Just a clarification to your otherwise good post – most Treasuries sold to big investors are sold at auction. It’s just the little guys like me that offer noncompetitive bids. This means that the US Treasury does not have the luxury of setting the interest rates. Instead the Treasury has so much money they need to fund. For example in the July 20-year TIPS auction they needed to fund $6 billion. In the August 10 year note acution they needed to raise $17 billion. So the rates are set by bid, not by fiat. As a result, if buyers expect higher inflation, a weaker dollar or if the Treasury simply needs to raise more money, rates will go up and you and I will pay for it in our taxes.

What makes you think that’s how it works? The whole thing doesn’t just implode with a loud noise and lots of smoke and dust.

Instead what happens is this:

The amount of your taxes that go to servicing the debt goes up and up, so you’re paying more and more taxes with less and less money available to actually fund stuff we want.

Ever larger portions of our debt are held overseas, including by nations who are not our friends, such as Russia and the PRC.

The more dependent we are on getting foreign, not necessarily friendly, nations to fund our government, the more this constrains our own geopolitical options.

The enormous volume of Treasuries that must be issued/bought to continually refinance this debt crowds out other commercial paper, raising the interest rates that private companies have to pay. Apologists for deficit spending have said that this isn’t a problem because US Treasuries are only a small percentage of total worldwide debt instruments. But other economists have pointed out that in high-quality debt (AAA-rated paper) US Treasuries are much larger percentage, so this has a trickle-down effect.

So think of our huge debt level, not as a bomb that will explode, but as “sand in the gears” that will slow down and impede all sorts of good things. Current debt-as-a-%-of GDP has been fairly level at just under 40% of GDP for a few years, but the GAO says it will be going up dramatically in the next few years.

Should we make a decision that will impact a minimum of the next 4 years based ONLY on what we know about her past 20 months of public service in remote Alaska? There is not much to go on and I am disgusted by what I DO know.

However, since these candidates have the ability to put into effect changes that will impact my personal life and rights, I feel that we should have the right to inspect them closely – including their daily lives, actions, and values. They will bring them to Washington and create legislation that we will be expected to abide – personal life or not!

Did any of the Republicans ever consider she might have to be president? She has not impressed me with an understanding of foreign policy, domestic policy, or economic strategy. What does that leave? Our individual rights.

Would someone please tell her that drilling in Alaska will not sustain our national energy consumption through her grandchild’s 25th birthday? It would create more jobs for Alaskans. That isn’t really country first, though. There is nothing to scrutinize about Palin since it all bubbles up to the surface effortlessly.

The only thing that surprises me is that McCain didn’t choose a young African American woman in an attempt to steal all of the votes since he obviously feels we cannot think past the apparent.

LOST

REPUBLICAN VALUES

LAST SEEN WITH DWIGHT EISENHOWER

IF YOU HAVE SEEN THEM PLEASE KEEP THEM CALM BY READING THE FEDERALIST PAPERS.

RESPONDS TO THE WORD, “BULLY,” JUST CLEAR YOUR THROAT AND SAY, “BULLY GOOD!”

CALL JOHN MCCAIN DAY OR NIGHT

REWARD THANK YOU

It’s already happening and the evidence can be seen in commodity prices, and I’m not just talking about oil and corn. As one commentator above noted, a key strategy to dealing with our debt is monetization. Let me explain:

The treasury sells debt to primary dealers at regular intervals. In the end, the big buyers include the foreign central banks and the Fed. So far so good. The problem occurs when the Fed monetizes the debt, which means that it basically prints money to buy the bonds. This printing expands the money supply, which in turn devalues the currency.

Furthermore, because there is so much outstanding debt, there is a need to keep interest rates low to reduce the cost of further borrowing needed to service that debt. Low rates tend to devalue the dollar relative to other higher yielding currencies, which forces investors to protect their wealth by converting that currency into a hard asset such as gold and oil. This is why commodity prices have been surging over the last year. Economists from the Austrian school refer to this as “crack-up boom inflation”.

The boys in the Fed know all this, which is why on March 23, 2006, they stopped reporting M3, which is the broadest measure of money supply and a true predictor of inflation. This was highly controversial in financial circles, but didn’t even make the evening news.

With all of the talk of taxes at these conventions, there’s no talk of the most insidious and regressive tax of all, inflation. And that tax is being felt the most by the poorest on most vulnerable amongst us.

But we haven’t seen anything yet. Wait till the boomers show up at the trough en mass.

The bottom line is that we will not be able to borrow our way to prosperity. As a country, we need to place the highest priority on drastically reducing spending.

We are always being reminded that the Nationl Debt is at historic highs(which is always the case, the debt has risen every year since at least 1950). We never hear how our GNP is at historic highs (also risen every year since 1950, currently at $14 trillion). We are never told how or when the National Debt will be end of us all.

Forget about oil, health care, and the war in Iraq, this issue trumps them all; and after watching both conventions, the amount of discussion I’ve heard on this topic is zero.

I agree completely, and I think this reflects what I’ve talked about, above, that US voters are just too ignorant of basic economics to engage on this problem.

The London School of Economics has a wonderful lecture series by top researchers all available as free MP3’s (see http://www.lse.ac.uk/resources/podcasts/publicLecturesAndEvents.htm)
Some of them are a bit academic and technical but anyone with a college education should be able to follow them – and the Powerpoints are also there. And one thing that becomes painfully clear from much of the research is how poor most people’s grasp of money and economics is! It’s scary!

WRT default – For the first time in 38 years of reading the business press – Wall Street Journal, BusinessWeek, etc, I only started seeing discussions of this in the last month or two. The idea used to be inconceivable. It’s still unlikely but now it’s conceivable.

A more likely scenario is the “monetization” of the debt. In short, let inflation run so high that the government can discharge its obligations in cheaper money. This is the one I’m most worried about and so are others – earlier this year T.I.P. yields actually went negative.

We certainly need more infrastructure investment – here in Massachusetts one recent estimate said that 1/3 of our bridges are in serious need of repair and some my need to be shut – thanks to the neglect under the Riomney administration.

But it’s not clear that this helps the overall economy. On paper it looks great – infrastructure provides jobs, and supports businesses that make everything from cement to steel to heavy equipment . . .

. . . but during the long Japanese recession (some say depression) of 1991-2004 infrastructure investment was a cornerstone of the Japanese government’s efforts to fight the downturn and it had no effect whatsoever. Billions of yen were spent on bridges, roads, rail-transport and other projects. They spent so much money that Japanese government borrowing reached 130% of GDP – the highest in the industrialized world. And yet during that time the economy continued to slide. From 1989 to 1992 the Nikkei went from 40,000 to 15,000. But by 2001 it was down to 12,000. And employment by Japan’s vaunted salarymen also slid, even though construction workers did well. So all that infrastructure spending didn’t trickle down (or up) to the rest of the economy. And now Japanese taxpayers are saddled with huge debt.

So while I’m all in favor of infrastructure spending, I don’t think it will be of much help in the larger economy.

I fear our country is slowly losing the ability to govern itself. Government by the people requires a dynamic, healthy, substantial political discourse.

As I’ve said elsewhere, I think this reflects a conscious decision by voters about how seriously they want to engage with the issues, history, the Constitution, etc. The average American spends ober 4 hours a day watching TV. If you could get to turn off the TV for even a half hour to read a good daily newspaper or weekly news magazine (I like The Economist) we’d be way ahead.

But we can’t. As a gardener I know that to grow a plant you need to plant it in the right soil. I don’t think US culture has what it takes to grow an active, engaged electorate needed for good government.

Referring to Palin or Obama?

Once again, most of the country is distracted as we face financial Armageddon. Currently, the national debt sits at 9 trillion. With 300 million people, that works out to 30K per person. Now tack on the unfunded liabilities (SS, Medicaid, etc.) and that debt balloons to 54 trillion, or 180K per person. Conservatively, about half the population has the means to pay even a modest debt, so let’s double that to 360K per person. In no scenario, will this debt be paid. Either we default or we significantly cut social outlays.

Forget about oil, health care, and the war in Iraq, this issue trumps them all; and after watching both conventions, the amount of discussion I’ve heard on this topic is zero.

We hear a great deal from so-called conservatives and corporatists that they love their country. They like to tell us all about their great love and loyalty to America. And they repeat it, over and over: I love my country.

But when it comes to their country in action, to those things that make America the country it is, they become very uncomfortable.

We say, “Let’s build a bridge; let’s hire some more teachers and police officers; let’s develop the space program,” and they say “Sorry, times are tough, we have to cut taxes.”

When the press questions the judgment and integrity of a Republican politician, they cry that the “elite” and “liberal” media is out to destroy her.

I fear our country is slowly losing the ability to govern itself. Government by the people requires a dynamic, healthy, substantial political discourse.

The fascistic twinge rising to the surface is replacing politics with a carnival of shifting and emotion-provoking forms: the sheen is impenetrable, but the content is always changing.

It is a trick of popular culture that what I’m saying makes me sound like one of the tinfoil hatted: but keep in mind, the sitting president revoked habeas corpus, the basis of our liberty.

Once that happened, in my view, the conversation drew very near to an end. You don’t talk to a power that refuses to grant you hearing.

I find it ironic that the Republican Party is holding its convention in Minneapolis where the I-35W Bridge collapsed.

This country is need of a huge investment in our infrastructure.
All across the country this is an issue. You want to create jobs good paying jobs this is one way to move forward. We need to revamp the energy grid, which is not been modernized to deal with the growth of our country or the development of alternative sources of energy generation.
Of course the issue is money. How and where does it come from?
The traditional way is taxes and bonds.

The question I have is what kind of nation do we want to live in?
What kind of community do we want to live in?
What is good for the common good of the whole nation and how do we confront this?
The Republicans has told us that big government is bad, that taxes are bad.
My feelings are that it’s not taxes, it’s how they are spent, witness the last 8 years.

Investment in the country’s infrastructure is a no brainier to me.
I think we need a kind of Marshall plan, oh no I said it big government.
We need to create jobs and this is a good way to help people and communities.
The Republicans are using culture, fear, and rhetoric to avoid the issues.

What kind of country do we want to live in?

I’m not sure why you think that Romney would have been a major asset, economics-wise. When he was governor of Massachusetts we didn’t do anything spectacular here compared to other states with similar economies. Furthermore, he left the state with a huge deficit!

Palin is a no-op on economics because Alaska’s economy is so incredibly different from other states’ that you can’t really make any comparison.

Neither party has a strong economic story. Obama’s chief economic advisor is Laura Tyson who is about as good as they get in that role. Besides her many academic credits, she was also the head of Bill Clinton’s Council of Economic Advisers and the economy during that periosd was excellent and the envy of most other nations. So that’s good, but the problem is that Obama (and Hillary!) disavowed many of Bill Clinton’s greatest achievements, including trade policy.

McCain has a better trade position but the rest of his (Bush) policies are a trainwreck as the empirical data of recent years makes clear.

Why don’t the Democrats jump on that?

Partly for the reasons I just said, but also because McCain and Palin present the Democrats with what the military calls a “target rich environment”. There are so many things they can go after that I’m sure their heads are spinning trying to decide! In any case they’re not going to waste their ad money while the RNC convention is in progress.

Alaska Gov. Sarah Palin told ministry students at her former church that the United States sent troops to fight in the Iraq war on a “task that is from God.”

“That’s what we have to make sure that we’re praying for, that there is a plan and that plan is God’s plan.”

“Palin told graduating students of the church’s School of Ministry, “What I need to do is strike a deal with you guys.” As they preached the love of Jesus throughout Alaska, she said, she’d work to implement God’s will from the governor’s office, including creating jobs by building a pipeline to bring North Slope natural gas to North American markets.”

In an address last June, the Republican vice presidential candidate also urged ministry students to pray for a plan to build a $30 billion natural gas pipeline in the state, calling it “God’s will.”

(quoted sections are copyrighted by the Associated Press)

The whole article may be found here . . .

http://news.yahoo.com/s/ap/cvn_palin_iraq_war

When Mike Hukabee was running last spring we could laugh at his jokes and enjoy his affability because we all knew he didn’t stand a chance of actually winning. I’m sure if Ms Palin had been forced to take part in a primary she, too, wouldn’t have made it far. But VP’s are chosen in smoke-filled-rooms and this is what you get.