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James Bacon

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  • End of the Global Capital Glut [View article]
    MacroTrading, you said, "Increased worldwide investment leads to increased worldwide savings." I'm not sure where you got that idea. The McKinsey report does not make that claim. Indeed, it assumes that increased investment draws from a finite pool of savings, requiring the market to ration capital by means of higher interest rates.

    Chance Devereaux, our past profligacy has led us to a no-win place. If we cut spending now, we will reduce aggregate demand, and undermine economic growth. But if we increase spending to promote short-term economic stimulus, we will accelerate the slide to fiscal insolvency, which will result in far greater economic pain down the road. Both options stink. take your pick. I believe the economic dislocation will be far less if we take our hits up front than kick the can down the road until the whole system falls apart.
    Dec 14 01:46 PM | Likes Like |Link to Comment
  • The Perils of Foreign Debt [View article]
    We cannot make the legislature understand. Nothing is more important to lawmakers than getting re-elected. Fundamental change won't occur until the financial markets rebel and force change upon us. Prepare your personal finances accordingly.
    Dec 11 08:08 AM | Likes Like |Link to Comment
  • The Perils of Foreign Debt [View article]
    Yes, my understanding is that Fed purchases of Treasuries count as domestic debt. It is classified as a sub-category of domestic debt called "intra-governmental holdings."

    Why can't the Fed purchase all the Treasuries the government needs to sell? In theory, it could. But doing so would inject massive liquidity into the money supply (Quantitative Easing on steroids), which at some point would unleash massive inflation, drive down the dollar, and spark a capital flight.
    Dec 10 06:28 AM | Likes Like |Link to Comment
  • How to Balance the Budget Without Raising Taxes - An Intellectual Exercise [View article]
    For what it's worth, Cato advocates significant cuts in military spending -- and so do I. We can't afford our global military posture, and we need to realign our foreign policy with our pocketbook.
    Dec 3 09:06 AM | Likes Like |Link to Comment
  • Will Bond Holders Be on the Hook for Bailing Out Failing European Countries? [View article]
    JGB, I don't disagree with you. By the "tens of billions" of dollars, I was merely referring to the net costs of TARP. Of course, the Fed has supported the banking system, too, by propping up Freddie and Fannie/the housing market and by means of its ultra-low interest rate policy. Those costs are measured in the trillions of dollars.... But the subsidies don't come out of the public fisc and cannot be said to be borne by the taxpayers.
    Nov 28 08:51 AM | Likes Like |Link to Comment
  • The GAO Update: Worse Than It Looks [View article]
    Eric, I share your concern that the U.S. lacks the political will to close the fiscal gap. The Republicans and Democrats are like two guys in a car heading toward a cliff and playing chicken -- first guy to turn the steering wheel loses. I fear that we'll end up flying off the cliff.

    As for your grandfather's Block Island story, the situation is even worse today than in 1978. Today, he probably couldn't get the permits to erect a windmill on Block Island -- even if the economics were a slam dunk!
    Nov 24 09:05 AM | Likes Like |Link to Comment
  • The GAO Update: Worse Than It Looks [View article]
    Beowulfx1 -- I stand corrected. Solyndra received government loan guarantees, not subsidies. However, that doesn't change the fact that the company is the beneficiary of government largesse. Capital steered to Solyndra is capital that is not available for some other enterprise.
    Nov 23 08:53 AM | Likes Like |Link to Comment
  • When Japan Collapses [View article]
    Where does that leave the US Bailout Nation? Right behind Japan.
    Sep 20 08:15 AM | Likes Like |Link to Comment
  • America's Shrinking 'Fiscal Space' [View article]
    Gregman2, That's a good question, and I don't know the answer. Pure speculation: There may be an issue with the transparency of the Chinese government data.
    Sep 7 01:30 PM | Likes Like |Link to Comment
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