12-05-2003 09:59									#61
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quote: Originally posted by DAVOUT Kidicious, thanks. Excellent links. In the Digital Economist : in fiscal 2002, Interests 332 billions (19% of the Federal budget).

That's a big decrease from the 1990s. I'm not sure what your point is. Is it just that governments have a lot of debt? Or that governments like low interest rates so that their debt costs less?

	12-05-2003 12:40									#62
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Considering the low inflation of 2002, I am not sure the decrease is so big. Anyway, the total debt in % of GNP was 55% en 1990 and is 59% in 2002, and the charge of interests is equivalent to the defense budget.

If I have a point, it is that a monetary policy aiming to minimize inflation is not consistent with a budget policy resulting in huge deficit increasing consistently the debt.

I observe that the publicly held debt which was 75% of the total debt in 1990, is now only 54%. Any clue of which part of the federal institutions took the share previously bought by the public?

	12-05-2003 20:41									#63
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quote: Originally posted by DAVOUT If I have a point, it is that a monetary policy aiming to minimize inflation is not consistent with a budget policy resulting in deficit

We agree on this. I doubt we share the same conclusions though

	12-05-2003 20:46									#64
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quote: Originally posted by Spiffor We agree on this. I doubt we share the same conclusions though

This is only technical, not political. Difficult enough.

	12-05-2003 20:54									#65
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My conclusion is that we shouldn't have a monetary policy aimed at limiting inflation

	12-05-2003 21:01									#66
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If you read my post page 4, you will see that I am not that far.

But I would rather say that I am for a controled inflation, and that cannot be summarized by a maximum figure.

	12-05-2003 21:05									#67
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Well, then we are agreed. An uncontrolled inflation can have even worse effects than an anti-inflation fundamentalism. But I still think price stability should be only a remote aim of the Central Bank, with growth being the main concern by far (this implies some cohesion with the budget policy, something we direly lack in Europe :sigh: )

	12-05-2003 21:43									#68
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Inflation is the consequence of some unbalanced part of the overall economy, and a global monetary treatment is not often appropriate. For instance, in 2002 the US inflation was very low (about 1%), resulting of an increase of all goods and services, offset by a huge decrease of energy prices (for a significant part imported). The Fed decided nevertheless to lower the interest rates in order to help the economy, and particularly the capital expenditures to recover (and subsidiarily - or primarily? - to give some happiness to the stock exchange). This could have no effect on the imports of energy, could marginally further the price-increases of goods and services already increasing, and extremely marginally help the capital expenditures. And additionnally, considering that the rates were already extremely low, the impact was and is still not visible. The end result is that the monetary policy for regulating the economy has reached in the US (but it is not significantly different in Europe) its level of absolute inefficiency : there now only one way for the rates, up.

	12-05-2003 22:03									#69
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quote: Originally posted by DAVOUT Considering the low inflation of 2002, I am not sure the decrease is so big. Anyway, the total debt in % of GNP was 55% en 1990 and is 59% in 2002, and the charge of interests is equivalent to the defense budget.

Hmmmm.. I don't know about those numbers. Are you sure. The US economy grew a lot during the 90s and we had surpluses during a lot of those years.

quote: Originally posted by DAVOUT I observe that the publicly held debt which was 75% of the total debt in 1990, is now only 54%. Any clue of which part of the federal institutions took the share previously bought by the public?

I thought this meant the amount held by Americans. Maybe not.

	12-05-2003 22:11									#70
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quote: Originally posted by Kidicious Hmmmm.. I don't know about those numbers. Are you sure. The US economy grew a lot during the 90s and we had surpluses during a lot of those years. I thought this meant the amount held by Americans. Maybe not.

Grew a lot for sure (90% from 90 to 02), but the debt grew more (103%).

I suppose that publicly held means private individuals, enterprise or whatever is not a federal institution, American and foreign.

I wonder what is the share of the FED in the non-publicly held, and its evolution.

	12-05-2003 22:12									#71
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quote: Originally posted by DAVOUT Inflation is the consequence of some unbalanced part of the overall economy, and a global monetary treatment is not often appropriate. For instance, in 2002 the US inflation was very low (about 1%), resulting of an increase of all goods and services, offset by a huge decrease of energy prices (for a significant part imported). The Fed decided nevertheless to lower the interest rates in order to help the economy, and particularly the capital expenditures to recover (and subsidiarily - or primarily? - to give some happiness to the stock exchange). This could have no effect on the imports of energy, could marginally further the price-increases of goods and services already increasing, and extremely marginally help the capital expenditures. And additionnally, considering that the rates were already extremely low, the impact was and is still not visible. The end result is that the monetary policy for regulating the economy has reached in the US (but it is not significantly different in Europe) its level of absolute inefficiency : there now only one way for the rates, up.

Are you saying that things would be better if the Fed didn't lower rates? The lower interest rates are keeping us stable for now.

	12-05-2003 22:14									#72
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quote: Originally posted by DAVOUT Grew a lot for sure (90% from 90 to 02), but the debt grew more (103%).

I'm sure the debt didn't grow that fast. Where are you seeing that at?

	12-05-2003 22:20									#73
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I am saying that the last decreases of interest rates were useless or even counter productive. The interest rates (real interest rates) have probably a range of effectiveness, and the US are certainly now outside, as the Japan put itself sooner.
The religion of the rates which are supposed to solve all economic problems is dangerous, and I am quite concerned that it seems to spread in Europe.

	12-05-2003 22:31									#74
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quote: Originally posted by DAVOUT I am saying that the last decreases of interest rates were useless or even counter productive. The interest rates (real interest rates) have probably a range of effectiveness, and the US are certainly now outside, as the Japan put itself sooner. The religion of the rates which are supposed to solve all economic problems is dangerous, and I am quite concerned that it seems to spread in Europe.

I think that they should have already started purchasing bonds instead of the short term securities. I don't think inflation is as dangerous as deflation. I like a nice cusion of inflation. Once prices start falling your in big trouble, because consumer behavior has been altered. It's too hard to change consumer behaviour not to take things seriously when there is danger.

	12-05-2003 22:35									#75
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quote: Originally posted by Kidicious I'm sure the debt didn't grow that fast. Where are you seeing that at?

You gave me some good links : Economic report of the President - Government Finance

	12-05-2003 22:41									#76
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quote: Originally posted by DAVOUT You gave me some good links : Economic report of the President - Government Finance

I rechecked the CBO site, and it says that the debt held by the public-as a % of GDP-went down to 35%.

	12-05-2003 22:47									#77
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Ok. I'm a victim of my media. They have been acting like the numbers went down more between 95 and 2000 than they really did. I should be more carefull.

	12-05-2003 22:50									#78
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quote: Originally posted by Kidicious I rechecked the CBO site, and it says that the debt held by the public-as a % of GDP-went down to 35%.

I agree with this figure, it makes 54% of the total debt.

	12-05-2003 22:53									#79
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But the % of debt held by the public has decreased, but the % of gross debt has increased. I don't know why.

	12-05-2003 22:59									#80
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What set of nrs are you looking at? The increased non-publicly held share should be mostly due to the social security "trustfund".

	12-05-2003 23:13									#81
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Look at the President's economic report.


Taxes pay for the interest payments on that. So we should look at the gross numbers.

	12-05-2003 23:14									#82
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No, that's just intra-government transactions.

	12-05-2003 23:18									#83
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quote: Originally posted by HershOstropoler No, that's just intra-government transactions.

But don't taxes have to be collected for it, where does the transfer come from?

	12-05-2003 23:24									#84
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I'm not sure about the book-keeping details of the trustfund, but the interest to the bonds it holds should just be added as another IOU from the general budget to the trust fund.

	12-05-2003 23:59									#85
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quote: Originally posted by HershOstropoler I'm not sure about the book-keeping details of the trustfund, but the interest to the bonds it holds should just be added as another IOU from the general budget to the trust fund.

So they really don't mean anything. I wonder why they have the securities in there. Why not just have IOUs?

edit: When they run a defict in the trustfund. That's really a simple monetary injection into the economy, right?

	13-05-2003 00:36									#86
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Sorry, I can't follow you there. What do you mean?

The "trustfund" is just an accounting entity within the federal government.

	13-05-2003 02:06									#87
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Congressional buget office :

trust funds: Government funds that are designated by law as trust funds (regardless of any other meaning of that term). Trust funds display the revenues, offsetting receipts or offsetting collections, and outlays that result from implementation of the law that designated the fund as a trust fund. The federal government has more than 200 trust funds. The largest and best known finance major benefit programs (including Social Security and Medicare) and infrastructure spending (the Highway and the Airport and Airway Trust Funds).

	13-05-2003 02:39									#88
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quote: Originally posted by HershOstropoler I'm not sure about the book-keeping details of the trustfund, but the interest to the bonds it holds should just be added as another IOU from the general budget to the trust fund.

That means that if those interests were not received by the trustfund, an equivalent amount would have to be received from the general budget. Is that correct ?

	13-05-2003 09:26									#89
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quote: Originally posted by HershOstropoler Sorry, I can't follow you there. What do you mean? The "trustfund" is just an accounting entity within the federal government.

Right now a surplus accumulates there. In 10 years or so there will be a deficit. So that will increase the money supply like a budget deficit, right? Will they sell off the govt debt in there?

	13-05-2003 22:11									#90
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The weak Dollar doesn't seem to be affecting US trade much.

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