I love these kinds of discussions....

What people fail to fundamentally understand is that regardless of who owes whom... you can't spend your way out of it. I don't give a rats azz what came first the chicken or the egg... or the why... or the how... or even when. Debt is debt and when you owe more than you can afford to... you're in deep trouble. Borrowing more isn't going to help.

The medicine tastes bad... which is -- SOMEONE has to quit spending. SOMEONE must end the vicious cycle...

JP's version of a fix is to just spend some more and everything will be fine. That might be true -- TEMPORARILY... But in order to spend more we have to borrow more -- which means our interest rates will rise - which will take a larger bite out of everyones pocket INCLUDING the Governments which will exacerbate the deficit since we've been re-financing the older higher rate debt with new lower rate debt (in business we called that a "roll over"). The current low rates on US Treasuries has actually HELPED our deficit. Once that comes to an end... and it will... then what? Borrow more at higher rates to roll over the low rate and what happens?

Remember that when you see these 1 year and 5 year and 10 year Treasury notes... that means that the capital is DUE on those. So while we might be financing that 5 year note at .67%.... in 5 years when that note is due - what's the rate going to be... which means we'll still owe that amount - we'll roll that at the new rate - which sends the deficit even higher.

It's a toilet that just needs to be flushed.


Basically our government is no better at this game than the idiots that bought houses with 1 year teaser rates... Then they couldn't figure out what to do when the real rate hit.

I get JP's position on increasing employment - with stimulus - which creates tax income etc. Except that we're still borrowing from Peter to pay Paul and we'll end up with a sore Peter...

Entitlement society. It only gets worse with each generation. Look at a multi generational welfare family, each passing generation understands less and less of how to actually take care of themselves. I mean honestly, they REALLY DON'T KNOW HOW TO. They never had to and it is just a way of life and they are trapped and don't even know it. And that is just ONE program! That doesn't include all the other "free programs", and haven't even touched on the mass amounts of government/union jobs that are so inefficient that they could not sustain in the private sector!! Somebody has to pay for it.:willy:

Quite simply, we're screwed! Too many hands waiting on that "government spending" and not enough paying for it.

My dad always said that you can never borrow your way out of debt. He also said that you can never argue someone right!

Right, but the fundamental flaw in that premise, is the theory that the govt knows how to spend your money better than you. If that was the case, the govt or the Fed would have never gotten us into this mess or have gotten us out by now. Quite simply, the Congress is very ignorant to monetary policy and the Fed is private, global institution protecting their own interests.

The other argument is investment or stimulus and doing so creates enough prosperity to turn things around. This is also flawed in that yes, you can bail out a failed business, but unless they change their protocol they're going to fail again. It's like giving money to a shopaholic to buy therapy. They will choose to buy something else.

The other HUGE problem is our fiat currency. I think it's interesting that the only thing that gives a $100 bill more value than a $1 is numeral printed on that paper. Fiat currencies always fail. History shows this. It needs to be competing with world currencies and backed by commodities to have value.

Also, I'm feeling the need to dispell the myth that is this "Paradox of Thrift"

and...

Taken from:
http://www.thesimpledollar.com/2009/...r-the-economy/

Where's Andrew in this discussion!?! LOL!:cheers:

http://economywatch.msnbc.msn.com/_n...utmk=187396776

A quick summary of the MSNBC article --

1. Exuberance due to low borrowing costs in the early part of the European common currency experiment, resulting in large capital investments in Spain from other portions of Europe, much of which was led by banks around Europe. Much of the exuberance was caused by misreading risks -- investors figured that Spanish investment was the same as German investment.
2. Which caused a big real estate / housing boom in Spain.
3. When the bubble burst, and the economy contracted, the investors pulled their money out of the Spanish economy.
4. As millions of Spaniards lost their jobs (current unemployment is twice that of the US, with young people even higher) government revenues plummeted.
5. As the government started cutting spending to deal with lower revenue, that caused even more job losses. Austerity measures proved to be counter-productive, and as Spanish government spending dropped, revenues dropped faster.
6. Bond yields are climbing, as the time needed for a reasonable economic recovery seems longer and longer, and as Spanish sovereign default looms.
7. Spain seems unable to fix this themselves, and there's a reason why: they don't have their own currency. They don't have a Fed that can backstop their banks and be the lender of last resort.
8. The long-term fix is for Spain to cut prices -- but to cut prices it needs to cut wages, and that's a very difficult problem. Wages are sticky; they are difficult to cut across the whole Spanish economy. Once again, the common currency is the root of the problem. If Spain had its own currency, it could allow it to devalue, effectively cutting the country's wages without having to physically cut the wages of all of its citizens.


A final point: at no point does the article mention high taxes, or people unwilling to work. In fact the article lays more blame on investors misreading risk than on Spanish worker laziness or entitlements.

Tying this back to home: this scenario is similar to the US -- our economy was wrecked by risky trading of mortgage-backed securities that resulted in a housing bubble that burst when investors misread the risks. The good news is that we have stabilized our banks, which now have enough liquidity to weather this de-leveraging of private debt, and there is no risk of sovereign default. Investors are signaling their agreement with that by accepting historically low yields on Treasuries. However, our economy still has millions of people out of work -- through no fault of theirs -- and our revenues are suffering as a result, and you know the rest of my argument. :cheers:

And thank goodness we have our own currency, and a Fed that can intervene to prevent disaster.

While I think your argument is full of more holes than swiss cheese, I must give you a :thumbsup: :thumbsup: :thumbsup: .

I count on the madness you speak of from this administration, and i have made more money on Precious Metals than I spent on my car..

So while I don't agree with you, I am laughing all the way to the bank. Sure I am shaking my head in disgust about what is happening to the Country and the Devalued dollar, and I think the FEDS are crooks, I will continue to make money due to the exact things you talk about..:cheers:

I will continue to run my Portfolio betting on exactly what you argue, because although I know your argument is the wrong thing to do for this Country, I sure will take advantage of it at every turn...:thumbsup:

Normally I only run 5% in Metals for Insurance, but until the administration changes, I will stay where I am, betting on the FEDS

Here's another article from the NY Times:

http://www.nytimes.com/2012/07/25/wo...pagewanted=all

The article describes how the austerity measures levied on the Greek government in exchange for bailout funds from the rest of Europe may have made the problem worse.

Now, Greece is different than Spain in 2 key ways:
1. Greece has a long history of tax avoidance. Some analysts estimate that Greece loses 30% of its tax revenue due to fraud.
2. Greece has a long history of graft, cronyism, and outright fraud within its government. Despite their ancient history, most of recent Greek history is that of far right governments, and democracy as we know it has only been in place for a few decades.

For me, anything that comes from the New York Times is lining for the bottom of a Bird cage to collect poo..

I will stick to the analysis from the Wall Street Journal and other Fiduciary Economists, before I even think of the Times for analysis.:cheers:

And the Euro was a disaster from the Beginning..Greece would have never even made it into the Euro had Goldman Sachs not stepped in and cooked the books for Greece in 2000. Then they stepped in , in the mid 2000's to re-cook the books.

The Federal Reserve is the problem and not the solution...But again, I make money every time they print...

They will not spend there way out of this....No one wants to take the small pill now....

I think we are verging on apples to oranges territory, so I'll keep my comments about our country and its monetary policy.

2 clear points:

1. Our economy was wrecked because the Fed fixed interest rates too low for too long creating a housing bubble.

2. That led to the risk behavior by the banking industry. The largest players knew the Fed will bail them out. So the Fed bailed out themselves basically, since the largest banks are the cartel that makes up the Fed. So they went hog wild, because they could, got bailed out and passed the losses and depression onto us, the taxpayers.

I think this tells us everything we need to know. These clowns who caused the problem, do not know how to fix it.

http://static.safehaven.com/authors/berwick/22363_b.jpg

I probably wont get an answer, but I'll ask anyway: John, don't you find in suspicious that these Treasury Secretaries are straight from Goldman Sachs? And that's just one example.

Tony,

We probably agree a lot about the underlying mechanism of the housing bubble, but you can't put all of the bubble at the feet of interest rates that were too low, along with the moral hazard of too big to fail. You have to also acknowledge two other contributing factors:
1. The repeal of the Glass-Steagall act, and
2. The complete lack of regulation of credit-default swaps.

Neither of those significant contributing factors had anything to do with the Fed.

Yes, Wall Street caused our housing bubble, with the Fed supplying some of the cash. But better / more regulation of Wall Street is essential to keep it from happening again. You'd think they'd be a bit humbled after their performance leading up to 2008-2009, but they are fighting Dodd-Frank with everything they've got.

You need to read Krugman in context:

John I agree with your 1st point. No doubt that was a factor. The repeal opened the doors for abuse. But to your 2nd point, the SEC was supposed to regulate Bernie Madoff. The fact is they failed and/or covered for him in that regard. So we just can not rely on 'regulations' alone.

However, the fact still remains. The Fed is the great facilitator. Without them fixing the rates too low for too long, the sharks would have nothing to feed on. So, yes, the Fed gave Wall St the fuel to start that fire. And Wall St did have the cover too, making the Fed a huge moral hazard. These banks took risks and as an insider cartel members, they put their competition out of business and their losses on to the US govt/taxpayers.

We are talking about a private banking institution, who by law can create dollars out of thin air. All with NO oversight, rules or regulation. So would you agree that the regulation needs to be on the Fed?

To avoid this again, interest rates need to be a result of the free market, not fixed by a handful of special interests at the top of the pyramid.

And the whole Krugman article does not change much for me. Those are still his words and ideals.

Somebody overheard us:

http://money.cnn.com/2012/07/25/news....htm?hpt=hp_t3

Interesting stuff.

That's not true. The Fed is run by a set of regional governors appointed by the President and confirmed by the Senate, with a clear mandate: manage inflation, and maintain full employment. There is a need to keep it from being directly managed by the government, because we don't want politicians managing our economy for political gain.

Creating dollars out of thin air has been the way of the US currency for a long long time, and it is a necessary tool for managing the economy. See Spain, Greece, and Italy as we've been discussing.

I don't see conspiracy and criminal conduct by the Fed, I see principled bankers doing their best in an unbelievably complex environment. Sometimes thing get missed and asset bubbles arise. Sometimes they get flattened in time (dot com), and sometimes they don't (housing).

I'm sure we aren't going to agree on this. :cheers:

This from the guy who lobbied to repeal Glass-Steagal. Yeah, it should be brought back, even after the damage has been done.


We agree on some things though.

As for the Fed chairmen, The president can only appoint from a pre-selected pool of people. Pre-selected by the heads of the Federal Reserve banks. The chairman is accountable only to the shareholders within the Fed system. An the regional directors are all chosen from within, outside of politics.

Let me ask this... What is more dangerous, a top down monetary policy controlled by a cartel or monopoly of private banking institutions, or a monetary policy that is transparent and accountable and reflects the will of the people?

Well no one see's ANY conduct because the Fed isnt transparent or regulated in any shape or form! It's ironic that people want to regulate Wall St and banks, but not the Fed.... that is made up of banks. The Fed conducts policy completely outside of any oversight.

This is supposed to be our nation's currency, not the bank's currency, that is used for their gain, at our expense. John, I think you give these institutions far too much clout and trust. Even IF they are innocent, trust worthy principled little bankers, they still need to be transparent and held to certain laws to protect our economy.

But c'mon, you gotta get peeved when Goldman Sachs CEO Blankfien said "he's just a banker, doing God's work". :lol: My question is which God?

:cheers:

Man, I agree with everything you wrote.

The House just passed a bill to audit the Feds, but as usually, Harry Reid will not bring it up for a vote, and he will put it on his desk with the other 33 Bills that he won't vote on..

We're coming up on 4 years since many economists claimed that fiscal stimulus and Federal Reserve quantitative easing were going to cause massive inflation and high Treasury bond yields.

So far they've uh, been a bit on the wrong side.

http://delong.typepad.com/sdj/2012/0...epartment.html

I disagree.....


#1 -- Tell me a bill that you pay today that isn't higher than it was last year.

#2 -- What's saving us from INFLATION is the Europe crisis.... companies don't have pricing power or stickiness

#3 -- What's really helping the inflation numbers is GASOLINE prices -- and they're down because GLOBAL demand is down... otherwise we'd be at $5 a gallon already.

I don't know how anyone believes there is no inflation if they do their own shopping. I have a friend I support who I had to give a "raise" because of the increased food costs, and he can't make it on the same amount of money as he could a year or two ago. He knows all the prices of the food he buys, and it's climbed a lot, and/or the packaging has been reduced in size/weight and price stayed the same. It's undeniable.

Jody -- let's look at data:

http://ycharts.com/indicators/us_cor...ion_rate/chart

John,

The Fed is PRO inflation as one of their mandates. And if you believe the "official" inflation numbers, I have a bridge to sell you. As for your last link: The "official" numbers does NOT include the cost of food or energy! So yeah, 'lies, damn lies and statistics' a man once said.

You are drunk on your kool aid..No Inflation ? Sure if your figures leave out Food and energy costs.

Dude you won't convert anyone with your "facts", they are biased numbers.

Again, the readers will decide from this thread what they think, and you are a lone wolf..No one believes what you believe.

Food costs are up, and the size of the products are down. So an increase of 30% in costs, and a reduction of the size of the product by 20% is Inflation, plain and simple.

Correct: core inflation excludes food and energy because they have volatile price swings. For example, recent oil prices have trended considerably downward -- which would skew inflation numbers, and cause poor policy choices.

That's not to say the food and energy prices don't show up in the core: they do as they are assimilated into the greater economy. Just not their "retail" numbers.

Here's a look at core vs "headline" (which includes energy and food costs). Note how they are similar, but core is less volatile:

http://www.advisorperspectives.com/d...e-and-Core.php

You can see that trying to use headline vs core inflation as a way of saying that we do have high inflation is a red herring.

I am pretty aligned with what JP believes (or at least his level headed approach), I just don't feel like arguing about it.

What I will say is that I heard something on NPR about a study that demonstrated the fairly obvious concept that people choose to access news/media that aligns with what they already believe.

Granted you could say I was listening to liberal government funded NPR because I believe X or Y, and just ignore whatever I have to say but the source shouldn't matter. Doesn't it just make sense that people would do that?

My point is only that it's good to listen to people with other opinions, and it's pretty weak to attack people that have different views because you just may be wrong.

The real red herring is that food and energy is excluded and the excuse because it's volatile? That goes for every other commodity. They're all "volatile". Try buying cotton, paper and ink. Should we exclude those too?

It's like real unemployment numbers are cooked too. It does not include workers that settle for part time, ones who's benefits expire or those who gave up and stopped looking. So yes, its true that official are deceptive.

Even the former Comptroller General agreed. David Walker admits the fudged numbers in all sorts of "official" areas. I just finished I.O.U.S.A and it 100% neutral. I'm going to keep recommending it until someone watches it. :lol:

BTW, they had to buy a new debt clock. The owners of it said so, since we broke the $9 trillion mark. :faint:

You miss my point and call it a weak attack..The point is that one person can post all the "facts" that they want, and we all know that they are just cooked numbers. Reality in the real world,it tell us different. You cannot say that inflation is not happening if you are out buying products.It is obvious that it is here.

Why do you think I post to let the readers decide ? I did not "attack" him.

I own tons of several assets that are Commodity based..I see my profits.I know what is happening..I don't worry about food or gasoline because others are paying me for it.

It is obvious that we will never change each others minds. That isn't what the thread is about..It is to post ALL sides, and let people decide for themselves... Everyone will have their own view, no doctored figures will change my mind, or your mind, and that is what is cool about it. We don't have to think like each other.

So with that, I welcome John's posts, and your thoughts, because the readers need both sides to make their own choice. I personally don't care what someone thinks, I for sure am not posting to win the"argument". There is no arguing.We all have our beliefs and one thread won't change that.

And I really appreciate your post. It makes me realize that I am wasting my time on this thread. Nothing will change, and no one may be reading this but us few people..So I will leave it at that and let the facts speak in the real world, and not on paper, or the Internet.:cheers:

Policy choices take time, and need to be done based on reasonable and continuing trends. Excluding volatile data helps keep policies on that path. Commodity prices do get reflected into core inflation as they change long term wages and business costs.

As an example look at Headline inflation in the chart from my previous post. If the US and/or the Fed had reacted to the spikes and valleys in those numbers during the recession of 2008/09, we might have seen an amplification of them, rather than damping.

I was hoping we could discuss these matters using facts -- but we seem to have trouble even agreeing on those. :(

Many message boards tend to have echo-chamber tendencies, and this one is no different. But I must point out that there are millions of people, nations even, of people with views different than one's own. We ignore the possibility of being wrong at our own peril.

But who's facts, the governments? Is 8.2% unemployment a "fact"?

Facts are digging up my receipts from the past 2 years and seeing ink, paper and cotton just WELL over 10%.

But what sort of policy change can reverse the decline of the dollar to the tune of 95%? It doesn't matter because the monopoly known as the Fed is not interested in that. It's an instrument of wealth transfer. Yet we somehow give them clout as innocent, principled bankers just trying to do the 'right thing'. AKA, Gods' work. :lol:

A-men!

Here you go:
http://video.google.com/videoplay?do...67650600562607

But in reality John, you should be riding high. The Fed is in power, along with Wall St and they are running the show, so what are you so concerned about? The policy of govt stimulus and creating more fiat money is in full effect.. What are you warning us about?

I don't think anyone would disagree in terms of 'underemployment', ie people who took part time work or just gave up completely, being much higher than 8.2%, but wasn't that also the case back when unemployment was reported at 5%, chances are some people had to take part time jobs when they would have preferred full time, etc.

It's a number that is not shrouded in secrecy in regards to how it's calculated, just like the inflation values thrown around here. It's common knowledge that it excludes some things, things which actually have a real effect on everyday people. We all notice food and gas prices going up or down, we're less likely to notice the price of paper going up as you point out.

A business owner might but even then, myopia can influence things. If I work at a business that uses a lot of paper, ink and cotton, and they all go up 10%, of course inflation would seem high, but what if I worked at a plant that used natural gas to manufacture things, where the price of it has dropped significantly, wouldn't I have a different view?

True enough, though I don't think I'm warning anybody. I'm just trying to round out the discussion a bit. Let's go back to the title of the thread, which implies that $17T is bad. Just... because. It's worth a discussion to see if there is more to it than that. It would be better for us in the long term if we were to do more stimulus to put millions of people back to work, and then pay down the debt with a healthy economy.

We've done it before: after WWII, and again after the 80s.

OK , my statement was a little harsh and wrong..:cheers:

I guess what I should have said, is many believe that there is Inflation..My other statement was kinda Hypocritical on my part.

The reason I say that I am wrong is I believe that the government thinks exactly like you, and will print and spend more money.

So in fact my statement was way off...Many do think like you, and I was wrong.:thumbsup:

The cool thing is that I have set my Investment for a crushed and devalued dollar. So while I may think it is the wrong thing to do, I plan that they will do exactly as you say that we should do. I do it solely for an Investment strategy and not for my personal beliefs.

So I won't be in any peril at all. In fact every time that Stimulus is used, my assets soar.. So I am not worried if my personal beliefs are wrong, I will still profit from it.

But again, my statement was wrong, and many do think like you, so sorry about the harsh comment...But if I am wrong I win, and if I am right, I win.

What I personally think may be bad for the country means nothing to how I invest.

So either way it goes I am ready..I don't Invest according to my beliefs, but according to what I think the powers that be will do...:cheers:

I guess if you would warn people about anything, it would be to invest for more Stimulus. And against the Fiat Currency. That may be a tip to tell people.:cheers: :thumbsup:

I've enjoyed this discussion although I havn't got much to contribute, both sides make some good points. But, isn't this point in time "just another one of those things" that happens in our system that eventually corrects itself and we then see another period of greater prosperity? Since we can't really do much about it, I guess we should just try to educate ourselves on how to survive periods like this.

Our nation is currently lead by people who share his beliefs.

Sounds like you have your fingers in your ears yelling, LA, LA, LA.
I mean come on, there is no arguing in this thread. What is wrong with differing views expressing them?

As stated earlier, facts are undisputed. All the figures a governments use will have some sort of twist to them including or excluding data, to achieve their desired results.

Would it be possible this is not an echo chamber but people who might just actually agree with one another with a view that differs from yours?

What do we know is that spending trillions of dollars DOES NOT make Americans better off.

Exactly. :cheers:

Let's go down a different path; maybe this will generate some good discussion. Here's my question: how much is the US worth? What value do we place on our country? Not just the infrastructure and hardware. Not just on bridges, roads, national parks, and aircraft carriers. The discussion about the national debt often goes hand in hand with what we owe. I'm asking this question: what are getting for our $17T? When we buy a car on credit, we get something. The same is true for the national debt. We are getting something --

Is it worth it?

John, put yourself on a fixed income and you'll see that the chart is not accurate. I have no idea how or where the numbers came from, but I'm not buying it. My friend is very structured and actually started tracking food costs over a year ago. Identical items have risen WAY more than 2-3% that the chart indicates.

Debt in and of itself is not always bad.
But it's not just the static number. The spending year over year is incredible. But if debt spending was as great as people like Krugman make it sound, then one must conclude that if 17 trillion is good, then 100 trillion must be astounding. Think about what could be done with that.
Washington has a "debt ceiling". Supposedly, because now they just raise it to fit what they want, not what they need. There are Zero controls on spending.

If spending was a good thing at all costs, why not pay people to dig holes and others to fill them in? That would be a boom to the economy.

Here are some "maybe" facts to chew on.

Government dependency jumped 8.1 percent in the past year, with the most assistance going toward housing, health and welfare, and retirement.
The federal government spent more taxpayer dollars than ever before in 2011 to subsidize Americans. The average individual who relies on Washington could receive benefits valued at $32,748, more than the nation’s average disposable personal income ($32,446).
At the same time, nearly half of the U.S. population (49.5 percent) does not pay any federal income taxes.
In the next 25 years, more than 77 million baby boomers will retire. They will begin collecting checks from Social Security, drawing benefits from Medicare, and relying on Medicaid for long-term care.
As of now, 70 percent of the federal government’s budget goes to individual assistance programs, up dramatically in just the past few years. However, research shows that private, community, and charitable aid helps individuals rise from their difficulties with better success than federal government handouts. Plus, local and private aid is often more effectively distributed.


You ask, "is it worth it"? I guess that depends on if your a Paul or a Peter?

I don't understand what a fixed income has to do with any of this. The inflation rates on the chart I referenced are the official government numbers: they come from the Bureau of Labor Statistics. They aren't some sort of private made-up thing:

The Consumer Price Index is a comprehensive report on prices in the United States. It contains national, regional, and local data broken down into population subgroups. Prices are collected from 87 urban areas from 23,000 retail and service establishments. Rent data are collected from approximately 50,000 landlords or tenants. The Consumer Price Index is the most widely used measure of inflation.

I'm sure your friend means well and believes what he's telling you. But I doubt he's sampled from 23000 retail establishments from 87 urban areas. I think most reasonable people would go with the BLS on this one.

I'm an American. I don't really understand the tribal resonance of that response.