Pepper sprayed for public safety.

[Sidd Finch]

Originally Posted by LessinSF

Because the seller paid the construction worker via her taxes, i.e. she has sold herself a sandwich.

LessinFrankfurt

But it's okay if the seller paid the construction worker via buying haircare products?

[Adder]

Originally Posted by sebastian_dangerfield

It is, but that assumes taxpayers with disposable income pulling back on spending voluntarily.

It assumes that magic happens and current consumption perfectly offset future expected taxes. That's nuts in particular because it assumes not only that people are rationale economic actors when they are not, it also assumes that the rationale belief is that there will be future tax increases to pay back today's deficit. There is almost no reason to believe that.

In a nation of taxpayers unable to save anything

I have no idea what you're talking about. Right now, we are a nation of taxpayers saving at way above historic levels.

I know you like to dismiss that as the result of mortgage defaults and corporate hording, but that's rather beside the point. Right now, we are a nation saving too much.

and with sinking wages

We don't have sinking wages overall. We have growing wages overall, but not at a rate fast enough to catch up to the big decline in aggregate incomes (NGDP) that began in 2008.

Granted, we also have a distribution problem that can mean that top-end incomes can grow while the middle class you are so focused on stay fairly flat, but that's a different and trickier policy problem. The first order problem is that aggregate incomes are too low (not enough NGDP).

(which cannot be fixed via Fed created inflation, as has been demonstrated thus far)

I don't know how you think anything has been demonstrated. The Fed has not tried to create inflation, or better yet, NDGP growth. To the extent that the Fed has wavered at all from it's 2% inflation rate target, it's to become comfortable with below-target performance.

The economics and finance professions (and the 1970s) did us an incredible disservice by driving home the notion of real returns, growth rates and interest rates. The world is nominal, and most economic actors make their decision in nominal terms. Falling/weakly growing nominal incomes (NGDP) means falling/weak consumption, falling/weak investment and falling/weak employment.

Until the Fed recognizes that that's what matters and not measured "inflation" and interest rates, we're going to have bad monetary policy for times like these.

[Greedy,Greedy,Greedy]

Originally Posted by Sidd Finch

I haven't been keeping up on this board (I've had limited time which I mostly devoted to looking at TM's Kate Upton pics). I assume Hank has duly apologized to everyone for ridiculing everyone who suggested that the USSC might find HCR constitutional?

If the search function worked, I'd find you the link, but it was quite the apology. I think he worked through all 12 steps in the trollers anonymous program. I was heartened.

[sebastian_dangerfield]

It assumes that magic happens and current consumption perfectly offset future expected taxes. That's nuts in particular because it assumes not only that people are rationale economic actors when they are not, it also assumes that the rationale belief is that there will be future tax increases to pay back today's deficit. There is almost no reason to believe that.

Did I say I believed that? No - you did, so you could label me a believer of a theory I never championed.

I have no idea what you're talking about. Right now, we are a nation of taxpayers saving at way above historic levels.

Deleveraging via default (look it the data and you'll find that's most of what it is) and "saving" = Not the same thing. There is no saving going on in the middle and lower middle classes. I reviewed portfolios of these people for years. Trust me.

We don't have sinking wages overall. We have growing wages overall, but not at a rate fast enough to catch up to the big decline in aggregate incomes (NGDP) that began in 2008.

Distinction without a difference. If it can't keep up with costs of living, it's sinking. Call it what you want. Effect is all that counts.

I'll get the rest later. Have to ferry my kid to the pool.

[Adder]

So some posted a link to twitter of the WSJ journal saying that two court sources say Roberts did indeed switch his vote (at least a month ago), thus so enraging the other four horseman they they vowed not to join his opinion at all and instead did their unsigned joint dissent.

Okay, accepting that as true, isn't that rather insanely stupid? If the join Roberts in his commerce and N&P opinion, with which they do not disagree (except to the extent that Thomas thinks the 19th century rocks), they have a clear majority opinion narrowing the commerce clause precedents. That might actually have been worth something.

But instead, they've created a muddled argument on whether the dissents plus Roberts = precedent.

That seems a silly place to end up if you believe in limited government.

[Adder]

Originally Posted by sebastian_dangerfield

Did I say I believed that?

No, and I didn't say you did. You said something that seemed to require one to believe it to be accurate, so I pointed out it is bullshit. Then you disclaimed belief in it. Then I agreed with your disclaimer and added further explanation as to why it made no sense.

Apparently, there is no disagreement here.

I reviewed portfolios of these people for years. Trust me.

And you think this is somehow representative? Why?

[Tyrone Slothrop]

Originally Posted by sebastian_dangerfield

I don't. And you know that, so don't try to shift the debate. My point was that to spend more govt money necessarily involves a decrease in what's available in the private sector in terms of disposable income. That's undeniable.

Originally Posted by LessinSF

Because the seller paid the construction worker via her taxes, i.e. she has sold herself a sandwich.

LessinFrankfurt

No. The government can borrow. Bonds will have to be repaid, but not today.

[Tyrone Slothrop]

Originally Posted by sebastian_dangerfield

If you think the Fed's interest rate policies are anything more than a small fractional cause of our current unemployment, there is no point discussing anything with you any further.

Now you're just obfuscating. How we got to where we are is one thing; what we do going forward is another. The Fed has a dual mandate and it is ignoring half of it -- the unemployment half. It is fighting yesterday's war.

Economists have been looking at the relationship between unemployment and inflation for decades. If you really think there is none, and can prove it, you'll get a Nobel Prize.

[Adder]

Originally Posted by Tyrone Slothrop

Now you're just obfuscating. How we got to where we are is one thing; what we do going forward is another. The Fed has a dual mandate and it is ignoring half of it -- the unemployment half. It is fighting yesterday's war.

Economists have been looking at the relationship between unemployment and inflation for decades. If you really think there is none, and can prove it, you'll get a Nobel Prize.

I'd have no problem arguing the Fed can't help if we were running 5% inflation and still had high unemployment. But there is no defense for having (CPI headline) inflation averaging around 1% over the last four years.

[Hank Chinaski]

Originally Posted by Sidd Finch

I haven't been keeping up on this board (I've had limited time which I mostly devoted to looking at TM's Kate Upton pics). I assume Hank has duly apologized to everyone for ridiculing everyone who suggested that the USSC might find HCR constitutional?

ridicule?

[Tyrone Slothrop]

Something Obama keeps screwing up: lipstick on banking pigs.

[sebastian_dangerfield]

Originally Posted by Tyrone Slothrop

Now you're just obfuscating. How we got to where we are is one thing; what we do going forward is another. The Fed has a dual mandate and it is ignoring half of it -- the unemployment half. It is fighting yesterday's war.

Economists have been looking at the relationship between unemployment and inflation for decades. If you really think there is none, and can prove it, you'll get a Nobel Prize.

Were you not suggesting Fed policies are a primary driver of today's high unemployment?

Did I say there was no relationship? Or did I acknowledge one, but say it was small?

[sebastian_dangerfield]

Originally Posted by Tyrone Slothrop

No. The government can borrow. Bonds will have to be repaid, but not today.

Your gripe is with state austerity, yes? Explain how, say, CA, or IL, or FL, or any of the other states that desperately need capital, and are shit risks, can borrow cheaply.

If you're suggesting Uncle Sam can borrow cheap and give the money to them, explain who pays off the bonds down the road?

Here's your plan in a formula:

Borrow Cheap long term + [Something magical happens to the economy w/in 20 years] = Win/Win

This plan has already been used and abused to the point global long term debt obligations owed by most of the developed world are impossible to ever pay down. The next step is them becoming impossible to roll over at reasonable terms.

You can not indefinitely borrow your way to prosperity any more than you can tax yourself there. Read Stiglitz and Krugman closely and you'll see neither is a true, hard core advocate of more borrowing and stimulus. The bigger reason they're arguing for it now it is because we're at a point where we either buy time or run into a slowdown, which will put serious teeth on this depression. They're not intellectual advocates of increased govt spending so much as voices of dissent, saying, "If we keep on this road - this failed 'muddling through' - we're going to economically find ourselves, at least for at time, on something like Cormac McCarthy's Road." It's fear of the Austrian reckoning more than anything else, and truly, I understand it, and sympathize with it. But what is unsustainable will not be sustained. And your math, your academic somersaults, offered to suggest we can indebt ourselves out of debt, fall flat.

We either have upheaval, or a long, slow decline trying to prop up the status quo. I think the latter, but the former's looking more and more like a possibility.

ETA: The asset prices need to fall. Wealth needs to change hands. The disequilibrium between capital and labor has to correct. None of this happens without face-ripping creative destruction - the exact thing we've fought to avoid.

[sebastian_dangerfield]

Originally Posted by Adder

And you think this is somehow representative? Why?

Since 2007, I've looked at the US consumer. I've seen portfolios of his debt in auctions - charged off debt sold by credit issuers. All lending is ultimately consumer lending, as he's the seed of all economic activity. And he's a deeply sick man.

You realize why credit card defaults have not jumped as much as anticipated in this downturn, right? You understand the American middle class is so fucked it's been forced to preserve lines of liquidity while it defaulted everywhere else? Why? Because it can't even afford most of its essentials. Every time you see analyses touting the strength of consumer debt, you should be scared. It is not a sign of strength, but a canary in the coal mine. Every time you see a jump in consumer debt, it should scare you, rather than cause you to think, stupidly, as most fools will, "Yay! The consumer's back! Banks are lending!" Look at what people are buying. Look at how essentials are being recharacterized as discretionary purchases.

I nearly gagged when I did a payment run once and discovered how much bad debt was paid off with other credit cards. (75%) The other 25%? Most of that was refis, when banks would still lend to the middle class on r/e.

No savings, no hope of wage increases, terrible cash flow, and one crisis from bankruptcy... That's the American middle and lower middle class. Pardon me if I don't share your optimism. I actually happen to have seen the subject we're discussing. You haven't, or you wouldn't argue the rosy assumptions you have.

[Adder]

Originally Posted by sebastian_dangerfield

If you're suggesting Uncle Sam can borrow cheap and give the money to them, explain who pays off the bonds down the road?

This is the fundamental disconnect. No one replays the bonds down that road. Instead, the bond shrink relative to a growing economy over the long term as we run balanced or close to balanced budgets when the economy is closer to full employment (Bush administration not withstanding).

Here's your plan in a formula:

Borrow Cheap long term + [Something magical happens to the economy w/in 20 years] = Win/Win

The something magical is people (and entities) moving back closer to historical saving rate (i.e., less hoarding of cash) and the economy getting closer to potential.

Read Stiglitz and Krugman closely and you'll see neither is a true, hard core advocate of more borrowing and stimulus.

This is true, but Stiglitz has also been embarrassingly wrong lately.

It's fear of the Austrian reckoning more than anything else

No, it really isn't. These gentlemen to not believe there is anything credible about Austrian business cycle theory, not least because Austrian predictions over the last four years have proved demonstrably wrong (gee, where's that hyper inflation?).

And your math, your academic somersaults, offered to suggest we can indebt ourselves out of debt, fall flat.

I've got to run to a call, but there was a recent excellent blog post on this "how can more debt solve a debt problem" nonsense. I'll find it for you later.

But a key point is that not all debt is created equal, and we, in the U.S., do not have a public debt problem (nor does Spain, nor did Ireland before it took on a ton of private bank debt).