Roubini: No Poom

[Master Shake]

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.

The data you posted supports what I said. Section 2 page 29 of your link. Total government revenues increased from 517,122 in 1980 to 909,303 in 1988. Individual tax revenues increased from 244,069 in 1980 to 401,181 in 1988.

As i said, low taxes aren't the problem; government spending is.

[WDCRob]

Re: Roubini: No Poom

What do those numbers look like as a percentage of GDP?

[xtronics]

Re: Roubini: No Poom

I agree with the general thrust of your statement, but the mechanics of the federal debt doesn't work quite like this. We're not paying interest on the $50T figure -- more like $10.5T.

I agree - but the cost of delivering promised health care will go up with inflation - not sure it is much different other than it won't compound.

Of course there is the little problem that both parties are reacting to this financial disruption with ever more government. I think government will continue to grow much faster than inflation - the squeeze of excess government seems to me to be inflationary.

Couple that with a loss in reserve currency status and I don't see how we avoid much higher inflation. I'm sure I could be wrong, but if we don't have reserve currency status for the dollar,we almost have to be headed for a crash in value of the dollar - something called inflation.

[Verrocchio]

Re: Roubini: No Poom

Caught between the Scylla of runaway inflation and the Charybdis of a deflationary spiral, central banks will, like Odysseus, choose the lesser of the two evils -- and opt for inflation.

This statement assumes, of course, that the CBs will have a choice between the two -- and they may not (...all the King's horses and all the King's men...)!

[xtronics]

Re: Roubini: No Poom

Expansion of government beyond around 50% historically causes economies to blow up. Socialism fails every time it is tried. The cost of government can be paid by taxes, debt, and monetization. If the debt just keeps growing, the value of the currency should go down (but markets can stay irrational longer they you can stay solvent).

One other way of looking at this - if the government is taking to much in taxes - prices go up. If the government prints to much money - prices go up. If we just keep borrowing ever more money we have a debt spiral. All of these lead to inflation.

My big point is that NO ONE is addressing the size of government anymore - it would be political suicide today. But it is the root cause of inflation and I'm hearing of plans to increase the size of government even more- and the FED is also increasing the size of the shadow government.

The unwinding of funny paper has caused a temporary shrinking of liquidity, but once it unwinds this core problem remains. The core problem was papered over by relaxing oversight and thus the bubble. Because the core problem is not being addressed, it has to cause inflation - when - exactly how much I don't think anyone knows.

As we are seeing prices going down, we have to wait a bit before calling it deflation as it could just be the result of a selling climax.

[Louie.G]

Re: Roubini: No Poom

Who would finance this "mushrooming of public debt"? After what just happened would you be interested in lending the U.S. more money? Is there anyone out there capable of financing the exploding debt?

With interest on the debt becoming a larger and larger % of government expenditures, what programs would be slashed? Defense? Social security?

First, lets just forget about the US as a stand alone country. We are in A GLOBAL economy these days. Foreigners "Own" a lot of US domiciled "Stuff". The USA, for want of a better description, is the marketing department of a global manufacturing and distribution business. Like all marketing departments it likes to call the shots because it thinks it is the heart and soul of the business. But without access to sale-able products, marketing is useless and will fail unless it can sell itself.

Now from what I see

The US has exported a lot of its corporate financial crap overseas, to other departments, hence the problems in EU, UK, Asia etc, of huge write offs, losses, devalued currencies, etc. That transfer of money obviously benefited the US to some extent because houses were built, the economy moved, but, there were also some inefficiencies. Nowadays no one really trusts the Marketing Department anymore, but they still need it and given time, they will sell their stuff direct to new customers and save on Marketing expenses

Deflation, disinflation whatever else you want to call it is, in my mind, a reduction in the value of stuff. All over the world most stuff is now cheaper than it was 2 months ago. Most people are much "Poorer" than they were 2 months ago. Most Banks are now being seen for what they really are. SECONDHAND MONEY SALESMEN. And who the hell trusts a secondhand anything salesman.... certainly not another "Secondhand .... salesman

So what happened. The FIRE economy created a pile of not worth anything "Fake" products and sold them everywhere that they could. Now we are coming to see that some of those products were worth nothing and some are worth something. Some were bought with "Real Money" some were bought with "Fake Money".

We are going through a sorting out period where the Fake Money is being removed from the system and the Real Money is turning up in all sorts of places. In the US a lot of Real Money (USD) has gone overseas, and some of it has come back only to leave again. Eventually it will ALL come back home to roost. But not until the owners have replaced or restructured the Marketing Department.

Until we know what is where, no one knows anything.

So inflation or deflation in the future. I tend to agree with both but in different areas of the economy at the same time, and at least for a few years probably. Just look around. Who the hell has spare cash (deflation) to pay stupidly high prices (inflation) for stuff that isn't worth it (Greed). So deflation will keep inflation in check, but inflation will win over wherever GREED is allow to function and Deflation will win wherever reality prevails.

So now we move on to .... Hedge funds... They have lots of Real AND Fake money that they are trying to sort out. They have to sell because people want their "Real Money" back. So they are selling at a "Fake" loss to try and get "Real" Dollars. The DJI, S&P, OIL, Steel, are all just going back to their "REAL Intrinsic Price (or value, but R.I.P seemed more appropriate lol)" after having been played, inflated, juggled around for years to justify higher "Fake" profits. SO is this drop just Deflation, Disinflation or Reality.

So what is inflation. By my definition its root cause is only ever one of 2 things.... Greed or Inefficiency.

You can take charts, theories, fancy words, whatever you want and try to justify otherwise, but in my experience, when you follow the cause of a price increase in anything all the way back to the root initial cause, there you will always find either Greed or Inefficiency. We are seeing Greed being removed from the Fake financial world, and the Inefficiency from the "Real" world. I am sorry, but it is that simple. When you boil it all down, Greed is the cause of this, and some unfortunate people have been caught up in it, but most who have been caught, were being greedy. Just ask the idiot who bought that house down the street for 3 times what it was REALLY worth, why he bought it. He did it to make a quick easy buck or to get "on the bandwagon". (Greed). Same goes for Stocks too.

Any other excuse, is just a cover up. Please prove me wrong, but do it in laymans terms so I can understand it and make sure you follow the cost increase back to it's initial starting point.

So to be honest, there is NO REAL DEFLATION. There is merely a return to the real intrinsic value of ALL stuff. When we find that Real level, we will all be able to get on with life again. The rest of this stuff is just illusionary crap, designed to keep us all disorientated and mystified and SCARED. Some billionaires have lost more in 3 months than whole countries have, so did he ever really have it in the first place?? or was it just a Fake illusion of worth and not REAL worth.

Thats what I think..

Have a great day, and know that the sun will, yet again, sink in (or on) the west.

[labasta]

Re: Roubini: No Poom

I don't think Roubini has read Hudson when he says that more financing with public debt has less pain than monetisation. Hudson says the growing level of debt is becoming harder to service all the time creating a deflationary spiral, then Hudson points to the fall of the Roman Empire being caused by efforts to protect creditors in the face of deflationary spiral that further exacerbates the spiral. So I'm thinking that Roubini isn't following the mounting public debts process all the way through when reaching his conclusion. Unless he thinks the banksters would prefer mutual assured destruction rather than lose status like the Romans did. And Roubini doesn't seem to take the net capital flows into consideration, but this is pretty hard to predict I think, I'll go with Itulips confidence in the direction but this is due to trusting their track record and confidence rather than confirming it with any solid understanding of my own; it all depends on the alte and infrastructure spend happening I guess.

I'm not 100% sure on the inflation/deflation debate either. I don't fully understand the mechanism for inflation when a country is bankrupt (I assume the US is bankrupt - Enron accounting and all that). I can picture it but not understand the logical steps to it, if you know what I mean.

Does it mean no external investment in the country? Dollars are dumped back into the US as holders flee because the dollar is backed by debt which is now bad. Debt which has also been compounded by derivatives. The dollar's return can't be serviced by industry anymore. Ok, got that.

The number of dollars coming back to America will outweigh the dollars destroyed by debt destruction, as dollar is debt. Is this right?

What would cause, say, a biro pen in a local store to costs 10 times more in US dollars than today, but people's wages are generally depressed because of the crappy economic situation meaning assets are also very depressed.

Do you see my confusion? I feel I'm missing a cog in the logic wheel somewhere along the line. Can Fred or someone help me out?

I mean, I understand poor countries have weak currency and rich countries have strong currency, but I don't understand the relationship between the two.

My head has been nullified this weekend trying to figure it out.

[labasta]

Re: Roubini: No Poom

Thanks xtronics, I know you weren't addressing me but I think I understand it now.

[marvenger]

Re: Roubini: No Poom

I feel your pain. There's many many variables that have influence adn iTulip is good because they keep you on the overall theme. It's been getting harder and harder to stay on the theme though because the lack of confidence has made everything so unstable that people are scared to do anything other than hold US dollars and treasuries even though US dollars are at the root of the problem; I guess it's like people turning to their oppressive king for protection in times of trouble. I think at the end of the day though if the money doesn't start flowing with all this creation of new debt, then we're in for more serious trouble and further contraction of the real economy, maybe then paulson will realise that more debt to bailoit bankers isn't the solution and that they either have to have debt jubilee, print money, or if debt is created they have to make sure it goes into productive industry so debts can be paid off, although I think its too late for the later measure to work in and of itself. So I guess there has to be some of either debt jubilee action hapenning or monetisation and I think, from itulip education, the powers that be would prefer monetisation.

[we_are_toast]

Re: Roubini: No Poom

My apologies for not being clear.



Year Revenues Expenditures Deficit


1972 ....207.3 230.7 –23.4

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

1988 ....909.3 1,064.5 –155.2

1993 ....1,154.4 1,409.5 –255.1

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

2007..... est 2.6 2.9 -300



The implication was that the radical tax cuts by Reagan and Bush stimulated revenue growth.

From 1972 - 1980 under reasonable taxes and in a very slow economy, government revenues grew by 149%.

In the 2 years after the Reagan tax cut, revenues didn't grow at all.
In 1982 Reagan signed the "Tax Equity and Fiscal Responsibility Act" which reversed about 1/3 of the previous tax cut, then came the Social Security reform act of 1983 (another tax increase). So after 1 big tax cut and flat to falling revenues, 2 tax increases were able to squeeze out a 51% growth for the 8 year period (1981-1988). Only 1/3 the growth rate of the previous 8 years, along with the largest increase in budget deficits in the known universe.

In the 8 years between 1993 and 2000 following a large tax increase by the Clinton administration, revenues increased 75% and budget surpluses were created.

In the 8 years of the Bush administration after another massive tax cut, revenues increased 30% and deficits once again exploded to historic levels.

2 cases of massive tax cuts with immediate declining revenues, intermediate slow revenue growth, and historic increases in deficits, and 2 cases of reasonable tax rates with considerable revenue growth, and moderate to declining deficits.

The myth that massive tax cuts (for the wealthy) leads to government revenue growth is busted.

On with the roubini discussion.

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?

[Wild Style]

Re: Roubini: No Poom

Expansion of government beyond around 50% historically causes economies to blow up. Socialism fails every time it is tried. The cost of government can be paid by taxes, debt, and monetization. If the debt just keeps growing, the value of the currency should go down (but markets can stay irrational longer they you can stay solvent).

One other way of looking at this - if the government is taking to much in taxes - prices go up. If the government prints to much money - prices go up. If we just keep borrowing ever more money we have a debt spiral. All of these lead to inflation.

My big point is that NO ONE is addressing the size of government anymore - it would be political suicide today. But it is the root cause of inflation and I'm hearing of plans to increase the size of government even more- and the FED is also increasing the size of the shadow government.

The unwinding of funny paper has caused a temporary shrinking of liquidity, but once it unwinds this core problem remains. The core problem was papered over by relaxing oversight and thus the bubble. Because the core problem is not being addressed, it has to cause inflation - when - exactly how much I don't think anyone knows.

As we are seeing prices going down, we have to wait a bit before calling it deflation as it could just be the result of a selling climax.

Not to get off topic but cant the same be said for capitalism? Laissez faire does not work. Allowing the market "to correct itself" is a very painful/ugly process. The same way socialist systems fail for varies reasons so to do capitliast ones, no? No system is infallible.

[ASH]

Re: Roubini: No Poom

What we are spending on is going to determine what we can cut. If you think Medicare Part D is going to cost us more in the long run than Iraq and Afghanistan ("will be around a lot longer than his wars," is your way of terming it), then you truly believe we have no obligation to our veterans. These wars, which are off-budget, currently, are going to be major on-budget drags as the VA starts sending bills to Congress. Unless we just opt out of social programs. Then we can just leave the limbless to their families or the streets, and start new wars.

I respect your point. I just figured we'd have a better chance at making common cause over balancing the budget if all major categories of spending are scrutinized. We aren't going to agree upon spending priorities, but I personally feel that avoiding national bankruptcy is so important that compromise is the best course. The various things in the federal budget are there because they're all important to someone, and they all have their political defenders; we can't really compromise if some of those things are taken off the table. We can't even find a quantitatively valid solution if the biggest category of spending is regarded as sacrosanct. This doesn't have to be a choice between all guns/no butter and no guns/all butter. I just want both guns and butter to be on the table when we start looking at ways to cut back.

For instance, my parents collect Social Security payments. They also take maybe four major overseas trips a year while their savings continue to increase in retirement, thanks to three separate sources of pension income: VA disability from a misadventure at the Chosin Reservoir, a public employees pension from teaching at a community college, and then Social Security. If we're faced with national insolvency, then I think it makes sense to consider awarding Social Security benefits only on the basis of need.

Rationalizing the federal budget may mean higher taxes for me, less money for the industry that employs me, and no benefits in retirement unless I actually need them to keep a roof over my head. I'm honestly willing to accept all that, just so long as other members of society give up something as well... like maybe working longer before being eligible for retirement benefits.

[metalman]

Re: Roubini: No Poom

[quote=phirang;56728]

Can you provide some links that explain how CB's work in layman's terms?

I'm particularly puzzled by this:



I was under the impression that increasing interest rates was the method by which CB's would "mop up" excess liquidity. How else can they destroy liquidity?[/quote]

I suggest learning about central banking on your own rather than hoping EJ or someone else guesses(incorrectly) for you. I have, and I wish I had learned more earlier. What I find most dangerous is the contempt shown for Bernanke, who is a very, very, very smart man and would destroy anyone here in topics involving economics. Enough sophmoric theories have lost i-tulipers money.

There are lots of ways to suck up liquidity: reserves requirements, collateral rule changes, and of course FOMC (again, I suggest reading up on the FOMC and how exactly it works).

It does concern me what Roubini says, and some pat answers from FRED won't cut it. You can say EJ isn't a trader bla bla, but you know what, there comes a point when you ask, "then what is he?"

I want to see EJ take on Roubini. Until he does, I'm not convinced.

that'd be a prime time match. i'd like to see a roubini/ej debate.

[phirang]

Re: Roubini: No Poom

[quote=metalman;56988]

that'd be a prime time match. i'd like to see a roubini/ej debate.

Here's what EJ needs to do:

Go through Roubini's argument and repudiate what he disagrees with.

Then, email it to RGE Monitor.

Nature will do the rest...

btw, if EJ doesn't battle Roubini, then he loses all credibility.

[Master Shake]

Re: Roubini: No Poom

What do those numbers look like as a percentage of GDP?

Don't know.