On Government debt

Now, what news on the Rialto?
Mr. Perfect
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Re: On Government debt

Post by Mr. Perfect »

Typhoon wrote: If China were to "dump" their debt, then it would quickly drive down the price of that debt and they would end up taking a massive haircut.

China would have to unwind their holdings carefully to avoid a "bank run".
What if they wanted a bank run.
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Mr. Perfect
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Re: On Government debt

Post by Mr. Perfect »

Mr. Perfect wrote:
Typhoon wrote:Given that every mature industrialized state is in debt, it makes me wonder it is simply too expensive to maintain such societies.

In other words, it ends up being a lot cheaper to build an industrial state, than it does to maintain it.

Little to do with ideology, rather a losing battle against entropy.
Err the Biden intiative of "Spending your way out of bankruptcy" is 100% ideological.
Plus, every economic textbook in the world is right wing teabagger, even Krugman ACCEPT when it comet to STPN everyone of them says spending, QE and low interest rates lead to return to normal output or whatever (there is a term for it).

And they are all completely wrong. I looked into it and basically STPN is a deadweight loss.
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Re: On Government debt

Post by noddy »

Mr. Perfect wrote:
Typhoon wrote: If China were to "dump" their debt, then it would quickly drive down the price of that debt and they would end up taking a massive haircut.

China would have to unwind their holdings carefully to avoid a "bank run".
What if they wanted a bank run.
a bank run is certainly cheaper and less destructive than a war and has a more garunteed outcome for the winner.
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Re: On Government debt

Post by Mr. Perfect »

We have a winner. No casualties too.
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Re: On Government debt

Post by Typhoon »

TA9wRWnpsjE
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Alexis
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On Total Debt

Post by Alexis »

I think the topic should be more general: it is not Public Debt alone, but rather Total Debt -public + households + companies- which to me looks like the most worrying metrics.

The US to take one example went from total debt <200% of GDP around 1980 to >350% of GDP around 2010.
This drift towards higher and higher total debts is general, with varying degrees of severity, across the whole Developed world.

When one looks at public debt only, one can get the feeling that some developed nations were not too indebted before the 2007-8 financial crisis started. However, looking at total debt, all have had progressive increases within the last generation. Britain had limited public debt e.g.... but household debt was very high. Ditto Netherland. On the other hand, Italy already had a very high public debt... but its household debt was quite small.

When looking at the whole picture, one gets the feeling of a general phenomenon (which probably has similar root causes in most countries... albeit not necessarily obvious causes)... but which becomes manifest in different ways, here more on public debt, here more on household, here more on companies.

Debt obviously has an economic role, however like every other thing it should be balanced: common wisdom alone dictates that if it increases continuously, at some point its detrimental effects will be stronger than its positive effects. We are obviously way past that point.

How to come back to say 200% total debt ratio to GDP? Or even 250%?
... Now that's the hard part. No matter the chosen path, it will be a difficult, even a dangerous one.
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Doc
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Re: On Total Debt

Post by Doc »

Alexis wrote:I think the topic should be more general: it is not Public Debt alone, but rather Total Debt -public + households + companies- which to me looks like the most worrying metrics.
But it is one debt to rule them all.
The US to take one example went from total debt <200% of GDP around 1980 to >350% of GDP around 2010.
This drift towards higher and higher total debts is general, with varying degrees of severity, across the whole Developed world.

When one looks at public debt only, one can get the feeling that some developed nations were not too indebted before the 2007-8 financial crisis started. However, looking at total debt, all have had progressive increases within the last generation. Britain had limited public debt e.g.... but household debt was very high. Ditto Netherland. On the other hand, Italy already had a very high public debt... but its household debt was quite small.

When looking at the whole picture, one gets the feeling of a general phenomenon (which probably has similar root causes in most countries... albeit not necessarily obvious causes)... but which becomes manifest in different ways, here more on public debt, here more on household, here more on companies.

Debt obviously has an economic role, however like every other thing it should be balanced: common wisdom alone dictates that if it increases continuously, at some point its detrimental effects will be stronger than its positive effects. We are obviously way past that point.

How to come back to say 200% total debt ratio to GDP? Or even 250%?
... Now that's the hard part. No matter the chosen path, it will be a difficult, even a dangerous one.
"I fancied myself as some kind of god....It is a sort of disease when you consider yourself some kind of god, the creator of everything, but I feel comfortable about it now since I began to live it out.” -- George Soros
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Re: On Total Debt

Post by Doc »

Doc wrote:
Alexis wrote:I think the topic should be more general: it is not Public Debt alone, but rather Total Debt -public + households + companies- which to me looks like the most worrying metrics.
But it is one debt to rule them all. Non government people and entities an not print their way out of it
The US to take one example went from total debt <200% of GDP around 1980 to >350% of GDP around 2010.
This drift towards higher and higher total debts is general, with varying degrees of severity, across the whole Developed world.

When one looks at public debt only, one can get the feeling that some developed nations were not too indebted before the 2007-8 financial crisis started. However, looking at total debt, all have had progressive increases within the last generation. Britain had limited public debt e.g.... but household debt was very high. Ditto Netherland. On the other hand, Italy already had a very high public debt... but its household debt was quite small.

When looking at the whole picture, one gets the feeling of a general phenomenon (which probably has similar root causes in most countries... albeit not necessarily obvious causes)... but which becomes manifest in different ways, here more on public debt, here more on household, here more on companies.

Debt obviously has an economic role, however like every other thing it should be balanced: common wisdom alone dictates that if it increases continuously, at some point its detrimental effects will be stronger than its positive effects. We are obviously way past that point.

How to come back to say 200% total debt ratio to GDP? Or even 250%?
... Now that's the hard part. No matter the chosen path, it will be a difficult, even a dangerous one.
"I fancied myself as some kind of god....It is a sort of disease when you consider yourself some kind of god, the creator of everything, but I feel comfortable about it now since I began to live it out.” -- George Soros
noddy
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Re: On Total Debt

Post by noddy »

Alexis wrote:I think the topic should be more general: it is not Public Debt alone, but rather Total Debt -public + households + companies- which to me looks like the most worrying metrics.

The US to take one example went from total debt <200% of GDP around 1980 to >350% of GDP around 2010.
This drift towards higher and higher total debts is general, with varying degrees of severity, across the whole Developed world.

When one looks at public debt only, one can get the feeling that some developed nations were not too indebted before the 2007-8 financial crisis started. However, looking at total debt, all have had progressive increases within the last generation. Britain had limited public debt e.g.... but household debt was very high. Ditto Netherland. On the other hand, Italy already had a very high public debt... but its household debt was quite small.

When looking at the whole picture, one gets the feeling of a general phenomenon (which probably has similar root causes in most countries... albeit not necessarily obvious causes)... but which becomes manifest in different ways, here more on public debt, here more on household, here more on companies.

Debt obviously has an economic role, however like every other thing it should be balanced: common wisdom alone dictates that if it increases continuously, at some point its detrimental effects will be stronger than its positive effects. We are obviously way past that point.

How to come back to say 200% total debt ratio to GDP? Or even 250%?
... Now that's the hard part. No matter the chosen path, it will be a difficult, even a dangerous one.
absolutely true and the number one reason i think most of the west will be stagnant and or declining, if they are lucky!, over the next few decades.
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Mr. Perfect
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Re: On Total Debt

Post by Mr. Perfect »

Alexis wrote:I think the topic should be more general: it is not Public Debt alone, but rather Total Debt -public + households + companies- which to me looks like the most worrying metrics.
It's all just deck chairs. To me the likely pressure point is the Governments, but frankly anything can happen.
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Alexis
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Re: On Government debt

Post by Alexis »

Here is public sector debt issuance 2013 as compared to GDP, for different countries.
The grey part is ancient debt being rolled that year, the red part is new debt.

Image

We observe several groups of countries:

1. Japan, who is in a class of its own with debt issuance this year to the tune of 58% of GDP

2. The "Latin" group, or "Club Med" with issuance 17% to 28%, Canada then France being the least stricken among that group, Italy then USA the most stricken

3. The "Northern" group with issuance 5% to 12%

4. Switzerland who is in a class of her own, barely more than 3%, almost none of it new debt




Some will be worried by such figures, but I say there is a big plus here: the Japanese at last have been unmasked.

They are in fact Super-Italians :D ;)

Image
Super-Italians greeting Emperor Akihitus Maximus on his birthday

And the Swiss are Super-Germans. But this we already knew!
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Enki
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Re: On Government debt

Post by Enki »

noddy wrote:
Mr. Perfect wrote:
Typhoon wrote: If China were to "dump" their debt, then it would quickly drive down the price of that debt and they would end up taking a massive haircut.

China would have to unwind their holdings carefully to avoid a "bank run".
What if they wanted a bank run.
a bank run is certainly cheaper and less destructive than a war and has a more garunteed outcome for the winner.
I think the idea that China is suddenly going to turn into a rash actor and take the expedient loss is one that can only be held by someone that hasn't read much news about China.

They'll try to keep the value of that investment up. I think the US will too ultimately.
Men often oppose a thing merely because they have had no agency in planning it, or because it may have been planned by those whom they dislike.
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Re: On Government debt

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How did that work with the tech bubble or subprime mortgages.
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noddy
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Re: On Government debt

Post by noddy »

Enki wrote:
noddy wrote:
Mr. Perfect wrote:
Typhoon wrote: If China were to "dump" their debt, then it would quickly drive down the price of that debt and they would end up taking a massive haircut.

China would have to unwind their holdings carefully to avoid a "bank run".
What if they wanted a bank run.
a bank run is certainly cheaper and less destructive than a war and has a more garunteed outcome for the winner.
I think the idea that China is suddenly going to turn into a rash actor and take the expedient loss is one that can only be held by someone that hasn't read much news about China.

They'll try to keep the value of that investment up. I think the US will too ultimately.
i dare say i read more chinese news and interact with more chinese businessmen than most people on this forum including yourself.

you missed the point anyway, the rather droll reality of ~1 trillion not being very much money to write off if the end result is that you are in control of the world trade and legal systems.

i dont actually think its likely to happen rashly because their is little point in them attacking your system when you are do such a fine job of destroying it yourself.

whats happening right now is that in order to protect their investments they are actively and successfully making american dollars irrelevant by creating direct trade agreements with all their magor trading parties and turning the american dollars they have into real physical assets, be it real estate or be it business ownership.

i think its a matter of "when" and not "if" american loses world currency status and china will happily take the haircut on their dollar investment because that means the new world order will have formed and they will control it alot more than they do the current one.

nothing rash required, this outcome is baked in.
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Re: On Government debt

Post by Enki »

noddy wrote: i dare say i read more chinese news and interact with more chinese businessmen than most people on this forum including yourself.
That's not hard. ;)
you missed the point anyway, the rather droll reality of ~1 trillion not being very much money to write off if the end result is that you are in control of the world trade and legal systems.
I don't see how writing off our debt harms our standing on the world stage. Certainly it makes us more of a credit risk, but still we are less of a credit risk than well...anyone else. It's all relative. And then China eats the loss and we don't owe the money any longer.
i dont actually think its likely to happen rashly because their is little point in them attacking your system when you are do such a fine job of destroying it yourself.
I just seriously doubt that China wants our economy to collapse. We are a big customer. I guess maybe China has a different business logic than we do...but over here you want your customers to succeed.
whats happening right now is that in order to protect their investments they are actively and successfully making american dollars irrelevant by creating direct trade agreements with all their magor trading parties and turning the american dollars they have into real physical assets, be it real estate or be it business ownership.
Yea, true.
i think its a matter of "when" and not "if" american loses world currency status and china will happily take the haircut on their dollar investment because that means the new world order will have formed and they will control it alot more than they do the current one.
Sure, the dollar will stop being the reserve currency eventually. And yes, China is a big player. So will India be over the next generation. Relatively America will have a smaller piece of the pie, but the pie will be MUCH, MUCH, MUCH larger.
nothing rash required, this outcome is baked in.
They probably will still hold out for repayment. Being paid back in a devalued currency is still better than nothing at all.
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Re: On Government debt

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Gvts are pivotal in the debt typhoon that sweaps across the globe? I think so. :roll:

First, it regulates and monitors (for bad or worse, with too much, too little or the wrong regulations) the financial industry directly and indirectly. They are like the FIFA in world soccer. We da people supposedly have a say in our democracies how they behave, what they decide. But our influence has turned out to be minimal. It is not a sexy subject during elections. Raising or lowering taxes only scratches the surface, a bipolar hobby horse.

Second, gvt debt is always our debt. Of consumers and producers. Overhead debt. But indeed it just adds to the total debt. And it is spinning out of control in many places. Especially the big players.

Third, gvts by nature increase their public debt. No market mechanism in place to punish them on the spot and in the moment and let them go bancrupt when needed. And, gvts draw voters by promising them free candy usually, the pain is after the elections. Then blame your opponent with emo-arguments and stupid slogans.

There is a simple reason politics and big business became joined associates in their oligarchic monopoly: in the eye of the storm private risk is lowest. You can become a millionaire bank manager when your bank is dying, and you can increase public dept as a politician while selling free candy to the public that will in turn vote for you.. so you keep your job and can still pay your bills.

Oligarchs will never change the rules because the game is good for them as it is.
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Enki
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Re: On Government debt

Post by Enki »

It has become all about taxes because the only thing our representatives really control is the budget.
Men often oppose a thing merely because they have had no agency in planning it, or because it may have been planned by those whom they dislike.
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Re: On Government debt

Post by Mr. Perfect »

Enki wrote:
I don't see how writing off our debt harms our standing on the world stage. Certainly it makes us more of a credit risk, but still we are less of a credit risk than well...anyone else. It's all relative. And then China eats the loss and we don't owe the money any longer.
You literally do not understand the world around you. Anti-intellectualism at it's height.
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Re: On Government debt

Post by Doc »

Parodite wrote:Gvts are pivotal in the debt typhoon that sweaps across the globe? I think so. :roll:

First, it regulates and monitors (for bad or worse, with too much, too little or the wrong regulations) the financial industry directly and indirectly. They are like the FIFA in world soccer. We da people supposedly have a say in our democracies how they behave, what they decide. But our influence has turned out to be minimal. It is not a sexy subject during elections. Raising or lowering taxes only scratches the surface, a bipolar hobby horse.

Second, gvt debt is always our debt. Of consumers and producers. Overhead debt. But indeed it just adds to the total debt. And it is spinning out of control in many places. Especially the big players.

Third, gvts by nature increase their public debt. No market mechanism in place to punish them on the spot and in the moment and let them go bancrupt when needed. And, gvts draw voters by promising them free candy usually, the pain is after the elections. Then blame your opponent with emo-arguments and stupid slogans.

There is a simple reason politics and big business became joined associates in their oligarchic monopoly: in the eye of the storm private risk is lowest. You can become a millionaire bank manager when your bank is dying, and you can increase public dept as a politician while selling free candy to the public that will in turn vote for you.. so you keep your job and can still pay your bills.

Oligarchs will never change the rules because the game is good for them as it is.

Big government(actually small government as well but they are less effective at it) and big corporations like to be in the position of making up the rules. Or rather the people running things in Big Government and Big Corporations.

and there is this little look behind the curtain. Pay careful attention to what Shays says "and I am tempted to ask who in this room are in the pay of Fannie Mae...."

http://www.youtube.com/watch?feature=pl ... Xos4#t=195
"I fancied myself as some kind of god....It is a sort of disease when you consider yourself some kind of god, the creator of everything, but I feel comfortable about it now since I began to live it out.” -- George Soros
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