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I hope they monetize the debt with the printed money. Bernanke told them to do it in 2002. They didn't listen. they need a higher inflation target, something like 5%. But they are unwilling to have an inflation target in excess of 1%. For shame! See Mick, debt is relative. Inflation erodes away the debt load.
31 Dec 2012, 04:37 PM Reply Like
  • mickmars
    , contributor
    Comments (1323) | Send Message
     
    A 5% inflation target? We had that under Carter and it didn't work out so hot.

     

    Personally, I don't care what they do in Washington. I know inflation is the long-term plan and am positioned for it. Those in bonds and cash will be wiped out when inflation begins in earnest.... being led like sheep into 'safe assets'.
    31 Dec 2012, 04:52 PM Reply Like
  • Brian Abbott
    , contributor
    Comments (139) | Send Message
     
    there is some irony that if the Fed monetized debt, it would raise inflation which would also minimize the impact of the remaining debt. The only problem is that the trillions of dollars that have to be rolled over would go at much higher refinancing rates. That's what kills countries that think they can pull this off. Check with Greece.
    31 Dec 2012, 04:53 PM Reply Like
  • Brian Abbott
    , contributor
    Comments (139) | Send Message
     
    of course Greece couldn't monetize since they can't print their own currency, but you see what I mean.
    31 Dec 2012, 04:54 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8393) | Send Message
     
    There was a 5% inflation target under Carter? I learn new history every day on SA. Wow!

     

    I do agree that the risk off guys will be wiped out under the inflation scenario. At some point they will move to equities and then watch out above.
    31 Dec 2012, 05:02 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8393) | Send Message
     
    Why would it have to be rolled over Brian if the debt is monetized? When the Fed monetizes the debt the debt simply goes away. It disappears. Into thin air. Poof. The problem with Greece is that it cannot print its own currency to monetize its debt like it used to be in the past.
    31 Dec 2012, 05:03 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8393) | Send Message
     
    I don't see what you mean Brian because Greece is not monetizing the debt. The problem there is totally different, in that they are forced into austerity when precisely the reverse is needed.
    31 Dec 2012, 05:04 PM Reply Like
  • Brian Abbott
    , contributor
    Comments (139) | Send Message
     
    sure, they were targeting 5% inflation when it was actually 15%. well, probably not until Volcker under Reagan
    31 Dec 2012, 05:07 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8393) | Send Message
     
    ROFL Brian.

     

    Look the 1970s inflation was oil induced. We all know that. It was not due to expansion of the monetary base.
    31 Dec 2012, 05:12 PM Reply Like
  • D-inv
    , contributor
    Comments (3919) | Send Message
     
    "Look the 1970s inflation was oil induced. We all know that. It was not due to expansion of the monetary base. "

     

    You best look at the numbers a bit closer.
    31 Dec 2012, 05:53 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    This debt monetization strategy has a short shelf life. The US is still the reserve currency of the world as we are still the largest economy in the world and are relatively stable politically believe it or not.

     

    However we are becoming a smaller portion of the world GDP and China will likely pass us inside 10 years which means we become less important and we are dictated the terms and they will be painful.

     

    The clock is ticking.
    31 Dec 2012, 06:32 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8393) | Send Message
     
    Show me, D-inv.
    31 Dec 2012, 06:40 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8393) | Send Message
     
    USA will be the second biggest economy for the next 100 years. Trust me, no one dictates terms to the second biggest economy. USA tried to dictate terms to China and failed.
    31 Dec 2012, 06:41 PM Reply Like
  • Herr Hansa
    , contributor
    Comments (3079) | Send Message
     
    Tax evasion is the national past-time of Greece. Solve that and quite a bit less austerity would be "needed". The other issue is corruption on a scale far beyond what other western governments have yet attained (if ever). A look at either Spain or the UK would provide a more valid comparison for the United States.
    1 Jan 2013, 12:25 AM Reply Like
  • Macro Investor
    , contributor
    Comments (8393) | Send Message
     
    Well said. It always gives me a chuckle when the Tea Party Patriots claim that USA is going the way of Greece.
    1 Jan 2013, 12:34 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    MI

     

    Where do you get these baseless stupid axioms?
    1 Jan 2013, 03:37 AM Reply Like
  • D-inv
    , contributor
    Comments (3919) | Send Message
     
    "Show me, D-inv. "

     

    YOU show me where monetary expansion did not occur in the wake of the Arab oil embargo and Iranian revolution. Your statement,
    "Look the 1970s inflation was oil induced. We all know that. It was not due to expansion of the monetary base" is one of the most absurd economic arguments I have encountered on Seeking Alpha.
    1 Jan 2013, 06:37 AM Reply Like
  • Macro Investor
    , contributor
    Comments (8393) | Send Message
     
    Prove me wrong, D-inv.
    1 Jan 2013, 11:04 AM Reply Like
  • Macro Investor
    , contributor
    Comments (8393) | Send Message
     
    " MI

     

    Where do you get these baseless stupid axioms?"

     

    Goblins.
    1 Jan 2013, 11:04 AM Reply Like
  • Herr Hansa
    , contributor
    Comments (3079) | Send Message
     
    There is a very real feeling of concern amongst a segment of Americans about the troubles in Greece happening here. It's not a pillar of Tea Party rhetoric any more than it is a concern of Occupy WallStreet. In a way I think it is healthy to have these groups raising concerns, because that creates awareness. People do not need to disagree with them in order to understand those concerns. Obviously some people consider TP and OWS arguments and concerns as baseless, and the major media certainly tried to brand them as nutcases and extremists. However, when you look at the residual affects of those groups, then you see some actions being taken on bank regulations, and you see new Congressmen coming in to replace politicians who were entrenched in DC for decades. Those effects on the structure of politics might look sloppy at first, but it should be glaringly obvious that the old guard of aging multi-term politicians is genuinely worried about getting booted out of the political class.

     

    That's not to state that comparisons with Greece are without any connection to reality. Maybe I am tough on Greece since I am German, but I have tried to understand the issues there. I also have several Greek friends, and their views make for interesting looks at the economy there. Greece has a political elite, and now with the Lagarde List we see examples of prominent Greek politicians, and those who influence politicians, enriching themselves at the expense of the common people. When we see politicians in the United States, and their families, benefiting financially from being in office, then are comparisons with Greece really that extreme?

     

    The idea behind this is for people in the United States to try to do something now, and over the next few elections, to change the status quo dysfunction of Washington, D.C. I think that absolutely people should be concerned, on many levels. Whether one drinks Republican Koolaid or Democratic Koolaid, I think most people in the United States feel that the current make-up of politicians is unable to accomplish much of anything. That we would discuss these things on financial forums indicates to me the spill-over of the concern over the present dysfunction.
    1 Jan 2013, 04:31 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8393) | Send Message
     
    You said a lot about what people believe. You said nothing about what is wrong. You totally lost me when you said that politicians are benefiting financially from being in office. While bribery cases do crop up every now and then, the amounts are trivial and the punishments are medieval. Let's get our facts straight here, shall we, Mr Duck?

     

    Do you live in the USA or in Germany? I doubt you live in the USA.
    1 Jan 2013, 05:29 PM Reply Like
  • Herr Hansa
    , contributor
    Comments (3079) | Send Message
     
    I split my time between Texas and California, so I get to see some interesting economic activity. Also, my name is not Duck, nor is it remotely even close to that, so I'm not sure what you mean. As to why I should be concerned about the United States, despite that I am German, there are several reasons. One of the main reasons is that the United States is a very large and important economy, so the economic long term health of the United States is important. There is a saying that if they US catches a cold, then the rest of the world will soon be sneezing.

     

    As to politicians and their families benefiting financially. Did you miss the recent pay raise? Ever look at Senate and Congressional expense accounts? Health care and pensions for life, regardless of how long they stayed in office? They use to be allowed unhindered insider trading, though that was rolled back after public disapproval.

     

    Congressman Cuningham of California was an interesting case. I happened to have met him in California and he seemed like a nice enough guy. While the amount of wealth he amassed, and the real estate deals that fell into his lap were his undoing, I don't know too many people who feel that was isolated. Then there was that Senator with the bundles of cash in his freezer; now that was interesting. So no, you guessed wrong on that; my point was not that illegal activity was enriching politicians. In fact the enrichment happens quite legally.

     

    Maybe I should not be concerned that politicians game the system to their benefit. They get a high civil service pay level, but perks beyond other civil service workers. I'm not even getting into the millions spent to put these guys in office, for that civil service pay level. No one I know in the private sector spends so much to gain employment that pays so much less than the cost of getting that position. Why is that?

     

    Do I like politicians? No. I suppose that is my bias against them. I acknowledge the need for them, and that an orderly society requires politics to function. It might surprise you that I agree with many of your posts here, and liked some of the things you stated. However, as a few others stated, you might want to step off your high horse and listen a bit to other people, even if you disagree with them.

     

    As far as a suggestion of how to improve the function of government, I suggest term limits. If the people of the United States want this, then they can get together and craft an amendment to allow no more than two terms in each high office. Historically the voting age amendment passed fairly quickly, so it is theoretically possible. The benefits would be some new ideas from new members, and politicians in their last term not using the time for campaigning.
    1 Jan 2013, 06:16 PM Reply Like
  • User 5938141
    , contributor
    Comments (7) | Send Message
     
    FYI, Marco Rubio just tweeted a claim to the contrary. Is he lying? Or trying to rehabilitate the position Mccain described as "a losing hand"?

     

    For the record, chained CPI based increases for Social Security make sense to me under the condition of both higher baseline payments and fairly stringent means testing. Given that both these propositions are politically poisonous, I don't see how it's obtainable.
    31 Dec 2012, 02:39 AM Reply Like
  • Macro Investor
    , contributor
    Comments (8393) | Send Message
     
    I feel bad for the Republicans. Any move they make gets a smackdown from the Democrats and the Republicans are left scrambling to control damage.
    31 Dec 2012, 02:45 AM Reply Like
  • june1234
    , contributor
    Comments (2493) | Send Message
     
    If you thought this was fun wait till they get around to the debt ceiling negotiations. Another S&P downgrade is almost certain not that the Fed or the markets seem to care. Polls have for years shown Congress with a 10% approval rating and 90% of the get reelected. You get what you pay for I guess
    31 Dec 2012, 02:56 AM Reply Like
  • Bobby Coul
    , contributor
    Comment (1) | Send Message
     
    Its in the details. The chain actually gives a lower increase to the people already receiving SS. The calculation to get your first check which is also part of the negotiations, wants to use the last 10 years vise 5years of earnings for calculating the annual wage average for recipients. Also the minimum age to receive benefits is being discussed and being suggested to be raised to 66 from 62 and shift the age for max benefits up 4 years along with requiring this for medicare.
    31 Dec 2012, 07:02 AM Reply Like
  • Brian Abbott
    , contributor
    Comments (139) | Send Message
     
    the government might lay off hundreds of thousands of workers if no deal reached? wow, that might not be that bad of an outcome (no offense to the affected workers)
    31 Dec 2012, 01:23 PM Reply Like
  • Brian Abbott
    , contributor
    Comments (139) | Send Message
     
    another thing lost in the GDP talk is that it assumes nothing else changes - but something else ALWAYS changes. if taxes go up, it reduces some of people's spending but not dollar for dollar - some people will save less. 60% of my after-tax earnings go into savings. even if they raise my taxes, and they will, it won't result in a dollar for dollar reduction in my spending. don't forget half the population pays little or no taxes - business as usual for them.
    31 Dec 2012, 01:28 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8393) | Send Message
     
    Brian, Excellent point. This is precisely why tax increases on the rich do not hurt the economy, as money shifts from savings to taxes. But tax increases on the poor and the middle class hurts the economy as money shifts from spending to taxes. On the reverse, tax cuts for the rich doesn't stimulate the economy as the rich just save more, but tax cuts for the poor and the middle class leads to higher spending. That's why if economic growth is your goal, you should always vote for tax hikes on the rich and tax cuts for the wealthy. Of course, the wealthy make net gains, as the economic growth increases their wealth far more than the loss from increased taxes. What I don't get it why the rich donors of the Republican Party don't explain this simple thing to the Party bosses so that they can get the far right tax cut enthusiasts in check.
    31 Dec 2012, 01:31 PM Reply Like
  • D-inv
    , contributor
    Comments (3919) | Send Message
     
    "if taxes go up, it reduces some of people's spending but not dollar for dollar - some people will save less."

     

    Very true. Still, it might be good to keep in mind that something like 40% of the population (IIRC) has savings of less than $500. For households in that financial condition any tax increase will leave them little choice but to cut consumption or delay (slow) rate of payout on existing fixed costs and debt obligations. Expiration of "Bush tax cuts" will have very little effect on them, but expiration of the 2% SS "tax holiday" will bear directly on them and reduced current federal expenditures due to sequestration will hit them indirectly. Sequestration will unquestionably result in layoffs of some federal employees and many government contractor personnel who will reduce consumption to a much greater extent than those responding to higher tax rates.
    31 Dec 2012, 06:08 PM Reply Like
  • D-inv
    , contributor
    Comments (3919) | Send Message
     
    "This is precisely why tax increases on the rich do not hurt the economy, as money shifts from savings to taxes."

     

    Nonsense. The only way that perspective would hold true is if "the rich" stuffed their mattresses with their savings. In reality, savings of the rich is investment capital allocated to a multitude of investment vehicles including some (charitable organizations) on which the investor expects no direct monetary return. "The rich" are creators of opportunity for others as well as themselves. Higher taxes on the rich only serve to further distort market price signals and incentivize "the rich" and others to lobby for new tax deductions and tax credits.
    31 Dec 2012, 06:19 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8393) | Send Message
     
    See, this trickle down voodoo economics will fail over and over but still never go away.
    31 Dec 2012, 06:42 PM Reply Like
  • HoldAndBuyInvestor
    , contributor
    Comments (146) | Send Message
     
    Terry, you should be ashamed to use the photo of a pornstar in your profile. I guess liberals should be OK with it. It does not suite seekingalpha.
    31 Dec 2012, 06:35 PM Reply Like
  • Deltascared
    , contributor
    Comments (289) | Send Message
     
    I did not like the privatizing idea but...

     

    To answer those morons who love to bash W for his "privatizing" Social Security idea...The Dow was at 10,500 when he mentioned it. Things have not been good. It is now at 13,000. Gov't employees have a system like he envisioned and it is up 25%, I am told.

     

    The reason I did not like it is because most people are cowards and nanny state lovers and really like floors. And it makes sense to give the pols another football to toss around like they are magic athletes and have a gift for the sheepie.

     

    Remember..... the US Government is our dear mom and Superman -- whatever you need.
    1 Jan 2013, 08:59 AM Reply Like
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