[barmar]

blackshoe, on 2014-January-11, 18:41, said:

You're basically arguing that government debt is necessary because you can't imagine a society without it. Sorry, but that's a silly argument.

It's kind of like the "too big to fail" argument. You can argue all you want that there shouldn't be any companies we're so dependent on, but the fact is that we are. And there's no practical way to get out of this situation, so you have to figure out how best to live with it.

[32519]

How many of you have heard of "The Fragile Five", Turkey, South Africa, India, Indonesia and Brazil, the emerging economies with the biggest overseas financing needs.
How much money have you got invested there?

[32519]

How many of you follow The Sovereign Risk Index?

[Al_U_Card]

barmar, on 2014-January-12, 20:38, said:

It's kind of like the "too big to fail" argument. You can argue all you want that there shouldn't be any companies we're so dependent on, but the fact is that we are. And there's no practical way to get out of this situation, so you have to figure out how best to live with it.

I gather that this is where the "bail-in" concept originated and was put to "one-time only" use in Cyprus. It is going into the Canadian budget for this year as well as in several other countries. Not so much "too big to fail" as "they still have some money that we can squeeze out of them".

[onoway]

barmar, on 2014-January-12, 20:38, said:

It's kind of like the "too big to fail" argument. You can argue all you want that there shouldn't be any companies we're so dependent on, but the fact is that we are. And there's no practical way to get out of this situation, so you have to figure out how best to live with it.

what companies do you consider "too big to fail"? I can't think of any that people couldn't manage to adjust to being without unless ,perhaps, some companies involved with medical stuff, and even then it seems likely that it wouldn't be long before the gaps were filled by other companies.

According to reports there are over 200,000 refugees in camps from Syria alone, and 10s of thousands fleeing the violence in the Sudan, and that doesn't consider the others such as the Palestinians and the people in other parts of the world. Some of them are now 3rd generation in refugee camps. What possible acceptable rationale would there be to any of them to tell them that they can't get help because some business enterprise needs the money more because it's "too big to fail and we can't do without them" ? Do you suppose that that value system might conceivably have something to do with the fact that some people would rather tie a bomb around their belly and walk into a crowded shop and blow themselves up than live under those conditions any more?

Seems to me that the "competition" laws that many countries have were designed to make sure that no company ended up the only game in town. If governments have reneged on that responsibility then they should do something about fixing the situation, rather than supporting bloated, badly run companies feeding off the taxpayer.

The last time the taxpayers in Canada bailed out Air Canada the president who (almost) put them into recievership walked away with an over $600,000 bonus. Rumor has it that this is not an unusual sort of thing to happen. Too big to fail, my foot.

[helene_t]

I used to learn quite a lot from reading the Water Cooler. It has been a while. But today I learned the secret on how to create a unanimous poll.

[billw55]

barmar, on 2014-January-10, 16:34, said:

It would be nice if we could solve the problems that have higher priority than the debt. In fact, I suspect if we addressed them, a side effect would be that we would reduce our deficity. So we shouldn't worry about the debt itself, just work on improving the economy and the debt will take care of itself.

That only works if the people running the government are responsible. Improving the economy will increase revenues, but that by itself won't stop us running a deficit. Our politicians (of both parties) have shown a strong propensity to spend everything they have and then some. More comes in? More spending! New programs! Less comes in? Borrow to maintain spending! It's a double standard that leads to trouble. In my own state (Illinois) we are feeling the pinch of decades of grossly irresponsible spending. Taxes are high, grants are cut, state bills take many months to get paid. Our borrowing costs to maintain all the waste became too high. But I am sure the economics whizzes will explain why this cannot happen to the US government, why it is all OK for Washington to borrow, spend, and waste, how there will never be any consequences no matter how deep we dig. That's what Illinois government thought too.

I think we need a policy whereby we run a balanced budget on something like a ten year basis. Sure, there will be times when revenues decline and we run a deficit for a few years. But we should balance that with surpluses in good years. Sadly, anymore no politician looks beyond his/her next election. They don't give a rat's ass what happens after they are out of office. Or even while they are in office, unless it risks their reelection. Short term thinking and no responsibility are a bad recipe.

[Vampyr]

32519, on 2014-January-12, 11:03, said:

What is the VAT/GST rate in your country? In my own country the rate is currently 14%.

Here it is 20%. And I believe that VAT has normally been paid (on various portions of the product) several times before an item or service is delivered to the consumer. But I am not sure exactly how this works.

Quote

How much of the pump price you pay for fuel is loaded with all sorts of government levies? In my own country well over a third of the price is tax.

In this country 60% is tax.

[Winstonm]

billw55, on 2014-January-13, 08:30, said:

That only works if the people running the government are responsible. Improving the economy will increase revenues, but that by itself won't stop us running a deficit. Our politicians (of both parties) have shown a strong propensity to spend everything they have and then some. More comes in? More spending! New programs! Less comes in? Borrow to maintain spending! It's a double standard that leads to trouble. In my own state (Illinois) we are feeling the pinch of decades of grossly irresponsible spending. Taxes are high, grants are cut, state bills take many months to get paid. Our borrowing costs to maintain all the waste became too high. But I am sure the economics whizzes will explain why this cannot happen to the US government, why it is all OK for Washington to borrow, spend, and waste, how there will never be any consequences no matter how deep we dig. That's what Illinois government thought too.

I think we need a policy whereby we run a balanced budget on something like a ten year basis. Sure, there will be times when revenues decline and we run a deficit for a few years. But we should balance that with surpluses in good years. Sadly, anymore no politician looks beyond his/her next election. They don't give a rat's ass what happens after they are out of office. Or even while they are in office, unless it risks their reelection. Short term thinking and no responsibility are a bad recipe.

Of course there is waste in federal government spending and that should be corrected as much as possible but that does not get close to lowering the debt. The annual deficit spending leads that lead to debt is comprised of three main ingredients: social security, medicare, and defense spending.

The debt is mostly made up of war costs that have never been paid, going all the way back to Vietnam. If you really want to balance the budget, stop going to war.

[1eyedjack]

Vampyr, on 2014-January-13, 08:39, said:

Here it is 20%. And I believe that VAT has normally been paid (on various portions of the product) several times before an item or service is delivered to the consumer. But I am not sure exactly how this works.

There are exceptions, such as when a business makes a mixture of taxable and exempt supplies, but for the most part any VAT incurred by an intermediary business in the chain of supply can be reclaimed by that business, so that in the end it is just the final 20% that gets collected by the Exchequer.

[billw55]

Winstonm, on 2014-January-13, 08:41, said:

Of course there is waste in federal government spending and that should be corrected as much as possible but that does not get close to lowering the debt. The annual deficit spending leads that lead to debt is comprised of three main ingredients: social security, medicare, and defense spending.

The debt is mostly made up of war costs that have never been paid, going all the way back to Vietnam. If you really want to balance the budget, stop going to war.

This is a policy I could support.

Even so, we must accept that once in a while, war is necessary. When we are attacked, we must fight. When another nation declares war on us by statement or by action, we are at war whether we want it or not. We could have stayed out of Vietnam and Iraq. World war 2 and Afghanistan, not so much. World war 1? Not sure about this one, maybe a historian can help.

But, critically, war debts need not be permanent. We successfully disposed war debts from the two largest wars in history. It can be done - proof by example. So what has changed?

[32519]

billw55, on 2014-January-13, 08:30, said:

Our politicians (of both parties) have shown a strong propensity to spend everything they have and then some. More comes in? More spending! New programs! Less comes in? Borrow to maintain spending! It's a double standard that leads to trouble. In my own state (Illinois) we are feeling the pinch of decades of grossly irresponsible spending. Taxes are high, grants are cut, state bills take many months to get paid. Our borrowing costs to maintain all the waste became too high. But I am sure the economics whizzes will explain why this cannot happen to the US government, why it is all OK for Washington to borrow, spend, and waste, how there will never be any consequences no matter how deep we dig. That's what Illinois government thought too.

No politician looks beyond his/her next election. They don't give a rat's ass what happens after they are out of office. Or even while they are in office, unless it risks their reelection. Short term thinking and no responsibility are a bad recipe.

This is something I only recently found out in my own country.

Ever since the ANC took over governing the country, many local governments/municipalities have been placed under administration (controlled by our Inland Revenue Services) because they were declared bankrupt and so unable to provide even the most basic services. All of them had managed to run up huge bank overdrafts before the IRS stepped in. Now as a private individual, my bank has limited my bank overdraft to the risk level that the bank deemed me worthy. So I asked myself, “Why does the same overdraft criteria not apply to all these bankrupt local governments/municipalities? How were they able to run up these huge overdrafts?”

Answer: Apparently our IRS has given security to the banks, guaranteeing that any overdraft by a defaulting local government/municipality would be paid for by them. This policy has led to an increase in corruption never seen before. Tax payers money is being siphoned off left, right and centre. Our print media is exposing the level of corruption and those involved (including our president) every day in the newspapers. Only now that the most recent polls indicate that the ANC support in our upcoming elections is likely to drop to 53% (from a high of nearly 70% in 2004), are they making hollow promises to stem the tide. Only now that the black middle class is starting to desert them are they promising to put in more effective measures to stop the corruption. We will see.

Maybe Illinois is doing the same, knowing that a higher authority in your country will stand in for any untoward debt?

[barmar]

onoway, on 2014-January-12, 21:46, said:

what companies do you consider "too big to fail"? I can't think of any that people couldn't manage to adjust to being without unless ,perhaps, some companies involved with medical stuff, and even then it seems likely that it wouldn't be long before the gaps were filled by other companies.

It's not I who makes these decisions. But during the 2008 financial crisis, huge financial institutions like JP Morgan Chase and AIG were considered too big to fail, even though they caused the crisis in the first place. The government has also bailed out most of the car companies.

If a company like GM went out of business, huge numbers of workers would lose their jobs, dealer franchises would go out of business because they had no cars to sell, and there would be ripple effects down the supply chain. The workers without jobs would stop paying income taxes, the businesses would stop paying corporate taxes. Yeah, eventually other companies will increase their production to make up for it, and they'll hire many of these workers to build them. But that will take quite a bit of time, and crisis until that happens would probably be much worse than the recession we went into 5 years ago.

I'm not an economist, I can't really be sure of the magnitude, this is just my intuitive, lay opinion. But it seemed like most economists were in favor of the bailouts, because the alternative would be much worse.

[Winstonm]

billw55, on 2014-January-13, 08:54, said:

This is a policy I could support.

Even so, we must accept that once in a while, war is necessary. When we are attacked, we must fight. When another nation declares war on us by statement or by action, we are at war whether we want it or not. We could have stayed out of Vietnam and Iraq. World war 2 and Afghanistan, not so much. World war 1? Not sure about this one, maybe a historian can help.

But, critically, war debts need not be permanent. We successfully disposed war debts from the two largest wars in history. It can be done - proof by example. So what has changed?

Tax rates have changed.

[32519]

Does playing the stock market add any actual value to the overall economy?

The original purpose (the issuing of shares to raise capital to float a business or to raise new capital to expand a growing business) has long been buried underneath the rampant speculation seen today. A classic example here is the recent listing of Facebook and Twitter. Neither have an actual revenue stream or a projected revenue stream to warrant their market capitalization values. Investors have zero chance of ever receiving a dividend on either of these two shares, yet speculators are buying and selling them every day hoping to make money without doing a days honest work in their lives.

[onoway]

barmar, on 2014-January-13, 11:10, said:

It's not I who makes these decisions. But during the 2008 financial crisis, huge financial institutions like JP Morgan Chase and AIG were considered too big to fail, even though they caused the crisis in the first place. The government has also bailed out most of the car companies.

If a company like GM went out of business, huge numbers of workers would lose their jobs, dealer franchises would go out of business because they had no cars to sell, and there would be ripple effects down the supply chain. The workers without jobs would stop paying income taxes, the businesses would stop paying corporate taxes. Yeah, eventually other companies will increase their production to make up for it, and they'll hire many of these workers to build them. But that will take quite a bit of time, and crisis until that happens would probably be much worse than the recession we went into 5 years ago.

I'm not an economist, I can't really be sure of the magnitude, this is just my intuitive, lay opinion. But it seemed like most economists were in favor of the bailouts, because the alternative would be much worse.

I'm not an economist either but some things need to be noticed.

In Canada, " in order to save jobs" the government handed over millions of dollars to companies who were threatening to move out of the country. At least two of them moved out of the country anyway asap. So what exactly did we gain for all that taxpayer money? A few months worth of work..it would likely have been cheaper and more productive to give it to the workers instead, to retrain or to start new small businesses. Polls consistently say most people want to do that and even though most of those may fail, it's small businesses which keep a country alive, not the monolithic ones which replace as many workers as possible as quickly as possible with robotics etc.

We have bailed out subsidiaries of American car companies twice (Ford only once ..so far..)yet have still fallen from 3rd to eleventh in production. Air Canada has been bailed out at least twice, and Blue Sky, a huge conglomerate of pig farms which was finally sold to new investors last year, had been bailed out by taxpayer money twice just in the four or so years previously. If bailing out companies works, why does it need to be redone?

As an aside, taxpayer money was simultaneously being given to Blue Sky to keep them going at the same time as small pig farmers were being paid pennies on the dollar to kill their breeding sows because of overproduction of pigs.

Why is it that for the companies which employ many workers some form of the following is apparently never up for consideration?
" It's really too bad you can't meet your obligations and have to close down shop. I guess we will have to take it over and keep it going with the workers who are already doing the job, and promote some of them to management with a panel of expert advisors to help. Good luck now, you hear?"
Is it that McCarthyism still exerts a gangrenous influence over common sense or something else?

It seems as though there is almost a deliberate decision to ignore the concept of consequences. Yet Pavlov clearly demonstrated that consequences drive learning. What do you suppose the bankers who walked away from the debacle they were responsible for, have learned? to say nothing of everyone else, corporate or individual, who was watching this?

Perhaps the problem is that it is a whole lot simpler to hand a whack of money over to one entity than to deal with hundreds. Too bad nobody seems to have noticed that bailouts "because the company is too big to fail" seem to be ineffective at best and even if passively, encourage huge companies to be careless if not actually misbehave at worst.

[32519]

Check this out - NYSE Euronext.

Here is an extract from the article:
"For the first time in its 213 year history, the New York Stock Exchange became a for-profit company, and began trading publicly on its own stock exchange under the NYX ticker. Owners of the 1,366 NYSE seats received 80,177 shares of NYSE Group stock plus $300,000 in cash and $70,571 in dividends for each seat. The completion of this deal created two new branches of the NYSE Group: NYSE Arca and NYSE Arca Europe, which launched after the acquisition of Euronext."

Does anyone have a link to the shareregister of NYSE Euronext so that we can find out who these 1,366 shareholders are? Whoever they are they are making a lot of money out of your daily trades.

[blackshoe]

onoway, on 2014-January-14, 00:23, said:

Perhaps the problem is that it is a whole lot simpler to hand a whack of money over to one entity than to deal with hundreds. Too bad nobody seems to have noticed that bailouts "because the company is too big to fail" seem to be ineffective at best and even if passively, encourage huge companies to be careless if not actually misbehave at worst.

Government's solution to most problems is either to throw money at them, or try to kill them. In almost all cases, politicians have no idea whether their "solution" will work, or what the consequences might be if it doesn't.

[billw55]

onoway, on 2014-January-14, 00:23, said:

... Too bad nobody seems to have noticed that bailouts "because the company is too big to fail" seem to be ineffective at best and even if passively, encourage huge companies to be careless if not actually misbehave at worst.

Careful there onoway, you're starting to sound ... dare I say ... conservative.

[kenberg]

In Three Days of the Condor (I like it, I don't claim it is a great movie) an old CIA/OSS man (John Houseman) is asked if he misses the action of the good old days. "I miss the clarity", he says.


In many, many ways, in defense, in economics, in education, this seems to sum up our current situation. Perhaps the previous clarity was really a mirage. Well then I miss the mirage.