Weekend Open Thread (2010-08-13)

Here is your open thread for the weekend beginning Friday August 13th, 2010. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

129 comments:

  1. 1
    Scotsman says:

    If you’re up, go outside- meteor shower!

    http://leonid.arc.nasa.gov/estimator.html

  2. 2
    Cheap South says:

    In general, it seems SB readers are a frugal bunch (I thought I was the only person in the country that carry a cheap prepaid Nokia in my pocket).

    So, in the spirit of frugality, here is a good article from earlier this week.

    http://www.nytimes.com/2010/08/08/business/08consume.html?pagewanted=all

  3. 3
    Trigger says:

    I am not sarcastic and this is not a sarcastic comment.

    But we really have 2 choices in front of us

    OPTION #1
    Try to stick to conservative economics. So you spend what you can afford to spend. You run your budget in a conservative way. The US has not been doing this. If it starts doing this
    a) Unemployment will increase substantially as a result of govt spending going down
    b) Unemployment will further go up because govt spending dries up and private sector starts feeling the pinch.
    c) People who are unemployed will become very unhappy and riots can start.
    d) Obama might get stressed out by the whole situation. It will not be convenient for him to be presiding over a big recession. Politicians will all blame Obama for this mess.
    e) GDP will contract to a sustainable level. Maybe this could mean say a 15-20% GDP contraction
    f) House prices will drop further. Deflation could be a likely scenario here.

    OPTION#2
    We go the route we have been taking. Screw conservative economics. Let’s spend and then spend some more. Let’s increase deficit. Let’s increase money supply. Let’s get into more debt.
    In this route
    a) There is a risk which Sniglet described. When the govt starts real printing of money – the currency stops existing. I doubt that it would happen overnight but still it could happen. If this happens we would go into GD II for sure. Bernake should simulate this scenario and see if it would really happen. I am sure it is on the table. Maybe he could say that this will be a 1 time printing and then we will never do anything like this again.
    b) Huge mounting deficit and debt can be a problem. But we only care about servicing of debt. We never care about paying off debt because nobody has intention to pay off the debt ever. Right now debt is 100% of GDP – so the cost of servicing is say 3% of GDP. If we go to 200% of GDP – it will be say 6%. 500% of GDP maybe already dangerous because the costs will mount and the economy will start to stagnate. But for the next 3-4 years we can just print and take on debt and things will look fine on the surface.
    c) We can also count on the fact that businesses will stumble on some invention and we will start a new industrial revolution – this would take care of the whole problem. So buying some time may make sense. The problem is that there is no revolution on the horizon.

    So option #2 looks more attractive. It buys time. And can make people more happy.

  4. 4
    David Losh says:

    Wow!, but a good segway into my week end diatribe.

    Why is everybody looking at the government to do some thing? Business got us into this mess, and business should get us out. How is this, in any way, the governments problem?

    I really started thinking about this with BP. How did a disaster, a man made disaster, become a government problem for the government to fix? Yes, I understand the law concerning the EPA, so give it a rest. The EPA is an enforcement branch of government.

    What I think #1 is that government should cut worker, and small business taxes. If a worker makes less than $42K per year they should be exempt from Federal taxes, FICA. If a small business has less than $500K in gross revenue they should be exempt from taxes.

    If a business has more than $20 Million in gross revenue, then $60 Million, $100 Million, then $200 Million, and so on, then the tax rates should be adjusted upward.

    Tax the frigging rich, but tax the wealthy more. Send the wealthy the heck out of this great country, back to some Third World cess pool where they can have cheap labor, and exploit the environment all they want.

    Business, the American Business model, the something for nothing, make it cheaper so we can increase profits, charge more, and deliver less is the problem. Get rid of ’em. Get these unAmerican low lifes out of the country, and send them to where ever so they can continue to inner breed.

    How about a back to England movement?

  5. 5

    By David Losh @ 4:

    I really started thinking about this with BP. How did a disaster, a man made disaster, become a government problem for the government to fix? Yes, I understand the law concerning the EPA, so give it a rest. The EPA is an enforcement branch of government.

    Excellent example of why people should read Losh’s posts!

    There’s a lot going on here. BP is a good example of needing to fix government. The oversight agency was completely inept and/or corrupt. The point is, it’s not necessarily an example of a need for new regulations, but instead of the need to get government enforcing existing regulations. One advantage of that course of action, over new regulations, is you don’t hinder business activity with uncertainty while new regulations are considered, and additional regulation which might be completely unnecessary.

    Also, the whole call for additional regulations assumes businesses are run by incredibly stupid people. I’ve called the MBA degree the most over-rated degree in history, but that doesn’t mean that people with MBAs are stupid. The Gulf oil spill will cost BP billions. Do people really think what has happened to BP won’t cause other oil drilling entities to be more careful? Do people really think that what happened to AIG and WAMU won’t cause other companies to keep a better eye on risk control? It’s not just consumers whose behavior will be affected going forward by the “great recession.” To a great extent, additional regulation is simply unnecessary.

  6. 6

    RE: Trigger @ 3

    Interesting Blogs This Friday, I’m Enjoying Them All

    Trigger, here’s a piece today warning about “not printing more money” out of the repression; albeit the comments on both sides of the argument are almost better than than the news article…LOL

    http://www.marketwatch.com/story/hoenig-current-fed-policy-dangerous-gamble-2010-08-13?siteid=bnbh

    BTW, I’m on Scotsman’s side on this one….we’re broke, option 2 is moot. When the government has to buy it’s own “zombie rate zero interest treasuries” to give the illusion the economy doesn’t stink, the jig is up. Even the stock market isn’t fooled by that smoke and mirror trick.

    The folks in Wash DC all rant about cutting the federal deficit or else, even Bernanke and Obama, so who are we to believe? The tooth fairy?

  7. 7

    RE: David Losh @ 4

    You Sound Like a 3rd Party Endorcement

    I’m on your side too. The Dem/Reps have recently been in the corporate pocketbooks in America way too deep. Public polls are extremism to them. The “Y” Generation is something like the Jews in Nazi Germany, lead to the unemployment gas chambers in the name of uncontrolled population planning for cheap corporate labor.

    There was a time a few years ago when I focused most of my attention on my retirement and how to get there; now I’m totally worried about America’s “Y” Generation’s future, in our current duel-party political direction.

  8. 8

    RE: Kary L. Krismer @ 5

    LOL Kary

    They even tried putting MBAs as engineers’ supervisors in the mid 90s; a total failure. Now, all the technical jobs are being outsourced and our country’s economy backbone is broken.

    Like one blogger on SB noted, all GE now is, is a financial paper pusher, all the GE appliances and electrical product manufacturing has been outsourced.

  9. 9
    Sniglet says:

    I have a different take on the causes, and “solutions” to the depression. As I’ve mentioned before, I believe this economic malaise is the result of naturally shifting patterns in social mood. We are entering a phase of fear and negative attitudes, which will last for decades. Thus, no amount of government policy can fix things. At best, the government could avoid throwing good money after bad and at least not drive up debt (i.e. because nothing the government does will change social mood).

    Unfortunately, governments are animals of societal sentiments themselves, so it is silly to expect policy makers to respond rationally. If voters are scared, the government will do everything it can in a futile effort to make them feel better.

    The very argument about whether regulations are good, bad, or properly enforced, is irrelevant. When society is feeling bullish, it will repeal regulation (and decrease enforcement). When society is feeling bearish, it will create new regulations and dogmatically enforce existing rules.

    Moreover, the number (and magnitude) of disasters will always increase during times of negative social mood. The fear, and anger, that are hallmarks of bearish times will lead managers to make more poor decisions, cut corners, etc. Nobody thinks long term when times are tough, and volatile.

  10. 10

    By Sniglet @ 9:

    I have a different take on the causes, and “solutions” to the depression. As I’ve mentioned before, I believe this economic malaise is the result of naturally shifting patterns in social mood. We are entering a phase of fear and negative attitudes, which will last for decades. Thus, no amount of government policy can fix things..

    Good post, but I think you overlooked the government policy change of legalizing drugs. Or maybe mandatory anti-depressants. ;-)

  11. 11
    Chris says:

    Maybe this weekend Pfft will answer two questions I posted last weekend at 20 and 24. I think it’s remarkable how people suggest radical spending in an unproven experiment and changing the tax structure and assume the burden of persuasion is on anyone who questions how this would work.

    https://seattlebubble.com/blog/2010/08/06/weekend-open-thread-2010-08-06/#comments

    20. Deficit spending: For the sake of argument let’s say a proper amount of deficit spending would stimulate the economy out of this “slow patch”, that all the money would be properly applied (ie that a large percentage of the money would not be siphoned off for corruption), that the bubble started to grow only post-911 and that the economy does not need to be drastically restructured. How do you determine the proper amount to spend? What is your formula?

    24. Tax the rich: The top 5% already pays 60% of the taxes. The top 25% already 86% of taxes and the top 50% pays 96.93%. The bottom 50% pays 3% of taxes.

    Source:
    http://www.taxfoundation.org/press/show/22652.html

    Do you think these numbers are cooked? If so how and if not please provide your position for reallocating income through taxation. How much more should the top 50% pay? The top 25%? and so on. From what I read the top 1% have been very generous in charitable giving, especially for health care related issues which you seem to favor.

    http://givingpledge.org/#enter

    Do you want the government to just take over the money before the billionaires can pass it to a foundation? If so do you really think they won’t figure ways around the tax (like Howard Hughes did with his medical charities and how Europeans do now). If you are suggesting we go after the finance people who profited from this debacle? Krugman strongly favored the bail out of the banks and strongly favored bailing out Lehman Brothers so he offers your positions no support if it is limited to isolating the finance industry for special treatment.

    You still haven’t suggested a formula for spending our way out of the “slow patch” ( @18). If you are in favor of going into debt several trillion dollars and radically changing the tax structure, please give some specifics.

  12. 12
    Willy Nilly says:

    RE: Sniglet @ 9

    I don’t know about this thesis. Fear and negative attitudes do not cause a bank account to drain or create the absence of a job that was once there. Moods are inextricably tied to the situation at hand – throw a party and moods improve, execute someone in the street in front of the neighbors and the mood sours. The mood did not manifest the party or put a slug in Joes head. Also I disagree that people do not think long term when times are tough, actually the inverse. When things are bubbling along people make all kinds or impulse decisions, when it is your last and only dime, you are more careful where it get spent.

    Moods and sentiment can change overnight, or within minutes. On the other hand massive debt, rotting products, commodity shortages, or threadbare infrastructures cannot be transformed in an instant. Perception is highly pliant and subject to influence, more tangible items are not.

    As far as remedying the situation the following must be asked: Who has the power to make the decisions and what are their intentions? Do their actions match up with their intentions?
    Is there a comprehensive aptitude for systemic understanding as well as macro and micro points of view for these folks? Do they have fundamental skills in systems design of any type? Pencil in your politicians, financial gatekeepers, energy magnates, local officials, and assess them on their intentions, aptitude and skill. Asking the right questions can be a very powerful tool with many uses.

  13. 13

    This is related to some comments in the foreclosure thread regarding banks allowing some people to stay in a foreclosed house, but a bit different.

    There is/was a company out there that would stage houses with residents, and the residents would bring their own furniture, make the house ready for showing on a moment’s notice, and move out when the house sold. The occupants would pay the staging company rent, so the staging was free to the owner. If the occupant didn’t leave, it would be the staging company’s responsibility to evict them.

    I always thought that would be something an individual could do. Hook up with a real estate firm, buy some nice looking (but cheap) furniture, and just live in the various listings the firm had. You’d have to move from time to time, but otherwise you’d be living practically for free.

  14. 14
    Sniglet says:

    Fear and negative attitudes do not cause a bank account to drain or create the absence of a job that was once there

    Quite the contrary. Negative mood can cause consumers to cut back in spending and businesses to reduce capital expenditures because of fear for the future. This in turn can lead to a loss in jobs and drained bank accounts.

    I agree that societal mood changes between bullishness and bearishness can be swift (or seemingly so), but I don’t think they change very frequently. This is why there can be long (multi-decade) periods of economic expansion, following by very long periods of economic contraction/malaise.

  15. 15

    By Willy Nilly @ 12:

    RE: Sniglet @ 9 – I don’t know about this thesis. Fear and negative attitudes do not cause a bank account to drain or create the absence of a job that was once there.

    Fear causes people to quit spending, which leads to fewer jobs.

  16. 16
    Matthew says:

    Trigger:

    What does option #2 do for our country in the long run? The debt eventually has to be paid back, you would rather our children and children’s children pay the debt back just we can attempt to maintain the status quo for 1 or 2 more years?

    It really has nothing to do with “conservative” or “liberal” thinking. It’s simply about not spending money you don’t have. If only more Americans embraced the concept along our elected representatives in DC. Unfortunately politicians on both sides of the aisle are always looking for more spending to bring back home.

    Neither road is an easy path to prosperity. I’d rather try and get us back on track rather than kick the can down the road and make things worse for future generations.

  17. 17
    Scotsman says:

    RE: Trigger @ 3

    You clearly understand the issues. They can easily be summarized as some pain now and a stable future, or put off the pain but suffer more when the consequences come due. The one thing we can’t do is avoid the pain- it has to come. The debt/losses are real, overwhelming, and need to be cleared from the system. No matter how you do it someone is going to be unhappy, so the best we can hope for is to minimize the suffering and get back as quickly as possible to a system that offers hope and sustainability, one where people can plan for a future instead of just waiting for the doom they know must come. I’d rather have the whole mess behind me than temporarily delayed, and delay is the all that can happen- there is no cure in waiting.

  18. 18
    Scotsman says:

    RE: Willy Nilly @ 12

    Fear, as expressed through expectations, is a huge factor in economics. People and businesses plan for the future based on expectations. This is why stability in political systems, taxes, regulation, etc. are so important to businesses and individuals alike. When the rules of the game change every couple of months people do only one thing- they wait, sitting on investments, plans for major purchases, etc. So perhaps fear isn’t the most accurate term- I’d use expectations, but the two are closely related in terms of ultimate impact on an economic system.

  19. 19
    One Eyed Man says:

    RE: Scotsman @ 18

    I certainly have to agree with Scotsman on the expectations issue, at least as to the acceptance of its importance in economic theory. Shiller and Keynes each use the term “Animal Spirits.” In doing so they are referring to expectations that are as close to being emotion as anything else. When Krugman talks about the need for more stimulus (whether he is right or he is wrong) the premise behind his conclusion is that stimulus will create an “expectation” of inflation and spur spending and investment rather than the holding of devalued currency. Bernanke, Roubini, etc etc, all talk about expectation as being as important if not more important than the statistics most people refer to as the “fundamentals.”

  20. 20

    RE: One Eyed Man @ 19

    Very True

    Ambiguous Psychology drives the Stock market too, explaining why yesterday’s good news becomes today’s bad news.

    Here’s some news that warmed my heart today and yes, made me more positive about America. It’s this type of integrity and honesty that will bring the economy back, IMO.

    http://www.nypost.com/p/news/local/manhattan/reunion_with_amex_angel_dFCLsWzzXEj2mwhFn6g2IJ

  21. 21
    David Losh says:

    RE: Chris @ 11

    Well, you are right about who pays more in taxes. The rich, and wealthy do pay into the tax system, and what I suggest is that they get nothing back.

    Let’s stop corporate welfare.

    Let’s stop having our tax dollars used for dodges, or a means for making more profit.

    You presented the data, now explain it. This is like saying Insurance Companies pay out 80% of what they take in.

    Executives get $28 Million dollars, and if they pay half in taxes they only keep $14 Million after tax dollars. The profit that pays the bonuses is from a financially engineered Institutional Investment Group that deals in tax deferred profits that in theory have no maturity because a corporation, as an entity, has no life span.

    I can think of a trillion ways that the wealthy can pay a high tax rate, and make a million times that by gaming the tax system.

    Got to go back to work, but I’m interested in your explanation of how it is, if the wealthy pay so much, why we have so much Federal Debt.

  22. 22
    pfft says:

    By softwarengineer @ 6:

    RE: Trigger @ 3
    BTW, I’m on Scotsman’s side on this one….we’re broke, option 2 is moot. When the government has to buy it’s own “zombie rate zero interest treasuries” to give the illusion the economy doesn’t stink, the jig is up. Even the stock market isn’t fooled by that smoke and mirror trick.

    The folks in Wash DC all rant about cutting the federal deficit or else, even Bernanke and Obama, so who are we to believe? The tooth fairy?

    we are broke? really? is that why interest rates have plunged in the last few weeks? the bond market is saying spend money!

    is the stock market really fooled? it’s still way above 6,000. this pause it typical at this point.

    http://dshort.com/charts/bears/road-to-recovery-large.gif

    austerity will be worse than running deficits at this point. you cut the budget and you cut demand which leads to job losses which leads to less revenue. what you end up with is more people unemployed who can’t pay taxes and the deficit and debt goes up. a nice little austerity spiral.

    in Asia they are bragging about the stimulus. if stimulus is so bad and inhibits recovery how do you explain Asia? the stimulus was too small. people like krugman and dean baker pointed this out when the Recovery Act passed. it’s a real simply equation. there was something like a $2 trillion drop off in demand. you need a really big stimulus to jumpstart the economy. $700 billion is far short of $2 trillion.

  23. 23
    pfft says:

    By softwarengineer @ 8:

    RE: Kary L. Krismer @ 5

    LOL Kary

    They even tried putting MBAs as engineers’ supervisors in the mid 90s; a total failure. Now, all the technical jobs are being outsourced and our country’s economy backbone is broken.

    Like one blogger on SB noted, all GE now is, is a financial paper pusher, all the GE appliances and electrical product manufacturing has been outsourced.

    only about 1/3 of profits come from GE capital. you’re anchoring to the pre-crisis economy. GE capital shrunk.

  24. 24
    pfft says:

    By Scotsman @ 17:

    RE: Trigger @ 3

    You clearly understand the issues. They can easily be summarized as some pain now and a stable future, or put off the pain but suffer more when the consequences come due. The one thing we can’t do is avoid the pain- it has to come.

    the stimulus adds practically nothing to the debt in the long run. I’ve posted those projections many times. the time for belt tightening is later when the economy can handle it.

    you don’t have to drastically cut spending. that is what the bond market is saying. Is Greece some kind of economic oasis now that they are pushing austerity? no.

  25. 25
    2kt says:

    RE: David Losh @ 4
    That’s quite a bag of ideas you dropped before the weekend.

    I guess there a couple of things left to figure out.

    1) who will be buy those products made by workers with union-scale wages when there is no shortage of either cheaper goods or services? Tariffs and embargos, eh?

    2) The idea of forcing all rich people out is hoot, is not it. Do you also plan to keep their capital while expelling them? I can think of a couple countries where this was done. Usually at a cost of a few million lives and a revolution or two.

  26. 26
    pfft says:

    By One Eyed Man @ 19:

    RE: Scotsman @ 18When Krugman talks about the need for more stimulus (whether he is right or he is wrong) the premise behind his conclusion is that stimulus will create an “expectation” of inflation and spur spending and investment rather

    now. what happens is the multiplier effect. the government buys supplies to pave a road. they take the money and buy stuff and so on. the multiplier for stimulus spending is 1.4.

  27. 27
    pfft says:

    By Chris @ 11:

    Maybe this weekend Pfft will answer two questions I posted last weekend at 20 and 24. I think it’s remarkable how people suggest radical spending in an unproven experiment and changing the tax structure and assume the burden of persuasion is on anyone who questions how this would work.

    https://seattlebubble.com/blog/2010/08/06/weekend-open-thread-2010-08-06/#comments

    20. Deficit spending: For the sake of argument let�s say a proper amount of deficit spending would stimulate the economy out of this �slow patch�, that all the money would be properly applied (ie that a large percentage of the money would not be siphoned off for corruption), that the bubble started to grow only post-911 and that the economy does not need to be drastically restructured. How do you determine the proper amount to spend? What is your formula?

    24. Tax the rich: The top 5% already pays 60% of the taxes. The top 25% already 86% of taxes and the top 50% pays 96.93%. The bottom 50% pays 3% of taxes.

    Source:
    http://www.taxfoundation.org/press/show/22652.html

    Do you think these numbers are cooked? If so how and if not please provide your position for reallocating income through taxation. How much more should the top 50% pay? The top 25%? and so on. From what I read the top 1% have been very generous in charitable giving, especially for health care related issues which you seem to favor.

    http://givingpledge.org/#enter

    Do you want the government to just take over the money before the billionaires can pass it to a foundation? If so do you really think they won’t figure ways around the tax (like Howard Hughes did with his medical charities and how Europeans do now). If you are suggesting we go after the finance people who profited from this debacle? Krugman strongly favored the bail out of the banks and strongly favored bailing out Lehman Brothers so he offers your positions no support if it is limited to isolating the finance industry for special treatment.

    You still haven�t suggested a formula for spending our way out of the �slow patch� ( @18). If you are in favor of going into debt several trillion dollars and radically changing the tax structure, please give some specifics.

    1. the formula I can’t find. search krugman’s blog. we will use the easy formula. the drop off in demand over 2 years is something like $2 trillion dollars. you need almost that much to stimulate the economy.

    2. the rich have all the money! they’ve made all the gains over the last few decades. the middle class hasn’t gained much.

    3. the tax situation will only go back to where it was during the clinton eras. that era was good for everyone including the rich.

    4. the only reason why we have this big national debt is because of spending during the bush administration.

  28. 28
    pfft says:

    here is a report on the stimulus if you don’t want projections.

    One year after the stimulus, several independent macroeconomic firms including Moody’s and IHS Global Insight estimated that the stimulus saved or created 1.6 to 1.8 million jobs and forecasted a total impact of 2.5 million jobs saved by the time the stimulus is completed.

    http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009#Developments_under_the_Act

  29. 29
    Daniel says:

    RE: pfft @ 27 – I never read posts by people who are to lazy/stupid to cite. How do you guys handle this?

  30. 30
    pfft says:

    By Daniel @ 29:

    RE: pfft @ 27 – I never read posts by people who are to lazy/stupid to cite. How do you guys handle this?

    caffeine has over ridden my sarcasm detector. do you want me to provide sources?

  31. 31
    jj says:

    Highest marginal personal income tax rate should be in the 90-95% range, say on incomes over 2 million or so, with no lower tax rates on capital gains or deferred compensation over the 2 million ceiling. Since 1934, it was only with Reagan in the 80s that the highest tax rate dropped below 60%. Since Reagan, and huge drops in the highest tax rates, we have seen skyrocketing federal deficits and debt, stagnation of middle class incomes, and outsourcing of jobs to cheaper labor overseas. Extremely high marginal rates for the top 5% insures either reinvestment in American business, or redistribution of wealth that was UNFAIRLY distributed in the first place. What is very clear in the past 10 years is that if you let the rich and politically connected take as much money out of the system as they want, they will – it’s a no-brainer – see Goldman Sachs, Lehman, Madoff, Cheney, HCA, United Health Care Corp, Halliburton, Exxon, BP, and the list goes on. These people don’t put their money back in the system, they don’t reinvest; there is NO trickle down. A 90% tax rate on personal incomes over 2 million would make a huge impact on federal deficits, or would promote business reinvestment, lower (more competitive) prices on american made goods and services, and more jobs and better wages for those at the lower end of the income scale.

    http://www.taxfoundation.org/files/fed_individual_rate_history-june2010.pdf

  32. 32

    Christine Gregoire’s website is looking for ideas on how to help the state’s budget crisis. Right now the idea receiving the most votes is for the legalization of marijuana.

    When Mayor McGinn took over in Seattle, he also had an online poll going to see what people’s ideas were. The top three were expanding light rail, legalizing marijuana, and establishing a nude beach.

    So how does Dino Rossi respond? He attacks a medical marijuana study on pain control done at WSU:
    http://seattletimes.nwsource.com/html/politicsnorthwest/2012614353_rossis_attack_on_marijuana_stu.html

  33. 33
    One Eyed Man says:

    RE: Chris @ 11

    Chris, I’d just like to respond to your statement that the top 5% pay 60% of the taxes and the bottom 50% pay 3% of the taxes. As you probably know, those figures include only the “federal income taxes,” and leave out the fica, medicare and payroll taxes that are also calculated based upon income. The income tax accounts for about 1 Trillion of the 2.2 Trillion in federal tax revenue. The fica medicare and payroll taxes account for about 900 Billion. Leaving out the payroll taxes is misleading just as it would be misleading to leave out medicare and social security if we were talking about the federal budget expenditures.

    In my opinion the employer side of the payroll taxes that are computed based upon the employees income and are a direct cost of the employee should for this purpose be allocated to the employee just as for a self employed individual. That results in an additional flat income tax at the rate of over 13% on the income of every working person earning less than the fica cutoff which is currently a little over 100K. If you include the payroll taxes in with the income tax, the lowest 50% of earners probably pay something like 15% of all such taxes and the top 5% would drop to something like 40%. That’s a pure guestimate but I think its in the ball park. I’m not going to pull the numbers and do the math.

    If you say the payroll tax isn’t an income tax you are exalting form over substance. They may not call it an “income tax” but its a tax calculated based upon the employee’s income and its nearly a Trillion dollars in tax revenue.

  34. 34
  35. 35
    pfft says:

    By Scotsman @ 34:

    RE: Ira Sacharoff @ 32

    Pot smokers for Palin! Count me in!

    http://hotair.com/archives/2010/08/13/ppp-poll-palin-leads-gop-field-among-republicans-who-say-theyve-smoked-pot/

    pot smokers probably don’t mind that she quit her job.

  36. 36
    pfft says:

    I found what I think is the stimulus equation. I assume it applies to the US

    dY/dD = (1-m)/[1 – (1-t)(1-m)c – t(1-m)]

    European macro algebra (wonkish)
    http://krugman.blogs.nytimes.com/2008/12/14/european-macro-algebra-wonkish/

  37. 37
    pfft says:

    scotsman- you continually harp about the debt.

    should we extend the bush tax cuts which will cost trillions of dollars that will need to be borrowed over the next 10 years?

  38. 38
    Scotsman says:

    .

  39. 39
    pfft says:

    By Scotsman @ 38:

    .

    is that a yes?

    I know you didn’t click on the krugman link but he addressed your (we’re going to be swamped by ever increasing sky-rocketing exponentially goemetrically increasing) interest payment concerns.

    Since governments are worried about debt, it’s also important to ask how much the budget deficit is increased by an increase in government spending. It’s not one-for-one, because higher spending leads to higher GDP and hence higher tax revenue. We have

    dD = dG – tdY

    A crucial number is “bang for euro”: the ratio of the increase in GDP to the increase in the deficit. After a bit of grinding, it can be shown to be

    dY/dD = (1-m)/[1 – (1-t)(1-m)c – t(1-m)]

  40. 40
    wreckingbull says:

    RE: Ira Sacharoff @ 32 – What a tool. In all seriousness, I watched legally prescribed opiates absolutely destroy the life of a friend. He lost everything. If Rossi had any brains at all in that greasy little head of his, he would realize that replacing opiates with marijuana, where medically prudent, is a smart move

  41. 41
    Scotsman says:

    RE: pfft @ 39

    If I thought you had a chance in h#ll of understanding any of that math I’d dig into it. But since you don’t understand anything beyond cutting and pasting Krugman’s columns, I’m not going to waste my time.

    What kind of discussion can we have when you don’t even question his underlying assumptions when the obvious facts are a direct contradiction? Krugman says:

    “It’s not one-for-one, because higher spending leads to higher GDP and hence higher tax revenue.”

    It’s obviously not true. Show me that higher tax revenue from the expanding GDP. Calculate the multiplier effect net of normalized expansion. If you can’t handle percentage changes, how are we going to discuss calculus?

    If you think the recovery is rolling and inflation is just around the corner, then I can only encourage you to leverage up to the maximum allowed by your income and credit rating. I’m sure that’s what Krugman is doing- putting his money where his mouth is, along with all the other bulls trying to cover for their mistakes of the last 30 years. Good luck!

  42. 42
    Chris says:

    RE: jj @ 31

    JJ – have you ever talked to someone who earned a lot of money in the 70s or early 80s? None paid close to 90%. There were all kinds of crazy tax shelter schemes. They shot movies in Spain, actors created their own production companies, airline pilots claimed their airport pads as primary residences, professionals bought businesses that lost money on paper, untaxed fringe benefits were a standard part of the job etc. I talked to one person who made a lot in the 60s and 70s who said he never paid taxes till Reagan changed the tax code. I don’t think a government can collect 90% without tremendous intrusions into privacy or a prohibition-like disrespect of the law. Look at Greece.

    http://online.wsj.com/article/NA_WSJ_PUB:SB10001424052748704182004575055473233674214.html

    To say nothing of the negative effects on the economy of trying to take money from the producers of jobs and make them spend their energies squeezing through the nutty loopholes you know will exist. I exclude from “producers” the same finance people you do however this is not a the conservative/liberal issue you think it is. Are you in the same group that thinks Ralph Nader is nuts for saying the Democrats are every bit as dirty and corrupted as Republicans?

    http://www.cnn.com/2008/POLITICS/02/25/nader/

    Do you have an example of money being expropriated from the wealthy to the tune of 90% in a free society?

  43. 43
    Willy Nilly says:

    RE: Scotsman @ 18

    I agree with you 100%. Clarity and being able to anticipate an economic state and general trajectory heavily influences business choices and personal decisions as well. I was just having some trouble digesting statements by Sniglet such as:

    “I believe this economic malaise is the result of naturally shifting patterns in social mood.”

    “If voters are scared, the government will do everything it can in a futile effort to make them feel better.”

    “Nobody thinks long term when times are tough, and volatile.”

    Perhaps I need to get a economic decoder ring to understand the nuance of these types of statements?

  44. 44
    Chris says:

    RE: Scotsman @ 41

    Scotsman – I agree. What I find interesting is the attitude of the deficit spenders that the burden of persuasion is on those who want proof the money won’t be wasted or make things worse. At every point from how much money needs to be spent, where it will come from, how it will be spent and the effects of the spending they assume they can sit back and speak in platitudes. Not just here but back to 2008 at every turn in the disaster even when Congress was voting on the initial stimulus. Now Pfft and other die hards seem to acknowledge the initial stimulus was inadequate.

  45. 45
    David Losh says:

    RE: 2kt @ 25

    Some first class plane tickets for Bill, and Melinda, Warren Buffet, and the all the Walton family would be a start. Pretty much all of the top 200 richest people in the United States can take their blood money, and get out, go where ever they can destroy next.

    It never tinkled down.

    I view these people as unAmerican, and the politicians that have helped them as treasonous.

    Union jobs are a fallacy that is trotted out any time there is a discussion about redistribution of wealth. First you have to define wealth. Wealth, to many definitions, is abundance. What I have found is that there is only so much wine you can drink, so many people you can have sex with, so many meals in a day, and I can only help support so many families, before I get expended.

    This thing about passing down wealth from generation to generation is a myth. The family farm I understand, the factory that makes the bread, not so much.

    The circulation of the money makes an economy. If the worker benefits directly from the labor they are better compensated. If the worker has to support the management, that supports the owner, who supports the investors, bankers, stock holders, and insurance companies, then some thing went wrong.

    Oh, and in all of that support, there are tax loop holes that change weekly. Get a good accountant to explain it to you.

  46. 46
    Chris says:

    RE: One Eyed Man @ 33

    But One-Eyed-Man, with all due respect, aren’t those payroll deductions considered payments into a mandatory social insurance plan?

    http://en.wikipedia.org/wiki/Social_insurance

    If you don’t think so (ie you think these programs won’t exist when you need them) why would you trust the same government that squandered insurance payments? Do you think such a government could ever get 90% and if so don’t you think it would get taken from a producer like Bill Gates and given to a banker who needs another bailout after another nutty derivative blows up?

  47. 47
    Sniglet says:

    RE: Willy Nilly @ 43

    Perhaps I need to get a economic decoder ring to understand the nuance of these types of statements?

    Nope. All you need to do is start listening to my economist podcasts and weekly internet radio show on the subject.

    http://bit.ly/bearradio

  48. 48
    Mikal says:

    RE: Chris @ 44 – How is the money not wasted on tax cuts for the rich. As Warren Buffet say’s, “The only reason I was able to do this well financially is because of the system we live in. I owe it.”

  49. 49
    Chris says:

    Mikal – My point is the rich are already paying a lot of taxes. I don’t know what you mean by “tax cuts for the rich” when they are paying the same or more of their income in taxes in absolute and relative terms. Half of all people pay nothing in taxes and the higher up the income ladder you go the more is paid.

    A small group is supporting a large part of our government and according to the charity website http://givingpledge.org/#enter a lot of them are coming out of the closet as past anonymous donors of massive amounts that in fairness should be added to the already massive amounts they pay (which are not in official tallies).

    Other countries don’t have this and we risk killing the goose that lays the golden egg. If we mandate all their money goes to the government do you think the money will be better spent and do you think all these donors would feel as grateful to a country that feels entitled to their money? I’ve lived in countries the rich and those with business ideas leave as soon as they get a chance. More often than not they come to the United States.

  50. 50
    Mikal says:

    RE: Chris @ 49 – What other countries? Most democracies tax the rich. PERIOD. That is why they remain democracies.

  51. 51
    David Losh says:

    RE: Chris @ 49

    The rich, are a lower class to the wealthy. Wealth is a world so far beyond simple comprehension it is only a term. The wealthy can keep the charity, we don’t need it, no one actually wants it. It is an insipid little game the wealthy play, like today in Pakistan.

    The wealthy ask us for continued hand outs at every turn. You are right, as soon as the wealthy get the money together they come here, to the United States, and play the tax shelter game, that increases their wealth.

    These sleazy low life sycophants feed in the darkness off of the blood that they cause in every corner of the world.

    Wealth is easy to obtain, as long as you have no morals, no conscience, no honor, and are willing to do the dirty work governments aren’t allowed to do. Oil, diamonds, commodities, weapons, war, drought, disease, death, destruction, starvation, those are the things wealth, true wealth, is made of.

    So, yes, they should pay. They should pay up, or get out of this great nation. Let them go back to where ever they came from, because we don’t need them, no one does. Governments, globally, would spend far less by not baby sitting the wealthy, and letting currency circulate more freely.

  52. 52
    David Losh says:

    Now what I was really interested in is this entire idea that the government will some how fix the economy.

    It’s up to business to take the lead and start innovating ways to generate more capital.

    I said generate capital, rather than borrow it.

    Kary made a good point about regulations, I’ll add legislation. Business needs to start regulating itself, or go out of business.

    The defenders of the Second Amendment are a group, that we call a fringe group. One thing that is a constant argument is, that if the regulations, and legislation, that is already in place, was enforced, gun violence would decrease dramatically. There are so many laws, and regulations on the books that gun ownership is a complete liability.

    Business is the same way. If business would spend more on doing business, rather than having a lobby for new legislation, they would probably get more done, more money would be available, and productivity could mean people in jobs, rather than doing more for the same pay.

    Banks, who have been regulated for years, by passed a ton of legislation to over inflate pricing. There are laws about deception. There are laws against small print, fraud, misrepresentation, lack of due process, and coercion, but hey, they are also too big to fail, they need our help, if we don’t help them they will stop lending, and go bankrupt.

    Wait! Didn’t they fight to change the bankruptcy laws just before the economic melt down?

    The government should collect as much tax as they can from the new found wealth in this country, and stop handing out services. The government should be giving less, to the wealthy, and taking care of the Public Welfare.

    Call it redistribution? I call it giving the money back to the people they stole it from.

  53. 53
    Chris says:

    I didn’t say don’t tax the rich. I said they must pay their fair share and are already paying a lot. Please point out in post #49 where I said the rich should not be taxed.

  54. 54
    Chris says:

    RE: Chris @ 53
    And that is directed at Mikal at 50.

  55. 55
    David Losh says:

    RE: Chris @ 53

    They don’t pay a lot. It seems like a lot because of the size of the numbers. Show me where the rich get the money from.

    You are very correct that the wealthy from around the world want to be here, in the United States. Our goverment is the most generous to the wealthy of any place in the world. We give them so much for the very stinking little they begrudgingly give back to this great country.

    I would suspect that our government creates more wealth for the wealthy than they pay out of profits they make by other means.

  56. 56

    By Scotsman @ 41:

    [Pfft],

    What kind of discussion can we have when you don’t even question his underlying assumptions when the obvious facts are a direct contradiction? Krugman says:

    “Itâ��s not one-for-one, because higher spending leads to higher GDP and hence higher tax revenue.”

    It’s obviously not true. Show me that higher tax revenue from the expanding GDP. Calculate the multiplier effect net of normalized expansion. If you can’t handle percentage changes, how are we going to discuss calculus?

    It almost sounds like you think the argument is it should be one to one, when the quote you use says Krugman thinks it wouldn’t be.

    But to modify an argument I made earlier, if government spends money so that Joe Sixpack can build a road, he [gets taxed and] spends money at Home Depot [which gets taxed], which results in additional employment [of people who get taxed], who then spend money, etc.

    I don’t think there’s anyone that suggests with would self fund immediately. The proponents of deficit spending are looking more at the long term. I’d also add that let’s say you spend $3,000 in a month on a given job. Not only will maybe $400 of that come back in taxes, but in addition if the job hadn’t been there the person might have collected unemployment. So the real cost isn’t anywhere near $3,000.

  57. 57

    As to some other comments here, a lot of tax policy is designed to encourage certain activity. A favorite here is the deduction of home interest, which encourages home ownership. Small businesses can depreciate 100% of the value of a limited number of assets in one year, which encourages capital investment. There are tax benefits to building low income housing, which encourages obviously low income housing.

    So to the extent the wealthy shelter their taxes, largely it’s doing things the government is trying to encourage. Also, I’d note that there are very few things that result in a one to one reduction of tax (although arguably building depreciation is even better than that), and that with the double taxation of corporate income, the wealthy pay a rather significant amount of tax.

  58. 58
    One Eyed Man says:

    RE: Chris @ 46

    I guess faith in government is a relative thing. IMHO having all entitlements disappear wouldn’t be a good thing. But then again, when I was 18 we still had government sponsored involuntary servitude where they could take your freedom, give you a green suit and a gun and send you to some third world toilet to kill rice farmers for what many people still conclude was no good reason.

    Although I hate to move away from a progressive tax system, I think that the best tax structure to make the US competitive in the global economy would be to institute a modified VAT which would probably end up being just a federal sales tax on consumer consumption of goods and services.

    The entitlement programs have always been unfunded plans. Current revenues go to pay current benefits with the Treasury borrowing any excess FICA revenues on an intra-government “bond” deal that decreases the amount of Treasury debt they have to sell on the open market. The entitlement programs aren’t a closed system and they’ve never had any guaranteed level of benefit, only a calculation of what the government will pay you under current law. Prior to the Reagan administration, I don’t think they kept a running account of payroll tax surpluses and deficits. The payroll taxes just went into the general fund and the payments for SSI and medicare just came out of the general fund without any bogus intra-government bond deals.

    As far as I’m concerned, payroll taxes are just one more revenue stream that helps offset increasing government debt. That doesn’t mean that I think that the government should do away with SSI. It just means that I don’t think it matters if you pay for it out of the “general fund” with a revenue stream from a sales tax or have a bogus set of allocated taxes that really have nothing to do with how the money is actually spent.

  59. 59
    Ricoshea says:

    The fact that the rich and wealthy percentages of ownership in the country have expanded so vastly in the last 2 decades shows that they are not paying enough in taxes. I think we should tax them as high as we need to until the disparity in ownership in America and rising percentages stop. They are not smarter or more productive (especially not the 30-50 times higher salary) than the middle class, just luckier or having started with a monetary base that allows them to spend into more affluence. The banker/financial executive does not deserve their salary. They are adding a financial tax on real services and work with little benefit. We need to do everything we can to protect the middle class, the only real value provided into our system.

    Obviously this cannot accomplish the task of getting our economy back on track on its own. We need to reign in government waste (including salaries and retirements well beyond the private sector). I have to agree with oftwominds.com blogger, Charles Hugh Smith that the elite wealthy and socialist political parties are complicit in squeezing the most productive portion of our economy (the middle class). And don’t misread my socialist comment as meaning democractic, the republican party is socialist as well. They just tend to benefit the wealthy instead of the poor in more cases.

  60. 60
    Chris says:

    RE: Kary L. Krismer @ 57
    Kary – I completely agree. I would add however that with no line item veto constitutionally possible (without an amendment) http://scholar.google.com/scholar_case?case=4447838344519582856&q=524+U.S.+417+(1998)&hl=en&as_sdt=2002 there will always be a legislator who will slip in a tax loophole when the tax rate exceeds a level most consider fair. This avoidance still exists with corporate tax rates (eg companies with headquarters in Bermuda that do all their business in the US).

    And then there will be another era of nutty tax avoidance and the airline magazines will once again contain ads from Cayman Island banks, dentists and doctors will be buying ostrich farms and actors will shoot movies in Europe. Just because the tax rate is changed doesn’t mean it gets paid at that rate. Just productive energy is diverted to tax avoidance. No one ever paid 90% and no one will pay 90%.

  61. 61
    Chris says:

    RE: Ricoshea @ 59
    I agree we have to protect the middle class but I also think we have to be careful about thinking enacting a higher tax rate on the wealthy will result in the amount of money coming in most people think. The wealthy people I’ve known (who didn’t inherit it) worked very hard or came up with a good idea, didn’t over consume and accumulated appreciating assets. Many wealthy farmers drive older cars and have modest houses. The suburban middle class people I know in the US as a whole consumed like there was no tomorrow. Houses became enormous, people bought foreign luxury goods, especially cars, and many took out second mortgages or refinanced in order to consume more. Here’s a blast from the past to remind you: http://www.usatoday.com/money/advertising/2003-01-30-marketing-luxury_x.htm and here’s another classic: http://www.youtube.com/watch?v=Ubsd-tWYmZw

    The rich people who got that way, not through sweat of the brow, but by manipulating compensation committees and the like – the flaw isn’t the tax rate but corporate governance. Over the past two decades, so much money was being printed and created electronically and getting spread around people didn’t care that much. Now let’s hope that has changed. But back to tax rates – if the government can’t eliminate these abuses with publicly traded companies, why would anyone think the same government could collect punishing amounts of taxes from wealthy individual tax payers? It won’t happen.

  62. 62
    Blurtman says:

    RE: Kary L. Krismer @ 13 – I think this is already being done. At the intersection of 212th and E. Lake Sammamish (bottom of 212th), was built a spec home that sat unsold for perhaps as long as two years. A remarkable looking house with a view of the lake, although on a large lot with a potential future house to be built west of it so who knows how the view may turn out. Asking price was above $1 million.

    Terrible idea of the developer to build this white elephant. Timing is everything. The point is that after two years, the for sale sign was removed, and occupants seemed to have appeared. My last check of the transaction history did not show a sale, but I am no expert in this area. But lights were on, cars were in the driveway, and stuff was inside.

    Now after a year, the house is back on the market. The for sale sign is up.

    Was this permanently staged? Who would buy in a horrible downturn, and flee in less than a year?

  63. 63
    David Losh says:

    You will never see the money the wealthy have. They take dividend income from some holdings anywhere in the world.

    We need to tax the wealthy out of this country. We get rid of them, and build an economy of scale, to what we produce, and use. Banks, by far need to go. Send the bankers to Europe where they can work for the king or queen of some place. Those lackey dogs suck money out of our system to pay wages to idiot dilettantes.

    Send Bill, Warren, Waltons, and any other monarchy want to be, to Europe along with the politicians who have catered to them by giving them our money.

    The way the tax code is written everything I do is tax deductible. Me sitting here is a business expense. My trip to Peru, Spain, Italy, Greece, and my private jet, that I rent for business, is tax deductible, or paid for with tax dollars, because I am on some important business for the government.

    Trade deficit or tax deduction? You decide.

    All you do, your entire life, is to work so the wealthy can have more. The sum total of your life is to ensure that the Waltons can exploit the most people in the world, to get as much money as they possibly can.

    Did some one mention Charity? It’s tax deductible, and free advertising at the country club.

    Let’s buy a few hundred First Class plane tickets for the Fortune 100, and take away their passports. I’m sure some other country can straighten them out.

  64. 64

    RE: Ricoshea @ 59

    On the one hand, we as a society need government, and taxes are what keeps government going. If we are a compassionate society, we make sure that our citizens don’t starve to death and are able to survive when they are no unable to work.
    The fact that there is such a growing disparity in wealth between those who have a lot and those that don’t is not a good sign.
    By the same token, we can’t raise taxes so much on the wealthy that they take their marbles and play elsewhere.
    Nobody is suggesting that we go back to a 90% tax rate on the wealthiest. But given that governments at all levels are hurting financially and cutting back on services to the most needy, doesn’t it make sense to let the tax cuts on the wealthiest expire?
    I’m not calling for seizing the assets of the Gates and Allen families and resdistributing them to all the poor families of Skyway and White Center.
    It’s a delicate balance. People who provide jobs need an incentive to produce. But unrestrained capitalism just isn’t the answer.
    I know that there are folks here who claim that the free market will solve all our problems, and that we’ve never had a true free market.
    Well, there also hasn’t been true socialism either. Not in the Soviet Union, not in China, and not here.

  65. 65
    Trigger says:

    RE: Trigger @ 3

    I think option #1 is preferred if your economy is doing fine. Basically this policy ensures you do not run into trouble.

    In the current state – option #1 would have the consequences but also it would enlarge the debt problem. If say GDP falls by 20% then the debt ratio goes up. If deflation happens on top of this – the debt gets to be even more problematic.

    Scotsman – I would be interested in a logical argument that you have no chance of getting out of the depression by going with option #2 in the current environment.

    I think most people in SeattleBubble make decent money and probably have saved say 500K. If the US chooses option #1 then all the people here will be happy. Their 500K will seem like 1 mill or maybe 2 mills. But the key is to do what is best for the overall economy.

  66. 66
    ARDELL says:

    RE: Blurtman @ 62

    Not familiar with that particular house, but I have run across many “new homes” occupied by the builder’s family, for a time. Many thought it silly to sit in their own “lesser” home while having a “mansion” empty on market…so they moved in.

    They get to a frustration point where they truly love the homes they built, and can’t understand why home buyers aren’t loving it. During that love fest with themselves they decide to move in and enjoy it for a time…before the bank takes it.

  67. 67
  68. 68
    One Eyed Man says:

    RE: Ricoshea @ 59

    In my experience the two main reasons that small builders move into their expensive spec homes are:

    #2 They are running out of cash and it’s usually quicker and easier to sell their less expensive old home to pay down debt and generate needed cash.

    And, drum roll please:

    #1 If they live there for 2 years they can convert up to 500K of profits that would have been taxed as ordinary income into tax free income with any profit above 500K taxed as capital gains.

    Hows that sound to you for a tax break. Wouldn’t you like it if your income was Tax Free? Unfortunately, if you move and don’t make a profit, your loss becomes non-deductible so its not a good idea in a falling market. The guy you are talking about is more likely relying on the reason labeled #2.

    Before they changed the tax law on personal residences to the current system I used to tell clients that “builders own home” which brokers used as promotional talk to indicate the house was something special, actually ment that the builder probably couldn’t sell it and had to move into it.

  69. 69
    Blurtman says:

    I don’t think this is a good idea:

    Luxury Condos Asking the Feds For Help
    Seek FHA insurance to drive condo sales

    The federal government may soon come to the rescue of stalled luxury condominiums in Manhattan.

    Manhattan luxury condominiums known for posh amenities and high price tags are beginning to apply for Federal Housing Administration backing.

    Condominium developers hope to open financing opportunities for their purchasers as well as guarantee a little protection for themselves. Not only will lending institutions be more willing to lend to purchasers with FHA backing, but the FHA will pay the mortgage should a home buyer default.

    http://www.nbcnewyork.com/around-town/real-estate/Luxury-Condos-Asking-the-Feds-For-Help-100625504.html

    Gee, I wonder who are the benficiaries of the FHA’s intervention?

    And from the story: “Something has to happen for this product to be marketable,” Jonathan Miller said told Bloomberg.

    Uh, try lowering the price.

  70. 70
    David Losh says:

    RE: Ira Sacharoff @ 64

    I am truly advocating for the wealthy to take their marbles, those that they haven’t lost already, and get the heck out of our country. Where are they going to go? Germany? Africa? South America? China, Russia? They would be stripped bare within ten years, and they know it.

    We need to tax the heck out of them until they realize that adding expenses will be the only way they can keep some of the money we gift them on a daily basis.

    Another one, other than those unAmerican Gates, Buffets, and Waltons, that really bothers me is that Mexican Slim guy of Telephonica. If that guy ever sets foot in this country we should tax that low life at 110% for all the damage he has done.

    Don’t get me started on Japan and those robber barons who over inflated all markets within that country, and just kept the money like they were the emperor himself. Now there’s a country who should take itself back. If we talk revolution it should start in Japan. Twenty years of giving the wealthy money with no return? Come on.

    The wealthy contribute absolutely nothing to society, the economy, or the world they feed on. It’s like having pet slugs that you feed every day by growing a garden.

  71. 71
    Courtney says:

    RE: David Losh @ 70 – Oh good grief.

  72. 72
    Pegasus says:

    William Black speaks about banks hiding real estate losses. Pay attention pfft…there is NO REAL RECOVERY.. only the crooks are in control.

    “The situation is likely even worse than the FDIC portrays, says William Black Associate Professor of Economics and Law at the University of Missouri-Kansas City.

    “The FDIC is sitting there knowing that it has both the residential disaster and the commercial real estate disaster [and] knowing it doesn’t have remotely enough funds to pay for it,” he says.

    Aaron Task: Should we be surprise there are not more bank failures?

    William Black: Not Surprised,we should be upset there are not more bank failures. The industry has used its political muscle to get Congress to extort the financial accounting standards board to gimmick the accounting rules so that banks do not have to recognize their losses.

    Aarron Task: In practical terms, what does the gutting of that rule mean for the banks?

    William Black: Capital is defined as assets minus liabilities. If I get to keep my assets at inflated bubble values that have nothing to do with their real value, then my reported capital will be greatly inflated. When I am insolvent I still report that I have lots of capital.

    Aaron Task: You are saying the FDIC is intentionally keeping foreclosures down because it knows it does not have enough money to pay off depositors who are insured by the FDIC?

    William Black: That is correct and that is going to make ultimate losses grow. It also means we are following a Japanese type strategy of hiding the losses and we know what that produces – a lost decade, which is now two lost decades. Your listeners and viewers if they are stock types, look at the Nikkei. It lost 75% in nominal terms and has stayed that way for 20 years. I real terms it lost 85% of its value. This is a really stupid strategy. And it’s ours.

    Aaron Task: You can just keep kicking this down the road and have stagnant economic growth?

    William Black: Geithner’s original estimate was $2 trillion and of course things got much worse that their original estimates. The IMF estimates were in the $3 trillion range. So, there are trillions of dollars of unrecognized losses under these guy’s scenarios. There is a huge slug, far more than they can pay for. What they are doing instead is these stupid subsidies for the biggest banks, with essentially no political oversight. It works, for the banks but it’s really bad for the economy. It diverts money from small businesses, large businesses, and entrepreneurs.

    Aaron Task: What does it say to you that Tim Geithner and Larry Summers are still on the job?

    William Black: Well I said it from the beginning, Geithner and Summers were selected and promoted, and the same is true with Bernanke, because they are willing to be wrong and have a consistent track record of being wrong. That’s useful for senior politicians but disastrous for the country.

    http://globaleconomicanalysis.blogspot.com/2010/08/former-bank-regulator-william-black-us.html

  73. 73
    Pegasus says:

    RE: David Losh @ 70 – Comrade Loshnikov…. Perhaps the government should just seize all of the assets of Bill Gates, Paul Allen, Warren Buffet, etc. Just the billionaires. Then they coud pay off the deficit? Not likely. Perhaps the money could be better spent by buying votes in the form of a huge dividend for the masses? I venture to say that the Muckleshoot and every other casino would have a hey day as would every scamster in America. After we attack the billionaires we can attack those worth over a 100 million and then after that those worth 10 million and after that those worth a million and after that those worth one hundred thousand and after that….well by now you get the picture. Everyone will have the same net worth whether they are productive or not. That is your big dream.

  74. 74

    RE: Pegasus @ 73

    On the other hand, just a few televised executions of some bank CEOs could provide some awesome entertainment. Not sure if it would be on network TV, cable, or pay per view.

  75. 75

    RE: Chris @ 61 – Besides that, if you did something totally nutty, as was being proposed in the House of Stupid-Representatives last year, and taxed people at a very high rate, they’d simply stop working. That would not be good for the company they work for, the economy or tax revenues.

  76. 76

    By Ira Sacharoff @ 64:

    Nobody is suggesting that we go back to a 90% tax rate on the wealthiest.

    That’s pretty much what was being proposed in the House last year for people working for any entity bailed out.

  77. 77
    Blurtman says:

    RE: Ira Sacharoff @ 74 – Don’t forget Hank Paulson, the first major felon cabinet official in quite a while.

  78. 78

    RE: Kary L. Krismer @ 76
    If I remember correctly, what was being stupidly proposed by some members of the house, without Obama’s support, was to institute a 90% tax on bonuses over and above the salaries on employees of those firms that received 5 billion dollars or more of bailout money, for employees with 250,000 or more household income.
    Yes, it did seem outrageous that these banks and investment firms were handing out millions of dollars in bonuses, money that they received from the taxpayers, to employees who did nothing but screw things up.
    Still, under that proposal, a bank teller who received a bonus, but happened to be married to an attorney or doctor or successful software geek ,would have that bonus taxed at 90%.

  79. 79
    Blurtman says:

    RE: Ira Sacharoff @ 78 – That hastened repayment of the TARP bailout money at several firms. Obama has grossly miscalculated the efffects of not prosecuting outright financial fraud. Average Americans realize, once again, what a fraudulent system we labor under, and feel no qualms about committing fraud themselves. Strategic defaults are but one symptom.

  80. 80

    RE: Blurtman @ 79
    I completely agree. Fraud was rampant, and tolerated.
    But back to executing Hank Paulson on national TV:
    He has this might be already dead Skeletor/Zombie look anyway. If he’s executed on TV, how are they going to tell if he’s dead or not?

  81. 81
    David Losh says:

    RE: Pegasus @ 73

    What a ridiculous reaction. I said tax them the heck out of this country to some place else. let them take the money.

    The money they have does nothing for the economy or us. It’s dead money. In another system the money would be attached in some way. From there the money would enter the global economy.

  82. 82
    David Losh says:

    RE: Courtney @ 71RE: Ira Sacharoff @ 80RE: Blurtman @ 79

    Of course this seems like a lark, but it’s to the point that business, corporate, multi national, business caused a global economic melt down, and are now absent. Government is supposed to step in, and clean up the mess.

    Let’s take this Bill Gates creature. If our piracy laws don’t protect him, he’s broke. Our laws do protect him, and we fight with a country like China for his God given right to make profit. We fight wars for oil companies, and supply them with Bell Helicopters, Colt weapons, Haliburton Construction, and General Electric defense systems.

    Our government probably creates more wealth than anything else they could possibly do. Then the government gives tax breaks to the financial engineers who have amassed fortunes from the taxes of the American work force.

    It’s not redistribution, it’s our tax dollars. Our tax dollars pay the $400 for a toilet seat. Some supplier makes a profit from that. Our tax dollars paid for the electronic guidance systems that blew the heck out of the infrastructure in Iraq so Haliburton could get a no bid contract to rebuild infrastructure. Our tax dollars fight a drug war in Thailand, Afghanistan, Columbia, Peru, Italy, Morocco, Lebanon, and especially Mexico. Our pharmaceutical companies of course make a profit, as do the wood pulp producers, weapons, helicopters, intelligence, security consultants, really I have a long list of profit margins on that drug war.

    Our tax dollars create banking profits. The entire system is built on the Fed, and after the banking system created a mess the Fed is supposed to clean that up. God forbid Bank of America should skip a couple of quarters of profits, or renegotiate with some home owners, who will be paying on Notes owed on twice the price of the actual asset value. God forbid Warren Buffet might not make a wind fall profit because Wells Fargo has to actually do some work.

    It amazes me that the American people take this so lightly. Fraud is a kind term for theft.

  83. 83
    2kt says:

    RE: David Losh @ 45

    Your views are a product of much confusion about just about any subject related to function economy or money. What you propose does really make any sense, but you like the sound of your own proposals. Hell, it’s a free country. God bless you.

  84. 84
    2kt says:

    It meant — “does not really make any sense”. Basically, who cares. My response was just as sensible as your ideas.

  85. 85
    Dirty_Renter says:

    Whew…the left-wing nutters have taken over the thread.
    They’re almost as scary as the right-wing nutters.

  86. 86

    RE: Dirty_Renter @ 85
    Who you calling a left winger?
    All I said was that CEOs should be executed on national TV.
    That would only be scary if :
    a. I had any power
    b. You were a CEO.

  87. 87

    By Ira Sacharoff @ 78:

    Yes, it did seem outrageous that these banks and investment firms were handing out millions of dollars in bonuses, money that they received from the taxpayers, to employees who did nothing but screw things up.

    That’s guilt by association. I really doubt that anyone who seriously screwed something up at a company is getting six figures in bonuses, or is even employed by that company any longer.

    The only guilt by association that I accept is that is someone was a member of Congress between 2004 and 2008, I assume they’re responsible for the mess we’re in. It is a rebuttable presumption though.

    Also, presumably people making six figure bonuses have value to the company, and losing them to the competition would be bad to the company, which would make it less likely the TARP funds could be repaid. Thus, that tax plan was just as stupid as Obama attacking AIG at a time when AIG was largely owned by the US government.

  88. 88

    By Blurtman @ 79:

    RE: Ira Sacharoff @ 78 – That hastened repayment of the TARP bailout money at several firms. .

    Which harmed the recovery. Another reason people in Congress should STFU.

  89. 89
    Blurtman says:

    RE: David Losh @ 82 – If you are reasonably well informed, you may suffer from a bias that assumes what you know is common knowledge. A lot of Americans are focused only on their immediate environment, a lot don’t understand what is going on.

    Both dominant politcal parties are more beholden to special interests than to the average citizen. And the goal of elected representatives is to stay in power, so one gets nothing but lies from both sides of the aisle. Example: Patty Murray’s anti-Rossi ad that tries to pin the Wall Street bailouts on him. Murray of course voted for the TARP bailout, and voted to confirm the engineers of the AIG bailouts. (I am not a Rossi fan, for the record.) Murray claims she is running the Boeing ad because she believes that our military should fly planes into battle made in the USA. Wrong, she is running the ad because she wants you to vote for her. Murray knows most folks glued to the tube have a vestigial lizard brain, and she believes she can twist logic and the truth to get their votes. She may be right.

    The mood in the USA is anger. We’ll see where this leads. As the PTB haven’t figured out the next source of cake for the masses, maybe we’ll see some action on the part of J6P, but I wouldn’t bet on it.

  90. 90

    RE: Blurtman @ 89 – The other planes would also technically be built in the US too. I can’t believe Murray is making an issue of that. I would assume Rossi supports Boeing too, so all she’s doing is misleading voters.

  91. 91
    David Losh says:

    Here’s the problem for all the people who discuss, into the ground, how the government should “print” money, or provide “stimulus,” or do something about this Great Recession, this Global Recession.

    It’s not government policies that cause the problem.

    Today the United States farmers are calculating the price of wheat because of the drought in Russia. They can calculate until the day they die, but the money would have to come from some place. What’s Russia going to do? Borrow the money? From who? China, or the United States?

    Over inflated property prices have left an equity issue. The money is out there, profits were made, and they are being made today, but where is the money?

    There are 6 Billion people in the world. In a computer program that looks like a huge profit potential. The reality is, that is 6 Billion people to feed, and shelter, every day, before they start taking what they need.

    What governments are looking at is the populations they can’t feed. Starvation in Somalia, makes good press, but once it happens in Mexico, Ozarks, Mid West, or California then we have a problem.

    Distribution is a problem. An armed global populace is a problem.

    I just don’t think giving a few hundred more billion to the wealthy will fix government problems today.

    $42K for the Volt? and Bank of America is supporting the IPO? Come one, give me a frigging break. We have real problems today.

  92. 92
    Trigger says:

    Wow – Just looked at this listing:
    http://www.realtor.com/realestateandhomes-detail/9003-Ne-139-St_Kirkland_WA_98034_1120905950

    Ok. Not a great shack. But for 289K in Kirkland? What is going on here?

  93. 93
    Trigger says:

    And look at this whooper:
    http://www.realtor.com/realestateandhomes-detail/12611-Ne-145Th_Kirkland_WA_98034_1121188847

    120K. I know it is a shabby condo and everything but I remember shabby condos going for 300K. Is this Mars or what? Have the prices gone down so much?!!

  94. 94

    RE: Trigger @ 93
    Being an agent, I’m not allowed to comment on specific listings, but a couple of things that might be noted:
    1. Not all of Kirkland is the same, pricewise. The parts that border Bothell and Kenmore are generally less expensive and considered less desirable, and
    2. Kingsgate is an area that’s considered ” the ghetto” of Kirkland, with a lot of lower end apartment buildings and older condos. Also pay attention to homeowner dues. Some condos with high HOA dues are sold at a much lower cost because people just don’t want to pay several hundred per month to maintain an older building.
    3. These are just general references. Any resemblance to actual listings is purely coincidental.

  95. 95
    Scotsman says:

    Now I understand why British health care is so popular:

    “One local authority is using its budget to pay for the services of a prostitute in Amsterdam, while others have said visits to lap dancing clubs are permissible under new policies which transfer funds directly to those who receive care from social services. ”

    http://www.telegraph.co.uk/health/7945785/Councils-pay-for-prostitutes-for-the-disabled.html

  96. 96

    RE: Scotsman @ 95
    And if it happened in this country, either the lap dancing would be denied because the disability was not covered…” The loss of two arms in a thrasher does not qualify for any coverage, sir” OR the lap dancing would be covered, but services provided by the new Department of Lapdancing Administration, their sole employee having fifty years experience as a file clerk and recently retrained as a lap dancer.

  97. 97

    RE: Ira Sacharoff @ 94 – Lay off the agent “real estate is local” BS. Next you’re going to say that Seattle isn’t all the same, King County not, Washington not and the West Coast not the same. ;-)

    On the condo topic, some also have serious financial issues. Wasn’t there a waterfront condo in Seattle that you could pick up units in pretty inexpensively due to uncertainties over the association’s finances, and the possibility of a huge special assessment?

  98. 98

    RE: Scotsman @ 95 – Is that all that different than insurance paying for Viagra?

  99. 99
    pfft says:

    By Scotsman @ 41:

    RE: pfft @ 39

    If I thought you had a chance in h#ll of understanding any of that math I’d dig into it. But since you don’t understand anything beyond cutting and pasting Krugman’s columns, I’m not going to waste my time.

    What kind of discussion can we have when you don’t even question his underlying assumptions when the obvious facts are a direct contradiction? Krugman says:

    “Itâ��s not one-for-one, because higher spending leads to higher GDP and hence higher tax revenue.”

    It’s obviously not true. Show me that higher tax revenue from the expanding GDP. Calculate the multiplier effect net of normalized expansion. If you can’t handle percentage changes, how are we going to discuss calculus?

    If you think the recovery is rolling and inflation is just around the corner, then I can only encourage you to leverage up to the maximum allowed by your income and credit rating. I’m sure that’s what Krugman is doing- putting his money where his mouth is, along with all the other bulls trying to cover for their mistakes of the last 30 years. Good luck!

    the multiplier effect is basic economics. I think I learned that days into my first economics class. I have two PHds, krugman and baker, who say that the multiplier is positive. it’s obvious the multiplier is positive. when you buy something from someone that let’s them have the money to buy something from someone else.

    for you to make your case it’s real easy. show your work that the multiplier is not positive. tells us what your multiplier is. show that interest will cost more than the stimulative effects of deficit spending.

    just how much interest do you think we’re paying?

    stimulus has worked all over the world.

    How do stimulus size and economic growth compare internationally?
    http://voices.washingtonpost.com/ezra-klein/2010/06/research_desk_responds_how_do.html

  100. 100
    pfft says:

    By Chris @ 44:

    RE: Scotsman @ 41

    Scotsman – I agree. What I find interesting is the attitude of the deficit spenders that the burden of persuasion is on those who want proof the money won’t be wasted or make things worse. At every point from how much money needs to be spent, where it will come from, how it will be spent and the effects of the spending they assume they can sit back and speak in platitudes. Not just here but back to 2008 at every turn in the disaster even when Congress was voting on the initial stimulus. Now Pfft and other die hards seem to acknowledge the initial stimulus was inadequate.

    krugman and baker pointed that out the stimulus was too small when it passed. I can post the columns.

    ” What I find interesting is the attitude of the deficit spenders that the burden of persuasion is on those who want proof the money won’t be wasted or make things worse.”

    deficit spending isn’t some new exotic idea. it’s economics 101.

  101. 101

    RE: Kary L. Krismer @ 97
    Absolutely. I’ve shown a couple of condos recently also that were priced really low, and the agent remarks state that the HOA is involved in litigation. And where does the HOA get the money if the litigation against them is successful?

  102. 102
    pfft says:

    By Chris @ 61:

    RE: Ricoshea @ 59
    I agree we have to protect the middle class but I also think we have to be careful about thinking enacting a higher tax rate on the wealthy will result in the amount of money coming in most people think.

    we know that more money will come in. clinton raised taxes in the 90s and it didn’t stop the boom. reagan raised taxes and it didn’t hurt the 80s boom.

    bush cut taxes for the rich in 2001 and 2003 and look at where that got us. deficits and a great recession.

  103. 103
    pfft says:

    By Pegasus @ 72:

    William Black speaks about banks hiding real estate losses. Pay attention pfft…there is NO REAL RECOVERY.. only the crooks are in control.

    I didn’t know that banks “supposedly” sitting on losses accounted for a non-recovery. GDP has been positive for many quarters. manufacturing and services have been expanding for months. the private sector has been adding jobs for months. the stock market bottomed more than a year ago.

    if you wait for every single thing to be perfect you’ll be waiting until the next recession. you can go back into history and say the economy has never recovered ever. JP Morgan(the person) bailed out the system in the early 1900s so I guess no real recovery in over 100 years? then you had the depression.

    I can go back to every crisis and find a reason why there wasn’t a real recovery. I can go back and find you someone who said sell stocks and was wrong.

  104. 104
    David Losh says:

    RE: pfft @ 98

    This is exactly what I’ve been talking about all week end.

    This is theory. It doesn’t translate into an affordable price, for a bushel of wheat, this year, but those are very pretty charts.

  105. 105
    Blurtman says:

    RE: pfft @ 103 – Depends on how you define recovery, and what it means to you. We can have 25% unemployment, decreasing standard of living even for the employed, and increasing GDP. Hurrah.

    The issue with the banks is that they are insolvent, and would be declared so except for FASB accounting mark to pretend gimickry. The FDIC cannot cover the insured accounts under the real banruptcy scenario, so let’s pretend, OK?. Translation: the money the collective citizenry has in their savings accounts is gone. Pfffffttttt…. But let’s pretend it is still there.

    Obama did not address the root problems, Just kicking the can down the road, like Bush the war criminal did before him.

  106. 106
    Trigger says:

    RE: Ira Sacharoff @ 94 – Ira – I don’t know. I went to realtor.com and I saw hundreds of condos for sale for less than 200K.

    I am 100% sure that in 2006 there would be 1-2 condos for sale for less than 200K. And they are not just in Kingsgate – they are all over the place.

    Look at this: http://www.realtor.com/realestateandhomes-detail/9330-Ne-Juanita-Dr_Kirkland_WA_98034_1118434762

    189K right near the lake. What? The number of listings went up and the prices are really low. Same goes for houses.

    I remember that in 2006 – you could buy a burned down shack for 600K and now for 600K you can get a shack but it is not a dogs house anymore.

  107. 107
    Trigger says:

    RE: Trigger @ 106 – Ira – look at this even:
    http://www.realtor.com/realestateandhomes-detail/12037-100Th-Ave-Ne_Kirkland_WA_98034_1120939539

    200K for this. In 2006 this would cost 350K for sure….

  108. 108
    Trigger says:

    RE: Trigger @ 107 – Oh – look at this shack. Maybe not an estate and maybe slightly ugly. But it is going for 400K – What is going on?
    http://www.realtor.com/realestateandhomes-detail/8428-Ne-131St-Place_Kirkland_WA_98034_1117079219

  109. 109

    RE: Trigger @ 108
    There’s no question that prices have gone down a lot in much of the Seattle area, especially condos. They built so danged many of them. That’s not to say prices won’t drop further.
    And again, I’m not commenting on specific listings, but short sales are sometimes priced artificially low, and the lender may not approve the deal even if you offer full price. And sometimes you need MLS access or have a pal with MLS access to look up properties to know for sure whether they’re short sales or not.
    Again, I’m not suggesting that two out of three listings you posted are short sales or not. Just making a statement out of the blue.

  110. 110
    Chris says:

    RE: pfft @ 100
    But you’ve been touting the positive effects of the stimulus all along implying we were turning a corner. Do you think that is an unfair statement of your comments the past few weeks? What is Krugman’s position (and therefore yours) where a “recovery” fails? Does the train go all the way back down the tracks or does it remain where sputtered out? I think things will be in a far worse position because money has been wasted and we are deeper in debt. If Krugman thinks we will be in a worse position he never said so when the first stimulus was debated.

    How could it help a recovery to pour money into the same inefficiencies that got us into trouble – too much money printed and sent to a finance and housing sector that is massively overvalued and state governments that need to balance their budgets at the expense of unions? I leave aside the massive corruption the spending is supporting.

    Now that the stimulus is failing, is it your opinion we would be better off not having spent it to begin with or are we in a better position because the government kept the housing bubble inflated a few more months? At post #69 is news the government is now guaranteeing luxury condos that have not been able to meet the (previous) requirement of selling 50%. Do you think it’s a good idea to pledge the full faith and credit of the United States to failing luxury condo projects?

  111. 111
    softwarengineer says:

    RE: Ira Sacharoff @ 109

    The Stimulus Money Put Us In the Economic Mess “Eye of the Hurricane”

    Everything seems convoluted and unpredicatable when the winds die down and the imminent depression seemed over, no, the double dip winds won’t go back to 130 mph again, we’re safe in the calmer eye.

    But wait until we get out of the eye and into the real storm soon. It would explain banks denying lower price “short” loans today, that 6 months from now they’d beg for.

  112. 112
    Pegasus says:

    RE: David Losh @ 104 – You and pfft need to return to the mothership immediately. You both know you are not to expose Uranus or it’s mythology.

  113. 113
    David Losh says:

    RE: Pegasus @ 112RE: Pegasus @ 72

    http://globaleconomicanalysis.blogspot.com/2010/08/fooled-by-stimulus-structural-problems.html

    And who do you think controls the banks?

    Speaking of the mother ship, I’d suggest you beam up, get a down load then come back with some original thought.

  114. 114
    pfft says:

    By Blurtman @ 105:

    RE: pfft @ 103 – Depends on how you define recovery, and what it means to you. We can have 25% unemployment, decreasing standard of living even for the employed, and increasing GDP. Hurrah.

    The issue with the banks is that they are insolvent, and would be declared so except for FASB accounting mark to pretend gimickry. The FDIC cannot cover the insured accounts under the real banruptcy scenario, so let’s pretend, OK?. Translation: the money the collective citizenry has in their savings accounts is gone. Pfffffttttt…. But let’s pretend it is still there.

    Obama did not address the root problems, Just kicking the can down the road, like Bush the war criminal did before him.

    I define recovery as a process, not a destination. nobody will ring a bell when we’re recovered. people will probably too busy getting on with their lives to notice.

  115. 115
    pfft says:

    By Chris @ 110:

    RE: pfft @ 100
    But you’ve been touting the positive effects of the stimulus all along implying we were turning a corner. Do you think that is an unfair statement of your comments the past few weeks? What is Krugman’s position (and therefore yours) where a “recovery” fails? Does the train go all the way back down the tracks or does it remain where sputtered out? I think things will be in a far worse position because money has been wasted and we are deeper in debt. If Krugman thinks we will be in a worse position he never said so when the first stimulus was debated.

    How could it help a recovery to pour money into the same inefficiencies that got us into trouble – too much money printed and sent to a finance and housing sector that is massively overvalued and state governments that need to balance their budgets at the expense of unions? I leave aside the massive corruption the spending is supporting.

    Now that the stimulus is failing, is it your opinion we would be better off not having spent it to begin with or are we in a better position because the government kept the housing bubble inflated a few more months? At post #69 is news the government is now guaranteeing luxury condos that have not been able to meet the (previous) requirement of selling 50%. Do you think it’s a good idea to pledge the full faith and credit of the United States to failing luxury condo projects?

    I have not really been touting anything. I am just countering all the arguements that the stimulus did nothing. not true but study after study doesn’t matter to you guys.

    “If Krugman thinks we will be in a worse position he never said so when the first stimulus was debated.”

    oh yes he did.

    The Obama Gap
    http://www.nytimes.com/2009/01/09/opinion/09krugman.html?_r=1

    ” I think things will be in a far worse position because money has been wasted and we are deeper in debt.”

    1. prove it. the multiplier according to two Phd economist is between 1.4 to 1.5. there are many other studies I can point to if you want me to.

    2. what are government bonds yielding? enough said. you guys would be screaming if rates were a lot higher. the bond market isn’t crying uncle but that will never cause you bears to change your tune. you only listen to and extol the virtues of the market when it lines up with your bearish views.

    “Do you think it’s a good idea to pledge the full faith and credit of the United States to failing luxury condo projects?”

    the money is a rounding error compared to the economy or debt.

  116. 116
    pfft says:

    By softwarengineer @ 111:

    RE: Ira Sacharoff @ 109

    The Stimulus Money Put Us In the Economic Mess “Eye of the Hurricane”

    Everything seems convoluted and unpredicatable when the winds die down and the imminent depression seemed over, no, the double dip winds won’t go back to 130 mph again, we’re safe in the calmer eye.

    But wait until we get out of the eye and into the real storm soon. It would explain banks denying lower price “short” loans today, that 6 months from now they’d beg for.

    they yield curve isn’t signaling recession.

    Yield Curve as Recession Harbinger
    http://online.wsj.com/article/SB10001424052748703321004575427822149953204.html?mod=googlenews_wsj

  117. 117
    pfft says:

    even when things are good they are bad! this shows two things.

    1. there is always something to worry about.

    2. stimulus worked all around the world

    With the stimulus equivalent to 3 percent of gross domestic product, some economists say Norway could overheat.

    http://www.businessweek.com/managing/content/aug2010/ca2010084_319342.htm

    I’ve posted about sitmulus working in Asian and in Norway. will any of the anti-stimulus folks please comment? nobody has addressed that.

  118. 118
    Scotsman says:

    RE: pfft @ 117

    I don’t live or work in Norway or Asian (wherever that is), so to be truthful I really don’t care. But for the sake of discussion, were their stimuli funded by foreign investors, from accumulated government savings, or private domestic saving? It makes a big difference.

    But let’s assume the stimulus has worked here, that it saved a gajillion jobs, and that you are correct about it being a success. My question is, do you think you and/or the country is going to be better off in a couple of years for this move, or will it be worse? Five years from now will the stimulus or lack of it make a knat’s as# worth of difference in how we are living and what our future looks like?

  119. 119
    Blurtman says:

    RE: pfft @ 114 – You do not define recovery at all. And I have not taken a position on the stimulus, just that GDP can be a meaningless measurement.

    Here is an abstract hypothetical: Assume Goldman Sachs were the only employer in the USA, and was doing quite well, sigificantly contributing to a GDP increasing at 5% per year. Goldman cannot employ more than 30% of the work force, and so unemployment is 70%. Goldman’s IT department continues to increase operating efficiencies so that they can now lay off employees. So a situation exists where there is massive unemployment, where unemployment is increasing, and where GDP is increasing.

    A long way to go to illustrate that GDP can increase even with increasing unemployment, and a decreasing standard of living – the situaion we appear to be in currently.

    “Economic performance is generally being measured through GDP (Gross Domestic Product), a variable that has also become the de facto universal metric for ‘standards of living’. However, GDP does not properly account for social and environmental costs and benefits. It is also difficult to achieve sustainable decision-making aiming at sustainable progress and wellbeing if welfare is being considered from a purely financial point of view. Sustainable development can be defined as “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. Therefore, in order to effectively measure ‘progress, wealth and well-being’, one must go beyond GDP. This requires clear and at the same time multidimensional indicators showing the links among a community’s economy, environment, and society.”

    European Parliament, Policy Department Economic and Scientific Policy: Beyond GDP Study
    http://www.beyond-gdp.eu/download/bgdp-bp-goossens.pdf

  120. 120
    David Losh says:

    RE: pfft @ 117

    Well, yes, that has been answered repeatedly. Just Google Global Economic Stimulus, it’s all there for you to read. Government Stimulus does nothing but add to accounting theory.

    What no one has addressed all week end is my tirade against the wealthy, because that would be too out of the box to even consider. Giving the wealthy, of the global economy, a few more trillion to play with won’t change our lot in life.

    Until the price of housing comes down to be cheap, by the middle class standard of living, at the very least, there won’t be a recovery. The only thing that has floated the GDP is upward mobility. Plug that in to your figures while you talk about the psychology of the stock market.

    If all the world is doing is feeding the rich, there will continue to be a back lash.

    Now some of you may not like Obama, but he is the picture of change in this country. Other countries have already gone through significant change. Asia is a very changing face.

    You’re going to have to do better than theory to prove any thing about a recovery because, as it stands, the standard of living in the United States is dropping like a rock.

    Oh, and I would also like some theory about how GDP is tied to Standard of Living.

  121. 121
    pfft says:

    By Scotsman @ 118:

    RE: pfft @ 117

    I don’t live or work in Norway or Asian (wherever that is), so to be truthful I really don’t care. But for the sake of discussion, were their stimuli funded by foreign investors, from accumulated government savings, or private domestic saving? It makes a big difference.

    But let’s assume the stimulus has worked here, that it saved a gajillion jobs, and that you are correct about it being a success. My question is, do you think you and/or the country is going to be better off in a couple of years for this move, or will it be worse? Five years from now will the stimulus or lack of it make a knat’s as# worth of difference in how we are living and what our future looks like?

    stimulus did help and I have posted many studies to prove it. the most alarming was the blinder-zandi study.

    “I don’t live or work in Norway or Asian (wherever that is), so to be truthful I really don’t care.”

    of course you don’t because it proves you wrong. that and you probably don’t know enough about the economies of those countries to argue. the stimulus and bailouts worked to the extent that they could, deal with it. the places with austerity are a disaster- look at estonia. I remember you did care about estonia. something about no debt and a flat tax. typical. don’t mind the 20% unemployment rate!

    Greek recession deepens as austerity bites
    http://www.google.com/hostednews/ap/article/ALeqM5iXUJvBknZVGqsBenIusBgBvWj5WQD9HHTFRG0

    austerity spiral just as predicted.

  122. 122
    pfft says:

    By Blurtman @ 119:

    RE: pfft @ 114 – You do not define recovery at all.

    actually I have given a dozen or so links showing recovery. I mentioned above GDP growth and expansion of industrial production and the services sector. I can give 10 more if you want.

  123. 123
    Chris says:

    RE: pfft @ 115
    But Pftt, I stated that “worse position” meant the economy ends below the starting position. The metaphor I used was a train lower on the hill than it started (the Little Engine That Can’t). You responded with an article in which Krugman said in Jan 2009 “the Obama plan just doesn’t look adequate to the economy’s need. To be sure, a third of a loaf is better than none.” In other words he thinks the economy will be further along, whether successful or not, than the starting point (half a loaf).

    Now we are getting indications the “recovery is weakening” or whatever the new code words are for “about to stall again” http://www.dailyfinance.com/story/fed-leaves-rates-near-record-low-to-purchase-u-s-debt/19588223/

    No one has contested that GDP has expended. I should hope so with all the money spent. You keep putting up a Keynesian understanding of the multiplier effect. This multiplier effect has been both supported and criticized by economists. http://en.wikipedia.org/wiki/Fiscal_multiplier and http://online.wsj.com/article/SB10001424052748704471504574440723298786310.html .

    Even if the multiplier formula works as stated, what numbers do you use? Are the unlimited Fannie Mae and Freddie Mac pledges included in spending in your analysis? Since Krugman’s analysis is yours, apparently you think we are better off than without the stimulus spending and are further along to recovery even if things sputter out.

    I think we can fairly say you have a “half loaf” is better than none idea like Krugman’s. I think the government has poured money down a rat hole and we will wish in five years we hadn’t spent it or that we had spent it on something other than reinflating a bubble. I don’t understand why Krugman or you don’t care how the money was spent. The fact that a developer in New York can call in political favors to get the US government to guarantee financing for luxury condos against all previous rules and common sense is wrong and an indication of rot. You call it a rounding error.

  124. 124
    Blurtman says:

    RE: pfft @ 122 – I did review several of your posts, but there are a lot in this string. So post two links.

  125. 125
    Scotsman says:

    RE: pfft @ 121

    “of course you don’t because it proves you wrong. that and you probably don’t know enough about the economies of those countries to argue.”

    OK, I took the time to look up the stimulus for Norway, and you know what- it confirmed what I already knew. You’re an economic idiot. You’re comparing apples to oranges, two completely different scenarios that prove nothing.

    Norway’s stimulus was a mix of tax cuts and government spending on infrastructure construction jobs, and was rapidly put into place unlike efforts in the U.S. where the funds were leaked out over 3-4 years and often to pet political programs, not labor intensive construction.

    But most importantly it was paid for FROM SAVINGS, like Keynes said it should be, not financed with borrowed money supported by foreign interests. Norway is a huge oil and gas exporter, one of the largest in the world, and maintains a RESERVE FUND from which it can draw money when it needs to. That’s where the stimulus money came from. Any interest cost incurred is paid back to the fund, not to foreigners, so the NET COST to the country is ZERO. It makes a huge difference

    How did they define success or recovery?:

    “”The size of the stimulus package is right and the measures can rapidly be put in effect. But we will not escape an economic downturn,” Hilde Bjoernland, a professor of macroeconomics at Oslo’s business school BI, told AFP.”

    So, even with this package they still saw increased unemployment and a sharp drop in GDP. I guess that’s the new definition of “success.”

    You’re a joke. Your own best example doesn’t even support your claims because it 1) isn’t relevant to the economic situation here in the U.S., 2) was funded from savings, not new debt, 3) was applied differently (correctly, I might add) and 4.) still only managed to slow the fall of the economy. Completely pnwd, as they used to say.

    I’d suggest you read some more, but Krugman won’t teach you anything that’s based on reality, and we already have enough Skittle-shitt*ng unicorns and pink ponies running around.

  126. 126
    Scotsman says:

    RE: Scotsman @ 125

    Oh- there’s one more issue- scale. Norway “borrowed” $3 billion from it’s $450 billion sovereign wealth fund to pay for it’s stimulus, a drop in the bucket compared to our string of $ trillion dollar deficits, fully 8% of GDP on an ongoing basis.

    Let me help you out with this. That’s like borrowing $5.50 from your $1,000 savings account to buy an extra sandwich for lunch verses what the U.S. did- borrow $8,000 from your neighbor when you make $100,000 a year, but have no savings at all. (But you do already have $90,000 in existing debt and projected shortfalls for the next decade averaging almost $20,000 a year.) Would you loan to this guy? Who do you think is in the stronger position financially? What would Krugman say? Does he mention that “small” difference in his effusive “conscience of a liberal” column? I’d guess not, but you still see him as a valid source for anything except toilet paper?

  127. 127
    Mikal says:

    RE: Scotsman @ 125 – There you go again. Why didn’t we save during the good times of 2002-2007 instead of tax cuts for the rich? You always want it both ways.

  128. 128
    Scotsman says:

    RE: Mikal @ 127

    Um, Mikal- we haven’t “saved” here in the U.S. for over fifty years. So you know what the bad news is? Your “inheritance” will be nothing but higher taxes and ever reducing services. And your kids will all be saying it’s Obama’s fault.

  129. 129
    Mikal says:

    RE: Scotsman @ 128 – Not my kid. She is intelligent enough to know the Republicans did alot of it during their six years of control of government.

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