Archive for the ‘economy’ Category

Deficit games

Nothing like a little voodoo economics to scare the crap out of the ignorant US public. Let’s talk about the budget deficit and how large the national debt happens to be.

Guess what? The US deficit is mostly the fault of the Bush tax cuts, the Bush wars, and the financial collapse that happened during the Bush presidency. At this point, though, this is more in the nature of a religious debate than a factual one, and conservatives are going to keep repeating the same tired disinformation about the deficit regardless of any evidence one way or the other.

Of course, there is a shift of wealth with the rich getting richer and the poor getting poorer, and everybody else seeing their standard of living drop.

Personally, I wish these ideas would go away, they are a bad idea for the US and a worse idea for the rest of the world.

Economic Downturn and Bush Policies Continue to Drive Large Projected Deficits
The Deficit Chart Republicans Hate

Weddings, Tourists, Budgets, and other distractions.

I’ve been wanting to go off on a rant about tourists for some time. It seems that tourists are drawn to most of the places I’ve lived. I realise that they provide jobs, but they can also be a bit obnoxious. This is due to the fact that they tend to stop and gawk at things the locals take for granted.

But we don’t have houses like this in California

I’ve wanted to find out where these people come from and go and just stare at their houses and where they shop. You’ve had your fun, now go back to where you came from.

Anyway, it’s fun in Festival City! I went to the dentist and she made the comment that I looked as if I were in pain. My comment was that someone was poking around in my mouth with sharp instruments. Going to the dentists was nearly as bad as a visit to the local experimental theatre company. I can feel better about not being in London when I consider that there are at least two experimental theatres there (Royal Court and Donmar Warehouse–my mother’s a member of the latter).

For some reason, there is (was) Royal Wedding fever here with a local junk shop antique store placing various royal memorabilia in the window. I was out walking and ran into a group of young women in the height of wedding fever wearing gloves and other regalia as well. Fortunately, there is enough republican sentiment hereabouts that the insanity is kept to a dull roar. Things might be different had the 1745 gone the other way!

Here’s to the king across the water!

Anyway, one of my fav commentors, Richard T, said this about the Remember When Post:

Posting from Britain you forgot imposed a more stringent regime of cuts in service to pay for their misdeeds than Mrs T could manage and an attack on pensions based on the lies and manipulation of a gutter press – Fox TV on paper indeed.

I have to agree that I do fixate on the US’s budget disaster far more than I do about the same processes in the UK, but for good reason. The budget debate in the US is rather one sided toward the right wing viewpoint. In fact, it seems the right in the US has hijacked political “debate” so that the US looks as if it is one gigantic lunatic asylum (e.g., Terry Jones and Donald Trump’s birther lunacy). I believe Kurt Anderson made the comment that US Politics is like the film Groundhog Day where people keep rehashing the same old arguments over and over with no change ever coming about.  The poor deluded peasants in the states that believe they will really be able to pick up the crumbs from the billionaires’ tables if the rich don’t pay taxes after 30 years is truly amazing.

The good reason is that if the US’s economy tanks due to right wing morons, it will have catastrophic effects for the entire world economy.  That might not be so bad since it could lead to a new economic system.  Of course, it depends on how equitable that new economic system would be for the world.

I guess I shouldn’t be too upset about some innocent fun from the hereditary celebrities–especially if it creates jobs.

Remember when?

OK, this message is making it’s way around the internet and I’m happy to share it:

Remember when teachers, public employees, Planned Parenthood, AmeriCorps, NPR and PBS crashed the stock market, wiped out half of our 401Ks, took trillions in TARP money, spilled oil in the Gulf of Mexico, gave themselves billions in bonuses, and paid no taxes? Yeah, me neither. Please share this message.

The Kinks – The Money Go Round

This seems appropriate to the current economic situation (neglect the references to the music industry and just use them for any industry):

Robert owes half to Grenville
Who in turn gave half to Larry
Who adored my instrumentals
And so he gave half to a foreign publisher
She took half the money that was earned in some far distant land
Gave back half to Larry and I end up with half of goodness knows what
Oh can somebody explain why things go on this way
I thought they were my friends I can’t believe it’s me, I can’t believe that I’m so green
Eyes down round and round let’s all sit and watch the moneygoround
Everyone take a little bit here and a little bit there
Do they all deserve money from a song that they’ve never heard
They don’t know the tune and they don’t know the words
But they don’t give a damn
There’s no end to it I’m in a pit and I’m stuck in it
The money goes round and around and around
And it comes out here when they’ve all taken their share
I went to see a solicitor and my story was heard and the writs were served
On the verge of a nervous breakdown I decided to fight right to the end
But if I ever get my money I’ll be too old and grey to spend it
Oh, but life goes on and on and no one ever wins
And time goes quickly by just like the moneygoround
I only hope that I’ll survive

Cheap is small and not too steep
But best of all cheap is cheap
Circumstance has forced my hand
To be a cut price person in a low budget land
Times are hard but we’ll all survive
I just got to learn to economize

I’m on a low budget
I’m on a low budget
I’m not cheap, you understand
I’m just a cut price person in a low budget land
Excuse my shoes they don’t quite fit
They’re a special offer and they hurt me a bit
Even my trousers are giving me pain
They were reduced in a sale so I shouldn’t complain
They squeeze me so tight so I can’t take no more
They’re size 28 but I take 34

I’m on a low budget
What did you say
I’m on a low budget
I thought you said that

I’m on a low budget
I’m a cut price person in a low budget land

I’m shopping at Woolworth and low discount stores
I’m dropping my standards so that I can buy more

[Quality costs, but quality wastes,
So I’m giving up all of my expensive tastes.
Caviar and champagne are definite no’s,
I’m acquiring a taste for brown ale and cod roes ]

Low budget sure keeps me on my toes
I count every penny and I watch where it goes
We’re all on our uppers we’re all going skint
I used to smoke cigars but now I suck polo mints

I’m on a low budget
What did you say
Yea I’m on a low budget
I thought you said that
I’m on a low budget
I’m a cut price person in a low budget land
I’m on a low budget
Low budget
Low budget

Art takes time, time is money
Money’s scarce and that ain’t funny
Millionaires are things of the past
We’re in a low budget film where nothing can last
Money’s rare there’s none to be found
So don’t think I’m tight if I don’t buy a round

I’m on a low budget
What did you say
Yes I’m on a low budget
I thought you said that
I’m on a low budget
I’m a cut price person in a low budget land
I’m on a low budget
Say it again
Low budget
One more time
Low budget

[I look like a tramp, but don’t write me off,
I’ll have you all know, I was once a toff
At least my hair is all mine, my teeth are my own,
But everything else is on permanent loan.
Once all my clothes were made by hand,
Now I’m a cut price person in a low budget land.
I’m on a low budget
I’ll have you all know
We’re on a low budget
I’m on a low budget]

Posted 18/02/2011 by lacithedog in economics, economy, Kinks, money, The Kinks

Eban Pagan and Self-Made wealth

OK, I put the last post I wrote about Eban into the Private category for a while since I don’t want to shill for someone who is selling get rich quick schemes. I decided to make it public again since I’ve been listening to the things Eban says on his blog:

Eban has been saying a lot of things I have about economics, which is why I am making the last post public and making this post.

Not to mention he commented here. He made his comment in the slavery post.

Only you can decide whether what Eban wants to teach you is something that meets your needs, but I think that what he says is worth giving a listen.

Especially since I say a lot of the same things when I talk about money. HIs latest post is really to the point:

Budget Cuts–UK v. USA

OK, the economy sucks worldwide.  Budgets are tight and governments don’t want to raise taxes.  It is blasphemy in the US to even think of raising taxes.  It seems to me that the US would rather put its head in the sand when it comes to taxes.

In the UK,  the Labour-controlled Council in Lambeth has erected posters saying: “The government has cut our money so we are forced to cut services.” Also, the Labour-supporting union Unison published a poster depicting a blue-coloured axe with the slogan: “Look what’s in the Tories’ first budget.”

It’s pretty much typical that Labour will point out that budget cuts mean cuts in services.  And they will happily rub people’s noses in it. Not that I totally disagree with doing this since it needs to be made clear that one way that taxes are cut is to cut government services.

Either that, or the US governments will have fire sales of their assets in something which will cause seller’s remorse (e.g., the sale of Pennsylvania’s Liquor Control Board: PLCB). In the PLCB sale, the sale will be done by auction in the hope that top dollar will be realised, but auctions can also see lower prices than hoped.

It will be interesting to see how the austerity budgets end up being received: especially in the US. Are Americans really willing to see their services cut, or privatised, just to have low taxes?

Posted 18/01/2011 by lacithedog in economy, tax, taxation, taxes, UK Politics, US politics

Self-Made wealth

O.K., I’m a bit wary when people send me things telling me how to get money, but I received a link to Eben Pagan’s Self Made Wealth Blog.

The only reason I am passing this on is that he says some of the things I say here about fiat money and debt.

And he doesn’t ask for money up front.

I’ve always had this belief that if someone is onto something that will really make you rich, they aren’t going to need to ask you to pay for the secret. There’s no theory here, it’s just very practical, down-to-earth information that has been the cornerstone of why the rich get richer while the poor get poorer.

Maybe I’m a little too hopeful, but the video I watched has me very interested in what this person has to say.

Posted 07/01/2011 by lacithedog in debt, Eban Pagan, economics, economy, Fiat Money, money

Do They Know its Christmas?

Is it just me or does it seem that the economy is really hitting people? It doesn’t seem that the decorations are out in as much strength as they have been in the past. Of course, the economic effect of Christmas spending seems to be chilling out. But, I am not in retail.

The BBC hasn’t set up the Christmas specials other than Rick Stein’s Cornish Christmas. That’s got me homesick for the West Country, but it doesn’t take too much for me to miss that part of England.

What gives?

Poverty Knocks

Microdot asked me for suggestions for his playlist Working Class Heros…Or Else….

No matter that the US is still reeling from the biggest economic crisis since the 1930s. Inequality continues to grow. Wealth in America is now concentrated to a degree unprecedented since the Great Depression. The top 1 per cent of taxpayers – roughly those making $500,000-plus annually – now receive almost a quarter of all national income, and own more than a third of the country’s private sector assets.

The same pattern is visible in the financial sector, whose recklessness was the main cause of the crisis. Since the crash of 2008, the concentration of power in a handful of giant financial institutions has only increased. Attempts to break them up failed. Wall Street bonuses are back in dreamland.

Source The Independent

World Collapse Explained in 3 Minutes

“How can broke economies lend money to other broke economies who haven’t got any money because they can’t pay back the money the broke economy lent the other broke economy and shouldn’t have lent it to them in the first place because the broke economy can’t pay them back?”

Posted 05/12/2010 by lacithedog in debt, economics, economy

Reserve Banking

OK, I am totally pissed off that the quantitative easing goes to the people who need it the least, the banks, while the rest of the population is broke.  The money needs to be spread amongst the people so they can pay off their debts–except that a cash economy is the worst thing that can happen.

Debt makes the economy go ’round.

But you need to make sure people have jobs so they can keep paying the company store.

But that is not exactly what I want to talk about.  I keep mentioning reserve banking and want to explain that term.

Reserve banking refers to the amount of cash reserves and assets that a bank has to hold to function.  A full reserve bank is one where 100% of the bank’s assets are in cash.  This is best described as a cheque since the amount of money needed to pay the obligation is held in full.

Fractional reserve banking is exactly that, the bank has only a fraction of its assets held as reserves against its obligations.  The amount of money which must be kept as reserve is determined by law.  It is also a surprisingly small number, which is a reason for bank failures.   If banks give out loans which go unpaid, then the “assets” aren’t worth anything.  In simple terms, if the customers make a run on the bank, then there is not enough money to pay out and the bank collapses.

The problem is that the cycle of debt is a necessity for the current world economy, but it is like a game of musical chairs or monopoly and someone ends up losing.

There needs to be a new, equitable distribution of cash to enable the economy to flow.  Money needs to be seen again as a tool for enabling commerce rather than a commodity in itself.

Still more quantitative easing

OK, the video is a bit simplistic and a political as heck, but it is bang on!

“Is this an episode of the twilight zone?” That is a very good description of the current economic system.

“Why don’t they call it printing money?
Because printing money is the last refuge of failed economic empires and banana republics. The Fed doesn’t want to admit this is their only idea.”

This is pretty funny as well.

A dialogue on Quantitative Easing

In a facebook discussion:

Right wing, nitwit Brother in law says:

Do you realize that California is paying out $40,000,000 a day in unemployment benefits and since they are broke, that means you and I are paying this……oh wait, we (the feds) are broke too………..ok….print more money………wait…….won’t that lead to inflation?

Financial Services insider cousin says:

Nope. It won’t lead to inflation. Well not much anyway. Maybe a percentage point or two if we are lucky – because thats the point. When interest rates are at the zero bound, as economists say it is the equivalent of “pushing on a string”…. You try and pump the economy with fiscal policy but nothing happens because people save their money and banks wont lend so the money just sits there. Normally the fed would just cut interest rates now, but as they are at zero – they can’t. Thus Quantitative easing. Not a cure all – but it might help at the margins. That’s why there is an argument for temporary government spending, which would help. But there is zero appetite for more spending, so the Fed is the next best alternative.

Think of it this way – is our debt easier to pay off with inflation or deflation? Answer: inflation. And deflation is the Fed’s biggest fear right now. See 1930’s America and Japan today for reasons why.

While cutting spending and having the government tighten it’s belt and reduce debt sounds great – it really does – almost all evidence in economic history says that it would only make the economy worse when we are on the verge of deflation. Cutting debt and spending makes lots of sense when the economy is growing and we have slight inflation.

The ideal thing would be to get the economy recovered first. THEN cut government spending.

The real fear with QE2 is that it won’t do enough and the economy will stay in the doldrums. In fact, that’s what most economists think will happen.

So don’t worry about hyperinflation. It ain’t happening.

OK, the quantitative easing economics thing is something I’ve commented upon, which tempts me to want to respond on the facebook post, but I’d prefer not to deal with RWNBIL.  I will begin with where I am in agreement with FSI cousin which is  “The real fear with QE2 is that it won’t do enough and the economy will stay in the doldrums. In fact, that’s what most economists think will happen.”  I mentioned in the the quantitative easing post that “economists over at Goldman Sachs estimate that it would take a staggering $4 trillion in quantitative easing to get the economy rolling again”, which is a note that FSI insider is one of those economists. I also said that “quantitative easing can lead to serious hyperinflation and that the cycle of debt needs to come to an end”

Note that I said can not will.

That is an important distinction since unless we are talking about the $4 trillion in quantitative easing, we probably won’t see hyperinflation.  Still, the point is that quantitative easing is not the optimum solution: it is the ultimate last ditch.  It is screaming “uncle”.

World opinion to QE2 is negative and in some ways ironic: e.g., The Chinese chastised the US for QE2 at the G20.  The Irony being that the Chinese Yuan is the usual suspect in currency diddling for being undervalued. Now, the Chinese have turned the tables and are accusing the US of the same thing the Chinese are usually accused of doing.

The real beef with FSI cousin is that he is one of the beneficiaries of Quantitative Easing since the eased “money” goes to the financial services industry, not the people who are in debt.  My previous quantitative easing post was a bit simplistic in how it addressed this issue prefering to let the video describe the practise. Likewise, I will let this video explain fractional reserve banking:

The current economic system is based upon debt. If you consider that fractional reserve banking is based upon debt and that quantitative easing means that the banks will be able to increase their “reserves”. The problem is that the people who really need money are not the beneficiaries of the quantitative easing. That means the economy will stagnate and we will see our standard of living drop.

Propaganda at work

It doesn’t look very convincing.

And while we’re at it, take a look at the Fed’s announcement about the quanititative easing translated into plain english by NPR’s Planet Money.  A sample:

Fed: Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow.

Translation:  The economy still sucks.

This is the entire translation:

The economy still sucks. People are spending a little bit more, but they’re stretched thin: One in 10 workers can’t find a job, wages are basically flat, home prices are way down and nobody can get a loan. Companies are buying more stuff, for now, but they’re not building new factories or offices. Nobody’s hiring. Nobody’s building. Inflation has gone from low to super low.

The Fed has two main jobs: Keep unemployment low and prices stable. At the moment, as you may have heard, unemployment is really high. And inflation is so low that it’s making us nervous. We keep saying that unemployment’s going to fall. And it keeps not falling.

So to give the economy a kick in the ass—and to pump up inflation a little bit—we decided to go on a shopping spree. First of all, we’re going to keep buying new stuff when our old investments pay off. Second—and this is the big news for today—we’re going to create $600 billion out of thin air and use it over the next eight months to buy bonds from the federal government. We hope this will make interest rates go so low that people will borrow and spend more money, and companies will start hiring. By the way, this is an experiment, and we don’t really know how it’s going to work out. We reserve the right to change our plans at any time.

Of course, we’ll continue our policy of letting banks borrow money for free. If you’re worried this is going increase inflation and destroy the dollar, please reread everything we’ve said to this point. We plan to keep rates near zero for as long as it takes, but we won’t tell you how long that is. In the meantime, we’ll keep an eye on things.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy was Thomas M. Hoenig. He’s the president of the Kansas City Fed, and he’s voted against Fed policy at every one of our meetings this year. He thinks this whole creating-$600-billion-out-of-thin-air thing is going to do more harm than good.He also thinks that all this money we’ve pumped into the economy could inflate another bubble and create widespread worries about inflation. That could lead us right into another crisis.


Posted 05/11/2010 by lacithedog in economics, economy, propaganda

Quantitative easing

This is a term we may hear a lot more of in the coming days since it is a last ditch method of dealing with debt when a nation is skint.   It is where a nation puts more money into the economy.  The US Federal Reserve has done some quantitative easing by purchasing $600 billion of U.S. Treasury securities.   I’m not sure if quantitative easing is more like counterfeiting or cheque kiting: both of which are ways anyone other than the official national bank spends nonexistant money.   Another problem is that quantitative easing is an extremely short term fix which is as useful as counterfeiting or cheque kiting.

You too can be a billionaire in hyperinflated currency!

The problem is that the world economy is based upon debt, but everyone is pretty much in debt up to their eyeballs.  The Fed wants to revive the debt cycle which the world economic system is based upon. The Fed believes that if it can get more money into the banking system, the banks will turn around and make more loans. Unfortunately, this is a misinformed concept since everyone is pretty much in debt up to their eyeballs. The banks want to get solvent again and anyone else who can pay down their loans is trying to do that as well. The economy is tanking as Charles Hugh Smith recently explained:

Anyone who believes a meager one or two trillion dollars in pump-priming can overcome $15-$20 trillion in overpriced assets and $10 trillion in uncollectible debt may well be disappointed.

In fact, economists over at Goldman Sachs estimate that it would take a staggering $4 trillion in quantitative easing to get the economy rolling again. But one problem with quantitative easing is that it can lead to hyperinflation.   Seeking Alpha has a super post explaining this in detail called 9 Reasons Why Quantitative Easing Is Bad for the U.S. Economy. Although the short form is that quantitative easing can lead to serious hyperinflation and that the cycle of debt needs to come to an end.

Personally, there would be better ways to quantitatively ease the economy other than increase debt.  It seems that they could infuse the money via a lottery.  Given how lottery winners can go through the money, that would stimulate the economy.  There must be other ways to spend the money in a way that isn’t as obvious as giving it to the banks to shore up their assets.  After all, most counterfeiters don’t want to get caught.  But, I think this is a method of creating money, which while “legitimate”, ends up causing as much havoc as the illegal methods in the end.