It does make sense, intuitively, but on the other hand it is a bit dubious that there is essentially always (in 1859 and 2012) a single fixed percentage of GDP lost to disasters. The nominal losses ought to be greater now than in the past, but there's no a priori reason to think the percentage would be the same. (Actually, some of the data Pielke shows do have trends, but he dismisses them as insignificant without quantifying significance).
Indeed, the trouble with Pielke's method is that it rests on a single basic assumption: a linear fit to complex time series data is meaningful. If you look at the data he shows, it's pretty clear that the biggest losses come from tail events. Imagine, for example, what the linear trend is if only peaks are fit. His data also shows peaks (i.e. single extreme events or extremely eventful seasons) becoming more frequent. I'm not arguing for or against the notion that climate change has increased disaster related costs, but I do think it's clear that relying solely on linear correlations and traditional p-value measurements is not going to do much good when the interesting part of the data appears to involve higher-order statistics.
The NSA is only still associated with the American people in the sense that it funds itself in large part with tax money taken from those Americans.
Not even that. Federal spending is not "funded" by tax money. Indeed, the IRS destroys the money it collects. The federal government finances spending by printing money. Taxes are just to create demand for money, and to control inflation.
The CPI is manipulated to show little or no inflation and the core CPI
Ah, another tinfoil hat.
The US also exports a ton of inflation via treasuries to other countries which lowers the rate of inflation here.
Sorry, this is logically incoherent. If a foreigner buys US bonds, they have less US cash, leading to lower dollar denominated prices in their markets. Supply and demand. Part of the problem here is misunderstanding that "inflation" means an increase in price levels, regardless of changes in the money supply. Just increasing the money supply is not "inflation" although it may lead to it, again via supply and demand.
This might only work in the short term until banks start raising their interest rates to compensate so any new borrowers get screwed instead.
The problem now is a debt overhang which is hampering growth by depriving banks of profitable lending opportunities, and depriving the private sector of its ability to innovate and invest. After private balance sheets are repaired and full employment is reached, I will begin to favor deflationary policies.
This also only works in the short term until other countries retaliate by debasing their currency as well.
You should look up the Plaza Accord and reverse Plaza Accord.
We are already giving tons of money to the Chinese in exchange for goods. If they wanted to turn around and spend those dollars here, they could. Instead, they turn them into bonds in order to manipulate FX prices and to capitalize their banks. Keep in mind that as a result of Chinese demand for US paper, we are trading them our official stamps for their sweat, toil and natural resources, which we consume instead of they and which they can never recover.
The misunderstanding this AC has, is that redeeming a bond adds to the net financial assets of the bond holder. This is false. If I have $100 in bonds, then on redemption my $100 in bonds is destroyed, and replaced with $100 in reserves. The only difference is the interest rate. Just redeeming bonds (or buying up bonds China is willing to sell) can't change the net financial assets of the private sector, and is thus very unlikely to lead to inflation.
Real rates are calculated by subtracting inflation from the nominal rate. E.g. if inflation is 2% and the rate on a US bond is 1.75%, then folks are paying the US government to safely hold their money a -0.25% (realistic numbers at the present time).
There are some rare inflation adjusted debt instruments, for example the US Treasury sells TRIPS which are inflation-protected securities. AFAIK in the USA and most other countries, nearly no debt is inflation protected.
If the value of my work stays steady, a strong dollar actually makes it harder for me to pay my mortgage, but a weak dollar lets me pay off my loans faster.
Since that's pretty much what I said, I assume you meant to reply to Lotana in explanation of why we're right...
If outstanding bonds are redeemed, their balance becomes reserves. Relatively more plentiful reserves will induce relatively higher bids on new issues of US Treasury debt, that is, relatively lower rates. This is the supply-and-demand mechanism by which quantitative easing reduces Treasury rates.
The Fed can always set the yield curve on Treasuries by buying bonds from the private sector (and setting IOR) such that takers receive a spread. If some institutions don't like those terms, they can try to collude to keep rates up, but there is a prisoners' dilemma in that the first one to break ranks will reap the gains.
It would be even simpler for the Fed to control rates if we altered the Federal Reserve Act to allow direct purchases of Treasury debt (such as are allowed by most countries).
I would think any american who plans to collect "old age security" (or whatever it is called) would be hurt.
Not really. To explain, our 'social security' is an intergenerational assurance program (those who currently work transfer some potential consumption to those currently retired), implemented through a so-called payroll tax (6.2% collected from employees and employers up to the first $117,000 earned only) which is used to sock away bonds as internal debt. So 12.4% of wages are taken from the private sector and placed into this trust. The 12.4% doesn't cover all the benefits that get paid, but interest income will make up the difference probably for about another decade. After that, the payroll taxes will have to pay benefits directly (at about 75% the level of current benefits) unless we allow social security to be paid from discretionary deficit spending instead of the trust fund.
To summarize, no matter the general price levels or rates on US Treasury debt, social security provides for 12.4% of wages to be diverted from workers to retirees. No matter what, any form of old age pension requires workers to abstain from consuming some goods, transferring them instead to retirees. Assuming for the moment that retirees should be supported by society, the question then is what proportion should be transferred. Under current US law, the proportion is greater than or equal to 12.4% (plus I think 2.9% for Medicare).
A massive US dollar devaluation would be a tough political sell, not sure all those foreign nations who hold US bills would be happy.
Agreed - but we were talking about Russia and/or China causing the devaluation, right?
From a US perspective, both dollar devaluation and dollar revaluation can be seen as positive. The former increases employment and domestic production, while helping debtors, and the former increases our ability to import the production of others and benefits creditors.
Really? How do you think we pay off our debts now? You realize that fixed-term Treasury instruments are constantly coming due and being redeemed, right?
The truth is that a (Federal government) debt instrument is the money that pays itself off. $100 of securities disappear, $100 of reserves take their place. No change in net financial assets.
So, no, there is no harm in "printing" money to "pay off" these "debts." We do it all the time. As a result, of course, there is no need to worry much about the national debt, or to destabilize things by trying to pay them off rapidly.
"It's the best thing since professional golfers on 'ludes." -- Rick Obidiah
