Your obviously very well learned on this subject or at least think you are considering your very detailed explanation. Economics is not my strong point and I, like 99% of the population take my information from world news broadcasters. These private organisations employ experts in all sorts of fields of work, to what level they are censored by the powers that be is anyones guess but to presume these people are less educated on a matter of world economics than you seems a bit pretentious.

From what iv read S&P and Moodys were very negligent in the years leading up to 2008, however they were very misled and almost hoodiwnked by the investment bankers, who in their infinite quest of greed would take bottom of the tranch debt and somehow reconfigure these low tranches and mix and match them together in order to bring the average credit rating on these new tranches into line with the rating agencies triple A rating thus making them a much more attractive proposition to investors failing to do their own research and just basing their investments on the ratings received. Now obviously these tranches were way more likely to default than the rating suggested thus being part of the fault of the 2008 collapse. The people who actually did their research had foretold this inevitability as early as 2003 but their claims fell on deaf ears and in the end they simply shorted the debt and became billionaires (john paulson for one). So while this shows a huge amount of negligence on behalf of the credit ratings I dont think the entire fault can be laid at their door.

As for the stock markets I cant even begin to write an argument as I know so very little which i really should remedy. However it is common knowledge that the stock market simply runs on confidence, the people in the know obviously concur with your statement that it simply makes no difference whether the us defaults or not. While this may not affect the stocks it is simply untrue written in isolation, if the U.S were to publicly default and the rating lowered then other countries are entitled to ask for more protection on their debt i.e more capital which the government simply does not have.

As I say my information is limited to the news I read as it is not an area I have found much interest in in order to really dive in deep, I have read a few books about the lead up to 2008 so I feel well in the loop as to the truth regarding that but as for present day economics im sure you will respond with answers that will blow me out of the water. These are just facts as i understand them.

wait, u mean you don't take a non USA residents word over USA economic experts? shame on you.

sorry, couldn't help myself. Just think its funny when someone that doesn't even live in the US and doesn't have any sort of degree or expertise in economics tries to give advice on the economic landscape on a country he doesn't live in. now that being said, i'm sure rickys advice on this issue is about 10x better than anything i or anyone else in this thread could give. i don't know the first goddamn thing about the debt or economics. all i know is it doesn't really affect me, and if it does itll just be another reason on the list of reasons to move to another country.

Pretty good post although this one right here doesn't seem to have much factual basis at all. There's not "Americans" being over-taxed there are individual people some of which pay a ton in taxes etc. I'm far from the people saying "oh just tax the rich and they can pay for all our ****" but it is also a fact that the marginal tax rate on the richest portion of America is currently lower than it ever was when we were actually running a surplus under Clinton. Now correlation does not prove causation but it does prove the statement that higher taxes won't work no matter what wrong.

Anyway no matter how we distribute it it's my opinion though that taxing the public and making them actually see how much money all the stuff we spend on costs is far better than simply printing our way out of it. The public will pay some of it regardless. Whether it's not getting stuff promised to them, having the money they currently own get inflated, or increased taxes. Now we also have to be careful how we structure the tax code in terms of companies no longer wishing to remain in the US because of the tax code. But if we simply print our way out of it the hardest hit are the ones with the most liquid cash. I guess I'm a bit biased because currently most of my net worth is in liquid cash somewhere.

keynes anyone?

edit: not going to be arguing here since i dont really know enough about the specifics. But from what i can gather from news and european decision making, both the states and the eu seem to be forgetting Keynes lessons about cutting back on spending during recesssions.

Ricky I pretty much share your overall position on western economy debt levels, but I think your definition of a default seems pretty subjective.

"They are 14 TRILLION dollars in debt and have unfunded liabilities (social security, medicare, etc) of approximately another 100 trillion. They will not be able to pay this off"

Post the 2nd world war the UK had a far higher debt to GDP than the US is currently running and paid it off, despite being a declining economic force. Yes, this involved currency depreciation, but that is not default, it is a risk that any creditor takes buying sovereign debt. This is why Greece and Argentina were/will be defaults because the debt is denominated in a currency they couldn't/can't control the value of or print more of.

"These are AMERICAN ratings agencies and they are the same guys that didn't see 2008 coming and they failed to warn the public about Fannie Mae and Freddie Mac. They are not to be trusted"

I agree that ratings agencies have proven to be grossly inefficient, but this is more likely because they were beholden to corporate interests rather than somehow being pro-US. If the latter was the case, why would they threaten to reduce the rating to AA now, when observers universally regard this as a trigger for catastrophe for the US and global economies.

"***The stock market doesn't seem to care. If the US were likely to "default" (or if "defaulting" actually meant something) we would expect to see government bonds getting **** kicked but they haven't flinched. Instead it has been the US dollar that has tanked in recent weeks and gold has got a nice fat hardon. This should lead us to believe that more debt and money printing is on its way.

I'm not sure this logic holds. If printing is on the way then this devalues the dollar as you state. However, this also devalues the stream of cashflows in the hands of the bondholder. Therefore the holder of US bonds should also be looking to find alternative investments. As an alternative I would suggest that the reason they haven't tanked is because the risk is so broad that it is almost impossible to diversify and seek safe havens. Holders of US bonds such as the Chinese government have sought to diversify in to Euros/some gold etc, but the sheer size of their holdings and risk to the remainder of the investment doesn't easily allow them to shift out.

"I'd like to point out again that the USA is broke"

This is your opinion. There are certainly sane commentators who believe the US debt position is manageable. In any case the options you outline are not those of someone who is broke. The US has traded its past reputation to enable it to borrow money cheaply. If it takes the routes you outline to reduce its debts it won't be broke, it simply will have reduced opportunity to tap such funds in the future.

But overall, yeah, we're all pretty ****ed....

And Disco, I'd find it less concerning that a non-resident is offering advice on the US economy, than that even though it's your country you have no clue whether he's right or not.

i just stay out of politics and all that ****. nothing i'll ever do will change anything, so it's not worth my time to bother worrying about it all. in the meantime everyone can discuss their thoughts/opinions on it.

by the way, i was wondering if we are going to have a 2012 FTP Regs thread even though there won't be any FTP regs in 2012.

In the UK at least our political cycle seems to work in precisely the reverse of how it should economically.

In boom times we end up with left leaning governments ramping up public spending and crowding out private investment.

In recessions we end up with right leaning governments introducing austerity measures and amplifying demand shortfalls.

In short, democracy and economics don't mix well.

sounds about right

shark week is cool

I think its only fitting that Les makes that thread, as now both of them don't exist anymore.

Sigh. I didn't really feel like getting involved in this, but couldn't help myself...

Oh but it will affect you, your standard of living is going to decline. Prepare accordingly. It doesn't matter if it's hyperinflation as Ricky says or deflation.

FYP.

The post WWII years saw some of the largest debt/GDP ratios ever in both the US and the UK. Fortunately, both had plenty of economic growth to realize. The UK was yet to find the North Sea oil discoveries, in which production peaked only recently, and the US was still the largest producer of oil in the world. Right now, the US has no prospects to reduce its oil dependency and it will only get worse. The UK's North Sea oil production is rapidly declining, and the UK will soon (or is already? I don't feel like looking it up) become a net energy importer. Hence, neither the UK nor the US will be able to "grow" its way out of debt/GDP ratios approaching those of the postwar levels that were seen. It's game over. Get over it. Ricky is correct, the unfunded liabilities are simply too large. There is no massive growth prospect on the horizon that will save the US. (unless somebody figures out net positive nuclear fusion, but I'm not holding my breath on that)

???
god bless america
starting now?


+1

theres also a weekly doc on climbing everest on discover now. looks good so far

god bless america

what did cannibal to be doing after dumping girlfriend?

god bless russia

US is fcked, end discussion. Just today, the proposed big "deal" being worked out cuts 2.5trillion in 10 years. O RLY? Wow so thats ~250 billion/year right? The govt borrowed 1.5 trillion for 2011; I guess this means we only borrow ~1.25 trillion/year from now on. Budget crisis solved!

my career best week is april 8th - april 14th, 2011 with my career best day being april 14th

i got a HEM2 beta code and haven't messed around with it too much so far, but the **** imports fast as hell. super easy to import over from a hem1 or pt3 database.

Not true, for someone like disco id assume his standard of living could in fact become better under deflation as im sure it would for most poker players due to the fact most poker players capital is liquid which under deflation would rise in value verse goods and services.

What does my country of residence have to do with this? In a couple of posts you yourself state that as an american citizen, you have no clue what is going wrt your economy and government so clearly, being an american citizen is not a pre-requisite for being knowledgeable about the USA.

Why do I need a degree to be in the know about something? Have you seen what one of those things costs nowadays? Funny you should mention it though because I'm pretty bothered by all things paper these days, paper degrees included.


I actually agree with you but I actually think it's possible for us both to be right. I'm in total agreement that the rich aren't paying their fair share of taxes and it is pretty ugly to see how little the big banks and corporations are paying but this doesn't mean that we should raise taxes on them to compensate. I don't think that anybody needs to be taxed hard. As I said, it's an expenditure problem, not a revenue one but I'm definitely not happy that the rich get to game the system and strap the poor/middle class with more pain.

I would probably ignore the Clinton surplus. As Jim Rogers says, "if you or I did our accounting like Clinton did, we would be in jail." I don't know much about the subject, but if Jim f-ing Rogers told me to jump off of a bridge I'd probably give it serious consideration.

You're right about printing money hurting those with cash but the rich have historically done quite well during times of economic turmoil. They have better advisers and many will be situated to get through some money printing. The people that really get hurt are the ones that have limited disposable income and see doubling prices. I would want to look at not only who gets hurt most by printing money but also at who has the most to gain ie. government and big pension funds that owe hundreds of trillions and have to make astronomical returns on investment to be able to cover their rears. They will probably only be able to pull this off if they print and unfortunately, they're also the guys that are calling the shots.

I'll address what I can here but we may have to just agree to disagree on some issues. Still think we see things in the same light though.

fwiw I'm in the Waffe camp wrt britain post WWII. I don't think the USA will be able to grow its way out of this miss until they liquidate all of the debt.

wrt the dollar getting whacked and bonds being okay-
I actually don't know much about bond markets and I debated leaving that part out. I agree that a devalued dollar would pay back bond holders in devalued money (and this will happen) but the point that I was trying to make is that the treasury market wasn't predicting any sort of overnight spike in interest rates. Rates will probably stay low for another couple of years but eventually the 30+ year bull in treasuries will end. A lot of very very smart people are already getting short the treasuries.

wrt to the USA being broke-
I agree that they have traded their past reputation for cheap borrowing. The problem that I see is that they haven't traded it in for schools, roads and factories, they have traded it in for a huge welfare state and a handful of wars. I don't think that those things will be of much help when it comes to getting out of the whole that all of the debt has created.

imo if you don't have enough money to pay the bills, you're broke

You're right that people holding money in a deflation would enjoy a better standard of living but I don't like Disco's chances. People get this deflation/inflation thing mixed around all the time and I don't blame them. It's complicated as hell. I'd recommend reading http://fofoa.blogspot.com/2011_04_01_archive.html if anyone wants to brush up on it (it's long).

The problem is that most poker players keep the majority of their net worth is paper money and it's paper money that is going to be devalued. There will be price deflation but it will be in terms of real money and real assets and not paper ones. It's totally feasible that a chocolate bar could cost $1000 USD but in terms of gold or oil etc it would be cheaper than ever.

The only way out of this debt problem is to come to terms with the fact that our society can't afford to pay for providing health care for everyone over 65. The average recipient of medicare today paid in $50,000 and receives $150,000 in benefits. Not to mention there are alot of old people in the system today and the boomers are just starting to be eligible. Going into debt covers alot of this difference and creates this illusion of sustainability. My friends grandmother is 83 and has stomach replacement surgery that cost total $400,000. My boss's mom at 85 had heart replacement surgery, tab at $215,000. Our gov getting its debt under control has to mean those two people cannot be saved on the backs of the tax payer. If they cant afford it, well then they will die. That is the cold hard truth when you look at the numbers.

looool <3 sooo true

comments about taking the word of 'experts' pretty hilarious also. Coincidentally I ran across this article a few days ago. LOL expertaments.

http://www.taipeitimes.net/News/edit.../31/2003509551