Graphing the economic crisis, notice a trend?

Moderators: Elvis, DrVolin, Jeff

Postby posting tulpa » Thu Jan 08, 2009 6:31 pm

Byrne wrote:US National Debt Clock:
Image
http://www.brillig.com/debt_clock/

so each citizen's share of this debt is $34,834.15.



so do I still get my tax return?
... and still, people like me are called anti-Semitic… nut jobs… and of course, ‘racist’ by members of the self-chosen at any one of the sewer forums where they gather to gang rape the truth.-Les Visible
posting tulpa
 
Posts: 296
Joined: Mon Nov 06, 2006 12:58 pm
Blog: View Blog (0)

Here is the graph we all need to read

Postby slow_dazzle » Tue Jan 13, 2009 5:50 pm

and a commentary worth reading too:

http://market-ticker.denninger.net/arch ... -Spin.html

Is that an orchestra playing "Abide by Me" in the background? WTF is that gurgling sound? Sounds like water rushing in through a hole...

Edit - Hat tip to Matt at LATOC for drawing our attention to the article.
On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather.

John Perry Barlow - A Declaration of the Independence of Cyberspace
slow_dazzle
 
Posts: 1132
Joined: Sat Nov 11, 2006 3:19 pm
Blog: View Blog (0)

Postby wintler2 » Tue Jan 13, 2009 6:10 pm

Thanks Slow Dazzle, one of the ..lovely figures from yr link:

Image
User avatar
wintler2
 
Posts: 2884
Joined: Sun Nov 12, 2006 3:43 am
Location: Inland SE Aus.
Blog: View Blog (0)

Postby JackRiddler » Tue Feb 17, 2009 5:18 pm

.

love this thread, hope to see more!

.
User avatar
JackRiddler
 
Posts: 16007
Joined: Wed Jan 02, 2008 2:59 pm
Location: New York City
Blog: View Blog (0)

Postby stefano » Wed Feb 18, 2009 8:13 am

Byrne wrote:it is/was $10,639,227,038,659.27 when I wrote this


And US GDP is around 15 trnUSD, no? So how do we get debt = 4x GDP?
User avatar
stefano
 
Posts: 2672
Joined: Mon Apr 21, 2008 1:50 pm
Blog: View Blog (0)

Postby erosoplier » Wed Feb 18, 2009 9:13 am

So how do we get debt = 4x GDP?


Public + private debt?
User avatar
erosoplier
 
Posts: 1247
Joined: Mon Aug 28, 2006 3:38 am
Blog: View Blog (0)

Postby stefano » Wed Feb 18, 2009 9:47 am

OK, obviously. Cheers
User avatar
stefano
 
Posts: 2672
Joined: Mon Apr 21, 2008 1:50 pm
Blog: View Blog (0)

Postby JackRiddler » Wed Feb 18, 2009 11:46 am

stefano wrote:
Byrne wrote:it is/was $10,639,227,038,659.27 when I wrote this


And US GDP is around 15 trnUSD, no? So how do we get debt = 4x GDP?


Public + private + corporate. In the following, note the rapid development in financial corporate since the 1980s and consider how much of that is off the books or offshore. And everything's shot up in '08.

Image

Following shows as of 2007: Who owns the national portion: i.e., US Treasury bonds.

Image

http://www.optimist123.com/optimist/200 ... e_cha.html

Note the largest share is intragovernmental, i.e. the Social Security and Medicare fund SURPLUSES. (IMO, the true thinking behind "expenditures reform," which is still an issue to Obama despite the ongoing crisis, has always been about how to commandeer that giant accumulated surplus, instead of having to pay it out to retired workers, who should instead be starved out of existence, pronto.)

http://www.democraticunderground.com/di ... 202#493247

The US government share...

would mostly be the Social Security share, as others have pointed out. The SS fund, in surplus for the entirety of its 75 year existence, has been used to finance the deficit, ostensibly on the assumption that this will be paid back into the fund.

Yes, it's ironic that the federal government approaches insolvency under the standards usually applied by the IMF, but that is never mentioned in the MSM, whereas the SS fund is considered in great danger because it will, unless demographic trends change or minor reforms are implemented, go into deficit for the first time in about 30 years.

This is the share of the debt that Bush, in possibly his most important of all statements as president, called "just a bunch of IOUs." That's in reference to US T-Bills! (He was serving notice to the world: We decide and and when and what we pay. Tough. You can't trade in all your dollars anyway.)

Thus the government is in a position to default on 35 percent of its debt without pissing off anyone who matters. (Except the entire US population: what are you gonna do about it?).


SS surplus discussion:
http://www.democraticunderground.com/di ... 00#3526440

Government's table on development of SS trust fund:
http://www.ssa.gov/OACT/STATS/table4a3.html


All figures in the above pie chart have shot up in the last few months to some indeterminate amount far above 10 trillion, may have even hit 14 trillion, as it is yet not really clear what kind of liabilities were taken on or will yet be taken on in the various bailouts, hand-outs, loan and asset guarantees, etc., and how many T-bills were-are being sold to finance it. Fannie and Freddie's 6 trillion in liability, for example -- some good share of that is going to still have value afterward, won't need to be covered.

And there have yet to be big writedowns of personal debt, ideologically unthinkable but a necessity for truly confronting this crisis.
User avatar
JackRiddler
 
Posts: 16007
Joined: Wed Jan 02, 2008 2:59 pm
Location: New York City
Blog: View Blog (0)

Postby JackRiddler » Wed Feb 18, 2009 12:16 pm

UK

Image

Canada

Image

US fed debt v. GDP by presidents (initial high coming off WW2)

Image

Trade/capital deficit

Image

Australia compared to US, highlights significance of financial debt in recent years:

Image

Rise in debt of US states & municipalities:

Image

Kwaves.com

Per capita debt burden by state (from NPR's "the takeaway" propaganda show).

Image

(Extremely misleading if one doesn't look at state GDP and per capita income, growth trends and how it's been spent. All other things equal, I'll take living standards in Massachusetts over Mississippi!)

Image

Cato.org using that one to tell you states must roll back, but this is what I see: For less than the price of the Treasury & Fed bailout to date, USG could have wiped out all state and municipal debt in the country.

Gross!

At any rate, seems that state/municipal not included in US national or in the above cumulative all-debts charts.
User avatar
JackRiddler
 
Posts: 16007
Joined: Wed Jan 02, 2008 2:59 pm
Location: New York City
Blog: View Blog (0)

Postby JackRiddler » Wed Feb 18, 2009 6:26 pm

.

Some figures from 2005:

Image

Image

(Above forgot a big arrow from wages up to govt, but probably not for mean reasons.)

Image

Image

From article worth reading about impact of trade deficit:

http://www.321gold.com/editorials/conra ... 60205.html

The current account deficit is now unsustainable at 6% of GDP. Since imports are bigger than exports, if they grow at a similar rate, the deficit will grow. The accumulation of debt means that we have to pay increasing interest on the debt making the balance worse. Historically, as the US GDP grows 1%, the current account deficit has grown 2%. But foreigners grow their CA by only 1% for a 1% of GDP growth. The conclusion is that the CA will get worse.

The 6 measures to identify if the CA is a problem:
Is it too big? At 6% of GDP it is bigger than the level that brought Argentina into collapse. Mexico got to 8% before its last collapse. The US absorbs 75% of the world's export surplus. A G7 country has never had such a big deficit before. The conclusion is that 6% is already too big.
.
Is it rising? Yes, suggested by the measures mentioned above.
.
What is the comparative rate of National Investment compared to the National Saving rate? If a country is making investment for future production and has a strong savings rate, it is in a stronger position. The US has the opposite with big government deficit, and little savings.
.
Does the composition of the deficit indicate weakness? If a country is running a CA deficit, by importing the means of manufacturing for example, it can be expected that investment will improve output, and thus be more sustainable than if the imports are for consumption. A measure of composition is whether the goods are traded goods, or not. The composition of the CA for the US is for consumer products, and therefore more dangerous.
.
Where are wealthy locals moving their money? The US is expanding its buying of foreign stocks. We are making foreign direct investment outside the country. The net flow out of investment adds to the view that US decision-makers do not find good value in US.
.
Is the capital flow to the US coming from private investors, who tend to be more concerned about returns than politics, or more from central banks, who may have other reasons then just profits? The US was getting about 2/3 of its investment from Central Banks, and this could be a weak position.

By all 6 measures the CA deficit is judged to be a serious risk to the US economy.

There are 3 counter arguments that the situation may not be serious:
We are the Reserve Currency. The large liquid market for US Treasuries has given us leverage and speed. It looks like local stability, but if there is a big shift, the speed could lead to explosive results. The global capital market my not give that much edge to the dollar.
.
"We will rip the foreigners off." We will depreciate the dollar enough that they will be left with less than they paid for. In fact, this has been happening. The foreign debt to GDP (nominal) ratio hasn't been expanding much. The weaker dollar means that the purchasing power of the accumulated foreign debt is not growing so rapidly. The argument has short-term merit, but the obvious flaw is that foreigners can see what is happening and may not allow it to continue. An expectation of a weaker dollar would drive the dollar down even more.
.
Bretton Woods II Co-dependency. The term refers to the regime of using the dollar, which is no longer based on gold, to manage the world economic system. The cold war term of Mutually Assured Damage can be applied to the very big holders of our debt. The foreign country that accepts US dollars in trade transactions and re-invests them in US Treasuries may not be so concerned about the dollar drifting lower, if they believe that keeping the dollar strong will benefit their own economy. We have the odd policy of asking China to raise the value of their currency, leaving them holding claims on us of decreasing value.

There will be substantial adjustments ahead:
The most similar historical time was the mid-1980s when the CA peaked at 3.5% of GDP. The fall of the dollar after 1985 caused the CA to come back in line.
.
The 1987 crash might have had some input from these unstable antecedents.
.
Japan had several parallels in its situation in the late 1980s with seemingly unending growth. China today looks like Japan of the 70s and 80s.

The trade imbalance is a substantial problem not only in the US, but globally. US purchases of world goods are necessary for other countries' economic growth. If the US fixes its CA deficit, then the rest of the world will have excess capacity. So the US fix is a problem for the world.

The relationships of the US savings rate, CA, and investment rate, leave us only limited options. The US investment (borrowing, including the government) has to be funded out of US households' savings, or from foreigners as investment of their trade-won dollars. For all these things to work, as the US cuts its CA deficit, foreign countries must stimulate their own demand to provide markets for their output. There is no simple path here. With US consumers not saving much at all, the funding of credits must come from foreigners. Asian consumers have been held back by lack of long-term mortgage lending and retail constraints. Commensurately, currency adjustment of the weaker dollar should occur against Asian currencies more than European. The economic link of the CA deficits and the budget deficit, is that a smaller fiscal deficit would help improve the CA deficit.

Summers' concluding comment was to say "I don't know the answer." His arrival at such a dire evaluation, suggests reason to be cautious about the economy and the value of the dollar for the future.

My Conclusion

I think the US trade deficit will lead to a weaker dollar. That means alternatives to US-dollar-denominated assets must be an important part of a portfolio. The US avoided a serious recession in 2001 by letting the consumer expand his spending by borrowing. We now have more debt than ever, not only internationally as described above, but also for government, and for mortgages. If foreigners were to consider other options for holding these dollars, there could be a glut of dollars in the world that would drive the exchange rate downward and prices in the US upward. If inflation rises, US interest rates could rise, and many parts of the economy could turn down, like housing, stocks and consumer spending. Because of the size of the amounts involved, and the speed of today's currency and interest rate markets, the shift could move very fast in a downward spiral.

Bud Conrad
email: budconrad@earthlink.net

Originally published on KitcoCasey on May 31, 2005.


Contrary to oft-heard conventional wisdom, a fall in dollar (shown in chart against an index, not just euro) does not necessarily mean a decline in trade deficit. World economy simply no longer structured that way. Two factors key:
A) energy imports!
B) 2/3 of trade is intra-company; e.g. Walmart is importing not from "China" but from its own factory there, Ford sources components from parts factories it owns abroad or has a partnership, etc. In a period of recession and scarce capital, you can't just pack these up and move them elsewhere to find lower wages, too many startup expenses associated, in the examples especially for Ford due to high specialization & need for quality/associated expertise of workforce involved. (Marx understood this already as the weight of past capital investment pressing down on future profit growth.)

Image

You've had a rise in the dollar in 2008 even as the crisis kicked in due to deleveraging. The trade deficit has also fallen. Of course, this is thanks to a fall in consumption, not the rise in the dollar.

.
User avatar
JackRiddler
 
Posts: 16007
Joined: Wed Jan 02, 2008 2:59 pm
Location: New York City
Blog: View Blog (0)

Postby JackRiddler » Wed Feb 18, 2009 6:53 pm

.

Image

compare to:

Image

from

http://www.iea-macro-economics.org/ff-approach.html

Static vs. Flow Perspective in
Flow-of-Funds Accounts
and Financial Analysis


Written by John Atlee, November, 1959. Published as "Comment" in
The Flow-of-Funds Approach to Social Accounting --
Appraisal, Analysis, and Applications:
Studies in Income and Wealth, Volume Twenty-Six,
by the Conference on Research in Income and Wealth
(a report of the National Bureau of Economic Research, New York)
(Princeton University Press, Princeton, 1962)

Contents
The Conceptual Treatment of Money
The Concept of Credit Flows
Quantitative Estimation of Primary Credit
Preliminary adjustments
Netting out of intermediate credit
The National Credit Balance
A Flow Model for Dynamic Macroeconomic Analysis
The circuit of money flows
The money-flow equation
Analytical uses


One perspective on what's happening right now:

Image
User avatar
JackRiddler
 
Posts: 16007
Joined: Wed Jan 02, 2008 2:59 pm
Location: New York City
Blog: View Blog (0)

Postby smiths » Wed Feb 18, 2009 8:03 pm

Image

Average of World Central-Bank Interest Rates (FED, BOJ, BOE, ECB, Switzerland)
User avatar
smiths
 
Posts: 2205
Joined: Wed May 18, 2005 4:18 am
Location: perth, western australia
Blog: View Blog (0)

Postby JackRiddler » Thu Feb 19, 2009 11:00 pm

.

Now here's one to make the goldbugs happy.

FEB 13, 2008

Image

http://www.chartoftheday.com/20090213.htm?T

How significant is this bear market? It all depends on how you measure. When measured in US dollars, the Dow currently trades 44% off its October 2007 record high. However, when measured with that other world currency (gold), the bear market is much more significant. To help illustrate the point, today's chart presents the Dow divided by the price of one ounce of gold. This results in what is referred to as the Dow / gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 8.4 ounces of gold to “buy the Dow.” This is considerably less that the 44.8 ounces it took back in 1999. When priced in gold, the Dow from 1999 to today is down 81%!
User avatar
JackRiddler
 
Posts: 16007
Joined: Wed Jan 02, 2008 2:59 pm
Location: New York City
Blog: View Blog (0)

Postby anothershamus » Thu Feb 19, 2009 11:27 pm

smiths posted this on Market ticker RED ALERT and I thought it would look good here. Thanks for reviving this thread, too bad we aren't through it yet!


Image
)'(
User avatar
anothershamus
 
Posts: 1913
Joined: Fri Jun 23, 2006 1:58 pm
Location: bi local
Blog: View Blog (0)

Postby JackRiddler » Sat Feb 21, 2009 2:27 pm

User avatar
JackRiddler
 
Posts: 16007
Joined: Wed Jan 02, 2008 2:59 pm
Location: New York City
Blog: View Blog (0)

PreviousNext

Return to General Discussion

Who is online

Users browsing this forum: No registered users and 164 guests