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Thread: Japan Election bodes poorly for the US dollar !!!

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    Default Japan Election bodes poorly for the US dollar !!!

    from

    (snip)"The loss by the Liberal Democrats would open the way for the Democratic Party of Japan, headed by Yukio Hatoyama, to oust Prime Minister Taro Aso and establish a new Cabinet, possibly within the next few weeks.

    It would also smooth policy debates in parliament, which has been deadlocked since the Democrats and their allies took over the less powerful upper house in 2007.

    "The ruling party has betrayed the people over the past four years, driving the economy to the edge of a cliff, building up more than 6 trillion yen ($64.1 billion) in public debt, wasting money, ruining our social security net and widening the gap between the rich and poor," the Democratic Party said in a statement as voting began Sunday.

    "We will change Japan," it said.

    The Democrats have also said they will make Tokyo's diplomacy less U.S.-centric. But Hatoyama, who holds a doctorate in engineering from Stanford University, insists he will not seek dramatic change in Japan's foreign policy, saying the U.S.-Japan alliance would "continue to be the cornerstone of Japanese diplomatic policy.""(snip)

    (snip)"The Democrats are proposing toll-free highways, free high schools, income support for farmers, monthly allowances for job seekers in training, a higher minimum wage and tax cuts. The estimated bill comes to 16.8 trillion yen ($179 billion) if fully implemented starting in fiscal year 2013."(snip)


    Like the Chinese, the Japanese have now reached the point where they have committed to spending hundreds of billions of their US trade surplus dollars to stimulate ( i.e. subsidize ) their own domestic economies. This in turn will result in far fewer billions of trade surplus US dollars finding their way to future US Treasury Bond / Bill auctions. This is very likely to mean a further weakening of the US dollar's international exchange rate ( thus higher US dollar denominated pricing for all international commodities from energy to food to raw materials ), and a significant rise in US interest rates.


    more economic centered 'professsional' commentary ... from

    (snip)RCM Comment: I am loath to bore you with the same story over and over but the story’s far reaching ramifications demand that we cover this story like the wet blanket it represents. You see, there is a fire raging in the U.S.. Our government is burning paper (US$s) at an alarming clip as it spends aggressively to avoid the inevitable. Let’s not debate the simple fact that government spending plans have never in history helped drag an economy out of a recession. Even the oft-praised New Deal of the ’30s didn’t save the country from the depression; WWII accomplished that feat.

    So, paper is burning and the only way to get more paper, short of ‘cooking the books’, is to issue Gov’t debt and hope our trading partners continue to fund our addiction. Enter the wet blanket. The cry to dethrone the US$ as the reserve currency is building and now Japan in an ‘et tu Brute’ moment adds its voice to the majority….

    July 13 (Bloomberg) — Japan’s opposition party, leading in polls ahead of next month’s election, said the nation should consider shifting its $1 trillion of foreign reserves away from the dollar and buying International Monetary Fund bonds. “In the medium to long term, we need to do what we can to avoid the risk of currency losses or economic turbulence that could result if the dollar were to swing,” Masaharu Nakagawa, the shadow finance minister in the Democratic Party of Japan, said in an interview in Tokyo on July 9. “Many countries are starting to diversify their reserves.” (snip)


    However, there is a HUGE difference between Japanese Democrats and American democrats who both advocate greatly increased government spending. The Japanese can actually afford to make these expenditures via diverting the reinvestment of their US trade surplus dollars. The US obviously cannot afford increased gov't spending, and will now have a much more difficult and expensive time attempting to borrow additional moneys from foreign sources for this purpose !

    ~
    Last edited by Melonie; 08-30-2009 at 11:42 AM.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    Quote Originally Posted by Melonie View Post

    However, there is a HUGE difference between Japanese Democrats and American democrats who both advocate greatly increased government spending. The Japanese can actually afford to make these expenditures via diverting the reinvestment of their US trade surplus dollars. The US obviously cannot afford increased gov't spending, and will now have a much more difficult and expensive time attempting to borrow additional moneys from foreign sources for this purpose !

    ~
    Japan's government is much further into debt than the US government. Japan's national debt is 150% of their gdp compared to the US debt, which is approximately 100% of gdp. The US government can afford to spend a lot more than Japan's government.
    Last edited by eagle2; 08-30-2009 at 10:24 PM.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    ^^^ but the national 'income' of Japan i.e. worldwide earnings versus domestic expenditures, is positive and rising ... while the national 'income' of the US is negative and falling to increasingly negative values. In essence, you're saying that a 'person' with a $100,000 income and a $150,000 mortgage debt is better off than a 'person' with no income but a $100,000 mortgage debt. The 'slight' difference is the fact that GDP counts both gov't and private sector spending, and gov't spending does not contribute any 'new' value with which to pay down debts ( in fact it only INCREASES future debt obligations in order to make payments on debt that is currently due ).

    But the pertinent point is that the new Japanese democratic gov't has promised to increase gov't domestic spending. Accomplishing this will mean diverting billions of Japanese trade surplus / foreign exchange reserve dollars ( of which they have nearly a trillion !) towards their domestic economy and away from US treasury bill auctions.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    No, you don't understand the differences between government budget surplus/deficit, trade surplus/deficit, and national income (GDP). Trade surplus/deficit has nothing to do with government budget surplus/deficits and it has nothing to do with income. US income is higher than Japan's. The income made from the sale of a product or service is the same whether it is sold domestically or overseas. In essence, you're saying that a person with a $100,000 income and $150,000 debt is better of than someone with an income of $100,000 and a $100,000 debt.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    ^^^ no, I am saying that a person with a $100,000 income and $150,000 in mortgage debt is better off than another person who has no current income, $ 100,000 in first mortgage debt, but who has just taken out a new home equity line of credit with which to make payments on that first mortgage as well as buying a new car and a new refrigerator ! Apparently it is you who does not understand the difference between true income from profitable enterprises which create additional value, and 'apparent income' which is the result of an expansion of debt with no additional value created. Under government GDP formulas the two are actually treated the same ... but in the real world there is a huge difference.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    What you are saying makes no sense at all. You are saying that in the United States, nobody has any income at all.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    ^^^ what I am saying is that , compared to Japan's gov't, the US gov't has very little 'real' income. Yes the US gov't does receive some 'real' income from natural resource leases, from the taxation of Americans who are actually creating additional 'real' income (i.e. manufacturing, mining, farming, software etc.). But an increasing share of the US gov't's 'apparent' income is not 'real' income. For example, income taxes paid by every gov't employee, by every teacher / cop, by every gov't contractor, etc. contribute zero additional 'real' income to the gov't since the dollars they were paid with in the first place CAME FROM gov't coffers to start with ! And the $787 billion in US gov't stimulus spending was based on zero additional 'real' income ... it comes from vastly increased 'borrowing' from the Japanese and Chinese ( i.e. issuance of new US treasuries which the Japanese and Chinese purchase ... but which eventually must be repaid with interest )

    The Japanese ( and Chinese, and all other net US creditor countries ) realize that they are now being paid in 'apparent' dollars ... dollars which are based on increased US gov't (future taxpayer) debt obligations rather than on activities which produce 'real' dollars (i.e. manufacturing, mining, farming, software etc.). Thus the present global trade arrangement and the exchange rate of the US dollar is almost entirely based on 'faith / hope' by the Japanese and Chinese that the US gov't (future US taxpayer) will actually pay their debts ... as well as 'faith / hope' that the future US dollars that they receive will still be worth something in terms of exchange rate / purchasing power. It is this issue, 'faith / hope' in the future of the US economy / dollar / taxpayers, as well as an increasing reluctance to purchase additional US treasuries, which was changed by the recent Japanese election.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    Quote Originally Posted by Melonie View Post
    But an increasing share of the US gov't's 'apparent' income is not 'real' income. For example, income taxes paid by every gov't employee, by every teacher / cop, by every gov't contractor, etc. contribute zero additional 'real' income to the gov't since the dollars they were paid with in the first place CAME FROM gov't coffers to start with ! And the $787 billion in US gov't stimulus spending was based on zero additional 'real' income ... it comes from vastly increased 'borrowing' from the Japanese and Chinese ( i.e. issuance of new US treasuries which the Japanese and Chinese purchase ... but which eventually must be repaid with interest )
    Japan does not have government employees and contractors? Huge swaths of the People's Republic's economy are state owned. Of course, the People's Republic has a few state employees as well.

    The Japanese ( and Chinese, and all other net US creditor countries ) ... Thus the present global trade arrangement and the exchange rate of the US dollar is almost entirely based on 'faith / hope' by the Japanese and Chinese that the US gov't (future US taxpayer) will actually pay their debts ....
    You really need to check your facts. As of March 2009, the latest quarter for which statistics are available, all foreign holders of US Treasury Securities amounted to $3.267 trillion of a total debt of $11.126 trillion. That is 29.36365%. See the current issue of http://fms.treas.gov/bulletin/index.html for all the numbers. By the way, when was the last time the US defaulted????? Oh, that's right, we have not. Which probably explains why US Treasuries are regarded as safe harbors.

    HTH
    Z

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    ^^^ you didn't count custodial account holdings on behalf of foreign gov'ts ... the FED's latest 'sleight of hand'



    (snip)"May 30 (Bloomberg) -- For the moment, at least, financing the U.S. budget deficit may be getting less arduous as foreign investors now own a record 80 percent of the Treasury notes due in three to 10 years.

    Not since the 19th century have foreigners held so much American debt, said Alan Taylor, a professor of economic history at the University of California, Davis. International investors own $672 billion of the $835.4 billion Treasuries due in three to 10 years, according to research by Lawrence Dyer, a New York- based strategist at HSBC Securities USA Inc., the investment banking arm of HBSC Holdings Plc in London.

    While the Central Bank of China in Taipei and the Bank of Korea say they have had their fill of Treasuries, the 22 percent rise in U.S. dollar reserves led by Brazil and China during the past year makes Treasuries irresistible. Yields on U.S. government bills, notes and bonds are higher than similar- maturity debt sold by Japan and the countries sharing the euro. That's partly why foreign holdings of U.S. securities have doubled since 2002.

    ``Those dollars need to go somewhere and the natural place to go to is Treasuries,'' said Charles Comiskey, the New York- based head of U.S. government bond trading at HSBC, Europe's largest bank by market value. ``They're not bought for fundamental reasons but for necessity.''(snip)

    from


    when was the last time the US defaulted?????
    from a foreign creditor's viewpoint, 1933 under FDR and again in 1971 under Nixon. In both cases, the US paid back foreign creditors with much less 'valuable' US dollars than were originally borrowed.

    This is precisely the reason that the new Japanese PM-elect has called for Japan to stop purchasing US treasuries denominated in US dollars and has suggested that future Japanese purchases of US treasury bonds must be denominated in Yen. Obviously, the US taxpayer having to stand behind US treasury principal and interest payments that could rise 300% in US dollar terms ( due to a US dollar exchange rate decline over the term of the treasury bond ) involves suicidal risk !

    ~
    Last edited by Melonie; 09-02-2009 at 02:47 PM.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    Quote Originally Posted by Melonie View Post
    ^^^ you didn't count custodial account holdings on behalf of foreign gov'ts ... the FED's latest 'sleight of hand'
    You apparently value a bloggers take over the real data. Oh well, there's not accounting for fantasy.

    from a foreign creditor's viewpoint, 1933 under FDR and again in 1971 under Nixon. In both cases, the US paid back foreign creditors with much less 'valuable' US dollars than were originally borrowed.
    I guess there must be a language barrier. Default has a definite meaning. Given that inflation is the norm, all debts are paid off with currencies that are worth less than when the debt was incurred.

    HTH
    Z

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    Quote Originally Posted by Melonie View Post
    But an increasing share of the US gov't's 'apparent' income is not 'real' income. For example, income taxes paid by every gov't employee, by every teacher / cop, by every gov't contractor, etc. contribute zero additional 'real' income to the gov't since the dollars they were paid with in the first place CAME FROM gov't coffers to start with !
    This is a primetime example of what can only be described as mental masturbation.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    You apparently value a bloggers take over the real data
    No, I value Bloomberg's analysis of ALL related data over the sleight of hand official presentation of limited / cherry picked data by the US gov't. Like official US gov't unemployment data, by excluding certain (major) components from the total, it is relatively easy to 'paint a different picture' via cherry picked statistics that doesn't agree with reality.


    I guess there must be a language barrier. Default has a definite meaning
    indeed it does ! And in both 1933 and 1971 the US gov't failed to honor the terms under which the US bonds were originally sold.


    Given that inflation is the norm, all debts are paid off with currencies that are worth less than when the debt was incurred
    US currency depreciation did not become the norm until after 1933. It accelerated after 1971 ! In both cases previous foreign buyers of US bonds did not expect the degree of US currency depreciation ( i.e. price inflation ), and had purchased those US bonds under terms that would have immunized them from said US currency depreciation IF the US gov't had not 'defaulted' on their original contract obligations ! The contract obligation in question was of course redeemability in gold !

    Circling back to the original topic, the Japanese PM-elect's statement that Japan would only consider future purchases of US gov't bonds if those bonds were denominated in Japanese Yen is roughly equivalent to the reedemability in gold provision of much earlier US bonds. It is intended to insulate Japanese bond buyers from huge future US dollar exchange rate losses.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    what can only be described as mental masturbation
    OK let's look at an extreme example. How does Washington DC contribute to US federal tax revenues, given that 90% of the people receiving paychecks from working in Washington DC have 'Uncle Sam' as their ultimate employer ?

    Arguably, the 'recycling' of the same dollars out of and then (partially) back into federal coffers is financial masturbation, because nothing of 'real value' is created in the process !

    ~
    Last edited by Melonie; 09-03-2009 at 02:55 AM.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    So, everyone receiving funds from a government, or government agency, aren't being paid "for real"? And, the taxes they pay back aren't real either?

    The problem here is, you don't think governments do any "real" work, and the people who work in the public service, or supply, or service the government in some way, don't do any "real" work. This is your extreme ideology showing.

    Like it or not Mel, governments and their workers are responsible for the realest stuff their is out there. Stuff that actually matters in the day to day lives of people...real people. And the taxes those people pay back are just as good as the taxes you pay...er, used to pay, before your ideology sent you off into lala land.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    Quote Originally Posted by hockeybobby View Post
    So, everyone receiving funds from a government, or government agency, aren't being paid "for real"? And, the taxes they pay back aren't real either?

    The problem here is, you don't think governments do any "real" work, and the people who work in the public service, or supply, or service the government in some way, don't do any "real" work. This is your extreme ideology showing.

    Like it or not Mel, governments and their workers are responsible for the realest stuff their is out there. Stuff that actually matters in the day to day lives of people...real people. And the taxes those people pay back are just as good as the taxes you pay...er, used to pay, before your ideology sent you off into lala land.
    Thank you for illustrating the crux of the ideological battle between statism and liberty.

    Nobody said that Government employees aren't being paid "for real". Or that their taxes aren't real. But they are being paid with funds that originated with somebody creating or providing a good or service, getting paid for it, paying taxes on it and then having a portion of those taxes paid out as salaries to government workers.With very few exceptions the Government does not create anything of value to anyone other than the government. Nor should it. It's sole functions ought to be providing for the common defense and performing those essential purposes and duties that cities, states and individuals cannot do for themselves.

    Nobody said Federal workers don't do any "REAL" work. Whether it is necessary to employ many of them to do some of what the government does is the real question. Many Federal functions are best left to state and local governments e.g.
    The Department of Education which for example is now dictating that grade schoolers sit, listen to and critique Obama's internet speech. Leaving aside the issue of publicly funded political indoctrination, many of us wonder what the hell the Federal government is doing in this and many other areas.
    Does anyone think education has improved since Carter established the Dept. of Education ?
    Has HUD done anything to alleviate urban poverty or provide more decent housing than the private sector could ?
    Is anyone willing to point to Amtrak as an example of government succeeding ? How about anyone willing to say that Fannie Mae and Freddie Mac improved the mortgage market ?
    How about letting the FCC decide who gets to hear what on the radio ?

    In every example listed above and hundreds ( and perhaps thousands ) more, there are government workers collecting paychecks but it's questionable, to put it mildly, whether their function is either necessary or worth the money. The primary reason government is by it's very nature wasteful and inefficient is that they spend OTHER PEOPLE's MONEY. The bureaucrats and politicians don't spend their own money to do all these supposedly laudable things. There is no incentive for them to be thrifty and efficient and no punishment for waste and inefficiency. Quite the contrary. Many savings and efficiencies are not pursued to protect turf and the next year's budget.

    Where it really gets dirty and smelly is when we examine the POLITICAL activity of AFSCME and the Federal Unions who endorse and contribute to the very people who decide how much to pay them or whether to employ them at all. Time was, Federal employees could not campaign for or contribute to political candidates. That changed under Carter who converted what used to be political appointees in the Justice and other Depts. to permanent Civil Service positions. Reagan tried to change it back and was stymied by Ted Kennedy and others and never bothered trying again.

    Btw, where Melonie chooses to live and why is NONE of YOUR Business !
    She chose to pack up and move to where she could enjoy the fruits of her labor and sweat off her brow without the government telling her
    how to live her life. If I didn't have a business to run and some other obligations, I'd be living right next door to her. And looking forward to her coming over to "borrow" my hose.
    Last edited by Eric Stoner; 09-03-2009 at 11:59 AM.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    Quote Originally Posted by Melonie View Post
    OK let's look at an extreme example. How does Washington DC contribute to US federal tax revenues, given that 90% of the people receiving paychecks from working in Washington DC have 'Uncle Sam' as their ultimate employer ?

    Arguably, the 'recycling' of the same dollars out of and then (partially) back into federal coffers is financial masturbation, because nothing of 'real value' is created in the process !

    ~
    I suppose Obama, and his administration does nothing of value. Running the whole fucking country is of no value...right? Perhaps the U.S. should contract that job out to private industry, then it will have some value in your conservative eyes.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    Eric, that is just a whine about waste and inefficiency. Something we all can agree should be rooted out whether under a Republican or Democrat administration. But admit it, there is waste and inefficiency in any large corporation or enterprise. I bet there is waste and inefficiency in your company too.

    You (and Mel & others) just don't like paying taxes. As soon as a nickle is spent on something you perceive as of no benefit to you, you scream like a banshee. Think of it like this: it isn't the government paying people for goods and services...it's people paying people for goods and services. Governments are acting as agents for the taxpayer, making sure that the services they need, like tax auditors and border guards, and food inspectors etc are contracted for and paid for. Someone has to collect the money and make sure these types of things are in place and functioning. Or would you like to personally be responsible for paying a tax auditor with your particular chunk of tax money?

    You just don't like what the government does, so you call it worthless. How would we all stand up to someone else's scrutiny if they were judging our usefulness and worth?

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    Quote Originally Posted by hockeybobby View Post
    I suppose Obama, and his administration does nothing of value. Running the whole fucking country is of no value...right? Perhaps the U.S. should contract that job out to private industry, then it will have some value in your conservative eyes.
    It's getting to the point where Obama doing nothing would be preferable to his current course.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    Quote Originally Posted by hockeybobby View Post
    Eric, that is just a whine about waste and inefficiency. Something we all can agree should be rooted out whether under a Republican or Democrat administration. But admit it, there is waste and inefficiency in any large corporation or enterprise. I bet there is waste and inefficiency in your company too.

    You (and Mel & others) just don't like paying taxes. As soon as a nickle is spent on something you perceive as of no benefit to you, you scream like a banshee. Think of it like this: it isn't the government paying people for goods and services...it's people paying people for goods and services. Governments are acting as agents for the taxpayer, making sure that the services they need, like tax auditors and border guards, and food inspectors etc are contracted for and paid for. Someone has to collect the money and make sure these types of things are in place and functioning. Or would you like to personally be responsible for paying a tax auditor with your particular chunk of tax money?

    You just don't like what the government does, so you call it worthless. How would we all stand up to someone else's scrutiny if they were judging our usefulness and worth?
    No you're misunderstanding me. The fact is that government creates NOTHING of value. It does however provide essential services like armed forces, courts of law as integral to it's CONSTITUTIONAL powers.

    The reason business is more efficient than government is because it has a profit motive to be so. As do I with mine.

    The most efficient government is usually local government because the recipients of those services and those paying for them are on the scene so to speak. They can witness personally who is doing what with their money. And it's usually easy to access those responsible for performing those services if they are not being done properly. It's harder to do that with services provided by the state and next to impossible when it is the Federal government.

    if you look at what governments do today as opposed to 80 years ago, they primarily takes money from one person and give it to another. Transfer payments are the overwhelming bulk of the Federal budget; and state budgets and and every major city's budget.

    EVen if I got my wish and many government services were contracted out to private companies, we'd still need bureaucrats to make sure that they were earning their money and picking up the garbage, clearing the snow etc.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    ^^^ perhaps it is natural for Canadians to misunderstand the concept of 'real value' and 'real income'... since unlike the US gov't the Canadian gov't DOES have independent sources of both. Thus if the Canadian gov't chooses to spend X dollars on a social welfare program or a new bridge, this can theoretically be paid for by Canadian gov't royalty earnings on exported oil, exported natural gas, exported hydroelectricity etc. But in the US, the gov't has virtually no similar sources of 'real value' and 'real income'. Instead the US gov't must tax those Americans whose paychecks are funded by 'real income' ... which results from creating something of 'real value'.

    By definition, any paycheck that is funded from gov't coffers is not 'real income'. Instead it is 'recycled income'. In other words, in the US at least, the dollars used to fund every gov't paycheck do not originate from the creation of 'real value', but from the taxation of someone else working in the private sector who actually created 'real value'. This is of course the way that the system has always worked ... BUT ... with proportions where the number of 'real value' creating taxpayers was vastly higher than the number of workers being paid in 'recycled' money. As the percentage of workers who actually create 'real value' declines with every factory closing / farm bankruptcy etc., and as the percentage of workers on the gov't payroll continues to increase, the US has arguably already passed the point where the workers who actually create 'real value' can fund the paychecks of workers on the gov't payroll. The US gov't has been covering this shortfall by borrowing ever larger amounts of money from foreign lenders ( which borrows 'real value' that THEY have created).

    But in the final analysis the US probably does not have enough 'real value' creation remaining to ever pay these creditors back in terms of equal 'real value' to that which was borrowed. This completes the circle back to the original thread topic !

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    Quote Originally Posted by Eric Stoner View Post
    No you're misunderstanding me. The fact is that government creates NOTHING of value. It does however provide essential services like armed forces, courts of law as integral to it's CONSTITUTIONAL powers.
    It creates an environment where people can pursue their happiness in peace, and get rich. How's that for value?

    The reason business is more efficient than government is because it has a profit motive to be so. As do I with mine.
    Efficient to who though? If I get a service from the government, I get all service for my money. If I get a service from you, I get some service, and some profit for you. Depends on your point of view eh? The efficiency comes in maximizing the profit part....not the part I want.

    Governments, at least the kind you and I are used to, are reviewing how they do things all the time. They have to...money is tight, and always scrutinized carefully both internally, and externally. For instance, our Auditor General here in Canada exposes waste and stupidity every year, causing embarassment to the minister in charge in parliament. It's great fun, and always results in changes to the way things are done.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    Quote Originally Posted by Melonie View Post
    By definition, any paycheck that is funded from gov't coffers is not 'real income'. Instead it is 'recycled income'. In other words, in the US at least, the dollars used to fund every gov't paycheck do not originate from the creation of 'real value', but from the taxation of someone else working in the private sector who actually created 'real value'. This is of course the way that the system has always worked...
    Who decided this? Rush Limbaugh? You talk like this is the gospel, that only private citizens not on a government payroll create anything of value. This is as I mentioned earlier, mental masturbation. Who gives better "value", the guy who makes sure your shit goes down the pipe to the treatment plant and is dealt with, or the athlete making a bizillion dollars to entertain you? The guy who teaches your children how to do math, or the CEO of the paper clip factory? The woman who tests your water to make sure it's safe, or the woman who lobbys your government on behalf of the cigarette companies?

    YOU don't value what governments or their employees do. YOU. Period.

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    Default Re: Japan Election bodes poorly for the US dollar !!!

    Well I'll let you run the math for yourself. Imagine a tiny community / economy that has ...

    a government with no pre-existing debt thus a $0 starting balance, and 10 total residents

    one of the residents is retired and collects $ 10,000 a year in benefits from the gov't and pays no taxes

    another of the residents is unemployed and collects $10,000 a year in unemployment and other social welfare benefits from the gov't and pays no taxes

    two other residents work for the govt (either directly or through a contractor), collect $50,000 per year each, and pay $ 10,000 a year in taxes

    another resident works for a company whose profits are subsidized by the gov't. This resident collects $50,000 per year, $25,000 of which is actually earned / paid by the employer and the other $25,000 of which is due to gov't subsidy payments. This resident pays $10,000 a year in taxes

    Another resident is actually an 'illegal'. This resident has no official reported income, pays no taxes, but consumes $5,000 per year in government services.

    Two other residents are 'service industry' workers. They earn $ 25,000 per year and pay no taxes

    The last two residents work for a company that does no business with the gov't. They earn $100,000 per year which is earned / paid by their employer, and they pay $35,000 in taxes.


    At the end of one year, what is the 'ending balance' for the local gov't ?

    ~
    Last edited by Melonie; 09-03-2009 at 03:55 PM.

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    Default Re: Japan Election bodes poorly for the US dollar !!!


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    Default Re: Japan Election bodes poorly for the US dollar !!!

    Quote Originally Posted by Melonie View Post
    ^^^ perhaps it is natural for Canadians to misunderstand the concept of 'real value' and 'real income'... since unlike the US gov't the Canadian gov't DOES have independent sources of both. Thus if the Canadian gov't chooses to spend X dollars on a social welfare program or a new bridge, this can theoretically be paid for by Canadian gov't royalty earnings on exported oil, exported natural gas, exported hydroelectricity etc. But in the US, the gov't has virtually no similar sources of 'real value' and 'real income'. Instead the US gov't must tax those Americans whose paychecks are funded by 'real income' ... which results from creating something of 'real value'.

    By definition, any paycheck that is funded from gov't coffers is not 'real income'. Instead it is 'recycled income'. In other words, in the US at least, the dollars used to fund every gov't paycheck do not originate from the creation of 'real value', but from the taxation of someone else working in the private sector who actually created 'real value'. This is of course the way that the system has always worked ... BUT ... with proportions where the number of 'real value' creating taxpayers was vastly higher than the number of workers being paid in 'recycled' money. As the percentage of workers who actually create 'real value' declines with every factory closing / farm bankruptcy etc., and as the percentage of workers on the gov't payroll continues to increase, the US has arguably already passed the point where the workers who actually create 'real value' can fund the paychecks of workers on the gov't payroll. The US gov't has been covering this shortfall by borrowing ever larger amounts of money from foreign lenders ( which borrows 'real value' that THEY have created).

    But in the final analysis the US probably does not have enough 'real value' creation remaining to ever pay these creditors back in terms of equal 'real value' to that which was borrowed. This completes the circle back to the original thread topic !
    Melonie,

    What you are saying makes no sense. You're just making things up to fit your ideology. The government provides goods and services in return for taxes and any other revenue. The value of these goods and services are the same whether they are produced in the private sector or government sector. A cell phone or laptop PC has the same value whether it is produced in a private factory in the US or a government-owned factory in China. An operation performed by a surgeon has the same value whether the operation took place in a government run VA Hospital or a private hospital. The value of these products and services count just as much towards GDP regardless of whether they came from the government or private sector.

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