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Guest Post: “Nobody understands Debt (But Me)”

Tyler Durden's picture




 

From Alexander Gloy of Lighthouse Investment Management

"Nobody understands Debt (But Me)"

Luckily they are easy to spot: the demagogues, the manipulators and the hired claqueurs. Unfortunately, there is no lack of media willing to provide a platform to perform their insidious game.

Take Nobel-prize wielding economist Paul Krugman. In an article for the New York Times (“Nobody understands debt”) from January 1, 2012, he writes:

“Through most of 2011, as in 2012, almost all of the conversation in Washington was about the allegedly urgent issue of reducing the budget deficit.”

His opening gambit: a reduction of the budget deficit is not an urgent issue. Really? The US has reached 100% debt-to-GDP, and each year another 10%-points get added to the pile. Those $15 trillion exclude a vast array of debt from quasi-governmental organizations (FannieMae, FreddieMac, etc) and unfunded liabilities (Medicare, Social Security, Veterans’ benefits) resulting in a total debt of $61.6 trillion, as per the Heritage Foundation. This explains Krugman’s disdain for the institution, as we will see below. He continues:

“This misplaced focus said a lot about our political culture, in particular about how disconnected Congress is from the suffering of ordinary Americans.”

Krugman tries to portray those who are trying to save the country by reducing spending as heartless and mean-spirited people, when those attributes should apply to those who applauded spending future generations’ taxes to the point of collapsing the financial system. To add insult to injury:

“When people in [Washington] D.C. talk about deficits and debt, by and large they have no idea what they’re talking about.”

He brings out the “I know better – I have a Nobel prize” argument. And the reasoning:

“Perhaps most obviously, the economic ‘experts’ on whom much of Congress relies have been repeatedly, utterly wrong about the short-run effects of budget deficits. People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring. Any day now! And while they’ve been waiting, those rates have dropped to historical lows.”

This is right in line with those people who, back at the height of the housing boom, ridiculed anyone warning about dangers of a possible fall in housing prices. Only because riding your bike with your hands up in the air went smoothly for 10 seconds doesn’t mean you will make it in one piece over the pothole. Krugman’s rhetoric matches that of a mayfly rejecting the possibility she might die at the end of the day because so far the sun has never set during its life.

Could the international financial crisis have led to a flight to safety into US Treasury bonds? Could the trillions of Fed buying have helped? Could the largest non-official buyer of Treasuries (Cayman Islands) be hedge funds looking for a cheap way to “hedge” stock market risk, because, in a twisted way, they rely on negative correlation between stocks and bonds (if one goes up, the other one goes down) to continue ad infinitum? Where else are the Chinese going to put their trillions of foreign exchange assets accumulated by holding the Yuan down? In the crumbling Euro? Back to mayfly Krugman:

“For while debt can be a problem, the way our politicians and pundits think about debt is all wrong, and exaggerates the problem’s size.”

If anything, the size of the debt problem is underestimated. It is amazing to see how the problem (too much spending leading to too much debt) is being turned around 180 degrees into “the problem is too little spending”.

“Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing.”

Paying back debt doesn’t impoverish; spending money you don’t have does. But Mayfly doesn’t relent and tries to spell it out in simple terms for the average American:

“They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments. This is, however, a really bad analogy in at least two ways. First, families have to pay back their debt. Governments don’t – all they need to do is ensure that debt grows more slowly than their tax base.”

Exactly. Let’s look at how US GDP and debt have developed over the last 46 years:

Debt caught up with GDP, reaching 100% in Q4 2011. Debt (taking only the “on-the-books” part) is growing faster than GDP.

Over the last three years, US debt has grown by roughly $4 trillion , while GDP has grown only by $1 trillion. One additional dollar of debt has led only to 25 cents additional GDP. This is the “marginal utility of debt” (how much you get out of an additional dollar of government spending). At elevated debt levels, debt service (interest and redemptions) carves out an increasingly high share of tax revenue, leaving less for productive uses.

The lower chart shows rolling 3-year periods for growth in GDP and debt as well as the resulting ratio (marginal debt utility). It has almost reached zero. Granted, the increase in government debt has partially been “diluted” by a deleveraging of the private sector. Still, 2012 will be the fourth year in a row with a budget deficit exceeding $1 trillion. Continuing this pace, combined with a marginal debt utility of 0.25 would get the US to a Greece-like 143% debt-to-GDP ratio within 9 years. But Mayfly tells us we don’t understand.

“We need more, not less, government spending to get us out of our unemployment trap. And the wrong-headed, ill-informed obsession with debt is standing in its way.”

How can a Nobel-prize carrying economist, who is presumably smart, write such nonsense? “He knows better”, says Jim Rickards (author of “Currency Wars”). And that makes Krugman so dangerous. Decision makers will reference his “debt does not matter” mantra over and over again – until it’s over. Thank you, Mayfly. You really understand debt – and how to make others believe it doesn’t matter.

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Mon, 02/06/2012 - 11:36 | 2130632 francis_sawyer
Mon, 02/06/2012 - 11:42 | 2130655 whstlblwr
whstlblwr's picture

Change registration Republican today for super Tuesday vote in a month. Call friends in these states to vote for Ron Paul. Maybe use standard politics and go to senior home to talk of Ron Paul and take voter registration cards with you. For any who say he’s not electable, look at this video. Ron Paul’s already changed primary elections with focus on delegates. First time I see news media report about delegates. Now Gingrich says getting delegates is his strategy too. They follow lead of Ron Paul.
http://www.youtube.com/watch?v=enhAGVi7QJA&feature=related
March 3, 2012
Washington

March 6, 2012 (Super Tuesday)
Alaska
Georgia
Idaho
Massachusetts
North Dakota
Ohio
Oklahoma
Tennessee
Vermont
Virginia

March 10, 2012
Kansas
Wyoming
U.S. Virgin Islands

March 13, 2012
Alabama
Hawaii
Mississippi

March 17, 2012
Missouri

March 18, 2012
Puerto Rico

March 20, 2012
Illinois

March 24, 2012
Louisiana

http://www.2012presidentialelectionnews.com/2012-republican-primary-sche...

Mon, 02/06/2012 - 11:54 | 2130693 redpill
redpill's picture

Nobel Prize?  OHHH you mean the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel that is really not a Nobel Prize at all and is sponsored by the oldest central bank on the planet?  Shocking that someone recognized by such an institution would be in favor of money printing and endless debt slavery.

Mon, 02/06/2012 - 12:02 | 2130722 WestVillageIdiot
WestVillageIdiot's picture

You are right.  The voodoo practice of economics had to pay out money to create a prize to try to prove that it has some legitimacy.  The Teen Choice Awards have more credibility than this flaming pile of shit.  But most people only read the headlines so they think this is actually a real prize. 

"And this year's winner of the award in the field of excellence is Paul Krugman.  Presenting the award will be last year's winner, Homer Simpson."

Mon, 02/06/2012 - 12:14 | 2130758 JW n FL
JW n FL's picture

 

 

AGAIN!

 

WHY DOES ANYONE CARE ABOUT THE DEBT? National Debt???

 

The Federal Reserve collects enough in interest payments from Private Debt that the public debt should be a wash.

 

Why is NO! ONE!! Talking about what the Federal Reserve Earns in Interest Payments from the Banks of the World!

Why is no one mentioning that given the 6% in earnings that the FED Share Holders Earn.. should be more than enough to right ALL of the WALL STREET BANKS?

 

How come NOT! one person has bothered to line item the FED's earnings?

 

HOW COME????

 

Must I do everything?

Mon, 02/06/2012 - 12:18 | 2130771 JW n FL
JW n FL's picture

 

 

The Month in Review
A recap of last month's articles & documents   JUMP TO:
News Article Recap
Conference Update
Document Recap       OffshoreAlert monitors individuals, businesses and important events regarding the offshore world. Once we find out about something of material importance, subscribers are notified about it shortly afterwards. Click here to learn more about gaining Unlimited Access to the Largest Offshore Database For Less Than $2 per Day.       NEWS ARTICLE RECAP Jonathan Curshen faces up to 20 years in prison after Florida jury convicts him of securities fraud and money laundering
February 03, 2012 - Jonathan Curshen, a former offshore financial services provider and Honorary Consul to Costa Rica for St. Kitts & Nevis, has been convicted of securities fraud for the second time in two-and-a-half-years.

Swiss private bank Wegelin & Co. indicted in U. S. for allegedly conspiring to defraud the IRS
February 02, 2012 - Switzerland's oldest private bank, Wegelin & Co., was indicted today in the United States for allegedly conspiring to defraud the IRS and, in a parallel civil action, had $16 million seized at its correspondent bank, UBS AG, due to alleged money laundering.

Ernst & Young (Cayman) current & former partners settle litigation with Cash 4 Titles 'investor' Lewis Rowe
January 27, 2012 - A legal dispute in the Cayman Islands in which current and former Ernst & Young partners Dan Scott, James Cleaver and Richard Fogerty were accused of illegal conduct towards Lewis Rowe over his alleged participation in a Ponzi scheme known as Cash 4 Titles has been settled.

Credit Suisse (Guernsey) and trust officers accused of concealing proceeds of corruption by Ukraine politicians
January 17, 2012 - Credit Suisse (Guernsey), three of its trust officers and a BVI-domiciled IBC are being sued for allegedly concealing the proceeds of a corruption by former Ukraine Prime Ministers Pavlo Lazarenko and Yulia Tymoshenko and avoid paying debts, including an $18 m judgment. At least $2.6 m in "bribes" went into accounts at Barclays Bank, in the Cayman Islands, it was alleged.

Ex-owners of Clarendon Insurance seek to enforce $92 m Bermuda judgment regarding Stirling Cooke fraud
January 10, 2012 - The former owners of the Clarendon Insurance Group have taken legal action to force Travelers Indemnity and Executive Risk Specialty Insurance to satisfy $25 m of a $92 m judgment in Bermuda arising from a fraud committed by the now-defunct, Goldman Sachs-controlled Stirling Cooke group.

Bahamas-domiciled Gemini Investment Fund and IBCs in BVI and Panama 'used for $183 m fraud'
January 09, 2012 - Bahamas-domiciled Gemini Investment Fund, which is administered by Trident Corporate Services, and IBCs in the British Virgin Islands and Panama were used launder $183 million from two frauds perpetrated against the Russia-based Otkritie financial group by London-based trader Georgy Urumov, it has been claimed.

Bancroft Life's fired managers must return records and 'cease interfering' with relationships, rules US Court
January 07, 2012 - The U. S. Court of Appeals has upheld a lower court's decision ordering the former managers and professional advisors of offshore insurer Bancroft Life & Casualty to return its "corporate books and records" and "cease interfering" with the insurer's relationship with its insureds.

Antigua police appeal to former diplomat Sir Ronald Sanders to co-operate with corruption investigation
January 04, 2012 - The Royal Police Force of Antigua and Barbuda has issued a public appeal to the country's former Ambassador to the United Kingdom – Sir Ronald Sanders – to co-operate with a corruption investigation in which he is a suspect.

Swiss bankers indicted for conspiring to defraud IRS while working for Wegelin & Co.
January 03, 2012 - Three former client advisers with Swiss bank Wegelin & Co. - Michael Berlinka, Urs Frei and Roger Keller - have been indicted in the USA for allegedly conspiring with U. S. taxpayers and others to conceal more than $1.2 billion from the IRS.

Insolvent Bahamas insurer sues former directors over 'dubious' Florida property deals
January 03, 2012 - The court-appointed managers of Bahamas-domiciled British American Insurance Company Ltd., which operated throughout the Bermuda-Caribbean region, are suing the insurer's former directors and others for 'recklessly gambling away' hundreds of millions of dollars on 'speculative' Florida real estate investments.       GET FREE INSTANT EMAIL ALERTS
Don't wait for the monthly round-up. Get notified by email as soon as an article, document or blog post is published. Plus, you can customize what you get by jurisdiction, topic & crime! Requires a FREE OffshoreConnect Account. RSS FEED Subscribe to "Latest Articles" feed

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Mon, 02/06/2012 - 13:34 | 2131020 JW n FL
JW n FL's picture

 

 

http://www.youtube.com/watch?v=x3EUzV5_TUs&feature=related

A Rothschild Speaks on the idea of Developing One International Currency

 

Mon, 02/06/2012 - 14:58 | 2131281 JW n FL
JW n FL's picture

 

 

Federal Reserve Earnings verse Federal Reserve Loans to the United States of America

 

 

1.    How much does the Federal Reserve Bank Earn in Interest Payments? From anyone other than the United States of America.

 

Federal Reserve $15 Trillion Dollars in Loans Bloomberg

 

Loans from 3 / 9 / 2008 to 3 / 9 / 2009 totaling $15,760,004,161,955.00

 

https://docs.google.com/spreadsheet/ccc?key=0Aq7CIo3B6RWfdDlTRWk5SnVOTUp1bG4wMXdPMnV2SUE#gid=0

 

Getting Bigger

Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.

Total ** assets ** held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data

**  http://www.ffiec.gov/nicpubweb/nicweb/Top50Form.aspx **

 

The Fed’s Secret Liquidity Lifelines

http://www.bloomberg.com/data-visualization/federal-reserve-emergency-lending/#/overview/?sort=nomPeakValue&group=none&view=peak&position=0&comparelist=&search=

 

 

 

2.    Who are those Monies Participated Out too? That the Federal Reserve Bank Collected?

Who owns the Federal Reserve?

The Federal Reserve System fulfills its public mission as an independent entity within government. It is not "owned" by anyone and is not a private, profit-making institution.

As the nation's central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.

However, the Federal Reserve is subject to oversight by the Congress, which often reviews the Federal Reserve's activities and can alter its responsibilities by statute. Therefore, the Federal Reserve can be more accurately described as "independent within the government" rather than "independent of government."

The 12 regional Federal Reserve Banks, which were established by the Congress as the operating arms of the nation's central banking system, are organized similarly to private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.

http://www.federalreserve.gov/faqs/about_14986.htm

 

 

So! The question stands.. if the Federal Reserve is collecting .25% interest on $100 Trillion Dollars a Month.. Where Does ALL!! That Money Go?!?!?!?!?!

6% here.. 6% there.. Participated Out to the Shareholders.. into their Federal Reserve Bank Accounts.

 

Mon, 02/06/2012 - 13:43 | 2131049 rayduh4life
rayduh4life's picture

How many times did we here it during Regans' big run up in the national debt that "debt doesn't matter"  How many times did Cheney say "Regan proved debt doesn't matter"?  What ever. 

Right or wrong, debt only seems to be a problem when democrats are in the white house. 

I'm not saying Krugman is right but I'd rather "owe them" than they "owe me".  As for foreign ownership of all that debt, if you owe the bank a thousand bucks, you're in trouble - if you owe the bank a million bucks, the banks in trouble.  And lastly, name a country that paid off all it's debts?

Rant over appologies to the offended.

 

Mon, 02/06/2012 - 17:45 | 2131990 JW n FL
JW n FL's picture

 

 

 

The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.

http://www.federalreserve.gov/faqs/about_14986.htm 

Mon, 02/06/2012 - 19:30 | 2132292 thewhitelion
thewhitelion's picture

@JW n FL  Must you say the same thing repeatedly?

Mon, 02/06/2012 - 19:32 | 2132301 JW n FL
JW n FL's picture

 

 

Yes.

Until it sinks in.

Mon, 02/06/2012 - 13:55 | 2131085 SAT 800
SAT 800's picture

Yes. Yes. Yes. Spin spins on. "most people only read the headlines"; yes. yes. And having ascertained that, the rest of the modern world follows logically; consensus manufacturing; it's so much nicer than propaganda. When I tell people that he did not win a Nobel Prize, (which because that "phrase" has a meaning which is consistent for everyone, and is "understood"; is correct; it is not a Nobel Prize); they look at me like I'm a crazy person. Or, if they've spoken to me before, they may say, "oh, you always make such outlandish statements". Al Gore is a Climate Scientist. Did you know he was a theological student who dropped out without graduating? NO, you didn't. Why? It doesn't fit in the media. "The Science is settled"; well the last time the science was settled it was called the Luminiferous Ether. For the science on this question, please Rogoff's book, "it's different this time"; it's a very good book.

Mon, 02/06/2012 - 13:26 | 2130979 TruthInSunshine
TruthInSunshine's picture

Krugman's 'interest rates aren't soaring' argument is incredibly fraudulent.

The reason why interest rates are not soaring (yet) is because Bernanke & the boys at the Federal Reserve have been buying a massive bulk of USTs, on the United States credit card (read more debt accumulation - I challenge Krugman to explain how this is not so), artificially driving interest rates on those same USTs lower and lower (as well as all competing asset class yields), and Bernanke has simultaneously pushed the FOMC ZIRP pedal to the metal.

I'd wonder if Krugman would argue that this can go forever.

Let's see the Federal Reserve back off UST purchases, for at least an 18 month period, and check where UST yields are compared to now.

Let's see Fed not buy any USTs for at least 48 months, and check the yields on USTs.

I wonder if there's any level of debt accumulation or deficit spending that Krugman whereupon Krugman woudl say:  "Now wait a minute, this is getting to be excessive..."

Is there any point at which he would begin to warn of the hazards of such deficit spending and aggregate debt levels?

 

He's an outright fraud. That he knows that the primary reason "interest rates haven't risen" is because the Fed is monetizing U.S. deficit spending (approximately 1.9 trillion in the last 24 months), yet uses this as his basis for claiming for minimizing hazards associated with our current fiscal path, let alone the apparently more reckless one he'd like for us to embark upon, is nothing SHORT OF INCREDIBLE.

Krugman's entire argument this time alleges there's no bubble in the UST market BECAUSE interest rates haven't risen as of yet, even though the primary reason interest rates haven't risen is because of the Fed is an artificial actor intervening in a historically inprecedented way, to precent them from rising.

Let's just let Krugman go nuts and lets have the Fed buy another 2 trillion - no - 30 trillion - in USTs, yielding nothing, and lets cut the discount rate to O% with an announcement it will be official policy until 2050. What could possibly go wrong since nothing will go wrong based on what the Fed has already done vis-a-vis UST (and all yield bearing asset class) markets.

 

Mon, 02/06/2012 - 13:36 | 2131026 redpill
redpill's picture

Interest rates haven't gone up for the same reason the Chinese yuan hasn't appreciated.

 

There are always vocal fans of price fixing until reality reasserts itself.  And it always does, it's only a matter of time.

Mon, 02/06/2012 - 17:52 | 2132019 JW n FL
JW n FL's picture

 

 

http://www.youtube.com/watch?v=x3EUzV5_TUs&feature=related

A Rothschild Speaks on the idea of Developing One International Currency

 


The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.

http://www.federalreserve.gov/faqs/about_14986.htm

 

 

Mon, 02/06/2012 - 13:45 | 2131056 hannah
hannah's picture

'...because Bernanke & the boys at the Federal Reserve have been buying a massive bulk of USTs,'

 

truth - what do you define as massive...91%....heck i aint worried til theybuy 97% or 98%. 91% isnt that much....?

Mon, 02/06/2012 - 13:59 | 2131093 SAT 800
SAT 800's picture

An outright fraud compared to who? James Hansen? Barrack Obama? Larry Summers? These are all people who live in little self-referential worlds; they don't need no "steenkin education"; they already know the answer. Power corrupts, and absolute power corrupts absolutely.

Mon, 02/06/2012 - 23:18 | 2132807 TruthInSunshine
TruthInSunshine's picture

An outright fraud in the world of academia.

It's incredible that Krugman serves up a claim that interest rates haven't risen as proof of his contention that taking on more debt, regardless as to how much debt we already have, is a harmless idea, let alone a good one, when he knows an artifice of unprecedented federal reserve interventionism, and not market forces, is the only reason interest rates haven't risen.

When they do, I want to see Krugman literally eat an entire crow.

Mon, 02/06/2012 - 14:33 | 2131187 Hedgetard55
Hedgetard55's picture

The day the
FED even hints at tightening is the day that makes Black
Monday, Tuesday and Friday look like a picnic.

Mon, 02/06/2012 - 16:22 | 2131638 Totentänzerlied
Totentänzerlied's picture

Krugman's intended audience is the class of Americans - mainly east and west coast liberal élite - whose politics align with those of the NYT and who (would) benefit from the economic policies he prescribes and do benefit from ZIRP, QE4Eva, massive deficit spending & stimulus, etc.

He is nothing more than a credentialed establishment sycophant/mouthpiece for the economic agenda of the NYT and its readership. Just like every other NYT columnist, he exists to toe the editorial party line. Viewed in this light, everything he says and writes makes utterly perfect sense. He's a puppet-prophet of neo-Keynesianism, interpret his words accordingly.

Mon, 02/06/2012 - 12:18 | 2130772 battle axe
battle axe's picture

Stalin, Stalin, Stalin...Lets dig him up and give him a chance. 

Mon, 02/06/2012 - 12:56 | 2130791 LouisDega
LouisDega's picture

Travis Bickles reply... "Damn!!" ( Hitting his head in disbelief) .......  "Damn!!"

Mon, 02/06/2012 - 11:42 | 2130657 MillionDollarBonus_
MillionDollarBonus_'s picture

I love watching discredited, intellectually inferior libertarians squirm after being totally HUMILATED by top Nobel Prize winning economists. Dr. Paul Krugman is absolutely right - interest rates are at RECORD LOWS. Where's the collapse that libertarians have been predicting? Where's the 'collapse' in housing prices? I'm still waiting.  

Mon, 02/06/2012 - 11:44 | 2130664 HyperLazy
HyperLazy's picture

Keep waiting and thou shalt be rewarded. ;)

Mon, 02/06/2012 - 14:17 | 2131132 economics1996
economics1996's picture

6 million homes in foreclosure and record low sales in new home construction, employment levels not seen since Clinton, record deficits, European bankruptcy, and MDB is asking Libertarians what?

Mon, 02/06/2012 - 11:47 | 2130670 homersimpson
homersimpson's picture

You talk too much for a guy who already forgot about 2008, 2005, 2001, etc. etc..

Get your head out of arse and stop soundling like a rookie real estate agent.

Just because a bubble hasn't popped due to artificial means in the past 4 years doesn't mean one isn't around the corner. Yes - more debt and money printing - always good for the economy *rolls eyes*

Mon, 02/06/2012 - 11:59 | 2130711 WestVillageIdiot
WestVillageIdiot's picture

Homer, you should be able to recognize that MDB is constantly being sarcastic and trying to get a rise out of people. 

I have no doubt that he understands what is behind the Krugman's of the world.  It is all ego.  Krugman got into the religion of debt and found that it was a world in which he could shine.  He could become a high priest.  This is a guy that probably got picked last in kickball, football, softball, basketball and suddenly he found something where he could get picked first.  That is why he embraces his debt message so gladly and with such zeal. 

The further down the debt wormhole we get the more guys like Krugman have to keep convincing themselves that they are right.  Like the priests of the middle ages they must burn more people at the stake of debt.  They must dump more heretics into the rivers of debt they have helped create. 

It can't be easy to be 60, or however old Krugman is, and realize that he should have been picked last in economics, the same way he was passed over for Suze Kowalski on dodge ball day. 

Mon, 02/06/2012 - 12:34 | 2130816 Buckaroo Banzai
Buckaroo Banzai's picture

Indeed. MDB is one of our most valued trolls. Let us celebrate his trolldom!

Mon, 02/06/2012 - 13:11 | 2130922 oldman
oldman's picture

homer

the bubble has popped, so you can quit waiting for it. And as long as you pay your taxes and vote for the 'new edition', the dudes will continue to pay the the losers and liars your money to pretend that the game is still on; it is not.
it is tiring, however, to go through this blog and others daily and see and read what people's opinions of history and the future are, but rarely see or read about anything that is happening in the present-----how can there be no news? (thanks, ZH for the story on the BDI where's the rest?)

I have spent nearly two months away from all of this, but the bubble has popped. What now----do we keep waiting for something to happen as we vote for the new edition and stuff our tax dollars into the pockets of those poor bankers?
I think so----om

Mon, 02/06/2012 - 11:46 | 2130672 CPL
CPL's picture

Reinstate Mark to Market as removed by FAS and we'll talk about reality then.

Mon, 02/06/2012 - 11:52 | 2130692 Captain Kink
Captain Kink's picture

Add the debt of the individual states to the number and what's our debt to GDP?  We are already Greece.

Mon, 02/06/2012 - 12:38 | 2130829 MachoMan
MachoMan's picture

First, these figures are with a completely fudged gdp...  the real intersection was probably long, long before q4 2011...

Second, who the fuck cares about debt to gdp?  What is our marginal ability to collect tax revenue?  How do we generate enough return to pay for the juice on what we borrow (and have borrowed)?  We keep printing to generate a fraction of every dollar of new debt?  Are we planning on making that shit up on volume or what?

Third, we're not greece...  we're a whole different level of risk...  greece is just the staging ground for the destruction of the world's most prolific currencies/economies, given the interconnected nature of world trade and economies.  The battle isn't over greece per se, it's over the whole ball of wax.  Practically speaking, I'm not sure it's even possible to really calculate the relative financial condition of the various debtor countries...  I don't see much standardization in accounting methods and I also see plenty of off balance sheet shenanigans...  thus rendering the basic analysis pointless (presuming you can even get to all the source documents).

Mon, 02/06/2012 - 15:06 | 2131319 cranky-old-geezer
cranky-old-geezer's picture

 

 

Keep going, add debts of county and city governments.

Wana know why your taxes are so high?  There it is.  You're paying interest on federal debt, state debt, county debt, and city debt ...and school district debt too probably.

Mon, 02/06/2012 - 12:07 | 2130734 resurger
resurger's picture

reinstate mark to market! MTM will be history CPL

Just wait for 2013 with the new FASB & IAS New accounting standards, you will be amazed

+1

Mon, 02/06/2012 - 11:51 | 2130687 Surly Bear
Surly Bear's picture

I love watching discredited, intellectually inferior libertarians squirm after being totally HUMILATED by top Nobel Prize winning economists. Dr. Paul Krugman is absolutely right - interest rates are at RECORD LOWS. Where's the collapse that libertarians have been predicting? Where's the 'collapse' in housing prices? I'm still waiting. 

You are the most uneducated individual in the history of the world. I know for a fact you're an idiot because if you had ever done any work with the classical or keynesian theories you would know that their models do not answer every circumstance observed in the real world. From my studies at the university, I do not think we really understand everything, and the reason for that is people are not rational. That is, they do not behave according to mathematical models. Please, for the love of god, shut the fuck up.

~SB

Mon, 02/06/2012 - 12:06 | 2130731 WestVillageIdiot
WestVillageIdiot's picture

I believe Amazon.com has Sarcasm Detectors on sale this week.  MDB is always tongue-in-cheek.  It is funny how easy it is for us to get mad when we read something we don't like.  Don't get me wrong.  I fall for it, too.  But I've seen him enough to know that he is just trying to act like somebody that is plugged into the system. 

Read MDB as comedy and you will understand his posts better.

Mon, 02/06/2012 - 12:57 | 2130875 Surly Bear
Surly Bear's picture

You are correct, and I bow to you.

Mon, 02/06/2012 - 13:17 | 2130948 Blano
Blano's picture

It's happened to all of us the first time or two we read his schtick.

Mon, 02/06/2012 - 14:07 | 2131113 SAT 800
SAT 800's picture

On the other hand, I know for a fact that I can go out and find two middle aged American citizens who agree completely with the post; and would probably be willing to generate something similar spontaneously; Never under-estimate the ignorance of the American Citizen.

Mon, 02/06/2012 - 16:40 | 2131700 Totentänzerlied
Totentänzerlied's picture

Yep, we've all heard "but Paul Krugman said in the Times last week that ... " from some dutifully misinformed and ignorant acquaintance/friend/family member.

And not as in "Krugman said it so we can know with certainty that it's nonsense unworthy of the ink in which it was written."

When respected (not by me) publications publish the proselytizing of clowns like Krugman, they commit the journalistic and intellectual capital crime of tricking the reader into affording the material presented a vastly greater degree of credence and credibility than it merits - if this guy wrote it and the Times published it, it must be true!

Et voila, consent manufactured.

Mon, 02/06/2012 - 11:54 | 2130694 Clueless Economist
Clueless Economist's picture

Thank You Mr M $ Bonus for admitting my superior intellect!

"The only solution to the debt problem, is more debt"

P. Krugman

Economist

New York Times Writer

Ivy Leaguer

Nobel Winner

All-around Douchebag

Mon, 02/06/2012 - 12:07 | 2130733 WestVillageIdiot
WestVillageIdiot's picture

I believe "Ivy Leaguer" and "all around douche bag" are a redundancy.

Mon, 02/06/2012 - 12:55 | 2130870 WALLST8MY8BALL
WALLST8MY8BALL's picture

ManBernKrug

Mon, 02/06/2012 - 14:10 | 2131118 SAT 800
SAT 800's picture

they all learn to play something called "squash" and join Fraternities, and this contributes to their "tendencies"; but I agree with you.

Mon, 02/06/2012 - 13:56 | 2130867 Dr. Engali
Dr. Engali's picture

There are very few avatars in this forum that makes me want to throw up. Yours just happens to be one of the.m

Mon, 02/06/2012 - 11:55 | 2130696 EvlTheCat
EvlTheCat's picture

Please don't feed the troll!

Mon, 02/06/2012 - 11:57 | 2130701 BandGap
BandGap's picture

I'm looking forward to making money by sending ships I don't own hither and yon. Same kind of thinking.

Mon, 02/06/2012 - 11:59 | 2130709 Clayton Bigsby
Clayton Bigsby's picture

Did you actually read the article?  Do you understand the structural forces at play?  Do you understand why rates are at "record lows"?  Do you understand the costs this imposes upon society?

It is simply amazing to me that people like you hide behind the imprimateur of Krugman's "nobel prize", and this somehow makes the laws of reality (i.e. solving too much debt with more debt) not apply to you.

This isn't ideology, genius - it's arithmetic and common sense.  Let me explain it to you thus - Debt doesn't matter... until it does, and nothing is free.  There are costs to accumulating such a massive debt pile and just because they are hidden from you does not mean they do not exist.

Do NOT follow this link or you will be banned from the site!