Speaker Mike Johnson: "We Are On An Unsustainable Track With Our Debt"

[Visbek]

Unlike someone like Jim Rodgers, who said he's completely out of U.S. stocks and looking to short the Magnificent 7 at some point, I don't attempt to time the markets. But I am cheap and try to focus on companies with high returns on capital and low earnings yields. So that has pushed me largely out of tech and into more normally ho-hum companies like retail, oil, and big pharma.

...and that means you're missing out on big gains.

Jim Rogers is also a permabear, who has repeatedly predicted market crashes that didn't happen. (Again, see https://scottphillipstrading.com/how-have-jim-rogers-investment-predictions-performed/)

I went from losing my entire profit in this thing in one day for the three years I had owned it up to that point to making that money back plus another 50% in four months.

lol... How is that any different than how individual stocks behave in any year?

Back in the real world, the VIX is pretty low. You're into leading indicators, right?

It's not unusual for a company to lose one-third or even half of its value in a single day, and make that up in relatively short order. That is not normal, but taking advantage of this phenomenon is how I've been making money.

I'm going to guess that is also how you will eventually lose money -- or at least, lose out on gains. You'll learn.

I also don't think a company instantly becomes worth tens of billions of dollars more or less than it did the day before simply because it misses a profit forecast by a penny or two.

You think daily stock prices are based exclusively on fundamentals? That's so cute!

From a macro-economic perspective, does any of this matter?

No.

....a market implosion potentially involving tens of trillion of dollars of American' savings has major ramification's for this nation's financial prosperity just as it did in the 1930's when the federal government had sounder money and lower relative levels of debt.

So, let me get this straight. Because some stocks are showing volatility that is outside your personal comfort zone, we're headed for another Great Depression?

What you fail to realize is that governments learned from the Depression. E.g. in the 1930s, the US government did almost everything wrong. Hoover didn't spend on stimulus or adjust monetary policy, and levied tariffs that backfired. There was no depositor insurance. The stock market lost 89% of its value in 2 years.

Unemployment was already at 25%, and manufacturing down 50%, when Roosevelt ditched the gold standard and started the New Deal. (And even that wasn't really enough spending to end the recession.)

Thanks, but no thanks, for the irrelevant FUD.

Just for reference, in 1930 the debt to GDP ratio for the federal government was 17%. Today it's 120%, with $1 trillion in debt being added every 100 days. Will it matter?

No.

Yet again! Japan's debt-to-GDP ratio is more than double that of the US. Why hasn't the Nikkei melted down? Why isn't it overrun with speculators? Why is Japan dealing with deflation rather than inflation?

 

[Cynical]

Yet again! Japan's debt-to-GDP ratio is more than double that of the US. Why hasn't the Nikkei melted down? Why isn't it overrun with speculators? Why is Japan dealing with deflation rather than inflation?

Not necessarily apples and apples:

What Lessons Can Be Drawn from Japan’s High Debt-to-GDP Ratio?

Taking into account other public liabilities and assets can provide a clearer picture when comparing Japan’s debt-to-GDP ratio with that of the U.S.

www.stlouisfed.org

 

[NoMoreDems-Reps]

Yes, that's why the Trump tax cuts during an economic boom were so irresponsible. Now that the economy is getting back on track, I hope Johnson does the right thing and spearheads an effort to overturn them. We need the ammo for the next time the economy has a serious downturn. It's just a matter of time.

Wrong !
Taking more money from People to Cover for BAD Spending is not the problem! "Bad Spending" is the Problem !
Stop letting CRIMINALS Politicians manipulate you in to thinking that OPPRESSION of hard working Americans is OK !

Just to help you get a Clue!
1) Remember Trump was only in US Politics for 4 years! (Mostly tied up if FALSE impeachments and legal BS).
2) The DEM-REP Monopoly has been in TOTAL JOINT POWER for more that 124years !
3) See if you think they did a Good Job, and you think you should owe this much for what we are getting!

https://www.usdebtclock.org/

 

[ralfy]

Definitely usdebtclock.org.

 

[ataraxia]

Just to help you get a Clue!
1) Remember Trump was only in US Politics for 4 years! (Mostly tied up if FALSE impeachments and legal BS).

And yet he managed to rack up more debt than any previous president. And he managed to do that BEFORE the pandemic even hit. Where is your outrage for that? It’s so odd.

Donald Trump Built a National Debt So Big (Even Before the Pandemic) That It’ll Weigh Down the Economy for Years

The “King of Debt” promised to reduce the national debt — then his tax cuts made it surge. Add in the pandemic, and he oversaw the third-biggest deficit increase of any president.

www.propublica.org

 

[jonny5]

Bloated military spending most certainly does contribute to the debt. The idea that cutting spending without raising taxes will not put a dent into the national debt. The only positive about 34 trillion....65% of that debt is held by wealthy Americans/American Corporations, s=So a lot of it is owed to our own.

Defense certainly doesnt contribute to the debt. We tax more than enough to fund it.

 

[rickc]

Pretty obvious where the right is on this issue.

Continue to spend and cut taxes (revenue)for the rich

Federal debt/deficit spending is only a problem when a democrat is in the white house.

Republicans only exist to protect/increase the wealth of the wealthy.

 

[Lord Tammerlain]

Not just billionaires, but certainly for everyone who pays taxes. Since the last one, revenue has increased by over a trillion a year. Had we simply returned spending to pre pandemic levels we would have a balanced budget. Instead, that revenue is going to interest on the debt.

2023 revenue 4.4T
2019 spending 4.4T

Don't forget Trumpflation

 

[Lord Tammerlain]

Yet again! Japan's debt-to-GDP ratio is more than double that of the US. Why hasn't the Nikkei melted down? Why isn't it overrun with speculators? Why is Japan dealing with deflation rather than inflation?

Japan has seen Germany pass it as the third largest economy in USD terms as the yen has tanked.


South Korean gdp per capita has passed Japan's on a per capita basis.

Japan is turning slowly into a basket case, and it is not stopping. It's manufacturing declined in the last quarter. With the yen value dropping manually should be increasing in Japan

https://www.reuters.com/markets/asia/japan-january-factory-output-falls-75-mm-2024-02-28/#:~:text=TOKYO%2C%20Feb%2029%20(Reuters),into%20recession%20late%20last%20year.

 

[HangLow]

More tax revenue will just encourage Democrats to spend even more. You got to attack the root problem which is this mentality of free everything.

​

 

[Gimmesometruth]

manufacturing declined in the last quarter.

Due to declines in global demand....not from "debt to GDP".

 

[jonny5]

Don't forget Trumpflation

You mean the debt funded pandemic spending the dems passed in congress and Trump signed?

 

[Lord Tammerlain]

You mean the debt funded pandemic spending the dems passed in congress and Trump signed?

Exactly Trumpflation

The buck stops at the president

 

[notquiteright]

A press conference 20 minutes ago (don't ask for a link - there isn't one . . . yet . . . my thoughts are in blue)

". . Getting us beyond the shutdown and making sure the government stays in operation is a matter of consciousness for all of us [Congress members]. We owe that to the American people. I believe that we can fight on principle, and do these things simultaneously.

(Mike, you should be wary of using the word 'FIGHT'. Most Dems think that you mean actual hand-to-hand combat. They don't understand the metaphorical use of the word fight)

When you have a small [House] majority, it requires some things are going to have to be bipartisan. But I think these are issues that every member of Congress should agree on.

(you would think so, but dems will fight you all the way on this. They don't care about debt - they just want to spend, spend, spend . . . This is not anything new - they've been doing this for decades. C'mon Mike.)

We are on an unsustainable track with our debt - - there's no two ways about it, and I think everybody recognizes that we've got to get down to the matter of the heart of this to change the way we do business. We have an important role to play in the world, but we have to take care of our own house first.

(Mike means that before America spends hundreds of billions of taxpayers' dollars on aid to foreign countries fighting their wars, we should take care of Americans FIRST, and then if there is money left over, then we can make charitable donations to other countries.)

And these things must be done simultaneously and even to start a generation ago - and it hasn't - and we're on the job now, and we're gonna make it happen."

Wow, this guy has a fine grasp of the obvious. (Too bad the MAGAnuts didn't 'discover' this when tRump was in the White House, or any other Republicant congress critter whenever a GOP shill sits in the Oval Office.)...

Stopping the red ink would be easier than reducing the debt but the MAGAnuts want the cuts into programs they don't like but a majority of Americans want. Other cuts are into agencies the MAGAnuts don't like- EPA, ATF, FB and IRSI. Returning the tax rates to the 'Good Old Days' of Ronnie Reagan would help set the tone for addressing red ink. Negotiating not grandstanding is what's needed now, and Handmaid's Tale Mike Johnson just isn't that guy...

 

[Visbek]

Japan has seen Germany pass it as the third largest economy in USD terms as the yen has tanked.

That's not because "the yen has tanked." Japan is still the 4th largest economy in the world, even though its debt-to-GDP ratio went above 100% back in 1997. Unemployment is low, corporate profits are off the hook, Nikkei is still soaring.

The most likely culprit is that Japan's corporations hiked prices too high, and wages have not yet caught up, which has resulted in consumers cutting back spending.

It's manufacturing declined in the last quarter.

Three months of a manufacturing decline?!? NOOOOO!!!

C'mon, man. This is all short-term stuff. None of these issues are caused by Japan's decades of deficit spending.

 

[Lord Tammerlain]

That's not because "the yen has tanked." Japan is still the 4th largest economy in the world, even though its debt-to-GDP ratio went above 100% back in 1997. Unemployment is low, corporate profits are off the hook, Nikkei is still soaring.

The most likely culprit is that Japan's corporations hiked prices too high, and wages have not yet caught up, which has resulted in consumers cutting back spending.


Three months of a manufacturing decline?!? NOOOOO!!!

C'mon, man. This is all short-term stuff. None of these issues are caused by Japan's decades of deficit spending.

It's deficit spending limits Japan's options as it has to pay interest on the debt. As the debt gets larger the interest gets larger

One typical way for governments to manage that is to print more money, which devalues the currency, and creates inflation.

Japan has not really seen inflation as it is still dealing with the high prices from its boom time.

Overall the living standards for Japan has been declining for the last 30 years, and really no expectation that it will change anytime soon

 

[jonny5]

Exactly Trumpflation

The buck stops at the president

Maybe in Canada. In the US we have separation of powers, federalism, checks and balances. But using your math its Bidenflation since he was in office during the inflationary period (and also signed 5 trillion in new spending)

 

[Lord Tammerlain]

Maybe in Canada. In the US we have separation of powers, federalism, checks and balances. But using your math its Bidenflation since he was in office during the inflationary period (and also signed 5 trillion in new spending)

the buck stops here - Wiktionary, the free dictionary

en.m.wiktionary.org

Great presidents take responsibility.

I guess Trump is not

 

[jonny5]

Great presidents take responsibility.

I guess Trump is not

Youre welcome to go debate him. Im just giving you the facts. Everyone is to blame for the inflation. Democrats AND Republicans passed all that spending in congress. Trump signed them and spent the money. The Treasury injected trillions to banks. Democrats added fuel to the fire by passing trillions more spending, Biden signed it spent the money. Consumers stayed home, didnt work, used all their cash to buy toilet paper and stocks.

And to relate to the topic, this made our debt situation worse and unsustainable. And congressional republicans and democrats, Biden are making it worse by spending more and otherwise doing nothing.

 

[Lord Tammerlain]

Youre welcome to go debate him. Im just giving you the facts. Everyone is to blame for the inflation. Democrats AND Republicans passed all that spending in congress. Trump signed them and spent the money. The Treasury injected trillions to banks. Democrats added fuel to the fire by passing trillions more spending, Biden signed it spent the money. Consumers stayed home, didnt work, used all their cash to buy toilet paper and stocks.

And to relate to the topic, this made our debt situation worse and unsustainable. And congressional republicans and democrats, Biden are making it worse by spending more and otherwise doing nothing.

The buck stops at the President

He has the power to veto most spending, if the president chooses not to, they bear that responsibility. Especially a " Conservative" president who is "supposed" to be fiscally conservative

 

[SkyChief]

The buck stops at the President

He has the power to veto most spending, if the president chooses not to, they bear that responsibility.

Well said.

Especially a " Conservative" president who is "supposed" to be fiscally conservative

Not really. The responsibility/guilt for passing dumb fiscal policies is equal - - - regardless of Party affiliation. Trump was foolish to dump trillions of non-existent dollars into the economy. So was Biden.

They are equally foolish/inept. It's a mystery to me why either of these men are the nominees for their respective Parties.

 

[Visbek]

It's deficit spending limits Japan's options as it has to pay interest on the debt.

Sort of like how... Congress' refusal to pass sufficient stimulus in 2008 limited the US's options? Or how the Fed sending interest rates down to near-zero limited its options?

I see no sign of anyone refusing to lend to Japan because of its debt, or an unwillingness to spend on stimulus.

As the debt gets larger the interest gets larger

So what? Interest on government debt isn't causing Japan's recession.

One typical way for governments to manage that is to print more money, which devalues the currency, and creates inflation.

Did you notice how Japan spent years dealing with deflation, not inflation?

Did you notice how the US hasn't actually devalued its currency, even when it lowered interest rates?

Why are you bringing up all this irrelevant bullshit?

Japan has not really seen inflation as it is still dealing with the high prices from its boom time.

lol... Japan's boom time was what, 25 years ago? Stop the madness.

Overall the living standards for Japan has been declining for the last 30 years, and really no expectation that it will change anytime soon

No, Japan's living standards are fine. What's declining is Japan's population.

This is a common issue as nations become more affluent. Couples have fewer kids, in part because they're much more expensive to raise. The result is slowing birth rates and aging populations. Even China is seeing this now -- the government has flipped from discouraging couples from having more than one child to encouraging them to have kids.

Again, that has jack shit to do with its federal spending or debt.

Seriously, you need to stop spouting irrelevant platitudes, and look at the facts.

 

[jonny5]

The buck stops at the President

He has the power to veto most spending, if the president chooses not to, they bear that responsibility. Especially a " Conservative" president who is "supposed" to be fiscally conservative

TDS. Moving on.

 

[Visbek]

Well said.

OK then. What gets cut?

I have a feeling I posted this already in this thread, but... Americans don't actually want to cut spending. They may splutter about cutting spending in the abstract, but when you ask what they actually want to cut, it's almost nothing.

Go ahead, tell us again how it's the responsibility of politicians in a democratic society to do the exact opposite of what their constituents tell us they want. It'll be funny.

 

[jonny5]

Well said.

Not really. The responsibility/guilt for passing dumb fiscal policies is equal - - - regardless of Party affiliation. Trump was foolish to dump trillions of non-existent dollars into the economy. So was Biden.

They are equally foolish/inept. It's a mystery to me why either of these men are the nominees for their respective Parties.

Not well said. 75% of spending is mandatory and acccounts for all of revenue. The President can have an opinion and try some executive orders, but that spending was authorized decades ago. The buck doesnt stop with the President. It stops with the people from which all authority flows. They could fire everyone if they wanted. EVERYONE IS TO BLAME, not one person at one particular time. That is politics, not process.