The Bipartisan March to Fiscal Madness

[zk]

I always like to hear as many sides to an argument as I can. Here is, from what I can tell from his very-poorly-presented case, a contrary view:

http://finance.yahoo.com/blogs/breakout/case-low-end-consumers-higher-dollar-sideways-fed-121503233.html%20%20%20;_ylt=ApchbAfmxoPgpj0KOnra9M67YWsA;_ylu=X3oDMTE2NjFqNGU2BHBvcwMxMQRzZWMDdG9wU3RvcmllcwRzbGsDYWdyZWF0bG9uZy10?sec=topStories&pos=8&asset=&ccode=

That’s Oppenheimer Asset Management’s chief investment strategist.I’d be interested to hear what more knowledgeable people than me have to say about his ideas.

[briansd1]

I think that America is still a paragon of political and economic stability as compared to the rest of the world.

The Dollar will remain the reserve currency for the foreseeable future.

Interest rates will move higher but the cost of borrowing will remain manageable because there is a glut of liquidity around the world as countries try to create corporate giants to compete against our own multinationals.

A lower Dollar will allow us to compete with the rest of of the world.

[briansd1]

I think that America is still a paragon of political and economic stability as compared to the rest of the world.

The Dollar will remain the reserve currency for the foreseeable future.

Interest rates will move higher but the cost of borrowing will remain manageable because there is a glut of liquidity around the world as countries try to create corporate giants to compete against our own multinationals.

A lower Dollar will allow us to compete with the rest of of the world.

[briansd1]

I think that America is still a paragon of political and economic stability as compared to the rest of the world.

The Dollar will remain the reserve currency for the foreseeable future.

Interest rates will move higher but the cost of borrowing will remain manageable because there is a glut of liquidity around the world as countries try to create corporate giants to compete against our own multinationals.

A lower Dollar will allow us to compete with the rest of of the world.

[briansd1]

I think that America is still a paragon of political and economic stability as compared to the rest of the world.

The Dollar will remain the reserve currency for the foreseeable future.

Interest rates will move higher but the cost of borrowing will remain manageable because there is a glut of liquidity around the world as countries try to create corporate giants to compete against our own multinationals.

A lower Dollar will allow us to compete with the rest of of the world.

[briansd1]

I think that America is still a paragon of political and economic stability as compared to the rest of the world.

The Dollar will remain the reserve currency for the foreseeable future.

Interest rates will move higher but the cost of borrowing will remain manageable because there is a glut of liquidity around the world as countries try to create corporate giants to compete against our own multinationals.

A lower Dollar will allow us to compete with the rest of of the world.

[urbanrealtor]

[quote=Rich Toscano][quote=urbanrealtor]
If we ever really had a problem paying on those bonds we could just literally print the cash and mail it to the bond holders.
[/quote]

True, but there may (or, I will go so far as to speculate, *will*) come a time when doing that causes serious problems of its own… problems that are not necessarily all that different from actual default.

If they print more, the problems will show up more in the currency market; if they show some restraint at the press then it may show up in the bond market as in Greece. Believe it or not I actually think there is a chance that the folks at the Fed would actually restrain themselves under certain conditions, even if it resulted in a big backup in bond yields.

But that’s probably trying to speculate too many moves ahead. My point is that it could get to the point that printing money to pay back debt is not perceived as all that different from outright default.[/quote]

You have a point with that.
However, at present, we can just print our way out.

That will remain so (at least I believe it will) as long as we are a ginormous consumer market.

If a large slice consumers start getting too broke, we can bring everyone down below our level to supply us. Alternatively, we start supplying more.

That scenario, however, is based on static relative positions in the global economy.

That is unlikely to play out.

It seems more intuitively likely that the US will continue to lose prominence as a global economic power and that at some point (5 years in the IMF’s eyes) we will no longer be too big to fail.

There are other factors at play.

EG: If China sees unrest or catastrophic democratization (which would probably not be a good thing) we could be looking at a very different play out.

[urbanrealtor]

[quote=Rich Toscano][quote=urbanrealtor]
If we ever really had a problem paying on those bonds we could just literally print the cash and mail it to the bond holders.
[/quote]

True, but there may (or, I will go so far as to speculate, *will*) come a time when doing that causes serious problems of its own… problems that are not necessarily all that different from actual default.

If they print more, the problems will show up more in the currency market; if they show some restraint at the press then it may show up in the bond market as in Greece. Believe it or not I actually think there is a chance that the folks at the Fed would actually restrain themselves under certain conditions, even if it resulted in a big backup in bond yields.

But that’s probably trying to speculate too many moves ahead. My point is that it could get to the point that printing money to pay back debt is not perceived as all that different from outright default.[/quote]

You have a point with that.
However, at present, we can just print our way out.

That will remain so (at least I believe it will) as long as we are a ginormous consumer market.

If a large slice consumers start getting too broke, we can bring everyone down below our level to supply us. Alternatively, we start supplying more.

That scenario, however, is based on static relative positions in the global economy.

That is unlikely to play out.

It seems more intuitively likely that the US will continue to lose prominence as a global economic power and that at some point (5 years in the IMF’s eyes) we will no longer be too big to fail.

There are other factors at play.

EG: If China sees unrest or catastrophic democratization (which would probably not be a good thing) we could be looking at a very different play out.

[urbanrealtor]

[quote=Rich Toscano][quote=urbanrealtor]
If we ever really had a problem paying on those bonds we could just literally print the cash and mail it to the bond holders.
[/quote]

True, but there may (or, I will go so far as to speculate, *will*) come a time when doing that causes serious problems of its own… problems that are not necessarily all that different from actual default.

If they print more, the problems will show up more in the currency market; if they show some restraint at the press then it may show up in the bond market as in Greece. Believe it or not I actually think there is a chance that the folks at the Fed would actually restrain themselves under certain conditions, even if it resulted in a big backup in bond yields.

But that’s probably trying to speculate too many moves ahead. My point is that it could get to the point that printing money to pay back debt is not perceived as all that different from outright default.[/quote]

You have a point with that.
However, at present, we can just print our way out.

That will remain so (at least I believe it will) as long as we are a ginormous consumer market.

If a large slice consumers start getting too broke, we can bring everyone down below our level to supply us. Alternatively, we start supplying more.

That scenario, however, is based on static relative positions in the global economy.

That is unlikely to play out.

It seems more intuitively likely that the US will continue to lose prominence as a global economic power and that at some point (5 years in the IMF’s eyes) we will no longer be too big to fail.

There are other factors at play.

EG: If China sees unrest or catastrophic democratization (which would probably not be a good thing) we could be looking at a very different play out.

[urbanrealtor]

[quote=Rich Toscano][quote=urbanrealtor]
If we ever really had a problem paying on those bonds we could just literally print the cash and mail it to the bond holders.
[/quote]

True, but there may (or, I will go so far as to speculate, *will*) come a time when doing that causes serious problems of its own… problems that are not necessarily all that different from actual default.

If they print more, the problems will show up more in the currency market; if they show some restraint at the press then it may show up in the bond market as in Greece. Believe it or not I actually think there is a chance that the folks at the Fed would actually restrain themselves under certain conditions, even if it resulted in a big backup in bond yields.

But that’s probably trying to speculate too many moves ahead. My point is that it could get to the point that printing money to pay back debt is not perceived as all that different from outright default.[/quote]

You have a point with that.
However, at present, we can just print our way out.

That will remain so (at least I believe it will) as long as we are a ginormous consumer market.

If a large slice consumers start getting too broke, we can bring everyone down below our level to supply us. Alternatively, we start supplying more.

That scenario, however, is based on static relative positions in the global economy.

That is unlikely to play out.

It seems more intuitively likely that the US will continue to lose prominence as a global economic power and that at some point (5 years in the IMF’s eyes) we will no longer be too big to fail.

There are other factors at play.

EG: If China sees unrest or catastrophic democratization (which would probably not be a good thing) we could be looking at a very different play out.

[urbanrealtor]

[quote=Rich Toscano][quote=urbanrealtor]
If we ever really had a problem paying on those bonds we could just literally print the cash and mail it to the bond holders.
[/quote]

True, but there may (or, I will go so far as to speculate, *will*) come a time when doing that causes serious problems of its own… problems that are not necessarily all that different from actual default.

If they print more, the problems will show up more in the currency market; if they show some restraint at the press then it may show up in the bond market as in Greece. Believe it or not I actually think there is a chance that the folks at the Fed would actually restrain themselves under certain conditions, even if it resulted in a big backup in bond yields.

But that’s probably trying to speculate too many moves ahead. My point is that it could get to the point that printing money to pay back debt is not perceived as all that different from outright default.[/quote]

You have a point with that.
However, at present, we can just print our way out.

That will remain so (at least I believe it will) as long as we are a ginormous consumer market.

If a large slice consumers start getting too broke, we can bring everyone down below our level to supply us. Alternatively, we start supplying more.

That scenario, however, is based on static relative positions in the global economy.

That is unlikely to play out.

It seems more intuitively likely that the US will continue to lose prominence as a global economic power and that at some point (5 years in the IMF’s eyes) we will no longer be too big to fail.

There are other factors at play.

EG: If China sees unrest or catastrophic democratization (which would probably not be a good thing) we could be looking at a very different play out.

[urbanrealtor]

[quote=briansd1]I think that America is still a paragon of political and economic stability as compared to the rest of the world.

The Dollar will remain the reserve currency for the foreseeable future.

Interest rates will move higher but the cost of borrowing will remain manageable because there is a glut of liquidity around the world as countries try to create corporate giants to compete against our own multinationals.

A lower Dollar will allow us to compete with the rest of of the world.[/quote]

I think that is an oversimplification of the scene in evidence.
Internal inflation (and, lets be honest, no inflation is strictly external) will benefit borrowers and punish savers.
I don’t think that is necessarily a bad thing at an academic level but if a large percentage of board executives start feeling broke, we will feel that in corporate actions (layoff, reduced outlays).

A cleaner way to create broad private deleveraging is to pass a law that restricts recourse on home loans.
Like “any loan for 1-4 units is non-recourse”.
That would keep the negative incentives that cause people try and avoid short sales but would leave banks in the position of either negotiating with due haste or foreclosing quickly.
That would tighten up distress markets and reduce informations sets significantly.

[urbanrealtor]

[quote=briansd1]I think that America is still a paragon of political and economic stability as compared to the rest of the world.

The Dollar will remain the reserve currency for the foreseeable future.

Interest rates will move higher but the cost of borrowing will remain manageable because there is a glut of liquidity around the world as countries try to create corporate giants to compete against our own multinationals.

A lower Dollar will allow us to compete with the rest of of the world.[/quote]

I think that is an oversimplification of the scene in evidence.
Internal inflation (and, lets be honest, no inflation is strictly external) will benefit borrowers and punish savers.
I don’t think that is necessarily a bad thing at an academic level but if a large percentage of board executives start feeling broke, we will feel that in corporate actions (layoff, reduced outlays).

A cleaner way to create broad private deleveraging is to pass a law that restricts recourse on home loans.
Like “any loan for 1-4 units is non-recourse”.
That would keep the negative incentives that cause people try and avoid short sales but would leave banks in the position of either negotiating with due haste or foreclosing quickly.
That would tighten up distress markets and reduce informations sets significantly.

[urbanrealtor]

[quote=briansd1]I think that America is still a paragon of political and economic stability as compared to the rest of the world.

The Dollar will remain the reserve currency for the foreseeable future.

Interest rates will move higher but the cost of borrowing will remain manageable because there is a glut of liquidity around the world as countries try to create corporate giants to compete against our own multinationals.

A lower Dollar will allow us to compete with the rest of of the world.[/quote]

I think that is an oversimplification of the scene in evidence.
Internal inflation (and, lets be honest, no inflation is strictly external) will benefit borrowers and punish savers.
I don’t think that is necessarily a bad thing at an academic level but if a large percentage of board executives start feeling broke, we will feel that in corporate actions (layoff, reduced outlays).

A cleaner way to create broad private deleveraging is to pass a law that restricts recourse on home loans.
Like “any loan for 1-4 units is non-recourse”.
That would keep the negative incentives that cause people try and avoid short sales but would leave banks in the position of either negotiating with due haste or foreclosing quickly.
That would tighten up distress markets and reduce informations sets significantly.

[urbanrealtor]

[quote=briansd1]I think that America is still a paragon of political and economic stability as compared to the rest of the world.

The Dollar will remain the reserve currency for the foreseeable future.

Interest rates will move higher but the cost of borrowing will remain manageable because there is a glut of liquidity around the world as countries try to create corporate giants to compete against our own multinationals.

A lower Dollar will allow us to compete with the rest of of the world.[/quote]

I think that is an oversimplification of the scene in evidence.
Internal inflation (and, lets be honest, no inflation is strictly external) will benefit borrowers and punish savers.
I don’t think that is necessarily a bad thing at an academic level but if a large percentage of board executives start feeling broke, we will feel that in corporate actions (layoff, reduced outlays).

A cleaner way to create broad private deleveraging is to pass a law that restricts recourse on home loans.
Like “any loan for 1-4 units is non-recourse”.
That would keep the negative incentives that cause people try and avoid short sales but would leave banks in the position of either negotiating with due haste or foreclosing quickly.
That would tighten up distress markets and reduce informations sets significantly.

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