More on public pensions and the economy

[The-Shoveler]

[quote=Allan from Fallbrook][quote=The-Shoveler]Guys I have to add this,
Whatever you do,
Do not let them put the SS money into the Stock Market,
It will evaporate faster than rubbing alcohol on a hot sidewalk,[/quote]

Shoveler: What SS money? Dude, politicians have been treating this like a massive cookie jar and replacing actual money with IOUs for years.

Plus, SS is rapidly heading towards insolvency: http://www.michigandaily.com/content/social-security-insolvent-2017-trustees-say%5B/quote%5D

There is one critical difference between the Federal Gov and the State Gov’s
The Fed can print it’s own money.
The state cannot.

[Allan from Fallbrook]

[quote=SK in CV][quote=Allan from Fallbrook]
SK: Yup, agree on solvency versus IOUs being two separate issues. My point on the IOUs was simply that the government has been dipping into the SS trust fund for years and not “repaying” the money (quotes used to denote that the amounts represent an “intracompany payable” in accounting parlance.)

[/quote]

Last time. The government has had no choice but to “dip into” the SS Trust Fund. The only legal investment the trust fund can make is in special issue US debt. Even if there was no other federal debt, the fund would still have to buy those bonds, the treasury would still have to sell them (essentially borrowing the funds). The debts have never been repaid before last year because the current year collections have always exceeded current year benefits. As a practical matter they couldn’t be repaid.[/quote]

Um, SK? I’m in agreement with you on this. No disagreement whatsoever.

Hence my use of the term intracompany payable, as well as my acknowledgment that the “dipping into” has/had no effect regarding solvency or insolvency. Two separate and distinct points.

[Allan from Fallbrook]

[quote=The-Shoveler]

There is one critical difference between the Federal Gov and the State Gov’s
The Fed can print it’s own money.
The state cannot.[/quote]

Shoveler: I think we’ll see “Brown Bucks” before long. Give Jerry some credit: He’s an innovative guy. Remember when he was Gov back in the day and wanted California to launch its own satellite?

I think “Brown Bucks” should be redeemable at any one of California’s numerous (but dwindling) pot dispensaries. Then we’d still have all sorts of issues, we just wouldn’t give a shit.

[briansd1]

Allan, here’s an intersting WP article on Milton Friedman, the dean of conservative economics.

The response to the financial crisis has been just as he would have done it himself:
http://www.washingtonpost.com/opinions/how-conservatives-misread-and-misuse-milton-friedman/2012/07/27/gJQAcrISEX_story.html

I think that you cast too wide of a net. The Federal government and central bank need to focus on getting us over the financial crisis. Once we get out, do what is necessary; but that’s for later.

Just because easy money led the Financial Crisis of 2008 does not mean that we should not be “pump priming” out of the Great Recession.

[Allan from Fallbrook]

[quote=briansd1]Allan, here’s an intersting WP article on Milton Friedman, the dean of conservative economics.

The response to the financial crisis has been just as he would have done it himself:
http://www.washingtonpost.com/opinions/how-conservatives-misread-and-misuse-milton-friedman/2012/07/27/gJQAcrISEX_story.html

I think that you cast too wide of a net. The Federal government and central bank need to focus on getting us over the financial crisis. Once we get out, do what is necessary; but that’s for later.

Just because easy money led the Financial Crisis of 2008 does not mean that we should not be “pump priming” out of the Great Recession.[/quote]

Brian: As I’ve written before, we’re in terra incognita now. Like I said, I’m not trying to debunk Keynes, nor am I endorsing Friedman. What I am arguing, however, is that we continue to follow policies that are simply not working. Supposed experts like Krugman can argue, and often persuasively, for more stimulus, but the fact remains that the stimulus Krugman is arguing for simply cannot be implemented. Why? Well, he’s trying to pump money into a system completely unready and unable to receive it. His solutions, like virtually every economists’, are academic and based on models and don’t fare so well in the real world.

This is all about debt. The solution to too much debt does not appear to be more debt. Again, this is a Balance Sheet recession and it spans the globe. The US, the Eurozone and China are all facing significant headwinds and any serious improvement will only happen after that debt overhang is dealt with.

How many times has the Eurozone crisis been fixed? How many times have we heard about a “recovery summer” or a “pivot to jobs”? Is China going to have a hard landing or a soft landing? You know as well as I that if you ask five different economists a question, you’ll get five different answers. We are in a place we’ve never been before and economists, politicians, etc are all throwing shit at the wall in the hope that something sticks.

[no_such_reality]

Are problems are actually best summed from for a Harvard Business Review case study from the late 80s.

I cannot find a free link on the net, so I’ll summarize.

It was about Vlasic Foods. Makers of Vlasic Pickles.

And about growth.

Vlasic, like most good companies wanted to grow. Provide a product and be profitable.

One day, they entered a supply agreement with WalMart (If I remember correctly).

As is Walmart’s typical practice, they pushed vlasic on the price. In fact, they pushed to the point that Vlasic was providing a giant jar of pickles (gallon I think) for a retail sale price of $3 (I think)

So along came the problems. Vlasic wasn’t geared to providing gallon jars of pickles by bazillion.

Vlasic supply chain wasn’t geared to providing pickles by the bazillion gallon either.

Walmart customers loved the cheap gallon super deal. Bought them by the droves. In fact, it was considered something that pulled customers into the store. You could only get the gallon vlasic at the stores.

Vlasic was bursting the seems and going broke. Their margins were thinner then ever, less per jar than the original jars but they were pumping out massively more product. Massively more labor. Massively more distribution costs, processing cost, etc. And the pain rolled down through the supply chain.

Then Vlasic figured something out. The customer’s loved the gallon jar. But didn’t eat more pickles. The pickles literally rotted in the fridge.

But the customers still wanted the pickles and stores still wanted the big jars…

So we have Vlasic, Walmart, the suppliers and consumers. Who is driving the situation and for what?

Similarly, we have Government, Public Employee Unions, Tax Payers and service consumers (both the public and developers).

So who matches up to whom?

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