Roubini: No Poom

[*T*]

Re: Roubini: No Poom

Luke & Phirang:

The quite rational conclusion as to where it must wind up - in a funding train wreck for the USA. Why does Roubini not mention that? Has he not even bothered to glance at this even if only to discard it?

He does and has. The Roubini & Setser double act are well-known for anticipating a dollar funding crisis. They, however, expected it much earlier. He is being misrepresented in this thread.

Setser in fact recently posted that he had expected the failing of BWII to be because the Chinese got sick of negative returns on their Treasuries, whereas the US banking system simply failed first.

Go back and re-read what they actually say

In late 2004, Nouriel Roubini and I wrote that “the tensions created [by the Bretton Woods 2 system] are large, large enough to crack the system in the next three to four years.”

[marvenger]

Re: Roubini: No Poom

Thanks T. But it still seems strange Roubini is not worried about inflation. If foreigners do not finance deficits then you'd expect inflation through dollar depreciation, ceating even more problems for debtors and real economy. Roubini seems to want treasuries printed for bailout here, or maybe he's just saying the options now available are more treasuries and monetisation and he'd go for more treasuries. I think Hudson is right though about more treasuries being a deflationary burden that cannot be sustained resulting in a death spiral and therefore Itulip will be right with the monetisation and POOM, I think this what Itulip calling, I get lost with the official version of how it'll play out.

[kingcopper]

Re: Roubini: No Poom

They did that on purpose. Their approach has always been - do the spending and the tax cutting, and then blame the democrats whenever they try to raise taxes to try to deal with the massive deficit that the republicans forced them to have to deal with.

Basically, make the government structurally out of money so they can't spend it on more programs. Bankrupt it so it can't get any bigger.

Regan did that, Bush did that, and then Bill had to balance the budget. Then Bush II did that, and now Obama has to balance the budget.

The republicans knew very well what they were doing.

Actually, Bush senior was pretty frickin conservative and tried to raise taxes. Remember his famous saying about reading those "lips, no new taxes". He lost to Clinton during the ending of a small recession as far as I'm concerned and that is that. His son on the other hand is a complete tool. Bush senior was a generic political tool but does not belong with the other group you mention when it comes to spending.

[we_are_toast]

Re: Roubini: No Poom

I very much disagree with your implication that our massive debt is a result of overspending. The "starving the beast" that Tip O'neill coined did not refer to busting the budget by spending more, it referred to cutting the revenues through massive tax cuts. Any historical chart of the national debt will show huge increases in debt following the Reagen and Bush tax cuts.

I agree that overspending is "A" problem, but it is not "the" problem. If we went back to the more equitable tax structure prior to the neo-con takeover of 1980 the budget would be much more manageable and the Roubini scenario would be more possible.

But this is not a political thread, and I would be more than glad to debate the politics that got us into this mess, but right now my economic well being is dependent on whether Roubini or EJ have the most convincing argument for what the intermediate future might look like.

I think we should separate the moral question of spending priorities from the purely financial question of balancing the budget, because people will disagree about which categories of federal spending are odious, whereas the problem of overspending is uncontroversial. For instance, I note that social spending did not make your list of culprits, despite its importance in the federal budget, and despite the fact that social spending is precisely what GAO and other nonpartisan budget agencies predict will break the federal budget in the long run. Hell, Bush gave us Medicare part D, which will be around a lot longer than his wars. The fact of the matter is that it all comes out of one pot, and we are overspending in aggregate.

No disagreement whatsoever about the lack of Republican fiscal discipline. What wankers. They even talk openly about trying to "starve the beast" by breaking the budget.

I just think what we overspend on is less important right now than that we are overspending in the first place (and, of course, who presided over this profligacy).

[Master Shake]

Re: Roubini: No Poom

I very much disagree with your implication that our massive debt is a result of overspending. The "starving the beast" that Tip O'neill coined did not refer to busting the budget by spending more, it referred to cutting the revenues through massive tax cuts. Any historical chart of the national debt will show huge increases in debt following the Reagen and Bush tax cuts.

Wrong. Government revenues increased after the Reagan tax cuts, not decreased, as did the percentage of taxes paid by the wealthy. The problem continues to be that the government spends too much and not wisely, not that it taxes too little.

Under Reagan, marginal tax rates were cut from a top of 70% to 28%. Revenues (from all taxes) to the U.S. Treasury nearly doubled. According to the Budget of the U.S. Government, FY 1997, Office of Management and Budget. Revenues increased from roughly $500 billion in 1980 to $1.1 trillion in 1990.

In each case, the personal income taxes paid by "the rich" increased when their tax rates were cut. The top 10 percent of earners in the Reagan years paid 48% of the income tax burden between 1981 and 1988.

http://www.mackinac.org/article.aspx?ID=676

[Yaowarat]

Re: Roubini: No Poom

Roubini wants to solve the crisis with more debt, more Keynsianism, more big government socialism; yes, he identified the mess early, but his solution is a nightmare of socialism.

Listen to this madness:


Roubini Says Stay Away from `Risky' Assets, U.S. Dollar October 24 (Bloomberg) -- New York University Professor Nouriel Roubini talks with Bloomberg's Guadalupe Barriviera in Madrid about the outlook for the U.S. economy and financial markets, efforts by policy makers to stabilize credit markets and Roubini's investment advice.

http://www.bloomberg.com/news/av/

[we_are_toast]

Re: Roubini: No Poom

Master shake, your posting from right wing propaganda think tanks (mackinac center) discredits your discussion. Here are the numbers the conclusion is obvious.

http://www.whitehouse.gov/omb/budget...5/pdf/hist.pdf

Year Revenues Expenditures Deficit

1970 ....192,807 195,649 –2,842

1980 ....517,112 590,941 –73,830

1981 ....599,272 678,241 –78,968

1982 ....617,766 745,743 –127,977

1983 ....600,562 808,364 –207,802

2000 ....2,025,218 1,788,773 236,445

2001 ....1,991,194 1,863,770 127,424

2002 ....1,853,173 2,010,970 –157,797

2003 ....1,782,342 2,157,637 –375,295

2004 1,798,093 2,318,834 –520,741

There's plenty of political blogs to post your right wing ideological junk, but I think most people here are trying to present, or learn from (me), information and discussions grounded in legitimate data.

Wrong. Government revenues increased after the Reagan tax cuts, not decreased, as did the percentage of taxes paid by the wealthy. The problem continues to be that the government spends too much and not wisely, not that it taxes too little.

Under Reagan, marginal tax rates were cut from a top of 70% to 28%. Revenues (from all taxes) to the U.S. Treasury nearly doubled. According to the Budget of the U.S. Government, FY 1997, Office of Management and Budget. Revenues increased from roughly $500 billion in 1980 to $1.1 trillion in 1990.

In each case, the personal income taxes paid by "the rich" increased when their tax rates were cut. The top 10 percent of earners in the Reagan years paid 48% of the income tax burden between 1981 and 1988.

http://www.mackinac.org/article.aspx?ID=676

[seanm123]

Re: Roubini: No Poom

Are our loan sharks are getting nervous? You bet, once the seeds of doubt have been planted it is tough to keep doubt from growing. Our current sitting president is going to have allot of explaining to do at the emergency summit of the Group of 20 countries in Washington.

Japan, China Leaders Agree to Stem Dollar’s Plunge
Leaders of Japan and China agreed Friday that the two countries will cooperate to stem the dollar’s further plunge and overcome the U.S.-originated global financial crisis.


Japanese Prime Minister Taro Aso, in separate meetings with Chinese President Hu Jintao and Chinese Premier Wen Jiabao, confirmed that the two nations will strive to maintain the current monetary system with the U.S. dollar playing the role of the world's key currency.
Aso told Hu that the further deepening of the current financial crisis would undermine national interests of the two countries. Aso stressed that world countries must take their respective measures to stabilize their financial systems.
Hu replied that countries must cooperate in dealing with the current crisis including in an emergency summit of the Group of 20 countries in Washington next month, which will be joined by the two countries.
After meeting with Hu and Wen, Aso told reporters that Japan and China are not hoping for a further plunge in the dollar and a meltdown of the dollar-based currency regime, adding the two countries should contribute to maintaining the currency regime.
The dollar, which dived to a 13-year low below 91 yen in London Friday, made China and Japan nervous because they are the world's top two holders of foreign exchange reserves. The nations are believed to have invested massively in dollar-denominated securities.
In a move to beef up the mutually beneficial strategic relationship, Aso and Hu agreed that they will hold telephone talks frequently. They confirmed that Japan and China are permanent neighbors and are in mutually beneficial ties.
In the meeting with Wen, Aso stressed the importance that China pay attention to consumers' worries about and distrust in Chinese food products and wipe them out, referring to a string of problems caused by Chinese foods, including those tainted with melamine, a toxic chemical.
Urged by Aso to strengthen food inspections, Wen promised that Beijing will address the issue.
Aso and Wen agreed that the two countries will cooperate in six- party talks aimed at making North Korea give up its nuclear ambition.
Aso asked Wen for China's help in resolving the issue of past abductions of Japanese nationals by North Korean agents. Wen only expressed hopes for a solution.
Furthermore, Aso and Wen agreed that Japanese, Chinese and South Korean leaders will launch a three-way summit in Japan by year-end. The first three-way summit is likely to take place in the southwestern Japan city of Fukuoka in mid-December.
A string of meetings took place on the sidelines of a two-day summit of the Asia-Europe Meeting, or ASEM, forum that just started here. Each of the talks lasted for over 40 minutes.
This was the first time that Aso, as prime minister, held summit talks with Chinese leaders. The latest bilateral summit followed one held in August when his predecessor Yasuo Fukuda visited China to attend the Beijing Olympics.END
Japanese Prime Minister Taro Aso, in separate meetings with Chinese President Hu Jintao and Chinese Premier Wen Jiabao, confirmed that the two nations will strive to maintain the current monetary system with the U.S. dollar playing the role of the world’s key currency. Aso told Hu that the further deepening of the current financial crisis would undermine national interests of the two countries. Aso stressed that world countries must take their respective measures to stabilize their financial systems.
The dollar, which dived to a 13-year low below 91 yen in London Friday, made China and Japan nervous because they are the world’s top two holders of foreign exchange reserves. The nations are believed to have invested massively in dollar-denominated securities. In a move to beef up the mutually beneficial strategic relationship, Aso and Hu agreed that they will hold telephone talks frequently. They confirmed that Japan and China are permanent neighbors and are in mutually beneficial ties.
http://www.istockanalyst.com/article...d_2737398.html

[Joy]

Re: Roubini: No Poom

I think Americans are unique in the world in really believing deflation is politically possible with their paper currency. Of course, it is theoretically possible to have deflation now, but how is it conceivable that a democratically elected government would embrace such an austere and hard money program.

If not for its reserve currency status, the dollar would have met its eventual fate much earlier. The words of George Elliot come to mind whenever I hear the - "why hasn't gold soared" - retort:

"The sense of security more frequently springs from habit than from conviction, and for this reason it often subsists after such a change in the conditions as might have been expected to suggest alarm. The lapse of time during which a given event has not happened, is, in this logic of habit, constantly alleged as a reason why the event should never happen, even when the lapse of time is precisely the added condition which makes the event imminent. A man will tell you that he has worked in a mine for forty years unhurt by an accident as a reason why he should apprehend no danger, though the roof is beginning to sink; and it is often observable, that the older a man gets, the more difficult it is to him to retain a believing conception of his own death."

[phirang]

Re: Roubini: No Poom

I think Americans are unique in the world in really believing deflation is politically possible with their paper currency. Of course, it is theoretically possible to have deflation now, but how is it conceivable that a democratically elected government would embrace such an austere and hard money program.

If not for its reserve currency status, the dollar would have met its eventual fate much earlier. The words of George Elliot come to mind whenever I hear the - "why hasn't gold soared" - retort:

"The sense of security more frequently springs from habit than from conviction, and for this reason it often subsists after such a change in the conditions as might have been expected to suggest alarm. The lapse of time during which a given event has not happened, is, in this logic of habit, constantly alleged as a reason why the event should never happen, even when the lapse of time is precisely the added condition which makes the event imminent. A man will tell you that he has worked in a mine for forty years unhurt by an accident as a reason why he should apprehend no danger, though the roof is beginning to sink; and it is often observable, that the older a man gets, the more difficult it is to him to retain a believing conception of his own death."

1) Roubini isn't american.

2) See japan post 1987.

[Joy]

Re: Roubini: No Poom

Phirang,

Thank you for your response. If I am reading Roubini correctly he isn't predicting deflation, but only that inflation will not be a problem. If I have this wrong please let me know. I was referring to the many comments in this and other forums predicting a period of deflation in the US.

Regarding your second point, for Japan mild deflation was a great help in keeping the Yen low and subsidizing their export industries. Either way should our experience in the US going forward be like that of Japan's we will be very lucky. Throughout their decade long period of mild deflation they enjoyed one of the highest standards of living throughout the world.

I very much enjoy your points of view. If you see flaws in what I am suggesting please let me know. Best.

[phirang]

Re: Roubini: No Poom

Phirang,

Thank you for your response. If I am reading Roubini correctly he isn't predicting deflation, but only that inflation will not be a problem. If I have this wrong please let me know. I was referring to the many comments in this and other forums predicting a period of deflation in the US.

Regarding your second point, for Japan mild deflation was a great help in keeping the Yen low and subsidizing their export industries. Either way should our experience in the US going forward be like that of Japan's we will be very lucky. Throughout their decade long period of mild deflation they enjoyed one of the highest standards of living throughout the world.

I very much enjoy your points of view. If you see flaws in what I am suggesting please let me know. Best.

As for a strict comparison with Japan, it's a bit specious: I used it as a counterexample.

Remember:
1) japan had and still has a meaningful savings rate
2) Yen is not a reserve currency
3) BoJ rates of 0%

More later... gotta jet.

[ASH]

Re: Roubini: No Poom

I very much disagree with your implication that our massive debt is a result of overspending... If we went back to the more equitable tax structure prior to the neo-con takeover of 1980 the budget would be much more manageable and the Roubini scenario would be more possible.

But this is not a political thread, and I would be more than glad to debate the politics that got us into this mess, but right now my economic well being is dependent on whether Roubini or EJ have the most convincing argument for what the intermediate future might look like.

Actually, I agree. It is wrong to only look at one side of the coin. Talking about overspending without saying anything about taxation was an oversight, albeit one that probably reveals my political biases.

[SJ]

Re: Roubini: No Poom

Phirang, while Roubini has been right about the financial crisis, I would not rely on him for the correction phase. He is not as consistent as you think. For example, he also wrote about the collapse of BW2 recently. So how can he agree about the decline/collapse of the dollar, but be so focused on the deflationary aspects of this crisis. He is the Abby Joseph Cohen of the recessionary world - always seeing the glass as too empty and needing more stimulus. These pundits turn out to be fatally wrong when start to be wrong. EJ's thesis has been simple and beautiful - the dollar will decline and enter a sudden stop. If you don't see that happening as the confluence of the current events, man you need to step back and look again. In fact, the inevitability of that outcome scares me more than anything else.

[Judas]

Re: Roubini: No Poom

Maybe I'm missing something, but after downloading the file I see that in 1980 total receipts were 517,112, and in 1988 total recipts were 909,303. So revenues did almost double.

Why would you point to a file that supports your "opponent's" arguement, or post a list which skips from 1983 to 2000?

Master shake, your posting from right wing propaganda think tanks (mackinac center) discredits your discussion. Here are the numbers the conclusion is obvious.

http://www.whitehouse.gov/omb/budget...5/pdf/hist.pdf

Year Revenues Expenditures Deficit

1970 ....192,807 195,649 –2,842

1980 ....517,112 590,941 –73,830

1981 ....599,272 678,241 –78,968

1982 ....617,766 745,743 –127,977

1983 ....600,562 808,364 –207,802

2000 ....2,025,218 1,788,773 236,445

2001 ....1,991,194 1,863,770 127,424

2002 ....1,853,173 2,010,970 –157,797

2003 ....1,782,342 2,157,637 –375,295

2004 1,798,093 2,318,834 –520,741