It's not necessarily that I don't understand the scenario but more that it seems we are left to make inferences and I want to clear that up and then maybe you can expound upon anything as needed. I infer that in the simplified example you gave there is either A) an obviously correct selection or B) enough information to choose one over the other based on individual preference. Believing that I have learned enough about your style of posting over the years I think A is the right answer and that you would say "let's buy bonds" is the better choice than "let's cut taxes".



Maybe. Maybe not. Certainly when economics is wielded as a tool (or a weapon) to accomplish ideological, political, etc goals there must be a term we can agree to wrt the different theories, implementations, etc. This is a minor point and not one really key to the discussion or so I believe anyway.



I can't pretend to have a real understanding of arbitrage beyond the definition so I won't. I just take not at your use of the word "all" in that sentence and note that I don't know if it is always bad. Because I tend to think in micro rather than macro I also note the rent seeking comment. I know this came up earlier in the thread so perhaps I should review it. I don't think your talking about small scale landlords but perhaps you do think that should be discouraged as well. Again, my fault, you don't have to repeat anything you've already posted. If this turns out to be informative and interesting I will go back and find it. I only highlight the last portion of that because I'd just like to read what more you have to say on the topic.



Interesting because economists that have excited me also identify as libertarian.



I didn't want to go point by point with this post because that's just too much right know. I just notice you always have this tendency to go straight to Wal-Mart and huge corporate business. Of course they're gigantic employers but not generally what I would consider quality employers. Typically hiring the worst and least qualified among us (unqualified opinion). Now, I don't think people should necessarily be paid essentially punitive wages but if they're poorly qualified and doing relatively menial work how do you determine a market value that is anything but poor?

A lot of self-proclaimed "libertarian economists" are just right-wing hacks or anarcho-capitalists. There's a difference between arriving at a policy recommendation by careful consideration, and bludgeoning people with watered down jargon to justify your own political philosophy.

Insightful as always.

well tbf greg gutfeld isn't actually an economist

because **** you, that's why

I can't remember, is he the funny one or the one that pretends he's serious? I did read that Fox unceremoniously dropped Beckel, though. Haven't watched FNC for years.

He's the one who pretends he's funny.

LOL, I forgot the other guy's name anyway. Too bad Beckel is gone though. I think they all just tried to see who could be the first to make him break out in a profane rant. Can't imagine the show will be as entertaining now. Oh, and one of the major FNC execs was in the news recently as leaving. Damn, can't remember his name off the top of my head either. I imagine they will swing harder to populist and eat even more of the audience share and become bigger and "worser".

There is no obviously correct selection.

Arbitrage is always bad. Arbitrage opportunities arise because of market failures; whether imperfect information, or because of regulatory/non-regulatory barriers, arbitrage is always 'skimming off the top', depriving both producers and consumers of surplus. Front running is a kind of arbitrage, so is off-shoring. Arbitrage can go beyond finance as well; instead of using the heavily-regulated H-1B visa process, Microsoft and Facebook have started taking the easier path of moving foreign workers to Canada, and then to the United States on L-1/TN visas, a sort of immigration arbitrage.

Residential landlording isn't great, but it's also not terrible. My main objection is selling goods in the free market which are essential to human survival. Efficient free markets will by definition not produce enough of each good at each price to satisfy all demand, which means a free housing market will always leave at least some people on the streets to die. Doing this is immoral and unchristian. However, it's not going to hurt all that many people because residential is a poor investment, with high depreciation and capital consumption, and returns which are ultimately limited by GDP growth.

For psychological reasons investors typically demand around 4-5% p.a. return over the long run, so residential real estate investment actually imposes a hard upper limit on real estate prices. For example, following the contemporary wisdom that one cannot afford more than 30% of their pre-tax income on housing, the absolute maximum theoretical long-run price for a dwelling is 6x to 7.5x the annual gross income of its occupant (assuming no property tax, upkeep, or administrative costs). This hard limit also limits the capital appreciation of residental land. Since you can only charge 30% of your tenant's income, you can also only claim 30% of their pay increases, which in aggregate is equal to 30% of inflation. The great thing about these observations is that it's just applying accounting identities to the easily corroborated observation that investments have historically tended toward 4-5% annual return. It's trivial to apply these calculations to your own home, and I encourage you to do so. Deviation from these values means you're the victim (or beneficiary) of some financial ****ery.

I attack huge corporations because they are impossible without extraordinary (government) assistance. Walmart exists today only because of direct and indirect subsidies from the Chinese government, US federal government, and numerous states. They literally would not be able to exist otherwise. They couldn't afford to; none of their business practices are sustainable in the long run.

I'm not qualified to decide how much unskilled laborers deserve to be paid. The most effective way of making this decision is with an efficient free market, with a large number of employers and a correspondingly large number of employees. However, such an efficient free market is not possible so long as the government and large corporations are actively subverting market efficiency. The only thing we can say for sure is that the clearing wage is more than they are currently paid.

That was pretty cringe inducing. I would like your description of what we see there before I make any false assumptions but briefly what I saw was somebody that didn't understand the question she was asking, one politician struggling to make sense of it, and another contorting it into a great populist performance. Ugh, that's the first election I voted in. I missed the prior presidential election by about a month.

Basically. But Clinton's treatment of the question was quite good and it illustrates remarkable statesmanship in contrast to his opponent. I don't think it's common today for a politician to correct a confused citizen of their concerns, especially when it would draw attention away from issues that principally affect the super-rich like the national debt.

Regardless, I found it relevant to this discussion. While one candidate struggles to put a positive spin on his opaque economic policies while trying to not to tacitly admit that he and his ultra-rich friends experienced no hardship, the other candidate is honest and says that Americans have to know enough to pick the economic agenda that will work best for them. Can any of you honestly say you'd prefer Bush? Be honest, Wookie06 - economically H.W. Bush was more of a democrat than Clinton was.

It's been in the news that Elizabeth Warren and John McCain are attempting to reintroduce the parts of Glass Steagall that were repealed in 1999. It seems like people are either 100% certain that the sections removed from it were directly responsible for the economic crisis, or that it had no effect whatsoever.

I can't help but note the correlation between a deregulation of financial institutions and them proceeding to **** the bed harder than they had since the economic crisis that caused Glass Steagall to be implemented to begin with.

It certainly didn't help, although the regulations were already quite weak before 1999. Another thing that doesn't help is that the United States' 10% reserve rate is enforced via strongly worded letter and the government can't take real action until it drops to 2%.

But really, the entire crisis was caused by the nationally recognized statistical rating organizations: S&P, Moody's, and Fitch. Those agencies knowingly gave poor, high-risk financial products high ratings, allowing regulated funds to buy them in lieu of much safer products like government bonds. Banks behaved irresponsibly with FDIC backed deposits, sure, but S&P made it so everyone in the world invested more irresponsibly.

Lil perspective on this: S&P rated subprime mortgage derivatives higher in 2007 than they currently rate US federal bonds, the safest store of wealth in human history and pretty much the only thing that held value through the GFC.

All S&P employees should have been thrown in prison forever.

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Well, I actually voted for Clinton in that election but I don't attribute that to any great insight. I remember later thinking how popular the "war" had made Bush and then how a candidate that really was not considered a serious rival ended up beating him. Of course Perot spoiled that election anyway.

I'm actually surprised you're using that trio (questioner+2xCandidates) to make that point unless you just want me to take it at face value because all three of those people are quite mediocre as far as articulating the issues involved. I figured it was more a demonstration of ignorance rather than anything else.

I understand your representation of the video but that seems beneath your intellect. From an intellectual stand point wasn't Bush more on point wrt the National Debt? Isn't it reasonable to think that we won't really feel affected by the national debt until it is virtually or actually too late? Of course that's not what he said but he was struggling to understand how the national debt was personally affecting people. Of course it did and does but in much more indirect ways and that certainly wasn't within the realm of understanding of the woman asking the question.

While I am not claiming some great intellect or education on these topics, I'm for much more radical change. I don't know if that equals "eat the rich" but I have micro ideas and possibly macro ideas that I think would lead to a healthier economic situation. I've tired of the RightVsLeft, RepublicanVsDemocrat debates. Yeah, I still have to choose in that realm but I will strive to choose those that effect the changes I believe in.

How does the national debt affect you? What is "too late"?

So, here's what a high national debt means.

The government won't be able to invest in economic enhancement anymore. Except the U.S. already chooses not to, so it won't affect you.

The government will theoretically need to offer higher interest rates in order to sell bonds. Except they won't, bond rates are already negative in a real sense and there is still outsized demand because it's the only safe store of wealth, and also they won't because it would increase inflation which would be at odds with the neoliberal monetarists who control the whole thing.

The government may need to raise income taxes. Or maybe default on the bonds held by the social security fund? Except they won't because it's political suicide and all US pols care about us reelection. Certainly not the country.

Seems to me like defence is the only thing up for choppin', and it's economic poison anyway so that'll actually be good news for you.

Interesting. So if the things that should happen can't or won't because of this high debt then what happens? Some say some sort of national or global economic collapse. That seems plausible to me. That's too late. At the least I guess we're looking at the dreaded austerity measures. All of which I believe will lead to greater civil unrest.

I could be mistaken but my recollection is that you were never particularly concerned about our high national debt some years ago. Now, it could be that I am mistaken or that your views have changed. It could also be that you weren't too concerned then but now that American debt has probably doubled you are. Since many of us have been involved in these sorts of discussions here for over a decade now I would be interested if you have noticed any shifts in your thinking or seen your thoughts validated over time. I'm also curious what your thoughts are of US unfunded liability which a google search shows me numbers ranging greater than $100-200 trillion.

You read my post backwards.

Re: 127 trillion of unfunded liabilities.

Most of that is Medicare, and due to your highly wasteful healthcare system. These are FYI prices the federal government negotiates, so the fact that they're so high is because someone in your government wants to lob bushels of free money at HMOs. any ideas?

A lot of that figure also includes social security. Which isn't unfunded. However, most of the fund is in U.S. government bonds and republicans are trying to spin it as an unfunded entitlement so it doesn't spark a revolution when they renege upon their debts to you, the American people, when they borrowed money that belongs to you with no intention of ever paying it back.

I was afraid you were going to think that and I was too lazy to write my comments in a more explicit way.



Yes, our healthcare system sucks and is getting worse although I don't complain much about what I have because my insurance is less for a year than many people pay each month. I kept one crappy job for twenty-one years for lifelong benefits so that I would not need to concern myself with that employment component again.

Wrt social security, the courts have made it clear that we have no rights to those funds and that the dollars withheld from our paycheck are merely a tax such as any other. I'm not sure what the current projections are but it is certain that without changes the so-called trust fund will be exhausted at some point (2033 according to wikipedia), and then it is doubtful the program could operate without changes.

So stupid because investing less than a hundred dollars a month from 18-68 and you retire with a million dollars. Instead we pour multiples much more money into a program guaranteed to not make you a millionaire but to definitely make you a political pawn.

you mean in a way other than what you intended?



the fact that the government declared that stealing from your pension fund is legal does not change the fact that they are.

Either way IMO the U.S. Government shouldn't be able to selectively default on the bonds held by specific people. Otherwise nobody is safe; they could just as easily default on Japan, or Pimco. This would destroy the U.S. reputation as a safe store of wealth and ultimately destroy its privileged position in the glib economy (read as: the alleged consequences of high debt except it would actually happen)

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Certainly not an ideal choice for many but a factor that led me to stay longer than I otherwise would.



You've missed the point. A person making less than $10,000 per year has that amount removed from his pay for Social Security, which of course doesn't take race into account as your employer must be (illegally) doing. A quick google search tells me an average wage of $26,695 which equals $3310.18 (12.4%) removed from their pay (the 6.2% they see and the 6.2% they never see because the employer takes it off the top like some other employer paid taxes). Actually, you would have to add half of that back into the $26,695 for a total of $28350.09 per year. So the average worker in America right now has about $275 per month going to a program, as I said earlier, guaranteed not to make them a millionaire by "retirement age". I wonder, what would be the economic result of all of the workers in America investing an average of $275 per month. Besides the rich getting richer, of course.

yeah, government jobs are great



Invest in what?

Economic result of all of the workers in america saving ("investing") in government bonds: sovereign debt crunch, bond rates fall and prices rocket, GOP suggests defaulting on bonds held by citizens. OH WAIT

In equity: mad cash grab to pump out bad IPOs as fast as possible, especially in high tech where it is difficult for consumer investors to differentiate the good businesses from the bad, creating huge bubbles that pop when investors rightfully lose confidence. OH WAIT

In financial derivatives: perverse incentives for banks to create low quality derivatives and misrepresent them as safe products, creates a moral hazard where the government is forced to choose between propping up failed banks and wiping out the retirement savings of the entire country. OH WAIT


Oh yeah, and the rich get richer and the poor get poorer.

Real life finance is much worse than you can possibly understand.

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Well, the average worker should start by investing in any pre-tax savings (in 401(k), 403(b), TSP, Traditional IRA) and tax-free savings (Roth IRA, Roth 401(k)) that are available to them. Beyond that they should invest in growth, growth and income, aggressive growth, and international mutual funds. If we went from the status quot today where only those wise enough to do this to everyone doing it I'm certain there would be some shenanigans to follow which would cause problems by itself but the idea that as individuals we're all much better off doing what I've just outlined here rather than not doing it.

I was going to create a Social Security account online since it's been years since I've seen one of those statements they used to send us. Haven't been able to access the page all day. Amazon's still up. Prime Day sucked though.

Ok, apparently I should put money in my tax bomb 401k. That still doesn't answer the question: what do I buy?

"Growth" and "international growth" are marketing terms, not investment advice.

Generally speaking, mutual funds of course.

I see, the Bernie Madoff Special. Only the best of the best for all the responsible adults who don't understand finance but were told that "investment" is the proper thing to do.

Normally at this point it should be obvious that asking laypeople to gamble on the financial markets in the hopes of some day being able to afford old age is absurd.

Sure I've given my life savings to an opaque Wall Street fund but my local branch's "financial advisor" McJobber said that he put all of his savings in the same fund so I guess I will trust him and the 10 minute training video he watched.

not to mention all the immoral **** that your money is going to support, but why should we care? just make the number be bigger nao pls

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Damn, I was typing a blog post here. What a damn waste of time that was. BLUF, invest wisely and when appropriate. If you're in debt beyond a reasonable mortgage, clean it up first. If you're financially stupid or illiterate, either get smart or don't do anything. You'd be better off burying in the backyard. If you're concerned about the morality of a fund, buy one through a company that is concerned with that although unless you're talking about an IPO that's kind of a moot point anyway. I'm concerned with the morality of government taxing peoples property and income (which really is redundant because income is property). Remember, though, I brought up investment in regards to a broken Social Security system. Something we don't own nor have any right to. If someone is personally opposed to the ideas of saving for your own future and that of your heirs or to ownership then it's unlikely that any inarticulate musings I post is going to change their mind.

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Stopped reading after you tried to put words in my mouth. Too long, didn't read.