I have probably blogged on this before, but I want to state this a different way. First, I will use the term "cash" to mean Federal Reserve Notes, "dollars" to be interchangeably with "money that is denominated in dollars", and the term "dollarverse" to mean the total amount of dollars.
The Fed does not create dollars. They are mostly created by the US Treasury when it deficit spends. When the Fed creates cash to buy up Treasury bills as part of quantitative easing, it is merely exchanging a more liquid type of dollars for a less liquid type, but the total does not change. Imagine ice melting (although this is not a perfect analogy since when water freezes it expands).
Banks also create dollars when they make loans. The accounting entry is a new liability on their book for the amount of the money newly placed in the checking account, and a new asset in the form of a note receivable.
Dollars are destroyed when loans are paid back or when the government runs a surplus. Also when debts are written off or when someone declares bankruptcy.
So what is the size of the dollarverse? It is much larger than M2 since bonds should also be included. As well as things like brokerage accounts, life insurance reserves, and accounts payable.
The Fed tracks this as series FL894090005.Q and the current value (2011-Q3) is 152326.7 billion, i.e. $152 trillion. So the $1.3 trillion deficit is less than 1% of all financial assets and is almost a rounding error in comparison. Note that this value was 151625.6 billion at the end of 2007, so the current total is only about 700 billion more than it was 4 years ago. If there had been no deficit spending the number would have shrunk.
Saturday, December 31, 2011
Reserve Currency Theory
Reserve Currency Theory is a new term I just invented to describe why the US can issue so much debt. It is simply because the US Dollar is the world's reserve currency. So long as the dollar continues in this role, then the US can issue an almost infinite amount of debt.
MMT (Modern Monetary Theory) is the latest preferred term for theory that was previously called Keynesianism. Keynesianism, if I understand it correctly, states that the government should run a surplus when times are good and a deficit when times are bad to counterbalance the economy. MMT, if I understand it correctly, states that government debt is necessary for private savings, and to increase the money supply, and so government deficits are not bad per se. However, even so, under MMT, there is a limit to how much debt a country can incur before it reaches the Keynesian endpoint.
Another version of it is called Monetary Sovereignty, and advocate it as the cure for whatever economic ails a country has. So Monetary Sovereignty adherents would tell Greece to regain its monetary sovereignty and inflate away its debts. However the truth is that nobody would want to use the Greek drachma unless they were forced to.
So under my theory, world currencies are split into 4 categories. First, the dollar (which I will come back to). Second, the currencies which are linked to the dollar and for all practical purposes are also dollars, just under a different name. Third, the "normal" currencies, such as the Euro, Canadian dollar, etc. which are commonly traded on the Forex markets and to which MMT may have some relevance. Fourth, the "local" currencies, such as the Botswana pula, or the proposed Greek drachma, which are used only as a local currency. No foreigner would buy debt denominated in the local currency.
The dollar is exempt from the "laws of gravity". The US can issue an almost infinite amount of dollars. When the US issues enough dollars to deflate their value, then the other countries issue more of their currencies in turn in a process called competitive devaluation.
But what about a gold-backed currency? Maybe it would make sense for some country to issue a gold-backed currency, like the gold dinar, meant to be an alternative to the dollar. But people wouldn't use it as a currency for most transactions simply because of Gresham's law ("bad money chases out good"). It would be used as a store of value, however.
What about the euro or yuan? At the moment it appears that neither of these will replace the dollar. For a currency to do so, it would have to have a Lender of Last Resort, and a well-developed centralized market for debt.
So, assuming my theory is true, what should the US do? It should use the power it has been given, issue more debt, and buy up debt of European countries (earning the interest that they pay), and invest in big infrastructure projects, like a tunnel under the Gibraltor straits.
I will be looking for arguments to further develop or to challenge this theory.
========
Update: I am tagging this as a projection that the US economy can survive almost indefinitely or at least until 2099.
===========
Update 6/19/12. This isn't a model, its an article on the almighty US dollar. If the US runs into severe problems, there will be alternatives, even if we can't see what they would be right now.
MMT (Modern Monetary Theory) is the latest preferred term for theory that was previously called Keynesianism. Keynesianism, if I understand it correctly, states that the government should run a surplus when times are good and a deficit when times are bad to counterbalance the economy. MMT, if I understand it correctly, states that government debt is necessary for private savings, and to increase the money supply, and so government deficits are not bad per se. However, even so, under MMT, there is a limit to how much debt a country can incur before it reaches the Keynesian endpoint.
Another version of it is called Monetary Sovereignty, and advocate it as the cure for whatever economic ails a country has. So Monetary Sovereignty adherents would tell Greece to regain its monetary sovereignty and inflate away its debts. However the truth is that nobody would want to use the Greek drachma unless they were forced to.
So under my theory, world currencies are split into 4 categories. First, the dollar (which I will come back to). Second, the currencies which are linked to the dollar and for all practical purposes are also dollars, just under a different name. Third, the "normal" currencies, such as the Euro, Canadian dollar, etc. which are commonly traded on the Forex markets and to which MMT may have some relevance. Fourth, the "local" currencies, such as the Botswana pula, or the proposed Greek drachma, which are used only as a local currency. No foreigner would buy debt denominated in the local currency.
The dollar is exempt from the "laws of gravity". The US can issue an almost infinite amount of dollars. When the US issues enough dollars to deflate their value, then the other countries issue more of their currencies in turn in a process called competitive devaluation.
But what about a gold-backed currency? Maybe it would make sense for some country to issue a gold-backed currency, like the gold dinar, meant to be an alternative to the dollar. But people wouldn't use it as a currency for most transactions simply because of Gresham's law ("bad money chases out good"). It would be used as a store of value, however.
What about the euro or yuan? At the moment it appears that neither of these will replace the dollar. For a currency to do so, it would have to have a Lender of Last Resort, and a well-developed centralized market for debt.
So, assuming my theory is true, what should the US do? It should use the power it has been given, issue more debt, and buy up debt of European countries (earning the interest that they pay), and invest in big infrastructure projects, like a tunnel under the Gibraltor straits.
I will be looking for arguments to further develop or to challenge this theory.
========
Update: I am tagging this as a projection that the US economy can survive almost indefinitely or at least until 2099.
===========
Update 6/19/12. This isn't a model, its an article on the almighty US dollar. If the US runs into severe problems, there will be alternatives, even if we can't see what they would be right now.
Why the dollar reigns supreme
This is from an older article. The author's thesis is that the dollar's reign is about to end, but I get a different conclusion.
==============
"To understand the dollar's future, it's important to understand the dollar's past—why the dollar became so dominant in the first place. Let me offer three reasons.
First, its allure reflects the singular depth of markets in dollar-denominated debt securities. The sheer scale of those markets allows dealers to offer low bid-ask spreads. The availability of derivative instruments with which to hedge dollar exchange-rate risk is unsurpassed. This makes the dollar the most convenient currency in which to do business for corporations, central banks and governments alike.
Second, there is the fact that the dollar is the world's safe haven. In crises, investors instinctively flock to it, as they did following the 2008 failure of Lehman Brothers. This tendency reflects the exceptional liquidity of markets in dollar instruments, liquidity being the most precious of all commodities in a crisis. It is a product of the fact that U.S. Treasury securities, the single most important asset bought and sold by international investors, have long had a reputation for stability.
Finally, the dollar benefits from a dearth of alternatives. Other countries that have long enjoyed a reputation for stability, such as Switzerland, or that have recently acquired one, like Australia, are too small for their currencies to account for more than a tiny fraction of international financial transactions."
--http://online.wsj.com/article/SB10001424052748703313304576132170181013248.html
==============
"To understand the dollar's future, it's important to understand the dollar's past—why the dollar became so dominant in the first place. Let me offer three reasons.
First, its allure reflects the singular depth of markets in dollar-denominated debt securities. The sheer scale of those markets allows dealers to offer low bid-ask spreads. The availability of derivative instruments with which to hedge dollar exchange-rate risk is unsurpassed. This makes the dollar the most convenient currency in which to do business for corporations, central banks and governments alike.
Second, there is the fact that the dollar is the world's safe haven. In crises, investors instinctively flock to it, as they did following the 2008 failure of Lehman Brothers. This tendency reflects the exceptional liquidity of markets in dollar instruments, liquidity being the most precious of all commodities in a crisis. It is a product of the fact that U.S. Treasury securities, the single most important asset bought and sold by international investors, have long had a reputation for stability.
Finally, the dollar benefits from a dearth of alternatives. Other countries that have long enjoyed a reputation for stability, such as Switzerland, or that have recently acquired one, like Australia, are too small for their currencies to account for more than a tiny fraction of international financial transactions."
--http://online.wsj.com/article/SB10001424052748703313304576132170181013248.html
Louis McFadden and Conspiracy Theories
Louis T. McFadden (1876-1936) was a Representative from Pennsylvania. He made a scathing speech before Congress in 1934 accusing the Federal Reserve of being corrupt and of causing the Great Depression.
He survived a first assassination attempt (two revolver shots missed him), then he became violently ill after eating some food at a political banquet in Washington, DC. A physician friend quickly procured a stomach pump and saved his life. Shortly after this he took a trip to New York City where after another banquet he suffered a "dose of intestional flu" and died. The cause of death as listed on the death certificate however was "heart failure".
While I am on the topic, Charles Lindbergh, Sr. (1859-1924) was a Representative from Minnesota who was opposed to the Federal Reserve Act. His son was the famous aviator (and alleged Nazi sympathizer) and his infant grandson, also named Charles Lindbergh was kidnapped and murdered in 1932. Coincidence? Of course. But there is a conspiracy theory that the man executed for the Lindbergh kidnapping was actually innocent. One theory is that the aviator accidently killed his own son and covered it up with the kidnapping claim (a la Jon Benet Ramsey, whose father was a pilot).
While I am talking about conspiracy theories, John F. Kennedy signed an executive order (#11110) limiting the power of the Federal Reserve only a few months before his assassination.
Now you know the rest of the story.
Gwadar Pakistan
Somebody with a wild imagination spent a lot of time in SimCity building his dream city.
Futures market melting down now
"Some very ordinary transactions that we have all become accustomed to are at risk of disappearing entirely. Among them are airline tickets at a known price for travel six months from now. Reasonably-stable prices for a box of cereal are another example (corn has traded from 572 to 799 in the last year; a forty percent range over the last 12 months; soy and wheat have seen similar moves); indeed, virtually every food item in your store, from orange juice to bacon (pork bellies) is hedged off in these markets!
The move to direct transactions means that the reasonable stability we have enjoyed in these transactions, or even the ability to enter into them at all over a horizon of more than a month or two, is at risk of disappearing!"
http://market-ticker.org/akcs-www?post=199790
"U.S. commodity markets have shrunk almost 9 percent since MF Global's collapse as farmers, investors and traders close out positions, according to a Reuters analysis of data that suggests there may be lasting effects from the industry's most disruptive broker failure."
http://www.reuters.com/article/2011/12/21/uk-mfglobal-futures-idUSTRE7BK1E220111221
"The process of hedging allows parties with a legitimate business interest that wish to shed risk transfer it to those willing to take risk in expectation of a return (speculators). In other words, speculators are absorbing price risk and therefore its volatility. Because of the mechanism of the futures markets day-to-day volatility is not put through to the economy on a day-to-day basis. This allows stability of prices which is really stability of the exchange medium.
Take away this mechanism and we have to imagine an economy in which farmers, for example, would not be willing to take the risk of planting enough food to feed the population, or the price for doing so would be very dear as to make it unaffordable to all but the wealthy. Or as news and rumors of unfavorable weather, droughts and crop failures hits the wire, prices fluctuate instantly and wildly at the end user level.
This instability is a positive feedback loop that leads to shortages, hoarding, increased poverty and overall economic and social instabilityas people are thrust into a law of the jungle world where moment-to-moment survival dominates the psyche.
I reiterate, in a complex economy, futures markets are as important as is a reliable medium of exchange. Currently both are at risk of being destroyed.
MF Global punctuates the issues at hand. Opacity, willful deception (fraud), the absence or impotence of the rule of law, which is nothing less than a collapse in government. With that said, opacity and fraud are a human constant. It is the collapse of government that poses the greatest threat."
http://charleshughsmith.blogspot.com/2011/12/mf-global-when-belief-in-system-fades.html
The move to direct transactions means that the reasonable stability we have enjoyed in these transactions, or even the ability to enter into them at all over a horizon of more than a month or two, is at risk of disappearing!"
http://market-ticker.org/akcs-www?post=199790
"U.S. commodity markets have shrunk almost 9 percent since MF Global's collapse as farmers, investors and traders close out positions, according to a Reuters analysis of data that suggests there may be lasting effects from the industry's most disruptive broker failure."
http://www.reuters.com/article/2011/12/21/uk-mfglobal-futures-idUSTRE7BK1E220111221
"The process of hedging allows parties with a legitimate business interest that wish to shed risk transfer it to those willing to take risk in expectation of a return (speculators). In other words, speculators are absorbing price risk and therefore its volatility. Because of the mechanism of the futures markets day-to-day volatility is not put through to the economy on a day-to-day basis. This allows stability of prices which is really stability of the exchange medium.
Take away this mechanism and we have to imagine an economy in which farmers, for example, would not be willing to take the risk of planting enough food to feed the population, or the price for doing so would be very dear as to make it unaffordable to all but the wealthy. Or as news and rumors of unfavorable weather, droughts and crop failures hits the wire, prices fluctuate instantly and wildly at the end user level.
This instability is a positive feedback loop that leads to shortages, hoarding, increased poverty and overall economic and social instabilityas people are thrust into a law of the jungle world where moment-to-moment survival dominates the psyche.
I reiterate, in a complex economy, futures markets are as important as is a reliable medium of exchange. Currently both are at risk of being destroyed.
MF Global punctuates the issues at hand. Opacity, willful deception (fraud), the absence or impotence of the rule of law, which is nothing less than a collapse in government. With that said, opacity and fraud are a human constant. It is the collapse of government that poses the greatest threat."
http://charleshughsmith.blogspot.com/2011/12/mf-global-when-belief-in-system-fades.html
Friday, December 30, 2011
Chandigarh, India
Chandigarh is a very interesting planned city in India that is the capital of 2 states.
"The city of Chandigarh was the first planned city in India and is known internationally for its architecture and urban design. The city has projects designed by architects such as Le Corbusier, Pierre Jeanneret, Matthew Nowicki, and Albert Mayer."
I just want to make a note about it for future reference.
"The city of Chandigarh was the first planned city in India and is known internationally for its architecture and urban design. The city has projects designed by architects such as Le Corbusier, Pierre Jeanneret, Matthew Nowicki, and Albert Mayer."
I just want to make a note about it for future reference.
Dodoma, Tanzania
Dodoma is the new capital of Tanzania, and it is a planned city, so it shares some characteristics with cities such as Gaborone, Botswana; Abuja, Nigeria; and Brasilia.
The plan is to build it as a series of connected communities, each with a population of about 28000.
Here is a sample layout of a community.
More to follow
The plan is to build it as a series of connected communities, each with a population of about 28000.
Here is a sample layout of a community.
More to follow
Chinese space plans
"Outer space is the common wealth of mankind. Exploration, development and utilization of outer space are an unremitting pursuit of mankind. Space activities around the world have been flourishing. Leading space-faring countries have formulated or modified their development strategies, plans and goals in this sphere. The position and role of space activities are becoming increasingly salient for each active country's overall development strategy, and their influence on human civilization and social progress is increasing.
The Chinese government makes the space industry an important part of the nation's overall development strategy, and adheres to exploration and utilization of outer space for peaceful purposes. Over the past few years, China's space industry has developed rapidly and China ranks among the world's leading countries in certain major areas of space technology. Space activities play an increasingly important role in China's economic and social development.
The next five years will be a crucial period for China in building a moderately prosperous society, deepening reform and opening-up, and accelerating the transformation of the country's pattern of economic development. This will bring new opportunities to China's space industry. China will center its work on its national strategic goals, strengthen its independent innovative capabilities, further open to the outside world and expand international cooperation. In so doing, China will do its best to make the country's space industry develop better and faster. At the same time, China will work together with the international community to maintain a peaceful and clean outer space and endeavor to make new contributions to the lofty cause of promoting world peace and development."
--http://www.chinadaily.com.cn/cndy/2011-12/30/content_14354558.htm
The Chinese government makes the space industry an important part of the nation's overall development strategy, and adheres to exploration and utilization of outer space for peaceful purposes. Over the past few years, China's space industry has developed rapidly and China ranks among the world's leading countries in certain major areas of space technology. Space activities play an increasingly important role in China's economic and social development.
The next five years will be a crucial period for China in building a moderately prosperous society, deepening reform and opening-up, and accelerating the transformation of the country's pattern of economic development. This will bring new opportunities to China's space industry. China will center its work on its national strategic goals, strengthen its independent innovative capabilities, further open to the outside world and expand international cooperation. In so doing, China will do its best to make the country's space industry develop better and faster. At the same time, China will work together with the international community to maintain a peaceful and clean outer space and endeavor to make new contributions to the lofty cause of promoting world peace and development."
--http://www.chinadaily.com.cn/cndy/2011-12/30/content_14354558.htm
Thursday, December 29, 2011
The megacity of Brakin
Brakin is the name for the combined cities of Brazzaville, Republic of the Congo, (population 1 million, urban area 1.5 million), and Kinshasa, Democratic Republic of the Congo (population 10 million).
The Patroonship of Rensselaerswyck
This is a fascinating story of a feudal estate in New York that was established while it was under Dutch control and lasted until the 1840s.
http://en.wikipedia.org/wiki/Manor_of_Rensselaerswyck
"Kiliaen van Rensselaer, a pearl and diamond merchant of Amsterdam, was one of the original directors of the West India Company[7] and one of the first to take advantage of the new settlement charter. On January 13, 1629, van Rensselaer sent notification to the Directors of the Company that he, in conjunction with fellow Company members Samuel Godyn and Samuel Blommaert, sent Gillis Houset and Jacob Jansz Cuyper to determine satisfactory locations for settlement."
http://en.wikipedia.org/wiki/Manor_of_Rensselaerswyck
"Kiliaen van Rensselaer, a pearl and diamond merchant of Amsterdam, was one of the original directors of the West India Company[7] and one of the first to take advantage of the new settlement charter. On January 13, 1629, van Rensselaer sent notification to the Directors of the Company that he, in conjunction with fellow Company members Samuel Godyn and Samuel Blommaert, sent Gillis Houset and Jacob Jansz Cuyper to determine satisfactory locations for settlement."
Wednesday, December 28, 2011
Fed bailing out Europe
Update: So this is how it works, I think. The ECB creates new euros which it swaps with the Fed for new dollars. (So technically, they aren't new euros and this isn't a loan). Then it uses the dollars to lend to banks. The banks exchange these for euros, thus helping keep the value of the euro up, and then they buy European debt. The banks make money because the interest rate on the debt is 5%+ and they can borrow at about 0.5%. So the indebted countries win, because they have buyers of their debts, the banks win, because they lock in profits, the value of the euro is maintained, because no new euros are created, the ECB wins, because it technically hasn't created any new euros and because it does not buy debt directly, and the Fed gets to loan dollars to a very secure borrower, the ECB. The only question I have is what the Fed does with the euros. Does it buy up European debt with them?
See also: http://www.marketoracle.co.uk/Article32370.html
New space company
The field of private space ventures is gaining a new competitor, Stratolaunch Systems, the brainchild of former Microsoft cofounder Paul Allen. According to press reports, Allen is prepared to commit at least $200 million of his own fortune to the creation of a launch vehicle he believes will allow for inexpensive launches of satellites into low Earth orbit.
While the U.S. government’s manned space program has floundered for years, lacking a destination and the will to develop new launch vehicles in a timely fashion to replace the obsolete space shuttle, several private corporations are actively pursuing technologies for carrying people and cargo to Earth orbit.
On December 13, Allen announced the creation of Stratolaunch Systems, which would, the company claimed, reunite Allen and Burt Rutan “to develop the next generation of space travel.” Allen and Rutan collaborated on SpaceShipOne, which flew in September 2004. According to a corporate press release, the goal of Stratolaunch Systems is to “bring airport-like operations to the launch of commercial and government payloads and, eventually, human missions. Plans call for a first flight within five years. The air-launch-to-orbit system will mean lower costs, greater safety, and more flexibility and responsiveness than is possible today with ground-based systems.”
The recent expansion of efforts by private industry to expand a nongovernmental role in space exploration has highlighted the contrast between the NASA and its would-be competitors. Obviously, NASA has an established history, with several dramatic successes which include the moon landings from 1969 through the early 1970s. The success of companies such as SpaceX, which developed the Falcon 9 booster and is actively pursuing further advances that offer the possibility of relatively inexpensive launches to low Earth orbit, has demonstrated a growing role for private industry. Allen’s new Stratolaunch Systems is but the latest competitor in a steadily expanding niche of the aerospace industry.
An article for the Wall Street Journal explains the technological approach favored by Rutan’s and Allen’s new company:
Announced Tuesday, the novel, high-risk project conceived by renowned aerospace designer Burt Rutan seeks to combine engines, landing gears and other parts removed from old Boeing 747 jets with a newly created composite craft from Mr. Rutan and a powerful rocket to be built by a company run by Internet billionaire and commercial-space pioneer Elon Musk.
Dubbed Stratolaunch and funded by one of Mr. Allen's closely held entities, the venture seeks to meld decades-old airplane technology with cutting-edge booster-rocket designs in an unprecedented way to assemble a hybrid that would offer the first totally privately funded space transportation system.
The ultimate goal — which has eluded corporate and government rocket scientists for decades — is to build a reliable and flexible aircraft-based launch option capable of hurling satellites as heavy as a pickup truck into low-earth orbit.
Whether Stratolaunch’s "composite craft," or SpaceX’s less expensive, but more "traditional," rockets will prove the more successive technology, only time — and the market — will determine. But the future of the new space corporations seems bright.
--http://www.thenewamerican.com/tech-mainmenu-30/space/10246-microsofts-allen-launches-new-space-company
While the U.S. government’s manned space program has floundered for years, lacking a destination and the will to develop new launch vehicles in a timely fashion to replace the obsolete space shuttle, several private corporations are actively pursuing technologies for carrying people and cargo to Earth orbit.
On December 13, Allen announced the creation of Stratolaunch Systems, which would, the company claimed, reunite Allen and Burt Rutan “to develop the next generation of space travel.” Allen and Rutan collaborated on SpaceShipOne, which flew in September 2004. According to a corporate press release, the goal of Stratolaunch Systems is to “bring airport-like operations to the launch of commercial and government payloads and, eventually, human missions. Plans call for a first flight within five years. The air-launch-to-orbit system will mean lower costs, greater safety, and more flexibility and responsiveness than is possible today with ground-based systems.”
The recent expansion of efforts by private industry to expand a nongovernmental role in space exploration has highlighted the contrast between the NASA and its would-be competitors. Obviously, NASA has an established history, with several dramatic successes which include the moon landings from 1969 through the early 1970s. The success of companies such as SpaceX, which developed the Falcon 9 booster and is actively pursuing further advances that offer the possibility of relatively inexpensive launches to low Earth orbit, has demonstrated a growing role for private industry. Allen’s new Stratolaunch Systems is but the latest competitor in a steadily expanding niche of the aerospace industry.
An article for the Wall Street Journal explains the technological approach favored by Rutan’s and Allen’s new company:
Announced Tuesday, the novel, high-risk project conceived by renowned aerospace designer Burt Rutan seeks to combine engines, landing gears and other parts removed from old Boeing 747 jets with a newly created composite craft from Mr. Rutan and a powerful rocket to be built by a company run by Internet billionaire and commercial-space pioneer Elon Musk.
Dubbed Stratolaunch and funded by one of Mr. Allen's closely held entities, the venture seeks to meld decades-old airplane technology with cutting-edge booster-rocket designs in an unprecedented way to assemble a hybrid that would offer the first totally privately funded space transportation system.
The ultimate goal — which has eluded corporate and government rocket scientists for decades — is to build a reliable and flexible aircraft-based launch option capable of hurling satellites as heavy as a pickup truck into low-earth orbit.
Whether Stratolaunch’s "composite craft," or SpaceX’s less expensive, but more "traditional," rockets will prove the more successive technology, only time — and the market — will determine. But the future of the new space corporations seems bright.
--http://www.thenewamerican.com/tech-mainmenu-30/space/10246-microsofts-allen-launches-new-space-company
Tuesday, December 27, 2011
Let's go whole hog!
"A sovereign government faces no financial constraints. We can have payroll tax holiday extensions and unemployment benefit extension. Heck why don’t we go whole-hog and actually create jobs for the unemployed? We need 25 million of them."
-- http://www.economonitor.com/lrwray/2011/12/26/the-job-guarantee-as-an-alternative-to-enforced-idleness-but-what-will-they-do-examples-from-the-wpa/
Yea, let's have one man dig holes and another man fill them in. Or better yet, pay people to surf the internet!
-- http://www.economonitor.com/lrwray/2011/12/26/the-job-guarantee-as-an-alternative-to-enforced-idleness-but-what-will-they-do-examples-from-the-wpa/
Yea, let's have one man dig holes and another man fill them in. Or better yet, pay people to surf the internet!
Is MF Global causing a shadow bank run?
"It is an open secret that there are more paper-assets than there are actual assets. The markets are essentially playing musical chairs—and praying that the music never stops. Because if it ever does—that is, if there is ever a panic, where everyone decides that they want their actual asset instead of just a slip of paper—the system would crash.
And unlike with fiat currency, where a central bank can print all the liquidity it wants, you can’t print up gold bullion. You can’t print up a silo of grain. You can’t print up a tankerful of oil.
Now, question: When is there ever a panic? When is there ever a run on a financial system?
Answer: When enough participants no longer trust the system. It is the classic definition of a tipping point. It’s not that all of the participants lose faith in the system or institution. It’s not even when most of the participants lose faith: Rather, it’s when a mere some of the participants decide they no longer trust the system that a run is triggered.
And though this is completely subjective on my part—backed by no statistics except scattered anecdotal evidence—but it seems to me that MF Global has shoved us a lot closer to this theoretical run on the system.
As I write this, a lot of investors whom I know personally—who are sophisticated, wealthy, and not at all the paranoid type—are quietly pulling their money out of all brokerage firms, all banks, all equity firms. They are quietly trading out of their paper assets and going into the actual, physical asset.
Note that they’re not trading into the asset—they’re simply exchanging their paper-asset for the real thing.
Why? MF Global."
“Because of MF Global, the integrity of the system has disappeared,” said a good friend of mine, Tuur Demester, who runs Macrotrends, a Dutch newsletter out of Brugge. “The banks are insolvent, the governments are insolvent, and all that’s left is for the people to realize what’s going on—and that will start a panic.”
--http://gonzalolira.blogspot.com/2011/12/run-on-global-banking-systemhow-close.html
And unlike with fiat currency, where a central bank can print all the liquidity it wants, you can’t print up gold bullion. You can’t print up a silo of grain. You can’t print up a tankerful of oil.
Now, question: When is there ever a panic? When is there ever a run on a financial system?
Answer: When enough participants no longer trust the system. It is the classic definition of a tipping point. It’s not that all of the participants lose faith in the system or institution. It’s not even when most of the participants lose faith: Rather, it’s when a mere some of the participants decide they no longer trust the system that a run is triggered.
And though this is completely subjective on my part—backed by no statistics except scattered anecdotal evidence—but it seems to me that MF Global has shoved us a lot closer to this theoretical run on the system.
As I write this, a lot of investors whom I know personally—who are sophisticated, wealthy, and not at all the paranoid type—are quietly pulling their money out of all brokerage firms, all banks, all equity firms. They are quietly trading out of their paper assets and going into the actual, physical asset.
Note that they’re not trading into the asset—they’re simply exchanging their paper-asset for the real thing.
Why? MF Global."
“Because of MF Global, the integrity of the system has disappeared,” said a good friend of mine, Tuur Demester, who runs Macrotrends, a Dutch newsletter out of Brugge. “The banks are insolvent, the governments are insolvent, and all that’s left is for the people to realize what’s going on—and that will start a panic.”
--http://gonzalolira.blogspot.com/2011/12/run-on-global-banking-systemhow-close.html
Debt limit to increase $1.2 trillion
See: http://news.yahoo.com/obama-ask-debt-limit-hike-treasury-official-152416457.html
This is after increases of $400 billion in August and $500 billion in September. After the new increase, the debt limit will be $16.394 trillion, which should be enough to last through the November 2012 elections.
This is after increases of $400 billion in August and $500 billion in September. After the new increase, the debt limit will be $16.394 trillion, which should be enough to last through the November 2012 elections.
Monday, December 26, 2011
Sunday, December 25, 2011
There is no debt problem
We are never going to pay back the national debt. But if we decided to, we could print the money to do so. So stop worrying and spend, spend, spend!
2011 Financial Report of the U.S. Government
http://www.fms.treas.gov/frsummary/frsummary2011.pdf
The US government has a net negative position of $14,785 billion, up from $13,473 in 2010.
Update: This report itself says that the system is unsustainable after 2024, when the Medicare Trust Fund runs out of money.
The US government has a net negative position of $14,785 billion, up from $13,473 in 2010.
Update: This report itself says that the system is unsustainable after 2024, when the Medicare Trust Fund runs out of money.
Saturday, December 24, 2011
The US Treasury is the only game in town
In the New World of Safe Investments, U.S. Debt Stands (Nearly) Alone
"investors are so desperate for Treasuries that some would actually pay the government to take their money.
There's a simple reason. When it comes to rock-solid safe investments, Uncle Sam is pretty much the only game in town"
US debt is considered "rock solid", and the only other debt that is considered rock solid is that of Germany and France. There is such a high demand for such debt that the US could easily borrow another $10 trillion.
"investors are so desperate for Treasuries that some would actually pay the government to take their money.
There's a simple reason. When it comes to rock-solid safe investments, Uncle Sam is pretty much the only game in town"
US debt is considered "rock solid", and the only other debt that is considered rock solid is that of Germany and France. There is such a high demand for such debt that the US could easily borrow another $10 trillion.
Sunday, December 18, 2011
Love's Theme, Part VI - Rap Version
Notorious B.I.G. vs. Herb Alpert - Rise Hypnotize (Dubious Remash Full Version)
Love's Theme, Part V - Dream on Me
Orchestral Manoeuvres In The Dark - Dream Of Me
say it isn't right
to be alone tonight
so in love with you
tell you what I'm gonna
do about it
I had an idea
based on a love theme
I had an idea
based on a love theme
all I ever do
is what you want me to
so in love with you
tell you what I'm gonna
do about it
I had an idea
based on a love theme
I had an idea
based on a love theme
say it isn't right
to be alone tonight
so in love with you
tell you what I'm gonna
do about it
I had an idea
based on a love theme
I had an idea
based on a love theme
Love's Theme, Part IV - The Love Boat Theme
Love, exciting and new
Come aboard, we're expecting you
Love, life's sweetest reward
Let it flow, it floats back to you
Love Boat soon will be making another run
The Love Boat promises something for everyone
Set a course for adventure
Your mind on a new romance
And love won't hurt anymore
It's an open smile on a friendly shore
It's love
Welcome aboard
It's love!
Love's Theme, Part III - Feels So Good
"Chuck Mangione - Feels So Good (w/lyrics)"
There's no place for me to hide
The thoughts of all the time I cried
And felt this pain
That I have known
Because I needed just to hear
That special something
And then one day
You just appear
You said "hello"
"Let's make love along the way"
Your name is music to my heart
I'll always really love you
Feel so good when I'm with you
I can't believe you love me too
With you it feels like it should feel
With you it feels so good
Love's Theme, Part I
I had this tune running through my head last week and couldn't identify it, and so started listening to instrumental music to try to find it. I since have found at least 12 different versions of it, including some with words. I believe this is the original. The composer is Barry White. This is called "Love's Theme by Barry White and Love Unlimited Orchestra":
Nobody else that I can find has commented on the connections between the different versions. There are 3 main versions in addition to the original one by Barry White: "The Hustle" by Van McCoy; "Feels So Good" by Chuck Mangione; and "Rise" by Herb Alpert.
Nobody else that I can find has commented on the connections between the different versions. There are 3 main versions in addition to the original one by Barry White: "The Hustle" by Van McCoy; "Feels So Good" by Chuck Mangione; and "Rise" by Herb Alpert.
Saturday, December 17, 2011
The Social Security Story
Here is a documentary from 1962 about Social Security that is interesting. They believe that there is a social security trust fund, haha.
Emergency spending bill to increase 2012 deficit by $166 billion
This wasn't in the news anywhere, I just decided to check the progress of the appropriations bill and found this. There are 2 bills the Senate is debating right now (on a Saturday).
The first is HR3630, the "Middle Class Tax Relief and Job Creation Act of 2011", which will reduce revenues by $130 billion and increase outlays by $36.8 billion in FY2012, for a total increase of 166.8 billion to the 2012 deficit. Another version is called the " Temporary Payroll Tax Cut Continuation Act of 2011", which would increase the deficit only $30 billion. (This was just released today, December 17, and it is pretty cool that the budget analysts are working today).
The other one is HR2055, the appropriations bill, which is still under debate as we speak.
The first is HR3630, the "Middle Class Tax Relief and Job Creation Act of 2011", which will reduce revenues by $130 billion and increase outlays by $36.8 billion in FY2012, for a total increase of 166.8 billion to the 2012 deficit. Another version is called the " Temporary Payroll Tax Cut Continuation Act of 2011", which would increase the deficit only $30 billion. (This was just released today, December 17, and it is pretty cool that the budget analysts are working today).
The other one is HR2055, the appropriations bill, which is still under debate as we speak.
The 2012 deficit so far
FY2012 started on October 1, 2011.
The CBO projects revenues of 2635 and outlays of 3609, for a deficit of 973.
The OMB projects revenues of 2627 and outlays of 3729, for a deficit of 1,101.
I am projecting revenues of 2624 and outlays of 3913, for a deficit of 1,289.
There is only 2 months of data, but how does it look so far?
Well, there were revenues of 316 and outlays of 553, for a deficit of 237. Multiplying these numbers by 6 gives revenues of 1896 and outlays of 3318, for a deficit of 1422.
The latest FRED prediction for annualized receipts is 2572.5. The latest FRED prediction for annualized expenditures is 3745.2. So FRED is predicting a deficit of 1172.7.
The CBO projects revenues of 2635 and outlays of 3609, for a deficit of 973.
The OMB projects revenues of 2627 and outlays of 3729, for a deficit of 1,101.
I am projecting revenues of 2624 and outlays of 3913, for a deficit of 1,289.
There is only 2 months of data, but how does it look so far?
Well, there were revenues of 316 and outlays of 553, for a deficit of 237. Multiplying these numbers by 6 gives revenues of 1896 and outlays of 3318, for a deficit of 1422.
The latest FRED prediction for annualized receipts is 2572.5. The latest FRED prediction for annualized expenditures is 3745.2. So FRED is predicting a deficit of 1172.7.
New House Appropriation Bill
The House passed a bill that claims to have cut spending:
"The passage of this bill marks the second year in a row that Congress has cut discretionary spending – the first time this has occurred in modern history. Once the legislation has been passed by the Senate and signed by the president, the government will have saved nearly $31 billion in total discretionary spending compared to last year’s level and $95 billion compared to FY 2010 – the last year Democrats controlled Congress.
“The Appropriations Committee has been successful in making real and meaningful cuts in government spending. For two years in a row, we have shown our commitment to the American people to change spending habits in Washington to help get our budgets back into balance,” Chairman Rogers said."
================
My comment: I wish this were true. The first problem I have is how do they define "discretionary spending". I thought discretionary spending was everything except for Social Security, Medicare, Medicaid and Interest. They say the baseline for discretionary spending is 1.043 trillion, down from last year's 1.050 trillion. By my calculation, last year's discretionary spending was 1.857 trillion.
The second problem I have is that they claim that discretionary FY2011 spending was 64 billion less than FY2010 spending. By my calculation, FY2011 discretionary spending was 48 billion more than FY2010 spending.
"The passage of this bill marks the second year in a row that Congress has cut discretionary spending – the first time this has occurred in modern history. Once the legislation has been passed by the Senate and signed by the president, the government will have saved nearly $31 billion in total discretionary spending compared to last year’s level and $95 billion compared to FY 2010 – the last year Democrats controlled Congress.
“The Appropriations Committee has been successful in making real and meaningful cuts in government spending. For two years in a row, we have shown our commitment to the American people to change spending habits in Washington to help get our budgets back into balance,” Chairman Rogers said."
================
My comment: I wish this were true. The first problem I have is how do they define "discretionary spending". I thought discretionary spending was everything except for Social Security, Medicare, Medicaid and Interest. They say the baseline for discretionary spending is 1.043 trillion, down from last year's 1.050 trillion. By my calculation, last year's discretionary spending was 1.857 trillion.
The second problem I have is that they claim that discretionary FY2011 spending was 64 billion less than FY2010 spending. By my calculation, FY2011 discretionary spending was 48 billion more than FY2010 spending.
Friday, December 16, 2011
Tuesday, December 13, 2011
The amazing new Hoover Dam Bridge
The concrete span is 1060 feet across and is 890 feet above the Colorado River. The Mike O'Callaghan – Pat Tillman Memorial Bridge opened on October 19, 2010.
Quantitative easing prevents fiscal discipline
"The reason that the ECB is not opening the flood gates to buy sovereign bonds in unlimited amounts is due to what happened in the United States," [Dick] Bove said. "In this country, once the Federal Reserve made it known it would use quantitative easing to buy Treasury debt, the Congress abandoned any attempt to deal with U.S. deficit. The ECB has learned this lesson and is not letting European governments slide back into their old habits. It wants some discipline."
--http://www.cnbc.com/id/45655607
--http://www.cnbc.com/id/45655607
Sunday, December 11, 2011
Robots on the Moon
http://www.latimes.com/news/science/la-sci-naveen-jain-20111210,0,6032753.story
"Most people don't take it literally when they're told to shoot for the moon — but thinking small isn't Naveen Jain's way. The 52-year-old Internet entrepreneur is a co-founder of Moon Express Inc., one of several companies in the Google Lunar X Prize competition, in which privately funded teams will try to put robots on the moon by 2016.
Jain's plans don't end at reaching the moon's surface. MoonEx, as his company is also known, plans to make billions mining the moon for precious resources. It also hopes to let customers send messages and materials to the moon."
===============
On a related note, Romney was attacking Gingrich for promoting lunar colonies at the debate in Iowa. Here is Gingrich's idea:
"Gingrich, who has dabbled in science fiction and cited both futurist Alvin Toffler and the concept of "psychohistory" in Isaac Asimov's Foundation novels as intellectual inspirations, has long been dubbed "Newt Skywalker" thanks to his vision of future warfare that blends fact and fantasy. This streak of futurism is, by his own admission, rooted in a political and philosophical belief about technology and power. ''I would rather rely on engineers than diplomats for security,'' Gingrich told Aviation Week & Space Technology magazine in 1994, in reference to his support for missile defense."
"Most people don't take it literally when they're told to shoot for the moon — but thinking small isn't Naveen Jain's way. The 52-year-old Internet entrepreneur is a co-founder of Moon Express Inc., one of several companies in the Google Lunar X Prize competition, in which privately funded teams will try to put robots on the moon by 2016.
Jain's plans don't end at reaching the moon's surface. MoonEx, as his company is also known, plans to make billions mining the moon for precious resources. It also hopes to let customers send messages and materials to the moon."
===============
On a related note, Romney was attacking Gingrich for promoting lunar colonies at the debate in Iowa. Here is Gingrich's idea:
"In response to another question, Gingrich criticized the handling of the nation's space program, saying the country was leading the world, but the program is now stymied by bureaucracy.
“Instead of being the exciting, dynamic entrepreneurial future, we studied it to death and we red-taped it to death and we created standards that are absurd,” Gingrich said.
He said he would like to devote a portion of NASA's budget and use it as tax-free prize money for private companies that develop new ways to explore space.
“If you took 5 percent of the NASA budget over the last 10 years, you'd have $8 billion in prizes,” Gingrich said. “If you said, for example, we'll pay a billion dollars to the first folks to get to the moon and be able to stay there, we'd have all sorts of folks forming various efforts to get to the moon, none of them would be applying for federal money, none of them would be sitting around waiting for grant reviews.”
--http://www2.tbo.com/news/politics/2011/nov/17/1/gingrich-tells-florida-crowd-he-welcomes-scrutiny-ar-325422/
=======================
Newt Skywalker and the Moon Mirror =======================
"Gingrich, who has dabbled in science fiction and cited both futurist Alvin Toffler and the concept of "psychohistory" in Isaac Asimov's Foundation novels as intellectual inspirations, has long been dubbed "Newt Skywalker" thanks to his vision of future warfare that blends fact and fantasy. This streak of futurism is, by his own admission, rooted in a political and philosophical belief about technology and power. ''I would rather rely on engineers than diplomats for security,'' Gingrich told Aviation Week & Space Technology magazine in 1994, in reference to his support for missile defense."
Who is Aubrey McClendon?
"FORBES estimates McClendon's personal fortune exceeds $1.2 billion, including his 2.5% personal stake in nearly every Chesapeake well, real estate and 19% of the NBA's Oklahoma City Thunder, which he helped move from Seattle to his hometown amid much acrimony. He is without a doubt the most admired--and feared--man in the U.S. oil patch."
--http://www.forbes.com/forbes/2011/1024/feature-aubrey-mcclendon-hero-energy-chesapeake-risk-christopher-helman.html
"We have a three-pronged approach. First, we will create huge new supplies of oil and natural gas liquids in the United States, as much as 50%. Our company will be part of that not all of it. Second, we will create what is called a natural gas highway for America. we will start with heavy trucks. We think within 3 years we will be able to rely on a coast-to-coast border-to-border network, grid if you will. We will begin to convert from trucks that use diesel, primarily foreign oil, to something running on American natural gas. The third thing is our investment in Sundrop fuels, which is a company that has developed a proprietary way to combine two great American resources, which is biomass and natural gas together, to create the only affordable scalable, green gasoline that our country has ever seen. I think you take those three things together, you have an immediate solution to the problem of imported oil and a moribond economy, and you have an intermediate solution through natural gas fuel and infrastructure and finally, the longer term green gas as well.
What do you think these initiatives will do for employment?
At a minimum, I think they can create a million jobs over the next few years. I look at our own company, we have create 2000 jobs over the last six months alone, just through expanding our business in natural gas and oil production as well. And these are not low wage jobs. These are good solid jobs that should have salaries in the range of 50-75-100,thousand dollars, white collar and blue collar jobs."
==================
"Yes, it’s really true: America’s future energy needs can be supplied 100% from home-grown energy resources. Production of unconventional oil and shale natural gas from 32 of our 50 states now provides fuel sources of revolutionary abundance, allowing us in the years ahead to stand tall again without the weight of exporting trillions of dollars to the world’s oil producers.
This new energy supply revolution in the U.S. is so enormous that American manufacturers now enjoy natural gas costs that are the envy of the world. Since 2008, the abundant supply of natural gas has dropped the price of natural gas by 67%, providing a national economic stimulus of $250 million per day. This domestic energy cost advantage is already attracting industrial facilities back into the U.S.; witness the almost weekly announcements of new jobs in the American chemical industry, for example. In the next few years, rising production of American natural gas can spark a 21st century American manufacturing renaissance, producing jobs that will help revitalize America."
--http://www.forbes.com/sites/christopherhelman/2011/10/03/chesapeake-energys-mcclendon-how-america-can-get-its-swagger-back/
--http://www.forbes.com/forbes/2011/1024/feature-aubrey-mcclendon-hero-energy-chesapeake-risk-christopher-helman.html
"We have a three-pronged approach. First, we will create huge new supplies of oil and natural gas liquids in the United States, as much as 50%. Our company will be part of that not all of it. Second, we will create what is called a natural gas highway for America. we will start with heavy trucks. We think within 3 years we will be able to rely on a coast-to-coast border-to-border network, grid if you will. We will begin to convert from trucks that use diesel, primarily foreign oil, to something running on American natural gas. The third thing is our investment in Sundrop fuels, which is a company that has developed a proprietary way to combine two great American resources, which is biomass and natural gas together, to create the only affordable scalable, green gasoline that our country has ever seen. I think you take those three things together, you have an immediate solution to the problem of imported oil and a moribond economy, and you have an intermediate solution through natural gas fuel and infrastructure and finally, the longer term green gas as well.
What do you think these initiatives will do for employment?
At a minimum, I think they can create a million jobs over the next few years. I look at our own company, we have create 2000 jobs over the last six months alone, just through expanding our business in natural gas and oil production as well. And these are not low wage jobs. These are good solid jobs that should have salaries in the range of 50-75-100,thousand dollars, white collar and blue collar jobs."
==================
"Yes, it’s really true: America’s future energy needs can be supplied 100% from home-grown energy resources. Production of unconventional oil and shale natural gas from 32 of our 50 states now provides fuel sources of revolutionary abundance, allowing us in the years ahead to stand tall again without the weight of exporting trillions of dollars to the world’s oil producers.
This new energy supply revolution in the U.S. is so enormous that American manufacturers now enjoy natural gas costs that are the envy of the world. Since 2008, the abundant supply of natural gas has dropped the price of natural gas by 67%, providing a national economic stimulus of $250 million per day. This domestic energy cost advantage is already attracting industrial facilities back into the U.S.; witness the almost weekly announcements of new jobs in the American chemical industry, for example. In the next few years, rising production of American natural gas can spark a 21st century American manufacturing renaissance, producing jobs that will help revitalize America."
--http://www.forbes.com/sites/christopherhelman/2011/10/03/chesapeake-energys-mcclendon-how-america-can-get-its-swagger-back/
Chesapeake Energy
Chesapeake Energy is going crazy buying leases and drilling for oil. Their stock prices is being punished because they are spending so much money. But it seems a lot more rational than investing in Treasury bonds.
http://seekingalpha.com/article/312715-why-won-t-the-stock-market-believe-in-chesapeake-energy-s-business-model
"Chesapeake has repeatedly amassed leading land positions in highly valuable resource plays and then recovered 100% of the cash Chesapeake invested (while still retaining 75% ownership of the play) by bringing in Joint Venture partners.
Spend a billion dollars for a million acres. Then sell 25% of the acreage for a billion dollars. Keep 75% of the acreage at a net cost of zero.
And the stock market is punishing the stock price because Chesapeake plans to continue to spend money locking down land.
It borders on the absurd. Chesapeake has a net cost of zero on millions acres of land worth billions of dollars. Yet the stock market wants Chesapeake to stop doing this.
Not me. I say spend away boys. I am fully aware that the undervaluation of Chesapeake’s shares can last for years, but at some point the true value of all of this acreage has to be realized."
http://seekingalpha.com/article/312715-why-won-t-the-stock-market-believe-in-chesapeake-energy-s-business-model
"Chesapeake has repeatedly amassed leading land positions in highly valuable resource plays and then recovered 100% of the cash Chesapeake invested (while still retaining 75% ownership of the play) by bringing in Joint Venture partners.
Spend a billion dollars for a million acres. Then sell 25% of the acreage for a billion dollars. Keep 75% of the acreage at a net cost of zero.
And the stock market is punishing the stock price because Chesapeake plans to continue to spend money locking down land.
It borders on the absurd. Chesapeake has a net cost of zero on millions acres of land worth billions of dollars. Yet the stock market wants Chesapeake to stop doing this.
Not me. I say spend away boys. I am fully aware that the undervaluation of Chesapeake’s shares can last for years, but at some point the true value of all of this acreage has to be realized."
System in freefall now
I think that the system is in freefall now. It is not because of any ratio that has been breached. I have spent a lot of time trying to speculate on some metric that would indicate whether some problem has occurred, usually as a percent of GDP or tax revenue. Most of the "objective" trends that I have been coming up with indicate a problem somewhere around 2025 to 2035, which is too far out to worry about.
No, the problem has to do with attitude. If you give a spoiled girl a credit card and she spends it and doesn't even keep track of the receipts and ignores the bills when they come in, then you know there is a problem. Why do I need to care, she says, my daddy will take care of it, and even if he doesn't, what are they going to do, arrest me?
We have that same problem. Everyone is living in a fantasy world. And here are some indicators, either causes or symptoms, of the problem.
1. The collapse of the Super-Committee talks. This happened on November 22. This was the committee that was supposed to come up with $1.2 trillion in savings over the next 10 years. And nobody cares. I think this was the last best hope of reaching an agreement. I don't think we will ever have a serious attempt at cutting the deficit again. Instead, there will be some token attempts, like arguing over how to pay for FEMA costs, or holding up FAA construction projects for a few weeks.
2. Lack of seriousness in the budget projections and process. CBO and OMB projections don't even start with the same numbers for 2010 and 2011, and don't have a common definition of what is mandatory spending or defense spending. We don't have a budget, instead we have Continuing Resolutions. The current one funds the government through 12/16/2011 (this Friday). I don't even know when the last time the US had a budget (as opposed to a series of resolutions).
3. The collapse of MF Global, and the apparent immunity of Jon Corzine. MF Global collapsed on 10/31/11, and there was a "shortfall" in customer accounts of $1.2 billion. Will Corzine go to jail? I don't think so. The accounts are insured by the SIPC, so nobody really cares. But it shows systemic problems. The collapse of MF Global is what caused Ann Barnhardt to lose it, which seems extreme. One company fails and you think the sky is falling, but if you see every company as having the same problems then I think you have a valid argument.
4. Social Security. I have written about this before. The combined Social Security and Medicare trust funds reached a permanent peak balance on 10/18/2011 and it is all downhill from here. It would be fiscally prudent to reinstate the 2% payroll cut, but nobody cares.
5. Increasing Cash Deficits. I look at the Debt Held by the Public as a key indicator. This was $10,389,958 on 11/30/2011. It was $9.756 trillion on 7/29/2011; $10.024 trillion on 8/31/2011; $10.127 on 9/30/2011 and $10.256 on 10/31/2011. It has gone up at least $100 billion every month since August. I don't think we will ever have a month again in which the debt does not increase at least $100 billion.
So now that the crisis is upon us, what do we do? First, stop using the dollar as a measurement of anything except insanity. It has no fixed value, so it is meaningless as a measurement device. The is also true of the other major currencies, the pound, euro and yen. Instead, use the stable secondary currencies, such as the Swiss franc, Canadian dollar, Australian dollar, Hong Kong dollar, Norwegian krone, Chilean peso, Brazilian real, Indian rupee, South Korean won, etc. And buy silver. Sell any bonds and invest in foreign stocks. Don't worry about any debts, they will be inflated away.
How long until we see the practical effects of this? Well, it depends on what you are looking for. I don't think we will have a stock market crash or a lot of major companies failing because they are being artificially inflated. When M2 velocity starts to pick up, I think we will quickly see inflation of 10% or more. The M1 multiplier is already starting to turn. I think we will see the effects by summer 2012.
I am going to stop making any budget projections since they are meaningless. I will continue to blog about positive developments.
=============
Update 6/19/12: This isn't a model, it's a pessimistic rant. An economy is pretty robust and won't collapse just because the government doesn't go through a formal budgeting process.
No, the problem has to do with attitude. If you give a spoiled girl a credit card and she spends it and doesn't even keep track of the receipts and ignores the bills when they come in, then you know there is a problem. Why do I need to care, she says, my daddy will take care of it, and even if he doesn't, what are they going to do, arrest me?
We have that same problem. Everyone is living in a fantasy world. And here are some indicators, either causes or symptoms, of the problem.
1. The collapse of the Super-Committee talks. This happened on November 22. This was the committee that was supposed to come up with $1.2 trillion in savings over the next 10 years. And nobody cares. I think this was the last best hope of reaching an agreement. I don't think we will ever have a serious attempt at cutting the deficit again. Instead, there will be some token attempts, like arguing over how to pay for FEMA costs, or holding up FAA construction projects for a few weeks.
2. Lack of seriousness in the budget projections and process. CBO and OMB projections don't even start with the same numbers for 2010 and 2011, and don't have a common definition of what is mandatory spending or defense spending. We don't have a budget, instead we have Continuing Resolutions. The current one funds the government through 12/16/2011 (this Friday). I don't even know when the last time the US had a budget (as opposed to a series of resolutions).
3. The collapse of MF Global, and the apparent immunity of Jon Corzine. MF Global collapsed on 10/31/11, and there was a "shortfall" in customer accounts of $1.2 billion. Will Corzine go to jail? I don't think so. The accounts are insured by the SIPC, so nobody really cares. But it shows systemic problems. The collapse of MF Global is what caused Ann Barnhardt to lose it, which seems extreme. One company fails and you think the sky is falling, but if you see every company as having the same problems then I think you have a valid argument.
4. Social Security. I have written about this before. The combined Social Security and Medicare trust funds reached a permanent peak balance on 10/18/2011 and it is all downhill from here. It would be fiscally prudent to reinstate the 2% payroll cut, but nobody cares.
5. Increasing Cash Deficits. I look at the Debt Held by the Public as a key indicator. This was $10,389,958 on 11/30/2011. It was $9.756 trillion on 7/29/2011; $10.024 trillion on 8/31/2011; $10.127 on 9/30/2011 and $10.256 on 10/31/2011. It has gone up at least $100 billion every month since August. I don't think we will ever have a month again in which the debt does not increase at least $100 billion.
So now that the crisis is upon us, what do we do? First, stop using the dollar as a measurement of anything except insanity. It has no fixed value, so it is meaningless as a measurement device. The is also true of the other major currencies, the pound, euro and yen. Instead, use the stable secondary currencies, such as the Swiss franc, Canadian dollar, Australian dollar, Hong Kong dollar, Norwegian krone, Chilean peso, Brazilian real, Indian rupee, South Korean won, etc. And buy silver. Sell any bonds and invest in foreign stocks. Don't worry about any debts, they will be inflated away.
How long until we see the practical effects of this? Well, it depends on what you are looking for. I don't think we will have a stock market crash or a lot of major companies failing because they are being artificially inflated. When M2 velocity starts to pick up, I think we will quickly see inflation of 10% or more. The M1 multiplier is already starting to turn. I think we will see the effects by summer 2012.
I am going to stop making any budget projections since they are meaningless. I will continue to blog about positive developments.
=============
Update 6/19/12: This isn't a model, it's a pessimistic rant. An economy is pretty robust and won't collapse just because the government doesn't go through a formal budgeting process.
UK selling 50 year gilts
The gilt, which will pay inflation-linked coupons to investors, matures in 2061 and has a yield of 0.49%. The DMO believed it was the longest-dated bond issued by any government.
http://www.efinancialnews.com/story/2011-10-26/50-year-index-linked-gilt
Well, Mexico is selling 100 year dollar bonds at 5.96% interest
http://www.bloomberg.com/news/2011-08-10/mexico-to-sell-100-year-dollar-bonds-as-benchmark-treasury-yields-tumble.html
http://www.efinancialnews.com/story/2011-10-26/50-year-index-linked-gilt
Well, Mexico is selling 100 year dollar bonds at 5.96% interest
http://www.bloomberg.com/news/2011-08-10/mexico-to-sell-100-year-dollar-bonds-as-benchmark-treasury-yields-tumble.html
Saturday, December 10, 2011
New energy boom
http://www.npr.org/2011/12/02/142695152/oil-boom-puts-strain-on-north-dakota-towns
"North Dakota has a low 3.5 percent unemployment rate and a state budget with a billion dollar surplus. That's because of a major oil boom in the western part of the state, a discovery of at least 2 billion barrels to be gained by fracking — the controversial process of injecting fluid deep into underground rock formations to force the oil out. The find could be the largest ever in the lower 48 states. It's expected to make North Dakota the third largest producer of oil after Alaska and Texas."
http://www.denverpost.com/breakingnews/ci_19333957
Anadarko Petroleum Corp said today [November 14, 2011] it estimates there are between 500 million and 1.5 billion barrels of oil in Colorado's Wattenberg Field in Weld County.
http://seekingalpha.com/article/306542-shale-oil-is-the-new-energy-boom-in-the-u-s
The Niobra Shale Formation Geography
The Niobrara Shale formation covers parts of four western states – Wyoming, Colorado, South Dakota and Nebraska:
Geologists have known about the oil in Niobrara for about 80 years. But no one ever thought it could be recovered economically… until now. Like the Barnett, Fayetteville, Marcellus, Haynesville and Bakken – the Niobrara is another shale play that’s been known about for some time.
But it’s only recently that some of the major exploration and production companies shifted capital and drill rigs to explore the Niobrara.
And it’s only since the advent of hydraulic fracking and horizontal drilling that it’s possible for this formation to be exploited for the oil and natural gas it contains.
http://news.yahoo.com/thanks-fracking-north-dakota-midwests-own-little-saudi-205949554.html
"North Dakota has a low 3.5 percent unemployment rate and a state budget with a billion dollar surplus. That's because of a major oil boom in the western part of the state, a discovery of at least 2 billion barrels to be gained by fracking — the controversial process of injecting fluid deep into underground rock formations to force the oil out. The find could be the largest ever in the lower 48 states. It's expected to make North Dakota the third largest producer of oil after Alaska and Texas."
http://www.denverpost.com/breakingnews/ci_19333957
Anadarko Petroleum Corp said today [November 14, 2011] it estimates there are between 500 million and 1.5 billion barrels of oil in Colorado's Wattenberg Field in Weld County.
http://seekingalpha.com/article/306542-shale-oil-is-the-new-energy-boom-in-the-u-s
The Niobra Shale Formation Geography
The Niobrara Shale formation covers parts of four western states – Wyoming, Colorado, South Dakota and Nebraska:
Geologists have known about the oil in Niobrara for about 80 years. But no one ever thought it could be recovered economically… until now. Like the Barnett, Fayetteville, Marcellus, Haynesville and Bakken – the Niobrara is another shale play that’s been known about for some time.
But it’s only recently that some of the major exploration and production companies shifted capital and drill rigs to explore the Niobrara.
And it’s only since the advent of hydraulic fracking and horizontal drilling that it’s possible for this formation to be exploited for the oil and natural gas it contains.
http://news.yahoo.com/thanks-fracking-north-dakota-midwests-own-little-saudi-205949554.html
Thursday, December 8, 2011
How to fix Social Security and Medicare
"Social security and medicare are criminal ponzi schemes. The only possible way to keep these ponzi schemes from completely collapsing and destroying the entire economy, our constitutional republic, and western civilization by extension, as we have known it, is to rapidly sunset and eliminate them entirely."
Who is Ann Barnhardt?
"Get the hell out. Get out of all paper and it's not just the commodities markets. This is going to cascade through everything. It is going to get into the equities. It is going to get into 401ks and IRAs, it is going to get into pension plans and so on and so forth. Total systemic collapse. Get out! I don’t know how I can be anymore plain about this. I say this over and over and over again and then I get scads of emails saying, well I can’t get out of my 401k. Yes, you can. Yes, you can. Take the penalty and get the hell out of there. What would you rather do? Would you rather pay the 10% penalty or would you rather have it all go up in smoke? Because that's what we're staring down the barrel of."
Corzine is a cockroach
My name is Foti Georgiadis and I want to explain to you today how your life can get turned upside down in a New York minute. One day you are living the dream, and the next minute you are thinking to yourself, what the hell do I do now? I woke up Monday morning at 6:30, to find out that my brokerage firm filed bankruptcy and were in a liquidation position. I didn't know how to react, I didn't know what to do. I immediately called another brokerage firm to transfer my account over, which I had securities in there and some limited amount of cash. I was in an all cash position, no margin, and I sat and I waited. They called me back and said that my ACAP form was rejected and that my account was frozen. What do you do in a situation like this, when you have all your life put in one brokerage firm that has been around for 100 years, called MF Global started from Man Financial? How do you trust the system?
The aftermath of the MF Global collapse
It seems that the MF Global collapse is causing huge problems on par with the AIG collapse in 2008.
"The Merc itself basically did the equivalent of sticking a nine millimeter in their mouth and pulling the trigger by not stepping forward, backstopping the MF Global client accounts and at the very least, the Merc should have allowed the MF Global customers to liquidate their accounts and then transfer to other firms. What the Merc did was the worst possible thing—they froze those people out of their accounts and didn’t allow them to liquidate while the markets continued to trade."
--http://theautomaticearth.blogspot.com/
"MF Global's bankruptcy revelations concerning missing client money suggest that funds were not inadvertently misplaced or gobbled up in MF’s dying hours, but were instead appropriated as part of a mass Wall St manipulation of brokerage rules that allowed for the wholesale acquisition and sale of client funds through re-hypothecation. A loophole appears to have allowed MF Global, and many others, to use its own clients’ funds to finance an enormous $6.2 billion Eurozone repo bet.
If anyone thought that you couldn’t have your cake and eat it too in the world of finance, MF Global shows how you can have your cake, eat it, eat someone else’s cake and then let your clients pick up the bill."
--http://newsandinsight.thomsonreuters.com/Securities/Insight/2011/12_-_December/MF_Global_and_the_great_Wall_St_re-hypothecation_scandal/
the MF Global bankruptcy, much more than merely a one-off instance of "repo-to-maturity" of sovereign bonds gone horribly wrong is a symptom of two things: i) the lax London-based unregulated and unsupervised system which has allowed such unprecedented, leveraged monsters as AIG, Lehman and now as it turns out MF Global, to flourish until they end up imploding and threatening the world's entire financial system. Simply said: when one truly digs in, MF Global exposes the 2011 equivalent of the 2008 AIG: virtually unlimited leverage via the shadow banking system, in which there are practically no hard assets backing the infinite layers of debt created above, and which when finally unwound, will create a cataclysmic collapse of all financial institutions, where every bank is daisy-chained to each other courtesy of multiple layers of "hypothecation, and re-hypothecation."
--http://www.zerohedge.com/news/why-uk-trail-mf-global-collapse-may-have-apocalyptic-consequences-eurozone-canadian-banks-jeffe
"The Merc itself basically did the equivalent of sticking a nine millimeter in their mouth and pulling the trigger by not stepping forward, backstopping the MF Global client accounts and at the very least, the Merc should have allowed the MF Global customers to liquidate their accounts and then transfer to other firms. What the Merc did was the worst possible thing—they froze those people out of their accounts and didn’t allow them to liquidate while the markets continued to trade."
--http://theautomaticearth.blogspot.com/
"MF Global's bankruptcy revelations concerning missing client money suggest that funds were not inadvertently misplaced or gobbled up in MF’s dying hours, but were instead appropriated as part of a mass Wall St manipulation of brokerage rules that allowed for the wholesale acquisition and sale of client funds through re-hypothecation. A loophole appears to have allowed MF Global, and many others, to use its own clients’ funds to finance an enormous $6.2 billion Eurozone repo bet.
If anyone thought that you couldn’t have your cake and eat it too in the world of finance, MF Global shows how you can have your cake, eat it, eat someone else’s cake and then let your clients pick up the bill."
--http://newsandinsight.thomsonreuters.com/Securities/Insight/2011/12_-_December/MF_Global_and_the_great_Wall_St_re-hypothecation_scandal/
the MF Global bankruptcy, much more than merely a one-off instance of "repo-to-maturity" of sovereign bonds gone horribly wrong is a symptom of two things: i) the lax London-based unregulated and unsupervised system which has allowed such unprecedented, leveraged monsters as AIG, Lehman and now as it turns out MF Global, to flourish until they end up imploding and threatening the world's entire financial system. Simply said: when one truly digs in, MF Global exposes the 2011 equivalent of the 2008 AIG: virtually unlimited leverage via the shadow banking system, in which there are practically no hard assets backing the infinite layers of debt created above, and which when finally unwound, will create a cataclysmic collapse of all financial institutions, where every bank is daisy-chained to each other courtesy of multiple layers of "hypothecation, and re-hypothecation."
--http://www.zerohedge.com/news/why-uk-trail-mf-global-collapse-may-have-apocalyptic-consequences-eurozone-canadian-banks-jeffe
Thorium-powered cars
Thorium, a silvery-white metal, is a mildly radioactive element (with an atomic weight of 90) that is as abundant as lead. It is present in large quantities in India and is a much-touted stand in for uranium in nuclear reactors because its fission is not self-sustaining, a type of reaction called “sub-critical.”
The idea has energized the small but active thorium community, which holds that it is the answer to our clean energy needs because it could, effectively, power a car forever. The new technology “would be totally emissions-free,” Stevens said, “with no need for recharging.”
--http://www.txchnologist.com/2011/the-thorium-laser-the-completely-plausible-idea-for-nuclear-cars%20
The idea has energized the small but active thorium community, which holds that it is the answer to our clean energy needs because it could, effectively, power a car forever. The new technology “would be totally emissions-free,” Stevens said, “with no need for recharging.”
--http://www.txchnologist.com/2011/the-thorium-laser-the-completely-plausible-idea-for-nuclear-cars%20
Spaceport planned near Denver
Front Range is located near Watkins, east of Denver. Its proposed status as "Spaceport Colorado" would allow for creation of a facility offering tourism, travel and cargo transport to space and from point to point on Earth.
Spaceports — of which eight are active in the United States — are viewed as important economic-development tools.
"These are the opportunities, like cellphones in the early 1990s, that seem farfetched but may not be all that far away. The potential here is huge," Hickenlooper said to about 300 aerospace industry members gathered at the Denver Museum of Nature & Science.
Just a year or two ago, Colorado was considered too populated to allow the construction and operation of a spaceport.
Since then, the development of dual-propulsion spacecraft that can take off from a conventional runway has altered those perceptions. The emerging technology is expected to make space travel easier because it doesn't have the risks of vertical launches.
"Being able to launch horizontally is a game-changer," said Barry Gore, chief executive of Adams County Economic Development.
The concept sounds like something out of Buck Rogers — space planes taxi and take off powered by jet engines, switch to rocket engines when they hit altitude and switch back to jet engines for landing.
"In an hour and a half, you can be in Singapore," said Tom Clark, executive president of the Metro Denver Economic Development Corp.
--http://www.denverpost.com/business/ci_19493801
Spaceports — of which eight are active in the United States — are viewed as important economic-development tools.
"These are the opportunities, like cellphones in the early 1990s, that seem farfetched but may not be all that far away. The potential here is huge," Hickenlooper said to about 300 aerospace industry members gathered at the Denver Museum of Nature & Science.
Just a year or two ago, Colorado was considered too populated to allow the construction and operation of a spaceport.
Since then, the development of dual-propulsion spacecraft that can take off from a conventional runway has altered those perceptions. The emerging technology is expected to make space travel easier because it doesn't have the risks of vertical launches.
"Being able to launch horizontally is a game-changer," said Barry Gore, chief executive of Adams County Economic Development.
The concept sounds like something out of Buck Rogers — space planes taxi and take off powered by jet engines, switch to rocket engines when they hit altitude and switch back to jet engines for landing.
"In an hour and a half, you can be in Singapore," said Tom Clark, executive president of the Metro Denver Economic Development Corp.
--http://www.denverpost.com/business/ci_19493801
Tuesday, December 6, 2011
The debt threshold is 84%
"In the case of government debt, when the debt exceeds the 84 percent threshold, an additional 10 percentage point increase in debt-to-GDP will actually drive growth downward by 10 to 15 basis points (0.1 to 0.15 percent). This additional debt has the exact opposite impact on the economy that governments want."
http://viableopposition.blogspot.com/2011/12/debt-break-over-point-when-is-too-much.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+blogspot%2FtTbKB+%28Viable+Opposition%29
The US may hit this level by 2016.
http://viableopposition.blogspot.com/2011/12/debt-break-over-point-when-is-too-much.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+blogspot%2FtTbKB+%28Viable+Opposition%29
The US may hit this level by 2016.
Social Security in permanent cash-flow deficit now
First, it appears that the "Intragovernmental Holding" portion of the National Debt reached a peak on 10/18/2011 at $4.744 trillion. This includes the Social Security Trust Fund and Medicare Trust Fund. When more social security and medicare taxes are withheld than paid out, this number increases. It also accrues interest which increases the balance. When more benefits are paid out than taxes are withheld, it decreases. Since the government overall is running a huge deficit, this means that a portion of the Social Security checks now are coming from borrowed funds.
Second, read this article: http://brucekrasting.blogspot.com/2011/12/social-security-2011-another-bad-year.html
"The 2011 numbers for SSA indicate that we are at least five years ahead of existing thinking on the SSA deficits. When this realization sinks in, it will break the hearts of the SS defenders. If we are, as I contend, five to six years ahead of “schedule” with cash deficits at SSA, there is no alternative besides cutting scheduled benefits. Raising taxes to fill a hole this big is not an option. Nor is it an option to maintain the status quo and allow for a very rapid rundown of the SS Trust Fund.
If we are going to experience what I believe we will, then the cumulative SS cash shortfall over the next decade will add ANOTHER $1.5 trillion onto Public Sector Borrowing ("PSB"). (A shift from the Intergovernmental account into the PSB account; AKA the Chinese). This increase in PSB more than offsets the $1.2 T of cuts that the congressional super committee failure has just mandated."
Second, read this article: http://brucekrasting.blogspot.com/2011/12/social-security-2011-another-bad-year.html
"The 2011 numbers for SSA indicate that we are at least five years ahead of existing thinking on the SSA deficits. When this realization sinks in, it will break the hearts of the SS defenders. If we are, as I contend, five to six years ahead of “schedule” with cash deficits at SSA, there is no alternative besides cutting scheduled benefits. Raising taxes to fill a hole this big is not an option. Nor is it an option to maintain the status quo and allow for a very rapid rundown of the SS Trust Fund.
If we are going to experience what I believe we will, then the cumulative SS cash shortfall over the next decade will add ANOTHER $1.5 trillion onto Public Sector Borrowing ("PSB"). (A shift from the Intergovernmental account into the PSB account; AKA the Chinese). This increase in PSB more than offsets the $1.2 T of cuts that the congressional super committee failure has just mandated."
International panhandles
http://opinionator.blogs.nytimes.com/2011/12/05/a-few-salient-points/
But surely the two most striking international panhandles are the Wakhan Corridor in Central Asia and the Caprivi Strip, in southern Africa [4].
Both were 19th-century British attempts to modulate the ambitions of other colonial powers (the Russian and German empires, respectively). These “great games” [5] were played out in the smoke-filled salons and conference rooms of Europe; hardly a thought was given to the locals.
But surely the two most striking international panhandles are the Wakhan Corridor in Central Asia and the Caprivi Strip, in southern Africa [4].
Both were 19th-century British attempts to modulate the ambitions of other colonial powers (the Russian and German empires, respectively). These “great games” [5] were played out in the smoke-filled salons and conference rooms of Europe; hardly a thought was given to the locals.
Sunday, December 4, 2011
The UK debt is over 900% of GDP
See http://www.businessinsider.com/g10-countries-by-total-debt-to-gdp-2011-12
"This chart is looking at all kinds of debt, not just sovereign debt. The UK's staggering debt-to-GDP ratio is largely due to the size of its financial sector.
All financial sector debt is, to some extent, potentially government debt, since all governments end up having to rescue their financial sectors in the event of a crisis. That's what brought down Iceland and Ireland."
My questions: How is this even possible? How much longer can it continue? When will the UK have its debt crisis?
My answers: Most of this is "external debt", which is meaningless. When someone outside the UK, say in Bermuda, deposits money in a London bank, then this is in increase to the external debt. The bank will then loan money on a skyscraper in Bahrain. Maybe there is an implicit guarantee by the UK government, but presumably the banks have invested the money and aren't totally bankrupt. London is an international banking center, that is the only thing this shows. The only important number is the net public debt, which is debt that the government is actually paying interest on. And by that measure, the UK is way down the list.
"This chart is looking at all kinds of debt, not just sovereign debt. The UK's staggering debt-to-GDP ratio is largely due to the size of its financial sector.
All financial sector debt is, to some extent, potentially government debt, since all governments end up having to rescue their financial sectors in the event of a crisis. That's what brought down Iceland and Ireland."
My questions: How is this even possible? How much longer can it continue? When will the UK have its debt crisis?
My answers: Most of this is "external debt", which is meaningless. When someone outside the UK, say in Bermuda, deposits money in a London bank, then this is in increase to the external debt. The bank will then loan money on a skyscraper in Bahrain. Maybe there is an implicit guarantee by the UK government, but presumably the banks have invested the money and aren't totally bankrupt. London is an international banking center, that is the only thing this shows. The only important number is the net public debt, which is debt that the government is actually paying interest on. And by that measure, the UK is way down the list.
Miami jail overrun with strippers posing as paralegals
http://blogs.miaminewtimes.com/riptide/2011/11/strippers_posing_as_paralegals.php
Multiple attorneys interviewed by Riptide say the FDC visitor rooms have been taken over by South American pole dancers posing as paralegals for wealthy drug lords inside. Lawyers hired by the accused narco dons allegedly list the scantily clad women as "legal assistants," and the FDC lets them in. Meanwhile, attorneys who refuse to go along risk losing their clients to lawyers with busty beauties on staff.
"They take off their tops and let the guys touch them," veteran defense attorney Hugo Rodriguez says. "The majority of these young, very attractive women are noncitizens brought in exclusively for the purposes of visiting the FDC. Any lawyer can sign a form and designate a legal assistant. There is no way of verifying it. The process is being abused."
Multiple attorneys interviewed by Riptide say the FDC visitor rooms have been taken over by South American pole dancers posing as paralegals for wealthy drug lords inside. Lawyers hired by the accused narco dons allegedly list the scantily clad women as "legal assistants," and the FDC lets them in. Meanwhile, attorneys who refuse to go along risk losing their clients to lawyers with busty beauties on staff.
"They take off their tops and let the guys touch them," veteran defense attorney Hugo Rodriguez says. "The majority of these young, very attractive women are noncitizens brought in exclusively for the purposes of visiting the FDC. Any lawyer can sign a form and designate a legal assistant. There is no way of verifying it. The process is being abused."
Friday, December 2, 2011
Slow GDP growth would be a disaster
"To get the long-term fiscal picture back to being sustainable, a slow down in expenditure is necessary. The proposed legislation tries to achieve that. However, this long running cap on spending will translate to an equally long-term period of sub 3% economic growth. I wouldn’t be surprised it the GDP gains matched the growth in expenditures in the future. That would mean GDP averages about 1.8% for the next eight years or so.
If 1.8% GDP for the next eight years were the outcome, it would be a disaster. The non-discretionary side of the budget will explode regardless of economic performance. If GDP does not rise by a minimum of 3% (average), tax receipts will fall well below plan, and the budget will explode on its own. We will be at 200% debt to GDP by 2021 if sub 2% growth is in our future. We either grow or die; but, we can’t grow without bigger deficits and more debt. What do you call this? Dilemma comes to mind. Alternatives include, quandary, tight spot, predicament, impasse or catch-22. A problem, is what it is."
--http://brucekrasting.blogspot.com/2011/12/payroll-tax-deal-what-does-it-cost.html
If 1.8% GDP for the next eight years were the outcome, it would be a disaster. The non-discretionary side of the budget will explode regardless of economic performance. If GDP does not rise by a minimum of 3% (average), tax receipts will fall well below plan, and the budget will explode on its own. We will be at 200% debt to GDP by 2021 if sub 2% growth is in our future. We either grow or die; but, we can’t grow without bigger deficits and more debt. What do you call this? Dilemma comes to mind. Alternatives include, quandary, tight spot, predicament, impasse or catch-22. A problem, is what it is."
--http://brucekrasting.blogspot.com/2011/12/payroll-tax-deal-what-does-it-cost.html
Public debt up $134 billion in November
On 10/31/2011, the public debt was $10.256 trillion.
On 11/30/2011, the public debt was $10.390 trillion.
To go back a month, on 9/30/2011, the public debt was $10.127 trillion, so the number increased $129 billion in October.
Intragovernmental holdings have been decreasing. This indicates a cash-flow deficit in Social Security & Medicare, which is made up for by extra borrowing. Yet another reason that the debt held by the public is the number to focus on.
Intragovernmental holdings apparently peaked at $4.744 trillion on 10/18/2010 and have been decreasing slowly ever since. The current number is $4.700 trillion.
Another interesting factoid is that the total debt first exceeded $15 trillion on 11/15/2011, and it first exceeded $15.1 trillion on 11/30/2011, only 15 days later.
On 11/30/2011, the public debt was $10.390 trillion.
To go back a month, on 9/30/2011, the public debt was $10.127 trillion, so the number increased $129 billion in October.
Intragovernmental holdings have been decreasing. This indicates a cash-flow deficit in Social Security & Medicare, which is made up for by extra borrowing. Yet another reason that the debt held by the public is the number to focus on.
Intragovernmental holdings apparently peaked at $4.744 trillion on 10/18/2010 and have been decreasing slowly ever since. The current number is $4.700 trillion.
Another interesting factoid is that the total debt first exceeded $15 trillion on 11/15/2011, and it first exceeded $15.1 trillion on 11/30/2011, only 15 days later.
Thursday, December 1, 2011
Naypyitaw, Myanmar
Naypyitaw is the new capital of Myanmar, the country formerly known as Burma. It’s been built from scratch in the middle of nowhere. It's still a work in progress, it was only designated as the administrative capital in 2005, and until recently was largely off-limits to foreigners.
It’s a sprawling, surreal place with so few people that its eight-lane highways are almost deserted – a somewhat shocking site in this congested part of the world.
For several miles down one stretch, I saw just three motorcycles and a truck transporting a group of workers who had been tending the landscaped gardens on either side of the road.
Despite the apparent lack of people, Naypyitaw does have plenty of monstrous government buildings and villas, and several hotels and an international airport are under construction.
--http://worldblog.msnbc.msn.com/_news/2011/12/01/9147022-myanmars-new-capital-a-vast-empty-city
Wednesday, November 30, 2011
Warning signs
"While there are many inputs that are functionally relevant, we look for a couple of warning signs. We move a nation out of the risk free category as soon as they spend more than 10% of their central government revenues on interest alone. We also worry about debt loads that represent more than 5x the revenue of the responsible government. When these and other characteristics are met or exceeded, it can quickly move the country into checkmate."
--http://www.scribd.com/doc/74335711/Hayman-Nov2011
--http://www.scribd.com/doc/74335711/Hayman-Nov2011
Tuesday, November 29, 2011
Debt and Money Supply
What if the proper comparison is not debt to GDP but debt to money supply? So you are really comparing an asset (money) to debt.
The ratio was 1.26 in 2008; 1.41 in 2009; 1.56 in 2010; and 1.55 in 2011. As long as this ratio doesn't keep increasing then there shouldn't be a problem right? Yea, more debt, but also more money to pay for it. No worries.
Update: Is the economy like a machine with 2 related levers, interest rates and money supply? You push on the gas when you want to speed up, and you pull up when you want to slow down. So it just needs more gas (money supply).
The ratio was 1.26 in 2008; 1.41 in 2009; 1.56 in 2010; and 1.55 in 2011. As long as this ratio doesn't keep increasing then there shouldn't be a problem right? Yea, more debt, but also more money to pay for it. No worries.
Update: Is the economy like a machine with 2 related levers, interest rates and money supply? You push on the gas when you want to speed up, and you pull up when you want to slow down. So it just needs more gas (money supply).
Monday, November 28, 2011
Monetary Inflation
The Monetary Base (M0) is up 34% over last year (2663 on 10/1/2011; 1987 on 10/1/2010). M2 is up 10% over last year (9559 on 10/1/2011; 8699 on 10/1/2010). This hasn't hit the consumer price index yet but it will.
Sunday, November 27, 2011
$708 trillion of derivatives
There are now $708 trillion of derivatives outstanding according to the BIS. The biggest category of these is Interest Rates Swaps at $442 trillion.
I don't know what this means. Probably nothing, unless something unusual happens, like a sudden rise in interest rates. And then if a big counterparty fails, a la Bear Stearns or AIG, all hell will break loose.
I don't know what this means. Probably nothing, unless something unusual happens, like a sudden rise in interest rates. And then if a big counterparty fails, a la Bear Stearns or AIG, all hell will break loose.
Friday, November 25, 2011
Should the Fed bail out Europe?
This is just a thought experiment. What if the Fed bought up 200 billion Euros, and then bought up Italian or French debt? The purchase of the Euros would weaken the dollar slightly which would be good for US economy. And the purchase of the bonds would help stabilize Europe.
See also: http://www.zerohedge.com/news/will-fed-buy-efsf-bonds
"The EFSF should announce bonds sales to the Fed. The Fed should purchase 200 billion Eur of EFSF bonds today. They should commit to further purchases of 100 billion in Q1 and Q2 next year. The Fed has been dying to do some quantitative easing and has been looking for a liquidity crisis in need of some liquidity. It has also been looking (quietly) for ways to keep the dollar weaker."
See also: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8918784/Should-the-Fed-save-Europe-from-disaster.html
"The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt. Potentially, this class of assets offers huge scope for Fed operations," he [Bernanke] said.
Berkeley’s Brad DeLong said it is time for Bernanke to act on this as the world lurches straight into 1931 and a Great Depression II. “The Federal Reserve needs to buy up every single European bond owned by every single American financial institution for cash,” he said.
The Fed could buy €2 trillion of EMU debt or more, intervening with crushing power. The credible threat of such action by the world’s paramount monetary force might alone bring Italian and Spanish yields back down below 5pc, before one bent nickel is even spent.
And yet another article saying the same thing:
http://www.aljazeera.com/indepth/opinion/2011/11/20111128143150223756.html
"Fortunately, the Fed has the tools needed to prevent this sort of meltdown. It can simply take the steps that the ECB has failed to do. First, and most importantly, it has to guarantee the sovereign debt of eurozone countries. The Fed simply has to commit to keep the interest rate yields on debt from rising above levels where it risks creating a self-perpetuating spiral of higher debt leading to higher interest rates, which in turn raises the deficit and debt."
See also: http://www.zerohedge.com/news/will-fed-buy-efsf-bonds
"The EFSF should announce bonds sales to the Fed. The Fed should purchase 200 billion Eur of EFSF bonds today. They should commit to further purchases of 100 billion in Q1 and Q2 next year. The Fed has been dying to do some quantitative easing and has been looking for a liquidity crisis in need of some liquidity. It has also been looking (quietly) for ways to keep the dollar weaker."
See also: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8918784/Should-the-Fed-save-Europe-from-disaster.html
"The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt. Potentially, this class of assets offers huge scope for Fed operations," he [Bernanke] said.
Berkeley’s Brad DeLong said it is time for Bernanke to act on this as the world lurches straight into 1931 and a Great Depression II. “The Federal Reserve needs to buy up every single European bond owned by every single American financial institution for cash,” he said.
The Fed could buy €2 trillion of EMU debt or more, intervening with crushing power. The credible threat of such action by the world’s paramount monetary force might alone bring Italian and Spanish yields back down below 5pc, before one bent nickel is even spent.
And yet another article saying the same thing:
http://www.aljazeera.com/indepth/opinion/2011/11/20111128143150223756.html
"Fortunately, the Fed has the tools needed to prevent this sort of meltdown. It can simply take the steps that the ECB has failed to do. First, and most importantly, it has to guarantee the sovereign debt of eurozone countries. The Fed simply has to commit to keep the interest rate yields on debt from rising above levels where it risks creating a self-perpetuating spiral of higher debt leading to higher interest rates, which in turn raises the deficit and debt."
Thursday, November 24, 2011
The Renminbi is no threat to the dollar
In contrast to popular perception, evidence from China suggests that the internationalization of the renminbi is stalling — and in many respects it has barely got off the ground.
In its latest monetary policy report, the People’s Bank of China revealed that the amount of cross-border trade settled in the renminbi fell in the third quarter, the first decline since China started using its own currency for imports and exports in June 2009.
Renminbi Threat to Dollar Could Be Stalling
In its latest monetary policy report, the People’s Bank of China revealed that the amount of cross-border trade settled in the renminbi fell in the third quarter, the first decline since China started using its own currency for imports and exports in June 2009.
Renminbi Threat to Dollar Could Be Stalling
GDP
According to the US Bureau of Economic Analysis, GDP at the end of the 3rd Quarter was as follows:
2009 13920.5
2010 14605.5
2011 15180.9
It doesn't project 3Q 2012, but at a 3.9% growth rate, it should be at 15773.0.
2009 13920.5
2010 14605.5
2011 15180.9
It doesn't project 3Q 2012, but at a 3.9% growth rate, it should be at 15773.0.
Tuesday, November 22, 2011
Monday, November 21, 2011
What happens in a crisis?
I keep using the words "crisis", "tipping point", "doomsday", etc. What exactly do I expect to happen?
First, the land will still be here obviously, as will the people, and something called the United States of America. But interest rates will soar to 10 or 20% or higher within a short period of time because no one will be willing to lend to the bankrupt US without a much higher return. Inflation will increase to at least 20% and could reach 50% or even 100% as the Fed goes wild. Commodity prices (gold, silver, copper) will soar, as will real estate and stocks. Bondholders and savers (and banks) will be screwed. Whoever is buying US bonds now (read: China) is an idiot.
Actually, this doesn't sound so bad. Bring it on!
First, the land will still be here obviously, as will the people, and something called the United States of America. But interest rates will soar to 10 or 20% or higher within a short period of time because no one will be willing to lend to the bankrupt US without a much higher return. Inflation will increase to at least 20% and could reach 50% or even 100% as the Fed goes wild. Commodity prices (gold, silver, copper) will soar, as will real estate and stocks. Bondholders and savers (and banks) will be screwed. Whoever is buying US bonds now (read: China) is an idiot.
Actually, this doesn't sound so bad. Bring it on!
Worst Case Scenario - 2019
I don't think this scenario is likely, but it certainly is possible. Revenue and GDP figures come from the CRFB projection. Social Security and Medicare come from the "high-cost" projections. Medicaid increases at a 8.3% rate, which comes from the trustee report. "Other" increases at 4%, which is less than Revenue and GDP increases.
Update 6/19/12: This is model J-6, and it is too pessimistic.
Sunday, November 20, 2011
Another Calculation - 2031
This is based partially on http://crfb.org/document/analysis-cbos-august-2011-baseline-and-update-crfb-realistic-baseline. It assumes that the deficit reduction committee is successful in cutting $1.2 trillion from the budget. It pushes the crisis point out to 2031, but the basic problem still exists: revenue increases at the same rate as GDP (4.5% here), but the entitlement spending increases at a rate greater than GDP (7% here).
CBO and OMB both flawed
I was trying to produce an even better model but have temporarily abandoned it. There are numerous small problems that exist, such as:
1. What is "net interest"? I assume it is interest paid, less receipts from the Federal Reserve, and so that number is in my model. But I can't even find good numbers on what net interest was in 2010. Was it 228, which is what I am using from the Treasury? That seems to be the number. But the CBO says it was 196 and OMB says it was 196. What about 2011? I have 266 from the Treasury, CBO says 221, and OMB says 205.
2. What is "Defense Spending"? In 2010, per the Treasury, "Defense-Military" outlays were 667 and in 2011 it was 678. Per the CBO, in 2010, "Defense" outlays were 714, and in 2011 were 712. Per the OMB, in 2010 "Security" outlays were 815, whereas "Security" funding levels for 2010 were 682.8 (including Defense of 530), and in 2011 "Security" outlays were 891, with "Security" funding of 714.
3. What is "Mandatory Spending"? Treasury doesn't use the term. The CBO says that "Mandatory spending" in 2010 was 1913. OMB says that outlays in "Mandatory programs" was 1954 in 2010.
4. What about "Social Security" spending? Treasury says the spending in 2010 was 696, CBO says it was 701, and OMB also says it was 701. But for "Medicare", in 2010, Treasury says it was 450, CBO says it was 520, OMB says it was 446.
In conclusion, I am convinced that the CBO and OMB numbers are both unreliable and would use them only for comparison purposes. I believe the Treasury numbers are very reliable.
I am going to continue to use my model for now, which is split into 5 categories: Social Security, Medicare, Medicaid, Interest, and Other.
1. What is "net interest"? I assume it is interest paid, less receipts from the Federal Reserve, and so that number is in my model. But I can't even find good numbers on what net interest was in 2010. Was it 228, which is what I am using from the Treasury? That seems to be the number. But the CBO says it was 196 and OMB says it was 196. What about 2011? I have 266 from the Treasury, CBO says 221, and OMB says 205.
2. What is "Defense Spending"? In 2010, per the Treasury, "Defense-Military" outlays were 667 and in 2011 it was 678. Per the CBO, in 2010, "Defense" outlays were 714, and in 2011 were 712. Per the OMB, in 2010 "Security" outlays were 815, whereas "Security" funding levels for 2010 were 682.8 (including Defense of 530), and in 2011 "Security" outlays were 891, with "Security" funding of 714.
3. What is "Mandatory Spending"? Treasury doesn't use the term. The CBO says that "Mandatory spending" in 2010 was 1913. OMB says that outlays in "Mandatory programs" was 1954 in 2010.
4. What about "Social Security" spending? Treasury says the spending in 2010 was 696, CBO says it was 701, and OMB also says it was 701. But for "Medicare", in 2010, Treasury says it was 450, CBO says it was 520, OMB says it was 446.
In conclusion, I am convinced that the CBO and OMB numbers are both unreliable and would use them only for comparison purposes. I believe the Treasury numbers are very reliable.
I am going to continue to use my model for now, which is split into 5 categories: Social Security, Medicare, Medicaid, Interest, and Other.
Saturday, November 19, 2011
US GDP
From: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
"Current-dollar GDP -- the market value of the nation's output of goods and services -- increased 5.0 percent, or $185.8 billion, in the third quarter to a level of $15,198.6 billion."
So the GDP number for 2011 should be revised to this number.
================
Update: This was later revised to $15176 bn.
"Current-dollar GDP -- the market value of the nation's output of goods and services -- increased 5.0 percent, or $185.8 billion, in the third quarter to a level of $15,198.6 billion."
So the GDP number for 2011 should be revised to this number.
================
Update: This was later revised to $15176 bn.
Belgium is not a real country
It should also be noted that Belgium, with a population of only 10 million, is 450 billion dollars in debt, with a debt/GDP ratio higher than Ireland, Portugal or Spain. Belgium should also be considered one of the PIIGS.
Friday, November 18, 2011
The Fed doesn't create inflation?
http://moslereconomics.com/2011/11/14/it-must-be-impossible-for-the-fed-to-create-inflation/
In conclusion, theory and evidence tell me it’s impossible for the Fed to create inflation, no matter how much it tries. The reason is because all the Fed does is shift dollars from one type of account to another, never changing the net financial assets held by the economy. Changing interest rates only shifts dollars between ’savers’ and ‘borrowers’ and QE only shifts dollars from securities accounts to reserve accounts. And so theory and evidence tells us not to expect much change in the macro economy from these primary Fed tools, making it impossible for the Fed to create inflation.
==========
My comment: The Fed is creating inflation, but it is being offset by deflating asset prices. The author should wait 5 years and still try to make the same argument.
============
Update: Here is another argument saying the same thing.
From: http://econviz.org/macroeconomic-balance-sheet-visualizer/
In conclusion, theory and evidence tell me it’s impossible for the Fed to create inflation, no matter how much it tries. The reason is because all the Fed does is shift dollars from one type of account to another, never changing the net financial assets held by the economy. Changing interest rates only shifts dollars between ’savers’ and ‘borrowers’ and QE only shifts dollars from securities accounts to reserve accounts. And so theory and evidence tells us not to expect much change in the macro economy from these primary Fed tools, making it impossible for the Fed to create inflation.
==========
My comment: The Fed is creating inflation, but it is being offset by deflating asset prices. The author should wait 5 years and still try to make the same argument.
============
Update: Here is another argument saying the same thing.
From: http://econviz.org/macroeconomic-balance-sheet-visualizer/
- Quantitative easing simply swaps one type of asset on private sector balance sheets (typically treasuries) for another type (deposits backed by bank reserves, or simply bank reserves if a bank did the selling.)
- QE effectively changes the duration mix of outstanding government liabilities toward more short term liabilities and less long term ones. As such, it is roughly equivalent to if the treasury had previously chosen to issue relatively more T-Bills (short duration) and less bonds (long duration).
- No sectors (or entities within sectors) see any change in balance sheet equity as a direct result of QE. Therefore, there is no meaningful increase in the private sector's purchasing power or propensity to spend. At the level of each individual household or firm who might sell to the Fed during QE, decisions regarding investment portfolio composition tend to be made independently from decisions about how much to spend versus hold in an investment portfolio — so a change in the portfolio mix (cash, bonds, stocks, etc) won't cause more spending. Also, treasuries are almost as liquid as "money" and anyone previously holding treasuries could have easily sold them to support any planned spending.
- The central bank balance sheet expands as it draws in assets from the private sector and creates new liabilities (reserves) to match.
- Modern Monetary Theorists point out that from a macroeconomic perspective, QE includes a deflationary impulse because is it replaces a higher yielding asset (treasuries) with a lower yielding asset (money), reducing the interest income paid to the private sector by the government! As such it is comparable to the removal of some fiscal stimulus, though the extent to which aggregate demand is impacted in each case could differ depending on targeting (i.e., those earning treasury bond income may have a different propensity to spend from the initial recipients of fiscal stimulus related spending.)
- Broad money and base money both increase when households do the selling (however, when banks are the ones deciding to sell treasuries, broad money does not increase). QE does not lead to loan-driven inflation now or in the future, as banks never lend out reserves or are reserve constrained, rather loans create deposits (see "Bank Loan" operation).
- QE is sometimes argued to lead to asset price inflation as the holders of now more numerous low yielding deposits and currency may bid up asset prices (stocks, commodities, real estate, etc) in a search for yield, but whether this leads to inflation in the real economy depends on the extent to which this induces a subsequent and ongoing increase in private sector demand for goods and services. The existence of a transmission mechanism from QE to sustained inflation in goods and services is highly questionable. Any psychology-driven increase in asset price valuation multiples is unlikely to be sustained, since real earnings underlying the assets are unlikely to grow as fast as expected by who assume QE directly stimulates the economy. For example, Japan has engaged in multiple rounds of quantitative easing since the early 2000s with no discernable impacts on the real economy and certainly no growth in inflation (Japan has moved in and out of mild deflation). Japan expert Richard Koo calls QE the "greatest monetary non-event."
- Ultimately, the private sector controls the size of the broad money supply as a consequence of its borrowing decisions and portfolio adjustment decisions. Some theory and evidence support the idea that the private sector can "undo" the increase in deposits that results from QE! See the post "A Visual Guide to Endogenous Money and the Failure of QE" and its predecessors for a detailed explanation.
Thursday, November 17, 2011
Germany joins the PIIGS
From: http://www.telegraph.co.uk/finance/financialcrisis/8897775/Asian-powers-spurn-German-debt-on-EMU-chaos.html
The question on everybody's mind in the debt markets is whether it is time to get out Germany. The European Central Bank has a €2 trillion balance sheet and if the eurozone slides into the abyss, Germany is going to be left holding the baby.
Jean-Claude Juncker, Eurogroup chief, fueled the fire by warning that Germany is no longer a sound credit with debt of 82pc of GDP. "I think the level of German debt is worrying. Germany has higher debts than Spain," he said.
Critics say Germany is falling between two stools. It has backed EMU rescues on a sufficient scale to endanger its own credit-worthiness, without committing the nuclear firepower needed to restore confidence and eliminate default risk in Spain and Italy. It would be hard to devise a more destructive policy.
The question on everybody's mind in the debt markets is whether it is time to get out Germany. The European Central Bank has a €2 trillion balance sheet and if the eurozone slides into the abyss, Germany is going to be left holding the baby.
Jean-Claude Juncker, Eurogroup chief, fueled the fire by warning that Germany is no longer a sound credit with debt of 82pc of GDP. "I think the level of German debt is worrying. Germany has higher debts than Spain," he said.
Critics say Germany is falling between two stools. It has backed EMU rescues on a sufficient scale to endanger its own credit-worthiness, without committing the nuclear firepower needed to restore confidence and eliminate default risk in Spain and Italy. It would be hard to devise a more destructive policy.
Wednesday, November 16, 2011
$15 trillion national debt
The total national debt just passed $15 trillion on 11/15/2011. It first passed $10 trillion on 9/30/2008, only a little more than 3 years ago.
I think a better measure is debt held by the public. It first exceeded $5 trillion on 3/1/2007 and $10 trillion on 8/31/2011. It will exceed $15 trillion by 9/30/2016.
I think a better measure is debt held by the public. It first exceeded $5 trillion on 3/1/2007 and $10 trillion on 8/31/2011. It will exceed $15 trillion by 9/30/2016.
Actual expenditures 2009-2011
Category-- 2009 2010 2011
Social Sec 660 _696 _720
Medicare 429 _450 _483
Medicaid 251 _273 _275
Source: http://www.cbo.gov/ftpdocs/125xx/doc12541/2011_Nov_MBR.pdf
Social Sec 660 _696 _720
Medicare 429 _450 _483
Medicaid 251 _273 _275
Source: http://www.cbo.gov/ftpdocs/125xx/doc12541/2011_Nov_MBR.pdf
Medicaid Projected Expenditures
2012 260
2013 281
2014 340
2015 379
2016 415
2017 446
2018 477
2019 513
A projection for 2020 was not given in this report, but it does state that "Medicaid is expected to grow about 8.3 percent per year on average", pointing to an estimate of 550 billion for 2020.
Source: http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf,
pg. 31, Federal expenditures
The report doesn't make any long-term assumptions, so I think it should use the 8.3% growth rate until it reaches 5.0% of GDP and then cap it.
2013 281
2014 340
2015 379
2016 415
2017 446
2018 477
2019 513
A projection for 2020 was not given in this report, but it does state that "Medicaid is expected to grow about 8.3 percent per year on average", pointing to an estimate of 550 billion for 2020.
Source: http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf,
pg. 31, Federal expenditures
The report doesn't make any long-term assumptions, so I think it should use the 8.3% growth rate until it reaches 5.0% of GDP and then cap it.
Medicare Projected Expentitures
2012 572
2013 607
2014 643
2015 676
2016 716
2017 760
2018 810
2019 865
2020 932
Source: http://www.cms.gov/ReportsTrustFunds/downloads/tr2011.pdf , pg. 51, Intermediate estimates.
After 2020, the projected expenditures are given as a percent of GDP as follows. Percents for dates between these would be interpolated.
2020 3.99%
2025 4.59%
2030 5.16%
2035 5.56%
2040 5.77%
2045 5.87%
2050 5.94%
2013 607
2014 643
2015 676
2016 716
2017 760
2018 810
2019 865
2020 932
Source: http://www.cms.gov/ReportsTrustFunds/downloads/tr2011.pdf , pg. 51, Intermediate estimates.
After 2020, the projected expenditures are given as a percent of GDP as follows. Percents for dates between these would be interpolated.
2020 3.99%
2025 4.59%
2030 5.16%
2035 5.56%
2040 5.77%
2045 5.87%
2050 5.94%
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