Election 2010: Teabaggin' the Ds & Rs

[sgtclub]

Originally Posted by Adder

Funny in a rather disturbing way, yes.



Don't they both still have surpluses (from payroll taxes)?

That was my understanding too. But if that's the case, why does everyone say they have to be included in the conversation of deficit reduction? Do they mean long term? Or is the government still borrowing from SS?

[Adder]

Originally Posted by sgtclub

That was my understanding too. But if that's the case, why does everyone say they have to be included in the conversation of deficit reduction? Do they mean long term? Or is the government still borrowing from SS?

I'm not sure.

[sebastian_dangerfield]

Originally Posted by Tyrone Slothrop

I'm not getting why you think QE is about mortgage rates. It's like saying that raising the gasoline tax is about deterring people from going out to eat at restaurants. The two are not completely unrelated, true.

eta: I see now that the confusion comes from the Washington Post. Expecting that paper to explain economic or business concepts is a fool's errand. NPR's Planet Money does a better job:



It's worth pointing out that while it sounds like a lot of money, it really isn't when you compare it to the size of the economy.

I think you have it backward:

1. Big companies don't need loans (they have huge reserves [$1.8 trillion worth]);
2. Small to mid sized ones don't want to take on added debt, even at low rates, given the volatile economic climate.

The policy is geared toward freeing consumer dollars because those are the ones that need to be unlocked first to create demand necessary to raise revenues justifying borrowing, expanding and hiring by businesses. You have to start with the consumer and let their dollars trickle up. What's monopolizing most of the consumer's money right now? Mortgages.

But we shouldn't waste too much time discussing this because ultimately it's an academic disagreement. In the end, BofA's $50bil is going to go where most of the money the Fed has created since this crisis started has gone: Asia, to seek better, lower risk returns. Hence, all the talk of Asian bubbles.

[Tyrone Slothrop]

Originally Posted by sebastian_dangerfield

I think you have it backward:

1. Big companies don't need loans (they have huge reserves [$1.8 trillion worth]);
2. Small to mid sized ones don't want to take on added debt, even at low rates, given the volatile economic climate.

The policy is geared toward freeing consumer dollars because those are the ones that need to be unlocked first to create demand necessary to raise revenues justifying borrowing, expanding and hiring by businesses. You have to start with the consumer and let their dollars trickle up. What's monopolizing most of the consumer's money right now? Mortgages.

The policy is a macro one, aimed at the value of money, and it should affect everyone's behavior on the margin. It's aimed at the economy as a whole.

But we shouldn't waste too much time discussing this because ultimately it's an academic disagreement. In the end, BofA's $50bil is going to go where most of the money the Fed has created since this crisis started has gone: Asia, to seek better, lower risk returns. Hence, all the talk of Asian bubbles.

The point is that it's not BofA's $50 billion anymore. The Fed buys those bonds, and it essentially creates money to do so. But if your point is that the delta to the global money supply is rather small, I agree. It seems like the policy is aimed more at political critics who say the Fed isn't doing anything.

[sebastian_dangerfield]

Originally Posted by Tyrone Slothrop

The policy is a macro one, aimed at the value of money, and it should affect everyone's behavior on the margin. It's aimed at the economy as a whole.



The point is that it's not BofA's $50 billion anymore. The Fed buys those bonds, and it essentially creates money to do so. But if your point is that the delta to the global money supply is rather small, I agree. It seems like the policy is aimed more at political critics who say the Fed isn't doing anything.

It's too blunt an instrument for the reasons I noted. Businesses won't expand until they see sustained demand. Hence, unemployment will remain high. We know what that does in terms of foreclosures and consumer spending. Banks will naturally lend where they can get the best return on risk. That's emerging markets.

I'm confused on your second point. The Fed buys $50bil in bonds from BOA. How is that $50bil not BOA's money?

ETA: I hope your final point is wrong. If the Fed is doing this just to do give the appearance of engagement and control, Bernanke has lost his mind.

[Tyrone Slothrop]

Originally Posted by sebastian_dangerfield

It's too blunt an instrument for the reasons I noted. Businesses won't expand until they see sustained demand. Hence, unemployment will remain high. We know what that does in terms of foreclosures and consumer spending. Banks will naturally lend where they can get the best return on risk. That's emerging markets.

I'm confused on your second point. The Fed buys $50bil in bonds from BOA. How is that $50bil not BOA's money?

ETA: I hope your final point is wrong. If the Fed is doing this just to do give the appearance of engagement and control, Bernanke has lost his mind.

The Fed gives $50 billion to BofA for the bonds, but it doesn't sell anything to raise the funds. It just creates them. Presto: the money supply is increased by $50 billion.

[sebastian_dangerfield]

Originally Posted by Tyrone Slothrop

The Fed gives $50 billion to BofA for the bonds, but it doesn't sell anything to raise the funds. It just creates them. Presto: the money supply is increased by $50 billion.

I get that. My point was not whether the supply was increased, but who has the liquid. BOA gets the liquid to lend, and one of the primary aims is to get it to lend that money to businesses or refi mortgages... or anything else that creates domestic economic activity. But that isn't going to happen for the reasons I noted above. Hence, the money goes abroad: http://www.bloomberg.com/news/2010-1...-stimulus.html http://www.ft.com/cms/s/0/46c65ec8-d...44feabdc0.html

[Tyrone Slothrop]

Originally Posted by sebastian_dangerfield

I get that. My point was not whether the supply was increased, but who has the liquid. BOA gets the liquid to lend, and one of the primary aims is to get it to lend that money to businesses or refi mortgages... or anything else that creates domestic economic activity. But that isn't going to happen for the reasons I noted above. Hence, the money goes abroad: http://www.bloomberg.com/news/2010-1...-stimulus.html http://www.ft.com/cms/s/0/46c65ec8-d...44feabdc0.html

It increases BofA's liquidity only relative to a hypothetical world in which they can't sell their bonds to anyone else, but no one thought that was the world we're in. The key is that if anyone else had bought the bonds, they would have had to tie up other assets to do so, but not the Fed, increasing the supply of money.

[sebastian_dangerfield]

Originally Posted by Tyrone Slothrop

It increases BofA's liquidity only relative to a hypothetical world in which they can't sell their bonds to anyone else, but no one thought that was the world we're in. The key is that if anyone else had bought the bonds, they would have had to tie up other assets to do so, but not the Fed, increasing the supply of money.

In any scenario, the institution selling the bonds will not be lending the resulting liquid to domestic businesses who aren't seeking loans or to underwater homeowners seeking refis. The money will look for returns abroad. The devaluation will boost export markets, and maybe that will create enough activity to spark some form of hiring, but it seems unlikely given the lack of response last time.

[Greedy,Greedy,Greedy]

Originally Posted by sebastian_dangerfield

In any scenario, the institution selling the bonds will not be lending the resulting liquid to domestic businesses who aren't seeking loans or to underwater homeowners seeking refis. The money will look for returns abroad. The devaluation will boost export markets, and maybe that will create enough activity to spark some form of hiring, but it seems unlikely given the lack of response last time.

I think you're off a bit here. Lend money to BofA and it likely won't be invested anywhere, just go to supporting their current loans and investments as they continue to suck wind. Maybe that gives shareholders and bondholders some comfort, and so maybe that helps out the Chinese bondholders a bit, but really all that happens is that the money makes it possible for them to continue to work to salvage what they have, and maybe avoids them pressuring some big American businesses to repay their loans and lets them forestall some foreclosure proceedings in their acquired mortgage business.

But if you're a medium size business and did business with BofA, they've already squeezed you until it hurt and you're probably borrowing from someone else.

There are lots of domestic businesses seeking loans these days, including some good sized ones. More available money would probably lead, for example, to a round of consolidation in several industries, and a fair bit of M&A activity. You are right that there would be more foreign buyers than domestic ones. But that money's probably not coming from BofA for at least a couple quarters, and even then you've got to be a little wary about taking it the way they've behaved.

Goldman, on the other hand, looks ready to pump some more money out any time now.

[Did you just call me Coltrane?]

Originally Posted by sgtclub

I find it sad that every rank and file GOPer that has been asked about spending cuts has no fucking idea/plan for what is going to be cut. Even funnier is the blank look on their face when asked "how can you cut taxes and cut the deficit" - I suspect there are about 3 republicans that have a clue and the message hasn't yet been distributed to the parrots.

Another thought - does anyone know whether SS and medicaid are funded solely out of payroll deductions or is part from the general budget?*

They're not going to cut anything of significance, Club. It was all talk. This is not your father's GOP. I wish it were, but it's not.

[Gattigap]

Originally Posted by Did you just call me Coltrane?

They're not going to cut anything of significance, Club. It was all talk. This is not your father's GOP. I wish it were, but it's not.

C'mon, Coltrane. Give them a chance. FWIW, I've bet Atticus an unsoiled princess bed that this Republican House will shut down the government in the spring by refusing to raise the debt ceiling. You want spending cuts? Cuts down to zero with a bullet, baby!

[Cletus Miller]

Originally Posted by sgtclub

I saw a link on Drudge but I don't recall what outlet. The actual number may not be $200 million/day, but it certainly is big, and the entourage sounds really big, but maybe that is standard for POTUS international travel.

It's sort of standard.

Do note that this is also a *HUGE* trade mission, with the CEOs of Boeing and Honeywell(? Cat?), various other biz people and their staffs along for the trip. The entourage is not all traveling on the federal dime--tho I'm sure the F-50 CEOs are flying with the Prez.

[Greedy,Greedy,Greedy]

Originally Posted by Cletus Miller

It's sort of standard.

Do note that this is also a *HUGE* trade mission, with the CEOs of Boeing and Honeywell(? Cat?), various other biz people and their staffs along for the trip. The entourage is not all traveling on the federal dime--tho I'm sure the F-50 CEOs are flying with the Prez.

I know a couple of people on the trip - both paying for themselves, both traveling with their wife. One has no staff members, the other has three management team members (CEO, COO and CSO). Both have businesses with both US and Indian operations and will be making decisions affecting where to put a healthy number of new jobs in the coming year.

Still, I am sure that while they are over there, the Government will spend a million gajillion dollars on them by inviting them to a couple of meals and giving them some bus rides. And that's a million gajillion dollars A DAY. Can you believe it? Millions of gajilions of dollars just to try to get a few lousy jobs for Americans. If we just extended the Bush tax cuts for them instead, they'd be hiring every Tom, Dick and Hari they could find.

[Tyrone Slothrop]

Originally Posted by Did you just call me Coltrane?

They're not going to cut anything of significance, Club. It was all talk.

I hear they're going to cut NPR.