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i always quote the source at the end, so too bad if you can't read. it is a shame that people won't comment on the content of an article, but rather criticize the source. maybe you don't like denninger, but you can't come up with a valid argument against anything he posted in that article.
I got an infraction for doing that once, that's all it took. I was told we could quote two sentences. I wonder why the mods didn't catch that?
When you can sell 10-year Treasuries at a yield of 3.85% (which is what they closed at last Thursday), the national debt is not causing any "major trouble".
And I don't know why you think such low rates are beneficial to us in any way except the immediate short term. Chinese leadership has expressed unhappiness in their returns on US debt. If rates don't go up they will buy less securities. Where will Uncle Sam get his money then? Our pockets.
Quote:
Originally Posted by saganista
The current weakness in the economy has resulted from sagging consumer demand which led to sagging business demand. You think cutting back on government demand would have been a good way to respond to that? Brilliant plan. Let's just have no demand at all and see how many jobs we have left. The biggest problem with the $787 billion stimulus bill was indeed that it wasn't bigger.
A weakening currency meanwhile has no effect on the economy at all save in making imports more expensive and exports cheaper while putting modest long-term pressure under interest rates. Our trade balance could frankly use a little boost and interest rates are a long, long way from reaching anything resembling problematic ranges.
All you are doing here is stacking up imaginary problems against the actual gains that ARRA has delivered. That doesn't make for much of a persuasive argument.
No, I think if money was to be spent it should have been on tax breaks for small and medium size businesses leading to an increase in new hires. The TARP funds kept the financial system in place, I'll give it that, but at what cost? The arguments about the unimportance of the national debt sound like they come from someone who's head is in the sand. You really think a weak US dollar only influences imports/exports and American tourists?! It is of great interest to nations and funds funding the US government since the yields on government don't account for foreign exchange rates. Why would you want to pay x amount Yuan now for y amount Dollars in the future when x is appreciating relative to y? Sure, there are derivatives that mitigate FX risk but are costly.
The debts from WW1 and WW2 were paid back by deprecating the dollar to the 2 cents that it is today.
Two cents relative to what, or do you simply suffer from money illusion? Meanwhile, inflationary risk is a component of interest rates, and Treasury securities do pay interest. But when it comes to repayment of principal, we either convince the holder of a maturing note to take a new note for the same amount, or we borrow that amount from someone else and use the proceeds to repay the original note holder. Sort of like charging your MasterCard payment to your VISA card. Works every time, if you're a government. We've essentially done nothing with our debt since 1836 but roll it over in this way. No one today has any plans to do anything differently in the future. Nobody's kids or grandkids are going to be scraping together nickels and dimes to pay off the public debt from any source.
The public debt will continue to be "repaid" with depreciating fiat currency. Just like Vietnam did, we'll try experiments with price controls and restricting the trading of gold. It will fail.
i always quote the source at the end, so too bad if you can't read. it is a shame that people won't comment on the content of an article, but rather criticize the source. maybe you don't like denninger, but you can't come up with a valid argument against anything he posted in that article.
Well, the article seems to be gone now, but I would still not see a reason to deal with Denninger at all. According to him, representative democracy should already be gone from these shores as the result of the AIG bailout. And that was when it was only $40 billion. But a line was crossed. The die was cast. It was lights out and party's over. Yet Congress will be back in session here shortly. I don't understand it. Unless it had something to do with that thing at the end of all his videos that says they are FOR ENTERTAINMENT PURPOSES ONLY, explaining that Denninger is NOT TRAINED and NOT QUALIFIED in any financial area. You want all that drama, why not check out an afternoon soap opera. I hear Mildred is thinking about cheating on Harvey with that no-good Bradley. Boy, if THAT happens, it's lights out and party's over.
The currency of a nation is the lifeblood of all transactions. A currency cannot simply be a promise to pay tomorrow; it must in fact BE payment today.
My dear, all currency is simply a claim upon the economy that issues it (i.e., it's an IOU), and in any modern economy, the vast majority of transactions that occur involves no currency at all.
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Originally Posted by floridasandy
The toil and sweat of people whether they be social security contributors or foreign investors cannot continue to be converted into Government IOU's anymore than toilet paper can be converted into the Magna Carta. People must snap out of the catatonic state they have fallen into. The past, if it could speak would laugh at us and the future (if it were here) would condemn us. (souleles)
Ack! Currency itself is an IOU. A ten dollar bill is an evidence of indebtedness, and that debt is enforceable anywhere within the economy. You can use it to claim a cab ride, or a movie ticket, or two Big Bites and a Slurpee. Once you do, the debt is satisfied and nobody owes you anything anymore. You've got to go back to work and trade in some of your labor for some more IOU's.
Actually the economy of the first 6 years of the Bush administration were good. To blame this on the GOP is juvenile. I don't put full blame on Bush, Obama, the Democrats or Republicans. The economy is too complicated and big to do that. Normal business cycles are the major cause of downturns. They happen about every 6 years or so and the stimulus is going to cause many more problems down the road.
The first six years of Bush were built on credit. Not good if you have to pay the bill later. It is juvenile to blame on any one party, its wiser to blame it on the mentality of Americans that want a lot of stuff but never want to pay the real cost.
Gee, you know they CAN'T call in their loans. The notes they hold are payable at maturity and not until. They can sell them on the secondary market if they'd like, but that's really the only option that they have. Meanwhile, propping up their own economy to levels that will satisfy their growing and increasingly comfortable urban middle class requires selling a lot of stuff overseas. Like to the US. Without the US as their consumer-of-last-resort, China stands to be in rather a lot of trouble. So they will happily continue to take in a surplus of dollars. They will continue to use what they can where they can, and then invest the rest in US Treasuries. At this point, they need us as much as we need them.
I do not believe the propaganda that China needs us.You have it right that we are a 72% consuming economy and they would want to be in our market.On the other hand China is more of a producing economy but they have 1 billion consumers.See,they can off set some or most of their money by encouraging tax cuts or cost of living increases which would gas consumer spending big time.Imagine 1 billion people with more money in their pockets.
What is so good about the above it was done with real earnings,they would not have to borrow to stimulate their economy.
China is firmly in the drivers seat,the only thing we could do is to war monger them.Just because they no longer want to loan us money is no reason for a war,they can not help they are smarter then us.
Look at the history of treasury rates. They are quite low right now (3.84) but have steadily increased since December 2008 when they were yielding 2.42%.
Actually, the 10-year reached a low of 2.08 on December 18, 2008, but that was at the tail end of one the great flights to safety of recent times, as investors flooded out of plummeting equity markets for the security of goverment notes. Hardly a representative point of reference. Here for context are the year-end 10-year Treasury yields since 1990...
Pretty obviously, we are a long way from any point where financing the debt is likely to become a major trouble or burden.
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Originally Posted by decafdave
And I don't know why you think such low rates are beneficial to us in any way except the immediate short term.
The historically low yield was noted re the "major trouble" claim. Right-wingers do like to claim that spending and the debt are somehow spiralling out of control. Not happening.
Quote:
Originally Posted by decafdave
Chinese leadership has expressed unhappiness in their returns on US debt. If rates don't go up they will buy less securities. Where will Uncle Sam get his money then? Our pockets.
China has no leverage. If they want to buy fewer securities, all they have to do is sell us fewer of their exports. That way, they won't have so many dollars sitting around that they have nothing else to do with. Of course, they won't have so many jobs either or as much GDP growth, and that won't play well internally for them at all.
By the way, as of the end of October, China held just a little less than $800 billion worth of US Treasury securities. That was about 23% of all foreign holdings and about 6.7% of all public debt outstanding. Obviously, we are able to borrow money from sources other than China.
Quote:
Originally Posted by decafdave
No, I think if money was to be spent it should have been on tax breaks for small and medium size businesses leading to an increase in new hires.
Tax breaks for corporations do not lead to new hires. These are one of the least stimulative options in the toolbox. Hiring occurs when businesses large or small sense that there is demand in the market that they could meet, but not with a staff of the current size. Hence, they hire new workers, produce new output, and make new sales and profits. If demand fades, staff are laid off and production goes down. Demand is the driver, not taxes or cash-on-hand.
Quote:
Originally Posted by decafdave
The TARP funds kept the financial system in place, I'll give it that, but at what cost?
The Fed's operations were a more signficant factor than TARP, but TARP was a good idea at the time even if there weren't very good plans yet for how to implement it.
Quote:
Originally Posted by decafdave
The arguments about the unimportance of the national debt sound like they come from someone who's head is in the sand.
No, it's just that the debt isn't much of a problem. Unemployment is a problem. Aggregate demand is a problem. Energy and health care are problems. The debt is not so much of a problem. It could become one, but we are still quite a long way from that.
Quote:
Originally Posted by decafdave
You really think a weak US dollar only influences imports/exports and American tourists?! It is of great interest to nations and funds funding the US government since the yields on government don't account for foreign exchange rates. Why would you want to pay x amount Yuan now for y amount Dollars in the future when x is appreciating relative to y? Sure, there are derivatives that mitigate FX risk but are costly.
Yields on US Treasury securities do include an exchange rate premium because they are widely marketed into foreign economies. No foreigner would be willing to buy if he felt his return would be eroded beyond his tolerances by either inflation or exchange rate losses. On the other hand, US Treasuries carry no credit risk at all. Particularly in unsteady times, the certainty of repayment relative to other investment options has positive market value. Derivatives come into play only when an investors perception of risk is greater than the market's perception. In that case, he might choose to hedge against possible loss. Wouldn't be foolish, and wouldn't be that expensive either. All of this however affects the behavior of capital markets at the margin. None of it affects the actual economy at all. Resources, transportation networks, the quality and creativity of the workforce, and so many other factors are not altered by exchange rate movements. We have been through strong and weak dollars for decades and have done just fine with both.
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