Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
"The question is not: is it a good idea to hire more police, firefighters and construction workers? The question is: how do we pay their salaries and benefits? If the answer is, by borrowing more from China and others, then the response is clear: we can’t afford them right now."
This statement shows a lack of understanding of how trade with other countries works. China and other trade partners hold Federal reserve notes as a choice of payment to keep inflation low in their country. We did not borrow...it is not a loan...it is a credit that can be accepted as a form of trade and can be used at some later point in time to settle another trade. In the meantime China receives the benefit of being able to control inflation in their growing economy.
The U.S. is part of a global deflationary debt spiral. Taxes can only be collect after you provide a wage. Low wages = Low tax collection. A good wage = higher tax collection. Keeping a teacher, firefighter and cop employed even if it requires the feds printing money and therefore weakening the dollar might be a worthy federal government goal short term. It might keep more cities from going bankrupt which really is a city crying for help since they can't print money nor get tax payment from an out-of-work teacher, firefighter or cop...not to mention the outsource unemployed private sector worker.
I'll also take his stock calls with a grain of salt.
I wish he concentrated on the concepts Inflation and deflation...not tax collection.
You noted from the original article author: "The question is not: is it a good idea to hire more police, firefighters and construction workers? The question is: how do we pay their salaries and benefits? If the answer is, by borrowing more from China and others, then the response is clear: we can’t afford them right now."
This situation was discussed 3 years ago at FA. It was then and remains the scenario; not suprisingly.
A few MI notes: I am not pointing fingers at any group with this note; only the facts as they exist in MI and many other states. One fairly large community continues to reduce public safety employees and services; as 46% of the current budget is set for retiree pensions and health care plans; which, of course is related to an ongoing reduction of tax revenues, too. Another large city is reducing other public services and adding $66/year to all property taxes (a special assessment) in order to recover 25 police officer positions. Unpaid citizens are answering police phone calls of a non-emergency nature to help reduce costs and allow police officers to be patroling the streets. MI has hired and trained state police officers for the first time in many years in order to have these officers help patrol the big cities.
The unwind will continue; as catching up to all events takes some time to wind through the systems to show more of the problem areas. Part of why our house is still mostly a house of bonds.
Totally agree...this stuff ebbs and flows. My question to these politicians from both sides (and in between) is this... What does an energy independent America look like? What does the strongest economy in the world look like when it doesn't need to import OIL, NG, coal, or food? What does this country look like when regulation is imposed, rules are followed, and criminals pay for their crime? What does its roads, bridges and sewers look like? What does its healthcare system have to offer? What can it demand from its untrained adults and youth? What can Americans expect from the hungry masses who will once again be knocking on our shores and borders. We need are politician preparing the country for the prosperity that it exported and outsource 30 years ago. We have a "do over" here folks. The reality is that there are a lot more positive things to focus on. But, inside the halls of the Capitol, they hide in Washington (the huddle asses) seeing everything half empty and too tough to tackle.
Finally, I will apologize every chance I get for living in the same state as Senator Dodd. He represents the type politician that needs to be voted out...instead he left a 2000 page piece of crap at the doorstep of his country, lit the paper bag on fire, knocked on our door and walked away...into the Hollywood Sunset.
Hello again, bee: I agree with your comments on "This statement shows a lack of understanding of how trade with other countries works".
Your observations are consistent with the principles of "Modern Monetary Theory". This theory describes the workings of a modern monetary system, "powered" only by a fiat currency, with no underlying measure of "value", such as gold, silver, or any other medium of perceived value. Since this description obviously fits virtually all of today's major trading countries, understanding the underlying principles is important.
A link is given below for an interesting paper by Cullen Roche which describes the major principles of this theory. Here is a paragraph from that paper:
"The US government is never revenue constrained. They are not like a household, business or state government. We don’t need China to buy our bonds in order to spend. China gets pieces of paper with old dead white men on them in exchange for real goods and services. They can either hold that money in a checking account at the Fed OR they can do what they wisely do and invest those pieces of paper in what is actually a savings account at the Fed. We also don’t need taxes to spend although taxes play a vital role in helping to regulate aggregate demand. It can be helpful to understand this concept by understanding some simple accounting identities behind government spending."
Thanks OJ...reading this for the first time is kinda mind blowing. I believe Investor was the first to suggest Cullen's explanations of these dynamics...so thanks to Investor and you for keeping the light on. Our currency is a reflection of our country's worth...I still feel our country and our currency still has chance of regaining value and worth so long as we can rein in the worthless before they get a chance to rain on the worthy.
Your anger toward the Dodd-Frank legislation is misplaced. The problem resulting in a 2000 pages of useless legislation is not Senators Dodd and Frank. Rather, it is the entrenched system of lobbying, er, I mean, legalized bribery, that exists in the United States. Both parties are governed by lobbyist money and what started out as badly needed legislation was twisted into something unrecognizable by the lobbyists. Simply put, each lobbyist representing his/her special interest group, corporation, or billionaire bribed a legislator (it's euphemistically called a "campaign contribution", but in reality we all know what it really is), added another 10-20 pages of loopholes, and when all was said and done the legislation had no teeth, no use, and had become undecipherable.
If one thinks about it carefully, our present system of government most closely resembles the Soviet Union, minus the hooliganism and thuggery. Both countries hold sham elections and claim they are democratic, yet in reality all power is wielded by a select group of privileged individuals. In the U.S.S.R., they are members of the Communist Party and friends and supporters of Vladimir Putin. In the U.S., they are wealthy individuals with billions of dollars, corporations with deep pockets, and well-funded PACs, almost invariably ultra-right wing --- who then bribe legislators to buy votes and circumvent the will of the people. Both parties are equally guilty and will line up like pigs at the trough when the lobbyists come calling.
My point: effective legislation of ANY sort is not possible in the current political climate as long as lobbyists are permitted to buy votes and form legislation favorable to their own narrow special interests. Whether Obama or Romney wins in November is ultimately irrelevant and neither party will balance the budget or bring the unemployment rate down.
Embarrassment (he reminds me of my crazy uncle) and rage (we left him in charge of the cash register) may be coloring my perspective but, that only on good days.
Comments
"The question is not: is it a good idea to hire more police, firefighters and construction workers? The question is: how do we pay their salaries and benefits? If the answer is, by borrowing more from China and others, then the response is clear: we can’t afford them right now."
This statement shows a lack of understanding of how trade with other countries works. China and other trade partners hold Federal reserve notes as a choice of payment to keep inflation low in their country. We did not borrow...it is not a loan...it is a credit that can be accepted as a form of trade and can be used at some later point in time to settle another trade. In the meantime China receives the benefit of being able to control inflation in their growing economy.
The U.S. is part of a global deflationary debt spiral. Taxes can only be collect after you provide a wage. Low wages = Low tax collection. A good wage = higher tax collection. Keeping a teacher, firefighter and cop employed even if it requires the feds printing money and therefore weakening the dollar might be a worthy federal government goal short term. It might keep more cities from going bankrupt which really is a city crying for help since they can't print money nor get tax payment from an out-of-work teacher, firefighter or cop...not to mention the outsource unemployed private sector worker.
I'll also take his stock calls with a grain of salt.
I wish he concentrated on the concepts Inflation and deflation...not tax collection.
Note: I have not read the article.
You noted from the original article author: "The question is not: is it a good idea to hire more police, firefighters and construction workers? The question is: how do we pay their salaries and benefits? If the answer is, by borrowing more from China and others, then the response is clear: we can’t afford them right now."
This situation was discussed 3 years ago at FA. It was then and remains the scenario; not suprisingly.
A few MI notes: I am not pointing fingers at any group with this note; only the facts as they exist in MI and many other states. One fairly large community continues to reduce public safety employees and services; as 46% of the current budget is set for retiree pensions and health care plans; which, of course is related to an ongoing reduction of tax revenues, too. Another large city is reducing other public services and adding $66/year to all property taxes (a special assessment) in order to recover 25 police officer positions. Unpaid citizens are answering police phone calls of a non-emergency nature to help reduce costs and allow police officers to be patroling the streets. MI has hired and trained state police officers for the first time in many years in order to have these officers help patrol the big cities.
The unwind will continue; as catching up to all events takes some time to wind through the systems to show more of the problem areas. Part of why our house is still mostly a house of bonds.
Regards,
Catch
http://individual.troweprice.com/public/Retail/Planning-&-Research/T.-Rowe-Price-Insights/Market-Analysis/Quarterly-Wrap-Ups?placementGUID=em_marketsum&creativeGUID=EMBDHT&v_sd=201207
muni crisis news
http://www.cnbc.com/id/48149920
Totally agree...this stuff ebbs and flows. My question to these politicians from both sides (and in between) is this... What does an energy independent America look like? What does the strongest economy in the world look like when it doesn't need to import OIL, NG, coal, or food? What does this country look like when regulation is imposed, rules are followed, and criminals pay for their crime? What does its roads, bridges and sewers look like? What does its healthcare system have to offer? What can it demand from its untrained adults and youth? What can Americans expect from the hungry masses who will once again be knocking on our shores and borders. We need are politician preparing the country for the prosperity that it exported and outsource 30 years ago. We have a "do over" here folks. The reality is that there are a lot more positive things to focus on. But, inside the halls of the Capitol, they hide in Washington (the huddle asses) seeing everything half empty and too tough to tackle.
Finally, I will apologize every chance I get for living in the same state as Senator Dodd. He represents the type politician that needs to be voted out...instead he left a 2000 page piece of crap at the doorstep of his country, lit the paper bag on fire, knocked on our door and walked away...into the Hollywood Sunset.
Yeah we have a lot of things to work through.
Your observations are consistent with the principles of "Modern Monetary Theory". This theory describes the workings of a modern monetary system, "powered" only by a fiat currency, with no underlying measure of "value", such as gold, silver, or any other medium of perceived value. Since this description obviously fits virtually all of today's major trading countries, understanding the underlying principles is important.
A link is given below for an interesting paper by Cullen Roche which describes the major principles of this theory. Here is a paragraph from that paper:
"The US government is never revenue constrained. They are not like a household, business or state government. We don’t need China to buy our bonds in order to spend. China gets pieces of paper with old dead white men on them in exchange for real goods and services. They can either hold that money in a checking account at the Fed OR they can do what they wisely do and invest those pieces of paper in what is actually a savings account at the Fed. We also don’t need taxes to spend although taxes play a vital role in helping to regulate aggregate demand. It can be helpful to understand this concept by understanding some simple accounting identities behind government spending."
Regards- OJ
⇒ Understanding The Modern Monetary System
Thanks OJ...reading this for the first time is kinda mind blowing. I believe Investor was the first to suggest Cullen's explanations of these dynamics...so thanks to Investor and you for keeping the light on. Our currency is a reflection of our country's worth...I still feel our country and our currency still has chance of regaining value and worth so long as we can rein in the worthless before they get a chance to rain on the worthy.
Take care.
Your anger toward the Dodd-Frank legislation is misplaced. The problem resulting in a 2000 pages of useless legislation is not Senators Dodd and Frank. Rather, it is the entrenched system of lobbying, er, I mean, legalized bribery, that exists in the United States. Both parties are governed by lobbyist money and what started out as badly needed legislation was twisted into something unrecognizable by the lobbyists. Simply put, each lobbyist representing his/her special interest group, corporation, or billionaire bribed a legislator (it's euphemistically called a "campaign contribution", but in reality we all know what it really is), added another 10-20 pages of loopholes, and when all was said and done the legislation had no teeth, no use, and had become undecipherable.
If one thinks about it carefully, our present system of government most closely resembles the Soviet Union, minus the hooliganism and thuggery. Both countries hold sham elections and claim they are democratic, yet in reality all power is wielded by a select group of privileged individuals. In the U.S.S.R., they are members of the Communist Party and friends and supporters of Vladimir Putin. In the U.S., they are wealthy individuals with billions of dollars, corporations with deep pockets, and well-funded PACs, almost invariably ultra-right wing --- who then bribe legislators to buy votes and circumvent the will of the people. Both parties are equally guilty and will line up like pigs at the trough when the lobbyists come calling.
My point: effective legislation of ANY sort is not possible in the current political climate as long as lobbyists are permitted to buy votes and form legislation favorable to their own narrow special interests. Whether Obama or Romney wins in November is ultimately irrelevant and neither party will balance the budget or bring the unemployment rate down.
Embarrassment (he reminds me of my crazy uncle) and rage (we left him in charge of the cash register) may be coloring my perspective but, that only on good days.