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Exchange Rate Deteriorating
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atwood

Joined: 26 Dec 2009

Posted: Wed Apr 10, 2013 10:22 pm Post subject:

slothrop wrote:

atwood wrote:

CDS are a kind of insurance that can be traded and are used by banks as hedges. Unless you're a hedge fund manager or a high net worth individual, I doubt you'd be investing in them.

pension funds invest in them. if you've got a pension, chances are, you've had a stake in them, even if you didn't buy them directely.

Good point, although you may be overestimating how many pension funds are invested in them and of how many people, other than public sector employees, have an actual pension these days.

atwood

Joined: 26 Dec 2009

Posted: Wed Apr 10, 2013 10:43 pm Post subject:

KimchiNinja wrote:

Dearest Atwood, please calm yourslef, there's no point to all this carrying on. If you want to show mathematically how a government works its way out of a negative $75T+ hole please do so. It's been my pet project for 5yrs now and nobody has shown me how it can be done (using math).

atwood wrote:

What are the expected cash flows of the U.S. Treasury? You can only guess.

It's not some grand mystery dear fellow.

Expected cash flows are plugged into the model (the US Govt has forecasts and they are available) then you adjust those up/down by inputting various assumptions into said model (GDP growth rate, tax rate, increased/decreased expenses, interest rate on debt, etc). It's called a financial model, you run different scenarios because you don't know the cash flows exactly. But when you build a super optimistic sceanrio, and even in that sceanio the cash flows don't work...you know it's game over.

atwood wrote:

If it were game over for the U.S., why would investors continue to pour money into U.S. Treasuries? Into U.S. stocks? Into the U.S. RE market?

Why did investors keep buying into sub-prime? Why did they keep buying CDOs? Why are you asking me, I didn't.

atwood wrote:

What do you know that all of them don't?

See point above.

atwood wrote:

You're a lifelong finance professional. So was the London whale. So were the guys at Lehman Bros.

I wasn't one of the guys at Lehman Bros though.

atwood wrote:

Anyway, if you're so bright, tell me when to start shorting U.S. Treasuries.

The US Govt is hosed financially speaking, that doesn't mean you are going to be able to time the market. To know the math doesn't work is to understand finance 101, to time the market is to have a crystal ball. Let's be reasonable dammit.

And yet for five years, while your financial models were predicting the opposite, the U.S. government has kept on trucking and the U.S. economy is improving.

Financial models have a great history, a history of being wrong. Of course when the total U.S. government debt is $20 trillion and not the $75 trillion you're starting with I'm not sure how your model would ever work.

As for market timing, that's where the rubber hits the road. If your model can't do that, if it can't make money, it ain't jack.

How can the deficit be brought to heel?

Quote:

The Clinton years showed the effects of a large tax increase that Clinton pushed through in his first year, and that Republicans incorrectly claim is the "largest tax increase in history." It fell almost exclusively on upper-income taxpayers. Clinton�s fiscal 1994 budget also contained some spending restraints. An equally if not more powerful influence was the booming economy and huge gains in the stock markets, the so-called dot-com bubble, which brought in hundreds of millions in unanticipated tax revenue from taxes on capital gains and rising salaries.

Clinton�s large budget surpluses also owe much to the Social Security tax on payrolls. Social Security taxes now bring in more than the cost of current benefits, and the "Social Security surplus" makes the total deficit or surplus figures look better than they would if Social Security wasn�t counted. But even if we remove Social Security from the equation, there was a surplus of $1.9 billion in fiscal 1999 and $86.4 billion in fiscal 2000. So any way you count it, the federal budget was balanced and the deficit was erased, if only for a while.

Fox

Joined: 04 Mar 2009

Posted: Wed Apr 10, 2013 11:43 pm Post subject:

KimchiNinja wrote:

If it is positive, that is nice.

If it is negative, that's not so nice.

If it is negative $75+ TRILLION dollars, such as the case of the US government, then it is game over. You can adjust the model any way you like, you can double GDP growth rate, you can raise taxes like crazy, you can cut government expenses in half, there is no way out of that hole.

There is a way out of that hole. The first step is the federal and state governments defaulting on all debt. The second step is the legal abolition of usury and the termination of the Federal Reserve System. There's more after that, but we've already walked completely out of what is realistically possible given the temperament of the common American citizen and the politicians they elect, so we're stuck with national economic suicide being the prevailing orthodoxy.

akcrono

Joined: 11 Mar 2010

Posted: Thu Apr 11, 2013 2:49 am Post subject:

Fox wrote:

KimchiNinja wrote:

Defaulting on out debt is incredibly dangerous, as the US will never be able to borrow at low rates, since we'd never be trusted again. Also, since the US dollar is the global currency standard, and the dollar's value would take a nosedive, a default would trigger a global recession at least, with a good chance at being a depression.

There are several valid complaints about the fed, but to get rid of it entirely and not replace it is dangerous. A central bank is very important to a stable currency.

Fox

Joined: 04 Mar 2009

Posted: Thu Apr 11, 2013 3:10 am Post subject:

akcrono wrote:

Defaulting on out debt is incredibly dangerous, as the US will never be able to borrow at low rates, since we'd never be trusted again.

See? The American people are beyond saving here. It's no lack of solution that traps them, it's their own urge to feel "adult" by defending a system which predates upon them. This urge makes them say things like:

akcrono wrote:

There are several valid complaints about the fed, but to get rid of it entirely and not replace it is dangerous. A central bank is very important to a stable currency.

akcrono

Joined: 11 Mar 2010

Posted: Thu Apr 11, 2013 4:19 am Post subject:

So how is that wrong? How is defaulting a better option than not defaulting?

atwood

Joined: 26 Dec 2009

Posted: Thu Apr 11, 2013 4:41 am Post subject:

akcrono wrote:

So how is that wrong? How is defaulting a better option than not defaulting?

Look at Fox's avatar, not to mention his handle, and you'll realize you're not going to get a reasonable answer from her.

Beeyee

Joined: 29 May 2007

Posted: Thu Apr 11, 2013 7:27 am Post subject:

akcrono wrote:

A central bank is very important to a stable currency.

Oh man, thanks so much for that!

Edit: Wait, maybe I am doing you a disservice. A central bank run by a democratically elected government or a run for profit private foreign bank accountable to no one?

Fox

Joined: 04 Mar 2009

Posted: Thu Apr 11, 2013 3:34 pm Post subject: