stillafewleft

What Will the U.S. Economy Look Like in 10 Years? Look to Greece

The argument is nominally valid short-term but not long term. True, no one will launch a frontal assault on the US now or for the foreseeable future. But, long term, the very military expenditures you point to and the campaigns the military is mired in sap US wealth and vigor. Nations which produce and reward producers will grow and gather wealth quietly and steadily under a US umbrella which may stabilize the current world order but not the long-term stature or self-sustenance of the US.


On Nov 30 07:40 AM Troy Jensen wrote:

> Carlos, again, you completely miss the point. "Many countries have
> embarked on monetization, and it has never ended well for their middle
> classes." You are absolutely right - but put this in historical context.
> AGAIN, there has never existed, ever, in human history, a global
> power comparable to the United States. I am not here (as I stated
> in my comment) espousing a particular course of action. I am here
> to tell you that we can indeed print our way out of this current
> situation, IF that is the course of action taken. Carlos, be realistic.
> Small Caribbean countries buy large amounts of our treasuries at
> auctions every month. I don't know about you, but I am doubting the
> Cayman Islands are holding the $30 billion in treasuries purchased
> at auction last month - the Federal Reserve purchased those bonds.
> America can issue all the debt it wants, because there are several
> factors that are so basic in their premise, it astounds me that people
> - intelligent people! - simply don't understand how the system really
> works:
>
> 1. The Federal Reserve (which, incidentally, is not a government
> institution, but a "hybrid" of sorts - many Americans have absolutely
> no idea that it isn't simply a branch of the Federal Government,
> but an independent private organization with government oversight)
> can indeed purchase our treasury bonds and hold them as assets with
> freshly printed currency. The idea that the government could liquidate
> the federal debt by simply printing up dollars and buying back its
> own bonds with them is dismissed out of hand by economists and politicians
> on the ground that it would produce rampant runaway inflation. But
> would it? Inflation results when the money supply increases faster
> than goods and services, and replacing government securities with
> cash would not change the size of the money supply. Federal securities
> are already money. They have been money ever since Alexander Hamilton
> made them the basis of the national money supply in the late eighteenth
> century. Converting federal securities into government-issued U.S.
> Notes would not cause prices to shoot up because consumers would
> have no more money to spend than they had before.
>
> A "security" is a type of transferable interest representing financial
> value. The federal securities composing the federal debt (bills,
> bonds and notes) are treated by the Federal Reserve and by the market
> itself just as if they were money. Federal securities are traded
> daily in enormous volume among banks and other financial institutions
> around the world just as if they were money. If the government were
> to buy back its own bonds with cash, these instruments of financial
> value would merely be converted from interest-bearing notes into
> non-interest-bearing legal tender. The funds would move from M3 into
> M1 (cash and checks), but the total money supply would remain the
> same.
>
> Let's go to point #2 and find out why in fact the U.S. can print
> money and issue debt with almost unfettered impunity...it's not some
> world conspiracy, but indeed a new reality.
>
> 2. American projection-of-power is now the world's new commodity.
> Gotta hit on this again Carlos. The United States is responsible
> for 41.5 per cent of the global military spend, distantly followed
> by the China (5.8% of world share), France (4.5%), UK (4.5%), and
> Russia (4%). And these numbers are actually off - for various budgeting
> reasons, the United States unofficially spends much more than the
> over $600 billion that is officially reported (spend figures are
> adjusted for exchange rates, as opposed to the purchasing power parity
> method, or PPP, which is widely accepted as suspect). Why does this
> matter? Because our economic power is derived from our military power.
> Again, I am not advocating anything here - just delivering you the
> facts. 63% of foreign currency reserves are in United States dollars
> for a reason - if the proverbial crap truly ever hits the fan anywhere
> on earth, what does a finite shiny commodity do for you? The U.S.
> Dollar is the default world fiat currency because, by its very definition,
> the mechanism for valuing a fiat currency is directly correlated
> to the ability of the government issuing the currency to ensure it
> remains legal tender. The United States projection-of-power is absolute,
> hence the U.S. dollar, and it's ability to both print currency, ensure
> it remains "legal tender", and issue Treasuries is at the moment
> infinite. That military projection-of-power, right, wrong, or indifferent,
> has evolved into the new "Gold Standard." The funds raised from the
> issuance of debt, much of which we are already monetizing, is used
> to maintain and increase the United States military, which in turn
> allows the U.S. an even larger geopolitical margin of error and the
> ability to print more currency and issue more debt....round and round
> it goes. China is not even in the outskirts of the neighborhood of
> playing on the United States level - we have eight carrier battle
> groups (each of which costs roughly the equal of Norway's annual
> GDP to maintain each year - amazing thought to even grasp), while
> China has hull of a never-completed small Soviet aircraft carrier
> built in the late 80's. It is currently not seaworthy. China has
> a navy that is only capable of guarding their coast - and even then,
> barely. So no "China is the New Power" baloney please - I laughed
> at the "Japan is the New Power" folks in the 80's, and I am giggling
> again now. Militarily, the U.S. could shut down access to the Pacific
> Ocean whenever it wished. Economically, the United States is dependent
> on trade with Asia, but not NEARLY as dependent as Asia is on trade
> with the United States. In the cold harsh reality of the world, East
> Asia has no real effective countermeasure to an American military
> or economic move.
>
> The bottom line is, we have single-handedly saved the entire global
> economy with our deficits and expansion of money supply. And indeed
> Carlos, there is a whole new economic paradigm - I am stating that
> monetizing our debt would not have the devastating inflationary or
> currency devaluation most economic models (models that are hundreds
> of years old, in an era where a nation as powerful as the U.S. was
> inconceivable) call for with certainty. It's a brave new world, and
> if you don't think we are monetizing debt right now...you are just
> not facing reality.
>
> I mean nothing harsh in my response, I just really want to point
> out geopolitical realities that affect economic predictive modeling.
> Greece isn't the United States. Japan isn't the United States. Zimbabwe
> is not the United States. No nation has ever been the United States.
> I am not pounding my chest with hubris...again, just the facts. Zimbabwe's
> devaluation strategy didn't quite work out, to say the least...but
> the world doesn't price it's commodities in Zimbabwe Dollars. 63%
> of the world's currency reserves are not held in Zimbabwe Dollars.
> I don't know too many major economies that peg their currency to
> the Zimbabwe Dollar. Not many countries are absolutely reliant on
> Zimbabwe as a trading partner. Zimbabwe doesn't account for 24.6%
> of the global GDP. Zimbabwe does not have a functional internal military,
> let alone a naval force of any sort, negating Zimbabwe's projection-of-power.
> Zimbabwe has an extremely small geopolitical margin of error. The
> comparison is totally irrelevant.
>
> I truly do appreciate the debate! Cheers!

The Myth of the Strong U.S. Dollar

re: "The only public person alive today that, in my mind, has any credibility on this issue is Paul Volcker. " ... You forget Ron Paul

Hank

There's No Bubble in China

Like previous commentors I do not see anti-Americanism in the article though I do see vigorous questioning of and objection to recent and ongoing policy and the societal leaders which create it. If expression of opinion in a public forum is not the responsibility of a good American what is?

Regarding your argument against gold, you apparently accept that QE is sufficiently massive to keep the whole world afloat. And, on top of the global effects of QE, does not the US continue to run gargantuan deficits and are not China and other non-US economies growing organically at a much greater rate than US/Europe? So then, why will the currencies of the low growth countries (e.g., US) being diluted through QE and deficit fiscal policy not fall against those of the high growth, non-diluting ones? Any relative weakness in the value of US currency must be reflected as a rise in the US dollar price of objects in widespread global demand such as gold.

Granted that it is theoretically possible that dollars could be soaked up "just in time" as has been alluded to; however, given past history of the dollar under Fed management and the current need to weaken the dollar to have any hope of reducing trade deficits and paying obligations (debt, health care, retirement programs, etc.) I consider that an unlikely scenario.
Hank


On Nov 06 05:45 AM James Lewis wrote:

> This author hates the USA and loves gold. Not sure why the gold bugs
> always hate the USA. Maybe its becaus etheir entire thesis of gold
> appreciation is based on the demise of the USA.
>
> I dont like corruption and the shafting of the ordinary man on the
> street either. But do try to keep my views on asset markets outside
> my political, social leanings.
>
> The author however has some exceptional points in this article.<br/>If
> the stats are true, then in effect bank lending in China is in line
> with standardised norms. I have argued for a very long time bubbles
> do not exist in the real estate market here in China. The markets
> are now priced at about fair value. For a long-term (5-10 years)
> now is still a good time to invest.
>
> Also there is very little chance of a debt implosion at the banks
> because they are controlled by the government, have guarantees by
> the government. And the government is sitting on 2.3 trillion usd
> of reserves.
>
> Further to this, all the QE that has been going on worldwide makes
> a banking system default in the next 10-15 years very unlilely. Unless
> of course we do actually get some real bubbles.
>
> And by bubble I mean the property market going up 25%+ for 3-4 years.
> Based on the exit strategies that will come into fruitation in europe
> over the next 6 months, the US/UK/China over the next 12 months.
> I very much doubt that we will see extreme asset price spikes. If
> we do, no doubt conditions will be tightened. Not 3 continuos years
> of these price spikes being allowed.
>
> So:-
>
> Underweight - Gold
> Overweight Property/Certain sectors in China/food
> Neutral - US/Europe Equities/industrial metals.
>
> I get the sense we are in for a boring 10 years in most areas.<br/>The
> Boom Camp and The Doom Camp will all be proven to be wrong.

Electronic Game Card Enters the Chinese Lottery Market

oops, correct spelling, wrong word. ;>)
Should be "at" the right time.


On Oct 14 01:38 PM stillafewleft wrote:

> I strongly agree. The format is a brand new vehicle which will find
> much use in product promotions and for casual fun and probably other
> venues as well. The price is right (pertaining to the product as
> well as the stock). A company in the right place in the right time
> and on the cusp IMO. Based on the above I own EGMI shares.

Electronic Game Card Enters the Chinese Lottery Market

I strongly agree. The format is a brand new vehicle which will find much use in product promotions and for casual fun and probably other venues as well. The price is right (pertaining to the product as well as the stock). A company in the right place in the right time and on the cusp IMO. Based on the above I own EGMI shares.

Malpass in WSJ: Devaluing Currency Has Never Led to Prosperity

"If stocks double but the dollar loses half its value, who beyond Wall Street are the winners...? "

Those who get to tax the apparent gains.

U.S. Banks Face Chinese Resistance over Derivative Losses

Please explain. How does one lose huge amounts in derivatives if they are used to thoughtfully hedge rather than speculate?

Tx

Gold Is Still the Opportunity of a Lifetime

I can't find anything about the nature of the commodity contracts that China has(had?) with western banks/brokers. Who was buying what from whom, or insuring against what from whom, and what wool was allegedly pulled over Chinese entities' eyes that is making them cry foul? Help please.
TIA

The Federal Reserve Must Die, Part 3

I'm late to the party, hope some are still in attendance.. great article James. But the underlying presumption persists that the government controls the Fed or maybe the Fed controls government depending on personalities, time and place, whether it be in the US or elsewhere. However, as you say these are among the best and the brightest, how many incompetent fools are among them and their legions of support? Are Fed / Congress / Presidents and those who advise them so cloistered that the absence of prior real world experience prevents learning and course correction after one's first policy mistake or two? Is it not more probable that the two most often operate from a common script, share the same play book, alternating good cop - bad cop, fool - wise man, traitor - hero roles, for the purpose of concentrating power and wealth? Could the two seemingly separate entities be tools implemented as expedience dictates by a higher seat of power? Viewed that way all the incompetents that you described were simply good soldiers. Just a thought. Thanks again.

Health Care Bill: Prescription for Disaster

Perhaps the goal is to complete the social safety net ASAP so as to to avoid popular discontent as the remaining nails are put in the US / US $ coffin over the next few years. The calculation would be that most people will not get too upset over national insolvency or the loss of individualist America if they have shelter, personal safety, health care, education (or what passes for such), a livable income. Substantial time would be bought. In the meantime expectations could be continued to be guided down gradually with the goal of a soft landing when internal economic underpinnings completely unraveled. Just a thought.

Unimpressed with China’s High Reserve and GDP Growth Numbers

yes, that was my question too - or commodities, or anything else that is denominated in or available to US $??


On Jul 17 11:23 AM Billy Gee wrote:

> Michael, is there not the other option for the massive surplus of
> U.S. dollars held by China? -- that being the purchase of U.S. goods
> and services.

No One Saw This Economic Crisis Coming?

Good point. But doesn't that also beg the question of how our best and brightest academicians, financiers, etc. ever considered it possible to understand much less forecast economics without following the money? Though I have no information either way I can see where Jeff Neilson is coming from in alleging that smart people don't repeatedly and as a herd act that stupid.


On Jul 13 07:23 AM Crocodilian wrote:

> Saw "it" coming? Really depends on what the "it" is.
>
> It is painful and expensive to be "right" too soon. In fact, its
> so painful and expensive that its little different from being wrong.
> So the temporal aspect of the calculation is critical; particularly
> for a policy maker.
>
> A second aspect of "it" is that so far as I'm aware, no one saw clearly
> the web of derivative products that had increased implicit leverage
> far higher than we understood-- I'm thinking specifically of AIG.
> One reason that we didn't see AIG coming, was that like Enron, they'd
> structured their business to make it hard to see the parts that were
> contributing risk.
>
> The FIRE sector didn't get modeled as Brezmer notes-- but not because
> people didn't want to. It couldn't modeled because AIG had purposefully
> established AIG Financial Products in a domicile outside of the Fed's
> ambit, and as such the Fed simply didn't have data to model their
> exposures. If you don't have AIG CDS exposure (and the similar exposures
> of counterparties) in your model, how _could_ you see "this" coming?
>
>
> This is what is famously called the "shadow banking system". The
> essence of the shadow banking system is that it represents the movement
> of capital -- and leverage -- from the traditional, observable, regulated
> financial institutions to an alphabet soup of opaque entities.<br/>
>
> We created a perverse set of incentives for the FIRE entities to
> move their risks to precisely the place where we couldn't see them
> clearly.

Bankers, The Spooks Want You!

Hmmm. I guess that would depend on which questions were asked at which interview... ;>)


On Jul 10 12:53 PM Swashbuckler wrote:

> The CIA requiring new recruits from the banking industry to pass
> lie-detector tests is ingenious. That way, only the most accomplished
> liars and thieves will be allowed to join.The less-accomplished will
> fail the test. The fact that the pay is supposedly less than that
> available on Wall Street should not be a major deterrent in landing
> recruits. Most of the recruits would much prefer to steal from others
> than to receive an honest paycheck. The money is really only a secondary
> issue anyway, since the majority of the new recruits get much more
> fulfillment from the act of f**king over someone while stealing their
> money and ruining their life than they do from the actual money itself.

TARP for Regulators

The Fed can't watch the financial hen house because it has been proven unable and has a gross conflict of interest to say the least. Well, let's have civil servants do it. Oops, the revolving door, not to mention influence by politicians who either have their own gross conflict of interest (need to get re-elected) or are influenced by those who do. OK, academics then. Oops, no real-world experience needed in that club, and getting that next promotion is a disincentive to cross those (wealthy donors) being regulated. Thank goodness for the watch dog media. Hmmm, "green shoots" and all those "less bad things presaging recovery" anyone?

Policing those with ultimate wealth and power requires (a) smart, well informed, nonconforming idealists with public credibility and an effective podium (a very small group) AND (b) an assertive, educated public which has long been among the missing. Intellectually it is a non-starter because beyond window dressing it simply will not be permitted by those with power and influence. Can anything other than changing the monikers and acronyms of ineffective institutions be accomplished?

The Debt Conundrum, Part 2

Glen L.,
Thanks so much for organizing and recording my thoughts for me regarding TonyCinTx's comment! ;>)

I would briefly add a few examples that illustrate how we already know that management of healthcare by our government is not advisable. The Medicare prescription plan is intensely wasteful of taxpayer dollars paying drug companies at their "ask." In addition, people who are really sick and need substantial newer (i.e., brand name) medication are forced to stop taking it when they hit the "donut hole." To devise a worse "solution" to the problem or expensive prescription medication would have been difficult.

Medicare itself in the 60's was the camel's nose under the tent which initiated the healthcare bubble. Though currently "well managed" using the oft-quoted metric of overhead costs divided by dollars expended, it is arbitrary in its decisions over what services to cover and bundle, and it frequently fails to compensate healthcare providers sufficiently for covered services. I treat Medicare recipients on what amounts to a charity basis.

Medicaid coverage simply equates to second-tier healthcare. Two-tier healthcare may become commonplace in the US healthcare scene.

TonyCinTx seems to believe in utopian society where government functions purely for the equitable benefit of all of its constituents. Nice thought, but not here, not anywhere.


On Jun 14 11:09 AM Glen L. wrote:

> To TonCinTx: your comment is filled with so many errors it compels
> me to reply, even if to educate the gullible who might believe any
> part of what you're saying.
>
> For every entrepreneur that "borrowed his way to prosperity" there
> are 9, at least, that tried that and failed. Besides, you're missing
> the point; Quinn is talking about the consumer, not the good luck
> or timing of individual business owners. In their case, borrowing
> is of course often necessary, but it must be balanced by good business
> sense, meticulous planning, and a timely paydown of debt in order
> to have a healthy economy. All three of those qualities are sadly
> lacking in the sickly consumer debt-driven economy of today's America.
>
>
> "If we had to borrow half a trillion from China to do it, wouldn't
> it be worth it to get us off oil and on to electric cars and trains
> fueled by geothermal, wind, solar and ocean energy?"
>
> NO! You obviously don't understand how completely the debt load is
> crippling America's ability to compete. And "investing" (at the point
> of a gun) in inefficient so-called "green" technologies is malinvestment
> at its very worst. To the extent that government has forced us down
> that path already (oil drilling restricitions, ethanol, banning nuclear
> power plants, restricting oil refineries, ad nauseum) it has done
> massive damage. Only the apolitical market should decide which energy
> sources are best.
>
> "If our government borrows at its low rate in order to reduce consumer
> interest rates that are running at 24%, (say through some legislative
> trick or another) wouldn't that cut consumer expense and improve
> their prosperity? Expenses do matter in economics."
>
> Pathetic. Don't you understand that "our government" is us? And that
> when you force productive people who are NOT in debt now to go into
> debt to subsidize the fools who ran up huge personal debts, you are
> punishing the prudent to benefit the imprudent? Socialization of
> debt is the very definition of moral hazard, a lesson that your public
> school education did not impart to you.
>
> Likewise, you learned nothing about economics from you experience
> working at the hospital. I work in the medical billing field, and
> I know what I'm talking about: for-profit hospitals are all in danger
> of going out of business because of government intrusion in the medical
> marketplace; Medicare and, especially, Medicaid, force them to accept
> payments that don't even come close to paying their costs, so it
> should come as no surprise that they boost the price of everything
> else that doesn't have a price control slapped on it. The problem
> with healthcare prices in the US is driven entirely by the Byzantine
> third-party payer system, a much too complicated issue to discuss
> here, but rest assured it has nothing to do with free markets in
> medicine.
>
> "We have government do jobs that we do not WANT done at a profit.
> We don't want our police force to be a for-profit organization, we
> don't want our health inspectors to be either, nor our safety inspectors,
> or our garbage collectors, or any of our consumer protection agencies
> like the FDA, FAA or SEC."
>
> Well, you're obviously speaking for yourself, but you couldn't be
> more wrongheaded. Where I live there is private, for-profit garbage
> collection, and it is far, far better than the noisy, destructive,
> union-addled non-service I got when I endured big-city public garbage
> collection. And I would LOVE to see for-profit police agencies (which
> already guard many communities in this country, by the way, the public
> police being useless for basic protection). And if you can't see
> how dismally your alphabet-soup federal agencies have failed you
> over the years you are obviously blind to reality. Did the SEC protect
> the millions of Americans from the FED-induced stock market bubble
> that recently deflated, taking trillions of 401k dollars down with
> it? You must be joking, man.
>
> "For all that the US Postal service gets dissed, they deliver a letter
> cross country for 50 cents, while the same delivery by a for-profit
> carrier like FedEx costs at least $10, twenty times as much."
>
> FedEx is forbidden to compete in the first class letter carrying
> business! Don't you know that?! If it wasn't, one thing for sure
> it wouldn't be doing is RAISING it's postage rates because it is
> LOSING money. The only reason USPS can handle mail as cheaply as
> it does is Federal government monopoly and subsidy. Some business
> model to emulate!
>
> "Although I agree with the points made by Mr. Quinn, his arguments
> are weakened when he does not understand basic entrepreneurial economics
> (you CAN borrow your way to prosperity, just look at FedEx), or basic
> political philosophy. "
>
> You don't agree with any of his points, and your own complete lack
> of understanding of basic entrepreneurial economics must be embarassing
> to everyone who knows you. As for basic political philosophy, yours
> is straight from your government high school education. Now, there's
> an industry that desperately needs a for-profit competition model,
> considering its pathetic products.
>
>
>
>