USA Debt Crisis

[enragedcow]

Originally Posted by Marwan2010
Simple questions >
italy, Greece, Spain, portugal and Ireland are all in a **** hole! they have borrowed

They borrowed mostly from Germany, France and UK.

Germany, France and UK. are also in a **** hole by lending money to these stupid countries
USA is in a Bigger **** hole

so the big question is FROM WHERE is all the MONEY coming from????????
In balance sheet - there is always a DEBIT and CREDIT and the books are balanced

but here everyone is in a **** hole

I am baffled! - can someone help me?

since no one else is helping, big meanies

the debts of these countries are in their respective balance of payments (wikipedia can help here so i don't need to type it)

since we can't have interplanetary trade, all the countries on earth (assuming you can get perfect measurement) should when added up have a balance of exactly 0

so who's funding the deficits.... ASIA! many Asian countries have massive account surpluses (omg time to go all xenophobic the chinese own you muahaha!!!)

the last part was obviously a joke, made as a cynical remark on the stupidity that grips the provincial imbeciles i see being interviewed on the TV news over here

short and sweet and could do with a bit more in depth discussion but you odn't need me for that SEARCHWORDS: current account, balance of payments

 

[Atilla]

well that's my fix to a few of your strange comments

please read a few textbooks on macroeconomics before arguing it on the interwebs

btw this isn't a personal attack; i'm not a troll/flamer and realised i've replied to quite an old post lol sorry d00ds





A. Economic activity leads to increased frequency of transactions exchanged and thus increase in money supply.

my fix: increased money demand actually, and at a fixed level of money supply nominal interest rate should increase



B. Any freaking twit who thinks by increasing the supply of money via loose monetary policy one can get economic activity ie frequency of economic transactions going is well deluded to say the best. You can pull a string but pushing it is a whole different kettle of fish. You capiche?

my fix: increase money supply which puts downward pressure on interest rates which should lead to an increase in consumption and in an open economy should lead to a currency depreciation thus improve the trade balance (assuming the marshall lerner condition holds)

Re: A - If there is an increased economic activity and all individuals carry out 10 transactions instead of 5 then
effectively money supply moves.

Re: B - You are full of your self and asusmptions. Go and read some economic books??? You for real? Another know all clown...


Neither of your suggestions are fixes to problems we have. High interest rates worst possible solution. As for your shoulds and assumption - well after all the billions and QE pumped into economy how long does the 'should' take?


This isn't a personal attack either just sound common sense compared to your should, would and could daft assumptions which are not happening...

Any other bright ideas or explanations...

 

[Atilla]

Well, sounds to me like a conservative "equitable" word used very cleverly so as not to show a left bias. It reminds me of the time Gordon was appointed chancellor and moved straight in on good ole conservative John Major type words like "prudent". socialists/prudent can't stop laughing.

But basically cos atilla is saying it. It means " just hand out cash to anyone who wants it but isn't capable of earning it themselves" no work required

Just for good measure US has had a slap by Standard and Poor's.
http://www.bbc.co.uk/news/world-us-canada-14428930

Also I don't think we all now need to worry about this bit of inflation we saw this year.
It will be interesting to see how all these govt's now deal with the very real threat of another recession / depression and the deflation that will surely come with it.

What will come of all this is inflation. This is the cure. It is also most governments (those who are in debt) strategy albeit a disguised one. It is already happening.

I hope we'll review thread perhaps in another 3-5 years time and have another good laugh then...

 

[enragedcow]

Re: A - If there is an increased economic activity and all individuals carry out 10 transactions instead of 5 then
effectively money supply moves.

you did it again

money demand increases not supply and not "effectively" money supply

also i didn't say an increase in interest rates is a solution, it was merely a result of the demand for money increasing at the current supply of money pushing up the price of money (interest rates)

apologies for choice of wording "my fix" was intended to be my fix to your post not my fix to the problem lol

Quantitative easing (increasing money supply) was the Fed's best response to the situation of America facing "the recession" (meant to be said in a very deep and rather comical voice)

any freaking twit who thinks that increasing money supply doesn't decrease nominal interest rates depreciating the currency increasing the trade balance and increasing consumption spending is in need of a visit to the library

i don't appreciate being called full of myself, i am not an expert nor do i hold myself out to be an expert my replies are based on a passion for and 4 years of study in economics at university also not a know-all

 

[Splitlink]

Originally Posted by Marwan2010
Simple questions >
italy, Greece, Spain, portugal and Ireland are all in a **** hole! they have borrowed

They borrowed mostly from Germany, France and UK.

Germany, France and UK. are also in a **** hole by lending money to these stupid countries
USA is in a Bigger **** hole

so the big question is FROM WHERE is all the MONEY coming from????????
In balance sheet - there is always a DEBIT and CREDIT and the books are balanced

but here everyone is in a **** hole

I am baffled! - can someone help me?

since no one else is helping, big meanies

the debts of these countries are in their respective balance of payments (wikipedia can help here so i don't need to type it)

since we can't have interplanetary trade, all the countries on earth (assuming you can get perfect measurement) should when added up have a balance of exactly 0

so who's funding the deficits.... ASIA! many Asian countries have massive account surpluses (omg time to go all xenophobic the chinese own you muahaha!!!)

the last part was obviously a joke, made as a cynical remark on the stupidity that grips the provincial imbeciles i see being interviewed on the TV news over here

short and sweet and could do with a bit more in depth discussion but you odn't need me for that SEARCHWORDS: current account, balance of payments

I'll have to read all this thread but the sentence "where has all the money come from? " caught my eye.

As long as there are no questions asked the money will be invented by sticking a nought at the end of the bank balances. I am sure that no one knows the true amount of money swilling around the planet's balance sheets. Probably, the only way to manage money is through the markets and the levels are maintained by confidence.

Eon is putting up its gas price by 18%. It is no good saying that we will not pay it. The money will have to be found for that otherwise we all freeze and all factories close. The only way out of this is money printing. The markets mark down the value of the currency but, as all countries are in the same boat, the par will be maintained. The suffererers are those who hold savings. You could say that that is where a good portion of the money is coming from.

 

[Atilla]

you did it again

money demand increases not supply and not "effectively" money supply

also i didn't say an increase in interest rates is a solution, it was merely a result of the demand for money increasing at the current supply of money pushing up the price of money (interest rates) Not sure I understand this. Why would interest rates rise when there are extra trillions & billions now circulating in the economy.


apologies for choice of wording "my fix" was intended to be my fix to your post not my fix to the problem lol

Quantitative easing (increasing money supply) was the Fed's best response to the situation of America facing "the recession" (meant to be said in a very deep and rather comical voice)

any freaking twit who thinks that increasing money supply doesn't decrease nominal interest rates depreciating the currency increasing the trade balance and increasing consumption spending is in need of a visit to the library I don't recall saying this I think you have misunderstood.

i don't appreciate being called full of myself, i am not an expert nor do i hold myself out to be an expert my replies are based on a passion for and 4 years of study in economics at university also not a know-all. Sensitive soul aren't you... Go and read some books on how to deal with rejection.

Fair point - perhaps I haven't explained it well. The point I'm trying to make is that increased economic activity - frequency of transactions effectively increases money in circulation.

However, throwing money at corporates does not yield the same increase in economic activity. The QE and transmission mechanism isn't working. Also, corporates will not simply invest because rates are low and banks will not lend to people just they have money when there is no business case. Can't tell people how to run their business. That is real Government intervention which is not wanted. I'd suggest government setup a cooperative bank or an enterprise bank for such ideas etc...

Good to know you have 4 years under your belt. Now try and apply it... Theory is also not the same as practice. Especially for students of economics as I have learnt to my cost.

 

[new_trader]

Fair point - perhaps I haven't explained it well. The point I'm trying to make is that increased economic activity - frequency of transactions effectively increases money in circulation.

However, throwing money at corporates does not yield the same increase in economic activity. The QE and transmission mechanism isn't working. Also, corporates will not simply invest because rates are low and banks will not lend to people just they have money when there is no business case. Can't tell people how to run their business. That is real Government intervention which is not wanted. I'd suggest government setup a cooperative bank or an enterprise bank for such ideas etc...

Good to know you have 4 years under your belt. Now try and apply it... Theory is also not the same as practice. Especially for students of economics as I have learnt to my cost.

Atilla, I think you’ve been reading the wrong economics textbooks and they have made you think like a politician. Governments can’t solve anything, just look at their track record. The same inept group of people who didn’t see the Global financial crisis coming now think they have the solutions to the problems, and that is, more of the same. All they know is printing money.

The solution is to raise interest rates and allow the economy to go through the restructuring it needs, the UK needs a recession to purge it of all the malinvestments made during the boom but that isn’t the politically expedient thing so it will never happen. It will always be a case of politics attempting to triumph over economics. As a result, you, me and all of society will be made poorer through debasement and the economy will never heal.

 

[anley]

New trader makes sense but the trouble is the nasty medicine needed doesn't translate into good re-election prospects for the politicians. Which is why again they'll try to muddle through with more meetings, more words, more plasters on the gangrene wounds etc.

This is why we need a benevolent dictator in charge. Hitler was good till about 1936, then he went mad. Although there is a school of thought that he actually saved Western Europe from communism, ie if he hadn't beefed up the military and gone to war the ever growing threat of the Soviet Union would have engulfed Western Europe.

By the way, there is a far easier way to solve the problems here in the UK and other countries and it doesn't mean increased taxes or massive job cuts.

All governments have to do is cut waste, 10% at a minimum can be cut within 6 months and 20% within 2 years. Setup a crack team of businessmen and accountants and pay them an absolute fortune, not to slash, but to cut waste. Let them publish the savings they make in relation to the salaries they earn, ie we've saved £10billion and have paid ourselves £100million.

A good example of big time Government waste is the NHS medical records computer fiasco, the program burnt through £11billion and has now been cancelled as 'unworkable. Excuse me, it's nothing but a very large database. A small team of good computer people of no more than 50 people could build one for £100million within 12-24 months.

Focus on waste, no more £30 loaves of bread, no more £15 reams of photocopy paper, no more £200 a year servicing per laptop, no more new government agencies, no more employment in the government sector (there's enough jobs already), no more leaflets on how to bring up a child (feed them at least 3 times a day, make sure they're warm at night, make sure you clean their botties etc - oh, thanks for the reminder I thought it was natural for them to have **** and **** everywhere!).

All we need is common sense which is why we're probably all doomed.

 

[Atilla]

Atilla, I think you’ve been reading the wrong economics textbooks and they have made you think like a politician. Governments can’t solve anything, just look at their track record. The same inept group of people who didn’t see the Global financial crisis coming now think they have the solutions to the problems, and that is, more of the same. All they know is printing money.

The solution is to raise interest rates and allow the economy to go through the restructuring it needs, the UK needs a recession to purge it of all the malinvestments made during the boom but that isn’t the politically expedient thing so it will never happen. It will always be a case of politics attempting to triumph over economics. As a result, you, me and all of society will be made poorer through debasement and the economy will never heal.

I hear what you are saying NT and re: currency depreciation and inflation you are correct. However, the adjustment necessary to undo 40 years of wrong policies and given our current climate would be like giving a shock to a fragile patient. The patient will die. Millions will be left destitute. The fall out would be tragic.

Raising interest rates and currency strengthening would kill so many businesses and cause phenomenal unemployment and collosal poverty.

Monetary tightening now once the horse has bolted is wrong policy.

Moreover right now the money supply is not very responsive to monetary policy.

Basically the elasticity of demand and supply of money to interest rates is not responding so raising interest rates will kill the economy with a long time lag before its beneficial effects take hold.

Very tough call. Very hard call. Not right one imho.

 

[Pazienza]

Atilla, I think you’ve been reading the wrong economics textbooks and they have made you think like a politician. Governments can’t solve anything, just look at their track record. The same inept group of people who didn’t see the Global financial crisis coming now think they have the solutions to the problems,

 

[Splitlink]

Atilla, I think you’ve been reading the wrong economics textbooks and they have made you think like a politician. Governments can’t solve anything, just look at their track record. The same inept group of people who didn’t see the Global financial crisis coming now think they have the solutions to the problems, and that is, more of the same. All they know is printing money.

The solution is to raise interest rates and allow the economy to go through the restructuring it needs, the UK needs a recession to purge it of all the malinvestments made during the boom but that isn’t the politically expedient thing so it will never happen. It will always be a case of politics attempting to triumph over economics. As a result, you, me and all of society will be made poorer through debasement and the economy will never heal.

Sadly, your last paragraph hits the nail on the head but the only ones made poorer are those of us who have money in the bank ( except for those who have millions and whose llfestyles will not, therefore, be affected. The majority, who lived on a credit card, and had little cash will simply re-adjust their life styles and try to get credit where they can and the whole thing will over,again.

Even now, it is not clear to me who the winner is going to be in this. China is a big creditor. Is it going to do them any good to be the holders of so many trillions of western debt?

 

[Ross Spur]

All governments have to do is cut waste

All we need is common sense which is why we're probably all doomed.

Sad but true.
Getting rid of about 80% of town planners would be a start, the ones who blow billions on paving and iron bollards to make everywhere look like imititation quaint clones, while leaving nearby roads dangerously potholed for the sake of a few quid of tar.
Our local bunch of idiots is building a huge new block of council offices they don't need, simply to avoid paying a penalty for cancelling the contract. Meanwhile, they're letting a fairly recent supermarket/car park a few hundred metres away go derelict, and the town centre is filling up with charity shops because of all the supermarkets and retail parks that have replaced the industry in the outskirts.
Welcome to the UK, an economy based on buying things you don't need, and hairdressers.

 

[Pazienza]

Cutting public sector waste is a great idea - in fact it's essential - but it will never happen.

The real waste they need to cut is payroll and employee benefits. Not only do they employ far too many, they pay too much and provide terms of employment that are far too generous. Add to that the lack of any market discipline and the natural inclination of all petty bureaucrats to expand the scope (and thus budgets) of their little fiefdoms and you have the swamp that we must endure today.

Cuts will be fruitless as the people actually implementing the cuts have no incentive - quite the opposite, in fact - to cut what needs to be cut. Instead, already inefficient and insufficient services will be cut. This will enable them to demonstrate that there should be no cuts, as "front line" services must inevitably suffer.

Nothing will change until we see a fundamental shift in attitude. The public services need to be seen once again as a mechanism for providing services for the public, and not a job creation and patronage scheme that is attractive to the inept and work-shy because it allows them to be remunerated far beyond a level commensurate with their ability.

 

[Liquid validity]

Agree with both of these posts by Paz and NT.
http://www.trade2win.com/boards/general-trading-chat/131524-usa-debt-crisis-17.html#post1638022
http://www.trade2win.com/boards/general-trading-chat/131524-usa-debt-crisis-17.html#post1638072

They are the solution.
NT's suggestion is not a vote winner.
Paz suggestion, although totally true raises the issue of filling the employment void.
That void was created by a lot of UK manufacturing moving to eastern Europe and China.
Lower wages and / or higher efficiency were the drivers.
Cue public sector taking up the slack to give the Govt. the chance to promote growth and win votes.
Either that or deal with the uncomfortable truth of the uncompetitive UK workforce.

All boils down to the fact that the UK cannot support current public spending levels
and current average living standards.
Many western countries face similar problems.
Those that don't are noted for efficiency and quality despite high wage costs (Germany).

So where does that leave the UK:
1/ Defence spending cuts on a massive scale - Sweden has high living standards partly due to
its lack of frequent military action as an example.

2/ Wage parity with China and eastern Europe, either by UK wage cuts or
increasing pay demands in competing manufacturing countries, thus reducing public sector employment
levels in the UK.

Until any of that happens, anything else is just papering over the cracks.
With global retail demand for manufactured products hardly surging now or for the foreseeable,
the UK is not likely to regain lost private sector jobs anyway even if it was competitive.
Enter stage left massive shift in average living standards...

 

[Pazienza]

Agree with both of these posts by Paz and NT.
http://www.trade2win.com/boards/general-trading-chat/131524-usa-debt-crisis-17.html#post1638022
http://www.trade2win.com/boards/general-trading-chat/131524-usa-debt-crisis-17.html#post1638072

They are the solution.
NT's suggestion is not a vote winner.
Paz suggestion, although totally true raises the issue of filling the employment void.
That void was created by a lot of UK manufacturing moving to eastern Europe and China.
Lower wages and / or higher efficiency were the drivers.
Cue public sector taking up the slack to give the Govt. the chance to promote growth and win votes.
Either that or deal with the uncomfortable truth of the uncompetitive UK workforce.

All boils down to the fact that the UK cannot support current public spending levels
and current average living standards.
Many western countries face similar problems.
Those that don't are noted for efficiency and quality despite high wage costs (Germany).

So where does that leave the UK:
1/ Defence spending cuts on a massive scale - Sweden has high living standards partly due to
its lack of frequent military action as an example.

2/ Wage parity with China and eastern Europe, either by UK wage cuts or
increasing pay demands in competing manufacturing countries, thus reducing public sector employment
levels in the UK.

Until any of that happens, anything else is just papering over the cracks.
With global retail demand for manufactured products hardly surging now or for the foreseeable,
the UK is not likely to regain lost private sector jobs anyway even if it was competitive.
Enter stage left massive shift in average living standards...

 

[Splitlink]

Hi Atilla,

This whole crisis is built on a mountain of debt. Debt that will never, ever, be repayed, so pardon me if I don't have much sympathy for borrowers. I am a saver and am watching this war on currencies because I do not know the best one be in, so I have my savings spread around a little. It does not matter, though. Inflation is wasting it.

 

[Atilla]

Hi Atilla,

This whole crisis is built on a mountain of debt. Debt that will never, ever, be repayed, so pardon me if I don't have much sympathy for borrowers. I am a saver and am watching this war on currencies because I do not know the best one be in, so I have my savings spread around a little. It does not matter, though. Inflation is wasting it.

Well we've been arguing about inflation for some time and it is certainly pencilled in imo - what ever the official figures say it is. I'd double that really.


So from what I understand on this thread the problem lies in;

1. low interest rates - should be raised
2. high taxes - should be lowered
3. spending on social security - should be cut back
4. migrant labour - should be stopped
5. currencies - should be strengthened

If we address these issues then we would be well on the way to resolving the debt problem???


Regarding;

a. bailing out the banks
b. financing wars
c. bailing out the PIGS
d. politicians expenses
e. fat cat bonuses
f. ageing popullation and health costs
g. ageing popullation and pensions
h. energy prices rising; gas, electricity and oil
i. food and commodity prices rising
j. declining manufacturing

These are now either behind us or non-issues that have been dealt with and closed off??? Against the list of challenges adhering to points 1-5 should address our issues.


Be good to summarise. Add to either list if I missed anything.

 

[Splitlink]

Well we've been arguing about inflation for some time and it is certainly pencilled in imo - what ever the official figures say it is. I'd double that really.


So from what I understand on this thread the problem lies in;

1. low interest rates - should be raised
2. high taxes - should be lowered
3. spending on social security - should be cut back
4. migrant labour - should be stopped
5. currencies - should be strengthened

If we address these issues then we would be well on the way to resolving the debt problem???


Regarding;

a. bailing out the banks
b. financing wars
c. bailing out the PIGS
d. politicians expenses
e. fat cat bonuses
f. ageing popullation and health costs
g. ageing popullation and pensions
h. energy prices rising; gas, electricity and oil
i. food and commodity prices rising
j. declining manufacturing

These are now either behind us or non-issues that have been dealt with and closed off??? Against the list of challenges adhering to points 1-5 should address our issues.


Be good to summarise. Add to either list if I missed anything.

If you've missed something it can be brought up later.

 

[counter_violent]

Well we've been arguing about inflation for some time and it is certainly pencilled in imo - what ever the official figures say it is. I'd double that really.

Your probably right about the real rate of inflation being nearer double the official published amount. At least in the sense of what the majority of ordinary Joes have to pay out, food, transportation, energy, household day to day etc.


So from what I understand on this thread the problem lies in;

1. low interest rates - should be raised

Yes rates should be raised gradually to restore some confidence but the main point being that it would attract investment and also create jobs as a knock on effect.

2. high taxes - should be lowered

Yes this should be done alongside the other measures which has a number of benefits. It puts more money in the hands of individuals (equitable re-distribution of wealth) to spend within the economy. It incentivizes people to work and/or work harder to make more net income and therefore more disposable and spending will follow.

3. spending on social security - should be cut back

Yes there most deffinately should always be a distinction between those who work and those who don't. It is complete nonsense to have policies that give people something for doing nothing, it just sends out entirely the wrong message.


4. migrant labour - should be stopped

The unskilled element of migrant labour should be stopped, i'm sure we have enough people to do what needs to be done. Also there is a growing ageing population many of whom don't want to retire but perhaps would be quite happy doing some part time work to suppliment pension income etc.

5. currencies - should be strengthened

Will be what they will be, probably doesn't matter too much in the scheme of things.

6. Progressively and drastically reduce the size of govt and public sector.
People do not respond well to being told what to do all the time and especially by officials/jobsworths.
There would be opportunity/incentive enough within the framework outlined in points 1-5

If we address these issues then we would be well on the way to resolving the debt problem???


Regarding;

a. bailing out the banks
b. financing wars
c. bailing out the PIGS
d. politicians expenses
e. fat cat bonuses
f. ageing popullation and health costs
g. ageing popullation and pensions
h. energy prices rising; gas, electricity and oil
i. food and commodity prices rising
j. declining manufacturing

These are now either behind us or non-issues that have been dealt with and closed off??? Against the list of challenges adhering to points 1-5 should address our issues.


Be good to summarise. Add to either list if I missed anything.

The Liberals had their one chance in govt to show that they could be responsible and handle power. This is perhaps a shame for them, but I did say when the coalition was formed that they would need to behave themselves and be seen to work with the administration. They have completely failed in this respect and will pay a hefty price by the time of the next election. So it will be a straight two horse race next time around and hopefully more clearcut battle lines will be drawn.

 

[0007]