Scrappy Jack

iTrader: (2)

So you preferred Clinton over Reagan (and virtually every other President in the history of the USA)?

jeff_man

iTrader: (7)

Notice wherever Rmoney goes along the cost god sends a hurricane. Jesus is telling you something.

thenuge26

iTrader: (2)

Ah, and of course as the President, it is 100% Obama's fault that he didn't ignore the constitution and just implement his budget?

I am all for taking shots at Obama. He has done some shitty stuff the last 4 years.

But you can't just imagine things that you want him to do, and then blame him for not doing it.

bbundy

I cannot understand the complete disconnect with reality it requires for people to make this argument. We are significantly better off now than we were 4 years ago. we were loosing jobs at an incredible rate which was turned around and we have seen steady job growth, millions of people without access to healthcare now have it. The unnecessary wars are winding down while we have killed Osama Bin Laden as well as many other terrorist enemies.

While true I think a lot more to undo the disaster that was done by a Republican administration with a Republican congress I still have to give Obama a lot of credit for what he has managed against the obstruction. Obama is responsible for a fraction of the current deficit compared to what Bush piled on.

Romney’s plan regardless of what he wants you to believe the details work out to be more debt with more unfunded tax cuts for the rich and more government spending to the military industrial complex and handouts to the large and already successful corporations.

bbundy

I find it interesting studying past history and how similar the administrations of Harding, Coolidge and the beginning of Hoover were to the current strong Ideological push coming from the main stream republican party. They were very laissez-faire in terms of interfering with business and yet favored government and business partnerships. The result back then was followed up disastrous great depression.
T. Roosevelt and Taft I see as different in that they believed government should be the great arbiter of the conflicting economic forces in the Nation, especially between capital and labor, guaranteeing justice to each and dispensing favors to none. Roosevelt was a great trust buster.

The next big change to the Republican Party was Reagan where as Eisenhower, Nixon/ford were not dramatic departures from the prevailing democrats. Between Reagan Bush 1 and Bush 2 the Republican Party became all about tax cuts mostly for the wealthy and deficits don’t matter even when times are good we can pump up the bubble. It amazes me how many people are still deluded in thinking this was good for America. Under the Clinton administration we raised taxes cut spending, and reduced deficits. Something the current republicans in congress refuse to cooperate with which would reduce deficits. Instaid they seem to be focusing on making everything fail.

Now with another republican administration or two like Harding and Coolidge I think we will re-live the teens and 1920’s followed by a great depression. Remember in 1908 a banking crisis shook the stock market to half its value and there were mass layoffs and unemployment a precurser to the big one in 1929.

Scrappy Jack

iTrader: (2)

What I find ironic is that Reagan is a darling of the "conservatives" while he increased the Fiscal deficit via military spending and tax cuts. That is something "liberals" like to lambast him for, but I would argue that it was the appropriate and correct thing to do at the time.

Meanwhile, Clinton raised some taxes and reduced government spending, leading to a Fiscal surplus or near-surplus (depending on who you ask). Combined with a persistent current account (aka trade) deficit and low interest rates, this coincided with the private sector leveraging up which preceeded the "lost decade" of the 2000s.

I would argue the deficit busting of Clinton's administration and Republican Congress was one of the most significant factors that led to the recessions and secular bear market of the last 12 years that almost no one talks about.

bbundy

I understand the leveraging up. But I don’t understand the complexities of the correlation to interest rates. Interest rates are not set by the federal government or an administration and they are only influenced by the Federal Reserve. Big anomalies in interest rates did not occur during the Clinton years. The big anomalies occurred in the transition between Jimmy Carter and Ronald Reagan. Paul Volcker was chairman of the Federal Reserve at the time. Followed by Allan Greenspan. I make the assentation that when you grow government spending as Reagan did while giving huge tax cuts mostly to the wealthy then it follows that the money flows to the rich at a greater rate than they spend it on consumer products so it goes and sits in banks and or investment firms to be lent out, Interest rates go down as a result. This is the policy we have been following since this Reaganomics trickledown theory became the norm. The problem is low interest rates don’t really make it any more easy for unemployed or under employed people to access it or do anything with it and eventually the economy stagnates with a few very rich people sitting on piles of slowly compounding money while you have a lot of poor people and a stagnant middle class slowly loosing there livelyhood to the piles of slowly compounding money that the super weathy possess.

I was paying ~8% on my home mortgage in the 90’s and I was accelerating payments on my 30 year mortgage to pay it off faster. When I saw the economy tanking in 2008 I did exactly the opposite that the conservative/ Libertarians like Jason were saying in getting out of the market and buying gold etc. Instead I stopped paying extra on the mortgage and started dumping maximum allowed into 401k plus some into a Roth while the market was going down. I just refinanced my house at 2.75% on a 15 year mortgage. If low interest rates were the source of all the ills and bubble in the 90’s how is it that they can be so much lower now and yet the result is somewhat different.

Ryan_G

iTrader: (8)

If you had invested in gold in 2008 you would have doubled your money by 2012... just sayin.

EDIT: Price of gold per ounce: May 30, 2008 - $887.30
October 30, 2012 - $1,709.40

It peaked at a little over $1,900 this year and hovered in the mid 1,800's for like 2 months. Anyone who jumped on that train and sold made a heafty profit.

bbundy

I did the same thing in the market on the stuff I was buying through 2009. The price of gold is inflated by parinoid lunitics.

Braineack

iTrader: (62)

so is the cost of college.

Ryan_G

iTrader: (8)

Your point...? This is how the stock market works. It is all perception not reality.

Scrappy Jack

iTrader: (2)

I am going to simplify it a LOT, but you can think of the Federal Reserve as effectively being a fourth branch of the government, unelected but with nominated board members (similar to the Supreme Court). The Federal Reserve and the Treasury work very closely on a day-to-day basis.

Interest rates on US Treasury securities (bills, bonds, notes, etc) are directly affected by the Federal Funds Rate target (FFR, "Fed Funds"). The Federal Reserve Chairman and the Federal Open Market Committee basically say, "We are going to set the rate of really super short term lending at X%. We will buy an infinite amount of short-term paper until we drive the price to that level."

They don't say, "We will buy $Z quadrilliondy dollars in order to drive the rate to our target price." The market knows they can, so that's where rates settle. If they really wanted to, they could skip the whole QE and Operation Twist dog and pony show and just say, "Rates on the 30-year Treasury will be 2%."

Any bond trader that tried to fight that would end up out of a job.

All longer term interest rates on US Treasury securities like the 10-year and 30-year bonds are then a function of short-term rate expectations with some minor market influences.

When interest rates rose in the late '70s and early '80s, Paul Volcker and his Federal Reserve were raising the Federal Funds Rate target to try and break price inflation.

When rates fell and stayed low in the early '00s, Greenspan and his Federal Reserve were dropping them and holding them there. When they crept up in the later half of the 2000s, Greenspan and his Federal Reserve were raising them. The central banks of countries with monetary systems like the USA, Japan, Australia, Canada, and the UK largely control the interest rate on their own sovereign bonds ("debt").

The actual transmission mechanism has changed a few times since the late '70s, but that's a super-duper simplified version.

Market forces or "the bond vigilantes" only have about a 10 - 15% influence on long-term interest rates and a less than 5% influence on shorter-term rates (as measured via correlation).

Yes and no. Unemployed or under employed people that are poor credit risks and/or have no demand for credit will not benefit from low interest rates. An under employed worker who is a decent credit risk or who can secure non-traditional funding (e.g. private equity or venture capital) can benefit from the low opportunity cost the lenders are facing.

Likewise, if there is enough aggregate demand for goods and services to justify it, low interest rates make it easier and cheaper for employers to grow - potentially hiring some of those unemployed workers.


That's how it works in most average business cycle recessions. That's not what we've just been through/are working through. It's a combination of a global financial crisis and a private sector balance sheet recession.


I do not think that low interest rates in the '90s "were the source of all the ills and bubble."

I said the massive reduction of the Fiscal deficit while running a current account (aka balance of payment, aka trade) deficit was a big part of it. That is part of the understanding of sectoral balances that really belongs in the "bore you to death" thread.

Basically, while running a trade deficit, either the government sector or the private sector can save more than they spend but not both. As the government sector became a net saver (ran a surplus), the private sector moved in to a net deficit.