How much is $17 trillion? Visualized for reference.

[parsonsj]

Yeah, California has real problems. It's a bit of a poster child for austerity efforts not working.. as each new round of spending cuts is instituted, the deficit goes up, not down. It was true for Gray Davis, the Governator (who can spell the man's name), and now for Jerry Brown.

What's the answer? More tax base. How? Invest in the population. Get the unemployed back to work paying texes. If you want to see the cause of California's budget problems, go back to Proposition 13 in 1978, and you can see a series of budget crises that have been happening since then.

There's no easy solutions -- but cutting government spending doesn't work. It hasn't worked in California, it hasn't worked in Texas, it hasn't worked in the UK, and it hasn't worked in Italy, Greece, or Spain. We need to do something else.

Wisconsin has shown some promise. Their approach has been to require government employees to provide a larger percentage of their pension contributions -- in effect, a tax on unionized government employees. I'm just spitballin' but maybe something to try in California is to invest in more school teachers (California is currently 48th in spending per capita in education) and require them to provide a greater percentage of their pension.

[Bucketlist2012]

Originally Posted by parsonsj

Yeah, California has real problems. It's a bit of a poster child for austerity efforts not working.. as each new round of spending cuts is instituted, the deficit goes up, not down. It was true for Gray Davis, the Governator (who can spell the man's name), and now for Jerry Brown.

What's the answer? More tax base. How? Invest in the population. Get the unemployed back to work paying texes. If you want to see the cause of California's budget problems, go back to Proposition 13 in 1978, and you can see a series of budget crises that have been happening since then.

There's no easy solutions -- but cutting government spending doesn't work. It hasn't worked in California, it hasn't worked in Texas, it hasn't worked in the UK, and it hasn't worked in Italy, Greece, or Spain. We need to do something else.

Wisconsin has shown some promise. Their approach has been to require government employees to provide a larger percentage of their pension contributions -- in effect, a tax on unionized government employees. I'm just spitballin' but maybe something to try in California is to invest in more school teachers (California is currently 48th in spending per capita in education) and require them to provide a greater percentage of their pension.

Wow...It is the poster child for austerity not working ??? Now that is funny..Nice twist on things. It is the poster child for...well i cannot get political..But without cutting the government waste and spending, it will just be asking for a bailout soon..Moonbeam got it wrong the first time, and round two will be worse.

Again with comments like that, you and I will never agree...More spending on teacher's ? Less Illegal Immigration maybe. No bullet train..No 1000 employees of the government getting raises..

More spending ? Of money they do not have...They will punish the successful to fund the lazy.. More property tax, mileage tax, all to fund those not putting into the system.

I like your twist on things..In my humble opinion, completely off base and wrong, but again, good for the readers of this thread...

Let them decide what they believe..I know you have, and so have I.
We agree to disagree.

[parsonsj]

In related news:

http://www.bloomberg.com/quote/USGG10YR:IND

I'm not trying to change the subject from California, but have a look at Japan.

Its bond yields are even lower than those of the US, with a debt to GDP ratio nearing 200%. And that's been true for a very long time.

[Bucketlist2012]

Originally Posted by parsonsj

In related news:

http://www.bloomberg.com/quote/USGG10YR:IND

I'm not trying to change the subject from California, but have a look at Japan.

Its bond yields are even lower than those of the US, with a debt to GDP ratio nearing 200%. And that's been true for a very long time.

I will check it out..

Gotta go, but like I said, it is good to hear all sides and let each reader decide for themselves.. lateral:

[Tony_SS]

If we go back and look at our own recent history, we can see what got us out of the depression. And despite what public school textbooks say, it was not going to war, but it was the ending of WW2, reducing taxes by 1/3 and cutting govt spending by 2/3. Those 3 key items gave us baby boomers and prosperity.

John, I don't know if you have Amazon Prime but I want to suggest a neutral movie called IOUSA. It's free to watch if you have Prime. I'm about half way through but so far it does a good job explaining the history of our debt and tells the story of how the Govt Accountability Office basically went on a tour trying to educate voters about the dangers of a then 14 trillion dollar debt.

But a large part of this too, is understanding the Federal Reserve. It is a private cartel of banks that by law is in charge of our currency and fixes interest rates. They are a blank check for a spend happy Congress, and they profit from govt spending. Think of Goldman Sachs financing our govt spending, and allowed to create money from thin air and charge interest on that. You can see how private institutions like this are only concerned with their bottom line and not the end users. Especially when they have a monopoly.

The truth is our govt (which is really us, you and me) is indebted to private central banks in which we are human collateral providing revenue by law. We have literally been enslaved and conquered by these institutions.

[GregWeld]

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...

[Shmoov69]

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.

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!

[Tony_SS]

Originally Posted by GregWeld

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...

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"

The Paradox of Thrift
The whole idea that saving money is bad for the economy comes from the economist John Maynard Keynes, who referred to it as the “paradox of thrift.” (“Paradox of thrift” and John Maynard Keynes is one of those things you can bust out at a party to seem quite smart.) He believed that if everyone saved more money during times of recession, then demand for goods will fall. If demand for goods falls, then economic growth will stall, causing all sorts of additional economic problems (lost jobs, failed businesses, etc.).

It makes some sense on the surface. If everyone stopped spending money tomorrow, the economy would indeed fall apart. There are two big factors that keep this from happening.

First, when demand falls, prices fall, and when prices fall, people are more likely to spend money. That’s why sales always work – and thus businesses regularly have sales. If demand falls across the board, then businesses will lower their prices to get more customers.

and...

Savings Accounts Contribute to the Economy
The second factor – and this is the big one – that makes the “paradox of thrift” fail is that putting money in savings accounts does not remove it from the economy. When you put money in a savings account, it becomes money that the bank can then lend out to businesses. Thus, when more people save, the banks have more resources to pump out to businesses, and when the businesses have more resources, they employ more people, innovate new products, and find new ways to sell.

By saving, you’re actually doing your economic duty, just as you would be if you were buying things. A healthy economy needs plenty of both.

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

[Shmoov69]

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

[parsonsj]

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.

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