asset bubbles.

sorry, but the last jobs report was painfully obvious as to how the "stimulus" has done over the past year. The recovery will not come from heavy government spending, but rather from the private sector.
But the recovery has come almost exclusively from heavy government spending and deficits, and it's worked -- monthly job losses increased almost steadily from Dec. 2007 to Jan. 2009, when they reached almost 800,000, and then the situation turned around.

Please provide evidence that the stimulus has not done much. Don't quote essays, unless they're from people with very good track records (according to other people, not themselves, especially if they're running for Congress).

I would agree with you IFF government deficits now meant surpluses in the future (you know, to actually PAY DOWN that accumulated debt). But we all know that that will never happen. It's like giving a gambling addict $20 for "just one last pull".
What do you mean we all "know" it will never happen? Historically, debt/GDP had been decreasing steadily, from the end of WWII (roughly 120%) until the end of the Carter administration (30%), and it increased only because we adoped crazy economic policies and a "starve the beast" mentality about government spending (Nobel economist Milton Friedman originally believed that starvation would limit government but later admitted he was wrong). Then George Bush and Bill Clinton put our finances back on track, simply by going back to the old practices, and again debt/GDP continued to fall. It didn't rise again until GW Bush brought back voodoo economics with an intensity Reagan had never practiced, and, combined with complete faith in free markets, caused the crash. If you remember forecasts made in the late 1990s, the national debt was expected to be paid off completely in the 2030s because the economy would generate hundreds of billions of dollars more tax revenue each year than the government would spend, and in 2000 that estimate was moved up by 15 years.

Don't confuse deficits caused by economic fundamentalism and political opportunism with deficits generated to bring the economy out of a slump. The latter are needed and do more good than harm. Nor are today's deficits anything like the last act of a desperate gambler because in reality they're rational, and in the past 24-27 downturns, deficits have helped. Those are better odds than offered by any slot machine.

The trend is still positive.21 K private-sector jobs? 411 K from census workers??

are you being serious? :lmao:

:lmao: Everybody knows that one month is not a trend. Here's the monthly situation from Dec. 2007 (the official start of the Great Recession) through Mar. 2010:

http://farm5.static.flickr.com/4071/4682118324_c50965bb6f_b.jpg

Explain why 12/2007-1/2009 is the Obama Recession and why 1/2009 - 5/2010 is the GW Bush Recovery (as they say on Fox News).

If you look at the course of a decade... 2000-2010 our gdp went from 9951.5b to 14623.9b an increase of 4672.4b while the debt increased 7422.1b.. Thats right! If you took out all the government borrowing and spending our economy shrank almost 3 trillion dollars over the past decade (this doesn't even account for inflation).

In conclussion, our economy has been shrinking for the past decade and it's only the borrowing that has kept up the illusion of growth. Please tell me that I am wrong.One textbook definition says:

GDP = Consumer + Investment + Government

You're leaving out Government. How can you claim that Government contributes nothing to GDP when Consumer and Investment do? Are you saying that if a country's economy is 50% Government, as is the case with some Western European nations, like Germany, its GDP is actually just half the official figures? What if that government suddenly decides to outsource everything by simply signing some papers? Does its GDP instantly double?

Please provide evidence that the stimulus has not done much. .

http://finance.yahoo.com/banking-budgeting/article/109739/the-bad-news-bad-news-on-jobs?mod=bb-budgeting&sec=topStories&pos=5&asset=&ccode=

We already know that when you strip out the short-term Census jobs, May's jobs growth was a pitiful 41,000. But what people haven't realized is that the leading indicators for June are even worse. TrimTabs Investment Research Inc. tracks the real-time jobs picture by monitoring income tax deposits at the Treasury. And these have suddenly started falling. Based on the latest data, the firm predicts the economy will actually lose up to 200,000 jobs, net, in June. "The big news is that we have a job loss of about 200,000 coming in June," says Trim Tabs' Madeline Schnapp, "and the market isn't ready for it."

The government says the unemployment rate "edged down" to 9.7% -- keeping it below the politically sensitive 10% level. Read more jobs coverage.

But that's only because about one and a half million people have just, miraculously "disappeared" from the official labor force.

A million and a half people disappearing? It sounds like a crazy conspiracy theory. But there it is, buried in the fine print of the government's own data.

From May 2009 to May 2010, the U.S. "civilian non-institutional population" of prime working age -- 20 to 64 -- expanded by one and a half million, 180.5 million to 182 million.

Yet over the same period the official tally of the labor force over age 20 held steady at just 148 million.

What happened to those extra people?

The Bureau of Labor Statistics doesn't have a full explanation. "We don't have direct questions (in the survey) addressing that fact," said a spokeswoman. But many of the disappeared are "unemployed who have decided not to look for work any more," or who haven't looked for work recently. Anyone who hasn't actively sought a job in the last four weeks vanishes from the rolls.

People dropping out completely are not a bullish sign — unless, perhaps, one is measuring the unemployment figures for the government.

Some recovery: The number employed in the private sector is still about 900,000 below where it was even a year ago, and about 8 million below where it was in 2007. And remember, it has to keep growing just to stand still, because the population is growing.

"There's practically no growth in private sector employment," says Gluskin Sheff strategist David Rosenberg. Jobs growth was anemic even in the parts of the economy allegedly leading the recovery, such as manufacturing. And now, he says, many leading economic indicators have started to turn down again.

Unemployment Rate Still Only 10% Because Everyone's Just Giving Up (http://consumerist.com/2010/01/unemployment-rate-stays-below-10-because-people-are-just-giving-up.html)

The good news: the national unemployment rate hasn't gone above 10%. The bad news: it's because hundreds of thousands of people are giving up hope and dropping out of the labor force entirely. The percentage of Americans taking part in the labor force is the lowest it's been since the mid-'80s, and over 900,000 people are no longer looking for work because they don't think any is available.

“About 1.7 million Americans opted out of the workforce from July through December, representing a 1.1 percent drop that marks the biggest six-month decrease since 1961, the Labor Department report showed. The share of the population in the labor force last month fell to the lowest level in 24 years.

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- rose to 17.3 percent in December from 17.2 percent.

The number of discouraged workers, those not looking for work because they believe none is available, climbed to 929,000 last month, the most since records began in 1994.

And yet we'd have been thrilled with +41K jobs instead of -700K in Jan, 2009.

The only way this is "terrible" is compared to the previous 3 months.

Way to move the goal posts!

http://www.washingtonmonthly.com/mayjobs.jpg
It's a tough job, but somebody has to do it :lol:

The conclussion I draw (and hopefully someone can correct me) is that, our economy has been shrinking for the past decade. Our government borrowing and spending is the only reason our economy looks like it is growing.
This is correct.
Alternatively, one could say that such borrowing/government spending over the past decade has constrained the economy from realizing its full potential, particularly in the context of the fed and its creation of asset bubbles.
What? How does cheap dollar constrain the economy from realizing its full potential, whatever that may mean?

Please provide evidence that the stimulus has not done much. Don't quote essays, unless they're from people with very good track records (according to other people, not themselves, especially if they're running for Congress).

http://finance.yahoo.com/banking-budgeting/article/109739/the-bad-news-bad-news-on-jobs?mod=bb-budgeting&sec=topStories&pos=5&asset=&ccode=


Unemployment Rate Still Only 10% Because Everyone's Just Giving Up (http://consumerist.com/2010/01/unemployment-rate-stays-below-10-because-people-are-just-giving-up.html)

There is no evidence that Brett Arends of MarketWatch has, as I requested of any source, a very good track record.

And to show that the Obama program hasn't done much, you have to demonstrate what would have likely happened to the economy without it.

The Obama program is bad for the opposite reason you think.

What? How does cheap dollar constrain the economy from realizing its full potential, whatever that may mean?

By creating wild swings in economic growth (ie bubbles and bust), instead of allowing for gradual growth with a solid footing? Also, heavy government spending has the potential to crowd out the private sector, also curtailing possible growth.

The Obama program is bad for the opposite reason you think.

Yeah, you, krugman and the other keynesians can keep believing that. In the meanwhile, take a long hard look at countries like Greece and Portugal and tell me if you see a problem.

I guess the conservatives have no problem knowing the the debt spending started in full trottle under the REAGAN PRESIDENCY ( a REPUBLICAN )

I guess the conservatives have no problem knowing the the debt spending started in full trottle under the REAGAN PRESIDENCY ( a REPUBLICAN )

and liberals don't care that Obama is continuing it full force.

and liberals don't care that Obama is continuing it full force.

When was deficit spending a liberal talking point.... ?

I only hear it being used by conservatives as some b.s rally the voters ploy...

One textbook definition says:

GDP = Consumer + Investment + Government

You're leaving out Government. How can you claim that Government contributes nothing to GDP when Consumer and Investment do? Are you saying that if a country's economy is 50% Government, as is the case with some Western European nations, like Germany, its GDP is actually just half the official figures? What if that government suddenly decides to outsource everything by simply signing some papers? Does its GDP instantly double?

No, I am not leaving out government, it is included.

The only thing I took out was the borrowed cash. In other words if the government's total budget was 3trillion of which 600billion was borrowed (ie added to the national debt), I took out the 600 billion. Over the past decade the government spent what they collected in taxes and then borrowed (and spent) an additional ~7.5 trillion, yet over that same period the GDP only increased ~4.5 trillion.

In other words, if we had a fiscally responsible government who had a balanced budget and not borrowed the trillions, our GDP would have shrank about 3 trillion over the past decade.

As I see it, we are in a damned if you do, damned if you don't type of situation. If we reign in government spending our economy is going to crash, if we don't our economy is going to crash. The funny part is, until I started adding up the number (earlier in this thread) I didn't realize how bad it is and thought we still had a chance to pull through.

Why U.S. debt matters to you

Government Workers are not helping.. Taxpayers are being taken to the cleaners. Most Taxpayers don't even know it.

Are Government Workers Taking Taxpayers to the Cleaners? (See Video)
According to Dan, the U.S. has way too many bureaucrats, making way too much money. He uses government data to show how federal, state, and local governments are all in fiscal trouble in part because of excessive pay for a bloated civil service.
http://www.cnbc.com/id/37469782

Government Workers are not helping.. Taxpayers are being taken to the cleaners. Most Taxpayers don't even know it.

I was going to ask you to quote the whole article, but apparently you did..

RUN FLEE PANIC!!! The government workers are going to kill you in your sleep, rape your daughters and impregnate your dog... Brothers and sisters I call upon you to get on your knees and pray to our god the FREE MARKET, so it may banish the demons called government and union workers who are determined to steer us away from our god and stop us on our mission to destroy the evil islamic religion... In the name in capitalism, the free market and the holy balance sheet .... Amen!

I was going to ask you to quote the whole article, but apparently you did..

RUN FLEE PANIC!!! The government workers are going to kill you in your sleep, rape your daughters and impregnate your dog...

http://www.publicradio.org/columns/marketplace/farrell/union_density_over_time.gif

http://www.cato-at-liberty.org/wp-content/uploads/201004_blog_edwards51.jpg

They already did it in California.. California Taxpayers were taken to the cleaners. :nod:

No one can argue with that..

http://www.publicradio.org/columns/marketplace/farrell/union_density_over_time.gif

http://www.cato-at-liberty.org/wp-content/uploads/201004_blog_edwards51.jpg

Pretty charts, useless, but pretty...

I can make a chart comparing DEBT/GDP vs "Number of buttplugs sold to conservatives" (or any trend that shows a year to year increase), it will just produce a nice looking chart with absolutely 0 relevancy.

Edit: Ummm the first chart actually shows union membership in public employees has been roughy steady since 1976, actually union membership (as a %) is down since then. We didn't have the over-spending issues in 1976 when union membership in government was at it's peak, so that directly contradicts your assertion. Woot, another propaganda peice debunked by their own article!

http://www.publicradio.org/columns/marketplace/farrell/union_density_over_time.gif

http://www.cato-at-liberty.org/wp-content/uploads/201004_blog_edwards51.jpg

Not getting your point here.

Are you arguing that workers should not be free to bargain collectively?

Debt to rise to 19.6 trillion by 2015. :eek:

http://www.reuters.com/article/idUSN088462520100608

Are you arguing that workers should not be free to bargain collectively?

They shouldn't be allowed to control government through powerful lobbies like they have in NY. They've passed all sorts of rules that essentially ensure they will have plenty of $$$ and power in the legislature for years to come.

Debt to rise to 19.6 trillion by 2015. :eek:

http://www.reuters.com/article/idUSN088462520100608

Don't worry, the Dem partisan hacks will blame Bush.

High deficits, high debts = slower growth = higher unemployment.

The majority of jobs being created are gov't jobs - the next bubble to pop!

========================================

The report that was sent to lawmakers Friday night with no fanfare said the ratio of debt to the gross domestic product would rise to 102 percent by 2015 from 93 percent this year.

"The president's economic experts say a 1 percent increase in GDP can create almost 1 million jobs, and that 1 percent is what experts think we are losing because of the debt's massive drag on our economy," said Republican Representative Dave Camp, who publicized the report.

He was referring to recent testimony by University of Maryland Professor Carmen Reinhart to the bipartisan fiscal commission, which was created by President Barack Obama to recommend ways to reduce the deficit, which said debt topping 90 percent of GDP could slow economic growth.

The U.S. debt has grown rapidly with the economic downturn and government spending for the Wall Street bailout, the wars in Afghanistan and Iraq and the economic stimulus. The rising debt is contributing to voter unrest ahead of the November congressional elections in which Republicans hope to regain control of Congress.

The Obama program is bad for the opposite reason you think.
Yeah, you, krugman and the other keynesians can keep believing that. In the meanwhile, take a long hard look at countries like Greece and Portugal and tell me if you see a problem.
Your comparison doesn't apply because nobody wants to lend money to small economically strapped countries that don't matter in the world, like Greece and Portugal. In comparison, the US is a large economically strapped country.

You need to quit criticizing Keynesian economics for the wrong reasons. You also need to propose your own realistic solution to the Great Recession.

No, I am not leaving out government, it is included.

The only thing I took out was the borrowed cash. In other words if the government's total budget was 3trillion of which 600billion was borrowed (ie added to the national debt), I took out the 600 billion. Over the past decade the government spent what they collected in taxes and then borrowed (and spent) an additional ~7.5 trillion, yet over that same period the GDP only increased ~4.5 trillion.

In other words, if we had a fiscally responsible government who had a balanced budget and not borrowed the trillions, our GDP would have shrank about 3 trillion over the past decade.

As I see it, we are in a damned if you do, damned if you don't type of situation. If we reign in government spending our economy is going to crash, if we don't our economy is going to crash. The funny part is, until I started adding up the number (earlier in this thread) I didn't realize how bad it is and thought we still had a chance to pull through.You're using accounting gimmicks to try making your point, but at least you see the consequences of taking popular but tragic fiscal measures. OTOH, the national debt we'll have to deal with over the next decade or two will be managable, despite being highly undesirable, because the much smaller Japanese economy has managed to muddle through with a far bigger debt/GDP burden, despite having a far less important international currency.

http://www.publicradio.org/columns/marketplace/farrell/union_density_over_time.gif

http://www.cato-at-liberty.org/wp-content/uploads/201004_blog_edwards51.jpg
What kind of pricing power do unions have now? Practically none. They're just coasting on past stupidity glory.

So do you support lots more Mexican immigration into the US, legal or illegal? Immigrant workers and free trade with China are the prime cause of weak American unions. BTW even dock workers are at risk -- China has been building a huge port in northern Mexico so they can bypass Los Angeles harbor, helped by NAFTA and the free flow of trucking between Mexico and the US.

What kind of pricing power do unions have now? Practically none. .

Perhaps in the private sector, but certainly not in the public one (http://slickdeals.net/forums/showthread.php?t=1349015).

You're using accounting gimmicks to try making your point, but at least you see the consequences of taking popular but tragic fiscal measures. OTOH, the national debt we'll have to deal with over the next decade or two will be managable, despite being highly undesirable, because the much smaller Japanese economy has managed to muddle through with a far bigger debt/GDP burden, despite having a far less important international currency.

It might be an accounting gimmick, but it is the truth, our economy has been shrinking with public sector reckless borrowing being the main crutch keeping us in a float.

The national debt problem will be ignored (by both parties), this is how our country works; Ignore problem until said problem becomes a clusterfrak then overact with a sweeping amount of intrusive changes that make life miserable for everyone. The debt will solved in either of 3 ways; (1) we inflate our currency, (2) we default and tell the world to bite us or (3) world war 3...

Japan has a high personal savings rate, strong family bonds and a smaller geographic area that makes infrastructure a lot more cost effective. They also don't have a military. They can cut back and wheather the storm a lot better then we can.

Perhaps in the private sector, but certainly not in the public one (http://slickdeals.net/forums/showthread.php?t=1349015).

Don't worry that will change, let them enjoy a year or two more of pig-headedness..

Your comparison doesn't apply because nobody wants to lend money to small economically strapped countries that don't matter in the world, like Greece and Portugal. In comparison, the US is a large economically strapped country.

For how much longer?

You need to quit criticizing Keynesian economics for the wrong reasons. You also need to propose your own realistic solution to the Great Recession.

A reigning in of the deficit through medicare, DOD/military and SS reforms, along with a more disciplined and targeted stimulus measures that actually improve the infrastructure of this country in a meaningful way.

I guess you people don't get it. The liberal / conservative cheer leading is meaningless at this point, i.e., Reagan did it, Bush did it, Clinton good, Clinton bad, Obama etc.

There is no way that the current programs meaning Social Security, Medicare/Medicaid, welfare, can continue. If you eliminated ALL OTHER SPENDING there isn't enough. But keep on dreaming.

Even Madoff's suckers wised up in the end.
You guys keep believing in the Ponzi scheme.

Some interesting statistics about the US economy. Its not pretty..

50 Statistics About The U.S. Economy That Are Almost Too Crazy To Believe

Most Americans know that the U.S. economy is in bad shape, but what most Americans don’t know is how truly desperate the financial situation of the United States really is. The truth is that what we are experiencing is not simply a “downturn” or a “recession”. What we are witnessing is the beginning of the end for the greatest economic machine that the world has ever seen. Our greed and our debt are literally eating our economy alive. Total government, corporate and personal debt has now reached 360 percent of GDP, which is far higher than it ever reached during the Great Depression era. We have nearly totally dismantled our once colossal manufacturing base, we have shipped millions upon millions of middle class jobs overseas, we have lived far beyond our means for decades and we have created the biggest debt bubble in the history of the world. A great day of financial reckoning is fast approaching, and the vast majority of Americans are totally oblivious.

Sometimes it takes cold, hard numbers for many of us to fully realize the situation that we are facing.

So, the following are 50 very revealing statistics about the U.S. economy that are almost too crazy to believe….
http://www.austinreport.com/archives/2933

Your comparison doesn't apply because nobody wants to lend money to small economically strapped countries that don't matter in the world, like Greece and Portugal. In comparison, the US is a large economically strapped country.

For how much longer?It depends on whether we have the sense to go deep in debt now and fix the economy or continue the half-hearted measures that you, the Republcians, and Obama favor that will make the economy limp along for years and actually result in greater debt in the long term. Worse, by limiting the economy to slow growth, as your group favors without admitting it, vital sectors will fade away permanently and make it easier for China to compete against us in the upcoming decades.

You need to quit criticizing Keynesian economics for the wrong reasons. You also need to propose your own realistic solution to the Great Recession.

A reigning in of the deficit through medicare, DOD/military and SS reforms, along with a more disciplined and targeted stimulus measures that actually improve the infrastructure of this country in a meaningful way.Things like Medicare, SS, and DoD are structural and should be fixed whether the economy is in a boom or bust, but they didn't cause the GW Bush recession, , and it's going to be virtually impossible to trim Medicare especially because the recent health care reform was so mild and didn't include the right measure -- universal Medicare. SS is going to be handled by raising the retirement age, and any effort to privatize it will actually increase the national debt (don't deny this -- supporters of privatization said it would).

And once again: you don't try to reduce the deficit during a severe economic downturn because that simply weakens the economy even more, as 1937 demonstrated.

I guess you people don't get it. The liberal / conservative cheer leading is meaningless at this point, i.e., Reagan did it, Bush did it, Clinton good, Clinton bad, Obama etc.

There is no way that the current programs meaning Social Security, Medicare/Medicaid, welfare, can continue. If you eliminated ALL OTHER SPENDING there isn't enough. But keep on dreaming.

Even Madoff's suckers wised up in the end.
You guys keep believing in the Ponzi scheme.What is your realistic solution?

It might be an accounting gimmick, but it is the truth, our economy has been shrinking with public sector reckless borrowing being the main crutch keeping us in a float. If it was the truth, it wouldn't be a gimmick.

The public sector tends to enlarge, relative to the public sector, during economic downturns because the public sector holds responsibility for the people released by the private sector. And why do we have "reckless" borrowing now but didn't before 2001? Forecasts back then predicted federal surpluses of hundreds of billions a year for perhaps dozens of years. Don't blame the war because during the Vietnam War, we still managed to cut debt/GDP, despite expansion of social welfare programs.

Explain.

And once again: you don't try to reduce the deficit during a severe economic downturn because that simply weakens the economy even more, as 1937 demonstrated.

Or you leave things alone, as 1920-21 (http://www.youtube.com/watch?v=czcUmnsprQI) demonstrated.

Not surprising that you'd say that since you think so many people are "useless."

Why don't you ask Al Gore how his invented internet came into being?

For how much longer?


Until at least 2020, apparently.

http://www.cbsnews.com/8301-503544_162-6163712-503544.html

It depends on whether we have the sense to go deep in debt now and fix the economy or continue the half-hearted measures that you, the Republcians, and Obama favor that will make the economy limp along for years and actually result in greater debt in the long term. Worse, by limiting the economy to slow growth, as your group favors without admitting it, vital sectors will fade away permanently and make it easier for China to compete against us in the upcoming decades.

Really? How much further down can we go?

In addition to the stimulus and bailouts that have already been spent, how much more do you want and where/how would you spend it? Why hasn't what we've done already worked?

Things like Medicare, SS, and DoD are structural and should be fixed whether the economy is in a boom or bust, but they didn't cause the GW Bush recession, , and it's going to be virtually impossible to trim Medicare especially because the recent health care reform was so mild and didn't include the right measure -- universal Medicare. SS is going to be handled by raising the retirement age, and any effort to privatize it will actually increase the national debt (don't deny this -- supporters of privatization said it would).

How about we end SS altogether. I'll keep paying it at the current rate so the past generations get their money. I have no expectation of getting anything from it, so I'll waive my right to any SS money, on the condition our children do not pay into it and get nothing from it. Lets end it and people will take care of themselves. I'll make sure my children know they have to take care of themselves and not expect the government or the taxpayers to do it for them. I hope everyone else will/does do the same.

It depends on whether we have the sense to go deep in debt now and fix the economy or continue the half-hearted measures that you, the Republcians, and Obama favor that will make the economy limp along for years and actually result in greater debt in the long term. Worse, by limiting the economy to slow growth, as your group favors without admitting it, vital sectors will fade away permanently and make it easier for China to compete against us in the upcoming decades.
Really? How much further down can we go?Without bigger deficits, quite a bit farther down, and we could end up like Japan, which foolishly tried to trim its debt a few years after its stimulus was pulling it out of a recession. Look at history and see how in 1937-38 the recovery from the Great Depression was set back 1-2 years because the government tried to balanced the budget (and almost succeeded, cutting the deficit to just 0.1% of GDP):

http://www.ourfuture.org/files/images/Depression-GDP-output-2.gif

The short term savings added to long term debt, and this is what you people don't understand because you're so "sensible". :lol: How much more can we borrow? We can probably crank up the debt/GDP to 150% and still be able to borrow without having to pay sky-high rates. I say this because Japan has long been at well over that (maybe now at 200%) and still pays very low interest to borrow money, and Japanese prospects in the long term are worse than ours (no immigration, aging population). Of course I expect a predictable objection from you about me using Japan as an excuse for more borrowing more while saying its economy has long been in the tank, proving you didn't understand the point.

In addition to the stimulus and bailouts that have already been spent, how much more do you want and where/how would you spend it? Why hasn't what we've done already worked?It has worked, as this graph of monthly jobless claims shows:

http://farm5.static.flickr.com/4139/4738344292_b73a88595c_b.jpg

How about we end SS altogether. I'll keep paying it at the current rate so the past generations get their money. I have no expectation of getting anything from it, so I'll waive my right to any SS money, on the condition our children do not pay into it and get nothing from it. Lets end it and people will take care of themselves. I'll make sure my children know they have to take care of themselves and not expect the government or the taxpayers to do it for them. I hope everyone else will/does do the same.And replace it with what? A private system with far higher overhead costs than the current system has? Look at Chile, a country that, for a while, allowed workers to choose between its public plan and a privatized system: people who chose the latter averaged half as much as those of the same age and working income as those who stayed with the public system. And in Britain, private providers warn of the lower returns because the costs are much higher. Maybe that's why Vanguard mutual fund company founder and Republican was against privatizing SS when it was a hot issue during the GW Bush administration. You're also a hypocrite if you favor both privatization and cutting federal deficits because even the GW Bush administration admitted that the switch to a private accounts system would require new borrowing, and you seem to be saying this as well (how else would your plan to pay off current recipients work?). I'd favor SS privatization if it would greatly help increase the capital for business to expand, but it seems it will merely shuffle money around and let the financial sector siphon off as much as 1/2% of the trust fund. The financial sector is already too big a part of our economy, so much that it probably decreases or GDP rather than help expand it.

And if you have no expectation of getting anything from the current SS system, either you don't understand how to cash checks, or you're very, very bad at math and history. Look at the reports of the SS trustees, and notice the system will be able to pay out at least 75% of its obligations in the 2030s, and that's if no reforms are made.

Well?

Why don't you ask Al Gore how his invented internet came into being?But Gore was right when he called for government intervention to expand the Internet, not from the point of free market capitalism or small government, but it was right in the sense of investing in national infrastructure that would help business and help the economy grow.

So what would our economy be like if Al Gore had been allowed to become President in 2001? I'd say it would be like Canada's, where debt/GDP has dropped to 38% and is on the way to zero -- just as it had been trending when Clinton was President and when Gore told an indecisive Clinton to freeze spending and raise taxes to fix the economy. If you have evidence to the contrary, please present it here, without the usual cliches.

I say this because Japan has long been at well over that (maybe now at 200%) and still pays very low interest to borrow money,

All the more reason to keep our debt/GDP ratio LOW

But Gore was right when he called for government intervention to expand the Internet, not from the point of free market capitalism or small government, but it was right in the sense of investing in national infrastructure that would help business and help the economy grow.

So what would our economy be like if Al Gore had been allowed to become President in 2001? I'd say it would be like Canada's, where debt/GDP has dropped to 38% and is on the way to zero -- just as it had been trending when Clinton was President and when Gore told an indecisive Clinton to freeze spending and raise taxes to fix the economy. If you have evidence to the contrary, please present it here, without the usual cliches.


And I'd say you're smoking Al Gore's son's weed. Not that your speculation is worth anything...

But Gore was right when he called for government intervention to expand the Internet, not from the point of free market capitalism or small government, but it was right in the sense of investing in national infrastructure that would help business and help the economy grow.

So what would our economy be like if Al Gore had been allowed to become President in 2001? I'd say it would be like Canada's, where debt/GDP has dropped to 38% and is on the way to zero -- just as it had been trending when Clinton was President and when Gore told an indecisive Clinton to freeze spending and raise taxes to fix the economy. If you have evidence to the contrary, please present it here, without the usual cliches.
And I'd say you're smoking Al Gore's son's weed. Not that your speculation is worth anything...I asked you to answer without your usual cliches, but you answered with your usual cliches, anyway. I guess that's the best you can do.

I say this because Japan has long been at well over that (maybe now at 200%) and still pays very low interest to borrow money,
All the more reason to keep our debt/GDP ratio LOWWrong and out of context, because in the same message you quoted, I also said the following about Japan:

and we could end up like Japan, which foolishly tried to trim its debt a few years after its stimulus was pulling it out of a recession.

So any attempt to reduce the deficit now will have the same consequences as our 1937-38or Japan's mid-1990s deficit reduction policies and likely increase the deficit instead.

For at least about the 5th time, you haven't provided realistic forecasts for what will happen to the Great Recession if your recommendations are implemented.

I asked you to answer without your usual cliches, but you answered with your usual cliches, anyway. I guess that's the best you can do.

Your baseless hypothetical runs contrary to the same promises that Al Gore made in the 2000 campaign.

Evidence, indeed. Whatever. It's rather amusing to watch you simply make up numbers. :wave:


We do know, however, that Obama plans to run tremendous, massive deficits for the entire duration of his presidency, and even his successor's presidency. Good times and bad. It's in his own documents.

you haven't provided realistic forecasts for what will happen to the Great Recession if your recommendations are implemented.

Neither have you. You're just parroting op-eds from people like Paul Krugman

Without bigger deficits, quite a bit farther down, and we could end up like Japan, which foolishly tried to trim its debt a few years after its stimulus was pulling it out of a recession. Look at history and see how in 1937-38 the recovery from the Great Depression was set back 1-2 years because the government tried to balanced the budget (and almost succeeded, cutting the deficit to just 0.1% of GDP):

I have looked at the GD, I suggest you read The Forgotten Man by Amity Shlaes to find out what FDR really did to the GD and the middle class, and it wasn't end it, he only prolonged it, WWII ended it. Also, look at the Depression of 1920-1921 for further proof that no stimulus is the cure.
FDR demonized business and raised taxes on them, stifling any chance the private sector had of recovering without the War.


http://www.ourfuture.org/files/images/Depression-GDP-output-2.gif

The short term savings added to long term debt, and this is what you people don't understand because you're so "sensible". :lol: How much more can we borrow? We can probably crank up the debt/GDP to 150% and still be able to borrow without having to pay sky-high rates. I say this because Japan has long been at well over that (maybe now at 200%) and still pays very low interest to borrow money, and Japanese prospects in the long term are worse than ours (no immigration, aging population). Of course I expect a predictable objection from you about me using Japan as an excuse for more borrowing more while saying its economy has long been in the tank, proving you didn't understand the point.

And Japan is doing awesome huh? I don't want to be Japan, I want to be a stable America will a solid Dollar in my pocket. None of the above will lead to that. Is that interest they're paying always going to stay low?

It has worked, as this graph of monthly jobless claims shows:

http://farm5.static.flickr.com/4139/4738344292_b73a88595c_b.jpg

Lets revisit this, you and me, when the Census is over with, I'd like to see that chart again then. And where on that chart are the people who don't have jobs but have given up looking?

And replace it with what? A private system with far higher overhead costs than the current system has? Look at Chile, a country that, for a while, allowed workers to choose between its public plan and a privatized system: people who chose the latter averaged half as much as those of the same age and working income as those who stayed with the public system. And in Britain, private providers warn of the lower returns because the costs are much higher. Maybe that's why Vanguard mutual fund company founder and Republican was against privatizing SS when it was a hot issue during the GW Bush administration. You're also a hypocrite if you favor both privatization and cutting federal deficits because even the GW Bush administration admitted that the switch to a private accounts system would require new borrowing, and you seem to be saying this as well (how else would your plan to pay off current recipients work?). I'd favor SS privatization if it would greatly help increase the capital for business to expand, but it seems it will merely shuffle money around and let the financial sector siphon off as much as 1/2% of the trust fund. The financial sector is already too big a part of our economy, so much that it probably decreases or GDP rather than help expand it.

With nothing. Save for your own retirement, it's not that hard. Don't live beyond your means and you can save for the later years. Did I say privatize it? Nope. I said end it, and I said I would pay for those who expect it, give me nothing and take nothing from our children. Not that hard of a concept. Where are the added costs there? We wind it down, not replace it. Why do you have to have the government hold your hand though life?

Agreed, the financial sector is too big. You know what would have brought them to their knees? If back under Clinton they'd listened to Brooksley Born and regulated the derivatives market (yes I am for some regulation if we're going to support these markets with taxpayer funds) or, under Bush and now Obama, we'd let AIG and Citi and GM and anyone else fail. Put them out of our misery, we'd be on the road to recovery by now, not stuck in this rut. Business can't do anything because it has no idea what government is going to do next, who or what will get taxed. Give us stability and we can move on. Give us no more bailouts and companies will operate so as not to fail, not so as to make the biggest possible profit at the highest possible risk and then get bailed out by Washington when you're about to fail.

And if you have no expectation of getting anything from the current SS system, either you don't understand how to cash checks, or you're very, very bad at math and history. Look at the reports of the SS trustees, and notice the system will be able to pay out at least 75% of its obligations in the 2030s, and that's if no reforms are made.

Well?

Ok, so you're saying SS will be there, but that we need reforms if we expect more than 75% of our money. How is that a good investment? What would reforms be like? Extend the age? Reduce benefits? Increase taxes? How are those options better than investing for yourself???


http://www.foxnews.com/politics/2010/03/14/social-security-start-cashing-uncle-sams-ious/ (http://www.foxnews.com/politics/2010/03/14/social-security-start-cashing-uncle-sams-ious/)

Yes its FoxNews, try to restrain yourself.


The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration.

So the SS fund is full of only IOU's and we're already starting to have more payouts than payins and I'm expected to sit back and think everything is fine? Who owes that IOU to who? We owe it to ourselves. How exactly do you think that is solvent and sound?

I have looked at the GD, I suggest you read The Forgotten Man by Amity Shlaes to find out what FDR really did to the GD and the middle class, and it wasn't end it, he only prolonged it, WWII ended it.The Shlaes' book concentrates on the very 1937-38 period during which FDR cut back on the deficit and caused the economy to recede, as the graph shows. You can't make a case that FDR's economic policies did more harm than good by citing the one short period when he essentially gave up on them. Shlaes' book is being used by anti-FDR revisionists who have no integrity, like Newt Gingrich, or any clues.

http://www.ourfuture.org/files/images/Depression-GDP-output-2.gif

And Japan is doing awesome huh? I don't want to be Japan, I want to be a stable America will a solid Dollar in my pocket. None of the above will lead to that. Is that interest they're paying always going to stay low?That's one strange answer, but I'll take it seriously anyway. Japan's unemployment rate is 5%, one of the lowest in the world, they have the third largest GDP, despite having 90% fewer people than China does, and their government can borrow at rock bottom rates, which is rarely the case with nations having precarious finances.

And replace it [Social Security] with what? A private system with far higher overhead costs than the current system has? Look at Chile, a country that, for a while, allowed workers to choose between its public plan and a privatized system: people who chose the latter averaged half as much as those of the same age and working income as those who stayed with the public system. And in Britain, private providers warn of the lower returns because the costs are much higher. Maybe that's why Vanguard mutual fund company founder and Republican was against privatizing SS when it was a hot issue during the GW Bush administration. You're also a hypocrite if you favor both privatization and cutting federal deficits because even the GW Bush administration admitted that the switch to a private accounts system would require new borrowing, and you seem to be saying this as well (how else would your plan to pay off current recipients work?). I'd favor SS privatization if it would greatly help increase the capital for business to expand, but it seems it will merely shuffle money around and let the financial sector siphon off as much as 1/2% of the trust fund. The financial sector is already too big a part of our economy, so much that it probably decreases or GDP rather than help expand it.

With nothing. Save for your own retirement, it's not that hard. Don't live beyond your means and you can save for the later years. Did I say privatize it? Nope. I said end it, and I said I would pay for those who expect it, give me nothing and take nothing from our children. Not that hard of a concept. Where are the added costs there? We wind it down, not replace it. Why do you have to have the government hold your hand though life?

Agreed, the financial sector is too big. You know what would have brought them to their knees? If back under Clinton they'd listened to Brooksley Born and regulated the derivatives market (yes I am for some regulation if we're going to support these markets with taxpayer funds) or, under Bush and now Obama, we'd let AIG and Citi and GM and anyone else fail. Put them out of our misery, we'd be on the road to recovery by now, not stuck in this rut. Business can't do anything because it has no idea what government is going to do next, who or what will get taxed. Give us stability and we can move on. Give us no more bailouts and companies will operate so as not to fail, not so as to make the biggest possible profit at the highest possible risk and then get bailed out by Washington when you're about to fail.

Ok, so you're saying SS will be there, but that we need reforms if we expect more than 75% of our money. How is that a good investment? What would reforms be like? Extend the age? Reduce benefits? Increase taxes? How are those options better than investing for yourself???
Eliminating Social Security will just increase senior poverty greatly because few people save, and that's going to be a costly burden on society. I'm being practical here, but you aren't.

Clinton didn't do enough to regulate the financial sector because he would have been called a big-government socialist by the right wing -- you know, the people who wanted to eliminate Social Security.


http://www.foxnews.com/politics/2010/03/14/social-security-start-cashing-uncle-sams-ious/ (http://www.foxnews.com/politics/2010/03/14/social-security-start-cashing-uncle-sams-ious/)

Yes its FoxNews, try to restrain yourself.Don't worry; I won't even click on those links because cable news, regardless of its political leanings, is garbage.

So the SS fund is full of only IOU's and we're already starting to have more payouts than payins and I'm expected to sit back and think everything is fine? Who owes that IOU to who? We owe it to ourselves. How exactly do you think that is solvent and sound?Don't be a fool who thinks trillions of dollars in US Treasury securities are worthless or that Social Security regulations will forever remain the same.

Don't be a fool who thinks trillions of dollars in US Treasury securities are worthless or that Social Security regulations will forever remain the same.

You're the fool if you think that's the biggest issue. You've been clamoring for expanded medicare when we have trillions in unfunded liabilities just for the people over age 65 who are covered by medicare. Instead of trying to shore up our financial situation by reducing medicare eligibility, you are trying to make the problem worse by creating medicare for all.

And yes, T-bills can become worthless if the government has to print more to get out of its debts. Please tell me, when we reach a 100% debt/GDP ratio in 2020, how will we pay it off? Unpopular tax hikes? Severe austerity measures? No --- politicians will take the easiest way out: the printing press.

Neither have you. You're just parroting op-eds from people like Paul Krugman

So when is the time to cut the deficit? According to Krugman, not 2001, 2002, 2003, 2006, 2007, 2008, 2009, 2010, 2011, or 2012.

Now that the Democrats have regained some power, they have to decide what to do. One of the biggest questions is whether the party should return to Rubinomics — the doctrine, associated with former Treasury Secretary Robert Rubin, that placed a very high priority on reducing the budget deficit.

The answer, I believe, is no. Mr. Rubin was one of the ablest Treasury secretaries in American history. But it’s now clear that while Rubinomics made sense in terms of pure economics, it failed to take account of the ugly realities of contemporary American politics.

And the lesson of the last six years is that the Democrats shouldn’t spend political capital trying to bring the deficit down. They should refrain from actions that make the deficit worse. But given a choice between cutting the deficit and spending more on good things like health care reform, they should choose the spending.

The answer, I now think, is to spend the money — while taking great care to ensure that it is spent well, not squandered — and let the deficit be. By spending money well, Democrats can both improve Americans’ lives and, more broadly, offer a demonstration of the benefits of good government. Deficit reduction, on the other hand, might just end up playing into the hands of the next irresponsible president.

In the long run, something will have to be done about the deficit. But given the state of our politics, now is not the time.





That's the amusing thing about the false Keynesian types. They demand more and more and more spending, saying they'll pay for it 'later'. When 'later' comes, now is not the time.

I guess that leaves 2 or 3 years out of 15, to pay for the massive spending accumulated in the other 12. Interesting.

That's one strange answer, but I'll take it seriously anyway. Japan's unemployment rate is 5%, one of the lowest in the world, they have the third largest GDP, despite having 90% fewer people than China does, and their government can borrow at rock bottom rates, which is rarely the case with nations having precarious finances.

So how long will those rates stay "rock bottom"? They can't forever, and when they do have to start refinancing that debt at higher rates, then what?


Eliminating Social Security will just increase senior poverty greatly because few people save, and that's going to be a costly burden on society. I'm being practical here, but you aren't.

Why can't it be ended the way I noted? I never said cut it off now, I said wind it down.

Few people save because they know, errrr, assume SS will be there for them. End the program and people will take care of themselves. Saving for retirement is something people CAN DO on their own.

Clinton didn't do enough to regulate the financial sector because he would have been called a big-government socialist by the right wing -- you know, the people who wanted to eliminate Social Security.

Hahahahaha, he was worried about being called names. Please.

Don't worry; I won't even click on those links because cable news, regardless of its political leanings, is garbage.

No worries, the paragraph I quoted was all you needed, SS is empty except for the IOU's.

Don't be a fool who thinks trillions of dollars in US Treasury securities are worthless or that Social Security regulations will forever remain the same.

They are next to worthless. They're non-transferable, so where is the government going to come up with the money to meet those obligations? Print/create it? That means inflation which destroys the purchasing power of the dollars already in circulation.

Please expand on your "regulations will forever remain the same" comment? How do you think they will change? Increase the retirement age? Decrease benefits? Increase taxes? How does this make SS a better investment than investing on your own? You say costs of private retirement are so high, but you say we must expect new regulations to alter SS. What types of alterations do you foresee?

And yes, T-bills can become worthless if the government has to print more to get out of its debts. Please tell me, when we reach a 100% debt/GDP ratio in 2020, how will we pay it off? Unpopular tax hikes? Severe austerity measures? No --- politicians will take the easiest way out: the printing press.

i don't know why you think 100% is some magical number...japan is far beyond that, and there is deflation there...though i mean, there's deflation here...

http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CUSR0000SA0&output_view=pct_1mth

but who are you going to believe, Glenn Beck who says there's going to be hyperinflation or your own lying eyes?

So how long will those rates stay "rock bottom"? They can't forever, and when they do have to start refinancing that debt at higher rates, then what?
there's no reason to believe otherwise. it's like saying the how long will the sky stay blue?
i mean, you should provide evidence that things will change before assuming that they will given that there is plenty of evidence that rates will stay low in the long term (as evidenced by low long term rates)

i don't know why you think 100% is some magical number...japan is far beyond that, and there is deflation there...though i mean, there's deflation here...

:secret: Japan has been and continues to be a country full of savers (most of their debt is internally held) -- it's hard to have inflation when your average citizen hoards all their $$$. Not so much in the US (http://articles.moneycentral.msn.com/Investing/Extra/USSavingsRateFallsToZero.aspx), until the recession hit.

You can thank their zombie banks (http://www.forbes.com/2009/02/10/recession-tarp-japan-opinions-columnists_0211_thomas_cooley.html) for their deflation (along with the popping of their impressive real estate bubble).

But since you want to use Japan as an example we should attempt emulate, please indicate how you expect an increase in OUR debt to some how magically get our economy on track and help us avoid the stagnation they have been suffering since the 90s? Seriously, we are literally staring at an example of keynesianism gone wrong in Japan and people like you and Paul Krugman want the same fate for us.

i don't know why you think 100% is some magical number...japan is far beyond that, and there is deflation there...though i mean, there's deflation here...

http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CUSR0000SA0&output_view=pct_1mth

but who are you going to believe, Glenn Beck who says there's going to be hyperinflation or your own lying eyes?


there's no reason to believe otherwise. it's like saying the how long will the sky stay blue?
i mean, you should provide evidence that things will change before assuming that they will given that there is plenty of evidence that rates will stay low in the long term (as evidenced by low long term rates)

Why trust the CPI? What does the government exclude from that equation? How else does it "adjust" the number?

US debt is meaningless as it is not backed by hard assets. Right now EU, US and JAP printing presses are being prepped to be revved to a high gear never seen before. Global depression can only be stopped by massive spending and inflation. How does another stimulus check of $10k a head sound?

US debt is meaningless as it is not backed by hard assets. Right now EU, US and JAP printing presses are being prepped to be revved to a high gear never seen before. Global depression can only be stopped by massive spending and inflation. How does another stimulus check of $10k a head sound?

The can also known as "Global depression" can only be kicked down the road by massive spending and inflation. Let's take the hit now and sort it out and recover, I don't want to pass this down to my kids and grandkids.

$10k check sounds useless, as does a $10 trillion check, unless I get it before everyone else. If we all get it at the same time then nothing has changed except that shortly after that my paycheck may not even pay for groceries, never mind the mortgage.

The CBO chimes in... for whatever they're worth

CBO chief: Budget outlook 'daunting' (http://money.cnn.com/2010/06/30/news/economy/fiscal_commission_cbo/index.htm?hpt=T2)

WASHINGTON (CNNMoney.com) -- Douglas Elmendorf, chief budget cruncher for Congress, got to play the role of bad-news bear before the president's bipartisan fiscal commission on Wednesday.

His job: Present the Congressional Budget Office's latest assessment of the long-term federal budget.

The gist of his testimony went something like this: The outlook is bad under current law and daunting if many current policies are extended as expected. And even that may understate the fiscal problem the country faces, because it doesn't factor in potential effects of debt on economic growth.

Under the rosiest scenario painted by Elmendorf, the debt held by the public is on track to rise to 80% in 2035 from 62% at the end of this year. At that point, interest payments on that debt would jump to 4% of GDP, up from roughly 1% today. That's the equivalent of a third of all federal revenue.

From there, the increases are stark under an alternative policy scenario, which includes an extension of the 2001 and 2003 tax cuts for most people, permanently protecting the middle class from the Alternative Minimum Tax and a permanent increase in Medicare payments to doctors.

Based on current policies, debt held by the public would hit 185% of GDP in 2035. And interest payments on that debt would jump to nearly 9% of GDP.

Focus on health spending: Spending on health care remains the federal budget's biggest problem, even after accounting for the estimated impact of the health reform law enacted in March.

The health care law "made a dent in the problem but did not significantly reduce the challenge," Elmendorf said. "If all the health law measures are implemented, we end up with slightly lower federal health spending by the end of the 2020s."

Specifically, Elmendorf noted that spending on major mandatory health care programs such as Medicare is on track to double by 2035, up to 10% of GDP from 5% today. That increase is the equivalent of $700 billion this year in additional spending, Elmendorf said.
Add in the less dramatic increase in Social Security spending, and the cost to federal coffers of mandatory entitlement programs will reach 16% of GDP by 2035. That's not very far below what the government has spent on all federal programs and activities on average over the past 40 years.

A few Democratic members of the commission registered their concerns that the CBO's assumptions about the effects of the new law are understating its potential to reduce costs.

The 18-member fiscal commission, which 12 members of Congress and 6 presidential appointees, will submit a report by Dec. 1 recommending ways to bring down deficits and stabilize the country's long-run debt.

Debt can sap growth: The larger the debt burden grows, the less money there will be for domestic investment. That, in turn, can suppress income growth and economic growth, which then reduces tax revenue.

The only way to bring the federal budget into better balance would be to sharply reduce U.S. spending, drastically increase taxes to rates never before seen in the United States or some less dramatic combination of the two, Elmendorf said.

The challenges are great, and the longer policymakers wait to stabilize the debt, the harder their task, Elmendorf said.

He gave an example: Say Congress started implementing measures next year to bring public debt back to what it was before the financial crisis. They would immediately and permanently need to cut spending by or increase taxes by 5% of GDP. That's $700 billion a year. And if they wait until 2020 they'd need to make changes worth 8% of GDP.

The hearing touched on one of the trickiest fiscal questions facing Congress: When to pivot from economic stimulus to fiscal restraint.

Elmendorf said that most economists believe cutting spending and raising taxes this year or next could slow economic recovery. But he added that "reaching agreement as quickly as possible would support the economic recovery because it would provide some clarity [in policy]."

While deficits can help boost the economy in a recession, over time government debt can drag it down, he said.

"If debt grows unchecked," Elmendorf said, "it means declines in people's standards of living."

The US Debt/State Debt is "spiraling out of control.".. and they are raising your taxes to try and pay for it..

10 States Where Taxes Are Rising the Most

New York. Total enacted and proposed new taxes, 2009-2011: $8.2 billion; $419 per person.

Enacted: Higher taxes on the wealthy and on tobacco, beer and wine, car rentals, and taxi rides; increased fees on motor vehicles, hospital stays, car insurance, tax preparation, utilities, and several other things; reduced tax credits for a variety of businesses.

Proposed: Additional taxes on cigarettes; new taxes on certain small businesses, soft drinks, and some medical services.

California. Total: $11.5 billion; $312 per person.

Enacted: 1 percentage point increase in the sales tax and a quarter-point increase in personal income taxes. Lower business tax credits; new fees on motor vehicles, vessels, and aircraft.

Proposed: A net decrease in gas and diesel taxes.

Delaware. Total: $253 million; $286 per person.

Enacted: 1 percentage point increase in taxes on incomes above $60,000; higher taxes on cigarettes, video lottery, utilities, and some businesses. New estate tax.

Connecticut. Total: $777 million; $221 per person.

Enacted: Higher income taxes on the wealthy and on medium-sized and large corporations; higher taxes on tobacco; accelerated estate- and gift-tax payments; various new fees.

Wisconsin. Total: $900 million; $159 per person.

Enacted: Higher taxes on the wealthy, lower capital-gains-tax exclusions, higher taxes on tobacco.

Arizona. Total: $1 billion; $154 per person.

Enacted: A 1 percentage point increase in the sales tax on most goods and services.

Kansas. Total: $425 million; $151 per person.

Almost all of the new taxes in Kansas are proposed for 2011, including an increase in the sales tax and the tax on tobacco.

Washington state. Total: $982 million; $147 per person.

Enacted: Higher tuition at public universities and a variety of fee increases.

Proposed: Higher taxes on cigarettes, carbonated beverages, hazardous substances, and some businesses.

Oregon. Total: $541 million; $141 per person.

Enacted: Higher personal and corporate income taxes, higher taxes on tobacco, higher motor vehicle fees.

Massachusetts. Total: $890 million; $135 per person.

Enacted: A 1.25 percentage point increase in the sales tax, elimination of the tax exemption for alcohol, new taxes on direct-broadcast satellite service.

New Hampshire. Total: $161 million; $121 per person.

Enacted: Higher taxes on tobacco, some motor vehicle records, hotel rooms, gambling winnings; higher fees on boat and motor vehicle registrations and some government activities.
http://finance.yahoo.com/news/10-States-Where-Taxes-Are-usnews-3057409508.html;_ylt=Ak.Ji7IU1NNvrn2_GHJDate7YWsA;_ylu=X3oDMTFiZGFubTdpBHBvcwMxMARzZWMDc3BlY2lhbEZlYXR1cmVzBHNsawMxMHN0YXRlc3doZXI-?x=0

So on the issue of US debt, most of you take the side of the Chinese government, which wants to protect its investment in the US dollar, rather than the interests of the US people.

Responsible spending is in the best interest of US people.
So on the issue of US debt, most of you take the side of the Chinese government, which wants to protect its investment in the US dollar, rather than the interests of the US people.

This is bullshit. The GOP and Fox News and all the conservatives didn't have two words to say about the deficits throughout eight sold years of Bush. Suddenly, they think we're all a bunch of damn idiots who forgot all about that, and they want us to think everything was just perfect before Obama came to the White House.

BECAUSE I am genuinely concerned about deficits, I known all about Bush's deficits. I know that with Obama's spending today, we wouldn't have any deficit problem, and we could become zero-deficit, except that we have to pay over half a trillion a year of interest on Bush debt, and another trillion on the two wars that Bush started.

I KNOW THIS. Why don't the so-called "conservatives" know it? Conservatives will elect a Republican, and we'll be back in the debt shithole three times worse than before.

I KNOW THIS. Why don't the so-called "conservatives" know it? Conservatives will elect a Republican, and we'll be back in the debt shithole three times worse than before.

out of one shithole and back into another.

Bush farked up big time. Obama was supposed to be about change, and whether we like it or not, deficit reduction has to happen sooner rather than later, because if we let the bond markets decide that we have too much debt down the road, it will be too late.

So on the issue of US debt, most of you take the side of the Chinese government, which wants to protect its investment in the US dollar, rather than the interests of the US people.

Responsible spending is in the best interest of US people.

Bingo.

We need to continue to be the beacon of financial sanity in this world compared to the debt-ridden entitlement republics like Greece and Spain

and why would the bond markets decide that?

as has been stated multiple times in this thread, japan has much higher debt levels than us and an arguably weaker economy, yet they have faced rock bottom interest rates for over a decade. similar to bank runs, speculative attacks generally don't happen to countries with strong fundamentals (and debate however you like, but until we get 2 straight terms of sarah palin, there can be little doubt that america is a strong country)

i mean saying we need to worry about interest rates going up and up it's like saying we need to defend against monsters from the depths of the ocean because when they come, we'll all be screwed. well yes, perhaps that's true, but there's no reason to believe that those monsters will come.

This is bullshit. The GOP and Fox News and all the conservatives didn't have two words to say about the deficits throughout eight sold years of Bush. Suddenly, they think we're all a bunch of damn idiots who forgot all about that, and they want us to think everything was just perfect before Obama came to the White House.

BECAUSE I am genuinely concerned about deficits, I known all about Bush's deficits. I know that with Obama's spending today, we wouldn't have any deficit problem, and we could become zero-deficit, except that we have to pay over half a trillion a year of interest on Bush debt, and another trillion on the two wars that Bush started.

I KNOW THIS. Why don't the so-called "conservatives" know it? Conservatives will elect a Republican, and we'll be back in the debt shithole three times worse than before.


:lmao:


The United States only paid $187 billion in interest last year. (http://www.whitehouse.gov/omb/budget/fy2011/assets/tables.pdf). Course, that becomes $900 billion by the end of the decade. And of course, Obama spent $3.6 trillion this year while collecting $2.2 trillion. Whoops.

Don't worry. Some other poor fool is going to have to pay for Obamacare.

as has been stated multiple times in this thread, japan has much higher debt levels than us and an arguably weaker economy, yet they have faced rock bottom interest rates for over a decade.

Some important differences: much more of japan's debt is internally held, and the japanese population has a savings rate that puts ours to shame.

Not to mention, if you want to use japan as an example, their lost decade and stagnation has come about because of keeping their "zombie" banks alive and preventing assets from deflating naturally after the real estate crash. And this occurred all while the stimulus spigot was on.

So I'll ask you as I asked the other poster --- do you really want to emulate Japan?

i think you're presenting what is called, i believe, a false dichotomy.
it is not only the prospect of japan or a miraculous recovery that we face in situation nor japan or austerity that we face in choice. i bring up japan because it challenges the assumption that interest rates must rise.

furthermore, most modern economists agree that deflation is a terrible affliction for any economy (http://en.wikipedia.org/wiki/Deflation). it is why organizations such as the ECB have an explicit inflation target. Several respectable economists argue that in addition to the zombie banks problem, a significant driver of japan's lost decade was persistent and widespread deflation.

japanese population has a savings rate that puts ours to shame.
i would disagree with that assessment. japan's savings rate is only a percentage point higher than ours
http://balita.ph/2010/06/29/s-koreas-personal-savings-rate-lower-than-u-s-japan-report/
and given that our savings rate has risen further since this was put out (http://research.stlouisfed.org/fred2/series/PSAVERT) I don't even know if the disparity is that large

to answer your question, no, i do not want to emulate japan, and i think the most important thing we must do to avoid that emulation is to avoid deflation.

i would disagree with that assessment. japan's savings rate is only a percentage point higher than ours
http://balita.ph/2010/06/29/s-koreas-personal-savings-rate-lower-than-u-s-japan-report/
and given that our savings rate has risen further since this was put out (http://research.stlouisfed.org/fred2/series/PSAVERT) I don't even know if the disparity is that large


The recession has elevated our savings rate, but traditionally americans have been poor savers since the advent of easy credit

http://www.billshrink.com/blog/5667/personal-savings-rate/
http://articles.moneycentral.msn.com/Investing/Extra/USSavingsRateFallsToZero.aspx

to answer your question, no, i do not want to emulate japan, and i think the most important thing we must do to avoid that emulation is to avoid deflation.

so we should pursue policies that will eventually lead to a weakening of the dollar and eventual hyperinflation instead? No thanks.

No ordinary amount of stimulus is going to affect what is the natural deflationary trajectory of assets after the bubble pops. Japan has been trying to stave that off forever with stimulus, unsuccessfully.

Until we hit rock bottom, we can't begin the repair process. Does it really make sense to keep the bubble inflated?

i must question if you bothered to click on my link, which shows exactly the same data as your first link (and is possibly the source of the data used to create your first link). i enjoy discussing these issues with you and the other posters here, but it bothers me if you just go "oh, this guy disagrees with me, therefore he must be wrong, and i sure don't need to check out his evidence"

so we should pursue policies that will eventually lead to a weakening of the dollar and eventual hyperinflation instead? No thanks.
despite what you may think, hyperinflation is not the same as 5% or even 10% inflation. while high relative to what we have been used to in these last 20 years, 10% inflation is not unmanageable, as volcker (and many other central bankers) have proven. hyperinflation has to do with an exponential increase in the money supply, not on the order of 10% or 20% (and no, the fed's balance sheet is not the same as the money supply, though it does make for a potentially frightening graph to those who don't know what it means. if you want to look at the money supply, here's a graph of the money supply http://research.stlouisfed.org/fred2/series/M2?cid=29) but an increase of many thousands or millions of percent over a year

No ordinary amount of stimulus is going to affect what is the natural trajectory of assets after the bubble pops. Japan has been trying to stave that off forever. Besides, Deflation only hurts you when you're in debt
i'm of the impression that japan's asset values have already plummeted precipitously. furthermore, i assure you that as someone with no debt, i and many others will be hurt by the reduced economic growth, stagnant real wages, and increased unemployment that prolonged deflation often causes. again, this is discussed in the wikipedia link and in the articles that it references and many other academic articles easily accessible on the internet on deflation. i encourage you to peruse them before just repeating a nice sounding but misleading talking point.

Edit: I see you have edited your post slightly. To address that, the prices of real estate is not the only price in the economy. I don't think there was a bubble in japan of consumer goods and services, yet the prices of those are falling as well, and it is deflation in those areas that are also very relevant and even more relevant than real estate to the deflation problem. furthermore, i don't think i nor anyone else is proposing to affect prices through fiscal policy. it is generally agreed that prices are tied to the money supply and monetary policy, and that japan could've done much more quantitative easing if it was really committed to avoiding deflation.

Until we hit rock bottom, we can't begin the repair process.
see, that's what andrew mellon believed when he told hoover to "liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate, purge the rottenness out of the system." unfortunately, it's just not true. there is no reason to believe that it is better to painfully start from nothing than to bootstrap yourself from a down, but functioning, economy besides pure masochism. there are myriad economics costs and frictions to bankruptcy (as a concrete example of the costs of "hitting rock bottom" that we needn't face necessarily, there are many econ papers that you're welcome to look up and read if you're curious) that we avoid through "bailouts" like fiscal stimulus. think what you want of the bank bailouts, but surely you must agree that if we gave every small business in america 10k dollars, at least a few in a downturn will be saved by this money. in turn, they keep their capital stock active and productive, capital stock that would go idle for months if not years in a bankruptcy. their employees keep getting paid, and in turn those employees turn those paychecks into revenue at other businesses and so on. i could go on, but before i do, i must ask you why you think we must hit rock bottom before recovering besides a sense of masochism and "morality" (that is, a sense of "if we are suffering we must be doing the right thing")?

furthermore, most modern economists agree that deflation is a terrible affliction for any economy (http://en.wikipedia.org/wiki/Deflation). it is why organizations such as the ECB have an explicit inflation target. Several respectable economists argue that in addition to the zombie banks problem, a significant driver of japan's lost decade was persistent and widespread deflation.
What exactly are the negative consequences of deflation?

Honestly, most people say, "Most economists say, "blah, blah, blah," about deflation" but don't really explain why people being able to buy more with the dollars they save is a bad thing.

What exactly are the negative consequences of deflation?

Honestly, most people say, "Most economists say, "blah, blah, blah," about deflation" but don't really explain why people being able to buy more with the dollars they save is a bad thing.

From my understanding of deflation, it is very bad if it is demand-side, where people simply don't have the money to buy the products available on the market (a result of high unemployment or "drastic" contraction of the money supply by the Fed) so companies drop prices to clear inventory, then with reduced profits or even losses, the same companies can't give raises or hire more employees and maybe even have to let more employees go. This becomes a deflationary spiral and can get out of control as it did for part of the GD.

Now if you are a saver, have a very steady/safe job or are on a fixed income it's not the end of the world.

Conversely, supply-side deflation is usually good, where prices drop because of advancements in efficiency and productivity. Now wages don't necessarily rise, but prices still fall, so your money still gets you further.

I think everyone agrees on which deflation we are worried about now.

None of this would be an issue if we didn't have a Federal Reserve manipulating the money supply, we wouldn't have had the severe bubbles we've seen since 1913. We would still have ups and downs in the market, that is only natural, but we wouldn't have the enormous bubbles we've seen just in the last 10 years in interweb and housing.

The can also known as "Global depression" can only be kicked down the road by massive spending and inflation. Let's take the hit now and sort it out and recover, I don't want to pass this down to my kids and grandkids.

$10k check sounds useless, as does a $10 trillion check, unless I get it before everyone else. If we all get it at the same time then nothing has changed except that shortly after that my paycheck may not even pay for groceries, never mind the mortgage.

China will not let us take the hit now. They need us to continue to buy their goods. They will take a hit on their USD denominated debt to keep the current system in place. Big big hikes in spending ahead. US debt is not indexed for inflation....your grandkids wont owe much at all.

China will not let us take the hit now. They need us to continue to buy their goods. They will take a hit on their USD denominated debt to keep the current system in place. Big big hikes in spending ahead. US debt is not indexed for inflation....your grandkids wont owe much at all.

Probably not now, but I think that time is coming. Why would they keep giving us money to buy their products?

It's not indexed, but a vast portion of it is short term, which will have to be refinanced at rates that are more than likely to be higher than they are currently.

From my understanding of deflation, it is very bad if it is demand-side, where people simply don't have the money to buy the products available on the market (a result of high unemployment or "drastic" contraction of the money supply by the Fed) so companies drop prices to clear inventory, then with reduced profits or even losses, the same companies can't give raises or hire more employees and maybe even have to let more employees go.
Isn't this just a decrease in demand for a group of goods, and the natural result of it? I mean, if unemployment is so high (first off, isn't that the real problem? well that, and what caused the high unemployment), the fact prices fall to match people's willingness to spend would be the healthy and positive natural correction, right?

During the Great Depression the government tried to prop up prices, and hence lengthened it, because unemployed couldn't purchase the products.

deflation is bad because of this:
why do people make goods or services (i.e. why is there economic production)? because what you get from the buyer (in the modern economy, the money) is worth as much or more than what you're giving up in time and possessions.

now, as a buyer, if you expect prices to be lower tomorrow than today, unless you absolutely need the good today, you'll wait until tomorrow to buy it. and tomorrow, you'll wait until the next day, and so on.

as a seller, no one is buying what you're making, because they know what you're selling will be cheaper tomorrow, and so you make less. you lay off workers because you're producing less, and those workers, now being out of jobs, buy less since they have lower incomes. the cycle repeats.

on the other hand, a small amount of inflation is good because of the opposite reason:
you expect goods and services to be a little more expensive tomorrow, and so at times you'll buy today instead of tomorrow. in turn, the producer of that good or service gets your money, and hires more people because they're receiving orders. those employees spend their money on other goods and services, and the cycle repeats.

however, low inflation is by no means the same as high inflation, and just because low inflation can be beneficial doesn't mean high inflation is, but just as important, just because high inflation is bad doesn't mean low inflation is also bad and deflation is good.

None of this would be an issue if we didn't have a Federal Reserve manipulating the money supply, we wouldn't have had the severe bubbles we've seen since 1913. We would still have ups and downs in the market, that is only natural, but we wouldn't have the enormous bubbles we've seen just in the last 10 years in interweb and housing
without a doubt the fed has made mistakes, but http://en.wikipedia.org/wiki/Template:BankPanicUSA. notice how there were many more before the establishment of the federal reserve
and despite what us young'uns may think, depressions have happened long before we or even our grandparents were born
http://en.wikipedia.org/wiki/Long_depression

deflation is bad because of this:
why do people make goods or services (i.e. why is there economic production)?

What about deflation that's been going on for a decade?

20 products that are cheaper today than 10 years ago (http://www.walletpop.com/blog/2010/06/30/20-products-that-are-cheaper-today-than-10-years-ago/)

http://www.blogcdn.com/www.walletpop.com/blog/media/2010/06/mnt-inflation-r4454ver2.jpg

Why haven't the prices of these items kept up with inflation? There are a number of possible explanations.

Market competition helped minimize the increase in some of these items; aspirin and airfares are two good examples. Some prices were directly affected by the market collapse, such as Walmart stock, while the drop in the cost of a house loan has come about at least in part due to government monetary policy.

Other companies found it difficult to increase prices enough in the face of a recession to keep up with inflation; Harley-Davidson and its Sportster motorcycle, for example. The recession also brought about a drop in discretionary spending, one reason for the decline in value of the Hummel figurine.

Still other companies found ways to lower the cost of production of items, allowing them to give more value for a better price; the Sears paint and Volkswagen Golf are likely examples of this. Polished logistics allow streamlined shipping of items such as bananas and apples.

Finally, diminishing demand has forced some industries to cap price increases; the CD industry, for example, must compete with the $0.99 download.

deflation is bad because of this:
why do people make goods or services is worth as much or more than what you're giving up in time and possessions.

now, as a buyer, if you expect prices to be lower tomorrow than today, unless you absolutely need the good today, you'll wait until tomorrow to buy it. and tomorrow, you'll wait until the next day, and so on. So, essentially, when prices get lower or newer technology is around the corner, people have an incentive to save? And saving is bad because?

as a seller, no one is buying what you're making, because they know what you're selling will be cheaper tomorrow, and so you make less. you lay off workers because you're producing less, and those workers, now being out of jobs, buy less since they have lower incomes. the cycle repeats.
Not necessarily true. If this were true it would have been a never ending spiral prior to the creation of central banks, which wasn't the case.

on the other hand, a small amount of inflation is good because of the opposite reason:
you expect goods and services to be a little more expensive tomorrow, and so at times you'll buy today instead of tomorrow. in turn, the producer of that good or service gets your money, and hires more people because they're receiving orders. those employees spend their money on other goods and services, and the cycle repeats. So, in your opinion, there needs to be an added incentive to induce people to purchase today? If a present good is pretty much always more valuable (other things constant) than a future good why do we need even more incentive to get people to buy today? And won't this added incentive have people spending more than they probably should under the belief that if they hold onto any money it will be instantly worth less tomorrow?

however, low inflation is by no means the same as high inflation, and just because low inflation can be beneficial doesn't mean high inflation is, but just as important, just because high inflation is bad doesn't mean low inflation is also bad and deflation is good. What's the difference between high inflation and low inflation? Or is it an arbitrary number that no one on earth really knows?


without a doubt the fed has made mistakes, but http://en.wikipedia.org/wiki/Template:BankPanicUSA.
No one denies panics and crashes, these are natural reactions to bad business decisions. The problem is, why were all the panics prior to central banking so short, while the Great Depression lasted so long?

There is a lot of non-win in this thread. Lets get started shall we?

What do you mean we all "know" it will never happen? Historically, debt/GDP had been decreasing steadily, from the end of WWII (roughly 120%) until the end of the Carter administration (30%), and it increased only because we adoped crazy economic policies and a "starve the beast" mentality about government spending (Nobel economist Milton Friedman originally believed that starvation would limit government but later admitted he was wrong). Then George Bush and Bill Clinton put our finances back on track, simply by going back to the old practices, and again debt/GDP continued to fall. It didn't rise again until GW Bush brought back voodoo economics with an intensity Reagan had never practiced, and, combined with complete faith in free markets, caused the crash. If you remember forecasts made in the late 1990s, the national debt was expected to be paid off completely in the 2030s because the economy would generate hundreds of billions of dollars more tax revenue each year than the government would spend, and in 2000 that estimate was moved up by 15 years.

Don't confuse deficits caused by economic fundamentalism and political opportunism with deficits generated to bring the economy out of a slump. The latter are needed and do more good than harm. Nor are today's deficits anything like the last act of a desperate gambler because in reality they're rational, and in the past 24-27 downturns, deficits have helped. Those are better odds than offered by any slot machine.

Complete faith in the free market? That's the lolz. As to the second bolded part would you also recommend taking a cash advance on one credit card to make a minimum payment of 5 other maxed out cards?

You're using accounting gimmicks to try making your point, but at least you see the consequences of taking popular but tragic fiscal measures. OTOH, the national debt we'll have to deal with over the next decade or two will be managable, despite being highly undesirable, because the much smaller Japanese economy has managed to muddle through with a far bigger debt/GDP burden, despite having a far less important international currency.

Tell me what do you think the total national debt will be in 10 and 20 years including unfunded liabilities and off books debt?

I'm not sure how something that can never be repaid could be considered manageable...

It depends on whether we have the sense to go deep in debt now and fix the economy or continue the half-hearted measures that you, the Republcians, and Obama favor that will make the economy limp along for years and actually result in greater debt in the long term. Worse, by limiting the economy to slow growth, as your group favors without admitting it, vital sectors will fade away permanently and make it easier for China to compete against us in the upcoming decades.



Things like Medicare, SS, and DoD are structural and should be fixed whether the economy is in a boom or bust, but they didn't cause the GW Bush recession, , and it's going to be virtually impossible to trim Medicare especially because the recent health care reform was so mild and didn't include the right measure -- universal Medicare. SS is going to be handled by raising the retirement age, and any effort to privatize it will actually increase the national debt (don't deny this -- supporters of privatization said it would).

And once again: you don't try to reduce the deficit during a severe economic downturn because that simply weakens the economy even more, as 1937 demonstrated.

DOD, SS, Medicare have more off the books debt than anything else. I thought you were against accounting tricks.

I haven't looked into the 1937 example you've given in depth, but I'm sure its wrong.

Neither have you. You're just parroting op-eds from people like Paul Krugman

:eek: Disgusting

This is bullshit. The GOP and Fox News and all the conservatives didn't have two words to say about the deficits throughout eight sold years of Bush. Suddenly, they think we're all a bunch of damn idiots who forgot all about that, and they want us to think everything was just perfect before Obama came to the White House.

BECAUSE I am genuinely concerned about deficits, I known all about Bush's deficits. I know that with Obama's spending today, we wouldn't have any deficit problem, and we could become zero-deficit, except that we have to pay over half a trillion a year of interest on Bush debt, and another trillion on the two wars that Bush started.

I KNOW THIS. Why don't the so-called "conservatives" know it? Conservatives will elect a Republican, and we'll be back in the debt shithole three times worse than before.

Who cares what Fox news and the GOP said? GOP = DEM I can't state this any simpler. There is no difference between them. The sooner you realize that the sooner you can move on with your life.

What exactly are the negative consequences of deflation?

Honestly, most people say, "Most economists say, "blah, blah, blah," about deflation" but don't really explain why people being able to buy more with the dollars they save is a bad thing.


in short, our economy will spiral into a black hole never to be seen again. if people hold off buying something today because they know they will save one dollar tomoroow then americans will never buy anything out of greed.

the economy cannot run on speculation trying to figure out when will prices will bottom out.

i think any economist you ask will, including this wannabe economist, will take inflation 10 times out of 9, rather than deflation. :nod:

deflation is great if you have no debt and a lot of cash saved up, because its value will INCREASE over time...however, most people in the USA, as well as the government itself at all levels, are HEAVILY in debt...thus in a deflationary environment where the money you owe will grow in value (and nominal incomes fall as well) debt becomes HARDER to pay off.

in short, our economy will spiral into a black hole never to be seen again. if people hold off buying something today because they know they will save one dollar tomoroow then americans will never buy anything out of greed. Is this really accurate? If we experienced an expected deflation of 1% per year (meaning every dollar in your pocket got 1% stronger vs. a basket of goods), would you never buy anything? This doesn't seem realistic because before the Fed (when deflation was the norm, and people didn't get into crazy debt like today), people still made purchases.

Is this really accurate? If we experienced an expected deflation of 1% per year (meaning every dollar in your pocket got 1% stronger vs. a basket of goods), would you never buy anything? This doesn't seem realistic because before the Fed (when deflation was the norm, and people didn't get into crazy debt like today), people still made purchases.

Heck deflation is the norm in electronics arena. Do people hold off on purchasing memory, computers, TVs etc. because it will be cheaper down the road?

:shake:

I remember when it was $30 to get a 2 GB card for my camera. Now i can get 4x that amount now. That doesn't mean I still didn't buy the card back then. The $400 I spent on a 27" TV can easily get me a 32"+ these days. I still bought a TV back then because I needed it.

Is this really accurate? If we experienced an expected deflation of 1% per year (meaning every dollar in your pocket got 1% stronger vs. a basket of goods), would you never buy anything? This doesn't seem realistic because before the Fed (when deflation was the norm, and people didn't get into crazy debt like today), people still made purchases.

deflation at 1% doesn't seem realistic either :lol:
how do we go from inflation of about 3-4% a year to defaltion of 1%? :confused:

you guys can't make up "what if " scenarios with people in the world today. countless polls show and it almost like common sense, like the sky is blue, that people are in debt. that is fact!!!!!! so why the EFF would anyone in debt want deflation?

and deflation in electronics doesn't mean a entire basket of goods. technology falls into its own category. there are always paradigm shifts and the market decides what it will flock too and supply and demand will take over from there.

you guys can't make up "what if " scenarios with people in the world today. countless polls show and it almost like common sense, like the sky is blue, that people are in debt. that is fact!!!!!! so why the EFF would anyone in debt want deflation?

At the same time, why would anyone responsible enough to not be up to their eyeballs in debt want inflation?

These two questions accentuate why we should not have the Fed playing with the money supply and interest rates.

At the same time, why would anyone responsible enough to not be up to their eyeballs in debt want inflation?

These two questions accentuate why we should not have the Fed playing with the money supply and interest rates.

think of it as a zero sum game....there will be winners and losers. the savers unfortunately are the losers!!!!

further if interest rates ever shot up to 10+% again then the "responsible" people can buy some super long dated bonds and lock in 10+% for 30 years and just sit on a great return for years to come.

then when the rates comes down as im sure they would they will still be pulling in great returns.

At the same time, why would anyone responsible enough to not be up to their eyeballs in debt want inflation?

These two questions accentuate why we should not have the Fed playing with the money supply and interest rates.

Bingo.

deflation at 1% doesn't seem realistic either :lol:
how do we go from inflation of about 3-4% a year to defaltion of 1%? :confused:

you guys can't make up "what if " scenarios with people in the world today. You can move the the rate of deflation around all you want, it most likely won't be a constant 1% anyway. The actual number isn't important, what is important is that in a period of deflation you will still make purchases. Everyone here typing on a computer purchased it knowing full well in 6 months it would be cheaper.


countless polls show and it almost like common sense, like the sky is blue, that people are in debt. that is fact!!!!!! so why the EFF would anyone in debt want deflation? Why on earth would you design an ecomonic system around people who spend money they don't have? Would you design road ways around drunk drivers?

and deflation in electronics doesn't mean a entire basket of goods. technology falls into its own category. there are always paradigm shifts and the market decides what it will flock too and supply and demand will take over from there.Deflation in electronics is merely an example that would extrapolate to other goods. If, thanks to innovation and improved efficiencies, every commoddity was cheaper 6 months from now, people would still buy goods today because of their time preference. Savers would just be rewarded for delaying the purchase.

even the IMF is now trying to teach Obama that his debt-binge needs to stop.

http://news.yahoo.com/s/afp/20100708/pl_afp/useconomyimf

IMF presses US to cut debt



WASHINGTON (AFP) – The International Monetary Fund on Thursday urged the United States to rein in its ballooning budget deficit without putting the "modest" economic recovery at risk.

Amid jitters that high levels of unemployment may force a double dip recession, the IMF warned the slow US recovery would continue and that debt problems loomed.

"The central challenge is to develop a credible fiscal strategy to ensure that public debt is put -- and is seen to be put -- on a sustainable path without putting the recovery in jeopardy," an IMF report said.

The balance between spending to stimulate the economy and putting budgets in order has vexed countries around the world as the recovery has looked more and more precarious.

President Barack Obama has plowed nearly a trillion dollars into the economy to spur economic growth, exploding the US deficit to a level that many believe is unsustainable.

The IMF praised US efforts to cut the long-term deficit through health system reform, but said more needed to be done now.

"The authorities' commitment to halve the budget deficit by 2013, and intention to stabilize public debt at just over 70 percent of GDP by 2015 are welcome, although much remains to be done to achieve these aims."

At a recent summit of the Group of 20 leading economies in Toronto, Obama vowed to halve the deficit within three years.

But the IMF projected that the deficit will stand at 64 percent of gross domestic product this year, rising to just over 96 percent by 2020.

In June, the total US debt topped 13 trillion dollars for the first time in history, stoking a political furor over government spending.

Stemming the flow of red ink has become a contentious political issue in Washington, with Democrats and Republicans trading barbs about who is to blame.

The IMF also cautioned that the recovery would still be slow.

"While still modest by historical standards, the recovery has proved stronger than we had earlier expected," it said.

"The outlook has improved in tandem with the recovery, but remaining household and financial balance sheet weaknesses -- along with elevated unemployment -- are likely to continue to restrain private spending."

The IMF on Thursday raised its global growth forecast for this year despite renewed financial turbulence stemming from a European debt crisis that has sharply raised potential risks.

The fund projected the world will grow by 4.6 percent, up from its 4.2 percent forecast in April, reflecting "stronger activity" during the first half of 2010 and expectations of fiscal action, especially in Europe.

In 2010, the United States, the world's largest economy, was expected to grow by 3.3 percent, the eurozone by 1.0 percent and developing Asia by 9.2 percent.

China and India were forecast to lead Asian growth with rates of 10.5 percent and 9.4 percent respectively.

At a recent summit of the Group of 20 leading economies in Toronto, Obama vowed to halve the deficit within three years.

Really? Does anybody believe this -- he's spending our money hand over fist and committing to ballooning costs for the next 10 years.

So, essentially, when prices get lower or newer technology is around the corner, people have an incentive to save? And saving is bad because?
saving=investment http://en.wikipedia.org/wiki/Savings_identity
when investment demand is low and rates are zero or near zero (such as right now), extra saving will not induce extra investment, i.e. your money is sitting and doing nothing. it is producing nothing. it is like taking a nap when one is already rested.

when people buy something from a business, that business earns money. when people buy a lot of things from that business, that business expands its operations. it hires more people, it produces more goods, it builds new factories. that is why consumption can be good.

think about consumption vs investment this way: why do you save your money? so you can spend it later. there are very few people in the world who save money to have money (and those people are idiots). nearly everyone who saves money or earns money (or in the case of businesses, builds factories and hires human capital) does so so that in the future, they or their children can spend that money on enjoyable things. in this sense, saving is good, but it's not what any of us should be living for.

something about deflation being badNot necessarily true. If this were true it would have been a never ending spiral prior to the creation of central banks, which wasn't the case.
okay i'm not claiming the cycle must continue forever, and futhermore, central banks do not always prevent deflation, just look at japan.

So, in your opinion, there needs to be an added incentive to induce people to purchase today? If a present good is pretty much always more valuable (other things constant) than a future good why do we need even more incentive to get people to buy today? And won't this added incentive have people spending more than they probably should under the belief that if they hold onto any money it will be instantly worth less tomorrow?

What's the difference between high inflation and low inflation? Or is it an arbitrary number that no one on earth really knows?
and how much "should" people buy? how come you get to decide how much "should" is or what "should" should be?
i say that people "should" consume however much makes us all the best off (which is impossible to gauge, and thusly i question the usefulness and validity of having a "should" in the first place), not necessarily what people would otherwise consume if inflation were zero.
what's the difference between high inflation and low inflation?
in a nutshell it's this: low inflation empirically and theoretically imposes low costs (such as menu costs) which are more than offset by the benefits (such as making "sticky" prices less sticky). high inflation has higher costs which are not offset by the benefits.
if you're curious as to more details instead of just ranting on the internet, there's plenty of textbooks and articles available at your library on this subject.




No one denies panics and crashes, these are natural reactions to bad business decisions. The problem is, why were all the panics prior to central banking so short, while the Great Depression lasted so long?
sometimes i ask myself: why do i bother?
...I already linked to this once, but here goes again: http://en.wikipedia.org/wiki/Long_Depression
"At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression's 43 months of contraction."

Heck deflation is the norm in electronics arena. Do people hold off on purchasing memory, computers, TVs etc. because it will be cheaper down the road?
Yes, they do. I mean, is this a serious question? It's a well-documented phenomenon. I'm sure there are many threads on slickdeals asking "should I buy this computer now or wait six months?"

Really? Does anybody believe this -- he's spending our money hand over fist and committing to ballooning costs for the next 10 years.

I do actually, since he doubled the deficit, he should be able to half it and bring it back down to what it was (in about 10 years). If you ignore the double speak, he is promising to bring the deficit to the level it was a couple years ago...

I do actually, since he doubled the deficit, he should be able to half it and bring it back down to what it was (in about 10 years). If you ignore the double speak, he is promising to bring the deficit to the level it was a couple years ago...

I have some magic beans for sale.

Yes, they do. I mean, is this a serious question? It's a well-documented phenomenon. I'm sure there are many threads on slickdeals asking "should I buy this computer now or wait six months?"

But in the end, computers do get purchased and profit does get made on said computer purchases. If you wait 6 months for prices to go down, you're still without a computer for 6 months. The analogy will fit to anything else as well, in most situations.

But in the end, computers do get purchased and profit does get made on said computer purchases. If you want 6 months for prices to go down, you're still without a computer for 6 months. The analogy with fit to anything else as well, in most situations.

right, for probably 90% of people 1% deflation or 3% inflation isn't going to make a difference on whether they buy or not, but you surely wouldn't deny that that 4% between deflation and inflation affects a non-zero percentage of people. (and even a few percent makes a difference. after all, a 1.5% decline in annual gdp is a bad recession whereas a 2.5% growth is a brisk expansion)

right, for probably 90% of people 1% deflation or 3% inflation isn't going to make a difference on whether they buy or not, but you surely wouldn't deny that that 4% between deflation and inflation affects a non-zero percentage of people. (and even a few percent makes a difference. after all, a 1.5% decline in annual gdp is a bad recession whereas a 2.5% growth is a brisk expansion)

Compound that inflation and get the real number before you say too much on this subject.

right, for probably 90% of people 1% deflation or 3% inflation isn't going to make a difference on whether they buy or not, but you surely wouldn't deny that that 4% between deflation and inflation affects a non-zero percentage of people. (and even a few percent makes a difference. after all, a 1.5% decline in annual gdp is a bad recession whereas a 2.5% growth is a brisk expansion)

The market will have a way of working itself out. If the computer supply drops because manufacturers aren't making their required profit and they cut back on production, prices will go up with the smaller supply.

Compound that inflation and get the real number before you say too much on this subject.

that is a real number, in the sense that they're made-up "real" (as in, not nominal) growth rates to illustrate a point. if you have a point to make, i welcome you to make it instead of posting comments that possibly make a point without actually saying anything.

The market will have a way of working itself out. If the computer supply drops because manufacturers aren't making their required profit and they cut back on production, prices will go up with the smaller supply.
that's all true, but 1. for computer manufacturers their costs go down as well, and 2. computers aren't entirely relevant because we're talking about prices across the whole economy, not just the price of one good or service. and of course, most economists (even the "liberal" ones) believe that in the long run, the market will work itself out somehow, but as keynes said, in the long run, we are all dead

most economists (even the "liberal" ones) believe that in the long run, the market will work itself out somehow, but as keynes said, in the long run, we are all dead

So I guess in the short-run, it's better to bail out failed industries and go up to our eyeballs in debt so we can prevent the market from working itself out.

So I guess in the short-run, it's better to bail out failed industries and go up to our eyeballs in debt so we can prevent the market from working itself out.

false dichotomy.

So I guess in the short-run, it's better to bail out failed industries and go up to our eyeballs in debt so we can prevent the market from working itself out.

What?

false dichotomy.

Yeah, he'll do that

saving=investment http://en.wikipedia.org/wiki/Savings_identity
when investment demand is low and rates are zero or near zero (such as right now), extra saving will not induce extra investment, i.e. your money is sitting and doing nothing. it is producing nothing. it is like taking a nap when one is already rested.

when people buy something from a business, that business earns money. when people buy a lot of things from that business, that business expands its operations. it hires more people, it produces more goods, it builds new factories. that is why consumption can be good.

think about consumption vs investment this way: why do you save your money? so you can spend it later. there are very few people in the world who save money to have money (and those people are idiots). nearly everyone who saves money or earns money (or in the case of businesses, builds factories and hires human capital) does so so that in the future, they or their children can spend that money on enjoyable things. in this sense, saving is good, but it's not what any of us should be living for.

So you agree that saving is good?

I'm not sure where you're going with all that other aggregate stuff. You highlight the Keynesian equation that includes Savings=Investment, which I'm not even sure applies to us any more because I don't think it takes into account when the Treasury (section of our government) funds government operations by issueing t-bills, which are then purchased and held by the Federal Reserve (essentially another area of our government).

My overall point, in an inflationary economy, the incentive is to spend, and in an inflationary economy with artificially low interest rates, the incentive is to borrow and spend. Now, Krugman loves this, because as Keynes said, "In the long run, we're all dead.", but in my opinion, this statement merely highlights the overwhelming shortsightedness of most of Keynes work. His sacrafice of the future for present consumption got us to where we are today (of course, Keynes is dead, so he's probably laughing at us right now.)

okay i'm not claiming the cycle must continue forever, and futhermore, central banks do not always prevent deflation, just look at japan.
I'm pretty sure the central bank of Japan tried every inflationary trick in the book to print their way out of a recession. Just because in this one short period, the size of their problems in their economy outweighted their central bank's inflationary attempts, certainly doesn't obsolve the central banking system and the over whelming trend they have for creating inflation.


and how much "should" people buy? how come you get to decide how much "should" is or what "should" should be?
i say that people "should" consume however much makes us all the best off (which is impossible to gauge, and thusly i question the usefulness and validity of having a "should" in the first place), not necessarily what people would otherwise consume if inflation were zero.
what's the difference between high inflation and low inflation?
If you truly felt that people should consume what they want, why do you desire inflationary policies that create further consumption incentives?

Personally, I favor staying away from value judgements of who should do what in an economy, but at the same time, I don't want the over reaching powers of government creating incentives one way or the other.

In a capitalist economy, deflationary prices is natural as technologies and efficiencies progress.

if you're curious as to more details instead of just ranting on the internet, there's plenty of textbooks and articles available at your library on this subject. I assure you, I read plenty on economics.

sometimes i ask myself: why do i bother?
...I already linked to this once, but here goes again: http://en.wikipedia.org/wiki/Long_Depression
"At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression's 43 months of contraction."I guess it depends on how one defines 'depression'.

Orthodox economic historians have long complained about the “great depression” that is supposed to have struck the United States in the panic of 1873 and lasted for an unprecedented six years, until 1879. Much of this stagnation is supposed to have been caused by a monetary contraction leading to the resumption of specie payments in 1879. Yet what sort of “depression” is it which saw an extraordinarily large expansion of industry, of railroads, of physical output, of net national product, or real per capita income? As Friedman and Schwartz admit, the decade from 1869 to 1879 saw a 3-percent-perannum increase in money national product, an outstanding real national product growth of 6.8 percent per year in this period, and a phenomenal rise of 4.5 percent per year in real product per capita. Even the alleged “monetary contraction” never took place, the money supply increasing by 2.7 percent per year in this period. From 1873 through 1878, before another spurt of monetary expansion, the total supply of bank money rose from $1.964 billion to $2.221 billion—a rise of 13.1 percent or 2.6 percent per year. In short, a modest but definite rise, and scarcely a contraction. It should be clear, then, that the “great depression” of the 1870s is merely a myth—a myth brought about by misinterpretation of the fact that prices in general fell sharply during the entire period. Indeed they fell from the end of the Civil War until 1879. Friedman and Schwartz estimated that prices in general fell from 1869 to 1879 by 3.8 percent per annum. Unfortunately, most historians and economists are conditioned to believe that steadily and sharply falling prices must result in depression: hence their amazement at the obvious prosperity and economic growth during this era. For they have overlooked the fact that in the natural course of events, when government and the banking system do not increase the money supply very rapidly, freemarket capitalism will result in an increase of production and economic growth so great as to swamp the increase of money supply. Prices will fall, and the consequences will be not depression or stagnation, but prosperity (since costs are falling, too) economic growth, and the spread of the increased living standard to all the consumers.


Yes, they do. I mean, is this a serious question? It's a well-documented phenomenon. I'm sure there are many threads on slickdeals asking "should I buy this computer now or wait six months?"
So as a result one would assume the technology sector is in shambles? I mean if such a large portion of the populus waited until infinity to purchase their tech goods, how could Apple or any other firm make a profit?

I'm not sure where you're going with all that other aggregate stuff. You highlight the Keynesian equation that includes Savings=Investment, which I'm not even sure applies to us any more because I don't think it takes into account when the Treasury (section of our government) funds government operations by issueing t-bills, which are then purchased and held by the Federal Reserve (essentially another area of our government).
"thinking" it doesn't make it true

I assure you, I read plenty on economics.
this may surprise you, but reading the national review's economic analysis isn't quite good enough. also, understanding what you read is just as important

My overall point, in an inflationary economy, the incentive is to spend, and in an inflationary economy with artificially low interest rates, the incentive is to borrow and spend. Now, Krugman loves this, because as Keynes said, "In the long run, we're all dead.", but in my opinion, this statement merely highlights the overwhelming shortsightedness of most of Keynes work. His sacrafice of the future for present consumption got us to where we are today (of course, Keynes is dead, so he's probably laughing at us right now.)
saving=borrowing
the world as a whole and any closed economy, which the us is not, cannot borrow more than it saves nor can it save more than it borrows.
now that the fact that the us is not a closed economy and has low interest rates would make one think we would have capital outflows, since why would you want to save in america when there are higher interest rates abroad. obviously that is not the case. make of that what you will.

I'm pretty sure the central bank of Japan tried every inflationary trick in the book to print their way out of a recession. Just because in this one short period, the size of their problems in their economy outweighted their central bank's inflationary attempts, certainly doesn't obsolve the central banking system and the over whelming trend they have for creating inflation.
being "pretty sure" isn't good enough. as you as your fellow conservatives have pounded over and over, printing money MUST create inflation. japan didn't have inflation, therefore they did not print money (and they didn't print money).

If you truly felt that people should consume what they want, why do you desire inflationary policies that create further consumption incentives?
i said what makes us all better off, not what people want. there is a difference.

Personally, I favor staying away from value judgements of who should do what in an economy, but at the same time, I don't want the over reaching powers of government creating incentives one way or the other.
okay, what's your evidence that the free market always knows best? it's just a dogma, no different from any other. after the discovery of silver and gold in america, spain was flooded with bullion and suffered from steep inflation for centuries because there was no central bank to remove currency from circulation like the fed in the early 80s and kill inflation. spain's inflation then killed the growth of the spanish economy, despite it having been, you know, discoverer of america.

In a capitalist economy, deflationary prices is natural as technologies and efficiencies progress.
just not true, since the money supply changes constantly, even if there was no central bank as evidenced by my example above

http://en.wikipedia.org/wiki/Long_Depression
"At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression's 43 months of contraction."I guess it depends on how one defines 'depression'.
no, it doesn't. we're talking about economic contraction, and the facts are against you.

So as a result one would assume the technology sector is in shambles? I mean if such a large portion of the populus waited until infinity to purchase their tech goods, how could Apple or any other firm make a profit?
no one claimed this. you can try to take what i'm saying out of context, but it only shows how little you understand of economics despite having read so much supposedly.

saving=borrowing
the world as a whole and any closed economy, which the us is not, cannot borrow more than it saves nor can it save more than it borrows.


How so? Explain how the fractional reserve banking system we have lends out only the money someone else has saved? Do you disagree that banks create "new money" each time they make a loan?

fractional reserve means you don't have to keep money on hand = money owed. (for example, if someone deposited $100 with me, it means i have to have $100 worth of gold or cash or other assets in the vault under non-fractional reserve banking. under fractional reserve banking it means i can lend out that $100 while keeping only 10 or 20 dollars in the vault)

it does not mean that saving=/=borrowing. saving=borrowing is an identity, one that is always true in a closed system. it's like 1+1=2. it's not controversial.

under fractional reserve banking it means i can lend out that $100 while keeping only 10 or 20 dollars in the vault)



Many of the "too big to fail" banks and financial houses were leverage 30 - 1, and got into a severe cash/liquidity crunch when relatively small amounts (< 4%) withdrawals started.

Many of the "too big to fail" banks and financial houses were leverage 30 - 1, and got into a severe cash/liquidity crunch when relatively small amounts (< 4%) withdrawals started.

Correct. 33x is the multiplier with clever accounting.

there were no "withdrawals" per se. all of these investment banks were funded basically with overnight loans, not with commercial deposits, and with these overnight loans and investment banks being unregulated, they could lever up at their leisure. but hey, it would be wrong to mess with the free market and regulate this kind of stuff, right?

there were no "withdrawals" per se. all of these investment banks were funded basically with overnight loans, not with commercial deposits, and with these overnight loans and investment banks being unregulated, they could lever up at their leisure. but hey, it would be wrong to mess with the free market and regulate this kind of stuff, right?

the fed's manipulation of monetary policy ensured this was never a free market in the first place. It's intellectually dishonest to think otherwise.

the fed's manipulation of monetary policy ensured this was never a free market in the first place. It's intellectually dishonest to think otherwise.

rrc, can we agree that the fed is not going away anytime soon and so whatever debate about monetary policy, fiscal policy or regulation reform we need to have in this country should assume a federal reserve bank that's at least as strong as what we have today, and proceed from there?

If one wants to have a debate about the merits of central banks, that's fine as a purely theoretical exercise. But, to bring this up in every conversation does not help further the debate.

The closest example I can think of from my perspective is that of anti-capitalists. Whenever an issue comes up, their default position is that corporations are to blame. Now, strictly speaking, they are right in many respects that we wouldn't have many of the problems we ahve (from pollution to human rights abuses to corruption to deforestation) if we didn't have large multinational corporations. But, corporations aren't going away and frankly no one can predict what problems we might have had if there were no corporations. So, it renders the entire discussion a little moot. I think the same is true for the federal reserve system. No one can honestly say what the world of finance will look like if the US didn't have a federal reserve bank or if we eliminated it today.

rrc, can we agree that the fed is not going away anytime soon and so whatever debate about monetary policy, fiscal policy or regulation reform we need to have in this country should assume a federal reserve bank that's at least as strong as what we have today, and proceed from there?


certainly, but then on the same token, let's agree that the idea of a "free market" as karkaputto refers to it never existed as long as something like the fed is in existence, so it's pointless to suggest what we had under the last administration was a "free market"

I've said it before, and I'll say it again: I actually agree with the concept of Glass-Steagall so long as we have an environment like the current US system that allows the creation of banks that are too big to fail. The libertarian in me would argue otherwise, but the realist in me knows that the free market will only work when the free market is actually allowed to exist.

certainly, but then on the same token, let's agree that the idea of a "free market" as karkaputto refers to it never existed as long as something like the fed is in existence, so it's pointless to suggest what we had under the last administration was a "free market" Yes, it never existed and it will never exist. So, why even bring in that notion of a free market into the discussion? Why can't we, for the sake of a discussion, accept a less demanding definition of free market, one that's consistent with the actual policy discourse at the time ... and frankly one that makes sense in the context of the discussion.

Anyway, my point simple is ... it helps when you (and others like Dan) provide some intellectual arguments in support or in opposition to specific policy prescriptions. It doesn't when you point out issues you have with political labels when the context makes them plenty clear. This is not a criticism, really, just an 'outsider's perspective'.

there were no "withdrawals" per se. all of these investment banks were funded basically with overnight loans, not with commercial deposits, and with these overnight loans and investment banks being unregulated, they could lever up at their leisure. but hey, it would be wrong to mess with the free market and regulate this kind of stuff, right?

I think you've confused the free market with fascism. It boggles my mind how you can suggest this was a result of the free market.



rrc, can we agree that the fed is not going away anytime soon and so whatever debate about monetary policy, fiscal policy or regulation reform we need to have in this country should assume a federal reserve bank that's at least as strong as what we have today, and proceed from there?

If one wants to have a debate about the merits of central banks, that's fine as a purely theoretical exercise. But, to bring this up in every conversation does not help further the debate.

The closest example I can think of from my perspective is that of anti-capitalists. Whenever an issue comes up, their default position is that corporations are to blame. Now, strictly speaking, they are right in many respects that we wouldn't have many of the problems we ahve (from pollution to human rights abuses to corruption to deforestation) if we didn't have large multinational corporations. But, corporations aren't going away and frankly no one can predict what problems we might have had if there were no corporations. So, it renders the entire discussion a little moot. I think the same is true for the federal reserve system. No one can honestly say what the world of finance will look like if the US didn't have a federal reserve bank or if we eliminated it today.

Wow. So your contention is the fed is not related to the topic of US debt?

Tell me, how does the federal government get into debt?

Wow. So your contention is the fed is not related to the topic of US debt?
Wow. For someone who proclaim to be so smart, reading comprehension is not your forte huh?

Why US debt matters to you: By Paul Krugman.

http://www.abc.net.au/lateline/content/2004/s1064193.htm

ROFESSOR PAUL KRUGMAN, PRINCETON ECONOMIST: Well, basically we have a world-class budget deficit not just as in absolute terms of course - it's the biggest budget deficit in the history of the world - but it's a budget deficit that as a share of GDP is right up there.

It's comparable to the worst we've ever seen in this country.

It's biggest than Argentina in 2001.

Which is not cyclical, there's only a little bit that's because the economy is depressed.

Mostly it's because, fundamentally, the Government isn't taking in enough money to pay for the programs and we have no strategy of dealing with it.

So, if you take a look, the only thing that sustains the US right now is the fact that people say, "Well America's a mature, advanced country and mature, advanced countries always, you know, get their financial house in order," but there's not a hint that that's on the political horizon, so I think we're looking for a collapse of confidence some time in the not-too-distant future.

TONY JONES: When you say the not-too-distant future, what does that mean?

We know there may be a crisis in paying, for example, in social security...

PROFESSOR PAUL KRUGMAN: What I envision is that at some point, we have about 10 years now until the baby boomers hit the United States.

The US even more than other advanced countries has a welfare state that's primarily a welfare state for retirees.

We have the huge bulge in the population that starts to collect benefits and earn the next decade.

If there isn't a clear path towards fiscal sanity well before that, then I think the financial markets are going to say, "Well, gee, where is this going?"

I think, where in that 10 years the crunch comes, I don't know.

I think there's a real possibility that next year or one or two years from now, when they see that actually the same irresponsible tax cuts as the solution to everything continue, we might have a crisis that soon but more likely towards the end of the decade.

TONY JONES: Let me ask you this - just in the short-term, given today's policy settings and the ones that are going to prevail, we assume, through the election period, what's likely to happen to interest rates?

PROFESSOR PAUL KRUGMAN: Right now, long-term interest rates, short-term interest rates, I think, are going to stay where there are, which is not far above zero, right through the election and probably beyond because that's directly under the control of the Federal Reserve.

The economy is weak for the time being.

Job creation is essentially non-existent.

Long-term interest rates which should reflect all these things are actually quite low right now and it's an interesting thing when you try to talk to people in the bond market, why, you ask, doesn't the deficit worry you?

Don't you wonder that there's going to be a financing crunch?

And they say: "Well, we believe that next year Obama or whoever is in the White House is going to get responsible."

And you ask them: "What evidence do you have for that?"

And they say: "Well, I don't know but it's always happened before."

So right now again, the bond market is reflecting the credit built up in previous responsible governments.

TONY JONES: Actually the bond market's quite interesting because for the present moment there seems to be a huge influence on the US economy from the Asian central banks.

Is that risky?

PROFESSOR PAUL KRUGMAN: Well sure.

Although, I'm not sure that it's particularly riskier than a lot of other things. But yeah, we have this, I didn't say this, but we've got twin deficits.

We've got a huge budget deficit and an equally large current account deficit.

And if you ask, "How are we financing the current account deficit?", well that's a story.

A few years ago it was foreigners investing in the United States.

It was Daimler buying Chrysler, it was people investing in the strength of the US economy.

These days it's Asian central banks buying up US Government debt because they're trying to keep their currencies weak against the dollar and this can't go on forever.

TONY JONES: Your detractors - and there are quite a few of them on the Republican side of the equation - they're accusing you of scare mongering?

PROFESSOR PAUL KRUGMAN: The first thing to say is to look at what some of those same people were saying in the middle of the Bush years when the deficit was substantially smaller as a proportion of GDP and they were carrying on about what a bad thing it was.

The other thing is the comparison.

The only time post war that the United States has had anything like these deficits is the middle Reagan years and that was with unemployment close to 10 per cent.

A lot of that was a cyclical thing which would go away when the economy recovered.

Also the baby boomers were 25 years younger than they are today.

If you look at the actual fiscal situation, it's much, much worse than it was even at its worst during the Reagan years. One way to say this is we have social security which is a retirement program which viewed on its own is running a surplus.

If you take that out of the budget then we're running at a deficit of more than 10 per cent of GDP and that is unprecedented.


PROFESSOR PAUL KRUGMAN: Well, yeah, I mean, it's not what I intended. But I came in writing as a journalist, writing occasional columns in the 90s, mostly about economical fears with a political tinge.

I came to the New York Times intending to do pretty much the same thing.

But then it became clear very early on that the President of the United States was irresponsible and dishonest on matters economic and it turned out that what I learned there was true of other kind of policies as well.

I think you've confused the free market with fascism. It boggles my mind how you can suggest this was a result of the free market.
it boggles my mind how you came up with whatever idea of fascism you hold...


Wow. So your contention is the fed is not related to the topic of US debt?

Tell me, how does the federal government get into debt?

well the treasury issues the debt, not the fed, but i echo foreveryours's sentiment. you know what, this combined with the above convinces me that i should just move on...

regarding krazen: of course paul krugman might appear to be inconsistent from time to time, but as keynes said
When the facts change, I change my mind. What do you do, sir?
so changing one's mind in and of itself is not really a problem. the question is if he's doing so just because obama's in office, and i think the answer is no. krugman's pretty critical of the obama administration, albeit for different reasons than why he was critical of bush, but if one thought he was supporting our current deficits because he doesn't want to bash obama, then i think that is sorely mistaken since he has taken lots of other opportunities to bash obama.

also i think one significant point krugman was making is that the bush administration was fundamentally dishonest. he might not like the obama administration's policies, but he thought that bush was straight up lying about why they're doing tax cuts, and why they're entering iraq, etc, and that caused him discomfort

to rrc06: sorry about putting that unnecessary jab in there, i didn't mean for the discussion to get sidetracked. my point is that 1. saving = borrowing 2. investment is just another word for borrowing what one (or other people) have saved, and 3. the big investment banks such as lehman and bear sterns were not using commercial deposits.

saving=borrowing
the world as a whole and any closed economy, which the us is not, cannot borrow more than it saves nor can it save more than it borrows.Writing something down that is true by identity doesn't really add to the discussion. Just like saying, "Assets = Liabilities + Owner's Equity", it doesn't really tell us if a company is headed in the right direction, saying "savings = borrowings" doesn't show whether or not an inflationary policy is correct.

as you as your fellow conservatives have pounded over and over, printing money MUST create inflation. japan didn't have inflation, therefore they did not print money (and they didn't print money).
1. I'm not a conservative, so I don't have "fellow" conservatives.
2. I honestly don't believe that "printing money MUST lead to (price) inflation".

So, double fail aside, since 1990 the BoJ has kept interests rates below 1% for extended periods, bailed out failed banks (zombie banks, meet our future), multiple spending programs (stimulus), increasing M2 money supply, etc, so I think the idea that Japan didn't do enough is absurd. Japan's stangant economy can be blamed squarely on the bubble from the 1980's popping, and government intervening, failing to allow proper recovery.

okay, what's your evidence that the free market always knows best? it's just a dogma, no different from any other. It's the best we've found so far. It contains a profit/loss mechanism that reward/punishes far better than any other arbitrary manner.

after the discovery of silver and gold in america, spain was flooded with bullion and suffered from steep inflation for centuries because there was no central bank to remove currency from circulation like the fed in the early 80s and kill inflation. spain's inflation then killed the growth of the spanish economy, despite it having been, you know, discoverer of america.Don't you think it's a bit of a stretch to compare the systemic inflation inflicted by central banking all over the world to the discovery of a 'new world' and results from mining the gold?

Kind of strikes me as a "one event in the course of human history" vs. "contant, never ending occurances"

just not true, since the money supply changes constantly, even if there was no central bank as evidenced by my example above Money supplies do change, the problem being is that in our current situation they can change by merely printing something on a piece of paper. Having to mine gold is a vastly more capital intensive process.


no, it doesn't. we're talking about economic contraction, and the facts are against you. If So then, "what sort of “depression” is it which saw an extraordinarily large expansion of industry, of railroads, of physical output, of net national product, or real per capita income?"


no one claimed this. you can try to take what i'm saying out of context, but it only shows how little you understand of economics despite having read so much supposedly.

You said plainly, "I'm sure there are many threads on slickdeals asking "should I buy this computer now or wait six months?". Now lets think about your statement. If EVERYONE constantly waited to make a purchase, nothing would be bought. This obviously isn't the case.

So the fact that not everyone delays their purchases is evidence that people have a time preference (wanting a good now rather than later), and even in an economy where goods will be foreseeably cheaper, people will still make purchases.

Wow. For someone who proclaim to be so smart, reading comprehension is not your forte huh?

I don't proclaim it myself, I only repeat what everyone keeps telling me. All I can do is be the best.

it boggles my mind how you came up with whatever idea of fascism you hold...

Check the definition, it may help you with your studies.




well the treasury issues the debt, not the fed, but i echo foreveryours's sentiment. you know what, this combined with the above convinces me that i should just move on...

They don't "issue" the debt. They sell bonds to the fed who buys them with money they create from nothing. The money must be paid back with interest that is not created.

I'm sorry if I shattered any of your cherished delusions.

regarding krazen: of course paul krugman might appear to be inconsistent from time to time, but as keynes said

so changing one's mind in and of itself is not really a problem. the question is if he's doing so just because obama's in office, and i think the answer is no. krugman's pretty critical of the obama administration, albeit for different reasons than why he was critical of bush, but if one thought he was supporting our current deficits because he doesn't want to bash obama, then i think that is sorely mistaken since he has taken lots of other opportunities to bash obama.

also i think one significant point krugman was making is that the bush administration was fundamentally dishonest. he might not like the obama administration's policies, but he thought that bush was straight up lying about why they're doing tax cuts, and why they're entering iraq, etc, and that caused him discomfort

to rrc06: sorry about putting that unnecessary jab in there, i didn't mean for the discussion to get sidetracked. my point is that 1. saving = borrowing 2. investment is just another word for borrowing what one (or other people) have saved, and 3. the big investment banks such as lehman and bear sterns were not using commercial deposits.

It seems that no matter what Krugman changes his mind on he always ends up being wrong. He's wrong this way or that. It's good for the lols. :D

it boggles my mind how you came up with whatever idea of fascism you hold...



well the treasury issues the debt, not the fed, but i echo foreveryours's sentiment. you know what, this combined with the above convinces me that i should just move on...

regarding krazen: of course paul krugman might appear to be inconsistent from time to time, but as keynes said

so changing one's mind in and of itself is not really a problem. the question is if he's doing so just because obama's in office, and i think the answer is no. krugman's pretty critical of the obama administration, albeit for different reasons than why he was critical of bush, but if one thought he was supporting our current deficits because he doesn't want to bash obama, then i think that is sorely mistaken since he has taken lots of other opportunities to bash obama.

also i think one significant point krugman was making is that the bush administration was fundamentally dishonest. he might not like the obama administration's policies, but he thought that bush was straight up lying about why they're doing tax cuts, and why they're entering iraq, etc, and that caused him discomfort


How convenient.

Krugman can only accuse Bush of being dishonest because he, at the time, was asking the bolded questions. Now he doesn't bother asking them anymore, even though they are at least as relevant in 2010 as in 2004.

The facts have not materially changed. Every single point here is relevant today. The difference is Krugman doesn't care about the medium/long term anymore, and when others do, he bashes them in his column..

Krugman was the original bond vigilante; you know, those same people he derides today.

It's one thing to support running high current deficits. Fine. But why isn't Krugman asking where we are going anymore?







If there isn't a clear path towards fiscal sanity well before that, then I think the financial markets are going to say, "Well, gee, where is this going?"

Long-term interest rates which should reflect all these things are actually quite low right now and it's an interesting thing when you try to talk to people in the bond market, why, you ask, doesn't the deficit worry you?

And they say: "Well, we believe that next year Obama or whoever is in the White House is going to get responsible."

And you ask them: "What evidence do you have for that?"

And they say: "Well, I don't know but it's always happened before."

They don't "issue" the debt. They sell bonds to the fed who buys them with money they create from nothing.
They don't "issue" the debt. They sell bonds to the fed who buys them with money they create from nothing.

I had to read it again to see if it made any sense the second time. :secret: "Selling" bond is the same as "issuing" bond. (At least from the perspective of the original issuer of the bond, which in this case is the Treasury.)

Who are these people who tell you you're smart :confused:

They don't "issue" the debt. They sell bonds to the fed who buys them with money they create from nothing.

I had to read it again to see if it made any sense the second time. :secret: "Selling" bond is the same as "issuing" bond.

Who are these people who tell you you're smart :confused:

You didn't say anything about issuing bonds. You said issuing debt. Perhaps a second or third reading is in order? What happens if no one buys the bonds? How are the bonds sold? How is the size of the bond determined?

You're not fooling anyone by pretending you know how US debt creation works. It is clear from your posts you do not. Understanding this process is integral to understanding US debt.

They don't "issue" the debt. They sell bonds to the fed who buys them with money they create from nothing.

I had to read it again to see if it made any sense the second time. :secret: "Selling" bond is the same as "issuing" bond.

Who are these people who tell you you're smart :confused:
I believe the point being made was more the point that its circular accounting than it is 'issueing debt'.

For example, you might say "Wal-Mart issued $300 million in 30 year bonds today" and what that would imply is that Wal-Mart found private investors to buy debt at agreed upon interest rates.

The treasury on the other hand (for some years now) has been issueing debt in the same manner, but they don't have to just sell to the private sector. They now ring up the Fed, and the Fed purchases the debt with money 'printed' out of thin air.

You didn't say anything about issuing bonds. You said issuing debt.
What is a bond if not a debt?

13 Ways to Spend $1 Trillion

During the first nine months of fiscal 2010 the federal government spent $1 trillion more than it took in.

Confronting the federal deficit starts with grasping just how colossal that number actually is.
The figure is almost incomprehensible: $1,000,000,000,000. One trillion dollars. That's a dozen zeros.
So, what would $1 trillion get you?

http://finance.yahoo.com/banking-budgeting/article/110132/visualizing-the-national-debt;_ylt=AhOW5vA3KcbCOhtXMuDkQO27YWsA;_ylu=X3oDMTFhMmlocW5wBHBvcwMzBHNlYwNwZXJzb25hbEZpbmFuY2UEc2xrAzEzd2F5c3Rvc3Blbg--

What Congress Bought Itself With Your $1 Billion

Your taxpayer dollars? They bought a lot of water: $604,000 worth. And one politician spent $900 on ... doughnuts.!!
Our report has staggering breakdown
http://www.aolnews.com/article/the-other-congressional-spending-how-the-house-spent-1-billion-on-itself/19522761?icid=main|main|dl1|link1|http%3A%2F%2Fwww.aolnews.com%2Farticle%2Fthe-other-congressional-spending-how-the-house-spent-1-billion-on-itself%2F19522761

Since the dollar was taken off of the gold standard, there is no tangable value of a dollar. You cannot go to the US Treasury with a dollar and get anything in exchange. The fiat system we use is all based upon confidence (which is currently very low and getting worse with the increasing debt levels). Almost all of the financial system is based upon this confidence, no financial institution has the ability to actually pay out -- they are all leveraged way beyond any reasonable levels. There is actually very little difference between dollars, credit and debt. Everything is credit and this is why we are going through the pain today because credit is not flowing. When enough people lose confidence in an institution, it collapses because it cannot meet its obligations (all based on confidence). Whether the local bank, a giant bank, Goldman Sachs or the US Treasury. Just look at how a dollar is leveraged today (and based on no tangable asset). The fed reserve (not an official gov't agency) monitises a dollar to the Treasury, the treasury lends it to a bank, who keeps less than 5 cents and lends the other 95 cents to another bank, this bank will do the same and so and so on. The multiplier on that dollar is astromical by the time it actually gets used. When defaults happen, the credit squeeze starts and contraction begins. Because of the leverage, nobody can actually afford to pay anybody back, that is why the Fed Reserve and Treasury had to "buy up" bad loans, transfer trillions of obligations to Fannie and Freddie Mac and also "inject" liquidity into the system. Given the 70 years of inflation and money management of the fed, the contraction that is currently happening could very will cause deflation which will lead us into the next depression. An unstoppable downward spiral.

Since the dollar was taken off of the gold standard, there is no tangable value of a dollar. You cannot go to the US Treasury with a dollar and get anything in exchange. The fiat system we use is all based upon confidence (which is currently very low and getting worse with the increasing debt levels). Almost all of the financial system is based upon this confidence, no financial institution has the ability to actually pay out -- they are all leveraged way beyond any reasonable levels. There is actually very little difference between dollars, credit and debt. Everything is credit and this is why we are going through the pain today because credit is not flowing. When enough people lose confidence in an institution, it collapses because it cannot meet its obligations (all based on confidence). Whether the local bank, a giant bank, Goldman Sachs or the US Treasury. Just look at how a dollar is leveraged today (and based on no tangable asset). The fed reserve (not an official gov't agency) monitises a dollar to the Treasury, the treasury lends it to a bank, who keeps less than 5 cents and lends the other 95 cents to another bank, this bank will do the same and so and so on. The multiplier on that dollar is astromical by the time it actually gets used. When defaults happen, the credit squeeze starts and contraction begins. Because of the leverage, nobody can actually afford to pay anybody back, that is why the Fed Reserve and Treasury had to "buy up" bad loans, transfer trillions of obligations to Fannie and Freddie Mac and also "inject" liquidity into the system. Given the 70 years of inflation and money management of the fed, the contraction that is currently happening could very will cause deflation which will lead us into the next depression. An unstoppable downward spiral.
I thought Obama was the devil, no?

Since the dollar was taken off of the gold standard, there is no tangable value of a dollar. You cannot go to the US Treasury with a dollar and get anything in exchange. The fiat system we use is all based upon confidence (which is currently very low and getting worse with the increasing debt levels). Almost all of the financial system is based upon this confidence, no financial institution has the ability to actually pay out -- they are all leveraged way beyond any reasonable levels. There is actually very little difference between dollars, credit and debt. Everything is credit and this is why we are going through the pain today because credit is not flowing. When enough people lose confidence in an institution, it collapses because it cannot meet its obligations (all based on confidence). Whether the local bank, a giant bank, Goldman Sachs or the US Treasury. Just look at how a dollar is leveraged today (and based on no tangable asset). The fed reserve (not an official gov't agency) monitises a dollar to the Treasury, the treasury lends it to a bank, who keeps less than 5 cents and lends the other 95 cents to another bank, this bank will do the same and so and so on. The multiplier on that dollar is astromical by the time it actually gets used. When defaults happen, the credit squeeze starts and contraction begins. Because of the leverage, nobody can actually afford to pay anybody back, that is why the Fed Reserve and Treasury had to "buy up" bad loans, transfer trillions of obligations to Fannie and Freddie Mac and also "inject" liquidity into the system. Given the 70 years of inflation and money management of the fed, the contraction that is currently happening could very will cause deflation which will lead us into the next depression. An unstoppable downward spiral.

Great post.

"History repeats itself. All Great Empires have Collapsed.."

Did you ever wonder what the UK thinks of America? The UK has some interesting thoughts on America.. Which most Americans will agree with.. :nod:

The Collapse Of The American Empire And The Rebalancing Of The World

Not only does the American Empire, led at best by incompetence, at worst by greed and lies, suffer bankrupting, unwinnable and terrorizing wars, which are begun out of hubris (the illusion of self-satisfied pride). It also has a national debt of several trillions of dollars, which is supported largely, but temporarily, by China’s purchase of US government debt. Now with its illusory debt-financed boom over, the US is plunging into a crisis, as its housing bubble has burst and it faces soaring oil prices. With a dumbed down public education system, at its worst capable of turning out some of the most ill-educated and ill-behaved children in the world (not unlike the system in the UK), with a health system intent on profit and not health, with a non-existent public transport system, with a throwaway culture of unparalleled wastefulness, with an obesity crisis without precedent in human history, with a dollar so weak that American corporations are asking to be paid in euros, there are those who wonder how much longer the American Empire can continue. And this is no time for Western European countries to gloat. Having passively, or actively bought into the illusory ‘American dream’ for so long, they too will have to help pay the cost of the real American nightmare. Western Europe is dragged down by the measure of its own compromises with the ideology of pride, that is imaginary superiority.

Full Story..
http://www.orthodoxengland.org.uk/endofemp.htm

http://www.google.com/hostednews/ap/article/ALeqM5g-YziTsAJw1ofv-BiXk2MoSXknwQD9H4UJB01

White House predicts record $1.47 trillion deficit
By ANDREW TAYLOR (AP) – 4 hours ago
WASHINGTON — New estimates from the White House on Friday predict the budget deficit will reach a record $1.47 trillion this year. The government is borrowing 41 cents of every dollar it spends.
That's actually a little better than the administration predicted in February.
The new estimates paint a grim unemployment picture as the economy experiences a relatively jobless recovery. The unemployment rate, presently averaging 9.5 percent, would average 9 percent next year under the new estimates.
The Office of Management and Budget report has ominous news for President Barack Obama should he seek re-election in 2012 — a still-high unemployment rate of 8.1 percent. That would be well above normal, which is closer to a rate of 5.5 percent to 6 percent. Private economists don't think the unemployment rate will drop to those levels until well into this decade.
The gaping deficits are of increasing concern to voters. But Obama and Democrats controlling Congress are mostly taking a pass on deficit reduction this year as they await possible recommendations from Obama's deficit commission.
While there's a slight improvement in the deficit for the current year, next year's predicted $1.42 trillion worth of red ink — that's 37 cents of borrowing for every dollar spent — is looking worse. It's about $150 billion more than previously predicted, because of still-slumping tax revenues.
White House budget director Peter Orszag said the numbers represent a "fiscal situation that requires attention."
Deficits have skyrocketed since the recession took hold in 2008 and Congress responded with a massive bailout of the financial system and last year's $862 billion stimulus measure.



Tack 2 more record years of deficits onto Obama's tab. Great. :drool:

When Treasury officials are proven liars, who gets strung up first???

http://www.kitco.com/ind/willie/jul222010.html

Smoking Guns of U.S. Treasury Monetization
By Jim Willie CB
Jul 22 2010 11:08AM


Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

A significant feature of fiat money systems is the privilege for the custodian of the reserve currency to engage in regular practices of ham-fisted monetary management, even permission for fraudulent centers to flourish, surely developing a debt monster that an economy grows dependent upon. Fannie Mae might be the most offensive blight on such privilege. Unfortunately, many shenanigans have matured into grand fraud. They are smoking guns of USTreasury fraud and counterfeit, with strong whiffs of monetization. Much more monetization is to come, fully endorsed and sanctioned. Other clever techniques are being used, given the Quantitative Easing has officially been halted. A close look reveals that Excess Cash Reserves at the USFed are being drawn down, which are thus funding the USGovt deficits in the last couple months. Ironically, such reserves held by big banks at the US Federal Reserve were the only thing preventing vast insolvency. Now that cash is being used, and the USFed insolvency is slowly exposed. Details can be found in the July Hat Trick Letter reports. Evidence is compelling, and grand motive for foreign creditors to reject the USDollar, whose active control strings are traced to Wall Street. When recognized monetization destroys the last vestige of trust and confidence in the USDollar, when more official rounds of sponsored Quantitative Easing arrive, the USDollar will be on a downward spiral. In fact, all major currencies face the same prospect of vast monetary expansion. They will all fall sharply in value, and by counter-effect, the Gold price will rise powerfully.

CHINESE WARNING SHOTS ACROSS THE BOW

This story is a gem. The Chinese Dagong credit agency made an inaugural splash with a debt downgrade of the USTreasury Bonds. They called the US-based trio of debt rating agencies politically biased, an under-statement. The Dagong agency used its first splash into sovereign debt to establish a bold standard of creditworthiness around the world, giving much greater weight to wealth creating capacity and foreign reserves than Fitch, Standard & Poors, or Moodys. Dagong pays more attention to rapidly escalating debt levels. The Chinese Govt has coordinated their strategy, selling off short-term USTreasury Bills, but hangs onto a large raft of long-term USTreasury Bonds. On a net basis, the Chinese purchases have hit a plateau.

Meanwhile, with distracting commentary, China has doubled its gold holdings. At least the Chinese Govt has promised not to use their foreign reserves as a weapon. What a relief!! And Wall Street promises no more bond misrepresentation, no insider trading, no more fraud, no more drug money laundering (see Wachovia & Wells Fargo). What a relief!! The USGovt strives for clarity about management of China's $2.5 trillion in FOREX reserves, the world's largest. It contains $868 billion in USTreasurys at last count. The growing fear is that, in anger over trade friction, or in disgust over reckless USDollar management, or from a response to discovered hidden USTBond monetization, or with ambition to displace the US from its dominant post, China could dump USTreasury Bonds with a vengeance. The credit market analysts justifiably call it the Nuclear Option. The Beijing officials have given veiled warning to reduce the USGovt deficits and to put aside thoughts of another Quantitative Easing. The next QE2.0 comes as sure as night follows day. It comes with a heavy cost. The message is written on the wall, that the United States has forfeited its sovereignty with rampant debt production rather than industrial production.

US TREASURY ISSUANCE EXCEEDS US GOVT DEFICITS

This story is a gem. US Treasury bond issuance exceeds even the gargantuan US Govt deficits. The gap is $1.5 trillion over four years. One could guess that Wall Street is selling bonds and squirreling the money in foreign banks, a basic counterfeit in a syndicate operation. The operation might bring new meaning to monetization. At least a parallel exists. The majority of home mortgages have their income stream used in more than one mortgage bond. That is the real reason why home loan modification is a thin farce. The MERS database conceals the game, but the public has the satisfaction of knowing that MERS has no legal standing. The state courts are declaring no legal standing, and foreclosure procedures are blocked as a result. People cannot be removed from their homes when the database is used in handoffs of notes and titles.

Under Goldman Sachs rule, the USDept Treasury is running some bold kind of racket game, whose purpose is unclear, except it lacks legitimacy. The USGovt borrowing through debt issuance was $142 billion more than the June USGovt federal deficit, which means they are doing more than financing the deficit. The extra proceed funds are not accounted for. In chronic fashion, excess issuance has been the pattern, as the USGovt has issued $1.5 trillion more in debt securities than its budget deficit in the past four years. During the past 45 months, the USGovt has accumulated an incremental $4.7 trillion in new debt, but the federal budget deficit has grown by $3.2 trillion, much less but still a mammoth amount. Nobody asked why so, and nobody asks where the resulting funds from the bond sales go. One is left to speculate that a vast bold new syndicate technique is simply selling bonds beyond newly formed debt, seizing the funds in foreign locations for syndicate usage. The June USGovt official budget deficit was logged at $68.4 billion. During the same month, the USGovt borrowed a staggering total of $210.9 billion. These are not refinances of USTreasury debt in rollover. On a consistent basis, the USGovt has borrowed much more in each deficit month than was required to close the deficit and finance the debt accrued. The differential of excess debt issuance for the first six months of 2010 comes to a hefty $290 billion, a pattern in continuance.

Perhaps the Wall Street firms in control figure that with large numbers, nobody will notice, or given the hidden monetization, they might as well put the bond presses in hyper-drive. The cumulative data, as well as the mindboggling differential (dotted line) between the two series is shown on the attached chart. Perhaps it is for war funding far in excess of the stated costs, to save embarrassment and questions. Perhaps it is for enormous vertically integrated business investment in Afghanistan of clandestine type. Perhaps it is for the heavily rumored underground cities under construction for elite resident purposes. Perhaps it is extra costs for additional new military bases scattered across the globe. Perhaps the answer is simpler, in that it is just being counterfeited and stolen by the financial syndicate with impunity. This is a smoking gun.

http://www.kitco.com/ind/Willie/images/jul222010_1.jpg

ENGLAND BUYS $170B USTBONDS FROM SAVINGS ???

This story is a gem. The Chinese dump USTreasurys and England accumulates them. Or more accurately, the USFed hides its vast monetization efforts in the United Kingdom account ledger item. No way to the reasonable man can Britain purchase $170 billion in USTreasurys in five months from legitimate sources of savings!! In May 2010, China reduced their USTreasury holdings by $32.5 billion, now the lowest level since June 2009. China shed $35.4 billion in short-term USTBills, offset by a mere $2.9 billion in purchased USTBonds. Furthermore, Japan reduced holdings in USTBonds, as did the OPEC nations. However, buyers could be found, all Anglo descent, at least on the surface. The total foreign USTreasury holdings rose from $3957 billion to $3964 billion. Attribute the good tiding news to gigantic ongoing accumulation by England, just like the last several years. The UK-based buying is highly suspicious, like a group of homeless men walking out of a haberdasher shop wearing Brooks Brothers suits with bad hair and mismatched shoes, but arouses no attention except by intrepid analysis divorced from Wall Street or the USGovt. Generally, the United States financial system suffered a dramatic decline in May as foreign purchases of US assets hit a wall, falling from $110.3 billion to just $33 billion. See the graph of steady Chinese unloading of USTreasurys in the last several months.

http://www.kitco.com/ind/Willie/images/jul222010_2.jpg

As of end May, China still holds a gaggle of USTreasurys, but their USTBill holdings are down to a trifling $7 billion, as China sells into the confusion, especially at high principal prices tied to near 0% yields. China is selling the bubble. Without any question whatsoever, the USFed and USDept Treasury are using the United Kingdom as a ledger item for their mammoth USTreasury monetization, all barely hidden, with the TIC data used as a tiny fig leaf that offers inadequate coverage. The story receives no mainstream attention. The United Kingdom has wrecked banks, staggering deficits, no trade surplus, yet managed to buy a whopping $28 billion of USTBonds in just the month of May. Seems like Printing Pre$$ operations and London serving as the Hidey Hole. At end 2009, as of the December tally, the UK owned $180.3B in USTBonds, yet somehow managed to accumulate in the new year, up to the current $350.0B. THE UK SUPPOSEDLY HAS ALMOST DOUBLED THEIR HOLDINGS IN A MERE FIVE MONTHS!!

Bear witness to the shadow USFed debt monetization operation, operating out of the United Kingdom, or at least its accounting. The hidden USTreasury Bonds reside in England, home of the master to US bankers. Anyone who accepts the following graph on its face is foolish, compromised, or politically motivated to the extreme.

http://www.kitco.com/ind/Willie/images/jul222010_3.jpg

Bear in mind that we are talking about crippled England here, or the United Kingdom more generally. The UKGovt just announced spending cuts to reach 40% of budget, not the previous 20%. Britain could not cope with an extended episode in the credit crisis, according to the Bank For Intl Settlements. Yet this nation gobbled up $170 billion in USTreasurys from ripe savings in five months?? Hardly. The Bank For Intl Settlements has warned that sovereign debt under siege cannot adequate be relied upon as the coupon for broad national financial rescue and stimulus, not again, not in the next round. The UKGovt is admitting openly that the situation is worse than they said before. Newly ordained Prime Minister David Cameron ordered the officials to draw up 40% cuts, the biggest in history. He has ordered cabinet ministers to draw up a Doomsday budget whose essential service spending cuts could see tens of thousands given pink slips. Yet this nation gobbled up $170 billion in USTreasurys from ripe savings in five months?? Hardly. This is a smoking gun.

In the summer 2008 leading up the the Wall Street death experience, the British suffered their own shameful episode with Northern Rock, Royal Bank of Scotland, even the venerable Lloyds of London each succumbing, no longer breathing life in a solvent sense. They are equally broken and insolvent as the biggest US banks. Billions of pounds were spent in nationalizing the Royal Bank of Scotland (partial), Lloyds Banking Group (partial), and Northern Rock (total) in an attempt to prevent their collapse. Neither the UK nor the US is on any path of reform or restructure. London redeemed failure from a real estate bust, which is the absolute opposite of investment or stimulus. Yet this nation gobbled up $170 billion in USTreasurys from ripe savings in five months?? Hardly. This is a smoking gun.

USGOVT HIDEY HOLE IN "HOUSEHOLD" CATCH-ALL

This story is a gem. Eric Sprott of Sprott Asset Mgmt casts a suspicious eye at the USTreasurys for the so-called Household category in their accounting. It is a blatant ledger item for illicit monetization, a veritable crime scene without the cordoned zone and yellow tape. Sprott directs his accusations like a skilled prosecutor. He reinforces the claim of Ponzi Scheme cited by Bill Gross of PIMCO. Sprott calls the solution to finance the mammoth USGovt deficits to be the actual problem, namely hidden monetization. The Hat Trick Letter is in perfect sync with his line of reasoning and accusation, as the "Household" accounting ledger item is the culprit. This item has been the topic of past Jackass focus and analysis. Data in gory detail is offered in his indictment. Sprott points out that in order to balance the budget for fiscal 2009, the USGovt needed to sell $2041 billion in new debt, equal to three times the new debt that was issued in fiscal 2008. Witness the grand rampup without identified sources of buyers, mythical buyers in official USTreasury auctions, fraudulent accounting on the official books. No purchasing groups could could afford to increase their 2009 USTreasury purchases by 200%, a simple conclusion. So by process of elimination, the monetization source arises most visibly, but he shows where it appears in the accounting.

In the latest USDept Treasury Bulletin published in December 2009, ownership data reveals that the United States increased the public debt by $1.885 trillion dollars in fiscal 2009. That much is clear. According to this report, there were three distinct groups that increased their purchases from 2008 levels. The first was "Foreign & International Buyers" which purchased $697.5 billion worth of USTreasury securities in fiscal 2009, a 23% rise from fiscal 2008. The second group was the US Federal Reserve itself. Their published balance sheet reveals an increase in its USTreasury holdings by $286 billion in 2009, a 60% annual rise. Consider that jump to be a direct result of the official USFed Quantitative Easing program announced in March 2009. Quick summaries cover the other groups. Q1, Q2, and Q3 data from 2009 suggests that the State & Local Govts and US Savings Bonds groups were net sellers of USTreasurys in 2009. Then the pension funds, insurance companies, and depository institutions increased their purchases by only a paltry amount. The remainder was purchased by a category called loosely "Other Investors" as a catch-all. This other group purchased $90 billion in 2008, but then turned up into hyper-drive its purchases to $510.1 billion of freshly minted USTreasury securities so far in the first three quarters of fiscal 2009. On an annualized rate of purchase, the catch-all category is on pace to buy $680 billion of USTreasurys this year, over seven times the 2008 level. So the murky vague "Other Investors" saved the day and financed a gargantuan amount of the USGovt deficit.

Go to the source. The USDept Treasury Bulletin identifies "Other Investors" as consisting of Individuals, Government Sponsored Enterprises (GSE, as in Fannie Mae & Freddie Mac et al), Brokers & Dealers (who sell as intermediaries), Bank Personal Trusts & Estates, Corporate & Non-Corporate Businesses, Individuals, and Other Investors. It is far-fetched to believe parties in these groups had $700 spare billion to invest in the USTreasury market in fiscal 2009. Sprott dug deeper, and found the source in the data. The Federal Reserve Board of Governors Flow of Funds Data provides a detailed breakdown of the owners of USTreasury securities to 3Q2009. Within these parties, the GSE group acted as small buyers of a mere $5 billion this year. Brokers & Dealers were sellers of $80 billion. Commercial Banks were buyers of $80 billion. Corporate & Non-Corporate Businesses collectively were buyers of $11.6 billion. Add these cited parties to arrive at a net purchase of only $16.6 billion. The huge increase of purchases in 2009 came solely from one source within the "Other Investors" group.

The Federal Reserve Flow of Funds Report defines the infamous "Household Sector" which is a grab bag catch-all miscellaneous ledger item. The Hat Trick Letter has honed in on this corrupted ledger item in past reports. This category supposedly purchased $15 billion worth of USTreasurys in 2008, then jumped with ink jet assist (printing press) in 3Q2009 to a staggering $528.7 billion in purchases, a 35-fold increase. The Household is on track to buy $704 billion worth in all fiscal 2009. The bottom line is a shocker! What is the Household Sector? It is a combination of miscellaneous, ledger adjustments, and blatant monetization. Sprott calls it a PHANTOM that does not exist, but serves the purpose to balance the ledger in the US Federal Reserve Flow of Funds report. In the past, this ledger item was calculated as residuals, securities on loan across groups, even inclusive of rounding error. The monetization is no longer hidden. He concludes that USTreasurys have become one giant Ponzi scheme, just like Bill Gross of PIMCO quipped. This is a smoking gun.

BY THE END OCTOBER 2009, THE "HOUSEHOLD" ACCOUNTING CATEGORY OWNED MORE USTREASURYS THAN THE US FEDERAL RESERVE ITSELF. THAT IS CORRECT. MONETIZED USTREASURY BONDS ACCOUNT FOR MORE THAN WHAT THE USFED HOLDS. THE USTBONDS ARE HIDING IN ENGLAND.

Sprott summarized the bulk buyers of the $1885 billion in USTreasurys through Q3 of 2009:

1. Foreign & International buyers which purchased $697.5 billion
2. The US Federal Reserve which bought $286 billion
3. The Household Sector which bought $528 billion (think printing press).

Foreign USTBond holders share their worry openly. Zhu Min is deputy governor of the Peoples Bank of China. In a recent discussion on the global role of the USDollar, he told an academic audience that "The world does not have so much money to buy more USTreasurys. The United States cannot force foreign governments to increase their holdings of Treasuries… Double the holdings? It is definitely impossible." With foreign sources unwilling or unable to support USGovt debt, the monetization card will be used repeatedly and powerfully inside the desperate US-UK quarters. When the process is more widely recognized and publicized, the USDollar will be denigrated further, and rejected as quickly as any reasonable alternative can be produced by consensus. It is that simple. Worse, a viable alternative might be put forward with powerful force, enough to break any resistance from inertia or threadbare obstructions.

IMPLICATIONS TO THE USDOLLAR & GOLD

No creditor nation whose leaders are in their right mind would continue to support the USDollar as the global reserve currency when its debt securities are the object of such open fraud and high volume monetization. The USFed Chairman Bernanke before the USCongress testified that the USTreasury is not buying its own debt with printed money. His denial was a lie. He cannot identify the USTBond buyers. The evidence is compelling, and all around us. One does not have to be an advanced financial engineer to detect the trails of the monetized debt, its accounting location at the Household slot within the USGovt and within the United Kingdom in the Treasury Investment Capital (TIC) Report. The USGovt is racking up gigantic deficits, which will run in the neighborhood of $1.5 trillion annually for some time. The second half recovery claim is for the simple-minded. Austerity measures are a pipedream. Reform is nowhere. Confusion is everywhere. Economic recovery is a mirage.

Recent condescension from Kartik Athreya of the Richmond Fed toward economist critique was particularly offensive and disgusting. One does not need advanced economics degrees to detect grand malfeasance like described in this article, and utter failure of policy directions. Trained and decorated economists in the United States have very little to show for their erudite prose, abstruse doctrinaire, and affluent effluence. They have given wreckage to the USEconomy and insolvency to its financial foundation, as the cancerous outcome to their arrogant financial engineering and complex money & banking charts. An advanced statistics degree totally overwhems an advanced economics degree any day of the week. We make tools to fine tune a business, as our resumes overflow with successful stories.

Blown opportunities, wasted bailouts, and lack of solutions like reform & restructure assure a much high gold price. Actually, they assure much lower currency valuations. With the redemption of Wall Street bond failure in October 2008 (see TARP Funds), and the nationalization of failed firms (see Fannie Mae, AIG), and the vacant economic stimulus that served little more than state budget shortfall plugs, the potential for a $2000 gold price was provided. Over $2 trillion was wasted. Debt across the debt-plagued landscape will be monetized. That is a fanciful way of saying newly printed money will be used to buy the wrecked debt, so that it can be shoved under the carpet. The growing lump under the carpet is not a piece of furniture, but rather a fashion cancer. With the redemption of British bond failure in 2008, and the nationalization of failed firms, the potential for a $2000 gold price was reinforced from the Anglo flank. Over one trillion British Pounds were wasted. Debt across the debt-plagued landscape will be monetized. With the redemption of European sovereign debt in May 2010, and the absence of stimulus in the European Economy, the potential for $3000 gold price was provided. Almost $800 billion was wasted. Debt across the debt-plagued landscape will be monetized. Gold thrives when the major currencies are debased, debauched, and destroyed.

The winds are showing strong signals of another powerful round of Quantitative Easing, the so-called QE2. When announced formally, or incontrovertibly detected, the potential for a $5000 gold price will be provided. The USEconomy is moribund, and the EU Economy is moribund. Economic stimulus and monetary accommodations have ended in the United States. The deceptive cry of a second half recovery is met by the arrival of a second half deep swoon. November elections are coming in the United States, when liberal policy, free spending, and reckless decisions are normally made. Numerous smart analysts like Eric Sprott, Jim Grant, Jim Rickards, and Porter Stansberry expect the QE2.0 to set sail soon, a second shameful voyage, maybe announced this calendar year. Some analysts believe another financial market crisis episode will be permitted first, in order to permit an easy political path for the next round of Quantitative Easing. The QE2.0 is assured, not even worthy of a forecast. My forecast is for QE3.0 to be announced by early 2012, and for QE4.0 to be announced in 2013. The reason is simple. Absolutely no effort is being made to fix anything. Vast sums of newly printed money are being thrown at a problem without much thought or planning, while many new rules actually freeze businesses. The prevailing objective is to preserve power, but at a cost of devaluating all major currencies with a flood of money supply.

Banks still hold tons of toxic debt, as mortgage debt has been written down by $270 billion but residential housing alone has come down $7 trillion in value. Even the SEC head Shapiro admitted that a slew of bank failures is coming soon. Restructure of the USEconomy is not even a topic, as consumption is desired, not seen, as job growth is desired, not seen. Capital formation and job creation are no longer an understood concept within the tarnished marble halls of US economist offices. Return of the US industrial base is not even discussed, a lost bastion. Instead, the priority of banking and political leadership is preservation of power, in order to control the coveted USDollar Printing Pre$$.

The entire world is working overtime behind conference doors to fashion a new global reserve currency. The IMF Special Drawing Rights vehicle is openly discussed, more like a Straw Man. The New Nordic Euro is a promising initiative conducted in secrecy, to be constructed with a gold component. By design, it is to enable a return to monetary system stability. However, by design it is also a USDollar killer. Its arrival will come without any doubt. When it does, the talk will not be about a skein of distracting topics. Talk will be about hyper-inflation and the United States facing a Third World prospect. Talk will be about $5000 gold. Talk will be about nothing fixed by the stewards in charge. Let's hope by then, that some form of justice is introduced into the unfolding chapters of an American Tragedy.

Let's see, $24 Trillion - roughly 2x the yearly GDP... $75+K for everyone in the US... but not everyone works and pays taxes.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aY0tX8UysIaM

U.S. Rescue May Reach $23.7 Trillion, Barofsky Says (Update3)
By Dawn Kopecki and Catherine Dodge - July 20, 2009 15:01

July 20 (Bloomberg) -- U.S. taxpayers may be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, said Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program.

The Treasury’s $700 billion bank-investment program represents a fraction of all federal support to resuscitate the U.S. financial system, including $6.8 trillion in aid offered by the Federal Reserve, Barofsky said in a report released today.

“TARP has evolved into a program of unprecedented scope, scale and complexity,” Barofsky said in testimony prepared for a hearing tomorrow before the House Committee on Oversight and Government Reform.

Treasury spokesman Andrew Williams said the U.S. has spent less than $2 trillion so far and that Barofsky’s estimates are flawed because they don’t take into account assets that back those programs or fees charged to recoup some costs shouldered by taxpayers.

“These estimates of potential exposures do not provide a useful framework for evaluating the potential cost of these programs,” Williams said. “This estimate includes programs at their hypothetical maximum size, and it was never likely that the programs would be maxed out at the same time.”

Barofsky’s estimates include $2.3 trillion in programs offered by the Federal Deposit Insurance Corp., $7.4 trillion in TARP and other aid from the Treasury and $7.2 trillion in federal money for Fannie Mae, Freddie Mac, credit unions, Veterans Affairs and other federal programs.

Treasury’s Comment

Williams said the programs include escalating fee structures designed to make them “increasingly unattractive as financial markets normalize.” Dependence on these federal programs has begun to decline, as shown by $70 billion in TARP capital investments that has already been repaid, Williams said.

Barofsky offered criticism in a separate quarterly report of Treasury’s implementation of TARP, saying the department has “repeatedly failed to adopt recommendations” needed to provide transparency and fulfill the administration’s goal to implement TARP “with the highest degree of accountability.”

As a result, taxpayers don’t know how TARP recipients are using the money or the value of the investments, he said in the report.

‘Falling Short’

“This administration promised an ‘unprecedented level’ of accountability and oversight, but as this report reveals, they are falling far short of that promise,” Representative Darrell Issa of California, the top Republican on the oversight committee, said in a statement. “The American people deserve to know how their tax dollars are being spent.”

The Treasury has spent $441 billion of TARP funds so far and has allocated $202.1 billion more for other spending, according to Barofsky. In the nine months since Congress authorized TARP, Treasury has created 12 programs involving funds that may reach almost $3 trillion, he said.

Treasury Secretary Timothy Geithner should press banks for more information on how they use the more than $200 billion the government has pumped into U.S. financial institutions, Barofsky said in a separate report.

The inspector general surveyed 360 banks that have received TARP capital, including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. The responses, which the inspector general said it didn’t verify independently, showed that 83 percent of banks used TARP money for lending, while 43 percent used funds to add to their capital cushion and 31 percent made new investments.

Barofsky said the TARP inspector general’s office has 35 ongoing criminal and civil investigations that include suspected accounting, securities and mortgage fraud; insider trading; and tax investigations related to the abuse of TARP programs.

Everybody is priming the pump to get the American people used to the need for higher taxes, including the VAT because we all know congress isn't going to cut spending.

8 page report from the CBO,

Federal Debt and the Risk of a Fiscal Crisis

http://www.cbo.gov/ftpdocs/116xx/doc11659/07-27_Debt_FiscalCrisis_Brief.pdf