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US Federal Government Shutdown | Shutdown Shutdown, Debt Ceiling Raised

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birdhammer said:
Gotcha. Thanks for the insight.
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CNBC had a great article on this. The Treasury pays bills, automatically, electronically, AS THEY COME IN. So there would be random things not receiving pay/funding. It would be a very slow, random grinding of the machine.
 
Sanky Panky said:
Markets and economies inherently have cycles that self-regulate in true free markets. These are made worse under 1) a fiat system (with a not so nice record of 5 increasingly intense global boom-bust cycles since the 1970's) and 2) under artificially set/rigid exchange rates that ultimately mess up the balance of payments. The underlying poblem, of course, comes back to printing money, and assuming non-podutive debt with no intention of ever paying it back. It is what ultimately will undo the dollar, and the GOP ae plaing their part in it by adding immense political risk.



Agreed.



Politics and war get in the way of discipline in economics. They create uncertainty and shocks to the system. Governments have felt the need to print money for war purposes (or becuase banks were given free reign to do so), and this creates uncertainty because these "promises to pay" (bank notes and government debt) are based on cash flows expected in an uncertain future. When that future doesn't pan out as predicted, there is nothing of real value supporting all those nominal obligation. When only financial assets support those obligations (a fiat system), those assets are subject to fluctuations in price... the system itself promotes booms and busts.

When it comes to the point that a population or income (the economy) grows, all you have is more people chasing after a set number goods that are produced with increasing efficiency. Prices will increase in a more stable fashion, until the cycle dictates that production should decrease, and prices should deflate. It is all self-regulating.

Under a fiat system, or a system in which banks can lend based on only a fraction of reserves, money is created today based on years and years of future demand. A quick google for any graph showing us price stability under a pre/post fiat system can easily tell the story:

BxdQMHX.png
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What you seem to not understand is that a consistent a predictable rate of inflation is not only not harmful, but beneficial.

What IS bad for the economy is a volatile commodity based money, like gold, which is why pre-fiat there were so many depressions.

Long term price stability doesn't matter at all. That gold was the same price 30 years later is irrelevant because during those 30 years it fluctuated like mad which is what causes problems.

But because economies under the gold standard were so vulnerable to real and monetary shocks, prices were highly unstable in the short run. A measure of short-term price instability is the coefficient of variation—the ratio of the standard deviation of annual percentage changes in the price level to the average annual percentage change. The higher the coefficient of variation, the greater the short-term instability. For the United States between 1879 and 1913, the coefficient was 17.0, which is quite high. Between 1946 and 1990 it was only 0.88. In the most volatile decade of the gold standard, 1894-1904, the mean inflation rate was 0.36 and the standard deviation was 2.1, which gives a coefficient of variation of 5.8; in the most volatile decade of the more recent period, 1946-1956, the mean inflation rate was 4.0, the standard deviation was 5.7, and the coefficient of variation was 1.42.

Moreover, because the gold standard gives government very little discretion to use monetary policy, economies on the gold standard are less able to avoid or offset either monetary or real shocks. Real output, therefore, is more variable under the gold standard. The coefficient of variation for real output was 3.5 between 1879 and 1913, and only 0.4 between 1946 and 2003. Not coincidentally, since the government could not have discretion over monetary policy, unemployment was higher during the gold standard years. It averaged 6.8 percent in the United States between 1879 and 1913, and 5.9 percent between 1946 and 2003.
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You have everything backwards. Fiat money has been extremely stable and gold (or commodities) have been extremely volatile. It's just that you aren't analyzing it properly. You're looking at the wrong measurements!
 
Dude Abides said:
The government. It's bad you know. Because of things it does and pawns and stuff.
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This may seem random, but just for fun recently I've been mentally switching the word "government" with "civilization" and seeing how that changes statements made by various people.

Its been an eye-opening exercise.
 
Sanky Panky said:
Markets and economies inherently have cycles that self-regulate in true free markets. These are made worse under 1) a fiat system....
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I don't know how you can rail against "international bankers" and then accept gold as the answer to that problem, since gold is a finite resource even more susceptible to manipulation by global interests.
 
KHarvey16 said:
I've never seen a good explanation for why subjective value is bad when talking about paper but good when talking about metal.
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That's actually an amusing point to consider.
 
KHarvey16 said:
I've never seen a good explanation for why subjective value is bad when talking about paper but good when talking about metal.
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Isn't it simply because the metals are materials that have to be gathered and there are limited quantities. Where as we could make as much paper as needed, realistically.
 
Riki said:
Isn't it simply because the metals are materials that have to be gathered and there are limited quantities. Where as we could make as much paper as needed, realistically.
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Well, most money is digital, hehe.
 
Riki said:
Isn't it simply because the metals are materials that have to be gathered and there are limited quantities. Where as we could make as much paper as needed, realistically.
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It's harder to acquire but we'll never run out. And its value is also subject to pressures paper isn't, but ultimately its worth is not any more inherent or immutable.
 
Hawkian said:
I didn't see the actual language used by Koch Industries to distance themselves here, so I'll post it..

That "has not taken a position" sounds rather faint, like "we are neutral on this," but between the lines this is as close to "you fuckers are on your own" as we will ever see publicly.
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And this is just an example of the fact that they know if the economy tanks, they're going to lose some money.

One has to wonder if we're going to hit the tipping point of this sort of political brinksmanship and if the electorate will truly understand how damaging this political theater really is.

They probably won't, but I can hope.
 
Riki said:
Right. Really, money is worthless. At the very least, you could use most precious metals for something tangible.
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Yeah, that's true. If we're in a depression and you have no money to buy food, at least you can eat your giant pile of gold!
 
Crisco said:
Yeah, that's true. If we're in a depression and you have no money to buy food, at least you can eat your giant pile of gold!
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Gold can be made in to things, is what I mean. And even during a depression, people would still covet it.
 
Yamauchi said:
Here we go...
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Markets are going to be getting really interesting.

I find it amusing that I feel more threatened by certain members of the House right now than I have from terrorists since 9/11. This entire situation is completely manufactured and wholly avoidable.
 
Black Mamba said:
What you seem to not understand is that a consistent a predictable rate of inflation is not only not harmful, but beneficial.

What IS bad for the economy is a volatile commodity based money, like gold, which is why pre-fiat there were so many depressions.
Click to expand...

Not only are you likely ignoring the reasons for those recessions (*ahem* money printing, war, and debt.... over, and over, and over), but we have NEVER had a system that was truly based on free market dynamics of setting exchange rates and prices. We have never had a system that is 100% backed by a physical asset since the days goldsmiths used to issue receipts for the gold in their vaults. That actually worked quite well... you indeed had recessions (which are inherent in a human economic process), but you never had full blown depressions that began as soon as money-printing central banks started popping up around the world.

Black Mamba said:
Long term price stability doesn't matter at all. That gold was the same price 30 years later is irrelevant because during those 30 years it fluctuated like mad which is what causes problems.
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As I mentioned before, market forces are stabilizing. When you arbitrarily peg a currency to a fixed exchange rate (and you have to defend that exchange rate through the balance of payments between nations), then you have instability. The supply of gold or other commodities, is not only predictable, but stable in the long-run. The demand for money fluctuates depending on the current state of the economy... and a fiat system double-fucks it by letting monetarists also affect the supply of money.

The higher the coefficient of variation, the greater the short-term instability. For the United States between 1879 and 1913, the coefficient was 17.0, which is quite high. Between 1946 and 1990 it was only 0.88. In the most volatile decade of the gold standard, 1894-1904, the mean inflation rate was 0.36 and the standard deviation was 2.1, which gives a coefficient of variation of 5.8; in the most volatile decade of the more recent period, 1946-1956, the mean inflation rate was 4.0, the standard deviation was 5.7, and the coefficient of variation was 1.42.

Moreover, because the gold standard gives government very little discretion to use monetary policy, economies on the gold standard are less able to avoid or offset either monetary or real shocks. Real output, therefore, is more variable under the gold standard. The coefficient of variation for real output was 3.5 between 1879 and 1913, and only 0.4 between 1946 and 2003. Not coincidentally, since the government could not have discretion over monetary policy, unemployment was higher during the gold standard years. It averaged 6.8 percent in the United States between 1879 and 1913, and 5.9 percent between 1946 and 2003.
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This is quite a stretch of an analysis, and yet, you do not include the rest of the arguments made directly from the source:

http://www.econlib.org/library/Enc/GoldStandard.html

As mentioned, the great virtue of the gold standard was that it assured long-term price stability. Compare the aforementioned average annual inflation rate of 0.1 percent between 1880 and 1914 with the average of 4.1 percent between 1946 and 2003. (The reason for excluding the period from 1914 to 1946 is that it was neither a period of the classical gold standard nor a period during which governments understood how to manage monetary policy.)
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Of course, when you have any standard deviation over an average rate of 0.1, you'll get a high multiple. The inverse is also true.

You forgot to include this nugget from the article, which is ultimately my point:

The gold standard was also an international standard determining the value of a country’s currency in terms of other countries’ currencies. Because adherents to the standard maintained a fixed price for gold, rates of exchange between currencies tied to gold were necessarily fixed. ... Therefore, the exchange rate between dollars and pounds—the “par exchange rate”—necessarily equaled $4.867 per pound.

Because exchange rates were fixed, the gold standard caused price levels around the world to move together. This comovement occurred mainly through an automatic balance-of-payments adjustment process called the price-specie-flow mechanism.
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It is this arbitrary "fixing" of exchange rates that prevented the system to work... but the underlying causes for the instability were wars, indebtedness, and a loss of demand/confidence for investments/currency of a country.

As far as the second point, that governments lose the ability to effect monetary policy, then GOOD. Perhaps it is a dirty little secret, but Keynes did NOT argue that monetary policy would be effective as a determinant of aggregate demand. If you read Minsky's book on Keynes, you will understand that Keynes actually argued that uncertainty and cycles (deflation included) are inherent in the system. The policy makers picked and chose the bits of Keynes that favored the adjustment of interest rates to promote investment... which fell right into the hands of the global bankers that created the Fed in 1913. Now they had an excuse to control the money supply for the sake of "stability and prosperity". Instead, they now let the US middle class pay for the hidden tax of inflation, while they inflate their asset base (debt). It's a nice gig... at least in between global financial depressions.

kess said:
I don't know how you can rail against "international bankers" and then accept gold as the answer to that problem, since gold is a finite resource even more susceptible to manipulation by global interests.
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Yeah sadly, a lot has to happen before we can get to the point where we can trust the free market. A good start would be to press "RESET" on the "paper wealth" that these bankers have based on our debts.

KHarvey16 said:
I've never seen a good explanation for why subjective value is bad when talking about paper but good when talking about metal.
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A quick and dirty way of looking at it is that paper value is based on a promise of something happening in the future, versus a metal that is physically exchanged now or in the future. Big difference, especially when you realize that the party that made you that promise... is full of shit.
 
Movies and 24 taught me that the United States does not negotiate with Terrorists. Don't let me down Obama!
I truly honestly see the Tea Party as terrorists myself and have the same concern about their well-being.
 
Sanky Panky said:
Not only are you likely ignoring the reasons for those recessions (*ahem* money printing, war, and debt.... over, and over, and over), but we have NEVER had a system that was truly based on free market dynamics of setting exchange rates and prices. We have never had a system that is 100% backed by a physical asset since the days goldsmiths used to issue receipts for the gold in their vaults. That actually worked quite well... you indeed had recessions (which are inherent in a human economic process), but you never had full blown depressions that began as soon as money-printing central banks started popping up around the world.
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1. Yes we did. Panic of 1827? The Long Depression?

2. The Great Depression was aided by an adherence to Gold. Countries that ignored it fared much better.

Also, that system you describe did not work out well and there are economic papers out there that show as much. Going back to the 1200s it's been demonstrated how poorly it actually worked.

As I mentioned before, market forces are stabilizing. When you arbitrarily peg a currency to a fixed exchange rate (and you have to defend that exchange rate through the balance of payments between nations), then you have instability. The supply of gold or other commodities, is not only predictable, but stable in the long-run. The demand for money fluctuates depending on the current state of the economy... and a fiat system double-fucks it by letting monetarists also affect the supply of money.
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This is a bunch of gobbledygook that doesn't address what I said.

The fact that the supply of gold is stable in the long run is very bad and if you don't understand that concept then you're missing the entire picture.

This is quite a stretch of an analysis, and yet, you do not include the rest of the arguments made directly from the source:

http://www.econlib.org/library/Enc/GoldStandard.html
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It's only a stretch if you don't understand what's being said, which you clearly don't by what follows.

But what I quoted was a direct refutation of that point and a demonstration of why that viewpoint is nonsensical.

This was the first sentence after that quote: "But because economies under the gold standard were so vulnerable to real and monetary shocks, prices were highly unstable in the short run."

As I said already, the long term stability of gold, which is its so-called virtue, is USELESS. What actually matters is the short-term volatility of money. It DOES NOT matter if gold is worth the same in 30 years from now as today; what matters is if gold's value rises and falls a lot during that time period which it always has and is always bad.

I didn't need to include that quote because I already conceded the long term stability in price; my point is that long term stability is a bad thing if it comes with short term volatility - a point you don't seem to get.

Of course, when you have any standard deviation over an average rate of 0.1, you'll get a high multiple. The inverse is also true.
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I don't think you understand what a standard deviation is. Not that it matters, but the article described the coefficient of variation which is not standard deviation. If you did understand this, you would have understood that the values of the average are irrelevant because the math fixes that problem.

But you're clearing just trying to regurgitate stuff you read on crank websites.

You forgot to include this nugget from the article, which is ultimately my point:
Click to expand...


It is this arbitrary "fixing" of exchange rates that prevented the system to work... but the underlying causes for the instability were wars, indebtedness, and a loss of demand/confidence for investments/currency of a country.
Click to expand...

The system never worked and will never work and this predates any fixing of exchange rates. It's always an excuse with you gold buggers. When shown gold doesn't work, it's that we never truly had a real gold standard. Or we never really had a real free market.

Well, howabout this, if that's truly the case, guess what? it's probably because it's impossible. So move the fuck on.

As far as the second point, that governments lose the ability to effect monetary policy, then GOOD. Perhaps it is a dirty little secret, but Keynes did NOT argue that monetary policy would be effective as a determinant of aggregate demand. If you read Minsky's book on Keynes, you will understand that Keynes actually argued that uncertainty and cycles (deflation included) are inherent in the system. The policy makers picked and chose the bits of Keynes that favored the adjustment of interest rates to promote investment... which fell right into the hands of the global bankers that created the Fed in 1913. Now they had an excuse to control the money supply for the sake of "stability and prosperity". Instead, they now let the US middle class pay for the hidden tax of inflation, while they inflate their asset base (debt). It's a nice gig... at least in between global financial depressions.
Click to expand...

When the hell did i mention Keynes, monetary policy, etc? It couldn't be more obvious that you just spit out things you've read elsewhere like a telemarketer because I made no mention or implication of any such discussion here, so you're clearly confused.

You gold buggers are hilarious.
 
besada said:
Unemployment is state, not federal, unless you're already in an extension period. Then you may see delayed payments.
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States pass through money that comes from the feds.

I was taking to someone at the state budget office and he said in two weeks they have to start making very hard decisions for social programs that will have run out of money
 
“They had three years to get this ready, if they weren't fully ready, they should accept the advice Republicans are giving them, delay it for a year, get it ready and make sure it works,” Blitzer said.
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fuck off, wolf
 
Zaraki_Kenpachi said:
A government shutdown and a government default are on such different levels that you can't act like they're the same.
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What level did you assign to the temporary arrears that dealt with US t-bills in Apr 1979? What about the shutdown in Dec 1995 that lasted 21 days?


What will borrowing costs and the availability of credit look like short-term and long-term...after the Treasury sets up their delayed payment system and the Fed buys securities? What does the global economy look like 4 months into a US goverment shutdown? I don't know about you but I have no clue.
 
Punchy4486 said:
If GTA Online, every MMO launch, most News sites when there is breaking news, and NeoGAF aren't ready, they should delay a year.
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They'll never be ready so cancel them forever!

Though the shutdown undoubtedly did not help matters, depending on how many are still manning it. So, hey, they had three years then psychos pulled the rug at the last second! And said psychos went fuck rugs who needs rugs.
 
love this link:

http://ceedubb.com/2013/10/bill-is-a-fucking-jackass/

So, Imagine that the company you work for held a poll, and asked everyone if they thought it would be a good idea to put a soda machine in the break room. The poll came back, and the majority of your colleagues said “Yes”, indicating that they would like a soda machine. Some said no, but the majority said yes. So, a week later, there’s a soda machine.

Now imagine that Bill in accounting voted against the soda machine. He has a strong hatred for caffeinated soft drinks, thinks they are bad you you, whatever. He campaigns throughout the office to get the machine removed. Well, management decides “OK, we’ll ask again” and again, the majority of people say “Yes, lets keep the soda machine.”

Bill continues to campaign, and management continues to ask the employees, and every time, the answer is in favor of the soda machine. This happens, lets say… 35 times. Eventually, Bill says “OK, I’M NOT PROCESSING PAYROLL ANYMORE UNTIL THE SODA MACHINE IS REMOVED”, so nobody will get paid unless management removes the machine.

What should we do???

Answer: Fire Bill and get someone who will do the fucking job.

Bonus: Bill tells everyone that he was willing to “Negotiate”, to come to a solution where everyone got their payroll checks, but only so long as that negotiation capitulated to his demand to remove the soda machine.

Bill is a fucking jackass.
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TheLaughingStock said:
What level did you assign to the temporary arrears that dealt with US t-bills in Apr 1979? What about the shutdown in Dec 1995 that lasted 21 days?


What will borrowing costs and the availability of credit look like short-term and long-term...after the Treasury sets up their delayed payment system and the Fed buys securities? What does the global economy look like 4 months into a US goverment shutdown? I don't know about you but I have no clue.
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So you're arguing then that we will default because it's the same as the shutdown so the republicans and people in congress don't see it as being on another level? Please do explain.

Edit: And if you're trying to compare a techinical glitch that caused a slight delay in 1979 to a willful default on its obligations than LOL.
 
Holy shit, I've been marathon-ing The West Wing, and I just got to the Season 6 episode "In God We Trust", and there's a scene in the first 10 minutes that explains what happens if the debt ceiling isn't raised. This episode came out in 2004 (maybe 2005?). Eerie stuff.

Edit: And now the democrats are contemplating attaching a partisan amendment to the debt ceiling raise at the last minute. Ugh.
 
Black Mamba said:
1. Yes we did. Panic of 1827? The Long Depression?

2. The Great Depression was aided by an adherence to Gold. Countries that ignored it fared much better.
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You mean the panic in 1837? because that had nothing to do with the gold standard. As with any panic since the dawn of banking, it was the result of speculative lending backed by very little reserves (specie at the time). History is actually a lot more interesting when you further read about New York banks sabotaging the new competitors to the west (NY bank reserves were heading west), causing a recession. But that's for another thread.

Black Mamba said:
Also, that system you describe did not work out well and there are economic papers out there that show as much. Going back to the 1200s it's been demonstrated how poorly it actually worked.
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If you want to go way back and to argue the merits of feudalism with these economic papers, go right ahead. We can instead start with when banks were given free reign to issue currency, the advent of banks financing and instigating wars (and debt), or perhaps at the advent of central banks. You'll see a clear pattern of cause and effect... little of which had to do with maintaining proper assets backing money.

Black Mamba said:
As I said already, the long term stability of gold, which is its so-called virtue, is USELESS. What actually matters is the short-term volatility of money. It DOES NOT matter if gold is worth the same in 30 years from now as today; what matters is if gold's value rises and falls a lot during that time period which it always has and is always bad.

I don't think you understand what a standard deviation is. Not that it matters, but the article described the coefficient of variation which is not standard deviation. If you did understand this, you would have understood that the values of the average are irrelevant because the math fixes that problem.
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I'm assuming that your first paragraph here comes from your own misunderstanding of the basic math referenced in your second paragraph, and what inflation (loss of purchasing power) implies. Let's look at your "coefficient of variation" as being the end-all-be-all metric for instability.

For the period of 1894-1904 [gold standard], the mean inflation rate was 0.36 and the standard deviation was 2.1, which gives a coefficient of variation of 5.8;

So after this ten year period, prices varied +/- 2.1% each year from the average of 0.36% (ZOMG), and ultimately increased 3.66% over that period. Had real wages remained stagnant (how they are now), the people would have lost 3.66% of purchasing power through inflation. But holy crap that coefficient of 2.1 divided by 0.36 sure is high!!

in the most volatile decade of the more recent period, 1946-1956, the mean inflation rate was 4.0, the standard deviation was 5.7, and the coefficient of variation was 1.42.

In this period, prices ended up 48% higher!!! imagine stagnant wages and losing almost half of your purchasing power in 10 years!!! (nevermind... it's not hard to imagine, since it has happened in the last 30 years). But rest assured, your metric of instability (5.7 divided by 4) clearly shows that this situation is more optimal. Again, that analysis is stretching it.

Black Mamba said:
The system never worked and will never work and this predates any fixing of exchange rates. It's always an excuse with you gold buggers. When shown gold doesn't work, it's that we never truly had a real gold standard. Or we never really had a real free market.
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The argument that you refuse to see, and that has been the undoing of sovereign nations, is the manipulation of the money supply. It has been done to finance wars, pay debts, and at the behest of powerful bankers. What we have today is a confluence of all three, except that the money supply is unhinged in our fiat system (therefore the collapses are of a global nature).
 
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