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Obama Calls for 'Full-Scale Attack' to Revive Struggling Economy

Goldenboy219 said:
That's a bit fuzzy. An $8 trillion spending spree is overkill. But HG's concept is correct, not to mention impeccable timing given current long term interest rates.
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It's horribly shortsighted and negligent.
 
washunut said:
Besides this being a silly idea. What would the money be spent on. Recent expeience shows either paying down debt or consumer products mainly helping the Chinese economy.
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Depends on income really. If a wealthy person (someone who is very liquid) is given $10k, then you are correct the money is more likely to be saved. Yet if a person is poor, they are more likely to spend every drop of that $10k within a month.

Not to mention you re just stealing money from future generations to make this group feel better, pretty selfish.
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This statement becomes true only if other nations are the primary holders of public debt. They are not....
 
The gold-plated credit rating of the United States — an article of faith across America and, indeed, around the world — may be at risk in coming years as the nation copes with its growing debts.

The gold-plated credit rating of the United States — an article of faith across America and, indeed, around the world — may be at risk in coming years as the nation copes with its growing debts.

That sobering assessment, issued Monday by Moody’s Investors Service, provided a reminder that even Aaa-rated United States Treasury bonds, supposedly the safest of safe investments, could be downgraded one day if Washington failed to manage the federal debt.

Moody’s said the United States and other major Western nations, particularly Britain, have moved “substantially” closer to losing their gilt-edged ratings. The ratings are “stable,” but “their ‘distance-to-downgrade’ has in all cases substantially diminished,” the credit ratings agency said.

A downgrade would affect more than American pride. The bigger risk would be to the country’s ability to keep borrowing money on extremely favorable terms, and therefore to keep spending more money than it takes in from tax revenue.

 
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damianvincent said:
The gold-plated credit rating of the United States — an article of faith across America and, indeed, around the world — may be at risk in coming years as the nation copes with its growing debts.

The gold-plated credit rating of the United States — an article of faith across America and, indeed, around the world — may be at risk in coming years as the nation copes with its growing debts.

That sobering assessment, issued Monday by Moody’s Investors Service, provided a reminder that even Aaa-rated United States Treasury bonds, supposedly the safest of safe investments, could be downgraded one day if Washington failed to manage the federal debt.

Moody’s said the United States and other major Western nations, particularly Britain, have moved “substantially” closer to losing their gilt-edged ratings. The ratings are “stable,” but “their ‘distance-to-downgrade’ has in all cases substantially diminished,” the credit ratings agency said.

A downgrade would affect more than American pride. The bigger risk would be to the country’s ability to keep borrowing money on extremely favorable terms, and therefore to keep spending more money than it takes in from tax revenue.

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Explain to all of us the current situation regarding long term interest rates.
 
Goldenboy219 said:
Explain to all of us the current situation regarding long term interest rates.
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about as low as they can go, hense quanitive easing. I have to leave real soon wish I could. But more debt will kill this country, sound fiscal policy is needed now, and Bernankee and Obama are destroying this economy.
 
damianvincent said:
The gold-plated credit rating of the United States — an article of faith across America and, indeed, around the world — may be at risk in coming years as the nation copes with its growing debts.

The gold-plated credit rating of the United States — an article of faith across America and, indeed, around the world — may be at risk in coming years as the nation copes with its growing debts.

That sobering assessment, issued Monday by Moody’s Investors Service, provided a reminder that even Aaa-rated United States Treasury bonds, supposedly the safest of safe investments, could be downgraded one day if Washington failed to manage the federal debt.

Moody’s said the United States and other major Western nations, particularly Britain, have moved “substantially” closer to losing their gilt-edged ratings. The ratings are “stable,” but “their ‘distance-to-downgrade’ has in all cases substantially diminished,” the credit ratings agency said.

A downgrade would affect more than American pride. The bigger risk would be to the country’s ability to keep borrowing money on extremely favorable terms, and therefore to keep spending more money than it takes in from tax revenue.

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What would happen if the world’s largest economy goes into a full-fledged depression?
 
Harry Guerrilla said:
Poor people spend money, doesn't matter if some of it goes to foreign made products as American businesses get a nice cut off the top, it isn't about making low income people better but stimulating the economy.

I don't like these things but I'm not pretending to believe that the American government will magically stop redistributing income.
If my choices are 1. crazy pet projects designed by politicans to stimulate the economy or 2. creating a direct consumer stimulus, I'll choose 2.
It's more effective than 1.
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I choose none of the above. The harsh reality that most people do not want to talk about is that we never had an economy that generated the income to support the US lifestyle for the last 10-20 years. So we need to find a new baseline. Creating debt to fix our debt problem seems like lunacy to me.

Also remember that when people talk about getting unemployment down etc that something like 15% of GDP usually comes from the housing market. No matter how many roads we pave housing is not going to materially improve until the excess inventory is burned off. That excess includes probably about the last 8% of people who bought homes that could not afford them, even before the downtun in the economy. So we have too many homes and employment in housing will continue to be a problem.
 
Goldenboy219 said:
Said with such confidence and analysis :lamo
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I've all ready expressed why. I also shot down your silly notion that giving away money we don't have would do anything good for the economy, and I debunked your silly commentary on why the Government needs to step in to spend cause "the private sector isn't".

If you don't respond to those, why should I keep repeating myself?
 
washunut said:
I choose none of the above. The harsh reality that most people do not want to talk about is that we never had an economy that generated the income to support the US lifestyle for the last 10-20 years. So we need to find a new baseline. Creating debt to fix our debt problem seems like lunacy to me.

Also remember that when people talk about getting unemployment down etc that something like 15% of GDP usually comes from the housing market. No matter how many roads we pave housing is not going to materially improve until the excess inventory is burned off. That excess includes probably about the last 8% of people who bought homes that could not afford them, even before the downtun in the economy. So we have too many homes and employment in housing will continue to be a problem.
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Well self directed consumer spending, via a stimulus, can restore some economic confidence.
It can establish new trends in the market and get businesses putting people back to work.

The housing market will take more time to work itself out, on the other hand, we don't necessarily need those jobs in housing.
It's more efficient to have those people going into other value added fields.

Edit: following it up with a firm governmental debt reduction plan and you have a home run.
 
MrVicchio said:
Dude, the Private sector is holding back cause of impending new taxes, regulations and demands from Washington. Cap and Trade, yeah that passes it will hit EVERY business, this Obamacare mess? Impending new expenses. The Bush Tax Cuts expiring? More expenses. CO2 Regulation from the EPA? MORE cost.

Businesses respond poorly to added expenses. And Gov't can't fix that with it's own spending.
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What a short sided view of private industry. When the going gets tough, the tough.... stay home:confused: Remember the time when petro prices shot to $140/barrel? I did not see a glut of firms marginally decrease their expenditures due to higher costs (instead they increased their prices as any good company does during an economic expansion). Ask any of our resident truckers if they suddenly felt like "working less" due to higher input costs. There is a major difference between the two time periods.... It is commonly referred to as demand. Yeah, it seems to be lacking at the moment.
 
MrVicchio said:
I've all ready expressed why. I also shot down your silly notion that giving away money we don't have would do anything good for the economy, and I debunked your silly commentary on why the Government needs to step in to spend cause "the private sector isn't".

If you don't respond to those, why should I keep repeating myself?
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Bits of opinions are a means to debunk? Ha, only in your mind.
 
Harry Guerrilla said:
Well self directed consumer spending, via a stimulus, can restore some economic confidence.
It can establish new trends in the market and get businesses putting people back to work.

The housing market will take more time to work itself out, on the other hand, we don't necessarily need those jobs in housing.
It's more efficient to have those people going into other value added fields.

Edit: following it up with a firm governmental debt reduction plan and you have a home run.
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The bold is crucial!
 
damianvincent said:
They are!!!

fed using quantitative easing to purchase bonds - Google Search

check it out, scary stuff going on out there.

We can't sell our treasury securities on the open market like we where because of the long term debt picture, 10 trillion over 10 years, and the fed is now purchasing them with money printed out of thin air.
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The Fed purchases treasuries via open market operations. They are not (because it is illegal) purchasing treasuries directly from the treasury.
 
Goldenboy219 said:
The Fed purchases treasuries via open market operations. They are not (because it is illegal) purchasing treasuries directly from the treasury.
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The end result is the exact same thing.
 
MaggieD said:
The end result is the exact same thing.
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Not in the least bit. If that was the case, US debt would be downgraded, and USD/foreign currencies would fall faster than Vegas home prices. Within days, inflationary expectations would shoot through the roof.

No, the end result is not the exact same thing.
 
Goldenboy219 said:
Not in the least bit. If that was the case, US debt would be downgraded, and USD/foreign currencies would fall faster than Vegas home prices. Within days, inflationary expectations would shoot through the roof.

No, the end result is not the exact same thing.
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Trying to learn here. Am I correct in thinking that the government is loaning money to itself? Through the secondary market? What would be the difference? It's still completely ridiculous either way. And why would the end result be different? If one way is illegal, it can't be done anyhow.
 
MaggieD said:
Trying to learn here. Am I correct in thinking that the government is loaning money to itself?
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Yes, but not due to monetary policy. Intergovermental agencies are the primary holders of US debt (with social security being the largest single holder). However, congress gave their control of monetary policy to the Federal reserve. When the Fed purchases securities, it purchases them from member banks who hold them as assets. Once they sell the Fed a bond, they trade an asset for liquidity (also known as the monetary base). This money does not make itself into the general economy (necessary to be listed as part of the money supply) until it is lent out.

Through the secondary market? What would be the difference? It's still completely ridiculous either way. And why would the end result be different? If one way is illegal, it can't be done anyhow.
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Lets set up a simple example.

Pretend Bank of America has $1million in reserves, and $1million in $100k US treasury certificates. The Fed purchases treasuries in this fashion: they purchase (with their newly created money) half of Bank of Americas USTC's at a price of $505,000. This does two things: first, it increases BOA's reserves to $1,505,000. Second, it decreases their assets by only $500,000 (or half) yet by purchasing the USTC's for more than face value, they have effectivily lowered the market interest rate (not to be confused with the coupon rate). Remember, Yield= Price of the bond/ coupon rate.

The reason the Fed would do this is to lower the federal funds rate (the interest rate FDIC banks charge eachother to borrow). As bank reserves increase, the federal funds rate decreases. The inverse holds true as well.
 
Goldenboy219 said:
Yes, but not due to monetary policy. Intergovermental agencies are the primary holders of US debt (with social security being the largest single holder). However, congress gave their control of monetary policy to the Federal reserve. When the Fed purchases securities, it purchases them from member banks who hold them as assets. Once they sell the Fed a bond, they trade an asset for liquidity (also known as the monetary base). This money does not make itself into the general economy (necessary to be listed as part of the money supply) until it is lent out.



Lets set up a simple example.

Pretend Bank of America has $1million in reserves, and $1million in $100k US treasury certificates. The Fed purchases treasuries in this fashion: they purchase (with their newly created money) half of Bank of Americas USTC's at a price of $505,000. This does two things: first, it increases BOA's reserves to $1,505,000. Second, it decreases their assets by only $500,000 (or half) yet by purchasing the USTC's for more than face value, they have effectivily lowered the market interest rate (not to be confused with the coupon rate). Remember, Yield= Price of the bond/ coupon rate.

The reason the Fed would do this is to lower the federal funds rate (the interest rate FDIC banks charge eachother to borrow). As bank reserves increase, the federal funds rate decreases. The inverse holds true as well.
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I've marked this as a Fave - I'm going to have to read it over a number of times to "get it." Thank you. I think your example is a good one, but I have to wrap my head around it!
 
MaggieD said:
I've marked this as a Fave - I'm going to have to read it over a number of times to "get it." Thank you. I think your example is a good one, but I have to wrap my head around it!
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Don’t read it more than once an hour or it will give you a friggen headache. :(
 
Goldenboy219 said:
Explain to all of us the current situation regarding long term interest rates.
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I have a question goldenboy.

During the crisis the average maturity of US treasuries took a nose dive, and the average maturity has really been decreasing since about 2001. Only recently has it begun climbing again. What, if anything, does this change represent?

debt_maturity2_aug_10.gif


x -axis = year
y - axis = average maturity of debt held by the public (in weeks)
 
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Harry Guerrilla said:
Well self directed consumer spending, via a stimulus, can restore some economic confidence.
It can establish new trends in the market and get businesses putting people back to work.

The housing market will take more time to work itself out, on the other hand, we don't necessarily need those jobs in housing.
It's more efficient to have those people going into other value added fields.

Edit: following it up with a firm governmental debt reduction plan and you have a home run.
Click to expand...

More consumer spending will not fix the real problems in our economy. We do need to better our infrastructure and find the next home run sector. Obama thinks it is green energy. Maybe he is right.

The problem that you and others here have is the expectation of a short term solution. The answer will have to be long term. That does not mean should not start right away, but we don't need any more sugar highs and be left with long term debt with no long term benefit.
 
Goldenboy219 said:
Yes, but not due to monetary policy. Intergovermental agencies are the primary holders of US debt (with social security being the largest single holder). However, congress gave their control of monetary policy to the Federal reserve. When the Fed purchases securities, it purchases them from member banks who hold them as assets. Once they sell the Fed a bond, they trade an asset for liquidity (also known as the monetary base). This money does not make itself into the general economy (necessary to be listed as part of the money supply) until it is lent out.



Lets set up a simple example.

Pretend Bank of America has $1million in reserves, and $1million in $100k US treasury certificates. The Fed purchases treasuries in this fashion: they purchase (with their newly created money) half of Bank of Americas USTC's at a price of $505,000. This does two things: first, it increases BOA's reserves to $1,505,000. Second, it decreases their assets by only $500,000 (or half) yet by purchasing the USTC's for more than face value, they have effectivily lowered the market interest rate (not to be confused with the coupon rate). Remember, Yield= Price of the bond/ coupon rate.

The reason the Fed would do this is to lower the federal funds rate (the interest rate FDIC banks charge eachother to borrow). As bank reserves increase, the federal funds rate decreases. The inverse holds true as well.
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I do not think that this is correct with the newest purchases the fed is making. During the crisis they bought up debt from banks as you mention.

However what is happening now is materially different. As mortgages run off do to patments, prepayments eyc the Fed is now going into the market and buying Treasury bonds of varying maturities. So this will be purchased directly from the Federal government which in effect is funding the deficits.

This is an important distinction that many do not really understand.
 
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