Donald trump. what is your take on him?

[tands]

"Both Bernanke and Geithner have pointed out that if every other country is going to save in dollars, the U.S. has to run a deficit in dollars."

 

[JohnRoberts]

While we are on a bad trajectory wrt spending, we can't cut our way to growth. We need to promote GDP growth, and not with Keynesian borrowing and spending (while infrastructure spending appears to be on the menu). I am optimistic about stopping the growth of regulation and tax reform. Both of these could help GDP growth. GDP growth will increase tax revenue to reduce deficits and debt.

I still disagree with Trump's hyperbolic campaign rants about trade, but he has surrounded himself with smart people who understand it, so I expect (hope for) more reasonable actual policy decisions. 

I remain optimistic, but am concerned about all the anger and ugliness. I hope this will subside soon, it always has in the past, but this time seems worse than usual.

JR

PS: The Mexican cement company stock I bought is up $500 since the election, but I expect more volatility. Trump is scheduled to meet with the Mexican leader soon, and both will be posturing to preserve "face" over the wall. I am hopeful that the negotiator in chief can come up with a win-win. Mexico is a huge trading partner.

 

[DaveP]

" However, a government that is sovereign with respect to its own fiat currency bears no resemblance at all to a household. Such a government creates the money we all use, either physically on a printing press or, more importantly, electronically in the accounts of financial institutions.

Licence to print money

I do understand all of this, the debts get transferred to obscure institutions and the government simply buys the debt by printing money (electronic transfers).  This happened with Q.E.

What I was referring to were the debt repayments the US makes Quote:-

In 2015, the U.S. spent $223 billion, or 6 percent of the federal budget, paying for interest on the debt. In recent years, interest rates have been at historic lows. As they return closer to normal levels, the amount the government spends on interest will rise substantially.

I would be interested to know if this gets paid from Tax returns or by printing money.

DaveP

 

[Matador]

While we are on a bad trajectory wrt spending, we can't cut our way to growth. We need to promote GDP growth, and not with Keynesian borrowing and spending (while infrastructure spending appears to be on the menu). I am optimistic about stopping the growth of regulation and tax reform. Both of these could help GDP growth. GDP growth will increase tax revenue to reduce deficits and debt.

Believe it or not, we already tried this: twice.  The first time was in 1871, which led to the Gilded Age.  A refresher in what happened:  seem familiar?

For starters, economic development was facilitated by a supportive culture—one which placed confidence in industrialists and businessmen and refused to permit government to interfere in their efforts. Most Americans embraced the principles of laissez faire economics, which argued that economic forces should be allowed to work themselves out with maximum freedom and minimal government interference...State laws that attempted to regulate the workplace, such as restrictions on work hours and safety requirements, were repeatedly struck down by state courts with the argument that they violated the rights of employers and employees to enter into contracts freely.

In particular, these approaches fail to reveal the impact of this particular form of economic growth on those at the bottom of the economic ladder... The same economy that gave Carnegie, Rockefeller, and Morgan the opportunity to amass the largest fortunes in the history of the world also required unskilled industrial laborers to work an average of 60 hours per week for 10 cents an hour.

The period's label, "Gilded Age," comes close to capturing the juxtaposition of enormous wealth alongside crushing poverty.

The second time was during Reagan beginning in 1981:

Hence, what evidence there is suggests there to be a correlation between lower taxes and LOWER revenues, not HIGHER revenues as suggested by supply-siders. There may well be valid arguments in favor of tax cuts. But higher tax revenues does not appear to be one of them.

According to the graph and second table, the GDP reached a high 10-year growth rate of 36.4% from 1983 to 1993. However, it reached higher highs of 37.9 from 1991 to 2001, 47.3% from 1947 to 1957, and 50.3% from 1959 to 1969. In fact, the above graph shows that the 10-year growth rate in the GDP has been relatively stable since 1965 to 1975 though it began to drop in 2008 and is projected to stay weak through 2021. Hence, these figures don't provide any strong evidence that the Reagan tax cuts permanently affected the GDP one way or the other.

If anything, the data since WW2 shows that GDP growth is most strongly correlated to periods where the progressive tax rates and spending are higher.

In fact, Moody's published a paper in 2008 that shows a strong correlation between infrastructure spending and GDP growth:

Increases for infrastructure spending will have a relatively large multiplier as well, exactly because these are expenditures for goods and services. To the extent that most of the input (concrete, labor) is domestically sourced, then on the first round impact, the increase in GDP is almost dollar for dollar (I’ve suppressed the marginal propensity to import in the above calculations to simplify the algebra and to provide the clearest intuition).

It appears Trump and the GOP are desperately trying to return America to 1891, where the financial moguls ruled the country, and were essentially free to do whatever they please to whomever they pleased.

 

[JohnRoberts]

I do understand all of this, the debts get transferred to obscure institutions and the government simply buys the debt by printing money (electronic transfers).  This happened with Q.E.

What I was referring to were the debt repayments the US makes Quote:-

In 2015, the U.S. spent $223 billion, or 6 percent of the federal budget, paying for interest on the debt. In recent years, interest rates have been at historic lows. As they return closer to normal levels, the amount the government spends on interest will rise substantially.

I would be interested to know if this gets paid from Tax returns or by printing money.

DaveP

The government borrows the money to pay debt service. They in fact want more inflation than we are getting so printing more money would be an easy way to create inflation, but could have other unintended consequences.

I have been warning about this debt service when interest rates return to more normal levels. IMO government borrowing is held artificially cheap caused by all the debt that the government buys itself to manipulate the market price. If when the US government sells the debt they hold that will increase interest rate service costs too. The public only holds $14.4T of the $19.8T total so more than $5T held by the government itself.

I have long wondered how they would unwind this massive economic experiment, I haven't seen how yet. Owing debt to ourselves is an accounting curiosity, I hope we don't see this get squirrelly. Probably not wise to keep growing that debt at same rate as the last administration did (doubled it).

JR

 

[dmp]

Although not updated with the last 10 yrs, a  good graphic I found that illustrates the lack of negative feedback since Reagan / GWB  tax cuts and the change in wealth distribution. We already are back to a robber baron era.  Though since the robber barons lead the country politically and  control the dialog, most people are in the dark about it. Eventually, this is probably going to crash and the next time Uncle Sam may not be able to break the fall.

The treasury auctions off bonds to finance the gov debt. The rates need to be competitive to attract buyers. We are at a debt level that is addicted to low rates. A rising rate environment is going to create significant pressure on the status quo.
Once the debt hits the ceiling (next expected in March), Congress has to vote to up the limit.

The money supply, inflation, and the purchasing power of the dollar are inter-related but not the same thing. The money supply has increased significantly while having no effect on most measures of inflation over the last decade (although 'measures' of inflation are suspect since oil, health care, and home prices have all been having significant changes in the last few years), since incomes of regular folks were flat. Only recently, as wages have started to increase has 'measures' of inflation seen an increase. Takeaway: printing money to make the rich richer doesn't budge the inflation measurements of things regular folks buy.. Additionally, even as the money supply increased the strength of the dollar increased significantly over the last few years.

 

[dmp]

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[tands]

In 2015, the U.S. spent $223 billion, or 6 percent of the federal budget, paying for interest on the debt. In recent years, interest rates have been at historic lows. As they return closer to normal levels, the amount the government spends on interest will rise substantially.

I would be interested to know if this gets paid from Tax returns or by printing money.

DaveP

There's no distinction between them. It's just semantics, the scam they're selling to justify who they pick to win, and who they pick to lose. It's not a balance sheet. They just pay for whatever they want to have happen, and use taxes as a brake, or fiscal scolding and other excuses, to stop what they don't. They don't need our taxes.

"Remember, the government does not have to borrow or tax in order to finance spending because they can create money."

The only constraint is inflation, which is not happening.

"I think a lot of people want to secure the border, on both sides of the aisles," Van Susteren said, "but the estimates are $8 billion to $14 billion..." "That's about right," Ryan agreed."

http://theweek.com/speedreads/675916/paul-ryan-says-congress-pay-trumps-14-billion-mexico-border-wall

 

[DaveP]

The UK has a stricter approach to borrowing for the deficit, as far as I know, they only print money/Q.E. in times of crisis like the credit crunch.  If we were to print money all the time, then the currency would collapse.  I guess the US can get away with it because your economy is that much larger.

DaveP

 

[tands]

The UK has a stricter approach to borrowing for the deficit, as far as I know, they only print money/Q.E. in times of crisis like the credit crunch.  If we were to print money all the time, then the currency would collapse.  I guess the US can get away with it because your economy is that much larger.

DaveP

We get away with it because there is almost no inflation. We have to start wars and emit money directly to hedge funds to get any 'growth' at all. Right John?

 

[tands]

Oh yeah, and Obamacare.

 

[dmp]

The UK has a stricter approach to borrowing for the deficit, as far as I know, they only print money/Q.E. in times of crisis like the credit crunch.  If we were to print money all the time, then the currency would collapse.  I guess the US can get away with it because your economy is that much larger.

What can the US get away with? There's a big misunderstanding here that the US is printing money "all the time". 
Three QEs happened in the US, ending in 2014 - "printing money" - as the Fed injected liquidity into the system by buying bonds, which drove down rates. (yields move inverse to price). The Fed has a balance sheet with all these bond assets sitting - at some point to unwind. My understanding is that the Fed can just let the bonds expire and bring the "printed money" back. Or they can sell the bonds back on the market to bring bond prices down / yields up.

Countries all around the world have done this - Europe, Japan.
Time will tell how it works out.

If you really want to know about the money supply in the US you need to read about reserve banking, not conspiracies of the elites.

Inflation has been low because there haven't been  wage increases for 8 years until recently.

 

[tands]

It's weird how with the GOP poised to pass a bunch of giant tax cuts all the well-funded debt-scolding groups seem to have disappeared.

 

[Script]

Countries all around the world have done this - Europe, Japan.
Time will tell how it works out.

Time has told Japan that QE (first pillar) is rather unsuccessful if not accompanied by massive public spending (second pillar). And it has pretty much failed so far because governments can't possibly force companies to invest or raise wages (third pillar). The typical remedy for the last pillar is corporate taxation, which is one of the highest in Japan the world already. So raise further? Lower? Even if it is lowered, companies still do not necessarily feel the urge to stop hoarding. There's a lot of psychology involved too. Basically pretty much about finances that is not naked numbers on a spreadsheet is psychology.

 

[dmp]

Republican in power? Check. Debt OK again.
I don't think Congress is going to go along with it completely, though. When the debt ceiling hits, I think Trump's going to hit a wall.
I may be underestimating Republican hypocrisy though.

 

[tands]

Luckily Obama's no longer in office.

"When Obama’s new Deficit Commission gets going, it has plans for "partnering“--in the words of executive director Bruce Reed--with outside groups. Among them will be the foundation run by Wall Street billionaire Peter G. Peterson, who on today is upstaging the president with his own fiscal summit in Washington. Obama insists he is keeping an open mind about how to deal with the deficit and national debt--but he’s already stacked his own commission with people who lean heavily toward one particular solution: cutting entitlements for the old, the sick, the disabled, and the poor. And if that wasn't enough, he now looks to be working hand-in-glove with a wealthy private organization whose central purpose is to cut Social Security and Medicare. Talk about foregone conclusions.

The White House set the stage two months ago when it created the euphemistically named National Commission on Fiscal Responsibility and Reform--commonly called the Deficit Commission or the Debt Panel. The commission's anti-entitlement bent was clear from the get-go based on Obama’s choice of Alan Simpson to co-chair the commission. "

http://www.motherjones.com/mojo/2010/04/pete-petersons-anti-entitlement-juggernaut-gets-fueled-obama

 

[Script]

Also not all debts are comparable. The question is always: who owes how much to who in what currency(!) and at what interest rate(!). The idea of a low-interest rate environment is to restructure debts under cheaper conditions and fixate those rates (e.g. Greece) or make even more debts under extremely cheap (read: favourable) conditions. Then, when inflation kicks in, new debts will become more expensive and old low-interest rate debts may even get cheaper in the mid-term (in terms of purchasing power, when inflation is higher than the fixated interest rate).

If a country owes the money to itself/its own population, it's not that grave a problem, financially speaking. QE is one way to deal with it. However, to make it bearable for society, there needs to be more public spending and adjusted taxation system, otherwise it only contributes to social imbalance (which, of course, has more than one single cause).

-- So much for the theory.

Apart from that state debt crises are a fetish, IMO. If a country can't pay, it simply declares a default.

 

[JohnRoberts]

The UK has a stricter approach to borrowing for the deficit, as far as I know, they only print money/Q.E. in times of crisis like the credit crunch.  If we were to print money all the time, then the currency would collapse.  I guess the US can get away with it because your economy is that much larger.

DaveP

The traditional task of central banks is to print just enough new money to support the GDP growth (low single digit). Too much money we get inflation as more money chases the same goods, not enough money we get deflation as less money for the same amount of goods causes prices to drop. Economic activity can fall off as people wait, expecting prices to fall further (this is called the deflationary spiral).

Too easy credit can have the same effect as printing money and that is what happened with housing bubble where easy loans caused house prices to surge and increasing college costs now (due to too easy student loan borrowing).

Of course this is the simple explanation and there are other factors like velocity of money, yadda yadda. Interbank rates are tweaked to fine manage money supply.

JR

 

[lassoharp]

So an import tax was proposed to pay for that wall.

75% of my daily diet are fresh fruits and vegetables and a big chunk of those come from Mexico

Great, we'll pay 10 bucks apiece for watermelons and avocados this summer and our grocery and clothes bills will double.

So, way back during the summer when he got the crowd to answer his chant "Who's gonna pay for that wall???"    Had he given any serious thought as to how it was going to actually be done I wonder.


I think America is headed for a hard lesson on the matter of becoming this insular, non-dependent nation he rallies towards.  We can't live in a bubble.  We have to get along with the rest of the world.  He's pissing off diplomats right and left.

 

[mattiasNYC]

When debt repayments get very large you end up servicing them rather than spending on essentials.

My bet is the opposite. They'll do cuts but spend more elsewhere and both debt and budget deficits will increase. Having debt is necessary for the US economy, that's how the economy grows. It's the essence of what makes capitalism absolutely ludicrous, but it is what it is. So he'll be forced to "borrow" otherwise the economy will shrink, and those that benefit the most from it (banks) won't allow that.

What the international audience saw was some very nasty rioting ( I understand that the worst of this was caused by the Anarchist movement which seems to exist in every country).  Windows smashed with pre-prepared concrete blocks carried in their back packs (sky news).  A car set on fire and way too many journalists and photographers carefully recording it all.  Do you not think that the rioters are using this naive professional audience?

No, I don't, because there's nothing to gain from that sort of rioting. First of all it's ineffective in and by itself. Secondly it's probably blown WAY out of proportion. Thirdly the reason it's ineffective is because those people don't really have an agenda. People who play fast and loose with language will call them "the Anarchist movement", but that's just horseshit. I'm willing to bet a thousand dollars the vast majority of them have never read a single word out of a book written by an Anarchist intellectual on the concept of Anarchism.

No, what they most likely are are hooligans. And, as a European, a Brit at that, you should be very well aware of that type of people. You know, the type of people that we've learned to live with and don't really talk too much about these days, the type that go to soccer games with the sole purpose of destroying property and fighting afterwards....

This paled in comparison to the problem soccer fans have posed in Europe.

From what I've read in this forum, the American system of Congress and Senate has so many checks and balances that they act as a safeguard.  As this President has upset so many on both sides of the house, I think this must limit his more extreme options.

Depends on the definition of "extreme" I guess. Dismantling any government program that the politician disagrees with may indeed result in pretty extreme policies. On other issues not so much. One opinion I read was that Republicans will use Trump to allow some issues to pass through, but will toss him overboard as soon as he's "used up" and then they're left with the VP which will be 'their' guy. I don't think that's entirely unreasonable an outcome.

Listing all these issues is not evidence that the US is taking the world to hell in a handcart, it is evidence of liberal unease sure, but other points need to be mentioned for balance.  The most important issue is the confrontation of China and this again may be part of a deal making strategy, but its too early to say as yet.

DaveP

Well, once this is all over I suppose we can revive this thread and either we'll go "You overreacting liberals...." or "Told'ya!"