Rolling US Economy Into The Shitbin Thread

>Is it partly that the US holds the world's reserve currency and can "create money" i.e. debt without having to ever pay it back?

Isn't a short term consequence of just printing money and flooding all the (so much for "transparency") undisclosed banks in this latest version of TARP going to be inflation, no matter what?

My understanding is that the US doesn't suffer the same inflationary consequences as other countries do when banks or the govt. just creates more money to pay debts but I'm not quite sure how that works. For instance, everyone is now saying deflation is the big problem.

read good piece i think in krugmans blog abt deflation addressing the lol just print more money and create inflation then angle - basically he said to create serious inflation the currency markets have to be convinced that youre going to continue to print too much money - but that w/responsible countries like the us and japan everyone just assumes that theyll just take the extra money out of circulation once its done its job - there by never letting serious inflation happen

here u go http://krugman.blogs.nytimes.com/2008/11/15/macro-policy-in-a-liquidity-trap-wonkish

My big question is, do deficits actually matter? If so, why?

The US gets away with big debts because Japan, Korea and, to a lesser extent, china have a vested interest in buying US debt to keep their currencies and their exports competitive.

Normally where one country was running big trade deficits with another the relative value of the currencies should make the exporter's currency more expensive unless the exporter sells the money back to the importer as cheap debt.

obv a hueg question that lol serious professionals disagree abt no doubt above my pay grade but ill give it a shot

1 you do have to pay that money back w/interest so thats a drag on yr bottom line in it self obvs

3 theres all sorts of day to day monetary funky macro economic etc consequences that im sure i dont fully understand past the lol china wants to sell us crap real bad angle ed just mentioned

2 the doomsday scenario: where the us has borrowed so much that one day every country looks at us and simultaneously goes lol yr debt is like 1mx yr gdp were not lending u anymore money - we default on our payments cause we cant roll them over our money ceases to be worth anything and we all have to give back our iphones - obv our economy would have to seriously shrink from its current global bully size - cause right now if china or whoever let us die theyd die to

lol tracer said deficit not debt - anyway thats my 2cents on a question no one asked

Argh yeah the trade deficit is entirely different. Sorry. What I meant was US govt debt, not the trade imbalance whereby the US buys more from the world than it sells to the world.

As to your 1) the US doesn't have to pay it back if no one ever cashes it in, cf. Treasury bonds.

I'm starting to come away with the impression that at least in the short to medium term, the debt burden doesn't actually matter.

yah as far as this current crisis spend spend spend ffs

u do eventually have to pay at least some of the money back or stop borrowing otherwise #3 eventually - but yah obv pretty much everyone for the foreseeable future is just gonna keep sending us those 0% interest platinum cards

if china or whoever let us die theyd die to

U.S. "Too big to fail"?

haha yah i wrote that initially except like 2 big 2 fail but then i deleted it

2 legit 2 enter inflationary spiral as a result of massively increasing national monetary base

kevin drum says ritholtz is on the pipe:

http://www.motherjones.com/kevin-drum/2008/11/the_cost_of_the_bailout.html

This stuff has gotten completely out of hand, with "estimates" of the bailout these days ranging from $3 trillion to $7 trillion even though the vast bulk of this sum comes in the form of loan guarantees, lending facilities, and capital injections. The government will almost certainly end up spending a lot of money rescuing the financial system (I wouldn't be surprised if the final tab comes to $1 trillion over five years, maybe $2 trillion at the outside), but it's not $7 trillion or anything close to it. People really need to stop throwing around these numbers as if the bailout is comparable to World War II or something.

http://dshort.com/charts/bears/four-bears-large.gif

When in 2007 was T=0 in the current bear?

"prices peaked at 381.17 on September 3, 1929" so I guess 9th of October? Which makes sense if you're counting from the top.

ty

Calm down its only 1 trillion dollars

BTW, it's time to brace yourself for the deluge of stories about how retail businesses are faring during the Xmas season. These are a tradition as firmly entrenched as publishing the weekend box office figures for Hollywood films.

It is also traditional to characterize small increases in year-over-year retail revenues as devastating failures, accompanied by dire warnings about the need for consumers to shop more and spend more. This is as common as coaches of sports teams poor-mouthing their team's chances in the upcoming Big Game.

no retail is actually fucked this year

yah RIP macys -- time to spend my gift card while the company still exists

I agree retail is fucked this year, but not as much as next year.

Still, no matter what happens, even if it's only flat sales, retailers will complain like they lost a pound of flesh. Therefore, no matter how fucked retail is, their sob story will sound exactly like all the other years when they were making out fine.

wheeeeeee

http://www.markborkowski.com/wp-content/57426_-_woe.jpg

US entered recession in December, 2007, National Bureau of Economic Research says.

Yeah I like how year-old information is enough to send things down another 300 pts

Sorry, 400 pts.

100 points in 13 seconds o my!

Let's say your bank sent you a statement saying that, contrary to the past year's worth of statements, your savings account contained substantially less money than they told you, due to a series of accounting errors that began in December 2007.

Would you consider this 'year-old information' or a nasty surprise when you opened the statement?

i have phrased myself badly. I'm suggesting that any new bad news that is exposed re: past indications of economic failing/flailing would have to have happened over a longer period than one calendar year for me to be shocked (like, say, five years...). I AM, however, always amused/annoyed by how backwards-looking the DJIA is wrt how it responds to news like this...

also, no bold-face MARKETS DOWN XXX PTS headlines today.

haha, it was the NBER's Business Cycle Dating Committee that fixed the 12/07 date. Sounds like Critical Mass for playas.

Like, for an industry whose anti-litigious slogan is that '...past results are no indication of future trends,'... past results seem to have a redic. amount of effect on the market.

dont u guys mean 600 pts

so much for GEITHNER BOUNCE!

Thanks for that, guy.

It is amusing to think of what institutional capital managers moved all this money out of equities today on the BRAKIENGEN NWEWS that the US has been in a recession all year.

like, I'm imagining some pension fund for cargo cults or something.

http://calculatedrisk.blogspot.com/2008/11/sad-news-tanta-passes-away.html

You were awesome.

http://krugman.blogs.nytimes.com/2008/12/01/tanta-has-died/

^^^ comments are amazing. I need to learn how to be eloquent one of these days. I suppose I could start by not trying to be all RIP on a thread with "shitbin" in the title.

http://www.nytimes.com/2008/12/01/business/01tanta.html?_r=1

The blog quickly drew a lively and informed group of commentators, few livelier and none more informed than someone who called herself Tanta. She began by correcting some of Mr. McBride’s posts. “She would tell me either I was wrong or the article I was quoting was wrong,” he said Sunday. “It was clear she really knew her stuff. And she was funny about it.”

Tanta soon graduated from merely commenting to being a full-scale partner. Her first post, in December 2006, took issue with an optimistic Citigroup report that maintained that the mortgage industry would “rationalize” in 2007, to the benefit of larger players like, well, Citigroup.

“Bear with me while I ask some stupid questions,” Tanta wrote, and proceeded to assert that the industry was less likely to “rationalize” than fall apart, which it did. Citigroup was bailed out by the government last month.

She loved the intricacies of mortgage financing and would joke about being not just a nerd on the subject but a nerd’s nerd. She eventually wrote, for the Calculated Risk site, “The Compleat ÜberNerd,” 13 lengthy articles on mortgage origination channels, mortgage-backed securities and foreclosures that constituted a definitive word on the subject.

The rest of the time, Tanta liked to chew on the follies of regulators, the idiocies of lenders and — a particular favorite — clueless reporters, which according to her was just about all of them. She did not approve, she once wrote, of “parading one’s ignorance about mortgages in an article full of high-minded tut-tutting over ignorance about mortgages.”

In March 2006, Ms. Dungey was diagnosed with late-stage ovarian cancer.

Ms. Dungey was raised in Bloomington-Normal, Ill., had a graduate degree in English, and worked as a writer and trainer for a variety of lenders, including Champion Federal and AmerUs Mortgage.

One of Tanta’s last posts was written as the $700 billion bailout was first being debated in mid-September, and it seemed that the Treasury Department might buy bad assets directly from troubled banks.

Tanta argued that for every asset that banks unloaded on the government, the chief executives should be required to explain “why they acquired or originated this asset to begin with, what’s really wrong with it in detail, what they have learned from this experience, and what steps they are taking to make sure it never happens again.”

English postgraduates are what this world needs more of, it would appear.

"tanta" is yiddish/german for "grandma"! my mom sometimes talks about her tanta yetta.

what they have learned from this experience, and what steps they are taking to make sure it never happens again.

hah awesome

and after that they should be spanked

The Big Three Should Become the Medium Two:

http://blog.wired.com/cars/2008/12/bankruptcy-and.html

this seems much more amenable to me.
balloon juice and others are continuing to make tipsy mothra's point, or points similar to his, but I still wasn't seeing any progress to it unless the executives came back with some more concrete ideas about restructuring. They're all still fucked and I still think any bailout is most likely going to wind up paying off the last generation of UAW's retirements instead of this generations' wages, but it's a game of compromises innit.

fuckin' baby boomers god dammit

^^yup

There are good pieces by Roubini and Martin Wolf in today's ft but I can't link to them as we still have no internet in my office.

here you go Ed

how to avoid stagflation (Roubini/FT)
http://www.ft.com/cms/s/0/0fe65a48-c0a9-11dd-b0a8-000077b07658.html

Interesting contrast between the two, Roubini advocating central banks lending to business to combat stagdeflation and wolf arguing that goverments should be borrowing in the absense of quality borrowers out there.