Are economies of democratically elected governments stable?

[GeoffP]

But the foreign market does it cheaper and faster.

[Billy T]

But the foreign market does it cheaper and faster.

From experience many years ago, I know that was once true of the Mexican market, but now sex is available in the US for free with no strings attached if you know where and how to look.

If you don´t have three ears, or no hands, etc. you should be able to get some. About 20 years ago at work I had a 50 year old, quite short and already nearly bald, friend, recently divorced, who often had interesting speech patterns. One day at lunch he remarked:

´It was amazing how many and what good bargains were available in the "used ladies" market.´ - And that was 20+ years ago.

[Billy T]

The Congress seems to be arguing for a NO answer now.

[Economister]

There seems to be a lot of general confusion and ignorance in this topic, lol. Billy T, I'm willing to bet $100,000 that the USD and the US Gov't do not collapse by Halloween 2014. (That should make my position clear enough, lol).

[Billy T]

There seems to be a lot of general confusion and ignorance in this topic, lol. Billy T, I'm willing to bet $100,000 that the USD and the US Gov't do not collapse by Halloween 2014. (That should make my position clear enough, lol).

I don´t expect to make that bet with you, but for me to even consider it you need to give an operational definition of "collapse" Certainly there will be an US government on 1Nov2014.

What I have said is that there will be a "run on the dollar" on or before Halloween 2014. Nothing about US government collapse.

[Economister]

If there's a run on the USD, then how does the US gov't pay for its liabilities? Hence, the collapse.

I'm willing to bet $100,000 that there isn't a run on the USD by Halloween, 2014. I'll even write you a call option for 2015.

[Billy T]

If there's a run on the USD, then how does the US gov't pay for its liabilities? Hence, the collapse. ...

Your understanding seems very limited. The reason there will be a run is that the FED / Treasury are intentionally printing dollars at an unsustainable rate (by a factor of 10, at least) to make paying the debts possible. I.e. they will pay a maturing 10 year bond with printing-press money. The run will be the result of this accelerating printing of thin air money.

After the run, the ten year bond holder is paid with freshly printed money and it will buy less than half what the goods and services that the money he lent the government 10 years earlier would. Many are already noting that buying US bonds is a sure way to lose purchasing power. When this POV is a little more common, very few (other than the FED and fixed obligation persons and corporations) will be net buyers of bonds.

I.e. redemptions will exceed new buying, making even more printing press money need to pay of the net reduction in Treasury bonds held by foreigners, Americans and corporations, both foreign and domestic. There will still be buying by for example life insurance companies (and others with fixed dollar future obligations) as their contracts require the payment of a fixed number of dollars. They don´t care if the widow collecting on her husband´s 50,000 dollar policy can only live one month on $50,000 - they have met their legal obligation to pay her $50,000. They and almost all, me included, are confident the US will not default on its bonds. - Not so long as it has a legal right to use printing press. Even if the dysfunctional Congress fails to raise the debt ceiling, Treasury will not pay some other obligations so that it can still pay the maturing bonds. ("Full faith and credit" will not be violated - just bond holders will suffer great loses in purchasing power.)

The Fed will continue buying in a failing effort to hold interest rates low, but interest rates required to sell Treasury bonds to anyone other than the Fed and those with fixed future obligations will rapidly rise (bond prices will fall). All will learn how stupid it was to buy US bonds. China became a modest net seller two years ago. When almost all are net sellers, the US has only the unacceptable choice of default or the undesirable, but acceptable choice of the printing press money.

To be more precise in what I mean by a "run on the dollar," it is when Either (1) There is a net reduction of holding of Treasury bonds by all but the Fed and corporations etc. with fixed future obligations to pay; OR When the interest rate on 10 year bonds triples in a year or less. (From the current ~1.7%); OR the 10 year bond interest rate increase by 1% in only two months. (This last so we don´t need to wait a year to know that the run on the dollar has started.)

You (and others) might learn something about what is already happening if you find out how the changing rate of sales of 10 or longer bonds are going compared to the changing rate of sales of silver and gold coins sales are going. The bond market is huge compared to the silver / gold coin market so focus on the net change in rate of holdings not the absolute size.

[Economister]

Are you referring to the US Dollar or to US Debt lol, because amongst the financial community, USD = US dollar.

[Billy T]

Are you referring to the US Dollar or to US Debt lol, because amongst the financial community, USD = US dollar.

I have been completely clear:

Your understanding seems very limited. The reason there will be a run is that the FED / Treasury are intentionally printing dollars at an unsustainable rate (by a factor of 10, at least) to make paying the debts possible. I.e. they will pay a maturing 10 year bond with printing-press money. The run will be the result of this accelerating printing of thin air money. .....
To be more precise in what I mean by a "run on the dollar," it is when Either ...

Thus in addition to having near zero understanding of economics, you have a reading comprehension problem too. One more annoying post with no thought content, and you go on my ignore list. (As you are new that means I will not see anything you post.)

[Workaholic]

Came across an interesting article related to the original topic of this thread:

The Parable of the Frogs

http://www.counterpunch.org/2013/01/...-of-the-frogs/

The metaphor of addiction is extremely relevant to situations such as these, because addicts always seek to maximize their intake (or behavior) rather than optimize it, even though the former leads to self-destruction. In the face of what seems to be biologically driven activity, reason doesn’t have much of a chance. An experiment with frogs some years ago demonstrated this quite clearly. They were wired up with electrodes in the pleasure center of the brain, and could stimulate that center–i.e., create a “rush”–by pressing a metal bar. Not only did the frogs keep pressing the bar over and over again, but they didn’t stop even when their legs were cut off with a pair of shears!

But what if the reality of all social systems is that they are homeostatic, which is to say, designed to stay in balance? In that case, said Bateson, the attempt to maximize any single variable (for example, wealth) will eventually push the system into runaway, such that it will destroy itself. To take a physiological analogy, we recognize that the human body needs only so much calcium per day. We do not say, “The more calcium I ingest, the better off I’ll be,” because we recognize that past a certain point any chemical element becomes toxic to an organism. Yet we seem to be unable to extend this insight to the social or economic realm. We do not say, for example, “That company is making too much profit,” or “That individual (Bill Gates, Carlos Slim) has too much money for one person,” or “The Gross Domestic Product is spinning out of control.” Rather than being interested in balance, in stability, we are fascinated by asymptotes–frogs at the bar of pleasure, even while our legs are being cut off. We don’t get it, that if you fight the ecology of a system, you lose, especially when you “win.”

How, then, can excess be curbed in a free democratic system? For we can be sure that the intelligent frogs, who are really quite exceptional, are not going to be listened to, and certainly have no power to enforce their insights. True, there are certain countries–the Scandanavian nations come to mind–where for some reason the concentration of intelligent frogs is unusually high, resulting in decisions designed to protect the commons. But on a world scale, this is not very typical. More typical, and (sad to say) a model for many other countries, is the United States, where proposed “changes” are in fact cosmetic, and where the reality is business as usual.

Of course, authoritarian systems don’t have these problems, which is a good indicator of how things will probably develop. Under the name of “harmony,” for example, China regulates its citizens for what it perceives to be the common good. Hence the famous one-child policy, introduced in 1979, supposedly prevented more than 300 million births over the next twenty-nine years in a country that was threatened by its own population density. In the case of the United States, the imposition of rules and limits on individual behavior to protect the commons is not, at present, a realistic prospect; the population is simply not having it. But how much longer before this freedom of choice is regarded as an impossible luxury? In fact, no crystal ball is required to predict the future here. The tragedy of the commons–what Hardin called “the remorseless working of things”–is that a society such as that of the United States won’t undertake serious changes even when it is sitting on the edge of an abyss. It has to actually be in the abyss before it will entertain such changes; i.e., it has to be faced with no choice at all. It seems unlikely now, but things are probably moving faster than we realize. In terms of population, energy, food, resources, water, social inequality, public health, and environmental degradation, a crunch of the type I am referring to may be only twenty years away.

[ElectricFetus]

The energy is out there, it just a matter of tapping enough of it in time. Social inequality is decreasing world wide and democracy is increasing. Sure collapse is possible, but not working for a better future will insure collapse.

[kmguru]

collapse is possible because we have too many Lawyer Leaders...followed by Economists...

[Billy T]

... not working for a better future will insure collapse.

In graduate school, I had a live in girl friend who had quite an ironic streak. At least once per day she would invert something I (or others) said. Often making more truth than the original version. In her honor I´ll do that with your statement:

Ben Bernanke is working* for a better future and, if his efforts continued, that will insure collapse.

* By printing more than 1 trillion dollars annually now

SUMMARY: "The road to Hell is paved with good intentions."

[ElectricFetus]

In graduate school, I had a live in girl friend who had quite an ironic streak. At least once per day she would invert something I (or others) said. Often making more truth than the original version. In her honor I´ll do that with your statement:

Ben Bernanke is working* for a better future and, if his efforts continued, that will insure collapse.

* By printing more than 1 trillion dollars annually now

SUMMARY: "The road to Hell is paved with good intentions."

I meant working for a better future as in the little things you your self can do other then say building a bomb shelter, stocking food and assorting a large armory of weapons in preparation because "the end is ni!". If everyone in the world decided to do that and had that mentality then the world would in fact end and soon. Little things like be productive, help others, invest wisely, if you predict an economic disasters is coming then you should ask "how can I prevent it?" not simply raise your hands up and flail wildly that the end is coming and nothing can be done to prevent it.

[Billy T]

... if you predict an economic disasters is coming then you should ask "how can I prevent it?" not simply raise your hands up and flail wildly that the end is coming and nothing can be done to prevent it.

About 10 years ago, before posting at Sciforums, when it might have been possible to avoid the coming economic disaster, I wrote and published Dark Visitor which is a fictional but possible cosmic disaster. (Small black hole passes by our solar system, slightly changing Earth´s orbit to make Northern hemisphere winters milder and summer significantly cooler. - Sounds nice, but huge snow falls, like occasionally do occur in early Spring happen nearly every day all winter long, and the colder summers that follow can not melt it all. - In a decade, sea level has dropped and no port can be used, etc. with thick ice sheet covering all but the southern tip of Florida in less than two decades, etc.)

I wrote Dark Visitor as I was concerned that the best and brightest US students were seeking careers, not in math or sciences, but with greatest earning potential (law and business / wall street, etc.). Dark Visitor is presented as the true observation of an astronomer, who has been studying Pluto´s perturbations from his Southern Hemisphere observatory (Pluto can only be carefully observered from the S. Hemisphere now.) That is how he detected the BH approaching.

I wanted at least some of these bright money-driven student to look at the physic* in Dark Visitor to see if it was possible that their plans were invalid and perhaps become interested in the math and physic area as US had already lost technology leadership to Asia and was in great danger of losing scientific leadership to Asian too.

* Dark Visitor could be true. Its physic is valid. - Most (>95%) on earth would die, but I adjusted the BH´s path** so that only all coastal cities in the Southern Hemisphere, SH, get washed into the sea by the torrential rains. (While Earth is closer to the sun during the NH´s winter, the mainly oceanic SH has greatly increased summer evaporation with dense clouds often spanning the globe - that is the origin of the 100 foot plus annual snow falls in the NH, making a transition to a PERMANET ice age.)

SUMMARY: I did what I could, back when avoiding the disaster was still possible. Now the developed nations are like an airplane over the ocean without enough fuel to reach an airport. A crash is only a question of when. There is no way the global and increasing flood of thin-air money can be undone without prompting the crash - a few years at best of "can kicking" is all that is left now, especially with US´s dysfunctional Congress.

** Trajectory calculation, including the changes in Earth´s orbit, is a three body (BH, Earth & sun) problem - the finite time step program used is one of several appendices. One chapter considers 4 or 5 dense non-reflecting alternatives to the black hole. My favorite is the aggregate*** of North and South magnetic monopoles - very dense as each is according to theory, more than 1000 times more massive point than the proton. Two chapters explain climate (before and after BH passes) - Things like why the prevailing wind comes from the West, etc. Actually, Dark Visitor is a well disguised physics book, calculating with all three of Kepler´s laws, etc. but never naming them. - My intended readers would never knowingly open a physics book. The first chapters are a "hook" that give the history of the astronomer and his ancestors, etc. He is very rich but has zero interest in the large cattle ranch he inherited, etc. except it permitted him to build his well equipped observatory with meter diameter mirror.

*** This explains why none have ever been found - Unlike the weak gravitational attraction that assembled stars their mutual inverse square attraction is very strong. All formed "lost in space" aggregates by time first star was born.

[rodereve]

"Democratically elected government" is an ideal, and the advantages of that ideal should not be attached to the pseudo-democracies that exist in reality. Not to bash the American forum-goers, but I don't think we should be taking the US as the model example of a democratically elected government. From an outside perspective (Canadian), its sad to watch the whole political orgy that occurs when election time swings around. Why has it become a money race. Does anyone see the huge contradiction in billions of dollars invested into political propaganda and commercial ads that are saying "4 trillion dollars in debt -- How can we solve it?". And political ads are becoming less about the capabilities of one candidate, but how incapable the other candidates are. The electoral candidates we have for the US presidency is not about who is the smartest most capable person, but who isn't a complete retard. Perry, Gingrich, Cain...how do these people get to the point where they even have a chance to become president. I know these aren't the smartest and most capable men the US has to offer. I guess I'm just angry because the US election is not about the United States, when you decided to elect Bush for 2 terms it affected the entire world lol

Rant complete sorry for getting on a tangent. I'd just like to say that economies and government type may not correlate. You can have bad democracies and good dictatorships in terms of the economy running smoothly. It just depends on the interests and the will of the people under that government. The government represents at a larger extent the type of conditions the people are willing to endure and live with.

[Billy T]

Certainly the typical voter supporting the politicians who promise more benefits now and will send the bill to later generations are a powerful force for instability (main theme of this thread) but central banks printing fiat money to pay the current bills are a force for instability too.

If the interest payments {on the debt} grow faster than the economy then the situation becomes unsustainable - the debt payments will cause inflation. At this time US borrowing is on an unsustainable trajectory. That's not a problem now, but it will become increasingly difficult for borrowing to produce enough deflation* to counter the inflation from interest on past borrowing. The Fed won't be able to monetize a deficit due to the inflation, so we'll be stuck with increased inflation or increased taxes. Based on CBO analysis, I estimate we have one to two years before the debt induced inflation starts to hinder overall economic growth.

--------
*Initially borrowing {from investors, not future generations by Fed just “printing” money} removes money from the economy,** which is deflationary, but when in a quasi-steady state is reached, as is now the case in US, especially with interest rates rising, the repayment of maturing bonds add more money than is removed due to interest paid. If there are no investors and Fed just pays growing debts by printing money that is road to Zimbabwe currency.

** Until it is all spent and even then if some is spent buying, for example, French wine and the vineyard owner wants to hold some dollars, then even long term money has been removed from the US economy. Until last few year confidence in dollar was stronger than many other currencies so holding dollars by foreigners was very very common - so much so that most physical green dollars were not inside the USA. The "Russian Mafia" alone was estimated to hold more physical dollars than all Americans did. In Brazil, bribes were paid with boxes or suitcases full of dollars as at one time inflation was 250% per year! (Person getting bribe, could not invest it even in an indexed to inflation account as he would need to account the the Brazilian "IRS" where the money had come from, so he just held the cash in his vault.)

[Billy T]

Answer: For the US´s, No.
Ever growing debt GDP ratio is not stable.

Take the long term averages (21% and 18% dashed lines). Government outlay exceed income by 16.7% and currently GDP is growing by 10% of that!

Not to mention that the balance of trade grows ever worse, but that will correct when Joe American has hit his buying limits. Infact in less than five years I expect US to have a trade surplus as financially busted Joe* will not be buying and the imported oil bill will be much less.

* Food prices climbing faster than inflation and his salary continuing to decline in purchasing power so ever more "Joes" go to food stamps, and soup kitchens etc.

[wellwisher]

The reason outlays are higher than revenues is because taxes are taken by force. One does not have the choice to opt out. Like the mafia protection racket, you are forced to participate in something you might not choose, if you had a choice. But since both can use force, you have no choice but be shaken-down.

Picture if taxes had to be collected, with the option to opt out, like a political fund raiser. The politician might still go into debt, but it can't force his contributors to pay, if he exceeds their limit of giving. The debt belongs to him. He would need to go back and fund raise again to make up the difference or pay from his own pocket.

On the other hand, say he could shakedown his contributors for money, with threats, like we do with taxes or mafia protection. There is no reason he can't overspend since it only means he needs to get more goons. This result is the graph above.

I like the idea of collecting taxes being more a fund raiser. Each political party has favorite programs and their own minions could be ask to attend the fund raiser so they can fund what they think is important. Or is stealing preferred?

The Church did it with a 10% tithe (forced) and the rest done by charity (fund raiser). Maybe we could blend revenue stealing and fund raising so there is less waste and more accountability.

[Billy T]

The reason outlays are higher than revenues is because taxes are taken by force. ...

What are you smoking?

I want some too so I can believe that people would increase their taxes if not required to pay by law.