Comments on: IMMORAL CO2 Curve

By: Record Arctic Melt Down « Some of Patrice Ayme’s Thoughts

Record Arctic Melt Down « Some of Patrice Ayme’s Thoughts — Tue, 28 Aug 2012 19:21:42 +0000

[...] First one has to understand that the exponentially rising CO2 curve is completely amoral. In the deep sense of what “moral” means. See “Immoral CO2 Curve“. [...]

By: Patrice Ayme

Patrice Ayme — Mon, 23 Jul 2012 18:02:24 +0000

Dear Partha: I am flying to Alaska, and I am not ready, so I cannot study what you wrote at this moment as much as it deserves.

Please be aware that quotes with hyperlinks get delayed by the anti-spam system (when it has the kindness of not sending them directly to “Spam”). Hyperlinks are, of course, excellent, and you are, in theory authorized, so I will have to look into that further.

Internal debt can be settled with tax differed, or internal cuts, so it’s indeed very different.
The apparition of negative interest in some countries of the Eurozone is a sight to behold…
Interestingly SOCIALIST France is one of those countries: some capitalists are so desperate, they pay French socialists to hold their money…
PA

By: partha shakkottai

partha shakkottai — Mon, 23 Jul 2012 17:48:27 +0000

dear Eugen:This part got lost somehow. Please add this at the beginning.
{Dear pshakkotai,
you say …(taxes = spending – “debt”) is NOT correct anymore since 1971.
It is right for internal debt, that always can be recycled by purchasing back the government securities at times of deflation and unused production capacities, as it is now. But it is not the same for debts causing current account deficit and trade deficit, financed with debts to foreign countries. This causes transfer of production capacities to those countries. When one day they decide to stop to finance the deficit, the production capacity will not be restored in one day, and this mean economic crisis, that nobody can predict its scale. viz.
http://www.creditwritedowns.com/wp-content/uploads/2012/05/us-employment-in-manufacturing.jpg
}
In http://www.rooseveltinstitute.org/new-roosevelt/should-america-kowtow-china
With title “Do the Chinese really fund our deficit? Or is this more Neo-classical money mythology?”
This claim is seldom challenged, but our friend, Warren Mosler, recently gave an excellent illustration of this fact in an interview with Mike Norman. Mosler provides a hypothetical example in which China decides to sell us a billion dollars’ worth of T-shirts. We buy a billion dollars’ worth of T-shirts from China:
“And the way we pay them is somebody pays China. And the money goes into their checking account at the Federal Reserve. Now, it’s called a reserve account because it’s the Federal Reserve, and they give it a fancy name. But it’s a checking account. So we get the T-shirts, and China gets $1 billion in their checking account. And that’s just a data entry. That’s just a one and some zeros.
Whoever bought them gets a debit. You know, it might have been Disneyland or something. So we debit Disney’s account and then we credit China’s account.
In this situation, we’ve increased our trade deficit by $1 billion. But it’s not an imbalance. China would rather have the money than the T-shirts, or they wouldn’t have sent them. It’s voluntary. We’d rather have the T-shirts than the money, or we wouldn’t have bought them. It’s voluntary. So, when you just look at the numbers and say there’s a trade deficit, and it’s an imbalance, that’s not correct. That’s imbalance. It’s markets. That’s where all market participants are happy. Markets are cleared at that price.
Okay, so now China has two choices with what they can do with the money in their checking account. They could spend it, in which case we wouldn’t have a trade deficit, or they can put it in another account at the Federal Reserve called a Treasury security, which is nothing more than a savings account. You give them money, you get it back with interest. If it’s a bank, you give them money, you get it back with interest. That’s what a savings account is.
The example here clearly illustrates that bonds are a savings alternative which we offer to the Chinese manufacturer, not something which actually “funds” our government’s spending choices.”

{Then you say,
(cumulative total govt_deficit) = (total national private wealth) = 60 Trillion, approx.
Total government debt is the total government bills, including dollar bills and government securities and it is about 10 trillion US dollars, out of it about 5 trillion are in foreign holdings. 60 trillion dollars you probably mean all the asset value of US, is valuated it between 40-100 trillion dollars. viz.
http://rodeneugen.wordpress.com/2012/07/10/after-all-it-is-not-so-bad-with-the-us-economy/
}
The x axis is the cumulative sum of T securities, savings bonds, other treasury and agency backed Govt supported enterprises (which are components of govt debt) adjusted for inflation in billion dollars. The y axis is the national wealth in the same units in
http://pshakkottai.wordpress.com/2012/02/27/national-debt-and-national-wealth-compared/

By: partha shakkottai

partha shakkottai — Mon, 23 Jul 2012 17:42:28 +0000

Re:EugenR Says:
July 14, 2012 at 11:01 pm
dear Eugen,
The cumulative deficit is obtained by summing all yearly govt deficits (= negative net_worths) after correcting for inflation using the GDP inflation factors published by Bureau of Economic Analysis. This cumulative sum is on the order of ten times the yearly deficit. For 2011 the deficit is 8746.2 billion and the cumulative deficit is 87120.5 billion in 2005 dollars. And the cumulated external account is $31788.4 in billion in 2005 dollars. The excel sheet S.7.a. Federal Govt says that many things are not counted in this sheet.
Note. The Federal government accounts exclude Federal employee retirement funds (1) Government-sponsored enterprises (GSEs) consist of Federal Home Loan Banks, Fannie Mae, Freddie Mac, Federal Agricultural Mortgage Corporation, Farm Credit System, the Financing Corporation, and the Resolution Funding Corporation, and they included the Student Loan Marketing Association until it was fully privatized in the fourth quarter of 2004. (2) The statistical discrepancy is the difference between net lending or net borrowing derived in the capital account and the same concept derived in the financial account. The discrepancy reflects differences in source data, timing of recorded flows, and other statistical differences between the capital and financial accounts.(3) Excludes land and nonproduced nonfinancial assets and IMF International Monetary Fund.
Peoples’ wealth is defined as the net worth of household and nonprofit sectors of the economy. In the USA, the figure regularly reported by the Federal Reserve of the US is household net worth, and includes corporations as they are essentially owned by American households.(?) from http://en.wikipedia.org/wiki/National_wealth
This includes foreign deposits, ownership of corporate and foreign bonds, real estate, financial assets, and mortgages.
a) Federal Deficits – Net Imports = Net Private Savings, is strictly true. See fig4 of http://pragcap.com/understanding-modern-monetary-syste
If this equation is summed over all years, we get
b) Cumulative Federal Deficits – Cumulative Net Imports = Cumulative Private Savings, or,
c) Cumulative govt “debt” = national wealth.
The last equation is my definition of govt debt which is the left hand side of b). This definition accounts for the foreign sector also.
I did this plot again using the latest data and will either replace or add to the one in my web site.

{Then you say;
In short, (govt debt) is (peoples’ anti-debt) and (govt surplus) is (peoples anti-surplus)!
Probably you mean that the government debt is the total peoples cash + financial savings. It is right, but as mentioned 5 trillion out of it is in foreign hands. And also the peoples wealth is not only cash and savings, it includes real estate, company ownerships etc. that are not financial assets.
And again you confuse between wealth and cash and financial savings in,
(Govt_debt / GDP) is exactly the same as (peoples’ wealth/ GDP) and can be any number not limited to 100%.
Very shortly, at the end of the day there is no free lunch, even if you are an US citizen. The only question is when this end of the day will come.}
I still do not know why the govt debt is not the cumulated deficit which is five times $15 trillion, the number often quoted. I am not confusing wealth and cash etc. I am using the standard definitions except for govt debt which is defined by b).

By: Patrice Ayme

Patrice Ayme — Sun, 15 Jul 2012 19:39:45 +0000

Dear Eugen: The economy is first about giving meaningful work to people. Money is just one mean to that end. Work is what greed does not necessarily supply. That’s the fly in the ointment of the plutocratic Trojan Horse.
PA

By: Patrice Ayme

Patrice Ayme — Sun, 15 Jul 2012 18:48:42 +0000

Dear Eugen: You comment was delayed by the AI because of the many links, sorry about that.
I try to NOT use sarcasm, because it’s often misleading. Hard to be funny without sarcasm, though. No, I was not sarcastic about the 10% of reserve. Last time I looked at an independent study, it said it was rather 3%… I know the official number is supposed to three times that. Good point about the cash. However…

What about financial derivatives? They say whatever they want (700 trillions out there, with, they meekly claim, 25 trillions or so in net positions…) But it is the (financial) derivatives’ debt that brought the system down in 2008…

Debt peaked at the end of World War II (112.7% of GDP in 1945). As of June 2012, debt held by the public was $11.04 trillion, while the intra-governmental debt was $4.81 trillion, to give a combined total public debt outstanding of $15.85 trillion, roughly 103% of current dollar GDP. The public debt has increased by over $500 billion each year since fiscal year (FY) 2003, with increases of $1 trillion in FY2008, $1.9 trillion in FY2009, $1.7 trillion in FY2010, and $1.2 trillion in FY2011…

My real question was what is intra gov debt made of, but I realize I knew the answer all along: when the gov uses revenues from trust funds such as Social Security and Medicare for invading Iraq… (Say)…
What it really means is obscure. But maybe not: if the expenses of the trust funds augment (retiring boomers), then taxes will have to be raised…
PA

By: EugenR

EugenR — Sun, 15 Jul 2012 14:58:18 +0000

Here it is the MB what is the reserve of commercial banks deposited in the Fed grew between 2008-2012 from 1 trillion to 2.5 trillion, roughly, and the M2 in the same period from about 8 to 10 trillion. And they call it quantitative easing. If the Fed continues, to purchase the treasuries, there will be no credit just cash deposited in the Fed.

Is any exit from here? Only to roll up the sleeves.

http://m5.paperblog.com/i/19/192724/the-changing-value-of-money-L-AX1_yl.jpeg

http://m5.paperblog.com/i/19/192724/the-changing-value-of-money-L-vFR16p.jpeg

By: EugenR

EugenR — Sun, 15 Jul 2012 10:15:21 +0000

I will try to reply to you to your questions, even if i believe they were ask out of sarcasm and not that you don’t know the answer.

1. The legal reserve requirements in US is 10%, but since the banks have no more AAA clients, Greece, Spain, sub-prime mortgages, AIG, General Motors, Enron, et.c. so they have no one to whom to borrow. so they keep it in the Fed reserve, that lately started to price them for it with interest rate. (Even very funny it is not a joke).

2. In my sketch article; https://rodeneugen.wordpress.com/2012/07/10/after-all-it-is-not-so-bad-with-the-us-economy/

I collected some interesting data as to 12.2011, (Most of it published in CIA world book). The total US national debt is 15 trillion, out of it the public debt (Government securities) 10 trillion, the difference is between non-marketable and marketable securities. Out of the marketable about 5 trillion are hold by foreigners amazingly as reserves. Most of the remaining is probably hold by long term funds, like pension funds etc. At the end of the day, the public debt seems surprisingly healthy, until the foreigners are ready to hold their reserves in US dollars. this is how Ben can keep the interest rate so low.

http://www.texasenterprise.utexas.edu/article/us-debt%E2%80%93intragovernmental-holdings-when-you-owe-yourself-does-it-still-count

http://www.texasenterprise.utexas.edu/sites/default/files/imagecache/Large/contributor_images/24/Chessman_Figure2-6s.jpg

http://www.treasurydirect.gov/govt/reports/pd/mspd/2012/opds062012.prn

The M1 that includes in principle all the cash in the checking accounts, available to withdraw is about 12 trillion, and it is supported by real cash deposit of about 2 trillion, which is almost 20% against legal requirement of 10%. Next time i check for you the development of the ratio between M0 and M1. I believe to find there some interesting findings, like dramatic increase since 2008.

By: Patrice Ayme

Patrice Ayme — Sun, 15 Jul 2012 02:26:57 +0000

20%!! That’s the law in (extremely rich) Suisse (CH). Last I heard it was more like 3% in the USA, and the ECB lowered the reserve requirements, or was talking about it… Where did you hear that?

…OK, The Economist pretends 10% for large USA banks in its last issue… But what is the independent agency certifying this? (The Fed, ha ha ha?)
PA

By: Patrice Ayme

Patrice Ayme — Sun, 15 Jul 2012 02:24:48 +0000

Eugen: Agreed. Real economy is a different set of skills form financial conspiracies (subprime, derivatives, facebook, etc.)
PA