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

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

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

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

I meant principal but you still won't get it. If you had you'd have 
understood I used the wrong word.


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

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

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

BK> JB> Budget = Cashflow

BK> JB> Liabilities = Debt

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

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

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

Sure it is.  You just don't understand it.


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

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

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

BK> You did on the "principle" above.

No, that was me being in too big of a hurry and not proof reading one 
word.


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

It isn't a one time thing.  It is ongoing.  We don't refinance all of 
the debt on one day.  We issue more debt to pay off what we owe.  


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

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

You will never understand this.


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

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

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

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

BK> JB> Not at all.

BK> Yes, it is.

Right.


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

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

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

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

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

OMG.  Now you are back on slavery and share cropping.  We are trying to 
talk economics here.


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

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

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

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

Yes, but budgets are single year budgets.  Try to stay on track.  We 
don't develop 15 year budgets.  Budgets still equal cashflow.  Learn 
this, if you learn nothing else.


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

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

Bush does not create spending bills.  He only signs them.  Liabilities 
have increased, which is far worse than current year spending.


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

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

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

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

BK> Count the number of federal employees.

Do it.


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

BK> That was under Bush. After 9-11.

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

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

We'll just agree it was a bad plan.   I am fine with abolishing it. 


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

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

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

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

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

Now this is funny.  I am not going to even try to explain what all is 
wrong with this but the government owing government is priceless, since 
the government owes the people.    


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

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

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

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

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

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

It is current account debt (debt = liability).


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

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

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

I see.


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

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


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

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

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

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

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

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

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

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

BK> JB>The big benefactors are the unions.

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

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

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

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

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

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

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

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

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

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

BK> A: The baby boomers will be retiring over a very short period of
BK> time.

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

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

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

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

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

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

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

BK> And they don't necessarily invest it in this country.

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

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

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

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

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

BK> ...

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

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

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

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

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

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

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

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

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

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

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

BK> JB> Hence the word "excess".

BK> Which contributes to my scenario.

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

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

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

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

BK> JB> or

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

BK> JB> and run your own reports.

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

BK> So I looked further.

BK> www.bls.gov/cps/cpswktabs/html

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

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

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

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

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

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

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

BK> Nope. Can you tell me how much of those profits are derived from
BK> overseas investments?

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

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

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

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

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

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

BK> JB> And what causes the interest rates to rise ?

BK> The fed. Gee, that was easy.

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

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

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

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

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

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

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

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

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

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

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

BK> Yep, sounds simplistic, but not necessarily wrong.

Let's hope not.


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

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

You aren't ahead of anything.  I am pretty much done with this thread.


Jeff

--- PCBoard (R) v15.3/M 10