Bond Markets Say US Debt Doesn't Matter

[Jaskalas]

Here's some meat for the topic of debt.

Japan’s Debt Sustains a Deflationary Depression

We seem to be following Japan's play book and it didn't work for them.

 

[Alyx]

Here's some meat for the topic of debt.

Japan’s Debt Sustains a Deflationary Depression

We seem to be following Japan's play book and it didn't work for them.

I think Japan is a great example of the risks America is heading toward. Our countries have so many similarities, political gridlock, near zero-interest rates, limited or stagnant growth, aging populations.

Hopefully the things that will pull us out are our more nimble workforce, Japan has a seniority pay structure and expects employees to stay with one company from college till death much like education in the US. And Japan's savings rate is super high which helped reinforce its deflation, once people/companies realized they could make decent returns by sticking their money in a mattress then no one invested and the whole economy stagnated. In the US we don't have much money in mattresses to start with. I think we are at a pretty big risk of capital flight because we are dependent on foreign capital for our government debt, if they get spooked we'll be in same boat as Euro crisis (and the Asian debt crises of the 90s).

 

[Cerb]

Then we are talking about two very different things. I'm talking about work ethic. You're talking about mythical numbers that aren't comparable to anything except money, which is meaningless when talking about work ethic.

Work ethic has even less worth, in our society, today (different argument, here, not going for a strawman). Ever stopped to think about why there might be less of a gung-ho work ethic, today? It's not because of any, "damn kids," crap. It's because the WWII era workers and Boomers that went along with it got royally screwed, by believing that if they did the work, they would be rewarded for it. Those with less humanity of their generations even did the screwing of them, acting like it was for their benefit. Now we're stuck with the burdens.

Until this country gets a real direction, and adopts some real trade policies, most people with, "a good work ethic," are generally either self-employed, workers at very small businesses, or fools. Fools, because they'll take pride in working themselves into sickness for their corporate masters, and then have nothing to show for it when they get the boot. The self-employed and small biz types will have something to show for it, that could not have been done just as easily by a random human robot with the right training. The rest of are keeping the high probability that an employer may be an adversary in the backs of our minds, due to the economic times we've grown up in.

The only way your numbers would mean something in relation to current workforce vs. past workforce is if you could find the same exact job being done in exactly the same manner.

Not at all. Workers today are more productive. That is because for the amount of them, and their cost to employ, they produce more monetary value, on average. Increased production, with stagnant wages, and a working population growing at a lower rate than the production, means none other than an economically more productive and efficient workforce. How much work is being put into a given job by the worker has no real influence, beyond putting in enough to stay hired. Comparing the same kinds of people at the same jobs is pointless, because the economic differences dictate that the same kinds of people won't be working the same kinds of jobs. There's simply no way to make that type of apples to apples comparison, unless you can find general labor markets that have not changed in the last 60 years.

That is a comparison, and it has meaning. Workers today are more productive than those coming back from WWII, just as those coming back from WWII were more productive than those coming back from the Civil War, and so on. For a given amount of work, they produce more. Thus, after a point, they should be able to keep producing more, while working slightly less. That should lead to each worker having more income, more chances to amass wealth, more leisure time (these two are actually fairly intwined), etc., in theory, with an idealized employer-worker relationship, and no pesky developing nations, greed at the top, outsourcing, etc.. For awhile, it seems like it did.

We can't return to glory days (those were built on colonialism, and most of them are freed from us, now), but we could very well go back to having a strong economy with low unemployment, and most people getting a decent wage. We cannot, however, do that, as long as the government is being paid/run by short-sighted businesspeople that want us to eat cake. Even as we erode our real production capability, there seems to be no problem in developing and making goods that others are willing to pay for (we can all agree that the service economy was a bad lie sold to gullible MBAs and politicians, right?). It just costs more this next quarter than selling it off to a developing nation's interests and pocketing the profits. Fix the system, and people will gladly work (they were working prior to 2008, after all).

 

[chucky2]

I disagree. What you are effectively saying is that the jobs today generate more productivity when worked, not the workers.

I'm talking about workers, you're talking about jobs.

Go take the same 1000 WWII era random workers, zap modern knowledge into their brains but with the work ethic from their era, and put them in the same jobs the 1000 current workforce random workers do.

The current workforce is going to put up better productivity numbers than the "imported" WWII folks? Haha....No.

 

[fskimospy]

I disagree. What you are effectively saying is that the jobs today generate more productivity when worked, not the workers.

I'm talking about workers, you're talking about jobs.

Go take the same 1000 WWII era random workers, zap modern knowledge into their brains but with the work ethic from their era, and put them in the same jobs the 1000 current workforce random workers do.

The current workforce is going to put up better productivity numbers than the "imported" WWII folks? Haha....No.

Based on what evidence? You seem to have admitted that your entire position is baseless speculation.

 

[Darwin333]

This is fundamentally untrue unless you are expecting to live in a deflationary environment in which you money become more valuable simply by being stored in your wallet.

Money is supposed to be a store of value to facilitate trade.

Interestingly most goods that you trade money for inherently become less valuable overtime.

Why do you presume that we MUST have either inflation or deflation? Why can't we simply target 0% inflation and make minor adjustments when it deviates slightly? That is the Feds mandate after all, stable prices.

 

[chucky2]

Based on what evidence? You seem to have admitted that your entire position is baseless speculation.

The same baseless speculation that says because the jobs being performed now are more productive than WWII era jobs that workers are more productive than WWII era workers.

I'm not saying the two are the same, you guys are.

 

[fskimospy]

Why do you presume that we MUST have either inflation or deflation? Why can't we simply target 0% inflation and make minor adjustments when it deviates slightly? That is the Feds mandate after all, stable prices.

Stable usually is taken to mean that something is not prone to sudden, large changes, not that it won't change at all. Most economists think that a low, steady inflation target is significantly superior to 0% inflation, which is why the fed targets it.

 

[chucky2]

Stable usually is taken to mean that something is not prone to sudden, large changes, not that it won't change at all. Most economists think that a low, steady inflation target is significantly superior to 0% inflation, which is why the fed targets it.

Ok, now this (bolded) I don't understand. Wouldn't 0% be ideal?

 

[Darwin333]

*FACEPALM* So you respond based on the title of the thread without trying to comprehend the contents? DOPPEL used basic reading skills to at least understand the point of my post was to demonstrate that the deficits do not matter relative to other factors. I thought this would be obvious. The size of the deficit and borrowing cost are not related. It is why I used a figure of $1 trillion stimulus and not $99 trillion. These kind of comments are a diversion to logical debate.

Imagine a Presidential debate on TV
Romney: We need to lower the top tax rate to 25% to spur growth.
Obama: If lowering taxes is so great, why don't we just lower them to zero, that will really get the economy going!

You included no commentary of why deficits matter IN RELATION to our current economic situation, which is the whole point of this thread.

You did not mention any alternative to anything that I said and/or how it would be better.



*SIREN HORN* Congratulations, we have a winner. Logical post with proper interpretation of what I posted. At least I know you read it.

"tax revenues declined from $2.5 trillion in 2008 to $2.1 trillion in 2009, and remained at that level in 2010. During 2009, individual income taxes declined 20%, while corporate taxes declined 50%. At 15.1% of GDP, the 2009 and 2010 collections were the lowest level of the past 50 years." Link: http://en.wikipedia.org/wiki/United_States_federal_budget

Corporate taxes make up 8% of all revenues despite record profits.

Revenue loss alone caused an additional $400+ billion of deficits each year and will continue until the economy is growing.

Increased Unemployment Spending - Food Stamps, etc 100's of billions more

The Stimulus LOOKS TINY when the magnitude of the chain reaction from the economic collapse is examined.

GDP growth of 4% a year and changes to the tax code to increase revenues back to near 20% would produce $3.7 trillion in revenues in 2017. This combined with slight modifications to SSI and security spending is the key. Security spending is well over half of all discretionary spending



I agree, but how? We know outsourcing is part of this, perhaps automation. Apple has to be a prototype situation to examine along with many other companies. The companies can afford to use American workers, but don't, and in the process get to exempt 100 years of labor laws that were fought for on the backs of the American workers. This money does not circulate in the economy the same as using American workers. They announced a big dividend. Are the rich investors going to stimulate the economy as much as thousands and thousands of more jobs that would exist without everything being outsourced to Foxconn?

Are American companies not innovative enough to produce new products and services that people want or need that would take workers to make them? Some combination of incentives and outsourcing disincentives must be tried.

Once again no one has proposed any alternatives.

Wrong. The key is Medicare and Medicaid both of which have been increasing at a rate around 9% a year. If this rate continues, which it shows no signs of slowing, that means we will be spending double on these programs in 8 years and quadruple in 16 years. That would be $1.67 trillion in less than a decade and $3.34 trillion in 16 years which is really close to this years entire budget (trillion+ dollar deficit included).

None of the other problems really matter unless we tackle the elephant in the room that no one wants to recognize is there.

 

[fskimospy]

The same baseless speculation that says because the jobs being performed now are more productive than WWII era jobs that workers are more productive than WWII era workers.

I'm not saying the two are the same, you guys are.

You're trying to make up a new term that isn't used when talking about this stuff and then trying to claim that it's different. Of course it's different. Productivity as it is commonly measured is done so based on output by workers.

There is no baseless speculation being done in that respect, the average human being who does work in the United States today produces vastly more product than the average human being doing work during WW2. This is an incontrovertible fact. If you want to say that it's due to technology or whatever that's fine, but none of that changes the fact that one hour of a 2012 person's time is worth vastly more than one hour of 1945 time. That is the only affirmative statement that I have made and it is indisputable.

You on the other hand have said that were we to control for technological progress that we would see much higher output from people in 1945. I have simply asked for even the slightest shred of evidence that this is true. You have not provided any. This is particularly bad since you claimed that the only way someone would dispute your fact free assertion would be if they were on drugs. I think I can find plenty of people who will agree with me that we shouldn't accept factless assertions.

 

[fskimospy]

Wrong. The key is Medicare and Medicaid both of which have been increasing at a rate around 9% a year. If this rate continues, which it shows no signs of slowing, that means we will be spending double on these programs in 8 years and quadruple in 16 years. That would be $1.67 trillion in less than a decade and $3.34 trillion in 16 years which is really close to this years entire budget (trillion+ dollar deficit included).

None of the other problems really matter unless we tackle the elephant in the room that no one wants to recognize is there.

I'm pretty sure that everyone who is actually acquainted with the federal budget knows that growth in health spending is the primary fiscal obstacle the US faces. If you eliminate that problem the US's fiscal picture going forward is totally fine.

 

[Darwin333]

Stable usually is taken to mean that something is not prone to sudden, large changes, not that it won't change at all. Most economists think that a low, steady inflation target is significantly superior to 0% inflation, which is why the fed targets it.

sta·ble/ˈstābəl/
Adjective:
Not likely to change or fail; firmly established: "a stable relationship";

synonyms: adjective. steady - firm - steadfast - constant - fixed - solid


And the reason the Fed targets inflation higher than zero is because it is necessary due to our borrowing practices but that is not what they are legally mandated to do.

If you took the first $100 you ever made at the age of 18 and buried it and then dug it up 40 years later when you retire how much of the spending power do you recon you would have lost? That is nowhere near the definition of stable regardless of whose definition you use.

 

[fskimospy]

sta·ble/ˈstābəl/
Adjective:
Not likely to change or fail; firmly established: "a stable relationship";

synonyms: adjective. steady - firm - steadfast - constant - fixed - solid

sta·ble 1 (stbl)
adj. sta·bler, sta·blest
1.
a. Resistant to change of position or condition; not easily moved or disturbed: a house built on stable ground; a stable platform.
b. Not subject to sudden or extreme change or fluctuation: a stable economy; a stable currency.

And the reason the Fed targets inflation higher than zero is because it is necessary due to our borrowing practices but that is not what they are legally mandated to do.

If you took the first $100 you ever made at the age of 18 and buried it and then dug it up 40 years later when you retire how much of the spending power do you recon you would have lost? That is nowhere near the definition of stable regardless of whose definition you use.

This is incorrect. All countries' central banks that I am aware of target low, sustained inflation. This is done primarily to err on the side of caution in avoiding deflation, which is catastrophic, and to help labor adjustments.

While I'm not 58, the US inflation rate has averaged a bit more than 3%. I'm willing to bet that's 'stable' according to lots of people's definitions.

 

[chucky2]

You're trying to make up a new term that isn't used when talking about this stuff and then trying to claim that it's different. Of course it's different. Productivity as it is commonly measured is done so based on output by workers.

There is no baseless speculation being done in that respect, the average human being who does work in the United States today produces vastly more product than the average human being doing work during WW2. This is an incontrovertible fact. If you want to say that it's due to technology or whatever that's fine, but none of that changes the fact that one hour of a 2012 person's time is worth vastly more than one hour of 1945 time. That is the only affirmative statement that I have made and it is indisputable.

You on the other hand have said that were we to control for technological progress that we would see much higher output from people in 1945. I have simply asked for even the slightest shred of evidence that this is true. You have not provided any. This is particularly bad since you claimed that the only way someone would dispute your fact free assertion would be if they were on drugs. I think I can find plenty of people who will agree with me that we shouldn't accept factless assertions.

That's fine, but I'm not arguing raw productivity numbers, I'm talking about work ethic. Unless you want to maintain that a current day lazy worker is going to output more than a 'go getter' at like jobs across the spectrum, I'm not sure why you are even bringing productivity comparison up. It's meaningless.

In 200 years when someone can sit at home 'telecommuting' and think of a ditch needing to be built, and the nano-robots swarm and magically build the ditch, all the while the guy is boning his wife while she's thinking about the laundry that needs to be done and the other nano-robots are doing that, the same version of you then will be claiming that that guy is more productive than the guy in the backhoe today digging that same ditch, and then concluding and telling the same version of me that the 200 year in the future guy has a better work ethic.

Do you understand how insane you are being now?

 

[Cerb]

I disagree. What you are effectively saying is that the jobs today generate more productivity when worked, not the workers.

I'm talking about workers, you're talking about jobs.

Workers are as productive as they are required to be. If they aren't productive enough, they will be replaced with workers who are. I don't see the disparity between worker and job, in productivity. A worker fills a job. They are either capable or not. There are exceptions, like some sales niches, and service establishment management, but they aren't the common case. A good worker not employed is not producing. A poor worker capable of the job is producing every bit as well as a good worker at the same job. A worker that is sufficiently bad will either not get the job, or not stay very long. The poorer worker will be the first to be axed when the lay-offs come, though.

Go take the same 1000 WWII era random workers, zap modern knowledge into their brains but with the work ethic from their era, and put them in the same jobs the 1000 current workforce random workers do.

The current workforce is going to put up better productivity numbers than the "imported" WWII folks? Haha....No.

Except for those are likely to quit in very short order, and wonder WTF happened to people-sized houses, the results will be about the same.

That's fine, but I'm not arguing raw productivity numbers, I'm talking about work ethic. Unless you want to maintain that a current day lazy worker is going to output more than a 'go getter' at like jobs across the spectrum, I'm not sure why you are even bringing productivity comparison up. It's meaningless.

In 200 years when someone can sit at home 'telecommuting' and think of a ditch needing to be built, and the nano-robots swarm and magically build the ditch, all the while the guy is boning his wife while she's thinking about the laundry that needs to be done and the other nano-robots are doing that, the same version of you then will be claiming that that guy is more productive than the guy in the backhoe today digging that same ditch, and then concluding and telling the same version of me that the 200 year in the future guy has a better work ethic.

Do you understand how insane you are being now?

You still aren't getting the basics, though: work ethic has no meaningful relationship to overall workforce productivity. If you remove raw productivity numbers, then you have no productivity to work with. They're mostly separate issues. Productivity is economic. Work ethic is social/psychological. In certain fields, there will be an overlap (real sales, service management, anything to do with startups, etc.). On the whole, however, they just aren't sufficiently related to one another. Being more or less productive has everything to do with inputs v. outputs, and is dependent on the context of the workers. The guy 200 years in the future is being more productive, because more is being done for the amount of input cost. Work ethic simply does not enter into that, beyond the most minimal willingness to do the work.

 

[fskimospy]

That's fine, but I'm not arguing raw productivity numbers, I'm talking about work ethic. Unless you want to maintain that a current day lazy worker is going to output more than a 'go getter' at like jobs across the spectrum, I'm not sure why you are even bringing productivity comparison up. It's meaningless.

In 200 years when someone can sit at home 'telecommuting' and think of a ditch needing to be built, and the nano-robots swarm and magically build the ditch, all the while the guy is boning his wife while she's thinking about the laundry that needs to be done and the other nano-robots are doing that, the same version of you then will be claiming that that guy is more productive than the guy in the backhoe today digging that same ditch, and then concluding and telling the same version of me that the 200 year in the future guy has a better work ethic.

Do you understand how insane you are being now?

Look, if you aren't arguing productivity numbers that's fine.

None of that changes the fact that you have provided zero evidence to back up your assertion. Go get some, we can wait.

 

[chucky2]

Time travel not possible. Just have to go by older worker experiences and basically everyone that has worked now and then opinions, along with my own multiple observations. I'll take what's basically known universally in Reality by basically everyone old enough to be in the know (and that's a gamut from flaming liberal to staunchly conservative) that the workers of yesteryear had by far a greater work ethic.

That's about all the 'study' I need. If you want to suggest that the average worker today has an equal or better work ethic, or an enormously better work ethic, then that's certainly your right. How you will back that up, given productivity numbers are meaningless in that comparison, I don't know.

I suggested earlier the same exact job being done in the same exact manner...check out turnover rate, production output, etc. Not sure what jobs haven't benefitted in 70 years from process improvements, tooling improvements, etc. though. Which brings us back to what I suggested earlier, manual ditch digger... Oh well...

Chuck

 

[fskimospy]

Time travel not possible. Just have to go by older worker experiences and basically everyone that has worked now and then opinions, along with my own multiple observations. I'll take what's basically known universally in Reality by basically everyone old enough to be in the know (and that's a gamut from flaming liberal to staunchly conservative) that the workers of yesteryear had by far a greater work ethic.

That's about all the 'study' I need. If you want to suggest that the average worker today has an equal or better work ethic, or an enormously better work ethic, then that's certainly your right. How you will back that up, given productivity numbers are meaningless in that comparison, I don't know.

I suggested earlier the same exact job being done in the same exact manner...check out turnover rate, production output, etc. Not sure what jobs though haven't benefitted in 70 years from process improvements, tooling improvements, etc. though. Which brings us back to I suggested manual ditch digger... Oh well...

Chuck

Why are you telling me to check anything? It's your argument, not mine. The burden of proof is on you.

It seems you are resting your ideas on little more than the 'kids these days' argument, which is not at all compelling. You can just say 'my gut tells me this but I have absolutely nothing to back it up with' and we can move on. You should realize that when you do that however, people might doubt you without being on drugs.

 

[chucky2]

You wanted to argue what is pretty universally agreed upon. I can't help that. I live in the Chicago area. Plenty of manual labor around here. When pretty much Everyone agrees, across political spectrum, that the older generations work better, I don't know why I'd not believe them...especially when I see it with my own two eyes.

I'm sorry you need a study to tell you what to think, that's not my problem.

 

[Alyx]

Ok, now this (bolded) I don't understand. Wouldn't 0% be ideal?

0% wouldn't be ideal. If inflation was targeted at 0% there would be a lower incentive to invest it. Basically a 2% inflation rate forces you to attempt to invest it some where productive so it doesn't devalue. Its one of the big issues in Japan, they have a huge savings rate but no one invests it because they have deflation right now, so you make money by doing nothing. This is the road to a stagnant economy.

Also the way you fight inflation and deflation are quite different and deflation is less understood than inflation. So by holding inflation at 0% it is less stable and makes the fed more prone to error. (I'm less certain about this last paragraph, but its to my understanding at least)

 

[chucky2]

Invest it where though? Wouldn't stocks still have rates people would want to invest in? I can understand wanting to have a buffer against deflation, however that buffer is costing you...that is, your hedge has a real cost to it, doesn't it?

 

[fskimospy]

You wanted to argue what is pretty universally agreed upon. I can't help that. I live in the Chicago area. Plenty of manual labor around here. When pretty much Everyone agrees, across political spectrum, that the older generations work better, I don't know why I'd not believe them...especially when I see it with my own two eyes.

I'm sorry you need a study to tell you what to think, that's not my problem.

Ahh, argumentum ad populum. Nice job.

You realize that everyone has viewed the generations following them as less productive and more coddled since basically the beginning of time, right? Take for example this famous quote:

"The children now love luxury. They have bad manners, contempt for
authority, they show disrespect to their elders.... They no longer
rise when elders enter the room. They contradict their parents,
chatter before company, gobble up dainties at the table, cross their
legs, and are tyrants over their teachers.

That's generally attributed to Socrates, expressing very similar sentiments to what you're trying to say. Any time people accuse following generations of moral decay, laziness, or whatever else you should always treat it as HIGHLY suspect information without some real evidence. I of course asked you for this and got nothing.

 

[Alyx]

Invest it where though? Wouldn't stocks still have rates people would want to invest in? I can understand wanting to have a buffer against deflation, however that buffer is costing you...that is, your hedge has a real cost to it, doesn't it?

Yes stocks would still have higher rates but the average american doesn't understand investing enough to really do stocks or mutual funds. I think most end up with Gov bonds or CDs or some awkward financial product that gets sold to them. If there wasn't the 2% inflation they probably wouldn't even do that.

And as long as the 2% inflation is stable then it really doesn't cost anything. Even 20% inflation wouldn't cost anything as long as its stable, businesses and consumers adapt around it and adjust prices accordingly. Its another reason deflation is so scary is that once people adapt around it then its hard to shake out, another reason japan's had 20 years of deflation no matter what the gov does.

 

[chucky2]

Ahh, argumentum ad populum. Nice job.

You realize that everyone has viewed the generations following them as less productive and more coddled since basically the beginning of time, right? Take for example this famous quote:


That's generally attributed to Socrates, expressing very similar sentiments to what you're trying to say. Any time people accuse following generations of moral decay, laziness, or whatever else you should always treat it as HIGHLY suspect information without some real evidence. I of course asked you for this and got nothing.

You got nothing? I gave you what pretty much every working person I've met has agreed upon, and I've seen with my own two eyes. For me, that's all that matters.

You've given me nothing to discount any of that, except trying to pin productivity numbers to work ethic and say nano-bot guy is akin to a God for work ethic.

I'm sorry if not having a peer reviewed study doesn't do it for you, I only deal in Reality. I get this feeling that if a study came out saying sh1t doesn't smell and is the best thing going, you'd wear it proudly and when Everyone in Reality told you you smelled like sh1t and WTF are you thinking, you'd derisively laugh at them waving your study, telling them 'Hahaha Fools, you have mere opinion, I have a study!'

Sometimes you need to, you know, observe, collect info from multiple sources, and, this is key, form your own opinion. I know, I know....insanity....

Chuck