The economics behind the bull and bear case

[Trembling Hand]

Have not been able to locate the source of 75% US GDP being consumption, but will keep at it.

Thats not the question explod. this is,

US GDP is 75% consumption, this is unproductive GDP (only one third of adults in the US work productively),

still waiting for the explanation and your ideas as to why anyone whose work goes to internal consumption is "unproductive ".

Its really such a memorable statement I'm still, two weeks latter, waiting for the explanation.

 

[explod]

Thats not the question explod. this is,



still waiting for the explanation and your ideas as to why anyone whose work goes to internal consumption is "unproductive ".

Its really such a memorable statement I'm still, two weeks latter, waiting for the explanation.

My statement was nonsensical amd cannot be answered in a satisfactory manner, I will however persist in my general laypersons direction on the subject. I intimated my stupidity about two of my posts back, I hope now it is clear, and I will also try to be more succinct in the future, "The Prof" has taught me well.

Lets move on to the problem, again from Chuck overnight:-

I was reading a great article written by Congressman, Ron Paul, who I believe is the only person in D.C. that understands what we're doing to our country and currency with all this deficit spending. Ron Paul thinks the Fed is in the midst of bailing out Greece with U.S. taxpayer funding... Let's listen in to Ron Paul...

"Is it possible that our Federal Reserve has had some hand in bailing out Greece? The fact is, we don’t know, and current laws exempt agreements between the Fed and foreign central banks from disclosure or audit.

Greece is only the latest in a series of countries that have faced this type of crisis in recent memory. Not too long ago the same types of fears were mounting about Dubai, and before that, Iceland. Several other countries (Spain, Portugal, Ireland, Latvia) are approaching crisis levels with public debt as well. Many have strong ties to Goldman Sachs and the case could easily be made that default could have serious implications for big US banking cartels. Considering the ties between the Fed and these big banks, it is not outlandish to wonder if the US taxpayer is secretly bailing out the entire world, country by country, even as our real unemployment tops 20 percent. Unless laws are changed to allow a complete and meaningful audit of the Federal Reserve, including its agreements with foreign central banks, we might never know if this is occurring or not."

So... Chuck here... Ron Paul not only gets to slam the Fed's cozying up to Goldman Sachs, but gets to point out that the Fed needs to be audited, which is the bill he sponsored that keeps getting put on the back burner in D.C.

And in a follow up to yesterday's story about how Greece hid the extent of their deficits with derivatives, and were shown how to do this by Goldman Sachs, allegedly... German Chancellor, Angela Merkel had this to say... "It would be a disgrace if it turned out to be true that banks that already pushed us to the edge of the abyss were also party to falsifying Greek statistics."

 

[Unnamed User]

My statement was nonsensical amd cannot be answered in a satisfactory manner, I will however persist in my general laypersons direction on the subject. I intimated my stupidity about two of my posts back, I hope now it is clear, and I will also try to be more succinct in the future, "The Prof" has taught me well.

Lets move on to the problem, again from Chuck overnight:-

Well done on admitting that and not avoiding or backtracking.

Big thumbs up.

but don't let that get in the way of a feel good story

Interesting quote from Chuckey and maybe he should mention himself when it comes to misrepresentation.

Ron Paul thinks the Fed is in the midst of bailing out Greece with U.S. taxpayer funding

Then he quotes Ron Paul

"Is it possible that our Federal Reserve has had some hand in bailing out Greece? The fact is, we don’t know, and current laws exempt agreements between the Fed and foreign central banks from disclosure or audit.

Quite a jump to make there Chuckey

 

[explod]

Then he quotes Ron Paul

Yep, maybe a bit off topic.

Putin calms Greece, says U.S. debt big too
Russian PM plays down Greece’s economic woes, telling his visiting Greek counterpart the U.S. is no better than Greece in handling its debt and fiscal deficit
Gleb Bryanski – Moscow
Reuters Published on Tuesday, Feb. 16, 2010 12:03PM EST Last updated on Wednesday, Feb. 17, 2010 7:39AM EST

Russian Prime Minister Vladimir Putin played down Greece’s economic woes on Tuesday, telling his visiting Greek counterpart that the United States were no better than Greece in handling its debt and fiscal deficit.

“As we all know, the global economic crisis started neither in Greece, nor in Russia, nor in Europe,” Mr. Putin told a news conference after talks with George Papandreou. “It came to us from across the ocean,” he said in a clear reference to the United States.

Yep, but he is not the only one, seems a few others may be smelling rats in all of this. I have noticed a few other commentators on it and will post as I find them

 

[Unnamed User]

Yep, maybe a bit off topic.



Yep, but he is not the only one, seems a few others may be smelling rats in all of this. I have noticed a few other commentators on it and will post as I find them

I think you missed my point.

He claims "Ron Paul thinks the Fed is in the midst of bailing out Greece with U.S. taxpayer funding" yet then quotes Ron Paul as asking the question, "Is it possible? and "the fact is we don't know"

Ron Paul was raising the question and stating that no one knows, so Chuckey is spinning the argument to back up his theory.

Yet he hypocritically criticizes others for spinning their reporting of the unemployment numbers.

I'm sorry but a lot of the conspiracy theorists i read, which i admit isn't that many because they **** me to tears to be honest, you can usually pick holes in their "Versions" of the truth.

My best guess it the truth probably lies somewhere in the middle between them both.

 

[ducati916]

My statement was nonsensical amd cannot be answered in a satisfactory manner, I will however persist in my general laypersons direction on the subject. I intimated my stupidity about two of my posts back, I hope now it is clear, and I will also try to be more succinct in the future, "The Prof" has taught me well.

Lets move on to the problem, again from Chuck overnight:-

I have an explanation for explod's statement:

Trembling hand perfect equilibrium is a refinement of Nash Equilibrium due to Reinhard Selten. A trembling hand perfect equilibrium is an equilibrium that takes the possibility of off-the-equilibrium play into account by assuming that the players, through a "slip of the hand" or tremble, may choose unintended strategies, albeit with negligible probability.

jog on
duc

 

[Trembling Hand]

Duc not sure confirmation bias sits within Trembling hand perfect equilibrium.

Maybe - Denial Bias Imperfect Disequilibrium .

 

[explod]

I have an explanation for explod's statement:



jog on
duc

Yep, exactly Duc, but just cant' explain it ???

Trembling Hand Re:
Duc not sure confirmation bias sits within Trembling hand perfect equilibrium.

Maybe - Denial Bias Imperfect Disequilibrium .

And ditto T/H

Are/am I dealing with what's on the ground at the back of the Bull, because I must take into account that its pile is larger, so of greater intrinsic value perhaps?

 

[explod]

Bloomberg articles seem to be writted by all sad sacks this morning. We need some rain to restore them shoots. But I spose its late summer over here.

Cheers explod

 

[motorway]

http://www.thelauderinstitute.com/pages/pdf/Reinhardt_and_Rogoff_Financial_Crises_NBER_2008.pdf


THIS TIME IS DIFFERENT:
A PANORAMIC VIEW OF EIGHT CENTURIES OF FINANCIAL CRISES
Carmen M. Reinhart
Kenneth S. Rogoff
Working Paper 13882

NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138

Motorway

 

[Aussiejeff]

http://www.thelauderinstitute.com/pages/pdf/Reinhardt_and_Rogoff_Financial_Crises_NBER_2008.pdf


THIS TIME IS DIFFERENT:
A PANORAMIC VIEW OF EIGHT CENTURIES OF FINANCIAL CRISES
Carmen M. Reinhart
Kenneth S. Rogoff
Working Paper 13882

NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138

Motorway

Pity it is a report based on data no later than 2006-2007 (ie PRE GFC). Would have been nice to see how all that data and graphs stacked up against the 2008-2009 data!

Thanks for the link anyway. Interesting.


aj

 

[Aussiejeff]

Meanwhile, in a BRIC country far, far away....

Feb. 25 (Bloomberg) -- India’s government may tomorrow raise excise taxes and slow spending in an effort to shrink a 16-year-high budget deficit and foster sustainable growth that avoids the asset bubbles emerging in China.

Finance Minister Pranab Mukherjee will promise to cut the deficit to 5.5 percent of gross domestic product from 6.8 percent in his budget speech, according to the National Council of Applied Economic Research in New Delhi and Morgan Stanley economist Chetan Ahya.

The challenge for Mukherjee is to unwind 7.5 trillion rupees ($162 billion) of fiscal stimulus and curb consumer-price inflation that’s the highest in the Asia-Pacific region, according to data compiled by Bloomberg. The payoff may be cheaper debt-financing costs and averting investor concerns at the sustainability of faster economic growth such as in China.

“India wants to avoid a China-like overheating problem,” said Shashanka Bhide, chief economist at the National Council, a corporate-funded analysis group. “Mukherjee has a tough balancing act -- to support growth and cut the budget deficit to control inflation.”

http://www.bloomberg.com/apps/news?pid=20601068&sid=aaBHWt7_X6u0

I'd suggest that "supporting growth" post GFC via massive stimulus while at the same time "cutting the budget deficit to control inflation" are mutually exclusive - ie mission impossible.

Good luck, India... don't fail us. Remember, the Rest Of The World is counting on you. No pressure, like....

 

[explod]

http://www.thelauderinstitute.com/pages/pdf/Reinhardt_and_Rogoff_Financial_Crises_NBER_2008.pdf


THIS TIME IS DIFFERENT:
A PANORAMIC VIEW OF EIGHT CENTURIES OF FINANCIAL CRISES
Carmen M. Reinhart
Kenneth S. Rogoff
Working Paper 13882

NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138

Motorway

The chart from Michael Panzer's webpage today gives perhaps a time scale for when the storm does come

 

[professor_frink]

The chart from Michael Panzer's webpage today gives perhaps a time scale for when the storm does come

So where do you(or the author) think that we are along this scale then?

If our economies were destined to go this way, with the money that has been thrown around to try and get us out of the crisis a couple of years ago, shouldn't it have already started to flow out of the financial system into the real world causing inflation?

 

[basilio]

Re: The economics behind the bull and bear case

Quote:
Originally Posted by explod View Post
The chart from Michael Panzer's webpage today gives perhaps a time scale for when the storm does come

So where do you(or the author) think that we are along this scale then?

If our economies were destined to go this way, with the money that has been thrown around to try and get us out of the crisis a couple of years ago, shouldn't it have already started to flow out of the financial system into the real world causing inflation?

The situation with the Weimar Republic in 1921 was framed by the huge reparations payments demanded by the Allies after WW1. When combined with the destruction of the German economy during the war it was in all practical terms impossible for Germany to keep a stable currency. Hence the resort to the printing presses.

The overall point of the paper is that when there is very large national debts and high capital flows there have been debt repudiation, currency crashes and associated depressions. This has happened over many centuries across scores of countries. Current writers just don't want to look past a short time frame because the look is very scary.

The uncomfortable reality is that historically whenever debt levels have reached anything close to our current situation the result is repudiation and crash. The question is whether it will happen next week, next month, next year or perhaps two years away.

__________________________
Of course this time it will be different.

 

[explod]

Thank you Basilio.

Professor, my view is that inflation figures currently produced from Government of say 1 or 2 percent are unrealistic. Most housewives will say that goods in the supermarketsare up 20 to 30% on a year ago. A thing noticed also are packets of goods, perporting to be the same have net weights less, fuel is about the same, rates and taxes are increasing a great deal, interest payments up and some reports of saleries down. All anecdotal to a great degree.

Reports from the USA, again not empherical (spellin?) suggest a worse scenario in the last six or 12 months. US Government says 10% unemployment other pundits say between 17 and 20% the numbers certainly getting much worse. Chinese costs of production going up passing on to goods increasing in price. From what I can see this is all happening fairly quickly, and my rough take is that USA inflation rate is at least 20% in real terms across the board.

So if the rate of nasties continues, and the debt problems keep spiralling (California et al, and understand one county is thinking of charging if you want attendance of police for an armed burglary or robbery) then the path to the first stage against the chart posted may only be a year or two away. If it was to proceed in the same fashion then we are looking at maybe 5 years from now. If the ability is better today with saturation media to hide it for longer (and is it being held past the breaking point now as we speak) then maybe the breakout/down as you will, may catch most off guard and be very ugly.

Anyway just to promote some other takes or facts perhaps.

In part of his address to the posted chart, Panzer has this to say (full report should be read on Financial Armegeddon website)

In fairness, Grice makes it clear that one impetus for the complete abandonment of fiscal discipline is currently lacking:

I don’t want to overplay the parallels. In fact, there is one very clear difference between the hand Von Havenstein had to play then and those today’s central bankers have to play now, namely the stability of today’s political climate. Clearly this can change, but the class warfare, nationalistic xenophobia and revolutionary spirit poisoning the political atmosphere of 1920s Germany is at the very least dormant today, and certainly not meaningfully visible across the political landscape.

But as we have seen over the past three years or so, things seem to move so much faster than they used to. Is it really such a stretch to think that the nascent rumblings of political dissent we're already seeing -- à la the tea party movement -- can suddenly escalate into widespread discord, where the torches and pitchforks are out in force?

 

[Aussiejeff]

Is it really such a stretch to think that the nascent rumblings of political dissent we're already seeing -- à la the tea party movement -- can suddenly escalate into widespread discord, where the torches and pitchforks are out in force?

I suspect deep inside every "peaceful, law-abiding citizen" lurks a feral peasant on the verge of revolt.

All it takes is a big enough "torch" to light the blue touch paper....so gummints are doing everything they can to soothe the hip pockets right now by pouring cold, hard cash everywhere.

If /when much of that cool, soothing moolah starts to evaporate and harsh reality bites is when sparks might really fly.

I'll keep my powder dry till then.

 

[ducati916]

The situation with the Weimar Republic in 1921 was framed by the huge reparations payments demanded by the Allies after WW1. When combined with the destruction of the German economy during the war it was in all practical terms impossible for Germany to keep a stable currency. Hence the resort to the printing presses.

The situation in 1921 was a direct result of the war, not the reparations. War has always historically been inflationary.

Years..........................Expenditures.....................Revenues
1914.............................9,651...............................8,149
1915.............................26,689.............................23,207
1916.............................28,780.............................22,815
1917............................53,261..............................35,215
1918............................45,514..............................31,590

Total...........................163,894............................120,976

The total deficit was filled via the printing of money, thus the inflation was created by the government policy of pursuing a war that they couldn't afford and pay for. The government believed that the war was to be a quick and decisive one, viz. short. Of course, they were spectacularly wrong, hence the ever increasing deficit, that was plugged via unbacked money creation.

jog on
duc

 

[motorway]

Wasn't Germany's problem that they had to make repatriations in GOLD ?
So they issued bonds ( paper ) to buy gold ?

A fast way to the POOR HOUSE
and then default broke everything else ?

Motorway

 

[professor_frink]

The uncomfortable reality is that historically whenever debt levels have reached anything close to our current situation the result is repudiation and crash. The question is whether it will happen next week, next month, next year or perhaps two years away.

So in your view we are looking at default and hyperinflation within the next 2 years. Thanks for your view basilio

Thank you Basilio.

Professor, my view is that inflation figures currently produced from Government of say 1 or 2 percent are unrealistic. Most housewives will say that goods in the supermarketsare up 20 to 30% on a year ago. A thing noticed also are packets of goods, perporting to be the same have net weights less, fuel is about the same, rates and taxes are increasing a great deal, interest payments up and some reports of saleries down. All anecdotal to a great degree.

Reports from the USA, again not empherical (spellin?) suggest a worse scenario in the last six or 12 months. US Government says 10% unemployment other pundits say between 17 and 20% the numbers certainly getting much worse. Chinese costs of production going up passing on to goods increasing in price. From what I can see this is all happening fairly quickly, and my rough take is that USA inflation rate is at least 20% in real terms across the board.

So if the rate of nasties continues, and the debt problems keep spiralling (California et al, and understand one county is thinking of charging if you want attendance of police for an armed burglary or robbery) then the path to the first stage against the chart posted may only be a year or two away. If it was to proceed in the same fashion then we are looking at maybe 5 years from now. If the ability is better today with saturation media to hide it for longer (and is it being held past the breaking point now as we speak) then maybe the breakout/down as you will, may catch most off guard and be very ugly.

Anyway just to promote some other takes or facts perhaps.

In part of his address to the posted chart, Panzer has this to say (full report should be read on Financial Armegeddon website)

C'mon explod! Facts and figures are the important part:

Best I can come up with as anything relating to facts from your post comes from shadow stats:

http://www.shadowstats.com/

looking at the "old" way of calculating CPI, it still doesn't come close to 20%, let alone 30. But then I'm sure it's not just a supermarket style measurement and includes many other things. Wonder if we can find out some more detail on that one.



On the other hand, the shadow stats site seems to agree with your unemployment stats. What I'd be interested in hearing is how you think having a high unemployment rate is going to contribute to the US defaulting and the hyperinflation that is due in the next 2 years(I'm assuming that you were agreeing with basilio when you thanked him after his prediction previously)

Cheers