US government shutdown - Page 85

On October 10 2013 16:04 Kaitlin wrote:
Default isn't necessary for interest rates to go up.

On October 10 2013 15:45 Kaitlin wrote:


Interest rates WILL go up and when they do, the % of the budget going to interest will explode.

On October 10 2013 17:06 HunterX11 wrote:


True, but it IS necessary that interest rates go up should the U.S. default, which means that anyone who claims they want to reduce debt but also doesn't want to raise the debt ceiling is an idiot, a liar, or both.

On October 10 2013 18:20 Vegetarian wrote:


Um no, if a country continuously borrows money and then shows themselves to be unable to pay it back unless they borrow more money it is called a ponzi scheme. All ponzi schemes end with massive spikes in interest rates/devaluation of whatever the ponzi scheme is selling. No country in history has had long term success doing what you are suggesting. Interest rates reflect current demand for treasury debt. The more debt the usa compiles the greater interest rates will eventually rise to. The obvious solution is to just cut spending.

On October 10 2013 18:42 kwizach wrote:

This is just flat-out wrong, as can be directly observed by looking at the current interest rates on U.S. debt (the debt is pretty much higher than it's ever been, yet the interest rates are certainly not).
Also, the long-term solution to reducing debt is a healthy economy, and that doesn't come with cutting spending now.

We’re not going to be disrespected. We have to get something out of this. And I don’t know what that even is.

Source: http://washingtonexaminer.com/gop-stands-firm-against-funding-bill-will-link-to-debt-ceiling-fight/article/2536750

On October 10 2013 19:15 Vegetarian wrote:


This is a pretty laughable post. I would have thought that in light of the housing bubble, as well as the nasdaq bubble that preceded it, people would recognize that current prices can sometimes be in...what are they called? BUBBLES! It should be pretty evident to anyone with half a clue that interest rates are low because the Federal Reserve is printing money to buy government bonds. They call it quantitative easing and apparently they have fooled some people. In case you still aren't following me, when the federal reserve stops subsidizing interest rates by buying bonds then interest rates will increase. And, as long as the federal reserve is printing money to buy bonds you have an equivalent amount of inflation being produced which acts to distort prices and hinder economic growth by transferring money from savers to debtors. The long-term solution to reducing the debt is pretty simple, you stop spending more money than you take in. I am not sure how your under the delusion that government spending is beneficial to economic growth.

On October 10 2013 19:15 Vegetarian wrote:


This is a pretty laughable post. I would have thought that in light of the housing bubble, as well as the nasdaq bubble that preceded it, people would recognize that current prices can sometimes be in...what are they called? BUBBLES! It should be pretty evident to anyone with half a clue that interest rates are low because the Federal Reserve is printing money to buy government bonds. They call it quantitative easing and apparently they have fooled some people. In case you still aren't following me, when the federal reserve stops subsidizing interest rates by buying bonds then interest rates will increase. And, as long as the federal reserve is printing money to buy bonds you have an equivalent amount of inflation being produced which acts to distort prices and hinder economic growth by transferring money from savers to debtors. The long-term solution to reducing the debt is pretty simple, you stop spending more money than you take in. I am not sure how your under the delusion that government spending is beneficial to economic growth.

Long-term interest rates are the sum of expected inflation, expected real short-term interest rates, and a term premium. Expected inflation has been low and stable, reflecting central bank mandates and credibility as well as considerable resource slack in the major industrial economies. Real interest rates are expected to remain low, reflecting the weakness of the recovery in advanced economies (and possibly some downgrading of longer-term growth prospects as well). [...] Finally, term premiums are low or negative, reflecting a host of factors, including central bank actions in support of economic recovery.

On October 10 2013 20:40 paralleluniverse wrote:

Completely wrong. Low interest rates predated QE. Your nonsense argument about Fed keeping rates low is debunked here.

I'm not sure how you're under delusion that cutting government spending is beneficial to economic growth, since spending, government or private, creates growth. Less spending means less growth.

On October 10 2013 21:31 Vegetarian wrote:


It never ceases to amaze me how people can be so ignorant of very recent events. Low interest rates did predate "Quantitative Easing" they did not predate a federal reserve subsidized interest rate which is the same exact thing. Since you don't seem to understand the interest rate is determined by something called supply and demand. If the Federal Reserve prints money and buys bonds to keep rates at a certain level we can see that the demand is not real. It is artificial demand that is sustainable only so long as the Fed continues to print money and create inflation. Paul Krugman's article does not debunk anything, linking to it only highlights your lack of understanding of the issue. If you can't formulate a basic argument yourself it should reveal to you your true ignorance of the topic at hand.

Further, private and government spending are not equal. There is a reason why the countries that have tried the most centralized economic planning have always experienced the lowest standards of living. Spending is not equal to growth. In order for an economy to grow you need to gain increases in efficiency so that current products or alternatives can be produced with less resources, hence economic growth. This scenario is not compatible with government spending. When the government spends money it first has to take that money from people in the private sector. The government then diverts these resources away from productive individuals that are making a profit by meeting peoples demands in a free market to government monopolies. Monopolies exist when a single entity is the sole provider of a product or service in a given market. Because government sponsored monopolies exist by government decree competition is usually illegal, or unprofitable because of subsidies to the government monopoly. This creates an environment where the government service or product provider has very little incentive to improve or lower costs of their product or service because they are faced with no competition. It should really be obvious by now but if you divert money from people who are forced to compete against each other for market share and transfer it to a government monopoly which has no competition you will achieve a lower standard of living as the resources diverted to government can never be used as efficiently as the resources left in the private sector.

On October 10 2013 20:17 paralleluniverse wrote:
Remember when the shutdown was about Obamacare?

Now, Republicans have changed their ransom. Their talking points these past few days have shifted. There's no mention of Obamacare, and it's all about budget negotiations and gutting welfare. Budget negotiations which they've rejected dozens of times before they decided to hold the economy to ransom.

Just goes to show how clueless and desperate their strategy is. A week ago, a Republican congressman said to a reporter:

This statement gets truer by the day.

No, Republicans won't get anything out of this. Obama cannot negotiate or offer anything. Because if he does so, this legitimizes hostage-taking, and the next time the debt ceiling needs to be raised or a government shutdown needs to be avoided, the minority party (e.g. a Democratic House against a Republican President), will threaten to destroy the economy unless their political agenda is implemented (e.g. raising taxes on the rich). This strategy of blackmail is an affront to the democratic process, regardless of the party of the President, and CANNOT be allowed to succeed. There is no choice but to give nothing.

On October 10 2013 21:31 Vegetarian wrote:


It never ceases to amaze me how people can be so ignorant of very recent events. Low interest rates did predate "Quantitative Easing" they did not predate a federal reserve subsidized interest rate which is the same exact thing. Since you don't seem to understand the interest rate is determined by something called supply and demand. If the Federal Reserve prints money and buys bonds to keep rates at a certain level we can see that the demand is not real. It is artificial demand that is sustainable only so long as the Fed continues to print money and create inflation. Paul Krugman's article does not debunk anything, linking to it only highlights your lack of understanding of the issue. If you can't formulate a basic argument yourself it should reveal to you your true ignorance of the topic at hand.

Further, private and government spending are not equal. There is a reason why the countries that have tried the most centralized economic planning have always experienced the lowest standards of living. Spending is not equal to growth. In order for an economy to grow you need to gain increases in efficiency so that current products or alternatives can be produced with less resources, hence economic growth. This scenario is not compatible with government spending. When the government spends money it first has to take that money from people in the private sector. The government then diverts these resources away from productive individuals that are making a profit by meeting peoples demands in a free market to government monopolies. Monopolies exist when a single entity is the sole provider of a product or service in a given market. Because government sponsored monopolies exist by government decree competition is usually illegal, or unprofitable because of subsidies to the government monopoly. This creates an environment where the government service or product provider has very little incentive to improve or lower costs of their product or service because they are faced with no competition. It should really be obvious by now but if you divert money from people who are forced to compete against each other for market share and transfer it to a government monopoly which has no competition you will achieve a lower standard of living as the resources diverted to government can never be used as efficiently as the resources left in the private sector.

On October 10 2013 22:59 Rassy wrote:
Spineless republicans caving in, this is just sad
A huge opportunity to realy test obama has been missed.
Well deal isn,t done yet but it looks a formality right now. Maybe it still all fails next week,should never rule out the option that they will manage to make a mess out of it but the changes on that happening seem slim. Unfortunatly i might add

On October 10 2013 22:08 paralleluniverse wrote:

The Fed lowers interest rates it lends to banks, it does not lower the rate on government bonds. QE is not the same thing as lowering the federal funds rate. The Fed is not trying to lower the rate on government bonds. The Fed is buying long term assets like MBS to lower the interest rate at which banks and firms lend money, to create a lower interest rate environment, so that banks give cheaper financing to people and businesses, not to lower costs of government finance.

The fed is currently buying 45 billion worth of United States Treasury bonds every month as part of QE. Why are they doing this if they are not trying to lower the interest rate on government bonds? Why don't you enlighten the entire investment community, or is this just more of your ignorance of current events?

You dodged the Krugman article which shows why you're wrong. It shows how countries like France have interest rates that tracked the fall in rates in the US. The same is true for Australia. Neither country did QE. It shows that when QE was stopped, there was no increase in interest rates. Lastly, how can the Fed artificially keep rates low without causing inflation? You say the Fed is causing inflation, but inflation is persistently below the Fed's 2% target.

Actually both of those countries pursued similar policies to QE by lowering interest rates and buying government bonds in the aftermath of the financial crises. Seriously, where are you getting your misinformation? What you don't seem to understand is that when the market expects the fed to continue to buy government bonds, it does not matter if the fed temporarily stops doing this as the market prices it in. When QE2 ended the market expected and had already priced in QE3 which surprised nobody. All Krugman's little graph shows is that when people expect the fed to overpay for an asset people will sometimes purchase the asset ahead of time with the sole plan of unloading it to the fed. Just like during the housing bubble lots of people were buying houses to just resell, without any intention of ever living in them.

The fed is causing inflation. The statistic you are referring to is the consumer price index or CPI. The CPI is not a measure of inflation. The CPI does not include housing, energy, food prices, and a host of other things, it is not really a measure of anything. If we use the methodology that the government used in 1980 to calculate the cpi you get a much more accurate inflation rate of 10% http://www.shadowstats.com/alternate_data/inflation-charts Further, if you were not already aware the United States has a rather large trade imbalance with the rest of the world. As a result of this imbalance we export a lot of dollars that in the short term that are held abroad and not spent on goods or services in America. Therefore, a lot of the inflation that has been created in the past several years will not yet show up in the CPI as it is being exported.

It is supply and demand that's keeping government bond rates low. High demand for government bonds due to a depressed economy, a lack of good investment opportunity and a desire for more safe assets from investors.

Investors do have a desire for safe assets. However, they are not choosing to place their money in government bonds. Why would the fed be buying 90% of newly issued treasuries if there was real demand for these bonds? Pretty obvious bubble. http://www.bloomberg.com/news/2012-12-03/treasury-scarcity-to-grow-as-fed-buys-90-of-new-bonds.html

You also make the crowding out fallacy: The bogus idea that the government needs to take money away from people to spend, and divert resources from the private sector. No. There is very little crowding out in a depressed economy. Resource don't have to be diverted from the private sector, because there are idle resources--unemployed people, high unemployment, that government spending could put to work. Also, investors are voluntarily throwing their money at government bonds. There is no better, nor cheaper, nor cost-efficient time for the government to spend than now.

Crowding out isn't a fallacy. There is a finite amount of capital on the planet earth. The government can't just magic wealth into existence. It has to tax the private sector or print money which transfers wealth from savers in the private sector to whoever receives the newly issued capital first. Unemployed people don't just need jobs. By your logic during a recession it would be a good idea to tax people that are still producing positive economic output in order for the government to employ people to build a useless ladder to the moon. These unemployed people would have temporary jobs supported not by their labor but by productive people in the private sector. Clearly this would not lead to economic growth. You would have full employment for a while and then a useless ladder that was a huge waste of that societies resources.

Your rant against centralized economic planning is also a strawman. Since when does temporary fiscal stimulus imply centralized government. So the US is a centralized economy now since it did stimulus? So welfare states like Germany, Norway, Canada, Australia have centralized economic planning. Growth in these countries have been strong, but that's clearly not possible because they're centralized economies. The fact is austerity has been a disaster in Europe, and is depressing US growth now, as the CBO and Fed warns. While stimulus has worked in Australia, China, and to a lesser extent the US, which didn't suffer as badly as austerity Europe despite being the epicenter of the crisis.

Not sure how its a strawman. You basically stated that government central economic planning is the solution to an economic contraction. I find it pretty ludicrous that there are people still out there that actually believe centralized economic planning could produce better outcomes then free market capitalism. I attempted to briefly explain to you how absurd that notion is by explaining some of the basic tenants of capitalism and how markets work. I guess it might shock you but there is not a country on the earth that does not interfere to some extent in its economy. The degree of intervention varies between countries and historically there is a very clear correlation as countries that pursue the greatest amount of centralized economic planning have the lowest standards of living. North Korea is a modern day example of this, although you should remember the Soviet Union as well as Communists China's failures. If you look into the history of the countries you mention you will see that they experienced greater growth when their governments were smaller. https://mises.org/daily/4146 Welfare states don't start as welfare states they start as free market economies that get wealthy enough at some point that they can afford the burden of a welfare state until the country inevitably goes bankrupt.