NEWS Is the pivot to China a bunch of bullshit?

[Mirage]

I have not seen a single credible analyst, leader or commentator claim that conflict is imminent, just that the threat of one is increasing. I am sure you can find a few folks out there that have claimed as much but they likely have about as much credibility as Ward Carroll has nowadays.

U.S. general predicts war with China in 2025, tells officers to get ready

“I hope I am wrong. My gut tells me will fight in 2025," said Gen. Mike Minihan in a memo sent to the officers he commands and obtained by NBC News.

www.nbcnews.com

China could invade Taiwan in the next 6 years, warns U.S. admiral

"Taiwan is clearly one of their ambitions. ... And I think the threat is manifest during this decade, in fact, in the next six years," Adm. Philip Davidson said.

www.nbcnews.com

That was a quick google search to find those. I've been briefed in person the same sort of thing repeatedly throughout my career by similarly "credible" leaders.

 

[Griz882]

Griz... come on man. You have not explained the math at all, and neither has Spekkio, who just said people are still buying the debt.

I explained what I think will happen when the debt bomb goes off. I said, "how does that not end in either hyperinflation a la the Weimar Republic, or extremely dramatic cuts to the budget to get to a surplus for awhile and pay it down?" That is what I think will happen. Both of those things spell a lot of doom for the world, as central as our economy and government is to it all. Chill out and lets have a rational conversation.

Sigh…Do with the actual math what you will.

The simple version…
Yd = W . Ls-T wherein Yd is the disposable income of households, W is wage, Ls is Labor supply, and T is tax payments.

This equation requires two behavioral equations.

The first is the T (tax) function defined by the government
T = t . W . Ls, T < 1 wherein t is the tax rate of a proportional wage tax leading us to the second equation…



where “a” and “B” are coefficients and Mhhh is money stock of households from the previous period. The consumption function in equation 3 depends on the disposable income, with α as the marginal propensity to consume and β as the influence of the money stock households hold from previous periods. (I had to cut and paste the last one and the next, I can’t type in “maths”).

So, to get to what @Spekkio wrote (accurately and simply) money is created by the government via the public budget deficit…


wherein Mg-1 is money creation of the government in the current (previous) period and G is government expenditures for goods and services. Equation 4 can be understood as the monetization of debt. Instead of I-owe-you’s (IOUs), the government buys goods and services by creating its own money, also called outside money. Money is defined here as an accounting measure, or “as a two-sided balance sheet phenomenon.” Therefore, it cannot be said whether it is an asset or only a numeraire - meaning the stuff in your wallet is just a confidence trick so you know you have a place on the balance sheet.


Got it?

 

[Flash]

That was a quick google search to find those. I've been briefed in person the same sort of thing repeatedly throughout my career by similarly "credible" leaders.

The first guy was an idiot, and I think was rightfully chastised by leadership afterwards. The second one reinforces my point though, 'could' being the operative word.

And having worked in government and the military for a long time, 'could' and 'possible' have always been the operative words when the leaders I've had talked about a conflict with China.

 

[Mirage]

Sigh…Do with the actual math what you will.

The simple version…
Yd = W . Ls-T wherein Yd is the disposable income of households, W is wage, Ls is Labor supply, and T is tax payments.

This equation requires two behavioral equations.

The first is the T (tax) function defined by the government
T = t . W . Ls, T < 1 wherein t is the tax rate of a proportional wage tax leading us to the second equation…


View attachment 39894
where “a” and “B” are coefficients and Mhhh is money stock of households from the previous period. The consumption function in equation 3 depends on the disposable income, with α as the marginal propensity to consume and β as the influence of the money stock households hold from previous periods. (I had to cut and paste the last one and the next, I can’t type in “maths”).

So, to get to what @Spekkio wrote (accurately and simply) money is created by the government via the public budget deficit…

View attachment 39895
wherein Mg-1 is money creation of the government in the current (previous) period and G is government expenditures for goods and services. Equation 4 can be understood as the monetization of debt. Instead of I-owe-you’s (IOUs), the government buys goods and services by creating its own money, also called outside money. Money is defined here as an accounting measure, or “as a two-sided balance sheet phenomenon.” Therefore, it cannot be said whether it is an asset or only a numeraire - meaning the stuff in your wallet is just a confidence trick so you know you have a place on the balance sheet.


Got it?

Oh dear Lord. Nevermind.

The first guy was an idiot, and I think was rightfully chastised by leadership afterwards. The second one reinforces my point though, 'could' being the operative word.

And having worked in government and the military for a long time, 'could' and 'possible' have always been the operative words when the leaders I've had talked about a conflict with China.

That we have a bunch of leaders who are wrong about China and go around making false claims is exactly my point. You and I agree some of them are idiots. Some do it for other reasons. I don't get what you're disputing about my claim.

 

[Flash]

That we have a bunch of leaders who are wrong about China and go around making false claims is exactly my point. You and I agree some of them are idiots. Some do it for other reasons. I don't get what you're disputing about my claim.

Where we disagree is the number, I have found it very few and not 'a bunch'.

Leave the rhetoric to the politicians and the Staties, let's continue to focus on preparing for a possible conflict with a very dangerous and capable adversary.

 

[Griz882]

Oh dear Lord. Nevermind.

You asked for the math…that is literally the math that explains it. You asked for reasonable, you got it pure fact based data.

What can I do for you?

 

[Mirage]

You asked for the math…that is literally the math that explains it. You asked for reasonable, you got it pure fact based data.

What can I do for you?

I'm not smart enough for the doctorate level stuff you copy/pasted. Can you explain it to me like I'm 5? How is us spending 1.6 trillion a year on interest, with that figure rising considerably each year, sustainable, when our economy is growing nowhere near that fast?

 

[Griz882]

I'm not smart enough for the doctorate level stuff you copy/pasted. Can you explain it to me like I'm 5? How is us spending 1.6 trillion a year on interest, with that figure rising considerably each year, sustainable, when our economy is growing nowhere near that fast?

Sure, I can do that.

Imagine the entire nation as a people living out on the Great Plains of Life. Of course we need shelter, in the form of a teepee, and that teepee is the national economy. To build it we only get three poles…one is revenue, the second is investments, and the third is debt. All of this is wrapped in a protective covering of money. Now, none of the these poles are the same size - for example - the debt pole can be much longer than the other two.

At this point we must careful not to confuse this big national teepee with a family teepee (budget). A family has the same three poles but the length of the revenue pole (income) is pretty much fixed in length for most of our lives; sure a promotion or raise will make it longer but not (typically) substantially longer. Our investment pole is most likely the shortest (and for some simply Social Security) but it is there and it works. The debt pole is our credit cards, auto loans, and other stuff. Because of this, all three poles in the family teepee must be tied at the top of the revenue pole (the fixed number) so we must try to manage our debt and investments lest our teepee be too lopsided and fall down.

So, back to the great national teepee. The revenue pole is taxes, the investment pole the treasury, and the debt pole, what we borrow. But, we are very fortunate because the tribal elders (the government) can decide each year how to set the poles so that the teepee is large enough for us all. This means that instead of tying our teepee at the fixed height of one pole, they can arrange the poles up or down to keep the teepee well rounded (the debt pole can be much higher than the revenue pole by as much as 50%) Better yet, they can seek out longer poles to rectify the situation. For example, if the revenue pole is too short they can raise taxes. Need more? They can trim the size of the debt pole by reducing spending on select programs. Have an emergency? Shorten the investments pole. Need to prepare in the long run? Increase investment opportunities. As for the wrapping (money), it too is controlled by the tribal elders. It is not based on gold, or silver, or how many buffalo hides we can acquire. The tribal elders can stretch it, or shrink it using the medicine men and shamans we call “the Fed.” What this means is that the debt pole can get longer, and longer but as soon as it starts to unbalance the teepee action can be taken to balance it all out. In fact, the elders can even slice tiny bits off the bottom of the debt pole even as it grows simply by paying just the interest (servicing the debt). Since there are no fixed pole length tribe (nation) manages its own fiscal policy and this means that modern nations can’t actually go “bankrupt” as long as they pay the interest. In the past the elders sometimes lost interest in the long debt pole and the teepee became imbalanced - and each time the elders were forced by the people, medicine men, and shamans to correct the situation - there is noting…nothing to suggest they won’t do it again.

Now, please keep in mind that this is an example (for a five year old) that applies to what government can control - fiscal policy. If you need one for the fundamentals of economics let me know. The two are different things.

(NOTE: I recommend trying the above example with twigs…you’ll see what I mean)

 

[Mirage]

Sure, I can do that.

Imagine the entire nation as a people living out on the Great Plains of Life. Of course we need shelter, in the form of a teepee, and that teepee is the national economy. To build it we only get three poles…one is revenue, the second is investments, and the third is debt. All of this is wrapped in a protective covering of money. Now, none of the these poles are the same size - for example - the debt pole can be much longer than the other two.

At this point we must careful not to confuse this big national teepee with a family teepee (budget). A family has the same three poles but the length of the revenue pole (income) is pretty much fixed in length for most of our lives; sure a promotion or raise will make it longer but not (typically) substantially longer. Our investment pole is most likely the shortest (and for some simply Social Security) but it is there and it works. The debt pole is our credit cards, auto loans, and other stuff. Because of this, all three poles in the family teepee must be tied at the top of the revenue pole (the fixed number) so we must try to manage our debt and investments lest our teepee be too lopsided and fall down.

So, back to the great national teepee. The revenue pole is taxes, the investment pole the treasury, and the debt pole, what we borrow. But, we are very fortunate because the tribal elders (the government) can decide each year how to set the poles so that the teepee is large enough for us all. This means that instead of tying our teepee at the fixed height of one pole, they can arrange the poles up or down to keep the teepee well rounded (the debt pole can be much higher than the revenue pole by as much as 50%) Better yet, they can seek out longer poles to rectify the situation. For example, if the revenue pole is too short they can raise taxes. Need more? They can trim the size of the debt pole by reducing spending on select programs. Have an emergency? Shorten the investments pole. Need to prepare in the long run? Increase investment opportunities. As for the wrapping (money), it too is controlled by the tribal elders. It is not based on gold, or silver, or how many buffalo hides we can acquire. The tribal elders can stretch it, or shrink it using the medicine men and shamans we call “the Fed.” What this means is that the debt pole can get longer, and longer but as soon as it starts to unbalance the teepee action can be taken to balance it all out. In fact, the elders can even slice tiny bits off the bottom of the debt pole even as it grows simply by paying just the interest (servicing the debt). Since there are no fixed pole length tribe (nation) manages its own fiscal policy and this means that modern nations can’t actually go “bankrupt” as long as they pay the interest. In the past the elders sometimes lost interest in the long debt pole and the teepee became imbalanced - and each time the elders were forced by the people, medicine men, and shamans to correct the situation - there is noting…nothing to suggest they won’t do it again.

Now, please keep in mind that this is an example (for a five year old) that applies to what government can control - fiscal policy. If you need one for the fundamentals of economics let me know. The two are different things.

(NOTE: I recommend trying the above example with twigs…you’ll see what I mean)

Welp, you tried.

 

[Griz882]

Welp, you tried.
View attachment 39898

I see you didn’t get the sticks.

Oh well, I should have known better. I offered an explanation a five-year-old would get and you’re closer to a three-year-old in your thinking. My mistake.

 

[Mirage]

Yeah, I guess I'll just stick with trusting the Fed chairman, Dimon, Dalio, etc., and stop trying to figure out how your teepee with different length sticks would stand up.

The only part of your analogy that made sense was that our leaders will have to do something to fix our debt burden. I found that funny, because it's exactly what I said before.. and their options are to print dollars to pay the debt (like the Weimar Republic I cited), creating hyperinflation, or dramatically cut spending and raise taxes, greatly shrinking our economy and sending the world into a depression.

 

[taxi1]

So, back to the great national teepee.

There was an F14 RIO back in the day of tribal heritage. Call sign was of course Two Dogs.

 

[Griz882]

Yeah, I guess I'll just stick with trusting the Fed chairman, Dimon, Dalio, etc., and stop trying to figure out how your teepee with different length sticks would stand up.

The only part of your analogy that made sense was that our leaders will have to do something to fix our debt burden. I found that funny, because it's exactly what I said before.. and their options are to print dollars to pay the debt (like the Weimar Republic I cited), creating hyperinflation, or dramatically cut spending and raise taxes, greatly shrinking our economy and sending the world into a depression.

Except you are fundamentally (economically) wrong about what happened to the Weimar Republic and why the current situation is vastly different. To start with, the Germans were wracked with war reparation payments and those payments (in kind and in cash) were linked to gold. As gold prices shifted the Germans found themselves paying continuously higher prices to provision the mark thus redefining its currency downward. That kind of neoclassical global financing was done away with after the Bretton Woods conference after WWII.

 

[ChuckMK23]

As a voter/taxpayer regarding the US national debt - its a non issue for me. I don't need to understand how the sausage gets made nor in the end do I view it as a threat. "Money, we can always make more!". In the end, crazy smart people at Federal Reserve and Dept of Treasury balance the money supply and US debt with inflation and the goal of full employment to produce our standard of living - American Exceptionalism. We are special as Americans, We expect a certain standard of living and vote with our pocketbooks/wallets.

In the end our national strength that supports the Full Faith and Credit of the United States of America is what really counts. The US Debt is just a patsy that politicos beat each other over the head with every few years.

Its a non-issue as a voter.

 

[number9]

Yeah, I guess I'll just stick with trusting the Fed chairman, Dimon, Dalio, etc., and stop trying to figure out how your teepee with different length sticks would stand up.

The only part of your analogy that made sense was that our leaders will have to do something to fix our debt burden. I found that funny, because it's exactly what I said before.. and their options are to print dollars to pay the debt (like the Weimar Republic I cited), creating hyperinflation, or dramatically cut spending and raise taxes, greatly shrinking our economy and sending the world into a depression.

The problem with the Wiemar Republic comparisons is that the US dollar is much, much, much stronger than the German Mark ever was. It is why comparing the monetary policy of, say, Argentina to the U.S. is a non-starter.

Every single person who has predicted hyperinflation (and there are a lot of them in the conservative political & media circles) has been wrong.