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The world economy is heading towards a black hole unless bold action taken

economist.com

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Re: The world economy is heading towards a black hole unless bold action taken

#61

Post by guelo »

dmfdmf wrote: post #49
guelo wrote: post #31

Earlier quoted context omitted.

Can you please explain your theory of how massive cuts to government and the ensuing massive layoffs of government workers, and the government buying less stuff from businesses, is going to fix the economy? Please take into account in your explanation that the US is able to borrow at record low rates right now.

> Can you please explain your theory... I wish I could but I can't, not in context of a HN thread comment. I'd be happy to recommend some books if you are interested.

"If you can't explain it simply, you don't understand it well enough" -Albert Einstein

Re: The world economy is heading towards a black hole unless bold action taken

#62

Post by icarus_drowning »

yequalsx wrote: post #48
TomOfTTB wrote: post #43

Earlier quoted context omitted.

> How high? And how is it a straw man? A straw man is a false argument that someone uses to make another person's position seem weak in a debate. I don't see that happening here. I suspect it's around where they were during the Clinton presidency. But I honestly don't know. And if we were making policy rationally instead of trying to demonize one side or the other what we'd be doing is trying to find that out. As for…

Here are some charts. I don't know how to make links in a comment. http://paul.kedrosky.com/archives/2011/07/tax-burdens-around...

A question: how does the fact that these are revenues instead of rates play into this discussion? I.E., one of the arguments of free-market proponents is that lower tax rates can increase revenues by allowing the economy to grow-- which, if it were true for some or all of the economies, would actually undermine the point.

I'm genuinely curious about this, not trying to stir up a giant political debate.

Re: The world economy is heading towards a black hole unless bold action taken

#63

Post by dmfdmf »

guelo wrote: post #61
dmfdmf wrote: post #49

Earlier quoted context omitted.

> Can you please explain your theory... I wish I could but I can't, not in context of a HN thread comment. I'd be happy to recommend some books if you are interested.

"If you can't explain it simply, you don't understand it well enough" -Albert Einstein

"Make everything as simple as possible, but not simpler." -Albert Einstein

Re: The world economy is heading towards a black hole unless bold action taken

#64

Post by TomOfTTB »

theoj wrote: post #59
anigbrowl wrote: post #14

Earlier quoted context omitted.

letting the banks fail, recapitalizing new banks, and basically rebooting the financial system Please tell us how that works in practice rather than in theory. I really, really want to know how you just 'reboot' the financial system without massive disruption to retail banking or the payments system. How do you 're'capitalize a new bank? If you just mean create new banks, who is running these banks? I mean, I'd like…

Contrary to what some pundits would like you to believe, this is not new ground. A real estate bubble followed by a balance sheet recession has happened in at least 2 other places before: Sweden in 1992 and Japan in 1991. Different choices in these countries led to different outcomes. In Sweden, the government demanded steep losses from equity holders before it took over a large part of the financial system (unlike U…

One of my favorite articles ever is Reason.com's "One Reason Why Keynesian Stimuli Aren't Working: They Aren't Keynesian" (http://reason.com/blog/2011/09/07/one-reason-why-keynesian-s...).

Re: The world economy is heading towards a black hole unless bold action taken

#65

Post by jamesaguilar »

TomOfTTB wrote: post #60
jamesaguilar wrote: post #53

Earlier quoted context omitted.

> Right now you're just making up numbers so I can't really debate your point. No, I'm not, and it's a bit disrespectful of you to say so. You could have verified what I was saying with a mere sixty seconds of fact-checking on your own. I was talking about receipts, just like earlier in the paragraph. What tax it comes from really does not matter for the purposes of this discussion. Receipts would have had to increas…

We weren't talking about balancing the budget we were talking about eliminating the debt and you didn't say 10-20% you said 5-10%. So do you have a source for the 5-10% or am I right that you just made that number up? I don't mean to flame but I based my statement on facts not a desire to disrespect you. Namely the Total U.S. tax revenue which was $2.1trillion. 10% of that is $210 billion which is less than half the…

Typically "eliminating the debt" is interpreted as building a modest surplus. No one is claiming it can be completely done away with immediately. That simply requires balancing the budget + a few percent. It's true that my 5-10% number was an estimate, as was the 10-20% number; that is not the same as making numbers up.

Even the estimate that is most generous to your position is more than sufficient to support my argument. It could be twice again that amount (40%) and still not reach the levels of unworkability you posited in your original post, considering a number of other countries are under burdens more than 60 or more percent above the United States'. You can pick all the nits in the world but that fact remains.

Re: The world economy is heading towards a black hole unless bold action taken

#66

Post by yequalsx »

TomOfTTB wrote: post #54
yequalsx wrote: post #48

Earlier quoted context omitted.

Here are some charts. I don't know how to make links in a comment. http://paul.kedrosky.com/archives/2011/07/tax-burdens-around...

I'm not saying you're wrong because I don't know but you are over simplifying First you're forgetting those countries don't have state taxes. For example, the top tax rate in California is close to 40% when you combine both State and Federal. Plus you have some cities that have income tax. Second you're forgetting loop holes. Again the point I made above is U.S. citizens paid less in taxes when the U.S. tax rates wer…

The chart says total tax burden so I'm assuming it takes into account state taxes. The one chart indicates an average for the U.S. of around 26%. This would be a 2% increase from what it is today. In a $10 trillion economy this would be a $200 billion tax increase. Given that borrowing rates are so low right now an awful lot of money can be borrowed before the budgetary burden reaches $200 billion in additional annual spending.

I responded to your post in another comment.

Re: The world economy is heading towards a black hole unless bold action taken

#67

Post by yequalsx »

icarus_drowning wrote: post #62
yequalsx wrote: post #48

Earlier quoted context omitted.

Here are some charts. I don't know how to make links in a comment. http://paul.kedrosky.com/archives/2011/07/tax-burdens-around...

A question: how does the fact that these are revenues instead of rates play into this discussion? I.E., one of the arguments of free-market proponents is that lower tax rates can increase revenues by allowing the economy to grow-- which, if it were true for some or all of the economies, would actually undermine the point. I'm genuinely curious about this, not trying to stir up a giant political debate.

I think it's quite bad to focus on rates. Given that there are usually loop holes and tax incentives it becomes necessary to look at tax burden as a percent of GDP.

The people who make the argument you mentioned are wrong. If lower taxes always lead to greater economic growth then the optimal tax burden would be 0%. But this would mean there is no government and we'd be in an anarchy. Does anyone really think an anarchy is the optimal way to grow an economy?

Re: The world economy is heading towards a black hole unless bold action taken

#68

Post by TomOfTTB »

jamesaguilar wrote: post #65
TomOfTTB wrote: post #60

Earlier quoted context omitted.

We weren't talking about balancing the budget we were talking about eliminating the debt and you didn't say 10-20% you said 5-10%. So do you have a source for the 5-10% or am I right that you just made that number up? I don't mean to flame but I based my statement on facts not a desire to disrespect you. Namely the Total U.S. tax revenue which was $2.1trillion. 10% of that is $210 billion which is less than half the…

Typically "eliminating the debt" is interpreted as building a modest surplus. No one is claiming it can be completely done away with immediately. That simply requires balancing the budget + a few percent. It's true that my 5-10% number was an estimate, as was the 10-20% number; that is not the same as making numbers up. Even the estimate that is most generous to your position is more than sufficient to support my arg…

I don't understand how you're having a problem with this. Looking at a good year (I chose 2005) we had $2.1 trillion in federal revenue (http://www.usgovernmentrevenue.com/year_revenue_2005USbn_12b...)

If we managed to increase that by 40% that would generate an extra $840 billion per year.

(Keep in mind that's massively generous because that would mean a 40% increase in everyone's taxes not just the top earners)

The total debt right now is $14.7 trillion. Even the most conservative CBO estimates had us adding $700 billion per year to the debt (usdebtclock.org) and those were very conservative estimates.

So your 40% increase doesn't even deal with the deficit. Much less the debt or the unfunded liabilities.

And that's assuming you could get that. My original point was people will subvert the tax code when tax rates get high enough to justify accountants and lawyers to do so. That's why a 90% tax rate didn't produce dramatically more revenue per capita.

Re: The world economy is heading towards a black hole unless bold action taken

#69

Post by jpdoctor »

michaelochurch wrote: post #56
OstiaAntica wrote: post #8

"Bold" action by the politicians and the central banks created much of the current mess. If we'd just cleared the pipes by letting the banks fail, recapitalizing new banks, and basically rebooting the financial system, we'd be much further along. Instead, we got bailouts and crony capitalism and ad hoc intervention, and today the global system is in many ways in worse shape now than in 2008. (Banking is more concentr…

"Bold" action by the politicians and the central banks created much of the current mess. The problem is a lack of boldness. Bold regulation on banks and insurance companies is necessary. If we're going to do bailouts, we had better make sure the same misbehaviors can't happen again. In the U.S., we're fucking up my trying to fix failing institutions in-place. No management changes. No meaningful regulations. Often th…

Great post, and I'd add one thing:

> This sounds like a quote by Herbert Hoover.

The current approach by Ben Bernanke of printing money is a reaction to the Great Depression, in which the money supply contracted. There seems to be little attention paid to the Hoover phase before it, in which many institutions failed. This purged many of the weak institution, and probably more than a few not-so-weak ones.

Purging weak institutions before making cheap money available to the banks would have been a helluva lot more sensible than the Great Giveaway that occurred.

Re: The world economy is heading towards a black hole unless bold action taken

#70

Post by z92 »

anigbrowl wrote: post #14
OstiaAntica wrote: post #8

"Bold" action by the politicians and the central banks created much of the current mess. If we'd just cleared the pipes by letting the banks fail, recapitalizing new banks, and basically rebooting the financial system, we'd be much further along. Instead, we got bailouts and crony capitalism and ad hoc intervention, and today the global system is in many ways in worse shape now than in 2008. (Banking is more concentr…

letting the banks fail, recapitalizing new banks, and basically rebooting the financial system Please tell us how that works in practice rather than in theory. I really, really want to know how you just 'reboot' the financial system without massive disruption to retail banking or the payments system. How do you 're'capitalize a new bank? If you just mean create new banks, who is running these banks? I mean, I'd like…

Look at Iceland.
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