International interest rates and Trump's dumb ass

bave said:

1) The purpose of entitlement programs is *not* to provide a basic minimum standard of living. It is to provide a safety net for retirees and those going through temporary crises. It has now become a method of living because of entitlement sprawl.

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We said the same thing in two different ways. I can tell you're prickly about entitlements, but don't take it out on me.

2) Unemployment isn't nearly that big a problem because it is time limited. If you want to look at a real problem look at SSDI. Look at how many people are now "disabled" due to obesity, nebulous claims of pain, and mental disorders. That is permanent largely and also gets you a free ride healthcare too. That's a good 40-50k a year forever.

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I fail to see the value in ranking the wastefulness of government spending. It makes sense to tackle the biggest numbers first, but there is fraud, waste, and abuse throughout the government, including unemployment payments.

3) You support social programs proposed by Warren/Sanders? Which? Just to be clear, we are failing in the promises we have already made and you want to make more promises? That's precisely the lying to ourselves I was talking about. Medicare and SS are bankrupt, period.

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No, it's not. Your doom and gloom for all of humanity predictions are sourced in experience, which is fine, but they aren't immovable. We can raise revenues without the economy collapsing. Remember that the economy was doing just fine before Trump tanked revenues by . . . wait for it . . . LOWERING taxes, not raising them. How's that residual benefit coming along? We can also reappropriate current spending to, say, provide universal pre-kindergarten without collapsing the economy.

4) I've underestimated what drives capital out? Hardly. It's data, lots of it from around the world. It is rather uniform and repeated time and time again. The best example of how these fail would be the Sanders/Warren unconstitutional wealth tax. Anyone who has over $100MM in net worth would immediately move. Bezos even joked around about how fast they could move the HQ from Seattle to Vancouver. That sort of idiocy takes the wealth tax rates to north of 100% on average.

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Well, this thread was originally about the international interest rate cuts. You've consistently tried to derail it with your obvious disgust for Sanders and Warren (who isn't even running for anything at this point). I'm not going to assist you further in that endeavor.

5) Medicaid generally does not require employment except in certain states which have requested it to try and drive moochers off the rolls.

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That's my point. A lot of Medicaid recipients aren't freeloaders. They want to work. Unfortunately, when they earn a modest wage full-time, they don't qualify for public insurance and they can't afford private insurance. So they work less than they can because it's their best option.

6) People do look at SS as a retirement plan, something it was never intended to be.

7) If you don't think regulations, taxes, and other government dictates drive business I will point you to Illinois, New York, Connecticut, Rhode Island, New Jersey, and California to a large degree. All the middle class jobs and households are fleeing those states as fast as they can. Why? The state has imposed taxes and regulations which have strangled them, their employers, and investment.

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All the middle class jobs and all the middle class households and all the hundred millionaires, huh? Your view of economics is too political to be largely useful. I don't mean that as an insult. I just have watched your behavior in an otherwise nerdy and harmless thread.

Diesel said:

No, it's not. Your doom and gloom for all of humanity predictions are sourced in experience, which is fine, but they aren't immovable. We can raise revenues without the economy collapsing. Remember that the economy was doing just fine before Trump tanked revenues by . . . wait for it . . . LOWERING taxes, not raising them. How's that residual benefit coming along? We can also reappropriate current spending to, say, provide universal pre-kindergarten without collapsing the economy.

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Medicare/SS are not bankrupt? You may wish to look at the sheer size of their unfunded liabilities. Let me put it this way, if they were a bank or an insurance company the government would shut them down overnight due to insolvency. The size of the numbers precludes the ability to raise that kind of revenue, period. Trump tanked revenue? Really? Record revenue for 2018 and 2019 I am sure set another record. The driver of the deficit is the growth in the Big3, Medicare, Medicaid, and SS. Your universal pre-K has an estimated pricetag of $1.6T for the first ten years. Exactly what "reappropriating" are you going to do? Moreover, initially you were concerned about the deficit. If we have such extravagant spending capacity, shouldn't we be using it to reduce the deficit? Which is it?

Diesel said:

Well, this thread was originally about the international interest rate cuts. You've consistently tried to derail it with your obvious disgust for Sanders and Warren (who isn't even running for anything at this point). I'm not going to assist you further in that endeavor.

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My disgust is with their disingenuous ideas and the people who believe the drivel because their snowflake mentality lets them believe they understand things they clearly don't. This thread is a classic case in point. You have someone trying to make a hard and fast point posting data that contraindicates the very argument they are trying to make.

Diesel said:

That's my point. A lot of Medicaid recipients aren't freeloaders. They want to work. Unfortunately, when they earn a modest wage full-time, they don't qualify for public insurance and they can't afford private insurance. So they work less than they can because it's their best option.

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Maybe, maybe not. What I will tell you is that Medicaid let's people slide with bad decisions. That's really the crux of my point here. This country, and most of the western world for that matter, has gone so far above and beyond to insulate people from the consequences of their decisions. Where else do we subsidize people to have children they can't afford and ill-equipped to raise? Where else do we pour vast sums of medical dollars into lost causes? America used to be about opportunity and personal responsibility, now it has become a land of entitlement.

Diesel said:

All the middle class jobs and all the middle class households and all the hundred millionaires, huh? Your view of economics is too political to be largely useful. I don't mean that as an insult. I just have watched your behavior in an otherwise nerdy and harmless thread.

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Have you seen the preliminary census data for IL and NY in particular? Hell, just go pull up the Uhaul data for the number of vans leaving the state compared to entering the state. If that is too much look at the trend of in the size of their congressional delegation. My view of economics is the harsh reality born from working in finance, being educated in economics, and actually reading the policies that these numbskulls (on both sides) produce. It is clear you are simply in the camp that wants more free stuff, which someone else pays for, and anyone telling you that it isn't going to work is a Trumpist... when in reality, I didn't vote for the guy.

Diesel said:

What does the 19.0% figure represent?

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That's a proposed target for spending and receipts to balance if we can obtain a 4% real GDP growth. The whole point of my exercise to try and eliminate the structural deficit situation we're in now by finding a way to reduce outlays and increase receipts to a realistic level where they can balance for a strong economy (which I define at 4% growth), run a surplus for an overheating economy (>4%), and run a deficit for a weak economy (<4%), all relative to how strong or weak we figure the economy is going to be compared to the target.

Judging from the record of the Administrations in the chart, I think the spending and receipts target should be in the 19-20% range, so 19% would be on the low side.... but I'm open to input from others on where they'd put the number. Once we arrive at a target figure, I figure then we can focus in on specific spending and taxation areas to decide what we'd do to meet that target.

bave said:

I believe that is a reference to the late 90's federal government revenue %. The problem is the late 90's were a perfect scenario for treasury. You had a booming economy, with *enormous* capital gains getting realized, and all the boomers were still paying into the FICA system, but not drawing out. That won't be repeating. Instead, if you listen to Coredelius you would want to raise capital gains tax rates and watch the resulting revenue collapse hit.

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And we'll address that changing situation.... but before we can get to specifics, we need to nail down a framework for what we want the "big picture" to look like. Once we do that, then we can focus on specific areas for spending cuts and revenue increases. Without a frame of reference, though, on which we can all agree, then we're just going to be talking past one another.

Cordelier said:

That's a proposed target for spending and receipts to balance if we can obtain a 4% real GDP growth. The whole point of my exercise to try and eliminate the structural deficit situation we're in now by finding a way to reduce outlays and increase receipts to a realistic level where they can balance for a strong economy (which I define at 4% growth), run a surplus for an overheating economy (>4%), and run a deficit for a weak economy (<4%), all relative to how strong or weak we figure the economy is going to be compared to the target.

Judging from the record of the Administrations in the chart, I think the spending and receipts target should be in the 19-20% range, so 19% would be on the low side.... but I'm open to input from others on where they'd put the number. Once we arrive at a target figure, I figure then we can focus in on specific spending and taxation areas to decide what we'd do to meet that target.

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First, 4% growth is unrealistic, by anyone's definition. We would be lucky to manage sustained 3% at this point for the next ~20 years. We currently have an economic anchor called the Baby Boomers. Again,your target is also unrealistically high. You grabbed a number that was attained once in the time period you outlined under an absolute goldilocks scenario that existed for only a short time and then ended in a bubble bursting (which isn't reflected in that period). I would point out that Obama had a heavier tax framework installed in ~2010 and still didn't generate the revenue you are talking about.

Cordelier said:

And we'll address that changing situation.... but before we can get to specifics, we need to nail down a framework for what we want the "big picture" to look like. Once we do that, then we can focus on specific areas for spending cuts and revenue increases. Without a frame of reference, though, on which we can all agree, then we're just going to be talking past one another.

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What situation are you referring to? The 90's? The boomers?

Let me ask you this, do you think it is realistic to continue to expect the same 20% to pay more and more, or do you think everyone else should actually start to chip in? I ask this because, as I have pointed out before, the effective tax rate for the wealthy in the US is very similar to that of the EU while the lower/middle class have a far better deal here than there. This is the point I keep pounding that you keep trying to ignore because I already know your answer. You have made it clear that, despite the evidence to the contrary, you believe the rich in this country have gotten some sort of amazing deal on taxation and the lower/middle class screwed. It is the classic ideological blinders.

bave said:

First, 4% growth is unrealistic, by anyone's definition. We would be lucky to manage sustained 3% at this point for the next ~20 years. We currently have an economic anchor called the Baby Boomers. Again,your target is also unrealistically high. You grabbed a number that was attained once in the time period you outlined under an absolute goldilocks scenario that existed for only a short time and then ended in a bubble bursting (which isn't reflected in that period). I would point out that Obama had a heavier tax framework installed in ~2010 and still didn't generate the revenue you are talking about.



What situation are you referring to? The 90's? The boomers?

Let me ask you this, do you think it is realistic to continue to expect the same 20% to pay more and more, or do you think everyone else should actually start to chip in? I ask this because, as I have pointed out before, the effective tax rate for the wealthy in the US is very similar to that of the EU while the lower/middle class have a far better deal here than there. This is the point I keep pounding that you keep trying to ignore because I already know your answer. You have made it clear that, despite the evidence to the contrary, you believe the rich in this country have gotten some sort of amazing deal on taxation and the lower/middle class screwed. It is the classic ideological blinders.

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I disagree with your assertion... 4% growth certainly isn't possible under the existing conditions we find ourselves... but if we re-engineer the economy to become more demand-focused instead of the supply-side bias we've given it these last 30+ years, I think it's entirely possible to achieve that kind of growth. I'm not saying it'd be easy.... it'll be hard as all hell. But impossible? Not by a long shot.

Cordelier said:

I disagree with your assertion... 4% growth certainly isn't possible under the existing conditions we find ourselves... but if we re-engineer the economy to become more demand-focused instead of the supply-side bias we've given it these last 30+ years, I think it's entirely possible to achieve that kind of growth. I'm not saying it'd be easy.... it'll be hard as all hell. But impossible? Not by a long shot.

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We haven't hit 4% GDP growth in 20 years, why? Boomers. They went from high income, high tax, high productivity to drawing on entitlement programs, it's the same problem on the tax side and it is the opposite of what China has going on right now. What do you think "demand focused" means? That sound suspiciously like more helicopter money, which is hilarious given your concerns with deficits. You are all over the board honestly. You want lower deficits, but more tax breaks for people not paying taxes. You want more growth, but you want higher taxes on businesses and high income households. You want lower deficits, but more "demand side bonus".

bave said:

We haven't hit 4% GDP growth in 20 years, why? Boomers. They went from high income, high tax, high productivity to drawing on entitlement programs, it's the same problem on the tax side and it is the opposite of what China has going on right now. What do you think "demand focused" means? That sound suspiciously like more helicopter money, which is hilarious given your concerns with deficits. You are all over the board honestly. You want lower deficits, but more tax breaks for people not paying taxes. You want more growth, but you want higher taxes on businesses and high income households. You want lower deficits, but more "demand side bonus".

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And that's exactly why supply-side economics has run out of steam.... because it's adherents are making the exact same tired arguments that the old-style New Deal Democrats were making in the late 70's, except in reverse. We can't achieve strong growth anymore. It's just not possible. We have to get used to accepting limits.

You know what? Reagan came into office and showed they were full of crap.

Now it's past time to turn the trick again. Because that's how the economy moves... sometimes you lead with your left foot, sometimes your right. If you try walking on only one all the time, you just go around in circles.

Mycroft said:

"The international rate cuts are a terrific opportunity for people like me and for businesses in general."

So you think the Fed cutting the rate is a good thing. Right?

Are you aware that Trump has been asking the Fed to cut rates for 3 years?

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Trump urged the Fed, when the country was in recession, to raise rates, calling them unnatural.

Trump claimed the economy under his presidency was strong but urged the Fed to lower rates when unemployment was at historic lows.

Now that 2020 Q2 will likely have a sharp drop in GDP, some say minus 14%, low interest rates are warranted.

Cordelier said:

And that's exactly why supply-side economics has run out of steam.... because it's adherents are making the exact same tired arguments that the old-style New Deal Democrats were making in the late 70's, except in reverse. We can't achieve strong growth anymore. It's just not possible. We have to get used to accepting limits.

You know what? Reagan came into office and showed they were full of crap.

Now it's past time to turn the trick again. Because that's how the economy moves... sometimes you lead with your left foot, sometimes your right. If you try walking on only one all the time, you just go around in circles.

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Look, I am not trying to be patronizing, but you just don't know what you don't know.

You realize that Reagan burned a few trillion dollars to get those economic results, right? Again, are you concerned about deficits or about growth? Moreover, again, Reagan didn't have an elderly bulge in the demo that was gobbling up economic resources like we do now.

MTAtech said:

Now that 2020 Q2 will likely have a sharp drop in GDP, some say minus 14%, low interest rates are warranted.

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The rate cuts in this environment accomplished almost nothing.

bave said:

The rate cuts in this environment accomplished almost nothing.

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It's the only tool the Fed has.

MTAtech said:

It's the only tool the Fed has.

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I disagree. Their backstop and direct lending authority powers right now are far greater. Right now we are less worried about economic stimulus impacts and more worried about preventing a liquidity crash.

The problem is, with global interest rates sitting in the toilet for a decade now, the power of the rate cut has been heavily diluted.

bave said:

Look, I am not trying to be patronizing, but you just don't know what you don't know.

You realize that Reagan burned a few trillion dollars to get those economic results, right? Again, are you concerned about deficits or about growth? Moreover, again, Reagan didn't have an elderly bulge in the demo that was gobbling up economic resources like we do now.



The rate cuts in this environment accomplished almost nothing.

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Speaking of what you don't know... when Reagan came into office, Social Security was in a lot worse shape than it is today. It was running a deficit and it's reserves were nearly depleted. So he sat down with Tip O'Neill and Bob Dole and lot of other interested parties, and together they hammered out a bipartisan deal that put it back in the black and boosted it's solvency for 30+ years. I'll refer you to the following chart:



Again, like the previous chart, revenues are in black, outlays are in red. The difference this time is the Purple Bar, which shows the size of the Social Security Trust Funds' debt reserves at the end of each term (This makes up a substantial portion of the difference between the Gray [Gross Debt] and Blue [Net Debt] Bars in my previous chart). Notice the dramatic shift toward surplus that occurred during the Reagan Administration thanks to his Social Security reform package.... notice also the increase in the debt reserves that this surplus accrued - all of this extra money financed a large measure of Reagan's overall deficit spending. Moreover, because the Social Security debt holdings are non-marketable, they didn't adversely affect the Bond market.

Cordelier said:

Speaking of what you don't know... when Reagan came into office, Social Security was in a lot worse shape than it is today. It was running a deficit and it's reserves were nearly depleted. So he sat down with Tip O'Neill and Bob Dole and lot of other interested parties, and together they hammered out a bipartisan deal that put it back in the black and boosted it's solvency for 30+ years. I'll refer you to the following chart:

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It was in bad shape, not sure about worse, and what did he do? He raised the retirement age rather dramatically. Again, it was also a very different time demographically. The worker/retiree ratio was far more favorable than it is today and the weighting was as well.

Cordelier said:

Again, like the previous chart, revenues are in black, outlays are in red. The difference this time is the Purple Bar, which shows the size of the Social Security Trust Funds' debt reserves at the end of each term (This makes up a substantial portion of the difference between the Gray [Gross Debt] and Blue [Net Debt] Bars in my previous chart). Notice the dramatic shift toward surplus that occurred during the Reagan Administration thanks to his Social Security reform package.... notice also the increase in the debt reserves that this surplus accrued - all of this extra money financed a large measure of Reagan's overall deficit spending. Moreover, because the Social Security debt holdings are non-marketable, they didn't adversely affect the Bond market.

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So, you are counting a trust fund that contains non-marketable securities? That's cute. Again, try that in any other world where you hold a "security" that you can't sell, yet you want to label collateral.

There is a word for it, fraud.

bave said:

It was in bad shape, not sure about worse, and what did he do? He raised the retirement age rather dramatically. Again, it was also a very different time demographically. The worker/retiree ratio was far more favorable than it is today and the weighting was as well.




So, you are counting a trust fund that contains non-marketable securities? That's cute. Again, try that in any other world where you hold a "security" that you can't sell, yet you want to label collateral.

There is a word for it, fraud.

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I'm not saying that we should follow exactly what Reagan did.... the circumstances are obviously different today and call for different solutions. What I am saying is that the system has been worse shape, and we were able to find a solution... not only that, but a solution that addressed several problems at once. Bob Dole has always claimed that the 1983 Social Security Reform was the legislative accomplishment he was most proud of shepherding through Congress. I can well see why.

Social Security has always held non-marketable securities with a coupon rate at par with the market conditions at the time the securities are issued. That was done with the intent of not interfering with long-term rates one way or the other. Unfortunately, we've forgotten that principle to our detriment, as witnessed by the ever-expending long-term debt holdings of the Federal Reserve (see the Green Bar of my earlier chart), which are marketable. The result is a terminally flat yield curve and a moribund economy where 2.5% growth is considered "strong".

We can do much better than that. We have to do much better than that if we expect to retain our economic competitiveness going forward.

Cordelier said:

I'm not saying that we should follow exactly what Reagan did.... the circumstances are obviously different today and call for different solutions. What I am saying is that the system has been worse shape, and we were able to find a solution... not only that, but a solution that addressed several problems at once. Bob Dole has always claimed that the 1983 Social Security Reform was the legislative accomplishment he was most proud of shepherding through Congress. I can well see why.

Social Security has always held non-marketable securities with a coupon rate at par with the market conditions at the time the securities are issued. That was done with the intent of not interfering with long-term rates one way or the other. Unfortunately, we've forgotten that principle to our detriment, as witnessed by the ever-expending long-term debt holdings of the Federal Reserve (see the Green Bar of my earlier chart), which are marketable. The result is a terminally flat yield curve and a moribund economy where 2.5% growth is considered "strong".

We can do much better than that. We have to do much better than that if we expect to retain our economic competitiveness going forward.

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Look, no one would love a 4% economy more than me, it just ain't in the cards for a laundry list of reasons. ****, I would be happy with a 3% number on a sustained basis.

RE: SSTF bonds, the bull**** factor there is that it allowed the government to actually borrow from itself and not actually suffer the negative consequence. This is why no pension fund on the planet, or insurance company, or bank would have been allowed to do what they did.

bave said:

Look, no one would love a 4% economy more than me, it just ain't in the cards for a laundry list of reasons. ****, I would be happy with a 3% number on a sustained basis.

RE: SSTF bonds, the bull**** factor there is that it allowed the government to actually borrow from itself and not actually suffer the negative consequence. This is why no pension fund on the planet, or insurance company, or bank would have been allowed to do what they did.

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I said 4% was the target... that doesn't mean we're going to necessarily hit it. But even if we do somehow manage to hit it with the way the Budget is structured today, we'd still be running a massive deficit. I'd take 3% growth as well... and I wouldn't mind running a 1% deficit if that's what it took. But 3% growth with a 4% deficit isn't exactly what I'd call economically healthy.

Reagan ran 4% deficits as well.... but he didn't run up the Net Debt by a massive amount because a lot of his deficit spending was absorbed by the Social Security surplus the 1983 reforms engineered. We don't have that luxury anymore.... now when we run these massive deficits - like the bailouts during the financial crisis and the coronavirus bailout, that debt goes straight into the Federal Reserve Bond holdings. Essentially, we're just printing money... but that only gets you so far before it starts to erode national competitiveness. What's more, it distorts the Bond Market... by keeping long-term rates artificially low, it gives you a flat - or even inverted - yield curve.... which means a flat economy. Until we can spur demand, we're just going to be in a continual cycle of lurching from one bubble to another... we've got a glut of capital and no good places to invest it.

Cordelier said:

I said 4% was the target... that doesn't mean we're going to necessarily hit it. But even if we do somehow manage to hit it with the way the Budget is structured today, we'd still be running a massive deficit. I'd take 3% growth as well... and I wouldn't mind running a 1% deficit if that's what it took. But 3% growth with a 4% deficit isn't exactly what I'd call economically healthy.

Reagan ran 4% deficits as well.... but he didn't run up the Net Debt by a massive amount because a lot of his deficit spending was absorbed by the Social Security surplus the 1983 reforms engineered. We don't have that luxury anymore.... now when we run these massive deficits - like the bailouts during the financial crisis and the coronavirus bailout, that debt goes straight into the Federal Reserve Bond holdings. Essentially, we're just printing money... but that only gets you so far before it starts to erode national competitiveness. What's more, it distorts the Bond Market... by keeping long-term rates artificially low, it gives you a flat - or even inverted - yield curve.... which means a flat economy. Until we can spur demand, we're just going to be in a continual cycle of lurching from one bubble to another... we've got a glut of capital and no good places to invest it.

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You're killing me smalls.

First, you make my point about SS/Medicare with the Reagan time vs. now. We now have massive, and growing, structural deficits because of entitlements. That means those need to get addressed first and foremost. Any increases in revenue, which you have previously wanted and seemingly from the top 10%, would materially impair growth and long term revenue growth. Second, the bailouts during the financial crisis were largely profitable, particularly to the banks. The only ones that lost money were to Chrysler and GM, but those were political bailouts more than anything else, and frankly rather illegal from top to bottom.

The problem with your excess capital is that it is global, not locked into domestic markets. Spurring national demand is a mess because a huge portion of the spending goes to imports rather than domestic production. In either case I am not sure how you intend to spur domestic demand, especially given the fact that the majority of American households have almost no FIT tax burden, no real savings, and a lack of modern industrial/trade skills, all while being deficit cautious.