Debt is indeed a problem, but only as it is measured in proportion to GDP.

The usual political response is that the debt that the party that I support is good, but the debt that your party supports is bad.

This seems to miss the point. If congress lacks the will power to restrain spending, you end up with a budget deficit, which is monetarized by printing money, or it is added to the national debt.


Greece is a perfect example of what happens when debt becomes too large a proportion of GDP. Greece is often referred to as having a liquidity problem. It would seem that they really have a solvency problem. They have spent until they are broke. So have California, New York, and New Jersey.

In the US, we have had periods where large debt has been incurred, such as WWII. These periods have been followed by decreasing debt. The decreases have been achieved through economic prosperity. When the economy is robust, government revenue increases. Tax revenue rises, and if spending is contained, the debt is reduced.

The more that any nation devotes to debt, and debt service, the less is available to the private sector that does the job creation, and increases in the GDP.

Getting back to the question brought up by the OP, which regards the stock market. It would seem that the equity market would boom if either party, or a coalition could: 1. Control government spending to the rate of inflation; 2. Grant the Chief Executive line item veto power, as most Governors have, to eliminate the hugh waste in earmarks; 3. Scrap the present 70.000 page IRS rule book, and put in a tax system that is clear, understandable, and diminishes the places to legally avoid taxes.

You design your own answer to #3. Russia had a huge tax avoidance problem with most of the economy taking place underground, and off the books. They instituted a "flat tax" that was easily understood. Tax evasion declined dramatically, and federal revenue increases dramatically.

If Russia, that until recent years couldn't build a flush toilet that worked, can solve their tax problem, it seems like the brightest in the US could come up with something that works better that our present system.

As you come up with your own solution to #3, it is helpful to think of Housers Law. Houser was an economist that went back to the beginning of the federal tax system in the US, and traced marginal rates vs federal revenue. He found that the marginal rates always generated 18.5% of GDP to the federal treasury, regardless of the marginal rates.

Ergo, if you raise marginal rates, federal revenue declines as less capital is put at risk and revenue to the government decreases.

Lower marginal rates, and the GDP increases and the federal income from tax revenue increases. Always at 18.5%, no matter what.

The answer to OP question would seem to be. Come up with an answer to 1,2, and 3, above, and GDP will increase with the stock market rising, because it is nothing more than an expectation of corporate earnings.

Design a plan that works for you. Don't make it a partisan battle, and maybe we have a chance. At this point, it is hard to find a lot of optimistic signs.

There may be some hope, as the American people seem to be tuning in, finally. There are many that would rather be governed by the first 535 people in the check out line at Wal Mart, than the present US Congress, that seems to be more interested in accumulation of personal power, than in the best interests of the US.

The oil shock has already happened, peak oil - of easy oil - happened in 2008, slightly earlier than forecast.

What remains, in Kashagan and currently polluting the Gulf and not forgetting the elusive oil sands - is difficult to get, ungainly to control and full of real nasty metacains and other noxious shit.

The party is fucking over, the burn out begins, the wars for remaining resources have already begun.

A good, sensible idea, is to wean our economies to nuclear and after our populations become sustainable, green wind power and the such like. Ofcourse, all our present ideologies and economies are based around growth - growth as we know it, is over.

Last edited by Big Tony (2010-06-09 15:02:45)

There was a pretty good bit that I think was an excerpt from "the big short" that I read in Vanity Fair a few months ago.
I see that it's online.

http://www.vanityfair.com/business/features/2010/04/wall-street-excerpt-201004

I have a friend who served in the early days in Afghanistan. Two villages got into a fight over a small grove of 18 pistachio trees. They exchanged fire and managed to kill 3 children and a donkey. The children were girls, so the side who lost the donkey begged for help from the Americans. Attempts to share the 18 trees wre rebuffed. The C/O promptly destroyed the pistachio trees. The two tribes united against the infidel invaders and were a nasty distraction until the growing season for poppies  took their full attention. The US military is expressly forbidden to interfere with poppy production, but apparently pistachios are fair game.
The only mining of note is lapis lazuli, a former afghan friend shocked I knew the tomb of Tamerlane was covered with it. Most Lapis requires dye and is overpriced.
I don't care for pistachios and passed on lapis cufflinks on EBAY.
I just want bin laden & friends wasted and our people brought home.

Last edited by ckav (2010-06-14 22:03:04)

Last edited by Big Tony (2010-06-18 16:09:56)

Found this yesterday:

http://www.nytimes.com/2010/06/28/opinion/28krugman.html

Of course it hasn't really start yet, this was just the transfer the car wreck further on down the line.

Its interesting here in Holland with the lowest level of unemployment in Europe how many people I meet who are on six month notice periods, generally professionals who thought they were immune from destruction.  And how many companies are down sizing.

Its going to get messy and bloody.