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  #51  
Old 02-01-2020, 12:19 PM
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Originally Posted by Jasmine View Post
I read somewhere that, as a global conglomerate, we are 217 trillion dollars in debt. It seems to be business as usual every day, so it doesn't seem to make much difference.
That also means that as a global conglomerate, we have 217 trillion dollars in assets.

A debt is a liability on the debtors' books, and an asset on the creditors' books.

For example, when you buy a T-Bill, that's a debt for the US Treasury, but an asset for you. That is business as usual.
  #52  
Old 02-01-2020, 12:28 PM
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Originally Posted by k9bfriender View Post
Yes, the economy is in a bubble that is financed by federal debt.
I'm not necessarily referring to federal debt here; I'm referring to political manipulation of the federal reserve to hold interest rates below where they should be. Moreover, considering how well this administration has regulated the aviation industry, it's probably a safe bet that they're not particularly interested in regulated finance - and that's a multi-trillion dollar powder keg waiting to detonate.

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Originally Posted by k9bfriender View Post
That trillion dollar give away in the tax bill translated into hundreds of billions of dollars of growth in the valuation of companies. Executives paid themselves more, and more money was divested to stockholders. All this money worked to stimulate the economy. Unfortunately, this stimulus if very inefficient and certainly not sustainable.
I would basically agree with this - it would seem that most of the money went back into corporate profits and dividends. If you're a holder of an IRA and 401K, I suppose you're relatively happy, but the real winners were the CEOs who turned in record profits and got compensation for them. The assistant manager working on the floor of the factory or retailer probably got very little in extra wages, and you can thank people like Bernie Sanders for whatever increases they did get.

It's not necessarily the length of the economic run that concerns me -- it's entirely possible for Obama to hand over the keys and for Trump to keep the economic engine going. But what concerns me is the emphasis on growth over stability, which is a traditional Republican economic philosophy. It usually ends in bank failures, corporate liquidation, market crashes, lost jobs, drug epidemics, and perhaps a few CEOs making a perp walk.
  #53  
Old 02-01-2020, 01:00 PM
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Originally Posted by asahi View Post
I'm not necessarily referring to federal debt here; I'm referring to political manipulation of the federal reserve to hold interest rates below where they should be. Moreover, considering how well this administration has regulated the aviation industry, it's probably a safe bet that they're not particularly interested in regulated finance - and that's a multi-trillion dollar powder keg waiting to detonate.
Yeah, the artificially low interest rates are concerning. It's a mixed bag for me, because as a business owner, I do benefit from cheap credit, but I certainly see that larger picture and how it's going to blow up.

If the economy was a good as Trump says it is, then we should be raising interest rates and taxes. Partly because we don't want to grow too fast, but mostly so that we have some breathing room to stimulate the economy by lower taxes and interest in the inevitable upcoming recession.
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I would basically agree with this - it would seem that most of the money went back into corporate profits and dividends. If you're a holder of an IRA and 401K, I suppose you're relatively happy, but the real winners were the CEOs who turned in record profits and got compensation for them. The assistant manager working on the floor of the factory or retailer probably got very little in extra wages, and you can thank people like Bernie Sanders for whatever increases they did get.
If you are holding a 401k or IRA, then right now you may be happy, but unless you are planning on cashing it out right now, then it's just numbers on paper, and doesn't mean anything at all. Will they still be happy with their retirement savings in a few decades when they actually need them? Will these short term boosts to their numbers hold up?

My guess is no. Right now they are contributing to their 401k's with the DOW at 28k. They are buying high, with the hope that it will go higher. If growth now costs us growth in the future, then anyone who is currently contributing to a retirement plan is really being scammed, and they will not have nearly what they think they should have when they need it.
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It's not necessarily the length of the economic run that concerns me -- it's entirely possible for Obama to hand over the keys and for Trump to keep the economic engine going. But what concerns me is the emphasis on growth over stability, which is a traditional Republican economic philosophy.
It's like a doctor who's only measure of a patient's health is the heart rate, and who considers a higher heart rate to be better than a lower one.

To that doctor, meth and cocaine are the most healthy drugs.
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It usually ends in bank failures, corporate liquidation, market crashes, lost jobs, drug epidemics,
true dat
and perhaps a few CEOs making a perp walk.[/QUOTE]

perhaps a few, but not for financial improprieties, but due to disloyalty to the president. The owners of Massey energy will get no bid govt contracts, and the owners of the Washington Post will get prison time.
  #54  
Old 02-01-2020, 03:08 PM
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Originally Posted by k9bfriender View Post
Yes, the economy is in a bubble that is financed by federal debt. That trillion dollar give away in the tax bill translated into hundreds of billions of dollars of growth in the valuation of companies. Executives paid themselves more, and more money was divested to stockholders. All this money worked to stimulate the economy. Unfortunately, this stimulus if very inefficient and certainly not sustainable.

If you think that the current growth is real, can you point to the factor that allows us to have a longer period of growth than any other in a modern economy that is not based on increasing deficit spending?
I agree that the tax cut was inefficient, and I wouldn't have done it at all. But what is the bubble? I don't see a bubble forming. The housing bubble was foreseen by many - not all - economists. I think the stock bubble in 2000 was small compared to the housing bubble, but some saw it. What is today's bubble? What class of assets is over-valued, such that when it pops, the economy will go into a recession?
  #55  
Old 02-01-2020, 03:10 PM
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Originally Posted by asahi View Post
I'm not necessarily referring to federal debt here; I'm referring to political manipulation of the federal reserve to hold interest rates below where they should be.


If anything, the Fed raised rates too quick between 2015-2018. There was very little inflationary pressure forming in the economy, and they were raising rates to head off something that wasn't occurring. It was actually right of them to stop raising rates, and even to lower them slightly.
  #56  
Old 02-01-2020, 03:20 PM
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...and they were raising rates to head off something that wasn't occurring.
That's what "heading off" means, right; trying to prevent something before it happens?
  #57  
Old 02-01-2020, 03:41 PM
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I agree that the tax cut was inefficient, and I wouldn't have done it at all. But what is the bubble? I don't see a bubble forming. The housing bubble was foreseen by many - not all - economists. I think the stock bubble in 2000 was small compared to the housing bubble, but some saw it. What is today's bubble? What class of assets is over-valued, such that when it pops, the economy will go into a recession?
Are you asking what is overvalued? Pretty much everything. I remember back in the late 90's investors were saying that P/E ratio's didn't matter anymore, then we had a market correction. Well, P/E values are getting to be a bit ridiculous as it is, and the earning that they are showing are being propped up by unsustainable high consumer spending that is financed by the tax cuts and by going into debt. With household incomes not rising, they will not be able to continue to finance the debt that they go into to finance their lifestyle.

The slightest wavering in consumer confidence, the slightest pullback in consumer spending at this point will cause waves that will cause a pretty severe correction. Keep in mind that this is not a bad thing in and of itself, it is a "correction", it is bringing the market back into balance. However, it is a bad thing for the people that lose money in it, and it can be made a much worse thing if the government reacts poorly to it, especially if they do more of the same of tax cuts and cutting interest.

If you are asking me what specifically will be the thing that pops the bubble and when, I will admit that I do not know, and if I did know I wouldn't tell you as I would instead be investing in some short selling.

If we tread the next few years carefully, we can emerge fiscally sound and sustainable. If we keep doing what we are doing, at some point, the house of cards will come crashing down upon us all.


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Originally Posted by Robot Arm View Post
That's what "heading off" means, right; trying to prevent something before it happens?
Just like vaccines.

Last edited by k9bfriender; 02-01-2020 at 03:42 PM.
  #58  
Old 02-01-2020, 03:53 PM
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Originally Posted by survinga View Post
I agree that the tax cut was inefficient, and I wouldn't have done it at all. But what is the bubble? I don't see a bubble forming. The housing bubble was foreseen by many - not all - economists. I think the stock bubble in 2000 was small compared to the housing bubble, but some saw it. What is today's bubble? What class of assets is over-valued, such that when it pops, the economy will go into a recession?
Agreed. We can disagree about the tax cut, but it seems like what the poster you were responding to complaining that this growth was somehow illegitimate because it all it did was cause companies to spend more of their own money, causing record low unemployment, and allowing consumers to spend more money seems like exactly what economic growth is.

The accusation seems to be that this can't last forever and when the economy slows down, it will slow down. You could say that about any time of prosperity.

I'm with you. What bubble is out there? House prices seem to be increasing a little more than I would be comfortable with and some of those lending practices that were present in 2006-2008 seem to be creeping back. Of course if there was something unknown like the dotcom bubble was out there we wouldn't know, but again, I don't think you can say that the surging economy is a fig leaf because something unknown might happen.
  #59  
Old 02-01-2020, 04:23 PM
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Agreed. We can disagree about the tax cut, but it seems like what the poster you were responding to complaining that this growth was somehow illegitimate because it all it did was cause companies to spend more of their own money, causing record low unemployment, and allowing consumers to spend more money seems like exactly what economic growth is.
Odd that you would take it to seem that way, when that is not remotely like what I said.

Also, consumer wages are not going up. Unemployment is down, but not for jobs that pay a living wage. By "allow consumers to spend more money" you are meaning allowing them to go further into debt in order to fund stock buy backs and dividends.

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The accusation seems to be that this can't last forever and when the economy slows down, it will slow down. You could say that about any time of prosperity.
No, the observation is that when it slows down, as it always has, it will cause waves that will cause far more damage than if the economy were not being goosed with economic stimulus when it is already going strong.

And that was for two reasons. One, the bigger the bubble, the more harm it does when it bursts. And two, if we are spending the deficit to stimulate an already growing economy and holding down interest rates, then what tools do we have left when we need them to stimulate the economy when it is in a recession?
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I'm with you. What bubble is out there? House prices seem to be increasing a little more than I would be comfortable with and some of those lending practices that were present in 2006-2008 seem to be creeping back. Of course if there was something unknown like the dotcom bubble was out there we wouldn't know, but again, I don't think you can say that the surging economy is a fig leaf because something unknown might happen.
Once again, please make some sort of cite where I remotely called the surging economy a fig leaf. Just because you choose to make illegitimate and stupid interpretations doesn't mean that they bear any resemblance to what I actually said.

It's not something unknown might happen. It is that something that has historically happened throughout the history of economies will happen. It is not unknown, other than the exact timing and nature of it. Can you explain why you think that we will never encounter another recession or correction? If not, then it's not exactly as you described, an unknown that might happen, now is it?

Do you understand now, or are there any other parts of this very simple lesson in economics that you will choose to misunderstand?

Last edited by k9bfriender; 02-01-2020 at 04:27 PM.
  #60  
Old 02-01-2020, 04:50 PM
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Originally Posted by k9bfriender View Post
Odd that you would take it to seem that way, when that is not remotely like what I said.

Also, consumer wages are not going up. Unemployment is down, but not for jobs that pay a living wage. By "allow consumers to spend more money" you are meaning allowing them to go further into debt in order to fund stock buy backs and dividends.


No, the observation is that when it slows down, as it always has, it will cause waves that will cause far more damage than if the economy were not being goosed with economic stimulus when it is already going strong.

And that was for two reasons. One, the bigger the bubble, the more harm it does when it bursts. And two, if we are spending the deficit to stimulate an already growing economy and holding down interest rates, then what tools do we have left when we need them to stimulate the economy when it is in a recession?


Once again, please make some sort of cite where I remotely called the surging economy a fig leaf. Just because you choose to make illegitimate and stupid interpretations doesn't mean that they bear any resemblance to what I actually said.

It's not something unknown might happen. It is that something that has historically happened throughout the history of economies will happen. It is not unknown, other than the exact timing and nature of it. Can you explain why you think that we will never encounter another recession or correction? If not, then it's not exactly as you described, an unknown that might happen, now is it?

Do you understand now, or are there any other parts of this very simple lesson in economics that you will choose to misunderstand?
The problem with your entire absurd argument is that simply having a lower tax rate is "goosing" the economy as if that is a parlor trick which is causing the current prosperity. Lower tax rates are not an "economic stimulus" like a one time injection of money into the economy or a makework program. It is simply freedom to keep more of what you earn. Did we "goose" the economy for the 130 years prior to the imposition of any income tax at all? Why is a 39.6% tax rate on the rich the sweet spot whereby anything less than that is a goosing?

Taxes are always a deadweight loss and lower taxes are acting to stimulate the economy exactly as it should: by allowing people to engage in economic activity free of this loss.

Sure, we could debate whether we would be better off paying down the deficit with that money instead of having tax cuts and a nice economy. We could debate on having a good economy and harsh cuts to social programs. But nothing you claim or the result of our debate about taxes v. spending stands for anything other than the ordinary proposition that all good economies must be followed by a slowing down or recession. None of that is an indictment on the current economy.

And even if these are burger flipping jobs, for which you have provided no cite and is a common refrain whenever a Republican is president, that is still better than no jobs as it takes at least a part of these peoples' needs off of the burden of government and gives them a partial ability to buy things which stimulates the economy.

Point to any period of prosperity and I could make the same arguments you are making. I'm not saying you are wrong, but that you are not really saying anything.
  #61  
Old 02-01-2020, 09:55 PM
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I agree that the tax cut was inefficient, and I wouldn't have done it at all. But what is the bubble? I don't see a bubble forming. The housing bubble was foreseen by many - not all - economists. I think the stock bubble in 2000 was small compared to the housing bubble, but some saw it. What is today's bubble? What class of assets is over-valued, such that when it pops, the economy will go into a recession?
First of all, few people see bubbles forming until they're about ready to pop. I lived through the S&L crisis, the tech bubble, the mark-to-market tricks, the derivatives of the 2000s -- people don't see bubbles coming until some company unexpectedly reports billion dollar losses or simply goes bankrupt.

I can't speak to over-valued assets, but what I can say is that more and more of the economy is increasingly dependent on fewer and fewer players. More of the country's deposit accounts are in the hands of fewer banks. More of this country's aggregate spending power is concentrated in the hands of fewer people. And nearly a handful of big tech companies comprise 1/5 of the S&P's overall value.

To think of it another way, a bubble isn't just a sector that's over-valued; it's also an economy that is over-reliant on a handful of individuals and companies to make decisions that benefit the rest of us. We'd be naive to assume that the plutocrats are going to carry the rest of us, as evidenced by that tax bill, which was not only "inefficient" but only intensifies the concentration of wealth.
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Old 02-02-2020, 01:15 AM
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In what sense are we in a "fake" economy? Real people are employed, often producing real goods and services that people want.

One way the economy is inefficient (or "fake") is if production is siphoned off to activities that do not really contribute to people's needs or wants. For example the financial sector is a very big piece of the U.S. economy, and includes activities which do not benefit the general population.

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I'm referring to political manipulation of the federal reserve to hold interest rates below where they should be....

If the economy was a good as Trump says it is, then we should be raising interest rates and taxes. Partly because we don't want to grow too fast, but mostly so that we have some breathing room to stimulate the economy by lower taxes and interest in the inevitable upcoming recession.
A hike in interest rates would plunge the country into recession.

True, higher interest rates would be a sign of a healthy economy and would provide regulators with leverage. But the cart can't push the horse. I'm not sure why interest rates are low — is it a result of QE? — nor if/when "normalcy" will return. But whether the present financial situation is an aberration or is the new norm, we're stuck with it for now.

As survinga says ...
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Originally Posted by survinga
If anything, the Fed raised rates too quick between 2015-2018.
Yes. The FedRes doesn't seem to be responding to political pressure: it's just pursuing its mandate to maximize employment while keeping inflation at about 2%. (Trump tries to pressure his Fed Chief to lower interest rates further but by now most ignore this President's prattling.)

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Originally Posted by survinga View Post
I agree that the tax cut was inefficient, and I wouldn't have done it at all. But what is the bubble? I don't see a bubble forming. The housing bubble was foreseen by many - not all - economists. I think the stock bubble in 2000 was small compared to the housing bubble, but some saw it. What is today's bubble? What class of assets is over-valued, such that when it pops, the economy will go into a recession?
Some analysts speak of a "risk-free asset bubble"! The concept seems silly. But analysts are worried that a slight slowdown will be amplified by the very high levels of corporate debt. A setback that would normally cause a company just to cut dividends may cause an over-leveraged company to default on its bonds.

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Originally Posted by UltraVires View Post
... Lower tax rates are ... simply freedom to keep more of what you earn. Did we "goose" the economy for the 130 years prior to the imposition of any income tax at all? Why is a 39.6% tax rate on the rich the sweet spot whereby anything less than that is a goosing?

Taxes are always a deadweight loss and lower taxes are acting to stimulate the economy exactly as it should: by allowing people to engage in economic activity free of this loss.
Should Lockheed Martin produce F-35s for free? Should the Interstate highways be turned into toll roads?? What does "sweet spot" even mean??? I just paid $2.15 for a can of tuna; would $2.10 be "sweeter"? (And if the tuna were completely free it would give me more freedom to simply keep more of my money.)
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Old 02-02-2020, 09:11 AM
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In what sense are we in a "fake" economy? Real people are employed, often producing real goods and services that people want.
I already explained it above. Yes, people are being employed and real goods are being produced, but this growth has been, and continues to be, fueled by cheap credit. Relative to 10 years ago, the banks are far less leveraged than they were - many are taking in record profits. However, the US household is gradually borrowing more because they have a job now, have a little more spending power than they used to, and like they typically do, forget that it doesn't always last forever -- and most American households, particularly the middle class households that really drive the economic data we want to see, are gradually taking on more debt and they don't have the savings to deal with even a moderate slowdown in the economy, as you yourself appear to acknowledge when you suggested that a simple rate hike might lead to a recession.

But if you're not sold on the above, consider the leveraging of businesses. Small cap stocks are as leveraged as ever relative to large and mid cap stocks. And larger cap stocks are playing a game of stock buybacks, in which they increase their stock value not by showing investors real revenues and profits, but by creating more "value" by simply decreasing the number of shares that are available to buyers. Keep in mind that as these companies could be paying their employees instead of buying stocks, but they don't because the CEOs and other executives have every incentive not to do that -- and enrich themselves in the process. Any pay increases that the average frontline worker or middle manager gets will only occur in very small increments, either because they are just keeping up with the demand for labor or because someone like Bernie Sanders comes along and shames them into doing so, or because local municipal governments make them do it outright. And oh by the way - a majority of the buybacks are financed...by debt. In short, American capitalism in 2020 has found another magic pill, another "new economy," another mark-to-market accounting trick, another credit default swap.

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A hike in interest rates would plunge the country into recession.
A periodic upward rate adjustment shouldn't plunge the country into a recession. If the markets push rates up by 50 basis points and consequently plunges the economy into a recession, I've got news for you: it was already hurtling toward a recession. I don't agree that a periodic quarter or half percent rise in interest rates necessarily leads to a contraction, but if it does, that's because consumers are already underemployed and over-leveraged, and businesses themselves are also over-leveraged. Moreover, that's indicative of an economy that favors "growth" over stable production and circulating the economic rewards of economic production back to the laborer. If you believe that an interest rate hike would cause a recession, then you already agree with me that for the average household, this economic "growth" is fake because while the numbers look good, the average household is increasingly struggling to stay in the middle class.
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Old 02-02-2020, 09:51 AM
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@ asahi - as you can see from my posts, I agree with much of what you say. I just question the term "fake economy." "Fragile"? Quite possibly. "Fueled by credit boom"? Yes. But "Fake"? The purpose of an economy is to provide goods and services, and consumers able to afford them. By this definition (and ignoring rising inequality) the economy is real and doing OK.

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... If the markets push rates up by 50 basis points and consequently plunges the economy into a recession, I've got news for you: it was already hurtling toward a recession.
I don't understand what your view is. You call the economy "fake" or fragile. Do you think it's heading for a recession? Apparently not, since you're calling for interest rate hikes.

Governments and central banks all over the world are keeping interest rates low. Do you think they're engaged in some sinister conspiracy? I think they're desperately trying to keep their economies running. Central bank planners have implied they'd like to see a return to "normal" interest rates, but don't know how to get there.

It's rather mysterious to me why interest rates remain low 12 years after the credit crisis, but I think economists would agree that for a central bank to raise them right now would cause recession. (Remember that central banks have little control over long-term rates, yet we have seen "yield curve inversions" recently.)
  #65  
Old 02-02-2020, 11:25 AM
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Should Lockheed Martin produce F-35s for free? Should the Interstate highways be turned into toll roads?? What does "sweet spot" even mean??? I just paid $2.15 for a can of tuna; would $2.10 be "sweeter"? (And if the tuna were completely free it would give me more freedom to simply keep more of my money.)
I'm not sure what you mean. It is Super Bowl Sunday and perhaps my reading skills are not up to their usual self, but I don't understand this at all.

I was simply responding to the contention that a lower income tax rate is not properly categorized as "goosing" or a government stimulus to the economy. It is traditional economic policy. Stating that lower tax rates are fueled by debt is a political argument that we could have, but it is not a stimulus as that word is used in economics.

Further, the argument assumes that taxes are "low" (or alternatively "high") only when compared to the rates set by the Obama administration. That alone is the economic baseline by which "goosing," normal, and high taxes are to be measured.

Last edited by UltraVires; 02-02-2020 at 11:28 AM.
  #66  
Old 02-02-2020, 03:55 PM
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I don't understand what your view is. You call the economy "fake" or fragile. Do you think it's heading for a recession? Apparently not, since you're calling for interest rate hikes.
I confess that I thought we were going to have one in 2019 based on manufacturing data, a contracting Chinese economy, uncertainty in emerging markets, and a weak European banking sector. I thought we'd be there by now, but services are doing well in the US and the consumer is confident that they'll be employed for another six months. In that general sense, you're right nothing has changed, and my economic weather forecast was admittedly incorrect - completely wrong, actually.

But be that as it may, I think the climate, not the weather, is more important to assess. What we're heading toward is far worse than a recession: unless things change dramatically at the political level, where headed into a situation in which there is a weak middle class that is perpetually fearful of slipping down to the lower rungs of the socioeconomic ladder, and those who represent the "underclasses" have little hope of ever escaping poverty. That's one reason why I don't care to make predictions about whether we will or will not have a recession anytime soon.

Without fundamental changes in the economy, I will continue to call any "growth" that we have fake, because it offers us a false sense of security and deludes us into believing that we're back to where we ought to be. But we're not, which brings me to this:

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Originally Posted by septimus View Post
Governments and central banks all over the world are keeping interest rates low. Do you think they're engaged in some sinister conspiracy? I think they're desperately trying to keep their economies running. Central bank planners have implied they'd like to see a return to "normal" interest rates, but don't know how to get there.
Indeed, and that's because even though we're 12 years after the financial crisis, we still have yet to recover from it. The idea that we recovered from the Great Recession of 2007-9 is as farcical as it was to suggest that the US had recovered from the Depression in 1939. The Eurozone economies have tried everything from austerity, which is politically unpopular, to negative interest rates in order to invigorate economic activity.

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Originally Posted by septimus View Post
It's rather mysterious to me why interest rates remain low 12 years after the credit crisis, but I think economists would agree that for a central bank to raise them right now would cause recession. (Remember that central banks have little control over long-term rates, yet we have seen "yield curve inversions" recently.)
It's because Americans haven't really recovered from the recession. They don't have the spending power they need. They have access to credit, but credit isn't as good as a stable job that provides a middle class income. Moreover, critical services like healthcare and education have embraced the Wall Street business model, as opposed to having the characteristics of a public service model that other institutional systems have elsewhere. I'm not saying that we should have a government takeover of higher education and healthcare but that the influence needs to be a lot less capitalistic and more balanced and fairer to those who use these services. That's not going to change until we have a change in values in this society that demands fairer taxation and more equitable distribution of resources.

Economy implies balance and fairness, not inequality and the concentration of wealth at the expense of the masses. Our economy isn't really economical in terms of providing for the common weal. Thus, it's fake.
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Old 02-04-2020, 02:05 PM
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We've allowed our "rulers" to load us up with astronomical amounts of unrepayable debt. We've robbed the future generations blind so that we can live large now.

The next economic crisis isn't merely going to be a repeat of 2007-2008. There's no way in hell we're getting off that easily. The next crisis is going to be a currency crisis and a sovereign debt crisis. And the longer the "good times"go on, the more painful the "reckoning" is going to be.
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Old 02-04-2020, 07:20 PM
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Paul Krugman has been one of my heroes for decades, but I almost always read his words rather than listen to him speak. In this YouTube he is interviewed for 5 minutes.
[this may seem slightly off-topic, but is only slightly so. Deficit spending is discussed.]

Last edited by septimus; 02-04-2020 at 07:21 PM.
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Old 02-04-2020, 09:11 PM
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And the longer the "good times"go on, the more painful the "reckoning" is going to be.
...especially when you consider that the "good times" are disproportionately enriching the people at the top of the food chain. The rest of us are increasingly dependent on how the uber-rich decide to spend their money.
  #70  
Old 02-08-2020, 07:55 AM
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Here's a good article that offers some evidence that our recent "growth" isn't really all that impressive.

http://theconversation.com/real-pay-...-charts-131264

The nominal wages are increasing, but the purchase power has flat-lined. This was likely happening even before Trump took office, owing to the fact that as wages increased, access to capital increased, and spending increased, all of which fuels demand and results in higher costs.

Independent of anything Trump has done, banks have built up their reserves but as interest rates are still quite low, financial institutions and real estate investment firms are looking for ways to make their businesses more profitable, and they've done that by driving up demand in the real estate market. Moreover, local zoning laws in communities all across the country have made housing increasingly difficult or outright impossible to afford.

Trump's policies have not only not helped, but the tax cuts in the upper tax brackets have led to the pooling of wealth. Portions of profits that could go back to either paying employees directly or to government offices for spending on public services and infrastructure, have instead remained pooled in the hands of the wealthy. The irony is that as our economy supposedly "improves," there's not only no material benefit for basic wage earners, in some cases, their earning power actually decreases. Unfortunately, it takes some education to understand all of this and for most people, this complicated analysis and explanation just doesn't make sense. The news media tell them the economy's fine, and at least people have jobs and incomes. This isn't the American Dream, but it's the American Dream we've come to accept.

This is as good as it gets until the next recession. And when that recession comes, this country won't have the savings to survive it on their own, and they will have an administration that is woefully unprepared to deal with it on a policy level. Moreover, they, like Herbert Hoover, this administration might be philosophically opposed to intervening and instead let market forces do their work on culling the herd - er, I mean, restoring economic balance.
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Old 02-08-2020, 11:09 AM
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... This is as good as it gets until the next recession. And when that recession comes, this country won't have the savings to survive it on their own, and they will have an administration that is woefully unprepared to deal with it on a policy level. Moreover, they, like Herbert Hoover, this administration might be philosophically opposed to intervening and instead let market forces do their work on culling the herd - er, I mean, restoring economic balance.
I agree with much of asahi's post, but the comparison to Herbert Hoover may be misleading. Hoover responded to the 1929 crisis with tax hikes, higher interest rates, and a big deflation: the average DEflation rate over the 4-year period 1929-1933 was a whopping 13 percent annually. (A major problem was that the U.S. lacked a "sovereign currency." Like most of the world, it was tied to the gold standard.)

The Trump Administration, or any Administration, will respond to the next recession oppositely to Hoover's path: with fiscal stimulus, lowering interest rates and, possibly, promoting INflation.
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Old 02-08-2020, 01:26 PM
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The Trump Administration, or any Administration, will respond to the next recession oppositely to Hoover's path: with fiscal stimulus, lowering interest rates and, possibly, promoting INflation.
The problem is that if interest rates are low, there isn't much room to lower them anymore. If there is a gigantic deficit already, there will be opposition to increasing it with stimulus.
During the Great Recession remember how Republicans were claiming that people were unemployed because they just didn't look hard enough? Remember how the Obama stimulus was opposed? Those people are in charge now. If we're lucky they are hypocrites and will do the right thing, but I think many of them are true believers.
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Old 02-08-2020, 01:50 PM
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The problem is that if interest rates are low, there isn't much room to lower them anymore. If there is a gigantic deficit already, there will be opposition to increasing it with stimulus.
During the Great Recession remember how Republicans were claiming that people were unemployed because they just didn't look hard enough? Remember how the Obama stimulus was opposed? Those people are in charge now. If we're lucky they are hypocrites and will do the right thing, but I think many of them are true believers.
Those Republicans are why we have a trillion dollars of deficits today rather than about 500 to 600 billion. They themselves don't care about deficits....unless a Democrat is in the White House. If we get another recession, the worst thing that could happen would be to have a Republican congress and a Democrat in the White House. At that point, Republicans will all of the sudden get concerned about debt/deficits, and block any needed stimulus.
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Old 02-08-2020, 02:12 PM
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The problem is that if interest rates are low, there isn't much room to lower them anymore. If there is a gigantic deficit already, there will be opposition to increasing it with stimulus.
During the Great Recession remember how Republicans were claiming that people were unemployed because they just didn't look hard enough? Remember how the Obama stimulus was opposed? Those people are in charge now. If we're lucky they are hypocrites and will do the right thing, but I think many of them are true believers.
I wrote "fiscal stimulus" to encompass both types of stimulus: more tax cuts (Republican), or infrastructure spending and/or welfare transfers (Democratic).

There is a way to get negative "real" interest rates without negative nominal rates: inflation. With the global economy so interconnected, and much of the world in slow-down, it may seem difficult to achieve inflation now, even if we wanted to, but it can be done. First step would be forcing China to revalue its currency upward.
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Old 02-08-2020, 10:13 PM
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Those Republicans are why we have a trillion dollars of deficits today rather than about 500 to 600 billion. They themselves don't care about deficits....unless a Democrat is in the White House. If we get another recession, the worst thing that could happen would be to have a Republican congress and a Democrat in the White House. At that point, Republicans will all of the sudden get concerned about debt/deficits, and block any needed stimulus.
Oh they'd be in favor of more tax cuts, but only if they mostly go to the rich which would have little impact on a demand-driven recession.
If the customers of a business can't afford to buy their products, tax policy encouraging investment isn't going to do any damn good. That's something Republicans never seem to be able to grasp. Or, more likely, the people giving them money don't want them to grasp it.
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Old 02-08-2020, 10:15 PM
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I wrote "fiscal stimulus" to encompass both types of stimulus: more tax cuts (Republican), or infrastructure spending and/or welfare transfers (Democratic).

There is a way to get negative "real" interest rates without negative nominal rates: inflation. With the global economy so interconnected, and much of the world in slow-down, it may seem difficult to achieve inflation now, even if we wanted to, but it can be done. First step would be forcing China to revalue its currency upward.
I agree that inflation would be useful, but in a deflationary environment it might be hard to pull off. Notice I didn't write against that as a policy.
The Fed printing money (metaphorically) would help, but I think the Republicans might have a fit about it.
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Old 02-08-2020, 11:57 PM
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I think the Republicans might have a fit about it.
Depends on who's in power, obviously, given the deafening silence surrounding the skyrocketing federal deficit.
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Old 02-09-2020, 07:26 AM
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The problem is that if interest rates are low, there isn't much room to lower them anymore. If there is a gigantic deficit already, there will be opposition to increasing it with stimulus.

During the Great Recession remember how Republicans were claiming that people were unemployed because they just didn't look hard enough? Remember how the Obama stimulus was opposed? Those people are in charge now. If we're lucky they are hypocrites and will do the right thing, but I think many of them are true believers.
Indeed, the Republican answer to every recession is austerity, not stimulus. Their answer to a recession would be cutting medicaid, cutting medicare, cutting the department of education, cutting bureaucracy at federal agencies, cutting everything except the Department of Defense, Border Patrol, and DHS - those departments will expand to deal with rising political tensions.
  #79  
Old 02-09-2020, 08:40 AM
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Indeed, the Republican answer to every recession is austerity, not stimulus. Their answer to a recession would be cutting medicaid, cutting medicare, cutting the department of education, cutting bureaucracy at federal agencies, cutting everything except the Department of Defense, Border Patrol, and DHS - those departments will expand to deal with rising political tensions.
No, it depends on what party occupies the White House. In 2008, Republicans worked with Bush and with Democrats to pass a tax rebate stimulus, and then to pass TARP. They had to be cajoled a little bit, but enough of them went along with Bush.

Fast forward to 2009, when the recession had kicked into overdrive. Obama was in the White House. All of the sudden, Republicans will be part of no deal on stimulus at all. And in 2011, when they were in the majority in the house, they almost forced a default when fighting a debt ceiling increase. This was when the economy was still in a mini-depression. They would not have done this if a Republican were in the White House.

Fast forward to 2017-today, and they're all OK with deficits now that Trump is in the White House.

Republicans use fiscal policy as a political weapon to punish Democrats whenever they can. See Krugman's article on this. He lays it out pretty good.

https://www.nytimes.com/2020/02/06/o...s-deficit.html
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Old 02-09-2020, 09:13 AM
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No, it depends on what party occupies the White House. In 2008, Republicans worked with Bush and with Democrats to pass a tax rebate stimulus, and then to pass TARP. They had to be cajoled a little bit, but enough of them went along with Bush.
Enough of them did - back then. We're a loooong way from 2008, my friend.

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Fast forward to 2009, when the recession had kicked into overdrive. Obama was in the White House. All of the sudden, Republicans will be part of no deal on stimulus at all.
The election was over by then and they went back to being their usual anti-stimulus selves. The recession wasn't their problem and they could blame unemployment and everything else on Obama. In 2008, they backed stimulus because they knew that they had to in order to have any chance at winning the White House, but that schtick was over once the race was done.

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And in 2011, when they were in the majority in the house, they almost forced a default when fighting a debt ceiling increase. This was when the economy was still in a mini-depression. They would not have done this if a Republican were in the White House.
There's no way to say they wouldn't have. There's no evidence that they would have supported stimulus through generous spending programs. They weren't acting out of character when they threatened to default on fighting a debt ceiling increase - they were very much in character. Had they been in power they would have probably passed tax cuts, which would have justified slight debt ceiling increases along the way. Debt ceiling increases don't materially result in stimulus. We're having to make minimum payments on the interest itself.

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Fast forward to 2017-today, and they're all OK with deficits now that Trump is in the White House.
Sure they are, because when push comes to shove, they will argue that we can no longer afford social programs like Obamacare, SS, Medicare, and Medicaid. There's an extreme austerity endgame.
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Old 02-09-2020, 09:20 PM
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LOL, right on cue: What's the president's solution to the debt? Make the poorest, neediest people pay it off while the rich get a break.

https://www.politico.com/news/2020/0...illions-112860

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For example, the administration is seeking an 8 percent cut to USDA’s budget over current funding levels. Trump’s plan would cut the Commerce Department by 37 percent, the Education Department by 8 percent, the Energy Department by 8 percent, the Department of Housing and Urban Development by 15 percent, and the Department of Health and Human Services by 9 percent.
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Old 02-11-2020, 05:58 AM
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LOL, right on cue: What's the president's solution to the debt? Make the poorest, neediest people pay it off while the rich get a break.

https://www.politico.com/news/2020/0...illions-112860
That "budget" isn't worth the paper it's written on. It will be DOA, and Trump knows it. It reminds me of all the "repeal ACA" votes the Republican house used to do. It was a statement, not actually governing.
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Old 02-11-2020, 06:02 AM
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There's no way to say they wouldn't have. There's no evidence that they would have supported stimulus through generous spending programs. They weren't acting out of character when they threatened to default on fighting a debt ceiling increase - they were very much in character. Had they been in power they would have probably passed tax cuts, which would have justified slight debt ceiling increases along the way. Debt ceiling increases don't materially result in stimulus. We're having to make minimum payments on the interest itself.


I know they weren't acting out of character, because Obama is a Dem, and they reserve their austerity games for Democrat white houses only. That was the point of my post, and I backed it up with examples, and Krugman's column said basically the same thing.

Dem in white house = time for false debt/deficit concern
Pub in white house = time to ramp up debt/deficits

That's their formula. You made the statement that they always resort to austerity in recessions. That's not true. If there's a recession while Trump is in office, we'll see another example of what I'm saying. They use fiscal policy as a political weapon.
  #84  
Old 02-19-2020, 06:31 PM
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I know they weren't acting out of character, because Obama is a Dem, and they reserve their austerity games for Democrat white houses only. That was the point of my post, and I backed it up with examples, and Krugman's column said basically the same thing.

Dem in white house = time for false debt/deficit concern
Pub in white house = time to ramp up debt/deficits

That's their formula. You made the statement that they always resort to austerity in recessions. That's not true. If there's a recession while Trump is in office, we'll see another example of what I'm saying. They use fiscal policy as a political weapon.
Is this the debate you want to have? Whether the GOP really cares about debt?

I'm not going to try and defend them, but... well, I thought you were going more towards "should the debt be important?" I found that debate to be quite interesting.

~Max
  #85  
Old 02-22-2020, 08:30 AM
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Is this the debate you want to have? Whether the GOP really cares about debt?

I'm not going to try and defend them, but... well, I thought you were going more towards "should the debt be important?" I found that debate to be quite interesting.

~Max
OK, so here's something from Olivier Blanchard, world-renowned economist, who says that the debt isn't that important. I don't think he says it's of no concern at all. But it's much less important than many folks think, in his view. He does say that spending must be well thought out.

https://www.marketwatch.com/story/le...bad-2019-01-07

Then, here's Greg Mankiw, Harvard Economist and former advisor to George W Bush and Mitt Romney. I would note that he broke with the Republicans after Trump came to power. Anyway, Mankiw says the debt is still a concern, still a problem.

https://www.nytimes.com/2019/06/20/b...ebt-trump.html

Here's Paul Krugman, Nobel Economist and NY Times columnist, on debt. He says it's basically not a problem as long as interest rates aren't as high as the rate of growth. He says it could become a problem, but not in the current environment, and way down on the list of problems.

https://www.nytimes.com/2018/09/11/o...on-spiral.html

Here's Ken Rogoff, Economist from Harvard, on debt. He argues that it's not a free lunch, that we should be more concerned about it than we are.

https://www.project-syndicate.org/co...rogoff-2019-11

I used to think Debt/Deficits were big problems. Now, I'm not so sure. I would think there has to be a blurry line that when crossed can make debt a huge problem. But for the US, I think that would require a loss in confidence in the US economy's ability to service our debt. On the other hand, having such a high debt level (debt/gdp now around 79% and climbing) might eventually make interest on the debt a drag on our economy. So, there has to be some costs there.

Maybe a huge debt is not a cause of a problem, so much as a symptom from another problem. Take Japan for instance. They have debt/gdp over 200%. I think that's a result of very low growth, demographic stagnation, and so forth. But the Japan debt itself isn't likely to lead to a run on the bank. They can still borrow at very low, and even negative interest rates.
  #86  
Old 03-21-2020, 10:24 AM
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