TPS

China can play the long game, Trump can't. It will be interesting to see how the ego will back down without looking like he lost....

I agree with you here. There are no perfect measures of employment or unemployment, and the nature of the economy is always changing. One way to help those at the bottom is to push the economy faster via stimulus and, at the same time, berate the Fed so they don't put an end to it with higher rates. Trump has done both.

My point: focusing on jobs, saying we're at a new record, does not carry a lot of weight in an economy where the population is growing over time, hence my age comment. Let me also say once again, I am glad Trump used "deficit spending" (widening the gap between government expenditures and revenues) to stimulate the economy when unemployment was approaching what many economists thought was full employment--he helped blow a hole in the traditional view. However, since most of the tax cuts go to the top payers, the impact is weaker since they spend less of any additional income. Corporate tax cuts have also mainly been used to fund stock buybacks, though the 100% expensing of equipment gave a brief jolt. As those stimulants have worn off, we're back to an economy not much different than what was going on the previous 4 years--my point. I believe I posted this graph at some point in this thread for the same reason: To answer your question: the previous peak was Jan 2008 which was surpassed in May 2014. Since then, there hasn't been much of a difference in the growth of employment. As I argue, Trump's second year was good because most of his stimulus was done then. Trump is also right to castigate the FED for raising rates, as that is what has caused most of the recessions since 1960. Growth should continue as long as the FED let's it, but Trump's tariffs are also having a negative effect. Unfortunately, he's playing a long game, but he's running out of time--the 2020 election. The Chinese can wait him out. I have also given him credit here. Changes in global production take time, so any positive gains from producers "insourcing" will be gradual. However, most of the manufacturing that comes back will be capital intensive, requiring even less labor than in the past (this has always been the case for much of manufacturing). Any amount is good in my view. The best thing for trump is if wages continue to rise faster, as wages and consumption by the middle class is the most important factor that will drive economic growth in the US.

This is an interesting tweet by Trump, but I don't think he's talking about tariffs here. What he really should say is they are selling US lots of stuff, then using the dollars they get from their trade surplus to buy treasuries to keep the USD from depreciating against the yuan. We get stuff, they get US paper.

2012 181 2013 192 2014 251 2015 227 2016 193 2017 179 2018 223 2019 to-date = 165 These are the monthly averages (in 1000s) by year since 2012. The past 2.5 years has been nothing special. 2018 was boosted by Trump's "deficit spending." The current trend is not so hot... As I mentioned, he will have to buckle before the Chinese do.

The average employment gain per month under Trump is 195,000. The average over Obama's second term was 212,000. Touting "a new record" for total employment is like me saying I set a new record for my age today....

I know...it’s a disease...

They don't have to wait long. The US economy is feeling the effects, and it will be political suicide for Trump if he lets this go into 2020.

It's pretty simple. Given the bonds are issued in USD, the attempt to exchange pesos for USD would lead to a depreciation of the peso, increasing the price of imported goods. The extent of the depreciation would depend on how many holders of USD would be willing to exchange them for Argentine pesos. It takes two to tango. Advanced countries that issue debt denominated in their own currency do not face this constraint. Ok, now how about you provide a concrete answer for why QE did not lead to inflation? Explain the details, not some nebulous notion of the dollar's special status. Give me the accounting and money trail....

In other words, you're asking why they had to issue debt in USD and not pesos? Here's a quote from an earlier post:

I wish you would read what I write. 1. The debt ceiling is a politically imposed constraint, not financial. That POSSIBLE default would've happened because the idiots in congress failed to raise the debt ceiling, though they always do so in the end). 2. A country that issues debt in its own currency can't default! Argentina has defaulted on debt denominated in USD, which it can't print. I brought up the Chinese example as a possible extreme event that @keepthefaith pondered. Extreme event related to a political event. Most of your argument is about hypotheticals, which is what most of those arguing against deficits deal in--where's the beef? "The probability is low, but it doesn't mean it is impossible...." I suppose it's not impossible that pigs will fly either.... Let's get back to the main issue. I have not excused away the FED creating $2.7 trillion out of thin air, I've described why it was NOT inflationary --I think this is the original point, yes? You think it's because of the dollar's "special status" as if investors determine prices and inflation and not cost of production and firms.... If you actually read my response to Faith as me "showing concern over build up of debt and deficits," then go back and read my first sentence in this post. If when you say the "Fed creating $2.7 trillion of assets out of thin air" you mean bank reserves held on accounts with the FED, then you're getting closer. The FED pays for any asset by crediting bank reserve accounts (for the umpteenth time). Other than vault cash, bank reserves are simply numbers on the FED's computers. The FED processes and clears checks in the banking system and if Key has more claims (say $1 million) against M&T's customers on any given day/week then the FED subtracts $1 million from M&T's account and adds it to Key's--there is no movement of funds between the banks, the FED simply nets things out on their reserve accounts. I hope you understand this: The only asset the FED can create out of thin air is "reserves held on account with the FED." So it appears the difference is you think that "somebody has to hold the debt that the FED temporarily parked on its BS." I assume by debt you mean the MBS and treasuries, which would be assets on the FED's BS. As I've said, there is no economic reason the FED has to reduce its balance sheet, and the FED can hold those assets to maturity if it wants. Again, MBS are paid down as homeowners make mortgage payments, so they disappear off the FED's BS over time. So I guess it comes back to you worrying about the treasuries....? Wake me up when the Treasury can't sell its treasuries..... I think I mentioned here that it would be wise for the Chinese to just let this go into next year. Let Trump bear the economic consequences of his decisions and see how it plays in the 2020 election....

The best i can say is to check out their database tools... https://www.bls.gov/jlt/data.htm

I'll try to answer as best I can without giving another dissertation... First point, the debt, deficit, and interest need to be discussed in relative terms--meaning relative to your income and assets (just like banks do when you want a loan). For corporations, we look at Debt/Asset ratios, interest expense ratios, etc., so we should do the same for the government. When you only give a $ amount, it doesn't really give you much information. How much larger will the economy be in 10 years? If the debt service is $1 trillion, has the ratio (say, relative to Nominal GDP) gone up or down? Since we don't have a measure of the government's assets, the ratio used is relative to NGDP, since that represents the tax base. Currently the gross debt outstanding is a little over 100% of GDP. The problem with this measure is it mixes a stock (debt) with a flow (GDP). The important measure then, and related to your questions is the interest expense as a share of GDP. One more correction: since the FED transfers any interest income beyond what it takes to operate (including now paying interest on bank reserves), the relevant measure is "net interest expense." In 2018, this was $325 billion; HOWEVER, relative to GDP it was 1.6%, below the historical average (since 1965) of 2% (the highest it's been is 3.2% in 1991). To your questions about the future... Forecasts: If Nominal GDP grows as fast as the $ value of net interest, then the ratio stays the same. However, currently the deficit is rising faster than NGDP, which means the total Debt is rising faster than NGDP, which means the net interest expense ratio (as projected by the CBO) will rise to 3% 10 years from now, still below the historical maximum though. A lot can happen over the next 10 years, so it's difficult to speculate on the projections. If one is worried about the interest expense, then the solution would be to bring down future deficits to sustainable levels (meaning the low enough for the interest expense ratio to stay constant). An event: most "events" tend to cause investors to seek safe, liquid assets--US treasuries, so you'd have to be more specific on what would trigger a run from treasuries (see next paragraph)? That said, as I keep saying to GG, the Fed's primary dealers (24 of the largest non-Chinese banks in the world) are required to make the market for Treasury auctions. Related to your $4 trillion per year, investors hold treasuries because of their liquid and safety qualities; the financial system uses treasuries as "currency" to fund trades--the collateral used for trillions in transactions, so the amount rolled (say $3 trillion) over shouldn't be a problem in a growing economy that desires a safe, liquid asset. The trillion dollar deficit will always be "financed" because the PDs are required to purchase the debt. My answer, then, I still don't see a problem. A worst case scenario: foreigners (China) sell off treasuries. First, China buys treasuries as a trade management policy--they don't want the USD to collapse against the yuan because it would cause a dramatic spike in the cost of Chinese goods. I've always argued they would only do so if there were some political event between US and THEM. First, selling a trillion in treasuries would cause a spike in interest rates; second, they would now hold $1 trillion in USD deposits, so the effect on the dollar-yuan would depend on whether they also converted these holdings into yuan (but they could convert to any other major currencies). That said, as the FED has shown, it intervened in the markets by several trillion dollars during the crisis, so there is no reason it wouldn't be the "buyer of last resort" in the case of this type of event (note, the FED would buy the assets by crediting the reserve account of the bank that China uses...). In a way, I'm less concerned about this type of scenario, because it would mean a very significant event where we are all most likely *****... I'll try to conclude with what you should focus on if you worry about this. The interest expense ratio grows if the deficit/GDP ratio + the average interest rate on the debt rises faster than the growth of NGDP. Last year the deficit was 3.9% of GDP and the average interest expense was about 2%, roughly 6%, and NGDP grew by 5.4%, and the interest expense ratio increased from 1.4% in 2017 to 1.6%. This year the deficit will exceed 4% but interest rates have come down a bit, still they will exceed NGDP growth so the interest expense will rise (as the CBO projects). If you are worried about this, then the deficit/GDP ratio needs to be reduced to a more sustainable level (<3%). This is what the politics have been building to: "fiscally responsible" politicians need a reason to go after SS and Medicare. We can't "afford" to fund both endless war and social spending. If Trump or a centrist Dem wins 2020, then the attack on social programs will begin; if a progressive Dem wins, they it will go to battle with the MIC. The latter always seems to win... This is longer than I wanted, and there is still the issue that I've been trying to get GG to understand--any government that issues its own currency can never default. Much of this is in the thread already though..... Glad to try and answer any other questions.

The JOLTS survey by the BLS addresses this. https://www.bls.gov/news.release/jolts.nr0.htm

In a way, it’s good he left with the injury settlement rather than getting cut. He helped recruit Long, and it would’ve sucked for him to have long make in his stead.

You still don't get it. You harped on me about accounting, but you completely ignore it when it comes to the Fed and Treasury. When the Fed buys an asset from banks, it does so by crediting the reserve account of banks. With the exception of vault cash, reserves are an accounting number on the Fed's computer. There is no "new cash" in the system (your words), which is why there was no inflationary burst. What happens is There are more reserves on the Fed's computer (the Fed's liability) which show up on banks' BS as an asset--deposits held by "other banks" and they now earn interest on them (as of 2008). "Somebody has to buy the new debt." How many times do I have to tell you the primary dealers are required to bid and fill Treasury auctions? This means the treasury will always be able to sell securities whether it's rolling over maturing debt or issuing new. Regarding MBS, I can't believe I have to tell you how markets work. When demand for an asset (debt instrument here) is less than supply, its price falls and yield rises attracting more buyers. Kind of like how the stock market works..... that said, the Fed does not have to unwind its BS, as I've also said many times, so There is no "race" to do so. The only reason it might do so is to drain the excess reserves from the banking system in order to make the Fed funds rate a relevant policy variable again. Otherwise, it will continue to use interest on excess reserves as the current effective policy variable.

Appreciate the thread. My golf group is coming over for a post-game swim and steak. Going to do the reverse seat on aged ribeyes. One quirk, I have an electric smoker I will use for stage one @225, without the smoke of course...

If he chooses Johnson, I'm taking Flutie....

There are only two people on the current roster that I could see adding to this in any meaningful way, but they will still most likely be on the roster: 1) the Shady speculation (he'd cost about $2.4 mil in dead cap); and 2) if Kroft can't come back from the same foot he previously injured. Not sure how the dead cap would adjust for an injury settlement, but he has a $4.2 mil dead cap hit currently. No doubt, Beane has put them in a very good situation.

Btw, S&P did downgrade the US in August of 2011, what did the 10-year yield do?

Having read the thread, You might need to re-post this one a few times...

Yes, this is the main question mark regarding the 2019 defense. While they will most likely be in the top 3 against the pass, to be an elite D, they must prevent teams from running all over them as many times as happened last year (you're may have 1 or 2 bad games, but 4-5 is not good enough).

. So that we are speaking the same language, most people discuss QE as having three distinct phases: QE1 was the FED's actions during the crisis, where its BS expanded from $900K to $2.2 trillion the first few months after Lehman; QE2 (from late 2010 to May 2011) and QE3 (late 2012 to 2014) are what you describe, which were efforts to stimulate the economy post crisis (that link I gave with some graphs of the FED's assets and liabilities shows these stages clearly). Every major financial crisis is also a liquidity crisis, and the FED's LOLR actions through all of its various loan programs was the most important factor stabilizing the system--we agree here. In terms of size and impact, while all of the various lending programs were most significant, QE1 was 3-4 times the size of any TARP funds that went to the banks. 2. The reason QE was not inflationary is because the FED bought most of the assets from the banking system, and, since banks were now being paid interest on reserves, they were (and still are) content to hold those trillions. This has everything to do with bank management and almost nothing to do with "Investor acceptance." By harping on reserve accounting, I AM focusing on how the $3 trillion was "created out of thin air." I guess it's my turn to say "focus on the accounting." When the FED "creates funds out of thin air," it still operates under standard accounting practices--Balance Sheets must balance. Again, look at those graphs, specifically the "FED's liabilities" and the category "deposits of depository institutions." When the FED ;buys an asset, it simultaneously credits that account of the bank that it bought the asset from (or the bank of the investor it bought the asset from). In QE, The FED pays for the assets by crediting a bank's reserve account. Those deposits represent assets for the banks and liabilities for the FED, and all of the FED's actions that created them are done with keystrokes of a computer (bank reserves are created out of thin air!) at the NYFED. Prior to Lehman, that account was about $20 billion and after QE3 it peaked at about $2.7 trillion (which indicates the majority of QE was done via purchasing assets from banks). Since the FED pays interest on reserves about the same as the T-bill rate, these reserves are risk-free assets on bank Balance Sheets. Because these funds are parked on an account with the FED, they don't circulate in the economy AND therefore do not influence prices and inflation. They have nothing to do with "investor acceptance." 3. Regarding money, I never said anything other than the FED/Treasury is the monopoly issuer of US$. To quote Minsky, "Anyone can create money, the problem is getting it accepted." Yes, many people try to create things that function like money, but, as I said before, the government will squash any attempts that encroach upon its monopoly. Did you see the article today about the IRS sending letters to holders of crypto? Since they have designated it as property, any gains are taxable. 4. Your quote, sounds a bit like you are coming around to what i have been trying to say...but not quite. The Treasury "issued money" the way it ALWAYS does: congress appropriated funds for TARP which added to deficits in 2008 and 09. The Treasury still had to "sell bonds" to "fund" those deficits to provide the "money" for TARP. TARP was simply additional "deficit spending" by the Treasury (had to say it). Again, QE created liquidity by mainly creating additional reserves for the banking system, almost all of which show up as assets for the banks and liabilities for the FED (deposits of depository institutions). You won't understand how the FED creates "money out of thin air" AND why it doesn't impact inflation until you understand reserve accounting.

Two issues I responded to before you chimed in: someone asked about the $3+ trillion in Fed intervention and why it wasn't inflationary; and, do deficits matter. I answered the question in my first response when I stated the Fed's actions weren't inflationary because nearly all of those funds were parked in reserve accounts (which don't circulate and hence had very little impact on the REAL economy). I also said deficits don't matter. You then took the thread for a ride...apparently because you don't understand reserve accounting--yes, excess reserves are parked "under the FED's mattress" (on their computer actually). Now that the FED pays interest on reserves, there's less of an incentive for banks to minimize them as was the case pre-2008. I went into the Fed's LoLR function because you unbelievably stated the Fed's actions that injected the $3+ trillion in reserves played a minor role in stabilizing the financial system. Post-crisis, the reserves aren't really that important. What IS important are the actions the FED took that created those reserves. I would love to hear you explain why the FED's actions were only 10% of the story....? You also brought in other topics which took the thread elsewhere. For example, now you want me to discuss crypto and the Treasury. See why the discussion goes off track.... I'll say one thing about cryptos: if they begin to encroach on the government's currency monopoly, then the Treasury will take action to suppress their growth. Gee, the financial crisis was caused by unregulated finance, what a surprise! No ***** sherlock! The FED's role is to clean up the mess, and without its unprecedented intervention we all would've joined D.Drane in a bunker. The banking system backstops the rest of the financial system and FED backstops the banks. The FED's lifeline to banks also means a lifeline to its customers, which includes the shadow banking system. I'm surprised someone in finance doesn't get the inverted pyramid of money and credit? Yes, finance is extremely elastic and difficult to constrain, but the curtain is pulled back when crises occur and everyone is scrambling for safe, liquid assets. So, if you want to stick to the topics, then please do. I explained why the Fed's injection of $3 trillion was not inflationary. Then I tried to explain to you why deficits don't matter, and that explanation requires understanding the mechanics underlying the interaction between the Treasury, FED, and Primary Dealers.

I think we'll be saying this about all three of this regime's drafts, wrt their ability to mine talent. 2017: the first 4 picks are starters, so they hit on 4/6. 2018: the first 4 picks are starters (I'd call H. Phillips a starter given their use of two waves on the DL). Neal and Teller should both be valuable back-ups. Ray-ray is probably gone-gone this year. Call it 6/8 on this draft. 2019 of course is way too early, but...I think it's a safe bet the first 4 picks will be starters at some point. People seem very high on Vosean, so I think we can at least say they hit on 5/8 with potential for more. Overall, and it is preliminary, it looks like they have about a 70% success rate on their three drafts. The Nix-Whaley era was under 50%. Prior to that, it was the dark ages of Bills drafting...