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Monday, June 11, 2012

WND column

Obama and the Debt Delta

When people who are fat and flabby begin to get in shape by lifting weights, they are often surprised to discover that, although they lose inches off their waistline, they don’t actually weigh any less. This is because muscle is much denser than fat, and an amount of muscle takes up about one-third the space as the same amount of fat. The change in a person’s shape is a qualitative one rather than a quantitative one, and such changes will often have a bigger result on how he looks and feels than simply losing weight while maintaining the same fat-to-muscle ratio.

Although Paul Krugman and a few other mainstream economists are finally beginning to admit that the U.S. economy is not only in a depression, but has been in a depression for some time now, their neo-Keynesian models, which are entirely quantitative, still do not permit them to understand how or why that is the case. With their singular focus on gross domestic product, or GDP, they completely fail to even try to understand how qualitative changes in outstanding credit market debt have a significant effect on the economy.

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23 Comments:

Anonymous Roundtine June 11, 2012 6:12 AM  

Paging Mencius Moldbug, it appears USG has been LBO'd. All of the bad debt of the financial and household sector is being shifted onto USG and the central bank. I would not want to be a creditor or customer of USG.

Romney seems like the perfect guy to take over at this stage (in the sense of following the script), the financial guy brought in to work out the debt overhang.

Anonymous Rantor June 11, 2012 6:20 AM  

In related news, as Treasuries have hit historically low interest rates, look for interest rates to start climbing in the coming months... As the credit troubles worsen, everyone, (USG, corporations, etc.) will have to pay more interest to keep people investing in their debt products.

Anonymous Roundtine June 11, 2012 6:28 AM  

Rantor,

In the end you will be right, but until then, people will keep buying Treasuries. It's like picking pennies up in front of the steamroller, the only question is how far away is the steamroller? It may still be a decade away if the Japan scenario keeps up.

Blogger kilo papa June 11, 2012 6:34 AM  

And then Jesus said, "What the fu*k!!? The French Open was postponed due to rain?? Who in the goddamned hell do I need to see about this!!!?"--Jebus

Anonymous E. PERLINE June 11, 2012 8:05 AM  

As a radio commentator says, you don't have to be a metiorologist to know which way the wind is blowing.

You don't have to be an economist to know you shouldn't spend money you don't have.

Anonymous FUBAR Nation (Ben) June 11, 2012 8:57 AM  

Romney is bought and paid for just like Obama.

Blogger IM2L844 June 11, 2012 9:19 AM  

I just caught the very end of it, but I thought I just heard Krugman say, on CBS This Morning, that to solve the problem all that needs to happen is for congress to give more money to the states so they can hire more teachers thus ending austerity in the U.S.

Apparently throwing money at teachers is some kind of miracle panacea.

Anonymous Daniel June 11, 2012 9:43 AM  

Krugman also said that Obama "screwed up the wrong line" when he said "the private sector is doing just fine."

So, not only is their script terrible, they can't even read from it correctly.

Anonymous rienzi June 11, 2012 9:52 AM  

We know that the economic Titanic has hit the iceberg, and is ripped open below the waterline. We also know that the ship's officers, rather than sealing off the flooded areas, and starting up the pumps, are counter-flooding the stern, in a desperate attempt to bring the bow back up. The ship's P.R. officers are assuring the passengers that all is well, and that the ship is coming back up, although a little slower than they had hoped, and are mocking those passenger that are floating away on gold and silver liferafts.

The ship is going down, that much is certain. As a passenger, at this point, I am not really interested in the various, competing theories of the effect of financial shocks on economic vessels. What I really need to know is: 1) How much time do I have before I have to go back to my cabin and get my gold and silver raft, before the ship sinks? 2) Will there be enough large, comfortable pieces of flotsam left after the sinking to make my purchase of the gold and silver liferaft, and my lead and canned goods lifejacket, foolish, redundant purchases?

Blogger Jardinera654 June 11, 2012 9:59 AM  

I know that I shouldn't feed the trolls, but:

Kilo papa, is that all you've got? If you're going to mock Christianity, AT LEAST BE CLEVER ABOUT IT! Go study the collected works of Oscar Wilde and Noel Coward. Then come back, and at least give us something that doesn't sound like it came from a retarded fourth-grader who just discovered profanity.

Anonymous Jubilee June 11, 2012 10:05 AM  

The solution is plain: cancel debt. Cancel the debt and reset the economic system. I explain this in detail in various posts at my blog.

The problem is, the creditors are in complete control of the political process. They are happy to float a high perpetual debt, because it directly enriches them.

Answer me this: If you could print out your own money, why would you borrow it?

Functionally, interest payment on the national debt is simply a subsidy of/tribute payment to the Creditor Overlords, which they engineered through the political process.

In short, interest payments on "national debt" are both illogical and immoral.

Anonymous Stilicho June 11, 2012 11:03 AM  

Excellent column. The growth rate of corporate since 2008 matches your Total 60 average projection. I wonder what further correlation can be found. What is the average corporate sector debt growth over the same period? If it is close, what are the implications of the corporate sector maintaining that debt growth rate? What would be the implications of corporate debt growth falling below that rate?

Blogger IM2L844 June 11, 2012 11:08 AM  

"Functionally, interest payment on the national debt is simply a subsidy of/tribute payment to the Creditor Overlords, which they engineered through the political process.

In short, interest payments on "national debt" are both illogical and immoral."


Being an admitted economics idiot, I naturally gravitate toward simple solutions that I can easily process. If it is also a biblically based solution, all the better.

After reading through some of the information available at your blog, the debt jubilee approach looks appealing, but I'm sure there are peripheral considerations that I am not taking into account. Thanks, though. I intend to spend some time learning more about it.

Anonymous Stilicho June 11, 2012 11:41 AM  

The current approach to the debt crisis is to try make the creditor banks, if not whole, at least solvent by replacing the bad debt with marginally better sovereign debt. For the moment, this has bought time for some sector deleveraging, but making the public responsible for the bad debts of a portion of the public has not reduced the debt burden in a meaningful amount and the total debt (public and private) must still be serviced and extinguished by the same productive economy that bore that burden before the debt shuffle. If the total sustainable burden is 1.5 times GDP, then shifting the load is not going to work when that load has only been reduced from 3.75 times GDP to 3.48 times GDP.

Anonymous Noah B. June 11, 2012 2:00 PM  

At the depths of the Great Depression, I don't believe the US had future spending obligations at all comparable to our future obligations toward entitlement spending. If future obligations are considered, the picture is much, much worse than the Z1/GDP ratio indicates.

I believe that any meaningful recovery, therefore, will also have to include a significant default on promised future benefits of Medicare, Medicaid, Social Security, and public pensions.

Anonymous Noah B. June 11, 2012 2:16 PM  

"I just caught the very end of it, but I thought I just heard Krugman say, on CBS This Morning, that to solve the problem all that needs to happen is for congress to give more money to the states so they can hire more teachers thus ending austerity in the U.S."

There isn't even a pretense of logic behind this. Last week was a terrible week for Obama; Bill Clinton sabotaged his tax plans, they lost the Wisconsin recall, a genuine bipartisan to investigate leaks from the White House seems to have emerged, the Fast & Furious scandal refuses to go away, and in a moment of sheer frustration and resentment, Obama brushed off the entire private sector. This statement that they need to hire more teachers, firefighters, and police is revealing of how desperate they have become.

Anonymous rycamor June 11, 2012 2:40 PM  

When people who are fat and flabby begin to get in shape by lifting weights, they are often surprised to discover that, although they lose inches off their waistline, they don’t actually weigh any less.

Yeah, yeah... it still cheeves me that I went from ~220lbs to 190 while adding at least 15lbs of muscle. I was sure I would end up a buff 210lbs. Had no idea I was carrying such a load. Trying to work my way back up gradually...

Still, not quite sure I get the metaphor. Muscle is denser than fat as X is Y to Z?

Anonymous PC Geek June 11, 2012 2:50 PM  

@Jardinera654

know that I shouldn't feed the trolls, but:

Kilo papa, is that all you've got? If you're going to mock Christianity, AT LEAST BE CLEVER ABOUT IT! Go study the collected works of Oscar Wilde and Noel Coward. Then come back, and at least give us something that doesn't sound like it came from a retarded fourth-grader who just discovered profanity.


According to my reading, for all his rebellion Oscar Wilde became a Believer in the end.

In terms of clever attempts at criticism of Christianity, there a few who have at least made an attempt, but by and large Kilo Papa represents the cream of atheist criticism, maturity, and intellectual development.

Please do not feed the trolls - it is for everyone's own good. :-D

Anonymous bob k. mando June 11, 2012 5:22 PM  

Kilo papa, is that all you've got?


be kind. tennis is almost as homo as soccer.

it's obvious that Kilo papa is not yet at peace with himself and is still acting out towards others.

Anonymous p-dawg June 11, 2012 7:22 PM  

Let's see, the "Federal Reserve" can print $100 worth of promissory notes for about 3 cents worth of those same notes. They can also manufacture promissory notes from thin air in electronic banking. Yeah, I'm sure they're going to voluntarily change THAT system.

Blogger W.LindsayWheeler June 11, 2012 7:29 PM  

On another blog, Evo and Proud, Peter Frost is running several posts on the Greek debacle. He is taking the historical approach by discussing the various stages of Greek political development since their independence laying out the groundwork for his take on why the Greeks are in a financial mess.

In his last post on the Colonel dictatorship in the 60s/70s, I posted that Spain is just as much in trouble as in Greece. The Colonels, who were conservative, never had an impact after their departure, much like Franco in Spain. Both countries are socialist, democratic, and thoroughly leftist.

California is the same way, along with the US Federal Government. What does California, Spain, Greece and the US Government have in common?

They are all socialist! Run by liberals/democrats!

To solve the problem means to get rid of the democrats in all of these countries. Isn't that the solution?

Anonymous Fatty June 12, 2012 12:48 AM  

Krugman/Bernake are not that stupid. They probably worked out every angle their lard could work... till now. The Spanish Bailout fiasco today just changed this horse into another color. US treasuries rates are about to make the cost of lard quadtriple and make them grow a pair! I hope. I could use the interest.

Blogger Nate June 12, 2012 6:36 AM  

http://www.washingtonpost.com/business/economy/fed-americans-wealth-dropped-40-percent/2012/06/11/gJQAlIsCVV_story.html

The Average American's net worth dropped 40% from 2007 to 2010.

Sounds like something that happens in a depression doesn't it?

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