# What is the fiscal cliff of US?

Discussion in 'Business & Economics' started by Saint, Nov 7, 2012.

1. ### joepistoleDeacon BluesValued Senior Member

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No one who knows anything about the Fed would say it is privately owned. This is a popular myth promulgated by right wing groups and individuals who make a lot of money selling this nonsense. The Federal Reserve is an agency of the federal government created by an act of Congress. It is governed by a board of governors who are appointed by the president and confirmed by congress to terms of 14 years. The federal government owns the Federal Reserve and the Federal Reserve reports directly to Congress as an agency of Congress.

3. ### nietzschefanThread KillerValued Senior Member

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So far Gold and silver ETFs have paid around 200% since the crash/correction....a lot more if you do leveraged ones like I do. You are not very good at betting. You don't know me from a hole in the ground Joe. I don't care to argue with you, I just care about trying to get my money to grow into a nest egg, while everyone borrows our dollhairs into worthless oblivion. You will not get a fight with me. Frankly - following Billy's general advice....I have made a lot of money(relative to me anyway). I will continue to do so I suspect.

Furthermore gold and more importantly silver follow Bollinger graph lines like clockwork. You can play the bull and the bear on precious metals....easily.

5. ### nietzschefanThread KillerValued Senior Member

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Same old sciforums, all you guys wanna do is fight.

I don't know if it will cause a crash(thats why I ask Billy his opinion...i suspect not because of all this quantative easing(QE3 now)...but this situation is new territory for the funny money system.

Me Bearing the market is nothing... I am not Warren Buffet.

7. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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Good, but the debt to GDP ratio is still growing by slightly more than 12.5% annually:

That is what determines if the government can recover or collapses when can´t sell its debt at an affordable interest rate and must just print more fiat money to pay off maturing bonds. I believe the blue facts, not the red estimates. Let see what these facts tell:

Debt to GDP ratio of 0.7 in 2008 and 1.0 in 2011. With a 12.5% annual growth of the ratio this gives in 2011: 0.7x1.125x1.125x1.125 = 0.9967 a little low (should be 1.0) so during this three year interval the debt to GDP ratio has been growing at slightly more than 12.5% annually.

Yes there was a recession during first part of that interval, but the blue bars of graph show a very steady climb upward and the Congress is fully capable of sending US back in to recession it is so ideologically divided that IMHO, the best we can hope for is that the "fiscal cliff" is kicked down the road at least half a year. The worst is that nothing significant is done for it AND we have another display of the debt ceiling fiasco of last time and US bonds ratings are cut again. In that case, a bad recession is best we can hope for, and depression is more likely, IMHO.

Last edited by a moderator: Nov 24, 2012
8. ### joepistoleDeacon BluesValued Senior Member

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22,910
To be more precise, the metals EFTs have returned about 180% whereas the S&P has returned about 200% over the same period. But that was not the issue, was it? The issue was your returns, not the market returns. And it is about long term returns. Anyone can gamble, get lucky and win. It is quite another to consistently invest and make money over the long haul.

Unlike you, I don’t bet, I invest. There is a difference. My stock portfolio is up 65% his year alone and my long term average is 40%. You are gambling. You don’t have to be bright to make a market rate or less when the markets are doing well.

I repeat if you don’t know the markets, you don’t know economics, you don’t know key institutions in the market as you do not, if you buy based on recommendations of others or rumors as you do, then you are a fool to invest in the market. There is even a name for that kind of investing; it’s called the Greater Fool Theory of investing.

http://en.wikipedia.org/wiki/Greater_fool_theory

9. ### Aqueous Idflat Earth skepticValued Senior Member

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Some folks are nuts and deserve some lip.

Billy's a cynic. If I knew where his Christmas tree was located, I'd leave a pair of rose-colored glasses for him to look through.

That sure adds to risk, esp. inflation, but it's also saving our collective ass.

Millions of folks selling off is what causes a crash. Each seller gives the shirt off their back just to get out, and sale by sale the whole country is driven into the tank. If everyone simply held on and refused to budge, there would be no crash. It's purely emotional. It seems just about everything in the public purview about economics is emotional lately. I think you have to be sitting in a classroom or in a business setting to get a factual take on reality anymore. Too many folks are relying on hype to inform them. I would like to think that we're on the verge of a new era, one in which average people are reasonably able to understand essential facts and to react rationally to this invisible beast we call the economy.

10. ### Aqueous Idflat Earth skepticValued Senior Member

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As for debt, though, you would not want to leave out the $10T or so that the Govt took on in absorbing the$13T or so that evaporated during the crash (as I recall). The spreading out of that loss over the last four years, and even in the years to come, is a shadow of the singular events of the subprime mortgage crisis, and should not be treated as a marker of unsound fiscal policy foreshadowing a crash yet to come. This is why it would behoove you to separate your eigenvectors, so to speak. There needs to be two graphs--one that shows the true cost of the sub-prime crisis (and maybe one for 9/11 and war, come to think of it) and a second one that shows how we're actually doing, renormalized, in spite of all of that.

Another event around the corner which would seem to me to put the halters on your doomsday predictions is the Affordable Health Care Act. If successful in curbing the sharp rise in medical costs, it may staunch the bleeding where the economy feels it the most.

11. ### RealityCheckBannedBanned

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A general observation: The factors causing 'inflation' today are nowhere near the same as those of times past.

Today, production/distribution capacity and actual 'stock' of goods and services is not subject to the old 'shortages' caused by poor production/transportation/co-rdination. And unless US nation is at war and suffering blockades, no 'inflation' will come from Quantitative Easing increases in money supply, since the economy has or can quickly produce more than what it needs of goods and services ready to supply demand.

So don't use the old 'measures/causes' when talking of possibility of 'inflation' nowadays.

The most relevant/causative factor in 'inflation' in the modern national/global economy/context is ACTUAL SHORTAGES/DISRUPTION caused by extreme weather, desertification and political/financial instabilities due to panic buying and destroyed infrastructure/trust.

And of course, the best way to destroy trust and cause panic is to allow the crooks and self-serving politicians to 'milk' the system and destabilize it by causing panic and fear such that all money will 'dry up' and feed the 'loop' of downward economic activity/production which we saw leading into the beginning of the last four years. Fortunately, sane heads prevailed and quantitative easing and other 'guarantee and support' measures were taken in US and Oz.

So it's not the more/less money supply/debt, it's the actual crisis of trust and panic and fear of continuing an economy such that no inflation (except from natural/war disasters) can happen....unless the economy is still subject to crooks and politicians who want to return to power to 'complete the job' their mercenary greed and ignorance started!.

Identify the crooks and shonky politicians/gangs, excise them from the system so that they cannot again milk it via loopholes and outright criminal theft. The internet information/communications cache/potential is a useful tool for facilitating this excision. Use it!

Then we can talk about what the REAL economy can and cannot do in the modern era of global integration, transportation, communication and production.

See you all in a few weeks, I hope.

Until then, good luck and good thinking, everyone!

12. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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23,198
A convenient and quite accurate way to find the time required in years, Y, for X percent of annual interest to double the principle is: Y =72/X where X is any typical interest rate for common interest. Thus if the current 1.02 Debt to GDP ratio continues to grow at 12.5%* annually then the Debt to GDP ratio will be 2 in 72/12.5 = 5 years, 9 months. That will not happen. Either during Obama´s second four year the annual growth of this ratio will become much less than 12.5% or the US will have collapsed economically as I predicted ~7 years ago.

* The 12.5% comes from the real data given in post 64 graph.

13. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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That is an interesting observation, but I think not fully true as it considers only the buying of things that can be produced. For example, one can not produce more farm land or ocean view lots, or gold as rapidly as the fiat dollars can be produced. If there were 10 million dollars for every American, do you not think there would be dramatic inflation in price of tickets to a broad way show, a water front lot, 10 fertile acres, average high end car price, admission to Disney land, NFL game tickets etc. ?

Only a small fraction of what you spend your money one is producable in unlimited quantities in factories. Take food and housing, the main cost items. Don´t you think many would be trying to buy the nice house on big lot with pool that is only short walk from the subway? Don´t you think that the farmer who has 10 times more capital tied up in the high priced fertile acres he owns will ask 10 times more for the food he produces?

Hell, as the farmer makes this food inflation, the owners of the TV factory (if the US still had one) etc. would want 10 times more for each TV as they eat too and they would get it too as the people have lots more money to buy with.

SUMMARY: It ain´t like you assume.

14. ### RealityCheckBannedBanned

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800

The 'land shortage/cost' aspect I covered in 'desertification' (and naturally, whatever population increase also causes directly/indirectly).

The shortage of ESSENTIAL goods and services which cause actual 'dislocation/anger' and political/economic/health instabilities is what causes REAL 'inflation'.

'Shortages' of luxury goods and services only cause temporary 'inconvenience'. These 'discretionary' aspects of the economy will only cause problems when 'stability' and 'trust' and confidence in the economic system as a whole are destroyed. Hence the most insidious damage from the GFC was not the more/less money supply, but the losing of confidence etc causing a run on institutions which would otherwise channel money into economic activity.

The problem is not 'inflation', nor is it the resources/capacity of the global or national US economy. It is and always will be the crooks and politicians which destroy confidence and stability by manipulation and theft of the nation/individual capacity to trust and participate IN the economy in the usual way, irrespective of 'money supply' from year to year.

That is what I am trying to convey to explain why 'inflation' is no longer the old bugbear and bogeyman it used to be. We have the capacity. We have the tools. What we don't want anymore is the crooks and self-serving politicians and ideologues.

Thanks for your discussion, Billy T, everyone. And good luck, everyone! Back in a few weeks.

Last edited: Nov 25, 2012
15. ### nietzschefanThread KillerValued Senior Member

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That's great for you Joe. I'd would thank you and not Billy if your wise wisdom had put money in my pocket. But it didnt. Billy's did. You offer me nothing but criticism.

Offer me your investment advice (specifically) or I guess I just ignore you, as I should have in the first place. I didnt come here to argue... just make money over america going bust. So far Billy has been right about everything in the last 4 (or more ) years...what were your predictions again?

Edit

as for a fool theory - we will see what win's:
paper(not even - just 1ss and 0sss in bank computers) backed by nothing,
or physical materials (historically gold/silver though I worry about needing to trade bullets). If I am wrong it's great - I still have a job. If not I will be rich and unemployed.

16. ### Aqueous Idflat Earth skepticValued Senior Member

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Considering that our current state of debt can almost be entirely attributed to two singularities - 9/11 and Lehman's collapse - I don't see how watching public debt trends leads to predicting collapse. Further, since the fiscal cliff offers hope of lowering the debt ceiling, increasing revenue and reducing spending, a new trend may be around the corner.

17. ### nietzschefanThread KillerValued Senior Member

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Ahh to be young and optimistic... lol

Hope you are right...frankly your generation is in for a massive reality check.

18. ### billvonValued Senior Member

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20,654
The returning vets of WWII came home to a country with a much higher debt (debt vs GDP) than we have today. They didn't get a "massive reality check" (if, as you seem to be implying, it involves massive financial pain.) We paid off most of the debt and continued on.

19. ### joepistoleDeacon BluesValued Senior Member

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22,910
You have always ignored reason and fact, why should you change now? Billy T has been predicting and economic Armageddon that has yet to occur. So Billy T has been far from correct. But don’t let that stop you now.

Further, I am not your economic wet nurse nor do I have any desire or intention of ever becoming your investment wet nurse. If you were clued in you would have noticed I have been very bullish on the equity markets since 2009 and it has paid off very well.

If you are just making a market return in a bull market with leverage as you have stated, it means you are doing very poorly in a bull market. You are making less than half the market. That is a pathetic return.

That is gibberish. Gambling, buying assets that you don’t understand, based on rumor or internet chat, forums, etc. is foolish. That is why they call it The Greater Fool Theory of investment. It’s your money, if you want to squander it, if you want to gamble with it, it’s your business. But you shouldn’t be encouraging others to be as foolish with their money as you are with yours. I don't encourage anyone to take their investment advice from an internet chat or post. There is no subsitute for doing the homework.

Every gambling addict thinks they are going to win and there is not telling them otherwise.

20. ### nietzschefanThread KillerValued Senior Member

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They worked...hard...at any job.

We'll see Joe. btw not sure wtf you are talking about, I told you I bull and bear the metals...mostly bull though - they follow the Bollinger lines like I said...like clock work:

If I only made a little less than you from stocks..I am quite happy - you are right I know about very few stocks (I knew rim would shoot up to 10 bucks and it went to 11!...but i missed it). So If i can make money playing metals, I am very happy. and you are wrong, the past 3 years have been much better than you said.

21. ### billvonValued Senior Member

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20,654
True. Nowadays they work a lot harder; average hours worked per week for all adults is about 30% higher than it was in the 1940's. (Primarily due to women working more; 70% of families now have both parents working.)

22. ### nietzschefanThread KillerValued Senior Member

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lol YUP! Of those that are working - working so hard, the corp doesn't need to hire a proper workforce!

23. ### RealityCheckBannedBanned

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800
It may have escaped your notice that most of the serious financial crises since WWII have been precipitated by self con-centered mercenary sociopath mentalities/types who game the system making paper profits without any national product/output to show for it except poverty, dislocation and crisis of confidence which destroys beyond the immediate destruction caused by these same sociopaths.

In your above comments, you have effectively espoused the "Gordon Gecko", Bain Capital/Mitt Romney etc MO for making unproductive paper profit while others pay for it through poverty and destruction of real aspirations/opportunities and financial confidence.

Soon, once the reform processes prompted by this latest mess (GFC) have made their inevitable way through the system (even despite the sociopathic obstructionism of Republicans/Romney-ites), such sociopathic-profit-MO of gaming the stockmarket and other financial system, by using 'financial instruments' and 'trading strategies' not directly tied to improved production of real good/services, will be a thing of the past. No longer can the miscreants be allowed to cruel the opportunities/aspirations/lives of innocent people to the extent that the GFC has done.

Be part of humanity's solutions, not the sociopathic problems. Cheers all!