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are we in a recession?
- Thread starter brokerboy
- Start date
Quote from achilles28:
But I'm thinking policy response. In fact, I am betting on it. If you take the other side, you're essentially betting the FED and Treasury will stand idly by and let this market economy slip into the deflationary oblivion they spent the last 4 years trying to save it from. I think that's a very unwise position to take. We're talking Bubble Ben here.
I hear you loud and clear. Believe me, after more than a decade of what I consider "asset inflation at all costs" (save the blip in 08-09), I'd never press a short bet against the lunatic known as "bullet ben".
You outlined the fundamental forces at work "fundamental vs central planners". I thought the previous iteration of this nonsense was bad (i.e. the centrally planned real estate bubble), but this round has my head spinning.
Quote from toc:
Without any further delay, Congress should pass the law that budgets at all levels have to be balanced no matter what.
No. That should not be needed.
This is why independent Central Bank has been created in the first place. Politician, government can not print paper (deficit) at will. They have to borrow and the value of the paper they issue is subject to evaluation in free market environment so there is natural limit how much they can borrow. Moreover they would have to make every effort to support good economic environment and please their electorate on economic front.
If such debt creation mechanism is distorted then government and politicians will threaten citizens freedoms and survival of the US.
However, they found the way to corrupt the Fed and influence banking regulations. This is letting them grow endless deficits. They elect themselves using these money to grow their support base and hold on to power at the cost of the entire society.
Government should go bankrupt and Congress fired by electorate very long time ago. Now it is too late and everybody is kept hostage and they know that.
Quote from vicirek:
Government should go bankrupt and Congress fired by electorate very long time ago. Now it is too late and everybody is kept hostage and they know that.
I only see two scenarios that can save the US economic ship from sinking. Sadly both are somewhat painful.
a) Hyperinflation, which washes out the value of the debt. Has very painful sideeffects on the 90% of the society.
b) Two decades long austerity which calls for balanced budgets. These budgets have allocation for debt interest payments and atleast $500B principal payments annually on $16 Trillion debt. From 2018 onwards, with energy self sufficiency, US will be saving $1 Trillion a year by not sending it to Middle East. This Trillion alone is sufficient to pay off the interest and principal on the debt in two decades. Also, this Trillion will create more jobs in energy sector which will pull economy out of the recessionary persistence that we are seeing since 2008.
The point is "Bastard Politicians" in DC and local state capitals do not mess this opportunity again.
or 3 they write off the debt it's been done before,i think this is what they are trying to avoid,but having that option as a last resort is why they are not in a panic .. http://www.nber.org/chapters/c10991.pdf
Quote from toc:
b) Two decades long austerity which calls for balanced budgets.
This is not possible or not going to happen because:
The US is global power and it costs a lot to maintain global balance of power. Many outside the US are willing to support US deficits which amounts to protection racket. As long as image of the US as a superpower is maintained deficit will grow.
US Dollar is reserve currency and the world demographics is growing.
Quote from vicirek:
This is not possible or not going to happen because:
The US is global power and it costs a lot to maintain global balance of power. Many outside the US are willing to support US deficits which amounts to protection racket. As long as image of the US as a superpower is maintained deficit will grow.
US Dollar is reserve currency and the world demographics is growing.
It is absolutely possible with sincerity ofcourse. If political mindset is thrown in then any good plan will be a mess. $1 Trillion a year from energy self sufficiency will more than account for debt interest and principal payments. It might even leave $200B to maintain growth in other areas. Currently US is at $1 Trillion a year deficit. This has to be cut down. With $13 Trillion economy this accounts for roughly 7.7% of "economic maneuvering". Very much possible and do not forget that around 2018 a new bull trend will be starting in economy and stock prices due to the commodity cycle peaking out and turning down. This means more growth and more revenues to pay for spending. Bill Clinton reached surplus from the bull trend in 1990s in the stock market cash outs paying capital gains taxes and also economy on high swing.
Regarding power projection, except for Fanatic Mullahs, no other nation want to get into the cross hairs of the US and allies. US does not have to project power on its own, EU and other regional allies should pay up. However, getting unnecessarily into the personal space of Russians and Chinese would require extra spending and that will bankrupt the US.
There are honorable ways to handling problems and there are ways of going totally naked on the streets. Hyperinflation will make US population naked on the streets in utter shame and depression.
The "guts and grits" of the US as a nation are based on honor, freedom and hard work. I do not think Hyperinflation will be chosen as the way out.