Monday, July 30, 2012
An easy way to envision the national debt:
The Federal Receipts and Outlays:
1.US Tax Revenue - $2,303,500,000,000
2.Federal Budget - $3,630,100,000,000
3.Deficit (new debt) - $1,299,600,000,000
4.National Debt - $15,582,100,000,000
5.Proposed Budget Cut - $33,000,000,000
If We Remove 8 zeros and pretend it is a household budget:
1.Annual Family Income - $23,035
2.Money the Family Spent - $36,301
3.New Debt on the Credit Card - $12,996
4.Outstanding Balance on the Credit Card - $155,821
5.Total Budget Cuts - $330
By the way, the numbers are from the various tables available at the St. Louis Federal Reserve, which maintains the fredii database for those that like to play with the numbers.
Posted by CSF - at 9:05 PM
Monday, July 23, 2012
The 5 Myths of the Great Financial Meltdown: Round 2
About 6 weeks ago I published a blog from CNNMoney.com/Fortune about the 5 Myths of the Financial Meltdown. Apparently this article caused quite a stir among the readers so the author responded to many of the comments. The comments basically broke out into 2 groups: those that thought the free market should have been left to resolve the issue and those that felt the banks should have been largely nationalized. Below is the author's response to the comments.
Article is in italics from CNNMoney.com-Fortune:
Critics of our analysis say Uncle Sam should have let the free markets take care of business. They tried. And they failed.
Posted by CSF - at 10:19 AM
What in the Economy Should Be Stimulated?
Once again another straight forward analysis from AIER. Basically the relationship between real Personal Consumption Expenditure (real PCE - about 70% of of GDP) and real disposable income is a straight line. If you want the economy to grow, then you have to increase real disposable income. That is tough to do with an 8%+ unemployment rate and consumer demand that is weak due to massive de-leveraging. But, if the government is going to stimulate this is where it has to be done. If you like this article there is quite a "civil" discussion in the comment section at the website about the value of GDP.
The article and graph are from AIER.
The single greatest driver of the economy is consumer spending. People, not firms, make best use of extra money.
Far and away, the most important factor in determining consumer spending is the buying power in paychecks. Economists call this real personal disposable income. It matters because spending by individuals makes up about 70 percent of all spending. You can’t have a recovery if the consumer stays home.
Through recessions, expansions, and everything in between, the relationship between disposable income and consumer spending is remarkably tight, as the chart above shows. Currently GDP growth is under 2 percent. With the growth of disposable income near zero, it’s not hard to see why the expansion has been anemic.
The relationship between spending and income also has irrefutable policy implications.
Any government policy to speed economic growth should focus on increasing disposable income. That likely means income and payroll tax cuts. Stimulus programs directed toward businesses, and monetary programs directed toward the financial sector such as those established in response to the recent downturn, won’t do the trick. They have resulted in larger cash holdings in corporations and banks, while consumer spending remains low.
Raising taxes might help reduce the deficit, but it would depress consumption. If the Bush-era tax cuts are allowed to expire at year-end, the results could be devastating. Combined with the mandatory spending cuts of the deficit reduction process, every model we have seen projects a decline in GDP of 3-3.5 percentage points. This would easily result in recession in the first half of 2013. Besides the impact of higher taxes on consumer spending, small businesses would have to redirect income to pay taxes rather than to hire. Increases in capital gains and dividends taxes will reduce income and net worth for some, further reducing spending.
Obamacare calls for nearly $300 billion in tax increases in 2013 alone. There are also mandates that imply additional costs to consumers, further reducing the income available for purchases.
Posted by CSF - at 9:50 AM
Monday, July 16, 2012
The photo on the banner of this blog is Mt. Blodgett just west of Colorado Springs. It is mostly black now due to the wild fires in the area.
Due to the wildfires my wife and I were forced to evacuate our home on June 26. My employer was generous enough to allow me to work out of their headquarters until it was safe to return. We arrived home last Thursday. The fires got within 0.5 miles of our home, but it is still standing.
I should start blogging soon. Just trying to get organized.
Posted by CSF - at 5:14 PM