Randall Wray: Simple minded hydraulic economist

What If China Dumps US Treasury Bonds?

Our deficit hysterians love to raise the specter of China. Supposedly Uncle Sam is at the mercy of the Chinese, who have a stranglehold on the supply of dollars necessary to keep the US government above water. If the Chinese suddenly decided to stop lending those scare dollars, Uncle Sam would be forced to default. Can anyone, please, explain to me how the sovereign issuer of the US dollar—Uncle Sam—could ever run out of his supply of dollars? Please, give me one coherent explanation of how that could happen.

OK. Here we go. Let us say that Obamacare promised us whatever heart treatment we needed for a fixed price, but there is simply not enough productivity to support the cardiology industry demanded. Obamacare will raise the price offered to infinity.

That example may be disputed, granted. Congress is likely not to pay the price of infinity. However, the other implication of Randall is that we can always print up our interest payments, true. But Congress cannot guarantee that the dollar is still a valid currency while doing so. Because, you see Randall, if Congress does prints money then the private sector will have to pay infinity for cardiologists. And that is as effective a bankruptcy as anything else, and we sill pay off our debt, with wallpaper.

Cohen and Left Wing Racial Pandering

“People with conventional views must repress a gag reflex when considering the mayor-elect of New York — a white man married to a black woman and with two biracial children. (Should I mention that Bill de Blasio’s wife, Chirlane McCray, used to be a lesbian?) This family represents the cultural changes that have enveloped parts — but not all — of America. To cultural conservatives, this doesn’t look like their country at all.” WA Post

Well, idiocy and sterotyping has been the hallmark of the racial pandering Undemocratic Party. Go ask Nency Pelosi, her political philosophy is built around racism. Cohen simply proves the old adage, American liberals are ignorant jackasses.

There was more than one fire?

In a CNBC interview Tuesday at the New York Times’ DealBook conference, Tesla CEO Elon Musk said that concerns over the three fires in the company’s electric sports cars are being overblown.

Well, at least the guy is honest. The Tesla is a burning piece of fireworks, nice to know.

Two Gods are sufficient

Hot Politically Repressed babe

Sarah Palin Warns America: Kicking God Out of Society Will Lead To Ruin

My One Fifth Senator has a clue

Sen. Dianne Feinstein (D-Calif.) said Tuesday that she will co-sponsor a bill by Sen. Mary Landrieu (D-La.) to require insurance companies to continue offering their existing health care plans — a way to make good on President Barack Obama’s promise that consumers can keep their current coverage if they like it. Politico:

Mainly because of this: 1 MILLION HAVE INSURANCE CANCELLED IN CALIFORNIA
 
Which got red headline on Drudge. The other news to report is that only half of California like the thing any more, and only a third are enthusiastic. I wonder if our Latino Majority has finally translated and read the law.
The whole Obamacare thing was pushed mainly by New York State which had so badly crewed up their own system it no longer worked. Diane and Babs, my two One Fifths never play a part in anything; their jobs are mainly that Affirmative Action Ambassadors to DC. Had California had a real complement of the ten Senators we are supposed to have, the whole crapola would never had occurred.

Stupidity, naivete, and arrogance

SALEM, Ore. (AP) — With a reputation as a pacesetter in health care, Oregon laid out bold plans for complying with the federal overhaul.
The state wouldn’t just create a health insurance exchange, a complicated undertaking in its own right. Oregon officials set out to build one of the biggest and best in the nation — a model that other states would want to copy.
But more than a month after Cover Oregon’s online enrollment was supposed to launch, reality is lagging far behind Gov. John Kitzhaber’s grand ideas. The online system still doesn’t work, and the exchange has yet to enroll a single person in health insurance. CBS Seattle

Now here is my problem. I knew that a Guv. Dumbnutz in Oregon would fail before Gov Dumbnutz even got into office.  I have years of documentation about corruption and ignorance that go along with government tech projects, they almost always end with universal failure.  By the way, this is documented for over 20 years, it is a fact, a known law of physics.  Now, with certainty, there will be another Gov Dumbnutz showing up in Oregon ten years from now, making the same failure. And I will be here, yet again, pointing out that Oregon prevails in serial Dumbnutzism.

Katy Grimes nails it on Covered California

President Obama just apologized for the millions of insurance policy cancellations under the Affordable Care Act, usually called Obamacare. He also has blamed “bad apple” insurers for the cancellations.
But in California, critics of the program insist the cancellations were not made by the insurers, but by Covered California, the state’s implementation of Obamacare. California compelled insurers participating in the Covered California health exchange to cancel noncompliant individual policies.
Cal Watch

Young and healthy, beware:

Gottwals [health care policy attorney and Obamacare expert with BB&T-Liberty Benefit Insurance] said the singular insurance issue with medical providers is reimbursement — getting paid for the treatment they give. Mandated coverage is the only way to save money in the system and cut reimbursement costs. “It’s a race to the bottom,” Gottwals said. “Doctors will opt out of [accepting] insurance because of low reimbursements. It’s not philosophical. The only leverage the government has is, ‘We’ll cut reimbursements.’ There’s no other way to to save money in health reform because of the mandated benefits.” Interestingly, Gottwals said the average age of persons enrolled in Obamacare is 51-54. By contrast, in 2013 the average age of someone enrolled in pre-Obamacare insurance was 41, which is close to the U.S. median age of 37 years. “This is significantly going to blow costs up, and taxpayers will be on the hook to pay for the difference,” said Gottwals. That’s because older people require more health care. He said there is a bailout plan already written into the Affordable Care Act, which requires U.S. taxpayers to pay the difference between what care is covered and what is not. “It is going to go way over budget, and taxpayers are on the hook for 80 cents on every dollar,” said Gottwals. “It’s a bad deal, and bad for taxpayers.”

McBride complaining about growth

 Looking for Stronger Economic Growth in 2014

From Merrill Lynch economists: Getting the exact timing of the acceleration in growth is tough, but the case for better growth next year is strong. The economy has healed significantly since the 2008-9 crisis. In particular, the government, households, businesses and banks have gone a long way toward fixing their balance sheets, allowing them to slowly shift their focus from balance sheet repair to expansion. ... We expect GDP growth to exceed 3% in the back half of next year as the federal fiscal drag drops from ~1.5pp in 2013 to ~0.5pp in 2014. Right now it looks like 2014 will be a solid year. Read more at http://www.calculatedriskblog.com/2013/11/update-looking-for-stronger-economic.html#ksDrYCOLsHcPRbbc.99

McBride, earlier complains that we would do much better without the budget cuts. But Golly gee whiz, he consistently cites evidence that disproves his own priors. 3% predicted growth is damn good, that is approaching third gear for the economy, our highest gear. If MJcBrides claims were true, then Merrill Lynch would be predicting a 4.1% growth rate, and that would be phenomenal.

The Tax Foundation gets it right

How Fast Would the Economy Need to Grow in Order to Close the Deficit?
The economy needs enough growth to generate taxes and pay the bills. The big bill is the interest expense, which goes up faster than growth. In other words, this chart shows the DC budget is impossible under any circumstances that include current DC obligations. We are not good enough to generate 7% annual growth, have never really done that for any length of time.

The Economist screws it up

RA from the Economist magazine tries to say that we would have had a small recession if the central bank in DC would have reacted faster to events. Before the panic

When we talk about the way in which the most recent crisis unfolded, we often talk about uncertainty of the extent of mortgage losses as a cause of the financial crisis. And we discuss that uncertainty as if it were entirely about microeconomic unknowns: which banks held which securities, what mortgages were in which securities, and how much of the information used in origination (like household incomes) was reliable, for instance. But there is also considerable macroeconomic uncertainty, which may well be the more important consideration. There are a lot of loans that go bust when real output falls 3% in a year that would not if output merely grew at 0.5%. Big crises therefore display a rather significant level of recursivity. Suppose there are brewing financial losses lurking in a financial system. Then suppose the outlook for the economy dims somewhat. Deterioration in the outlook raises expectations of likely financial losses. If the deterioration isn't addressed then crisis dynamics intensify and the outlook for the real economy worsens again. Eventually you get a break—a shift in the equilibrium. The crisis becomes acute, and the real economy suffers a major blow.

By recursivitiy the author means that a central bank aggregates data over the whole economy, and that causes a delay in its function. The delay is especially bad when the Central Bank aggregates over a huge continental wide economy. The delay in central bank actions to lower rates sooner makes worse the negative shock because real growth has already fallen by the time the Fed figures it out.

True in this case? No, the USA suffered a sudden reversal in terms of trade due to oil. Our central bank was chasing an oil bubble. The price of energy reached a peak of $120/barrel, and some 6% of our producers dropped out of the economy. It was not a demand shock, it was, plain and simple, a world oil shortage suddenly appeared, and that was the proximate cause of the recession.