LBYM is not factored into our economy

[chinaco]

Quote:

Originally Posted by MasterBlaster You have forgotten about those pesky unfunded/underfunded liabilities that are out there and promised to the Boomers. To fund some percentage of what has been promised means higher taxes and lower growth. Most analysis sees nothing but the opposite of a big boom cycle. The liabilities far exceed the assets.

We will see what happens.

[Danmar]

First thing they should do is phase out mortgage tax deductibility. Really a stupid thing-no such deduction north of the border. Also, agree with youbet- spending 30% more in retirement than before and having a lot of fun doing so.

[Gone4Good]

Quote:

Originally Posted by HFWR I don't vouch for the accuracy of this, but a majority of our trade deficit is because of the amount of oil we import... US Trade Deficit - A Description of the United States Trade Deficit and Its Impact on the US Economy

And you'll notice that many oil producing countries, like Saudi Arabia, also have a dollar peg. Saudi, for example, has FX reserves 30% greater than those of India, notwithstanding a GDP one quarter its size.

Beggar thy neighbor policies are employed far and wide, even if it's China who gets all the attention.

All of those excess reserves reflect loans to the country in which the currency is denominated, mostly the U.S. That serves to depress interest rates in the recipient country, discouraging savings and encouraging consumption. Decades of deliberate export focused economic growth policies by our trading partners have made the situation increasingly worse. We never cared because the world was loaning us cheap money to buy stuff with. That system is looking increasingly unstable.

[Emeritus]

Quote:

Originally Posted by Onward Without saving, there is no investment. Without investment, there is no capital formation or growth. So the economy requires saving just as much as it requires spending.

Actually the economy requires productive investment. Whether that investment is public or private is not really important. What is important is that it is productive. Building the Brooklyn bridge is productive. Building a bridge to nowhere is not. Both the public and private sectors make productive and unproductive investments.
But as Adam Smith wrote
Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident, that it would be absurd to attempt to prove it. But in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce....