Groundhogs Day

[benjamen]

http://finance.yahoo.com/news/markets-next-bogeyman-looming-inflation-101707484.html

"It's Groundhog Day. We're the definition of an idiot by Einstein - repeating the same experiment. That's what central banks have reduced themselves to. We'll never know what will happen if they stop because they continue to print, print and print," Steen Jakobsen, chief economist, Saxo Bank, told CNBC Europe's "Squawk Box" Tuesday.
:rotflmbo:

More and more people are starting to realize things are not right.

 

[pmbug]

Waking up in The Matrix. Have a great day!

 

[benjamen]

Waking up in The Matrix. Have a great day!

Ignorance is bliss.

Speaking of people waking, this is a great article I found on yahoo of all places:
http://finance.yahoo.com/news/low-rates-depress-savers-governments-134204446.html

"Though bad for people trying to live off their savings, low interest rates happen to be quite good for anyone borrowing money, like governments themselves. Over time, interest rates below the inflation rate allow governments to refinance, erode or liquidate their debt, making it easier to live within their budgets without having to resort to more unpalatable spending cuts or tax increases.

Along with keeping rates low, governments are using a variety of tactics to encourage captive audiences, like pension funds and banks, to buy their debt. Consumers, in other words, are subtly subsidizing governments without even knowing it. Economists have compared this phenomenon to a hidden tax on people’s wealth."

"This is not the first time governments have benefited by depressing interest rates, something economists refer to by the ominous name of “financial repression.”

In the three and a half decades after World War II, interest rates in the developed world were on average below zero after adjusting for inflation, according to Carmen M. Reinhart, a professor at the Kennedy School of Government at Harvard. This helped Europe, the United States and Japan slowly whittle away much of their war debt as their economies grew faster than their debt burden. "

"In the nearly four years that the Fed set its benchmark interest rate at zero, the government has saved trillions of dollars in interest payments. If interest rates today were what they were in 2007, the Treasury would be paying about twice as much to service its debt."

 

[DCFusor]

I'm not sure what the exact number is - and it's "all relative" anyway (when you have a press and reserve currency status...oops), but at some fairly small increase in current interest rates, the entire tax take won't service the debt, much less do anything else. Bernanke is stuck at the Keynesian endpoint and cannot recover.

 

[benjamen]

I'm not sure what the exact number is - and it's "all relative" anyway (when you have a press and reserve currency status...oops), but at some fairly small increase in current interest rates, the entire tax take won't service the debt, much less do anything else. Bernanke is stuck at the Keynesian endpoint and cannot recover.

The federal government debt just passed $16 trillion

Total federal government revenue is $2.3 trillion
http://www.usgovernmentrevenue.com/fed_revenue_2011USrn

It would take an interest rate of 14.375% on 16 trillion to cost 2.3 trillion.

Of course, it is projected we will clear $21.5 trillion in debt by the end of 2014
http://www.usgovernmentspending.com/

With that debt and current revenues, it would only take 10.7% interest for the interest payments to match the entire federal government revenue.

 

[DCFusor]

This doesn't count of course, the debt we know darn well we're going to start incurring around the entitlements...about 10x as much as reported as "current debt" and it's hit the hockey stick inflection point already.

 

[benjamen]

This doesn't count of course, the debt we know darn well we're going to start incurring around the entitlements...about 10x as much as reported as "current debt" and it's hit the hockey stick inflection point already.

That is the true problem with the official CPI. Most entitlements are linked to it. If CPI claims inflation is 2%, inflation is really 8%, then the effective amount paid to entitlements will actually decrease. Everyone say hello to our friend, hidden tax!