Hong Kong Harbor 2010
The 21st Century Asian Hub
In Economics 101, we all learned that Macroeconomics in America is a big deal. It is the analysis of literally all the transactions that take place every nanosecond for some given time period over the entire economy of our nation. Therefore it's complicated and many geometric progressions beyond the normal calculator in your head. The speedy supercomputers of the present day can chart the lines or bars to see what's going more accurately than ever in world history. So why are there so many competing stories about the economy?
Let's look back to the financial crisis of late 2008. To get what's going on I think we must look at the Japanese economy circa 1992. They were over-extended, and there was a real estate collapse, and their stock markets crashed, and the central bank made the borrowing rate very cheap mainly because the central/federal government had very little power to stimulate the economy with fiscal policy. Japan's Central Bank even tried negative interest rates paying companies to borrow money. Things moved better, but very, very slowly in recovery. The central banks like our federal reserve bank can only help so much, then we need fiscal policy, or the government paying for refurbishing our rusted bridges for example or building a national high speed rail service for another good example.
To better understand what happened in Japan, read some John Maynard Keynes, because Keynes applies well. When you read Keynes keep in mind that in 1919 he predicted the rise of a fascist Germany because of the forced austerity of the Treaty of Versailles. That same scheme of austerity mirrors the simplistic almost Randian, certainly delusional, "voodoo" by Wall-Street-And-Big-Bank shills Milton Friedman and Friedrich Hayek and Alan Greenspan. The three mythic names of Friedman, Hayek and Greenspan were touted by every International Banking huckster from the 1980's and on to justify their criminal schemes to literally steal money from both private clients and our federal government.
Let's look back to the financial crisis of late 2008. To get what's going on I think we must look at the Japanese economy circa 1992. They were over-extended, and there was a real estate collapse, and their stock markets crashed, and the central bank made the borrowing rate very cheap mainly because the central/federal government had very little power to stimulate the economy with fiscal policy. Japan's Central Bank even tried negative interest rates paying companies to borrow money. Things moved better, but very, very slowly in recovery. The central banks like our federal reserve bank can only help so much, then we need fiscal policy, or the government paying for refurbishing our rusted bridges for example or building a national high speed rail service for another good example.
To better understand what happened in Japan, read some John Maynard Keynes, because Keynes applies well. When you read Keynes keep in mind that in 1919 he predicted the rise of a fascist Germany because of the forced austerity of the Treaty of Versailles. That same scheme of austerity mirrors the simplistic almost Randian, certainly delusional, "voodoo" by Wall-Street-And-Big-Bank shills Milton Friedman and Friedrich Hayek and Alan Greenspan. The three mythic names of Friedman, Hayek and Greenspan were touted by every International Banking huckster from the 1980's and on to justify their criminal schemes to literally steal money from both private clients and our federal government.
Now here's some market advice. The US stock markets are today doing pretty well. Maybe the stocks are a bit overpriced. So my advice is to sell any bitcoins you have, and watch the market vacillate just like Japan for the next twenty years or so until we get rid of the fake patriots like the Koch brothers and green card Rupert Murdoch and all their Pay-Per-Vote™ politicians and Judges.
Please be careful not make the mistake of saying that because the markets follow a certain chart upward and then downward, it will repeat the curve. Each time the market moves upward or downward it is by definition an "independent event." Basic probability says that it may or may not repeat.
The thing to watch on the 1929 charts is how the economy went up for a while, and then crashed hard again in the late 1930s. If we follow this then we are in for a bad ride any day now. Put that with our Pay-Per-Vote™ egoist US Congress members who are used to making killings on shorting the US markets and we have a problem, Houston.
The single grand solution is for the National Government to start spending some money unlike the Pay-Per-Vote™ politicians and the Koch-Murdoch media cartels all say we should do. Those creeps think they are living in Greece or someplace that doesn't make massive amounts of stuff like we do.
About that, here's a little dialogue I made about how our government spends it's money, and how we should not worry too much. A FB Friend asked about the trillions of dollars of debt owed by our federal government. I told my friend, "Don't worry. If the Federal Reserve comes up short... they'll just print more money to make it up. Promise! That's how the Fed works." Now look for where all our treasured USA money may have gone. Look closely to the Federal Budget that is originated and written finally in the US House of Representatives, not the US Senate, and not the White House. Then in that budget: The Department of Defense is by far the biggest spender in Washington.
Then someone asked: What about our gold reserves? Remember, it's only money. The gold doesn't matter. Look closely at the top of any US bill in circulation now. It says "Federal Reserve Note." That means there's nothing other than "The Full Faith and Credit of the USA" backing the bill. So when the tea party Republicans in congress say they're not going to raise the debt ceiling the value of the US dollar and US Treasury Bonds drops in world markets. That's why those same tea party Republicans like Ryan and McConnell were probably shorting US treasury notes and the US Dollar when they say... "We're not going to raise the debt ceiling because we don't want to spend any more money." Then when the market falls those tea party Republicans make a killing on their shorting the bonds. Very, very unethical. But somebody voted for those hustlers. Ugh and pity those tea party muppets!
But what about inflation? And how we compete across the world? Don't worry about other countries out-producing the USA because they still make stuff here that is valuable in all world markets... like rice and corn and soy beans and Fords and Chevys and lots of other stuff.... trillions and trillions. Hyperinflation comes from no control at the national income and central banking level and corruption as in Argentina sometimes. For all those billionaires out there and the Saudi Kings, the US Dollar is and will continue to be a good shield against inflation. And it is safe because hopefully the tea party republican congress members will not continue to ruin our credit rating which in turn is really a measure of confidence in the US Economy. I would worry much more about some warhawk like John McCain or Ted Cruz who wants to fight a war with Iran and then one with North Korea and then Syria and then on and on. That is the most horrible scenario brought to you by sad tea party Republican muppets in power.
One more thing: Of course you all know that China holds USA bonds to the tune of about US$1.6 Trillion. But what you probably don't know is that there's a lot of other countries playing that game. For example, Japan holds about US$1.3 Trillion in USA bonds. So don't worry if some rube who watches a lot of Fox TV says "Oh, the Chinese own us!" It's not just the Chinese. Everybody owns us. And we own them. All ties together in this small world of creeps in jets. Look at Donald Trump and look at Mitt Romney and look at Rupert Murdoch and the Koch Brothers and all their sewer of billions in secret banks all over the planet.
Just so you'll understand about the bonds, the nation of the People's Republic of China has extra Kwai's, or RMB's or Renminbi's (in Mandarin, People's Money) because their factories shipped a lot of iPhones to Hong Kong last month, and the Hong Kong bank made a payment for the gadgets, so they need a place to put all that money while they are deciding on which type of French fighter jets to buy. So they buy US Bonds on the Bond Market in Hong Kong or New York or wherever... the bonds pay a little interest so they make a little. But in the PRC case a $1.3 trillion dollar US bond can lately pay about $1.3 billion a month or more in interest. But that's not a lot for the truly huge amounts of money in International banking. The real advantage is that US Bonds are very, very, very safe investments. You will not lose your principal (as in your capital). As I noted in my reputedly "dogmatic" post earlier, a lot of nations have some US Bonds in their savings portfolios. That guy in North Korea, Kim Jung Un and a lot of other wealthy world leader people own some bonds personally. Saudi Prince Alwaleed Bin Talal who until recently, was the all-American number two owner of News Corporation (Fox News and such) along with that other pluperfect patriot Rupert Murdoch certainly have some personal money in US Bonds.
Please be careful not make the mistake of saying that because the markets follow a certain chart upward and then downward, it will repeat the curve. Each time the market moves upward or downward it is by definition an "independent event." Basic probability says that it may or may not repeat.
The thing to watch on the 1929 charts is how the economy went up for a while, and then crashed hard again in the late 1930s. If we follow this then we are in for a bad ride any day now. Put that with our Pay-Per-Vote™ egoist US Congress members who are used to making killings on shorting the US markets and we have a problem, Houston.
The single grand solution is for the National Government to start spending some money unlike the Pay-Per-Vote™ politicians and the Koch-Murdoch media cartels all say we should do. Those creeps think they are living in Greece or someplace that doesn't make massive amounts of stuff like we do.
About that, here's a little dialogue I made about how our government spends it's money, and how we should not worry too much. A FB Friend asked about the trillions of dollars of debt owed by our federal government. I told my friend, "Don't worry. If the Federal Reserve comes up short... they'll just print more money to make it up. Promise! That's how the Fed works." Now look for where all our treasured USA money may have gone. Look closely to the Federal Budget that is originated and written finally in the US House of Representatives, not the US Senate, and not the White House. Then in that budget: The Department of Defense is by far the biggest spender in Washington.
Then someone asked: What about our gold reserves? Remember, it's only money. The gold doesn't matter. Look closely at the top of any US bill in circulation now. It says "Federal Reserve Note." That means there's nothing other than "The Full Faith and Credit of the USA" backing the bill. So when the tea party Republicans in congress say they're not going to raise the debt ceiling the value of the US dollar and US Treasury Bonds drops in world markets. That's why those same tea party Republicans like Ryan and McConnell were probably shorting US treasury notes and the US Dollar when they say... "We're not going to raise the debt ceiling because we don't want to spend any more money." Then when the market falls those tea party Republicans make a killing on their shorting the bonds. Very, very unethical. But somebody voted for those hustlers. Ugh and pity those tea party muppets!
But what about inflation? And how we compete across the world? Don't worry about other countries out-producing the USA because they still make stuff here that is valuable in all world markets... like rice and corn and soy beans and Fords and Chevys and lots of other stuff.... trillions and trillions. Hyperinflation comes from no control at the national income and central banking level and corruption as in Argentina sometimes. For all those billionaires out there and the Saudi Kings, the US Dollar is and will continue to be a good shield against inflation. And it is safe because hopefully the tea party republican congress members will not continue to ruin our credit rating which in turn is really a measure of confidence in the US Economy. I would worry much more about some warhawk like John McCain or Ted Cruz who wants to fight a war with Iran and then one with North Korea and then Syria and then on and on. That is the most horrible scenario brought to you by sad tea party Republican muppets in power.
One more thing: Of course you all know that China holds USA bonds to the tune of about US$1.6 Trillion. But what you probably don't know is that there's a lot of other countries playing that game. For example, Japan holds about US$1.3 Trillion in USA bonds. So don't worry if some rube who watches a lot of Fox TV says "Oh, the Chinese own us!" It's not just the Chinese. Everybody owns us. And we own them. All ties together in this small world of creeps in jets. Look at Donald Trump and look at Mitt Romney and look at Rupert Murdoch and the Koch Brothers and all their sewer of billions in secret banks all over the planet.
Just so you'll understand about the bonds, the nation of the People's Republic of China has extra Kwai's, or RMB's or Renminbi's (in Mandarin, People's Money) because their factories shipped a lot of iPhones to Hong Kong last month, and the Hong Kong bank made a payment for the gadgets, so they need a place to put all that money while they are deciding on which type of French fighter jets to buy. So they buy US Bonds on the Bond Market in Hong Kong or New York or wherever... the bonds pay a little interest so they make a little. But in the PRC case a $1.3 trillion dollar US bond can lately pay about $1.3 billion a month or more in interest. But that's not a lot for the truly huge amounts of money in International banking. The real advantage is that US Bonds are very, very, very safe investments. You will not lose your principal (as in your capital). As I noted in my reputedly "dogmatic" post earlier, a lot of nations have some US Bonds in their savings portfolios. That guy in North Korea, Kim Jung Un and a lot of other wealthy world leader people own some bonds personally. Saudi Prince Alwaleed Bin Talal who until recently, was the all-American number two owner of News Corporation (Fox News and such) along with that other pluperfect patriot Rupert Murdoch certainly have some personal money in US Bonds.
But buying bonds are different from buying Dollars in the currency markets. A nation or an individual can buy say, dollars because s/he believes the dollar will increase in value relative to say the Euro where s/he had some holdings last month. So the buyer gets some dollars and holds on to them for a month. If the Euro falls a little relative to the dollar then s/he can make a little bit of money. The currency markets are an extreme sport rather like the derivatives in mortgages and such that cued the breakdown in 2007.
Now let's look at what exactly is meant by "increasing the debt ceiling." It means only that the Government of the US will allow an increase in the amount of money it can borrow in order to service (pay) it's debts. That includes all debts... paychecks for soldiers, rent for the FBI offices in Memphis, F22 parts from Lockheed, Senator Ted Cruz's new girl intern assistant from San Antonio, and everything else the Government of the US needs to keep functioning. Every cent of the money to be paid came through and was approved by the budget committee in the House of Representatives and then passed by the whole House of Representatives and then to the Senate for a nod and then to the President for a signature. The House originated and completed the spending. The House is controlled by Speaker Paul Ryan. He controls it along with his other tea party Republican people. But we have seen that Paul Ryan and his sub rosa group of tea party Republicans may be gaming the credit rating of the United States as a political stunt. Please note China is not the only owner of US debt... there are lots more. The Japanese for example own about as much as the Chinese. But the PRC (China) gets a lot more fearsome press, probably because tea party Republican people in power like Paul Ryan and Ted Cruz and Mitch McConnell are delighted by more TV time on cable news shows.
A credit downgrade by a Chinese agency serves even more text for cable TV blurbs and little else. The rates for our bonds are determined by the worldwide market controlled mainly by enormous mutual funds and shady investment banking cartels owned by shady people who may even be Americans holding off-shore accounts.
Now here's some information about big-time corporation and government accounting operations and the differences for you to learn about: Most large corporations run their financial operations exactly the same way as the US Government. DuPont has an agreement, for example with Citibank in New York to cover their payrolls for the month of July when revenues are a little short because the sales of fertilizer are less than in spring planting. So DuPont pays Citibank a fee to cover the payroll funds borrowed. Citibank is assured of payment by DuPont putting up some of their assets as security. The same for film and media companies. Comcast's people at Universal studios need the cash for their production calendar for the summer. They call Bank of America or City National Bank here in LA and ask to borrow the funds and they put up their film library as collateral. So the bankers give them the money that Universal then uses for production. Revenues (income) from movies in theaters everywhere will bring in the money to pay the money back to the banks.
For the US Government tax revenues (income) are coming in the spring (from the IRS) to pay the money back. Next, because of it's unmatched reputation over more than two hundred years the US Government does not need to put up collateral. That is our credit rating. It is the credit rating for all the people of America, and that is why the tea party Republican people who disparage and attempt to exploit it for politics should be tried for treason.
Of course the possibility of default is near zero. And any default would come from the House of Representatives which controls the money. It's like judicial acts in courtrooms. Judicial ethics requires judges* to never, ever appear to be biased to one side of a case over another. The operative is "appear." For a trial to be fair it must "appear" wholly unbiased. Same for financial markets. No appearance of problems for payment ever can be seen. The appearance of problems to jittery financial markets world wide is as bad as really having a problem in payments. So exploiting the "Full Faith and Credit" of the United States is a truly criminal act.
It took me years in upper level economics work plus financial statistics and probability in grad school plus years of picking through all the media hucksters all over the planet to get a handle on this. So there you go, enjoy the dismal science at it's darkest. Note that Einstein gave up economics because he thought it was too easy. But the brilliant British philosopher and physicist, Bertram Russell gave it up because it was too hard. I abandoned economics for media mainly because the entire realm of economics in those days was an inhuman wasteland for ethics thanks to the rising dark stars of trickle down.
Los Angeles Skyline 2011
The 21st Century Western American Hub
3 comments:
A brilliant discussion and explanation of macroeconomics. Very informative. ...
Thanks, Martin, for a well-written piece.
I thought I would share it on FB ... one of the better written pieces on such matter that I have seen ... I even shared it on a relevant comment thread, and I hope people read it...
Keep these coming. You did an excellent job of enlightening me on our realities. Too bad cognitive dissonance is so abundant in America. Maybe that is why beer is so cheap, to keep the fools drunk and too foolish to care.
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