Should Obama ask for additional fiscal stimulus now?

[theeedude]

Stimulus is not the answer. Obama threw $4 Trillion at the problem and made it worse. That's $13,000 per person in the US. I didn't see any of it. Did you get $13,000 extra in the last 2+ years?

We spent $4 Trillion in the name of 10 million unemployed in a bad economy. That's $400,000 for each unemployed worker. Do you think it worked?

And you were calling me stupid?

 

[juiio]

Only if it's Fed doing it. If Chinese are buying it, then it's not.

The Fed passed China as the leading holder of Treasuries in February.

 

[theeedude]

The Fed passed China as the leading holder of Treasuries in February.

When the economy recovers we can pay the Fed back and take that money out of circulation. It's not rocket surgery, the Fed knows how to raise interest rates to curb inflation when the time is right.

 

[BoberFett]

When the economy recovers we can pay the Fed back and take that money out of circulation. It's not rocket surgery, the Fed knows how to raise interest rates to curb inflation when the time is right.

The Fed knows what they're doing? Are we talking about the same Fed here? The one with Bernanke at the helm?

Bubble? What Bubble?

 

[sMiLeYz]

Except that all of our debt has to be rolled over every 4 years because we moved it to the short end to save a few bucks now. That means when rates go up we will immiediately see our debt service payments shoot the moon.

How did those ARMs work out for people who purchased houses a few years before the market crashed? Our debt is basically structured the same way.

Are you seriously suggesting US-backed treasury bonds are the same as Adjusted Rate Mortgages?

 

[juiio]

When the economy recovers we can pay the Fed back and take that money out of circulation. It's not rocket surgery, the Fed knows how to raise interest rates to curb inflation when the time is right.

You said that it was not printing money:

And it's not printing money, it's borrowing. Printing money is what the Fed is going to have to do to resuscitate the economy if we don't have fiscal stimulus.

He asked if monetizing debt is printing money:

So monetizing the debt is not printing money now?

You said it is, but only if the Fed is doing it:

Only if it's Fed doing it. If Chinese are buying it, then it's not.

The Fed IS doing it, as evident by the Fed now being the largest holder of Treasuries (and that was before QE2 was even half over).

By your own reasoning, we are indeed printing money.

 

[theeedude]

You said that it was not printing money:



He asked if monetizing debt is printing money:



You said it is, but only if the Fed is doing it:



The Fed IS doing it, as evident by the Fed now being the largest holder of Treasuries (and that was before QE2 was even half over).

By your own reasoning, we are indeed printing money.

It may be the Fed doing it, or it may not be, depending on who the buyers of the bonds happen to be on any given day. The act of borrowing itself is not printing any money. We could borrow money even without Fed printing it, albeit at a higher interest rate. The Fed could also print money without the government borrowing a penny. The borrowing and monetization are not directly coupled.

 

[matt0611]

It may be the Fed doing it, or it may not be, depending on who the buyers of the bonds happen to be on any given day. The act of borrowing itself is not printing any money. We could borrow money even without Fed printing it, albeit at a higher interest rate. The Fed could also print money without the government borrowing a penny. The borrowing and monetization are not directly coupled.

The fed is already buying a very large percentage of US bonds.
Once they stop this (and they will have to eventually) expect interest rates to go higher, and if we keep up the deficit like this, or if we do what you want, and borrow a lot more, interest rates will go even higher. And yes, a lot of our debt is short term which is even more sensitive to interest rates.

We're already over-spending by 1.6 trillion a year. Its already crazy enough.

 

[juiio]

It may be the Fed doing it, or it may not be, depending on who the buyers of the bonds happen to be on any given day.

Of course the Fed is buying. That isn't even up for debate.

SOMA holdings

Fed Treasury Purchases Monetizing Debt, says Federal Reserve Bank of Kansas City President

Fed passes China in Treasury holdings

 

[Throckmorton]

Stimulus is not the answer. Obama threw $4 Trillion at the problem and made it worse. That's $13,000 per person in the US. I didn't see any of it. Did you get $13,000 extra in the last 2+ years?

We spent $4 Trillion in the name of 10 million unemployed in a bad economy. That's $400,000 for each unemployed worker. Do you think it worked?

Here's a breakdown of the stimulus from before the Senate passed it. It should still be mostly accurate:
http://www.washingtonpost.com/wp-dyn/content/graphic/2009/02/01/GR2009020100154.html

You can also see how stimulus money has been spent here http://www.recovery.gov

 

[Darwin333]

Only if it's Fed doing it. If Chinese are buying it, then it's not.

The Chinese don't "monetize" our debt, they actually loan us money. Back to the original point, is the Fed not monetizing our debt right now?

 

[Darwin333]

Are you seriously suggesting US-backed treasury bonds are the same as Adjusted Rate Mortgages?

Nope. I am suggesting that the consequences from the two very different actions/scenarios are very similar.

If you disagree I would appreciate a response backed up by actual math.

 

[Darwin333]

When the economy recovers we can pay the Fed back and take that money out of circulation. It's not rocket surgery, the Fed knows how to raise interest rates to curb inflation when the time is right.

And the moment they do what happens to the payments we must make to service our existing debt AND the debt you wish to add? I am talking almost immediate, not 20 years down the road.

 

[theeedude]

The Chinese don't "monetize" our debt, they actually loan us money. Back to the original point, is the Fed not monetizing our debt right now?

It's monetizing a lot of debt, not just US Government. Fed has a mandate to reduce unemployment, so is going to pump money out one way or another. You can have it go through the banks which will buy up junk and give it to Fed as collateral in exchange for zero interest money to use for their own ends, or you can have it go through Congress, where the American people get to decide how that money is spent. So you can have inflation taxation with or without representation. Your pick.

 

[sMiLeYz]

Nope. I am suggesting that the consequences from the two very different actions/scenarios are very similar.

If you disagree I would appreciate a response backed up by actual math.

*I* didn't make the unsupported assertion that ARMs are like US treasury bonds. I fail to see how I have to prove anything. Infact, I would like to see *your* math.

I'm sure ARMs are guaranteed by full power of the US Government Treasury, which can print nearly unlimited amount of their currency in payment of interest, right....

 

[Vic Vega]

He got political capital from OBL killing. Economy needs new fiscal stimulus to avoid sliding back into recession. Austerity is turning into an self inflicted economic debacle in the UK.
Put the economic necessity and political opportunity together, and now is the time to get this done. If GOP wants to block it and take the blame, let them do it, but Obama needs to do what's right for America and get another stimulus passed.

Bwhahahahahahhahhahhhaaaaaaaaaaaaaaaaaaaa

 

[QuantumPion]

The Fed knows what they're doing? Are we talking about the same Fed here? The one with Bernanke at the helm?

Bubble? What Bubble?

lol...tagged.

 

[sMiLeYz]

Bwhahahahahahhahhahhhaaaaaaaaaaaaaaaaaaaa

It's actually a very serious position taken by many Economists, and supported by past history.

 

[Darwin333]

*I* didn't make the unsupported assertion that ARMs are like US treasury bonds. I fail to see how I have to prove anything. Infact, I would like to see *your* math.

Exactly which math would you like to see? I can easily show you how having to roll over basically ALL of your debt every 4 years will result in higher interest payments should the interest rise. Its actually really easy math too, would you like me to do include all of the steps?

I'm sure ARMs are guaranteed by full power of the US Government Treasury, which can print nearly unlimited amount of their currency in payment of interest, right....

I wasn't arguing our ability to print money to pay the increased cost of servicing our debt, I was arguing that the cost of servicing our debt will go up unless bond rates stay at historical lows for the foreseeable future. Would you like to argue otherwise?

Psst, printing more money to pay increased interests costs likely leads to even higher interest....

 

[Darwin333]

It's actually a very serious position taken by many Economists, and supported by past history.

And completely unsupported by rather simple arithmetic unless there is a new type that I am unaware of.

Show me the numbers, how do we grow out of our current debt or inflate it away (without blowing the budget up due to those pesky entitlements that are indexed to inflation or those pesky oil prices)? Hell, just show me how we withdraw over 10% of GDP in deficit spending from the system without contracting the GDP by at least as much. I have yet to see a single plan from the right or the left that gets us to an actual balanced budget much less an actual surplus.

At least the banksters are getting richer though, right?

 

[theeedude]

And completely unsupported by rather simple arithmetic unless there is a new type that I am unaware of.

Yes, it's called actual arithmetic, and it's clearly new to you.

 

[sMiLeYz]

I wasn't arguing our ability to print money to pay the increased cost of servicing our debt, I was arguing that the cost of servicing our debt will go up unless bond rates stay at historical lows for the foreseeable future. Would you like to argue otherwise?

Rofl, that fact you are comparing the bond market to mortgages is shockingly ignorant.
The Bond market is NOTHING like real estate market, it's funny because the more debt we accumulate the cheaper it becomes to borrow.

Because countries are forced to buy our debt to maintain a currency arbitrage that favors export growth economies such as China, Taiwan, Brazil. These that are committed to a Mercantilist policies have no choice but to buy our debt or they lose a significant part of their export growth model economy, and would ultimately crash.

 

[sMiLeYz]

Show me the numbers, how do we grow out of our current debt or inflate it away

I'd never thought you'd ask...

More than happy to my man, this has happened before... the Kenysian fiscal stimulus known as World War 2 got us out of the Depression! I'm not suggesting we should start a war, but we should spend stimulating our economy that way. We can call it WAR ON UNEMPLOYMENT repair our infrastructure, create a green economy, create jobs.

I pointed this out in my past post in this very same thread, how a prominent economist is arguing for the very same thing I am.

Great article here on what I'm talking about:
http://blogs.forbes.com/timothysieg...it-spending-works-to-defeat-a-liquidity-trap/

Check out that big yellow spike during the 1940s...

The US government didn't pay off that debt, GDP growth stimulated by war spending simply outpaced debt. So not only has what I was talking about proven to work by History it was an enormous success.