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Sunday, October 30, 2011

Total global credit rose from $80 trillion in 2000 to $210 trillion today



Unemployment and deleveraging
The great debate

Oct 28th 2011, 13:34 by Buttonwood ECONOMIST

JUST off the plane from the Buttonwood conference in New York and, as always, it was great to have the chance to hear so many important thinkers speak on a wide variety of issues.

The speech that stuck in my mind was a passionate defence of the US jobs act from Gene Sperling, director of the National Economic Council in the Obama administration. Maybe the reason it caught my attention was that all the passion in this debate tends to come from the deficit-cutting side, but Mr Sperling made a very convincing case that long-term unemployment is a huge crisis.

The current mean period for workers to be unemployed is 40.5 weeks; in the early 1980s recession, it was 21. The longer a worker is unemployed, the harder it is for he or she to get a job; some companies even state that the unemployed need not apply for jobs. This can be terrible news for those at both ends of the age spectrum. Those in their 20s can find that a long spell of unemployment leaves a permanent dent in their lifetime income; those over 55 may find it impossible ever to get work again.

That, argues Mr Sperling, is why some kind of stimulus is needed. Doing nothing is not an option. To those who say that the 2009 stimulus plan failed, he had a convincing rebuttal; when President Obama was elected in November 2008, forecasters were projecting a decline in GDP over two quarters of 1.6%. The actual decline was 7.8%; the economy was in freefall. That output was growing again by late 2009 surely owed something to fiscal stimulus (although monetary policy must have had an impact too).

But what about tackling the deficit? Here Mr Sperling had a key fact which demonstrated why reduction cannot be achieved by spending alone. In 2000, 45 million people were getting social security; by 2020, that figure will be 70 million. Medicare has a similar uplift. Given that background, it is implausible to state that spending can be locked in at 2000 levels; one cannot repeal ageing, as Mr Sperling said. Even if adjustments are made to those programmes (increasing the retirement age, controlling drugs costs), politicians can, at best, slow the rate of spending increase. Taxes will have to be raised.

Typically, however, the other striking speech came from Kyle Bass, the investor, which illustrated the other side of the problem. He pointed out that total global credit rose from $80 trillion in 2000 to $210 trillion today. In many nations, debt is three to four times GDP. These figures have normally been seen only in the course of major wars (i.e 1914-1918 and 1939-1945) when the result was a complete wipeout for creditors of the losing states.

Dealing with this debt is a kind of deadweight on the economy. Yes, every debt is also someone else's asset. But the burden of repaying debt will affect the decisions of consumers, companies and governments while uncertainty over whether they will get repaid will weigh on investors. The euro crisis (which hadn't been solved by this week's deal) illustrates the point.

So that's the key issue. How to deal with an age of deleveraging without blighting the lives of millions of people though long-term unemployment. I am not sure that the conference provided the answer but it did make me think that one should not be too ideological about the issue; to recognise, for example, that America might have more flexibility to deal with the problem (because of its reserve currency status) than Britain or Greece.

102 comments:

  1. Low-grade, marginal farmland in the Southeastern United States.

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  2. Crappy desert land in the SW in close proximity to Powerlines, and/or Major metropolitan areas, or existing Wind Farms.

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  3. Perry is on Fox with Chris Wallace. If the Republicans get stuck with Perry, get ready for Hope and Change 2.

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  4. Newt needs to come forward, confess his past sins, and claim the nomination.

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  5. .

    Saw Newt on an interview the other day. He seemed to make some sense (more than most) on some issues; then he would fall back into a familiar pattern on others.

    Given the field the GOP has put up, he can sound like the only adult at the party some times.

    .

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  6. So, in ten years the Bankers created what $130 trillion USD?

    Talk about money for nothing ...

    And no one noticed...

    Attention was never focused.

    No decisive action taken.

    And no one else has a proffered remedy, that can be implemented, today.

    Not an economic remedy, nor ...
    more importantly ...

    A Political one.

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  7. Most of the public, following blindly as well as blissfully, down the road to serfdom.

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  8. The Bankers created over $15 trillion a year, without the need of any bread buyer for a wheelbarrow, to carry the money needed to make a purchase.

    Yet the idea that the Government should create a trillion or two, to break out of the political quagmire, met with derision.
    Proclamations of fear.
    Protestations of hyper-inflation.

    The Bankers scrip some how "better", more dependable and stable than that of the Congress.

    What a load of dung.

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  9. Everyone loathes socialism until it saves the whole shitty house of cards from tumbling down. Hard-assed names like The Terminator, The Axe Man, The Knife … are all very cutesy until the sociopath/bankster/cannibals and the establishment starts making nasty in their nappies because of the restless peasants who they know could snap their bones like dry twigs.

    My advice to bankers would be to get more sleep and maybe they would become nicer people, but I must get back to hugging the puppies and kittens.

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  10. Law Professor

    versus

    History professor?


    A window on the reality of the cultural calamity that has befallen the United States.

    Neither of the fellas ever having a "real" job. Nor Executive experience, prior to entering the Oval Office.

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  11. ..and by and bye on the Bi-ology metaphors. Lest I offend ;-)

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  12. .

    Yet the idea that the Government should create a trillion or two, to break out of the political quagmire, met with derision.
    Proclamations of fear.
    Protestations of hyper-inflation.



    What I am saying is that your pushing for the minting of a couple coins is ill-advised for the following reasons.

    1. It exacerbates the very problem you are trying to solve.
    2. It is too small to make a difference.
    3. Like other solutions you have offered it reflects merely a short-term fix.

    (Ignore the fact that it will change the responsibilities of the President and Congress as outlined in the Constitution, something you have abhorred in other contexts.

    Politically, it won't happen.)


    Most of the public, following blindly as well as blissfully, down the road to serfdom.



    The public though rightly outraged have to recognize that they are the abettors as well as the victims in the clusterfuck that has been wrought over the past 30 years.

    The Tea Party argues for smaller government and lowered debt through cost cutting. They claim the solution is smaller government. With the OWS it is hard to say what they want. There is only one theme that is consistent. They feel the game is rigged for big business and they want it reigned in.

    Two extremes, two enemies, big government and big business. Perhaps what we need is a sythesis of these two extremes to provide a way forward.

    However, even that synthesis while required is insufficient. The American people need to recognize their part in the current fiasco and learn to live within their means.

    .

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  13. .

    Deuce, I've noticed that for some reason we get some of the Sunday news programs 1 hour later than you.

    You are right, Perry is clearly clueless. Perhaps he is smart pulling out of the debates.

    .

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  14. .

    With regard to Newt, I have written him off so often that I haven't even listened to him during the debates.

    To be fair, I'll have to listen to the guy a little before rejecting him outright.

    .

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  15. .

    Looking at the field, Dems and GOP, you have to wonder in a country of 300 million, how could we have come to this.

    I'm not especially religious but it is Sunday morning and thoughts turn to the transcendental and when we plead "Why me lord" somewhere off in the ether we seem to hear, "I really don't know. There's just something about you that really pisses me off."

    .

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  16. The American public has not tuned into the sad fact that what was, was. Twenty years ago, I had live-in help from a Chinese exchange student. Her parents were academics from Beijing University and had been on the south side of the cultural revolution. My student had been deemed in need of an attitude adjustment by the communists and was sent to work on a farm for two years because her parents were too intelligent. She told me how hard life was in China.

    One of her big treats in being in America was going to a supermarket; to her heaven compared to what she knew in China. That was only 20 years ago. The days of a guaranteed US advantage over everyone else is over. Only after we accept that fact will we get serious about what we will have to do to reestablish economic leadership. I will know we are serious when we start closing down law schools and convert MBA programs to graduate schools for engineering, manufacturing and mechanical arts.

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  17. "The problem with socialism is that sooner or later you run out of other people’s money"

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  18. jenny said... Everyone loathes socialism until it saves the whole shitty house of cards from tumbling down.

    Everyone loves the cute, drunk sorority girl until she pukes on your blue suede shoes, then she's just a pain in the ass.

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  19. "Their Means"...


    Or the 3% of whirled resources justified by population?

    Or some weighted balance above 3%?
    Because we can.

    All of the "solutions" are short term. As is life, itself.

    Cutting the government, is no immediate solution.

    14. If federal, state, and local governments hadn't been slashing jobs since 2009, today's unemployment rate would be nearly a full percentage point lower.

    While we are getting more from private capital with less labor required, as productivity through technology provides for ever fewer jobs per unit of production.


    With ever more folk, the US, with an above replacement birth rate, in the US most create work for these folk, somewhere.


    While the public is beginning to live, with in its' means:

    30. Household debt payments as a percentage of income are now at the lowest level since 1994.

    29. Despite record federal deficits, total debt throughout the economy -- public plus private -- as a percentage of GDP has been dropping since 2008. Households are shedding debt faster than the government can go into it.

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  20. DR: Yet the idea that the Government should create a trillion or two, to break out of the political quagmire, met with derision.

    As Quirk and I have pointed out time and again, money is just a way to make barter more efficient with markers, be they paper, or metal coins, or ones and zeros. Anyone can create markers, but only producers can create wealth.

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  21. The minting of the coin, by the Treasury, at the direction of the Congress ...

    ... Well ...

    That would return US to the Constitutional format, not further remove US from it.

    The delegation of Federal authority to a private entity, a questionable moral, if not illegal, decision by the Congress.

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  22. All the dollar is, Ms T, is a marker.

    Get that through your skull.

    That is the starting point. Those Benjamen's in your pocket are so much TP.

    The paper towels in your kitchen have more intrinsic value.

    That you do not, even now, understand that, disheartening.

    The idea that the Bankers are creating wealth, with their management of the scrip, is comical.

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  23. Deuce: The days of a guaranteed US advantage over everyone else is over.

    Um, no it's not.

    Notice how all the talk of the Euro replacing the Dollar as the world's reserve currency has gone away?

    Yield curves don't lie. The US is on the high side of the Titanic exactly 180 degrees out from Greece.

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  24. The objective is to break the debt cycle, not go "cold turkey".

    Minting the coin, perhaps analogous to methadone for a heroin addict.

    Incremental improvement, bbut no cure all.

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  25. desert rat said...

    All the dollar is, Ms T, is a marker.

    Get that through your skull.

    That is the starting point. Those Benjamen's in your pocket are so much TP.

    The paper towels in your kitchen have more intrinsic value.


    All the trillion dollar coin is, Mr. Rat, is a marker. Get that through your skull. Those laundry tokens in your pocket have more intrinsic value.

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  26. .

    ..and by and bye on the Bi-ology metaphors. Lest I offend ;-)

    No offense.

    However, when it comes to the birds and the bees, and the flowers, on this blog it is usually spoken of on a different tack as in the 'days of wine and roses' and of 'slendor in the grass and of glory in the flower."

    Nothing quite as antiseptic as the component biology of the flowers.

    :)

    .

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  27. Everyone loves the cute, drunk sorority girl until she pukes on your blue suede shoes, then she's just a pain in the ass.

    Stop wearing blue suede.

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  28. Are consumers actually deleveraging? Well, yes if they're paying off existing credit. The real question is "are they making real progress or merely trying to keep their heads above water?"

    What if the US public becomes savers? Say goodbye to any hope of quick recovery.
    ---------------------------------
    What would have happened if US Banks had not been recapitalized? The deepest depression and most castrophic economic collapse in history?
    ---------------------------
    What is the actual GDP? Anyone's WAG?
    -----------------------------
    Some are saying that the EU, the US and the PRC have all kicked their cans down the road. They say we should look for real action in 2013.

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  29. The trillion dollar coin idea seems like a Keynesian end run around Congress.

    It would sets a dangerous precedent and could spark a Constitutional crisis.

    Advocates want the President to mint the coin and ,bypassing Congress, "write checks against it." Sounds like more voodoo economics to me. Similar to writing checks against the SS Trust Fund. Besides, Congress have final say spending authority.

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  30. What if the US public becomes savers? Say goodbye to any hope of quick recovery.

    Gosh, the Chinese are huge savers, they seem to be doing okay, 9% growth year over year.

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  31. May 17, 2007: Federal Reserve Chairman Ben Bernanke said growing number of mortgage defaults will not seriously harm the U.S. economy. One month later, two Bear Sterns hedge funds with large holdings of subprime mortgages run into large losses and are forced to dump assets. The trouble spreads to major Wall Street firms such as Merrill Lynch, JPMorgan Chase, Citigroup and Goldman Sachs which had loaned the firms money. "They" had no clue then and they still don't. Arguing over whether another trillion or three will make much of a difference one way or another is an interesting exercise, but without knowing where we really stand, it is academic.

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  32. Our friends the Saudis:

    RIYADH - A Saudi royal offered a $900,000 reward to anyone who captures an Israeli soldier, on Saturday. Prince Khaled bin Talal, the brother of business tycoon and Fox News co-owner Walid bin Talal, told the Saudi-based broadcaster Al Daleel that the captive would then be released in exchange for Arabs held in Israeli prisons.

    Khaled's offer comes days after the prominent Saudi cleric, Awad al-Qarni, put $100,000 on the head of every Israeli soldier.

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  33. Teresita said:

    "Gosh, the Chinese are huge savers, they seem to be doing okay, 9% growth year over year."
    ----------------------------------
    Yes, but who was buying?

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  34. As Mr Nixon told US, when he killed Bretton Woods, we're all Keynesians, now.

    That was in 1971, we have traveled far down that road. To far to abruptly turn about and head back.

    The road ahead washed out and impassable. That can be seen from here.

    Time to blaze a new trail, or fall into the abyss.

    I fully understand that the coins are but markers, Ms T.

    That is the essence of it.

    It is no "End Around Congress", it is implementation of the current legal codes and precedents.

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  35. The authority to mint the coins was granted the Sec Treas, in 1996.

    By the Congress.

    It was not a piece of sunset legislation nor since rescinded nor repealed.

    It is as legitimate an assignment of Congressional authority as is the Federal Reserve Act.

    That legislation would be implemented with such unintended consequence, all to true.
    Of both.

    It is totally a matter of Mr Obama's true self exhibiting itself. A matter of his being a radical, a community organizer, or just another politico, bought and paid for, by Wall Street.

    I've always opined that he was just another politico.

    We'll see.

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  36. Right now, it's not how much is borrowed, or "printed;" it's what we do with it.

    If the money were spent to build an ethanol refinery in every County in America, then it would be a wonderful investment in our future.

    If it was spent to buy larger, and larger Saudi-Oil/Gas Guzzling Cars it would be a disaster.

    If it were loaned at 0% interest to weatherize, and switch Northeastern homes from Diesel Fuel to Electricity it would be a Great Investment.

    If it were loaned to Exxon to build a super-refinery to convert sulfurous, super-heavy oil from Venezuela's rain forest to gasoline it would be a one way ticket to oblivion.

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  37. Last night I was looking at Geothermal. There's a lot more potential, there, than we ever imagined.

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  38. When you see an over-the-road trucker out there on I-40 carrying a load from L.A. to Philadelphia, and calculate the savings if that load was carried by an "electrified" train, the "Cost Benefit" is Astonishing.

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  39. Money spent to "lever up" our Solar, Wind, Biomass, and Geothermal would send us Racing into the 21st Century.

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  40. My God, when you consider the amount of money the citizens of New York, and Massachusetts will send to places like Venezuela, , Saudi Arabia, and Russia to heat their homes this winter, while fighting those that would utilize that Free Wind off the New England Coast you want to cry.

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  41. Rufus: If the money were spent to build an ethanol refinery in every County in America, then it would be a wonderful investment in our future.

    Such a refinery would be a great boon for Loving County, Texas, population 82. It would surely generate a lot of tax revenue for the county seat of Mentone, probably employing up to half of that city's 19 residents!

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  42. Loving Co, Tx. Pop 82 area 673 sq. miles

    Could produce 100,000 Megawatts from Solar.

    Estimated "real world" production 800,000 Megawatt hrs./day.

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  43. That's Before you add in a couple of hundred Wind Turbines for another 500 Megawatts Capacity - call it another 200 Megawatt hrs/day.

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  44. 1,000,000 Megawatt Hrs/Day from Loving Co. Tx.

    A little speck on the map of Texas with 82 souls on board.

    We're so awash in "Free" energy as to be incomprehensible.

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  45. But, no, let's dig up coal in Wyoming, and ship it on Saudi Diesel-fueled trains across America.

    Otherwise, we'd have to build a few transmission lines.

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  46. And, God knows, with this "full employment" we've got going on, we can't afford to spare a few workers building Transmission Lines.

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  47. And, in case you're wondering, the EROEI (energy return on energy invested) on Solar Panels, and Wind Turbines is less than a Year.

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  48. And, this is why I am Not a "Doomer." They can fool most of the folks for awhile; but they can't fool them forever.

    More and more people are starting to figure this all out.

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  49. When Energy is cheap life is good.

    Right now, Money is cheap. We need to borrow, and invest, a boatload of that cheap money into cheap energy in the "future."

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  50. And, we will. We just have to get past the Saudi-funded News Channels, and the Koch Brothers-funded Tea Party (not to mention, the Exxon-funded Congress.)

    It'll take about 10 years.

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  51. Try to imagine "cheaper" energy than that which comes from a "paid-for" Solar Panel (or Wind Turbine.)

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  52. Rufus:
    Ethanol=good

    I am glad we have "free marketeers" like the GOP.
    Pinko-ethanol is a scam, year in, year out. You think it will get better, the more stills are built?

    Oh, btw, cotton farmers have received pinko cash-handout, giveaways of $32 billion since 1995. After centuries of production in the USA, cotton farmers are still wards of the state.

    I am sure the GOP will put an end to this when they recapture the White House.

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  53. Sorry to be a downer but Debts, Deficits and other current concerns will not be a concern in a year's time. The debts and deficits will still be there, but nobody will be so concerned about them as they are at present. There will be bigger worries. Economic activity and unemployment. Things are getting worse and wishing and hoping won't make a dent.

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  54. These days, Ruth spends her night reading library novels, watching Netflix movies and living in terror of chipping a tooth “because she can’t afford to go to a dentist,” the Sandell’s book says.

    And even from his North Carolina jail cell, Bernie continues to undermine his wife. Despite Ruth’s claim that she and Bernie attempted suicide together, he denied it to writer Steve Fishman last year in a New York magazine article.

    “I never thought of taking my life,” Madoff reportedly told Fishman. “It’s just not the way I am.”

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  55. At 5:45 p.m. on March 19, three hours before the official start of the air campaign over Libya, four French Rafale jet fighters streaked across the Mediterranean coastline to attack a column of tanks heading toward the rebel city of Benghazi. The jets quickly obliterated their targets—and in doing so nearly upended the international alliance coming to Benghazi’s rescue.

    ...

    The French air attack that so angered the Italians two days later grew from French President Nicolas Sarkozy’s desire to launch an early, symbolic strike before the official start of the campaign. The White House did not object — Sarkozy had been a key advocate of military intervention, and French leadership on Libya had boosted the president’s popularity at home.

    ...

    The NATO-led air campaign quickly pushed Gaddafi’s forces from Benghazi. But by May, the alliance’s planes were patrolling front lines that barely moved.

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  56. I am curious rat - how did bankers CREATE 15 trillion?

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  57. The French air attack that so angered the Italians two days later grew from French President Nicolas Sarkozy’s desire to launch an early, symbolic strike before the official start of the campaign.

    A century ago the same Europeans had an "eleven" fetish, and set the Armistice of the Great War for 11/11, at 11 AM. It was signed by the Germans at 5:10 AM. In those six hours, the British suffered 2,400 causalties. The French suffered 1,170 casualties. The Germans suffered 4,120 casualties. Americans suffered 320 killed and 3,240 wounded in those last hours, spilling their blood and lives for a war that had already been won.

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  58. Ash said...

    I am curious rat - how did bankers CREATE 15 trillion?


    That's a lot of pork bellies. Maybe they have a replicator, like on Star Trek, when Picard says, "Computer, tea, Earl Gray, hot" and voila.

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  59. I'm not real big on cotton subsidies, Benji, but let's not overstate the case:

    The US provided $319m to cotton growers in direct subsidies in 2010-11, a 29% drop year on year, but leaving the country only just behind China in the support league, ICAC data show.

    China, which produces nearly twice as much of the fibre as the US, slashed its subsidies by 83% to $329m.

    Turkey, which pays a premium per kilogramme of seed cotton, raised its support, by 17.7% to $306m, reflecting an increased harvest.

    And the European Union lifted its support by 4.2% to $368m.

    This increase reflects the weakness of the dollar. Nonetheless, the EU was the most generous subsidy payer – with a support programme which works out at some $350 a bale, or more than 70 cents a pound.


    Numbers

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  60. BTW, that $50 Billion, or so, in NO-BID Contracts to Halliburton was a "FREE MARKETEER'S DREAM," wasn't it?


    You can peddle that shit to the school kids, benji. It won't sell, here.

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  61. Rufus II said...

    Try to imagine "cheaper" energy than that which comes from a "paid-for" Solar Panel (or Wind Turbine.)


    There's no cheaper food than that which comes from a "paid-for" tractor, except when you dig a hole and hit a cache of canned food some Mormons buried long ago. We're still porking out on Mormon pork 'n' beans. Haven't hit peak pork yet.

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  62. That's right, T. And, taking it one step further, gasoline will never again compete with ethanol produced with a "paid for Ford tractor, and Cellulosic refinery."


    And, diesel-transported coal doesn't have a chance against a "paid for" geothermal plant.

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  63. The Benjamins of the world will scream, and cry, and stamp their feet, but the future is rushing toward them.

    And, the future "takes no prisoners."

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  64. Rufus: The US provided $319m to cotton growers in direct subsidies in 2010-11

    But apparently there's an EROEI for cotton too. Total US cotton sales are forecast to be $5.3 billion, and most of that is exported. Cotton is like "good cholesterol" to our trade balance.

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  65. The same with Corn, Soybeans, Wheat, DDGS, and Ethanol, T. Our Ag Exports are, definitely, a very strong Plus in our balance of payments.

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  66. Now, here's a simple fact: "people" (singular) are smarter than "people" (plural.)

    And, you gotta give this to the average American: He/She never stops trying.

    People are paying off their Credit Cards, and Borrowing Money for Education.

    Americans are increasingly going into deep debt to retrain themselves in hopes of landing a job in this tough economy.

    USA Today cites a Federal Reserve report that shows student loan debt has now exceeds credit card debt, mainly because students and workers are taking advantage of federal loan programs to build new careers.

    Outstanding student loans will exceed $1 trillion this year, while more than $100 billion was taken out in loans last year. The average loan was $4,963 last year, up 63 percent, adjusting for inflation, from a decade ago.

    Defaults on loans also are on the rise. With big “payment due” notices on the horizon, one student told USA Today that all the borrowing is “going to create a generation of wage slavery.”


    Trying

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  67. Fractional reserve banking, ash.

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  68. Modern central banking allows banks to practice fractional reserve banking with inter-bank business transactions with a reduced risk of bankruptcy. The process of fractional-reserve banking expands the money supply of the economy but also increases the risk that a bank cannot meet its depositor withdrawals.

    Though not a mainstream economic belief, a number of central bankers, monetary economists, and text books, have said that banks create money by 'extending credit', ...
    ...
    ... and that rather than deposits leading to loans, causality is reversed, and loans lead to deposits.

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  69. Same way the Wall Street mavens created a $350 trillion USD derivative market.

    Money for nothin' fer real.

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  70. You are quoting something, rat, without providing the reference.

    How does fractional reserve banking create money?

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  71. how does the derivative market create new money?

    Really, inquiring minds would like to know?

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  72. desert rat said...

    Same way the Wall Street mavens created a $350 trillion USD derivative market.


    This is more of that trillion dollar coin crap.

    There was $5 trillion dollars in the big piggy bank that was home equity loans, where did it go? POOF!

    That's why they call this crap funny money.

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  73. Blogger Rufus ll said:

    We're so awash in "Free" energy as to be incomprehensible.

    Agreed. Opec and Nationalized oil companies are all in for a rude awakening in the not too distant future. I give them ten years.. With emphasis being put on alternative fuel sources, oil will soon be a thing of the past. Obviously, the countries with large oil reserves will make money, but profits will decrease. We are still the biggest oil importer on the planet but it ids conceivable that we could become energy self-sufficient within the next 10 years, due to the current shale gas boom, wind and solar. Whatever oil the US needs, can be bought from Canada, Brazil or use their own shale oil reserves.

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  74. Australian business traveler Graeme Yeatman sided with the airline, even though he was also trying to find a new flight home to Sydney on Sunday after his flight was canceled.

    ...

    The airline infuriated unions in August when it said it would improve its loss-making overseas business by creating an Asia-based airline with its own name and brand. The five-year restructure plan will cost 1,000 jobs.

    Qantas said in August it had more than doubled annual profit to AU$250 million but warned that the business environment was too challenging to forecast earnings for the current fiscal year.

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  75. Believe it or not (and, I wouldn't blame you if you didn't,) we not only are a net energy "Exporter" to Brazil, but we probably will be in Ten years, also.

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  76. .

    USA Today cites a Federal Reserve report that shows student loan debt has now exceeds credit card debt, mainly because students and workers are taking advantage of federal loan programs to build new careers.

    Outstanding student loans will exceed $1 trillion this year, while more than $100 billion was taken out in loans last year. The average loan was $4,963 last year, up 63 percent, adjusting for inflation, from a decade ago.




    Student loans, the next bubble ready to burst.

    We have been telling kids they 'have to' get a college education regardless of the cost if they want to get by with a resonable chance to live comfortably.

    The government and private companies have made student loans readily available. The colleges see the money readily available to students and budget accordingly. This is one of the main drivers in the rising cost of an education.

    Result: We speak of the increased cost of healthcare. Actually, while the general cost of living over the past 30 years has hovered at a little over 3%, healthcare has risen around 6%, and college tuition has been going up at close to 9% per year.

    A good portion of the young people in OWS have been screaming about the debt they have incurred trying to get an education.

    This is one of the reasons Ron Paul is against the government student loan program. He sees it as comparable to the easy lending that led to the housing bubble. We convince these kids they need a college education. Make it easy for them to barrow and go into debt. When they come out of school, they have student loans big enough to bury them, and worse yet, can't find a job.

    With over a $1 trillion in student loan debt outstanding and no jobs so they can pay it back we could soon be looking at another bubble.

    I hadn't really thought about the connection between the easy money for student loans and the escalation in the cost to go to college until Ron Paul brought it up.

    If he decides to run as a 3rd Party candidate, it could really shake up the 2012 election.

    .

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  77. .

    Clinton credited with key role in success of NATO airstrikes, Libyan rebels

    They say history is written by the winners.

    The following article credits Hillary with initial scepticism over the Libyan adventure followed by brilliant diplomacy to hold the NATO alliance together.

    HILLARY!!!

    The article cites a European diplomat and a State Department official, both unnamed, for the background on the story.

    I say the story is pure bullshit. I still feel the only reason we went into Libya was because Hillary screwed up in Egypt and was looking for some kind of redemption to show she was still a player.

    I am not going to go back looking for the stories but at the start of the whole Libya thing there were reports that Obama was the reluctant warrior and Hillary had to push him into war. She and the UN ambassador, forget her name, were the real hawks in the administration, Gates was against it.

    Obama hasn't gotten much of a bumb out of Libya and it sounds as if the whitewash has begun.

    IMHO

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  78. The thing is: If you scroll down to Household Data - A4 you find that

    Unemp. Rate for 4 yrs. College 4.2%


    Unemp. Rate for H.S. Grad 9.7%

    And, "lifetime earnings?" You don't even want to go there.

    Ron Paul is a Crank.

    BLS Data

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  79. Ron Paul running 3rd party is only going to peel votes off of Romney and you'll end up with Obama II.

    That unemployment trend line is down overall. Nice looking direction.

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  80. This comment has been removed by the author.

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  81. .

    Ron Paul is a Crank.


    Does nothing to change my point that if he does run as a third party candidate all bets are off in 2012, not because he would have a chance for the presidency but for what he would do to or for the other players.

    .

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  82. This comment has been removed by the author.

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  83. The trend I don't like Sam is the "part-time for Economic Reasons."

    It's up 874,000 in two months. Maybe it's just a "seasonal" thing, but I'm leery.

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  84. .

    From a previous blog stream while citing certain statistics, Rufus asked:

    Doesn't that tell you anything?

    And while I didn't respond, I thought, "Yea, it tells me picking the right statistics you can pretty much 'prove' anything you want."

    Unfortunately, the source Rufus cited didn't address the subjects I covered in my post which were the rising cost of education in the country, the reasons for that rise, the fact that a growing number of kids are getting in trouble on student loans, and the possible student loan bubble that is building.

    The BLS statistics talk to a breakdown of the current unemployemnt numbers. It doesn't break out graduates who graduated 30 years ago from those who graduated last June. Likewise, it doesn't address the reasons that a college education is rising in cost 50% faster than healthcare and that it is rapidly becoming too expensive for the middle class.

    In a September article in the NYT, it was pointed out that the share of federal student loan defaults rose sharply last year, especially at for-profit colleges and universities, where 15 percent of borrowers defaulted in the first two years of repayment, up from 11.6 percent the previous year. (I seem to recall the overall default rate was around 7% in 2008.)

    The BLS statistics also do not address the fact that in todays job market even with a college degree it's tough finding a job, and when you do get a job it is often part-time, not in your field, or paying substantially less than you expected. Add to this the 'average' student loan of a graduate (somewhere around $25k as I recall) and kids have a hard time meeting their obligations.

    If the employment rate doesn't pick up and costs keep rising for education it could result in rising defaults on student loans.

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  85. Q, I haven't seen any "actual numbers" that support the assertion that recent college graduates are having a hard time finding jobs.

    If you have, I'd appreciate seeing them.

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  86. I would keep in mind that, unfortunately, quite a few of the "for profit" schools are little better than scams.

    There are people "graduating" from culinary schools with $35, and $40 Thousand debts that are hardly qualified for a job at Denny's.

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  87. Well, I'll be danged. Here is a study that backs up what you've been saying, Q.

    Tough Times for Recent Graduates

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  88. Don't say I never gave you anything. :)

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  89. Evidently, the 2001 Recession was very similar (at least for recent graduates.)

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  90. .

    I pulled the first four that showed up on Google under "unemployment rate for recent college graduates".

    Even though it was from back in 2009, I put up the last one from the WSJ because it kind of gives a history of what happens to new graduates during recessions.

    Unemployment as of March 2010 according to the BLS stands at 9.7%, which translates into 15 million Americans without jobs. The BLS has broken the statistics down even further. For adult men, unemployment is 10%. For adult women, it is 8%. For teenagers, unemployment is an astounding 26.1% (the highest ever recorded for the demographic), but what about recent college graduates. 80.3% will graduate college this year without a job or roughly, 1 million will be jobless.

    ABCnews.com has reported unemployment for 16-24 year olds is 18.9% a slight decrease from its historic high of 19.2% in September 2009. Giving that only 20.7% of recent college graduates will graduate with a job this year, the number does not accurately portray unemployment trends. Since the federal government does not gather data on recent college graduates, it is hard to find and accurate number on recent college graduate unemployment. In reality since 80.3% will not find a job this year, an increase of 29.3% from 2007, unemployment for recent college graduates is almost 30%.

    But even that number fails to account for recent college graduates working in a field below their education level and earnings potential.

    Nearly 18% of 18-24 year olds are living below the national poverty line. As a result many recent college graduates have or will be forced to move back home. Working in low paying jobs as cashiers, waiters etc. many are no better off than they were four years ago. Except now, they have accumulated an average debt of $22,000.

    Studies show their suffering will not be short term...


    A Dismal Outlook: Recent College Graduates and the Job Market


    Many With New College Degree Find the Job Market Humbling


    Survey: 85% of New College Grads Move Back in with Mom and Dad


    The Curse of the Class of 2009

    .

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  91. My link was better; and I beat you to it. :)

    But, as the data shows, the situation was very similar after the 2001 Recession.

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  92. .

    And stop picking on my buddy Ron.

    .

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  93. .

    But, as the data shows, the situation was very similar after the 2001 Recession

    And the WSJ article goes back at least to 1981-1982 and tells the same story. The differences, 30 years of escalating college costs, higher student loan blances, and as we have discussed, this ain't your average recession. But it is possibly the "new normal" with regard to unemployment.

    .

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  94. Yes, it probably is - at least for awhile. Let's face it; if you have a new degree "University Studies," it might be slow sledding for awhile.

    I bet you, though, that those that are leaving the Ivied Halls with a Sheepskin with the word "Engineering" somewhere upon it, or some combination of the words "Computer, Software, Graphics, Design, etc, are, overwhelmingly, going straight to income valhalla.

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  96. And, here's a statistic you can't get away from. Diesel (home heating fuel) is Up 25% from last year. $3.09 to $3.87.

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  97. .

    I bet you, though, that those that are leaving the Ivied Halls with a Sheepskin with the word "Engineering" somewhere upon it, or some combination of the words "Computer, Software, Graphics, Design, etc, are, overwhelmingly, going straight to income valhalla.


    1. This has little to do with the subject at hand.

    2. I have been spouting and bemoaning the meme that has been going around lately that business is not hiring because their are not enough IT, Math, and Science majors for the job.

    Then a while back I saw an article with some numbers that said the meme doesn't cover the entire story.

    One, admittedly of a number of, reasons these businesses aren't luring in the candidates is that in today's environment they are unwilling to pay them sufficient wages to attract them.

    .

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  98. .

    And, here's a statistic you can't get away from.

    Even further from the point; however, from the number of posts you have put up on this this subject on this and the previous stream, I would say it was adequately covered.

    .

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