The 112th Congress: Debt ceiling edition

[Priceless]

Carry on

 

[Kepler]

Re: The 112th Congress: Debt ceiling edition

Good title.

 

[unh_hockey]

Re: The 112th Congress: Debt ceiling edition

shocked UNO fan has not come on here and given his treatise on the debt ceiling. seems like an appropriate forum to do so..

 

[unofan]

Re: The 112th Congress: Debt ceiling edition

shocked UNO fan has not come on here and given his treatise on the debt ceiling. seems like an appropriate forum to do so..

Woohoo, I've got my first stalker on the board! It's a proud moment, to be sure.

 

[Priceless]

Re: The 112th Congress: Debt ceiling edition

Woohoo, I've got my first stalker on the board! It's a proud moment, to be sure.

If I'd known it meant so much to you I would've started stalking you months ago

 

[unh_hockey]

Re: The 112th Congress: Debt ceiling edition

Woohoo, I've got my first stalker on the board! It's a proud moment, to be sure.

I am just really well informed. What can I say?

 

[JF_Gophers]

Re: The 112th Congress: Debt ceiling edition

We should just print the money, pay the debt off, deflate the dollar completely and start our economy over.

What's the worst that could happen? Economic collapse?

As long as we are printing money, why not get that infrastructure rebuilt/repaired while we are at it.

 

[unh_hockey]

Re: The 112th Congress: Debt ceiling edition

We should just print the money, pay the debt off, deflate the dollar completely and start our economy over.

What's the worst that could happen? Economic collapse?

As long as we are printing money, why not get that infrastructure rebuilt/repaired while we are at it.

I think it has something to do with the US dollar being the world currency reserve, so a default would basically mess everyone else up. Its like the euro crisis where everyone owes everyone else money, and banks are leveraged to the hilt so defaults would result in write downs, losses, and collapse ( according to them).

I suppose we could just start over if we wanted too. Of course this would drive a wedge between those who ‘have’ and those who do not ‘have’. People who had leveraged debt to acquire property etc would have an instant advantage. This would cause significant unrest in the population. However, maybe a new economy would work, but if we stick to our same old debt based monetary regime, we will be back to square one in a few short generations. On a basic level, maybe we could control monetary growth via useful goods/ resources we are able to produce as a nation? Have money backed on something. For example, if we are able to increase our capacity for nuclear, oil and coal combined 11%, allow our monetary base to increase by some directly proportional rate?

I don’t really understand the fundamental mechanisms the fed uses to govern monetary policy all that well. Not sure most people do. Considering the outrage for abortion, tax breaks, I am shocked that things like QE2 ( and maybe QE3) and POMOs have not gotten more attention. There is a lot of money trading hands there..

 

[Priceless]

Re: The 112th Congress: Debt ceiling edition

Good thing that tornado didn't hit in Cantor's district.

Firefighters and rescue workers who arrived in Joplin, MO, found that the deadly tornado that hit the state Sunday had left a “barren, smoky wasteland” in its path. Rescue workers worked through more storms in an effort to find potential survivors, even as the death toll rose to at least 119. President Obama pledged full support to the state Monday, telling survivors, “We’re here with you. We’re going to stay by you.”

House Majority Leader Eric Cantor (R-VA), however, said that before Congress approved federal funds for disaster relief, it had to offset the spending with cuts to other programs. The Washington Times reports:

House Majority Leader Eric Cantor said Monday that if Congress passes an emergency spending bill to help Missouri’s tornado victims, the extra money will have to be cut from somewhere else.

“If there is support for a supplemental, it would be accompanied by support for having pay-fors to that supplemental,” Mr. Cantor, Virginia Republican, told reporters at the Capitol. The term “pay-fors” is used by lawmakers to signal cuts or tax increases used to pay for new spending.

Meanwhile, as Climate Progress reports, the government’s tornado forecasting service faces cuts in the GOP Congress, including cuts to NOAA weather satellite that “could halve the accuracy of precipitation forecasts.” Accurate and early forecasting is tremendously important, as “tornado deaths in the United States have gone from 8 per 1 million people in 1925 to 0.11 per 1 million people today — a trend largely attributed to early-warning systems fed by advanced meteorology and the introduction of Doppler radar.”

 

[FlagDUDE08]

Re: The 112th Congress: Debt ceiling edition

So we owe other countries an s-load of cashola... how much do they owe us? I'm surprised that the debt can't simply just cancel out.

 

[ScoobyDoo]

Re: The 112th Congress: Debt ceiling edition

Cantor's a moron. Who knew?

 

[Priceless]

Re: The 112th Congress: Debt ceiling edition

Hey I have an idea...we can cut the energy subsidies and use that money to rebuild homes and schools. Win/Win!

 

[Bill]

Re: The 112th Congress: Debt ceiling edition

I don"t really understand the fundamental mechanisms the fed uses to govern monetary policy all that well. Not sure most people do.

Neither does the Fed.

 

[Rover]

Re: The 112th Congress: Debt ceiling edition

Good thing that tornado didn't hit in Cantor's district.

Well I guess we now know what caused the delay in the reaction to Katrina. The search for offsetting budget cuts!!!

Seriously, I don't know who pushed the "Self Destruct" button for the House majority, but The Boner needs to reign these guys in a little before they meet with the press.

 

[Handyman]

Re: The 112th Congress: Debt ceiling edition

Hey I have an idea...we can cut the energy subsidies and use that money to rebuild homes and schools. Win/Win!

They need that money to offset the taxes they dont pay...why do you hate big business?

 

[Handyman]

Re: The 112th Congress: Debt ceiling edition

Well I guess we now know what caused the delay in the reaction to Katrina. The search for offsetting budget cuts!!!

Seriously, I don't know who pushed the "Self Destruct" button for the House majority, but The Boner needs to reign these guys in a little before they meet with the press.

That wont happen, Cantor and Orange Julius have two different agendas and dont like each other much. The "New GOP" guys think they are Reagan's gift to governmental policy. The "Old GOP" are out golfing so they don't care

 

[unofan]

Re: The 112th Congress: Debt ceiling edition

I don’t really understand the fundamental mechanisms the fed uses to govern monetary policy all that well.

Monetary Policy 101:
MV = PQ

M = the money supply (generally M2)
V = the velocity of money (the multiplier effect).
P = average price (inflation/deflation)
Q = quantity of goods/services (GDP).

The Fed gets to control M. Generally speaking, V tends to remain fairly constant (though not always, as explained shortly). In a healthy economy, then, the fed will try to control P by using M while accounting for the natural changes in Q.
In other words, M should change at roughly the same rate as Q so as to leave P constant or only slightly increased, as its better for an economy to have minor inflation than any deflation.

What may have happened with the credit crisis was that V didn't necessarily remain constant; money stopped changing hands and the economic cogs ground to a halt. So now an increase in the money supply won't affect P or Q, as V has dropped so much that M has to increase just to keep that side of the equation stable.

As to how the Fed controls the money supply, it does so in a couple different ways:

It can raise or lower the overnight interest rate, which is what it charges banks who borrow money to satisfy their overnight reserve requirements. An increase in the rate will make banks borrow less cash and keep more of their own money in their vaults. Likewise a decrease in the rate will encourage more lending, getting more cash out on the market.

It can also change the money supply by buying and selling government bonds. When it wants M to increase, it buys up bonds to flood the market with cash (as well as lowering the effective yield of the government bonds, thereby discouraging them as an investment and forcing the money elsewhere). When it wants to reign in the money supply, it sells off bonds and hoards the cash.

 

[Rimbaud]

Re: The 112th Congress: Debt ceiling edition

Monetary Policy 101:
MV = PQ

M = the money supply (generally M2)
V = the velocity of money (the multiplier effect).
P = average price (inflation/deflation)
Q = quantity of goods/services (GDP).

The Fed gets to control M. Generally speaking, V tends to remain fairly constant (though not always, as explained shortly). In a healthy economy, then, the fed will try to control P by using M while accounting for the natural changes in Q.
In other words, M should change at roughly the same rate as Q so as to leave P constant or only slightly increased, as its better for an economy to have minor inflation than any deflation.

What happened with the credit crisis was that V didn't remain constant; money stopped changing hands. So now an increase in the money supply won't affect P or Q, as V has dropped so much that M has to increase just to keep that side of the equation stable.

As to how the Fed controls the money supply, it does so in a couple different ways:

It can raise or lower the overnight interest rate, which is what it charges banks who borrow money to satisfy their overnight reserve requirements. An increase in the rate will make banks borrow less cash and keep more of their own money in their vaults. Likewise a decrease in the rate will encourage more lending, getting more cash out on the market.

It can also change the money supply by buying and selling government bonds. When it wants M to increase, it buys up bonds to flood the market with cash (as well as lowering the effective yield of the government bonds, thereby discouraging them as an investment and forcing the money elsewhere). When it wants to reign in the money supply, it sells off bonds and hoards the cash.

I prefer PV=nRT.

 

[JF_Gophers]

Re: The 112th Congress: Debt ceiling edition

I prefer PV=nRT.

We don't care if you have gas.

 

[unh_hockey]

Re: The 112th Congress: Debt ceiling edition

I have read 101 class in a previous article, but am the kind of person that likes to understand whatever models they are working on. MV=PV is as simple at first glance as the heat diffusion equation ; breaking them down and understanding the underlying principals, and applications is harder to do without practice. Obviously I only read about monetary policy and have no practical experience. For example, I understand how the fed can buy/ sell bonds from the government, and change the rates…I just don’t understand the “why” in as complete a manner as , say ‘ navier stokes equations’ or something like that.

The way I see it, we have two problems. The first is inflation, and the second is deflation. In the first case, we see the prices of important commodities including oil and food go up. As was more the case in late 2008, we saw deflation as credit markets tightened up after the financial crash. Creditors were unable to extend loans, companies no longer could buy from vendors, and the vicious cycle resulted in the massive slow down. I see QE2 as an attempt to fix a broken monetary system. “easing” the credit markets allows them to lend, but that’s a temporary solution for a much bigger problem. What happens when QE2 ends in june? Will they have to do a QE3?