Rolling US Economy Into The Shitbin Thread

Yeah but eliminating paper money has nothing to do with whether Apple sits on $100 billion.

well his argument is more about negative interest rates than eliminating paper money. paper money isn't gonna be here forever anyway, who knows what the time horizon is gonna be, but I could see an end to paper money within 50 years. anyway his argument is in line w/ a lot of market monetarist stuff so it's not really 'economically illiterate' or even super far out of the mainstream dialogue atm. .

steve waldman had a better critique a few months ago:

http://www.interfluidity.com/v2/2535.html

Some sort of non-metallic money is likely to stay in use, but the essence of such money is trust in the issuer, so paper money is always vulnerable to a catastrophic loss of trust and can rather quickly plummet to zero value outside of areas where its face value can be enforced by government edict and police action.

The whole premise of this article 'Economy's Biggest Drag Right Now Is Government' seems incoherent to me, I'm throwing it out there though to see if anyone agrees with it ...

well I would imagine most people here do....you're misreading the premise - it's not that government is too big, it's that when governments are forced to cut spending it tears into economic and job growth

rereading it tho, it does seem like the premise almost wants to be misread

"Incoherent" pegs that article pretty well. The linkage between the thoughts contained in consecutive sentences and paragraphs are so weak the most charitable description would be "scattershot".

Buried in all that incoherence is the basic truth that government spending cuts when overall economic growth is very, very slow are anti-Keynesian. btw, Keynes actually recommended that governments use revenue surpluses to pay down debt when economic growth was high.

well his argument is more about negative interest rates than eliminating paper money. paper money isn't gonna be here forever anyway, who knows what the time horizon is gonna be, but I could see an end to paper money within 50 years. anyway his argument is in line w/ a lot of market monetarist stuff so it's not really 'economically illiterate' or even super far out of the mainstream dialogue atm. .

steve waldman had a better critique a few months ago:

http://www.interfluidity.com/v2/2535.html
― iatee, Thursday, April 19, 2012 6:44 PM Bookmark Flag Post Permalink

No, his argument is about eliminating paper money. The article is subtitled "How eliminating paper money could end recessions" and contains this premise, which I don't think it's a stretch to call "economically illiterate": Stop for a moment and ask yourself why the interest rate can’t be reduced much below 1 percent. The trouble is cash. At any given time, relatively little paper currency circulates in the United States. Instead, most of the American money supply consists of bank accounts and other electronic stores of value. People prefer to keep money in bank accounts because it’s convenient and because you get interest on it. If the rates were driven below zero—in effect a tax on holding cash in the bank—people would just withdraw money and store it in shoeboxes instead. But what if you couldn’t withdraw cash? What if all transactions were electronic, so the only way to avoid keeping money in a negative-rate account was to go out and buy something with the money? Well, then, we would have solved our depression problem. Too much unemployment? Lower interest rates below zero, Americans will start spending and investing again, the economic will grow, and unemployment will go back down to its “natural rate.”

the issue of paper money is a segue to talk about the idea of negative interest rates

Well I have a lot of reasons for thinking that further driving down interest rates (which are already "real" negative) isn't going to do any good, but I don't even think Yglesias is really getting at the issue because he misunderstands basic concepts.

Anyway, in re Apple, their calculus is not going to be "Are we losing money by sitting on this cash" but "are we losing more money by sitting on it than we would be doing something else with it." -1% interest is only going to motivate them to do something with their cash if there's anything better to do with it. In that sense it really doesn't matter whether interest rates are 1%, 0% or -1%.

well it "2% matters"

Sorry, the missing point from that line of thinking is that the -1% interest rate is also going to bear on the kinds of returns they can get elsewhere.

how is that any different from going from 3% to 1%, do you just not believe in monetary policy

I believe in monetary policy and I believe in the limits of monetary policy.

Don't we already have negative interest rates in real terms, since the "safe" rate of interest is less than inflation?

Yes.

Conversely, if there is deflation at -3%, then a nominally negative interest rate of -1% would be effectively positive.

This will end well

Kansas Gov. Sam Brownback (R) in January proposed a tax cut he said would give the state a “fairer, flatter, simpler” tax code, even though it raised taxes on the poor to help pay for a massive tax cut for the top one percent of state residents. Tuesday, Brownback signed an even bigger package into law, even as the state Senate’s top Republican and a host of other conservative lawmakers urged him not to.

The new package, largely backed by Tea Party-affiliated state legislators, abandoned some of Brownback’s proposals that would have hit the poor the hardest, though some still remain. But it will force lawmakers to make even deeper cuts to education and other programs to make up a growing budget gap, the Wall Street Journal reports:

The tax plan, which was the subject of weeks of intense debate and political maneuvering in the legislature, will reduce the top individual state income-tax rate to 4.9% from 6.45% in 2013. It also will eliminate income taxes on non-wage income for about 191,000 small businesses.

The plan likely would require additional cuts in spending on education and social services to cover a reduction in annual tax revenue projected by the Kansas Legislative Research Department to exceed $800 million by 2014, or 12.8% of projected state revenues.

“It is not good public policy,” state Sen. Steve Morris (R), the president of the state Senate, said of the legislation. Other Republicans agreed, including a group of 50 former Kansas Republican lawmakers who attempted to persuade Brownback to veto the bill. “I think Kansas taxpayers need to be asking where the governor would make these cuts,” said Rochelle Chronister, who formerly served as a state representative and as the president of the state GOP, said earlier this month.

Kansas’ tax code is already regressive, as the poorest 20 percent of Kansans paying more than 9 percent of their income in taxes, while the richest 1 percent pay less than 6 percent of theirs. Now, it is even more regressive, and on top of that, poor and middle class Kansans will have to deal with spending cuts that hit social programs on which they depend.

eh, the "even some Republicans opposed" bit misses the point of Kansas politics, which is that the GOP (t)here divides fairly neatly into "moderates" & wingnuts, & they're at odds with one another on lots of things. In the rest of the country the "moderates" here would be Democrats (Obama joke here).

in any case I'm glad to be leaving for a blue state, even though my property taxes are gonna double. At least we won't pay 8.5% sales tax on food anymore, since my new, civilized, home state charges only 1% on it.

So the world economy is about to have another shitfit, isn't it.

why? it sounds like Europe is starting to come around a plan for the Euro, thankfully.

More of a hunch than anything. Every day headlines are vascillation between "Europe hopes" and "Europe fears" -- one day deal looks more promising, next day it looks less promising. When I feel like the financial press is jerking me around like this, I expect bad things to happen.

Steve Keen confident the UK will suffer another credit crunch sometime soonish: http://www.bbc.co.uk/programmes/b01j5h51

Hooverism didn't work the last time, it's not gonna work again.

Even the 'good' outcome for Europe will involve economic turmoil, no?

Considering the problems behind the malaise of the past few years have not been remedied, save the solvency of the banks and the rescue of the auto industry, I'd say yeah, we're all cruisin' for a bruisin'. The US (and UK, for that matter) is in no position to weather more severe Euro-chaos, and the instability of the EU will will take us all down, economically. Even China is slowing right now, which is as bad a sign as any (conceding for the moment that the Chinese economy was/is an even bigger illusion than the various U.S. bubbles).

Pessimism? Oh, yeah. But there is no reason to be optimistic. Even better, if all this gets worse before the election, Obama is toast, because the American people are at best in no position to make a reasonable decision but now are particularly susceptible to whims, bad ideas and outright lies. And then we'll go to war again.

The Eurozone is obviously mishandling their economy, due to how poorly integrated the Eurozone countries are politically, so yeah, it seems like another worldwide shit fit is more likely than not. These things usually simmer along through the summertime and then bust open in early autumn.

I may need to do a bit of judicious rebalancing to my extensive portfolio of stocks, bonds, real estate, gold bullion and post-impressionist artworks. /bullshit

I need to go for a good long hike in the backcountry.

do we have a general Eurozone Crisis thread? I think we need one.

Perhaps rename it Rolling World Economy Into The Shitbin Thread?

gotta search for who's making money offa this turmoil, what political angles they're playing (and who they're paying), and we'll figure out just why this nonsense has been allowed to simmer for so long. it's frustrating b/c we have (at least some of) the answers to getting out of the current economic malaise -- and i'd like to think that when we're thinking about high-level players like this that such ignorance isn't from stupidity but is feigned to mask self-interest.

i miss the rolling DJIA graph at the top

The people making money off of this are the usual suspect: the wealthy minority with enough cash to diversify enough to weather all of this. And when things get worse, they snag up more bargain assets. I think all the "1%" stuff is a bit simplistic, but don't discount the incredible shift of power in favor of the few at the expense of the many. And if you thought it was bad before, man. I imagine the near future will be not unlike the Depression, whether it amounts to a statistical depression or no. We'll have a wealthy minority comfortable, some concerned, some not, while a majority struggles in a sort of parallel world. There's be some sort of mass reset to set it right, and since worker revolt won't happen, I'll put my money once again on war. A real war this time. But I hope it doesn't happen.

Aren't the banks pretty much making all the money? With corporate profits higher than ever, I'm sure they are doing well with the money we gave the banks to give to them.

to the corporations I mean

the banks make their money by gambling on derivatives then taxpayers bail them out to place new bets

But they all learned their lessons and changed their ways! (Looks over at Chase's 2 billion loss). OK, maybe they didn't.

I think all the "1%" stuff is a bit simplistic

Only to the extent that the really big winners have been not the top 1% but the top .01%

Sure, but I think there's a more robust minority with all the money. Like a top 10% or something.

90th percentile of pre-tax income in 2011 for single filers was only about $65,000, if I'm reading this right, and $191,000 for married joint filers.

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=2362

191,000 for a family is a comfortable life but it's not exactly jetset. 65K for an individual certainly isn't.

http://m.rollingstone.com/?redirurl=/culture/news/the-sharp-sudden-decline-of-americas-middle-class-20120622?print=true

so much of this stuff goes under the radar. some of the parking lots in this article are walking distance from my dad's house.

http://online.wsj.com/article/SB10001424052702303561504577495332947870736.html?mod=WSJ_hps_LEFTTopStories

Kinda lol mostly fuk

Bank of America Corp. BAC +3.42%thought it had a bargain four years ago when it paid $2.5 billion for tottering mortgage lender Countrywide Financial Corp. But the ill-fated decision has already cost the Charlotte, N.C., lender more than $40 billion in real-estate losses, legal expenses and settlements with state and federal agencies, according to people close to the bank.

"It is the worst deal in the history of American finance," said Tony Plath, a banking and finance professor at the University of North Carolina at Charlotte. "Hands down."

dudes were desperate to chip away at wells fargo mortgage division.. obviously this was not the right way to do it and I think almost anyone could have predicted such a thing would happen.. dummies.

Kind of reminds me of the famous $100 houses of Detroit...that required tens or hundreds of thousands of dollars of work/payment of fines/taxes etc.

http://bostonglobe.com/news/nation/2012/07/22/poverty-track-rise-highest-level-since/S6mOppYXf7NuFnmnJR20gJ/story.html

https://www.youtube.com/watch?feature=player_embedded&v=u8-d95SO_3g#!

unreal

P.S. I miss you tombot

also, the watermelon queen

http://www.businessweek.com/articles/2013-02-27/ben-bernanke-sean-duffy-and-the-watermelon-queen

but i thought prosperity trickled down?

https://www.youtube.com/watch?feature=player_embedded&v=QPKKQnijnsM

The history of all hitherto existing society is the history of class struggles.