The Trump Economy

[3rdnlng]

1 hour ago, OldTimeAFLGuy said:

 

...so is your husband on the window ledge??.........

It's a ranch style home, so most likely the most that will happen is a contribution towards his healthcare deductible.

[Chef Jim]

2 hours ago, ALF said:

 

The increase in the number of Baby Boomers retiring each day is expected to have a direct impact on the number of available workers in the U.S. workforce as the Social Security program is primarily funded by payroll taxes assessed on wages in the United States. 

 

The increasing number of Baby Boomers leaving the workplace along with historically low U.S. birth rates could very well impact the future of the Social Security program.

 

You do know that the there are more millennials than boomers right?

[Buffalo_Gal]

2 hours ago, ALF said:

 

So there are job openings due to retirement ?  The economy has been adding jobs for the last 8 years , no ?

Here are the Bureau of Labor and Statistic private sector job growth numbers for the last 10 years (seasonally adjusted, whatever that means).  I shall let you figure out if  these are all simply jobs due to retirement and replacement, or if new people entered the job market, did people over 65 stay on instead of retire, where new jobs were created,  old jobs lost, etc.

[TPS]

52 minutes ago, Buffalo_Gal said:

Here are the Bureau of Labor and Statistic private sector job growth numbers for the last 10 years (seasonally adjusted, whatever that means).  I shall let you figure out if  these are all simply jobs due to retirement and replacement, or if new people entered the job market, did people over 65 stay on instead of retire, where new jobs were created,  old jobs lost, etc.

The JOLTS survey by the BLS addresses this. 

https://www.bls.gov/news.release/jolts.nr0.htm

 

[keepthefaith]

11 hours ago, TPS said:

 

 

"Somebody has to buy the new debt." How many times do I have to tell you the primary dealers are required to bid and fill Treasury auctions? This means the treasury will always be able to sell securities whether it's rolling over  maturing debt or issuing new.

 

 

 

Full disclosure, I'm not an economics professional but have a great deal of interest in this debate and the posts by you and GG. 

 

So the U.S. ability to deficit spend and finance new and rolling debt is contingent on the ongoing ability to finance that debt which has not been a problem.  We have $22T in debt now and we're essentially committed to 10's of trillions more in the next couple decades or so based on forecasts for mandatory entitlement spending.  Nobody feels this.  The sun rises and sets every day and debt gets financed.  What happens if there is an economic event that causes buyers of our debt to turn away or demand much higher rates?  What then?  Forecasts for debt service costs 10 years from now are about $1T per year.  Add to that annual deficits and in the not too distant future we're looking at financing let's say $4T a year in new and rolling debt.  What then?  Still no problem? 

[plenzmd1]

11 hours ago, Chef Jim said:

 

You do know that the there are more millennials than boomers right?

well, that is a point only because baby boomers are dying ...and i am a boomer ! (so are you ya old fart!)

 

Couple good pieces here about the structural makeup of the labor force..first one is a bit old, and actually references research done in 2015..as i have said several times in this thread..what is happening now in the "war for talent" has been predicted for at least a decade..there is a reason Talent Acquisition technology gets the lion's share of VC investment in the HR TEch space

 

https://www.pewresearch.org/fact-tank/2018/04/11/millennials-largest-generation-us-labor-force/

 

And this Forbes piece gets into a little more detail about the makeup of the labor force..and no matter what politicians scream..whether it be Obama or Trump most of the tight labor markets are not because of them LOL

https://www.forbes.com/sites/cognitiveworld/2019/01/31/help-desperately-wanted-the-coming-employee-shortage/#3e1bdcaf1751

 

[BeginnersMind]

10 hours ago, keepthefaith said:

 

Full disclosure, I'm not an economics professional but have a great deal of interest in this debate and the posts by you and GG. 

 

So the U.S. ability to deficit spend and finance new and rolling debt is contingent on the ongoing ability to finance that debt which has not been a problem.  We have $22T in debt now and we're essentially committed to 10's of trillions more in the next couple decades or so based on forecasts for mandatory entitlement spending.  Nobody feels this.

 

10% of the budget is paying interest. We all feel it. Paying it off would take even more %. 

 

 

Quote

 

  The sun rises and sets every day and debt gets financed.  What happens if there is an economic event that causes buyers of our debt to turn away or demand much higher rates?  What then?  Forecasts for debt service costs 10 years from now are about $1T per year.  Add to that annual deficits and in the not too distant future we're looking at financing let's say $4T a year in new and rolling debt.  What then?  Still no problem? 

 

Exactly. But Congress passed and Trump signed. The only bipartisan moment in 2 years was joint fiscal irresponsibility. What drove it? Good of the country? No. Election year politics so everyone could keep their jobs. 

Edited August 1, 2019 by BeginnersMind

[TPS]

10 hours ago, keepthefaith said:

 

Full disclosure, I'm not an economics professional but have a great deal of interest in this debate and the posts by you and GG. 

 

So the U.S. ability to deficit spend and finance new and rolling debt is contingent on the ongoing ability to finance that debt which has not been a problem.  We have $22T in debt now and we're essentially committed to 10's of trillions more in the next couple decades or so based on forecasts for mandatory entitlement spending.  Nobody feels this.  The sun rises and sets every day and debt gets financed.  What happens if there is an economic event that causes buyers of our debt to turn away or demand much higher rates?  What then?  Forecasts for debt service costs 10 years from now are about $1T per year.  Add to that annual deficits and in the not too distant future we're looking at financing let's say $4T a year in new and rolling debt.  What then?  Still no problem? 

I'll try to answer as best I can without giving another dissertation...

 

First point, the debt, deficit, and interest need to be discussed in relative terms--meaning relative to your income and assets (just like banks do when you want a loan). For corporations, we look at Debt/Asset ratios, interest expense ratios, etc., so we should do the same for the government. When you only give a $ amount, it doesn't really give you much information.  How much larger will the economy be in 10 years? If the debt service is $1 trillion, has the ratio (say, relative to Nominal GDP) gone up or down?  

 

Since we don't have a measure of the government's assets, the ratio used is relative to NGDP, since that represents the tax base.   Currently the gross debt outstanding is a little over 100% of GDP.  The problem with this measure is it mixes a stock (debt) with a flow (GDP). The important measure then, and related to your questions is the interest expense as a share of GDP.  One more correction: since the FED transfers any interest income beyond what it takes to operate (including now paying interest on bank reserves),  the relevant measure is "net interest expense."  In 2018, this was $325 billion; HOWEVER, relative to GDP it was 1.6%, below the historical average (since 1965) of 2% (the highest it's been is 3.2% in 1991). To your questions about the future...

 

Forecasts: If Nominal GDP grows as fast as the $ value of net interest, then the ratio stays the same.  However, currently the deficit is rising faster than NGDP, which means the total Debt is rising faster than NGDP, which means the net interest expense ratio (as projected by the CBO) will rise to 3% 10 years from now, still below the historical maximum though.   A lot can happen over the next 10 years, so it's difficult to speculate on the projections. If one is worried about the interest expense, then the solution would be to bring down future deficits to sustainable levels (meaning the low enough for the interest expense ratio to stay constant).

 

An event: most "events" tend to cause investors to seek safe, liquid assets--US treasuries, so you'd have to be more specific on what would trigger a run from treasuries (see next paragraph)? That said, as I keep saying to GG, the Fed's primary dealers (24 of the largest non-Chinese banks in the world) are required to make the market for Treasury auctions.  Related to your $4 trillion per year, investors hold treasuries because of their liquid and safety qualities; the financial system uses treasuries as "currency" to fund trades--the collateral used for trillions in transactions, so the amount rolled (say $3 trillion) over shouldn't be a problem in a growing economy that desires a safe, liquid asset.  The trillion dollar deficit will always be "financed" because the PDs are required to purchase the debt.  My answer, then, I still don't see a problem.

 

A worst case scenario: foreigners (China) sell off treasuries.  First, China buys treasuries as a trade management policy--they don't want the USD to collapse against the yuan because it would cause a dramatic spike in the cost of Chinese goods. I've always argued they would only do so if there were some political event between US and THEM. First, selling a trillion in treasuries would cause a spike in interest rates; second, they would now hold $1 trillion in USD deposits, so the effect on the dollar-yuan would depend on whether they also converted these holdings into yuan (but they could convert to any other major currencies).  That said, as the FED has shown, it intervened in the markets by several trillion dollars during the crisis, so there is no reason it wouldn't be the "buyer of last resort" in the case of this type of event (note, the FED would buy the assets by crediting the reserve account of the bank that China uses...).  In a way, I'm less concerned about this type of scenario, because it would mean a very significant event where we are all most likely *****...

 

I'll try to conclude with what you should focus on if you worry about this.  The interest expense ratio grows if the deficit/GDP ratio + the average interest rate on the debt rises faster than the growth of NGDP.  Last year the deficit was 3.9% of GDP and the average interest expense was about 2%, roughly 6%, and NGDP grew by 5.4%, and the interest expense ratio increased from 1.4% in 2017 to 1.6%. This year the deficit will exceed 4% but interest rates have come down a bit, still they will exceed NGDP growth so the interest expense will rise (as the CBO projects).  If you are worried about this, then the deficit/GDP ratio needs to be reduced to a more sustainable level (<3%).  This is what the politics have been building to: "fiscally responsible" politicians need a reason to go after SS and Medicare.  We can't "afford" to fund both endless war and social spending.  If Trump or a centrist Dem wins 2020, then the attack on social programs will begin; if a progressive Dem wins, they it will go to battle with the MIC.  The latter always seems to win...

 

This is longer than I wanted, and there is still the issue that I've been trying to get GG to understand--any government that issues its own currency can never default.  Much of this is in the thread already though.....

Glad to try and answer any other questions.

[Tiberius]

Here's Trumps economy, the one thing he directly did on his own:welfare to rich farmers: 

 

The Trump administration last week revealed details of a $16 billion aid package for farmers hit in the U.S.-China trade war, with key provisions meant to avoid large corporations scooping up big payouts at the expense of small farmers.

According to a report released Tuesday by the nonprofit Environmental Working Group (EWG), most of the $8.4 billion given out so far in last year’s farm bailout went to wealthy farmers, exacerbating the economic disparity with smaller farmers.

An EWG analysis found that the top one-tenth of recipients received 54 percent of all payments. Eighty-two farmers have each so far received more than $500,000 in trade relief.

One farm, DeLine Farm Partnership of Charleston, Mo., has so far received $2.8 million.

The top 1 percent of recipients of trade relief received, on average, $183,331. The bottom 80 percent received, on average, less than $5,000, EWG said.

https://www.washingtonpost.com/business/2019/07/31/trumps-billion-farm-bailout-will-make-rich-farmers-richer-hasten-small-farm-failure-study-says/?utm_term=.6261ec09be9d

2 hours ago, BeginnersMind said:

 

 

 

Exactly. But Congress passed and Trump signed. The only bipartisan moment in 2 years was joint fiscal irresponsibility. What drove it? Good of the country? No. Election year politics so everyone could keep their jobs. 

So what did you want? Cuts in government employment or taxes raised? 

[Buffalo_Gal]

13 hours ago, TPS said:

The JOLTS survey by the BLS addresses this. 

https://www.bls.gov/news.release/jolts.nr0.htm

 

That's pretty good. Do you happen to know if they have that in the 10-year spreadsheet too? Or would I have to seek it out page by page? Can I seek it out page by page, or do they write-over the last month with the most current available month's data? (I can't just thumb through the url for different months, hence the questions.)

[TPS]

42 minutes ago, Buffalo_Gal said:

That's pretty good. Do you happen to know if they have that in the 10-year spreadsheet too? Or would I have to seek it out page by page? Can I seek it out page by page, or do they write-over the last month with the most current available month's data? (I can't just thumb through the url for different months, hence the questions.)

The best i can say is to check out their database tools...

https://www.bls.gov/jlt/data.htm

 

[GG]

2 hours ago, TPS said:

 

This is longer than I wanted, and there is still the issue that I've been trying to get GG to understand--any government that issues its own currency can never default.  Much of this is in the thread already though.....

Glad to try and answer any other questions.

 

So you still think that you're not contradicting yourself?   

 

You seem to be making up your own definition of "default" to claim to win an Internet argument.  I know memories are fleeting, but we're not even a decade removed from the possible US default in the summer of 2011.  I'm guessing you don't remember the fun conversations about a possible default by a AAA global standard entity, and all the knock on effects that would have?

 

But other than that, sovereign issuers never, ever default.

Argentina defaults for second time

 

--

 

You just wrote up a page backing up my point that the cost of issuing US debt is always dependent on the investor appetite for US Treasury debt.  Why else would you bring up the possibility of the Chinese dumping Treasuries?   The obligation of Fed's primary dealers to buy up the Treasury auction is not the same as those dealers' ability to float those Treasuries into the market.  The last thing that the Fed wants is to saddle its primary dealers with unwanted inventory.   

 

Of course the probability of failed Fed auctions is low at this point, but it doesn't mean that it is impossible, and we've certainly lived through scenarios in our lives where the Treasuries' interest rates were adjusted because the demand wasn't there.    Again, this furthers the point that the US can get away with much more aggressive monetary & fiscal policies, because it's still the global economic engine.   

 

I'm still trying to figure out how you excuse away the Fed creating $2.7 trillion of assets out of thin air, yet show concern over continuing debt build up due to budget deficits. 

 

Someone once said that in the long run, we're all dead.  The same goes for debt issuances - in the long run someone has to pay for it.  Somebody has to hold the $2.7 trillion of debt that the Fed temporarily parked on its balance sheet.  It's no different for that $2.7 trillion that was created to prop up the economy or the trillions created each year to fund the budget deficits.

 

 

[Tiberius]

Higher Taxes on American consumers. More welfare to wealthy farmers also? 

 

Trump says he will impose new tariffs on $300 billion in Chinese imports

Once the 10 percent import penalty is imposed Sept. 1, almost all goods sent to the United States from China will face tariffs. Those tariffs could push the cost of many consumer products higher in the second half of the year.

• By David J. Lynch, Heather Long and Damian Paletta
• 1 hour ago

[TPS]

49 minutes ago, GG said:

 

So you still think that you're not contradicting yourself?   

 

You seem to be making up your own definition of "default" to claim to win an Internet argument.  I know memories are fleeting, but we're not even a decade removed from the possible US default in the summer of 2011.  I'm guessing you don't remember the fun conversations about a possible default by a AAA global standard entity, and all the knock on effects that would have?

 

But other than that, sovereign issuers never, ever default.

Argentina defaults for second time

 

--

 

You just wrote up a page backing up my point that the cost of issuing US debt is always dependent on the investor appetite for US Treasury debt.  Why else would you bring up the possibility of the Chinese dumping Treasuries?   The obligation of Fed's primary dealers to buy up the Treasury auction is not the same as those dealers' ability to float those Treasuries into the market.  The last thing that the Fed wants is to saddle its primary dealers with unwanted inventory.   

 

Of course the probability of failed Fed auctions is low at this point, but it doesn't mean that it is impossible, and we've certainly lived through scenarios in our lives where the Treasuries' interest rates were adjusted because the demand wasn't there.    Again, this furthers the point that the US can get away with much more aggressive monetary & fiscal policies, because it's still the global economic engine.   

 

I'm still trying to figure out how you excuse away the Fed creating $2.7 trillion of assets out of thin air, yet show concern over continuing debt build up due to budget deficits. 

 

Someone once said that in the long run, we're all dead.  The same goes for debt issuances - in the long run someone has to pay for it.  Somebody has to hold the $2.7 trillion of debt that the Fed temporarily parked on its balance sheet.  It's no different for that $2.7 trillion that was created to prop up the economy or the trillions created each year to fund the budget deficits.

 

 

I wish you would read what I write.  1. The debt ceiling is a politically imposed constraint, not financial. That POSSIBLE default would've happened because the idiots in congress failed to raise the debt ceiling, though they always do so in the end). 2. A country that issues debt in its own currency can't default! Argentina has defaulted on debt denominated in USD, which it can't print.

 

I brought up the Chinese example as a possible extreme event that @keepthefaith pondered.  Extreme event related to a political event. Most of your argument is about hypotheticals, which is what most of those arguing against deficits deal in--where's the beef?  "The probability is low, but it doesn't mean it is impossible...."  I suppose it's not impossible that pigs will fly either....

 

Let's get back to the main issue.  I have not excused away the FED creating $2.7 trillion out of thin air, I've described why it was NOT inflationary --I think this is the original point, yes?  You think it's because of the dollar's "special status"  as if investors determine prices and inflation and not cost of production and firms....

 

If you actually read my response to Faith as me "showing concern over build up of debt and deficits," then go back and read my first sentence in this post.  

 

If when you say the "Fed creating $2.7 trillion of assets out of thin air" you mean bank reserves held on accounts with the FED, then you're getting closer.  The FED pays for any asset by crediting bank reserve accounts (for the umpteenth time).  Other than vault cash, bank reserves are simply numbers on the FED's computers.  The FED processes and clears checks in the banking system and if Key has more claims (say $1 million) against M&T's customers on any given day/week then the FED subtracts $1 million from M&T's account and adds it to Key's--there is no movement of funds between the banks, the FED simply nets things out on their reserve accounts. 

 

I hope you understand this: The only asset the FED can create out of thin air is "reserves held on account with the FED."  

 

So it appears the difference is you think that "somebody has to hold the debt that the FED temporarily parked on its BS."  I assume by debt you mean the MBS and treasuries, which would be assets on the FED's BS.  As I've said, there is no economic reason the FED has to reduce its balance sheet, and the FED can hold those assets to maturity if it wants.  Again, MBS are paid down as homeowners make mortgage payments, so they disappear off the FED's BS over time.  So I guess it comes back to you worrying about the treasuries....?  Wake me up when the Treasury can't sell its treasuries.....

 

 

 

7 minutes ago, Tiberius said:

Higher Taxes on American consumers. More welfare to wealthy farmers also? 

 

Trump says he will impose new tariffs on $300 billion in Chinese imports

Once the 10 percent import penalty is imposed Sept. 1, almost all goods sent to the United States from China will face tariffs. Those tariffs could push the cost of many consumer products higher in the second half of the year.

• By David J. Lynch, Heather Long and Damian Paletta
• 1 hour ago

I think I mentioned here that it would be wise for the Chinese to just let this go  into next year.  Let Trump bear the economic consequences of his decisions and see how it plays in the 2020 election....

[Foxx]

6 hours ago, TPS said:

... --any government that issues its own currency can never default.  ...

no but hyper inflation can sure make that fiat worthless.

 

 

6 minutes ago, TPS said:

... Wake me up when the Treasury can't sell its treasuries.....

 

they, are the buyer of last resort. even though it is a sham, they will always sell them (to themselves if they have to).

Edited August 1, 2019 by Foxx

[GG]

Funny.  All Argentina had to do was to issue enough fiat currency to repay US$ obligations 

[SoCal Deek]

I thought Democrats liked higher taxes?  What do they think a tariff is?

[TPS]

15 minutes ago, GG said:

Funny.  All Argentina had to do was to issue enough fiat currency to repay US$ obligations 

In other words, you're asking why they had to issue debt in USD and not pesos?  

 

 

Here's a quote from an earlier post:

Quote

Final point. Only governments that issue debt in their own currency are not financially constrained. State and local governments are required to balance their budgets, so they are financially constrained; Greece issues debt in euros, so it is constrained; many developing economies issue international debt in hard currencies which makes them financially constrained; and most underdeveloped countries fall under the constraint that they lack capacity in real resources, so any attempt to deficit spend is inflationary--increasing spending when you can't produce more things.

 

Edited August 1, 2019 by TPS

[dpberr]

46 minutes ago, TPS said:

I wish you would read what I write.  1. The debt ceiling is a politically imposed constraint, not financial. That POSSIBLE default would've happened because the idiots in congress failed to raise the debt ceiling, though they always do so in the end). 2. A country that issues debt in its own currency can't default! Argentina has defaulted on debt denominated in USD, which it can't print.

 

I brought up the Chinese example as a possible extreme event that @keepthefaith pondered.  Extreme event related to a political event. Most of your argument is about hypotheticals, which is what most of those arguing against deficits deal in--where's the beef?  "The probability is low, but it doesn't mean it is impossible...."  I suppose it's not impossible that pigs will fly either....

 

Let's get back to the main issue.  I have not excused away the FED creating $2.7 trillion out of thin air, I've described why it was NOT inflationary --I think this is the original point, yes?  You think it's because of the dollar's "special status"  as if investors determine prices and inflation and not cost of production and firms....

 

If you actually read my response to Faith as me "showing concern over build up of debt and deficits," then go back and read my first sentence in this post.  

 

If when you say the "Fed creating $2.7 trillion of assets out of thin air" you mean bank reserves held on accounts with the FED, then you're getting closer.  The FED pays for any asset by crediting bank reserve accounts (for the umpteenth time).  Other than vault cash, bank reserves are simply numbers on the FED's computers.  The FED processes and clears checks in the banking system and if Key has more claims (say $1 million) against M&T's customers on any given day/week then the FED subtracts $1 million from M&T's account and adds it to Key's--there is no movement of funds between the banks, the FED simply nets things out on their reserve accounts. 

 

I hope you understand this: The only asset the FED can create out of thin air is "reserves held on account with the FED."  

 

So it appears the difference is you think that "somebody has to hold the debt that the FED temporarily parked on its BS."  I assume by debt you mean the MBS and treasuries, which would be assets on the FED's BS.  As I've said, there is no economic reason the FED has to reduce its balance sheet, and the FED can hold those assets to maturity if it wants.  Again, MBS are paid down as homeowners make mortgage payments, so they disappear off the FED's BS over time.  So I guess it comes back to you worrying about the treasuries....?  Wake me up when the Treasury can't sell its treasuries.....

 

 

 

I think I mentioned here that it would be wise for the Chinese to just let this go  into next year.  Let Trump bear the economic consequences of his decisions and see how it plays in the 2020 election....

 

I don't think the Chinese can wait out the United States.  Despite the bluster, their economy is more fragile than ours.  

[GG]

1 hour ago, TPS said:

In other words, you're asking why they had to issue debt in USD and not pesos?  

 

 

Here's a quote from an earlier post:

 

 Nice copout.  I'm asking why didn't they just issue unlimited pesos, convert them to dollars and pay the obligations?