Comments for The Graph You Really Need When Watching the Republican (and Democratic) Conventions at http://www.cepr.net , comment 1 to 13 out of 13 comments http://www.cepr.net Thu, 20 Jun 2013 07:22:33 +0100 FeedCreator 1.7.3 http://www.cepr.net/index.php/blogs/beat-the-press/the-graph-you-really-need-when-watching-the-republican-and-democratic-conventions#comment-18547 Baker: "Unless I've gone senile the interest burden we faced in the early 90s did not prevent us from having a decade of solid growth and low unemployment at the end of the period." Oh really? So, is it your contention that the general price level of assets today is, roughly speaking, just as affordable/cheap, just as unencumbered with debt, as they were in 1990, ennabling another round of credit-creation/levering-up? (unbelievable.) - Thorstein Sun, 02 Sep 2012 19:14:29 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/the-graph-you-really-need-when-watching-the-republican-and-democratic-conventions#comment-18466 In response to John Q., i don't consider the budget deficits a mess, I was referring to the state of the economy. In response to James, bonds are sold in the market every day of the week. Nothing prevents the federal government from buying them up. I don't know the law on whether they can literally destroy the bond before its expiration date, but I assume we can agree that if the government owes $4 trillion on bonds that are in its possession, that it has no net debt as a result of this situation. - Dean Thu, 30 Aug 2012 00:25:58 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/the-graph-you-really-need-when-watching-the-republican-and-democratic-conventions#comment-18462 Yes bond prices move inversely to rates but 30-year LT T-bonds are callable by issuer without any penalty? If not callable, investors would simply hold on to maturity. If callable by U.S. Gov't, who investors would be willing to accept that kind of interest rate risk (30-years term with such yield) without sufficient compensating returns? - James Wed, 29 Aug 2012 18:59:43 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/the-graph-you-really-need-when-watching-the-republican-and-democratic-conventions#comment-18461 And the president picks the chairman, and profits from its treasuries portfolio go back to the treasury, completely independent? Ok, so it's kinda separate, but it's a creature of congress, it's as independent as we let it be, they didn't want to be audited but it happened anyways... No, the US doesn't really borrow in the same sense as a private individual. Yes they issue bonds, and the money from bond sales eventually goes to the treasury's account so they can write a check on it, but the whole notion of it being "borrowing" is senseless, kinda absurd really. Govt can create money (you've said that many times), but yet it has to borrow it back? Where would the citizens get the dollars to pay the taxes (that supposedly fund the federal govt) if the govt hadn't created them first?(maybe check out "hut tax") What do you think would happen if the federal govt ran a surplus for too many years in a row? How could it be possible, even in principle, for the non-government sector to accumulate any dollar/treasuries savings without a federal govt deficit? A dollar you earn is a dollar someone else spent. Follow it through to its logical conclusion. - Joe Wed, 29 Aug 2012 17:09:37 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/the-graph-you-really-need-when-watching-the-republican-and-democratic-conventions#comment-18456 [quote](Yes, the Bush tax cuts were stupid and the wars should not have been fought, but they did not get us in this mess.)[/quote] By "this mess" I take it you mean the millions of unemployed, and that you're not referring to the annual deficit/growth of national debt which politicians (of both parties) so foolishly focus on. - John Q Wed, 29 Aug 2012 11:53:20 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/the-graph-you-really-need-when-watching-the-republican-and-democratic-conventions#comment-18445 The bond price is inversely related to the interest rate. When interest rates go up, bond prices go down. If the interest rate more than doubles, as CBO projects (here in DC, CBO is the word of God), then long-term bond prices will plummet. That means that if the goal is reducing the debt, then we can buy these bonds back at much lower prices than they were issued at, and thereby reduce the debt. It's silly, but it should make deficit hawks in Washington feel good. Joe, the government does really borrow in the sense that it issues bonds that it has an obligation on which to pay interest and principle. The Fed is run separately from the executive branch so the government does have to raise taxes or issue more bonds to pay interest. You may not like the Fed being run separately, but at the moment it is. - Dean Wed, 29 Aug 2012 07:51:47 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/the-graph-you-really-need-when-watching-the-republican-and-democratic-conventions#comment-18444 Check this out http://pragcap.com/understanding-quantitative-easing QE is just an asset swap, the fed "buys" bonds and gives reserve balances for them. Now that the fed has those bonds on its books, the interest on them is return back to the treasury, google "Fed Turns Over $77 Billion in Profits to the Treasury". The govt basically pays interest to itself when the fed holds the bonds. I'm not sure as to the mechanism for retiring these bonds, the treasury could easily mint a coin for the amount and just get them off the fed's books. Keep in mind, the difference between treasuries and dollars is the interest rate and maturity, big whoopty doo. - Joe Wed, 29 Aug 2012 06:48:39 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/the-graph-you-really-need-when-watching-the-republican-and-democratic-conventions#comment-18443 to understand that the US govt issues its own currency. It doesn't really "borrow" money, some private sector dollar balances are switched to treasuries balances, while the govt's account increases an equal amount, big whoop, the fed can transfer these treasuries balances back to dollar balances anytime it likes, and the interest on the bonds the fed would now hold goes back to the treasury. There's no such thing as not being able to 'pay back' the 'debt'. Tell me, when a govt issues its own currency, what's the difference between a dollar and a treasury, besides the interest rate and maturity? (the govt doesn't actually even need to issue bonds for interest rate maintenance, there's other methods).... - Joe Wed, 29 Aug 2012 06:40:10 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/the-graph-you-really-need-when-watching-the-republican-and-democratic-conventions#comment-18437 The interest payments issue is one I don't quite understand. Could someone explain/provide a link to explain the ".. federal government would be able to buy back the $4 trillion in bonds it had issued for roughly $2 trillion, immediately eliminating $2 trillion of its debt" comment? - Jsanto Wed, 29 Aug 2012 05:02:40 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/the-graph-you-really-need-when-watching-the-republican-and-democratic-conventions#comment-18435 1) I agree with Ron that a chart that mixes actual interest burden up to now, with PROJECTED interest burden until 2020, can be misleading. Those projections typically include rising interest rates. It is entirely possible that interest rates stay about the same for the next 5 years. 2) It should be understood that the federal government currently is borrowing with a weighted average maturity of 64.2 months, or a bit over 5 years. The principal value of a 5 year bond will not drop 50% if interest rates double. And since over 25% of Federal borrowing is less than 1 year, rising interest rates will change the interest burden fairly quickly. 3) The purpose of a monetary system is to guide resources into their best use. 8% unemployment implies wasted resources, and calls for intervention by society to apply those resources. If that means an increaded debt burden in the short term, so be it. Long term we should bring taxes back into balance with Govt spending. [url] http://www.treasury.gov/resource-center/data-chart-center/quarterly-refunding/Documents/TBAC Discussion Charts August 2012.pdf[/url] Pages 19, and 25 - AndrewDover Wed, 29 Aug 2012 03:25:37 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/the-graph-you-really-need-when-watching-the-republican-and-democratic-conventions#comment-18433 [url] http://ccc.commnet.edu/grammar/notorious2.htm [/url] [quote] "We use the word percent as part of a numerical [removed]e.g., Only two percent of the students failed.). We use the word percentage to suggest a portion (e.g., The percentage of students who fail has decreased.)." [/quote] Each data point represents a percentage, such as two percent. Since the distinction is blurry, it has become common to just use the word "percent" in any case. - David Wed, 29 Aug 2012 03:11:09 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/the-graph-you-really-need-when-watching-the-republican-and-democratic-conventions#comment-18432 In response to Ron Alley. As the title of the graph says, this is "interest as a percent [sic] of GDP". (Maybe it would have been clearer to say "percentage"?) In any case, I am a bit surprised Dean Baker chose to highlight this point after having convinced me that growth in the future could well be slower given that there is no miraculous housing recovery to be expected. Why is CBO so optimistic about faster growth? Or does it matter that much if growth is slower since interest rates are therefore also likely lower? The back of my envelope is confusing me a bit at this point. - Justafed Wed, 29 Aug 2012 02:25:18 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/the-graph-you-really-need-when-watching-the-republican-and-democratic-conventions#comment-18431 Thanks for putting up a graph that displays the actual burden of interest rates. Your graph surely makes one realize that we have been in an unusual interest rate environment since just before the collapse of the stock bubble in 2000. I am puzzled as to why you included the forecast of interest rates from 2012 through 2020. - Ron Alley Wed, 29 Aug 2012 01:58:28 +0100