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Source: (consider it)
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Thread: Purgatory: Staring at the debt ceiling
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by Ender's Shadow:
At the moment the US is running a severe balance of payment deficit which it is already covering by borrowing.
Total non-sequitur. The U.S. trade deficit is not the same thing as the U.S. federal deficit. Attempts to conflate the two are usually a sign of slight-of-hand argumentation.
quote:
Originally posted by ken:
It is instructive to work out who the main beneficiaries of inflation are.
Bearing in mind that in normal inflation (i.e. not the kind of hyperinflation they had in Germany in the early 1920s or Zimbabwe recently, which disrupts normal economic activity) production continues more or less at the same level - in fact it usually slowly rises - so there is the same amount of stuff to buy, so if the poor are getting poorer and having to make do with less stuff, someone else will be getting hold of more stuff. Who are they?
Those hurt most by inflation are usually the very poor (those with fixed or marginal incomes) and the very rich (creditors holding a lot of fixed-rate debt and anyone with a lot of cash reserves). The beneficiaries are usually the working class and the middle class, whose wages typically inflate at a similar rate to the inflation rate for commodities while any fixed-rate debt they owe (e.g. mortgage, car loan) does not inflate.
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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Ender's Shadow
Shipmate
# 2272
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Posted
quote:
Originally posted by Crœsos:
quote:
Originally posted by Ender's Shadow:
At the moment the US is running a severe balance of payment deficit which it is already covering by borrowing.
Total non-sequitur. The U.S. trade deficit is not the same thing as the U.S. federal deficit. Attempts to conflate the two are usually a sign of slight-of-hand argumentation.
If you read what I said, you will see that I'm not relating the two specifically, rather indicating how a default achieved by inflating the problem away would play out in the real world. Though actually there CAN be a relationship: if foreigners - broadly defined - are going to buy your national debt, then they need to have your currency, which they will gain if there is a trade deficit. However it is possible to run the two separately, and, indeed, there is a tendency to confuse them. But I plead not guilty.
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Test everything. Hold on to the good.
Please don't refer to me as 'Ender' - the whole point of Ender's Shadow is that he isn't Ender.
Posts: 5018 | From: Manchester, England | Registered: Feb 2002
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ken
Ship's Roundhead
# 2460
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Posted
quote:
Originally posted by New Yorker:
Mark Steyn is always a good read.
I agree, he's a great aid to the constipated. In fact I feel an urgent need to visit the bog right now.
I don't think anyone over the mental age of seven would take his nasty embittered little racist whinges seriously as political comment though.
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Ken
L’amor che move il sole e l’altre stelle.
Posts: 39579 | From: London | Registered: Mar 2002
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New Yorker
Shipmate
# 9898
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Posted
quote:
Originally posted by Sober Preacher's Kid:
*The Tea Party idiots want the US to do just that.
Excuse me, SPK. I believe we have been civil in the past. I support the Tea Party, strongly, and I object to being called an idiot. Obviously, therefore, if you think we Tea Partiers are idiots then you are one for thinking thus.
Posts: 3193 | From: New York City | Registered: Jul 2005
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ken
Ship's Roundhead
# 2460
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Posted
quote:
Originally posted by New Yorker:
I support the Tea Party, strongly, and I object to being called an idiot.
You'd better get used to it then because their idiotic policies don't seem to be going away.
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Ken
L’amor che move il sole e l’altre stelle.
Posts: 39579 | From: London | Registered: Mar 2002
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tclune
Shipmate
# 7959
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Posted
Meanwhile, back at the subject of the debate...
--Tom Clune, Purgatory Host
[ 19. July 2011, 16:12: Message edited by: tclune ]
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Posts: 8013 | From: Western MA | Registered: Jul 2004
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Sober Preacher's Kid
Presbymethegationalist
# 12699
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Posted
quote:
Originally posted by New Yorker:
quote:
Originally posted by Sober Preacher's Kid:
*The Tea Party idiots want the US to do just that.
Excuse me, SPK. I believe we have been civil in the past. I support the Tea Party, strongly, and I object to being called an idiot. Obviously, therefore, if you think we Tea Partiers are idiots then you are one for thinking thus.
With the host's indulgence because New Yorker addressed me directly:
Cutting the US government's expenditures is a legitimate political goal. One I mainly disagree with in what is to be cut, but that's politics.
Threatening to default on US debt payments, causing a credit crunch and victimizing millions of Americans who will lose their jobs when credit gets scarce (again) is so ill-considered that I really can't think of another word. Not to mention the rest of us worldwide since US government debt is embedded in the world's economy like nothing else.
Look, I thought the bailed out banks should have been grateful to have survived at all and shown an appropriate degree of penitence and humility, but they didn't.
But holding a gun to the US economy just to make a political point is beyond sensible.
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NDP Federal Convention Ottawa 2018: A random assortment of Prots and Trots.
Posts: 7646 | From: Peterborough, Upper Canada | Registered: Jun 2007
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New Yorker
Shipmate
# 9898
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Posted
quote:
Originally posted by Sober Preacher's Kid:
Cutting the US government's expenditures is a legitimate political goal. One I mainly disagree with in what is to be cut, but that's politics.
Fair enough.
quote:
Threatening to default on US debt payments, causing a credit crunch and victimizing millions of Americans who will lose their jobs when credit gets scarce (again) is so ill-considered that I really can't think of another word. Not to mention the rest of us worldwide since US government debt is embedded in the world's economy like nothing else.
You sound as if it is the Tea Party (or the GOP or Conservatives) that is, all by itself, threatening a US debt default. It take's two to tango and Obama isn't on the dance floor. Indeed, the GOP is trying to pass a bill today that will solve the problem and he's already threatened to veto it. So not only is he not on the dance floor, he's trying to stop the music.
And the Democrats in the Senate? They have not even passed a budget in two years, despite being required to by law. And, all they're doing is pointing out what's wrong with the various Republican proposals. They are not offering one of their own.
FWIW, I don't think we would default. Obama would have enough money coming in to service the debt and other programs. He would not be able to spend on new programs, of course.
quote:
Look, I thought the bailed out banks should have been grateful to have survived at all and shown an appropriate degree of penitence and humility, but they didn't.
But holding a gun to the US economy just to make a political point is beyond sensible.
Not sure how the banks are holding a gun to the US economy.....
Posts: 3193 | From: New York City | Registered: Jul 2005
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Alfred E. Neuman
What? Me worry?
# 6855
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Posted
quote:
Originally posted by New Yorker:
...FWIW, I don't think we would default. Obama would have enough money coming in to service the debt and other programs. He would not be able to spend on new programs, of course.
Wrong. Raising the debt ceiling allows the government to pay debts already incurred. By failing to raise it, the government by law will have to default on those debts already incurred.
[ 19. July 2011, 17:07: Message edited by: Alfred E. Neuman ]
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tclune
Shipmate
# 7959
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Posted
quote:
Originally posted by Alfred E. Neuman:
quote:
Originally posted by New Yorker:
...FWIW, I don't think we would default. Obama would have enough money coming in to service the debt and other programs. He would not be able to spend on new programs, of course.
Wrong. Raising the debt ceiling allows the government to pay debts already incurred. By failing to raise it, the government by law will have to default on those debts already incurred.
Exactly. It is rather stunning that this point is not universally understood -- and it is horrifying that it does not appear to be universally understood by the members of Congress.
--Tom Clune
[ 19. July 2011, 17:31: Message edited by: tclune ]
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New Yorker
Shipmate
# 9898
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Posted
quote:
Originally posted by Alfred E. Neuman:
Wrong. Raising the debt ceiling allows the government to pay debts already incurred. By failing to raise it, the government by law will have to default on those debts already incurred.
I am not an economist nor do I play one on TV, but tax revenues will be coming in even if the debt ceiling is not raised. Those revenues can be used to service the existing debt. So no default.
quote:
Originally posted by tclune:
It is rather stunning that this point is not universally understood -- and it is horrifying that it does not appear to be universally understood by the members of Congress.
Well, given the current make-up of Congress, why is anyone surprised that they don't really know what they're doing? Really.
Remeber the whole "we have to pass the bill in order to learn what's in it" nonsense?
Or the Congressman who wanted to know if the Mars rover (or whatever) would see if the American flag were still flying Mars?
Posts: 3193 | From: New York City | Registered: Jul 2005
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Anyuta
Shipmate
# 14692
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Posted
You sound as if it is the Tea Party (or the GOP or Conservatives) that is, all by itself, threatening a US debt default. It take's two to tango and Obama isn't on the dance floor.
WHAT???? you have GOT to be kidding me. Obama has made proposal after proposal that gives the GOP consession after consession.. cut after cut, and they refuse to accept them, beucase, well, I don't quite know why. he has made proposals which would have been called a Conservative triumph in the past, but becuase he feels that yes, this has to be at least somewhat balanced with an incereas in income as well as spending cuts, the GOP thumbs it's collective nose at him and says he isn't playing? what the heck? seriously? what does the man have to do to be considered to be "playing" (or dancing).
Indeed, the GOP is trying to pass a bill today that will solve the problem and he's already threatened to veto it. So not only is he not on the dance floor, he's trying to stop the music.
of course he has, becuase it's an absolute absurd bill! have you READ it?
And the Democrats in the Senate? They have not even passed a budget in two years, despite being required to by law. And, all they're doing is pointing out what's wrong with the various Republican proposals. They are not offering one of their own.
http://www.politifact.com/ohio/statements/2011/jun/16/rob-portman/sen-rob-portman-chides-senate-democrats-not-passin/
FWIW, I don't think we would default. Obama would have enough money coming in to service the debt and other programs. He would not be able to spend on new programs, of course.
I don't think you quite get how this works. you see, we are earning (taxes) less than we are paying (debt and other obligations). that means that in order to pay what we owe, we have to borrow more money. that's obviously not a good way to do busness, and clearly in the long run we need to increase our income (taxes) and cut our sepnding. But this current discussion is purely about accepting that we have to borrow more money in order to be able to pay what we owe. we have some income, but it's not nearly enough to pay everythign that we have promiced to pay. no one is talking about "new programs" here.. we're talking only about paying for old ones. in fact Obama's proposals have presented absolutely unprecidented cuts (cuts which I personaly think go way too far as it is) to existing programs.
Think of it this way. you have an icome, right? say it's $1,000/month. but you have a mortgage, a car loan, and some credit card loans, as well as regular bills you have to pay for food, electricity etc. all of that adds up to $1,500/month. to pay $1500/month when your income is only $1000/month, you have to borrow some money, or else NOT pay something. those are the only choices. in the future, you can perhaps agree to live off of ramen and turn off the electricity, but for now, you have to pay those bills, and the only way to do that is to borrow some money. YOu might of course use your entire $1000 to pay off the credit cards, mortgage and car loan, and not have enough left over to pay the electric bill or buy food. that's fine, until you get hungry.
Obama hasn't completely rooled over, true.. so I suppose if your only acceptable standard for "cooperation" is "do only exactly waht I want" then I suppose one can say he's not cooperating. but by any normal standard of "cooperation" and "compromise" he's gone way, way, way overboard bending over backwards and giving away nearly everything. and still that's not enough for the Tea Party, who apparently were out the day the word "compromise" was taught in English class.
Posts: 764 | From: USA | Registered: Mar 2009
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Imaginary Friend
Real to you
# 186
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Posted
quote:
Originally posted by New Yorker:
I am not an economist nor do I play one on TV, but tax revenues will be coming in even if the debt ceiling is not raised. Those revenues can be used to service the existing debt. So no default.
Well yes, but they can't also be used to pay the military, fulfill the obligations on entitlements, and all the other things that the federal government spends money on. That is why the deficit exists! So if the debt ceiling is not raised, somebody has to make a choice about where the money from tax receipts goes. Servicing the debt would obviously be a good choice, but so would most of the other possibilities.
I read somewhere this week what the projected tax take was for the month of August, compared to projected expenditures. I don't remember the exact figures, and a quick search didn't help me locate the article, but the bottom line was that the latter was significantly larger than the former.
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"We had a good team on paper. Unfortunately, the game was played on grass."
Brian Clough
Posts: 9455 | From: Left a bit... Right a bit... | Registered: May 2001
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Timothy the Obscure
Mostly Friendly
# 292
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Posted
Ezra Klein lays out the problem with Republican economic thinking here..
Obama is, quite rightly, refusing to capitulate because, though default would be dreadful for the economy, so would the GOP's all-cuts approach to the deficit--hell, I heard an economist for the American Enterprise Institute (they don't get much more conservative than that) say hesterday that short-term spending cuts are a bad idea.
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When you think of the long and gloomy history of man, you will find more hideous crimes have been committed in the name of obedience than have ever been committed in the name of rebellion.
- C. P. Snow
Posts: 6114 | From: PDX | Registered: May 2001
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Imaginary Friend
Real to you
# 186
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Posted
But that's win-win for the GOP. Put half of the federal workforce out of a job, and take the resulting jump in the unemployment rate all the way to the polls next November.
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"We had a good team on paper. Unfortunately, the game was played on grass."
Brian Clough
Posts: 9455 | From: Left a bit... Right a bit... | Registered: May 2001
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Golden Key
Shipmate
# 1468
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Posted
quote:
Originally posted by Alfred E. Neuman:
Raising the debt ceiling allows the government to pay debts already incurred. By failing to raise it, the government by law will have to default on those debts already incurred.
Ahhhhhhhh! Thanks for the explanation. That wasn't mentioned the general media coverage I've heard.
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Blessed Gator, pray for us!
--"Oh bat bladders, do you have to bring common sense into this?" (Dragon, "Jane & the Dragon")
--"Oh, Peace Train, save this country!" (Yusuf/Cat Stevens, "Peace Train")
Posts: 18601 | From: Chilling out in an undisclosed, sincere pumpkin patch. | Registered: Oct 2001
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Timothy the Obscure
Mostly Friendly
# 292
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Posted
quote:
Originally posted by Golden Key:
quote:
Originally posted by Alfred E. Neuman:
Raising the debt ceiling allows the government to pay debts already incurred. By failing to raise it, the government by law will have to default on those debts already incurred.
Ahhhhhhhh! Thanks for the explanation. That wasn't mentioned the general media coverage I've heard.
You ever wonder why? Or why it wasn't mentioned in the coverage that some members of Congress seem to have read (or watched)?
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When you think of the long and gloomy history of man, you will find more hideous crimes have been committed in the name of obedience than have ever been committed in the name of rebellion.
- C. P. Snow
Posts: 6114 | From: PDX | Registered: May 2001
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Golden Key
Shipmate
# 1468
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Posted
I'm quite aware that both media and gov't have all sorts of shenanigans going on, all the time; underestimate our intelligence; and highly filter the info that's put out.
Nothing new, there.
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Blessed Gator, pray for us!
--"Oh bat bladders, do you have to bring common sense into this?" (Dragon, "Jane & the Dragon")
--"Oh, Peace Train, save this country!" (Yusuf/Cat Stevens, "Peace Train")
Posts: 18601 | From: Chilling out in an undisclosed, sincere pumpkin patch. | Registered: Oct 2001
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tclune
Shipmate
# 7959
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Posted
quote:
Originally posted by New Yorker:
Never thought I'd agree with Harry Reid.
If that doesn't get you to rethink your views, then you're beyond redemption...
--Tom Clune
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Posts: 8013 | From: Western MA | Registered: Jul 2004
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New Yorker
Shipmate
# 9898
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Posted
quote:
Originally posted by tclune:
quote:
Originally posted by New Yorker:
Never thought I'd agree with Harry Reid.
If that doesn't get you to rethink your views, then you're beyond redemption...
--Tom Clune
Huh? In the video he's agreeing with me! (and taking a position 180 degrees from the one he's taking now.)
Posts: 3193 | From: New York City | Registered: Jul 2005
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Shadowhund
Shipmate
# 9175
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Posted
quote:
Originally posted by Imaginary Friend:
quote:
Originally posted by New Yorker:
I am not an economist nor do I play one on TV, but tax revenues will be coming in even if the debt ceiling is not raised. Those revenues can be used to service the existing debt. So no default.
Well yes, but they can't also be used to pay the military, fulfill the obligations on entitlements, and all the other things that the federal government spends money on. That is why the deficit exists! So if the debt ceiling is not raised, somebody has to make a choice about where the money from tax receipts goes. Servicing the debt would obviously be a good choice, but so would most of the other possibilities.
I read somewhere this week what the projected tax take was for the month of August, compared to projected expenditures. I don't remember the exact figures, and a quick search didn't help me locate the article, but the bottom line was that the latter was significantly larger than the former.
This analysis may refresh your recollection. And again, not raising the debt ceiling may result in the U.S. Treasuries being serviced, but not other obligations. This is like paying your credit cards and mortgages, but not paying the cable bill.
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"Had the Dean's daughter worn a bra that afternoon, Norman Shotover might never have found out about the Church of England; still less about how to fly"
A.N. Wilson
Posts: 3788 | From: Your Disquieted Conscience | Registered: Mar 2005
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tclune
Shipmate
# 7959
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Posted
quote:
Originally posted by New Yorker:
quote:
Originally posted by tclune:
quote:
Originally posted by New Yorker:
Never thought I'd agree with Harry Reid.
If that doesn't get you to rethink your views, then you're beyond redemption...
--Tom Clune
Huh? In the video he's agreeing with me! (and taking a position 180 degrees from the one he's taking now.)
That was my point -- if Harry Reid thinks that, it must be flawed. I assume that you do not believe that he was in general the soul of reason a few years ago, and somehow lost the thread...
--Tom Clune
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Posts: 8013 | From: Western MA | Registered: Jul 2004
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New Yorker
Shipmate
# 9898
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Posted
quote:
Originally posted by tclune:
That was my point -- if Harry Reid thinks that, it must be flawed. I assume that you do not believe that he was in general the soul of reason a few years ago, and somehow lost the thread...
--Tom Clune
No. I believe he opposed raising the debt ceiling when a Republican was in the White House and he's now in favor of raising it since there is a Democrat in the White House.
Posts: 3193 | From: New York City | Registered: Jul 2005
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tclune
Shipmate
# 7959
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Posted
quote:
Originally posted by New Yorker:
quote:
Originally posted by tclune:
That was my point -- if Harry Reid thinks that, it must be flawed. I assume that you do not believe that he was in general the soul of reason a few years ago, and somehow lost the thread...
--Tom Clune
No. I believe he opposed raising the debt ceiling when a Republican was in the White House and he's now in favor of raising it since there is a Democrat in the White House.
So what part of that do you agree with?
--Tom Clune
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Imaginary Friend
Real to you
# 186
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Posted
quote:
Originally posted by Shadowhund:
And again, not raising the debt ceiling may result in the U.S. Treasuries being serviced, but not other obligations. This is like paying your credit cards and mortgages, but not paying the cable bill.
Yeah. That was my point, although I wouldn't phrase the analogy quite like that.
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"We had a good team on paper. Unfortunately, the game was played on grass."
Brian Clough
Posts: 9455 | From: Left a bit... Right a bit... | Registered: May 2001
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ken
Ship's Roundhead
# 2460
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Posted
If the US government defaults on debts and gets its credit downrated its perfectly possible that this will go down in history as the year China started to become the world's number one superpower.
Maybe people who are worried about that future had better get investing in India.
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Ken
L’amor che move il sole e l’altre stelle.
Posts: 39579 | From: London | Registered: Mar 2002
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Josephine
Orthodox Belle
# 3899
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Posted
Knowledgeable people, what do you make of [url= http://www.alternet.org/news/151718/there%27s_a_solution_to_the_debt_fight_that_could_avert_catastrophe_--_why_is_everyone_ig noring_it?page=entire]this option[/url]? It says that the Fed has the authority to mint a trillion dollar platinum coin and use the funds to cover whatever expenses need to be covered, thus avoiding the debt ceiling entirely.
Is it possible? Is it reasonable? Would it work?
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I've written a book! Catherine's Pascha: A celebration of Easter in the Orthodox Church. It's a lovely book for children. Take a look!
Posts: 10273 | From: Pacific Northwest, USA | Registered: Jan 2003
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Crœsos
Shipmate
# 238
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Posted
I'm not sure that this really counts as satire.
quote:
Congress Continues Debate Over Whether Or Not Nation Should Be Economically Ruined
WASHINGTON — Members of the U.S. Congress reported Wednesday they were continuing to carefully debate the issue of whether or not they should allow the country to descend into a roiling economic meltdown of historically dire proportions. "It is a question that, I think, is worthy of serious consideration: Should we take steps to avoid a crippling, decades-long depression that would lead to disastrous consequences on a worldwide scale? Or should we not do that?" asked House Majority Leader Eric Cantor (R-VA), adding that arguments could be made for both sides, and that the debate over ensuring America’s financial solvency versus allowing the nation to default on its debt — which would torpedo stock markets, cause mortgage and interests rates to skyrocket, and decimate the value of the U.S. dollar — is “certainly a conversation worth having.”
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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Timothy the Obscure
Mostly Friendly
# 292
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Posted
As Tom Lehrer said, satire died when Henry Kissinger won the Nobel Peace Prize.
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When you think of the long and gloomy history of man, you will find more hideous crimes have been committed in the name of obedience than have ever been committed in the name of rebellion.
- C. P. Snow
Posts: 6114 | From: PDX | Registered: May 2001
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Grammatica
Shipmate
# 13248
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Posted
<free financial advice>
Well, as it looks pretty certain now (Friday evening) that the US will default, I have just stepped into a convenient phone booth, changed into my secret identity -- Bond Vigilante! -- and placed a sell order for all my T-bills. Not such a big order, but these are my retirement savings, and I want to protect them as much as possible from the financial storm about to break.
I'd ask all of you who hold T-bills to consider selling now, before the big rush on Thursday, when the entire Western World starts to dump them.
Get out of stocks, too. Internationals as well as domestics. Take a big position in money markets; you'll make money when interest rates go through the roof.
</free financial advice>
Nothing personal, nothing political in any of this, and yes, I am betting against my own country, but the markets don't have room for sentiment or ideology, and at this point neither do you or I.
Posts: 1058 | From: where the lemon trees blosson | Registered: Dec 2007
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Golden Key
Shipmate
# 1468
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Posted
Bill Clinton has a suggestion, posted at ThinkProgress.com.
quote:
Former President Bill Clinton says that he would invoke the so-called constitutional option to raise the nation’s debt ceiling “without hesitation, and force the courts to stop me” in order to prevent a default, should Congress and the President fail to achieve agreement before the August 2 deadline.
Sharply criticizing Congressional Republicans in an exclusive Monday evening interview with The National Memo, Clinton said, “I think the Constitution is clear and I think this idea that the Congress gets to vote twice on whether to pay for [expenditures] it has appropriated is crazy.”
...
The 14th Amendment reads, “The validity of the public debt of the United States, authorized by law… shall not be questioned,” which some scholars have interpreted as giving the president the authority to pay off all outstanding obligations of the United States, regardless of the statutory debt limit imposed by Congress. Prof. Garrett Epps, who teaches constitutional law at the University of Baltimore, wrote in the Atlantic that “it’s not hard to argue that the Constitution places both payments on the debt and payments owed to groups like Social Security recipients — pensioners, that is — above the vagaries of Congressional politics.”
Opinions on whether that would work?
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Blessed Gator, pray for us!
--"Oh bat bladders, do you have to bring common sense into this?" (Dragon, "Jane & the Dragon")
--"Oh, Peace Train, save this country!" (Yusuf/Cat Stevens, "Peace Train")
Posts: 18601 | From: Chilling out in an undisclosed, sincere pumpkin patch. | Registered: Oct 2001
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Golden Key
Shipmate
# 1468
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Posted
Josephine--
Here's a working URL for the article you mentioned, via TinyURL:
"There's a Solution to the Debt Fight That Could Avert Catastrophe -- Why Is Everyone Ignoring It?" (Alternet.org)
I've only read the first page, so far, but interesting idea. But would it be any different from Germany (Weimar Republic??) printing money that was pretty much worthless?
(Excuse me if I've got that wrong; got rather dusty in my memory attic!)
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Blessed Gator, pray for us!
--"Oh bat bladders, do you have to bring common sense into this?" (Dragon, "Jane & the Dragon")
--"Oh, Peace Train, save this country!" (Yusuf/Cat Stevens, "Peace Train")
Posts: 18601 | From: Chilling out in an undisclosed, sincere pumpkin patch. | Registered: Oct 2001
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the giant cheeseburger
Shipmate
# 10942
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Posted
Italy was also notorious for trying to print more and more Lira to get themselves out of trouble. This is one country which has definitely benefited from losing some of their financial sovreignity by being part of the Eurozone!
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If I give a homeopathy advocate a really huge punch in the face, can the injury be cured by giving them another really small punch in the face?
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Anyuta
Shipmate
# 14692
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Posted
quote:
Originally posted by Grammatica:
<free financial advice>
Well, as it looks pretty certain now (Friday evening) that the US will default, I have just stepped into a convenient phone booth, changed into my secret identity -- Bond Vigilante! -- and placed a sell order for all my T-bills. Not such a big order, but these are my retirement savings, and I want to protect them as much as possible from the financial storm about to break.
I'd ask all of you who hold T-bills to consider selling now, before the big rush on Thursday, when the entire Western World starts to dump them.
Get out of stocks, too. Internationals as well as domestics. Take a big position in money markets; you'll make money when interest rates go through the roof.
</free financial advice>
Nothing personal, nothing political in any of this, and yes, I am betting against my own country, but the markets don't have room for sentiment or ideology, and at this point neither do you or I.
my savings are, mostly, in my federal Empoyee Retirement fund.. which includes stocks of varous sorts. Unfortunately, I can't just pull it out, alhtough I'm ABOUT to take out a loan against it.. to pay for college. I will pull out as much as they'll let me at this point.. but unfortunately due to their rules, I can't take out a new loan untill an old one has been paid off in full for 60 days. my 60 days are up... on Aug. 5 I hope that nothing in this whole mess changes the rules.
I have no idea how to move my money around within that retirement fund such as to avoid any future problems due to the default (it if comes)... I don't think any of it is in bonds.
This is so darned frightening! how some idiots can mess with the lives of so very many people because of some misguided principle. talk about cutting off their noses to spite their faces.. they think they are being fiscally conservative, when in fact they are creating a huge fiscal meltdown!!!
Posts: 764 | From: USA | Registered: Mar 2009
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Sioni Sais
Shipmate
# 5713
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Posted
quote:
Originally posted by Grammatica:
<free financial advice>
I'd ask all of you who hold T-bills to consider selling now, before the big rush on Thursday, when the entire Western World starts to dump them.
Get out of stocks, too. Internationals as well as domestics. Take a big position in money markets; you'll make money when interest rates go through the roof.
</free financial advice>
Nothing personal, nothing political in any of this, and yes, I am betting against my own country, but the markets don't have room for sentiment or ideology, and at this point neither do you or I.
Would commodities in general be worth getting into? (As if they aren't rising enough already)
[ 23. July 2011, 12:23: Message edited by: Sioni Sais ]
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"He isn't Doctor Who, he's The Doctor"
(Paul Sinha, BBC)
Posts: 24276 | From: Newport, Wales | Registered: Apr 2004
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Grammatica
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# 13248
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Posted
Sioni, I need to preface this with the legal disclaimer, I think, because my investment advice could be quite possibly worth less that what you're paying for it -- I realize I could be wrong about all of this. Maybe ten minutes from now they will strike a deal. OTOH the freshman Republican interviewed on Scott Simon's NPR program this morning had himself convinced there wouldn't really be a default [etc. etc.]. And if you saw the Weekly Wrap on the News Hour last night, just after the collapse of the debt talks was announced (available on line): Brooks, Shields, and Lehrer were ashen-faced, frightened, somber, and no amount of professionalism on the part of these three experienced reporters could conceal it.
So I don't think I am wrong, unfortunately. We are going to default and it's going to be extremely nasty. I wish I were wrong.
So: With that in mind .... Commodities -- it depends. If economic activity collapses, so do most commodities, because their price depends on their usefulness in the production of goods. Foodstuffs might be a better bet ("people have to eat"), and the combination of drought in the Midwest and famine in the Horn of Africa puts something of a floor under their prices.
I'm able to move my money around because I chose a defined-contribution plan rather than a defined-benefit plan when I was hired. I thought that my money was safer with me, given these former Confederates' tendencies to default on their obligations. I didn't want to be held hostage by the politics of the state of Florida,.
Posts: 1058 | From: where the lemon trees blosson | Registered: Dec 2007
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Sioni Sais
Shipmate
# 5713
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Posted
Grammattica, thanks; I wasn't expecting professsional advice and informed opinion is handy (as well as being what Purgatory is all about).
I too was thinking about foodstuffs, mostly because man has to eat and also because of economic improvements in Asia, there is more market demand for food. We've noticed this in the price increases for rice and our daily bread (and butter. WTF has happened to the price of butter?)
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"He isn't Doctor Who, he's The Doctor"
(Paul Sinha, BBC)
Posts: 24276 | From: Newport, Wales | Registered: Apr 2004
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Crœsos
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# 238
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Posted
quote:
Originally posted by the giant cheeseburger:
Italy was also notorious for trying to print more and more Lira to get themselves out of trouble. This is one country which has definitely benefited from losing some of their financial sovreignity by being part of the Eurozone!
The problems Italy incurred by the practice don't seem to apply to the type of liquidity trap the U.S. currently finds itself in. The Federal Reserve recently expanded the U.S. monetary base (a.k.a. printed a lot of money) drastically without either triggering inflation or causing U.S. interest rates to rise.
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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Grammatica
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# 13248
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Posted
Sioni, thanks. I just don't want anyone to take what I say on investment topics without a close critical examination. Doesn't matter how convinced I am that I'm right.
Croesus, you're right about the non-effects of the recent round of "quantitative easing," though the price of gasoline and the prices of foodstuffs did rise as a direct result of quantitative easing. (Food and gasoline prices are stripped out of the measure of so-called "core inflation," in a bit of fiddle I personally find nauseating.)
However, the Federal Reserve could get away with what was essentially printing money, because the US dollar remains the international currency of settlement, and Treasuries are widely seen as a "safe haven" for investors. A default by the US government, especially as a result of an intractable political standoff between the President and House Republicans, could -- in fact, is likely to -- change all that.
So then what follows?
If oil is suddenly repriced in terms of a marketbasket of currencies, which is one likely consequence, the price of a gallon of gasoline will soar. I wouldn't be surprised to see gasoline go to $10 a gallon or higher, and quickly. The country's transportation system is in no way prepared for an oil shock of that magnitude. "Just-in-time" retailers like Wal-Mart (let alone the internet retailers) depend on cheap transportation costs to keep their prices low. A sudden, massive inflation will ripple through the whole domestic economy. Consumer buying power will collapse.
That is just one likely consequence of a default, if the default lasts more than a few days and/or can't be resolved politically.
Another likely consequence of a US default has to do with the pool of credit default swaps on Treasuries. The market for credit default swaps is still lacking in transparency, still unregulated, thanks to some very successful political action on the part of the financial sector over the last couple of years. They are going to wish they'd allowed more transparency in the very near future, though.
Last time there was a credit crunch, markets froze because of lack of transparency related to credit default swaps on securitized mortgages. Remember 2008? That time, the freeze-up was "just" over mortgages. Next to Treasuries, the value of those mortgages was mere pocket change. This will be huge. Markets will freeze worldwide, and financial institutions will collapse. We can forget about another round of TARP, needless to say. That saved us -- barely -- last time, but if politicians can't even manage to raise the debt ceiling, there won't be any TARP. So ....
Because China's sovereign wealth fund is largely in Treasuries, they will try to prop up their value as long as they can. But those of us who might remember the collapse of the pound sterling in the 1960s (let alone the 1970s) might remember that the intervention of the Bank of England was never sufficient to prop up the pound. The role of the US Treasury in the 1970s with respect to Britain could be taken by China with respect to the US this time. That is, the Chinese government could come in and force us to sort out our economy to their liking.
It's going to be very bad.
Posts: 1058 | From: where the lemon trees blosson | Registered: Dec 2007
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Grammatica
Shipmate
# 13248
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Posted
quote:
Originally posted by Josephine:
![[Waterworks]](graemlins/bawling.gif)
I REALLY hope I am COMPLETELY wrong about ALL of this!
Posts: 1058 | From: where the lemon trees blosson | Registered: Dec 2007
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by Grammatica:
Croesus, you're right about the non-effects of the recent round of "quantitative easing," though the price of gasoline and the prices of foodstuffs did rise as a direct result of quantitative easing. (Food and gasoline prices are stripped out of the measure of so-called "core inflation," in a bit of fiddle I personally find nauseating.)
I think you're making a post hoc error. I can't see anything about quantitative easing that would selectively raise the price of food and fuel but not anything else. The main reason that food and fuel are not included in core inflation is because they're subject to wild fluctuations for reasons that have very little to do with economic policy (political instability in petroleum exporting nations, drought, etc.) As such, including them would skew any short term (four quarters or less) economic assessment using that data. Over the longer term, such fluctuations would smooth out and it would be reasonable to include them when estimating inflation over longer periods.
So anyway, why do you say that U.S. quantitative easing is directly responsible for inflating food and gasoline prices (and not just in the U.S.) while leaving all other commodities uninflated?
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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Grammatica
Shipmate
# 13248
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Posted
quote:
Originally posted by Crœsos:
quote:
Originally posted by Grammatica:
Croesus, you're right about the non-effects of the recent round of "quantitative easing," though the price of gasoline and the prices of foodstuffs did rise as a direct result of quantitative easing. (Food and gasoline prices are stripped out of the measure of so-called "core inflation," in a bit of fiddle I personally find nauseating.)
I think you're making a post hoc error. I can't see anything about quantitative easing that would selectively raise the price of food and fuel but not anything else. The main reason that food and fuel are not included in core inflation is because they're subject to wild fluctuations for reasons that have very little to do with economic policy (political instability in petroleum exporting nations, drought, etc.) As such, including them would skew any short term (four quarters or less) economic assessment using that data. Over the longer term, such fluctuations would smooth out and it would be reasonable to include them when estimating inflation over longer periods.
So anyway, why do you say that U.S. quantitative easing is directly responsible for inflating food and gasoline prices (and not just in the U.S.) while leaving all other commodities uninflated?
Gasoline prices rise owing to quantitative easing, because the price of oil is denominated in dollars, and when the dollar depreciates, the price of oil rises.
Food prices rise for multiple reasons:1) because so much fertilizer is made from petroleum products. 2) because so much of our food these days is transported over long distances. The problem is 3) compounded with packaged foods, which must be transported several times before reaching the end user, are often packaged in plastic, another petroleum product, and so forth.
[ 23. July 2011, 19:06: Message edited by: Grammatica ]
Posts: 1058 | From: where the lemon trees blosson | Registered: Dec 2007
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Alfred E. Neuman
What? Me worry?
# 6855
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Posted
25lb. bags of rice on sale now at Saar's Market Place for $17.95. Get 'em while the gettin's good. ![[Biased]](wink.gif)
[ 23. July 2011, 19:28: Message edited by: Alfred E. Neuman ]
Posts: 12954 | Registered: May 2004
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Crœsos
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# 238
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Posted
quote:
Originally posted by Grammatica:
quote:
Originally posted by Crœsos:
So anyway, why do you say that U.S. quantitative easing is directly responsible for inflating food and gasoline prices (and not just in the U.S.) while leaving all other commodities uninflated?
Gasoline prices rise owing to quantitative easing, because the price of oil is denominated in dollars, and when the dollar depreciates, the price of oil rises.
Interesting theory, but it seems to be at variance with reality. For starters, U.S. consumer goods are also denominated in dollars, even the imports, so any currency fluctuations that affect petroleum should also affect clothing, electronics, etc., which is something we haven't seen.
Secondly, the U.S. dollar hasn't depreciated. The first round of quantitative easing began December 14, 2008, at which time the U.S. dollar could buy 0.7671 euros, 0.6739 British pounds, or 92.09 yen. Petroleum was going for US$46.28/barrel. At the end of QE1 (3/30/2010), the U.S. dollar could buy €0.7415, £0.6616, and ¥93.27, virtually unchanged. Despite this, petroleum had surged to US$84.87. At the beginning of the second round of quantitative easing, the U.S. dollar could buy €0.7187, £0.6310, and ¥81.01. You'll note that there is actual depreciation of the U.S. dollar vs. the yen in the period without quantitative easing. Petroleum sold at US$81.43/barrel. When QE2 ended (6/30/2011) the U.S. dollar bought €0.6958, £0.6244, and ¥80.72. Crude petroleum sold at US$94.97. Again, no depreciation in the value of the U.S. dollar despite an increase in the price of oil.
So, any theory which depends on depreciation of the U.S. dollar to explain rising petroleum prices obvious fails if the U.S. dollar isn't depreciating. A more reasonable explanation for increased petroleum prices is increased demand in developing economies (who are not as currently depressed as the industrialized nations) and war in north Africa.
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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sabine
Shipmate
# 3861
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Posted
I'm sure Washington politicians have seen the polls which show that a representative 80% of Americans are fed up--even angry--with all the drama in Washington. [That's Americans of all political persuasions.]
Do the politicans feel they no longer have to answer to their constituents?
Hubris is not a becoming trait.
sabie
[ 25. July 2011, 14:08: Message edited by: sabine ]
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"Hunger looks like the man that hunger is killing." Eduardo Galeano
Posts: 5887 | From: the US Heartland | Registered: Dec 2002
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tclune
Shipmate
# 7959
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Posted
quote:
Originally posted by sabine:
I'm sure Washington politicians have seen the polls which show that a representative 80% of Americans are fed up--even angry--with all the drama in Washington. [That's Americans of all political persuasions.]
Do the politicans feel they no longer have to answer to their constituents?
The question is, "Who is a constituent?" If the majority of Americans can't be bothered to vote, and an even larger percentage of Americans never contribute to a political campaign, either in time or treasure, then the majority of Americans are not their constituents.
It is tiresome to listen to Americans blather on about unresponsive politicians and then proudly claim to never have voted. It has been said that we get the representation that we deserve -- and the longer I live, the more I suspect that that is both true and tragic.
--Tom Clune
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