Carcano
Valued Senior Member
Hehe-hoho-haha...I'm supported by the Koch Brothers?
Living in Canada, a lifelong supporter of the green party and Canadian socialism???
Endless QE
- Thread starter Michael
- Start date
Living in Canada, a lifelong supporter of the green party and Canadian socialism???
So are you saying the Ron Paul Libertarian policies you advocate here with Michael, an avowed Libertarian, are consistent with the Green Party and Canadian socialism or are you just a common run of the mill troll?
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To continue the plane 500 miles from land with only 300 miles of fuel, I guess an optimist like you thinks a better pilot can save it.
Apparently browbeating joepistole with bad analogies passes for discussion of "business and economics" these days. Maybe next you can intimidate him by asserting that your dad could kick his dad's ass.
Your analogy is overly simplistic and does not adequately describe the present situation. There are no fixed endpoints as you seem to think. There are no fixed distances or timeframes. A better analogy would a group of discordant people are stranded on a remote barren island in a shallow lake within wading/swimming distance of shore. They each have only the clothes on their backs, the material to build a raft and each has a loaded gun. And they are all fearful of water. They each have a choice, they can face their fears, build a raft and float to shore and rescue themselves; they can commit suicide and/or some combination of murder-suicide with their guns or they can slowly starve and die.
I am advocating the former, building a raft and floating to shore. The economic problems we face today are not new. We know the solutions. The question, the real question, is do we have the political will make the rational decisions?
Carcano
Valued Senior Member
The airplane analogy is largely demographic...with the first of the boomers starting in 2010 to draw more from the government than they contribute through taxation.
We are just two years into a demographic wave that will crush whatever is gained through taxing the rich or downsizing the military.
And we all know the chances of republicans suddenly and magically disappearing from Washington.
Its like asking if pigs had wings...could they fly?
Nor is there a fixed amount of "gas in the tank." The US economy will continue to produce output for as long as there is a USA with an economy to speak of.
Moreover, we can readily observe that serious people with a stake in the question (i.e., the bond markets) do not share BillyT's perspective - if they did, the bond markets would already be in revolt. They function on the basis of expectations, so if there is a clear expectation that default/monetization is in the future for the national debt, they'd already be demanding huge interest rates (the way they are in Spain, Greece, etc. in recent times). But they aren't doing that (rather the opposite) so the conclusion is clear: these experts who study this issue for a living, and stake billions on their appraisal of such, do not see debt crisis as imminent or even on the horizon.
If the analogy is supposed to address only the question of solvency of Social Security and Medicare in light of the retiring Baby Boomers, then it should have included some explicit indication of such. As it is, it was presented as a general analogy for the US public debt as such.
Moreover, if we are sticking to the question of the Boomers drawing on benefits as they retire, the analogy would have to include the huge trust fund that was built up over decades now explicitly to cover exactly that issue. So, in that analogy, there is an additional "reserve" gas tank that covers exactly the extra demands, and keeps the system solvent for decades yet (at which time, after the Baby Boom effect has passed and stabilized, the system is projected to be close to solvent in the long run).
http://en.wikipedia.org/wiki/Social_Security_Trust_Fund
According to the Social Security Trustees, who oversee the program and report on its financial condition, program costs are expected to exceed non-interest income from 2011 onward. However, due to interest (earned at a 4.4% rate in 2011) the program will run an overall surplus that adds to the fund through the end of 2021. Under current law, the securities in the fund represent a legal obligation the government must honor when program revenues are no longer sufficient to fully fund benefit payments. However, when the trust fund is used to cover program deficits in a given year, the Trust Fund balance is reduced. By 2033, the fund is expected to be exhausted. Thereafter, payroll taxes are projected to only cover approximately 75% of program obligations.
Aren’t you the self-acclaimed Libertarian, Green, socialist, communist who lives in Canada? So where does this “we” stuff come from?
You are making a very important, salient point with your continuing emphasis on the political aspect of these issues. Things like default, debt monetization, hyperinflation etc. are all fundamentally political events. It is fallacious to start with the presumption that they are purely economic phenomena that can be conclusively analyzed and predicted simply by looking at economic data and trends, and then working out mathematical predictions on that basis. Likewise, even comparisons to historical instances of such cannot make good guides to the current situation if they fail to meaningfully encompass political factors, and only work in terms of macroeconomic indicators, etc.
Policies like QE are tantamount to inflight refueling. So far, so good - we still have lift. You can unfasten your seatbelt now. You're free to move about the cabin.
The problem with switching pilots midair is that the wise guy expects you to hang on to your seat cushion while he ditches in rough water. Getting home all boils down to a combination of brains and guts, which is why he's still way back in the tail section, grousing about the service.
Not quite. In flight refueling is inserting of aid from some OTHER source. The Fed giving dollars to the bank is from a US source. - QEs just adds to the growing fiat money supply and the eventual debt and inflation. That "refueling" is more like taking gasoline from the right wing tank and transferring it to the left wing tank, with some administrative losses.
Real "financial refueling" would be if China or some other country rich in assets, were to make a financial GIFT to the US with no need for it to ever be repaid. Borrowing even more from our unborn children is NOT "financial refueling." If the Fed printing more money were a solution, there would be no problem, and the current financial mess would not exist.
BTW I only mentioned the new and increasing stress of baby boomers retiring to point out that the US´s financial stresses are increasing. - That "growing out of the debt" is getting ever harder with each passing year. Likewise, fact that there are 3 million less jobs than four years ago while US population has grown by 10 million is (via social aid programs) also increasing financial stress. As is the fact the purchasing power of wages of the middle class is dropping by 1.5% annually for the last four years too, which means their taxes will be worth less to the government too - more increasing stress.
Even if these and other stresses were not growing worse there is no way 2% GDP growth can over take a debt growing by 10% annual. That is why changing pilots of the doomed plane will not help - simple math. Not even China´s several times higher GDP growth could solve the problem, and interest on each dollar of the debt is just now starting to rise - Bernanke can´t push rates below zero. The rate on the 10 year treasury bond was recently as low as 1.8% but now is at least 15% higher - more financial stress even if the debt were not growing by 10%. I .e. tax collections on "Big Mac" job salaries are less than on the jobs in factories that went to Asian factories.
US bonds do now look better than any other horse in the glue factory line, so yes those in Europe with funds despirate to invest out side of the Euro zone are buying some and US houses to rent, and gold, and farms all over the world, etc.
OK - that is enough "gloom and doom" facts for now - go stick your heads back in the sand to feel better.
I did not mention that the "too big to fail" banks are now even bigger now, that Wall Street (even London´s Libor setting banks) is as corrupt as ever, or Israel may attack Iran soon, or the era of cheap oil is over, or that China has stopped (on net) to buy US bonds for two years now, or that food prices are going up about twice the inflation rate, which is rising, or that the St. of Hormuz is easy to close with mines tossed over the sides of fishing boats (and Russia has bottom mines almost impossible to sweep as they require many triggers, including the pressure wave signature of a large oil-laden tanker)* etc.
*Russia would like to see oil selling for > $300 / barrel as would Hugo Chavez, but he does not have these very modern mines.
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Maybe if we torture this terrible, invalid analogy a bit more - say, by adding an air traffic controller and provisions for a water landing - we can totally forget about the fact that this is a pointless exercise in inanity.
This kind of argument via stilted, prejudicial analogy would make even Thomas Friedman blush.
This kind of argument via stilted, prejudicial analogy would make even Thomas Friedman blush.
That's not even close. The impending crash has been averted. The policies have kept us going. The Fed succeeded, and will probably continue to succeed. Inflation is not even an issue. And debt is not an issue during a recession. That's blue-sky stuff for fat days, when fish are jumpin and the cotton is high.
In a recession, all that matters is the recovery. All the intangibles - like debt 20 years from now - simply have no relevance. Without a recovery, life 20 yrs from now is going to have a lot more to worry about than inherited debt. We have to save the farm now. That requires adding some debt. The overconcern with intangibles like foreign debt, or future debt, or even future inflation are all secondary. The argument only serves to throw fuel in the flames, to incite the Right Wing to force an overcorrection and undermine the best efforts of the people who are putting up a helluva fight at the helm.
It's a matter of priority, and failing to see that is the formula for disaster that will invite all the trauma you're worried about, with a vengeance. First things first. Get the recovery rolling, then come in with the cleanup efforts to stem the long term effects. There simply is no other way.
I agree with all I have quoted, and that if pigs could fly we could save on pork delivery costs. My point, well documented, is that we with 100% debt to GDP ratio now are well past to point where recovery was possible and losing more ground (or should I say fuel for the air plane is leaking from the tank) with every passing year.
What economic forces do you see that will even stem the current losses (from sound economy) much less turn it around? Yes kicking the can down the road does "advert" current disaster but makes it worse in the end. Greece has averted collapse for 3+ years.
Carcano
Valued Senior Member
In this case, QE is more like diluting the fuel.
The fuel tank gauges return to FULL...but the plane is slowing down.
Perhaps that is better analogy as it gives the ILLUSION that all is OK. If you want to hear some real gloom and doom, also backed up by facts and simple math analysis watch this video: http://pro.moneymappress.com/PBICOM...6570&s=821892&u=40779324&l=490882&g=96&r=Milo
He got his MBA from Harvard more than 30 years ago, has advised US and many other governments etc. etc. but you can kill the somewhat long video when he starts to tell how exceptionally well qualified he is as soon thereafter he will begin his sales pitch telling you how you can avoid being in the 99% of Americans who will soon be financially destroyed.
Carcano
Valued Senior Member
I watched most of it....does he ever get around to the issue of Dividend Tax?
Not as I recall. I often am only half listening to these promos while doing something else so he may have. It was very impressive to me that almost all the net gain in many, if not most, stocks over the last few decades was actually in via the dividends they pay. He, I think, is correct that there has been very little gain in purchasing power with buy-and-hold, which has been my approach, especially if one considers the taxes paid on your nominal gains.
I have tried a few times his "buying dividends" (buy a few days before stock goes ex div) but if the dividend is significant it has been my experience that the post ex div date drop kills any gain so don´t do that any more - not worth the effort to find when stock with attractive dividend will go ex div.
And that is why Billy T finds himself revising and pushing out his Armageddon dates. He repeatedly fails to acknowledge the roll politics plays in his prognostications.