Global Stimulus?

[hblask 1]

30y yielded 3.88% today (source). I guess that's short-term if you're a geologist or something...

I'm sure you know this, but long term bonds compete against short-term, equities, cash, money markets, other country treasuries, etc. The problem is right now nobody is safe. The theory now is that the government will do something smart in the next 30 years. But I have yet to see anyone (except Krugman) who believes that national debt that is 100% of GDP is sustainable, and Obama is showing no inclination to reverse the trend.MOre on Krugman:Laughingstock on two continents

[LongLiveYorke 38]

Do you have any ideas on how to deal with 'medical costs' long term? Our costs are out of control now, and we're expecting to grant access to guarantee issue coverage to another 30-45million people by 2014. 1/6th of our economy. Do you have any sort of idea or plan or solution here? It seems that you're just taking the typical liberal 'let's pass it to see what's in it' position here. I guess I'm wondering how you can say it's a huge long term problem while also championing the healthcare reform bill. sorry if i'm hijacking the thread.

Honestly, I really don't know what the heck you're responding to here. In my post, I said that high health care costs were a major long term problem. This is a pretty objective statement. I'm not sure how you extrapolated that to the bold statement above. I don't know where you're coming from, or what you now want to get into a health care debate with me.

[mk 11]

The reason US treasuries are not dying is because we are the world's reserve currency, and most of the other major countries are in huge trouble.Anyway, as I mention above, our problem is that the problems are coming and need to be anticipated now or we will have a crisis in a decade. The short term bond investors don't care about that right now.

Again, in a word: no. The bond market isn't a short term market. As strat said, quite correctly, and which you dismissed, our 10s and 30s would be getting smoked if the marketplace were concerned that we'd have debt:gdp of 100% for any significant amount of time. We have a spike now, which will be smaller and less sustained than the spike in the 40s, for instance.The "lot" of economists you claim are indicating the U.S. isn't far behind Greece and Spain should be taken: less than seriously. Our economy is still enormous and the most productive of all major economies by a wide margin. This is what provides us with the borrowing power to leverage ourselves quite heavily temporarily. Greece and Spain are: the opposite of this.I agree that the aging population and costs of Medicare and Social Security are large, looming concerns, but I don't think they're quite as disastrous as many think. If the age for SS is raised, which I think it will be, that problem is lessened quickly. Medicare is less simple, but lowering the costs of disaster care, which I believe--and you will *GASP* at this--Obamacare will actually help, is a step in the right direction.

[Jeepster80125 0]

Honestly, I really don't know what the heck you're responding to here. In my post, I said that high health care costs were a major long term problem. This is a pretty objective statement. I'm not sure how you extrapolated that to the bold statement above. I don't know where you're coming from, or what you now want to get into a health care debate with me.

First, I am not seeking you out or anything, I totally understand that you didn't make a post in the healthcare thread or anything. I don't have a problem with you at all. I could be mistaken, but you've posted things like MPG restrictions, automatic subsidies for nuclear and other green energies, etc right? You've also posted that you are in favor of socialized medicine, right? That's obvious from your 'don't make old people pay for expensive end of life care'. If I am mistaken or if I am attributing stuff wrongly to you, please let me know. I'm not jjj and I don't have time to search your posts.I just have some problems with those 'solutions' that you propose, which seems to be repeated by many on the left, hence my comment which you bolded. I'm sure you understand that bolded info was from the healthcare reform bill, which is why I included it in my response to you. I'm pretty horrible at this posting stuff sometimes. It's not that I want to argue with you, but I am genuinely interested in your ideas. Assuming you were in favor of the healthcare reform bill, and assuming you understand that 'high healthcare costs [are] a major long term problem, then I would take the position that you don't really understand healthcare. That might sound a little harsh, but it's irritating to hear people spread mis-information. Especially really really smart people like yourself. I'd just like you to clarify your 'objective statement', because in my opinion it's just a talking point until you have a solution.But I could be wrong, and I'll happily admit that.

[AmScray 355]

Again, in a word: no. The bond market isn't a short term market. As strat said, quite correctly, and which you dismissed, our 10s and 30s would be getting smoked if the marketplace were concerned that we'd have debt:gdp of 100% for any significant amount of time.

LOL @ emh.So, when the entire market melted down and everyone got their face ripped off, did we then defer to the wisdom of the collective markets as well?When the CDS nightmare was winding up and the guys betting against subprime were laughingstocks (because, after all, if there was anything to be worried about, the market would surely see it!) were we still relying on 'market wisdom' as our guide?One thing about 'quants'. They can articulate all scientific properties of water, yet be totally unaware that they're standing chest-deep in a fucking lake.

[mk 11]

An opaque derivatives market is hardly the same thing as the US Treasury market, where the players aren't merely desk jockeys and quants at funds and banks trying to fabricate new ways to fleece Mom and Pop, but rather foreign central banks and real money. I'm not saying I think treasuries are always priced perfectly, but it's closer than you think and certainly much closer than CDSs.

[LongLiveYorke 38]

where the players aren't merely desk jockeys and quants at funds and banks trying to fabricate new ways to fleece Mom and Pop,

Isn't that what you do?

[mk 11]

Isn't that what you do?

No, I have no clients.

[mk 11]

http://ftalphaville.ft.com/blog/2010/07/07...-calls-for-qe2/Just saying, not unreasonable to consider. When Goldman's chief economist agrees with you, you're probably thinking along the correct lines.

[AmScray 355]

http://ftalphaville.ft.com/blog/2010/07/07...-calls-for-qe2/Just saying, not unreasonable to consider. When Goldman's chief economist agrees with you, you're probably thinking along the correct lines.

Some quick math and fun, quickly-gleaned Wikipedia facts.Per that article, present debt service stands @ 1.5% of US GDP, or about $210,000,000,000.To put that in perspective, $210,000,000,000 is greater than the entire GDP of the following countries.

 Hong Kong Czech Republic Israel Malaysia Egypt Singapore Nigeria Pakistan Chile Romania Philippines Algeria Hungary Peru New Zealand Ukraine Kuwait Kazakhstan Bangladesh Vietnam Morocco Slovakia Qatar Angola Iraq Croatia Libya Ecuador Sudan Oman Syria Luxembourg Slovenia Belarus Bulgaria Dominican Republic Azerbaijan Serbia Sri Lanka Tunisia Guatemala Lithuania Lebanon Uzbekistan Kenya Ethiopia Uruguay Costa Rica Burma Latvia Yemen Panama Cyprus Jordan Côte d'Ivoire Tanzania Cameroon El Salvador Trinidad and Tobago Bahrain Estonia Bolivia Bosnia and Herzegovina Uganda Ghana Paraguay Honduras Afghanistan Zambia Senegal Nepal Equatorial Guinea Albania Iceland Jamaica Botswana Democratic Republic of the Congo Gabon Cambodia Georgia Brunei Mozambique Republic of the Congo Namibia Macedonia Mali Mauritius Armenia Madagascar Burkina Faso Malta Papua New Guinea The Bahamas Chad Benin Haiti Nicaragua Laos Moldova Kosovo Niger Rwanda Tajikistan Kyrgyzstan Malawi Zimbabwe Guinea Mongolia Montenegro Barbados Fiji Mauritania Swaziland Suriname Togo Guyana Central African Republic Sierra Leone Eritrea Cape Verde Lesotho Maldives Belize Burundi Bhutan Antigua and Barbuda Djibouti Saint Lucia Liberia Guinea-Bissau Seychelles The Gambia Solomon Islands Vanuatu Grenada East Timor Saint Vincent and the Grenadines Samoa Saint Kitts and Nevis Comoros Dominica Tonga São Tomé and Príncipe Kiribati

Lots of insignificant, irrelevant and backwater crapistans on that list? To be sure... So lets crystalize a bit further.The INTEREST ON DEBT SERVICE we ship away every year is equal to up to half of the ENTIRE NATIONAL GDP of the following countries...

 Poland Sweden Norway Austria Taiwan Saudi Arabia Venezuela Greece Iran Argentina Denmark South Africa Thailand Finland United Arab Emirates Colombia Portugal Ireland

In a global economy with capital flow models rapidly evolving, that's hardly an effective way to manage our upcoming 'elegant decay' and diminishing global relevance, shipping the entire GDP of any number of small countries over to our bond holders in terms of interest, year after year. It doesn't exactly do much for our standard of living going forward, not to mention there's some off-kilter 'opportunity cost' dynamics when a lot of that wealth is being transferred to our chief competitor. Sad thing?That's with debt service @ 1.5%. We all know it's going much, much higher. Just because Greece was a lot worse doesn't make me feel any better about what we're doing here...

[LongLiveYorke 38]

Nero on the Roof?

[hblask 1]

http://ftalphaville.ft.com/blog/2010/07/07...-calls-for-qe2/Just saying, not unreasonable to consider. When Goldman's chief economist agrees with you, you're probably thinking along the correct lines.

So the group that gave $1M to Obama, who returned the favor by giving them back some bogus "reform" bill that just makes the big players even stronger while weakening competitors, now comes out in favor of more handouts to large corporations?Shocking!

[strategy 4]

So the group that gave $1M to Obama, who returned the favor by giving them back some bogus "reform" bill that just makes the big players even stronger while weakening competitors, now comes out in favor of more handouts to large corporations?Shocking!

so wait, you're not on board with extending the tax cuts? what's the world coming to?

[hblask 1]

so wait, you're not on board with extending the tax cuts? what's the world coming to?

It's something that needs to happen, but not as much as starting to shrink the country's debt load. And all the other "more debt now fix it later" stuff in there is just embarrassing.First, cut spending. By a lot. There is no other economically sensible answer if you expect to be around in 20 years.And much of that will have to come from the "untouchable" entitlements.

[mk 11]

So the group that gave $1M to Obama, who returned the favor by giving them back some bogus "reform" bill that just makes the big players even stronger while weakening competitors, now comes out in favor of more handouts to large corporations?Shocking!

Making fairly obvious statements regarding widely available economic data vis a vis growth and inflation when your job is that of an economist doesn't necessarily equate to a conflict of interest.BUT BUT BUT it's Goldman, therefore:

[hblask 1]

Making fairly obvious statements regarding widely available economic data vis a vis growth and inflation when your job is that of an economist doesn't necessarily equate to a conflict of interest.

But when you make a statement that will help to add millions to your coffers at taxpayer expense, in the face the failure of close to a century of "stimulus" spending experiments, then it clearly is just for political purposes. (I wouldn't say conflict of interest, since it is in their interest to get the government to give them free money and favorable regulations.)

[Balloon guy 158]

Making fairly obvious statements regarding widely available economic data vis a vis growth and inflation when your job is that of an economist doesn't necessarily equate to a conflict of interest.BUT BUT BUT it's Goldman, therefore:

I have not followed this because you guys are too smart / weird for knowing all this stuff.But a while back Rolling Stone did an article basically pointing out that every major financial crisis this country has had for the last decade was mostly Goldman's fault. They are entrenched in Washington etc.Since then I have noticed how often Goldman's name pops up in almost everything financial.Is this just because they are like Haliburton and the only ones big enough who CAN do this stuff?Or have they really basically turned this country into their own special monopoly game?

[hblask 1]

Or have they really basically turned this country into their own special monopoly game?

Yeah, this, pretty much. Not just them, but a good rule of thumb -- for each 5% of the population that has heard of a company, that is at least one congressman bought and paid for.

[LongLiveYorke 38]

First, I am not seeking you out or anything, I totally understand that you didn't make a post in the healthcare thread or anything. I don't have a problem with you at all. I could be mistaken, but you've posted things like MPG restrictions, automatic subsidies for nuclear and other green energies, etc right? You've also posted that you are in favor of socialized medicine, right? That's obvious from your 'don't make old people pay for expensive end of life care'. If I am mistaken or if I am attributing stuff wrongly to you, please let me know. I'm not jjj and I don't have time to search your posts.I just have some problems with those 'solutions' that you propose, which seems to be repeated by many on the left, hence my comment which you bolded. I'm sure you understand that bolded info was from the healthcare reform bill, which is why I included it in my response to you. I'm pretty horrible at this posting stuff sometimes. It's not that I want to argue with you, but I am genuinely interested in your ideas. Assuming you were in favor of the healthcare reform bill, and assuming you understand that 'high healthcare costs [are] a major long term problem, then I would take the position that you don't really understand healthcare. That might sound a little harsh, but it's irritating to hear people spread mis-information. Especially really really smart people like yourself. I'd just like you to clarify your 'objective statement', because in my opinion it's just a talking point until you have a solution.But I could be wrong, and I'll happily admit that.

I originally wrote a response to this, but then I opened another tab, forgot about the response, and ended up deleting the whole window and losing my comments. So, here's another shot:

First, I am not seeking you out or anything, I totally understand that you didn't make a post in the healthcare thread or anything. I don't have a problem with you at all. I could be mistaken, but you've posted things like MPG restrictions, automatic subsidies for nuclear and other green energies, etc right?

Yes, I'm for those things.

You've also posted that you are in favor of socialized medicine, right? That's obvious from your 'don't make old people pay for expensive end of life care'. If I am mistaken or if I am attributing stuff wrongly to you, please let me know. I'm not jjj and I don't have time to search your posts.But I could be wrong, and I'll happily admit that.

No, I'm not really a fan of socialized medicine. I don't think universal government healthcare is the best solution, though I don't think it's nearly as bad as many portray it to be. I mean, many, many countries have it and do okay for themselves. It has it's benefits and drawbacks. The conversation can't really move anywhere until certain people stop demonizing it (the conversation in general, I mean, not specifically on this website). My comment about paying for expensive end of life care was a general comment about human behavior and not really about any particular position on health care. I think that people are afraid of death (okay, obvious statement). People haven't come to grips with death yet, and people think they are immortal. Therefore, people somehow fell justified paying a fortune trying to fight death. This money is wasted, of course, because fighting death is impossible.Healthcare is about improving one's life, not trying to live forever. If it's clear that a person is going to die, why should he spend his last month in a hospital hooked up to tubes? He should be at home, or at a beach, or somewhere pleasant, and should gently let life take it's toll.But that's just a personal opinion. I'm just saying that if I'm 90 and diagnosed with terminal cancer, I'm spending a few hundred dollars on morphine prescriptions and living the rest of my days at home. And if everybody else did the same, we'd save a lot of money. That's all my comment was about.Here's a nice article on the issue:http://opinionator.blogs.nytimes.com/2009/...way-we-die-now/

I just have some problems with those 'solutions' that you propose, which seems to be repeated by many on the left, hence my comment which you bolded. I'm sure you understand that bolded info was from the healthcare reform bill, which is why I included it in my response to you. I'm pretty horrible at this posting stuff sometimes. It's not that I want to argue with you, but I am genuinely interested in your ideas. Assuming you were in favor of the healthcare reform bill, and assuming you understand that 'high healthcare costs [are] a major long term problem, then I would take the position that you don't really understand healthcare. That might sound a little harsh, but it's irritating to hear people spread mis-information. Especially really really smart people like yourself. I'd just like you to clarify your 'objective statement', because in my opinion it's just a talking point until you have a solution.

It's clear that healthcare costs are a long term issue. Both sides agree with this. There is no contradiction between understanding that there is a problem and being on the left or the right, or being for or against Obama's healthcare bill. Obama's bill isn't the solution. It doesn't really get at the heart of the issue. It solves many issues with our current system, but it won't automatically provide the long term changes that we need. However, every report I've seen shows that the bill saves the US money. At some point, someone posted a report on these forums showing that the bill will cost more than people originally thought. But, even under that scenario, it still saves us money.And the bill hasn't gone into effect yet, so it's impossible say for sure whether it will be a net benefit or loss. Some people have posted "horror stories" about the bill, but those are of course either fabricated or hypothetical, because practically none of the effects have happened yet. The only things that have gone into effect, as far as I know, is the thing where you can say on your parent's healthcare until you are 26. I believe that some states are beginning to form collectives; I'm not up to date on their status.Right, I'm rambling. You're probably wondering, "what is the ROOT of the problem that, as you say, Obamacare doesn't fix". One of the biggest issues, in my mind, is the fact that doctor's incentives are not perfectly aligned with the patient's well being. Many times, doctors (or hospitals) are paid or reimbursed based on which tests they preform, or which tests they use, and not based on the health of their patients. There are certain places where this not the case. The Mayo clinic, for example, has a really nice system where they use fixed salaries for doctors to separate money from healthcare. Further, they provide an environment where doctors can discuss in groups how best to deliver care. Doctors around the country don't have a consensus on which tests to preform and when to use them, which leads to massive differences in costs between hospitals.Here's a (long) article that I like:http://www.theatlantic.com/magazine/archiv...-father/7617/1/

[Jeepster80125 0]

post

I appreciate you taking the time to post a thoughtful reponse.I disagree with a lot of it though, hopefully I'll get some time to address it today. I'll just cross post it in the healthcare thread, I don't want to clutter this one.It's going to be nearly impossible for me to address all of the problems with our healthcare system and address your post, so I'll try to just continue to address your example of end of life care and it's costs and associated problems and potential solutions. That should keep us sufficiently confused.

[mk 11]

I have not followed this because you guys are too smart / weird for knowing all this stuff.But a while back Rolling Stone did an article basically pointing out that every major financial crisis this country has had for the last decade was mostly Goldman's fault. They are entrenched in Washington etc.Since then I have noticed how often Goldman's name pops up in almost everything financial.Is this just because they are like Haliburton and the only ones big enough who CAN do this stuff?Or have they really basically turned this country into their own special monopoly game?

Basically, they manage risk much better than all the other banks because they have economists and analysts who actually think and do work and these people actually communicate ideas to the trading desks. This is why their exposure to the subprime debacle amounted to nothing more than counterparty risk, i.e. people on the other side of their trades (cough, Lehman, Bear, AIG, MS) couldn't pay them. Their chief economist called a meeting with their higher ups sometime in 2007 and showed them a chart of US housing prices vs. personal income, and this prompted them to hugely minimize their exposure to all MBSs and housing-related derivatives. The stuff they did for Paulson was fairly uncouth, but nothing outlandish to people in the industry. The general population gets upset thinking about banks taking positions against their clients, and I agree they shouldn't attempt to bait their clients into this, but hedging shouldn't be punished; the outrage over this is hysterical. Their name gets dragged through the mud because there's populist rancor and politicians obviously have nothing better to do than try to score some points by dumping on people who are actually good at their jobs.

[Balloon guy 158]

Basically, they manage risk much better than all the other banks because they have economists and analysts who actually think and do work and these people actually communicate ideas to the trading desks. This is why their exposure to the subprime debacle amounted to nothing more than counterparty risk, i.e. people on the other side of their trades (cough, Lehman, Bear, AIG, MS) couldn't pay them. Their chief economist called a meeting with their higher ups sometime in 2007 and showed them a chart of US housing prices vs. personal income, and this prompted them to hugely minimize their exposure to all MBSs and housing-related derivatives. The stuff they did for Paulson was fairly uncouth, but nothing outlandish to people in the industry. The general population gets upset thinking about banks taking positions against their clients, and I agree they shouldn't attempt to bait their clients into this, but hedging shouldn't be punished; the outrage over this is hysterical. Their name gets dragged through the mud because there's populist rancor and politicians obviously have nothing better to do than try to score some points by dumping on people who are actually good at their jobs.

I get your point, they all play a game, they are better at the game.The problem is that the game they are playing, in my simplistic approach to it, is like seeing who can light the least amount of their canoe on fire as they sale across the Pacific at night during a storm.Being better at that game still makes you dumb in the long run.I am on the losing side of this whole issue, so I am probably slightly biased

[Naked_Cowboy 0]

Basically, they manage risk much better than all the other banks because they have economists and analysts who actually think and do work and these people actually communicate ideas to the trading desks. This is why their exposure to the subprime debacle amounted to nothing more than counterparty risk, i.e. people on the other side of their trades (cough, Lehman, Bear, AIG, MS) couldn't pay them. Their chief economist called a meeting with their higher ups sometime in 2007 and showed them a chart of US housing prices vs. personal income, and this prompted them to hugely minimize their exposure to all MBSs and housing-related derivatives. The stuff they did for Paulson was fairly uncouth, but nothing outlandish to people in the industry. The general population gets upset thinking about banks taking positions against their clients, and I agree they shouldn't attempt to bait their clients into this, but hedging shouldn't be punished; the outrage over this is hysterical. Their name gets dragged through the mud because there's populist rancor and politicians obviously have nothing better to do than try to score some points by dumping on people who are actually good at their jobs.

As much as I viscerally disagree with you on a lot of stuff... this 100%.

[hblask 1]

I get your point, they all play a game, they are better at the game.The problem is that the game they are playing, in my simplistic approach to it, is like seeing who can light the least amount of their canoe on fire as they sale across the Pacific at night during a storm.Being better at that game still makes you dumb in the long run.I am on the losing side of this whole issue, so I am probably slightly biased

The heart of the problem is not banks taking risks, or banks not giving loans, or any of those. The heart of the problem is political distortion of the markets. The govt implicitly told banks "if you win, you keep the profits. If you lose, the taxpayers will cover it." What are they supposed to do. So while any particular policy of Goldman or any of the other players would be OK in a true market, we didn't have a true market. "Too big to fail" is only a problem when someone is making taxpayers carry the weight. Big companies fail all the time; they spin off divisions, they close divisions, they sell profitable assets. These are normal processes that are fine -- as long as those who benefit from the good times are the same as those who lose during the bad. The rules need to be arranged so that happens, then get the govt out of the way.

[LongLiveYorke 38]

The heart of the problem is not banks taking risks, or banks not giving loans, or any of those. The heart of the problem is political distortion of the markets. The govt implicitly told banks "if you win, you keep the profits. If you lose, the taxpayers will cover it."

That wasn't the problem at all. Government bailouts weren't guaranteed before the crisis and did not lead to the crisis. The only bailouts that led to the crisis were the internal bailouts within investment banks. If a person failed at their job, or a bank went under, they were still left with a huge severance package. There was almost no connection between doing one's job well and making money. They were making money however they could make it (with no long term perspective), and they were shoveling that money out to everyone in their company.The real problem is that ibankers didn't really care about what the effect of their investments were as long as they made money. Even though they did their fair share to cause the crisis, they, for the most part, made money before, throughout the crisis, and continue to make money as the crisis is starting to wane. So, why should they ever care about creating risky investments that bankrupt people.But to say that implicit government bailouts were the cause is just, well, not right.