On June 25 2011 02:47 Bibdy wrote: Its obviously not exactly the same, but it does help in times of crisis like in 2008. When the shit hits the fan, private investors have a tendency to turtle up and pull money out of everything. People then turn to government to spend like assholes to keep things afloat. Lo and behold, once things start to fix themselves once more, and private investors return to the party, people complain that the government spent too much.
It's a cycle that repeats itself over and over and it just gets nauseating.
Except you have to realize that recessions don't happen for no reason. They have a very specific cause: overinvestment and malinvestment. And the primary factor driving overinvestment and malinvestment is the policies of easy credit, aggressive fractional reserve banking, and artificially low interest rates set by the federal reserve.
A recession is a CORRECTION. This is something that needs to be understood clearly. If someone stays awake way too late and then feels very tired, I wouldn't recommend that you go over and give them a shot of caffeine and some meth. That's essentially what the governments keynesian economic policies entail. They think they can perpetually create artificial growth financed with debt and there will never be any consequences.
Give that tired man enough caffeine and meth and eventually he's gonna collapse from exhaustion or die. "Spend spend spend!"
Oh, no doubt. Heavy spending during times of economic growth is enormously tempting, because it accelerates that growth. It's always done under the assumption that if we accelerate growth now, we'll be in a much better position to adopt a contractionary (raise taxes and reduce spending) fiscal policy later and pay back all that debt! But, it always comes back and bites us in the ass 10-20 years down the road.
The thing is, though, when you increase government spending "in order to keep things afloat" (I don't even want to touch on whether that's a good idea or not), that almost NEVER goes away. Those funds that get written into the budget are there for good.
So once things fix themselves and the private economy is healthy once again, government spending remains the same. If anything should ever happen again, it'll increase again like mad.
So while private investment may fluctuate with the times, government spending increases monotonically. With a finite amount of money, that means that eventually, the government will be in charge of more and more of the economy.
On June 24 2011 05:50 VPCursed wrote: so.. why are people stupid for investing in gold?
Basically for over a hundred years, the value of gold has gone up tremendously. If you invest now when the prices of gold is very high, sure maybe the value will still keep on going up but looking at history such as the tulip bubble, internet bubble, housing bubble, etc. there will most likely be a point where investors think "I should probably sell my stocks in gold now because if I don't, other people will and I won't get as much money" and as more and more people panic and sell off their gold, it will crash. Of course you never know and maybe investing in gold now can still be profitable but it most likely isn't worth the risk.
On June 24 2011 10:22 Madoga wrote: I'm curious, isn't this issue talked about in the media? A while back, before the "greece crisis", there where a lot of items about this topic in the media. the vibe I get here is that its pretty much beeing ignored in the US media, or am I wrong?
It isn't completely ignored, but it's downplayed. It's not as prevalent as you would think, given the circumstances.
I'm surprised more people aren't critical of the Federal Reserve. Greenspan's deregulation (e.g. unwillingness to regulate derivatives) greatly contributed to the 08 crisis. Furthermore by Bernanke's own admission the Federal Reserve was responsible (at least in part) for the great depression. I'm not an econ major but it seems to me the Fed is rather incompetent.
Uh, it's not the Federal Reserve's job to regulate capital markets. That would be the SEC. And, yes, the Federal Reserve was responsible for the Great Depression because they were stuck to the gold standard and were unable to drive aggregate demand through inflation. Some would argue the Federal Reserve is also responsible for this current recession for trying to tighten things back in 2007 (with gas prices soaring) rather than loosening monetary policy. And for not loosening it enough in 2008 and 2009; but mostly because of political pressure that it would cause runaway inflation despite the fact that inflation was very, very low.
On June 24 2011 05:20 Bibdy wrote:I don't necessarily buy that government spending is entirely bad, either. If it's spent domestically, then its little to no different than the rich reinvesting their money back into the economy.
I just wanted to pick on this little part here:
The important thing to consider is that the money spent by the government would otherwise be spent by private citizens/businesses.
One metaphor I've used before to explain this to my relatives: Imagine you need groceries. Now there's two scenarios. First, you can go and spend $50 to get all of the things you need. Second, you can give me that $50 and I'll go get the things that I think you need.
If I buy your groceries, I'll inevitably buy stuff that you don't need, meaning you end up with value less-than-or-equal-to the original $50. In the absolute best case, the second scenario is the same as the first.
Obviously this is just a metaphor, but the point is that when private businesses spend money on investments, they make sure there is a huge amount of value in what they're investing in. When the government spends money, they don't care what they get back. They just want a giant project that sounds nice. In both cases, a whole bunch of money gets spent and goes to the hands of the people on the ground working to make the giant projects happen. In only one of them, however, does the giant project ever actually return profit.
Perfect example is the high speed rail in my home state CA. At best, it's going to be billions of dollars spent and take away the tiniest fraction of traffic from southwest airlines. At worst (and most probably) it's going to end up being a giant money sink just like amtrak/metrolink/bart. If instead these billions of dollars were in the hands of people wanting to start businesses and invest in new enterprise, we would know that every single dollar spent is going to be well thought through.
You're basically advocating subsidies. You just take on at good faith that private business can somehow magically spend money better. When the government spends money on highways, they don't have to worry about the transaction costs of dealing with competing highways. When the government spends money on fire fighting services, they don't have to worry about the transaction costs of making sure they're covering the right property and the wrong property. When the government spends money on public sector health care systems, they don't have to allocate money to interacting with other health care systems. Private business to private business communication can be horrendous and be a drain on the economy.
The whole reason that the telephone system was regulated away from a a pure private affair in the 1800s was because the amount of copper lines from each 2^n homes to every other 2^n - 1 homes would become a nightmare to manage if there were multiple and competing telephone infrastructures. The whole reason that rural areas received electricity was because the government stepped in and said electricity to rural citizens is a good idea. Private businesses didn't say that and private businesses weren't willing to create infrastructure for rural electrification.
On June 24 2011 10:22 Madoga wrote: I'm curious, isn't this issue talked about in the media? A while back, before the "greece crisis", there where a lot of items about this topic in the media. the vibe I get here is that its pretty much beeing ignored in the US media, or am I wrong?
It isn't completely ignored, but it's downplayed. It's not as prevalent as you would think, given the circumstances.
I'm surprised more people aren't critical of the Federal Reserve. Greenspan's deregulation (e.g. unwillingness to regulate derivatives) greatly contributed to the 08 crisis. Furthermore by Bernanke's own admission the Federal Reserve was responsible (at least in part) for the great depression. I'm not an econ major but it seems to me the Fed is rather incompetent.
Uh, it's not the Federal Reserve's job to regulate capital markets. That would be the SEC. And, yes, the Federal Reserve was responsible for the Great Depression because they were stuck to the gold standard and were unable to drive aggregate demand through inflation. Some would argue the Federal Reserve is also responsible for this current recession for trying to tighten things back in 2007 (with gas prices soaring) rather than loosening monetary policy. And for not loosening it enough in 2008 and 2009; but mostly because of political pressure that it would cause runaway inflation despite the fact that inflation was very, very low.
The duties of the Federal Reserve (according to their own website) include:
-supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers
On June 24 2011 10:22 Madoga wrote: I'm curious, isn't this issue talked about in the media? A while back, before the "greece crisis", there where a lot of items about this topic in the media. the vibe I get here is that its pretty much beeing ignored in the US media, or am I wrong?
It isn't completely ignored, but it's downplayed. It's not as prevalent as you would think, given the circumstances.
I'm surprised more people aren't critical of the Federal Reserve. Greenspan's deregulation (e.g. unwillingness to regulate derivatives) greatly contributed to the 08 crisis. Furthermore by Bernanke's own admission the Federal Reserve was responsible (at least in part) for the great depression. I'm not an econ major but it seems to me the Fed is rather incompetent.
Uh, it's not the Federal Reserve's job to regulate capital markets. That would be the SEC. And, yes, the Federal Reserve was responsible for the Great Depression because they were stuck to the gold standard and were unable to drive aggregate demand through inflation. Some would argue the Federal Reserve is also responsible for this current recession for trying to tighten things back in 2007 (with gas prices soaring) rather than loosening monetary policy. And for not loosening it enough in 2008 and 2009; but mostly because of political pressure that it would cause runaway inflation despite the fact that inflation was very, very low.
Wait, the Fed's monetary policy has been incredibly loose over the last couple decades, the only thing left to them now is QE because of the ridiculously low interest rates that Greenspan supported during solid economic growth. How would further expanding the money supply do any good during a credit bubble?
Edit@ Pasade considering the tools the fed actually has how are they supposed to accomplish that? I just don't think they can fulfill that mission and if they lack the tools it is a failure of congress.
On June 25 2011 02:58 jackinthebox wrote: I'd just like to point out that the OP is clearly biased. The OP state that the US Federal debt does not follow general accounting rules, which is correct, and proceed to talk about how future liabilities such as SS and MC are not included INCREASING the size of the real debt. Great. However, the US debt also does not include assets of the US government including land, public buildings, etc. These assets would LOWER the amount of real debt. The OP simply doesn't mention this.
This post is not meant to be political and just pointing out bias in the OP.
I agree that the OP should point out the assets that the government has, but the land and public buildings that the government does own are A) non-profitable and B) a lot of this land is not owned by the federal government, it is owned by the states gov.
The problem I see with raising taxes is that the use of that money. As a country that is based off of capitalism, I really don't see a disencentive (such as higher taxes) as a way to bring and keep companies in the U.S. Furthermore, the programs created by the government for general welfare and other non-specific programs are inherently going to be easier for corrupt politicians and the companies that they represent to get free money.
100 years ago, the max rate that the federal government was going to tax the citizens was 7% http://en.wikipedia.org/wiki/Revenue_Act_of_1913Link. The Revenue act of 1913 reduced the % of tariffs from 40% to 25% and imposed an income tax starting at 1% and up to 7%. Now the income tax between federal and state can easily exceed 50% of total earnings and I feel that is complete bullshit.
The reason why the U.S nation is in debt for 14.49 trillion is because of frivolous spending in our federal government. The amount of money (including inflation) that is taxed has only increased, but the cost of the "Great deal" and the "Great new deal" plus other spending programs and Bush's medicare part D and other crap that has been passed is officially KILLING the U.S.
I would propose to reduce the tax rate on all citizens, increase tariffs and go through the "books" (ie, every single dollar that is spent by the federal government) and cut out all funding that can be done through private organizations. I would also like to implement a plan where you can reduce your yearly/quarterly tax by 100% of money that you have donated to charities that replace the government equivalents of those programs (medicare would be an example). Also, the Voucher idea for many programs (like k-12 schools) would be great. If a school sucks and a parent doesn't want their kid to go there, they can go to another school (this would mean that schools would have to compete for your money).
I know that social programs work in countries in Europe. I understand that in countries like Sweden (9mil pop, same as Michigan) and Denmark (5mil, same as Colorado). But in a country that is twice the population of Russia (141million), socialism doesn't work nearly as well. China is on the end of that bell curve with 1.3 billion and up until 1990's they were in a horrible state (even now, they still are). Socialism works in smaller countries because the cost of providing something like free healthcare increases exponentially because of additional spending occurences.
On a similar note, California is has the highest population of any state in the us (37 mil) and is practically bankrupt. California is also one of the most profitable lands in the world; California has the eighth largest economy in the world (if it were it's own country). Californias debt alone is 378 billion (2/3's of Greece's debt). This is another look at a country that has an extremely heavy list of social programs and has the highest tax rates on middle class families (10% on 47k or higher).
asset and liabilities are two separate things and often not allowed to get against each other until it has already been done so by actual settlement (ie selling assets to pay a debt).
the total debt + liability is relevant because those amounts needs to be paid with cash. the amount of assets the gov has is often irrelevant because most of it can not be sold for cash. the government runs into problem when it runs out of.... you guessed it: CASH!!
btw, majority of US gov asset are buildings (ie the white house), roads, water/sewage etc. these "assets" can not be sold. imagine how Congress react if China demands ownership of US airports as payment against debts owed to them.
slightly misleading-- social security is portrayed as a 4trillion dollar hole in the budget, but contributions aren't discussed in terms of the larger numbers. Its easy to scare people into privatizing social security when we use words like "ponzi scheme", "bankrupt" and the like.
The fact is, a lot of hedge fund operators and financial firms would stand to profit a significant deal if social security was converted into a personal accounts type system, so is it all that strange we see reports advocating such?
The increasingly pronounced boom-bust crisis cycle that we're seeing is a sign that the powers that be are running out of frontiers to harvest... social security is one of them though.
1. its not misleading. social security IS a ponzi scheme. if any other entity is to provide social security using the structure the gov is doing, it would have been shut down by the SEC due to fraud.
2. and bankrupt correctly describes it. the only way gov can continue social security is to significantly reduce payout. in the corporate world, we call this Chapter 11 Bankruptcy. btw, CBO already ruled out that increasing tax to match payout is improbable.
3. hedge fund operators will have a 1 time windfall at the switchover. but superior profits for the long run is not likely. to maintain superior profits, fund managers will need to form a monopoly or cartel to fix prices, outright steal money from your account or lie about your investments. but those options are illegal.
1) The OP is misleading since it talks about obligations as debt. There is also Social Security contributions, which are recievables, but they are left out of all calculations, and the OP frames the situation as a massive 100 trillion hole, when in fact it is not. It is not a ponzi scheme-- most people pay in, most people will receive benefits after. The income has surpassed the expenses in almost all years since it was implemented. THE WORST estimates for when the surplus will be eliminated is 2043. This will however be completely mitigated by a modest few percentage point increases to payroll taxes. A small price to pay for income security for the elderly. Many of which will be deep in poverty without it, and make no mistake, opening it to market forces WILL cause people to lose their money. Its a mathematical certainty.
2) see #1. Ruling a tax increase is improbably is a funny way to hide a solution-- the problem doesn't even start until 2043, or 2052 if you actually ask the state. Interestingly the majority of the American public is in support of increasing income taxes progressively, so it becomes a question of democracy.
3) No, because if you convert the system, you have a structural change, and under a single accounts system, financial entities including hedge funds have new territory, so to speak. Right now their creep stops at the social security zone, which is a pretty big part of the map. if you alter the system, social security becomes the territory of said entities and they throw down hatcheries all over all of the retirement planning that people do, henceforth profiting out of all financial transactions carried out within the domain of retirement planning.
On June 26 2011 00:19 caradoc wrote: 1) The OP is misleading since it talks about obligations as debt. There is also Social Security contributions, which are recievables, but they are left out of all calculations, and the OP frames the situation as a massive 100 trillion hole, when in fact it is not. It is not a ponzi scheme-- most people pay in, most people will receive benefits after. The income has surpassed the expenses in almost all years since it was implemented. THE WORST estimates for when the surplus will be eliminated is 2043. This will however be completely mitigated by a modest few percentage point increases to payroll taxes. A small price to pay for income security for the elderly. Many of which will be deep in poverty without it, and make no mistake, opening it to market forces WILL cause people to lose their money. Its a mathematical certainty.
2) see #1. Ruling a tax increase is improbably is a funny way to hide a solution-- the problem doesn't even start until 2043, or 2052 if you actually ask the state. Interestingly the majority of the American public is in support of increasing income taxes progressively, so it becomes a question of democracy.
3) No, because if you convert the system, you have a structural change, and under a single accounts system, financial entities including hedge funds have new territory, so to speak. Right now their creep stops at the social security zone, which is a pretty big part of the map. if you alter the system, social security becomes the territory of said entities and they throw down hatcheries all over all of the retirement planning that people do, henceforth profiting out of all financial transactions carried out within the domain of retirement planning.
1a. the receivables are only for amounts incurred but not yet remitted. there is usually about a 30 day lag. the amount isn't much. 1b. the income had never exceeded the expense. only the cash flow did. at the current pace, ppl paying into social security today will get back far less than what they put in, after adjusting for falling value of the dollar. 1c. your point about the percentage adjustment is invalid. in fact, Bernard Madoff paid back his investors, if only you take into consideration of a few percent adjustment annually. 1d. obviously the elderly want income security. they just dont want to pay for it. in fact, the problem faced by social security is because they didn't pay enough for it.
2. majority of Americans support increasing taxes, only if they don't have to pay for it. in fact, majority of Americans receive more benefit than they paid in taxes (even if you include VAT, property tax etc) but they still feel only the rich should pay for tax increases. they believe being bailed out for life is a birth right.
3. there is no doubt fund managers will profit. the question is superior profit, which is not possible without knowingly breaking the law. also, fund managers diligently look for investment opportunities, ensuring capital is efficiently allocated. there is always a few bad managers out there, but taxpayers can CHOOSE their own champions.
On June 26 2011 00:19 caradoc wrote: 1) The OP is misleading since it talks about obligations as debt. There is also Social Security contributions, which are recievables, but they are left out of all calculations, and the OP frames the situation as a massive 100 trillion hole, when in fact it is not. It is not a ponzi scheme-- most people pay in, most people will receive benefits after. The income has surpassed the expenses in almost all years since it was implemented. THE WORST estimates for when the surplus will be eliminated is 2043. This will however be completely mitigated by a modest few percentage point increases to payroll taxes. A small price to pay for income security for the elderly. Many of which will be deep in poverty without it, and make no mistake, opening it to market forces WILL cause people to lose their money. Its a mathematical certainty.
2) see #1. Ruling a tax increase is improbably is a funny way to hide a solution-- the problem doesn't even start until 2043, or 2052 if you actually ask the state. Interestingly the majority of the American public is in support of increasing income taxes progressively, so it becomes a question of democracy.
3) No, because if you convert the system, you have a structural change, and under a single accounts system, financial entities including hedge funds have new territory, so to speak. Right now their creep stops at the social security zone, which is a pretty big part of the map. if you alter the system, social security becomes the territory of said entities and they throw down hatcheries all over all of the retirement planning that people do, henceforth profiting out of all financial transactions carried out within the domain of retirement planning.
1a. the receivables are only for amounts incurred but not yet remitted. there is usually about a 30 day lag. the amount isn't much. 1b. the income had never exceeded the expense. only the cash flow did. at the current pace, ppl paying into social security today will get back far less than what they put in, after adjusting for falling value of the dollar. 1c. your point about the percentage adjustment is invalid. in fact, Bernard Madoff paid back his investors, if only you take into consideration of a few percent adjustment annually. 1d. obviously the elderly want income security. they just dont want to pay for it. in fact, the problem faced by social security is because they didn't pay enough for it.
2. majority of Americans support increasing taxes, only if they don't have to pay for it. in fact, majority of Americans receive more benefit than they paid in taxes (even if you include VAT, property tax etc) but they still feel only the rich should pay for tax increases. they believe being bailed out for life is a birth right.
3. there is no doubt fund managers will profit. the question is superior profit, which is not possible without knowingly breaking the law. also, fund managers diligently look for investment opportunities, ensuring capital is efficiently allocated. there is always a few bad managers out there, but taxpayers can CHOOSE their own champions.
1d) The point is that employers make contributions as well as employees. A well designed system would incorporate this into the structure of the economy, like a minimum wage.
2) This is not a critique. In a democratic society presumably you strive for a system that is supported by a majority.
3) This doesn't really deal with my main point, which is that it is partisan interests which stand to profit through privatizing social security are the ones that advocate and propagate this type of information.
If you want to discuss assets, we can. Small Business + Corporate + Household Assets = $75 trillion. Social Security + Prescription + Medicare Liabilities = $115 trillion
If you want to discuss revenue and the deficit we can. Revenue to GDP ratio = 30.5% Spending to GDP ratio = 46.6%
If you want to discuss receivables, we can. They aren't going to cover the costs, not by a long shot, and that is the whole point.
No matter what measure you want to use the conclusion will always be the same: we are in a massive hole and digging it deeper every day that passes. Splitting hairs regarding the numbers is just a way of avoiding that fact.
caradoc, if you think that trying to reduce the federal retirement burden is some hedge fund conspiracy to get old people's money, instead of a common sense measure to stave off mounting debt, I don't really know what to say. I would recommend you stop being paranoid about the rich boogeymen and instead consider how our children are going to pay these debts. A "modest" raise in the payroll taxes clearly isn't going to cut it. That's why I linked the IMF report which advocates an adjustment of 15% of GDP.
1d) The point is that employers make contributions as well as employees. A well designed system would incorporate this into the structure of the economy, like a minimum wage.
2) This is not a critique. In a democratic society presumably you strive for a system that is supported by a majority.
3) This doesn't really deal with my main point, which is that it is partisan interests which stand to profit through privatizing social security are the ones that advocate and propagate this type of information.
1a,b) those amounts are received, not receivables. they were already taken into calculation of the "gaping hole" the CBO was talking about, which is the actuarial deficit.
1c) the "percentage adjustment" you speak of involves increasing contribution by young workers to cover the older retirees without adding benefits to those paying for it. thus, the young workers will end up getting pennies on the dollar. hence the ponzi scheme.
2. Look at Greece. No one protested when the gov was borrowing to pay their social security. And now the debts come due, they blame the gov. Being a democracy doesn't save your country from bankruptcy or make social security solvent.
3. Nothing wrong with profiting from privatization of social security. This benefits young workers the most. effectively turning social security into defined contribution plan. older ppl will lose out. but that is because they never paid enough into social security in the first place.
and in it already you have the explanation why not only the US has a dept that is exponantially rising.
inadvertently, what the video proposes is what is being done in China. the gov owns all the biggest banks and has complete control over money supply. in fact, the RMB is not even a trade-able currency outside of China and look at the impact this financial crisis has on them.
the video does not purpose to create new dept money.
it proposes that the state creates money whithout any dept burden. otherwise the state (the borrower) is just a tool for banks (the lender) to make big profits on money that they never had.
what do you think the goverment in china is ? ofc its corporated dictatorship, nothing else. but i wouldnt be too happy with it, all the profits will still go to private ownership.
and in china you can see that the monetary system we use in its exponantial growth can have some shot term benefits. Just look up the dates when they created their central bank (1983) and how they economic growth did since then. Sadly its a trap ....
EPT
