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GreenRiver

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  • The Implications of a Downgraded U.S. [View article]
    If the treasury debt is so good, "productive interest bearing securities" as you call them, then why are bond holders willing to exchange them for "vapor cash"? If the coupon is paid in US$, how can they really be very productive since the only thing the produce is "vapor cash"?

    You seem to forget that the Treasury Department took "vapor cash" in payment for the "productive interest bearing securities", as well as the fact that the Treasury Department auctions "productive interest bearing securities on a regular schedule; for which the will take "vapor cash" in exchange.

    Treasury debt is "money good", meaning that it is a negitiable asset, the functional equivalent of cash, and only as good (or bad) as cash.

    The ECB is most definitely NOT monetizing debt. If you're referring to the bailout package used to purchase Greek Debt, the ECB is raising money from its member nations, mostly Germany and France I believe, as well as from the IMF in order to fund the purchases. The ECB is not expanding the monetary base to fund these purchases. Additionally, much of the bailout package is in the form of "loan guarantees" - promises to lend in the future - but no money has actually been raised or allocated for a large part of the promised bail out fund.
    Apr 19, 2011. 10:14 AM | Likes Like |Link to Comment
  • The Implications of a Downgraded U.S. [View article]
    I'd like to pose a question for all the Tea Partiers, Republicans, and various other supply siders:

    "What is the multiplier effect of tax cuts?" The rallying cry is that the allowing the money to stay in the hands of the taxpayer results in investment, which increases GDP, which increases revenue. What is the multiplier? By how many $ is GDP increased for each $ of tax cuts? This is VERY important, because for the "supply side" theory to work, the multiplier must eventually replace the forgone revenue PLUS INTEREST for the tax cuts to be even revenue neutral, let alone revenue positive.

    I was crunching some numbers with my pocket calculator. Currently, federal revenue is about $2.2T - about 15% of GDP.

    Lets suppose we reduce taxes (which would, of course, be taxes on the wealthy) by another $300B - about the amount of the Bush tax cuts. That would reduce revenue in the current year by about 16% to $1.9T, or 12.7% of GDP. So to what would GDP need to increase in order for the $300B tax cut to be revenue neutral? Assuming that we continue to collect 12.7% of GDP, the answer is $17.3T - an increase of 16% of GDP. The MULTIPLIER would need to be EIGHT - the increase in GDP would need to be 8x the amount of the tax cut for the tax cut to be revenue neutral ($300B tax cut would require $2.4T increase in GDP to be revenue neutral).

    Look at it from the other direction: if we eliminated the Bush tax cuts (increasing revenue to 16.8% of GDP), the economy would have to shrink more than 7% to $13.1T in order for overall revenue to decline. Is ANYONE claiming that a $300B tax increase would create a recession TWICE as bad as the housing bust? No, I didn't think so.

    Of course, there is absolutely NO reason to believe that that additional $300B would be invested in jobs-producing ventures, and every reason to believe that it would be used for things like rent-seeking, commodity speculation (driving up already astronomical costs for things like food, energy, and gasoline), foreign investment, and foreign made luxury goods.

    The supply siders never give any hard numbers, just pie in the sky claims that "The govornment can take a smaller slice of the pie, and the pie will grow enough that that smaller slice of a larger pie will be an improvement." I think there is a reason why, ever since Reagan to now, the supply siders have been lean on numbers and big on "pie in the sky."

    Even David Stockman, Reagan's budget director, has renounced supply sider economics.
    Apr 19, 2011. 08:20 AM | 7 Likes Like |Link to Comment
  • The Implications of a Downgraded U.S. [View article]
    Even more disgraceful is the fact that the US GDP has only grown from $750B to $14.9T since 1965.

    Federal spending as percentage of GDP in 1965: 22% [165B / 750B]

    Federal spending as percentage of GDP in 2011: 21.48% [3.2T / 14.9T]

    We don't have a spending problem NEARLY so much as we have a REVENYE problem. And the Rep/Teabag plan to address this problem is to REDUCE revenue.

    We've tried that ever since Reagan's first term, and it hasn't worked yet. Reducing revenue reduces revenue. Big surprise. But this time it will be different right, we'll reduce taxes on the wealthy AGAIN and in their gratitude they'll create millions of jobs and hire all the unemployed, rather than lend their savings to the govornment, invest in offshore businesses, purchase lots of foreign made luxury goods, and generally stuff all those extra $ into their matresses.

    Remind me, though, about all the jobs that were created as a result of the Bush tax cuts, because I seem to have forgotten about them. You do remember the sales pitch that Bushie made, that we can afford to lower taxes because Bill Clinton ran a miniscule surplus a couple of years, and that lowering taxes would be good for everybody because of all the jobs that would be created? How'd that work out?
    Apr 18, 2011. 06:06 PM | 15 Likes Like |Link to Comment
  • The Implications of a Downgraded U.S. [View article]
    The achievements of the Greatest Generation required major sacrifice by the entire society in pursuit of the greater good, sacrifices of treasure, of liberty, and of life. The flower of an entire generation was put into uniform to work at the sharp end of the spear, and the rest of the nation endured privation and want for the duration of the crisis.

    How many among the current generation are willing to make any sacrifice on behalf of the greater good? It is in fact the unwillingness to sacrifice any luxury or convenience in our current crisis which is in fact the root of the problem.
    Apr 18, 2011. 05:01 PM | 12 Likes Like |Link to Comment
  • A Reality Check for Wind Power Investors [View article]
    Two things I would like to add to this thread:

    First, the problem with wind generation the BPA area is even more ironic than just the day to day variability. Another commentor linked an article about BPA shutdowns of wind power capacity because they don't have transmission capacity to handle exports of both the wind AND the current huge surplus of Hydro. The wind operators are kvetching predictably because this is their peak generation SEASON. Spring is the season of wind in the PNW, apparently. It's also the season of melting snowpack which increases hydro output dramatically; late summer is poor wind AND poor hydro season. So we need mass storage capable of handling SEAONSAL variations, or good enough grid to ship solar north in the summer/fall/.

    Second: Most people have no IDEA how much power one megawatt is, let alone a gigawatt. I was crunching some numbers on a hairbrained storage idea I had - a steep grade electric rail line, pushing balast loads UP to store energy, then using the same grade and ballast to push the locomotives DOWN the grade to release energy - inspired by the way a grandfather clock works. To store ONE megawatt of electricity, you would need to raise 1000 metric tons a distance of 370 meters. At 5% grade, thats about 7 km; 1000 metric tons would be the weight of an average diesel electric locomotive [200 metric tons] and eight loaded rail cars [100 tons each]. That puts in perspective just how much storage a MW requries - enough to push a small freight train up several kilometers of steep track.
    Apr 16, 2011. 03:58 PM | 3 Likes Like |Link to Comment
  • The Impending Collapse of the Gold Bubble [View article]
    They can't get paid to turn the food into alcohol if they're selling the food to the poor.

    And your comments about the "huge obesity problem" being the result of access to food stamps is pure BS. You can't buy a Big Mac with food stamps, or booze, or for the most part, processed pre-packaged meals. You CAN buy things like cereal, meat, vegetables, bread, eggs, etc.

    If you want to address the obesity epidemic, hammer on school lunches. Lots of fat and calories; little nutritional value; setting in place food preferences and dietary habits which will last a lifetime. I wouldn't feed a lot of what currently passes for food in school cafeterias to pigs.
    Apr 16, 2011. 09:41 AM | Likes Like |Link to Comment
  • Unstoppable Silver? [View article]
    Mark Anthony:

    I believe the silver China is "re-exporting" MIGHT be in the millions of solar panels, cell phones, lap tops, iPods, iPads, personal computers, DVD players, etc. The list goes on an on.

    Or do you think they've found a way to manufacture those items WITHOUT using any Ag?
    Apr 14, 2011. 05:24 PM | 2 Likes Like |Link to Comment
  • Unstoppable Silver? [View article]
    ". . . . 83% . . . . "

    ONLY when measured against PM. Not by against any other [real] standard - prevailing labor cost, raw material, etc.

    And when PM prices come back down to earth, which the will, the gains of equities (by your standard) will be remarkable.

    Sir Isaac Newton observed that "what goes up must come down."
    Apr 14, 2011. 11:12 AM | 2 Likes Like |Link to Comment
  • Homeowners in Denial [View article]
    Maybe there are a lot of Americans who understand the concepts of market price, value, and realized losses. Many who understand that the selling price they could get today for their home is less than what they owe ALSO believe that the home is actually worth MORE than what the market would bring. So they stay put, expecting a rebound.

    Maybe they are right.

    Maybe not.
    Apr 13, 2011. 05:15 PM | 2 Likes Like |Link to Comment
  • Unstoppable Silver? [View article]
    Notice I said 'suggests'.

    Last time I remember price action like this it was due to the Hunt brothers' attempt to corner the silver market. Are you old enough to remenber that? Some believe that JPM has already cornered copper, who's to say that they or another player aren't attempting to do the same to silver. Will all the $T the Fed is spreading around, isn't it possible that all those printed $ could be inflating a bubble in silver?

    All I know is, when everyone believe the sky's the limit and anyone who questions that is ostracized the skeptic in me is filled with doubt.
    Apr 13, 2011. 01:58 PM | 1 Like Like |Link to Comment
  • Short-Term Deficit Cuts: When Do the Confidence Fairies Arrive? [View article]
    I sense difficulty breathing through all that sand around your nostrils.

    Get your head out of the sand and look around.
    Apr 13, 2011. 09:48 AM | Likes Like |Link to Comment
  • Wind Power Investors Get Another Reality Check [View article]
    @jerrydd:

    Recent studies are showing that the CO2 footprint of nat gas is much closer to that of coal IF you include the entire cycle - which includes a lot of drilling, fracking, and pipeline building.

    Other studies are also showing that the amount of methane (the primary hydrocarbon in nat gas) which escapes in the extraction process, while small in percentage, has an outsized impact. Methane is a much more powerful GHG than CO2.
    Apr 13, 2011. 09:40 AM | 2 Likes Like |Link to Comment
  • Short-Term Deficit Cuts: When Do the Confidence Fairies Arrive? [View article]
    To extend your analogy a bit further, consider the fact that our "college student" is maxing out his credit cards to pay for his mom and dad's health care and pension, as well as his younger sister's illegitimate kids and the private security guards who protect his 3 older brothers' homes and businesses [one's a banker, one's a doctor, and one's an oil man].

    Of course, the 3 older brothers aren't really providing much in the way of assistance to the parents or the sister. They're also the lenders providing the credit cards to the college student and are making a handsome profit as he tries to support his family. Their companies are also doing pretty well, and they're becoming quite wealthy, because THEY'VE figured out a neat trick - pass all of the family's social costs off to the college student, and keep all of the profits of their "free enterprise" for themselves.
    Apr 13, 2011. 08:48 AM | 1 Like Like |Link to Comment
  • Unstoppable Silver? [View article]
    Careful, friend, or you may have your lunch eaten by silver as well. Prices seem to be going hyperbolic - suggesting a bubble.

    I find it interesting that even today, there is very little direct silver mining. Most silver is recovered as a byproduct of mining lead, copper, and zinc.

    And [to butcher a Mark Twain quote] "rumours of the extinction of silver have been greatly exagerated." Unless you believe that all copper, lead, zinc, antimony, etc. deposits will be exhausted by 2020, there's no chance that silver will be. And if they are, we've got way bigger things to worry about than the eventual price of silver.
    Apr 12, 2011. 05:04 PM | 1 Like Like |Link to Comment
  • Short-Term Deficit Cuts: When Do the Confidence Fairies Arrive? [View article]
    The problem is that there is so much demand for govornmnet borrowing that it absorbs a tremendous amount of available investment capital. If there weren't $14T in debt, and a $1.6T deficit, what would bond investors do with their capital?

    Yes, that's a retorical question.

    At least some part of that $14T in capital would be invested in productive assets, adding to the GDP and creating jobs.

    Govornment debt is the largest "job destruction program" ever created by man. Investors need not invest in new enterprise and take risk to earn ROI, they just rent the money to the govornment - money the govornment hands out to the non-working class - the same non-working class which would fill the jobs which would be created in the absence of govornment job destruction.

    So circular it makes my head spin.
    Apr 12, 2011. 12:08 PM | 8 Likes Like |Link to Comment
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