The United States Government is carrying a frighteningly high level of debt. However, no serious plan has been implemented, by Democrats or Republicans. This high debt will have deleterious effects on the US, including the effect on taxes, economic growth and “entitlements.”
This article will steer clear of specific thoughts on social and political upheaval, since it is too hard to predict such trajectories, and are anyway another subject. Of course, macroeconomic trends can be just as tricky, I am sure many people will have differing opinions on how our national debt will affect the economy in the coming decades.
First, we must cover the current liabilities, debts, and revenue streams of the Federal government. All figures presented will be based on the most recent year available- 2016 data unless otherwise noted.
US GDP: 18.87
Total Federal Governmental Debt: 19.98
Interest rate: 2.232%
Debt as % of GDP: 106%
Interest Spending as % of GDP: 2.36%
Long-term economic growth trend: 2% (estimated based on post-2010 data)
Inflation: 1.26%
Pretty dire straits when debt is above total GDP. Having a debt ratio this high is actually cataclysmic, as pointed out by Salim Furth at The Heritage Foundation due to a phenomenon known as debt drag. I believe this is a fairly intuitive concept. As national debt increases as a portion of the total GDP, it causes a corresponding decrease in the growth of GDP. My personal theory on how and why this happens is as follows: There is a ‘crowding out’ effect by taking investments away from high risk/reward private debts, but also because more and more money is spent servicing debt rather than being spent on goods and services. Why risk your cash when you can get a guaranteed return on investment?
The exact magnitude of the effect is of course debated but is estimated at between 0.18-0.19% lower growth for every 10% GDP debt above about 84% of GDP and 0.16% lower for every 10% above 60% of GDP (see graph below). This seems to indicate that the effect of high debt is a nonlinear decrease in economic growth; however, we will represent the relationship as a tri-linear curve. For a country with debt at 106% of GDP, the effect would be about -0.82% to the annual increase in GDP. This is massive when one considers the historic growth rate of the US in modern times was close to 3%. However, we find now that the growth rate over the past 10 years has never surpassed 3% (year-long average) and is averaging much closer to 2%. This corresponds freakishly well with the increase in Federal debt. 10 years ago debt was about 60% of GDP, which based on empirical evidence does not seem to have a large effect on growth.
Another headwind for the US will be the increasing cost of capital. During the fantastic growth of the national debt interest rates were very low, a favorable position for a debtor to be in; however, the interest rates are likely to increase with the new Fed policy to increase the benchmark rates. This means debt will become more expensive to service, and likely return closer to the historical average rate of about 5%. Debt payments will increase, further accelerating the addition of debt. With the increased debt, revenue growth will slow due to a lackluster economic growth (remember that -0.185% of growth per 10% of debt to GDP?). This all points to a rapidly accelerating downward spiral from this point on unless spending can be reined in yesterday. All evidence in recent history points to the fact that reining in spending is a political no-go, for Millennials, the fiscal hot potato has been tossed around their entire lives. Short term pain will be high if spending is to be controlled, and that only gets worse as the deficits grow.
On top of all this bad news in terms of debt, growth and interest rates we will have acceleration in the costs of the major entitlement programs as the populace continues to age and even grow infirm before their years (some of this can be attributed to the increase in the average American’s waistline). Again, there is no political will to reform these programs. If recent events are any indication, even small cuts to unimportant programs are not possible.
For this thought experiment, let us assume that the Fed is targeting 3% for inflation and that they get it in 3 years. For the sake of simplicity, say that means the interest rate reaches ~5% on treasuries. This is in excess of 100% increase over the current cost of servicing debt for the US. This means our outlays to service debt will increase; making our current budget, which already relies on deficit spending to go further into the red by the same amount. Last year total debt servicing was $432 billion (including interest paid to the Social Security trust fund). If we assume this will double over the next 3 years when interest rates go up, that is a debt cost of 2*$432= $864 Billion. This is still pretty cheap but will be added directly to the deficit (and thus converted to new debt) as our revenue is unlikely to increase any more than the economy does.
Let us review our assumptions:
• (real) Growth rate starts at 2% but is decreased with increasing debt
• Expenditures and Revenue as a portion of GDP is constant (~3% funding gap)
• Inflation reaches 3%
• The interest rates on debt reaches 5%
Now, take a theoretical person “John” he will retire in 2045 and die in 2063. When John retires in 2045, our scenario would predict a real growth rate of 1%, however, because this includes a 1%/annum growth rate in population, average living standards would cease to increase at this time. John’s kids would probably riot since no one wants to be doing only as well as their parents did. This could change our long-term assumptions, so ignore that possibility for now. In 2063 when John dies, the debt to GDP ratio would be equal to 2.7 and real growth would be -1%. Japan aside, it is not clear anyone would be willing to continue to lend to a country with such anemic growth and high-debt.
So, right around when John retires in 2045, we’re likely to have a calamity in terms of funding the government (assuming this sort of steady-state worsening of financial conditions nationwide). We’re likely to see outlays hit, especially for social security, already projected to be something like 75% of promised benefits come 2035.
I think it is reasonable to think that around 2035-2045 something major will change our trajectory, as the combining forces of the elderly being cut off and economic stagnation unheard of in American history caused major political and social upheaval. We will have to have increases in effective taxation rates, decreases in benefits or some kind of default around this time period (or some combination of all three). Combined those efforts would result in an effective decrease in our living standards by about 10% in 2045 without accounting for lost economic growth, which would be another 12%. That is actually a good thing, compared to waiting until 2063 to deal with debt issues when growth would be worse than stagnant, and thus the consequences of the debt carried by the government exacerbated by economic conditions. I would estimate that by waiting until 2063, the decline in living standards by the combination of more taxes and less spending would be close to 16% and an additional 40% loses due to unrealized economic growth.
Further Reading:
https://www.cbo.gov/ has tons of information on projections, but they are very often wrong, for example:
In CBO’s baseline projections, the deficit in 2017 totals $693 billion, $134 billion more than CBO projected in January.
That is a 20% error in the deficit over the course of just one year. You can find the most recent 10-year outlook from the CBO here: https://www.cbo.gov/publication/52801
http://www.treasurydirect.gov/govt/reports/pd/feddebt/feddebt_ann2016.pdf
Comments
268 responses to “Debt and Growth in America”
*looks at own credit card debt and laughs*
I will have paid off my student loans at the end of the year.
I will have paid off my credit cards by the middle of next year.
I will have paid off my car and my house within six years after that.
🙂
Congrats!
I just want to find out what it is like to utter in complete truthfullness the words “I am debt-free.”
You pay an income tax, so I’m not sure you can ever say that honestly.
And property tax.
Taxes are not debts, they are extortion payments.
Debts are voluntary.
Fair enough. Still blows.
Fair point, until the IRS screws up your paperwork and starts garnishing your wage to make up for it.
My house is paid off, but I still owe 11k a year in “rent” to the government.
Move to an island somewhere.
Same here, UnCiv. I haven’t owed on anything but my house in years. The house, depending on cash flow, will be paid off in around 5 years.
I expect choirs of angels to sing when I am truly completely debt free. I also expect to give my notice at work on that day.
I will, if all things go well, start paying on my student loans next year.
Haven’t had a credit card in years, though, so I have that going for me.
You should have a credit card. Just don’t carry a balance.
I get 5% back on amazon.com purchases. Five fucking percent.
Consumer debt is the devil’s plaything!
tbh I’d forgotten about my Amazon card. I use it for textbooks, mostly.
Pfft. Paying off debt is for squares; just wait for Uncle Sam to wave his magic wand and forgive it. I was assured by many quite intelligent people on youtube that Obama was going to do that. Any day now…
Dave Ramsey sheds a tear of joy.
John hardest hit.
Wait until his heirs see the inheritance tax bill…
Will John have heirs? I thought he was more of a hit it and quit it with the landwhales.
Landwhales are very fertile.
In Richard Attenborough voice:
‘Here we see the land whale in it’s native habitat, seeking fresh chubby chasers with whom to mate and seek nourishment from.’
You mis-spelled “revenue”.
“Debt as % of GDP: 106%”
That’s a disturbing statistic. I wonder, if debt-to-GDP would be higher if the US were not a federal system. Since states carry most of the debt for local infrastructure and other programs (which would typically be the responsibility of the central government in a unitary system), I wonder if total debt (if including local and state debt) would be closer to 200% of GDP. Or maybe I’m overthinking that.
I had the same thought- if we dump in CA and IL, who are almost certain to be bailed out by a federal government that’s already drowning, what will the numbers look like?
And Lack, seriously fine work there.
Superb work. It is not easy to dig through federal financial statements. They use an accounting system that applies to themselves alone: bullshit
Maybe a state financial crash will be a wake up call. Not holding my breath. It probably will be but on some level but not enough to do more than slow down the problem.
I can’t see CA or IL being bailed out by the fedgov, at least not if they go belly-up during a Republican Congress or Presidency. I just see no way that the Republicans will want to bail out Democratic folly, and their constituents certainly won’t look kindly on that abuse of taxpayer funds. Even if the R politicians feel inclined to it due to misplaced sympathy, the moment that idea floats around it will get hammered by conservative activists to the point where the politicians will retreat.
That’s what they said about the bank bailouts. Conservative activists got Republicans in the House to vote down the bailout, but only temporarily before they were approved
We will see what happens with Puerto Rico if they get bailed out under a Republican Congress then 200% chance Illinois will.
They’ve already allowed them a type of managed bankruptcy which has allowed them to write-off most of their debts. Not a direct bailout, but pretty close to the same thing
Good point. I’d like to think the calculus has changed, given the Tea Party primary-ing and Trump election showing that the voters will occasionally buck their leadership and smack the politicians, but as Waterfall Insurance above notes we have a good test case coming with Puerto Rico, and it doesn’t look promising…
I hope so…Then, as some here floated when Il was starting to go sideways, those are become federal territories and loose their congressional seats and electoral votes
Republican voters may take that deal, as removing congressional seats means removing those votes out of the electoral college, and without California’s guaranteed 50 some odd votes, the democrats have a snowball’s chance in hell of getting the presidency. The democrats would likely lose their shit for the same reason, and it is enough of a naked power play that it may incite an actual civil war. If we’re going to disenfranchise California anyway, they don’t have as much to lose by fighting for sovereignty.
California’s statehood should be revoked, and then no piece should be permitted to re-enter with more than ten million inhabitants.
Apply the same to any other state that defaults.
They will get bailed out. Then the federal financial system will fail. Then the global financial system will fail because it’s stupidly still dependent on dollars. Then the dark years will have arrived. Have a nice day!
Thanks for the words of encouragement, Mr. Sunshine! 😛
See below. Is it too early to start drinking?
They’ll convince themselves they need to do it to steal some Demo votes. Without thinking about how many of their existing supporters will just stay home next time.
I just see no way that the Republicans will want to bail out Democratic folly,
The current Repubs? Seriously?
I don’t see them doing anything else.
Throw in unfunded liabilities, and it’s probably closer to 300%
“Japan aside, it is not clear anyone would be willing to continue to lend to a country with such anemic growth and high-debt.”
So long as you can only buy oil in dollars, thus making the dollar the reserve currency, is it at all likely that other people would ever stop buying our debt?
Didn’t Qaddafi find out the hard way what happens you challenge the petro dollar?
No. That’s not true. I, for one, love the petro dollar and all the unnecessary war that we must engage in to keep it alive. All hail fiat currency!
*psst…shut up*
Also what happens when you give up your nuclear (or chem/bio) deterrent.
He pissed off the French and Italians by telling them he would sell his oil to China instead. So the aggrieved reached out to the Clintons, whom then reached out to Obama, and boom. He was toast. I am still wondering who got pissed off at whom or what when Obama went all “We have to bomb the shit out of Syria” back when..
So long as you can only buy oil in dollars, thus making the dollar the reserve currency,
Reserve currencies come and go. It used to be Pound, until the Brits, wait for it, had to borrow too much. Nobody likes an inflationary reserve currency – they have to be relatively stable. We can absolutely lose reserve currency status. And will – its just a question of when.
The funny thing is the people most worked up over the US Dollar possibly losing reserve currency status are the people most likely to hasten the US Dollar losing reserve currency status.
Nice, Lackadaisical.
debt clock
The long-term tax revenue is 17.6% of GDP. If the 2016 budget was the same, it would have been $3.27 trillion. The real 2016 budget was $3.9 trillion.
People who promise to cut spending can’t get elected or get voted out. So the result is debt and inflation. The US does somewhat better than other countries because we’ve been piling up debt slowly.
Sadly, slow inflation is probably the best we’ll get.
I can’t find the clip, but it was some congress critter getting eggs thrown at his car because he proposed minor cuts to the Give Old People Lots of Money programs. This clip will have to do:
https://www.youtube.com/watch?v=ZI7hJHLyBZo
As much as I would like it to be lower, I have said that if spending is ever reduced to 15% of GDP, I will shut up about it forever (as long as it stays below that threshold).
Also, why doesn’t threshold have three h’s?
Because English uses digraphs instead of separate letters or diacritics. There used to be two letters for the th sounds. One of them, called thorn, looks like a Y and is the reason for things like Ye Olde Shoppe.
Fun fact- the sh sound used to be written sc. What a load of scit.
So… schedule really is pronounced shhhhhedule?
Yes. Sch was also used for the sh sound, and still is in German.
German uses Tsch for ch sound. They really like piling up consonants.
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Some Salishan languages exhibit long words with no vowels at all, such as the Nuxálk word /xɬpʼχʷɬtʰɬpʰɬːskʷʰt͡sʼ/: he had had in his possession a bunchberry plant.
***
https://en.wikipedia.org/wiki/Consonant_cluster
What is with languages that churn out words that are really phrases?
Okay, English looted a few like Defenistration, and cobbled together Antidisestablishmentariansism, but these are rather specific outliers.
Languages like English and Chinese are isolating- each word means one thing. Other languages like Turkish and Swahili are agglutinating- the subject, the verb, and sometimes the object get combined into one word: hatutajitambulisha- Swahili for “we will not introduce ourselves”. And then at the extreme end there are polysynthetic languages like Inuit and Cheyenne where a single word can convey an entire sentence.
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The Australian language Tiwi is also considered highly polysynthetic:
Pitiwuliyondjirrurlimpirrani
Pi-ti-wuliyondji-rrurlimpirr-ani.
3PL-3SG.FEM-dead.wallaby-carry.on.shoulders-PT.HABIT
“They would carry the dead wallaby on their shoulders.”
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https://en.wikipedia.org/wiki/Polysynthetic_language
To expand on derpy’s point, English is an outlier for the Indo-European languages. Most of the languages in that family are both agglutinive and highly declined, and English is notably lacking in both of those departments. We still have some declensions, such as adding an ‘s’ to denote multiples or ‘ed’ to denote the past tense, but that’s about it. Think of gender agreement in Spanish, for instance, where the ending of an adjective will change to match the gender of the noun it is describing. We can also use some agglutination, for instance by adding a prefix our suffix to a word, like ‘an’ or ‘pro’ to the root ‘tagonist’, but we can’t simply jumble words together to make a complete sentence like in German or Hungarian (although Hungarian isn’t an Indo-European language).
In short, English somehow became much simpler, mechanically, than the languages it is descended from and no one knows exactly why.
Also note, in your own prefix example “Tagonist” isn’t a word people will recognize on its own. Antagonist and Protagonist may be descendants from when such agglomeration was a more common trait within English.
My thought is that it was because of the linguistic abuse English recieved during its adolescence. The Norsemen kept dragging in other languages and beating up English, so when it went out in the world it rebelled (and started beating up other languages in turn)
Most people may not recognize it, but agonist is a perfectly cromulent English word, and legal in scrabble. Archaic, perhaps, but still valid.
English also belongs to the west Germanic branch, not the northern Germanic; the Norse had little impact on the development, but it makes for a better head canon.
The Norsemen also dragged in French when William the Bastard Usurped the throne.
English – Agglutination free way before it was hip.
I say we replace the letter ‘S’ with that weird letter that looks like an ‘F’ again. It looked classy in the Declaration of Independence.
No. I hate that letter.
It probably hates you, too. Just say’n
If we bring back the “long s” we should also look into borrowing other fun letters from foreign Latin-alphabet languages, such as the eszett from Germany and the aesc from Old English.
I think you mean clafsy.
I am referring to the preferred alternate spelling of “threshhold”. But one h in the middle has gone missing.
No eggs, but this one is similar:
https://www.youtube.com/watch?v=TboXsOuMQGU
Stossel did a thing where he took 5 zeros off the debt, spending, and revenue and told people it was a family’s finances. Everyone said the family’s spending was irresponsible and they needed to cut back a lot. Then he revealed it was the US govt budget.
https://www.youtube.com/watch?v=a9LWiSlVZiQ
That’s cause family budgets and fed budgets are totally different.
http://www.huffingtonpost.com/l-randall-wray/the-federal-budget-is-not_b_457404.html
Without reading that, it is BS. Budgets really arent different.
I read it, I was right.
You really only needed to read as far as “www.huffingt…” to figure that out.
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With the exception of the Clinton surpluses, every significant reduction of the outstanding debt has been followed by a depression, and every depression has been preceded by significant debt reduction. The Clinton surplus was followed by the Bush recession, a speculative euphoria, and then the collapse in which we now find ourselves.
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There was no Clinton surplus. The debt went up every year he was president.
Is he seriously trying to argue that paying off debt causes the economy to tank?
What an idiot.
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Roosevelt Institute Braintruster L. Randall Wray is Professor of Economics at the University of Missouri-Kansas City.
***
[head desk]
I think it is standard business cycle. The easiest time to run a surplus is when the economy is on the upswing of a cycle (hence the Clinton near surpluses). But what happens right after the boom part of the cycle? The bust.
So pretty much by definition any period of paying down the debt will be followed by a bust.
Even Keynes supported paying off debt during the boom part of the cycle. Deficit spending was during the bust phase to prime the animal spirits.
The simplified Keynes model is pay off debt and reduce government spending in the up cycle to reduce booms. Then borrow money and increase spending in the down cycle to reduced busts.
The modern model is to spend like drunken sailors in good times, then borrow money and double down in bad times.
So fuckstick professor doesn’t know the difference between causation and correlation.
True, nobody will keep making loans to families over their heads in bad debt. They can’t print their own money, either.
What’s really irritating, is when I talk about budgets with other government workers they all speak of it like it only exists in the abstract or if they try to relate to household finances makes me wonder if they weren’t working for the government they’d otherwise be homeless.
Me: How are you not seeing this? If our expenditures on a per authorization basis are exceeding their estimates by 40%, why wouldn’t you try to update the tools and methods you are using to estimate the authorizations?
Manager: Its just an estimate. It’s a number you have to put into the system to go to the next step, it doesn’t really mean anything.
Me: There are a half dozen accountants next door that are telling me they plan future expenditures on the total estimated authorizations on a monthly basis–it means something.
Manager: Its like an auto mechanic. If they give you an estimate, it could be higher or lower after they do the work, neither of you really know. If it’s higher you still have to pay for it.
Me: Nearly every mechanic overestimates his cost because he wants you to come back. If his estimate was constantly lower than what he eventually charges you, you won’t come back.
Manager: No, not all of them. Mine does this all the time, because they don’t know whats wrong with the car until they look at it.
Me: You need a better mechanic…..
Manager: No, not all of them. Mine does this all the time, because they don’t know whats wrong with the car until they look at it.
every time? not once has he called and said “good news!”?
The manager is a woman.
Really?
(just kidding, TIWTANLW)
I can think of the number of times we underestimated in locksmithing, and they were pretty rare. and usually those quotes were started with something like “this is totally in the dark”.
She does need a new mechanic. and should probably dig up old bills to look for overcharging. (gold mine, people like that)
She should sign up for mandatory “Woodchipper Training.”
Some asshole mechanic tried to tell me I needed new muffler bearings. I said “give me my keys, now.” He made some noise about me needing to pay for them to diagnose the problem. I said, very loudly, so that everyone in the shop could hear me, “show me muffler bearings on a brand new muffler.” I completely made a scene. Funny how he suddenly didn’t care about being paid for ‘diagnosing the problem’. Funny how fast they got me my keys and brought the car around.
Speaking of people who know what you should do with your money…
I’d like the path to the top of the restaurant business to be cleared of the obstacles that make it difficult for women and minorities. In March, when I reported on the attractive business deals being given to chefs by New York hotels, I noticed that with the exception of April Bloomfield, very few of those chefs were women. That needs to change.
Most restaurants, though, are funded by loans and private backers. Aby Rosen, one of the owners of the Seagram Building, recently told a reporter for Town & Country how he had raised $32 million for the Pool, the Grill and another restaurant the Major Food Group is building there. He and the restaurateurs solicited investments from “a nice mix of hedge fund guys, fashionistas, rich guys — an interesting group of 100 people who then bring 20 or 30 of their friends, and suddenly you have 2,000 people.”
It’s wonderful that all these interesting guys are willing to help. It would be even more wonderful if having a hand in these high-profile projects gave them an appetite for backing other talented chefs and restaurateurs who don’t have such an easy time getting financing. Maybe they will want to start something in neighborhoods that make banks skittish.
“I’m just a restaurant critic who loves *interesting* concepts. Why should I give a fuck if those rich assholes get a return on their investments?
“very few of those chefs were women. That needs to change.”
Why? Does food prepared by women taste more delicious? This kind of sexism seems to be o.k. in certain circles. I’ll bet they don’t worry that the cowboy rounding up their steaks on the hoof in Montana might have voted for Trump. Or maybe they do?
Why else would people alwyas want them to make sandwiches?
“Why else would people alwyas want them to make sandwiches?”
Literally Hitler
-ENB
“Might delete this later, but thought this bigot deserved to have his life ruined.”
Did she ever delete that, or is it still there? I don’t have the twits.
Does food prepared by women taste more delicious?
Grandmas across the nation hit hardest.
btw, my Grandma – may she RIP – made some fantastic sugar cookies that used almond flavoring. They were incredibly thin and buttery. No one ever got a recipe. 🙁
You know who else knew what you should do with your money?
My ex-wife? Still does come to think of it.
Anyone that has passed a Series 7 exam?
Me. And what you should do is give it to me.
You will have to come and collect it in person.
*readies shotgun*
Why should I give a fuck if those rich assholes get a return on their investments?
A modest proposal (call it the mafia option): Maybe Pete Wells, the critic sponsoring these “interesting concepts”, should pledge his right thumb to the project. Set some minimum threshold, say the 2.5% yield on Treasuries. If the pool of investments doesn’t pay off at that yield over, say, 5 years, the backers get to cut off Pete’s thumb. That would show real commitment on his part and instill some sense of security in his strategy.
Was flipping through the radio and stopped on some talk radio station playing a montage of lefty media outlets with “economists” claiming 3% growth in a quarter would be impossible. Well the last quarter hit 3%. Let’s hope that growth can be sustained.
You are mired in old, outmoded ways of thinking about fiscal matters. Your failure to cite a single neochartalist thinker reveals your lack of appreciation for the sophistication and nuance of modern monetary theory, which totally wasn’t contrived as a means to handwave these realities aside.
more, for people who enjoy self-abuse
https://en.wikipedia.org/wiki/Modern_Monetary_Theory
Man, I posted a bunch of comments from MMT at TOS sometime last year. It was brain-numbing reading their stuff. At heart it seems like warmed-over Keynesianism.
There was a commenter over there that would always push that shite. Draco or something like that.
more or less. if you skip to the ‘criticisms’ part, the main critic points that out, and notes that it takes Keynes, and removes the stumbling blocks which would make their entire house of cards fall apart at the outset (feedback mechanisms like exchange rates + inflation)
they basically pretend that the US fiscal system is hermetically sealed (in fact they use this analogy of a closed-loop plumbing system all the time) and assume-away anything that might cause complications w/ their monetary perpetual motion machine
There sure are a lot of people who don’t understand the difference between money and wealth. Hint: govts can easily make one, but not the other. Can you use guess which one?
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(8) Capitalism is a cataract in the eye of history.
(9) Capitalism does not exist.
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You can almost hear the bong rips.
***
by Scott Ferguson
Assistant Professor
Scott Ferguson holds a Ph.D. in Rhetoric and Film Studies from UC Berkeley and is presently co-director of the Film & New Media Studies Track in the Department of Humanities & Cultural Studies at the University of South Florida. He is also a Research Scholar at the Binzagr Institute for Sustainable Prosperity and Director of Humanities Research for the Modern Money Network. His current research and pedagogy focus on Modern Monetary Theory and critiques of neoliberalism;
***
Go home man, you’re drunk.
-Film and Cultural studies
-Monetary Theory
__________________
Does not compute
“Scott Ferguson holds a Ph.D. in Rhetoric and Film Studies”
When I wonder about monetary policy, I always think to myself: “what would Siskel and Ebert have thought about fractional reserve banking and its implications?”
“Never take net points.”
‘I give the Federal Reserve just 1.5 stars, only a bunch of pompus stuffed shirts could do the things they do and think it was clever.’
– Ebert in universe A-111
Hey you guys, he watched “The Big Short” so he’s as qualified as anyone to talk about financial theory!
I bet he’s also an expert on climate science.
Maybe he was a bad person to link to, because i think it gives the wrong impression about how popular MMT is with the Vox-ish set. They – and other, ‘more serious’ people – really do think its this magical new theory which provides conclusive proof that we can hold limitless debt forever with zero effect on the underlying economy.
Yes, that sounds almost exactly like the nonsense that Sad Beard spouts.
people who don’t understand the difference between money and wealth
The cause of a great deal of economic ignorance. I’d say that not being able to understand this idea as well as not being able to understand that wealth is both finite and unfixed (can be both created and destroyed) are the primary reason so many people still fall for socialism.
They understand what society is so they like socialism. They don’t understand what capital is, so they hate capitalism.
If you told them they have no intellectual capital, they’d probably thank you for the compliment.
You have no sexual capital!
I read that as Neocharlatan. Still am, in fact.
Money is just a made up concept, according to Deray McKesson
Yes, just like the alphabet and the metric system.
Interest rate: 2.232%
Just wait.
Thanks, Dwight.
OT: Stay classy Root, you wear it well
http://www.theroot.com/eric-trump-my-father-has-to-block-out-negative-media-o-1798661739
So you only fight midgets I assume?
Furhter OT( Sorry, missed the morning lynx):
http://everydayfeminism.com/2016/05/transgender-without-dysphoria/
Derpy’s Money Rules
1. You can’t get something for nothing.
2. Spending money results in less money.
3. Spending more than you earn creates debt.
4. Debt is bad.
5. Neither a borrower nor a lender be.
6. Never invest anything you’re not prepared to lose.
That reminds me, I should check on the state of my investment in Minds.
Everyone go and use that site, I want to make more money than I put in.
We need a glibertarians account there.
Trick question! All 6 are the NOT.
I’m a lender, so fuck your rules.
#2 is wrong, I invest in tools to do my job, is that not spending money to Make More Money?
There’s difference between spending and investing, though it is often ignored.
“Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor.”
I have been told by numerous “experts” that deficits and debt don’t matter and we can just print more money and everything will be A-ok.
(furiously huffs more spray paint)
Inflating your way out of debt did not turn out well for Weimar or Zimbabwe, and it doesn’t appear to be working any better for Venezuela…
It just hasn’t been tried for the right Top.Men.
+1 (trillion dollar coin)
(furiously huffs more spray paint)
Sorry, but for that one, you’d need to Huff more Post.
Debt payments will increase, further accelerating the addition of debt.
“Look, it’s simple. We borrow money from the loan shark to pay the bookie so he’ll let us bet on the Browns game. It’s a lock. We’ll be fine.”
+”Let down one more time.”
http://www.nydailynews.com/sports/football/fan-dying-browns-time-article-1.1393230
If someone is betting on the Browns, they might as well just break their own legs. That’s right- Cleveland’s not good at stuff
All they have to do is beat the spread.
Controversial statement of the year right there…
https://www.youtube.com/watch?v=ysmLA5TqbIY
For those Cleveland fans
Oi! When I was in Vegas in April, I put down a $10 bet on the Browns to win the Superbowl. It’s paid for itself in drinks at local bars.
“I’m sorry, Mister President, but we will not accept a ten trillion dollar bet.”
Great Work Lacks. I agree with Waterfall up there, It’s going to take a state going pear shaped in order to wake people up, but by that time who knows if that will be soon enough to right the ship of state.
It’ll happen.
I live in Illinois…I’ll let you know, fairly soon, what it is like to be in Pear Shaped Land.
*breaks down in sobs*
Get out while you can? I’m surprised the state hasn’t started putting fences up to retain tax-stock
Or that their neighbors haven’t been putting up fences to keep out parasites fleeing a dead host. Although I guess those fences would come later, as the parasites are generally the last to flee…
Rauner disappointed. Hope he goes to jail like the rest of them.
*looks across Mississippi river at other bank longingly*
Iowa is good people
…Missouri
I’m a southern Illinoisian. *pretend whoops and hollers*
Little Egypt or more central Illinois?
If I didn’t have familial ties in the Chicago area (damn familial ties and stuff), I’d get out. My dream is to retire to a piece of land in Iowa (near the Mississippi) and live as a gentleman farmer (not an actual farmer where I need to farm to survive, because that would suck). That sounds sweet
North of St. Louis, Missouri.
I went to college at Southern Illinois University at Carbondale. Back then it was a great party town.
I like that…make the orphans farm while sitting on the porch sipping lemonade.
Exactly
I remember going to some parties at SIU when I was an undergrad. Good times. That’s a fun school
Yes their Halloween celebration was famous at one point in time.
I got an 1800 sq ft house on 1 1/8 acres. Sure winter sucks. But it beats living in one of the Marxist states on the coast.
Maybe Illinois will start selling as much Lake Michigan water as it can and tell the rest of the great lakes states to piss up a rope.
Scott Ferguson holds a Ph.D. in Rhetoric and Film Studies from UC Berkeley and is presently co-director of the Film & New Media Studies Track in the Department of Humanities & Cultural Studies at the University of South Florida.
How do I subscribe to this guy’s investment advice newsletter?
Put a picture on Instagram of you getting a “FUCK NEOLIBERALISM” tattoo. You’ll probably get a nice paper-grading gig out of it.
As far I can tell, every currency is history eventually became worthless. The average life expectancy for a fiat currency is 27 years.
***
Monetary scholar Edwin Vieira … pointed out that every 30 to 40 years the reigning monetary system fails and has to be retooled. The last time around for the U.S. was in 1971, when Nixon cancelled the convertibility of dollars into gold. Remarkably, the world bought into the unbacked dollar as its reserve currency, but only because that was the path of least resistance. But here we are 40 years later, and it is clear to anyone paying attention that the monetary system is irretrievably broken and will fail.
***
***
According to a study of 775 fiat currencies by DollarDaze.org, there is no historical precedence for a fiat currency that has succeeded in holding its value. Twenty percent failed through hyperinflation, 21% were destroyed by war, 12% destroyed by independence, 24% were monetarily reformed, and 23% are still in circulation approaching one of the other outcomes.
The average life expectancy for a fiat currency is 27 years, with the shortest life span being one month. Founded in 1694, the British pound Sterling is the oldest fiat currency in existence. At a ripe old age of 317 years it must be considered a highly successful fiat currency. However, success is relative. The British pound was defined as 12 ounces of silver, so it’s worth less than 1/200 or 0.5% of its original value. In other words, the most successful long standing currency in existence has lost 99.5% of its value.
***
http://georgewashington2.blogspot.com/2011/08/average-life-expectancy-for-fiat.html
“23% are still in circulation approaching one of the other outcomes”
I wonder which outcome the dollar is approaching?
If my sources are correct we will be converting to the Russian Ruble at any moment.
Not the Chinese Yuan?
Or was it the Japanese Yen?
Before that it was…
The Deutch Mark?
Most likely inflation started by some sort of currency trading crisis.
Still way longer than the average Fiat.
-1 classic italian engineering.
(Not to be confused with Roman Engineering)
-1 Aerodynamics are for people who can’t build engines.
Fix it again, Tony!
and 23% are still in circulation approaching one of the other outcomes.
So… 23% have succeeded so far? Also, what does it mean when it says 12% were destroyed by “independence?”
Also, can’t we also say that all monetary instruments have cycles that cause fluctuations in value or, at least, their value is affected by real-world events?
I don’t think fiat currency is a good idea, but I also don’t think this is a very good article.
Many former colonies had their own currencies which were supervised by the empire. When those colonies became independent, they got control of the printing presses and printed like crazy. Same thing happened in many former Soviet republics.
Every time I read about this stuff, I get the urge to go buy more silver. Yeah, the price is volatile, but it’s never been worth nothing. Plus there’s the fun of thinking of places to hide it.
***
Ron Swanson explaining his receipts and various statements or lack there of.
Ron Swanson:
“You won’t find any bank statements either. I’ve heavily invested in gold which I’ve buried in several different locations around Pawnee… Or have I?”
***
Where do you buy ingots? There must be a supplier who will deliver the actual silver and gold, I mean Jewelers exist, and they can’t use brokerage-stored specie.
I buy my 1oz bars via Ebay. Apmex, MCM, and a few other large silver sellers are on there. I haven’t bought for awhile – I normally like to get five 1oz bars, or some American Eagles.
If you want some more history in your silver collecting, Morgan Dollars are also amusing to buy. Of course they are worth more than your average ounce of silver, some quite a bit more.
Aesthetically, US currency has never been very attractive. If it’s not cheapest price per unit, I want it to at least look interesting.
oh c’mon – there have been some beautiful designs – but most of them are 18th or 19th century. I do like Morgan Dollars a lot though, especially if BU or AU condition.
Here is one of my favorites – the Draped Bust penny
an AU Morgan
You’ve made my point concisely.
enjoy your soulless life, cretin 😉
UCS, can you provide any examples of attractive currency?* Or is this another installment in the hit series “UCS hates everything”?
*This is a genuine question, not rhetorical. I’m not a numismatist, so my knowledge of currency is limited and in that limited knowledge I think the US currency fares rather well aesthetically. But of course there is no accounting for taste.
This was my favorite coin when I collected back as a lad.
http://www.coinstudy.com/image-files/xwalking-liberty-half-dollar-value-top-2.jpg.pagespeed.ic.aHZWjaPwcI.jpg
That is a cool looking coin.
Look up Silverbugs “Spacebug” coin. One of my favorites. The 2nd of the series is meh but the first one is awesome.
http://cdn.silver.com/wp-content/uploads/2016/09/1-oz-silverbugs-in-space-silver-bar-obv.jpg
this link goes back to the top??
copypasta’d.
that is pretty cool.
I just sold 1 of the 3 I had and raffled other. *has sad but $ in hand perks me back up*
My current favorite is a Frank Frazetta Death Dealer 1oz round. Freaking sweet. Do not click on this link if you don’t want to see the statue that will someday collect dust on my shelf.
https://www.jmbullion.com/6-oz-antique-finish-frank-frazetta-legacy-collection-death-dealer-silver-statue/
That doesn’t look anything like the chick from Underworld.
If buying from ebay you might want to invest in a silver testing kit…
You can buy coins and bars at pawn shops and jewellery stores. That’s what I do. Most cities have coin shops. I have some silver bars from Swiss banks, but I mostly buy coins minted in the US by private companies. I bought a whole bunch of Mercury dimes once because I usually don’t come across junk silver in small amounts.
You could probably get them cheaper from a big coin dealer, but when you factory in the shipping and the minimum purchase amounts, I think it’s better just to buy a few coins a month.
When you have a good stash, you can make a pile and lie on top of them like an evil video game dragon.
Derpy spends a quiet evening at home: artist’s depiction
Pawn shops are great. The seedier the better, because they’ll pay for random stuff in cash.
Or ZaSu Pitts in Greed, although that clip doesn’t seem to be on Youtube.
You steal it from the Canadian mint and shove it up your butt.
He’d better have laundered it…
Wait…
Is this a parody?
YOU SAID DOODY!
JM bullion. Quite a few others. There are sites that raffle silver too…
His will is also pretty good.
never been worth nothing
Not strictly true, but then again the brief instances where it has been true the reigning currency has been lead/steel (i.e. weapons), and I bet anyone investing in precious metals has also invested in armaments. By the time silver/gold have lost all value people are losing their lives.
Iowahawk’s ‘the left takes over an institution’ quote in the comics industry.
Now imagine you were particularly stupid and did the same thing to a smaller industry. Like say…libertarian magazines and websites.
Rain on parade time:
The US government is comprised of people so incompetent (and/or mendacious and/or corrupt) that they couldn’t even repeal O-care, something they universally campaigned on and symbolically voted on 60+ times. The idea that they can fix something as major and complex as the debt is a preposterous fantasy. CA and IL *are* going to default and the Fed *will* bail them out. After that it is essentially a certainty that other states will follow suit and eventually the Fedgov itself will default and the financial system will fail. This will not have a happy effect globally. The debt bomb is ticking. It could be defused with actual spending cuts and actual financial reforms, but neither the Fedgov nor the electorate has sufficient gonadal fortitude to do what must be done. Dark times are on the horizon.
This.
The vast majority of politicians have absolutely zero insight into the issue and don’t care because they operate on immediate electoral or financial advantage over long term stability. Even outsider candidates like Trump don’t want to address it in any significant way. The U.S. is going to drive into the brick wall at near full speed and take half the world with it.
The U.S. is going to drive into the brick wall at near full speed and take half the world with it.
*pfft* Look at this pessimist here. Half the world…I’m confident the US could take the whole world with it, if it implodes economically.
Yeah, pretty much this.
The US dollar benefits from being the best looking turd in the punchbowl.
As soon as that changes, which might be a while, the jig is up.
I’m not counting third world countries and autarkic states, simply because they will be affected by it, but the result will be a decline from a shitty state into a slightly more shitty state. The developed nations will suffer far more (not to mention countries like China, which will not be emerging as some new hyperpower, but will instead take a massive economic hit that could destabilize them if combined with other things like the collapse of their environment).
A lot of them get it. They just don’t care and/or they value their political careers more.
Not to mention that among the electorate, even so-called “fiscal conservatives” that see what a shitshow is about to happen, will begin hemming and hawing when actual cuts are proposed.
“You can’t cut Medicare, I rely on that!”
“Hands off muh Soshul Suhkuritah!”
That’s not even counting the mindless free-shitters and progs who want the Fedgov to pay for their brain transplants.
SS and Medicare are the ticking time bombs of the U.S. financial situation. There is no real solution short of cutting benefits. The leftists talk about raising FISA caps and rates but that just defers the problem and makes it worse down the road (not to mention, they’re so addicted to debt that they’ll take any new revenue and use it as an excuse to spend even more). What a wonderful idea, let’s raise taxes on working people to pay generously for non-working people! What could possibly go wrong?
s/FISA/FICA/
I understood ya.
FISA sucks too but that’s a conversation for a different day…
Fuck I’m Still Away
David Walker has some good plans on SS – basically raise the caps, chain benes to CPI, means test, and gradually raise retirement age for people under 55. If you haven’t heard him speak, you should.
Medicare is the bigger problem.
Every one of Walker’s plans for SS have already been implemented in one form or another several times – it won’t make any difference. None of them SOLVE the real problem.
The real problem is SS is a de facto pyramid scheme – in reality if not in definition – because as productivity increases the economy needs to find ways to re-deploy workers into productive jobs. Instead the government finds way to put those workers into unproductive jobs: mainly government jobs or welfare programs that pay too much. And much of that is at the state and local level – especially the explosion in school administrators and the constant reduction in class sizes – none of which pay into SS at all.
So where is Walker’s plan to have state and local government workers pay 0.5% into Social Security with no defined SS benefit? THAT would fix the problem – but those slobs won’t even pay an 0.5% extra to fix their own pensions.
even so-called “fiscal conservatives” that see what a shitshow is about to happen, will begin hemming and hawing when actual cuts are proposed
A lot of people believe they are owed SS benefits and Medicare. They “paid into it” and they were “promised” it so therefore they should get it. It’s a fundamentally entitled attitude, and I see no easy way to change it.
That’s what happens when you abuse people’s private property rights. You think it makes me happy to see money stolen from my paycheck every month to pay into a useless pyramid scheme? If SS was so great, IT WOULD BE VOLUNTARY. I just consider it another tax and pour myself another drink.
As you said, the only reasonable change is to cut benefits. The true fix is to eliminate both programs. It’s not easy, but it is simple. Neither is going to happen.
+1
just like everything else.
I explain it to older folks like this, “I’m 33. I will pay into this system my entire like knowing it will go under before I see a single penny of it back. Your welcome.”
They “paid into it” and they were “promised” it so therefore they should get it.
Now apply that same logic to state and local pensions. There is no reason why state and local workers should see their schemes as entitlements but people paying into SS should not see theirs as an entitlement. The typical excuse is “CONTRACT!” but the contracts are fake contracts since the only people with a financial stake are the ones who didn’t get to sign the contract.
OTOH, the euro will implode before the dollar does, which might shock some sense into people.
I used to think that. Now I just think the majority will perceive a collapse of the euro as just how awesome the US is and how it won’t happen here because we’re not like those lazy frogs, et al….
…or trigger another war.
Nah, the Euros are so peaceful and they’ve been democratic socialisming for so long that that could never happen!
/sarc
Funny how Germany is going to succeed in taking over Europe this time without having to fire a single shot.
I’m happy I wasn’t the only one to notice that.
Owning all of Europe isn’t going to be worthwhile so long as the French and Greeks and Italians continue to behave like French and Greeks and Italians.
Hey, vaffanculo!
Just in time to hand it over to the remnants of the Ottoman Empire.
Strange times, indeed.
It might change some opinions in Europe, but I expect the U.S. to continue trucking along under the eternally ignorant logic of “it couldn’t happen here”.
the eternally ignorant logic of “it couldn’t happen here”
I wonder how much overlap this group would have with the “we should do things more like Europe!” group…
What are you talking about? It’ll get blamed on greed and corruption (of business only), allowing for even more government control. People aren’t going to make the connection to government debt and fiat currency… they’re just going to blame rich people and “capitalism.”
CA and IL *are* going to default and the Fed *will* bail them out.
Of course. The Serious People in Charge (aka “the grown-ups in the room”) will sermonize about the end of civilization until they get the credit card limit raised. The Fed will swoop in and buy up all that debt at face value, just like they did last time.
Completely OT: I hate people who think they need to talk in a louder voice over the phone. Had to take the headset off from a conference call because the speaker either has his input level set to max or his microphone is in his mouth. I just want to reach through the webex and start beating him to death with his own headset.
DO. YOU. SPEAK. AMERICAN??
Negative. I speak meat popsicle.
+1 Peter North
The only thing worse is the people who interject “Can you hear me?” or “Did you catch that?” after every sentence.
My personal faves:
Listen to what I’m gonna show you.
Look at what gonna tell you.
Way back when, my squadron had a sergeant major who would say “Y’all trackin’?” after every single sentence.
You be trackin?
Like a Stinger.
From time to time, I meet people who think inflation is something that just happens instead of being the direct result of govt policy. You’d think the different rates of inflation in history would be a clue that another factor is at play, but they don’t get it.
I like to point out that there was deflation in the 19th century in the US because the dollar was backed by gold and silver and there were many improvements in production. A dollar in 1900 was worth more than in 1800.
http://library.intellectualtakeout.org/sites/default/files/value_dollar_value_chart.png
For a species that has (partially) figured out space travel, you’d think we could get something as simple as this. Physics is a lot more complicated than Economics but it seems like we have a better handle on the former than the latter.
The species has no clue about space travel, only a few hundred engineers figured it out. A few hundred competent economists are enough to be considered scapegoats.
Most people don’t even know what the Federal Reserve does, never mind that one of its design goals is to maintain a steady level of inflation.
I always refer to cash as “federal reserve notes”. I often ask cashiers if I may pay in federal reserve notes. When they give me that puzzled look, I can point to where it says “federal reserve note” on the dollar. I like to remind people of its real name. A lot of people get a kick out of it.
What I’m saying is, I’m well on my way to becoming this guy:
https://www.youtube.com/watch?v=zuy_2Cq8HAA
***
It was a packed courtroom on Tuesday for the hearing of Ernie Tertelgte, a Manhattan man who says he’s being wrongly prosecuted for trying to feed himself. Tertelgte, 52 years old, was arrested on Monday and is accused of fishing without a license and then resisting arrest. He appeared before the judge via video from the Gallatin County Detention Center, and it was standing room only more than a dozen friends and family members filled the small courtroom. Tertelgte appeared subdued and respectful before the Justice of the Peace during Tuesday’s court session, which went very differently than his court appearance earlier this month, where Tertelgte and Three Forks City Judge Wanda Drusch got into a heated exchange. Terteltge argued that the court did not have the authority to charge him, citing “natural law.” He told the judge, “You are trying to create a fictitious, fraudulent action.” He continued, “I am the living man, protected by natural law.” He then yelled, “Do not tell me to shut up! I am the living, natural man, and my voice will be heard!”
***
He fought the law and the law won.
http://www.bozemandailychronicle.com/news/crime/natural-man-jailed-again/article_6d910b4a-8834-11e3-9850-0019bb2963f4.html
“That is the Jolly Roger, that thing you call the American flag with the gold fringe around it is the Jolly Roger, and you are acting as one of its privateers!”
I lose it every time I hear that. He spells his name “terTelgte” because moving the capital letter to the middle undos all tricknology.
Seems like it would be cheaper just to let him fish without a license than to keep hauling him into court and jailing him.
“it would be cheaper”
He’s right about one thing, this is all about power and the state imposing its will, not rationality.
Do natural laws also mean if I kill you I get to take all your stuff?
No silly, it just means you get to rape his wife.
To paraphrase Carlin, I have the right to do whatever I want, but so does everyone else.
It’s like the old joke where the thief begs for mercy because he can’t help it- it’s his nature to steal. The judge says OK, but it’s my nature to punish thieves. Off to jail with you.
This ain’t a role-playing game, TK.
When I worked at the jail in college a Sgt was speaking to an inmate, and offered to give him an “Inmate Request Form.” The inmate said yes, he would like a request form since the “Kites” don’t get him anywhere. Then he took the request form, read it and said, “what the fuck, this is a Kite?”
By the way, terrific article.
Yes, this. Much better than my upcoming one.
I can’t stop watching Mike Patton interviews
You also can’t stop Gilmoring links apparently.
…. sugarfree…..
whatever. elton john was drinking out of the toilet.
Clearly, you care a lot
Nice article, Lack.
We don’t even have to pay down the debt if we could just not add to it. Then the growing economy will mean that the debt will be a smaller proportion, and eventually the debt will be more manageable (read: not detrimental to growth). It takes longer, but it’s not as disruptive as actually paying it down. Similarly, Social Security can be slowly phased out without harming current and near-future retirees (after all, it took 80+ years of ratcheting up to get to where we are, and we shouldn’t necessarily just cut it off in one blow).
Of course, that requires multiple administrations and Congress to stay the course once it’s been implemented, and good luck with that (and good luck with the implementation, for that matter).
Thanks to all who said it was a good article. Sad I couldn’t be around for the discussion, but I’m pretending to be productive in my work life. Now the wife is breathing down my back! 😛
I would like to point out that I had both bullet points and references (references got cut off, but I’ve included them below).
Sources:
1. https://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&903=5
2. https://www.treasurydirect.gov/NP/debt/current
3. https://www.treasurydirect.gov/govt/rates/pd/avg/2016/2016_12.htm
4. https://tradingeconomics.com/united-states/gdp-growth
5. https://inflationdata.com/inflation/inflation_rate/long_term_inflation.asp
6. http://www.heritage.org/debt/report/high-debt-real-drag
Have a great night all.
I was told there would be no math.