Happy Sequester Day!

[GoldenMember]

Quote from BSAM:

White line test.

No white lines here, entire page. FYI

 

[jem]

great article pointing to the .8 multiplier..

1. Right now the fed govt is about 40 percent of GDP.

http://www.usgovernmentspending.com/spending_history


Government spending in the United States has steadily increased from seven percent of GDP in 1902 to 40 percent today.

Chart 2.21: 20th Century Government Spending
Government Spending started out at the beginning of the 20th century at 6.9 percent of Gross Domestic Product (GDP). As you can see from Chart 2.21, the federal share of that spending was modest. Spending got a big kick in World War I and ended up at about 12 percent of GDP in the 1920s.
Then came the Great Depression, in which President Roosevelt and the New Deal cranked up federal spending, and total government spending rose up to 20 percent of GDP. World War II really showed how the United States could commandeer its national resources for all out war. Government spending peaked at just under 53 percent of GDP in 1945.

2. Every dollar spent by govt in a zero interest rate environment... ( a fake one) destroys gdp.

In a health economy a dollar invested returns more because economic growth should be growing faster than credit growth.

But right now credit growth is growing faster than economic growth.

Govt spending is destroying gdp because the wasteful companies are not being destroyed and replaced with the productive ones.


The govt is destroying our economic future with each dollar they spend.


http://blogs.cfainstitute.org/investor/2012/12/05/credit-update-debt-growth-and-gdp/


3. The mariginal productivity of debt went below zero in 2006.

http://www.financialsensearchive.com/editorials/fekete/2009/0330.html


4, in 2011 it took more than 2 dollar in debt to make a 1 of GDP.

Consider G is the G in GDP... that means govt spending as debt destroys productivity.

 

[PHOENIX TRADING]

Quote from nitro:

remember, one dollar spent by the government turns into $10 in the real economy.

I propose the multiplier effect of govt spending compared to private is negative concerning real wealth.

I've predicted for quite awhile now that a Nobel prize could be given for proving that gift giving is a grossly inefficient use of resources and or economic utility. As a result gifts are always over priced or in which wealth is squandered for sentimental reasons.

1) The person getting the gift, if they could afford it. They would have already purchased it, if they had wanted it at that price anyway .

2) Or the recipient could't afford it no matter how much they desired it.

3) Invariably this leads the purchaser to overpay for the utility(the recipient derives) of the gift given.

4) The over payment portion of the gift (the sentiment factor) is quite simply wasted as far as increasing the quality of life is concerned. This is true for both parties.

So gifts are something the recipient cannot afford to buy himself or chooses not to afford because he values something else more highly.












Now all you have to do is recognize that all govt services are *gifts.
*Something all citizens cannot afford or choose not to purchase privately on their own.

This inherently is the problem with govt spending. The economic multiplier of govt spending says there is a gain, as if it's effect on the quality of life were equal to that of private spending but it's not.
Most of it is simply wasted. Just like borrowing is fictionally counted as part of GDP, govt spending multipliers are fictional in nature where wealth creation is concerned.

Keynes famous of paying one group to go around digging holes and paying another group to go around filling them is a good example of negative real wealth creation while generating a multiplier effect.

In the real world this would only net a waste of time, effort and the consumption of real wealth (tools, gas, injuries to workers etc) would be the result.






http://www.elitetrader.com/vb/showthread.php?s=&postid=3745843&highlight=nobel#post3745843

 

[Mav88]

Quote from futurecurrents:

It's about the best use of the money. The wealthy and corporations are sitting on piles of money that could be better used on things like infrastructure repairs and improvements.

The top 1% now own 40% of the nation's wealth, take home a quarter of it's income and are taking home more of the nation's income since the 1920's. This inequity can't be good for the general health of the economy.

And one thing for sure is that the top 1% are not being directly hurt by this sequester. Once again, they away scott-free while the regular Joe gets the shaft.

The regular joe gets the shaft because he can't have other people's money.

Liberal logic justifies stealing for the 'common good' and too stupid to see such economics isn't about prosperity, it's about envy and hate.

 

[jem]

I did not mean to state G is the entire G in GDP.

G is 40% of the G in GDP.

C+ I + G plus exports minus imports.

Quote from jem:

great article pointing to the .8 multiplier..

1. Right now the fed govt is about 40 percent of GDP.

http://www.usgovernmentspending.com/spending_history


Government spending in the United States has steadily increased from seven percent of GDP in 1902 to 40 percent today.

Chart 2.21: 20th Century Government Spending
Government Spending started out at the beginning of the 20th century at 6.9 percent of Gross Domestic Product (GDP). As you can see from Chart 2.21, the federal share of that spending was modest. Spending got a big kick in World War I and ended up at about 12 percent of GDP in the 1920s.
Then came the Great Depression, in which President Roosevelt and the New Deal cranked up federal spending, and total government spending rose up to 20 percent of GDP. World War II really showed how the United States could commandeer its national resources for all out war. Government spending peaked at just under 53 percent of GDP in 1945.

2. Every dollar spent by govt in a zero interest rate environment... ( a fake one) destroys gdp.

In a health economy a dollar invested returns more because economic growth should be growing faster than credit growth.

But right now credit growth is growing faster than economic growth.

Govt spending is destroying gdp because the wasteful companies are not being destroyed and replaced with the productive ones.


The govt is destroying our economic future with each dollar they spend.


http://blogs.cfainstitute.org/investor/2012/12/05/credit-update-debt-growth-and-gdp/


3. The mariginal productivity of debt went below zero in 2006.

http://www.financialsensearchive.com/editorials/fekete/2009/0330.html


4, in 2011 it took more than 2 dollar in debt to make a 1 of GDP.

Consider G is the G in GDP... that means govt spending as debt destroys productivity.

 

[denner]

Quote from Max E. Pad:

LOL!!! Dumbest thing i have ever read.

It is remarkably off the mark...just about as bad as Maxine Waters comment earlier in the week. Hopefully, Nitro simply reversed the formula accidentally...then again, I've always suspected the guy is a savant of sorts.

 

[nutmeg]

Quote from denner:

...then again, I've always suspected the guy is a savant of sorts.

Ditto.

 

[nitro]

The US government and Fed are inflating the world and its GDP not just the US. You would have to look at world tax rates not just the US.

Fundamentally the price of oil and gold tell you world output. More complexly, currencies do the same thing.

I have no idea why oil is not $125 a barrel, with FV way above that.

Quote from tomdavis:

If that's true, then a 100% tax and spend government would produce infinite growth in the economy.

But it's not true. It's not even close to being true when measured by a dynamic (as opposed to static) econometric model.

--------------------------------------

http://moveleft.org/voodoo_multiplier/index.html

To conclude: the main fallacy of the spending multiplier lies in the assessment of MPC. The multitude of factors that influences the propensity to consume is not taken into account. While government spending may have a small and transient positive effect on consumer spending (thus increasing MPC), there are numerous factors that reduce MPC. Among those factors are taxation and inflation (less money available for consumption), unemployment, and insecurity over the economic development. All these factors have the power to cause negative marginal propensity to consume and therefore a multiplier that is less than unity.

------------------


Looking at Federal Reserve data, the multiplier, whatever there may have been at one time, appears to be shrinking fast.

An endless stream of cheap money pumped into the system by the Federal Reserve has diluted the relationship between credit expansion, deficit spending and real economic growth. The result is diminishing returns on each dollar the fed supplies/spends. In the 1980s, it took four dollars of new credit to generate $1 of real GDP. From 1996-2005, it took an average of $10 of federal credit expansion to produce $1 in real economic growth. From 2006 through 2012 it took $20 to produce $1 in real economic growth. The marginal effect of federal reserve policy is rapidly approaching zero.

 

[jem]

Quote from nitro:

The US government and Fed are inflating the world and its GDP not just the US. You would have to look at world tax rates not just the US.

Fundamentally the price of oil and gold tell you world output. More complexly, currencies do the same thing.

I have no idea why oil is not $125 a barrel, with FV way above that.

When the Fed supports the govt in its deficit spending via QE not only do stocks go up but the price of food and oil go up.

For instance every 10 dollar increase in the price of oil - takes .3 percent out of gdp. (I believe the increase in the price of food and the increase in taxes also soaks up a lot of gpd. )

Then as the economy starts to get choked off the price of oil comes down.

Overall trying to increase the GDP via deficit spending seems very difficult. I realize the fed is trying to increase commercial real estate values so its member banks can become solvent... but do we really need to debase the dollar to this?

The private sector has to grow and become more efficient... like the rest of the world we have to manufacture things the world wants... the dollar has to get stronger not weaker.
We need to encourage investment in new techonology via lower taxes... We need to allow our investors to keep more of their profits so they can channel it back into to new technologies.

By the way


This article also points out what I have been saying for years.
This crazy spending in washington is what is causing the wealth inequality in america.

http://www.ft.com/cms/s/0/4fdcd560-fb32-11e1-a983-00144feabdc0.html#axzz2MVu8w9d0

 

[Tsing Tao]

As long as the Fed continues the CTRL-P spam, sequestration has nothing to do with the S+P.