The U.S. Economy: Stand by for more worse news

Discussion in 'Business & Economics' started by Brian Foley, Nov 28, 2010.

  1. ForrestDean Registered Senior Member

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    Well, I'm no banker. I'm just a regular, average, middle class "Joe".
     
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  3. Michael 歌舞伎 Valued Senior Member

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    Then my guess is, you'll spend a large portion of your life repaying debt obligations that were taken on (and spent) long, long, long ago - more than likely on something frivolous. And, once we start talking quadrillions, well, now we're talking real money

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  5. joepistole Deacon Blues Valued Senior Member

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    You know all of that is nonsense Michael. It's not like all of this stuff hasn't been explained to umpteen times over the years.
     
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  7. iceaura Valued Senior Member

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    Take your meds. There's a reason for them.
    Contrary to my dealing with exactly that, in 1834 above?
    Uh, no, not necessarily - depends.
    The price helps determine the effect in reducing the money supply. The lower the price, the less the effect. If the US ever runs into serious trouble selling T-bonds, reducing the dollar supply is going to get very difficult very quickly. And the inevitability of the demand is exactly the matter at issue.
    And Iraq and Russia, as pointed out to you above. That's four. All four have had their governance seriously damaged by US action, fairly recently. Now consider China's actual position here - and various African countries, if China moves. And Germany's, or France's.

    The relevance of Iran and Iraq being the lowest cost producers of the sweetest crude on the planet is that they can set the price. Nobody can undercut them, in price or quality. The currency they prefer then becomes the currency in which the best crude at the lowest price is purchased. That gives a significant advantage to their currency, and lowers demand for other currencies.

    Hey, you are correct about something I posted in error - whaddya know. I misread a report about Apple's fourth quarter - the 11 billion - as the whole year. That's pretty embarrassing, given your record. I'll have to pay better attention - you aren't always wrong.

    About the "sense", though: you seem to think that because Apple is a US corporation it is wedded to dollars. Apple's biggest market is going to be China, unless all the experts are wrong. It also has a serious future in India, which uses rupee. It doesn't need dollars at all, for most of what it does. Apple would have no trouble denominating its business in any currency - it is already buying and selling and paying wages in renmimbi, has offshored most of its manufacturing, and so forth.

    So any time the US dollar becomes just one of a couple of choices for buying crude oil, Apple can easily adjust.

    Everything you listed was made possible through a couple of legal loopholes we allowed our Government to allow Wall Street. We repealed the Government's legal ability to initiate violence against amoral profiteers of a rigged financial system.

    The argument for deregulation of the banks was that the capitalist free markets thereby set in motion would regulate and police themselves. The "libertarian" argument. They didn't. Even after crashing, they didn't learn. Bankers do not regulate themselves - left to their own morality and professional ethics, they will bankrupt whatever economic system shelters them.
     
  8. ForrestDean Registered Senior Member

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    Yep.

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    Yep. And this is hilarious because the average mainstream individual is no different. We are all of the same mindset. That's why I always get a big laugh whenever I see a large number of protesters protesting at the doorsteps of institutions. It's like, which one is the pot and which one is the kettle.
     
    Last edited: Sep 30, 2016
  9. joepistole Deacon Blues Valued Senior Member

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    Lol....is that the best you can do?

    What's the matter Iceaura? Are you embarrassed? The fact is you do modify names in order to avoid a response to your posts. You take extra effort to avoid letting the posters you quote from responding to your posts.

    And what does that mean? How does that make sense? The fact is you were wrong, as is your custom.

    And "uh, no, not necessarily - depends" what? Taking money out of the economy slows the economy, that's the whole point. There is no "uh, no, not necessarily".

    Well you are changing the subject, aren't you? You stated, "If they can't sell T-Bills easily and in very large quantities". As long as the US retains its creditworthiness, the US will always be able to sell its debt. The price it receives for its debt sales is another matter. But whatever price it receives, contrary to your assertion, it will be able to sell debt. There will always be a market for its debt as long as the US remains credit worthy, meaning the government remains able to govern responsibly.

    Now let's address the price issue. Prices would only decline, if there were substantial differences between the stated bond interest rate and the market interest rate, i.e. market interest rates would have to exceed the stated bond interest rates. And that would only happen if the economy was roaring along creating a strong demand for money. That's generally not considered a crisis.

    Oh, and with the exception of Russia, how has the US damaged the governance of the remaining 2 or 3? And how does your post here make the least bit of sense?

    And where is your evidence Iran and Iraq are the lowest cost producers or produce the "sweetest" crude on the planet? The fact is, as has been repeatedly pointed out to you, they are small producers. And as previously pointed out to you, cost is irrelevant to this discussion. What is relevant is production, and the fact is contrary to your assertions, these countries are not big producers. And the fact is there is an over abundance of oil on the market today. The OPEC cartel exists in name only. Thanks to new technologies, the OPEC has lost its ability to control the price of oil. Oil producers are now price takers rather than price makers.

    Yeah, you have posted many things in error. That's not surprising. That's the norm with you.

    Yeah, it is wedded to US dollars because as previously explained to you, all of Apple's earnings need to be translated into US dollars as with any US based company. I'd love to see you explain that to Apple or its American buyers. Instead of paying for their iPhones in dollars they now need to pay for them in renminbi.

    Just because a multinational company does business in other countries, it doesn't mean they can be independent of the US dollar. That's a great deal of simple minded thinking there. Multinationals, especially consumer goods companies, do businesses in a variety of currencies, but if they are US based, those earnings need to be translated into US dollars. It doesn't matter where those goods are produced or where they are sold.

    Yeah, I've already told you about India. I'm glad something got through to you.

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    And does that make any sense? Is Apple going into the oil business? The US dollar is just one of couple of choices for buying crude oil and has been for some time now. Oil contracts are denominated in euros, dollars, and renminbi.
     
  10. iceaura Valued Senior Member

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    I do apologize for my responses to you, in the past, when you were posting like that. I now understand the situation better.
    It doesn't necessarily slow the "velocity of money". It depends.
    This hides a dangerous illusion. It might be better to turn it around, once in a while, and say that as long as the US is able to sell its debt, it retains its creditworthiness. Just for mental clarity.
    You are asking, seriously, how the US has damaged the governance of Iran, Iraq, and Venezuela?
    When Apple is selling most of its stuff in China (and India, Indonesia, etc), as well as manufacturing most of its stuff in China (and India, Indonesia, etc), which is going to be the case in a couple of years unless things change a lot, it will need dollars for its American operations only.
    To what extent is Apple going to be "US based" in ten years, if Russia and China decide to risk crashing the dollar?
    - - - - - -
    Right now, Iran and Iraq can make good money drilling, pumping, refining, and selling, oil. All else being equal (which it isn't, but that can change) they're in fat city. North Dakota and Alberta are barely making it at these prices - their costs are too high, their oil is too dirty, sour, and difficult to obtain.
    Only if by "control" you mean raise the price as much as they want to. They can't do that. But Iran and Iraq can lower the price of their oil considerably, and still stay in business. They can also (all else equal) choose their customers - their high quality crude is in great demand. That combination can put lots of pressure on anyone who has to buy oil, to use whatever currency they prefer. Russia and China know this. America knew that, when Saddam Hussein made that threat - he had US Marines in his back yard within months.
     
  11. joepistole Deacon Blues Valued Senior Member

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    Do you now?

    And on what exactly? You do realize you're arguing against your previous position? You don't remember writing, "Raising reserve requirements would, but not by much and in the face of united and very strong resistance from their fellow bankers (can you think of the last time they did that?) - also, that tactic creates and is vulnerable to changes in the velocity of circulation."?

    Oh, and what is the illusion exactly, and please do be specific? The unfortunate fact for you is that as long as the US remains credit worthy, i.e. is able to responsibly govern itself, contrary to your assertions, it will always be able to sell its debt. You can turn that around any way you want too. It won't change.

    The credit worthiness of US isn't dependent up borrowing as you have asserted. It's dependent upon its ability to responsibly govern.

    Yeah, I asked you some questions with respect to your assertions in this regard, you haven't answered them.

    So you are finally conceding Apple cannot completely divorce itself from the US dollar as you had previously asserted. And actually, the lion's share of Apple's revenues are derived from the Americas, not China. Unfortunately for you Iceaura, facts do matter. https://www.statista.com/statistics/382175/quarterly-revenue-of-apple-by-geograhical-region/

    Most of Apple's revenues are derived from the Americans and Europe. And then there is the matter of currency translation which continues to elude you.

    All I can say is you have a quite an imagination. China and especially Russia aren't capable of "crashing" the dollar. Russia just isn't big enough to cause the US any economic heartburn. China maybe about to cause a short term devaluation of the dollar. But that short term bubble would hurt China more than the US. And I just don't see any reason to believe the Chinese are suicidal?

    Well, here is the thing, you like to write in broad and sweeping terms. So broad, in fact your assertions become meaningless. Yeah, Iraq is producing oil, lots of oil, because for many years it couldn't. It's a cash poor country. It desperately needs cash. So how is that relevant? It isn't.

    You do realize, Alberta is in Canada? What has that to do with the US? Nothing, it has nothing to do with the US. And where is the evidence to back up your assertion Bakken crude (i.e. North Dakota) is sour? It's not. It's light sweet crude. The US has large deposits of light sweet crude. Have you never heard of West Texas Intermediate?

    As previously pointed out to you cost of production is irrelevant here. If prices go up, they go up, and when they go up production goes up too. That oil doesn't go away just because producers reduce output. The fact is none of the countries you have referenced can cause the US any financial harm. This isn't 1973.
     
  12. iceaura Valued Senior Member

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    So I post the same thing twice, and you read contradiction.
    And when it finds itself unable to sell its debt when it needs to, say to reduce its money supply, it will no longer be creditworthy - at which point its government will be found to have been irresponsible. It would be best not to be surprised by this event, right?
    I said nothing about Iraq's production increases. The key aspect of Iraq's oil is that it is cheap to produce and very high quality. And it is very hostile to the US. Likewise Iran. (because of the damage done to their governance by the US - you asked?). So an alliance between Iran and Iraq, militarily backed by Russia and quite likely to be financially supported by China, would be an immediate threat to the dollar as the world's reserve currency.
    Bakken crude is expensive (and dirty) to produce. Alberta crude is truly foul stuff, as well as being expensive to produce. Both fields are marginal right now - barely making money, if at all. Neither can compete with Middle East crude in price.

    An Iran-Iraq alliance, suitably protected by Russia or China or both, could very credibly impose the use of some other currency on the oil trade. And then who would need dollars the way they do now? Not China. Not Apple.
     
  13. joepistole Deacon Blues Valued Senior Member

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    You do repeat yourself, but not this time. You clearly contradicted yourself as evidenced by my previous post.

    And where is your evidence for that one? Why would it no longer be credit worthy? As has been repeatedly pointed out to you over the years, you and those like you keep treating sovereign finances as if they were in kitchen table finances. They aren't and the reasons why have been explained to you numerous times over the years.

    The fact that you would make that statement, as you have done, clearly demonstrates your ignorance of macroeconomics. And your persistent refusal to acknowledge evidence and reason indicate you have no interest in learning.

    Did anyone accuse of you saying something about Iraq's oil production increases? This is what you said, " Iran and Iraq can make good money drilling, pumping, refining, and selling, oil. All else being equal (which it isn't, but that can change) they're in fat city." You were accused of be being overly vague to the point of being meaningless. You weren't accused of being specific. That's not your game.

    As has been previously and repeatedly pointed out to you, oil production costs are totally irrelevant to your notion that Iran, Iraq, Venezuela, Russia, and at one point you had Syria thrown into the mix, have enough economic clout to break the American dollar.

    I've asked you a number of questions of you to help you clarify your thinking. To date, you haven't answered even one.

    I've given you the numbers, there just isn't enough economic activity there to be able to bring down the dollar. As previously pointed out to you Apple Computer is worth more than all the oil production in those countries. That's not enough. The entire oil production of those countries accounts for about 500 billion dollars a year. The US economy is an 18 trillion dollar plus economy. Your machinations just don't add up.

    First it was sweetness and now it's dirty?

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    How does that work? All crude is "dirty". Crude is universally dirty. It isn't universally sweet, i.e. have a low sulfur content. Contrary to your assertions, the US has an abundance of sweet crude. And as previously pointed out to you, Alberta isn't in or a part of the United States. So, it's totally irrelevant to this discussion. Iran already denominates its oil sales in euros and it hasn't hurt the US dollar even an iota.

    Again, cost is irrelevant. This is a discussion about your notion that Russia, Iran, Iraq, and Venezuela can somehow collude and break the dollar. You need to show that there is sufficient volume, i.e. oil sales, generated by these countries to jeopardize the US dollar. And you can't, because it's not true. Iran already denominates all of its oil contracts in euros...oops.

    Yeah, well, then show me the numbers? You can't. Because it simply isn't true.
     
    Last edited: Oct 1, 2016
  14. iceaura Valued Senior Member

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    Try rereading.
    Because the currency in which it pays its bills is now worth much less.
    You did. 1848, third paragraph from the end - That's why I quoted it for you.
    It's production is dirty and expensive - it's fracking. I'm not sure when this was sweetness?
    You are wrong about that. You don't understand the problem - it has nothing to do with "economic clout". It has to do with the currency in which oil is traded internationally, which will of necessity be one of, if not the, dominant reserve currencies of international business.
    Which is one reason Iran is being subjected to the current level of abuse by the US - something that otherwise makes no sense at all in the context of Islamic jihad. It's very important to the US that this not catch on - that no close and economic Iranian alliance with Iraq and Syria and Russia and China be allowed, regardless of its effect on Islamic terrorism and refugee crises or the like.
     
  15. joepistole Deacon Blues Valued Senior Member

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    You need to try being honest.

    And how does that make any kind of sense? US debt is denominated in US dollars. Your argument would only make sense if US debt was denominated in some other currency. But it isn't.

    Ignoring your fantasy that somehow US currency would magically depreciate in value, it doesn't in the least bit affect the creditworthiness of the United States government. The US has experienced many periods of inflation, even double digit inflation, and not once has that ever affected its creditworthiness. Unfortunately for you Icearua, facts matter.

    Apparently, you don't know what creditworthiness means. It has nothing to do with inflation or currency valuations.

    Apparently, you don't know the difference between a citation and a quote either or you are just being dishonest. You never quoted me.

    As previously pointed out to you all oil production is dirty. Do you have any numbers to back up your assertions about expense? And has been repeatedly pointed out to you for all the reasons pointed out to you, the value of the dollar isn't in anyway tied to oil production costs.

    Now if you can make a factual and reasoned case to the contrary to support your assertions, do so. But you can't, because it doesn't exist.

    Oh, well if I'm wrong about that, you should be able to make a rational fact based case to support your contention. But you can't, because as with virtually all of your assertions, they just aren't true.

    As previously pointed out to you if you totaled all the oil exports in the world, it wouldn't be enough to destabilize the US dollar. The value of the US dollar isn't tied to oil exports. As previously pointed out to you, one of the countries in your imagined cabal, Iran, doesn't denominate its oil contracts in US dollars. Much of Russia's oil exports are not denominated in US dollars. They are denominated in euros, because Europe is the their biggest customer.

    So if you can make a factual and reasoned case for your belief, do it. But you can't. Because you are wrong, hence the need for all this obfuscation.

    The value of the US dollar rests in its economy. The US economy is by far the largest economy in the world. There are 4 world reserve currencies. The US dollar, euro, the British pound, and most recently the renminbi are world reserve currencies. The US dollar is the most common reserve currency by far because its economy is the largest by far. It's nearest rival is the European Union.

    The value of the US dollar and its reserve currency status is vested in its 18+ trillion dollar economy. Contrary to your assertions it's not vested in the cost of oil production or the oil trade. Some of the countries in your imagined cabal, including Russia and Iran, already denominate their oil contracts in currencies other than the dollar. Iran specifically excludes the use of the US dollar. So contrary to your assertion is difficult to see why they would be part of your imaginary cabal in order to so something they already do.

    Only in your fantasies, the trade between the US and the countries you named in your imagined cabal account for a tiny fraction of US economic activity. The US doesn't trade with Syria or Iran and does very little trade with Russia. Those countries would be, and in some cases are, more harmed than the US could ever be. Russia, which is the largest state in your imagined cabal, only accounts for about 2% of world GDP. The US accounts for about 23% of world GDP. The numbers just aren't there to support your case as you have been repeatedly told.
     
  16. iceaura Valued Senior Member

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    Post 1849, the third quote from the top.
    And what has not happened yet (because it was feared and fought) - cannot happen, because it would take magic?

    Adam Smith referred to the workings of supply and demand as an "invisible hand", but he did not mean to imply the hand was magical - merely hard to see.
    Don't forget Iraq and China. I didn't.

    But the more indicative point is that not trading with the US makes them more dangerous, not less. Our current safety rests largely on Iraq's co-dependent status and greatly damaged state, and China's thick and overwhelmingly significant trade relationships with the US. Both of those are possibly transient states of affair - in flux as we speak.
    Which became for a few weeks in 2008, quite suddenly, a nine trillion dollar economy - which fortunately was able to sell five or six trillion in debt, based largely on the world market for dollars.
    Some is much dirtier, and much more expensive, than others. The cleanest and cheapest, all else being equal, is from the oil fields of Iraq and Iran.
    I'm going to leave that as the epitaph of your arguments.
     
  17. Michael 歌舞伎 Valued Senior Member

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    From: The Fed that Cried Growth

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    Yup, looks like the 'expert' central bankers / "economists" have everything under control.
     
  18. Bowser Life is Fatal. Valued Senior Member

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  19. Schmelzer Valued Senior Member

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    The problem is the "over time".

    This does not happen immediately. Because, first of all, it is not everybody who gets the printed money. Those who get the printed money buy something - and first the prices rise for what they buy.

    Those who get the money are the superrich. What they buy? They don't buy more bread or donuts - they are already to fat anyway. So, prices for donuts do not rise. They buy firms, shares, property all over the world. So, the prices for shares, immobiles raise. Such a raise is not seen as inflation, but as prosperity.
     
  20. joepistole Deacon Blues Valued Senior Member

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    It's much more complicated than just printing money. Money is a commodity. It's value is dependent upon supply and demand. You cannot look at one factor and honestly or correctly make that assertion.

    Look at the last 8 years. The US has expanded its money supply over that period in response to the Great Recession without significant inflation.

    Additionally, a devalued currency isn't necessarily a bad thing. That's why countries like China have actively devalued their currencies. A devalued currency makes goods and services produced in that country cheaper, and that creates more demand for those goods and services.
     
  21. joepistole Deacon Blues Valued Senior Member

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    Your beloved Mother Russia isn't the world comrade.
     
  22. joepistole Deacon Blues Valued Senior Member

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    That's complete nonsense. Time isn't a significant factor. The relevant factors are supply and demand, not time.
    Yes it does.
    First of all, most money isn't printed. It's digital. You are confusing your beloved Mother Russia with the rest of the world. Things are very different outside your beloved Mother Russia. Prices don't rise simply because the money supply has increased. It's a common error with folks who have little to no understanding of macroeconomics.

    As demonstrated most recently by the US, an increase in the supply of money doesn't correlate with an increase in inflation. The US increased its money supply by 2 trillion dollars over the course of 6 years with virtually no inflation. Increasing the money supply had no effect on inflation, because inflation depends upon other factors and none of them have anything to deal with the super rich or oligarchs.
     
  23. Schmelzer Valued Senior Member

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    That's not the point, my use of "printed" was metaphorical anyway. And in Russia, a lot of things are already digital which are not yet in Europe. I know about this by reading in the internet how some Russian guys wonder about things which are impossible yet in Europe which are standard in Russia. I personally couldn't care less, because I was last time in Russia 2008 and have no plans to go there in some future.
    If you would have understood what I wrote, you would have understood that I have explained some reasons why this does not happen actually.
    Fine, if you would have explained some of them, this would have been a useful contribution to the discussion. You have not. Therefore you contribution is, as usual, nothing.
     

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