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Guest Post: Debt And Deficits - Killing Economic Prosperity

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Submitted by Lance Roberts of Street Talk Live,

 

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Tue, 10/30/2012 - 19:27 | 2933079 Mr Lennon Hendrix
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MOAR DEBT!!!!!!!!!!!!!!!!!!!

Tue, 10/30/2012 - 19:34 | 2933089 Enslavethechild...
EnslavethechildrenforBen's picture

They take money OUT of the economy by printing new money, they take money OUT of the economy by Taxing that money that they already taxed you for by printing it, they take money OUT of the economy by charging you interest on loaning you some thing that they did not earn ( all they did was press the "print" button on their copy machine)

Tue, 10/30/2012 - 19:42 | 2933106 sunaJ
sunaJ's picture

Of course they are both wrong.  They are two sides of the same fallacious argument.  It is the circus that has become, over decades, our political system. 

Tue, 10/30/2012 - 20:10 | 2933149 Manthong
Manthong's picture

“The current Administration believes that it is simply the lack of the "rich"  not paying their "fair share" and that a redistribution of wealth will solve the issue.”

 

No they don’t.

It’s just their mantra to facilitate the march into collectivist hell for the sheeple and nirvana for the elite.

Tue, 10/30/2012 - 21:46 | 2933361 Harlequin001
Harlequin001's picture

'What is really causing the economic malaise that the U.S. faces today?  '

This is a tough one. Could I sum up by saying that 'when your income shrinks your debt payments don't, therefore you have less to spend on stuff', hence the recession?

or 'when prices rise your income won't' hence real crushing poverty, and no 'recovery'?

Did I get it?

 

Wed, 10/31/2012 - 00:21 | 2933726 Ayr Rand
Ayr Rand's picture

Correct, but overly cheery.

Over the past four years, the US has spent $5T it didn't have to raise employment by about 5.2M jobs (if we are to believe the BLS, and why would they lie?). This averages to about $1M per job. Since employment has been ramping up over this time, the average employment increase has been 2.6M over that 4 years. (I.e., none at the beginning, 5.2M at the end averages to 2.6M.) So the average cost of each job gained has been about $500K per year. According to the Federal Reserve, the average American income (including the top 1% and the 99%) is about $100K. How long can a country afford to pay $500K / year for jobs that make $100K / year and pay $18K per year in taxes, on average. The Obama economics A team apparently believes that the -96% return on investment is a good idea. (But since the money has to be going somewhere, this tends to suggest where the bulk of those government-manufactured jobs and spending are going, doesn't it?)

I think that says a lot about what is really causing the economic malaise-- incredibly poor management of resources combined with 40 years of leveraging that has left US Debt / GDP far higher than ever before. The last time Debt / GDP was high (but much lower than now after 3 years of "deleveraging") was in 1929, and was the direct cause of the Great Depression (aka Deleveraging). 

Economic stimulus and monetary easing might be able to work, but as implemented by this Administration they had no chance. We need some serious wage inflation that is not focused on the top 1% (who currently receive 94% of gains) to recover from this "recovery". The ROI has to be more than -96%. Not clear to me why Romney etc have not bothered to point this out. 

Wed, 10/31/2012 - 04:44 | 2933884 CompassionateFascist
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When financial "products" replace real products, your economy is dying of a recurrent historical disease: terminal Jewification. 

Tue, 10/30/2012 - 19:57 | 2933119 vast-dom
vast-dom's picture

SHITCAN ALL TAXES and institute 10% across the board tax and reduce gov by 25%min and voila! Need more cash? Have the shithead print up some QE for the gov and not the banksters!

Problem Solved. Vote for me bitchez I can clean this mess up right quick: VD for Prez 2012!

Tue, 10/30/2012 - 21:16 | 2933311 LMAOLORI
LMAOLORI's picture

 

 

Fail you started out semi good then lost it with the need more cash crap we are the government and they have already monetized our debt. Something plenty of people don't understand is the loopholes used by people like bailed out Uncle Warren he hides his billions in the gates foundation closing those loopholes would actually make him put his bailed out billions where his mouth is. However even warren actually paying more taxes wouldn't put a dent in the debt so what we really need is a return to a small government that is limited in it's taxing power and imposition of regulations. We would also have to end socialist programs like obamacare which will add Trillions more to our debt and medicare, welfare including corporate welfare in short all the programs that take from one to give to another. 

Problem is plenty of people talk like they want to balance the budget but they don't want any of the loopholes they use closed that's why we are in the mess we are in the politicians use the power of the purse to purchase votes. The purpose of the government is only supposed to be limited to providing basic services not to enrich those who work for it,i.e. extravagant pensions, healthcare. Do we really even need them? IMO we would be better off if we returned the power to the states then we wouldn't all be forced to pay for special privledges to the chosen like this

 

Cook County lands $100 million federal waiver

Or ridiculous expenses like this

Obama extravaganza performance by pop star Beyonce, cost $969,793, more than $4,700 per attendee

Wed, 10/31/2012 - 00:30 | 2933740 cranky-old-geezer
cranky-old-geezer's picture

 

 

Have the shithead print up some QE for the gov and not the banksters!

He's already doing that moron.  $150 billion a month thereabouts.

Tue, 10/30/2012 - 20:23 | 2933169 AmCockerSpaniel
AmCockerSpaniel's picture

It isn't money, it is JOBS. There are no good jobs in any numbers because of the competition with workers over seas, that work for as little as a dollar a day (FoxCom). We will not work for that small amount "yet". This unfair competition is the result of "free trade". Free trade is the wind fall for the 0.10% who own the big companies. They get to dump their labor force here, and import the products of those who will work for very very little (they have a much lower standard of living than we do). No one can create jobs. Jobs are a factor of demand for goods, and the price for those goods. It just takes so much labor to make the goods.  Technology and innovation only eliminate jobs (machines & robots replace workers).  Giving a man money only domesticate him, like a wiled animal. To do this destroys the mans self image. Only when he feels he earned his money does he become a man. So what is the short answer for us?

Tue, 10/30/2012 - 21:10 | 2933294 Twodogs
Twodogs's picture

Australia has freer trade than the US, yet much higher wages and much lower unemployment. That utterly contradicts your assertion that off-shoring is the reason for high unemployment.

Look at your product life cycle to see what jobs are best off-shored I.e. commoditised jobs for commoditised products. Theoretically, this should free up productive capital to invest in productive enterprises. Australia is a case in point. It's a bit like the automation argument, where we don't have jobs because there aren't any typing pools any more. Bring back the horse-drawn cart manufacturers!

Tue, 10/30/2012 - 23:02 | 2933571 AmCockerSpaniel
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We have had about fifteen years of free trade, and I don't see this Australian effect. I don't know much about Australia, they have minerals/ mining & sheep. Oh; they speak the King's English too. It's one of those places I hope to visit. Yes, automation does result in lower labor. Bringing back the horse-drawn cart is a non starter too. What I do know is that "trade" is just that. It's trading some of your production for some of mine. With the great gap in the standard of living / cost of labor, we have makes it a one way trade. It's been going on for far to long, and we just can not afford it any more.  When was the last time you bought some thing costing over $100 that was wholly made in America? It's just not working! People will buy the lowest cost, even if it puts their neighbor out of work, and thus puts them out of work  when he has no money to buy your stuff. What are the numbers for unemployment, and SNAPS? 

Tue, 10/30/2012 - 23:26 | 2933634 Twodogs
Twodogs's picture

America's problems lie in crony capitalism = theft. Corruption is essentially waste, where everyone else picks up the tab. Multiply that 1,000,000 times and you end up with, well, what you have right now. Banning trade will not fix that. Worse, you will not only lose China's comparative advantage, but your own.

Wed, 10/31/2012 - 06:00 | 2933903 Acet
Acet's picture

One does not exclude the other, in fact quite the contrary:

- Outsourcing of jobs produces a temporary bonaza for those who own the capital, since there will be a period during which the production costs of making the products are at the lower, developing nations levels, while those in the developed nations continue to purchase the products at the higher price points (even though their jobs are gone, they try to maintain their quality of life by going into debt).

- The mass of the newly unemployed or underemployed is further propped up by the government itself going into debt to pay for things like Welfare. This extends the period during which people continue to pay for the products at the high price points while creating/growing a class of people dependent on government goodwill and thus easier to control.

- The economy in the developed nation slowly transforms into a services circle-jerk economy (everybody is somebody else's waitress effectivelly and such an economy doesn't really produce anything). A Services Economy is far more vague and hard to measure in nature - in manufacturing and agriculture one can measure the results directly by counting/weighting and checking the quality of the physical goods produced, not so in services - and thus far easier for crooked types to take advantage of (notice the boom in managers boosting short term profits - and their bonuses - at the cost of long term viability)

- The capital bonanza from outsourcing is used to buy politicians and regulators. In the new environment where the Economy is almost entirelly Services (and thus much harder to measure), it becomes far more easy to slip through laws and regulations which alter the level playing-field to benefit the corruptors and/or well connected people.

- As the eventual downsides of moving the jobs abroad finally catch up (i.e. neither people nor governments in developed nations can go further into debt to maintain old consuming habits), the corruption process just accelerates as those who have gathered the most capital (and the crooked politicans and regulators) seek to maintain the status quo at all costs. This is what we are seeing now.

As to Australia being better than the US, that's just because a large part of Australia's GDP and export surplus is due to Mining - Australia mines large amounts of things like Coal and Iron Ore which it exports to China, while the US has already had its mining boom and its easilly accessible mineral resources have been exhausted.

Wed, 10/31/2012 - 11:12 | 2934463 11b40
11b40's picture

Give the doggy a +100......jobs, jobs, jobs.  As long as there are jobs, everything hums along just fine.  Ross Perot was 100% correct in 1992 when he said "that giant sucking sound you hear is the sound of jobs leaving America".  Can you say NAFTA....and that's just one part of it.

Look, I know that 'protectionism' has been made into a dirty word, but this has been done over a period of decades by the special interest groups who benefit from shipping our jobs to foreign lands.  I argue that BEING PROTECTIONIST IS ONLY COMMON SENSE, and free trade is stupid.  Fair trade, yes - Free trade, no.  My garage has a door with a lock for a reason.  My fence has a gate for a reason.  I lock the doors of my home for a reason.  For us to throw open our borders to every other country and say "come & get it" regarding our markets, and force our manufacturing base to compete against slave wages and predatory governments is nothing short of treason from my perspective.

Jobs = cash flow = spending = demand for goods & services = increased tax revenues.  Business is not hiring, but it is not due to "uncertainty", the "fiscal cliff", "burdensome regulation", or any other theory tossed out as political talking points.  Business is not hiring because there is an ongoing lack of demand...a lack of orders.  As soon as a company has orders they can't fill, they will hire more people, buy a new truck, add new equipment, or whatever else needs to be done to fill the orders.  They know if they don't, their competitor will.  When demand arrives, supply soon follows.

This is the fallacy of "supply-side" economics.  It is backwards - the equivelent of pushing on a string.  Supply is meaningless without demand, and all this lose monetary policy over the past 30 years has created hauge debt and artificial demand, with the greatest benefit of this policy flowing to a small circle of insiders who have become unbelievably wealthy by mining the assets of the middle classes.

....and don't even get me started on the 'trickle down' part of supply side.

 

Wed, 10/31/2012 - 02:04 | 2933824 Lord Koos
Lord Koos's picture

The 1% take an awful lot of money out of the economy and put it in Swiss and Cayman banks.

Wed, 10/31/2012 - 03:40 | 2933862 Tango in the Blight
Tango in the Blight's picture

I wonder if luxurious megayachts count as productive assets.

Tue, 10/30/2012 - 19:30 | 2933083 tooriskytoinvest
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New signs a junk bond bubble is forming

http://www.thedailycrux.com/Post/41674/New-signs-a-junk-bond-bubble-is-forming

The Coming Economic Hurricane Will Be Worse Than 2008: Central Banks Are Now Fighting With Each Other, Europe Is Deeply Divided Politically, Chinese Economy Is Entering A Permanent Slowdown, And The Effect Of QE Is Diminishing!

http://investmentwatchblog.com/the-coming-economic-hurricane-will-be-worse-than-2008-central-banks-are-now-fighting-with-each-other-europe-is-deeply-divided-politically-chinese-economy-is-entering-a-permanent-slowdown-and-the-e/

Osama bin Laden” has successfully donated twice to Barack Obama’s presidential re-election campaign

http://www.wnd.com/2012/10/obama-accepts-osama-bin-laden-donations/

One key reason silver prices are set to rise next year

 

http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=161036&sn=Detail&pid=102055

“Gold cards” are the new bribe in China

http://www.sovereignman.com/expat/gold-cards-are-the-new-bribe-in-china-9379/

 

Higher jobless rate predicted by budget watchdog

http://www.cbc.ca/news/business/story/2012/10/29/pbo-growth-outlook.html

 

Tue, 10/30/2012 - 20:06 | 2933141 Mr Lennon Hendrix
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Why is everyone headlining articles with bold?  You think us blind?

Tue, 10/30/2012 - 19:40 | 2933100 SillySalesmanQu...
SillySalesmanQuestion's picture

Lance must be a writer at CNBS.

Tue, 10/30/2012 - 19:50 | 2933112 Bay of Pigs
Bay of Pigs's picture

WTF? You'd never hear that on the BlowHorn.

Tue, 10/30/2012 - 19:56 | 2933117 buzzsaw99
buzzsaw99's picture

The uber-wealthy wouldn't have jack shit if that joo at the federal reserve wasn't backing up the asset prices of all their investments.

Tue, 10/30/2012 - 19:54 | 2933123 Mrmojorisin515
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blah blah blah blah, rich people own assets that are overvalued and should have had to shed many of them if the bailouts hadn't happened, and mr market could have redistributed the assets for all.  Though the government never likes anyone doing something that would infringe upon its power thus mr market had to be tamed with endless 0% interest rates and QEternity.  All trying to keep itself at the reins of power, all roads lead to FUBAR, see you when we arrive.

Tue, 10/30/2012 - 19:59 | 2933131 newworldorder
newworldorder's picture

We have many economic problems as articulated by most of us at ZH. Many are solvable, but will have little impact unless we collectively solve the #1 isue, which is.

The American worker must be able to negotiate for his labor on an equal playing field between himself, others around him and those who employe him/her. With no artificial constructs in place sanctioned by government - such as unristricted immigration, offshoring of jobs, special privilages for racial/ethnic/gender representation.

For those that advocate labor globalism, find your own energy resources, polute your own land, and obtain your own raw materiel of production, without the benefit and security of the US Military.

Tue, 10/30/2012 - 20:02 | 2933134 vix is for kids
vix is for kids's picture

Bush's tax decreases early in his first term were intended to spur an anemic economic recovery from the Y2k recession, using the same reasoning that Mr. Roberts used early in his article.  They did squat.  The restoration of those taxes will also do squat. They won't come anywhere near solving the deficit problem, nor will they cripple the economy.  The tax increases for high earners is primarily a fairness issue.  More responsible government spending is the biggest factor, and should be dealt with first.

Tue, 10/30/2012 - 20:16 | 2933164 nmewn
nmewn's picture

"The tax increases for high earners is primarily a fairness issue. More responsible government spending is the biggest factor, and should be dealt with first."

+1

It is a fairness issue. And I don't make anywhere near 200k. You know government has grown beyond all possible means of financing itself when 200k is considered "rich" and that group made the object of, singling out for "special tax rises".

150k, then 100k, then 50k will be next.

Tue, 10/30/2012 - 20:27 | 2933192 Oldwood
Oldwood's picture

So you are saying that there was no recovery or increase in tax revenues after Bush's tax cuts? Fairness is a perspective. If it is to be judged democratically we will all be screwed. A responsible government is an accountable one. When do you think that will happen? Benghazi?

Tue, 10/30/2012 - 20:10 | 2933138 Marco
Marco's picture

"So, what are the assets that the rich own? The rich don't have money bins full of cash, like Scrooge McDuck. Rather, they own things like factories, office buildings, and oil wells, either directly or indirectly via stocks and bonds. In other words, the rich own most of the 'nonresidential fixed assets' of the nation. These assets certainly count as 'wealth', but what they are physically are the tools that workers use to produce America's GDP.”

True enough

"This is critically important to understand.  By increasing taxes, to generate additional revenue for the government, you decrease the available capital that could be used for productive investments. Since the government doesn’t want factories, office buildings, or oil wells, but rather cash, this forces the liquidation of productive investments thereby reducing capacity for economic growth."

Productive capital for the most part can't be taken out of the country or profitably scrapped, all what happens in liquidation is that it changes hands. That won't happen to pay the taxes though, have you seen the excess reserves lately? There is no shortage of money, and it's not being invested in making more productive capital.

Higher taxes for the rich will not change one goddamn fucking thing in this economy in and of itself ... not going to make it worse, not going to fix it.

Tue, 10/30/2012 - 20:15 | 2933153 buzzsaw99
buzzsaw99's picture

This article is a bunch of crap. The federal reserve and the gubbermint pick the winners and losers. The uber-wealthy bribe/ coerce/control them for their own enrichment. I have never read such a worthless piece extolling a non-existent beneficent wealthy class. They are kleptocrats and fascists all. They own the sweatshops in China and Viet Nam. Labor receives slave wages, a miniscule insult of an ort.

Tue, 10/30/2012 - 20:16 | 2933165 FreedomGuy
FreedomGuy's picture

Buzzsaw, try reading it again. I think you missed the point.

Second, you believe all wealthy are kleptocrats, fascists and essentially criminal? What should be done in your ideal?

Tue, 10/30/2012 - 20:19 | 2933176 buzzsaw99
buzzsaw99's picture

All I know is that without deficit spending all those big corporations that sell shit made in China at an obscene profit would be out of business tomorrow. Go ahead, balance the budget, see what happens. More bailouts for the big corporations, more bonuses as the stock goes to zero. The looting of America has nothing to do with anything but the destructive greed of those at the top. They create nothing, they are parasites, war mongers, the lowest form of vermin.

Tue, 10/30/2012 - 22:43 | 2933521 Twodogs
Twodogs's picture

Deficit spending is used for bailouts, duh!! You destroy your own case. Argument fail.

Wed, 10/31/2012 - 06:28 | 2933907 Acet
Acet's picture

Three things:

- Government grew in size also to employ those unemployed due to outsourcing. This adds to the deficit.

- Government has increased the amounts spent in Unemployment benefits and Welfare to support those whose jobs were lost due to outsourcing. This adds to the deficit.

- Government has both provided indirect subsidies and outright bailed-out companies with the justification that it was to save jobs. This adds to the deficit.

 

As jobs were lost in developed countries due to outsourcing, Governments stepped-up to make up for it, both by relaxing banking regulations (to allow much deeper levels of public indebtness) and by going into record levels of debt themselves to pay for extended Government spending, thus directly and indirectly supporting a level of consumption which was not compatible with the new Economic reality where many if not most jobs in productive industries had been sent abroad. By doing so, Governments have artificially sustained the large margins that came from having production costs at developing country levels while sales income continued to be at the old (much higher) developed country levels.

So Governments propped-up a bubble in consuming beyond your means. This significantly extended the period during which the capital-rich minority made enormous profits for arbitraging between developing countries' production costs and developed countries' sales prices. Without Government support the correction (and public backslash) would have happened in maybe 5 years, rather than 30.

So yeah, directly and indirectly Governments were subsidizing the owners of capital. If at the right time you had a lot of capital or were in a position of high-level management, you would have made tons of money without any significant effort or even skill: all you had to do was copy everybody else in the same position and tap into this Government-sustained torrent of money.

Tue, 10/30/2012 - 20:08 | 2933145 Stuck on Zero
Stuck on Zero's picture

Just a reminder.  The rich are rich not because of low taxes but because their incomes are so high.  Those high incomes drain working capital from the corporations.  For example: the ridiculous amount of money earned by Eisner at Disney. 

 

Tue, 10/30/2012 - 23:22 | 2933627 MILESCFA
MILESCFA's picture

Stuck, large corporations (>499 employees) provide about 17% of employment (St. Louis FRED data https://research.stlouisfed.org/fred2/ = NPPTL/(NPPTS+NPPTM+NPPTL)), so the Eisners of the world are "minimally" important, but I do agree that large corp salaries of CEOs and "top of the chain" are too high.

"The rich are rich not because of low taxes but because their incomes are so high" (wrong!).

Regardless, the most critical are small employers (<50 empl), who provide 45% of the employment in the US. The incomes these individuals might make are NOT usually high until LONG into the business life, or probably more realistic, the business becomes "the income" by reaching a high valuation (not necessarily a high income) and the owner sells it and retires.

Thus the returns here are returns on their capital, be it $ or "human capital" (commonly called sweat equity). You tax the incomes here, high or not, and you drain away capital that creates the jobs in America. And these corporations grow into the medium size, etc.

So the point in the article is fairly simple: For an economy to grow, it needs capital. You tax that capital away, the economy grows slower. OR, the government competes (and can do so unfairly!) for that capital by borrowing, and the economy grows slower.

 

Wed, 10/31/2012 - 06:55 | 2933917 Acet
Acet's picture

I think there are two sides to "tax the rich" which need to be looked at separatelly:

1) Are today's rich really wealth creators or does their wealth come from rent-seeking activities (i.e. parasitism), a temporary bonanza from outsourcing and direct and indirect Government support.

2) Is money going to the Government the right place for money to go to.

 

For the first point, just look at professional "Investors", for example Hedge Fund managers or Traders (who typically make many millions a years). Look at all the ultra-wealthy who specialized in intermediation activities (sales, distribution). Is most of "Investment" nowadays the creation/improvement of productive capacity or is it speculation? Does speculation create wealth or is it just rent-seeking? Does intermediation really creates wealth or is it just taking a cut between Producer and Consumer? Are not all of these highly reliant on Regulatory Arbitrage and on these "wealth creators" influencing Politicians and Regulators to make sure that regulation helps them while hurting consumers and hindering their competition?

I would say that most of the current wealth comes from parasitism, not wealth creation.

 

As for the second point, giving more money to the Government just means more waste. Effectivelly more money would just allow the Government to extend the status quo for a bit longer and the current status quo is an uneven competitive playing field were entrenched interests have bought themselves prime positions.

 

Does something need to be done about the excessive concentration of wealth? I think that it does. Either it happens the easy way or it's going to be the 1930s all over again and at the end of it the World (whatever is left of it after the wars to come) will be again covered in nasty dictatorships.

Me, I think what needs to be done is a cleanup in regulations to remove artificial anti-competitive barriers to entry, a breaking up of too large companies in markets that are dominated by a minority of companies and some kind of debt Jubilee (those with large amounts of wealth would see a lot of it wiped-out, same for those with large debts), maybe the style suggested by Steve Keen.

Tue, 10/30/2012 - 20:13 | 2933161 FreedomGuy
FreedomGuy's picture

It is interesting but even if one doesn't understand the mathematics, libertarian principles will work. Austrian economics is essentially ideas of liberty and human behavior applied to economic interactions.

Socialism in any of its many forms has never worked (over time), does not work now and will not work in the future no matter how smart the elitist central planners.

This articles is fantastic as a small class and analysis of what is going wrong. Can we get anyone in government to read it?

Tue, 10/30/2012 - 20:20 | 2933177 stiler
stiler's picture

or the absurdly crazy amounts skimmed off GM over the years by execs with such great and creative moneymaking ideas. And skimmed off the bottom by money-grubbing workers.

Tue, 10/30/2012 - 20:51 | 2933237 Oldwood
Oldwood's picture

Why don't those money-grubbing workers dump their oppressive jobs and become self-employed? Why would they willing go to work for greedy people who obviously have taken such gross advantage? While I have been a small employer, never more than eight employees, I have had but maybe two that have gone on to have their own business over a thirty year span. Most are quite open about their feeling, stating that they would never consider self employment. In a relative, up to now, open society, nobody is forced to work for anyone, yet most seem to feel that while they would never take on the responsibility of working for themselves, they feel free to demand from their employer what they would never provide themselves.

Tue, 10/30/2012 - 21:34 | 2933362 stiler
stiler's picture

I want to go freelance again!... it's the freedom not the spondulik and I can take my business anywhere in the world.

Tue, 10/30/2012 - 20:35 | 2933202 walküre
walküre's picture

One man's debt is another man's wealth.

Debt = wealth

A debt jubilee is really a wealth jubilee. A debt cut is a wealth cut.

Is the debt legitimate? Is the wealth legitimate? The questions around odious debts take on a whole new meaning.

Reducing the debt off the books really means reducing the wealth off the books. It would hit those hardest who are now sitting inside their NY brownstones and penthouses waiting for their staff to show up which is stuck on the other side of the city and has no transportation to get to their masters. Ironic isn't it?

Sharing the burden is just that, SHARING the burden. A man can only eat so many calories per day, can only wear so many garments per week, can only drive so many cars in a year, can only travel so many days in his life. All men are created equal and yet, some men are living 1000x bigger and louder than the rest. Now why is it such a bore to try and establish more of a balance and equilibrium? Huh? Why is that?

Tue, 10/30/2012 - 21:45 | 2933331 Radical Marijuana
Radical Marijuana's picture

One man's debt is another man's wealth.

Debt = wealth

That is only true if one is careful about how one defines those things, so as to stay on the superficially symbolic levels.

The IMPORTANT point is that we have a privatized fiat money-as-debt system!

The people who are owed the debts (the pryamidion people, bond holders, etc.,) are primarily benefiting from having being able to corrupt the government, so that the government gave away the power to make money out of nothing, as debts.

Fractional reserve banking is a DEBT ENGINE!

There is no "wealth" there, unless one expands the definition of  all "wealth" to be based on robbery. I tend to AGREE with expanding that definition, to that degree. I perceive human reality to ALWAYS be organized systems of lies, operating organized robbery. Therefore, I tend to perceive the banksters as simply being the best organized gangs of criminals, who were able to covertly corrupt the government, and then reinvest their profits from fraud into more frauds, until almost all the politicians were puppets, working for the banksters, and almost all the schools, and the mass media, were similarly controlled, so that the vast majority of people only "learned" through systems that excelled at lying by omission, so that the most important social facts were never mentioned.

THE MOST IMPORTANT SOCIAL FACTS ARE THAT OUR MONEY GETS MADE OUT OF NOTHING, AND THAT POWER WAS GIVEN AWAY BY GOVERNMENTS TO PRIVATE BANKS.

Our money-as-debt supply was privatized. Those who benefited the most from that process of totally runaway robbery, through legalized counterfeiting, are those who are the bond holders, or otherwise those who enjoy "wealth" through using the power of governments to enslave the vast majority of people to pay taxes, to pay debts, and to suffer endless runaway inflation, etc.!!!

I believe that we SHOULD understand that money is backed by murder, as the most extreme form of robbery. I believe that that REALITY goes all the way back to killing other organisms, in order to eat them.

I do not make special exceptions for the domestication of animals and plants, and our involvement in those processes as being somehow uniquely productive, (rather than just more of our behaviour as predator/parasites.) Similarly, I do not see industrialization of those processes as being anything that changes the fundamental nature of what was always here, from before human beings evolved.

Therefore, I regard all wealth as provided by our environment, which we TAKE, and the English definition of "TAKING" is to rob. Therefore, my basic way of perceiving the world is that we subtract aspects of the Whole, such as perceiving ourselves, and other organisms, as separated from that Whole. Thereafter, across those boundaries, which we defined by SUBTRACTION, there is ROBBERY. Food did not jump into our mouths! We killed it, and ate it!

Thus, all wealth is based on our environment, from which we can take things. That became more and more hyper-complicated, as civilization developed, so that some human beings taking from other human beings became more significant to us that all human beings taking from their environment.

The currently astronomically amplified Neolithic civilization system is organized into global electronic fiat money frauds, backed by atomic bombs, and other threats from mass destruction weapons. That gradually evolved through the history that made War King, into what is now the situation where Fraud is King, and those who are able to make the most money out of nothing are the Fraud Kings, to whom others are indebted.

That is the context in which I will try to answer your question:

Now why is it such a bore to try and establish more of a balance and equilibrium? Huh? Why is that?

The empirical observation is that we live in an exploding universe. There IS the Sun, Earth, Space system, and we are primarily the turbulence of the energy of the Sun, reflecting off the Earth, back into Space. The more times that there are non-linear functions, whereby that energy is recycled within the turbulent flows of energy on the surface of the Earth, the more life and consciousness there is. IF we were not in a state of extreme disequilibrium, because the Sun is concentrated energy, spreading out into Space, through us, on the surface of the Earth, then we would not be alive, and would not be conscious of our living. We are the flow of energy! We are patterns in that flow!

That energy directs its own transformations. It would be boring to the point that we would be dead if we were not doing that. However, I would also assert that the current human ecology and political economy is doing that in ways that are NOT good enough, and could be done much better. We could have more non-linear functions, with more life and consciousness.

Wed, 10/31/2012 - 01:23 | 2933794 walküre
walküre's picture

Good feedback. Will keep "expanding" my own thoughts on that some more. I'm sure someone somewhere at some point in time has had the same thoughts and died. His/her thoughts never seen the light of day. The wheels kept spinning forward without any real cultural progression. Frustrating. We're all dust in a matter of years. Some sooner, some later. What's the point if we keep submitting ourselves to the status quo and never willing rock the boat. We might win one day. Winner takes all and writes history. Obviously our side has never won which is why history is full of falsifications, lies and propaganda to deter coming generations from even trying. But we just might win one day.

Tue, 10/30/2012 - 22:53 | 2933552 Twodogs
Twodogs's picture

"One man's debt is another man's wealth."

Bollocks. It may appear that way on a balance sheet, but you're implying wealth is fixed, yet we are collectively far more wealthy than in the past. How could that be?

Tell us, if a debtor defaults, where does the creditor get his money back from? Risk is a cost, and that appears nowhere in your simplistic equation.

Wed, 10/31/2012 - 01:32 | 2933804 walküre
walküre's picture

It may appear that way? It is that way! Without debt there is no expansion of money, no expansion of wealth.

We have a debt problem. Really? Do we really just have a debt problem or do we have a wealth problem? Because we have to take on more and more debt to keep servicing the debt which is wealth. Debt doesn't need service. Wealth wants to get serviced. But it's never described that way. Too much debt is bad, too much wealth is?

Tell us, if a debtor defaults, where does the creditor get his money back from?

Why do you think "bailouts", "TARP" and "bad banks" happened? The risk has simply been transfered to another balance sheet.

Perhaps I'm oversimplfying this. I'm a common man and using my common sense. I'm not educated to bullshit people with economic speak and accounting gimmicks that would sound oh so fabulous but once stripped bare, are simply just one gigantic legalized fraud.

I'm a farmer and I know yield. My livestock and produce has limited yield. I put in, it puts out. I can't cheat or the quality suffers. Do you understand what I'm saying? There are natural laws in place which we all have to abide by. We're all confined to a very simple set of rules and laws. For some reason the current crop of bankers and politicians seems to think they can cheat their way out of any messes and become wealthier as a result.

It's a crock of shit. Plain and simple.

 

 

 

Wed, 10/31/2012 - 10:02 | 2934274 Col_Sanders
Col_Sanders's picture

Perhaps it would be clearer if you used the term "money" instead of "wealth" since they're not the same thing.

As a farmer, your yeild would be considered wealth.  You may use "money" to measure the value, but the wealth is the crop, not the money.

A banker or government can print as much money as they wish - and all that will do is change the measurement of the supply of it against the supply of your crop.

The underlying wealth doesn't change.

 

Tue, 10/30/2012 - 20:35 | 2933205 Never One Roach
Never One Roach's picture

Little incentive to work nowadays due to the massive and very generous entitlements. Same with Oabamacare; includes no incentives to stay healthy.

 

It's more then an economic problem; it's deep-seated cultural.

Tue, 10/30/2012 - 20:58 | 2933248 FreedomGuy
FreedomGuy's picture

I think you have something there. I believe collectvism and redistribution fatally corrupts a society. Besides the fact that those getting entitilements become addicted, the idea of stealing one person's property and giving it to another throught the power of government works at a subconscious level to corrupt the population.

Bastiat said it clearly:

Man can live and satisfy his wants only by ceaseless labor; by the ceaseless application of his faculties to natural resources. This process is the origin of property.

But it is also true that a man may live and satisfy his wants by seizing and consuming the products of the labor of others. This process is the origin of plunder.

Now since man is naturally inclined to avoid pain -- and since labor is pain in itself -- it follows that men will resort to plunder whenever plunder is easier than work. History shows this quite clearly. And under these conditions, neither religion nor morality can stop it.

When, then, does plunder stop? It stops when it becomes more painful and more dangerous than labor.

In the West it is neither dangerous nor painful to let the government plunder others for you.

 

Tue, 10/30/2012 - 23:06 | 2933588 Orly
Orly's picture

Very good analysis.  But it is possible to want to work because of some moral truth to yourself.  It is relatively rare, sure, but it does happen.  I would rather flip burgers and mop floors than be on the government teat.  It would seem that most of us would feel that way, though there must be some social mechanism that makes it okay to be on the dole; overriding that moral implication with mores and social acceptance.

It goes back to the corruption of society to expect things to be given to them readily and easily rather than having any input for the common good.  And if you work and study hard, instead of playing basketball all day while you're on food stamps, you are looked down upon as a "sell-out" and other choice words.  It is basal corruption that will need to be overridden in order to take the first step toward moving our society away from the very expensive free lunch.

:D

Wed, 10/31/2012 - 01:36 | 2933809 walküre
walküre's picture

Excuse me? How productive is a banker? How productive is the insurance industry that collects premiums, invest those and minimizes their payouts when risk happens?

A guy getting a few hundred bucks to survive is NOT welfare. That's pittance.

A guy or corporations receiving billions in subsidies, tax breaks or bailouts is WELLfare. They fare WELL. They eat well, sleep well and live well.

You're being conned. Time to unplug yourself from their propaganda.

Wed, 10/31/2012 - 22:17 | 2936476 FreedomGuy
FreedomGuy's picture

Don't outsmart yourself on this. I agree there is cronyism in government if that is your bigger point. As a libertarian it is one of my cheif reasons for severely limiting power.

However, if you argue that a redistributionist state does not undermine and corrupt a country we will have to part ways intellectually. If you look at some of my other posts you will see that it is all part of a continuum. Farm subsidies in a time of record crop prices, bank(ster) bailouts, inslovent social programs, record numbers on government programs of all sorts...all are part of the same problem. They all corrupt.

Socialists lie in saying they will tame the best by feeding it power.

If you think a guy getting a few hundred bucks to survive is fine then next time you see one give him a few hundred. If he robs you for the same amount I am sure you will be sympathetic. He can rob you or the government can rob you for him. Coercion is the same. Only the source is different.

Tue, 10/30/2012 - 20:51 | 2933236 hooligan2009
hooligan2009's picture

the trick is simply this...the more government/federal debt that is borrowed, the more interest that is paid, the bigger the tax rebate OR payment to offshore owners of debt. the US is an open economy that has borrowed way too much money and its assets are not held in private hands; they are in the Governments own hands via another accounting trick...welfare and the pentagon. 

it is not rocket science.

the economy is producing negative value for people. thats it.  current GDP output is not valuable and needs to be cut to a point hwere it is valuable. thatg point occurs at around 30% lower in output, with Government, State and City spending around one half of its current level. 

that is a sound base. it is not depression or recession or austerity to tell the truth. it is lying and dishonest to claim that fairy tale government financing at the current levels is desirable.

the teat is dry, polticians should stop sucking on it.

Tue, 10/30/2012 - 21:01 | 2933257 q99x2
q99x2's picture

The only choice left is to QE me.

Yaaaaa.

Tue, 10/30/2012 - 21:26 | 2933343 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

ha ha, yeah the Japanese announced QE 9, and the yen went UP. Not what they were hoping for in the currency wars. One of these days the same will happen to the Fed. As Hugh Hendry said, it didn't happen at $3 Trillion...but that doesn't mean it won't happen at 4. There IS a number out there, waiting for us

Tue, 10/30/2012 - 21:16 | 2933312 goodrich4bk
goodrich4bk's picture

The entire premise of this article is wrong.  The federal government doesn't tax assets, it taxes income, either in the form of profit or wages.  Ergo, the "rich" don't sell assets to pay their taxes, they earn income to pay their taxes.  No income, no taxes.

Capiche?

Tue, 10/30/2012 - 21:43 | 2933378 Orly
Orly's picture

Well, that is as silly a statement as I have heard in a long time.  How do you expect them to pay for increased taxes, then?  Why, according to your argument, by more income.  How will they get more income?  Well, they either have to raise prices, which is the last thing they want to do because their income then would actually decrease because the pool of buyers dries up very quickly, or, they have to sell assets to cover the cost, usually at reduced rates because by that point, there are no buyers for those assets because the other business owners are in the same boat and are dumping their assets as well.

Take even the "rich" who have assets in say stocks and bonds.  In order to pay their increased taxes, they will have to sell those assets, at reduced rates again because everybody and their brother is selling into the market to cover their tax burden.  Thus begins a downward spiral in net worth.  Not a good thing.

In other words, the rich can't earn more income to pay an increase in taxes no matter what happens, so your argument falls flat on its face right out of the box.  Unless, of course, they can pull it out of thin air or print it themselves in the basement.  That's a different story.

Love me some Lance!

:D

Wed, 10/31/2012 - 04:10 | 2933872 Tango in the Blight
Tango in the Blight's picture

The very rich do have money outside productive assets.

I have rich friends and poor ones and the ones who always complain that they don't have any money are the rich ones. They say things like "times are tough, it's hard to get by"

Next time you see them they have the latest iPad, bought a new car and have been on a cruise. And they still complain about having no money.

The poor ones hardly complain about money.

 

 

 

 

Tue, 10/30/2012 - 21:27 | 2933346 alentia
alentia's picture

I know it sounds crazy and unrealistic. Lets imagine for few moments following scenario with housing when Goverment voted the law to forbid personal debt on any new purchases:

Outcomes:

1. House prices collapse to the point where people can afford them using their savings

2. Existing home owners with large debt to banks, leave their houses and then repurchase them with their savings at low (market) price

3. No new housing is being build until commodity prices go down enough and labour rate is finally accepted by the workers to build affordable houses for people with savings

4. People start saving money for their house (or big) purchases, thus bringing money to banks

5. Banks or people with savings start to purchase shares of companies initiating profitable projects. Zombies will fall dead.

6. All money wasting projects can no longer be done as only "share purchase" is allowed

7. Obviously Goverment is not longer allowed to issue debt to finance the deficit.

Obviously all this accompanied by global wide recession where commodities and share prices come back to basics. Eventually this might be the way out of the mess we are now and most likely we will not see this happen during our lifetimes.

Tue, 10/30/2012 - 21:29 | 2933349 tony bonn
tony bonn's picture

"...raising taxes and redistributing wealth will impede economic growth...."

fuck you you goddamned ignorant sack of shit.....you can either take on debt with interest or pay as you go with taxes.....debt is carcinogenic - especially at the lethal levels it is now...and the debt proceeds have been shoveled into the coffers of banksters and the very people who caused the crisis in the first place....

and those malevolent whores of mammon don't invest in the usa anyway, so the taxes are not an opportunity cost on these shores....the marginal productivity of debt is negative!!!

and to suppose that zirp in a shrinking economy is cheap is buffoonery of the worst sort...the ir swaps used to play shell games with debt will explode and the fuse was already lit at jpm and will blow ms to smithereens....

you can have your taxes or your debt - both are losing propositions.....we have only seen the first act of the debt bomb..

the wealthy own too much including the government - they need the restraint of taxes....and government is far too large - it should be shrunk to the size of your dick....

Tue, 10/30/2012 - 22:54 | 2933556 Tommy Gunner
Tommy Gunner's picture

Oh fuck off with this shit.   The moment I read you disagree with taxing the rich was when I stopped reading.

I am sure there are many other things that should be done - but won't - to keep the US afloat... but taxing the rich should not be ruled out if you want to have a speck of credibility.

Romney is paying 15 fucking % tax - do you think that is even REMOTELY OK?

Many corporations are paying fuckall in tax - is that OK????

 

Of course taxing the rich is not the ultimate solution - BUT it is certainly part of it.

 

Tue, 10/30/2012 - 23:12 | 2933599 Orly
Orly's picture

How about if we didn't tax corporations at all but instead taxed just people, actual individuals.  There is no reason a small business should be taxed as an individual.  Sure, my shoe store makes $245,000 a year.  There's employess, overhead, product.  By the time you're done taxing my business as an individual, I have barely enough to get cable.

If corporations were not taxed at all, that would free up money for R and D, expansion, CapEx, etc.  But under this system, Jeff Immelt would sure pay his fair share, believe.

Tue, 10/30/2012 - 23:23 | 2933631 alentia
alentia's picture

Of course you gotta tax the rich, because they become rich by working 16 hours a day for many years or all their lifes.

Because they risked all their money, houses, etc going into risky business. Sure they gotta be taxed for their efforts.

How about just taking their money and dividing among the rest? That should be fair. Wasn't it already done in 1917 in Russia?

Tue, 10/30/2012 - 23:53 | 2933683 Vidar
Vidar's picture

End ALL taxes NOW!

Wed, 10/31/2012 - 00:00 | 2933688 Vidar
Vidar's picture

More and more of the so-called "rich" are waking up and "going Galt", refusing to work hard (in public at least) or earn a large income. If the middle class would work as little as possible and pull their money out of the banks, the system would collapse. The state only has as much power as the people are willing to give it. It produces nothing on its own. The host can remove the parasite if it is willing to suffer a little pain.

Wed, 10/31/2012 - 08:09 | 2934015 hooligan2009
hooligan2009's picture

Agreed.

I have "dropped out".

I pay no taxes and only work now at preserving my capital and have no intention of paying taxes beyond city ones and transaction taxes and corporation taxes on my investments and customs duties..bleh. I guess you can't full "drop out". It odes make me laugh at banks who cliam that paying very little in taxes is ok because they employ hundreds of thousands (in front-running the Fed) who pay income taxes. Of course the smarter bank employees don't pay taxes either.

Wed, 10/31/2012 - 01:55 | 2933767 cranky-old-geezer
cranky-old-geezer's picture

 

 

What is really causing the economic malaise that the U.S. faces today? 

It's not "economic malaise", it's not merely "recession".  It's deliberate economic destruction plunging America into depression, long deep depression.

The cause?   In a word, looting.   They're looting the economy, looting the people.

Corporations loot the economy and people by sending jobs overseas where labor is dirt cheap.

Then governments (at all levels) loot the economy and people with high taxes.

Then Wall Street loots the economy and people via cash-for-trash bailouts.

The '08 collapse was a debt collapse.  We reached debt saturation and it all collapsed.  Trillions of dollars of paper promises-to-pay just collapsed and became worthless, plunging bank balance sheets deep in the red.

Subprime was merely the trigger starting the avalanche.  It took down corporate debt, municipal debt, even sovereign debt of nations.  It all came crashing down. 

To "save the system" Bernanke fired up the presses and started buying up all that worthless paper.  Call it TARP, LSAP, QE, Twist, what-the-fuck-ever.  He has to print and buy it all up to keep the bond market from crashing ...because we've reached debt saturation.

In the process he's looting trillions of dollars of wealth from the economy and the people.  Just to save fucking banks and other criminal enterprises.

There's no end to it.  We keep bumping up against debt saturation and collapse, because the core problem, debt, isn't being addressed.  

Fed's becoming the biggest bad-bank-of-last-resort on the damn planet, where all the toxic worthless shit financial paper ends up. 

It'll be ZIRP and QE and bailouts from now on to keep the damn bond market from collapsing (which is really a damn debt market).

Well, till the currency collapses anyway.  Then none of it will matter anymore.  Game over.

Wed, 10/31/2012 - 02:23 | 2933823 alfbell
alfbell's picture

What is really STUPID is that people think that "government is stupid".

(There is no such thing as "government". It is a myth. There is no huge cognitive entity. Government = some individual making a decision. Government = getting a group together, and with  money and influence, creating policy or legislation. Government is composed of INDIVIDUALS.)

What is really STUPID is that people think politicians are stupid.

(Obama isn't stupid, Bernanke isn't stupid, Geithner isn't stupid, Romney isn't stupid, Greenspan isn't stupid, Summers, Rubin, etc. etc. They know about and understand Austrian Economics, that excessive credit creation and debt and deficits and high taxation are not healthy for an economy or a nation.)

What is really STUPID is that people think they have the "advanced data" and are intellectually superior and that our national and global leaders are just lacking that advanced data.

(They know everything the common person knows and more.)

What is really STUPID is not understanding human nature and its basic drives, such as power, greed, cronyism, control, elitism, ego, etc.

Our leaders aren't stupid. They are all caught up in a game of staying in power, trying to achieve more power, self-serving agendas, paying back favors, working to further a cause or hidden agenda that the ignorant public doesn't need to know about, etc. But worst of all they are unwittingly being used and manipulated and influenced by the big powerful people on this planet (call them the international bankers or whatever you want to). They have designs in their mind as to how they want governments and the world to run, and are pushing those designs  through via wealth, force, blackmail, infiltration, etc. Politicians, bankers and the like are their puppets who do their bidding (wittingly or unwittingly). They are content to see that the population just thinks that their leaders are stupid and corrupt and once they are replaced with "smart, good leaders" things will turn around. As if this election, or whether Romney or Obama wins, will have any significant effect or meaning as regards where this country is headed.

The majority of our citizenry are willfully ignorant. Their need to work hard and long to pay the bills and raise the family keeps them in a state of non-vigilance and paralysis. They are pacified by bread and circuses (NASCAR, Super Bowl, NBA, TV, movies, restaurants, Disneyland, Cirque du Soleil, alcohol, sugar, prescription and non-prescription drugs, etc.). The bright ones that are half awake are incensed by their leaders' ignorance and inability to make logical decisions and lead properly and by the corruption. This is a mistake. We need to look a bit deeper and shine a light on the real sources of our problems.

Don't be STUPID and waste your time with all of this. There are people behind the scenes shoving all of this down our throats. I don't know who they are. Maybe the old banking families like Rothschilds and Rockefellers all united.. maybe not. Just please don't think our problem is because Ben Bernanke doesn't understand Economics 101 or that Keynesianism is unworkable. That data is all over the universe and available to anyone. If that was all it took, our problems would've been solved years and years ago and we'd be on the straight and narrow path.

Our true enemies are "invisible". They are "interfering". They are throwing things out of balance to achieve THEIR goals. We won't be able to solve any of this insanity or prevent the collapse of the developed nations until this real situation is understood and addressed.

Wed, 10/31/2012 - 02:55 | 2933851 cranky-old-geezer
cranky-old-geezer's picture

 

 

95% of people would sell their soul to be part of that cabal.

That's the real problem, why I say America isn't worth saving.   Maybe a hundred years ago, but not anymore, not the way people are today.  

 

Wed, 10/31/2012 - 06:48 | 2933915 Darth Sidious
Darth Sidious's picture

sounds interesting, but how does the rich selling factories, office buildings, and oil wells decrease gdp?  these factories, buildings and oil wells cease to exist? or is it that the income from the factories, office buildings and oil wells is taxed higher and thus the rich have less to invest in more of them?  but what about the government? what if the government where to invest in factories, office buildings and oil wells?  then gdp would be the same, no? 

an understanding of the issue by the writer would be helpful, thx

Wed, 10/31/2012 - 07:40 | 2933959 rsnoble
rsnoble's picture

Now look...we've already been brainwashed into believing deficits don't matter.

Wed, 10/31/2012 - 07:58 | 2933998 lmile61
lmile61's picture

Toady US economy is high and if they want to pass away from recession then should do an effective changes which can increase jobs and maintain economic rates.

pests of stored products

Wed, 10/31/2012 - 08:59 | 2934120 Miramanee
Miramanee's picture

One fallacy: debt service in a fiat system means nothing more than adjusting numbers in accounting. For example, servicing our debt to China simply involves moving numbers around in different reserve accounts at the Fed. So, debt service in and of itself is not taking money away from capital investment. The problem is less about debt per se, and more about our financial system as a whole. Monetary policy and Fed action inherently destabilize markets and increase the gap between the wealthy and the rest of the population. We are an incipient banana republic: it's not debt that will destroy us, it is the fury of the masses who inevitably reject the stark inequities brought on by a corrupt economic system.

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cgagw's picture

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