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And so it begins ....


SharperDingaan
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http://www.theglobeandmail.com/report-on-business/americans-fret-about-how-to-survive-a-debt-default/article2111459/

 

Keep in mind that the advisers job in times like this is to spike the panic selling before it starts, & these retail calls are pouring into every advisory firm. We don't need much of a intra-day point drop, for those callers to start refusing the pablum.

 

Most folks don't use advisors - they trade directly, & they don't have a lot of patience. Experience a one-day 300-500 point drop, & almost everybody is going to suddenly be a seller. Back in the day, a JP Morgan could send a message - by standing in the pit & aggressively buying anything that moved. Hard to do today.

 

At best, it will take a day to get an agreement - & another day to vote it into law. Inaction, that can only increase the odds of triggering a panic. You don't call your congressman to vent, you place your sell order or tell your broker to do it for you.

 

Hopefully we don't see it

 

SD

 

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Does anyone think those children in Washington have a clue about the effect they are going to have on people's savings and retirement funds?

 

This is not 20 years ago when most people just kept their savings in the bank accounts and GIC's. Today much of that money is invested in the market and providing the stimulus for corporations to expand and hire workers. That in turn generates revenue and thereby taxes.

 

I wonder how much capital gain tax is lost for every hundred points the market loses?

 

I could develop this into a full blown rant but I would probably just be preaching to the converted...

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Does anyone think those children in Washington have a clue about the effect they are going to have on people's savings and retirement funds?

 

All they're thinking about is how to have the upper hand on the other party in the next elections. They're politicians, that's what they do.

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All they're thinking about is how to have the upper hand on the other party in the next elections. They're politicians, that's what they do.

 

The only way to stop this behavior is Term Limits. Politics should not be a career. Our founding fathers never intended it to be. Two terms and you are out!!  Or to put it more clearly: Go get a real job!!

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All they're thinking about is how to have the upper hand on the other party in the next elections. They're politicians, that's what they do.

 

The only way to stop this behavior is Term Limits. Politics should not be a career. Our founding fathers never intended it to be. Two terms and you are out!!  Or to put it more clearly: Go get a real job!!

 

Completely agree!!! +1 for you

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The most depressing book I ever read was David Stockmans Book, entitled The Triumph of Politics. It told the story of how an young idealist in the Reagan administration was gound up and spit out by the machine that is Washington DC.The founding fathers created so many checks and balances that getting ANYTHING sensible done in Washington is almost impossible. And not to sound too cynical, politics is nothing but the art of getting the other guy to pay for stuff. If you are in business and you can not beat your competitors in the mkt place hire a lobbyst and change the rules of engagement.

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On the subject of being depressed and being in a philosophical mood ...

 

Two snowballs.

 

Corruption. Greed. Power. They coalesce into governments that eventually become so dysfunctional they are no longer a viable entity.

Does it reach a tipping point where it collapses and we have to start over?

 

The world economy seems to be a house of cards built upon a necessity of ever increasing demand which in turn inspires ever increasing debt.

Do we eventually reach a saturation point where the house of cards will fall?

 

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The founding fathers created so many checks and balances that getting ANYTHING sensible done in Washington is almost impossible.

 

First, maybe that's because the sensible thing is to not have Washington do too much.  Or it's because they realized, after being careful students of history and governance generally, that if it's too easy to get "sensible" things done, then it's too easy to get "un-sensible" things done as well.  The easy slide therefrom into tyranny was, and is, well-documented throughout history.

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I know I am a partisan hack, but I dont see how Krugman has it wrong.

 

Paul Krugman: The Centrist Cop-Out

 

Why won't members of the media "acknowledge the one-sided role of Republican extremists in making our system dysfunctional"?:

 

The Centrist Cop-Out, by Paul Krugman, Commentary, NY Times: The facts of the crisis over the debt ceiling aren’t complicated. Republicans have, in effect, taken America hostage, threatening to undermine the economy and disrupt the essential business of government unless they get policy concessions they would never have been able to enact through legislation. And Democrats — who would have been justified in rejecting this extortion altogether — have, in fact, gone a long way toward meeting those Republican demands.

 

As I said, it’s not complicated. Yet many people in the news media ... portray the parties as equally intransigent; pundits fantasize about some kind of “centrist” uprising, as if the problem was too much partisanship on both sides.

 

Some of us have long complained about the cult of “balance,” the insistence on portraying both parties as equally ... at fault on any issue... The cult of balance has played an important role in bringing us to the edge of disaster. For ... there is no penalty for extremism. Voters won’t punish you for outrageous behavior if all they ever hear is that both sides are at fault.

 

Let me give you an example... As you may know, President Obama initially tried to strike a “Grand Bargain”... To do so, he ... offered extraordinary concessions on Democratic priorities: an increase in the age of Medicare eligibility, sharp spending cuts and only small revenue increases. ...

But Republicans rejected the deal. So what was the headline on an Associated Press analysis of that breakdown in negotiations? “Obama, Republicans Trapped by Inflexible Rhetoric.” A Democratic president ... who leans so far to the right that he’s in danger of falling over ... is treated as being just the same as his utterly intransigent opponents. Balance!

 

Which brings me to those “centrist” fantasies..., what’s with the buzz about a centrist uprising? As I see it, it’s coming from people who recognize the dysfunctional nature of modern American politics, but refuse, for whatever reason, to acknowledge the one-sided role of Republican extremists in making our system dysfunctional. And it’s not hard to guess at their motivation. After all, pointing out the obvious truth gets you labeled as a shrill partisan, not just from the right, but from the ranks of self-proclaimed centrists.

 

But making nebulous calls for centrism, like writing news reports that always place equal blame on both parties, is a big cop-out — a cop-out that only encourages more bad behavior. The problem with American politics right now is Republican extremism, and if you’re not willing to say that, you’re helping make that problem worse.

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The world economy seems to be a house of cards built upon a necessity of ever increasing demand which in turn inspires ever increasing debt.

Do we eventually reach a saturation point where the house of cards will fall?

 

Not to digress but I'd like to share a personal note.  My long-time girlfriend and I met out of extraordinary circumstances.  What I mean by that is we both had quite a few things go wrong in our lives such that we were at that exact time and place when we met each other.  We often joke that we'd never change all those things in the past because it led us to become who we are.

 

A part of me feels like this is where modern civilization is today.  Our society is a result of surviving Two Great Wars and a Great Depression.  But now we act like a world that has "learned" from those events and we try to make sure they never happen again.  To avoid Great Depression Two, we've instead chosen Great Debt Experiment One.  To avoid World War 3, we've given multiple nations the firepower to end this world forever.

 

I'm not the smartest man in the room (according to Larry Summers that title belongs to himself) but I don't see how this goes right.  I've never understood how it's supposed to be better than the alternative.  Why tie half of Europe to Greece, a country that has had the historical fiscal discipline of MC Hammer?  How does that help the average European? I don't get it.  

 

But TPTB claim it's better than the alternative...and the House of Cards continues.

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Guest Hester

I know I am a partisan hack, but I dont see how Krugman has it wrong.

 

Paul Krugman: The Centrist Cop-Out

 

Why won't members of the media "acknowledge the one-sided role of Republican extremists in making our system dysfunctional"?:

 

I completely agree, and maybe I'm a partisan hack too, but I think the media bends over backwards all the time to be centrist at times in the face of right wing extremism. And right wing extremism is practically sport right now. Maybe it's a response to constantly being labeled liberally bias.

 

It boggles my mind some of the people on the right that are actually considered serious presidential candidates. Bachmann, Palin, and even Trump for a time have been at the top of the polls.  It boggles my mind that the tea party movement, a movement supposedly for less taxes and government spending, was started less than a month after Obama was inagurated. Not a peep during the national debt ascending orgy that was the Bush years.

 

"The left has moved to the center, the center has moved to the right, and the right has moved into the looney bin." -Bill Maher

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How is Paul Krugman able to write what he writes about President Obama? The one budget he introduced this year received no votes. He OUTLINED some changes in April but never submitted it to the CBO. The head of the CBO said "they don't score speeches!"

So when you submit something by Mr Krugman (or Mr Brooks), the answer is yes, you are a partisan hack!

 

Once again, here is the grand bargain - I'll give you Clinton era tax rates, if you give me Clinton-era spending levels!

 

"It's the spending stupid!"

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I believe the Bush Administration's largest deficit was around $400 billion, and that is why the Republican Congress was relieved of their duties in Nov 2006. 2007, the deficit was lower, mainly due to Republican White House and Democratic Congress. There was no budget passed for 2008, it was held over until Obama was in office. The deficits are now $1 trillion and up.

In a prior reply, I said go back to 2000 spending levels. Let's go back to 2006 spending levels, are you with me??

 

Because if you are not, then you are the problem, not the Tea Party!

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I believe the Bush Administration's largest deficit was around $400 billion, and that is why the Republican Congress was relieved of their duties in Nov 2006. 2007, the deficit was lower, mainly due to Republican White House and Democratic Congress. There was no budget passed for 2008, it was held over until Obama was in office. The deficits are now $1 trillion and up.

 

Ok, I don't want to get involved in yet another politics debate, but I have to point out that a little something happened in 2008-2009 and it kind of changed a lot of things for the US govt's budget.

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Paul Krugman, Bill Maher - why would I waste my time arguing with people who look to them for a BALANCED view?

 

It's funny, look at the states that are in trouble - overwhelmingly Democratic and unwilling to change! California & Illinois being the biggest examples.

 

How is Cut, Cap, and Balance such a radical idea?? Or for that matter, Paul Ryan's budget plan? 2 plans passed by the House, still waiting for Harry Reid to let the Senate vote on them!

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I understand about 2008-2009, but the supposedly EMERGENCY spending for Obama's stimulus bill, $787 billion, is now part of the BASELINE!

The Democrats WILL NOT go back to a baseline from 2007!

 

Again, I would take FY2000 spending levels and Clinton tax-rates!! So please don't call me radical!

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Thank you for noticing me, first of all. As Dale Carnegie tells us, each and every person wants to be seen as special/important!

It is true, most of my responses are political in nature. I have come to this forum, for the most part, to LEARN. And I have learned a lot about investing. Thank you all very much, it is much appreciated! In the next 5-10 years, I hope I will feel comfortable enough to reply to, or actually start, an investing thread.

The reason why I like to reply to the political topics is because I feel that I have an ability to give an opinion. And also because the reasons given for support of certain policies are often based on emotion, as opposed to the numbers. It seems like there is such a disconnect between the value investor's way of investing, and their support of certain political policies.

I hope this is good enough for you. Or is it too muddied?

 

 

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Paul Krugman, Bill Maher - why would I waste my time arguing with people who look to them for a BALANCED view?

 

It's funny, look at the states that are in trouble - overwhelmingly Democratic and unwilling to change! California & Illinois being the biggest examples.

 

How is Cut, Cap, and Balance such a radical idea?? Or for that matter, Paul Ryan's budget plan? 2 plans passed by the House, still waiting for Harry Reid to let the Senate vote on them!

 

Southern Yankee. This believe it or not is not a left right battle nor is it a liberals vs conservative battle or Dems vs Republicans. If you are looking for political solutions to the problems of the US economy it would be adviseable to look outside of your borders. Some countries ARE getting it right. Trickle down paid off in the beginning because the private mkts were capital constrained. Give the "wealth creators" more dough they will invest and create more jobs and more wealth the pie gets bigger every body wins. The problem is the marginal returns from additional investment etc. have reached the point where all the "wealth creators "do is buy gold. The capital constrained are govts. they can not invest in areas that the private mkt can not because the pay off is too long or there is no way to capture the societal profit. If global warming is  a fact and I am not going to argue that it is and the outcome of global warming is a country wide or world wide cost. It is very difficult for private mkts to capture the societal benefit of a green investment only govt. can make that investment or implement regulation which imposes additional costs on mkt participants but yields a return for society as a whole. Consumption is the other part of the equation which is missing the middle class have been decimated in the last decade. The wealthy are buying gold and that does not create  a bunch of employment if you cut taxes more at this stage you will just get the price of gold going up. If you raise some taxes and give it to govt to make some needed investments you create a ton of employment. What the US needs more than anything is some growth.

  The time for cut cap and balance was a decade ago in fact it was pretty much how Clinton ran the govt finances. It is not a bad idea for all time just for the next few years. The time to implement that sort of policy would be after the US has run a surplus for a few years. For the US govt at his stage there are no easy choices but anything that is going to reduce consumption and jobs are clearly the wrong ones at this time. That is all Krugman is saying.  I think Bill Maher and Dennis Miller are equally funny but I think Rush Limbaugh is an obnoxious slime ball so I guess that makes me a liberal.

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"How is Cut, Cap, and Balance such a radical idea?? "

 

In my opinion, cut cap and balance is a radical idea because 1) maintaining spending at 18% of "last year's" GDP is simply not possible, and 2) the way the balance budget amendment was written does not take into account recessions.

 

http://www.washingtonpost.com/blogs/ezra-klein/post/the-futility-of-cut-cap-and-balance-in-one-graphic/2011/07/11/gIQAgWHuLI_blog.html?wprss=ezra-klein

 

http://www.washingtonpost.com/blogs/ezra-klein/post/the-futility-of-cut-cap-and-balance-contd/2011/07/11/gIQAej3PQI_blog.html

 

http://capitalgainsandgames.com/blog/bruce-bartlett/2194/dopiest-constitutional-amendment-all-time

 

"Or for that matter, Paul Ryan's budget plan?"

 

Paul Ryan's plan is radical because it would essentially replace medicare with vouchers worth significantly less than the cost of care, and some of the assumptions underlying it are not realistic:

 

http://krugman.blogs.nytimes.com/2011/04/06/paul-ryans-multiple-unicorns/

 

Neither of those plans raise revenue in any significant way.  What is radical in my opinion is to oppose all forms of tax increases at a time when revenue as a percentage of GDP is 14.9%,  the lowest point in at least 40 years.

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I will read all those links shortly. I did notice, very quickly, the names Ezra Klein and Paul Krugman. You may want to read some articles written by Thomas Sowell, Walter E Williams, Milton Friedman etc.

 

Fact: The stimulus bill, which was so-called EMERGENCY spending, is now included in the BASELINE for the next years budget.

Why don't we just start the new budget with spending levels from 2007 (the last year a budget was passed by a Dem Congress and a Repub in the White House)? The Tea Party "crazies" would probably go for that.

Fact: The debt ceiling was raised 18 times during the Reagan Administration, and average of every 6 months.

Why does our President Obama want it to be raised through the 2012 election?

Fact: The Senate, led by Democrats, and the White House, led by Democrats, have not submitted a budget plan. The House, led by the radical T-Party Republicans, have passed several.

Why doesn't Harry Reid let the members of the Senate actually vote on one of those Republican plans? Is he afraid that it would receive 51 votes?

Are any of these facts wrong?

 

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I do not like to talk politics on this board, because I do not see that as its primary function, and I do not see people swayed by each other much on political issues -- they convince themselves or they do not get convinced, so why poison the debate.  That said, political and macro issues today are very important for investing -- 2008 proved that to even the most hardened bottom up investors. 

 

I have noticed though that whenever anyone espouses anything remotely conservative on this board, there is a pretty much uniform gang up from the other side, with a few of them adding that the poster should not post political commentary.  That seems like being a bit of a last word freak to me, and not wanting opposing viewpoints to be heard. 

 

I'm conservative fiscally, but I always start from the premise that 50% of my fellow citizens cannot be completely without a point.  I would hope others would give the same courtesy to Southern Yangee, and Myth, and all the other viewpoints espoused.  If you don't want political thoughts on this board, just don't read them.  As long as people are courteous, I for one see no reason to shut down opposing viewpoints. 

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