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Thread: You cannot ignore economic reality.

  1. #621

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    Quote Originally Posted by ynot2k View Post
    Seems like the numbers are happy days for them, the club et al. As you point out it shows not much doing in terms of debt to gdp until 1985. It was just slogging along at under 40%. I mean what fun is that if you are the one printing all, and spending much or most, of it?

    But yes the days are pleasant when not only is the gdp is up but you now get 125% of the magic juice. And cherry on the top... well the top is covered with them... is you never have to pay it back. Bring it, where do I sign up?

    I may still be digesting your post brutus2 but the second read did have more light. Thanks again.
    From Geoge Mason University (Virginia) Mercatus Center. - Their studies on what high debt/GDP ratio does to economy.
    This was from 04/15/2020 just before the explosion of debt and Feds balance sheet. Man did they nail it in 3rd paragraph, remember if published in April 20230 much of research is before that. 2022 and 2023 and probably after, falls right into reality after the debt/GDP exploded.


    "A large majority of studies on the debt-growth relationship find a threshold somewhere between 75 and 100 percent of GDP. More importantly, every study except two finds a negative relationship between high levels of government debt and economic growth. This is true even for studies that find no common threshold. The empirical evidence overwhelmingly supports the view that a large amount of government debt has a negative impact on economic growth potential, and in many cases that impact gets more pronounced as debt increases. The current fiscal trajectory of the United States means that in the coming 30-year period, the effects of a large and growing public debt ratio on economic growth could amount to a loss of $4 trillion or $5 trillion in real GDP, or as much as $13,000 per capita, by 2049.

    Why Would a Large Federal Debt Have Negative Effects on the Economy?
    Before delving into the existing literature on the relationship between government debt and economic growth, it is useful to briefly explore the economic explanations for why a large and growing debt burden could drag down the growth potential of the US economy. Economists have long noted several macroeconomic channels through which debt can adversely impact medium- and long-run economic growth. More recent observations suggest that large increases in the debt-to-GDP ratio could lead to much higher taxes, lower future incomes, and intergenerational inequity.

    High public debt can negatively affect capital stock accumulation and economic growth via heightened long-term interest rates, higher distortionary tax rates, inflation, and a general constraint on countercyclical fiscal policies, which may lead to increased volatility and lower growth rates. Studies on the channels through which debt adversely impacts growth also find that when the debt-to-GDP ratio reaches elevated levels, the private sector seems to start dissaving. These findings contradict the Ricardian equivalence hypothesis, which holds that households are forward looking and increase their saving in response to increases in government borrowing.

    As America’s federal debt burden continues to grow, the government must increase borrowing in order to fund its expansive spending programs. This increased government borrowing competes for funds in the nation’s capital markets, which in turn raises interest rates and crowds out private investment. With entrepreneurs in the private sector facing higher costs of capital, innovation and productivity are stifled, which reduces the growth potential of the economy. If the government’s debt trajectory spirals upward persistently, investors may start to question the government’s ability to repay debt and may therefore demand even higher interest rates. Over time, this pattern of crowding out private investment coupled with higher rates of interest will drive down business confidence and investment, which drags productivity and growth down even further.

    A further cost resulting from increased government borrowing is the crowding out of public investment as growing interest payments consume an ever larger portion of the federal budget, leaving lesser amounts of public investment for research and development, infrastructure, and education. In fact, the Congressional Budget Office (CBO) predicts that by 2049, the cost of paying the interest on the nation’s debt will be the third-largest budgetary item after Social Security and Medicare, constituting almost 6 percent of GDP. The combination of reduced private investment and crowding out of public investment will have negative effects on social mobility as Americans find it harder to buy a home, finance a car, or pay for college. Reduced investment, lower productivity, and declining social mobility will continue to drive down the growth potential of the economy.

    Finding the Tipping Point
    “Growth in a Time of Debt” is the cornerstone study on the subject of debt and growth over the past decade. In order to determine the effects of government debt on growth, the authors compiled data covering 1946 to 2009 from the International Monetary Fund (IMF), the World Bank, and the Organisation for Economic Co-operation and Development (OECD) for 44 countries. The study finds that across both advanced and emerging economies, high debt-to-GDP levels (90 percent and greater) are associated with notably less growth. Countries with debt-to-GDP ratios greater than 90 percent have median growth roughly 1.5 percent lower than that of the less-debt-burdened groups and mean growth almost 3 percent lower."

  2. #622

    Default

    This is probably just a case of why would you buy long at a significantly lower rate than short, with a cloudy outlook many years out.
    But who knows?


    ---------------------------------------------------------------------------------

    "30-Year Treasury Auction Breaks Bad, Sinks Stock Market
    The Treasury’s auction of 30-year bonds on Thursday went about as badly as it could, indicating investors are reluctant to own long-dated government securities.

    At the auction of government debt that matures in 30 years, investors were awarded 4.769% in yield, 0.051 percentage point higher than the yield in pre-auction trading. The difference between the two yields—called a tail—indicated a weak auction where the U.S. government had to entice investors with a premium over the market to buy their debt.

    Primary dealers, who buy up supply not taken by investors, had to accept 24.7% of the debt on offer, more than double the 12% average for the past year.

    “Today’s 30 yr auction was outright bad,” Peter Boockvar, chief investment officer at Bleakley Financial Group, said in a research note.
    The 30-year auction was part of the government’s $112 billion debt sale and followed an uneventful 10-year auction on Wednesday.

    The 30-year yield ended Thursday at 4.777%, more than 0.12 percentage point higher than at Wednesday’s close. The reaction makes sense. When demand is weak, yields typically move higher. It is the inverse when demand is strong.

    Stocks didn’t like the auction either. The S&P 500 snapped an eight-session winning streak, dropping 0.8% on Thursday while the Dow Jones Industrial Average ended 0.7% lower. The Nasdaq Composite fell 0.9%. All three indexes had wavered between gains and losses before the sale.

    Market participants don’t usually focus on Treasury auctions, given that the government routinely puts billions of dollars of debt up for sale. But investors started zeroing in late this year as questions surfaced about demand for Treasuries. The national budget deficit grew to $1.7 trillion in fiscal 2023, the 12 months through September, making it about $300 billion more than the year before, according to the Congressional Budget Review, an independent research body.

    Year to date through October, Treasury debt issuance was 32% higher than a year earlier, according to the Securities Industry and Financial Markets Association, or Sifma.

    If government revenue doesn’t rise, higher spending would lead to a further increase in borrowing. Investors are concerned about who will buy the debt."

  3. #623

    Default We are being Played.

    If you believe that the ' Holy Trinity' in the world of today's economy, works in cooperation with each other ( Treasury/Fed/2BTF banks) then then this hypothesis may have some merit for you.

    Hypothesis: They are all working in concert to keep the 'husk' in power, ( or one of equal compliancy ), while giving the impression they are conforming with their mandates, and assisting in maintaining and growing a reasonably prosperous economy for all.

    Lets look at each one and their leaders. The motive and the action.

    Fed. Continues to shrink its bloated balance sheet ( very, very slowly vs how rapidly it increased it), and has raised rates aggressively ( after keeping them way lower than it should have for many years) and is probably going to start cutting them sometime in the near future. Their leader = Jerome Powell's term is up in mid 2026 and it is doubtful he would be given a third term by DT.

    Synopsis - They are the vehicle the main stream press can point to and say, see we are being tight and are trying to reign in the excesses of 2000 to 2021. The Fed can freely take a tight stand knowing how much ammo they had stocked in the reverse repo ( originally trillions) and that the other 2 of the HT are acting together to more than offset this tightening. .
    Also, obviously JP would stand a better chance of a 3rd term under a democrat or someone other than DT, should he want to do so.

    Treasury: I have run the numbers since the end of fiscal year end 09/30/2023, and the debt spend continues to amaze me, as it has all calendar year. It is running at a 15% of GDP clip so far 47 days into the 91 day 1st quarter of the new fiscal year. That is just crazy as the Atlanta Fed is saying GDP will be 2% and lets say inflation (cooling somewhat) will be 3% by their measurement) so that is a nominal GDP increase annualized of 5%. It is supposed to be lower than 5% in good times or certainly no greater than the 5% to maintain debt/GDP ratio.
    That is 3X higher and hugely stimulative. It is hard to believe this pace can be maintained but even if halved it would be extremely high and make the economy ( temporarily) better looking than it really is ( actually dead man walking without this and the below) This also factors out any money borrowed that was not spent ( 42 billion)

    The 'husk' is the obvious beneficiary of this or his successor, - The Fed can look tough without damaging the economy too much and the 2BTF banks benefit from all the money floating around. Janet Yellin would obviously not be reappointed if DT won.

    2BTF banks - you continuously hear how tight credit is or how it is tightening yet I follow the industries own index and it is loosening and has been relatively loose for some time.

    ---------------------------------------------------------------

    Index Suggests Financial Conditions Loosened Again in Week Ending November 10

    Contributions to the NFCI and ANFCI
    The first two columns in the table below denote how many series of the 105 used to construct the NFCI and ANFCI indicated tighter-than-average or looser-than average conditions in the most recent week. The latter two columns indicate how many of the 105 indicators have tightened or loosened in the past week.

    11/10/2023 Tighter than average Looser than average Tightened Loosened
    NFCI 8 97 46 59
    ANFCI 8 97 46 59

    ------------------------------------------------------------------------------------------



    When you have lots of $ being pumped into the economy by Fiscal ( increasing deficit) and credit conditions relatively loose, it is going to be hard to have a recessionary economy at least in the short term. Problem with a junkie, they keep needing more and more for the same effect.

    Synopsis: The 2BTF banks love lots of $ and they love big government as they benefit the most from it ( Facism/corporatocracy) .
    So although both parties are complicit, most would agree that the 'husk' and or the democtats would be more conducive to this than DT.
    ( even if they would be equal in this, most would prefer what you know to what may be. )


    So what do you arrive at. Keep the economy reasonably healthy until November, 2024 while giving the appearance of forceful guidance by the Fed. ( independent from the others - fall off my chair laughing)


    Just a possibility to explain the strange going ons that are differing so much from what many very smart people have anticipated the past year or two.
    This hypothesis is mine only, as far as I know, so it does not come from a smart or in the know person, just a suspicious one.

  4. #624
    Join Date
    Jan 2010
    Posts
    13,314

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    Quote Originally Posted by brutus2 View Post
    If you believe that the ' Holy Trinity' in the world of today's economy, works in cooperation with each other ( Treasury/Fed/2BTF banks) then then this hypothesis may have some merit for you.

    Hypothesis: They are all working in concert to keep the 'husk' in power, ( or one of equal compliancy ), while giving the impression they are conforming with their mandates, and assisting in maintaining and growing a reasonably prosperous economy for all.

    Lets look at each one and their leaders. The motive and the action.

    Fed. Continues to shrink its bloated balance sheet ( very, very slowly vs how rapidly it increased it), and has raised rates aggressively ( after keeping them way lower than it should have for many years) and is probably going to start cutting them sometime in the near future. Their leader = Jerome Powell's term is up in mid 2026 and it is doubtful he would be given a third term by DT.

    Synopsis - They are the vehicle the main stream press can point to and say, see we are being tight and are trying to reign in the excesses of 2000 to 2021. The Fed can freely take a tight stand knowing how much ammo they had stocked in the reverse repo ( originally trillions) and that the other 2 of the HT are acting together to more than offset this tightening. .
    Also, obviously JP would stand a better chance of a 3rd term under a democrat or someone other than DT, should he want to do so.

    Treasury: I have run the numbers since the end of fiscal year end 09/30/2023, and the debt spend continues to amaze me, as it has all calendar year. It is running at a 15% of GDP clip so far 47 days into the 91 day 1st quarter of the new fiscal year. That is just crazy as the Atlanta Fed is saying GDP will be 2% and lets say inflation (cooling somewhat) will be 3% by their measurement) so that is a nominal GDP increase annualized of 5%. It is supposed to be lower than 5% in good times or certainly no greater than the 5% to maintain debt/GDP ratio.
    That is 3X higher and hugely stimulative. It is hard to believe this pace can be maintained but even if halved it would be extremely high and make the economy ( temporarily) better looking than it really is ( actually dead man walking without this and the below) This also factors out any money borrowed that was not spent ( 42 billion)

    The 'husk' is the obvious beneficiary of this or his successor, - The Fed can look tough without damaging the economy too much and the 2BTF banks benefit from all the money floating around. Janet Yellin would obviously not be reappointed if DT won.

    2BTF banks - you continuously hear how tight credit is or how it is tightening yet I follow the industries own index and it is loosening and has been relatively loose for some time.

    ---------------------------------------------------------------

    Index Suggests Financial Conditions Loosened Again in Week Ending November 10

    Contributions to the NFCI and ANFCI
    The first two columns in the table below denote how many series of the 105 used to construct the NFCI and ANFCI indicated tighter-than-average or looser-than average conditions in the most recent week. The latter two columns indicate how many of the 105 indicators have tightened or loosened in the past week.

    11/10/2023 Tighter than average Looser than average Tightened Loosened
    NFCI 8 97 46 59
    ANFCI 8 97 46 59

    ------------------------------------------------------------------------------------------



    When you have lots of $ being pumped into the economy by Fiscal ( increasing deficit) and credit conditions relatively loose, it is going to be hard to have a recessionary economy at least in the short term. Problem with a junkie, they keep needing more and more for the same effect.

    Synopsis: The 2BTF banks love lots of $ and they love big government as they benefit the most from it ( Facism/corporatocracy) .
    So although both parties are complicit, most would agree that the 'husk' and or the democtats would be more conducive to this than DT.
    ( even if they would be equal in this, most would prefer what you know to what may be. )


    So what do you arrive at. Keep the economy reasonably healthy until November, 2024 while giving the appearance of forceful guidance by the Fed. ( independent from the others - fall off my chair laughing)


    Just a possibility to explain the strange going ons that are differing so much from what many very smart people have anticipated the past year or two.
    This hypothesis is mine only, as far as I know, so it does not come from a smart or in the know person, just a suspicious one.
    Suppose DT is victorious. Given his "spend" during his previous tenure, what can we imagine he will do (change?) that will affect the current "husk" starting 2025 and how will the investment markets react??
    Who are the righteous? ....Markpti

    What value did Burisma think to gain by hiring Hunter Biden as a Board member vs ALL other choices?

    Those who cannot articulate the other argument do not fully understand their own argument.

    "Much can be done by wise legislation and by resolute enforcement of the law. But still much more must be done
    by steady training of the individual - in conscience and character...." .......T. Roosevelt

  5. #625

    Default

    Quote Originally Posted by brutus2 View Post
    If you believe that the ' Holy Trinity' in the world of today's economy, works in cooperation with each other ( Treasury/Fed/2BTF banks) then then this hypothesis may have some merit for you.

    Hypothesis: They are all working in concert to keep the 'husk' in power, ( or one of equal compliancy ), while giving the impression they are conforming with their mandates, and assisting in maintaining and growing a reasonably prosperous economy for all.

    Lets look at each one and their leaders. The motive and the action.

    Fed. Continues to shrink its bloated balance sheet ( very, very slowly vs how rapidly it increased it), and has raised rates aggressively ( after keeping them way lower than it should have for many years) and is probably going to start cutting them sometime in the near future. Their leader = Jerome Powell's term is up in mid 2026 and it is doubtful he would be given a third term by DT.

    Synopsis - They are the vehicle the main stream press can point to and say, see we are being tight and are trying to reign in the excesses of 2000 to 2021. The Fed can freely take a tight stand knowing how much ammo they had stocked in the reverse repo ( originally trillions) and that the other 2 of the HT are acting together to more than offset this tightening. .
    Also, obviously JP would stand a better chance of a 3rd term under a democrat or someone other than DT, should he want to do so.

    Treasury: I have run the numbers since the end of fiscal year end 09/30/2023, and the debt spend continues to amaze me, as it has all calendar year. It is running at a 15% of GDP clip so far 47 days into the 91 day 1st quarter of the new fiscal year. That is just crazy as the Atlanta Fed is saying GDP will be 2% and lets say inflation (cooling somewhat) will be 3% by their measurement) so that is a nominal GDP increase annualized of 5%. It is supposed to be lower than 5% in good times or certainly no greater than the 5% to maintain debt/GDP ratio.
    That is 3X higher and hugely stimulative. It is hard to believe this pace can be maintained but even if halved it would be extremely high and make the economy ( temporarily) better looking than it really is ( actually dead man walking without this and the below) This also factors out any money borrowed that was not spent ( 42 billion)

    The 'husk' is the obvious beneficiary of this or his successor, - The Fed can look tough without damaging the economy too much and the 2BTF banks benefit from all the money floating around. Janet Yellin would obviously not be reappointed if DT won.

    2BTF banks - you continuously hear how tight credit is or how it is tightening yet I follow the industries own index and it is loosening and has been relatively loose for some time.

    ---------------------------------------------------------------

    Index Suggests Financial Conditions Loosened Again in Week Ending November 10

    Contributions to the NFCI and ANFCI
    The first two columns in the table below denote how many series of the 105 used to construct the NFCI and ANFCI indicated tighter-than-average or looser-than average conditions in the most recent week. The latter two columns indicate how many of the 105 indicators have tightened or loosened in the past week.

    11/10/2023 Tighter than average Looser than average Tightened Loosened
    NFCI 8 97 46 59
    ANFCI 8 97 46 59

    ------------------------------------------------------------------------------------------



    When you have lots of $ being pumped into the economy by Fiscal ( increasing deficit) and credit conditions relatively loose, it is going to be hard to have a recessionary economy at least in the short term. Problem with a junkie, they keep needing more and more for the same effect.

    Synopsis: The 2BTF banks love lots of $ and they love big government as they benefit the most from it ( Facism/corporatocracy) .
    So although both parties are complicit, most would agree that the 'husk' and or the democtats would be more conducive to this than DT.
    ( even if they would be equal in this, most would prefer what you know to what may be. )


    So what do you arrive at. Keep the economy reasonably healthy until November, 2024 while giving the appearance of forceful guidance by the Fed. ( independent from the others - fall off my chair laughing)


    Just a possibility to explain the strange going ons that are differing so much from what many very smart people have anticipated the past year or two.
    This hypothesis is mine only, as far as I know, so it does not come from a smart or in the know person, just a suspicious one.
    Well written and a good explanation of what is likely going on.


    Oh, lest I forget... "does not come from a smart...person". Haha, good one. I am always in for a good laugh, so thanks!

  6. #626

    Default

    Quote Originally Posted by Markpti View Post
    Suppose DT is victorious. Given his "spend" during his previous tenure, what can we imagine he will do (change?) that will affect the current "husk" starting 2025 and how will the investment markets react??
    I have no illusions about DT. I do not think the fiscal situation will change much or the markets will change much if he is elected. Other things will probably determine that.

    I like him because' they' do not. That is enough for me.

    If he is elected and completes a full term I suspect he will have been compromised, if not already, at least partially.

    I believe 'they' do not fully trust him, regardless of what he may advise them privately. The 'husk' and Kamala I would trust fully ( if I was 'they') One has no brain, or will left and the other never possessed either. 'They' do not like strong willed people, not heavily doused in the bureaucracy from an early age ( beholden) DT could be a wild card especially if he may hold a grudge against some of the 'They' or some of their ' familiars'. If I was 'they' I would want the status quo. Things are going quite nicely for 'they' so why rock the boat, potentially.

    Also if you are head of the Fed or the Treasury then you would be far better served with the status quo leadership.

    DT may also be a potential wild card on the warfare state. I have no doubt he will go along with much of it, but all, is better than much to the 'they'

    Finally DT has got somewhat of a bum rap about the debt he accumulated. It mostly has to do with the huge debt accumulated in 2020 but not spent until 2021 or later.

    You may notice when I look at the debt I subtract out any difference in the TGA ( cking account.)

    If you borrow 1 million dollars and spend only half and have the rest in a cking account, are you 500,000 more in debt or 1 million. I would say net, you are 500,000, as you can pay the other 500,000 at any time, or borrow that much less, in the future. That was what Biden had available.

    So when I do the numbers Trump borrowed roughly 6.1 trillion in his term ( adjusting for that huge TGA balance he left Biden of 1.7 trillion + ( it was only arounf 300 billion when he took over. If you assume Biden will only borrow 2 trillion more in the 13 1/2 months he has left ( really really really conservative) and that he has borrowed 7.2 trillion (adjusted for TGA), plus the 2 coming, that is 9.2 trillion. That is allowing him a 200 billion more cushion in the TGA than DT had when he started.

    That is over 50% more and Trump had to take accountability of 2020. Illusions are everywhere until you dig into the numbers.

  7. #627

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    Quote Originally Posted by brutus2 View Post
    ...Illusions are everywhere until you dig into the numbers.
    And every day people benefit from having you shed light on those numbers. I know you enjoy doing it so it is a win-win all around.

  8. #628
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    Well, there is debt and there is debt.

    If a household is in debt it is bad because its debt does consume money.

    If a corporation is in debt it might be not a bad thing. The corporation uses
    the debt to make money. If ROIC (Return of Invested Capital) is good,
    the corporation makes more money than it borrows.

    When we refer to debt we must analyze its components. Eg government bonds---
    some are assets and some are liabilities.

    Just my simple thoughts.

  9. #629
    Join Date
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    To brutus2

    "Illusions are everywhere until you dig into numbers."

    So true. I really like that

  10. #630
    Join Date
    Jan 2017
    Posts
    4,130

    Default

    To brutus2

    "Illusions are everywhere until you dig into numbers."

    So true. I really like that

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