...

BK>> JB> Except not all government debt can be financed through 15
BK>> JB> year notes. That is the point.

BK>> I believe the govt stopped doing 30 year notes some years back.
BK>> No matter anyway, the time frame may change, but the principle
BK>> remains.

 JB> No, the principle keeps rising because liabilities are
 JB> increasing.

 The principle as in how it works, not the money principle.

 ...

BK>> JB> Deficit and debt are completely separate things.  This is
BK>> JB> what you keep missing.  I can be in debt and have plenty of
BK>> JB> money to pay my debts (i.e. debt servicing), then I can
BK>> JB> still rack up more debt, also service that debt and still
BK>> JB> obtain positive cashflow.  And yet the debt would rise.

BK>> If you are wracking up debt, you are either experiencing
BK>> negative cash flow, spending more than you take in, or you are
BK>> stashing away the income from the sale of the debt instruments
BK>> somewhere. If the govt is doing that, please let me know.

 JB> Ok, I will say this one more time for you very simply.
 JB> Either get it or go back and take economics 101.

 JB> Budget = Cashflow

 JB> Liabilities = Debt

 JB> If you can't understand this then there is no reason to
 JB> discuss this further.

 Ok, I will say this one time, for you, very simply.
 Either get it or go back to English 101.

 Your explanation above is not the same as what we were talking
 about. And they are not disconnected from each other. Oops...
 that last was economics 101, sorry.

BK>> JB> Simple debt management.  People do it all of the time when
BK>> JB> the refinance their homes.

BK>> Which is not how the feds run up the debt. They don't refinance
BK>> the federal property, of if they do please give me a cite on
BK>> that.

 JB> Ohh boy.  You take things literally.  They refinance debt.

 You did on the "principle" above.

 And they budget for the payoff on debt. If they refinance the
 debt, then the debt does not increase it stays the same.

 Ok, I will conceed they *CAN* run the debt around in circile
 till it jumps through hoops, and do most anything the electorate
 will tolerate.

 However:

 I am speaking of how it was going, how it was planned, and what
 the numbers available show.

 JB> It is done by issuing new bonds.  It is done all of the
 JB> time.

 And that maintains the same level of debt. However, the federal
 budget includes paying off the debt.

BK>>BK>> However, I never believed the deficit would stay at zero anyway.
BK>>BK>> I am just reporting what the budget figures, and the press,
BK>>BK>> reported. I am the one who posted some economist's statement
BK>>BK>> that balanced budgets are always followed by recessions. Even if
BK>>BK>> they tried to keep it balanced, they would have a recession that
BK>>BK>> would ruin their plans. Plus borrowing is the normal way of
BK>>BK>> financing capital improvements. It's very difficult to run
BK>>BK>> construction projects out of current accounts.

BK>>BK>> So I did not believe a balanced budget was a practical reality
BK>>BK>> in the long run, but I do see they had one, more or less, for a
BK>>BK>> short time.

BK>> JB> Balancing the budget is the easy part, just spend less.

BK>> Which is also the route to a failed system when you cut back too
BK>> much.

 JB> Not at all.

 Yes, it is.

 Government spending is responsible for much of the growth of the
 GDP today. As it was during Reagan's time. Cut back on that and
 the system is in trouble. Cut back on that you you lose whatever
 the amount of the cutback is. Cut back and you lose not only
 what went to govt suppliers, but also what went to their
 suppliers, and what their employees spent.

 Some cutbacks will result from the end of the Iraq war, just
 like all previous wars. Which is why the end of a war tends to
 result in an increase in unemployment. However, in this war, we
 have the advantage of it won't result in as much unemployment,
 as so much is outsourced outside the country. The flip side is,
 we will still have the massive debt that outsourcing led to,
 with some increase in unemployment and thus reduced tax revenue
 to pay it with.

BK>> Notice, pretty much all the improved economy under Reagan and
BK>> Bush II, and job growth, can be related to govt spending. As
BK>> spending goes up, so does the economy.

 JB> It helps but the government does not generate stimulus.  In

 Yeah, spending is stimulus. Our economy is more involved in
 commerce than production, so any spending is a stimulus.

 JB> fact government spending coupled with higher taxes actually
 JB> works to stall the economy.

 Above a certain point. As does share cropping, or pay cuts, or a
 number of other things. Slavery, as I explained long ago,
 stalled the economy of the South. Today illegal immigration has
 the same effect.

BK>> JB> Bringing down the debt is much harder because of ongoing
BK>> JB> liabilities (i.e. expenses) along coupled with debt
BK>> JB> servicing and racking up new debt.

BK>> Since debt service is part of the budget, and all the rest is
BK>> figured in, that's not really that much of a problem.

 JB> Not all debt is serviced in a given year.  Much debt may

 True. However, it all is, one way or the other, over the course
 of the maturity of the elements of the debt.

 JB> not have a debt service in a given year.  The key is to
 JB> stop the bleeding.  Cutting spending and liabilities is the
 JB> only way to manage this.

 Increasing revenue to balance out spending works. OTOH, Bush has
 increased spending and cut revenue. So, what is the answer to
 that.

BK>>BK>> I don't believe we would reach zero debt, but I did believe they
BK>>BK>> could reduce the debt significantly.

BK>> JB> Not until the democrats have no say in this.  Not going to
BK>> JB> happen.  They are drunk with money power.

BK>> Uh... take another look... Even hard core right wing think tanks
BK>> were talking about the republicans spending like drunken
BK>> sailors. And Clinton really did reduce the size of government.
BK>> Bush and Reagan increased it.

 JB> The Clinton did not reduce the size of government.  Another

 Count the number of federal employees.

 JB> lie from the left.  The democrats in congress expanded it
 JB> further with the TSA becoming government workers.  I agree

 That was under Bush. After 9-11. And it was under republican
 rule. It was only 4 years ago.

 JB> the republicans and dems were in bed together on
 JB> prescription drugs and such.

 Again, under Bush. And that was Bush's screwed up plan to
 benefit the drug companies.

 ...

BK>>BK>>BK>> The federal budget includes debt service. So, when the
BK>>BK>>BK>> deficit disappears, the debt service pays
off the debt. When
BK>>BK>>BK>> the bonds mature, and are due they get paid.
If the longest
BK>>BK>>BK>> term is 15 years, then after 15 years they
would all be paid
BK>>BK>>BK>> off.

BK>> JB> It includes debt servcing on the current year, nothing
BK>> JB> more.  I can easily push off debt liability to out years
BK>> JB> and still have a positive budget.  The Clinton did just
BK>> JB> this, yet you refuse to admit it.

BK>> Show it and I will. BTW, that is exactly what Bush did. His tax
BK>> cuts aren't even all in effect yet.

 JB> If he didn't do it then explain how he had a budget surplus
 JB> and the debt went up ?  You can't.

 Say what? Oh, two ways. In the transition period it may well
 take time for the numbers to come into sync. In this case it
 didn't have enough time. And again, the govt *MUST* issue debt
 instruments to cover the social security surplus. Govt owing
 govt works out to zero net debt.

BK>>BK>> JB> Right.  See above.  I already predicted this nonsense.

BK>>BK>> It's not nonsense, it's common sense, *IF* they maintain the
BK>>BK>> balanced budget.

BK>> JB> And don't incur more long term delayed liabilities and
BK>> JB> debt.  This is where Social Security bankrupts the country.

BK>> Ah... no. Social security has it's own tax base. And it would

 JB> Social Security is still a government liability.  There is
 JB> no trust fund.  Deal with it.  The trust fund is full of
 JB> IOUs, which are out year liabilities.

 Yep, but that is not current account. And is no problem by just
 shifting 2%, as I explained before.

BK>> only take shifting 2% of the GDP to social security, from the
BK>> 30% typically in total tax portion, to make social security
BK>> solvent as far as the Bush administration forsees.

 JB> Another 2% of the GDP is another $250B to start.  You libs
 JB> sure like killing the economy and bloating government.

 Uh, when the normal portion is about 30%, just shift it, not add
 to it.

 OTOH, the medical industry was taking 13% just a few years back.
 Now it is counted at 15%. There's the 2%. Shift it from the
 medical industry and you are covered. Now consider, Bush, in his
 drug plan, banned govt negotiation with the drug companies for
 lower prices for medicare. Yet the VA does it.

  Allow negotiation. Allow importation of drugs from Canada. No
  increase in patent coverage above where they were when Bush
  took office.

 And require malpractice suits be settled publically. That last
 may not seem logical to you, but think about it. How much does
 malpractice insurance increase due to settlements of cases
 doctors and hospitals would probably win if they fought, but
 they are afraid of how much it will cost if they lose. Good for
 them, bad for the country.

 Remember, they can still settle before they go to court.
 However, fighing the case will lead to fewer frivilous cases.
 Lawyers don't expect to make money winning frivilous cases, but
 by settling frivilous cases. The court judgements you read about
 far over state the amount that is usually actually paid out.

BK>> JB>  We are getting the money now and spending it, while the
BK>> JB>  liabilities pile up.  At some point they will need to be
BK>> JB>  paid, along with the debt interest and current year
BK>> JB>  liabilities.  This is the triple play that bankrupts us in
BK>> JB>  the 2020s unless we continue to grow the economy and

BK>> Which "grow the economy" requires bringing industry back to the
BK>> US, and low unemployment and higher wages.

 JB> I see.  You plan to have the government order manufacturing
 JB> back to the US ?

 I see, you plan to invent your own objections? We call that a
 straw man. I have explained this before. If you want to hear it
 again, we can make it another thread.

 JB> And you presume that manufacturing jobs
 JB> are great well paying jobs that grow this country ?

 They were before globalization. They were the driving force
 behind the growth of America as a world economic power, esp
 after WW2. They were the source of the great wealth that built
 this country.

 JB>The big benefactors are the unions.

 The big benefactors are the workers, and those who deal with
 them, and the local state and national govt that depends on
 their taxes to do their jobs. And the country as a whole.

BK>> JB>  reduce long term liabilities via private accounts.

BK>> Ah, that way lies disaster. Private accounts are unstable and
BK>> unreliable. Retirement is one thing you have to have reliable.

 JB> This is funny.  That would explain all of the worthless
 JB> 401k plans lying around.

 Damn lot of them. Lots of people have seen their investment go
 down the tubes. The average plan has made zip during Bush's
 first 5 years.

 JB> It also explain all of the public
 JB> retirement plans that are not invested in government
 JB> securities.

 Have you got any idea how much money they have lost? And damn
 few of them are not backed up by social security as their other
 income source.

 Besides, if you are going to balance the budget you can't invest
 in govt securities, as the govt isn't going to be issuing
 enough.

BK>> The whole drive for private accounts is due to the fact that a
BK>> shift to private accounts would shift billions, perhaps
BK>> trillions, into the equity markets. When the money comes out, it
BK>> will pull it down just as fast. You cannot move those currently

 JB> Yes, everyone retires the same year and pulls out all 100%.

 A: The baby boomers will be retiring over a relatively short
 period of time.

 B: What ever age group you start with there will be a lot of
 people starting to take their money out over a relatively short
 period of time.

 There is no plan under which you have the money going in and
 coming out on a balanced basis from the start. It doesn't take
 100% to pull down the market. If you think that you need to go
 back to econ 101.

 JB>  I see. You've been listened to the idiots on the left.  In

 I see you've been listening to the greed merchants on wall
 street.

 JB>  2030 stuff all of your money in your mattress when the
 JB>  crash occurs.  The reality is that most folks will pull
 JB>  4-5% out a year and they may likely be earning that much.
 JB>  I'll leave you to the math.

 The reality is, if it was that easy they would all do annuities.
 Most will likely convert 100%, or nearly that, to more secure
 instruments, such as annuities. Likely well before retirement.
 Had you planned to retire soon after 2000, and converted your
 investments to secure investments, like T-Bills, before 2000,
 you likely made out like a bandit. If you stayed in the market
 you are probably still waiting to make up your losses.

 OTOH, if the amount going in the market is a steady flow, with a
 steady change up or down, the market will adapt to that. When 5%
 of the population pulls their money out, and stops contributing,
 the market will most certainly react.

 JB> That money being invested is put to use in the capital
 JB> markets, which drives further expansion.  The banks and
 JB> companies don't hide the money in vaults.

 And they don't necessarily invest it in this country. Why put
 workers money into a stock market that will finance the transfer
 of their jobs out of the country?

BK>> near retirement into the market, they would not have enough time
BK>> to gain anything. Which means trillions in liabilities being
BK>> paid out of tax revenue, which would have to continue, all the
BK>> while the young workers must pay into private accounts. I don't
BK>> see that working.

 JB> Again you have it backwards.  That money coming out of
 JB> retirement investments will be taxed, since 401Ks and IRAs
 JB> are tax free investments.  So what you will have is money
 JB> flowing out, being taxed and lining the government coffers
 JB> for you liberals to spend.

 Uh... you need to read that again. The trillions are for the
 baby boomers etc retiring in the next maybe 10 years. Probably
 even longer. Your new accounts won't flow out for 20 or more
 years. Not be complete for maybe 40 or 50 years.

 JB> If I am going too fast on any of this, I'll type slower for
 JB> you.

 If you go any faster you won't be able to read your own words.

 ...

BK>> JB> Current year debt servicing only.  I'll keep saying this
BK>> JB> till you get it.  And we can chose only to service the debt
BK>> JB> and not retire any of the noninterest portion.  It's all in

BK>> We could, but that's not how it's done. And with T-bill maturing
BK>> in 15 years, it's up to the investors, not the govt, whether the
BK>> debt gets paid off.

 JB> Really ?  You do know that some notes are callable and the
 JB> government pays the interest by issuing new bonds, right ?
 JB> Ponder this awhile.

 You know, if nobody buys those new bonds, the govt can't issue
 new bonds, don't you? And I know about callable bonds. I believe
 the govt should call all high interest bonds, if they haven't
 already. But that has very little to do with what we are
 discussing.

BK>> JB> how we choose to finance it.  I could balance the budget
BK>> JB> for the next 5 years just by bringing back the long bond,
BK>> JB> yet debt will go up.

BK>> What would you do with the money from the long bond? If you use
BK>> it for current account payments, that's not a balanced budget.

 JB> Sure it is.  Say to yourself "budget = cashflow"

 Say to yourself "debt increase is not a balanced budget". OTOH,
 I believe what you are talking about is what Bush is doing now.
 So, how come we don't have a balanced budget now?

BK>>BK>> And I see another downturn, good possibility of a recession, on
BK>>BK>> the horizon. Just talking to a heating contractor yesterday, he
BK>>BK>> says his new construction work is down about 60%. The papers
BK>>BK>> report new construction down, while permit issues are up.
BK>>BK>> Incomes down. Etc. That new construction figure lags the fed
BK>>BK>> funds rate by quite a bit, so it's an indicator that things are
BK>>BK>> not going well. Unless the Fed opens the spigot, and fairly
BK>>BK>> soon, things could get a lot worse.

BK>> JB> Construction will be down due to excess inventory.

BK>> Excess inventory means what there is isn't selling/renting.

 JB> Hence the word "excess".

 Which contributes to my scenario.

BK>> JB> Remodeling is on the upswing.  Wages are up.  What spigot

BK>> Where do you show wages up? Give a soure I can check.

 JB> http://www.bls.gov/cps/cpsaat37.pdf

 Those are household weekly earning, not adjusted for inflation.
 IOW, in real money *wages* are not in there. Wages are pay/time.

 JB> or

 JB> http://data.bls.gov/cgi-bin/surveymost?ci

 JB> and run your own reports.

 Those are all averages, I didn't find median there. The average
 can be pulled up, as in the old example - If a half dozen
 computer students are sitting around a table, and bill Gates
 joins the group, the average income becomes billions a year. But
 the median is still maybe $15K/yr.

 So I looked further.

 www.bls.gov/cps/cpswktabs/html

  I found median incomes. There I find, in current dollars, a big
  time increase. In constant dollars, it's flatlined, and down
  somewhat.

 The difference between current and constant dollars indicates
 you are looking at inflation driven increases, not real money
 gains.

BK>> JB> do you want the Fed to open ?  The liquidity spigot is too
BK>> JB> wide open right now.  There is more money out there than
BK>> JB> folks know how to spend.

BK>> I believe you are about a year behind. And what money is out
BK>> there that people don't know how to spend is debt money.
BK>> Borrowed money.

 JB> You don't have a clue.  Some may be and personally I'd just
 JB> as soon borrow your money and invest it than use my own but
 JB> you don't understand this concept.

 I do understand it. It's a form of gambling that could pay off
 very well. Margin buying in the market is the most prominent
 form. It can also be disasterous, though it's not much of a real
 threat if you are either very young or don't have anything to
 lose.

 JB> Have you looked at
 JB> corporate profits recently ?  That is not debt income.
 JB> That is income after taxes.

 Nope to question 1. Can you tell me how much of those profits
 are derived from overseas investments?

BK>> JB> Any more and we will see serious
BK>> JB> inflation.

BK>> Inflation may be unavoidable. Stagflation may be our future
BK>> under Bushonomics.

 JB> The Dems will try to cause it with tax hikes.  Count on it.

 If it happens before Bus leaves office, you won't have any
 excuse. And it will take about a year for the next president's
 policies to take effect.

BK>> JB> Any recession that comes will be solely due to
BK>> JB> tax policy by the Dems.  Count on it.

BK>> Tax policy seldom, if ever, causes recession. It will be
BK>> interest rates.

 JB> And what causes the interest rates to rise ?

 The fed. Gee, that was easy.

BK>> JB> The Dems are wanting
BK>> JB> to kill the stock market, yet it is what is lining the
BK>> JB> government coffers right now.

BK>> The stock market was comatose under Bush for 5 years. During the
BK>> 80s the stock market went up and up, while corporate cash flow
BK>> was down and corporate profits were down. All that time poverty
BK>> grew. The stock market is a poor indicator of prosperity. It
BK>> can, however, be a good indicator of problems.

 JB> I see.  So no wealth is in the stock market.  You keep it
 JB> under your mattress.

 How much of your income is derived from the stock market? Wealth
 in the stock market does not do much good if it's used to move
 jobs overseas. Not for the American worker, anyway.

BK>> JB> Not unlike a Democrat to
BK>> JB> kill the goose laying the golden eggs.

BK>> Funny that you are citing tax revenue as a basis for judging the
BK>> success of the market.

BK>> Cut govt spending and watch the economy stumble. Watch the
BK>> market stumble. Only Bush won't do it. He hasn't for 6 1/2
BK>> years, he won't now. As long as republicans get their share.

 JB> Consumer and business spending make up far more of the
 JB> economy than government spending.  Let's do some quick math
 JB> for you.

 Let's not. Govt spending doesn't have to be a majority of the
 market, or anywhere near. In fact, overall, it's about 30% of
 the GDP give or take the deficits.

 However, a relatively small change can have a big effect. 10%
 can be disasterous. And probably would be if done quickly.

 JB> The total GDP is around $12T .  The government steals just
 JB> over $2T for itself.  Of that $2T around $350-400B is used
 JB> to service debt.  Another $1.1-1.2T is used for social
 JB> programs.  What is left is discretionary spending.  That
 JB> equates to $400B or so.  That is less than 4% of the GDP.

 Yep, sounds simplistic, but not necessarily wrong.

 JB> This was all of the top of my head and I can figure this
 JB> our more easily than your DNC spoonfed mentality.

 Then figure out what happens if the right manages to cut the
 non-discretionary spending. Few in the DNC, or the RNC, study
 the stats I have posted in previous msgs. My bet anyway. I'm way
 ahead of you on that.


BOB KLAHN bob.klahn{at}sev.org   http://home.toltbbs.com/bobklahn

... ...Just one of the messy, loose ends of a civilized society.
 * Silver Xpress V4.5/P [Reg]
--- Platinum Xpress/Win/WINServer v3.0pr5a