Sign in to follow this  
Wolf DeVoon

Snapshot of Govt Spending and Debt

Recommended Posts

Something very screwy about this, and it gets worse in FY2018, total Govt spending $7 trillion, est Debt 170% of GDP. Little inset photo is me writing to Milton Friedman in 1987. He replied (letters with stamps, remember them?) said don't worry, everything's fine. Debatable in 1987, not any more. Chart data BEA and OMB, 1950-2015, nominal dollars, not adjusted for inflation. If rates go up, we're bankrupt.

18838844_218897271952638_643964240947718

Share this post


Link to post
Share on other sites

Federal government debt as "debt" doesn't matter. Other debt does. That's because that money's been spent and the Feds can roll it over and over and over, regardless of interest rates. The Feds have a printing press.

If you cut Federal spending that's money cut out of the economy resulting in a recession, even depression, without compensating factors. Trump doesn't seem to understand this. The Federal Reserve is in the interest rate business and is now raising rates, albeit slowly. That might be deflationary. Lowering rates won't juice the economy. The great problem of mal-investments that aren't being rendered out of the economy is virtually a world-wide problem and when the shit hits the fan--when?--it's going to hit world-wide.

--Brant

nowhere to run, nowhere to hide--?

Share this post


Link to post
Share on other sites
9 hours ago, Wolf DeVoon said:

Something very screwy about this, and it gets worse in FY2018, total Govt spending $7 trillion, est Debt 170% of GDP. Little inset photo is me writing to Milton Friedman in 1987. He replied (letters with stamps, remember them?) said don't worry, everything's fine. Debatable in 1987, not any more. Chart data BEA and OMB, 1950-2015, nominal dollars, not adjusted for inflation. If rates go up, we're bankrupt.

18838844_218897271952638_643964240947718

Yup.  As long  as the quantity of fiat money  is keep in line with  GDP  the economy will function properly.  

Share this post


Link to post
Share on other sites
On 6/4/2017 at 7:47 AM, Brant Gaede said:

Federal government debt as "debt" doesn't matter.

 

On 6/4/2017 at 8:29 AM, BaalChatzaf said:

As long as the quantity of fiat money is keep in line with GDP the economy will function properly.

 

Gentlemen, I know it's futile to debate anything, however I hope you know that your comments are conventional wisdom, taught in schools, repeated endlessly. The chart showed that Total Government Debt (federal, state, local, and GSEs) went hockey stick, decoupled from GDP. I'm particularly disturbed that you both believe there is a magic printing press. It does not exist. Low rates are financial repression, a disincentive to save or make conventional bank loans. That's why all mortgages are sold to GSEs or backed by Federal guarantees like FHA. Investors have been driven into lunatic HY, failing REITs, and risky equity markets at historically high P/Es. Banks have focused on credit cards, student loans, and home equity line of credit products. Household balance sheets are worse. Labor force participation is steadily declining. We are rapidly nearing a point of no return. "Printing money" is almost entirely a fiscal phenomenon, i.e., increased government spending.

I trust you know that manufacturing is no longer a meaningful fraction of GDP. It's almost entirely services and consumption, sustained by government debt issuance. Illinois will soon face a serious crisis in borrowing. Michigan is next.

Share this post


Link to post
Share on other sites
52 minutes ago, Wolf DeVoon said:

 

 

Gentlemen, I know it's futile to debate anything, however I hope you know that your comments are conventional wisdom, taught in schools, repeated endlessly. The chart showed that Total Government Debt (federal, state, local, and GSEs) went hockey stick, decoupled from GDP. I'm particularly disturbed that you both believe there is a magic printing press. It does not exist. Low rates are financial repression, a disincentive to save or make conventional bank loans. That's why all mortgages are sold to GSEs or backed by Federal guarantees like FHA. Investors have been driven into lunatic HY, failing REITs, and risky equity markets at historically high P/Es. Banks have focused on credit cards, student loans, and home equity line of credit products. Household balance sheets are worse. Labor force participation is steadily declining. We are rapidly nearing a point of no return. "Printing money" is almost entirely a fiscal phenomenon, i.e., increased government spending.

I trust you know that manufacturing is no longer a meaningful fraction of GDP. It's almost entirely services and consumption, sustained by government debt issuance. Illinois will soon face a serious crisis in borrowing. Michigan is next.

If the debt is decoupled from the GDP  then it is way out of line.  

A line of credit is necessary for growth in a capitalist economy.  But the debt incurred has lead to the production of goods and services that the debt money can buy back which also means that the debt can be repaid.  As long as the money stock (times velocity) is in alignment with goods and services  produced  we should not have a problem with inflation. 

Share this post


Link to post
Share on other sites
1 hour ago, Wolf DeVoon said:

Gentlemen, I know it's futile to debate anything, however I hope you know that your comments are conventional wisdom, taught in schools, repeated endlessly. The chart showed that Total Government Debt (federal, state, local, and GSEs) went hockey stick, decoupled from GDP. I'm particularly disturbed that you both believe there is a magic printing press. It does not exist. Low rates are financial repression, a disincentive to save or make conventional bank loans. That's why all mortgages are sold to GSEs or backed by Federal guarantees like FHA. Investors have been driven into lunatic HY, failing REITs, and risky equity markets at historically high P/Es. Banks have focused on credit cards, student loans, and home equity line of credit products. Household balance sheets are worse. Labor force participation is steadily declining. We are rapidly nearing a point of no return. "Printing money" is almost entirely a fiscal phenomenon, i.e., increased government spending.

I trust you know that manufacturing is no longer a meaningful fraction of GDP. It's almost entirely services and consumption, sustained by government debt issuance. Illinois will soon face a serious crisis in borrowing. Michigan is next.

It would be helpful if you quoted us separately.

I said Federal debt as debt doesn't matter--because it can be rolled over. As for funny money coming into and maintaining the economy, that's a whole another kettle of fish.

--Brant

Share this post


Link to post
Share on other sites
1 hour ago, BaalChatzaf said:

As long as the money stock (times velocity) is in alignment with goods and services produced we should not have a problem with inflation. 

Demand for energy collapsed, velocity crashed. 2% official inflation (BLS lies), job layoffs.

M2_velocity.jpg

US retail sales growth in decline, stores closing (May 2016 chart)

USA-Retail-May2016.gif

Share this post


Link to post
Share on other sites
10 hours ago, Wolf DeVoon said:

Demand for energy collapsed, velocity crashed. 2% official inflation (BLS lies), job layoffs.

M2_velocity.jpg

US retail sales growth in decline, stores closing (May 2016 chart)

USA-Retail-May2016.gif

And our inflation rate is quite low. We have not yet turned into the Weimar Republic.

Share this post


Link to post
Share on other sites
1 hour ago, Wolf DeVoon said:

Golly, you're dense. The Great Depression was deflationary.

And what we have now is not inflationary or too inflationary.  The U.S. is not yet the Weimar Republic.

Share this post


Link to post
Share on other sites

I didn't read the link (yet), Wolfo, but the debt of Illinois is a different kettle of fish than the debt of a sovereign's country's expressed in its own currency.

--Brant

Share this post


Link to post
Share on other sites
On 6/7/2017 at 9:12 PM, BaalChatzaf said:

And what we have now is not inflationary or too inflationary.  The U.S. is not yet the Weimar Republic.

Unfortunately, President Trump will “never” tackle the debt, though he is still a good choice for reelection. It would be nice if Jimbo would come back to o’land. I think he has left the day to day running of Wikipedia to someone else. Peter

From: Jimmy Wales To: atlantis Subject: ATL: One Amendment Date: Mon, 14 Apr 2003 12:04:27 -0700. In the vein of the question about a bill of rights for a hypothetical Iraqi constitution, here's a similar question: if you had the power to put into place one amendment to the United States constitution, what would it be?

I got this idea from libertarian law professor Eugene Volokh: http://volokh.blogspot.com/2003_02_23_volokh_archive.html#90381314

Be sure to read his post for all the "rules of the challenge" so to speak. My own suggestion, as you might have guessed from my comments earlier today, would be an amendment modifying the Article I, section 9 power to spend money: "No money shall be drawn from the treasury, but in consequence of appropriations made by law; and a regular statement and account of receipts and expenditures of all public money shall be published from time to time."

My amendment would read:

Section 1. No money shall be drawn from the treasury, but in consequence of appropriations made by law, whenever two thirds of both houses shall deem it necessary.

Section 2.  The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration, whenever two thirds of both houses shall deem it necessary.

The essential idea here is to restrain the size of government by raising the bar.  This would not result in overnight perfection, obviously, but it would help a great deal, I think. --Jimbo

Share this post


Link to post
Share on other sites

There is no Federal debt. It's de jure not de facto. This "debt" is money already put into the economy. If it's a cause of inflation it's already happened. Tackling the debt means taking money out of the economy causing a recession or depression.

--Brant 

  • Like 1

Share this post


Link to post
Share on other sites
On 3/23/2019 at 7:03 PM, Peter said:

Unfortunately, President Trump will “never” tackle the debt, though he is still a good choice for reelection. It would be nice if Jimbo would come back to o’land. I think he has left the day to day running of Wikipedia to someone else. Peter

 

From: Jimmy Wales To: atlantis Subject: ATL: One Amendment Date: Mon, 14 Apr 2003 12:04:27 -0700. In the vein of the question about a bill of rights for a hypothetical Iraqi constitution, here's a similar question: if you had the power to put into place one amendment to the United States constitution, what would it be?

 

I got this idea from libertarian law professor Eugene Volokh: http://volokh.blogspot.com/2003_02_23_volokh_archive.html#90381314

 

Be sure to read his post for all the "rules of the challenge" so to speak. My own suggestion, as you might have guessed from my comments earlier today, would be an amendment modifying the Article I, section 9 power to spend money: "No money shall be drawn from the treasury, but in consequence of appropriations made by law; and a regular statement and account of receipts and expenditures of all public money shall be published from time to time."

 

My amendment would read:

 

Section 1. No money shall be drawn from the treasury, but in consequence of appropriations made by law, whenever two thirds of both houses shall deem it necessary.

 

Section 2.  The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration, whenever two thirds of both houses shall deem it necessary.

 

The essential idea here is to restrain the size of government by raising the bar.  This would not result in overnight perfection, obviously, but it would help a great deal, I think. --Jimbo

The politicians will ALWAYS  deem it inecessary

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this