May 31, 2012

Bits Bucket for May 31, 2012

Post off-topic ideas, links, and Craigslist finds here.




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Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 05:55:33

Weekly Jobless Claims Rise for Fourth Straight Week
Published May 31, 2012
Reuters

New U.S. claims for unemployment benefits rose last week for the fourth straight week, which could heighten concerns the labor market recovery is softening.

Initial claims for state unemployment benefits rose 10,000 to a seasonally adjusted 383,000, the Labor Department said on Thursday.

The prior week’s figure was revised up to 373,000 from the previously reported 370,000. Economists polled by Reuters had forecast claims unchanged last week.

Claims have now risen in seven of the last eight weeks. Most of those increases were marginal and the overall level of claims has held at levels consistent with a modest recovery in the labor market.

But the steady increase could add to the concerns raised by April’s disappointing 115,000 gain in nonfarm payrolls. A Labor Department report due on Friday is expected to show employers added 150,000 jobs in May.

Comment by turkey lurkey
2012-05-31 06:17:49

PT college students and teachers.

Comment by sfrenter
2012-05-31 07:01:39

Teachers can’t file for unemployment in the summer. We are salaried.

Many of us have second summer jobs, though.

Comment by turkey lurkey
2012-05-31 07:43:22

Sorry. Meant assistants. College level.

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Comment by oxide
2012-05-31 08:14:17

TA’s are generally grad students who go on research assistantship money over the summer. I don’t think undergrads are eligible either.

 
Comment by Lionel
2012-05-31 09:39:10

Maybe so, oxide, although my experience at a big state U has been that it is very difficult to get summer funding now. I managed to just make it out of my program with funding all the way through (5 years), but my last summer (in which I was taking my exams) I couldn’t get funding.

 
 
 
Comment by Martin
2012-05-31 07:04:14

I think real UE rate is around 20%. I see a lot of underemployed and unemployed folks nowdays, cars for sale in driveways.

It doesn’t seem it will get better anytime soon. Wall is ready for QE3 and are waiting eagerly for the news from Dr. Ben.
Maybe if Dow hits 11K, QE3 would be announced.

On a humor note, can you guess what is wrong with this bathroom pic which was posted in houston for a house sale:

http://www.happyplace.com/2777/house-for-sale-accidentally-leaves-out-dildo-in-bathroom

Comment by turkey lurkey
2012-05-31 07:44:56

Accidentally? I don’ think so. :lol:

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Comment by Arizona Slim
2012-05-31 08:43:53

It was completely…

…unexpected!

 
 
Comment by Darrell in Phoenix
2012-05-31 07:52:25

All QE can do is bring down interest rates. 10 year US Treasuries are at 1.6% and 30 year mortgages are 3.5%.

How low can you go?

What is a lower interest rate going to do?

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Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 08:09:53

It’s going to increase the incentive for lenders to hide money under the mattress (deflationary) and reduce the incentive for lending (counter-deflationary).

 
Comment by Blue Skye
2012-05-31 09:05:22

Reduced lending is deflationary.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 23:26:04

“Reduced lending is deflationary.”

You repeat myself.

 
 
Comment by In Colorado
2012-05-31 08:03:23

I think real UE rate is around 20%.

Shadowstats agrees with you.

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Comment by oxide
2012-05-31 10:42:15

We don’t have to guess when it’s right in the weblink. :razz:

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Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 06:05:30

Which Eurozone member nations are too-big-to-fail?

U.S. Steps Up Pressure on Europe to Resolve Euro Crisis
By DAVID JOLLY
Published: May 31, 2012

PARIS — President Barack Obama is putting increasing pressure on European officials to resolve the euro crisis, talking with the leaders of Germany, France and Italy to help lay the groundwork for action before a Group of 20 summit meeting to be held in June in Mexico.

Mr. Obama discussed the recent developments in Europe in video conference calls with the European leaders on Wednesday. Mr. Obama was following up on discussions he held at the recent Group of 8 meeting at Camp David with the German chancellor, Angela Merkel, the French president, François Hollande and Mario Monti, the Italian prime minister.

“Leaders agreed to continue to consult closely as they prepare to meet at the G-20 summit in Mexico next month,” the White House said in a statement. The meeting will be held June 18-19, beginning just a day after a Greek election that is being seen as a de facto referendum on that country’s euro membership.

The White House has also dispatched Lael Brainard, a Treasury under secretary, to Europe this week for talks with officials in Greece, Germany, Spain and France.

In Ireland, voters were going to the polls Thursday for a referendum on the European Union fiscal treaty for fostering budgetary discipline and growth. While polls have shown a small majority favoring the treaty, the Irish are already resentful of painful austerity measures, and success is not certain. A failure to back the agreement could mean Ireland will be unable to draw on European Union financing after 2013 if it needs another bailout and could further encourage anti-euro sentiment in Europe.

Final results will be known only on Friday.

The main concern on investors’ radar remains Spain, which is searching for a way to recapitalize its struggling financial sector. The government had to nationalize Bankia, a foundering mortgage lender, in May, and the bank said Friday that it would need 19 billion euros, or almost $24 billion, in new rescue funds. The austerity-strapped government with little in its arsenal to help other troubled lenders, and borrowing in the market has become prohibitively expensive, at around 6.5 percent for 10-year debt.

Amadeu Altafaj, a spokesman for the European Commission, said the government in Madrid needed to move quickly to reassure investors.

“What you cannot do is maintain this uncertainty, which is what is dragging down market confidence,” The Associated Press quoted him as saying on Spanish National Radio.

Spain is ‘too big to fail’ as far as the euro is concerned,” Charles Diebel, head of market strategy at Lloyds Banking in London, wrote in a research note. “And the funding issues and lack of viable bank resolution are causing an investor flight as seen before, but the numbers and magnitude are on a different level from anything seen thus far. We could be fast approaching a situation where the sanguine outlook maintained by some politicians in core countries cannot be sustained.”

Comment by palmetto
2012-05-31 06:25:56

Nothing is too big to fail. Nothing. I notice nobody’s much worried about the Roman Empire these days. Dinosaurs have a nasty habit of going extinct.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 06:40:37

TBTF refers to the short-term policy choice which global financial authorities will make to either rescue or abandon a corporation, nation-state or financial institution on the present-day global landscape, not a judgment about the long-run destinies of financial entities, in which case your comment is relevant.

Ozymandias

I met a traveller from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desart. Near them, on the sand,
Half sunk, a shattered visage lies, whose frown,
And wrinkled lip, and sneer of cold command,
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them and the heart that fed:
And on the pedestal these words appear:
“My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!”
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away.

– Percy Bysshe Shelley

Comment by palmetto
2012-05-31 06:45:49

I love that poem. Thanks for the blast from the past.

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Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 06:49:08

I agree with your point; but TBTF concerns what will happen over the next few years, not long-run destiny.

 
Comment by palmetto
2012-05-31 06:51:36

You are, of course, correct in this. Although it does seem sometimes as if hubris projects itself foward into the centuries.

Oh, wait…

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 08:13:08

Here is a quote which nicely captures my point:

The long run is a misleading guide to current affairs. In the long run we are all dead.

– John Maynard Keynes

 
Comment by Montana
2012-05-31 10:02:38

haha, expedience wins.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 12:22:13

In the long run, and even the mid run, expedience loses.

 
 
 
 
Comment by Darrell in Phoenix
2012-05-31 06:55:37

U.S. Demands Europe Find a Way to Persist Trade Imbalances Forever.

Over concerns that economic troubles could spread across the Atlantic, today the U.S. Government issued a warning to Europe that they better figure out how to deal with the countries in Europe with limited natural resources and a high global wage, and therefore unable to compete in the global market with either resource rich countries like Germany and the USA, nor cheap labor nations like Chindia.

“What they need to do is figure out a way for these poorer nations to continue to borrow vast sums of money into existence, without ever having to pay on or for any of the debt this generates. We need that new debt generation to create the new money to fund the trade imbalances that allow the rich to become richer, and since that is the sole purpose of the global economy, to make the rich richer, if Europe and other nations do not figure out how these poorer nations can continue to borrow the massive amount of new debt needed to fund the global trade imbalances, they threaten to collapse the economy as we know it.” said a government official.

“Look”, he added, “the USA is doing its share, creating new debt on the order of $1.5T a year. That is $1.5T a year flooding into the hands ot the rich to ensure they can keep getting richer. But the USA can not do it alone. We need Europe and other nations to step up and do their share of unsustainable debt growth. Only by ensuring that the masses go ever deeper into debt, can we possibly generate the new money needed to ensure that the global elite can continue to get ever richer.”

Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 12:44:26

“Only by ensuring that the masses go ever deeper into debt, can we possibly generate the new money needed to ensure that the global elite can continue to get ever richer.”

1. Create money from thin air.

2. Create indentured service contracts by loaning out electronic printing press money to wage slaves so they can buy houses they can barely afford.

3. Collect govt-guaranteed loan principle and collateral from wage slaves who borrowed more than they could afford to repay.

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 12:25:28

Once the MSM starts conjecturing about potential future bank runs, you can be sure they are already well underway.

ft dot com
Last updated: May 31, 2012 12:55 pm
Spain reveals €100bn capital flight
By Claire Jones and Patrick Jenkins in London and Miles Johnson in Madrid
Mario Draghi, president of the European Central Bank

Madrid was dealt a double blow on Thursday after it emerged that almost €100bn in capital had left the country in the first three months of the year and the head of the European Central Bank lambasted its handling of Bankia, the troubled Spanish lender.

Data published by Spain’s central bank showed €97bn had been pulled out in the first quarter – around a 10th of the country’s GDP – as concerns mounted over Madrid’s ability to contain its twin economic and financial crises, which have forced government borrowing costs to euro-era highs.

The data appeared to corroborate earlier assessments from economists that foreign investors were selling Spanish assets, while Spanish banks were increasing their holdings of domestic bonds, helped by cash accessed through the ECB’s three-year liquidity operations.

“My concern is that we haven’t yet seen the most recent numbers, which could be far worse,” said Raj Badiani, an economist at IHS Global Insight. “We are seeing a perfect storm.”

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 12:30:26

Finally, a much-anticipated bailout plan announcement is made. It’s about time!

May 31, 2012, 1:06 p.m. EDT
Stocks cut drop on reported rescue plan for Spain

NEW YORK (MarketWatch) — U.S. stocks erased most of their losses Thursday after Dow Jones reported initial planning was under way for a rescue loan to Spain should the country fail to come up with the funds needed to bail out lender Bankia. “Contingency plans continue,” said Peter Boockvar, equity analyst at Miller Tabak, of the wire service report, which said the discussions were taking place at the International Monetary Fund. The Dow Jones Industrial Average (DJIA +0.37%) rose 18.89 points to 12,433.75. The S&P 500 (SPX +0.26%) was off 1.27 point at 1,312.05. The Nasdaq Composite (COMP -0.04%) was off 9.38 points at 2,827.98.

 
 
Comment by aNYCdj
2012-05-31 06:18:08

Dramatic situation in the Corinth prison, problems in Patra and Alikarnassos Prisons are running out of food

http://www.protothema.gr/news-in-english/article/?aid=200481

Comment by turkey lurkey
2012-05-31 07:54:10

Not good. While most people have no sympathy for convicts, this is the kind of thing that will piss off their relatives.

And that WILL be a problem.

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 06:19:41

Is U.S. housing market liquidity finally back on the upswing? Perhaps the housing bubble is finally in its death throes.

It’s interesting how homes sold in foreclosure are characterized by the MSM (and by RealtyTrac) as selling at a “discount.” Would they somehow sell differently if the lender put them on the MLS?

If anything, I would guess they would sell for a higher, not a lower, price than when marketed through the lender’s special back door REO sales channel, where price discrimination is under their direct control. Otherwise, why wouldn’t the lender just put all their REO up for sale on the MLS and be done with it?

May 31, 2012

RealtyTrac: Foreclosures Account For 26% Of 1Q US Home Sales
DOW JONES NEWSWIRES

Sales of U.S. homes owned by banks or in some stage of foreclosure accounted for a slightly larger share of total home sales in the first quarter compared with the same period a year earlier, according to market researcher RealtyTrac.

Residential properties linked to foreclosure–either in default, scheduled for auction or bank-owned–represented 26% of all home sales in the latest quarter, up from 25% a year earlier and 22% in the fourth quarter. Bank-owned homes are also referred to as real-estate-owned, or REO, properties.

“Foreclosure-related sales picked up in the first quarter, particularly preforeclosure sales where a distressed homeowner is selling to avoid foreclosure–typically via short sale,” said RealtyTrac Chief Executive Brandon Moore. “Those preforeclosure sales hit a three-year high in the first quarter even as the average preforeclosure sales price dropped to a record low for our report. Lenders are approving more aggressively priced short sales, which in turn is resulting in more successful short-sale transactions.”

The firm also reported the sale price of a foreclosed property averaged $161,214 in the first quarter, down 2% from a year earlier and a decline of 1% from the prior quarter.

That average sales price was 27% below the average sales price of homes not in foreclosure or not bank-owned during the quarter–matching a 27% foreclosure discount in the previous quarter but down from a 29% foreclosure discount in the first quarter of 2011.

“Meanwhile the average price of a bank-owned home is stabilizing and even increasing in some areas where a slowdown in REO activity over the past year has resulted in a restricted supply of REO homes available,” Moore continued. “Still, REO sales did increase on a quarterly basis in 21 states, indicating that lenders are still working through a bottleneck of unsold REO inventory in many areas.”

Comment by sfrenter
2012-05-31 07:09:41

O mighty and wise HBBers, someone please answer this question that has been gnawing at me:

There are obviously a ton of REOs out there. And there are a plethora of paid databases that list these foreclosures, so obviously the info. is valuable to someone (investors).

If I know of a vacant REO that I am interested in, and I know which bank owns it, and it’s not listed for sale, is there anything I can do? Contacting the asset manager at the bank has proven useless..

What do the investors do? Why does anyone buy a subscription to foreclosure radar or foreclosure.com or realtytrac or any of the other of the hundreds of fee-based REO databases?

Anyone here have a subscription? Do they give you contact info. for the bank?

Comment by polly
2012-05-31 07:37:49

Knowing about it is a necessary, but not a sufficient condition. You also have to get on the list of people who get their phone calls returned. Being able to buy in large batches with cash and without inspections probably helps. Being related (family or business) with someone at the bank might also be helpful.

Comment by alpha-sloth
2012-05-31 07:41:27

Being related (family or business) with someone at the bank might also be helpful.

Ding! Ding! Ding!

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Comment by sfrenter
2012-05-31 13:37:25

Being related (family or business) with someone at the bank might also be helpful.

These online paid databases are obviously used by enough people - there are quite a few of them. Are they all a scam?

 
 
 
Comment by jinglemale
2012-06-01 02:06:50

Yes they give you the bank contact info, the foreclosure status and the borrower. Give me the address and i will get you all the info.

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 19:13:04

“Residential properties linked to foreclosure–either in default, scheduled for auction or bank-owned–represented 26% of all home sales in the latest quarter…”

During my drive home tonight, I heard on the 5pm NPR headline news that 26 percent of U.S. homes are in foreclosure. I’m pretty sure it was a botched version of the RealtyTrac story that said 26 percent of homes sold last quarter were foreclosures. Big oops! There are on the order of 91,241,000 single-family homes in the U.S.; 26 percent of that number is
26% X 91,241,000 = 23.7 million
. If that is the number of U.S. homes currently in foreclosure, then we are economically doomed.

Here’s to hoping the NPR reporter screwed up the story! :-)

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 06:24:16

The long and the short of this advice: SELL EVERY RALLY!

May 31, 2012, 5:10 a.m. EDT
The Chin-ease is coming
By Andy Hicks

Equity investors will soon be given a gift by the Chinese central bank (PBOC). The Chinese economy is weakening, as expected, but it is now to a point where the PBOC must act aggressively.

In earlier years, the Chinese would ease in a heartbeat when their growth rate slowed, especially with inflation under control and below their target rate of 4% as it is now. But the political dynamic has changed. They are now the world’s economic insulin, and starving the western world of that economic insulin has paradoxically made them more politically powerful. This is why they have been so reluctant to ease over the past six months. Short-term economic pain is producing long-term political gains, and they enjoy that trade-off.

But with their economic growth rate now back to 2009 levels, the Chinese government has now overstayed their political ambitions. The PBOC has to ease or the country will face continued labor unrest and punishing economic retrenchment that will perpetuate the downdraft.

They can no longer sit at bay while laughing at the demise of the western governments and their fiscal imbalances. They have already stalled too long and, unfortunately, when they do ease this year, it will be too late. Rate cuts usually take at least a year to create any sort of economic growth momentum and, by that time in 2013, the global economy and employment will be in another severe recession.

In short, we will get another big bounce in the equity markets this year on the big “Chin-ease.” But prudence prevails, and prudent investors should look to take that opportunity to wind down their long positions.

Comment by Darrell in Phoenix
2012-05-31 07:01:51

Oh, it is global politics. It has NOTHING to so with them seeing 10s of millions of empty housing units, and not wanting to reignite the speculative bubble that makes the USA real estate bubble look like a tiny blip?

Comment by Al
2012-05-31 08:34:36

Yup. The author just assumes that China has a choice on what happens with their economy. They can restart the easing, but that doesn’t mean it will work any better than it has anywhere else. Sometimes even cheap money can’t find a buyer.

 
 
Comment by Jojo
2012-05-31 07:10:12

The writer appears not to know what insulin is. China is far mor like glucose to the world economy than insulin.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 08:18:25

It’s like insulin when they refrain from easing…

 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 06:29:23

Why Republicans won’t let this issue go is quite a mystery to me. Don’t they care about anything important?

Part of me is really hoping that Trump gets the VP nod (the part that likes to stay up late and watch Jon Stewart and Stephen Colbert).

Trump’s Birther Claim Eclipses Romney
Trump Stirs Up Birther Controversy Again
By MATT NEGRIN (@MattNegrin)
May 29, 2012

Donald Trump has become so unrelentingly fixated on his theory about President Obama’s birthplace that he was called “ridiculous” by Wolf Blitzer today.

It’s hard to see how Trump’s repeated claims that Obama was born in Kenya help Mitt Romney, say strategists on both sides, as a Trump fundraiser for the candidate gets under way in Las Vegas tonight. Their newfound association has spurred a barrage of attacks from the Obama campaign, as it ties Romney to the birther movement’s most prominent spokesman.

Obama campaign manager Jim Messina tweeted on Twitter, “Two words define Mitt Romney today: Donald Trump.

That was right after Trump completed his second TV interview of the day, not backing down on his unfounded birther theory in an exchange with Blitzer on CNN.

“Donald, you’re beginning to sound a little ridiculous, I have to tell you,” Blitzer said.

Comment by WT Economist
2012-05-31 06:37:00

Back during the W. Bush administration, it really seemed as if certain liberals had just gone insane. Bush infuriated them so much they almost seemed irrational.

Evidently, President Obama has done the same thing to many Republicans. Just by being there. Then again, the Republicans were insane about Clinton too.

Perhaps the deal is the shrinking share of those actively involved in politics are either special interest groups or insane.

Comment by palmetto
2012-05-31 06:50:04

Insane. Completely insane, most of them.

Trump, however, is not. He’s crazy like a fox. His schtick generates publicity for the Apprentice franchise. You can’t buy that kind of publicity. He’s of the school that there’s no such thing as bad publicity.

Besides, it gives him an opportunity to provoke people like George Will.

 
Comment by happyfriday
2012-05-31 06:54:24

Agree 100%.

Part of me thinks that the birthers don’t really believe that he was born in Kenya. It’s just that they are hoping they will stumble upon any embarrassing thing about Obama. May be he lied in college application or jobs that he was Kenyan as opposed to American to further his street cred. Just my 2 cents.

Comment by Montana
2012-05-31 10:20:05

More like, the Democrats are fumbling for any embarrassing thing they can find about a Romney supporter. This is a talking point of theirs, not Romney’s.

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Comment by X-GSfixr
2012-05-31 12:09:07

Romney isn’t telling the birthers they are nuts, either.

He’s smart enough to recognize he’s better off saying nothing.

 
 
 
Comment by scdave
2012-05-31 07:04:21

Bush infuriated them so much they almost seemed irrational ??

Like with this quote;

President George W. Bush, in an address to a joint session of Congress on September 20, 2001 said, “Either you are with us, or you are with the terrorists….

Comment by Jojo
2012-05-31 07:17:25

That was one of Bush’s smarter comments. At least it made sense. But Bush being dumb does not preclude his opponents being crazy, in fact having a moron in the White Hose may well have driven may Democrats insane.

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Comment by WT Economist
2012-05-31 07:55:55

That was Krugman’s excuse. Bush drove him nuts!

 
Comment by palmetto
2012-05-31 08:19:13

But the real reason was that his facial hair grew into his nostrils and from there up into his brain.

After the bust, Krugman was like a bride waiting in the wings, blushing and smiling, waiting for his moment, which never came.

The groom (Obama administration) stood him up at the altar.

He went mad.

 
 
Comment by goon squad
2012-05-31 07:38:13

“To those who scare peace loving people with phantoms of lost liberty, my message is this: your tactics aid terrorists for they erode our national unity and diminish our resolve. They give ammunition to America’s enemies and pause to America’s friends.” - Attorney General John Ashcroft, December 2001

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Comment by oxide
2012-05-31 10:47:27

I think that even more infuriating was Ari Fleisher’s “Watch what you say.” Then there’s always “Mission Accomplished.”

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Comment by Arizona Slim
2012-05-31 10:59:35

OTOH, Bush is one heckuva bicycle rider.

And, as un-Republican as I am, you get the two of us together for a conversation, and it would be bikes this, riding across Texas that, and what do you think of this pedal, and on and on it would go.

 
 
 
Comment by In Colorado
2012-05-31 10:21:52

“Back during the W. Bush administration, it really seemed as if certain liberals had just gone insane.”

Yeah, some did froth at the mouth. The thing that drove me out of the GOP was that it now seems that EVERYONE has lost their mind.

Comment by scdave
2012-05-31 11:38:12

+1 Colorado….The sane ones are retiring…

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Comment by michael
2012-05-31 06:50:06

seems like you and trump and maybe that sheriff in arizona are the only ones that still care about this.

Comment by Montana
2012-05-31 10:18:51

Yeah I never heard Romney or his minions bring this up. It’s the media that want to make him denounce this or that supporter. F*ck ‘em.

 
 
Comment by goon squad
2012-05-31 07:00:42

Mike Rosen editorial from the Denver Post - Mike Coffman was right about Obama in the first place:

“What (CO 6th Congressional District incumbent) Coffman did say was that Barack Obama is not an American “in his heart.” With that I also agree, emphatically. I can’t read Obama’s heart but I can appraise his words, his history, and his actions as president. He’s cut from the same cloth as leftist academic ideologues, blame-America-firsters and would-be revolutionaries. Their vision of America is a wistful, utopian notion of a socialist paradise, a country we have never been. They’re hyper-critical of our actual history, and deeply resent so many of our heroes, institutions, values and the lifestyles of “bourgeois” Americans who stand in the way of their utopian fantasy.

Obama plays the politics of envy like a fiddle, routinely demagoguing business, financial institutions and the wealthy (except for his campaign contributors). He’s praised Occupy Wall Street radicals. He doesn’t understand or esteem capitalism, since this nation’s inception the wellspring and engine of our prosperity and the economic dimension of liberty.

His stated goal of “fundamentally transforming” America is apparently to convert us to Euro-socialism. He trivializes the concept of American exceptionalism with a dismissive quip that “every nation is exceptional.” He’s apologized to the world for our foreign policy. It took Obama’s success in early 2008 Democratic primaries for his wife, Michelle, to declare that, “For the first time in my adult life, I am proud of my country.” How’s that for resentment and narcissism? And let’s not forget the infamous “God damn America” sermon of the Rev. Jeremiah Wright, Obama’s spiritual mentor of 20 years.”

Comment by ahansen
2012-05-31 11:36:53

Re: Rosen,

(Sigh) If only….

 
 
Comment by Darrell in Phoenix
2012-05-31 08:37:57

I cannot speak for all, just my father(72) and my in-laws(65ish).

40+ years of dogmatic propaganda that all Republicans are good and all Democrats are evil have brought them to the point that they will believe pretty much anything spewed by the political pendents on Faux News Channel.

Anyone remember that cartoon from the 70s.. or maybe very early 80s.. called “Wait until your father gets home?” The neighbor was a whack job that say “Leftest, Pinko, Commy conspiracies” pretty much everywhere? Well, the Republican Party has successfully converted several generations of Americans into those whack jobs.

My father would forward me the Republican propaganda that the party that I used to be a member of sends him. I would send him back links to actual data showing the flaws in the arguments.

Did he get angry at the Republican Party for sending out such lies and obvious propaganda? Of course not. They are all good, and their ends justifies any means.

Instead he got mad at me for pointing out their lies for what they are.

How dare I challenge the propaganda of the only people that can save this country from the evil, pinko, leftest, commies that want to destroy us!!!!

Comment by Arizona Slim
2012-05-31 08:48:42

I recently got a snoot-ful of the far right wing rhetoric when I was back east tending to my folks. Seemed as if my dad was on every single right wing mailing list under the sun. I took great pleasure in running all of that stuff through the household shredder.

 
 
Comment by ahansen
2012-05-31 10:12:51

Apparently Mr. Trump failed to read the subtext in Grandma Obama’s admission that she “was there when he was born” in a hospital in Kenya. Yes, she was talking about Barack Hussein Obama, but it was Barack Hussein Obama Sr. Her son.

Freaking ijits buy into Trump’s sheet every time.

 
 
Comment by alpha-sloth
2012-05-31 06:42:21

Eurozone set-up unsustainable, says Draghi
BBCNews

European Central Bank (ECB) president Mario Draghi says that eurozone leaders must decide what they want the bloc to look like in the future, because the current set-up is “unsustainable”.

He said that the ECB could not “fill the vacuum” left by governments on creating growth or structural reforms.

EU economics commissioner Olli Rehn said more austerity was needed if the eurozone was to avoid disintegration.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 06:50:34

What next: Debtor’s prison to help encourage those who can’t repay their debts to do so?

Comment by palmetto
2012-05-31 06:53:59

The beatings will continue until morale improves.

 
 
Comment by Neuromance
2012-05-31 09:28:17

“Structural reforms” require politicians to do hard work, listen to wonks on both sides, understand the situation and make tough decisions.

Endless monetary manipulations, issuance of debt, increases/decreases in the money supply, yet newer and stranger financial product constructs - this is easy relative to structural reforms for the politicians.

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 06:47:37

Not only did headline U.S. stock market indexes drop for most of the month of May, but for good measure, they appear set to end the month with a sell-off.

Booh-yah!

May 31, 2012, 9:40 a.m. EDT
U.S. stock indexes looking at May drop
Stories You Might Like
A Dow Theory sell signal?
U.S. stock futures drop; Spain downgrades weigh
In Spain, the worst is yet to come
By Kate Gibson

NEW YORK (MarketWatch) — U.S. stocks were steady at Thursday’s start, with the benchmark indexes readying to close out May with losses of 6% or more. “We continue to view the equity market as problematic, but not on a cliff facing a huge free fall,” noted Fred Dickson, chief investment strategist at Davidson Cos. The Dow Jones Industrial Average (DJIA -0.20%) was up 5 points at 12,428.5, off 5.9% for the month. The S&P 500 (SPX -0.37%) held flat at 1,313.70, down 6% from the end of April. The Nasdaq Composite (COMP -0.51%) fell 3.79 points to 2,833.57, leaving it down 7% for May.

Comment by Professor Bear
2012-05-31 08:52:56

What happened to the bulls? I knew that bears hibernated during the winter, but who’d've thunk the bulls would go into hibernation just before the summer?

Comment by Carl Morris
2012-05-31 12:28:08

Well…if the small investors have been mostly out for quite a while now (as keeps being reported) who exactly are the bulls?

Comment by drumminj
2012-05-31 17:15:06

if the small investors have been mostly out for quite a while now

I don’t believe that to be the case. Most of my peers still have their retirement money in mutual funds. Personally, I’m 90% cash/PMs.

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Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 08:57:40

It’s pretty frustrating for Californians to watch their gasoline prices advance north of $4/gal while oil sells off to a lower price day after day. At what point will California gasoline prices align with the oil price selloff?

MarketWatch dot com

Crude Oil - Electronic (NYMEX) Jul 2012
Market open $86.59
Change -1.23 -1.40%

Volume 175,076

May 31, 2012, 11:43 a.m.

Previous close $ 87.82

Day low $86.28

Day high $88.28

52 week low $77.40

52 week high $110.85

Comment by Northeastener
2012-05-31 10:13:59

Paying 3.55/gal regular here in MA. CA must be special…

Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 12:20:12

Yup. Special environmental standards for gasoline coupled with almost no refineries is a bad mixture of factors…

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Comment by ahansen
2012-05-31 22:09:29

“Almost no refineries” ?!

There are 21 refineries in California producing in excess of 22 million gallons of fuel a DAY here, much of which gets shipped out of LA, LB, and SF Harbors to Japan.

And I’ve been paying over $4.60/gallon in Central Valley for most of the last six months. (Which is still cheap compared to what it costs the taxpayers to subsidize.)

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 23:35:24

“21″

37,000,000/21 = 1,762,000 per refinery.

Seems like a lot, though I admit to not having compared to the populace per refinery ratio in other states.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 23:39:27

Utah (5 refineries):

North Salt Lake Refinery (Big West Oil), North Salt Lake 35,000 bbl/d (5,600 m3/d)
Salt Lake City Refinery (Chevron), Salt Lake City 45,000 bbl/d (7,200 m3/d)
Salt Lake City Refinery (Tesoro), Salt Lake City 58,000 bbl/d (9,200 m3/d)
Woods Cross Refinery (Holly Corporation), Woods Cross 26,000 bbl/d (4,100 m3/d)
Woods Cross Refinery (Silver Eagle Refining), Woods Cross 10,200 bbl/d (1,620 m3/d)

Utah population = 2.8M

2.8M/5 = 560,000 populace per refinery, around 1/3 the ratio for California. And I am guessing Utahns aren’t subject to all kinds of whacked out California environmental regulatory requirements on the fuel they use.

 
 
 
 
 
Comment by 2banana
2012-05-31 06:48:37

I expect to see alot more articles like this in the near future.

———————

Being 30 and Living With Your Parents Isn’t Lame — It’s Awesome
Time Moneyland | May 31,2012 | BRAD TUTTLE

Just how much of a bummer is it to be well past the age of adulthood and still living under your parent’s roof? As this living arrangement grows increasingly common, the perception is that it’s not so bad after all. In fact, living with mom and dad can be pretty sweet. According to a new survey, young adults who live with their parents are nearly as likely to say they are satisfied with their housing situation as those who live on their own.

The Great Recession has brought with it a reevaluation of the American Dream, and even whether a college degree is worth the money. Now, the idea of living at home with your parents isn’t associated with failure or a lack of achievement. More likely, young adults living with their parents are thought of as victims of unfortunate circumstances, with plenty of good company.

They may also be considered to be pretty smart customers: At the very least, they weren’t foolish enough to buy a home that they couldn’t afford—and that promptly declined in value by 50%. That’s what so many adults, young and old alike, did five or so years back. To homeowners who are deeply underwater or facing foreclosure, living debt-free in your parents’ home must sound like a nice possibility.

Comment by AbsoluteBeginner
2012-05-31 07:39:31

Lucky duckies that get to live at home. Tax them for imputed rent!

 
Comment by In Colorado
2012-05-31 08:12:55

This situation might become a two way street. Now that people don’t have pensions, their savings are risible and the GOP is chomping at the bit to take away social security, they will need their adult children to care for them in their old age. As part of the bargain the kids will get the house when mom and dad pass on to the next plane of existence.

Comment by palmetto
2012-05-31 08:20:33

Very European.

See where we’re headed?

Comment by In Colorado
2012-05-31 08:33:49

Except most Europeans do have pensions.

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Comment by iftheshoefits
2012-05-31 09:04:59

For now.

 
Comment by CharlieTango
2012-05-31 09:06:49

What is a pension’s future value in the PIIGS?

 
Comment by In Colorado
2012-05-31 10:25:36

“For now.”

The point was that we aren’t necessarily “following” the Europeans. If anything, we are the leaders in the race to the bottom.

 
 
Comment by Neuromance
2012-05-31 19:07:10

Welcome to the declining standard of living.

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Comment by aNYCdj
2012-05-31 11:00:45

Colorado:

The only hitch to that is they have to sign the house over at least 5 years before they need gov assistance

And the kids must be financially responsible….they cant file for BK because ..um the house is in their names.

Comment by In Colorado
2012-05-31 11:44:26

“The only hitch to that is they have to sign the house over at least 5 years before they need gov assistance”

I think the idea is that there WON’T be any government assistance.

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Comment by nickpapageorgio
2012-05-31 18:37:31

“the GOP is chomping at the bit to take away social security”

Link?

Comment by Robin
2012-06-01 21:39:22

champing?

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Comment by Arizona Slim
2012-05-31 08:50:28

One of my twenty-something cousins lives with his father and stepmom. He has a full-time job at the town grocery store, and the entire household benefits from his substantial employee discount. He also pays rent.

Comment by AbsoluteBeginner
2012-05-31 09:33:22

Tax him on the imputed income on grocery discounts! Lucky ducky!

 
 
Comment by eastcoaster
2012-05-31 09:53:48

When my son’s dad and I split, I would have gladly moved back home with my parents (and I was in my late 30s). I could have used the help and I would have saved a boatload of money. However, they sold their house shortly thereafter and moved to a retirement community. And, being the responsible grown up that I am, I carried on.

 
Comment by ahansen
2012-05-31 11:57:00

My son (27) lives with his father in Newport Beach and loves it. Free rent, great car(s), has the place to himself during the week. He’s free to write, take classes, go out on interviews and work freelance gigs all over LA and OC– and his friends appreciate the guest room when they’re in town on business. When I was his age, struggling to make ends meet, I would have KILLED for such an arrangement.

In exchange, son acts as chef, driver, and personal assistant to my ex (with whom he is great friends), and invests the money he would have otherwise spent on living expenses in his portfolio. Ex enjoys a trusted gofer, housesitter, and the pleasure of his company when he’s home.

What’s not to like?

Comment by X-GSfixr
2012-05-31 12:17:01

I’ve been trying (and have failed miserably) to convince my two youngest that this very plan is the best plan for them to get ahead over the next 10 years.

Comment by ahansen
2012-05-31 13:24:15

A good sense of humor, a wall of privacy, and a well-stocked refrigerator work wonders. As does a family math session over a good bottle of wine.

Think roomie, not advisor.

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Comment by 2banana
2012-05-31 06:52:33

Government DESTROYS everything it tries to “help.”

Look at health care. Look at housing. Look at college.

Want to make college affordable again? Stop ALL government loans and guarantees and subsidies to colleges. Allow all debt (to INCLUDE student loans) to be discharged in bankruptcy.

The price of college would drop for the next 20 years with these two simple fixes…

——————————–

This Bright-Eyed Young Man Was Utterly Demolished by Student Loans
Business Insider | Mandi Woodru

Even as total outstanding student debt rises to $1 trillion, lawmakers have yet to allow loans to be discharged in bankruptcy.

Without an escape clause, these loans can strangle a person.

Take 36-year-old Nick Keith, who remains $142,000 in debt eight years after graduating from culinary school. He’s featured in a new film, “Default: The Student Loan Documentary,” in which several college graduates expose the pitfalls of the private student loan industry.

“I want to educate the public about the facts,” Keith said. “My life has become a daily swim in a tar pit with very little hope of ever getting out.”

Keith’s father only agreed to co-sign a student loan if he stuck with an engineering degree at Iowa State University, but even with decent grades, he knew it wasn’t a right fit.

He dropped out sophomore year and later turned to the California Culinary Academy–without his dad as a safety net–hoping to put his love for healthy eating to use.

“The culinary academy commercials were on the Food Network every 15 minutes,” he said, and only required 12 months of study with a three month externship.

He fell for their sales pitch, hook line and sinker

“I should have seen all the signs. [The campus tour guide] had a used car salesman answer for everything,” Keith recalls.

Comment by michael
2012-05-31 06:57:35

sympathy for stupidity…it’s the new black!

 
Comment by WT Economist
2012-05-31 07:03:06

May we pause to remember why such harsh terms were imposed on student loans? It is because back in the day, lots of students strategically defaulted. Went bankrupt, got out of the loans, and THEN got a job. It was an epidemic.

Once again, today’s young pay the price for the worst of those who came before.

Comment by whyoung
2012-05-31 07:42:43

Not sure if it’s still true, but a long time ago one of my former Art School professors told me that art students had a better record of paying back loans than others such as doctors and lawyers. (And were talking about wannabe capital A artists - painters and sculptors with few lucrative job prospects…)

The whole thing has gotten out of hand, I just checked the tuition at the school I went to in the 70’s, when tuition was about $3000/year… Now it’s $30,000 (not including room, board and supplies).

Scary, no way I’d be able to even contemplate going to a place like that now.

Comment by ahansen
2012-05-31 12:33:21

Art students are typically better loan risks than engineers because it’s generally only the kids of wealthy parents who go into art in the first place.

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Comment by whyoung
2012-05-31 14:58:03

Maybe now, back then (1974-78) it was Vietnam Vets using benefits, some well off kids for sure, and fair number of clueless inner city kids like me who got enough scholarship money to take minimal loans.
‘Course it wasn’t all about job training back then either.

 
Comment by polly
2012-05-31 15:01:39

I personally knew two art majors in college. One had a big trust fund from a grandfather who had invented one of the major standardized tests in education land. Called the Iowas, I think. The art history major was a Rockefeller.

 
Comment by oxide
2012-05-31 18:22:28

You think correctly. We took the Iowa’s all the way through elementary school.

 
 
 
Comment by MaaacDoc
2012-05-31 14:02:43

So?

The billionaire companies strategically default all the time. I wonder why we make indentured servants then only of the weakest part of population to fail with its loans.

Weird

 
 
Comment by Darrell in Phoenix
2012-05-31 07:39:52

I would not attempt to argue that state, federal and other funding, along with access to long-term, low interest rate loans has detached the basic price control of supply and demand. Prices are rising much faster than inflation, and yet demand is maintained by detaching the cost from the immediate concerns of the person making the education decision.

However, I will address this “cut our way to prosperity” mentality.

Let us say, for the sake of argument, that we did as you suggest and stop all federal student grants and loans. Enrollment in college drops by, what? 50-75%?

Half of all people employed in higher education are added to the unemployment rolls. Those remaining take a 50% cut in pay?

20 million students spending $20K each = $400B a year in spending, just on tuition. Add in another $100B for books, supplies, fees. We slice that 75% to $125B, cutting $375B a year in “wasteful” spending.

That is an immediate drop in GDP of 2%. Echo effects of that reduced spending would likely trim another 2% from GDP.

4% drop in tax revenues from income and payroll taxes.

Perhaps, and I know this sounds insane… perhaps our problems are not one of, oh, a few select unionized groups still making above median income and having above median benefits. Perhaps the problem is all the people that used to have higher incomes and benefits, have seen drastic cuts in their pay and income.

If an eroding landscape reveals a few pinnacles of rock jutting above the plain, is the problem the pinnacles of rock? Or is the problem the eroding landscape that revealed those pinnacles?

i.e. Perhaps we should be focused on the degrading conditions of the middle class, and how we can bring them up to the levels of these few remaining good paying jobs, instead of focusing on how we can break these last few remaining sources of good jobs.

I, know, I know… insane. The economy is not about the vast majority. The economy is about ensuring the elite few mega rich can contionue to get ever richer.

My bad.

Comment by goon squad
2012-05-31 08:04:31

“The economy is about ensuring the elite few mega rich can contionue to get ever richer”

This is exactly the politics of envy as so eloquently discussed in Mike Rosen’s Denver Post column above. The Lucky Duckies should be grateful to the 1%ers for their $500/week existence. American exceptionalism means the opportunity to bootstrap, free market, rugged individualist, John Galt your way up and out of Lucky Duckydom and into the $600/week bracket of trickle down golden showers from the 1%er Masters Of The Universe, if only the latter get enough tax breaks to justify them being job creators.

“You work 3 jobs? How uniquely American” - the Decider, 2005

Comment by In Colorado
2012-05-31 08:16:47

Yesterday, as I read anecdotes about mystery buyers paying cash to buy REOs and short sales, it dawned on me that now I know where the 1%’ers are “investing” their money. And it isn’t in job creation.

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Comment by oxide
2012-05-31 10:54:29

Soon to be $400 a week. Too bad the Lucky Duckies can’t return those expensive children…

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Comment by Al
2012-05-31 10:18:24

Scenario B

Government quits subsidizing loans, initially the number of students attending drops, but then the price of tuition falls too. Enrollment slowly recovers, and the graduates can start life without crippling debt, thus more of their incomes go to the economy instead of servicing debt.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 20:04:42

Pretty soon, college professors are no longer elitist rock stars earning $200K+…

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Comment by nickpapageorgio
2012-05-31 20:10:04

Sounds reasonable.

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Comment by measton
2012-05-31 10:43:51

Your estimate is very conservative.

Throw in decrease in household formation as students stay at home with mom, and eat in instead of eat out, and all the businesses that contract with schools, and my guess is your talking about a much larger drop in GDP. College towns would quickly resemble Detroit with section 8 replacing the lost students crime rising.

 
Comment by mathguy
2012-05-31 13:00:21

Right, because no problems were ever caused by over leveraging debt… It’s not like a great depression happened less than a century ago because the margins were finally called in… Nooooo…

And further, it’s not like private banks ever loaned money for student loans or houses before the gov’t started guaranteeing the debt right? Nooo… people too scared… need government blankey… boo booo boo…. pacifier for baby.. we make beeeetterrrr

 
Comment by cactus
2012-05-31 13:15:48

i.e. Perhaps we should be focused on the degrading conditions of the middle class, and how we can bring them up to the levels of these few remaining good paying jobs, instead of focusing on how we can break these last few remaining sources of good jobs.”

The last technician we hired is about 60 years old. We have a labor shortgage as I predicted would happen back in the 1990’s when Aerospace went away here in CA.

and we won’t hire the culinary school dude sorry

 
 
Comment by whyoung
2012-05-31 07:46:36

“The culinary academy commercials were on the Food Network every 15 minutes,” he said, and only required 12 months of study with a three month externship.”

$142,000 in debt from a program that was a little over a year? Oy.

 
Comment by whyoung
2012-05-31 07:51:13

I have a friend who teaches at a for-profit school in the performing arts… many of their students are foreign nationals, some of whom couldn’t have passed a TOEFL…

Theory is it’s an easy way to for rich foreigners to get their kids a student visa.

 
Comment by In Colorado
2012-05-31 08:27:53

“The price of college would drop for the next 20 years with these two simple fixes…”

As many of you know, I lived in Mexico City and have family and relatives who still live there.

In Mexico, public universities are VERY cheap, virtually free. Getting into one requires passing a grueling entrance exam (There is no equivalent of the SAT, each school has its own entrance exam). The quality of instruction at the public U’s varies, from atrocious to decent.

There is a stigma, however, in attending public U’s in Mexico, so anyone who is middle class and up sends their kids to private universities. There are no student loans or federal financial aid in Mexico. In spite of all this, private U tuition can be very pricey, depending on the school it can be almost as expensive as in the US.

What I think would happen in the US if we ditched financial aid programs is:

1) No name, local private colleges would fold. Plus for profit chain schools like Phoenix, DeVry, etc. would go out of business.

2) There would be a run on public U’s and community colleges.

FWIW, I’m already seeing #2, as students are avoiding private schools like the plague. Not one boy on my son’s very upper middle class soccer team is headed off to a private college. They are all going to either CU, CSU, U Northern Colorado or to a Community College.

Comment by cactus
2012-05-31 13:23:26

to a Community College.

I hear the one in Moorpark is going to focus only on transfer students and get away from 2 year degrees

they do have a very popular exotic animal training program which I doudt they will get rid of though.

Comment by Arizona Slim
2012-05-31 13:31:52

You can get culinary training at community college. Our local CC has a very good program.

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Comment by Arizona Slim
2012-05-31 08:53:00

One of my cousins is a chef.

He’s 30 years old and spent some time in culinary school. Chef Miles decided that he could learn a lot more by just getting jobs in restaurants and learning by doing.

Last I heard, he was chef-ing in San Francisco. He’s already been quite successful in New York and Chicago. According to my Aunt Jean (his grandmother), he’s looking into starting his own restaurant.

 
Comment by Al
2012-05-31 10:10:33

“Government DESTROYS everything it tries to “help.””

Article talks about getting private loans for a private school. How exactly did government cause this?

 
Comment by MiddleCoaster
2012-05-31 11:12:27

Wow, that one year of culinary school was more expensive than the most ivy-covered of the Ivy League schools!

Comment by In Colorado
2012-05-31 11:46:28

So are “cosmetology” schools. They can charge top dollar and it’s not like the staff are well paid or get good bennies.

 
 
 
Comment by michael
2012-05-31 06:54:12

saw rubio being interviewe on the TV last night…i was curious so started looking him up on the interweb.

came across this short video of him and mitt romney…

http://www.youtube.com/watch?v=8Bfe6CgYbH8

Comment by happyfriday
2012-05-31 07:25:48

Rubio - Neocons’ wet dream.

Comment by michael
2012-05-31 07:59:06

obama was a wet dream too.

 
 
 
Comment by tj
2012-05-31 06:55:54

here’s why keynesianism’s “save in good times, spend in bad times” is counter productive and impossible to do.

governments can’t ’save’. they can only take less or take more money. but it always takes. if it takes more than it needs, the extra money taken can’t be used to start businesses that would supply jobs. the extra money taken or taxed away, is a drag on the economy.

next, spending in bad times if done by the government, is a waste of money. what should government spend money on? infrastructure? what if the infrastructure doesn’t need replacing or repair? should the money still be spent (wasted)? maybe it should be spent on solar or wind power? maybe it should be spent on electric cars? all of it is a waste of money taken from the public. the wpa and ccc were all ‘make work’ jobs that also wasted money. sure they got some things built. but the money would still have been better used if it were not taken from the private sector.

and even if the ’saving and spending’ were beneficial, it would still be impossible to do. good and bad times can only be seen in the rear view mirror. we are in bad times right now, but who can tell when they will end? who can tell when the good times will start or how long THEY will last? when will the bad times begin again? if anyone could answer these questions accurately, they’d be fabulously wealthy. no one can tell the future and that’s exactly what ’save in good times, spend in bad times’ requires. IT IS IMPOSSIBLE TO DO!

so the keynesians want us to do something impossible, that shouldn’t be done in the first place.

keynesianism doesn’t work, it never has and never will. it’s like Ben said.. balderdash.

Comment by happyfriday
2012-05-31 07:11:51

keynesianism doesn’t work, it never has and never will

Neither does Monetarism nor supply side. Any centrally planned system is doomed to fail at one time or another.

 
Comment by alpha-sloth
2012-05-31 07:39:43

keynesianism doesn’t work, it never has and never will.

Except for all those decades it did. (But those decades don’t count, of course.)

Comment by mathguy
2012-05-31 12:53:30

Alpha, it’s funny, because the thing you are saying worked wasn’t even Keynesian, it was worse than Keynesian. Keynesian is to create a budget surplus during good times, then spend the surplus during bad times. What happened was deficit spending in good times, then more deficit spending in bad times. If it was Keynesian and we were currently just spending a budget surplus to stimulate the economy I don’t think anyone here would have a problem with that. The problem is, people try to take our current poor system, call it Keynesian, and try to claim all the economic positives of the Keynesian philosophy. It’s not Keynesian what we are doing.. it’s just stupid. This is why there are calls for austerity.

Comment by alpha-sloth
2012-05-31 19:23:24

Clinton ran a surplus, W ‘gave it back’ to the wealthy as tax breaks, and started two very expensive wars (off the books, of course).

I agree it is hard to have a rational economic policy when half the country is a bunch of morons swayed by Faux News, but what can you do? You do what’s right and hope the idjits get a clue. Or at least their kids.

What happened was deficit spending in good times, then more deficit spending in bad times.

You must have one of those special Texas history text books, where the facts are changed to protect the guilty.

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Comment by Blue Skye
2012-05-31 07:44:18

” good and bad times can only be seen in the rear view mirror. we are in bad times right now…”

Award for concise contradictions.

Comment by tj
2012-05-31 08:18:03

you’re right Blue Skye. i shouldn’t have said “we’re in bad times now”. i can’t know that things haven’t changed and we’re starting ‘good times’.

the point is that no one can know when the ‘times’ are changing. we can only know that with the economic data that comes out after the fact. we can’t know that by the time we get the data, that the ‘times’ aren’t changing again.

timing the spending and saving is impossible. that’s why no one has done it. not to mention, it shouldn’t be done even if it could be.

Comment by Rental Watch
2012-05-31 08:36:06

Oh, I don’t know, Clinton did a decent job of not cutting taxes and spending more when he could (running a surplus).

We are a long way from those days though…demographics are going to make re-entry into those kinds of times very difficult, if not impossible.

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Comment by tj
2012-05-31 08:53:52

Clinton did a decent job of not cutting taxes and spending more when he could (running a surplus).

we would have been better off without it. and he didn’t know when any economic cycle was beginning or ending.

 
Comment by In Colorado
2012-05-31 10:31:10

we would have been better off without it. and he didn’t know when any economic cycle was beginning or ending.

The only President in recent memory who had a balanced budget was a Dem, a feat that NO Republican since Eisenhower has been able to accomplish. No wonder Cheney said that deficits don’t matter.

 
Comment by oxide
2012-05-31 11:00:02

we would have been better off without…[Clinton's surplus.]

Yuppers! And the Republicans and Bush got to work right away in getting rid of that evil surplus by cutting taxes. Twice. And covering the carnage with bubbles.

And why can’t a government save money? Do you mean there’s no mechanism for it, or because the politicians can’t keep their grubby hands off it?

 
 
 
 
Comment by polly
2012-05-31 07:54:59

Claiming that a government can’t “save” is absurd. The word is used as a short cut in describing the economic theory, but it isn’t meant to be taken literally. Governments can’t “take away the punch bowl” either, but everyone can figure out what that means.

Governments can engage in countercyclical spending - spending more when times are bad and there is a lot of slack in the labor market, and less when times are good and the private sector is doing a good job of keeping up employment. Governments tend to do all sort of “fun” building projects (remember my meme that you should be suspicious of any government project that can end with a photo op at a ribbon cutting ceremony) when times are good. That is totally counter to Keynes. They should be paying off their debt and doing as little as possible. Then they can borrow again when the next recession comes along and do major fixes on roads and bridges and update schools and whatever else is needed when labor and supplies are cheap.

I agree that it seems unlikely that governments will “save up” during good times so that there is a pool of money to use instead of issuing bonds, but so what? I would rather trust Wall Street to issue boring muni and state bonds than trust them with investing the money that is being saved up to update the waste water treatment plant.

Comment by tj
2012-05-31 08:27:28

Claiming that a government can’t “save” is absurd. The word is used as a short cut in describing the economic theory, but it isn’t meant to be taken literally. Governments can’t “take away the punch bowl” either, but everyone can figure out what that means.

we know what it means and that’s the point. it isn’t ’saving’ because government doesn’t ‘earn’ anything to save from. so the concept of government ’saving’ is wrong. it gives the idea that government earns or creates wealth to be saved. that kind of thinking is in error.

Governments can engage in countercyclical spending

no one can know when cycles will begin or end.. only that they have begun or ended. timing is impossible.

Comment by polly
2012-05-31 08:51:44

You don’t have to time it precisely. And it isn’t that hard to see when businesses are pulling back because private demand is falling.

Your nonsense about “can’t save because they don’t earn” is just that, nonsense. Any entity that receives money can spend all of those receipts or less than all of those receipts (or more than all of those receipts if it can borrow). Your artificial word games are boring.

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Comment by tj
2012-05-31 09:05:28

You don’t have to time it precisely.

economic cycles can be short and sharp. what if government is spending when it should be ’saving’? how precise do you think it could be?

Any entity that receives money can spend all of those receipts or less than all of those receipts (or more than all of those receipts if it can borrow).

government isn’t in business. it doesn’t sell products (although lately it has been trying to). it can’t save in the true sense of the word.

 
Comment by Neuromance
2012-05-31 09:36:03

tj: I think you’re on to something with the government can’t save concept. But that’s not because it’s not getting money - it’s because politicians are unable to practice the self-restraint required for fiscal prudence.

This is just a reality of human behavior. Politicians don’t even need to actually have money to spend it. Norquist got politicians to pledge they wouldn’t raise taxes in an effort to impose some spending restraint. But not raising taxes is easy for a feckless politicians. They’ll just borrow and spend. 8-O

If Norquist had tried to get politicians to sign a no spending increase pledge, he would have been burned in effigy on the Capitol steps.

 
Comment by tj
2012-05-31 10:00:04

Neuromance:

i’m just saying that the government has nothing that it doesn’t take from someone else. in order to save, one must set aside something one has earned, or created.

i’m not saying that government can’t spend less than it taxes. but that would just be unspent taxes, not savings.

 
Comment by measton
2012-05-31 11:04:47

government has nothing that it doesn’t take from someone else, in order to save, one must set aside something one has earned, or created.

This is really a rediculous statement. You’re only making a fool out of yourself.

So if I rob a bank I can’t save any of the money I steal. There are a lot of Wall Street Titans that seem to be saving quite a lot, most of it stolen in my view.

 
Comment by Neuromance
2012-05-31 11:32:03

tj wrote:

i’m just saying that the government has nothing that it doesn’t take from someone else. in order to save, one must set aside something one has earned, or created.

I could be a Mafia boss whose wealth comes from stealing from others. As long as my cash outflow is less than my cash inflow, I’m saving money.

I understand where you’re going with the government analogy. So look at it like you would the Mafia boss. So, clearly then, if the government’s cash inflow was greater than its outflow, it too could save money, like the Mafia boss does.

We could be quibbling about semantics - what is savings if not (cash outflow - cash inflow)?

There’s nothing in that equation that says the cash inflow must be of a certain moral caliber or from a certain source.

Or is there another definition of savings you’re thinking of?

 
Comment by tj
2012-05-31 12:13:16

We could be quibbling about semantics

yes, we are. i probably shouldn’t have mentioned it. if people want to believe that the government can save, they are free to believe it. i see a difference, that’s all.

There’s nothing in that equation that says the cash inflow must be of a certain moral caliber or from a certain source.

it’s a mindset. i was trying to point out a subtle difference between what most people think government saving is, and what private saving is. my argument that government ’saving’ is detrimental to the economy, no matter what it is called, still stands. it’s detrimental because it slows the capital formation that’s needed to start new businesses.

Or is there another definition of savings you’re thinking of?

no, it’s a minor point that’s detracting from the discussion.

 
Comment by measton
2012-05-31 12:38:12

it’s a mindset. i was trying to point out a subtle difference

Oh yes, It’s a fine line between stupid and clever. Spinal Tap

 
Comment by Al
2012-05-31 13:01:56

tj,

Let’s assume then that governments can retain tax revenues instead of spending them (but we won’t call this saving.) Then money would be available to engage in countercyclical spending.

The government could base the budgets on the actual expenditure from 3 years previous. Under normal circumstances of some level of economic growth, this would produce small surpluses that would accumulate as strategic reserves or some such (but not savings).

In a prolonged downturn the government would have the ability to keep the budget fixed instead of reducing it, drawing on the reserve. This would prevent having governments cut spending in response to an economic downturn, which reinforces the deflationary pressure. Furthermore, the government could institute emergency spending if the downturn is obvious (like this one you managed to spot) then additional spending from the reserve could be made.

The main impediment to Keynsian theory was identified Neuromance (at 2012-05-31 11:32:03), as well as not understanding what is really is.

 
Comment by tj
2012-05-31 13:06:43

Neuromance:

what is savings if not (cash outflow - cash inflow)?

it’s profit or loss. profit can be spent or saved.

 
Comment by tj
2012-05-31 14:46:54

Al,

Let’s assume then that governments can retain tax revenues instead of spending them (but we won’t call this saving.) Then money would be available to engage in countercyclical spending.

ok, but it’s easier to just go ahead and call it savings. by now we know what each other means by it.

The government could base the budgets on the actual expenditure from 3 years previous. Under normal circumstances of some level of economic growth, this would produce small surpluses that would accumulate as strategic reserves or some such (but not savings).

i don’t think we can assume true economic growth. the economy is getting so sick that growth may stop at any time.

however, for the sake of your argument we can assume government will have some ’savings’..

In a prolonged downturn the government would have the ability to keep the budget fixed instead of reducing it, drawing on the reserve.

yes, but the reserve was built at the cost of stopping growth that would have prevented a big downturn in the first place. for you and i, it is prudent to save (provided our dollars aren’t being devalued). however, for the government the optimal economic strategy is to stay out of markets.

This would prevent having governments cut spending in response to an economic downturn, which reinforces the deflationary pressure.

governments should continually seek to minimize spending no matter how good it thinks the economy is.

Furthermore, the government could institute emergency spending if the downturn is obvious (like this one you managed to spot) then additional spending from the reserve could be made.

’stimulative’ or ‘make work’ spending is wasteful. the money that is spent can’t be called back. yes, it’s out in the economy, but it was spent in a very inefficient way. it will take time and effort to get it into useful pools of capital again. pools of capital are required to invest in capital intensive industries that created wealth and high paying jobs.

The main impediment to Keynsian theory was identified Neuromance (at 2012-05-31 11:32:03), as well as not understanding what is really is.

keynsian theory is a myth concocted and peddled by one man.

classical economics has been studied for hundreds of years. many men have contributed to the knowledge base. it is time tested. the keynesians have tried to obscure classical economics
with muddled nonsense. they want to tear down the very thing that’s given all of us so much. free market capitalism.. the only thing that makes all our lives better. it asks for our labor but gives much more in return.

 
Comment by Al
2012-05-31 20:16:14

“i don’t think we can assume true economic growth. the economy is getting so sick that growth may stop at any time.”

My theory applies to normal circumstances. Currently things are very bad and I don’t believe there is a good way out.

“yes, but the reserve was built at the cost of stopping growth that would have prevented a big downturn in the first place.”

So you’re suggesting that not creating a reserve based upon saving a small amount equivalent to the growth in the economy would prevent a big downturn. Apparently Keynes was more right than I expected, as I believed that the economy was more powerful than government. I believed that the most government could do was offset some of the effects of a downturn, as apposed to preventing it. It seems you are more Keynsian than I.

“…which reinforces the deflationary pressure.”

Your response suggests you do not understand deflationary spirals.

“’stimulative’ or ‘make work’ spending is wasteful.’

A government that practices restraint during the good times will have beneficial projects during the bad, such as infrastructure and fleet replacements. Do you believe that law enforcement and roads shoud be a purely private sector endeavor?

Your last paragraphs suggests you have not studied Keynesian theory, but have instead accepted what recent economists/politicians have presented as Keynesian theory. They have badly distorted it to support unworthy political goals.

 
Comment by tj
2012-05-31 20:55:55

Apparently Keynes was more right than I expected, as I believed that the economy was more powerful than government. I believed that the most government could do was offset some of the effects of a downturn, as apposed to preventing it.

economies aren’t more powerful than government. big government weakens and even destroys economies over time. the essence of government is force. any use of force is anti-free market.

It seems you are more Keynsian than I.

if you believe that i am any degree of keynesian at all, then you don’t understand keynesianism or you don’t understand me.

Your response suggests you do not understand deflationary spirals.

you wrote “…which reinforces the deflationary pressure.”, not me. you are arguing against yourself.

Do you believe that law enforcement and roads shoud be a purely private sector endeavor?

yes, they could deliver the services cheaper and better than government.

Your last paragraphs suggests you have not studied Keynesian theory, but have instead accepted what recent economists/politicians have presented as Keynesian theory. They have badly distorted it to support unworthy political goals.

who are ‘they’? what are the distortions? i can’t refute your reasoning if you don’t show how you came to these conclusions.

 
Comment by Al
2012-06-01 05:20:45

tj, I see you are a 100% antigovernment type which is a position that has no logical underpinnings. Government always emerges, whether it be a Republic, warlords or HOAs. I suggest you conduct a though experiment on what would happen in the absence of government, without getting to hung up on the current state of affairs. If you can come around to a conclusion that some level of government is necessary, then ask yourself how do they plan their taxing and spending. Since government can’t accurately predict receipts or expenditures, my approach is one of two that make sense.

 
Comment by tj
2012-06-01 07:33:00

tj, I see you are a 100% antigovernment type which is a position that has no logical underpinnings.

you see things that aren’t true. i’ve never been an anarchist. nothing i’ve said can be interpreted to mean that i want to end government. we need government to protect our property and our personal rights.

but government has gone way, way beyond its proper role.

what i’m a 100% against is government going beyond its intended role. government has no right to be involved in markets. it’s too stupid to know that it hurts both us and itself when it does intervene in markets.

 
Comment by Al
2012-06-01 09:00:51

If goverment shouldn’t be looking after roads and law enforcement, what do you see government doing?

Also, if government does have a role, then why not use the Keynesian system I laid out earlier as a way of approaching budjeting? How would you approach it?

 
Comment by tj
2012-06-03 08:19:45

i came back to this thread to check something and just now saw your post. i’ll answer you even though it’s late.

If goverment shouldn’t be looking after roads and law enforcement, what do you see government doing?

federal government should protect our rights, property and lives against aggression or coercion. it should protect citizens against enemies both foreign and domestic. it should do nothing else.

states claim other powers that aren’t for federal government and don’t violate the constitution. the founders felt that naming the people’s rights would limit them, because in fact they’re almost limitless. too many to name. so instead, they restricted what the government is allowed to do. it’s called ‘negative rights’ and it’s the most powerful way to ensure freedom.

 
 
 
Comment by Arizona Slim
2012-05-31 08:56:04

Governments tend to do all sort of “fun” building projects (remember my meme that you should be suspicious of any government project that can end with a photo op at a ribbon cutting ceremony) when times are good.

One side of me agrees with the above. But the event photographer on the other side does not wish to be deprived of photo ops.

Dang. I’m just a walking contradiction.

Comment by polly
2012-05-31 09:12:28

The one exception that I came up with was waste treatment plants. I think that they do need to be built and updated occasionally and since it is an actual location, I think that photos could be done. Not anywhere near as nice as the “new downtown commercial district” or the sports stadia, but we can get you a photo gig every once in a while. Can you make those sludge ponds look good? Now that is a challenge for the photographer.

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Comment by Arizona Slim
2012-05-31 09:42:45

Believe it or not, I have done sewage-related photography. More than once, in fact. I now present to you…

Example #1. And Example #2.

 
Comment by polly
2012-05-31 15:09:54

Doesn’t count. Craggy, interesting pump guy is much more photogenic than a sludge pond. I like the pictures.

 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 23:42:57

“Government saving” = employ lots of otherwise-unemployed construction workers to build infrastructure when the economy is in the flusher.

I’ve seen plenty of evidence that has happened over the past four years, though I have heard Obama receive little credit for the effort…

 
 
Comment by Darrell in Phoenix
2012-05-31 08:09:10

Keynesian economic philosophy is fine tuning a fundamentally sound economy.

If you are putting on a few extra pounds, perhaps you should eat less and exercise more.

If you are already trim and starting to lose weight from lack of food, perhaps you should eat a little more.

For the last 35+ years, our economy has had a gun shot wound called trade deficits that have been causing ever increasing amounts of blood to pour forth from it.

Those attacking Keynesian economic philosophy using economic data of the last 40 years are doing the equivalent of saying that dietary nutrition guidelines are balderdash because people with good nutrition still die when a loaded gun is put to their chest and the trigger is pulled.

Trade imbalances can persist only as long as there is new money being created to fund them. Since money is borrowed into existence, increasing money supply is offset by increasing debt. Debt can not grow faster than incomes, forever. Therefore, large trade imbalances that are larger than can be funded by increasing wages, can not persist forever.

Our current economy is plagued by massive trade imbalances, which we have embraced as the key to prosperity. That has worked well for the few, but has been an economic disaster for the masses, and can not possibly be persisted indefinitely.

We attack a philosophy that was intended to fine tune a fundamentally sound economy, while ignoring the massive flaws in our economy that make it fundamentally unsound.

Meanwhile, even though it is self evident, I still struggle to convince people that money is borrowed into existence and is alway offset by an equal amount of debt.

We are doomed.

Comment by tj
2012-05-31 08:48:18

Keynesian economic philosophy is fine tuning a fundamentally sound economy.

even if it could be done, a fundamentally sound economy doesn’t need to be ‘fine tuned’.

If you are putting on a few extra pounds, perhaps you should eat less and exercise more.

adding or losing weight has nothing to do with economics.

For the last 35+ years, our economy has had a gun shot wound called trade deficits that have been causing ever increasing amounts of blood to pour forth from it.

according to adam smith in ‘the wealth of nations’, trade deficits are nothing to be concerned about.

Trade imbalances can persist only as long as there is new money being created to fund them.

ultimately, trade imbalances are self-correcting. it would be nice to always be on the plus side, but i don’t think that will happen.

Meanwhile, even though it is self evident, I still struggle to convince people that money is borrowed into existence and is alway offset by an equal amount of debt.

debt is half of every single transaction. it’s not the bogeyman that people think it is.

Comment by Darrell in Phoenix
2012-05-31 09:09:03

“even if it could be done, a fundamentally sound economy doesn’t need to be ‘fine tuned’.”

Incorrect. Even a fundamentally sound economy will have good times when people are freely spending, borrowing, burning savings, because there are plenty of jobs, customers, and opportunities. Boom.

All that borrowing and spending will get people into an overextended situation where they decide that maybe they should slow down a bit and begin paying back debt, or maybe rebuilding savings. This causes a slowing economy, making more people pull back.

In short, both the boom and the bust are self-reinforcing short-term, but unsustainable long-term.

Keynesian economic philosophy applies to this normal business cycle that occurs even in fundamentally sound economies. The government should be pulling money out of the economy during the boom, so make sure the high does not get too high, as a bust is sure to follow. When the bust comes, the government should be putting more money into the economy to prevent the low from becoming too low.

We have not had a fundamentally sound economy for 40+ years, so any attempt to use data of the last 40 years to disprove Keynesian economic philosophy is akin to arguing that nutrition guidelines are balderdash since good nutrition does not prevent death from a gun shot wound.

“adding or losing weight has nothing to do with economics.”

It was a metaphor for a growing and shrinking money supply. And the metaphor does apply.

“according to adam smith in ‘the wealth of nations’, trade deficits are nothing to be concerned about.”

I must have missed that part. If he truly believed this, then he must have only been focused on the short-term, of deficits that were a fairly small percentage of the economy that can be absorbed by generally increasing economic activity.

Perhaps you are confusing Adam Smith and Dick Cheney.

Trade deficits are funded by new money being borrowed into existence, resulting in increasing debt. Trade imbalances that generate new debt faster than a sustainable rate, are ultimately unsustainable.

“ultimately, trade imbalances are self-correcting. it would be nice to always be on the plus side, but i don’t think that will happen.”

Yes, by cascade debt default into depression, if we do not attempt to attack and reverse the imbalances directly.

“debt is half of every single transaction. it’s not the bogeyman that people think it is.”

Oh, I fully agree. I do not think a money supply based on, and offset by, debt is a bad thing IF!!!!!

If we keep total debt at a reasonable level where it can be paid on and for.

Over the last 30 years, we have increased per household share of total debt from 2.5x median income to 5.5x median income.

That is NOT increasing debt at a sustainable rate. That, long-term, IS the bogeyman that will get us eventually.

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Comment by tj
2012-05-31 09:52:18

“even if it could be done, a fundamentally sound economy doesn’t need to be ‘fine tuned’.”

Incorrect.

ok, how do you ‘fine tune’ a fundamentally sound economy? how do you know your ‘fine tuning’ won’t make a fundamentally sound economy sick?

and..

if an economy is fundamentally sound, why do you need to fine tune it?

Yes, by cascade debt default into depression, if we do not attempt to attack and reverse the imbalances directly.

a cascade debt default would only happen after prolonged government ‘help’ to save the day such as the various bailouts.

Trade deficits are funded by new money being borrowed into existence, resulting in increasing debt.

they can be ‘funded’ by old money that has been saved.

if i’m a millionaire and buy $200,000 of goods from china and sell $100,000 to them, i’ve got a trade deficit of $100,000 dollars. but no new money was created for my ‘deficit’. perhaps i’m reseller and sell the goods i bought for $400,000. does my trade deficit matter then?

 
Comment by Darrell in Phoenix
2012-05-31 10:54:48

“ok, how do you ‘fine tune’ a fundamentally sound economy? how do you know your ‘fine tuning’ won’t make a fundamentally sound economy sick? ”

Well, if you know population in increasing 1%, and wages 2%, then you can say that household debt increasing at a rate above 3.02% a year is unsustainable. If you see, like, say.. 13% per year increase in household debt like happened from 1981-1985, Reagan’s first tern, you may think… hmmm… household debt is increasing at an unsustainable high rate. Let’s increase the reserve requirement and increase interest rates to bring down that rate of new debt creation.

But, of course, you do not need to wait 5 years between fine tunings. You can do it every few weeks. The above is monetary policy.

You can use the new debt generation numbers to track money supply. Hmmmm… money supply is not increasing as fast as we want to keep up with increased production and target inflation. Let’s lower taxes, or go ahead and do that extra highway construction billl, so that it is the government increasing the money supply at the target rate. This is fiscal policy.

Unfortunately, we have not been able to fine tune the economy because we have trade imbalances approximately 10% of GDP. We’ve been forced to keep debt increasing at unsustainable levels, to keep new money generation at levels high enough to fund the trade imbalances.

“a cascade debt default would only happen after prolonged government ‘help’ to save the day such as the various bailouts.”

Whatever. I am growing less confident in your knowledge of economics and history.

“they can be ‘funded’ by old money that has been saved.”

1) where did that money come from?
2) with trade imbalances (domestic and international) amounting to 10% of GDP for 3 decades, what old money is left?
3) Debt is not generated when goods are bought and sold for money. The term “making money” is a misnomer since trading changes money from one hand to another.

Let’s say you manufacture some goods. Someone else borrows $200K from the bank to buy those goods from you. The debt creation was when they borrowed the money into existence, not when you “made money” by selling the goods to him.

Now, you use the $200K to buy goods from China and bring them to the USA to sell. People in the USA don’t have the money to buy, because you gave the money to someone in China, so they go to a bank and borrow another $400K into existence and use that to buy the goods from you.

You “made” $200K on the trade, but the trade did not really “create” money. The money was created when your customers borrowed the money that they needed to buy your goods.

Money can change hands without the transaction generating debt. New money can not come into existence without it generating debt.

 
Comment by tj
2012-05-31 12:44:00

Well, if you know population in increasing 1%, and wages 2%, then you can say that household debt increasing at a rate above 3.02% a year is unsustainable.

debt is self-resolving at any scale. no ‘adjustments’ are needed.

Hmmmm… money supply is not increasing as fast as we want to keep up with increased production

money supply doesn’t have to keep pace with production. prices can fall. only keynesians fear falling prices. it’s a fear that causes us to do stupid unproductive things like artificially increase the money supply.

Whatever. I am growing less confident in your knowledge of economics and history.

i’ve answered your questions to this point because you have been thinking and unemotional. if i get another insult, i’m done answering you.

where did that money come from?

where it came from is irrelevant. i don’t expect you to believe me, but it’s true.

with trade imbalances (domestic and international) amounting to 10% of GDP for 3 decades, what old money is left?

all of it.

Debt is not generated when goods are bought and sold for money.

then why are you worried about the trade deficit?

The term “making money” is a misnomer since trading changes money from one hand to another.

trading creates wealth. and it is ONLY wealth that allows jobs to be created.

Let’s say you manufacture some goods. Someone else borrows $200K from the bank to buy those goods from you. The debt creation was when they borrowed the money into existence, not when you “made money” by selling the goods to him.

the money you borrowed was “old money”, unless you borrowed directly from the FED.

You “made” $200K on the trade, but the trade did not really “create” money.

the trade created wealth, not currency/money.

 
Comment by ahansen
2012-05-31 23:23:59

Thank you, tj.

This (semantic) thesis is so full of holes and caveats as to be gibberish, and no matter how many times we’ve offered refutations or pointed out its logical fallacies, they are ignored in favor of trumpeting a different iteration of the same line. Nothing evolves here, no revisions are offered, we learn nothing from the discussion.

Moreover, it utterly ignores the realities of international trade, treaties, and finance. The US is not a closed system, money is not debt, merely a medium of exchange, and this seemingly endless drivel will never pass critical peer review.

Sadly, the author has numerous relevant observations to add to the overall discussion, but wading through these posts is like banging my head against a desktop and I’m going to have to defer to the Joshua Tree extension until it stops. But thanks for trying….

 
Comment by tj
2012-05-31 23:43:38

Ahansen, thank you for the post.

nothing much may evolve here, but i think you may have evolved/grown. i hope all is well with you.

 
Comment by ahansen
2012-06-01 00:23:01

Doing peachy, tj, thanks for asking. Just curious in what sense you think I might have “evolved”? My opinions seem to arouse passions from all sides of the ideological arena. :-)

 
Comment by tj
2012-06-01 00:36:53

i remember a long time ago your opinion on economics was a little different than now. i think you have been learning. and i think it’s great that you have. we should all keep learning through life. i hope to never stop.

 
Comment by ahansen
2012-06-01 21:59:20

My opinion on economic policy has always been pragmatic, though globalist and bearish. But as I said, the way it’s been interpreted tends to incite passions all over the ideological spectrum. (Politically, I’m pretty close to DiP’s orientation– I think.)

:-)

 
 
Comment by michael
2012-05-31 13:49:03

“In effect, our country has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4% more than we produce–that’s the trade deficit–we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own.” - Warren Buffet

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Comment by measton
2012-05-31 11:00:34

“governments can’t ’save’. they can only take less or take more money.”

A: Saving does not equal not taxing. I have an income and if my income is high I can pay down my debt and even put some in the bank. Gov can certainly pay down debt.

” if it takes more than it needs, the extra money taken can’t be used to start businesses that would supply jobs.” .

A: It can create tax breaks for job creation, it can provide seed money for start ups it certainly can create jobs.

the extra money taken or taxed away, is a drag on the economy

A: Your crowding out theory has fallen. Interest rates are at rock bottom despite our deficit spending. You simple equation doesn’t hold up to reality.

“spending in bad times if done by the government, is a waste of money. what should government spend money on? infrastructure? what if the infrastructure doesn’t need replacing or repair?

A: REally you don’t think our infrastructure could be improved. You think that allowing our infrastrucuter to crumble will improve the business climate in the US. Crazy. You think decreasing our reliance on imported oil that has siphoned off trillions over the last decade or two would be bad for the US. That’s Crazy

“sure they got some things built. but the money would still have been better used if it were not taken from the private sector. ”

Really and what’s to say that the private sector wouldn’t just sit on the money during bad times. That’s what is happening now. Corporations have huge cash reserves no one wants to spend because the consumer is dead.

“good and bad times can only be seen in the rear view mirror. we are in bad times right now, ”

A: You just contradicted yourself. I’m pretty sure people can tell when we are in good times and bad.

“keynesianism doesn’t work, it never has and never will. it’s like Ben said.. balderdash.”

A: Read up on the great depression and see what’s going on in Europe. Then get back to us.

Note I’ve been in the deflation camp for a while now so Austerity will only make me richer, it’s still the wrong thing to do. Particularly after bailing out the elite. The wealth concentration in this country is destroying democracy and everyone’s future.

Comment by nickpapageorgio
2012-05-31 20:57:21

““sure they got some things built. but the money would still have been better used if it were not taken from the private sector. ””

Keynesianism is just another ism, but outside of the isms you do have projects that only the government could back and coordinate using private contractors and such. No private company is ever going to say “hey, let’s build an interstate highway system” or “hey, lets build the boulder dam”. Take those or add in a national high speed rail system, etc, those are projects that benefit reclamation, agriculture, interstate commerce, transportation and benefit the country as a whole.

The problem is that we have corruption, political motivations and greed that eventually get in the way of common sense, making it impossible to have fair bidding on contracts and pretty much impossible to even agree on what projects we actually need going forward.

Comment by ahansen
2012-05-31 23:29:35

Agree 100%.

(Shaking my head in wonder) :-)

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Comment by nickpapageorgio
2012-06-01 02:30:14

I’m glad you agree. A lot of those large projects are some of the few things left that make me proud to be an American.

 
 
Comment by tj
2012-06-01 00:16:54

No private company is ever going to say “hey, let’s build an interstate highway system” or “hey, lets build the boulder dam”.

actually, if the private sector saw a way to make a profit, they would build a highway system. maybe they could eliminate tolls with advertising. i really believe that our roads would be cheaper in private hands.

the same goes for a dam. if they can profit from the electricity sold, they would build a dam. financiers would bring the capital together from various sources. electricity would be cheap and profits would be made. everyone would be better off.

for years the liberals claimed the private sector could not afford to go into space. but there was no economic reason to go into space back in the 60s. only military reasons. then came satellites and soon there came reasons for men to go into space. now we have spacex doing what the federal government can no longer afford to do, (re supplying the space station)

all these things can be done much better in the private sector. but we have been conditioned all our lives to believe the fallacy that only the government is big and strong enough to do it.

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Comment by ahansen
2012-06-01 00:34:06

NASA had 40+ years of government subsidy that defined the field, but now the “cost-plus” financing is over. Private industry is able to step in only because of the massive (tax-funded) spending on aerospace that created the industry in the first place.

Nor would there be a need to service the ISS via private industry, unless it was massively subsidized to begin with. I’d argue the same with our transportation, education, health, ag, etc. privatized industry.

The government,(we the people) built these industries and infrastructures yet private interests have cronytized them into the oligarchy we see today. An oligarchy paid for even still by we the people.

 
Comment by nickpapageorgio
2012-06-01 02:37:00

I think there is room for both TJ, think about the Empire State Building and the Hoover Dam. Both projects were inspirational and provided optimism to a nation mired in the depression. I don’t want the government funding skyscrapers and I don’t want private corporations funding infrastructure projects like the hoover dam.

 
Comment by tj
2012-06-01 07:21:51

and I don’t want private corporations funding infrastructure projects like the hoover dam.

but if they can do it better, and with none of our tax dollars, why not?

 
 
 
 
 
Comment by 2banana
2012-05-31 06:57:15

Amazing how many people don’t want to be in a public union when given the CHOICE.

However, liberals and democrats want to keep forcing people to join public unions against their will.

Why?

Membership == revenue == political power.

And the liberals/democrats get a huge CUT of the union dues and power.

——————-

Wisconsin unions see ranks drop ahead of recall vote
Wall Street Journal

Public-employee unions in Wisconsin have experienced a dramatic drop in membership — by more than half for the second-biggest union — since a law championed by Republican Gov. Scott Walker sharply curtailed their ability to bargain over wages and working conditions.

Now with Mr. Walker facing a recall vote Tuesday, voters will decide whether his policies in the centrist state should continue — or whether they have gone too far. The election could mark a pivot point for organized labor. Mr. Walker’s ouster would derail the political career of a rising Republican star and send a warning to other elected officials who are battling unions.

But a victory for the governor, who has been leading his Democratic opponent in recent polls, would amount to an endorsement of an effort to curtail public-sector unions, which have been a pillar of strength for organized labor while private-sector membership has dwindled.

That could mean the sharp losses that some Wisconsin public-worker unions have experienced is a harbinger of similar unions’ future nationwide, union leaders fear. Failure to oust Mr. Walker and overturn the Wisconsin law “spells doom,” said Bryan Kennedy, the American Federation of Teachers’ Wisconsin president.

Wisconsin membership in the American Federation of State, County and Municipal Employees-the state’s second-largest public-sector union after the National Education Association, which represents teachers-fell to 28,745 in February from 62,818 in March 2011, according to a person who has viewed Afscme’s figures. A spokesman for Afscme declined to comment.

Comment by Realtors Snort Bath Salts®
2012-05-31 07:24:16

Go Goonman!

 
Comment by WT Economist
2012-05-31 07:58:27

Unions enriched their older members and screwed their younger members. When I worked for the government, I wouldn’t have joined if I had a choice.

The “closed shop” argument is that since all workers got the benefits, all should pay the dues. That argument hasn’t held water since the advent of multi-tier contracts in the early 1980s.

 
Comment by turkey lurkey
2012-05-31 07:59:23

“…since a law championed by Republican Gov. Scott Walker sharply curtailed their ability to bargain over wages and working conditions.”

Choice? What choice?

Cabana boy, you really should seek help for masochistic tendencies. Do you never tire of being wrong?

Comment by goon squad
2012-05-31 08:12:00

Living wages and benefits like health insurance and pensions for woker bees are THEFT from the John Galt, “producer”, job creators…

Comment by Northeastener
2012-05-31 10:27:37

Living wages and benefits like health insurance and pensions for woker bees are THEFT from the John Galt, “producer”, job creators…

My sarcasm sensor is going off…

In all seriousness, how do we justify the wages and living conditions of a large percentage of the population of the world, say 2+ billion people between China and India, and the wages and benefits and pensions of workers here in the US. Are US workers that much smarter? More productive? More deserving?

I’m all for increasing jobs in the US, the higher paying, the better. But I’m running smack into that “producer-job-creator-John Galt” thing where wages of developers in India, China, Ukraine, and Russia are significantly cheaper than here in the US… giving me no choice but to go with the outsourced labor to get my code developed. When I can afford US labor, I will pay it, but not until then.

Rock, meet hard place… as long as free-trade exists, labor costs will move towards equilibrium, which means the majority in the US will move down in living standard compared to previous generations while those overseas continue to move up.

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Comment by In Colorado
2012-05-31 11:08:20

“Are US workers that much smarter? More productive? More deserving?”

We were just talking about our Beijing counterparts in a staff meeting. On thing they are notorious for is being utterly unable to deal with ambiguity. They need their objectives and tasks to be clearly spelled out in black and white by their bosses.

“Rock, meet hard place… as long as free-trade exists, labor costs will move towards equilibrium, which means the majority in the US will move down in living standard compared to previous generations while those overseas continue to move up.”

The fly in the ointment with globalization, which is essentially a race to the bottom, is that you end up without a middle class to “consume” all the pricey goods being produced by the Foxconn slaves.

 
Comment by measton
2012-05-31 11:09:22

Rock, meet hard place… as long as free-trade exists, labor costs will move towards equilibrium, which means the majority in the US will move down in living standard compared to previous generations while those overseas continue to move up.

Yes and we should all just accept this. There is no way we could keep the average standard of living higher in the US?

 
Comment by turkey lurkey
2012-05-31 11:15:16

How about we take away the tax breaks given to companies SPECIFICALLY REWARDING sending our jobs overseas and see if it’s competitive then.

Also, it’s being proven time and time again that American quality is far superior to Chindia quality.

So stop buying into and spreading the myth of cheaper and better quality. Those are lies created to target unions and wage workers in general.

 
Comment by Northeastener
2012-05-31 11:37:15

So stop buying into and spreading the myth of cheaper and better quality. Those are lies created to target unions and wage workers in general.

My point is that without cheap, overseas labor, I wouldn’t be able to afford to bootstrap my company, as we’re an underfunded startup. For those who lament cheap foreign labor (and as a software developer, I have railed against it for some time), it’s adding value in this case.

What is good for me and my company (micro) is bad for the US economy as a whole (macro)? Or is it adding value that seldom gets calculated, even at the macro level (entrepreneurship, eventual job creation, wealth creation)? Would my company exist if I was forced to pay “union” wages to produce code domestically? That answer is unequivocally no…

 
Comment by Northeastener
2012-05-31 11:44:05

Yes and we should all just accept this. There is no way we could keep the average standard of living higher in the US?

I refuse to accept it for myself and my family. In aggregate however, I don’t see how it can be changed. The trade imbalances are killing us. Our government spending is killing us. Our population, in aggregate, isn’t competitive (see international rankings in math and science, college graduation, etc.). Our domestic wages are significantly higher than many of our (free) trade partners.

In the past, I’ve looked to countries like Germany as an example of protecting a domestic economy successfully. Now, I’m just worried about me and mine and achieving a successful result with the startup… Maybe when things calm down and we’re in a better position financially, I can refocus on the politics of economic competitiveness.

 
Comment by In Colorado
2012-05-31 11:50:48

“The trade imbalances are killing us.”

Then we need to make our own stuff, pay a little a little more for it and stop supporting foreign countries.

But no, instead we spew soundbites about the government picking winners. Well guess what? It already is, and its not us.

 
Comment by Northeastener
2012-05-31 12:39:59

Then we need to make our own stuff, pay a little a little more for it and stop supporting foreign countries.

That’s part of the “rock meet hard place”: i.e. don’t have the money to afford domestically sourced product. That runs from my little startup to those Lucky Duckies shopping at Walmart on a fixed budget. Only so much money to go around…

 
Comment by Darrell in Phoenix
2012-05-31 13:29:47

“Only so much money to go around…”

The only limit to how much money there can be, is the ability to service the offsetting debt that money creation causes.

There is a TON of money. Literally $38T dollars, and that is just the dollars.. there are TONS of money in other countries’ currencies.

The problem is, most of the money is in very few hands, and those people are all uppity and are all like… I’m not spending any money unless I can earn even more in return, and since me and my fellow 1%ers already have the vast majority of this money that exists, and all the 99%ers are so tapped out that they can’t borrow any more money into existence, so I can’t sell anything to them, so can’t sell anything profitably, so I’m just not going to spend any of my money. I’ll loan it to the government at 1.6% instead.

 
Comment by turkey lurkey
2012-05-31 13:43:08

The “paying more” meme is bullcrap.

ABC News has proven and even has a website that shows that most American made products are the same price as their Chinese/foreign counterpart AND of higher quality.

Damn people! How many times do I have to say this? This myth is our biggest problem!

You want to fix it? Quit believing this bullcrap of higher cost if it’s made here!

 
Comment by Arizona Slim
2012-05-31 13:57:52

You want to fix it? Quit believing this bullcrap of higher cost if it’s made here!

Good point.

It’s not as if the iPads and iPhones are bargain basement priced. Far from it. Isn’t it something like 500 bucks for one of those pads?

 
Comment by Northeastener
2012-05-31 14:22:54

The “paying more” meme is bullcrap.

LOL.

Yeah right… I guess the following math is “bullcrap”:
US-based software developer annual salary+benefits: $100k+
Offshore developer hourly contract rate annualized: $19,200

Savings to company: $80,800 annually.

Next.

 
Comment by polly
2012-05-31 15:28:10

God luck maintaining the software written by the foreign contractor. Hint - better be sure that you specify that you need accurate comments in idiomatic American English for every line of code.

 
Comment by Arizona Slim
2012-05-31 15:41:44

God luck maintaining the software written by the foreign contractor. Hint - better be sure that you specify that you need accurate comments in idiomatic American English for every line of code.

I think the hint will be the deal-breaker. Very few foreign contractors can handle the commenting part.

 
Comment by Al
2012-05-31 20:55:55

“ABC News has proven and even has a website that shows that most American made products are the same price as their Chinese/foreign counterpart AND of higher quality.”

You say price, yet the question is cost. Same price, lower cost = big profits. Which company will survive?

 
Comment by sleepless_near_seattle
2012-05-31 23:20:13

Bingo, Al. Can’t tell you how many times I’ve looked at outdoor gear at places like REI and rolled my eyes at the prices of products made overseas. $65 for a button down shirt? Please.

 
 
 
 
Comment by Darrell in Phoenix
2012-05-31 08:11:01

If the problem is the structure of the union, that is not serving int membership, perhaps we should attack that structure, and not the concept of workers banding together to protect their mutual self-interest.

Comment by WT Economist
2012-05-31 08:53:32

The most effective union in the country is the union of top executives and directors, and it isn’t a closed shop. A mutuality of interest is all they need to work together to screw the rest of us.

 
 
Comment by In Colorado
2012-05-31 08:32:33

“Amazing how many people don’t want to be in a public union when given the CHOICE.”

They must hate having pensions, job security and wages that keep pace with inflation.

Then I’m reminded of a former tea bagger colleague who quit her low paid, no pension, no job security private sector job to go work for the government.

Funny thing about her, she once told me she would NEVER work for the government.

Comment by Darrell in Phoenix
2012-05-31 08:48:58

My dad HATES, HATES, HATES big government… all of it.

Oh, except defense, since he worked his entire career building satellites to detect and track Soviet ICBMs launched at the USA.

Oh, and of course, Social Security and Medicare, since he is now living on those… those are good to.

Oh, and, of course, the war on drugs, prisons, law enforcement, homeland security.

And, transportation. We need roads, airports, coast guard, etc.

Ah, and VA, since he, like I, is a US Navy vet.

And, he thinks we should probably keep paying interest on our national debt.

Oh, and education, though he’s sure we need to bust the unions to bring down the cost, but he doesn’t want to totally de-fund public education.

Okay dad, so you hate EVERY bit of big government, except the 85% of that big government that you like.

No wonder I make him so angry. I used data to determine truth. He prefers the truth that is whatever he decides it to be.

Comment by In Colorado
2012-05-31 10:04:20

“He prefers the truth that is whatever he decides it to be.”

AKA Truthiness.

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Comment by polly
2012-05-31 15:30:05

I think your dad is keeping more than 85% of the government. Might be interesting to add it up for him and see what he says.

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Comment by X-GSfixr
2012-05-31 12:42:58

And how much of this is due to layoffs, resignations, and early retirement buyouts?

The Republicans have this figured out.

-Cut the pay/benefits of government employees, so the ones that can go somewhere else, will.

-Then load up the ones that remain with workloads they can’t handle. Then complain about how government “doesn’t work”.

-Start a contractor business, charge public sector prices, pay private sector wages and benefits, and pocket the difference.

 
 
Comment by Martin
2012-05-31 07:08:27

This message is for Overtaxed:

I read your notes you mentioned yesterday about jobs in your company and how hot the storage/server/OS side are these days due to cloud computing. Would it be possible for me to talk to you more and get your thoughts on certifications etc. as I may be applying for a change and I’m in the HW side of IT. I can provide my email ID.

Comment by Overtaxed
2012-05-31 10:04:31

Sure. I’m not sure how to go about getting your e-mail address, but, if you can get it to me (or Ben, if you can help) I’d be happy to share some of the skills that we’re typically recruiting for in my area of the company.

Comment by Martin
2012-05-31 20:10:11

Thanks, you can email at forvg at hot male.

 
 
 
Comment by happyfriday
2012-05-31 07:16:20

Not sure what it says about me but I am really enjoying the Fadebook free fall.

Comment by goon squad
2012-05-31 07:20:06

Enjoying it immensely. LOOSERS!

 
Comment by Martin
2012-05-31 07:26:56

FB stock may touch 20 by July. I’m glad I waited and didn’t buy it.

Comment by Bill in Los Angeles
2012-05-31 07:39:53

I cannot see FB going up above $40 unless they come out with a seemingly unrelated but very useful product, just as Google was once just a silly worthless search engine but came out with the Droid. A FB phone, IMO, won’t do it for FB.

The last couple of days I learned more about some privacy issues that make me dislike FB even more. If you take a picture with your GPS smartphone, your location is embedded in the 1s and 0s of the image. Then you send the image to FB and even though FB claims to strip it away, someone with an app can read your location. Very eerie. Also it is a must to delete apps when you do not use them.

Comment by michael
2012-05-31 07:53:31

right around the IPO one analyst said that considering its current revenues and factoring in an annual growth rate of 10.8%; the stock should be valued at $ 9.59.

crazy that someone wold pay $ 38 for it.

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Comment by happyfriday
2012-05-31 08:02:14

crazy that someone wold pay $ 38 for it.

That someone is us I think. Our pension and 401k funds……

 
Comment by michael
2012-05-31 08:10:03

no pension for me and my 401k is not in equities.

 
Comment by Bill in Los Angeles
2012-05-31 08:11:41

Not really. Institutional investors = mutual funds. They got the inside scoop on the earnings estimates for FB and stayed away. The small “savvy” investors lost. Even so, it is wise to check the top 25 holdings of each of your funds from time to time, and keep tabs on who is managing them, unless they are index funds.

 
Comment by Bill in Los Angeles
2012-05-31 08:15:43

LOL! You will all be happy to know that Goldman Sacks is one of the two major holders of FB, outside the owners and founders. Millions of shares of stock. DST global is the other.

You can find this info on Yahoo Finance by looking at major holders…

 
Comment by Darrell in Phoenix
2012-05-31 08:40:13

Goldman bought LONG before the IPO at a price much lower. I think something like $15 per share, but that was pre-IPO shares.. not sure what the conversion rate is.

 
Comment by Northeastener
2012-05-31 10:33:32

Unless there was additional dilution when FB went public and GS had anti-dilution clauses as part of its share purchases, those shares converted 1:1 to common shares.

 
 
Comment by In Colorado
2012-05-31 08:38:01

“The last couple of days I learned more about some privacy issues that make me dislike FB even more.”

I think most of the proles don’t care about privacy anymore. G-Mail reads your email to figure out what kind of ads to bombard you with. Google’s real source of income is advertisement placement. All their other products (search engine, Droid, etc.) are just tools to sell more advertising.

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Comment by Arizona Slim
2012-05-31 08:59:34

I have one of those Gmail accounts. And have I ever clicked on one of those ads? Nope.

Anyone else? Do we have any admitted ad clickers here?

 
Comment by drumminj
2012-05-31 09:17:22

And have I ever clicked on one of those ads? Nope.

Just because you never click doesn’t mean the marketing doesn’t work…

 
Comment by Northeastener
2012-05-31 10:42:01

I have one of those Gmail accounts. And have I ever clicked on one of those ads? Nope

For what it’s worth, Google makes most of it’s money from paid search ads, i.e. do a Google search and the top result is most likely a paid result. If you click on it, Google makes money. How much depends on the competition for those keywords being bid.

Lots of people do searches on Google and many probably don’t know the difference between the paid advertisement search result and the non-paid… asymmetrical information at work. Those searches subsidize free Gmail (as well as paid business accounts like mine). The ads in the app are just one more revenue stream…

 
Comment by X-GSfixr
2012-05-31 12:36:31

“…..real source of income is advertisement…….”

Which brings up my question.

Where does the money come from to pay for the billions spent by advertisers on Facebook, Google, professional sports (where the money is in the Media contracts, not selling tickets).

Seems to me that advertising/sponsorship budgets would be cut left and right because the wretched refuse can’t afford to buy anything anymore. Instead, it seems like advertisers are “doubleing down”, and throwing even more money at sponsorship, TV rights, and advertising.

Nothing in this country is more “socialist” than college and professional sports. Don’t see to many Galters complaining/fighting against that.

 
Comment by Northeastener
2012-05-31 13:41:53

Where does the money come from to pay for the billions spent by advertisers on Facebook, Google

Traditional media… i.e. budgets for radio/tv/newspaper/direct mail get smaller (or non-existent) as online media buys get larger. There isn’t necessarily more money being spent, rather it is being divided up differently.

 
Comment by In Colorado
2012-05-31 13:44:20

Nothing in this country is more “socialist” than college and professional sports

Especially in the NFL, where teams are rewarded for failing with prefered draft choices and TV revenues are shared equally amongst teams.

Contrast this with “socialist Europe”, where basement dwellers in the soccer leagues are “rewarded” with a demotion to a minor league (and are replaced by the minor league’s champion)

 
Comment by X-GSfixr
2012-05-31 14:36:21

Colleges are making gazillions off their “student athletes”.

Which would be ok, if the kids had the choice to go straight to the NFL or NBA. Which they don’t. Having the colleges function as a no cost “minor league” for the pro teams works for both the pros, who get the pick of the litter, and for the college athletic departments, and their overpaid staff.

The colleges love it, because they have all of these kids working for, essentially, “free”. After all, in the “real world”, isn’t a “health and fitness” degree about as useless as a degree in “Basket Weaving”.

Major League baseball, OTOH, shows what happens when a “free market” rules. The rich get richer, and the poor get to watch crappy baseball for the rest of their lives…..and/or watch their best players go to the Northeast Corridor teams.

 
Comment by Pete
2012-05-31 15:56:22

“Lots of people do searches on Google and many probably don’t know the difference between the paid advertisement search result and the non-paid… ”

I actually find those paid ‘results’ helpful from time to time, so I really don’t mind them being there, even when I’m only looking for info.

 
Comment by oxide
2012-05-31 18:49:05

I like that they label them as paid advertising.

 
 
 
 
Comment by Darrell in Phoenix
2012-05-31 08:20:09

FB total gross revenue of $4B is about 1.2 cents per day, per active account.

Some say that tiny gross is an opportunity to drastically grow revenue if they can just increase the per user gross.

Others (like me) say that any attempt to drastically increase revenue will just drive the users to other sites. Remember Friendster? Myspace?

The normal IPO, a select few insiders are given a few shares, then in the after market, the low supply and high demand creates a big pop, making a lot of money for the insiders that got those pre-IPO shares.

FB, a huge number of shares were issued pre-IPO, to anyone that wanted them. High supply and already filled demand… Hmmm… falling price?

You can make a lot of money for a few people, but the model is not scalable. Bubble economics, speculation and stock manipulations can not make the entire country rich.

 
Comment by Rental Watch
2012-05-31 08:55:49

My partner noted just yesterday that the DECREASE in market cap for FB exceeds the total value of all but approximately 25-30% of the S&P 500.

If the stock gets into the teens, I might be a buyer…

 
Comment by Arizona Slim
2012-05-31 08:57:50

Methinks that the market is pointing out what a lot of us suspected all along. And that is that big chit-chat sites aren’t very valuable.

Comment by Darrell in Phoenix
2012-05-31 09:12:02

Well, not as insanely valuable as a few people tired to convince us they were.

Even at 29% off IPO price, it has market cap of $58B, 87x last year’s profit.

 
Comment by polly
2012-05-31 09:20:02

I think internet advertising has been hugely overrated and someone will figure it out eventually. Heck, the New York Times knows every single story I’ve clicked on for several years now and they still tried to get me to read a story about a raw food diet for pets for a over a week. I do not have any pets and the raw food movement bores me. They do not recommend Paul Krugman’s columns even though I read his blog consistently.

I have occasionally looked at the ads from Google, but only when I was specifically searching for an item to purchase and the search turned up an ad that seemed likely. I don’t think I ever bought from the stores that came up in the ads. It was always a better deal to go with one of the stores that came up in the search.

Comment by b-hamster
2012-05-31 10:52:53

My big issue with innernet advertising is half of the times I’ve searched on an item, I’ve already purchased it, yet I am barraged with ads for the next week for this item that I already purchased – whether a plane ticket or a dvd.

But on the FB side, I think the site has seen its glory days and is nearing the end of its shelf life. I wonder what will replace it? I have grown weary of the seemingly same twenty friends posting every time their happy hour begins or their kids scored a goal in soccer. {yawn}

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Comment by polly
2012-05-31 12:05:55

I bought an old version of a toy for my nephew on ebay (the current version is poorly rated on Amazon as being flimsy and likely to break). I now get an ad from ebay every week recommending other instances of this same toy, as if I would want to buy another one. Almost all of them are for 3 to 5 times what I paid for the one I actually bought. None are for other toys that would also be of interest to a child who likes the toy I purchased.

Why do they even bother?

 
 
Comment by turkey lurkey
2012-05-31 11:19:16

ALL advertising is HUGELY overrated except for those who get paid to create and place them.

Take it from someone who used work in that world.

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Comment by Arizona Slim
2012-05-31 11:23:37

I agree. Of all the things I’ve ever done to promote my wee little business, the least effective has been advertising.

 
Comment by In Colorado
2012-05-31 11:52:58

Advertising only works if you can carpet bomb potential customers with ads. That works if you’re a beer or soda pop company. For small biz, it’s simply impossible.

 
Comment by Darrell in Phoenix
2012-05-31 12:47:24

If I go to an internet search site and look something up, suddenly I’m carpet bombed with ads for that site. Hello, I already went looking for it, found it, and if I had any interest in it, already bought it. Why are you bombing me with ads for it AFTER?

Examples. I wanted to buy an irobot house sweeper for my wife for mother’s day. I googled irobot to get the link to their site, went to the site, bought it…. A month later, half the web sites I go to have banner ads for Irobot.

Got an email from a travel agent I had booked a cruise through in the past. wasn’t sure if the prices were that great, so went to the cruise company’s sites to look up other cruse rates… boom, for a month, ad after ad for carnival cruise.

If I were interested in the product, wouldn’t I have purchased when I looked it up? What good does it do bombing me with ads after I already bought or made the decision not to?

 
Comment by turkey lurkey
2012-05-31 13:46:19

Want to know another waste of time? SEO. I can teach anyone the basics in 30 minutes.

I’ve been paid to do it, but if you pay more than a few hundred dollars, you’re getting ripped hard.

 
Comment by Northeastener
2012-05-31 13:46:26

Advertising only works if you can carpet bomb potential customers with ads. That works if you’re a beer or soda pop company. For small biz, it’s simply impossible.

LOL. I sure hope it’s not impossible, as that is the problem my startup is solving.

 
Comment by Northeastener
2012-05-31 13:59:28

If I were interested in the product, wouldn’t I have purchased when I looked it up? What good does it do bombing me with ads after I already bought or made the decision not to?

The model is based on the premise that most buyers research/shop online for some time before pulling the trigger on a purchase. If you searched for something previously, they are betting that you just did some research and are still interested and in the market for the item. It works in aggregate, as statistically the assumption is mostly correct.

Online advertising hasn’t gotten to the level of personalization and recommendation that commerce engines like Amazon have been able to achieve. It is a tough problem to tackle (I’ve worked on both problems) and requires lots of data and lots of money to solve.

 
Comment by Arizona Slim
2012-05-31 14:00:14

Want to know another waste of time? SEO. I can teach anyone the basics in 30 minutes.

I’ve been paid to do it, but if you pay more than a few hundred dollars, you’re getting ripped hard.

I had a site that was ranked #1 in Google for several years. The income from that site helped me move into the Arizona Slim Ranch back in 2004.

Any-hoo, here are the secrets to its success:

1. It was about one topic and had more than 100 pages devoted to that topic.
2. The domain name had two words that people looking for info on this topic would use in searches.

 
Comment by Northeastener
2012-05-31 14:16:21

Any-hoo, here are the secrets to its success:

1. It was about one topic and had more than 100 pages devoted to that topic.
2. The domain name had two words that people looking for info on this topic would use in searches.

Google’s search algorithm uses external references as a variable in determining search ranking. The more your site is referenced (linked to) by other well-trafficked, high-ranking sites, the more relevance your site will be given relative to others within the same topic. Essentially your rank in a Google search has less to do with the actual content itself and more to do with how many other sites validate that your site content is relevant…

The algos are constantly being tweaked to reduce gaming and provide more accurate results, so SEO is also a moving target.

 
Comment by Robin
2012-06-01 22:44:51

SEO=Search Engine Optimization

 
 
 
 
 
Comment by Realtors Snort Bath Salts®
2012-05-31 07:22:12

Realtors Snort Bath Salts®

Comment by michael
2012-05-31 07:56:43

was curious…was that drug literally bath salts or is bath salts just its street name?

Comment by Darrell in Phoenix
2012-05-31 08:29:26

Bath salts was a way to sell it in stores.

Those head shops that sell rolling papers, pipes, bongs, etc for smoking tobacco… yeah right… can’t call a product “chemical that will get you high if you smoke it”. So, they called it “bath salts”, even though no one was actually going to the head shop to buy a product that they added to their bath water to help cleanse excess oil from their skin.

 
Comment by Young Deezy
2012-05-31 10:59:28

It’s also referred to as “Plant Food”, which just makes me chuckle.

Comment by jinglemale
2012-06-01 03:14:30

….because it turns you into a vegetable?

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Comment by Weed Wacker
2012-05-31 09:21:25

http://www.businessweek.com/news/2012-05-31/facebook-s-menlo-park-sees-home-prices-jump-as-inventory-shrinks?r=bloomberg

The initial public offering of the world’s biggest social network, which raised $16 billion on May 17, is contributing to surging real estate demand in Silicon Valley’s tech enclaves and bolstering values amid scarce inventory. The median price of a home sold in Menlo Park jumped 8.5 percent to $1.19 million in the first quarter, according to research firm DataQuick.

“The market was already hot, and now there’s more pent-up demand,” said Jim Harrison, chief executive officer of MLS Listings, a Sunnyvale, California-based publisher of home listings for San Mateo and Santa Clara counties in the heart of the Valley. “Buyers are going nuts, but sellers are holding back.”

Comment by turkey lurkey
2012-05-31 13:47:33

Silly Valley has always been way out of line with normal.

 
 
Comment by Prime_Is_Contained
2012-05-31 09:33:13

Darrell, I said essentially this exact same thing to you a few years back when you were first floating your money==debt theory.

The question seems to remain unanswered. From that simple fact, I assume that not all money is offset by debt.


Comment by Darrell in Phoenix
2012-05-30 08:13:42

“that’s why the fed isn’t technically “printing” money. every dollar they create is offset by the obligation of someone else to pay it back.”

[...]

So, in QE, are we breaking the balance that money is offset by an equal amount of debt? Is some new debt created somewhere, like a repurchase agreement that the bank owes the Fed $100B?

In the case of QE, I do not see the new debt that is offsetting the money that the Fed is creating and handing to banks.

What am I missing here?

Comment by Neuromance
2012-05-31 09:48:39

Darrell: I find your take on trade deficits to be compelling. But, I agree, you start off with saying that (all) money is debt, and that’s demonstrably false. If you prefaced your argument with “a vast amount of money today is debt” or some more accurate statement, it would make your argument more compelling.

Error builds up in arguments. If every premise has a bit of error, the conclusions can be wildly inaccurate.

Comment by Darrell in Phoenix
2012-05-31 09:56:52

What money is not offset by debt?

Comment by CharlieTango
2012-05-31 10:20:10

I have a positive net worth of $x and of that I have 10% in cash. What debt is offsetting my cash?

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Comment by Darrell in Phoenix
2012-05-31 10:33:30

Seriously? You are the only entity in the entire economy?

 
Comment by In Colorado
2012-05-31 11:01:50

The point might be that the 90% of your net worth is in hard assets. As for the 10% that is cash, well, obviously you don’t owe it to anyone. But if it’s deposited in a bank, chances are its been loaned out to someone.

 
Comment by CharlieTango
2012-05-31 11:04:32

I never claimed to be the only entity in the entire economy.

My claim is to my own money, meaning if I don’t owe my money to anyone, if no-one has a claim on it then it isn’t offset by some nameless business debt. This nameless buisness that has debt has no claim against my cash so their debt cannot offset my cash.

Again the offsets to the business’s debts are the business’s assets and / or the business’s losses not my totally unrelated cash.

You would assert that my cash was borrowed into existence by this nameless buisness and somehow got into my hands without an obligation to pay it back. You would also assert that when the debt is repaid that the offsetting money poofs out of existence but look at what happens in this case. The nameless company pays off their debt and the money is still in my pocket, it doesn’t poof. It isn’t offset by the debt, or any debt.

 
Comment by CharlieTango
2012-05-31 11:09:06

The point might be that the 90% of your net worth is in hard assets. As for the 10% that is cash, well, obviously you don’t owe it to anyone. But if it’s deposited in a bank, chances are its been loaned out to someone.

We are discussing Darrell’s hard and fast rule, all money is debt. For the sake of this argument I have to disclose that my cash is in my mattress, it isn’t loaned out to anyone, even if it was that disputes the theory as well, Darrell asserts that money is debt but you are pointing out that money is loaned as opposed to poofing into existence.

 
Comment by measton
2012-05-31 11:17:13

I believe Darrell would say

The money in your bank was created when the FED purchased debt from the Gov. The Gov spent it on something, and those people spent it on something and eventually it ended up in your account. It’s formation can still be traced back to the national debt. It’s also possible/likely that someone borrowed money to buy something from you.

 
Comment by Darrell in Phoenix
2012-05-31 11:29:04

“You would assert that my cash was borrowed into existence by this nameless buisness and somehow got into my hands without an obligation to pay it back”

You do not have an obligation to pay it back. The BUSINESS has an obligation to pay it back.

You seem to be talking micro (individuals) and I am talking macro (the entire economy… sum up ALL the money that exists in the global economy, and sum up ALL the debt in the global economy, and they are exactly equal and opposite offsetting factors of each other.

As I said yesterday, the one that confuses me is QE. I’m not sure where the debt is that offset the money. I believe it has to be there somewhere. Maybe it is the repurchase agreement.

 
Comment by measton
2012-05-31 12:46:47

Isn’t a lot of what they are buying with QE debt? MBS etc. I know in Japan they are buying stock.

Maybe the way to think of QE is like a reverse stock split. The debt is the same there are just more shares?

 
Comment by Darrell in Phoenix
2012-05-31 12:49:11

What they are buying is mostly mortgages, but also some long dated treasuries.

 
Comment by mathguy
2012-05-31 14:18:56

I had this discussion with Darrell several months ago. He defines money as something along the lines of only US greenbacks printed after 1974 that are offset by US treasury bills issued by the Fed. If you ask him what a 1904 silver dollar is (Still legal tender US currency btw) he kind of freezes up and says that’s not what he means when he says money. So if you look at a very narrow slice of the definition of money, some of what Darrell says makes sense. The problem is he tries to pass it off as the entire definition and you end up arguing semantics because he won’t use proper definitions.

My shortened summary of his “Money is debt” statement is “Mammal is Dog”.

 
Comment by tj
2012-05-31 15:49:50

I never claimed to be the only entity in the entire economy.

My claim is to my own money, meaning if I don’t owe my money to anyone, if no-one has a claim on it then it isn’t offset by some nameless business debt. This nameless buisness that has debt has no claim against my cash so their debt cannot offset my cash.

Again the offsets to the business’s debts are the business’s assets and / or the business’s losses not my totally unrelated cash.

You would assert that my cash was borrowed into existence by this nameless buisness and somehow got into my hands without an obligation to pay it back. You would also assert that when the debt is repaid that the offsetting money poofs out of existence but look at what happens in this case. The nameless company pays off their debt and the money is still in my pocket, it doesn’t poof. It isn’t offset by the debt, or any debt.

you’ve got it right CharliTango. that’s why those ‘money is debt’ videos are bunk.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 20:12:37

‘My shortened summary of his “Money is debt” statement is “Mammal is Dog”.’

I agree with you, mathguy. He is confusing a subset with the relevant set.

 
Comment by ahansen
2012-06-01 00:04:10

Bingo.

 
 
Comment by Neuromance
2012-05-31 18:02:54

Darrell wrote: What money is not offset by debt?

Let’s take the base case: Four people in a village, ruled by a king. The four villagers are a textile maker, a farmer, a basket maker and a laborer. They trade their goods for each others services. King comes in one day, tired of being paid in corn, and says, “I’m giving you these coins. Ten coins is equal to one bushel of corn. Your annual tribute will be collected in the form of these coins, not your goods/services.”

No debt.

There is always some central pump creating money (there are several definitions of the money supply). But there is not a static supply of money.

When the village in the initial example generates so much product/service that the currency becomes very dear, the king might come in and dump more in the village to maintain the corn-to-coin exchange ratio.

I appreciate that debt is (supposed to be) a zero-sum game. Today, maybe the amount of debt outstanding is equal to some measure of the money supply. But, if not, then there’s money not offset by debt.

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Comment by michael
2012-05-31 10:31:18

they are not creating money to buy the assets…they are creating money to loan to the banks taking the assets as collateral.

Comment by Darrell in Phoenix
2012-05-31 12:02:14

QE, they are not just loaning the bank money with the asset as collateral. If that were the case, then the bank would still be collecting the interest on the debt.

What they are doing is buying the assets, but since the ledger entries are into a bank’s internal deposit accounts, it is not “money”. It is not spendable, and therefore, not money.

 
 
 
Comment by Neuromance
2012-05-31 09:45:27

The real reason there have been no criminal convictions as a result of the US Debt Crisis: the top people in administrations come from top law firms. When the political term is finished, back they go. They can’t afford to burn bridges while they’re away from the business.

“There hasn’t been any serious investigation of any of the large financial entities by the Justice Department, which includes the FBI,” says William Black, an associate professor of economics and law at the University of Missouri, Kansas City, who, as a government regulator in the 1980s, helped clean up the S&L mess. Black, who is a Democrat, notes that the feds dealt with the S&L crisis with harsh justice, bringing more than a thousand prosecutions, and securing a 90 percent conviction rate. The difference between the government’s response to the two crises, Black says, is a matter of will, and priorities.”

Obama delivered heated rhetoric, but his actions signaled different priorities. Had Obama wanted to strike real fear in the hearts of bankers, he might have appointed former special prosecutor Patrick Fitzgerald or some other fire-breather as his attorney general. Instead, he chose Eric Holder, a former Clinton Justice official who, after a career in government, joined the Washington office of Covington & Burling, a top-tier law firm with an elite white-collar defense unit.

Putting a Covington partner–he spent nearly a decade at the firm–in charge of Justice may have sent a signal to the financial community, whose marquee names are Covington clients. Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, and Deutsche Bank are among the institutions that pay for Covington’s legal advice, some of it relating to matters before the Department of Justice. But Holder’s was not the only face at Justice familiar to Covington clients. Lanny Breuer, who had co-chaired the white-collar defense unit at Covington with Holder, was chosen to head the criminal division at Obama’s Justice. Two other Covington lawyers followed Holder into top positions, and Holder’s principal deputy, James Cole, was recruited from Bryan Cave LLP, another white-shoe firm with A-list finance clients.

http://www.thedailybeast.com/newsweek/2012/05/06/why-can-t-obama-bring-wall-street-to-justice.html

Comment by Arizona Slim
2012-05-31 10:03:40

William K. Black rocks. I highly recommend his book, The Best Way to Rob a Bank is to Own One. It’s about control fraud and how that crime became so prevalent during the S&L go-go years of the 1980s.

With regards from your HBB Librarian.

Comment by Ol'Bubba
2012-05-31 16:41:57

Hey Slim-

Any other recommendations from the HBB Librarian?

 
 
 
Comment by In Colorado
2012-05-31 10:12:48

From yesterday:

“Wow, what part of Colorado are you in. I live on the southside of Denver and that wouldn’t even cover the schools part of the tax bill.”

Answer: Loveland.

We pay $2000 a year on our 4000 sq ft McMansion.

I could see property taxes being higher in Douglas County though.

Also, it’s my understanding that in Colorado most schools districts are not funded locally. We tried to pass a $100 a year property tax bill increase for the local school district last year. It went down in flames, not even 1/3 voted yes.

Comment by Darrell in Phoenix
2012-05-31 10:22:24

I paid $940 property tax last year on my 1400sqft, 1978 block ranch in Glendale AZ. Of course, my sales tax is above 10%.

Comment by exit56
2012-05-31 11:38:08

Property taxes on my 2,000 sq. foot Long Island home are about $12,500.

Landlord pays ‘em :)

Comment by In Colorado
2012-05-31 11:56:57

Actually, you do. But he does get a tax write off for it, unlike you.

$12,000 …. holy moley. That’s about as much as our combined property, state and federal income tax bill.

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Comment by Northeastener
2012-05-31 14:32:02

$12,000 …. holy moley. That’s about as much as our combined property, state and federal income tax bill.

Are you kidding me?

Remember when I said you should move MA? I was wrong. I need to move to CO. Our combined tax bill approaches 3x yours, and our income is probably 35% higher.

 
Comment by Darrell in Phoenix
2012-05-31 15:31:03

Heck, I paid something like $16K just in income, and more than that in payroll if you count both halves. State income taxes were pathetically small by comparison.. like $3K if I recall. And of course, the already reported property tax of under $1K.

Sales tax at 11% bites the big harry butt!

I’d love to see them crank down the sales tax and up the income tax, even though that would hurt me personally. You know, customers need money to buy things….

 
 
Comment by Darrell in Phoenix
2012-05-31 11:59:05

It is in the rent….

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Comment by CharlieTango
2012-05-31 10:17:55

I have a positive net worth of $x and of that I have 10% in cash. What debt is offsetting my cash?

Comment by Darrell in Phoenix
2012-05-31 10:31:13

Do not confuse net worth with money.

Net worth is the sum of assets and money minus liabilities.

Money is currency, checking account balances, savings account balances, CD and other long-term, other dollar denominated deposits.

If you have $x more money than debt, then someone or something (government, business) has more debt than money to offset it.

Comment by CharlieTango
2012-05-31 10:48:46

Do not confuse net worth with money.

hmmm, let me ask again: What debt is offsetting my cash?

Notice I said cash not net worth?

If you have $x more money than debt, then someone or something (government, business) has more debt than money to offset it.

I say your wrong, lets pick business, if a business has debt it offsets the buisness’ assets or losses not my cash.

Comment by Darrell in Phoenix
2012-05-31 11:22:37

If a business lost money, where did the money go? It spent the money, giving it to someone like you.

You have more money than debt, the business has more debt than money. Again, assets has nothing to do with it. Assets are not money. The business has the debt that offset your money.

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Comment by In Colorado
2012-05-31 12:39:27

“Assets are not money.”

Well, on a balance sheet some assets are cash. But yes, many are not cash: real estate, equipment, inventory, etc. and my personal favorite: “goodwill”. They have a cash value on the books, which may or may not be completely out of sync with their real world value.

 
 
 
Comment by mathguy
2012-05-31 14:23:32

Awesome - “Money is dollar demoninated” — priceless summary Darrel.

Comment by CharlieTango
2012-05-31 16:10:53

The business has the debt that offset your money.

When the business pays off the debt my money does not poof so you are wrong by your own definition.

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Comment by Carl Morris
2012-05-31 16:52:11

He’s saying that if everyone everywhere pays off all their debt, your paper money will devalue to zero because there is no longer owed work backing it up.

 
Comment by Darrell in Phoenix
2012-05-31 16:52:25

And the money they used to pay off that debt was borrowed into existence. When they paid off that debt, both the debt and the money used to repay it was destroyed. So now, that new debt offsets your money.

 
Comment by Darrell in Phoenix
2012-05-31 17:08:43

“He’s saying that if everyone everywhere pays off all their debt, your paper money will devalue to zero because there is no longer owed work backing it up.”

Not even close.

I am saying that it is impossible for all people everywhere to pay off all debt, unless you have first spent your money.

Imagine an economy of 2 people. I borrow $x into existence, getting money and debt. The money offsets the debt; the debt offsets the money. I spend the money buying goods from CharlieTango. He has the money, I have the debt, but they still offset each other.

A 3rd person enters the economy and borrows another $x into existence and spends it buying stuff from me. I use the money he borrowed into existence to pay off my debt, destroying both my debt and his money. Now there is $x debt owed by the 3rd party, offsetting the $x held by CharlieTango.

The only way the 3rd party can possibly pay off his debt is if CharlieTango spends the money he holds, or someone borrows some more money into existence, and that money finds its way into the hands of the person with debt… but then not all debt is paid back.

Debt and money ALWAYS exist in equally offsetting amounts. The debt can’t be repaid unless the people with more money than debt first no longer have that money.

 
 
 
 
 
Comment by Arizona Slim
2012-05-31 10:19:24

Uh-oh! Another housing bubble’s forming here in Tucson. Get ready for the luxury student housing bubble.

Reason why this will end badly: There’s already a glut of student housing near the University of Arizona campus. And this city has a double-digit rental vacancy rate.

Comment by Darrell in Phoenix
2012-05-31 11:20:10

“wasn’t there any real news to print on the front page with a four-column, full-color photo and 80 point headline?”

Not that would have pleased the companies that are going to be buying up lots of ad space trying to fill all these new units being built.

Once upon a time, there was a clear line between the news and the ads. Not so much anymore.

Comment by Arizona Slim
2012-05-31 12:08:08

What’s worse, the high-end student apartment complexes are already competing ferociously for a very limited pool of customers.

How do I know this? Via a friend, whose son used to manage such a complex.

 
 
 
Comment by Darrell in Phoenix
2012-05-31 11:57:39

HA!!!! I figured it out. Why QE does not create money without offsetting debt!

Money is the sum of currency in circulation (meaning not sitting in a bank’s vault), money in checking, savings, CDs, money markets or other readily spendable accounts. Ledger entires in banks internal accounts/vaults is NOT money, since it can not be legally spent.

If I walk into a bank with $100 cash and deposit it into my checking account, I am not creating money. My checking account is increased by $100, but the $100 cash is put into the bank’s vault, where it is no longer spendable, and therefor, is not money.

If I were to withdraw $100 from my checking account as currency, my checking account goes down by $100 and is replaced by $100 currency in circulation… no money creation or destruction.

When the Federal Reserve buys debt from a bank or other institution, it is liquefying the banks assets. The bank can not loan out a US treasury, but it can loan out the liquefied assets that look, smell, and feel like “money” by are not considered money since they can not be spent.

The bank, no longer collecting interest on the loan it once held, (which has been replaced with a liquid asset that is not counted as money) is encouraged to loan that asset out to someone, creating both debt and money.

If a bank gets robbed, and the non-money currency is taken from the vault and put into circulation, then the bank has to take some of its profits (that are money since they are spendable) and put it into the vault (making it no longer money since it is no longer spendable).

Comment by Al
2012-05-31 20:32:08

Here’s why I think that many of us are disagreeing with you. The definition of money that you have in mind doesn’t include M0 and MB. If you disclude these then in a sense you are correct, but most of us don’t do so. M0 and MB (notes and coins) don’t have debt associated with them, or the debt doesn’t matter to the general public, can exist forvever, and can grow or shrink as required (Federal Reserve Bank credit.)

M0 and MB are the base that allows all other debt based money to exist. By summarily dismissing them you are undercutting your theories.

Comment by ahansen
2012-06-01 00:12:50

Yep.
Not just undercutting, contradicting.

 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 12:16:59

Only the VIX did really well this month…

May’s market mayhem

Global markets buckle (left: Spain’s IBEX) on concerns that the euro zone union is at grace risk. U.S. Treasurys and the dollar are among the few monthly winners as investors have sought safe havens
Global markets buckle (left: Spain’s Ibex) on concerns that the euro zone union is at grace risk. U.S. Treasurys and the dollar are among the few monthly winners as investors have sought safe havens.

Key Indexes Month to date
S&P 500 (SPX) -6.1%
Nasdaq Composite (COMP) -6.9%
Crude oil (NMN: CLN2) -16%
Spain Ibex 35 (XX:IBEX) -12.3%
Japan Nikkei 225 (JP:100000018) -10.3%
Hong Kong HSI (HK:HSI) -11.7%
Russia RTS (RTG: RTS) -20.3%
Euro vs. dollar (EURUSD) -6.2%
U.S. Treasurys (return) (10_YEAR) +1%
Dollar index (DXY) +5.1%
CBOE Market Volatility Index (VIX) +41%

 
Comment by rms
2012-05-31 12:27:06

The economic recovery is underway…

Delinquency Rate Hits All-Time High for CMBS
http://blogs.wsj.com/developments/2012/05/30/delinquency-rate-hits-all-time-high-for-cmbs/?mod=dist_smartbrief

Comment by turkey lurkey
2012-05-31 13:52:55

So much for the “lazy, overpaid union, poor people and that commie Frank Dodd” theory.

 
 
Comment by Darrell in Phoenix
2012-05-31 13:20:33

Comment by Northeastener
2012-05-31 11:37:15
“What is good for me and my company (micro) is bad for the US economy as a whole (macro)? Or is it adding value that seldom gets calculated, even at the macro level (entrepreneurship, eventual job creation, wealth creation)? Would my company exist if I was forced to pay “union” wages to produce code domestically? That answer is unequivocally no…”

To whom are you going to sell your products, and what money are they going to use to buy it?

You are paying people in Chindia to develop the software? Are they the target market for the product? If so, not problem, other than the low wages you are paying them is not going to let them afford to pay very much for the product.

Or, are you going to be trying to sell the product to Americans? If you are going to be selling to Americans, then with what money are they going to be buying since they no longer have jobs, since all the jobs have been outsourced?

Oh, right… no problem. Those American potential customers do not need jobs that pay enough to let them buy your product. They can just borrow the money into existence.

They borrow it, spend it on your product, you send the money to Chindia to pay cheap labor. You get rich, the elite in Chindia that are skimming big profits from their economy get rich, and the USA consumers get the book keeping thing we call debt that doesn’t really matter since they will just roll that debt over into MEW, never really having to pay on or for any of that debt they are racking up at a rate 3x the sustainable rate.

Excellent.

What could possible go wrong?

Oh, right… those consumers stop even trying to repay the debt, then the money that they borrowed into existence poofs out of existence… No problem, the USA government will just borrow it back into existence, and via FDIC, endure you don’t actually lose any money.

Oh, until the $1.5T forever, 10% of GDP, annual deficits finally push even the government’s debt too high to continue to pretend we are paying on it, and not just rolling it over into ever large, unrepayable bookkeeping entry called debt, which actually gives money value.

No worry, that can never happen.

Trade deficits do not matter…. (until they do).

Comment by Northeastener
2012-05-31 14:41:47

What your discounting is that the product my company offers will save other US companies money. That money saved will be put to productive use in our economy. My company, if successful, will employ US workers as well as workers overseas, putting wages into our economy (and theirs). If profitable, it will pay taxes here in the US.

If I was forced to only use US labor, the product wouldn’t exist and neither would the company. The money savings for other US companies wouldn’t exist, nor would all the other economic benefits going forward. It isn’t as simple as saying “All products sold in the US should be made in the US”. Especially if eventually we expand into overseas sales and generate additional profit (and taxes) for the US via our overseas success.

The world isn’t black and white. Rather shades of grey…

Comment by Darrell in Phoenix
2012-05-31 15:24:55

What you are missing is the main point that trade imbalances can only be persisted for as long as the entities on the deficit side can continue to increase their debt.

Every dollar that leaves this country and goes to Chnidia, is a dollar no longer in circulation in this country. Either we replace that dollar by borrowing a new one into existence, or our economy slows.

Let’s say Company XYZ was going to pay an American $15 to do a job, and that American employee was going to spend that $15 buying product from Company XYZ.

What if your company saves company X $10. Because you can do the job for $5. You send the $5 to Chindia to pay your employees there. Company XYZ fires that American and retains the $10 in savings as retained profits, padding its balance sheet.

Guess what. XYZ just lost $15 in sales because the American you got fired no longer has any income.

For 30 years, companies didn’t have to worry about whether their American customers had jobs that paid them well enough to buy products. Those customers could just borrow the money they needed.

For now, it is the USA government that is borrowing the $1.5T a year needed to replace all the money flowing out of circulation via trade imbalances. That can’t last forever.

What happens when your target customers, or the target customers of your target customers, no longer have any money because it has all drained out of circulation via trade imbalances, and no one, not even the government, can continue to borrow into existence, the 10% of GDP worth of new money, needed to keep adding money into circulation as fast as it is leaking out?

To whom will you sell your software when no one willing to spend money, has any?

As I said, not too much of a problem for the last 30 years as those that wanted to buy could just borrow.

However, we have increased debt from $4T to $38T since 1980. We have increased each household’s share of that total debt from 2.5x median income to 5.5x median income.

How much longer can we continue to increase total debt at 3x the sustainable rate as determined by population increase and inflation?

Then what?

Comment by Pete
2012-05-31 18:16:25

“Every dollar that leaves this country and goes to Chnidia, is a dollar no longer in circulation in this country.”

What if alot of Chinese are paying cash for real estate here in the US?

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Comment by Robin
2012-06-01 22:57:49

Rebalancing toward equilibrium occurs.

 
 
 
Comment by measton
2012-05-31 15:36:58

he world isn’t black and white. Rather shades of grey…

The ever expanding trade deficit and national debt and rising unemployment and deflation would say it’s an extremely dark and extremely light shade of grey.

 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 13:34:13

Who exterminated all the gold bugs?

May 31, 2012, 2:02 p.m. EDT
Global economic crisis plays out in NY’s gold market
Commentary: Pawn brokers and gold dealers take center stage
By Michael Casey

The following is an excerpt of Michael Casey’s new book, “The Unfair Trade: How Our Broken Global Financial System Destroys the Middle Class.”

NEW YORK (MarketWatch) — Roni Rubinov runs two firms: New Liberty Loans, a pawnshop that lends money against pledges of jewels and other keepsakes, and New York Estate Buyers, which mostly buys and sells items made of gold. Their offices sit side by side up a flight of stairs from the chaotic, multiethnic sidewalk of Manhattan’s 47th Street between Fifth and Sixth avenues, a strip of jewelry stores known as the Diamond District. While I waited half an hour to talk to Mr. Rubinov, two street scouts kept escorting prospective clients up the stairs, each toting bags of wares to exchange for cash. Depending on whether they were borrowing or selling, Mr. Rubinov would exit one office and enter the other while his tall blonde secretary would dutifully vacate one room’s desk for the other.

Comment by Darrell in Phoenix
2012-05-31 14:32:57

I think there were a lot of people buying gold for fear of inflation, and a lot more buying gold as a speculative ploy attempting to get rich off the suckers that were buying gold for fear of inflation.

Momentum becomes self-reinforcing, until the momentum stops.

That is, gold was going up because was going up. Not real fear of inflation or other economic factors.

Once it stopped going up, the people buying because it was going up, move to the next momentum play.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-05-31 16:35:24

Agreed.

Along similar lines, at what point will the stock market’s momentum stop dragging it down?

 
 
 
Comment by Florida is going to kill me ®
Comment by A Realtor Chewed My Face Off®
2012-05-31 18:37:53

How else is the innocent to protect themselves? This ought to be common practice when encountering these flesh eating drug addicted scumbags.

 
 
Comment by Darrell in Phoenix
2012-05-31 18:01:17

Comment by mathguy

“I had this discussion with Darrell several months ago. He defines money as something along the lines of only US greenbacks printed after 1974 that are offset by US treasury bills issued by the Fed.”

Wrong. I define money as:
M0 = physical currency in circulation
M1= M0 + checking acounts
M2 = M1 + savings accounts
M3 = M2 + CDs and other long term deposits.
M4 = M3 + Money markets and other non-bank, easy liquidatable assets.

Oddly, this is exactly how the US Government and the Federal Reserve also define the money supply.

” If you ask him what a 1904 silver dollar is (Still legal tender US currency btw) he kind of freezes up and says that’s not what he means when he says money.”

It is what Ben Bernanke says is not money because it is no longer commonly used for the direct purchase of goods and services.

http://www.youtube.com/watch?v=2NJnL10vZ1Y
4:25 in.

Yes, if you were ignorant that the 1904 silver dollar was worth far, far more than $1, you could spend it… but soon, someone would recognize it for what it is, an asset that is worth much more than $1. They would pull it out of circulation.

I ask you, do you use silver dollars for purchase, at face value, on a frequent basis? If not, then it is not in circulation, and is not money.

“So if you look at a very narrow slice of the definition of money,”

The narrow slice of money that fits within the official definition of the money supply.

” some of what Darrell says makes sense. The problem is he tries to pass it off as the entire definition and you end up arguing semantics because he won’t use proper definitions.”

If not the official definition of the money supply, then please provide a better definition of money. What is the “proper definition”?

“My shortened summary of his ‘money is debt’ statement is ‘Mammal is Dog’.”

What money is not equally offset by debt?

What “proper definition of money” is it that you want to use? Why do you want to use a definition of money that is different than the official definition of the money supply set by governments and central banks around the world?

Or, asking it another way? What is lost by considering gold and silver as assets than can be traded for money, and that money can then be used to buy things?

 
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