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The American Empire Is Bankrupt (pg. 2)
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| DOOMBOT |
| quote: | Originally posted by Groundhog Boy
Actually, now you've touched a nerve. Not really because of what you said, but because your comment contains the same stereotypical view of banks & the financial industry that is so populist-chic. I'm not saying you directly, but it's hilarious that the same people who bitch about ethic/racial/religious stereotypes out of one side of their mouths view all components of business structures as homogeneous units to be unilaterally criticized. The hypocrisy is astounding.
Just because someone works for a bank doesn't mean that they ed the whole system. Likewise, because a division of a bank, or in this case, credit rating agency, ed up, doesn't mean the whole company is screwed up. Sub-prime MBS were a new model, one that was proven wrong by the fallout. Correct me if I'm wrong, but while the model may be tweaked, the manner in which the credit rating agencies rate the debt of nations has been pretty standard through a few economic cycles.
Don't get me wrong, I'm pretty pissed at credit rating agencies because of how they ed up the whole MBS structure, but that doesn't mean that everything they do is equally poor, which is pretty much the same view I saw jerz elicit in the Fed thread. You do have to take these ratings into perspective and not see them as the Holy Grail of investment.
At the same time, apparently China's due diligence has determined that the US is still a good investment because they're still buying debt. Or do you think that they just follow S&P's lead because they can't evaluate bond strategies on their own? |
You opened up an entire can of worms. I was discussing a specific issue that Krypton brought up. I didn't delve into other things that they do. They were, though, an influence on peoples decision to invest in subprime mortgages. Just like an agency would with investing into the bond market. Looks like the AAA rating of our country's bonds really don't seem to matter to countries much lately though, given this...
And the well known fact that countries are discussing another world currency, away from the dollar. |
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| Krypton |
| quote: | Originally posted by DOOMBOT
So you are saying that the government hasn't underestimated the amount of money that it is borrowing from other countries, in which it has to pay back? The fact that the government is borrowing money with virtually no limitations does not bother you? Do you have any idea as to what this eventually does to the buying power of your federal reserve notes? |
The government underestimating the amount of money is borrows from other countries? What? The government shouldn't estimate its liabilities, it should KNOW them. And the national debt stands around $11 trillion. Yes, it bothers me. But to say the government's credit worthiness is somehow on par with subprime mortgages is ridiculous. Or to say the US government is on the verge of bankruptcy is also ridiculous. Clearly, the US government is able to pay all of its debts and obligations and the world financial system continues to extend a huge credit line to the USA, something which doesn't happen to any entity which is on the verge of bankruptcy. |
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| pkcRAISTLIN |
| quote: | Originally posted by DOOMBOT
Do you have any idea as to what this eventually does to the buying power of your federal reserve notes? |
of course we do. nobody here is a fan of government debt or losses of purchasing power. but the loss of purchasing power isn't always relevant. if your currency is worth 10% less one day, but you're earning 25% more, then you're laughing. you lose or gain purchasing power of every market day every year, the same as every currency does. if your currency is weaker, it can be a boon for exporters. you can't focus on one single element and say its the worst thing since forever.
but as far as the recent addition to the debt goes,
| quote: |
"That's the paradox of the situation that we're in now," observes Matt Miller, author of The Tyranny of Dead Ideas. "Government has got to run big deficits to stimulate the economy, deficits that would have been unthinkable ... because government's the only entity with the wherewithal to prop up a demand in the economy when businesses and consumers are all pulling back." |
is pretty much the consensus of economists.
seriously, i think it was you that bagged out PBS before, but check it out
http://www.pbs.org/wgbh/pages/front...ntrillion/view/
a nice and neat examination of the US' debt crisis. government debt can be a bad thing, but sometimes there are things on the horizon that are far worse (like a systemic collapse of financial systems around the world, massive unemployment and severe and prolonged recession). |
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| DOOMBOT |
| quote: | Originally posted by Krypton
The government underestimating the amount of money is borrows from other countries? What? The government shouldn't estimate its liabilities, it should KNOW them. And the national debt stands around $11 trillion. Yes, it bothers me. But to say the government's credit worthiness is somehow on par with subprime mortgages is ridiculous. Or to say the US government is on the verge of bankruptcy is also ridiculous. Clearly, the US government is able to pay all of its debts and obligations and the world financial system continues to extend a huge credit line to the USA, something which doesn't happen to any entity which is on the verge of bankruptcy. |
Read this. http://dallasfed.org/news/speeches/...08/fs080528.cfm
A speech by Richard W. Fisher, president of the Federal Reserve Bank of Dallas.
Then you tell me if the government can clearly pay all of its debts and obligations, which I really can't believe is something that you even consider possible at this point. |
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| pkcRAISTLIN |
| quote: | Originally posted by DOOMBOT
Read this. http://dallasfed.org/news/speeches/...08/fs080528.cfm
A speech by Richard W. Fisher, president of the Federal Reserve Bank of Dallas.
Then you tell me if the government can clearly pay all of its debts and obligations, which I really can't believe is something that you even consider possible at this point. |
hang on a moment - did you just use a federal reserve president as a source? are you kidding me? |
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| Krypton |
| quote: | Originally posted by DOOMBOT
You opened up an entire can of worms. I was discussing a specific issue that Krypton brought up. I didn't delve into other things that they do. They were, though, an influence on peoples decision to invest in subprime mortgages. Just like an agency would with investing into the bond market. Looks like the AAA rating of our country's bonds really don't seem to matter to countries much lately though, given this...
And the well known fact that countries are discussing another world currency, away from the dollar. |
Just because our country has a AAA rating on its debt does not mean the demand for them fluctuates. The Chinese aren't going to buy US debt all the time. They are going to buy it when it benefits them the most. That is when the yield is relatively high (i.e. above 3.5% on 10Y T-bonds). That spike in Chinese purchases of US gov't debt coincides with the worst of the world wide recession and the almost 4% yield of 10Y treasury bonds, which beat anythings the deflationary markets could drum up. If you were China, do you want to buy assets that are losing value in a world wide recession, or do you want 3.5% yield on a bond that guarantees you a return and all your principle back. You'r going to choose the bond. Now when that bond yield becomes less than 2.5%, why would you want to buy more bonds, especially when it appears the economic downturn is bottoming out. No, you'r going to hold off on buying any more bonds, in preparation for the inevitable recovery. This is all apart of the business cycle, which you seem to believe is caused not by free market mechanisms (which it is), but by your perception of central planning by the Federal Reserve (which the Fed DOES NOT centrally plan the economy). |
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| DOOMBOT |
| quote: | Originally posted by pkcRAISTLIN
of course we do. nobody here is a fan of government debt or losses of purchasing power. but the loss of purchasing power isn't always relevant. if your currency is worth 10% less one day, but you're earning 25% more, then you're laughing. you lose or gain purchasing power of every market day every year, the same as every currency does. if your currency is weaker, it can be a boon for exporters. you can't focus on one single element and say its the worst thing since forever. |
I'm trying to understand your example there. Why and how am I earning 25% more? Did I get a raise or something? Was there ever a time when the purchasing power dropped so badly and people simply made more money to cover the loss of the purchasing power? I would imagine what needs to happen is more money would be printed to even be able to give to the people, which means more inflation was created, which also translates to weaker purchasing power.
| quote: | but as far as the recent addition to the debt goes,
is pretty much the consensus of economists.
seriously, i think it was you that bagged out PBS before, but check it out
http://www.pbs.org/wgbh/pages/front...ntrillion/view/
a nice and neat examination of the US' debt crisis. government debt can be a bad thing, but sometimes there are things on the horizon that are far worse (like a systemic collapse of financial systems around the world, massive unemployment and severe and prolonged recession). |
| quote: | | because government's the only entity with the wherewithal to prop up a demand in the economy when businesses and consumers are all pulling back |
Prop up a false demand. Obviously there is no demand if the businesses and consumers are pulling back. That is what a free market does. When a government steps in and takes dollars from the consumer to prop up a sector of the economy in which it thinks SHOULD be in demand, government has essentially stolen capital from those who need it and will eventually need it to stimulate the economy again at some point! |
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| DOOMBOT |
| quote: | Originally posted by pkcRAISTLIN
hang on a moment - did you just use a federal reserve president as a source? are you kidding me? |
Read it and you will understand why. |
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| Krypton |
| quote: | Originally posted by DOOMBOT
Read this. http://dallasfed.org/news/speeches/...08/fs080528.cfm
A speech by Richard W. Fisher, president of the Federal Reserve Bank of Dallas.
Then you tell me if the government can clearly pay all of its debts and obligations, which I really can't believe is something that you even consider possible at this point. |
Sorry dude, I don't have the time to read that. Can you quote the specific parts you want me to look at? |
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| DOOMBOT |
| quote: | Originally posted by Krypton
Sorry dude, I don't have the time to read that. Can you quote the specific parts you want me to look at? |
I would just suggest reading it when you have the time. Not a big deal if you don't read it tonight but I think you would appreciate what he had to say and hopefully understand the magnitude of the problem(s) he discusses. |
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| Krypton |
| quote: | Originally posted by DOOMBOT
Prop up a false demand. Obviously there is no demand if the businesses and consumers are pulling back. That is what a free market does. |
Actually no. The government itself is a part of the demand equation of the entire economy. Gross Domestic Product, a measure of total economic expenditure, measures consumer expenditures, GOVERNMENT expenditures, investment expenditures, and net export expenditures.
| quote: | | When a government steps in and takes dollars from the consumer to prop up a sector of the economy in which it thinks SHOULD be in demand, government has essentially stolen capital from those who need it and will eventually need it to stimulate the economy again at some point! |
Refer above, the government is a consumer. What's this about the government stealing money? You talking about taxes? Taxes are just one unspoken-of agreement in your submission to your government. The Bush tax cuts are simply expiring. Big whoop. |
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| DOOMBOT |
| quote: | Originally posted by Krypton
Actually no. The government itself is a part of the demand equation of the entire economy. Gross Domestic Product, a measure of total economic expenditure, measures consumer expenditures, GOVERNMENT expenditures, investment expenditures, and net export expenditures. |
And you know how much I am against the government being a big part of the demand equation, so I don't feel like I need to get into that again.
| quote: | | Refer above, the government is a consumer. What's this about the government stealing money? You talking about taxes? Taxes are just one unspoken-of agreement in your submission to your government. The Bush tax cuts are simply expiring. Big whoop. |
When the government bails out Business A it needs to get the money to do that from somewhere. That somewhere is the pockets of its citizens, on top of the exorbitant amount of borrowing it does from other countries. That borrowing is going to have to get repaid somehow, which we all know it never will. But how do you think that is going to happen? You think they are going to come knocking on our doors asking for money to pay them back? No, they are going to tax the living out of us and they aren't going to ask for your permission to do so. |
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