President Obama's swearing-in (not meant to be political)

[_JohnStuartMill]

What do you think Keynesian economics is?[/quote]
My understanding is that it a major component is government intervention in free markets.

Spend and cut taxes when times are tough and tax and reduce deficits when times are good is the simplest explanation.[/quote] I think you're closer to the mark with the latter sentence. Your analysis seemed to presume that Keynesian economics called for extensive government intervention in markets even in boom times, which isn't quite right.

I am not an economic expert though I did spend my first year in college as an economics major. I find the theories can be difficult to grasp. As a free trader proponet most my life I have tended to believe that in a total world open market where we all do whatever we can do best that it does not matter what is produced where.

Yeah, same here. I'm a Democrat, and the thing I hate most about my party is the protectionist faction within it.

But it also seems with too many dollars abroad that if those dollars flood the US market for scarce goods it could drive up inflation to double digits. Sure it puts money back into the US economy. But what is happnening is the Chinese are buying back from US retailers the stuff they make. Or they may not even bother to ship it to us and just buy themselves,

Considering that most American economists are losing sleep over the possibility of deflation, I'm still not sure that the mild inflationary effects of increased demand for American goods and services would be so awful. Also, there are measures the Fed can take to counteract or mitigate these inflationary pressures anyway.

It is complex though. And I do agree that currently raising interest rates would be a mistake. It seems that policy right now is to do the opposite of what happened in the late 20s and early 30s. Maybe increasing the money supply will do the trick.

I'm sympathetic to this idea, but I think a more to-the-point solution would be to keep the prime rate low, because the problem isn't that the dollar is too dear, it's that money is too hard to get. Increasing the money supply would only indirectly loosen credit markets. If we've cut interest rates to zero and credit markets still don't loosen up, I can see an argument for a cash infusion, but the most recent indicators I've seen show that those markets have begun to thaw.

You seem pretty knowledgeable about this. Check out Peter Schiff;s ideas and let me know what you think.

Will do, thanks.

[_Jason Bourne]

I thought this might be of interest:

http://www.europac.net/externalframeset ... e&id=15252

January 23, 2009

The World Won't Buy Unlimited U.S. Debt: Peter Schiff's Editorial in The Wall Street Journal


Barack Obama has spoken often of sacrifice. And as recently as a week ago, he said that to stave off the deepening recession Americans should be prepared to face "trillion dollar deficits for years to come."

But apart from a stirring call for volunteerism in his inaugural address, the only specific sacrifices the president has outlined thus far include lower taxes, millions of federally funded jobs, expanded corporate bailouts, and direct stimulus checks to consumers. Could this be described as sacrificial?

What he might have said was that the nations funding the majority of America's public debt -- most notably the Chinese, Japanese and the Saudis -- need to be prepared to sacrifice. They have to fund America's annual trillion-dollar deficits for the foreseeable future. These creditor nations, who already own trillions of dollars of U.S. government debt, are the only entities capable of underwriting the spending that Mr. Obama envisions and that U.S. citizens demand.

These nations, in other words, must never use the money to buy other assets or fund domestic spending initiatives for their own people. When the old Treasury bills mature, they can do nothing with the money except buy new ones. To do otherwise would implode the market for U.S. Treasurys (sending U.S. interest rates much higher) and start a run on the dollar. (If foreign central banks become net sellers of Treasurys, the demand for dollars needed to buy them would plummet.)

In sum, our creditors must give up all hope of accessing the principal, and may be compensated only by the paltry 2%-3% yield our bonds currently deliver.

As absurd as this may appear on the surface, it seems inconceivable to President Obama, or any respected economist for that matter, that our creditors may decline to sign on. Their confidence is derived from the fact that the arrangement has gone on for some time, and that our creditors would be unwilling to face the economic turbulence that would result from an interruption of the status quo.

But just because the game has lasted thus far does not mean that they will continue playing it indefinitely. Thanks to projected huge deficits, the U.S. government is severely raising the stakes. At the same time, the global economic contraction will make larger Treasury purchases by foreign central banks both economically and politically more difficult.

The root problem is not that America may have difficulty borrowing enough from abroad to maintain our GDP, but that our economy was too large in the first place. America's GDP is composed of more than 70% consumer spending. For many years, much of that spending has been a function of voracious consumer borrowing through home equity extractions (averaging more than $850 billion annually in 2005 and 2006, according to the Federal Reserve) and rapid expansion of credit card and other consumer debt. Now that credit is scarce, it is inevitable that GDP will fall.

Neither the left nor the right of the American political spectrum has shown any willingness to tolerate such a contraction. Recently, for example, Nobel Prize-winning economist Paul Krugman estimated that a 6.8% contraction in GDP will result in $2.1 trillion in "lost output," which the government should redeem through fiscal stimulation. In his view, the $775 billion announced in Mr. Obama's plan is two-thirds too small.

Although Mr. Krugman may not get all that he wishes, it is clear that Mr. Obama's opening bid will likely move north considerably before any legislation is passed. It is also clear from the political chatter that the policies most favored will be those that encourage rapid consumer spending, not lasting or sustainable economic change. So when the effects of this stimulus dissipate, the same unbalanced economy will remain -- only now with a far higher debt load.

If any other country were to face these conditions, unpalatable measures such as severe government austerity or currency devaluation would be the only options. But with our currency's reserve status, we have much more attractive alternatives. We are planning to spend as much as we like, for as long as we like, and we will let the rest of the world pick up the tab.

Currently, U.S. citizens comprise less than 5% of world population, but account for more than 25% of global GDP. Given our debts and weakening economy, this disproportionate advantage should narrow. Yet the U.S. is asking much poorer foreign nations to maintain the status quo, and incredibly, they are complying. At least for now.

You can't blame the Obama administration for choosing to go down this path. If these other nations are giving, it becomes very easy to take. However, given his supposedly post-ideological pragmatic gifts, one would hope that Mr. Obama can see that, just like all other bubbles in world history, the U.S. debt bubble will end badly. Taking on more debt to maintain spending is neither sacrificial nor beneficial.

Mr. Schiff is president of Euro Pacific Capital and author of "The Little Book of Bull Moves in Bear Markets" (Wiley, 2008).

[_JohnStuartMill]

Oh, that was Schiff? How funny -- my friend just sent me that article. This was my response:

Yeah, Obama's current policies are pretty fiscally reckless. My hunch is that he's putting this stuff on the backburner, so he can use the 100-day window to get support for stuff it's possible to get support for, like health care reform, renewable energy programs, and the rest. It's not going to EVER be possible to get support for higher taxes, or raising the retirement age, etc., so why waste the valuable 3-month period on those chimeras? Even Bush was smart enough to wait a year to try to push through Social Security privatization.

[_hobart]

Could we maybe take the political discussion into the off-topic forum?

Discussing President Obama (and thus, politics) is germane to the thread, hobart.




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I have obviously chosen a poor title for the thread, as it makes it sound political. But it is clear from the first post (which I authored) it is not about President Obama, his policies, or his ability as a president. It was about the ceremony of becoming a president by swearing-in and its connection to Mormon rites (whether that swearing-in was done by Sen. McCain or any other person who could have become president). I feel that the post has been hijacked by going off topic and talking about nothing to do with Mormonism. But carry on if the moderators approve.

[edited for spelling and grammar]

[_hobart]

Hi Hobart, no worry about being late... You said:

Thank you for your thoughtful post. Sorry I didn't have until this evening to address it. It actually sent me thinking back to my Anthropology of Religion class. There are theories about why these rituals and rites are so important. Transformation ceremonies and ritual catharsis (theories that were developed by thinkers like Arnold Van Genep and Victor Turner) "heighten your awareness that something important has taken place--the transformation ceremonies that have the most drama associated with it are the most important in a society" (my actual notes from the class). And I suspect swearing-in ceremonies and exact wording of rites are done so as an outward symbolism to heighten the awareness (for the participants) of the importance of the event that has taken place. As you said "theatrics supposedly adding drama and significance to impress the impressionable." And that's the whole point--if it were as simple as what we do every day, there would be no importance in our minds of what has occurred. I am also reminded the when I sent my resignation letter to the church--I bought heavier weight paper, printed it in "fine" quality, and signed it with my best pen that I normally keep in a drawer because it's hard to write with (black gel ink). Why? Because it was important to me; it was a serious, life-changing event. But again, it doesn't do much for a perfectionist like me. I recall printing the thing numerous times because I wanted it perfect.

Thanks for that. I understand the principles involved in most crowd manipulative theatrics. It is common and obvious on many fronts. I think, for the most part they appeal to emotion--that is what generally motivates folks--rather than to intelligence, that is generally speaking not as easily arroused;-)

I think our individual dispositions probably influence our reactions to crowd stimulation. As best I can I remove myself from any such overt or covert attempt to violate my integrity--such as it is :-) Watching the genious of Hitler as he influenced by those tactics has left me questions about any person or group that uses the same device to elicit what they want from me as a spectator. Which by nature & nurture I am not; I'm more of a participator...

Of course that fact also motivates me to impress as best I can, when I feel (think?:-)so to do. As you did when writing your very important letter.

BUT hiring a Limo to ego-enhance Graduates of Elementary School IMSCO is???? As are sports hysterics BLAH BLAH BLAH...

BUT, I'm all for Obama... Long may he reign!!!!

Roger
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I would have to disagree with your wording that it is "crowd manipulative theatrics." I would have to say those who chose to witness the event of the inauguration (or a baptism or sacrament blessing) are more than mere spectators, but are in essence, participants in the ceremony. But I do understand what you say about an analogy to the theatrical operations of Hitler (or any other figurehead)--after all, what is the importance of the Queen of England waving and speaking to her countrymen (since she doesn't have the power of parliament)? The citizens seem to like it. There is a fine line between participating in drama and being a captive audience to displays of power.

[_Roger Morrison]

Good AM Hobart, from your post:

... I would have to say those who chose to witness the event of the inauguration (or a baptism or sacrament blessing) are more than mere spectators, but are in essence, participants in the ceremony. True, as I was willingly engrossed in the whole Obama proceedings, for months... But I do understand what you say about an analogy to the theatrical operations of Hitler (or any other figurehead)--after all, what is the importance of the Queen of England waving and speaking to her countrymen (since she doesn't have the power of parliament)? The citizens seem to like it. True. And I often wonder at the reasons, while understanding the purpose--often with disdain... There is a fine line between participating in drama and being a captive audience to displays of power. True again. A line that that I often sidestep with little cringe of my conscience; malleable-man that i am.
Staying on topic is a most difficult thing, as our scatter-brained tendency is to be influenced by the last thing we hear or see. Generally speaking, that is what we react to--so studies reveal. I too, often find going off-topic for the most trivial reasons very annoying.
Personally, I have disciplined myself from such child-like responses to be more intellectually mature and address the initial thought/question...
Traits that I see we both share... Without having a Chair-person

Enjoy your day, Roger
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