US is a zero-sum game


By pkennedy   Follow   Mon, 12 Nov 2012, 5:17pm   1,201 views   22 comments
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As luck would have it, a small business owner in the complex I work, liked romney, so I sent him over some information, so I could cut and paste some of it here :) This covers a bit more than just the economy and gdp though :)

My argument to him was that the US actually behaves much more like a zero sum game at the country level. While at the individual level, it's possible to exceed in life by working harder (much harder these days), but at the country level, it's a zero sum game. He wanted lower taxes and basically trickle down, less hand outs at the lower levels, more incentives to try and do better. I said the game was rigged, that not everyone could live like bill gates. There are tiers in our system and moving between them is almost impossible, but the dream of moving up, makes people ignore this. It's almost impossible for someone to move down. Family, education, childhood expectations ensure that people get chance after chance of maintaining their tier, while those trying to move up, have to essentially ace ever move while growing up. They need to get a better education, have higher expectations in life, they need to make connections, they need to move to an area that will help them. Eg out of the ghetto and at least rent somewhere with middle class people. It's very rigged against anyone moving up. I could write a book on that part I think :)

Anyway, Gdp information, it used to go back further, and when it did it was a much smoother line. But I would say that line is pretty smooth as it is.

http://www.google.com/ publicdata/explore?ds= d5bncppjof8f9_&ctype=l&met_y= ny_gdp_mktp_cd#!ctype=l& strail=false&bcs=d&nselm=h& met_y=ny_gdp_mktp_cd&scale_y= lin&ind_y=false&rdim=region& idim=country:USA&ifdim=region& hl=en_US&dl=en_US&ind=false

Here is a great video from Elizabeth warren, it gives no answers, blames no one, it's only about how the middle class has changed and become more stressed. It's long I know, but it has some pretty good data that she has collected. You could find corner cases or pull out your own theories from it, but it's really about the gist of what happened between the 1970's and 2010's on our income and where we spend it.
Spoiler alert :) The end result is this: In the 1970's there was more discretionary spending, 1 income. If someone got sick, you could put your wife out to work and you could stop spending, you could slow the bleeding until that person got better. Today, if someone gets sick there is no one else to go out and work (both parents working). The money is spent on items that aren't discretionary any more and thus there are fewer places to cut back. It goes into each category of spending in our lives and shows how it's either grown or shrunk and how it's impacted our lives. Eg housing, insurance, cars vs food, clothing, electronics, entertainment

http://www.youtube.com/watch? v=akVL7QY0S8A

Also take into account that our productivity has been running 2.3-2.4% over the last 70 years. When you compound that, over just 30 years, you get a 100% increase! (100% in 1980-> 205% in 2010 @ 2.4%). That means the work your father did in 1980 is HALF of what you do today. We don't just get better at our jobs, we get better through out our lives. We maximize everything we do! We don't use computers, cell phones, gps units only at work to make us more productive, we use them all the time now. The way we drive, the way to avoid lines at the super market, everything we do gets a little more productive in our lives.

This is why Warren Buffet said that if we can grow at 1% a year for the next 100 years, it will be absolutely amazing to him. And why people want to ignore him, 1% is a "terrible" return! And if you think about it, in 30 years when your kids are working, they're going to be doing 100% MORE work than you're doing in a day.

This is what I meant about stressing out the middle class and it's not necessary. These improvements in our economy come at a horrendous toll to the population in general. Since the general population is stuck in it's tier, we're just making the lives of the bottom rung worse and worse. As the rich extract more money per year, they're actually taking it out of the pockets of the poor. The rich get richer, and the poor MUST get poorer. The system works best when the rich are "stopped" from getting too much of this pie. Basically higher taxes on the rich, ensure that more money gets dumped into the poor. The poor need all these social programs now, because they're getting squeezed beyond what they can handle.

Now onto the economy has recovered remark I made. If you look at the GDP today, it's at the highest it's ever been. Essentially, the pie has grown in size, at a rate that has historically been exactly where it says it should be and the jobs are gone. That is why some economists say it's a jobless recovery. I also remember back in 2003-2005 range, some economist being alarmed that the gdp had "moved" due to the housing bubble. I never understood what they meant, because I always assumed the economy would move when things got better... but that remark makes a lot of sense if you look at the historical numbers. Nothing has moved the gdp in the past, so this was an unheard of event. I think if you look at the GDP graph, and "corrected" the line from 2000-2008, and then extended it to today, you would find we are almost exactly where we should be. If you take that "extra cash" made during those years, I think you would find it back fills nicely into the whole the recession left as well. Essentially we were minting money we couldn't make and during the recovery, we basically had to pay it back.

I would also like to say that at 5% unemployment, the US is fully employed. At that point, if you don't have a job, you're in between jobs, or don't want to work. At 5% it's pretty difficult to find good people. Instead of saying we're at 8% unemployed, I would say we're closer to 3% unemployed and 97% employed.
Even though those people aren't working, they are still spending. The government helps them out, and they still put money back into the economy. Since most people in the lower income brackets don't save, they're basically doing exactly what they did when they were employed. Spending everything on necessities. Food, car, housing. Maybe they had a few hundred extra dollars to spend a month, but at the end of the day, a few hundred dollars * 3% unemployed doesn't add up to much.

At some point, the people will slowly get jobs, and then be cut off from the government. The economy won't notice it because we're in a zero sum game though.

So I say the economy has recovered, the jobs are gone, at least for now.

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  1. Bellingham Bill


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    1   7:17pm Mon 12 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    >So I say the economy has recovered, the jobs are gone, at least for now.

    ayup.

    AFAICT, it's all the rents. A person without money is powerless in this economy no? He has no ability to purchase anything, right?

    Unspent income becomes savings, and we also have access to credit, so those are the 3 sources of spending power every consumer has: income, savings, and credit.

    Use of credit defers payment into the future of course, generally with additional interest costs.

    So if we have an economy that is collectively pulling more money out of the working class than their household wages and interest incomes are putting, we have a long-run imbalance and the system will eventually seize up.

    We call these seizures "Depressions".

    In the US, the top 5% is collecting over 30% of the income:

    http://taxfoundation.org/article/summary-latest-federal-individual-income-tax-data-0

    Corporations are collecting $1.6T in net profits on top of that:

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

    this is money that is coming OUT of the working class (the lower 95%).

    2002-2007, lots of money was flowing INTO the middle classes via the mortgage lending bubble:

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

    but that bubble poped when valuations could no longer be pushed up by fraudulent suicide lending and everybody started defaulting on homes that were simply unaffordable.

    Since 2008 we've been getting by with our $1.2T+ fiscal deficit, allowing the nation's wealthy and foreigners to float the government loaned money to redistribute into the paycheck economy, and boy is it ever:

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

    $3.6T/yr . . . that's over $30,000 per household. That's a LOT of money being spent into the economy, providing liquidity for the paycheck economy.

    State and local spending:

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

    is another $2T on top of that . . . another $20,000 per household.

    That's $50,000 per household of spending! Theoretically, that should mean that one out of two households having a $100,000 government job or other form of income (welfare, social security, etc).

    I don't even understand how this could be, but let's put that aside for now.

    So that's the income. Outgoes are housing rent/mortgage, health insurance, transportation, energy, food, etc. These are the flows OUT of the paycheck economy back into the 5% economy -- housing rents pull money out of the paycheck economy, health care does have 20 million jobs now but there's still a lot of profit pocketed by the 5% there, transportation has jobs so there's more circulation there, energy doesn't employ many Americans so there's a lot of money being lost to the 5% who own all the oil (and energy stocks), and food isn't that big a cost compared to everything else at least (and is very labor intensive and thus provides jobs).

    On top of all of this is the $600B/yr trade deficit. This is literally sucking $600B/yr out of our paycheck economy every year. When we spend $50 at Walmart, (notionally) $40 goes for their operations (paychecks), $5 goes to their profits (to the 5%), and $5 goes overseas, and when that $5 sent to China comes back into our economy is something of a mystery to me.

    To counteract this parasitical loss via the trade deficit, I think the Fed's money supply expansion was started. It's IIRC $500B/yr, which is close to the trade deficit. By printing this new money and funding mortgages with it, the Fed is somewhat duplicating the redistribution back into the paycheck economy that the 2002-2007 housing boom/bubble was accomplishing.

    And at the end of the day, that's what we need -- redistribution, OUT of the 5% economy (the top of the pyramid) back into the 95% economy (where everyone has to work and create new goods & services for a living).

    Without this redistribution, the 95%'s economy simply runs out of money and has to tap credit, until that runs out, then there is nothing to be done but to start stealing whatever it takes to live.

  2. Bellingham Bill


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    2   7:19pm Mon 12 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Part II:

    As presently structured, not everyone can succeed in this economy without redistribution. Not everyone can even survive -- the money flows are just too asymmetric, away from the 95% and to the 5%.

    The 5% has paid a lot of money to many front groups -- AEI, Heritage Foundation, US Chambers of Commerce, Reason, Cato, to hide this dynamic.

    It didn't used to be this way, back before we started running trade deficits and had higher taxes, more money stayed in the paycheck economy and life was easier for more people.

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

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

    back then, too, the military was a massive employer:

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

    shows that 15-25% of ALL payrolls were courtesy DOD spending!

    (now we're around half that, even though it's $800B/yr, and immense figure)

  3. mell


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    3   7:26pm Mon 12 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    As discussed it's an interesting theory but it has a few holes. For example it just looks at all current participants in the economic pie, however the amount of deficit spending and debt affects the prosperity - or share of the pie if you believe in the zero-sum game - of future participants and thus you can create big distortions and affect individuals who have no voice yet. Sure, you can argue that you could possibly raise productivity of make new discoveries that create wealth, but that is not a given and if you fail prosperity of future generations will look even bleaker.

  4. Patrick


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    4   7:33pm Mon 12 Nov 2012   Share   Quote   Permalink   Like (2)   Dislike   Protected  

    Bellingham Bill says

    And at the end of the day, that's what we need -- redistribution, OUT of the 5% economy (the top of the pyramid) back into the 95% economy (where everyone has to work and create new goods & services for a living).

    Without this redistribution, the 95%'s economy simply runs out of money and has to tap credit, until that runs out, then there is nothing to be done but to start stealing whatever it takes to live.

    I think that's a good summary.

    When the top 5% own everything and everyone else (the 95%) has to pay them 100% of their labor as rents simply to breathe, then the economy just stops.

    Greed at the top is ultimiately suicide for themselves as well. They're not smart enough to understand that though.

    If you pluck all the feathers off the goose, it freezes and dies. You got a pile of feathers in the short term, but no source of more feathers in the long term.

  5. Bellingham Bill


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    5   7:44pm Mon 12 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    mell says

    but that is not a given and if you fail prosperity of future generations will look even bleaker

    yes, this is true. We could default on the internal debt and future generations would be liberated from it, but it's a tricky geopolitical event to default on foreign creditors.

    And we owe them a lot of our future product:

    http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt

    $5.4T -- at $25/hr that's 100 million man-years of work.

    If we're so great as a nation why are we $5T+ in debt to the rest of the world???

    Japan gets a bum rap as a broken economy, but they actually own over $3T of the world (a big piece of that is of us).

    Our problem is that we're using debt take-on to mitigate the asymmetric income flows from workers to rich.

    Workers get screwed by the 5%, 5% lend this money back to the workers to keep the game going.

    This is why we need to double taxation in this country.

    $300B more from corporations, $500B more from the 5%, maybe we can find $400B in spending cuts and savings to zero out the current deficit, but we're going to need raise FICA to cover the 80M+ boomer retirement wave coming next decade, probably double it maybe.

    If we can't cut spending we have to raise taxes. And we have to close the damn trade deficit. That's killing us.

  6. bg


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    6   7:50pm Mon 12 Nov 2012   Share   Quote   Permalink   Like   Dislike   Protected  

    So, let me see if I understand. There are a lot of people on P.net who argue that housing prices are still too high and that the bubble is only partially deflated. They point to unemployment and debt and indicators that the economy is still weak and that housing prices will continue to decline. Housing bears also point out that the jobs that have been added to the economy are low paying jobs, so therefore, people can't pay the prices that they used to pay.

    I think you are saying that based on GDP, the economy has recovered. I think you are pointing to two main explanations. One, the people who are working have essentially made up for the productivity of those who are not working. Two, the money that used to be available to the middle class in higher paying jobs is now migrated to the wealthy who are just extracting more money from the economy.

    Since the economy is a zero sum game, that money that used to be available to the middle class has moved to another part of the game, namely the rich who are just extracting more from the poor. The jobs that are now available are at lower pay.

    Forgive me if I am missing some piece of this.

    So, are the rich going to buy housing to make it available to people working in lower paying jobs by renting it to them? Are people going to live in smaller and smaller spaces to maintain the relatively high prices on housing?

    Thank you for your post. I think I may re-read that a few more times once my son is in bed :-)

  7. Bellingham Bill


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    7   8:11pm Mon 12 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    bg says

    So, are the rich going to buy housing to make it available to people working in lower paying jobs by renting it to them?

    This is an era of trillion-dollar deficits -- and $40B/month QE printing -- that are supporting everything in some semblance of what was supporting the 2003-2007 recovery/boom/pre-bust times.

    Balance the budget on the backs of the 95% and we'll see this economy pancake right back to 2009.

    The current plan is $300B in cuts & $100B in tax rises. The $100B is the Clinton rates returning on the 5%, and as Kristol recently said, their just pocketlint (well, 20% of their current tax burden, so the tax rise is not so insignificant).

    The $300B in cuts is more problematic. Those are peoples' paychecks -- 6 million jobs at $50,000 per if it were all going to the 95% (probably not though, who knows how much is being siphoned off the top).

    I'm almost more pessimistic about the state level (CA) though. Where's our tailwind going to come from? HSR spending? LOL. We need to double taxes here, too.

    Overall, I think we're worse than Sweden, since they at least have an economic structure that has co-evolved with their high taxes.

    We're trying to run "Socialist"-level spending on a minarchist tax base. Insane.

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

    is receipts / GDP (low)

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

    is receipts (blue) vs. social spending + military (red).

    That's a problem!

  8. pkennedy


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    8   10:14am Tue 13 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    bg says

    So, are the rich going to buy housing to make it available to people working in lower paying jobs by renting it to them? Are people going to live in smaller and smaller spaces to maintain the relatively high prices on housing?

    @bg

    What we have coined as the "rich" are also many white collar jobs. Basically anyone making over their share of the GDP is taking money from someone who is making under their share. Housing prices will follow inflation, and like in the Elizabeth Warren video, people will continue to move expenses from discretionary to non discretionary.

    Also, not all work was made up in productivity, the government has given money to those who don't have jobs. That is money that came from the economy and is going back into the economy. Unemployment is probably at 97% at this point. In most cases, I would say that is pretty good. Stepping back and viewing it from a numbers point of view. From a human misery point of view, it's a lot of extra misery and stress on those who don't want to lose their jobs. But from an economic point of view, 97% of your output is still functioning, that isn't bad.

    @mell

    Fixing up the debt isn't hard at this point. It's a lot of money and looks like a huge number but in reality based off that NY "fix the economy game" it didn't really require much more than a few tweaks here and there.

    I also have a feeling that if large companies "leave" due to taxes, those employees left behind will fill the void. Employees clearly can only produce so much per year, as seen in the GDP, so if their jobs go, they'll have free time and will take on new endeavours that will produce their fair share of the GDP again. The fact that we've had 2.4% productivity growth for nearly 70 years is amazing. Warren Buffet said if we could keep up 1% for the next 100 years, that would be amazing. I've also seen a few studies that say the maximum might be 2.4%, since we haven't really been able to push it beyond that in the last 70 years or so. We're just stuck at this growth rate.

  9. pkennedy


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    9   10:21am Tue 13 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Bellingham Bill says

    This is an era of trillion-dollar deficits -- and $40B/month QE printing -- that are supporting everything in some semblance of what was supporting the 2003-2007 recovery/boom/pre-bust times.

    I like to view things from another angle. The government knows it needs inflation. It's positioning itself where it won't be destroyed by said inflation. Right now it has short term debt, it rolls with the years. It's moving debt into long term, where inflation can't get it.

    Second, banks and other entities are holding masses of money, the economy is making more money than it ever has. They simply don't want to spend it or invest it. When you're rich, your goal isn't to make money. It's to preserve capital. Think about that closely.... As long as there is no inflation, they aren't losing capital by just parking it.... capital is safe. They have met their goals.

    We can't have much inflation right now because the government isn't in a position to handle higher interest rates and more inflation, so they're trying to shake people lose from their safe positions by under mining them, by taking away their best cash generating options and forcing them to invest.

    You also didn't look at the GDP graphs, recessions don't appear to effect the GDP much. In fact, I think the only reason we had a dip in the GDP this last time, is that we "created" wealth with loans that weren't supported, when they burst, they basically sucked down on the GDP until they were essentially all "repaid". A recession won't do much to the economy. Go look at the historical numbers.

  10. pkennedy


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    10   10:54am Tue 13 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    I'm going to say 5-6% never get a job for whatever reason, or there are always that many in between jobs. In 2000, we were probably "over" 100% employment. People that weren't qualified were being hired all the time. We were pulling in illegals, keeping older people working longer, younger people were being enticed in earlier, etc. We still had 4% though.

    I still say whatever numbers we're using today, chopping off 4-6% is a realistic number, and 97% employed is probably pretty close to correct.

    Even if you're pushing 93% employed, 93% of the economy is still making money, while the other 7% are being at least partially assisted by the government. Partial assistance probably equates to half pay? So we're back in the 97% range.

    These number don't move our GDP at all, at the end of the day. If we zoom in enough, we can see movements, but it's a pretty solid line, especially if you look at the last 70 years of data. Again, the dollar signs show almost no difference, the pain from people is different though.

  11. mell


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    11   11:45am Tue 13 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    While I agree that 5% real unemployment is pretty good, we currently don't have 8% unemployment if by employment you mean a fairly steady job that provides enough income to not depend on any government assistance and not fall below the poverty line. It's probably closer to 15%-20%, so we have another 10% to go.

  12. pkennedy


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    12   11:49am Tue 13 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Based off GDP, I would say we hit those numbers already.

    If you want to use the under employed numbers, then use the the average there, of 12-14%, and then take your 15-20% and chop off 12-14%.

    If you're looking at low wage jobs, that is just part of a zero sum game. Those numbers aren't going to get better until the rich take less. Since we don't see that, and we see "tax the rich LESS, it'll do wonders", it's definitely not going to get better for those at the bottom.

  13. dublin hillz


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    13   2:20pm Tue 13 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    The problem is also magnified by the fact that to many people shopping particularly at shopping malls is a form of religion. Then, there's also the fact that many people eat out as a form of entertainment, however it is so excessive that instead of entertainment, it become routine. Often, these habits are financed by credit cards which ultimately makes these items a lot more expensive than sticker price. While we debate buy vs rent, it is in fact the consumer lifestyle that is financed by credit cards that is a true problem. With buying a house that appreciates at histrorical rate on inflation, the odds are in your favor that you will get your principal paydown back and more when you sell provided you hold for 5 years, but with financing eating out, shopping, vacations by credit cards that money is truly gone and not only that, but the act of "financing" inevitably makes these things more expensive for everyone else.

  14. Bellingham Bill


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    14   3:54pm Tue 13 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    dublin hillz says

    While we debate buy vs rent, it is in fact the consumer lifestyle that is financed by credit cards that is a true problem

    http://research.stlouisfed.org/fred2/series/CCLACBQ158SBOG

  15. pkennedy


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    15   3:59pm Tue 13 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    This was the same argument given in the 1950's. It was game over back then too, because of consumer debt.

    As we've seen people survived, and continue to survive even with decent debt. The economy has grown at a very specific rate, along with productivity. Consumers are spending less on most discretionary items than they were in the 1970's.

  16. Philistine


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    16   4:25pm Tue 13 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    pkennedy says

    This was the same argument given in the 1950's. [. . .]
    As we've seen people survived, and continue to survive even with decent debt.

    People survived because we still had the wife to send off to work. Also, we weren't in full-throttle global wage-debasing mode, either. Now we are competing with the world, and there is nobody left at home to go out and fetch another paycheck.

    pkennedy says

    It was game over back then too

    When Monopoly is over, one player has everything. Atlas will shrug.

  17. pkennedy


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    17   4:28pm Tue 13 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Well, looking at the GDP that isn't true. While we like to hear about this in the news, the GDP shows a different picture, and productivity shows that growth only goes as fast as we become more productive as an entire country.

  18. Bellingham Bill


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    18   5:41pm Tue 13 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    pkennedy says

    This was the same argument given in the 1950's. It was game over back then too, because of consumer debt.

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

    shows consumer leverage is a bit different, then & now.

    also, debt take-on was different:

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

    shows there were certainly consumer credit cycles -- the '58 recession is pretty clear there, but the takeaway here is that borrowing hit 20% of wages during the suicide lending bubble.

    The entire consumer economy was basically being driven by this influx, IMO.

    The loss of that has been murderous to growth. We've thrown $6T:

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

    at the gov't (well, allowed them to borrow that) to keep the rubber side down on this economy -- or, shall I say, eCONomy.

  19. pkennedy


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    19   6:30pm Tue 13 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Well, GDP shows that this hasn't changed really. We're still growing at a constant rate. The 1950's was a lower level of debt, but since the 1950's the doom and gloom sayers have been out and about.

    The GDP paints a different picture though, it's shown a constant and steady growth, factoring in population growth, productivity increases and inflation we're flat.

  20. Bellingham Bill


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    20   6:42pm Tue 13 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    pkennedy says

    The GDP paints a different picture though

    Rising GDP since 1980 has been purchased by the redistribution-with-strings of debt take-on, both household and government.

    The 1990s was an exception to this.

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

    The Fed fought this debt-movement in the 1970s, made one last attack in 1980-81, and then threw in the towel basically.

  21. raindoctor


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    21   7:34pm Tue 13 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    1. US government does not operate like households and firms. So, the mainstream "loanble funds theory" is pure garbage sold to rob the ordinary folks. Government does not have any budget constraints, since it has the monopoly on the US dollar.

    2. Banks create and destroy money as well. This is called endogenous money. It creates money when they create loans; destroys the money once the loans are paid back.

    3. In a similar fashion, US government creates and destroys money: creates when it spends; destroys when it taxes.

    4. So, when you look at aggregate accounting level, the financial assets between private sector entities is zero, since ones asset is another's debt. If you expand further, Governments cumulative deficit = private sector savings. (all financialized)

    5. So, it is not a zero sum game, as you think. Government does not redestribute the wealth as we are told. The concept of redestribution works if you accept loanable funds doctrine, which is false--if you have studied history and phillospohy of sciences, you know that our descriptions are theory-laden. Since Loanbale funds doctrine is false, so is redstribution.

    There are many scenarios, assuming G = government's deficit, P = private's financial assets = assets of Elite (E) + income of ordinary 99% Joes (J)

    7. Government can employ a fiscal policy (spending to create jobs, infrastructure projects, etc). This increases the deficit, which in turn create jobs (and savings) for ordinary citizens. A net increase in G = a net increase in J

    8. Government deploys a monetary policy, which increases the deficit. This transfers the money from the govt to the elite. A net increase in G = a net increase in E

    9. Government can tax the elite. A net decrease in G = a net decrease in E.

    So, you can sketch many other scenarios.

    10. What the elite wants is this: a net increase in E; a net decrease in J. If they cast the debate in these terms, they will loose. So, they use a treacherous route of "a net decrease in G".

    Study Modern monetary theory, and follow this blog: http://bilbo.economicoutlook.net/blog/

  22. Bellingham Bill


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    22   8:07pm Tue 13 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    I agree with the above, somewhat, that the economy does not have to be a closed-loop system with all the books balancing.

    But what i am concerned about is how money flows and pools in the economy.

    Government just blindly printing allows for maldistributions to build and not be burst, ever.

    I see government's role as being the extra-market force that breaks up the trusts and keeps the powerful from sucking the little guys dry.

    I don't see why it can't do this running a balanced budget. This is how the nordic states operate, more or less. We need to double taxes in this country to do that though, and that's the difficulty.

    Keynesian intervention is just bandaids on a broken, corrupted system.

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