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14   humanity   ignore (0)   2013 Sep 25, 8:21am     ↓ dislike (3)   quote   flag        

Okay. Yeah I get it.

If the deficit increasing stimulus comes from cutting taxes (especially at the top) then it's worth it and it creates enough jobs to justify it. If it comes from QE, basically funding banks and causing long term rates to be lower than they otherwise would be, that's great.

But if the stimulus comes from increasing spending on productive enterprises such as building infrastructure or funding education, then it's bad...very very bad.

15   humanity   ignore (0)   2013 Sep 25, 9:49am     ↓ dislike (0)   quote   flag        

Heraclitusstudent says

There is a point where you have to say Krugman is just crazy.

There's a point way before that where you read and try to comprehend his point of view.

I wonder how many of the people who disagree with Krugman are intellectually about here:

mell says

He's a sheister. a crony-capitalist shill pumping voodoo economics so that people don't realize that every burger-flipper does a better service to the nation than him.

Kind of amusing really. He can tell us how he feels but he can't tell us why.

16   humanity   ignore (0)   2013 Sep 25, 9:55am     ↓ dislike (0)   quote   flag        

Heraclitusstudent says

Krugman looks at a situation where the gov still runs a large fiscal stimulus 4 years after the recession, where the interest rates are still at essentially 0% and where the Feds are creating $80+ billions of new money and concludes the bad economy is due to "unprecedented austerity".

That's correct. That 80 billion/ month is not government spending. That's the fed. Buying treasuries. The government spending is actually the money on the other side of those transactions. Money that would be borrowed and spent (bonds that would be issued) anyway. The difference is that the interest rates on these bonds is lower than they otherwise would be. And the Fed has all these bonds on their books.

It is uncharted territory, and there will be a cost. How much does the fed lose when they "unwind" those positions ? When do they ? That loss is probably ultimately what gets monetized. (paid for with digitally "printed" funny money). In any case, it's not spending. IT's not part of the Federal budget.

17   mell   ignore (3)   2013 Sep 25, 10:06am     ↓ dislike (0)   quote   flag        

humanity says

The difference is that the interest rates on these bond is lower than they otherwise would be. And the Fed has all these bonds on their books.

Oh, so the Fed is actually a charity organization who does those things for the greater good in coordination with the government and thus counterfeiting is forbidden for the regular guy but ok for the Fed to distribute the fresh fiat to the first-in-line cronies doing their heavenly work for the good of the masses? Beautiful! Come on, don't be daft! ;)

18   mell   ignore (3)   2013 Sep 25, 10:09am     ↓ dislike (0)   quote   flag        

humanity says

Kind of amusing really. He can tell us how he feels but he can't tell us why.

Krugsheister is advocating kicking the can down the road and putting the debt burden on future generations who have no say in it and promoting it as the responsible thing to do - that's the very definition of a sheister!

19   smaulgld   ignore (4)   2013 Sep 25, 10:17am     ↓ dislike (0)   quote   flag        

Quigley says

Obama won the Nobel peace prize before he did a single thing as president. Then he extended the unpopular Afghanistan war another 5(and counting) years and tried to make a case for invading Iran and Syria.

Seems like them Nobel awarding Norwegians aren't all that bright!

Especially calling themselves Norwegians when they are indeed Swedish!

20   smaulgld   ignore (4)   2013 Sep 25, 10:18am     ↓ dislike (0)   quote   flag        

Heraclitusstudent says

reating $80+ billions of new money and concludes the bad economy is due to "unprecedented austerity"

Hard to call that austerity.

21   humanity   ignore (0)   2013 Sep 25, 10:19am     ↓ dislike (0)   quote   flag        

mell says

humanity says

Kind of amusing really. He can tell us how he feels but he can't tell us why.

Krugsheister is advocating kicking the can down the road and putting the debt burden on future generations who have no say in it and promoting it as the responsible thing to do - that's the very definition of a sheister!

What do you call giving the social security surplus to the rich and the corporations in the form of tax cuts, and off the books spending on wars and medicare part D ?

After all, that's how we got to this place. Well that and GDP (and tax revenues) way below projections.

Funny how all that deficit spending was okay back then (tax cuts for the rich), to be paid for by future generations, but now when real unemployment is still so high, we can't afford deficit spending ?

22   smaulgld   ignore (4)   2013 Sep 25, 10:22am     ↓ dislike (0)   quote   flag        

humanity says

Money that would be borrowed and spent (bonds that would be issued) anyway.

That is actually not true-right now the fed is actually help fund the US government because THEY are the ones buying 60-90% of the newly issued US treasuries and they are willing to print US currency out of thin air to buy them and to receive a ridiculously low interest rate.

The demand for US treasuries is no longer great enough for the US to fund its deficit spending. The Fed and QE fills that void.
To add stimulus spending to the mix would not be a good idea.

23   curious2   ignore (0)   2013 Sep 25, 10:23am     ↓ dislike (0)   quote   flag        

humanity says

deficit spending was okay back then....

Who said that? Oh yes, Dick "deficits don't matter" Cheney and voters, apparently. Deficits do matter, very much in fact, even if voters are distracted by bogeymen. Alas among partisans, deficits are only acknowledged to matter when the other party is in charge, and somehow magically cease to matter when their own party is in charge. That is how a republic sinks into an empire of debt, bankrupting itself gradually and then suddenly.

24   mell   ignore (3)   2013 Sep 25, 10:54am     ↓ dislike (0)   quote   flag        

humanity says

What do you call giving the social security surplus to the rich and the corporations in the form of tax cuts, and off the books spending on wars and medicare part D ?

Crony capitalism.

humanity says

Funny how all that deficit spending was okay back then (tax cuts for the rich), to be paid for by future generations, but now when real unemployment is still so high, we can't afford deficit spending ?

It wasn't ok with me back then either, but nothing has changed on how the money is spent. We still have wars, the invested and leveraged wealthy float with the asset bubbles while inflation and taxes plague the middle class, most of the bailout went to failed banking and insurances who are paying themselves million dollar bonuses again as if nothing happened:

http://www.zerohedge.com/news/2013-09-25/blankfein-explains-doing-gods-work-demands-year-end-bonus

25   humanity   ignore (0)   2013 Sep 25, 10:59am     ↓ dislike (0)   quote   flag        

smaulgld says

That is actually not true-right now the fed is actually help fund the US government because THEY are the ones buying 60-90% of the newly issued US treasuries and they are willing to print US currency out of thin air to buy them and to receive a ridiculously low interest rate.

Why do you say it's not true. It seems like you almost understand what's going on. You just like to make up your own facts like right wingers always do ?

smaulgld says

The demand for US treasuries is no longer great enough for the US to fund its deficit spending. The Fed and QE fills that void.

This is incorrect. They couldn't sell bonds at the same high prices (lowest rates in 60 years). But that's not the same as not being able to fund their debt. How much lower would the bonds be priced ? We don't know. But it's not that much.

26   smaulgld   ignore (4)   2013 Sep 25, 11:04am     ↓ dislike (0)   quote   flag        

there is a huge difference between a crony capitalist and a capitalist who earns his money by providing a good or service that people willingly part with their money to get.

I have no problem in giving the latter a tax break even if it means he makes more money-better that he has it and can invest it in his business so he can continue to serve his customers than to give it to the government so they can send it to some foreign dictator or to fund Solyndra, the NSA or TSA or to provide a farm subsidy or a bail out of the post office.

A crony capitalist who lives off government protection and favors should be taxed at 100% not because I believe the government should have the money but its our money that the government has helped the crony make and we don't share in it.

I don't envy people who make more money than me honestly, or even by luck or inheritance. Taxing them doesn't help me one bit.

27   smaulgld   ignore (4)   2013 Sep 25, 11:07am     ↓ dislike (0)   quote   flag        

humanity says

Why do you say it's not true. It seems like you almost understand what's going on. You just like to make up your own facts like right wingers always do ?

Here I found this at a right wing conspiracy meeting where I learned that the Fed is buying up to 90% of the newly issued US Treasuries that you claim would be "issued anyway"
http://www.bloomberg.com/news/2012-12-03/treasury-scarcity-to-grow-as-fed-buys-90-of-new-bonds.html

28   smaulgld   ignore (4)   2013 Sep 25, 11:08am     ↓ dislike (0)   quote   flag        

humanity says

We don't know. But it's not that much.

THAT you just made up- You can't say what the market would pay

29   humanity   ignore (0)   2013 Sep 25, 11:09am     ↓ dislike (0)   quote   flag        

smaulgld says

right now the fed is actually help fund the US government because THEY are the ones buying 60-90% of the newly issued US treasuries and they are willing to print US currency out of thin air to buy them and to receive a ridiculously low interest rate.

True. And the only reason that the global financial market accept this without going haywire, is that they believe the fed will eventually unwind these positions (selling all these bonds to others) and then taking that money back out of the system.

I believe that they will, possibly with the exception of the amount that they lose, if they have to sell those bonds at higher interest rates (lower prices than what they paid for them). That will be the true amount that this costs us, and the true amount that the money supply gets diluted because of all of this. At least that's my somewhat simplistic assumption.

30   humanity   ignore (0)   2013 Sep 25, 11:13am     ↓ dislike (0)   quote   flag        

smaulgld says

THAT you just made up- You can't say what the market would pay

Neither can you, and yet your statement implied they could not sell them at a reasonable price.
smaulgld says

The demand for US treasuries is no longer great enough for the US to fund its deficit spending

IT's true I don't know. But the global market for comparable securities (that the fed is not buying) would give more than a clue.

31   smaulgld   ignore (4)   2013 Sep 25, 11:14am     ↓ dislike (0)   quote   flag        

humanity says

True.

Thank you for a reasoned response far different than the all too common labeling and name calling on these boards

I am glad you can see that I didn't just make something because I am a right winger prone just to make things up!

32   smaulgld   ignore (4)   2013 Sep 25, 11:15am     ↓ dislike (0)   quote   flag        

humanity says

Neither can you, and yet your statement implied they could not sell them at a reasonable price.

correct we both "made up" opinions on what the prices would be but you would probably agree they would be higher than what the fed "sets" the rate at.

33   humanity   ignore (0)   2013 Sep 25, 11:15am     ↓ dislike (0)   quote   flag        

smaulgld says

I am glad you can see that I didn't just make something because I am a right winger prone just to make things up!

well, actually this...

smaulgld says

The demand for US treasuries is no longer great enough for the US to fund its deficit spending.

is pretty border line.

34   smaulgld   ignore (4)   2013 Sep 25, 11:18am     ↓ dislike (0)   quote   flag        

The demand for US treasuries is no longer great enough for the US to fund its deficit spending.

"

is pretty border line.

"

If the Fed IS the market for treasuries its hard to say what demand is. But we have seen reduced buying by the Japanese and Chinese this year

35   humanity   ignore (0)   2013 Sep 25, 11:31am     ↓ dislike (0)   quote   flag        

The fed is the market at these prices.

I'm aware of how bizarre it is,...that is what they are doing. They are propping up the financial markets in an unprecedented way. And artificially low interest rates are inflationary for gold, real estate and other assets.

MY point simply was that this is not "spending" in the sense of being related to our budget or our budget deficits. In fact, it allows us to finance our current spending at a lower price. So it's the opposite of spending for now.

I believe it's hard to argue that the cost of it is more than what the fed ultimately loses when they unwind their position, which might be years from now.

36   smaulgld   ignore (4)   2013 Sep 25, 11:35am     ↓ dislike (0)   quote   flag        

humanity says

MY point simply was that this is not "spending" in the sense of being related to our budget or our budget deficits. In fact, it allows us to finance our current spending at a lower rate. So it's the opposite of spending for now.

But if the government spends money in excess of what it takes in in taxes, it has to issue bonds to cover the excess.

If the Fed is THE market for bonds, they are in effect helping to fund our deficit spending at a lower than market rates . We would be more retrained in our borrowing if the Fed didn't monetize the debt and our interest payments would be higher.

The concept of creating inflation as if its helpful is ridiculous. The less money you have the higher the percentage of your household budget goes to food, housing and energy which are rising. We would be better off with lower prices!
I

37   Heraclitusstudent   ignore (2)   2013 Sep 25, 11:42am     ↓ dislike (0)   quote   flag        

humanity says

How much does the fed lose when they "unwind" those positions ? When do they ?

They will never unwind these positions.
QE is just a way for base money to catch up with the amount of loans in the economy.

But they will have to stop it at some point. And that means all the imbalances they created will revert toward balance.

38   freak80   ignore (4)   2013 Sep 25, 11:47am     ↓ dislike (0)   quote   flag        

Ummm...gold is tanking...

39   humanity   ignore (0)   2013 Sep 25, 12:21pm     ↓ dislike (1)   quote   flag        

freak80 says

Ummm...gold is tanking...

Would be tanking far worse if the fed wasn't seemingly trying so hard to cause inflation.

40   humanity   ignore (0)   2013 Sep 25, 12:27pm     ↓ dislike (0)   quote   flag        

Heraclitusstudent says

They will never unwind these positions.

I strongly disagree. That's not what they say. And I don't think the market would be as well behaved as it is (especially currency markets) if the perception of the smartest people in finance was that the fed won't unwind those positions.

Also, if they don't unwind them in one way, they must in another, no ?

Do you believe that the U.S. government honers the bonds they sold to the fed, and they pay that money back to the fed ? If so what does the fed do with all of that money then ? Buy more bonds perhaps ?

41   theoakman   ignore (0)   2013 Sep 25, 12:28pm     ↓ dislike (0)   quote   flag        

Oh yeah...austerity...is that what we call ever increasing deficits now?

43   marcus   ignore (10)   2013 Sep 25, 2:51pm     ↓ dislike (1)   quote   flag        

Heraclitusstudent says

QE is just a way for base money to catch up with the amount of loans in the economy.

I think I maybe know why you think that. Is it because that collateral was essentially needed to clean up the banks balance sheets ?

The thing is, eventually there will be inflation (they hope). Even if it isn't a lot of inflation, in time all those questionable loans and underwater home owners move "in the the black" so to speak. In which case the extra collateral is no longer needed, because inflation has done its magic, changing all those equity to debt ratios. At that time, the Fed will be holding far more assets than they need.

44   Bellingham Bill   ignore (5)   2013 Sep 25, 3:43pm     ↓ dislike (0)   quote   flag        

smaulgld says

But we have seen reduced buying by the Japanese and Chinese this year

China has gifted us $100B YOY

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

Japan could of course buy more, but it's pretty happy where the yen is now. Given their energy situation, they don't actually want that much of a weaker yen.

45   upisdown   ignore (0)   2013 Sep 25, 4:04pm     ↓ dislike (0)   quote   flag        

Bellingham Bill says

China has gifted us $100B YOY

LOL, what else are they going to do with the payments for their junk that we buy from them?

Oh yeah, buy overpriced grain/commodities and now a pork packing house. I find it funny that the same politicians that used to rail on and on about communism now work for companies or lobby China to get companies off shored to China. If we wouldn't have off shored so much there so that their beaurocrats and leadership stayed in power, they would have had a revolution there by now.

I guesss the moral of the story is that those politicians actually love communism when they are on the recieving end of the perks from it's oppression.

46   smaulgld   ignore (4)   2013 Sep 25, 6:58pm     ↓ dislike (0)   quote   flag        

humanity says

freak80 says

Ummm...gold is tanking...

Would be tanking far worse if the fed wasn't seemingly trying so hard to cause inflation.

Gold would be $300 an ounce and nothing more than a rare shiny metal for jewlery and light industrial use if not for excessive printing of currencies around the world. A good part of gold's value stems from its perceived monetary value

47   freak80   ignore (4)   2013 Sep 25, 10:20pm     ↓ dislike (0)   quote   flag        

upisdown says

I guesss the moral of the story is that those politicians actually love communism when they are on the recieving end of the perks from it's oppression.

It's all about the money. It's the "theory of everything" that works.

48   upisdown   ignore (0)   2013 Sep 26, 3:35am     ↓ dislike (0)   quote   flag        

smaulgld says

Gold would be $300 an ounce and nothing more than a rare shiny metal for
jewlery and light industrial use if not for excessive printing of currencies
around the world. A good part of gold's value stems from its perceived monetary
value

That, and the severe hype and fear mongering to the gullible mopes that obviously believe it.*

*Morons that try to induce fear or stroke peoples' sense of paranoia are not financial "experts", they're con artists/grifters, especially when those same people couple those fears/paranoia with ideology. (Note to Mush, why people would entrust you with anything more than pocket change is an indicator of the total lack of intelligence of some people in this country and also the lack of personal responsibility of their own life and future.)

49   Heraclitusstudent   ignore (2)   2013 Sep 26, 4:19am     ↓ dislike (0)   quote   flag        

humanity says

I strongly disagree. That's not what they say. And I don't think the market would be as well behaved as it is (especially currency markets) if the perception of the smartest people in finance was that the fed won't unwind those positions.

Just talking about *buying less* caused rates to jump 1%.
Now how much do you think rates would jump if they were selling bonds? The market would try to front run them. Rates would jump to a level that would kill growth. So no. They can't sell, or reverse repo, their way out of it.

And btw, QE bring them to a more conventional position in terms of ratio base money to wider money. They can just keep the bonds they have and raise fund rate as needed to deal with inflation, and go back to more traditional central banking.

50   Heraclitusstudent   ignore (2)   2013 Sep 26, 4:24am     ↓ dislike (0)   quote   flag        

humanity says

Do you believe that the U.S. government honers the bonds they sold to the fed, and they pay that money back to the fed ? If so what does the fed do with all of that money then ? Buy more bonds perhaps ?

Traditionally the bonds are rolled over to keep a stable level of base money and interests received are returned to the treasury.

The Feds say they own government bonds, but the reality is this is not debt: It doesn't work like debt. It's never actually paid back and collects no interests. So in reality it's just a quantity of money that has been issued by the Feds through the government.

It shouldn't even be counted in the national debt.

51   humanity   ignore (0)   2013 Sep 26, 10:27am     ↓ dislike (0)   quote   flag        

Heraclitusstudent says

It shouldn't even be counted in the national debt.

And it isn't.

Or you mean the money that was borrowed from the Fed should not be considered debt ?

Well, wow. Then that would mean deficitts are REALLY dropping.

I believe it is debt and will be(needs to be) treated as such. Can you point me to some reading that supports your point of view ?

Please also point me to some evidence of this. It makes no sense to me.

Heraclitusstudent says

And btw, QE bring them to a more conventional position in terms of ratio base money to wider money. They can just keep the bonds they have and raise fund rate as needed to deal with inflation, and go back to more traditional central banking.

52   Heraclitusstudent   ignore (2)   2013 Sep 26, 11:15am     ↓ dislike (0)   quote   flag        

humanity says

Or you mean the money that was borrowed from the Fed should not be considered debt ?

Well, wow. Then that would mean deficitts are REALLY dropping.

Well yes. I repeat: the bonds are not paid back, just rolled over, and the interests are returned to the borrower.

So it doesn't work like a debt. It works like an amount of money given to the government, and injected into the economy.

And this is what they want to do: They want this money to circulate into the economy and increase demand, increase GDP and eventually increase tax revenues, and bring down the debt to GDP ratio.

They don't need to withdraw it. Today it doesn't create inflation, and it won't as long as it percolates slowly enough into the economy.

The only case where they would withdraw it is if it suddenly starts being spent, but that would also assume a jump in growth and inflation. Then of course they would clamp down.

53   marcus   ignore (10)   2013 Sep 26, 2:42pm     ↓ dislike (1)   quote   flag        

Interesting conjecture. But that's not what they say they are doing.

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