The US Debt and where it came from

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Zute
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The US Debt and where it came from

Post by Zute »

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Tudamorf
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Re: The US Debt and where it came from

Post by Tudamorf »

"Reagan proved deficits don't matter" - Dick Cheney

(Except when there's a Democrat in the White House, and particularly when he isn't white.)
erianaiel
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Re: The US Debt and where it came from

Post by erianaiel »

Tudamorf wrote:"Reagan proved deficits don't matter" - Dick Cheney

(Except when there's a Democrat in the White House, and particularly when he isn't white.)
Cheney was of course misrepresenting things when he said that (though in his mind he was entirely truthful). Reagan's re-election proved that the voters would vote for anybody who promised them more Chinese bling and did not care for how they got it.

The whole sorry episode becomes a lot less confusing when you look at it as purely an excercise in politics instead of the economy being involved in any way or form.
What happened is the republican majority in Congress flexing its muscles, and the Tea party minorty in the Republican party flexing their muscles. Any excuse would have done as long as a confrontation was forced. Politically speaking the republicans need to assert themselves in the run up to the next elections and they want to make Obama and democrats look weak. Wrecking the economy was not quite the intention (at least not by the rank and file republicans, no accounting for what the Tea party thinks or does), but it more likely than not never was a consideration either. The economy was simply an issue that could not be ignored.
For all intents and purposes the republican strategy worked perfectly. They got just about everything they asked for and had to give away nothing in exchange. They showed that the president and democrats were weak and easily cowed. They got to define the whole issue in terms that benefitted them and not their opponents and they can now link this confused democrat retreat to the unemployment rate and stand an excellent change that disappointed Obama voters will punish him for being 'too republican' by voting into office .. a republican.

Racism is only a card being played to keep part of the republican voters with them (instead of drifting off in the extremist militia and being lost for voting). The harsh truth is that representatives are only interested in the next election (and there are enough of those that they are always more busy with raising funds and looking good to the voters than with doing the job they were elected to do). Anything and everything will be sacrificed on the alter of re-election. The republicans are just a shade more ruthless in this pursuit.

In short, nothing in Washington is about economy. It is all politics, dressed up in rhetorics aimed to placate the voters and make the opposition look bad.


Eri
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Zute
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Re: The US Debt and where it came from

Post by Zute »

Democrats never win in these knockdown, drag-out fights. There was a graph recently showing why. Democrats by a largish majority think compromise is important, Republicans think compromise is bad. It seems to always play out that way.
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AbyssalMage
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Re: The US Debt and where it came from

Post by AbyssalMage »

erianaiel wrote:
Tudamorf wrote: Wrecking the economy was not quite the intention (at least not by the rank and file republicans, no accounting for what the Tea party thinks or does), but it more likely than not never was a consideration either. The economy was simply an issue that could not be ignored.
Wrecking the economy is and continues to be the intention of the Republican Party. Many of the senior Republicans (Including Boehner and most/all of the Tea party nuts) are on record for destroying the US economy. There philosophy is that if the economy tanks enough all Socialist programs will be forced to be cut and taxes will be slashed because Americans believe that, "If you lower taxes, it will stimulate the economy."

What they are hoping for is that the US doesn't lose its credit rating. If that happens, all bets are off that private corporations will support them in 2012. Reminds me of the Simpson episode where Lisa Simpson gets elected President but by time she does, the US economy is in shambles and the "George Burn's" of the world have already taken over. The government is nothing more than a symbol. This is the goal of the Republican/Tea Party.
For all intents and purposes {T}he republican strategy worked perfectly. They got just about everything they asked for and had to give away nothing in exchange. They showed that the president and democrats were weak and easily cowed. They got to define the whole issue in terms that benefitted them and not their opponents and they can now link this confused democrat retreat to the unemployment rate and stand an excellent change that disappointed Obama voters will punish him for being 'too republican' by voting into office .. a republican.
They won, straight and simple. The fact that they didn't get a balanced budget amendment through the Senate was no surprise. They needed to do it for the elections of 2012 to force Democrats hands. They are setting themselves up for another round of landslide elections in 2012. The only thing that can honestly stop them/make them stumble is the US Credit score being downgraded. Too many Americans have been brainwashed by Republican/Reagan economics.
Racism is only a card being played to keep part of the republican voters with them (instead of drifting off in the extremist militia and being lost for voting). The harsh truth is that representatives are only interested in the next election (and there are enough of those that they are always more busy with raising funds and looking good to the voters than with doing the job they were elected to do). Anything and everything will be sacrificed on the alter of re-election. The republicans are just a shade more ruthless in this pursuit.
Racism is just another card the party is playing. They haven't been able to play it until now but I suspect we will see it more and more now that many prominent Democrats are of non-white origins. Nothing different than the gender card they played against Pelosi and Mrs. Clinton. They will play any card that will help them get votes from the South. Republicans are more than "just a shade more ruthless," its borderline treasonous.

The sad thing is, I honestly don't believe everyone in the Republican Party is borderline treasonous, but the ones that are the most vocal, who grab all the press, who dictate policy are flirting with that line.
In short, nothing in Washington is about economy.
Currently, everything being played out in Washington is about the economy. The difference, is that Republicans view of "the economy" and most Americans view about "the economy" are completely different.
It is all politics, dressed up in rhetorics aimed to placate the voters and make the opposition look bad.
Politics is about getting re-elected. Making the other person look bad is slander. But slander is near impossible to prove thanks to the Supreme Court.
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Tudamorf
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Re: The US Debt and where it came from

Post by Tudamorf »

erianaiel wrote:For all intents and purposes the republican strategy worked perfectly. They got just about everything they asked for and had to give away nothing in exchange. They showed that the president and democrats were weak and easily cowed.
I wouldn't go that far.

But when your negotiation involves one group of reasonable people, one group of born again ideologues, and one group of outright lunatics, what outcome do you expect?
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Re: The US Debt and where it came from

Post by Fyyr »

Regarding the blurb on the Obama graph.

I think it's more accurate if it says 2008 recession, to the present. Not 2007 to 2009.

It started with the gas speculation run up, and resultant housing and credit collapse of the Summer of 2008. And is still going on by all economic accounts. Correct me if I'm wrong.
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Re: The US Debt and where it came from

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Fyyr wrote:It started with the gas speculation run up, and resultant housing and credit collapse of the Summer of 2008. And is still going on by all economic accounts. Correct me if I'm wrong.
You're wrong.

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Re: The US Debt and where it came from

Post by Fyyr »

Fair enough, Tudamorf. Those are rates(delta change) numbers. Not actual production numbers, of course.

But those numbers and graph is misleading(they are delta). The image projects a baseline. Those increases above the 0 are still making up the losses from 2008. We are still below the GDP of 2006 and 2007.

If I am driving a car at 60 miles an hour, and drop down 10% the second hour(to 54MPH), then drop again another 10% the next hour(to 48.6MPH). If I increase in speed 3% the next hour after that, I am only going 50MPH. The next hour increase by 3% I am going 52MPH. The next hour after that with a 3% increase I am going 53.6MPH. Even with an increase of 3% per hour, its going to take many hours of 3% increase to get back up to 60 miles per hour.

I can increase my speed for several hours, each and every hour after slowing down, and not get to 60 miles an hour.
erianaiel
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Re: The US Debt and where it came from

Post by erianaiel »

Fyyr wrote:Fair enough, Tudamorf. Those are rates(delta change) numbers. Not actual production numbers, of course.

But those numbers and graph is misleading(they are delta). The image projects a baseline. Those increases above the 0 are still making up the losses from 2008. We are still below the GDP of 2006 and 2007.

If I am driving a car at 60 miles an hour, and drop down 10% the second hour(to 54MPH), then drop again another 10% the next hour(to 48.6MPH). If I increase in speed 3% the next hour after that, I am only going 50MPH. The next hour increase by 3% I am going 52MPH. The next hour after that with a 3% increase I am going 53.6MPH. Even with an increase of 3% per hour, its going to take many hours of 3% increase to get back up to 60 miles per hour.

I can increase my speed for several hours, each and every hour after slowing down, and not get to 60 miles an hour.
The second problem with graphs like these is that, for the USA they are heavily skewed towards stockmarket figures, which show next to nothing about the actual economy that underlies them.
With all the rumours and (fabricated) panic stock markets can lose 10pct value in a day, leading to panicked reactions in the press as if somehow the end of the world is coming. Yet nothing in the economy that anybody but the financial traders see has changed one bit between the start and end of the day. The amount of houses and cars and factories are the same, as is the supply in the shops and the production of the factories throughout the world. Demand has not changed in any measurable way either.
All that really happened is that a group of lemmings (or sheep) ran towards an exit, spurred on by the panic of its neighbours, and that an arbitrary number on some computer screens changed. It is not even correct to state that the amount of money (as opposed to value) was altered because 99pct of what goes on in the financial markets is even less tangible than that. If you do away with all the mysticism assigned to the financial system and describe what it does in simplified terms it is a bunch of people trying to predict what number another bunch of people will assign to an arbitrary concept that may have, a long time ago, had some tenuous relation with production and if that number is going to be higher or lower. Alright, so maybe those were not quite simplified terms.
The point is though that the financial markets are given an importance far in excess of what they should have (about as important globally as the winning numbers of the Bolivian national lottery) and that while the numbers involved are huge, that is because the same actual transactions are rehashed and re-used hundreds or thousands of time and we are pretending that doing so will create hundreds or thousands times as much 'economy' as the actual transaction.
The financial markets certainly do serve a purpose, but it is past time we stop pretending they are part of the economy.
And we should adopt my second law of economics (mirroring the second law of thermodynamcis): In any closed system ecomic interaction will always lead to a greater or equal amount of risk, never to a reduction. Also phrased as: economic systems do not like smartasses.

When somebody takes a loan the bank creates the money for it (no, they really really do not have a pile of money in their vaults that they use to extend loans), and as that loan is paid back it is used to balance (and destroy) the created money. At the end the amount of money has been restored, but hopefully something useful was done with the money which lead to economic transactions (and through that to a tiny bit of economic growth). Now banks are severely restricted in how and how much they can create money, because there is an innate risk in this transaction (namely that the loan is not paid back, at which point the bank has to use its own money to balance the books. There are two 'innovations' that are plaguing us, the first one being that banks got permission to use the -promise of the debt being repaid- to finance new loans they can extend. A quick glance at how the loan/money creation repayment/money destruction works and the solvability requirement shows that this should never be allowed as the debt promissory is not money the bank has, but money the bank must destroy again. But the banks needed money and the people and companies wanted cheap credit so they got green light to go ahead anyway.
The second innovation, and the one that created and then blew the latest bubble, is that banks thought they could violate the law of constant risk. By slicing up and recombining all these promissories they could pretend that the risk of a default on the repayment was spread over thousands financial constructs and thus that each of them was secure. They could then use these to extend new loans as long as the financial constructs kept coming. Which is the point that mortgage banks did not care how reliable their clients were because there was an infinite demand for more mortgages from banks that had convinced themselves they had banned the inherent risk, and at the same time it gave the banks a near infinite money pump. Which they promptly and with great enthusiasm abused.
And all that money that was created on basis of these financial constructs (and the financial constructs based on them, and so on and so forth) is still floating around even if it is at this point purely hypothetical, is moving the economies of entire countries and nobody dares to tell these banks anything bad about it, but until the whole mess of phantom money is cleaned we will keep suffering from boom-bust cycles and huge flows of money from governments (and the people that finance them) into the black hole of refinancing all those theoritical debts that keep multiplying with every new round of bubble and collapse. And just as the house prices could not keep growing indefinetely (thus giving us the 2007-2009 recession) this too is going to blow up in our faces in a big way. And the banks are eagerly tapdancing on the minefield so that the governments keep giving them more money to postpone the explosion.

But .. nobody wants to talk about that too much because it might frighten the rabble .. I mean, the average person.


Eri
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