Mystery Economic Theater 2012

[Prime95]

Originally Posted by chappy

The US could easily handle a Federal Deficit much higher (think two to three times higher) with very little impact.

You should run for office - you'll fit right in (with either party). The heck with Greece, Zimbabwe here we come!

[Dubslow]

Originally Posted by Prime95

Check your math. ~16 trillion debt / ~350 million people ~= $50K. Perhaps you remembered the debt-per-family-of-4 value.

Either way it is a cesspool.

It's 312M, definitely quite a bit less than 350M, but your estimate is still about right (I get 51.3K per person).

[ewmayer]

Originally Posted by chappy

This is always thrown about, but is just as misleading as anything. We are barely above the all time low (since 1929 when these stats started being kept track) of the ratio between average income and the debt. In 2010 it was below 1 for the first time in 60 years. in May of 2011 it was still .92 (if you took all income based on May 2011 annualized it would pay off 92% of the debt.) This is way down from the 70's and 80's when this ratio was below .3

Reference, please - Without seeing where your alleged data come from, all I can say is that your claims would imply that average incomes have been rising faster than federal debt, which would imply income rising on the order of 10% per annum. Which happens to be about 10% more annual rise than incomes have actually been showing.

Additionally this doesn't even begin to cover the other sources of income.

Such as?

Debt, the deficit, and throwing around numbers in the trillions, claiming that 'printing money will lead to an economic catastrophe,' the stupid gold standard, is always politics of distraction. (people like to talk about it as if it has meaning, but most of the time it doesn't)

If you consider government theft of people's savings and destruction of their earnings power by way of deliberate currency debasement to be a "distraction", I would love to hear what you think are more "substantive" issues.

The US could easily handle a Federal Deficit much higher (think two to three times higher) with very little impact.

Based on the myriads of other countries which are managing debt-to-GDP of over 200% with no impact on their economies? Please list countries doing so, and summarize their economic status.

Remember that the only thing that big-finance was worried enough to (stupidly) lower the credit rating for was ham-stringing the ability to borrow more money--they are not concerned in the least that it won't be paid back.

If we follow your prescription, we should indeed have no such concerns, because what is now merely a concern would become a certainty.

Seriously if the US greenback isn't good, then every other currency is already worthless. (I'm not being Jingoistic here--it is the simple economic truth of our time. The same was true in the past of the British Pound, and the dollar could be replaced by the Euro, the Yen, or the Yuan, but it hasn't happened yet.)

The same "what" was true of the Pound - that it was worthless? That is news to me. Your "could be replaced" statement is gibberish. The rest of us are talking about an environment of competitive currency debasement which is steadily robbing billions of people of their savings ad earnings power. It's not a matter of being worthless, it's one of being steadily made "worth less" by criminal central banks (I say criminal because all the countries in question have stern laws against counterfeiting, which they ignore when it comes to their central banks). You seem to be trying to make some incoherent point about the global reserve currency, which is only peripherally related to the ongoing global currency race to the bottom.

[fivemack]

I hadn't realised that US savings-accounts rates were so particularly awful - I'm getting 3.7% on UK-government-insured tax-free two-year bonds, whilst it looks quite difficult to get 1% in the US.

I suppose that's why Americans are obsessing about earnings power getting eroded in a way that sounds pretty insane to my British-calibrated ears; -1% real growth brings out the Micawber even though it's not enough to halve a lump of capital's buying power in a lifetime. American stocks also tend to pay pretty awful dividends: the best yield in the DJIA 30 is 5% from AT&T at an unsustainable 234% payout ratio; Intel at 39% pays 4.19, Microsoft at 50% pays 3.29; Aviva in the UK is 7.6% whilst managing the interesting feat of being a loss-making insurance company, RDS is 4.9% at the same payout ratio as Intel, BAE Systems is 6.1% at 52% payout ratio.

It took two world wars (the Great Depression hit the UK much less hard than it did the US) to change the pound from being the world standard of exchange to being the currency of a second-rate power on an island off the coast of the EU; even quite an enthusiastic episode of bank over-exuberance is unlikely to be enough to dislodge the dollar.

[chappy]

ewmayer, though I rarely agree with you completely on economic issues, I generally feel that you speak from knowledge and belief. And generally more carefully than my gut feeling tells me you read my post. Especially the last paragraph. So I will continue forward under the assumption that it was my unclear language that brought about this misunderstanding, and not your reading of it. Though fivemack seems to have caught the meaning just fine. Perhaps it is with the clear sight of Once-Was-Empire, we may get there soon enough to see with eyes unclouded.

I've been drinking so my prose may be less prolix but more understandable, and my Cardinals are losing so my will is down. But, I will endeavor to address your concerns in more or less reverse order.

Right now the world economy is tied to the dollar. Every market manipulation by countries is based upon the relation of ____X___ to the dollar. For example. China has in the past tried to manipulate the international money funds such that the Yuan is worth less relative to the Dollar. I'm sure they wouldn't mind that effecting the Peso, the Euro, the Yen--but they strive to make it match the Dollar. Simply put, if the dollar fails the entire international economic system fails. And more importantly, none of the other countries in the world (and none of the major banks, economic lending institutions, or stock markets ever act as if they believe it is possible for the dollar to fail.)

As to the gibberish, I should think it is obvious (as Fivemack found it) that I was saying that the US Dollar is not eternally in this position, it is currently in this position. Go back a hundred years and the British Pound was the standard (and had been for a hundred years.) Follow the course of economic growth and two world wars, the marshall plan, the dumping of the gold standard and hard economic times for Great Britain in the 60's and you will see the trail by which the Dollar became the undisputed world currency. Even the Euro couldn't unseat it.

Now, I freely admit that this is a temporary thing. But, I agree with Fivemack that at the current time there are still no serious challengers.

B) Countries whose debt to GDP are 2.4 times the US: Japan. Economic outlook of Japan. continued 2% growth, even following the Tsunami and Nuclear problems.

But, again you (and Prime) have made a claim that you haven't proven, and that I don't agree with. Which is that debt to GDP is the most beneficial (or even a valid) way to talk about whether debt is good.

When you personally buy a home do you limit your spending by how much you can possibly make in a year? Or do you limit your spending by 1) some multiple of that number so that you can meet all your debt obligations and still have some coins to rub together. 2) assume that there is some value inherent in the debt--the home is worth more than the money spent plus interest. Since a great deal of the debt is money we pay to ourselves and money we have invested in the hope of future earnings I believe we should be talking about 1) what investment in the future the government is making with our debt-money, and 2) if that is worth it, and 3) how can we ensure that when the economy rebounds we begin to work that debt down (instead of cutting revenues by short-sightedly giving tax breaks to the rich).

If you consider government theft of people's savings and destruction of their earnings power by way of deliberate currency debasement to be a "distraction", I would love to hear what you think are more "substantive" issues.

Of course none of that first sentence is even remotely true. I just don't think any of those things have been done in the US. The Fed gave low and zero interest loans of about 16 trillion dollars during the early part of the economic crises. Effectively creating an amount of money equal to the total of the National Debt in 2 years. What happened to your purchasing power in that time? What happened to value of the Dollar in the world market? Nothing. If you want proof that the world trusts the dollar, there it is.

As to substantive issues: see #3 immediately before the quote, or the rant coming later about corporate taxes. Or domestic education and job creation. Or the need to get out of the current war situations while also providing a path to helping the UN become an actual police force with teeth. Providing a path for immigrants to legally work, while at the same time paying as much into the system as well as forcing the companies that exploit them for great profits to also shoulder the social costs. (and also provide a more realistic path to citizenship.) Healthcare/medicare/social security and social safety nets in general. All of these things concern me a great deal more than OMG the DEBT, its so BIG! It's golly almost as much as it was under Reagan, less than it was during either WW. Yawn. Plus now my Cardinals need to score a touchdown and go for two to beat the Giants. :)

Reference, please - Without seeing where your alleged data come from, all I can say is that your claims would imply that average incomes have been rising faster than federal debt, which would imply income rising on the order of 10% per annum. Which happens to be about 10% more annual rise than incomes have actually been showing.

Actually it doesn't imply anything of the sort (and as a maths person you should be able to spot the fallacy you just committed.)

But, first we'll get to source materials: Personal income in billions various debts current population estimates various fun stats on US household debts

Finally, what other sources pay into the Governmental coffers? well the only one that matters (to me) is those sociopathic "People" created not from clay, not by any god, but by 5 douchebags in black robes. Corporations currently pay about 10 % of the federal revenue in earnings taxes. A tax rate of about 13.8% (why do all these rich "People" Robots like Romney and Legal entities like General Electric pay so little in taxes? and always complaining about 13-14%?) Anyway if they were taxed at the same level I am (single above average wage earner paying 30% into federal taxes (and another 6% in state and local taxes) the budgets would start looking pretty good.

Here is a page that hits a great deal of the high-points with regard to Corporate taxes.

[chappy]

Originally Posted by chappy

We are barely above the all time low (since 1929 when these stats started being kept track) of the ratio between average income and the debt. In 2010 it was below 1 for the first time in 60 years. in May of 2011 it was still .92

Don't drink and post kids. This should read "in 2010 is was above 1 for the first time in 60 years. Not below. Though this mistake still doesn't make the criticisms so far valid.

Plus "started being kept track?" really? Me talk good.

anyway, the average income versus average debt ratio would still be above 1 except for the last couple years decline in real wages, and could be again if corporations started hiring more people with their record profits. Or if either capital gains or corporations were actually taxed at the same levels as personal income (since in effect capital gains and corporate profit are causally related--either one could be taxed.)

This would have the net effect of forcing corporations to invest in growth of total income (so that their smaller percentage of a larger number would be greater) which historically has been accomplished by expanding business and investing money in the business (especially helpful when credit is 1) cheap 2) freely available.)

[cheesehead]

Originally Posted by Prime95

I disagree. A logarithmic chart would make a President/Congress that took the debt from $1 to $100 worse than one that took it from one trillion to two trillion.

George,

Do you really think that the U.S. national debt has been $1, or $100, at any point during your lifetime?

If not, your objection is a strawman, perhaps intended to conceal Republican responsibility for pumping up the debt for three decades.

[Prime95]

Originally Posted by cheesehead

Do you really think that the U.S. national debt has been $1, or $100, at any point during your lifetime?

Where did I say it ever was??? I merely gave an example showing that a logarithmic chart isn't the best choice.

If not, your objection is a strawman, perhaps intended to conceal Republican responsibility for pumping up the debt for three decades.

Aaarrggghh - not the tired, worn-out strawman argument again. Where did I say that a %GDP chart would make Republicans look better??? Geez, chill out. I've made no attempt at creating such a chart and have no idea if it will make Republicans look better or worse than your proposed chart or the original author's chart. My only claim is that it would be a fairer chart.

[axn]

<offtopic>
I like the title of this article.
</offtopic>

[Fusion_power]

We are in debt approaching $200,000 per man woman and child already. I don't need to see much of a graph to understand that we have permitted politicians to put our children in a cesspool of debt.

George, current debt = $16.2 trillion give or take $100 billion.
Unfunded obligations = $10.5 trillion (excess spending above tax revenue per year over the next 25 years, this is CONSERVATIVE)
Open committments social security = $21 trillion (amount above current balance plus future expected revenues over 75 years)
Open committments medicare = $25 trillion (amount above current.....)

Add then divide by 400 million people. This takes into account population growth over about 25 years.

paraphrasing slightly, no matter how you count it, it is a cesspool of debt saddled on our children.

DarJones

[ewmayer]

@chappy: There are hundreds of tables and charts at the BEA site - since you're the one making the assertion, why don't just tell precisely data sets it is based one?

Originally Posted by chappy

I've been drinking so my prose may be less prolix but more understandable, and my Cardinals are losing so my will is down. But, I will endeavor to address your concerns in more or less reverse order.

Yes, you all were the most recent victims of the latest improbable comeback (first from down 0-2 in the best-of-5-game series vs Cincinnati, now from down 1-3 in the best-of-7-series vs St. Louis) by the SF Giants. I expect the Anheuser-Busch breweries are working overtime to meet local demand, first for game-day brewskies, now for drowning-sorrows ones.

Right now the world economy is tied to the dollar. Every market manipulation by countries is based upon the relation of ____X___ to the dollar. For example. China has in the past tried to manipulate the international money funds such that the Yuan is worth less relative to the Dollar. I'm sure they wouldn't mind that effecting the Peso, the Euro, the Yen--but they strive to make it match the Dollar. Simply put, if the dollar fails the entire international economic system fails. And more importantly, none of the other countries in the world (and none of the major banks, economic lending institutions, or stock markets ever act as if they believe it is possible for the dollar to fail.)

Your and Tom's notes about the UK pound would seem to indicate that such faith in fiat is misplaced. I would argue that in terms of global trade imbalances and overall debt-to-GDP, the entire international economic system already has failed - we are simply in the last-desperate-acts stage whereby those whose power and reputation is tied to the failed system are desperately trying to avoid recognition of the failure.

As to the gibberish, I should think it is obvious (as Fivemack found it) that I was saying that the US Dollar is not eternally in this position, it is currently in this position. Go back a hundred years and the British Pound was the standard (and had been for a hundred years.) Follow the course of economic growth and two world wars, the marshall plan, the dumping of the gold standard and hard economic times for Great Britain in the 60's and you will see the trail by which the Dollar became the undisputed world currency. Even the Euro couldn't unseat it.

Now, I freely admit that this is a temporary thing. But, I agree with Fivemack that at the current time there are still no serious challengers.

In that respect one should examine what factors allowed the Dollar to unseat the Pound - besides the lender/borrower relationship between the US and UK resulting from the 2 world wars, we had the US in the unique position of emerging from WW2 as the only major industrial nation with an intact industrial sector and negligible domestic infrastructure destruction. Also note that the Bretton-Woods agreement required broad agreement among multiple nations, which agreement was tied in no small part to the perceived stability of the Dollar. That was abrogated by the U.S. in 1971 largely as a result of its Vietnam-War debt (there is an obvious common theme here -- we should discuss "central bank money printing: An aid to warmongering?" in corollary fashion), but the U.S. has effectively leveraged its global superpower position to stifle any discussion of alternatives. More insidiously, the fact that just about every other develop(ed|ing) nation has bought into the "growth through debt-financed consumption" economic paradigm means that alternatives are in scant supply. The 2 major ones post-1971 have been the Euro, whose alleged stability has now been exposed as a debt-riddled lie, and the Chinese currency, which is at least backed by some real economic productive capacity, but lacks political backing, in no small part because it is tied to a deeply anti-democratic government.

Also note the deep irony of the post-WW2 Bretton Woods system, contrasted with the government-intervention-dominated faux capitalism and rampant central bank money-printing the world is now beset with:

The experience of the Great Depression was fresh on the minds of public officials. The planners at Bretton Woods hoped to avoid a repeat of the debacle of the 1930s, when intransigent insistence by creditor nations on the repayment of Allied war debts and reparations, combined with an inclination to isolationism, led to a breakdown of the international financial system and a worldwide economic depression.[2] [u]The so called "beggar thy neighbor" policies that emerged as the crisis continued saw some trading nations using currency devaluations in an attempt to increase their competitiveness (i.e. raise exports and lower imports), though recent research suggest this de facto inflationary policy probably offset some of the contractionary forces in world price levels (see Eichengreen "How to Prevent a Currency War"). Despite devaluation policy increasing national liquidity these national policy responses were neither deep enough nor coordinated enough to restore international trade volume.

Which is why they're being tried again, presumably - because they were so wildly successful the last time around.