Comments on: Counterparties: America attempts to retire http://blogs.reuters.com/felix-salmon/2012/07/12/counterparties-america-attempts-to-retire/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: KenG_CA http://blogs.reuters.com/felix-salmon/2012/07/12/counterparties-america-attempts-to-retire/comment-page-1/#comment-41817 Sun, 15 Jul 2012 06:14:28 +0000 http://blogs.reuters.com/felix-salmon/?p=16026#comment-41817 The people who are accumulating unused profits don’t want to spend or invest those profits, they don’t want to pay taxes,and they don’t want the government to inject money into the economy to replace what the hoarders are taking out of circulation. So how do they expect the economy to grow?

I normally would have swung at the softball, but I’m traveling and don’t like writing long rants on a tablet, so I’ll leave it at that. For now.

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By: TFF http://blogs.reuters.com/felix-salmon/2012/07/12/counterparties-america-attempts-to-retire/comment-page-1/#comment-41815 Sun, 15 Jul 2012 01:21:35 +0000 http://blogs.reuters.com/felix-salmon/?p=16026#comment-41815 Thought you might appreciate the softball, KenG.

But one way or another, the money needs to be allowed to circulate effectively. Not quite sure how the “velocity” of money is calculated, but the money supply has increased dramatically over the last few years while the GDP has barely budged.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2012/07/12/counterparties-america-attempts-to-retire/comment-page-1/#comment-41814 Sun, 15 Jul 2012 00:53:51 +0000 http://blogs.reuters.com/felix-salmon/?p=16026#comment-41814 TFF, we agree a lot more than we disagree.

I’ve been waiting 30 years for exports to catch up to imports. I don’t think China will stop subsidizing exports until their domestic demand and income can keep enough factories running. And they won’t let their currency float until that happens, so it’s not going to happen in the next four years.

We have been increasing the money supply to compensate, and as much as the 1% complains, it’s their own fault. If they kept more money in circulation, there wouldn’t be a need for the continuous printing of money. The more profits that are recirculated, the less the government needs to inject into the economy.

Did you ask that last question just so I could respond with my usual high tax rate/high investment tax credit pitc

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By: TFF http://blogs.reuters.com/felix-salmon/2012/07/12/counterparties-america-attempts-to-retire/comment-page-1/#comment-41807 Sat, 14 Jul 2012 17:32:32 +0000 http://blogs.reuters.com/felix-salmon/?p=16026#comment-41807 Sorry, KenG, you did say that consumption needs to expand to increase employment. We might agree more than we disagree on this? My main point being that the service industries offer greater opportunity for increased consumption than those that produce material goods. They also rely less on imported goods and resources than manufacturing.

The import/export balance will eventually swing back, as China tires of subsidizing our deficit spending. A free currency exchange market will make that happen sooner or later.

The corporate/labor imbalance is more problematic, and one we must address internally. Modern technology allows fewer people to run larger operations than in past decades. It is natural that this should tend to concentrate the wealth, but that still is unhealthy.
(I wonder, what would be the trade deficit if the 1% were considered a foreign country?)

Perhaps the answer is to continually increase the money supply to compensate? (A nod here to those who remind us that US Treasury obligations aren’t terribly different from “dollars” produced by the Fed.) Targeting NGDP growth or employment (rather than emphasizing inflation) would perhaps achieve this?

Alternatively, we might consider the impact of various taxation schemes. How might taxation discourage hoarding?

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2012/07/12/counterparties-america-attempts-to-retire/comment-page-1/#comment-41801 Sat, 14 Jul 2012 04:18:03 +0000 http://blogs.reuters.com/felix-salmon/?p=16026#comment-41801 TFF, I was referring your your suggestion that people hire other people to perform services for them.

Yes, the disposable income doesn’t disappear when one middle class family hires another, but my point is there is not enough of that disposable income among the middle class to support many people.

But I am totally in sync with your 3rd paragraph.

I didn’t say consumption is fixed, let me know where you got that impression.

There is unquestionably an import/export problem, we import far more than we export. There is also no question that over 100 billion of those dollars have landed in Apple’s bankroll, and are not being used by anyone. However, as much as I would like to criticize Zuckerberg, he’s not taking money out of the economy, his wealth is in shares of Facebook. It’s more like potential wealth, as in he can potentially sell those shares for cash, but until he does, he hasn’t extracted any wealth from the economy. I doubt that he has hoarded a lot of cash yet, he’s still pretty young.

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By: TFF http://blogs.reuters.com/felix-salmon/2012/07/12/counterparties-america-attempts-to-retire/comment-page-1/#comment-41799 Sat, 14 Jul 2012 01:04:31 +0000 http://blogs.reuters.com/felix-salmon/?p=16026#comment-41799 @KenG, I’m not sure what “plan” you are talking about?

Moreover, if one middle-income family buys a service from another middle-income family, the “disposable income” merely changes hands, it doesn’t disappear. Even taxation doesn’t change that — since the benefits are (mostly) redistributed to other middle-income families.

The problem with the system is that this “disposable income” is being siphoned off by the corporations and the wealthy, rather than being reinvested and recirculated in the economy. It is being siphoned off much faster than new money can be created, leaving the economy short.

Your premise that consumption is fixed is patently false. Consumption not only CAN increase, it WILL increase if money finds its way into the right hands.

I used to believe, as you do, that it is an import/export problem. But I’m thinking it is more than that — corporate profits are a record proportion of GDP, and the corporate “high earners” also represent a record fraction of the payroll. A dollar that ends up in Apple’s bankroll, or in the pocket of Zuckerberg, is just as lost as a dollar that ends up in China.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2012/07/12/counterparties-america-attempts-to-retire/comment-page-1/#comment-41796 Fri, 13 Jul 2012 22:43:28 +0000 http://blogs.reuters.com/felix-salmon/?p=16026#comment-41796 TFF, yes, the services sector can grow, but unless we can export some of those services, or import less goods, it’s not enough to pay for all those imports. And if the upper income brackets don’t spend more on services, your plan falls apart. The middle class doesn’t have enough disposable income to generate enough work for everyone who wants/needs it.

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By: TFF http://blogs.reuters.com/felix-salmon/2012/07/12/counterparties-america-attempts-to-retire/comment-page-1/#comment-41795 Fri, 13 Jul 2012 22:29:23 +0000 http://blogs.reuters.com/felix-salmon/?p=16026#comment-41795 Curmudgeon, remind yourself that all advertising is lying. If you can’t see how a particular ad is lying to you, then that simply means that the advertiser is better at it than you are.

That isn’t wholly true (is anything?), but a decent operating principle. Though it has the (unfortunate?) consequence of making me very reluctant to purchase something I’ve recently seen advertised, even when I might have purchased it anyways.

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By: Curmudgeon http://blogs.reuters.com/felix-salmon/2012/07/12/counterparties-america-attempts-to-retire/comment-page-1/#comment-41793 Fri, 13 Jul 2012 20:36:28 +0000 http://blogs.reuters.com/felix-salmon/?p=16026#comment-41793 KenG, that was a really good summary of the message I was trying to lead to (within the context of the Washington Monthly article). But it goes beyond eating; we get messages via our phones as we walk down the street on sales or dining options available in the area. These messages are becoming so finely tuned to our preferences that ignoring them may be psychologically impossible. And we may not even want to ignore them. Hopefully we can once again find balance before we gorge ourselves on food, goods, and services once again.

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By: TFF http://blogs.reuters.com/felix-salmon/2012/07/12/counterparties-america-attempts-to-retire/comment-page-1/#comment-41792 Fri, 13 Jul 2012 20:12:25 +0000 http://blogs.reuters.com/felix-salmon/?p=16026#comment-41792 Much to consider in this thread…

@Strych09, having a $90k income certainly helps to achieve financial security, but (as QCIC points out) there are plenty of people who make that much or more and STILL can’t find a way to save effectively. I have much less sympathy for somebody earning $100k who has trouble making ends meet than I do for somebody earning $30k who is pinched for savings.

@QCIC, children or no children? Many of the most expensive lifestyle elements revolve around that choice.

@KenG, the services sector continues to grow. I’ll happily help it grow further if I can find somebody responsible to do yard work at $30/hour.

And yes, the health care dilemma is at the basis of so many of our problems. It isn’t just that health care comprises 20% of GDP — it is the irrational way in which that burden is distributed.

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