What’s a dollar worth~?

Audio –

12:42 min.

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  • Paul

    Austerity in Spain is not working.  Spain is a basket case.
    Can we add, with certainty, to “The Way Forward” Mystic meta-plan, that “austerity never works”~?

    Germany might be able to contain the Spanish debacle.  But, I can’t see how they can save both Spain and Itlaly, if the contagion spreads.  That same contagion could even spread to France.  Spain, Italy and France are large economies by world GDP rankings; 12th, 8th and 5th, respectively.  Surely, that would have a massive impact on the global economy.  If all three severely contracted, would it cause a global Depression, or are the US, the UK, Japan and China sufficiently insulated because they maintain a sovereign currency?
    A question about Germany.  Why are their bond yields dropping so low?  Their last bond auction wasn’t even covered.  Their rates are now below Japan’s.  The German economy seems stable; low unemployment, stable/rising housing, etc.  Their bonds should be strong as well.  This is probably a dumb question, but what I am missing about the Germany economy that’s causing its bond yields to fall so low?  Rising interest rates affecting the yield to maturity of the older bonds?  I realize Germany is a safe haven, so their bond prices are higher.  But, is there something else happening? 

    free WSJ article with short videos:

    • http://overthepeak.com/wordpress/ Mystic

       Good comment~!
      I say that because it blasted me into a state of `must make a video`………….but then, it was `must make three videos`, but that was to much…So I probably won’t make any videos.

      I don’t think I have mentioned it much, but I see this `economy stuff` as a great big blob. 
      No, a city, would be the better description; because I like it when I find `gates in`.

      I think that `we didn’t ask to be here`, is a gate in.
      It looks like `when can a country do the `austerity thing“, is a gate in.

      A `gate` would be a thing that when you `follow it` mentally, puts you on a path where you get to the heart of the thing (city) quickly and without distraction.

      And when at the city centre, it is all busy with information and before you know it…….you are making a video.

      So, although I may not make a particular video, be knowing that your comments took da mystic on an express ride to the information centre.

      (I better have a lie down now~!)

      • Paul

        OK, get some rest and think on it.  But, when you wake up, I’d appreciate a response.  Be aware of the fact that I did not know, as we say here in the US, “shit from Shinola”, about economics, until I started watching your videos, years ago.  I mean that.  I am a well educated individual, but never in money matters.  You brought me up to a point where I could post a comment like that.  You should be proud of the fact that one of your students has learned a bit, here and there. 
        So, Professor Mystic, you must at least attempt to answer my questions, whether they are stupid or not.  That is the essence of OTP.  You took on the mantle, now express yourself, Boyo~!  You are a great teacher, Nick~!  You missed your true calling.
        I have learned a great deal from you.  Thank you, as always.

        I am going to say that the Austerity Gate leads to a dead end.  Agreed? 
        So, what’s the next piece to the puzzle that we can add or subtract?

        • Paul

          Forgot the imagery.

        • http://overthepeak.com/wordpress/ Mystic

           OK.  First establishing economics is a soft science, but there are some `facty thngs`.
          GDP can be worked out in a `facty` way.
          US GDP is 100% at all times.  We know what goes into that 100% –
          Government Spending +Consumer spending + Business investment ….then +or- for the difference between exports and imports.
          So, let’s work backwards – For the US, that imports more than it exports, we start off with a negative number..then we add the other three things.
          Business investment.  Businesses are not going to invest big (more) unless the consumer is spending and will make the investment pay…….This is where the US is stuck, what with people being in too much debt and all.
          …….And we get to the last component of GDP – The Government~!

          So, we go through the gate of governmental debt and ask `why is the government in debt`~?
          This is a hearty question~!

          Because, we could say, that the economy has been so often crap that they have come in and helped it back to health; but this becomes a political question (and therefore a silly question).

          We are thrown back to two vital questions –
          What is the government for~?
          What is money for~?

          Basically, the system is that the government takes taxes off the economy and with that money lays down the infrastructure for the private people to play.
          The money is similar.  The government supplies it for the private people to play with.

          I think that both government and money need to be established in their roles.
          Everyone should be in no doubt what each is for.
          At the moment, if anyone should take the time to look into it, they find that both are hovering in a kind of `neither here nor their limbo`.

          I think these will both resolve themselves in the government using money in order to boost GDP.
          They are starting to do it now `kinda subconscious like`, but I think they will soon get a sort of `battle plan` on the go, where `economic warfare will be overtly played out around the world. 

          This `limbo-land` stuff cannot last.
          A plan will emerge.
          It will probably really get going under President Romney (or, much more likely President Santorum~!)

          • Paul

            OK, great start,  By the way, Santorum is out.  The Obama vs. Romney race is too early to call.  It really doesn’t matter at this point, because either one will be forced into the same plan.

            So, Govt now has to spend the taxpayer treasury to get the economy rolling again, for the taxpayer.
            If/when the economy stabilizes, said taxpayer will start spending again and demanding more money from the banks to finance a new-found spending lifestyle.  The banks will feel that things are OK, with the govt/fed as a backstop, and will hopefully lend to the hungry consumers/taxpayers, again.  They will create the money out of thin air to make loans to feed the consumer demand for cars, homes, ipuds, widgets and gizmos.  All this silliness will be cajoled and monitored by the govt.  Then, the money will start moving again, GDP will “rise” and we will see a “recovery”, and a regeneration of tax revenue for the govt, which will feed that revenue back into the economy?
            It seems silly, but, I’ll accept it for now.
            However, doesn’t every nation have the same game plan?  Which nation will crack first once the currency wars begin, in a race to the bottom, as every nation seeks to devalue their currency to make their exports more attractive?
            U.S. natural gas dropped below $2/MMbtu’s yesterday.  Does that make the US the front-runner because energy costs will drop manufacturing costs, which will drive exports?  Is this global race to the bottom sustainable?  Aren’t we just propping up our GDP’s will money that we don’t really have?  Is this the MMT way?  Certain countries have a sovereign currency and, if so inclined, they can print billions.  Then, don’t we face the specter of inflation?  We can can control inflation with taxes, but then we disrupt the feedback loop of tax money used to cajole the consumer?  Again, the system freezes, no?  Sorry for so many questions, but I am trying to grasp the concept of MMT money used to drive up the GDP, but limit inflation at the same time.  Won’t the bond vigilantes appear at some point to cry “Foul!”?

            • http://overthepeak.com/wordpress/ Mystic

               Santorum must be favorite for the 2016 games.

            • http://overthepeak.com/wordpress/ Mystic

              “So, Govt now has to spend the taxpayer treasury to get the economy rolling again, for the taxpayer.”

              That is the `old old` system.

              The `old` system was/is to borrow the extra.

              There may be a new system one day.

            • http://overthepeak.com/wordpress/ Mystic

               In the race to the bottom, the US has certain advantages, but the biggest disadvantage is that it is `world leader` and so everyone is watching.
              Keeping the dollar down is going to take a very long lever, (which will visible from the moon).

            • http://overthepeak.com/wordpress/ Mystic

              Please note that I am not advocating for `Keynsian stimulus` or `MMT spending`; I am just saying that without it GDP goes down.

            • http://overthepeak.com/wordpress/ Mystic

               Here we get to inflation and a restatement that economics is not a hard science.

              It is not known what level of government spending (all other things taken into account) will cause inflation of general prices.

              I will take a stab and say that (all other things taken into account), Washington could run 2 trillion dollar deficits for the next five years and not cause any `bad` inflation.

              Now, you should ask – Is that `selling bonds` type spending or `Fed buys the bonds` or `Government just spends`~?
              Anyways, I don’t think it would cause inflation.

              But note~!
              At the end of those five years, the whole idea of debts/money/economics would have to be changed, as everything would be obviously look absurd. 

              • Paul

                I guess the Govt and the Fed could employ various tactics.  You’re right; the “old system” would look ridiculous, when compared to this new system.  The notion of running $2T deficits for 5 years will not be politically acceptable, but they really don’t have any choice, if they want to grow GDP.  People want jobs, income and stuff.  I doubt they will care if we have a $20T national debt, if they get want they want.  Thanks for the inputs.

                • http://overthepeak.com/wordpress/ Mystic

                  It looks to me like a big plan or nothing.
                  Go with the 2 trillion and make it work.
                  Or, go with 1 trillion and get no base for future growth (and bigger deficits to pay).
                  Or, cut the budget to payable levels and get a depression (which will actually make the deficit go up).

                  • Paul

                    Exactly,  Republican or Democrat, they really have no choice. Either grow the GDP with massive Govt. spending, or contract into a Depression.  There are already so many dead-beats on the govt payroll now (Chuck Rose), what’s another 50 million dead-beats to add the coffers~?!  Give all the lazy pricks a govt disability or, for the most industrious, a quasi-govt job in some sort of civil engineering infrastructure; rebuilding public schools, hospitals,  bridges, tunnels, highways, railways, airports, seaports, etc.
                    Is is sustainable?  Doubtful.  Do the have a choice?  Not really.
                    Personally, I say cut all the benefits, welfare (Chuck Rose), pensions and entitlements and re-boot the system.  Of course, the lazy, moronic, ineffectual slobs (50%) will never vote for that plan.
                    Hey, what about our “same fate and deal with it” mentality, right~?  Too bad we can’t all be on a govt disability pension, right, Chucky?  Some of us have to actually work.
                    It really comes down to the entitlements that make the current system unworkable.  We have a choice.  Cut the entitlements and re-boot.  Or, we save the lazy, old bastards, and let the govt take control of our economic future.  Some choice, huh~?  Still, I am for jettisoning the lazy and/or old bastards!  If you can’t hunt, you starve.  If you don’t contribute, then you don’t receive.
                    All past contracts are null and void in a bankruptcy.  Our nations are bankrupt.
                    I hope you folks saved for a rainy day, because it’s hurricane season~!

                    • http://overthepeak.com/wordpress/ Mystic

                      It is one thumping great `I wouldn’t have done it that way~!`…………
                      BUT, they did do it that way…..and here we jolly well are.

                    • Paul

                      Sooner or later, people are going to realize that there is no money to pay for all the promises the system made.  What to do~?  Default on the promises and re-boot?  Lots of pain.  Let the State take over and hope they have a good plan ready for quick implementation?  I don’t have much faith in that option either.  Que sera, sera~! 

                    • http://overthepeak.com/wordpress/ Mystic

                       One thing is for sure, it will not be `fair`.
                      The best we can hope for is that…..1.  something works….and 2. it is not too too unfair. 

                    • Paul

                      Something that works is the most important part.  Fair is relative.  Let’s hope for the best.
                      What about nationalizing all public and private pensions, 401K’s and putting the whole lot into a big pot from which to pay Social Security and Medicare for everyone over 65 years old and aid for the kiddies/sick.  Everyone else works.  Take a chunk of that money, and start an FDR type public works program, including apprenticeships, etc.  (Didn’t Argentina nationalize all the private pensions?)
                      A one for all, and all for one, plan.  Snowball’s chance in hell~?
                      It might just come down to that.  The Govt might have to take drastic measures at some point. 

                    • http://overthepeak.com/wordpress/ Mystic

                       Somats gotta give….(my bet, it’ll be the Fed~!).

                    • Paul

                      How so?

                    • http://overthepeak.com/wordpress/ Mystic

                       Revolution, or
                      money printing~!?

  • CSArichardo

    Great set of slides … always appreciate getting them.  I think the trends were all down from 1974 because energy was getting cheaper in constant US$.  Of course that has all changed now due to a combination of the depreciation of the US$ and the rise in US$ oil price.

    • CSArichardo

      Correction  – I think the trends were all down from 1974 because energy was getting cheaper using a —– rising — US$. Of course that has all changed now due to a combination of —- two separate forces —-   the depreciation of the US$ and the rise in US$ oil price.

      • http://overthepeak.com/wordpress/ Mystic

        Yes….I got’cha~!

  • Jetser

    Is Steve Keen’s solution to the financial mess to print more money and hand it out equally with the command that people must use it to pay down debt, thereby converting debt-money into cash-money at a 1:1 ratio and producing no inflation? The idea that shadow money is asset-based shows how this solution is not as fair or inflation-proof as some like to make out.

    For example, consider the bond worth $100. This might have a $200 face value and be owed by someone who can’t repay the whole debt, giving it a real value lower than its face value. But alternatively it might have a $100 face value and be owed by someone who has assets and an income and no problem repaying it. With Keen’s solution people’s ability to repay their debt increases, except where they were already able to repay. Suppose our bond can now be repaid in full; it will now be worth either $200 or $100, depending on the status of the debtor and the initial face value. This means that the value of shadow money will increase by more than the reduction in debt (inflationary) and holders of bad debt see the value of their shadow money increase by more than holders of good debt (non-linear rewards, unfair). The more bad debt there is, the more inflation Keen’s solution will create.

    • Bigcollapso

      The idea of any more money/debt creation helping is insane. It’s like attempting to fix cancer with some “new special” cancer cells that will try to only attack the “really bad” old cancer cells.
      It’s time to admit that we created too much money/debt and liquidate the shit.

      • Paul

        Don’t forgot his debt jubilee idea for the deadbeat spendthrifts!    We are supposed to forgive all the debts accrued by the “owners” of McMansions, BMW’s, boats, expensive vacations, etc.  Now, that’s fucking crazy talk~!  Keen needs to rethink his ideas, before he goes back on the lecture circuit.