TPS

Pot calling kettle black. Are you reading what I wrote without bias? Your first sentence is almost exactly what I said earlier. Their primary goal is to keep their currencies low relative to the dollar; they do that by purchasing dollar assets; a lot of which are treasuries, but not all. The People's Bank of China (PBC) does not hold dollars in a vault--only despots do. They have billions of dollars held in various other types of deposits, including US bank deposits. First, I'd be willing to bet you dinner at my/your favorite restaurant if the US government runs a surplus next year. Second, you are conflating two issues: 1) the US trade deficit with China; and 2) the twin deficit relationship. 1. As long as the US runs a CAB deficit with China, AND China continues to maintain its peg to the $, then the PBC will accumulate dollar assets to offset the pressures on the yuan/$ exchange. Those assets could be treasuries, other bonds (public/private), or dollar deposits held at US banks (or even the generic "euro $" market). 2. As long as the US government runs a deficit AND there is insufficient domestic savings (S - I), then the savings has to be supplied by the foreign sector. It could be in the form of foreign private investors purchasing US assets or foreign CBs purchasing US assets. Given that US private savings has been in deficit, any change in the US government's budget will require more or less foreign savings. As the US budget deficit has come down, that reduces the need for foreign savings. If the budget is in surplus next year, C&J could certainly continue to buy treasuries, since we still have to fund the $8 + trillion in government debt that rolls over. Was there a point to that question? You say that the deficits were caused by excessive spending. I gave you the spending changes--which were indeed excessive (greater than the 3%, so those numbers would be even more supportive of your argument), but the deficits were larger than the change in spending. The only explanation is that revenues also fell. I focused on the years the tax cuts were made. Is your claim that tax cuts from 2001/02 caused increase revenues in 2006 and 2007? That's the problem with S-Side theory, always changing the theory to fit the facts. And if the theory is that changes today have an impact 5-10 years from now, that theory is essentially unverifiable, which is why it's more like a religion... Sorry, was it too difficult to figure out that the first 4 numbers were gdp growth in his first term? Well, there you go again....did I say it was the driver of the bubble? Read what I wrote! I said a bubble in prices AND the movement toward stock options replacing income as compensation was the cause of the increased capital gains tax revenue---NOT THE CAUSE OF THE BUBBLE.

It's a lock: Republicans will retain control of both houses.

Tell me how he has influenced Bush's foreign policy? Do you think Kerry will have a chance in Hell in 2008? I'd give rosie o'donnell a better chance.... The last major party candidate I voted for was Clinton in the 1996 pres election. However, I have voted for dems/reps over the years who appear to have some independence.

No. Is it a problem? Should I give a **** about kerry when he doesn't matter a hill of beans to the current US policy? The right obviously cares about him, because there's nothing positive you can claim about this current regime. They suspend habeas corpus, but air america folding is big news. They support torture but gay marriage is a bigger issue. They've turned government into one big pork barrel of enrichment for themselves, but Bill Clinton couldn't sell tickets to his birthday bash. DC Monkey Jumper may be "contemptuous" of me, but we agree on one thing: the majority of Americans are stupid. You'll go out there and continue to vote for people who steal you blind. It's true, you get the government you deserve...

While I don't disagree with your sentiments, I'm not sure WNY politicians are any different from politicians in Texas or across the US. They are the Papparazi (sp) of photo ops...

China has pegged its currency to the $ (however, its made some recent changes--pegging to a basket of currencies and allowing very small annual changes in the Yuan/$ rate). The US runs a $200 billion plus trade deficit with China. That creates an excess supply of dollars relative to Yuan on FX markets, which would cause the dollar to fall against the yuan. However, China's CB steps in and buys the dollars (it's a little more complicated than this, but the process and effect is the same). Since they keep their currency pegged to the dollar, they offset the excess supply caused by the trade deficit by increasing demand for $s--as you know, when S=D, there's no tendency for the price to change. How do you think China's CB has accumulated $1 trillion? It doesn't go straight to the Japanese government. However, the same thing occurs with Japan: We run an $80 billion deficit with Japan. Japan's CB has intervened to prop up the $ by buying $s with yen, especially in 2004 when the $ almost fell below 100 yen. The reason Japan and China (and other countries) do this is because they pursue "export-led" growth strategies. by keeping the $ relatively strong, it makes imported goods cheaper. A fall in the dollar against the yen and yuan would make their goods more expensive. I'm surprised you don't know this. I'm starting to find out how little you do know... It's called the "Twin deficits." The relationship is: NX = (S -I) + (T - G) The current account deficit = the value of the net surplus/deficit in domestic private savings + Public savings (total government deficit/surplus). When the right hand side is negative, then the left hand side is negative. If there's insufficient savings domestically to fund domestic investment and government spending, then we borrow from the international sector. The current account deficit's mirrow is the capital account surplus--an $800 billion deficit on goods and services is offset by an $800 billion inflow of foreign savings. So, yes, there is a relationship between trade deficits and budget deficits; however, it's not always direct because of the third variable net domestic saving surplus/deficit. Here's a nice little primer for you: Twin deficits As you rightly point out, the deficit is the difference between revenues and expenditures. From the BEA web site (billions of $s--note also, that the difference between expenditures and total revenues = change in the deficit): From 2001 to 2002: G increased by $150, revenues fell by - $166 (personal taxes fell by $-160); change in deficit= -$316. From 2002 to 2003: G increased by $170, revenues increased by $24 (personal tax revenues fell by - $56); change in deficit = - $146. From 2003 to 2004: G increased by $133, revenues increased by $125 (personal taxes up by +$26); change in deficit = - $8. So you are wrong again. Even if expenditures had grown by 3%, there still would be deficits because of the drop (or slow growth) in revenues from 2001 to 2003. Certainly when the economy finally turned around revenues picked up again in 2004 and 2005. Real GDP growth for the 8 years under clinton (BEA): 2.7 4.0 2.5 3.7 4.5 4.2 4.5 3.7 As for the last point, that's why I said it was a combination of the options and bubble in prices.

And I have tee shirts that have as much time in hot zones as Bush, Cheney, Rumsfeld, Wolfowitz, Perle, Limbaugh, et al...

So are you saying that Asia's central banks are investing in dollars because they believe in US economic strength? The dollar has defied gravity because they have anti-gravity machines called a fiat currency (of their own) and they use it to buy dollars. In 2003 and 2004 half of the US current account deficit was financed by purchases of dollar assets by foreign central banks, not private investors. They do not purchase $s because they believe in US economic strength. They purchase $s to support their own economic growth. Yes, growth is slowing much as it did in the post dot.com boom. Preliminary estimate of 1.6%, but that includes what appears to be a statistical error in the estimate of auto production. Without the assumption that auto production increased over 20% in the 3rd quarter, real gdp grew a paltry 0.9%. Well...you tell me I turn the conversation away from revenue generation, but you inlcude all quotes EXCEPT the one about revenues not hitting their previous peak which occurred in 2000. Everytime we have this conversation I focus on the revenue side because that is the focus of your argument, and I have stated that the deficits are a combination of increased spending and decreased revenues. You argue it is the spending. I'd like to see you prove that the increases in government spending each year is equal to the value of its deficit. Maybe you can also find the data that show personal tax revenues declined after Clinton raised the top rate in 1993? Personal taxes increased every year under Clinton, both when he raised taxes and when he cut the cap gains rate. What I believe is that the speculative bubble in the stock markets, combined with the fact that most compensation of management was through stock options in the late 1990s, helped generate the increase in capital gains revenue. It's pretty simple math. During the bubble P-E ratios for tech stocks (at least those that generated earnings) were near 100, compared to the historical average near 20. At the previous cap gains rate of 28% and normal valued shares at $20 (I'm assuming earnings of $1 to simplify), each share sold generated $5.60 in taxes. When the rate was lowered to 20% and shares sold at $100, it generated revenues of $20. In fact this is the same math necessary for your case on personal taxes. When you cut income tax rates, the only way you can get an increase in personal tax revenues is if income increases significantly like the stock prices did. If you cut taxes and you don't have a bubble, in income or stocks, then revenues decline. Each year Bush cut the personal tax rates, personal tax revenues declined. Only now, six years later, have revenues recovered to equal their previous peak. That is, now that personal income has grown by $2 trillion (since 2000), the lower tax rates are generating the same tax revenues that were collected in 2000. Gee, that's about how long it took the stock market to reach its previous peak....Those fantastic supply-side policies at work....

The liquidity is fueled by US deficits, and Asian CBs are holders of US debt, not equity. Asia has financed the budget deficits created by the tax cuts and increased spending. I stand corrected.... Let's see, that puts us back to where we were before the tax cuts, in surplus, yes? Federal Personal income tax receipts might actually reach the previous peak this year. They peaked at $1 trillion in 2000 and have yet to reach that over the past 6 years, even though nominal GDP increased by over $3 trillion over the same period. In fact, personal tax receipts fell every year from 2000 to 2003, consistent with the tax cuts. By the way, who said the tax cuts would wreck the country? Every economists knows that personal tax cuts stimulate growth by increasing disposable income and therefore consumption, but it comes at the expense of increased budget deficits. You guys claim that tax cuts increase tax revenues to such an extent, that tax cuts don't cause deficits. Your great evidence is to suggest, now that deficits are back in line with historical ranges, it was a success. When in fact, prior to the cuts, the budget was in surplus. That's an interesting definition of success....

I assume you agree with his assessment on the current expansion being driven by consumption, since you yourself stated in a different thread something like "the current expansion was driven by a housing bubble much like the 1990s was driven by the stock market bubble." He also rightly includes the "borrow and spend" fiscal policy of the Bush Administration. Neither of which creates a sound foundation for growth, which is one of his points. HIs comparison of the stock market bubble is just that, it's an example of the excesses of that market, just as there is an excess now of dollars worldwide. Eventually the bubble will burst. As for your example, as he mentioned, the DOW also lost some 40% of value; so while you could dump pets.com for ibm, you still lost because the entire market was overpriced. I agree with you on the possibility of trying to get the rest of the world to grow as a partial remedy, but that still won't solve the US CAB deficit problem--the marginal improvement in exports won't offset our addiction to imports. And there's the rub: Those CAB deficits, now approaching $900 billion annually, requires foreign investment in $ assets of an equivalent amount annually. Something has to give. While you focus on "investors", it's the central banks of Asia that have been propping up the dollar. China now owns US assets = $1 trillion. The only thing that keeps the dollar up is the continued support for the $ by these banks. However, this also puts China's interests in league with the $, because if it falls, then the value of their $ investments fall, and it could also put the brakes on the US consumption engine which keeps their economy growing. The point I beleive he was trying to make is that the world is awash in excess $ liquidity. It's in everyone's interest to continue the game of supporting the $, but, like all speculative bubbles, it will eventually crush under its own weight. I believe this is true as well. As he states, it may be tomorrow, it may be in a few months, or it may be in a few years, but the current situation is not sustainable. As it grows worse, it requires a smaller and smaller spark to set if off And yes, he's a writer for a magazine, so his style is a little more flamboyant--"greed is good" yes Mr. Gecko?

For those interested: There are some things I disagree with (his implication on growth and productivity statistics), but the general premise I agree with--the growth in global dollar liquidity is unsustainable compared to the US economic fundamentals: Der Spiegel Sorry about linking to another article Mr. Jumper....

If what I (and some others) say generates this kind of reaction, maybe you ought to take some time off and do some things that bring a little cheer to your life Tom--seriously.

Not quite. I do think that posting a link to an editorial/article is a good way to begin a discussion about a topic/issue. I also think that there are times when the source should be questioned, but I believe most of the time discrediting the messenger is just a way to avoid discussing a message that runs counter to one's belief. Wow! There's a "list of reasons" for why I make you feel contemptuous...interesting...Mr... "Well, I hope you're not too messianic Or a trifle too satanic We love to play the blues Well you're just a ..."

What, 6 posts in one thread and you still haven't added a thing to the discussion other then questioning the source. I'm guessing you're the monkey in disguise?

Tillman's is an editorial which expresses his beliefs; the other is a statement of fact that the Army's recent strategy to reduce violence in Iraq has not worked. No need to read them though, you already know the truth...

Kevin Tillman joined the army with his brother Pat, and both served stints in Iraq and Afghanistan.

I'm not sure why you think his press conference from July is relevant to this week's? According to the Post and many other sources, he stated this week that their strategy for the past two months has not stemmed the violence. That seems to be a pretty good assessment, and your last comment even supports it. If anyone else (bungeejumper?) has any counter proof to that assessment, please provide it. Hell, if anyone here has any evidence that we are "beating the insurgency and winning the hearts and minds of the Iraqi people" I'd love to see that too.

I would tend to believe one of the top ranking generals in Iraq when he says the "current strategy in Iraq isn't working." But, hey, "I'm a joker, and a toker, and midnight smoker...."

I thought you meant this general... Caldwell

The maybe they could have traded up to to get Whitner at #26...hind sight....

And the usual response from those who blindly follow... Do you realize the implications of this? Obviously not. The best you can do is attack the person who posts the article. IT says so much more about you than your weak attempt to attack Chicot...

First, Phillips was from New Zealand and attended the London School of Economics (starting the year Keynes, who was at Cambridge, died). Second, American Keynesian economics is based upon "interpretations" of Keynes by John Hicks and Alfred Hansen. Samuelson followed this line of thought. Actual disciples of Keynes at Cambridge--like Nicholas Kaldor, Joan Robinson (she called American Keynesians "Bastard Keynesians"), and Michel Kalecki--disagreed with those interpretations (one main reason was because those mechanical models ignored his discussion on uncertainty, which was fundamental in explaining why an economy could be stuck with high unemployment for an extended period). These economists represent the core of the post Keynesian school. An interesting side note on Hicks: toward the end of his life, he wrote a paper criticizing his interpretation of Keynes, mainly because of his admitted omition of the role uncertainty plays in a modern monetary economy. I'll try to simplify things for you: Phillips, a disciple of the Hicksian interpretation of Keynes, published an empirical paper on the trade-off between money wages and unemployment. S&S took it a step further, connecting wages to prices, and then estimating the trade off between inflation and unemployment. This simplified Phillips Curve relationship was then incorporated into the "Bastard" Keynesian models. However, without the concept of uncertainty, there's no role for expectations. This left the door open for Phelps and Friedman. So, yes, it was the American Keynesian School that was under attack, not Keynes's actual theory, which incorporates expectations based upon the concept of fundamental uncertainty. I believe you work in the financial industry, yes? You should read chapter 12 of the General Theory, "The State of Long Term Expectations." It's one of the best discussions on the relationship between real investment and financial investment you'll ever read.

I agree with you again; when will the press get back to focussing on ebezzlement and payoffs...? Can you say Mr. Abramoff?

You obviously don't know anything about Keynes' theory of inflation. Phelps (and Friedman) attacked the notion underlying the Phillips' Curve that there's a trade-off between UP and inflation. Phillips looked at historical data for the UK to come to this conclusion. In the US, Paul Samuelson and Robert Solow (so-called American Keynesians) did a similar study, and they came up with the same results. Phelps and Friedman argued that this relationship would not be permanent once you considered expectations. In particular, they held to the view that expectations were formed by the recent past--"adaptive expectations." Keynes' theory of output, employment, and prices also assumes that current expectations are formed by the recent past. His "theory of prices" is based on how prices are determined at the level of the firm--prices are a function of the costs of production (wages, materials, etc.) and a profit margin. The Phillips Curve relationship that Phelps "debunks" was based on an historical relationship and promoted by the American Keynesian school in 1960, not Keynes. For the record, and I stated this years ago here, I am not a proponent of this simplified interpretation of Keynes. I adhere to a group known as post keynesians, and I am probably most influenced by Hyman Minsky.

What a dope. First, you should be referring to me, not BlueFire. Second, I gave a possible scenario for how someone or an organization could have influenced gas prices; or, in fact, as the articles stated, did influence gas prices (not the only influence, but added "fuel" to the downward pressure). I stated it was either serendipity or consipiracy, and that I leaned toward the former (however, I said the latter wouldn't surprise me either). Who said that one was ok and the other wasn't? It is politics as usual. Many corporations make "bets" on which party (person) they believe will win the White House. They give to both sides, but tend to give more to the side they think will win. I don't think they should be giving at all, and I've constantly ranted that "both sides are bought and paid for." I've stated time and again, that I DO NOT VOTE FOR EITHER MAJOR PARTY ANYMORE (10 years now). I have voted for independents, greens, and believe it or not libertarians. The hypocrits around here are people who constantly defend (and believe) one party to no end. And from what I've read, you are one of them.