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Kalifornia Leading The Way Over The Cliff
#21
Sorry: IMF (in french acronymes are written in reverse) S5
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#22
Gotcha' S22
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#23
(01-02-2013, 09:08 PM)mv Wrote:
Quote:But will the Chinese buy our additional debt?

This one is easy: the Chinese have not been buying US debt since 2009. And I don't think anyone is buying US debt anymore besides the Feds.

I don't think there is much dispute that the Fed is the primary (if not near exclusive) buyer of U.S. Debt ... but if you do a search, there was a flurry of information on buying and selling ... leaning toward Euros etc .. in 2010 and 2011 ... then it seems like most of the public information on their moves have gone dark. The later articles from 2011 parrot the phrase a "97% divestiture" ... but nary a peep after that. Whatever it is that they are doing, either I'm not using the wrong keywords or they are keeping it fairly mum.
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#24
No. Maybe other countries are not buying US debt or in much less quantities because they have common sens (after terribly lacking it) and also because they hae much less surplus as before.
But the priate sector is still buying US debts by the trillions as a "safe heaven" as ridiculous as it sounds.

That's the role of the banks and most of the funds. They are required by internal regulation to invest a certain percentage into treasuries because it's AA+ and because it has always been so.
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#25
(02-03-2013, 06:54 PM)Fredledingue Wrote: They are required by internal regulation to invest a certain percentage into treasuries because it's AA+ and because it has always been so.

Incorrect ... it has not "always been so" ... The AA+ rating on U.S. debt is a recent thing. S1 [... and S&P is now paying the price for it ...]

Meanwhile ... Texas goes a maraudin'. Note the hoopla about California's improved fiscal condition. Brown is touting a 'surplus' ... but it's based on revenue 'projections' ... not actual revenue collected. The next 10 months or so are going to be very interesting. What are the odds of things not going according to plan? Particularly when the Obama sponsored sequestration plan kicks in ...
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#26
That "the fed is buying our debt" thing is simply amazing. Does the fed even have assets or is it printing money and creating E-Money credits only?
In other words, are we levitating an economy here?
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#27
(02-11-2013, 01:12 PM)Palladin Wrote: That "the fed is buying our debt" thing is simply amazing. Does the fed even have assets or is it printing money and creating E-Money credits only?
In other words, are we levitating an economy here?

Suggested reading: Hans Christian Anderson.
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#28
(02-11-2013, 01:12 PM)Palladin Wrote: Does the fed even have assets or is it printing money and creating E-Money credits only?

The bonds that the F'ED is absorbing are actually considered it's 'assets' (along with a small gold reserve and other things like the $40-50 Billion in mortgages that it's picking up on a monthly basis). The currency created by the Treasury is released into the system based on collateralize 'reserves' created by those bond assets. All this stuff is carried on it's balance sheet. Presumably, at some point, the F'ED will need to 'sell' these 'assets'. And that's where the real fun come in. S5
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#29
Mr Y Wrote:Incorrect ... it has not "always been so" ... The AA+ rating on U.S. debt is a recent thing.
The US has a AAA rating since 1941 (that means almost "always had" it).
And most of the private funds -all of the important funds- hae internal rules binding them legaly to buy AAA or AA+ securities in certain amount for safety.

Mr Y Wrote:Presumably, at some point, the F'ED will need to 'sell' these 'assets'. And that's where the real fun come in.
I understand they may need to sell private assets. But why would they need to sell Treasuries?
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#30
(02-13-2013, 02:18 PM)Fredledingue Wrote: I understand they may need to sell private assets. But why would they need to sell Treasuries?

Well, if you believe that interest rates will remain at zero levels forever and ever amen ... or that inflation will never ever exceed target levels, then I suppose they don't. They could hold them to maturity with no consequences. But I don't think this is a very rational expectation. They are bankers. And while I don't think that (by law) the Fed can be exposed to actual financial liabilities, losing money is ... well ... embarrassing. Their balance sheet should be near zero ... but it's closer to $3 Trillion. The Treasury 'borrows' from the Fed to cover it's shortfalls. The reverse would really be some terribly awkward new ground. Rates have stayed low and stable for an unusually long period. Maybe not this year or next ... but at some point they will return to normalcy. And when you're holding $Trillions in near zero interest paper in a 5% world, you're screwed ... and bankers of all people DO NOT like getting screwed.

Meanwhile ... back in California ... Jerry Brown has become a miracle worker ... well ... sort of. The Golden State remains the canary in the fiscal coal mine. If Brown's projections are shown up as mere LSD flashback fodder by this time next year, the timing probably couldn't be much worse for the 2014 elections. It's has to do with that ugly little distinction between tax rates and actual tax revenues. And the months preceding next years mid terms would be an very awful time for Democrats to be forced to learn this subtle difference now wouldn't it? S5
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#31
Yak,

You're well versed on all this and I appreciate the post here. New question, is what all you detailed there the = of magic/funny money(except for the gold and mortgage income listed)?

It just seems to me we get away with basic economic dishonesty due to our dollar status that other's cannot get away with.
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#32
(03-02-2013, 06:14 PM)Palladin Wrote: Yak,

You're well versed on all this and I appreciate the post here. New question, is what all you detailed there the = of magic/funny money(except for the gold and mortgage income listed)?

It just seems to me we get away with basic economic dishonesty due to our dollar status that other's cannot get away with.

Esther George's comments and votes are generally not mentioned in the media. I think she get's it ... but overall, she's rendered mute. Jeffery Lacker has been a more consistent dissident ... but you really don't hear much about him either.

http://www.federalreserve.gov/monetarypo...trends.htm

Quote:Since the beginning of the financial market turmoil in August 2007, the Federal Reserve's balance sheet has grown in size and has changed in composition. Total assets of the Federal Reserve have increased significantly from $869 billion on August 8, 2007, to well over $2 trillion.

"Well over $2 trillion" ... which turns out to be a damn sneaky way of saying $3 trillion. Look at their own chart and then read their quote in context ... and ponder how 'difficult' it is to get away with dishonesty.

The Federal Reserve's real inner workings are not known. People like Rand Paul would like an audit ... but it's unlikely to happen. I'm not sure anybody ... even Bernanke really wants to know the full story.

Consider this. Every U.S. dollar in existence up to 1933 was backed with hard and tangible monetary assets. Now we don't even to bother to back much of a fraction of them with actual 'paper' IOUs ... there are only about $1 Trillion in notes and coins in circulation ... and only a few billion of it is coins generally made of zinc ... because copper is already considered much, much too expensive a commodity to waste minting a penny ... and at some point, the cost of paper will become prohibitive to actually 'print' a dollar. In this sense, all the "printing press" analogies have pretty much become passe. Ink is no longer required ... all we really need is an endless supply of fools.

... edit ...
Consider this as well. "Faith and Trust" in our currency has declined to the level that states are beginning to consider taking matters into their own hands. But don't expect this sort of thing from California. They're way too far down the fiscal sink hole, and far too reliant on the rest of us to cover their 'leverage'.
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#33
The fed has essentially been printing money when it buys US bonds and mortage loans (quantitative easing). It is electronic money, and the purchased items are considered "assets". It does this to hold interest rates down. At some point it may have to sell these assets, I don't know what the rule is. It will do this after the economy is healthy and interest rates are up. Therefore it will not get the face value of its "assets" when they are sold. What happens then, I would like to know. I have seen no explanation of the laws governing the Fed.
Jefferson: I place economy among the first and important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our choice between economy and liberty, or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy.
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#34
(03-04-2013, 05:53 PM)jt Wrote: The fed has essentially been printing money when it buys US bonds and mortage loans (quantitative easing). It is electronic money, and the purchased items are considered "assets". It does this to hold interest rates down. At some point it may have to sell these assets, I don't know what the rule is. It will do this after the economy is healthy and interest rates are up. Therefore it will not get the face value of its "assets" when they are sold. What happens then, I would like to know. I have seen no explanation of the laws governing the Fed.

The rules are that as shareholder Fed banks can't actually lose money and they are guaranteed a 6% risk free dividend by law for their trouble. Presumably, the Treasury would eventually have to make them 'whole' on any real loses. They have no real liability, but it would be embarrassing as hell for them to have to get "bailed out". It would be pretty difficult to maintain any remaining faith in the system after the last little bits of credibility are eroded away. This system was intended to create the appearance of taking the fiat out of fiat currency. Good luck with that after they have to be pulled out of the crapper.
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#35
It looks to me that they will have to be pulled out of the crapper anon: too much in the way of worthless "assets" will show up in their accounts unless they find a sucker to buy them.

Thanks for the info mv.
Jefferson: I place economy among the first and important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our choice between economy and liberty, or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy.
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#36
Bill Maher finally puts his money where his mouth is ... or maybe vise versa?
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#37
Quote:State auditor: California's net worth at negative $127.2 billion

Were California's state government a business, it would be a candidate for insolvency with a negative net worth of $127.2 billion, according to an annual financial report issued by State Auditor Elaine Howle and the Bureau of State Audits.

The report, which covers the fiscal year ending June 30, 2012, says that the state's negative status -- all of its assets minus all of its liabilities -- increased that year, largely because it spent more than it received in revenue.

During the 2011-12 fiscal year, the state's general fund spent $1.7 billion more than it received in revenues and wound up with an accumulated deficit of just under $23 billion from several years of red ink. Gov. Jerry Brown has referred to that and other budget gaps, mostly money owed to schools, as a "wall of debt" totaling more than $30 billion.

Last November, voters passed an increase in sales and income taxes that Brown says will balance the state's operating budget and allow the debt wall to be gradually dismantled.

About half of the $127.2 billion in accumulated red ink came from the state's issuing general obligation bonds and then giving the money to local governments and school districts for public works projects, the auditor pointed out. The assets built with the bonds remain on local balance sheets while the bonded debt accrues to the state.

The remainder, however, is all on the state's ticket. "Expenses that exceeded revenues and increased long-term obligations resulted in an 81.4 percent decrease in the total net assets for governmental and business-type activities from the 20-10-11 fiscal year," said the report.

The report listed the state's long-term obligations at $167.9 billion, nearly half of which ($79.9 billion) were in general obligation bonds, with another $30.8 billion in revenue bonds, many of which were issued to build state prisons, whose "revenue" is lease payments from the state general fund.

The list of long-term obligations did not include the much-disputed unfunded liabilities for state employees' future pensions, nor the $60-plus billion in unfunded liabilities for retiree health care. The Governmental Accounting Standards Board and Moody's, a major bond credit rating house, have been pushing states and localities to include unfunded retiree obligations in their balance sheets and were they to be added to California's, it could push its negative net worth down by several hundred billion dollars.

California should follow Greece's lead and raid the bank accounts of its Hollywood celebrities.
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#38
Jerry Brown believes his state's budget is 'balanced'. This is mostly based on the (near religious) belief that higher tax rates automatically translates into more revenue. The theory will be tested over the next year or so ... the timing should roughly coincide with the mid-term election. Nice. Things are already starting to look a little creaky even a few months into the year.
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#39
Ahh, the essence of the superstition of economics, under the spiritual guidance of John Maynard Keynes. S13S6
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#40
(03-30-2013, 05:05 PM)mr_yak Wrote: Jerry Brown believes his state's budget is 'balanced'. This is mostly based on the (near religious) belief that higher tax rates automatically translates into more revenue. The theory will be tested over the next year or so ... the timing should roughly coincide with the mid-term election...

The Keynesian sleight-of-hand works politically but not economically. The definitions of Keynesian language cooked into the economy makes the books balance in black and white - but no metrics are applied at all. Since there are no real-world measurements, the accounting zeros out but the imbalance still exits.
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