patrick.net

david1 says

Vaticanus says

Your numbers are an illusion. You must subtract the growing national and

household debt from these numbers to have any connection to reality. We are

headed for a debt crisis both domestic and international.

Ah. Here it is, good 'ole #1 in the Austrian playbook...

http://patrick.net/?p=1224393&c=959218#comment-959218

"The government numbers are lies"

by the way, I responded to a similar "added debt" argument from mell a few days ago, here -

http://patrick.net/?p=1224393&c=959295#comment-959295

Never got a response to that.

Absent creation of money out of thin air, there is no way that borrowed money can be paid back without an increase in productivity.

Domestic productivity in USA is not increasing faster than borrowing.

Vaticanus says

Absent creation of money out of thin air

When did we lose the ability to do this? We are not Greece.

david1 says

Vaticanus says

Absent creation of money out of thin air

When did we lose the ability to do this? We are not Greece.

Not yet, but the party is almost over.

Vaticanus says

Domestic productivity in USA is not increasing faster than borrowing.

And oh by the way, this isn't true, if we define domestic productivity as GDP.

GDP is growing at 2.5%. Federal debt is projected by the CBO to grow at 2.2% for the next ten years.

Why would the volcano blow in the future if Debt/GDP remains the same or slightly lower than the current 77%?

Why wouldn't Japan, whose debt to GDP ratio is about 200%, have high borrowing costs? The 30 year JGB is 1.62%.

Reality says

Estimation of future existence is not the same as existing now. It can be
safely estimated that your dead body will be in a coffin somewhere within the
next 100 years; that does not mean it is there now.

Horrible analogy aside, the demand is there now--it is the product that doesn't exist yet.

mell says

The S & P is higher than it should be, is that your argument?

No that is evidence. The argument is the creation of debt is a positive feedback loop. Given that 1.) SP 500 P/E ratios are lower than historical norms, 2.) Corporate earnings are at record highs.

More debt = more demand for goods and services = more earnings.

The rich did not get rich due to cronyism - they are rich due to the market - and they remain rich (and get richer) due to tax policy. The tax policy is where the cronyism lies.

david1 says

No that is evidence.

Of crony capitalism, you are mistaking corporate wealth for societal wealth. Plus, it's nonsense to measure wealth solely by the stock market.

david1 says

More debt = more demand for goods and services = more earnings.

No. Not at the amount of debt injected.

david1 says

The rich did not get rich due to cronyism - they are rich due to the market - and they remain rich (and get richer) due to tax policy.

No, they did get rich by being fist in line to receive the freshly printed money. What tax policy are you talking about. The one that is crushing the middle class? Obamacare?

mell says

Plus, it's nonsense to measure wealth solely by the stock market.

I am just using Denninger's example.

mell says

What tax policy are you talking about. The one that is crushing the middle
class? Obamacare?

LOL. The trend of towards greater income inequality began long before the Heritage Foundation had its first wet dream about obamacare.

david1 says

Vaticanus says

Domestic productivity in USA is not increasing faster than borrowing.

And oh by the way, this isn't true, if we define domestic productivity as GDP.

GDP is growing at 2.5%. Federal debt is projected by the CBO to grow at 2.2% for the next ten years.

Why would the volcano blow in the future if Debt/GDP remains the same or slightly lower than the current 77%?

Why wouldn't Japan, whose debt to GDP ratio is about 200%, have high borrowing costs? The 30 year JGB is 1.62%.

You may define productivity however you wish but "we" don't equate GDP to productivity.

No matter, that is semantics. What about inflation? What about domestic debt? Surely you must not forget those drains on productivity?

Creating money out of thin air will induce mistrust, and eventually collapse if it is abused. when you see the way the USA bullies, sets up puppet regimes, you can clearly see the abuse. those chickens are coming home to roost in the form of terrorism. Our competitors will acquire the resources such as oil supply and raw materials to destroy the petrodollar and replace it with an international currency (controlled by the banksters no doubt). Then USA = Greece. Lately we are starting to see those resources being acquired by our competitors internationally. Both militarily and economically we are in grave danger of being overthrown. The economic war between the US and her thinning list of allies and the East/BRIC nations will likely prove to be the end of Keynsian theory.

david1 says

I am just using Denninger's example.

That's a fair point, though it was only a small part of his overall considerations.

david1 says

LOL. The trend of towards greater income inequality began long before the Heritage Foundation had its first wet dream about obamacare.

Again, be my guest and fight to change the taxes as you would like to see them, I am not wildly opposed. What I think is ludicrous though is the fixation on taxes while billions have been put directly into the pockets of the ones who should be in jail and their wealth clawed-back by this corrupt administration (and the one before). Instead you punish everybody by raising taxes, even if it may be necessary. Just stop the looting and start the prosecuting first, then you'd have more credibility and support from society to raise the taxes. I just don't get why people complain about this and go to great lengths to blame every Republican from the past while they blow the clown in chief who has been one of the biggest crony capitalists in action since he took office. The time is here and now to act.

Vaticanus says

You may define productivity however you wish but "we" don't equate GDP to
productivity.

Domestic aggregate productivity is not GDP? What about: Vaticanus says

The Austrian way to create demand is to allow people to use their land, their
labor, their resources to produce things they can trade for other things like
potatoes, shoes, houses, shingles, clothes, etc....

Vaticanus says

when you see the way the USA bullies, sets up puppet regimes, you can clearly
see the abuse.

This is an interesting argument. So we bully the world so they will buy our debt?

david1 says

Vaticanus says

You may define productivity however you wish but "we" don't equate GDP to

productivity.

Domestic aggregate productivity is not GDP? What about: Vaticanus says

The Austrian way to create demand is to allow people to use their land, their

labor, their resources to produce things they can trade for other things like

potatoes, shoes, houses, shingles, clothes, etc....

Vaticanus says

when you see the way the USA bullies, sets up puppet regimes, you can clearly

see the abuse.

This is an interesting argument. So we bully the world so they will buy our debt?

Now you just being stupid. One more = ignore.

Vaticanus says

Now you just being stupid. One more = ignore.

Darn. And I really thought you were going to teach me something too.

I'm a real asshole for using your quotes to ask you to explain your contradictions.

mell says

Also this remains to be proven

Not really. See 1940s and 1950s. Didn't seem to affect productivity then...

mell says

because the small bump in pay after tax wasn't worth the extra effort and giving
up privileges of their current position.

I think you're confusing the cause--it was the small bump in pay. Not the after taxes.

tatupu70 says

Not really. See 1940s and 1950s. Didn't seem to affect productivity then...

Not much dumb money was caught by those confiscatory rates. Warren Buffet should in theory be facing a 35% tax rate, but is actually paying something like 18% or less. What makes you think a 75% tax rate bracket will catch him? Talks about confiscatory rate brackets are just empty talks.

"labor is productive capital"

indeed.

Capital wealth is the ability to create "actual" wealth (or more capital)

"Actual" wealth is that which directly satisfies human needs and wants, which is why I call it "direct" wealth and capital "indirect" wealth.

Fixed capital serves as a multiplier on labor's ability to create wealth -- a tractor, roads, a computer, etc etc etc.

(knowing how to use a tractor or computer productively is a soft form of capital)

Money is a claim check on existing wealth for sale. Too much money in consumers' hands , compared to the productive capacity of the economy, will cause price inflation as scarcity rears its ugly head and goods and services get sold more on the bid than the ask (as sellers have the fun of picking among competing bidders).

The story of the past 50 years has been labor productivity rising immensely, and also income and wealth inequality rising with it.

Lots of skim and skimmers in this system, keeping the working class down.

http://research.stlouisfed.org/fred2/graph/?g=icj

blue is per-worker real GDP, red is income inequaility since 1970

Vaticanus says

What about inflation? What about domestic debt? Surely you must not forget those drains on productivity?

(price) inflation means nothing if a) you're a wage earner b) don't have savings and c) wages rise with prices.

~1/3 of the country doesn't even have discretionary income

http://www.marketingcharts.com/direct/64-of-americans-have-discretionary-income-2340/

~1/6th are on food stamps

http://www.kcet.org/living/food/food-rant/fifteen-percent-of-americans-use-food-stamps.html

hmm, price inflation actually stimulates production, as buyers try to maximize their spending power by pulling forward purchases and consumption.

Slack demand kills productivity. We've got a lot of slack now, LOL

Debt is also neither here nor there wrt productivity.

Debt take-on, however, creates spending power, which is demand, which produces trade, which supports new production.

If what you believe is Austrianism, then Austrianism is a joke philosophy really. Worthless at best.

http://research.stlouisfed.org/fred2/series/TCU

Buffett gets like 40,000 paychecks from ADP every two weeks, of course

you should see all the BNSF checks he gets!

Rothbard totally lied about Georgism, which puts the entire school on my shitlist, LOL

http://fraggle.wordpress.com/rothbard-v-georgism/

http://market-ticker.org/akcs-www?post=220451

This simply cannot be refuted by the Keynesian voodoo machine - no matter how many insults you hurl at him. The US is falling behind countries who have adopted sound money policies, keep peddling that nonsense and shoving freshly printed money into the bankstas pockets ;)

mell says

The US is falling behind countries who have adopted sound money policies

Which countries are those btw?

Question

There are a 7 billion people on this planet. Each one makes how many transactions per day? I'm guessing 50? That is 35 billion transactions per day.

How should we govern those transactions?

mell says

http://market-ticker.org/akcs-www?post=220451

This simply cannot be refuted by the Keynesian voodoo machine - no matter how many insults you hurl at him. The US is falling behind countries who have adopted sound money policies, keep peddling that nonsense and shoving freshly printed money into the bankstas pockets ;)

I already refuted this. Debt take on has been a positive feedback loop. Consumption (corporate earnings) are higher than they would be under more sound money policies. Look at the chart I posted with Red, blue, and green lines. The red lines is what the economy would look like with debt taken out. It is workforce * productivity. Much flatter slope than the slopes of GDP and money supply.

Ergo, you get more bang for your buck with debt (leverage) helping you out in a growing economy. Since we have the power to increase money supply in times of credit crunch, normal problems of liquidity do not apply to us as they do in Greece.

We have debt/GDP of under 80%, and the projection is for this to fall slightly over the next ten years. Japan has Debt/GDP of over 200% and the interest on their 30 year bond is under 2%. The rumors of our demise due to debt load are greatly exaggerated.

http://research.stlouisfed.org/fred2/graph/?g=ibt

Now, refute that, with logic or math, without resorting to "government numbers are lies" please.

david1 says

Look at the chart I posted with Red, blue, and green lines. The red lines is what the economy would look like with debt taken out. It is workforce * productivity. Much flatter slope than the slopes of GDP and money supply.

haha, what a joke. I'd like to know what methodology was used to calculate the hypothetical if that bridge to nowhere had not been enabled by debt . . . the same natural resources and labor could have been put to much more productive use, leading to more jobs and higher standards of living instead of the waste. The chart probably assumes that the resources and labor would just sit idle without the debt creation. . . in other words utterly wrong-headed assumptions.

tatupu70 says

mell says

The US is falling behind countries who have adopted sound money policies

Which countries are those btw?

Singapore
Poland
Switzerland
Germany (high debt-to-gdp but at least they are trying to contain it)
South Korea
Estonia
...

http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

With the example of few outliers (exceptions always prove the rule) the countries with low debt to gdp are doing much better. Wait, where's Zimbabwe at? 202? Yes we can!

david1 says

We have debt/GDP of under 80%, and the projection is for this to fall slightly over the next ten years. Japan has Debt/GDP of over 200% and the interest on their 30 year bond is under 2%. The rumors of our demise due to debt load are greatly exaggerated.

I never said that doomsday is imminent, but if you are trying to tell me that Japan with its rising poverty has been doing fine since embarking on the Keynesian voodoo train-of-shit, then I have another debt-enabled bridge to sell you.

mell says

Singapore
Poland
Switzerland
Germany (high debt-to-gdp but at least
they are trying to contain it)
South Korea
Estonia

So how do you define "sound" money then?

Reality says

A person facing a 75% bracket can easily restructure the bulk of his pay into
stocks and stock options, thereby get the capital gain rate instead of the 75%
income bracket rate. That's what Warren Buffet has been doing: taking his income
as capital gains instead of salary income.

Of course. And that's why top tax rate also applies to capital gains.

tatupu70 says

mell says

Singapore
Poland
Switzerland
Germany (high debt-to-gdp but at least

they are trying to contain it)
South Korea
Estonia

So how do you define "sound" money then?

For a start, adopting a binding balanced-budget amendment with short term (i.e. per budget) and long term (absolute) upper boundaries of debt to income and debt to gdp ratios. This really isn't anything drastic or dogmatic and leaves room to mix-and-match different economic approaches.

indigenous says

Question

There are a 7 billion people on this planet. Each one makes how many transactions per day? I'm guessing 50? That is 35 billion transactions per day.

How should we govern those transactions?

Bueller, Bueller, Bueller?

Actually a tax on financial transactions would take the front-running, skimming algos out (who are currently paid for "providing liquidity" which they don't) and discourage too much flipping and encourage long-term investing.

The middle class doesn't get the loop holes just the other 2 extremes, we know about the upper class, but at the lower quintiles 30% of their income (not including the for cash) is not reported as income.

The overall point is that is quite cavalier to think that anyone could govern 1.5 billion transactions in the U.S. per day which are intimately connected with the 35 million transactions that take place in the world.

indigenous says

The middle class doesn't get the loop holes just the other 2 extremes, we know about the upper class, but at the lower quintiles 30% of their income (not including the for cash) is not reported as income.

The overall point is that is quite cavalier to think that anyone could govern 1.5 billion transactions in the U.S. per day which are intimately connected with the 35 million transactions that take place in the world.

I think it would be enough and much easier to levy that tax on transactions on national stock exchanges only, less complicated and mostly effective. No loopholes.

Reality says

The chart probably assumes that the resources and labor would just sit idle without the debt creation. . . in other words utterly wrong-headed assumptions.

You could always click the link. I promise I won't correct any more of your latin if you do.

Reality says

There is nothing preventing Buffet from applying the Buffet rules to himself, now! The very fact that he is not is indicative that it's all empty talk and posturing.

Nice job pandering to the lowest common denominator here. You know very well the answer to that question. You play by the rules that are in place even if as you try to change them.

Reality says

Now look at Buffet's situation in more detail. Do you honestly think some nameless bureaucrats or lawmakers can spend and invest 75% of his income more wisely than he can with the money himself?

That's not the point at all. The purpose of the Buffet rule is not for the government to invest Buffet's money more wisely than he can. As you well know. The point is to redistribute wealth back to the people that will spend it.

Reality says

Get a brain for a change, if you really worship Buffet, figure out what he is doing, not just what he is saying and posturing.

Buffet is trying to change US tax code to ensure that the US economy is healthy for future generations. It'd be nice if you did the same...

Estonia sucks. Wouldn't want to be them, I'll say that. 9.3% unemployment. GDP per capita of $21k. GDP growth rate of .3%. Gini of 34.

The have national healthcare and a national pension though.

Why are we talking about how great things are in Estonia again?

tatupu70 says

Nice job pandering to the lowest common denominator here. You know very well the answer to that question. You play by the rules that are in place even if as you try to change them.

i.e. More excuses for why he doesn't want to live by his own rules first, but would like to have the rules enforced on others first.

tatupu70 says

That's not the point at all. The purpose of the Buffet rule is not for the government to invest Buffet's money more wisely than he can. As you well know. The point is to redistribute wealth back to the people that will spend it.

Another brain fart for simpletons. Buffet is one of the biggest beneficiaries of government redistribution. Think the bailout of Wachovia and Wellsfargo, along with Goldman Sachs.

tatupu70 says

Buffet is trying to change US tax code to ensure that the US economy is healthy for future generations. It'd be nice if you did the same...

No. Buffet enjoyed the government bailout, now he wants to stick the bill to the taxpayers.

mell says

Estonia

Singapore

Iceland

Most scandinavian countries

Switzerland

Estonia is 1.3M people, basically a city-state.

SG is 5M people on a rather small island (!) with basically a benevolent dictatorship running things, also a city-state

IS is the size of Stockton with a much bigger island to themselves, also a city-state

The scandinavian countries are 5M in size, except SE which is 10M (1/3 the population of CA with the same land area), arguably also city-states

CH is 8M in a small region but of course they have the global wealth transaction center thing going for them, pretty much a city-state too

European countries have the advantage of strong national identities, everyone's on their old homeland since time immemorial.

Germany is an interesting case more closely our parallel -- 80M people, sizable minority immigration (12%, 8% non-European) -- and maybe we've got a lot to learn from them.

I do think their high taxes on everyone keep rents down. But I see their land values are still pretty high I think.

When I meant "banking system" I meant banking system

What my above chart was getting at was there was nothing to stop a years-long continued cross-default collapse other than the Fed being the borrower of last resort.

I can simplify it a bit:

http://research.stlouisfed.org/fred2/graph/?g=idb

showing the Fed stopped the crash halfway into it.

Interest rates are a tricky topic as we know, so I can't speak intelligently what the interest rate environment would look like, but the System needed tons of money and DC was dysfunctional for most of 2009 and 2010 due to the exceedingly tenuous control of the levers of power the Democrats had, especially "liberal", blue-state Democrats like Pelosi.

Obama was doing stupid shit like setting up the Bowles-Simpson committee, and Brown took over Kennedy's seat in early 2010, making all legislation after that having to pass one of the Princesses of Maine's approvals to move forward, barring removing the power to filibuster from the Republicans.

Politicians also had to look to Nov 2010, and the general stupidity of the electorate -- how easy it would be for Republicans to paint all Dems as big-spending liberals should more fiscal attempts be tried in 2010 (on top of ARRA).

http://research.stlouisfed.org/fred2/graph/?g=idd

shows the system wasn't going to collapse to 0 altogether in 2010 -- there's always reversals in every major down move, and census hiring, ARRA's hundreds of billions of social spending, tax cuts, and a general "Summer of Recovery" attitude got the economy out of collapse mode.

I don't pretend to fully understand what happened with the Fed's injection of trillions since 2009, but my general impression is that without it, things would be as bad as what FDR was facing in 1933 already.

This historic monetary intervention was NOT in my thesis in 2009, LOL.