I think you just paraphrased what I had just said? U did, u did!!!

The US has been doing it for decades.


I imagine that before 08 the Chinese admired the US with it's abundant prosperity and wanted some of our magic...business acumen (how do they do it?).....to be so rich and live so well ...After 08 they were mortified that they had been conned hook line and sinker...(holding a cool 1.8T in USD"s and Treasuries). They suddenly found out that America appeared to be so prosperous because it is living on CREDIT. Since that date the Chinese have been doing everything they can in a quiet and methodological fashion to get away from USD hegemony, as they can clearly see that US fiscal and monetary policy is leading the US to the abyss.

And U boyz think T is making America Great Again...not with a Trillion in new debt he isn't.

I learned from da moister

The smarter you are the more you value my commentary...

And here's the crazy thing:

Rates US govt pays to service its debt is doubling and tripling.
6 month T-bill yield has moved from 0.06% in 2015 to 2.46% now
2 year T-bond yield from 0.64% to 2.85%
10 year T-bond yield from 1.40% to 3.16%

Amount of US govt debt is rising $800 billion a year, in 2018.
When the economy slows and next recession starts, US govt debt will start rising $1.5 trillion to $2.0 trillion a year.

That means the US govt's interest payments, which were about $260 billion/year a couple years ago, will be at least $400 billion in 2019 and will march up toward $1 trillion in a decade. For comparison, the defense budget is about $600 billion.

The govt is playing games to hold down interest payments in the short term. It is leaning on shorter maturity debt to get lower rates. So a 6 month US T-bill is yielding 2.46%, more than the 2.30% yield on typical 6-month bank CD. Think about that - the US govt is having to pay more to borrow money for 6 months than the average US bank is having to pay. Problem is, short maturity debt has to be rolled over soon, at higher rates.

When we have the next recession - 2019/20 is my bet - the Federal govt will not be able to use fiscal policy to stimulate the economy; fiscal policy will probably be making the recession worse. The Federal Reserve will have limited room to use monetary policy to stimulate the economy, because interest rates are still low (means not as much room to cut rates), the Fed still owns $ trillion in US debt (means not as much room to do quantitative easing), and the doubling of the US govt's borrowing needs will be pushing interest rates up.

A modest skid can get pretty bad if the driver isn't able to steer into it - or is forced to steer away from it.

How would you have started to fix the debt, Ted?

First, what percentage of the Federal Budget is not already law, and indexed to boot?

So your options are really few, as you no doubt already knew.

So, Ted, you would have:

1) Picked a fight on Medicare, ending the indexed increase every year
2) Picked a fight on welfare/social spending, rolling back spending and eliminating the indexed growth
3) Wear your Dragon Azz Jean to the Phoebe Buffet

The demand side of the Prez Bud wasn't going to change, Ted, not in the first term since he inherited O's budget the first year. That is how it works.

So, you either grow your way out of debt or reduce spending.

In the short term, he has rolled back draconian regulations, gave small businesses a break in taxes, encouraged growth, cut taxes and is getting America back to work.

We will see increase in debt in the short term, a small increase in interest rates and inflation...take the long view. Trump, for all his bluster and crudeness changed the course of our debt service....stop being so sad about the trajectory of the US.

BTW, hold your elected representatives responsible for the debt. Spending is the issue, not revenue.

Society might go totally cashless after I'm gone, dunno. But I can guaranty it will not go totally cashless BEFORE I'm gone.

I can remember about 15 years ago fools were talking about debit cards and swiping this and that, electronic transactions. Using credit cards over the interwebs etc.

I laughed and said watch, people are gonna be getting ripped off left and right, people will be hacking into their computers and such and they'll lose all their money.
Now it's the most common fraud, so common it has become normalized and for the most part accepted by law enforcement.

GOML.

The medium of money is determined by the payment requirements of government taxation. Always was and will be. It's the English model exported around the globe that insures continued participation and support.

Abut 10 years ago I wrote a piece on the unsustainability of debt service if (not if when) interest rates should spike. In that piece I covered the two major points illuminated by yourself above.

The FED can go to 7T on the balance sheet..after that it is no mans land.

Further....

http://forums.pelicanparts.com/off-topic-politics-religion/734011-adverse-shift.html


An Adverse Shift

Starting with the Financial Crisis in 2008 the United States Treasury embarked on a policy of massive deficit spending resulting in a now 6T USD increase in it's debt level, brining the upfront debt to roughly 16.5T USD. The Federal Reserve on the monetary front lowered interest rates and instituted a number of Quantitative Easings to increase the liquidity of the financial system in order to at first stabilize the system and then to promote economic growth in that system. The increase of liquidity to the system through Federal Reserve purchases of US debt instruments is roughly 3T USD. In September of 2012 the Federal Reserve embarked on OE3 whose tenents included the purchase of 85B a month in US debt instruments and mortgage backed securities with an open ended time frame of the US economy having a 6.5% unemployment rate.

What the concern in this is are the dislocations that these policies have caused in the stability of the global economy and the attendant political, social and cultural strata. Here one can postulate that as US debt levels climb, it destabilizes the above mentioned strata. This is because of several factors which include that the United States is the largest economy in a globally intertwined economy and that the USD is the Reserve Currency of the World. Being the Reserve Currency for the world means that every nation must hold reserves of USD in order to purchase oil. Further the USD being not only the Reserve currency but having a 200 year history of being a stable and thus responsible currency has made it the favored currency to be held by private concerns and individuals. This has been especially true in times of distress either globally or on a foreign national level. This has recently been a factor in the USD strength in the past several years as there has been a flight to the USD and US debt instruments in the face of a potential meltdown of the European Union due to the amount of leverage it has incurred and its slow response to rectifying it's problems.

However with the "unlimited" nature of both the European Central Bank and US Federal Reserves recent QE programs which for all intents and purposes means an unlimited printing of money to purchase sovereign debt, dislocations in the various economies are now beginning to appear which is resulting in their currencies seeking a new equilibrium. This is caused by a defacto devaluation of the large amount of USD being held either by foreign governments, held by private concerns or individuals which then puts pressure on those local economies. Further the real danger lies in the fact that as the USD becomes evermore diluted/devalued/debased those foreign holders of USDs will feel increasing pressure to divest themselves of those USDs or face continued pressure on their economies. Or going beyond this as Y. Aksoy and T Piskovski state in the conclusion of their paper "Foreign Holders of Dollars And The Information Value Of US Monetary Aggregates,"

"That if the leading role of US dollar as an international currency will be challenged by long term
adverse shifts in the preferences of the foreign holders, the US Federal Reserve may face serious
obstacles in the conduct of monetary policy to stabilize the US macroeconomic environment."

Thus in conclusion the Federal Reserves recent "unlimited" QE program has the potential unintended consequence of being a WMD which could create an economic tsunami that would sweep the world with catastrophic consequences.


Unfortunately neither the above piece nor the rest of the following discussion in the link link above is comprehensive in discussing the subject at hand. The President of the Saint Louis FED James Bullard read the above piece one morning on CNBC (along with a second email) and couldn't stop stuttering for 5 minutes as a reaction.

WOW..lots of complex issues are brought up in this missive..sorta like a hand grenade with fragments flying in every direction. To answer the questions adequately and comprehensively requires a rather lengthy discourse. Many of the questions have been answered in previous missives that I have written over time on this matter.

However let us dive in and try to answer the questions in an albeit rudimentary manner.

1. How to fix the debt...There is no fixing the debt if there is NO WILL TO FIX IT... Politicians will not touch SS or Medicare reform as to do so puts their tenure in office at risk. The American peoples mindset is at the heart of the problem...as example even BO often proclaimed the "America is a rich nation" ostensibly one that can have their cake and eat it to without consequences. Further Simpson Bolles couldn't get any traction on Budget reform. All the budget hawks have either shut up (the 2011 US credit downgrade by Standard and Poors did it) or have gone home (Paul Ryan among them).

That was how many Trillions of USD's ago? It is difficult to ascertain the point of no return on the debt? I believe we have crossed that rubicon as any debt cure is going to be no worse than just letting the debt train to rumble on. Every fix has an unintended bad consequence. No one even brings up the subject anymore, it is a continuing roll over of ever higher debt limits. The train rolls on. That said what can be done to ameliorate damage and hopefully provide survivability? The answer is create firewalls, Glass Steagall was such a firewall. An interesting phenomena is taking place in which Brexit, T's tariff wars and increasing nationalism are examples of firewalls being created. The fragmentation of the Global economy is in of itself a survival mechanism from a systemic collapse as each nation seeks to protect it's own interests. Even the very election of T himself being an outsider or revolutionary reformer of the system is part of the script, an expected development on the trajectory that the Global economy is on.*

Also the massive increase of global sovereign debt is only a symptom of the larger causation and that is that the Global economy in of itself is not sustainable. That is on two counts. First the fatted calf US consumer has run out of cash, assets and credit now relying on government deficit spending to pick up the slack to juice economies. Second is environmental degradation (including running out of resources) that is inevitable with economic development of scale. A third issue might be over population, but one thinks that is a subset or consequence of economic development (people live longer due to technology and better food production).


2.To ameliorate the economic malaise that the US has been mired in T and the Republican Congress passed Tax Reform. Which as stated before is repackaged Trickle Down economics, and is a gamble. Give corporations a tax break while increasing the deficit due to revenue decrease in the hope that it spurs economic growth which will eventually increase govt revenues. Give the MC short term tax breaks to spur consumer spending. This in essence is a govt stimulus package put on the credit card. The other side of the legislative equation that has not been addressed is SS and Medicare reform..which is the other book end to tax reform. The jury is still out as to the sustainability of the ensuing US economic bump??? Here we also have to remember that Europe is still juicing the system with QEing (at least till 12/18) and China has loosened lending from state owned banks (the Chinese version of QEing)??? (All of this QE action in the world is to maintain systemic monetary and thus economic equilibrium).

The other facet is that with increased economic activity inflation is becoming a real concern which is causing the FED to increase interest rates which then increases the cost of debt service. Which then slows the economy. A veritable Catch 22. The other nasty Catch 22 is in entitlement reform, if SS and Medicare is cut the old folks dependent on those payments will become a burden on their family financially, which then decreases consumer demand and slows the economy. That is one of the reasons why SS and medicare is the third rail of American politics the other reason is the betrayal by reneging on the promise, after American workers paid into SS and Medicare for decades. Here Americans have already ate their hamburger by living better than otherwise by using the SS Payroll taxes to fund govt spending which juiced the American economy for decades.

One of the FED's goals has been to have 2% inflation which over time makes debt cheaper as it is paid off in less valuable USD's. That has been one of the means to make US debt levels sustainable. However with the amount of newly printed USD's sloshing around inflation can get out of hand where interest rates spike. Also there is a limit to the appetite for buying new debt and to entice buyers higher interest rates have to be offered. Either way be careful of what you wish for when it comes to inflation.


3) Wear your Dragon Azz Jean to the Phoebe Buffet... Your dismissiveness of my foppish nabob demeanor wounds me grievously. For you mistake image for being substance. That lack of discernment makes you a loser, because you are susceptible to being easily led astray. Where bad decisions can be made, especially on the field of battle. Remember the old Sun Tzu axiom about knowing yourself and your enemy... well you failed with one of the two and it also indicates that you ain't so knowledgeable about the other as well...

Well Ma I tried to bring this hand grenade of a missive together in some kind of cohesive and coherent manner, barring the possibility that it couldn't be done I don't think that I did that well.



*Remember I have written that Power abhors a vacuum and that fragmentation and chaos set in as powers vye to fill that vacuum and the subset is when an established order can not fix a societies problems that they lose credibility then they lose power being replaced with someone who promises to fix it (in this case T)...When that fails despair sets in.

Increasing debt service negates increased tax revenue...at least to some extent?

Decreasing an onerous regulatory environment gives business some breathing room. Which increases confidence in their sustainability. A real T plus

Ted, I was kidding earlier - even Sun Tze could see that.

Depends on growth and reform of indexed, non-discretionary spending, the largest part of the federal budget. The easiest way to reduce the debt is to freeze spending at current levels and eliminate all mandated increases in spending based on inflation, etc. Do that for 5 years and we are done with debt.

There is so little in the budget that is actually discretionary spending.

This was where T has done his best work. It is still early in the China negotiations but reworking NAFTA, easing really stupid federal paperwork drills, signalling a more positive attitude towards energy independence, etc. has done wonders.

The current unemployment rate is near full employment - there is a percentage of the workforce that will never work regardless.

Originally Posted by tabs View Post
Decreasing an onerous regulatory environment gives business some breathing room. Which increases confidence in their sustainability. A real T plus

I have been wondering about this for over a year now. Off Topic but which regulations were repealed to spur the economy?

Here's a great list. https://www.brookings.edu/interactives/tracking-deregulation-in-the-trump-era/

My sense is any regulations repealed that wouuld spur the economy significantly would result in a lower quality of life; that said, it could take time to lower QoL based on repealed regs.

I think a stronger argument, one of many—including more buyers than sellers in the stock market—since the economy is multi-dimensional, is in the same way the U.S. economy benefited after WWII being the only Western manufacturer in the world, it is similarly benefiting from BREXIT. EU and UK economies are down and we are picking up the slack. Our GDP's are about the same, we do pretty much the same thing, EU is down 2%, we are up... Just a thought.

Even if the that correlation is incorrect, I would like someone to list the regulations repealed with an estimate of how much the repeal added to the GDP.

You can go get them since they are all available...the shale industry alone. You can do the math for your particular business. If you can't, not my problem.

The issue was that under O the regulations had the force of law, especially in federal contracting: Compliance was often difficult to discern so pricing our products to meet an odd set of poorly understood regulations became difficult. Certifications, for instance: Are you ISO 9000? FAR Compliant in your NACIS Code? FAA compliant?

It all mattered and we spent a loy of out profit ensuring compliance. The rules have changed and we spend much less.

The key to my business, and many others, was that T was willing to repeal the stupid stuff, which everyone in our industry knew was stupid but had enough "green" patina to make it unassailable.

Not anymore, at least for the next few years.

I don't see any math or numbers.

Gubmint regs you ask?



I use to work at an oil refinery.

that refinery has to buy "carbon credits" to stay in biddness. The gubmint said so.

They bought carbon credits from companies like tesla, who got a whole bunch of em for free. from the gubmint, picking sides.

Tens of millions of dollars per year AND THE PRICE WENT UP EVERY YEAR. because of the gubmint.

So at the end of last month, they shut down their main gasoline producing unit for good.
Permanente, even turned in the operating permit. fini.
they did that because of the carbon credits regulations and no other reason.

I'm sure those of you in So Cal noticed it, when the price at the pumps went up about 20 cents a gallon.

Thanks gubmint, for letting us all make tesla (almost) profitable.

it's only $3.81 a gallon (average price in California, second highest in the country), that's less than they pay in you-rup. For now at least.

Go get them yourself. I don't do requests.

Has the economy improved? Are more people working?

Why?

it would seem you do fake news and emotion more than numbers, true. I mean if you say the economy is growing because of deregulation, you should be able to show how. At least a little with one or two numbers. Otherwise it's the same as Ford claiming Kavenaugh raped her 30 years ago.

The economy is growing as it has done since the 2008-2010 crash. And since economies are global, we are picking up the 2% decline from the EU. It's also growing from ballooning the debt via tax cuts, that has a lot to do with it too, but also completely unsustainable. More buyers than sellers are driving the stock market.

When I took Managerial Accounting at Harvard, the professor told a story on the first day. A product manager in a cereal company reduced the size of the box and reduced the quality of the ingredients. His P&L was fantastic in the next quarter and he was promoted to VP. New product manager's numbers were horrible the next quarter and he was let go. New PM and next quarter was bad too.

Company did some research and found that customers had abandoned the lower quality and smaller package size cereal. The changes were great in the short term, just ask the new VP, but were completely unsustainable.

Ted, can you put some numbers to deregulation impacting the economy?

Show me the numbers, real rates of growth, unemployment (and why) and the impact on the deficit vs the EU, which means nothing, BTW.

Can't? Fake news and emotion.

Easy. Prove me wrong.

Ted, you want to give it a try.

Not necessarily.

I helped a friend get his small business off the ground a few years ago, and learned what it takes to accept credit cards.
-Complying with the security requirements handling customer's information
-One needs to have good personal credit.

At the time, my friend may not have been approved because his less than stellar credit.
All the responsibility fell on my shoulders.

There are plenty of small business owners who either have poor credit or see the cost of compliance plus the fees as taking too big of a bite out of their profit.

Sure, to most businesses, credit card fees are a normal cost of doing business. Not accepting cards is going to limit the customer base.
But accepting or not accepting credit card transactions is a simple business decision.

Your blanket statement implies anybody who doesn't take credit cards is a cheat. I don't agree.