Sunday, July 31, 2016
Thursday, July 28, 2016
Friday, July 22, 2016
Can we forgive and erase all debt in the world today?
I’ve pondered on this questions for years. Before entering in the world of banking & payments, every time I tried discussing this topic with others who were more educated than me, I was waived off, with a brush of the hand, as I don’t get it how the financial system runs!
I keep asking myself, if I can forgive debt that others owe me and vice versa, why can’t society in itself forgive debt and start with a clean slate.
I was obsessed with this. Truth be told, still am.
https://blog.faisalkhan.com/erase-all-debt-9f10ce75c7fd
https://blog.faisalkhan.com/erase-all-debt-9f10ce75c7fd
Wednesday, July 20, 2016
Saturday, July 16, 2016
The third path projection of the CBO
The CBO just issued their latest Long-Term Budget Outlook. In this, they do projections of the budget all the way through 2046.
The default baseline shows an annual budget deficit of 8.8% of GDP and net interest spending of 5.8% of gdp (up from today's 1.4%). The category of "other noninterest spending" (which includes all spending, including defense, except for interest, social security, and health care programs) is 7.3% of gdp, down from today's 9.2% of gdp. Also, it shows federal debt held by the public to be 141% of gdp.
They discuss three alternative paths to the baseline. The first two paths show what would happen if the ten-year deficits were reduced by $2 trillion and $4 trillion respectively. The third path is the interesting one. It shows what would happen if the ten-year budget deficit was increased by $2 trillion. Since a recession is guaranteed in the next ten years (and probably within the next year) and since politicians love the "free lunch", we can expect the third path to be the most likely one.
In the third path in 2046, the annual budget deficit will be 13% of gdp, of which net interest spending will be 8% of gdp. And federal debt held by the public will be 193% of gdp.
From the report: In addition to its effects on output, income, and interest rates, the third path would also bring about many of the other consequences associated with high and rising federal debt that are discussed above; those effects would be especially acute under this path because the debt would be so high and rise so rapidly. Such a path would necessitate much larger policy changes to reduce deficits to a particular level than the first two paths would. In addition, it would impose considerable constraints on policymakers and significantly raise the risk of a fiscal crisis.
I have previously speculated that if net interest spending exceeds 5% of gdp that a fiscal crisis is imminent or at least inevitable. This will occur either under the baseline scenario or under the third path. The only way to avoid it is to do serious deficit reduction now (at least $2 trillion in the next ten years). Since this is very unlikely, here is my conclusion based on the CBO report:
Sometime in the next 20 to 30 years, between 2036 and 2046, the U.S. is facing a fiscal crisis. A fiscal crisis is defined as a point in time in which investors "lose confidence in the government’s ability to manage its budget, and the government would thereby lose its ability to borrow at affordable rates. If the United States encountered a fiscal crisis, the abrupt rise in interest rates would reflect investors’ fears that the government would renege on the terms of its existing debt or that it would increase the supply of money to finance its activities or pay creditors and thereby boost inflation."
(See https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/reports/07-27_debt_fiscalcrisis_brief.pdf)
The default baseline shows an annual budget deficit of 8.8% of GDP and net interest spending of 5.8% of gdp (up from today's 1.4%). The category of "other noninterest spending" (which includes all spending, including defense, except for interest, social security, and health care programs) is 7.3% of gdp, down from today's 9.2% of gdp. Also, it shows federal debt held by the public to be 141% of gdp.
They discuss three alternative paths to the baseline. The first two paths show what would happen if the ten-year deficits were reduced by $2 trillion and $4 trillion respectively. The third path is the interesting one. It shows what would happen if the ten-year budget deficit was increased by $2 trillion. Since a recession is guaranteed in the next ten years (and probably within the next year) and since politicians love the "free lunch", we can expect the third path to be the most likely one.
In the third path in 2046, the annual budget deficit will be 13% of gdp, of which net interest spending will be 8% of gdp. And federal debt held by the public will be 193% of gdp.
From the report: In addition to its effects on output, income, and interest rates, the third path would also bring about many of the other consequences associated with high and rising federal debt that are discussed above; those effects would be especially acute under this path because the debt would be so high and rise so rapidly. Such a path would necessitate much larger policy changes to reduce deficits to a particular level than the first two paths would. In addition, it would impose considerable constraints on policymakers and significantly raise the risk of a fiscal crisis.
I have previously speculated that if net interest spending exceeds 5% of gdp that a fiscal crisis is imminent or at least inevitable. This will occur either under the baseline scenario or under the third path. The only way to avoid it is to do serious deficit reduction now (at least $2 trillion in the next ten years). Since this is very unlikely, here is my conclusion based on the CBO report:
Sometime in the next 20 to 30 years, between 2036 and 2046, the U.S. is facing a fiscal crisis. A fiscal crisis is defined as a point in time in which investors "lose confidence in the government’s ability to manage its budget, and the government would thereby lose its ability to borrow at affordable rates. If the United States encountered a fiscal crisis, the abrupt rise in interest rates would reflect investors’ fears that the government would renege on the terms of its existing debt or that it would increase the supply of money to finance its activities or pay creditors and thereby boost inflation."
(See https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/reports/07-27_debt_fiscalcrisis_brief.pdf)
Sunday, July 10, 2016
SDR valuation as of Sept 30 2016
The following weights based on the new formula will be used to determine the amounts of each of the five currencies in the new SDR basket that will take effect on October 1, 2016:
- U.S. dollar 41.73 percent (compared with 41.9 percent at the 2010 Review)
- Euro 30.93 percent (compared with 37.4 percent at the 2010 Review)
- Chinese renminbi 10.92 percent
- Japanese yen 8.33 percent (compared with 9.4 percent at the 2010 Review)
- Pound sterling 8.09 percent (compared with 11.3 percent at the 2010 Review)
The amounts of each currency in the revised basket will be calculated on September 30, 2016, in accordance with the above-listed weights.
From https://www.imf.org/external/np/exr/facts/sdrcb.htm
Friday, July 8, 2016
Congress debates bill to defend against flesh-eating (classified)
This is satire but very well done. From 2008.
Wednesday, July 6, 2016
Military Training to fight Zombie Apocalypse
First: Train against the zombie apocalypse
Second: "Something" happens. A terrorist attack or economic collapse or something else. If people don't have water for three days or food for ten days they go crazy and turn into zombies.
Zombie pandemic training
"If the zombie apocalypse should ever break out, nurses at the Pentagon will be well-prepared to take on the undead.
Military nursing students at the Uniformed Services University of the Healthcare Sciences are given ‘zombie pandemic’ training scenarios as a part of a population health course."
Read more: http://www.dailymail.co.uk/sciencetech/article-3677472/The-Pentagon-s-zombie-pandemic-training-revealed-Military-nurses-taught-respond-population-health-emergencies-creative-training-course.html
Tuesday, July 5, 2016
September 30, 2016
The Bible talks about a seven year cycle of crop planting called the Shemitah or Shmita or Sabbath year. "For six years you shall sow your land and gather in its yield, but the seventh year you shall let it rest and lie fallow." (Ex. 23:10-11). These seven year cycles have recently been linked to stock market crashes. Sept. 17, 2001 was Elul 29 on the Jewish calendar and the end of a seven year cycle and the Dow dropped 684 points. September 29, 2008 was also Elul 29 and the stock market dropped 777 points. The next 7 year cycle ended on September 13, 2015, and nothing happened on that day.
There is also a 50 year cycle called the Jubilee. It is unclear whether it is part of the 49 year cycle or whether it is a separate 50th year following the 49 years. But it seems to be a separate year. "You shall consecrate the fiftieth year, and proclaim liberty throughout the land to all its inhabitants. It shall be a jubilee for you, when each of you shall return to his property and each of you shall return to his clan." (Lev. 25:10).
This Jubilee year ends on October 2, 2016, which is Elul 29. This is a Sunday. So the last business day of the Jubilee year is September 30, 2016. So I am predicting a stock market crash on that day. Note that it is also the last day of the fiscal year that the U.S. government uses.
Disclaimer: My track record on predictions is horrible. I have been striking out every time. Still, something to think about.
There is also a 50 year cycle called the Jubilee. It is unclear whether it is part of the 49 year cycle or whether it is a separate 50th year following the 49 years. But it seems to be a separate year. "You shall consecrate the fiftieth year, and proclaim liberty throughout the land to all its inhabitants. It shall be a jubilee for you, when each of you shall return to his property and each of you shall return to his clan." (Lev. 25:10).
This Jubilee year ends on October 2, 2016, which is Elul 29. This is a Sunday. So the last business day of the Jubilee year is September 30, 2016. So I am predicting a stock market crash on that day. Note that it is also the last day of the fiscal year that the U.S. government uses.
Disclaimer: My track record on predictions is horrible. I have been striking out every time. Still, something to think about.
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