When the free market gives you free money, take it

The U.S. Mint has been trying to promote the use of $1 coins, offering free shipping to those who “purchase” large quantities of the more durable, more efficient currency.

Some credit card banks promote the use of their cards by offering frequent flyer bonus miles as a reward. The more you purchase with those cards, the more bonus miles you collect.

If you already see where this is going, then you’re a step ahead of the banks, the airlines and the mint — all of which were caught off-guard when they discovered people were exploiting this legal loophole.

The Mint figured out what was going on when some consumers started ordering large quantities of $1 coins, then depositing them in their local banks which, in turn, returned them to the Mint — still in their original wrapping. Now they’re closing the loophole.

But for a while there, a few canny consumers had taken advantage of this combination of offers to rack up enough miles for free flights all over the world. The process was simple.

Step 1: Purchase $20,000 or so in $1 coins from the mint using the rewards card, getting lots of bonus miles.

Step 2: Deposit the coins in the bank, using that $20,000 to pay off the balance on the credit card before accruing any interest.

Step 3: Repeat steps 1 & 2 until you’ve got enough frequent flyer miles for a first-class ticket to wherever it is you want to go.

National Public Radio’s David Kestenbaum and Robert Benincasa reported on this trick back in July in a report titled “How Frequent Fliers Exploit a Government Program to Get Free Trips.” Mint spokesman Tom Jurkowsky explained that the mint has imposed a limit of 1,000 coins every 10 days in an effort to close the loophole:

“It’s not illegal,” he said, “But it’s an abuse of the system. That’s not what the system was set up to do. The system was set up to promote the use of dollar coins and we are simply trying to do the right thing here.”

I bring this up because right now the same strategy that these “travel hackers” employed to acquire free flights all over the world can be employed by the U.S. government to make desperately needed overdue repairs and upgrades to our aging infrastructure and to end the deadlock crippling our economic recovery due to a lack of overall demand. Uncle Sam has a similar opportunity to use free money to create jobs and to attend to these red-alert repairs while at the same time helping to erase the short-term budget gap created by our current massive unemployment rate and the contraction that followed the Great Recession.

The government can’t get free frequent flyer miles, but it can get something even better — free cash. And if that sounds too good to be true, let me assure you that it’s even better than that. It’s actually free money plus free money — it’s free money being pushed on the Treasury by those desperate for the privilege of lending the Treasury free money.

The U.S. federal government, right now, can borrow money at a negative interest rate. Here’s the proof I’m not making this up:

Understand what this means. A negative interest rate isn’t just borrowing interest-free. It’s getting paid to borrow. It means earning interest on every dollar borrowed.

Why is this happening? Ask the bond market, that’s who’s doing this. If you believe in free markets, then you have to listen to what those markets are saying, and what those markets are saying right now is that they want the U.S. government to take their money. They’re begging the U.S. government to take their money.

Fact is there’s nowhere else to put it. Equities are terrifying just now and what investors want is safety. In this world, that means mainly one thing: U.S. government debt. Despite this summer’s shenanigans over the uniquely American invention of the “debt ceiling,” and despite the presence of a faction in Congress eager to concoct an unnecessary default, the bond market doesn’t believe that such a default is a credible threat and it desperately, urgently wants the U.S. Treasury to take more of its money.

That makes sense. Imagine you’re sitting on $20 billion. What do you do with that right now?

Maybe your plan was to invest it in a growing business, but with the global economy in the doldrums, there’s no point in doing that just now. You could invest that money in building a new factory to make more widgets, but you’d lose money on that deal because right now consumers can’t afford to buy all the widgets the factory would be producing.

You could put the money in the bank where it would earn interest in something safe and solid like housing loans, but the housing market is also swirling around the drain these days. Plus you already tried that and you got burned. If you’re the kind of person (or Chinese government) with $20 billion lying around, then odds are you already had a ton of money in some kind of mortgage-backed securities four years ago and that did not end well.

You can’t stuff $20 billion in your mattress or stick it in a giant piggy bank because inflation — even at its current modest rates — would eat away at it.

What you need is somewhere safe to put your money until demand rebounds to the point where it starts making sense to build that factory. It doesn’t matter if you’re not making money with your money until then, at this point you’re just trying not to lose it — or trying to find a place to put it where you won’t lose as much of it as you would by sticking it in the mattress.

And that means lending it to the U.S. Treasury.

So right now the bond market is all, like, “Please borrow this money!” And the U.S. Treasury is, like, going “We’ve already got enough debt, thanks, no.” And so the bond market is like, “Come on, please.” And the Treasury is like, “No, seriously, I am not paying any more interest to borrow more money.” And so the bond market goes, “Just take it for no interest then.” And Treasury’s like, “Uh-uh.” So the bond market is all, like, “Fine, whatever, we’ll pay you to take it — we’ll earn negative interest on it, just please, have mercy on us and take our money!

That’s what this means.

On the one hand, this is very good news for the U.S. Treasury. The chance to earn money by borrowing money is a sweet, sweet deal. It’s a nice perk for being a sovereign top dog and to be offered such a deal — the kind of terms that make Greek, Irish and Spanish officials weep with jealousy.

But on the other hand, such a deal only arises because the global economy is in really, really bad shape. The U.S. Treasury is being offered free money to take more free money only because that money, right now, can’t be invested anywhere else — it can’t find any other more productive use, any way to do all those things it ought to be doing in a healthy, growing economy.

So the key for America is to seize this opportunity and to use it to help get things back to the way they ought to be — back to a healthy situation in which investors are able to find better, more productive uses for their money than begging the Treasury to hold it for them.

Right now we’re in a catch-22. Businesses don’t want to hire any more workers until consumers look like they’re willing and able to buy the goods and services those new workers would produce. And consumers won’t be able or willing to buy such goods and services until those businesses start hiring more workers, because buying more stuff is not a smart move if you’re worried you might lose your job and not be able to find another one in this labor market.

So we’re locked in a holding pattern.

The bond market is begging the U.S. Treasury to take its money because the U.S. government is one of the few actors able to break this impasse. Consumers can’t do it — they’re waiting for hiring to pick up. Businesses can’t do it — they’re waiting for consumer spending to pick up.

But the government can start doing both — it can start spending and hiring, thus increasing the demand for businesses to start investing in those new factories and increasing consumer’s capacity to buy the goods those factories will produce.

“Gaah!” cry the deficit hawks. “Government spending bad!

Aversion to debt is a prudent and responsible principle. But it would be foolish to make it an absolute principle — that would rule out any leveraged investment, no such thing as a mortgage or a business loan. But more importantly, when interest is negative the normal rules do not apply. It may be “fiscally responsible” to refuse to borrow at even very low interest rates, but when those rates become negative, it is fiscally irresponsible not to accept the free money you’re being offered for accepting more free money.

“Take this free money,” the bond market is saying.

“No,” say the voices of fiscal responsibility. “Debt is bad.

“We’ll pay you to take this free money,” the bond market says. “We’ll give you money to borrow our money and you won’t owe us a penny of interest.”

“No,” say the voices of … well, if they keep saying “No” at that point, then it would be nonsense to keep calling them the voices of fiscal responsibility.

Those who claim to believe in free markets cannot continue to claim such belief if they refuse to listen to what the free markets are demanding. And right now what the bond market is demanding — what it is screaming for at the top of its lungs — is more U.S. government spending.

I appreciate the general ideological principle that weighs against government spending, preferring to leave the decisions on what and where to spend to the free market and the private sector. In an ideal context, any public project ends up hiring workers away from their productive roles in the private sector. That means, during full employment, that the government’s decision to build another Hoover Dam would mean building that dam instead of building more houses, or cars or iPads or more of whatever it was the private sector was employing those workers to make.

But this is not an ideal context and we are far, far, far from full employment. Right now, the private sector has no use for those workers and some 14 million of them — of us — are sitting on the sidelines, unproductive, desperately eager to contribute but not allowed to do so.

And right now the free market — the private sector itself — is begging the government to put that army of unemployed workers to good use.

We can do that, right now, for free. For less than free.

Anyone who says we shouldn’t doesn’t really believe in free markets.

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  • Marshall Pease

    I refuse to play the FIRST game.

  • http://mordicai.livejournal.com Mordicai

    If you are an individual taking advantage of loopholes in the market, it is an Abuse of the System.  If you are a corporation, though– hey, that is Capitalism!

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    The best and simplest method of explaining Keynesian theory I’ve seen in a long time. :)

  • rm

    Lord, how I wish that Fred were an influential columnist and David Brooks unemployed. Everything is backwards in this world.

  • http://mistformsquirrel.deviantart.com/ JJohnson

    Totally.

  • Anonymous

    From your keyboard to the government’s ears, Fred.

  • http://mistformsquirrel.deviantart.com/ JJohnson

    Free money you say… Borrow 20 billion dollars and get paid to do it?  I’m game.  Loan me the 20B, I’ll collect the negative interest, and when you want your 20B back I’ll just give it back to you straight up.  I have no need to spend that 20B, the interest alone would set me for life <_< at least if my maths are halfway accurate.

    Hrm… wonder if China would be willing to invest in a "Make me stinking rich" fund? <.<;

    (What? I'm broke )

  • ako

    But this is not an ideal context and we are far, far, far from
    full employment. Right now, the private sector has no use for those
    workers and some 14 million of them — of us — are sitting on the sidelines, unproductive, desperately eager to contribute but not allowed to do so.And
    right now the free market — the private sector itself — is begging the
    government to put that army of unemployed workers to good use.

    But, but, but, we could hold out for a situation where there are millions of employed people, the private sector is offering free loans, and the government has a giant pile of money and no debt, right?  And letting bridges collapse and the infrastructure crumble while the private sector loses even more money due to a lack of investment opportunities and millions of people end up increasingly destitute and fall further and further behind on job skills, increasing the chance that they’ll be permanently unemployed is the only responsible thing to do, right?  After all, accepting free money to spend on improving infrastructure and creating employment for millions of people is like [insert misleading household finance analogy here], and that’s bad!

  • Albanaeon

    We can only hope reality will soon intrude on our government.  Too bad so many of them are utterly devoted to being as unrealistic as possible.

  • Lori

    Because of the big anniversary tomorrow there have been a lot of articles the last few weeks about all things 9/11, including the 9/11 Truthers and by extension conspiracy theories in general. 

    Looking at the way a conspiracy theory protects itself from contradictory evidence it occurs to me that Right wing economic ideas have crossed the line and become conspiracy theories. The folks who think that cutting taxes on the wealthy creates jobs or that we have a debt crisis that must be addressed right now have gone beyond the ability to be convinced by evidence. In fact, they’ve willfully rendered themselves unable to even comprehend evidence. 

    IOW, I love you Fred, but I fear you’re just shouting into the void. I have no clue what it’s going to take to turn that around. 

  • Albanaeon

    Oh, I think the free market as a religion is a better fit.  If times are good, the free market is pleased and demands more sacrifices.  If time are bad, the market is displeased and demands more sacrifices.  Add in a hefty dose of reliance on unprovable (even dubious) things, high priests, and an almost instinctive “Ima Capitalist, therefore I am good!” and the resemblance is telling. 

  • Lori

     Oh, I think the free market as a religion is a better fit.  If times are good, the free market is pleased and demands more sacrifices.  If time are bad, the market is displeased and demands more sacrifices.  Add in a hefty dose of reliance on unprovable (even dubious) things, high priests, and an almost instinctive “Ima Capitalist, therefore I am good!” and the resemblance is telling.  

    I feel like these days I’m running into more, “The almighty market does so work like we say it does and when it doesn’t it’s because The Government something something something.” Government interference in the market. Government figures and graphs—obviously lies. Rent seeking by government agencies. Someone trying to get rich off government grants. That study was done by someone whose 2nd cousin’s hairdresser’s husband works for a government agency and so she’s suppressing the truth. 

    Maybe it’s just the flavor of nutter I’ve been running into lately. 

  • Albanaeon

    It’s even weirder when you see the nutters in the military community.  Its weird to hear officers complaining how horrible socialism is in a very socialistic organization, but then you get the contractors who are raking in the money complaining about government spending.  Then you get the troops who say how much they wish that we’d privatize even more things AND complain about how the contractors aren’t as good and overpaid.  There’s a connection that you are missing there, folks…

  • Tonio

    Uh, how is the military socialistic? That sound too much like the Tea Partyesque watering down of “socialism” to mean any type of government activity.

  • Albanaeon

    Well, health care for one (though Tricare is definitely trying to move that away to a much less pleasurable capitalistic one.  Add to complaints that really confuse me when made by a fellow that hates the very idea of health care reform, yet hates what’s been done to the military health services more…)  Standardized wages.  Wages for living expenses.  A few others.  I’ll amend that it’s socialistic for the US.  Rest of the world, its probably pretty center.

  • Albanaeon

    Well, health care for one (though Tricare is definitely trying to move that away to a much less pleasurable capitalistic one.  Add to complaints that really confuse me when made by a fellow that hates the very idea of health care reform, yet hates what’s been done to the military health services more…)  Standardized wages.  Wages for living expenses.  A few others.  I’ll amend that it’s socialistic for the US.  Rest of the world, its probably pretty center.

  • Anonymous

    Military’s got socialized health care, in a manner of speaking.

  • Anonymous

    Military’s got socialized health care, in a manner of speaking.

  • Tonio

    So they’ve essentially turned the free market into a god. “The market giveth and the market taketh away – blessed be the name of Wall Street.”

  • Anonymous

    Conservatism is a cult of Mammon. They have these strange, esoteric beliefs. Less taxes = more revenue, for instance. That’s the famous Laffer Curve, or the Laffo Curve, as I like to call it. They believe that if you throw people into the water to sink, swim, or be eaten by sharks then it’s good for them, even though 99% of them never had the option of sinking or being consumed by predators, because their families mostly have wealth and their struggles are illusory.

    It’s basically the most despicable, disgusting thing that I can possibly imagine, and when these utter bastards dress themselves up in the mask of Christianity and claim to be righteous, it makes me want to fucking puke.

  • ako

    They believe that if you throw people into the water to sink, swim, or
    be eaten by sharks then it’s good for them, even though 99% of them
    never had the option of sinking or being consumed by predators, because
    their families mostly have wealth and their struggles are illusory.

    Every time “sink or swim” comes up, I start to wonder about the people who sink, and the answers tend to be deeply creepy.  At best, there’s the least-bad-alternative approach, where I tend to disagree with the facts, but at least I can understand that from a moral perspective (for example – if sink or swim really did save ninety percent of people, and trying to save the ten percent really would lead to more people dying, it’d be the moral choice).  But that’s relatively rare, and a lot of people go for the much creepier alternatives.

    You get the denial approach, where they’re all “Don’t be so negative!  If you set high expectations and don’t coddle them with safety nets, everyone swims!  If people sink, it’s due to excessive coddling!” and refuse to look at reality.   Then you get people who don’t understand the question, and don’t seem to perceive the people who they’re leaving to drown.  Then you get the people who shrug and go “Well, they were unworthy.”  Those people always make me want to go wash after talking to them.  Then you get the people who don’t just shrug about the “unworthy” being left to drown, but take positive pleasure in it.  Those people make me want to run away.

  • Anonymous

    Every time “sink or swim” comes up, I start to wonder about the people who sink, and the answers tend to be deeply creepy.

    I was listening to KCRW’s Left, Right, and Center podcast on Friday, and after Robert Scheer ran through his usual mortgage bailout line* the moderator asked Tony Blankley what he thought should be done on the jobs front. Blankley’s response was, paraphrasing slightly, to get Obama out of office so that a Republican could get in and proceed to do nothing. That was his plan, to just cut government spending and then do nothing. He actually used the words “let the market bottom out.” His model for tackling the recession isn’t FDR but Hoover.

    This boggled my mind. The idea that we should just fiddle while our economy burns, presented as a serious solution to our economic woes. Blankley’s not some upstart Tea Party type, either, he’s as establishment Republican as they come. This is what they want, to let the economy crash and to stand idly by while a lot of people suffer terribly.

    *Robert Scheer’s line on mortgage bailouts is accurate, and I understand why he keeps hammering it over and over again, but as a regular listener I’ve kind of started skipping past them.

  • Anonymous

    His model for tackling the recession isn’t FDR but Hoover.

    Considering even Hoover figured out halfway through that doing nothing wasn’t going to work, it’s even worse than you’re implying — his model isn’t “FDR vs. Hoover” but “FDR vs. Coolidge.”

    Wow.

  • Sgt. Pepper’s Bleeding Heart

    I like your analogy @albanaeon:disqus .

    Every year when the minimum wage is considered* the business lobby opposes an increase. When the economy is strong they cite inflation and when it’s low they say it will cause unemployment. They’re not full of shit–they just have a dodgy god to deal with.

    *Minimum wage is set by an independent tribunal, not parliament

  • Anonymous

    The folks who think that cutting taxes on the wealthy creates jobs or that we have a debt crisis that must be addressed right now have gone beyond the ability to be convinced by evidence. In fact, they’ve willfully rendered themselves unable to even comprehend evidence.

    So, just yesterday I got into an argument with a conservative who claimed that the stimulus “failed miserably.” I pointed out that 40% of the stimulus consisted of nothing but conservative principals (cutting taxes on people and corporations), while only 13% consisted of actual Keynesian economics. First he refused to believe that there was any non-Keynesian things in the bill, and claimed that I must have heard such a “lie” from “liberal blogs.” Then when I showed him that he could look it up on wikipedia, the Wall Street Journal, or even Conservapedia, he turned to claiming that the tax cuts were for liberal programs.

    I’m pretty certain that the election of Obama caused us to cross a line where there isn’t even the most basic attempt to even consider reality.

  • Lori

      he turned to claiming that the tax cuts were for liberal programs. 

    Bwah?

  • Tonio

    All right, I’ll bite – what did that conservative mean by “liberal programs”? And how could those programs benefit from tax cuts if these are government programs?

  • Anonymous

    All right, I’ll bite – what did that conservative mean by “liberal programs”? And how could those programs benefit from tax cuts if these are government programs?

    I could never possibly explain the perfect storm confluence of stupidity, ignorance, and dishonesty that this particular person argued, so I’ll just repeat exactly what was said:

    Do you even understand the concept of tax cuts? It means you pay less taxes to begin with. this Obama failed stimulus outside of a meager tax cut, it still taxed us for the same stuff but then gave tax breaks to liberal causes. Thus the people still had essentially the same taxes they always had but money was directed to special liberal programs for the environment, energy, agriculture, etc…. So, the avg person didn’t keep their money, they were still TAXED the same. Get it?

    That’s it. Word for word. It makes no sense, and has absolutely no connection to the bill in question.

    We really have reached the point where we don’t have different opinions about the facts, but where one side treats the facts as utterly irrelevant.

  • Matri

    Do you even understand the concept of tax cuts? It means you pay less
    taxes to begin with. this Obama failed stimulus outside of a meager tax
    cut, it still taxed us for the same stuff but then gave tax breaks to
    liberal causes. Thus the people still had essentially the same taxes
    they always had but money was directed to special liberal programs for
    the environment, energy, agriculture, etc…. So, the avg person didn’t
    keep their money, they were still TAXED the same. Get it?

    Bwuh?!?1//

    Ahh, now I see. It’s just more of the same “If I say it a lot of times it will come true” thinking. They just keep thinking the tax cuts apply to them, instead of only to the rich.

  • Lori

     Do you even understand the concept of tax cuts? It means you pay less taxes to begin with. this Obama failed stimulus outside of a meager tax cut, it still taxed us for the same stuff but then gave tax breaks to liberal causes. Thus the people still had essentially the same taxes they always had but money was directed to special liberal programs for the environment, energy, agriculture, etc…. So, the avg person didn’t keep their money, they were still TAXED the same. Get it?  

    Does this guy listen to a lot of Rush Limbaugh or Glenn Beck? This sounds like the kind of counter-factual BS one of them would construct. The whole business about money being directed to special liberal programs and therefore people didn’t get a tax cut (What? Makes no sense.) is very Right Wing Radio. 

    It is nice to hear that the ag department is now running liberal programs. I assume they’re are designed to help small farmers and protect soil & water quality. The ag department has been in the pocket of agribusiness for so long now it’s good to know that they’re finally getting back to their mandate. 

    Ha, ha, ha. That’s a knee slapper. Liberal ag programs. I crack myself up. 

  • http://twitter.com/FearlessSon FearlessSon

    We really have reached the point where we don’t have different opinions about the facts, but where one side treats the facts as utterly irrelevant.

    I say again, Truthiness.  To quote Stephen Colbert, “It’s not just I want it to be true, it’s that I want it to be true.”  

  • http://twitter.com/FearlessSon FearlessSon

    To add a bit to the idea that to one side of the political debate is unconcerned with facts, is is possible to get people who vote based on a disregard for reality institutionalized?  Clearly they are suffering from schizophrenia and are a danger to themselves and others until they can be properly treated.  

    It really is the most compassionate course.  

  • Lori

    Holy crap. Don’t even go there. I feel like we’ve talked enough about the difference between real mental illness and the kind of disconnect we’re talking about in voting issues that we really shouldn’t be discussing this. People who vote with a disregard for the facts aren’t schizophrenic and no, we can’t get them institutionalized. 

    Gah. 

  • Anonymous

    No kidding. The whole ‘punitive psychiatry’ and ‘people who disagree with me must be literally mentally ill’ thing was old back when the Soviet Union was doing it. Even if you could lock someone up or strip them of their civil liberties because you disagree with their economic philosophy, you shouldn’t. a

    But I do
    remember Robert Anton Wilson suggesting it in one of his essays, as an
    alternative to taxation and a way to encourage people to buy things
    rather than hoard money.

    I have an extremely vague memory of someone here talking about a proposal in which people whose incomes were so low that they didn’t have to pay federal income tax would (instead of just not paying the federal income tax) would receive a certain amount instead. Is that the same guy (and do you know if I’m remembering that idea correctly)?

  • Lori

    I think what you’re remembering is Milton Friedman’s ideas about the poor being essentially given a stipend. 

  • Consumer Unit 5012

    That’d be “negative Income Tax”, and it’s been proposed several times.

    As for the Fact-Free Voting Bloc, this Scenes From a Multiverse comic seems relevant.

  • Anonymous

    No kidding. The whole ‘punitive psychiatry’ and ‘people who disagree with me must be literally mentally ill’ thing was old back when the Soviet Union was doing it. Even if you could lock someone up or strip them of their civil liberties because you disagree with their economic philosophy, you shouldn’t. a

    But I do
    remember Robert Anton Wilson suggesting it in one of his essays, as an
    alternative to taxation and a way to encourage people to buy things
    rather than hoard money.

    I have an extremely vague memory of someone here talking about a proposal in which people whose incomes were so low that they didn’t have to pay federal income tax would (instead of just not paying the federal income tax) would receive a certain amount instead. Is that the same guy (and do you know if I’m remembering that idea correctly)?

  • http://twitter.com/FearlessSon FearlessSon

    Holy crap. Don’t even go there. I feel like we’ve talked enough about the difference between real mental illness and the kind of disconnect we’re talking about in voting issues that we really shouldn’t be discussing this. People who vote with a disregard for the facts aren’t schizophrenic and no, we can’t get them institutionalized. 

    Sorry, I had my tongue in my cheek there.  But it does make me wonder, at what point does willful disregard for reality start to cross the line into some kind of environmental stress related disorder?  Like the mind retreating into itself because it cannot deal with what is in front of it.  

  • http://twitter.com/FearlessSon FearlessSon

    Holy crap. Don’t even go there. I feel like we’ve talked enough about the difference between real mental illness and the kind of disconnect we’re talking about in voting issues that we really shouldn’t be discussing this. People who vote with a disregard for the facts aren’t schizophrenic and no, we can’t get them institutionalized. 

    Sorry, I had my tongue in my cheek there.  But it does make me wonder, at what point does willful disregard for reality start to cross the line into some kind of environmental stress related disorder?  Like the mind retreating into itself because it cannot deal with what is in front of it.  

  • Anonymous

    I think the key term there is ‘willfull.’  Being ignorant isn’t grounds for institutionalization.  Neither is being irrational.  Neither is lying like a bastard.  And all three perjoratives can be applied in varying amounts to the current crop of authoritarians.

    Now, any of the above that actively harms people?  At that point it becomes a criminal issue.  But good luck getting any of them in front of a court.  In a world where Libby, Rove, and Cheney still walk free, good luck indeed.

  • Anonymous

    I have had a few friends over years who had schizophrenia- a treatable illness for many. Please, I’m not having a go at you … just the lazy way too many (myself included a few times) use mental illnesses to brand someone or some action we find unpalatable.

    It stigmatises those with such illnesses. Idea X is so ridiculous – lets calls it a paranoid delusion. Some person goes on a shooting spree in Scandanavia – lets label him crazy and obviously insane … definitely not a Christian.

    No mental illness or impeding attribute should be used in the perjorative. Again – not targetting you, have seen a few do the same, just was in a place to respond to yours.

    :)

  • http://twitter.com/FearlessSon FearlessSon

    We really have reached the point where we don’t have different opinions about the facts, but where one side treats the facts as utterly irrelevant.

    I say again, Truthiness.  To quote Stephen Colbert, “It’s not just I want it to be true, it’s that I want it to be true.”  

  • Anonymous

    In other words, The Market is like a Brony who sees something MLP:FiM related that he/she thinks can and should be merchandized: “SHUT UP AND TAKE MY MONEY!!!”

  • Anonymous

    I said that about Fallout:Equestria just a matter of hours ago….Put it in book form. All my money!

  • Anonymous

    You know the reason brony’s exists is that the creators respected the audience in the first place, I haven’t see the free market respect anything as loing as I can remember

  • Anonymous

    So a negative real yield rate on an “inflation protected security” means that the government will scale its future payment to inflation, adjusted by the yield rate (so that a small negative real yield rate means that the gov’t pays out just slightly less than the inflation-adjusted principal)?  Then the people willing to take these terms are worried about the possibility of future inflation and are trying to hedge?  Sorry, I’ve never really understood how these charts are supposed to be read.

    Some questions: If the government can’t find a better use for the money (that pays better real rates than this does for the investors), then it’s a loss for us, right?  Does this work if inflation is driven by the government printing money?  Does this work if inflation is driven by increased economic activity?  Ultimately, we have to pay back more than the principal of the loan in actual dollars, so how does the government use the principal to produce the inflation-adjusted value of the principal?  If we just print money to make up the partially inflation-adjusted value, have we gained or lost?

    Obviously there’s lots of stuff the government could spend money on that would be worth it, but I don’t really understand the talk about actual, free money, and I hope someone can explain.

  • Albanaeon

    I’m not an expert here, but I think part of the push towards buying debt right now is that it seems the least likely to cause major losses right now, if not profit per se.  Even if nothing changes, the likelihood of the US government defaulting is slim, most notably because their are methods of producing the currency to cover the debts.  Obviously, we can simply “print” the money if necessary.  The president may even have the authority by law or the Constitution to authorize it if Congress really breaks down.  Heck the Treasury might simply go on authorizing payments (the laws are a little fuzzy here…). 

    So, I think it comes down to investors looking for a safe place that probably won’t lose them too much money, and, if the US gets its ass in gear, they may be able to take that money back out to invest in profitable things.

  • Kenji

    I am surprised and pleased by the allusion to bronies and Friendship is Magic.  Please be awesome, Season 2, you’re our only hope for decent television…

    I’m also pleasantly surprised by this article and the evidence used to back it up.  Despite the histrionics on the media stage, I remember STRATFOR making a peculiar case that US debt is not the enfeebling abomination we’ve all been told to believe it is.  This, so far as my journeyman understanding of that argument is concerned, is based on the logic that US Government debt is the closest thing to an absolute standard by which everything else is measured.

    Now I see evidence supporting this.  I’m very intrigued.  If it’s true, the lies would be terrifying, indeed.

  • http://jakobknits.blogspot.com Jake

    So maybe this is a really stupid question, but how is lending the US government money at no interest, let alone negative interest, better (inflation-wise) than sticking your money under your mattress or in a mason jar in the back yard?

  • Lori

     So maybe this is a really stupid question, but how is lending the US government money at no interest, let alone negative interest, better (inflation-wise) than sticking your money under your mattress or in a mason jar in the back yard?  

     

    You get something for your money instead of getting nothing for it. 

    In any case inflation is hardly our major concern at this point. We have a real unemployment rate well north of 9% and the recovery that so many people never even caught a glimpse of is now totally stalled. If government spending causes inflation to increase to problematic levels there are things that can be done about it. That’s a bridge we need to cross when we come to it though, it’s not a reason to refuse to set off down the road. 

  • Anonymous

    …but how is lending the US government money at no interest, let alone
    negative interest, better (inflation-wise) than sticking your money
    under your mattress or in a mason jar in the back yard?

    Depends.

    If the government does nothing with it, then it might as well be a mattress. But if the government spends it on infrastructure, job training, etc? Now you’ve invested your money in such a way as to enable you to make more money in the future.

  • RickRS

    I’m having a problem with the answers to Jake so far.

    Lori said: “You get something for your money instead of getting nothing for it.”

    GDwarf said: “If the government does nothing with it, then it might as well be a mattress. But if the government spends it on infrastructure, job training, etc? Now you’ve invested your money in such a way as to enable you to make more money in the future.”

    But Lori, the interest is negative; $1000 in bonds at -1% means the government only has to pay you back $990 next year, while $1000 in a mattress is still $1000 next year.  Are you saying goverment bonds have an inflation adjustment because I never heard of one?

    GDwart, this assume a investor, who normally is only focused on the bottom line, can look beyond the interest payment they would not receive and consider the money as investment in government that will become an investment in their country.  Its a great idea in these times, but I don’t think it answer why an investor would buy T-bonds with a negative interest?

    About the only thing I can think of is the investor’s pile of cash is so large it’s impractiable to bury or stuff in a mattress and they have to store it somewhere.

  • Anonymous

    I would put it this way:
     
    Having $990 in a country with 6% unemployment, safer roads and bridges and tunnels, fewer laid off police officers, firefighters and teachers and an economy that in general is benefitting from the boost in demand all those things entail and therefore now offering actual positive investment opportunities is worth more than $1,000 with 10% unemployment, crumbling infrastructure, more dangerous streets, even larger class sizes, and an economy that continues to have no prospect for positive private investment opportunities.
     
    Or how about this more specific example: $1,000 but your adult child lives at home unemployed, or $990 but your child has a job. I think that $990 is worth more.

  • Tonio

    worth more than $1,000 with 10% unemployment, crumbling infrastructure, more dangerous streets, even larger class sizes, and an economy that continues to have no prospect for positive private investment opportunities.

    That reminds me of the private resorts run by cruise lines in places like the Bahamas, where outside the resort is searing poverty. The US is becoming more like that every day.

  • http://blog.trenchcoatsoft.com Ross

    But I was just in Freeport two weeks ago (Really. I was. Got out just ahead of the hurricane)! Everyone was so happy to be living the tax-free lifestyle (Really. That’s what they said. Only in the area I was in, people had this habit of using the phrases “What we have at this time” and “What is known as”, as in “What we have at this time is what is known as tax-free.”  Or “What we have at this time is what is known as there are no mountains in the Bahamas.” No point to this parenthetical except that I thought it was a kind of neat regionalism, and I wondered if living in a hurricane zone had some philisophical impact on a linguistic aversion to committing to statements of fact about the future)!  And no one seemed to think it was odd that about 2/3 of the island was still closed for repairs after the hurricanes of 2004, including most of their major  landmarks (Really.).  Plus, their schools still have corporal punishment and even though they’re a Christian Nation, Satanism is the only banned religion. Everyone on the tour bus cheered about that, so that’s a good thing, right?

  • Tonio

    Speaking of cheering, I found this chilling. When looking at the effects and mentality involved with executions, I don’t see much distinction from lynchings a century ago.

  • Lori

    But Lori, the interest is negative; $1000 in bonds at -1% means the
    government only has to pay you back $990 next year, while $1000 in a
    mattress is still $1000 next year.  Are you saying goverment bonds have
    an inflation adjustment because I never heard of one? 

    No. I;m saying that the govenment pays you back $990, plus they do things like build infrastruture that benefit you (directly or indirectly) and that government spending gets the economy moving again so that in the near future there will investment options for your $990 that will actually pay you a return so that in the end you’ll end up with more than $1000.

  • http://www.facebook.com/swbaxter13 Scott Baxter

    “So maybe this is a really stupid question, but how is lending the US government money at no interest, let alone negative interest, better (inflation-wise) than sticking your money under your mattress or in a mason jar in the back yard?”

    For the sums in question, buying US debt is actually the equivalent of sticking it in a mattress. There really aren’t a lot of mason jars big enough to hold that kind of money, and it’s not like they can actually get their hands on it in paper form (the amount of money held in digital form is vastly more than the total paper money in circulation). 

    Basically, what the price of US debt tells us is that the big institutional investors who need to know that as much of their money as possible will be available next year and the year after (and so on) feel that the economy is currently so shaky that they’re better off paying a small up front cost to guarantee most of their money will still be there later. It’s probably a closer match to sticking their stuff in a safe deposit box than stuffing it in a mattress, but any way you slice it it’s a sign that the investment community is very, very scared.

    This, of course, does not bode particularly well for the school of thought that says the way to recover from the current economic woes is to let the market handle it rather than government. The market has peered expertly into the future, then screamed in terror and started running for cover.

  • Uncle Max

    Not to disagree with the basic idea, but surely the right-wing knee-jerk jerk is just going to reply, “Doesn’t matter how much the interest is, we will still have to pay back the principal government debt something something grandchildren”.

  • Lori

     Not to disagree with the basic idea, but surely the right-wing knee-jerk jerk is just going to reply, “Doesn’t matter how much the interest is, we will still have to pay back the principal government debt something something grandchildren”.  

    That’s the case with any investment made via debt. You have to pay off the mortgage on your house. You have to pay off your car loan. If you take out a small business loan to start your own company you have to pay it back. The question in all those cases is the same one we face as a county, “Is this debt a good risk?” There are times when debt is not only a good risk, failing to take on the debt is a bad risk. 

    As a country that’s where we are. We have to invest now to make money in the future. If we do that wisely we’ll be able to pay off the debt and the return we get on it will be well worth it. If we continue the path we’re on we’re boned. 

  • Consumer Unit 5012

    As a country that’s where we are. We have to invest now to make money in the future. If we do that wisely we’ll be able to pay off the debt and the return we get on it will be well worth it. If we continue the path we’re on we’re boned.

    “THE VERY BIG STUPID is a thing which breeds by eating The Future. Have you seen it? It sometimes disguises itself as a good-looking quarterly bottom line, derived by closing the R&D Department. ” – Frank Zappa.

    “America has already been eaten by THE VERY BIG STUPID. We’re living in THE VERY BIG DUMP IT TOOK AFTERWARDS.” – Someone on urbandictionary.com

  • Lori

     Not to disagree with the basic idea, but surely the right-wing knee-jerk jerk is just going to reply, “Doesn’t matter how much the interest is, we will still have to pay back the principal government debt something something grandchildren”.  

    That’s the case with any investment made via debt. You have to pay off the mortgage on your house. You have to pay off your car loan. If you take out a small business loan to start your own company you have to pay it back. The question in all those cases is the same one we face as a county, “Is this debt a good risk?” There are times when debt is not only a good risk, failing to take on the debt is a bad risk. 

    As a country that’s where we are. We have to invest now to make money in the future. If we do that wisely we’ll be able to pay off the debt and the return we get on it will be well worth it. If we continue the path we’re on we’re boned. 

  • Mr. Heartland

    Why is Glen Beck shilling gold to me on ‘Slacktivist’?  Is some joker here investing his money ironically? 

  • Emcee, cubed

    Uh, how is the military socialistic?

    I’m sure Albanaeon or Hawker, or someone whose actually been in the service can answer this better than I can, but since the state provides food, housing and clothing (pretty much all basic necessities), it does have some similarities. It also, in theory, has a concept that wealth and status outside the military doesn’t matter. You could be a Rockefeller in civilian life, but a garbageman can be your superior in the military. (In practice, this is mostly complete BS, just like the “Anyone can grow up to be President” myth.)

  • Tonio

    since the state provides food, housing and clothing (pretty much all basic necessities), it does have some similarities. It also, in theory, has a concept that wealth and status outside the military doesn’t matter.

    But neither of those are socialistic. Socialism is about ownership of the means of production. Universal health care would only be socialistic if government owned all the hospitals and all health care workers were government employees. And with deference to Albanaeon’s point, the US “definition” is a straw man that has no validity. True, nations with some degree of government ownership of the means of production also have public benefits, but the latter is a separate concept from socialism. 

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    Also, the military has exactly the same pay for the same rank anywhere, barrign special payments for what-have-you. A colonel in New York (and one not named Joshua Jordan) would earn the same as a Colonel in California. But yeah, BOQ housing, food’s provided, etc, yadda yadda. In some eras you even got promoted at exactly the same time no matter what you might have done or not done. So just marking time for 20 years might get you to Corporal, or summat.

  • Sgt. Pepper’s Bleeding Heart

    Also, the military has exactly the same pay for the same rank anywhere, barrign special payments for what-have-you.

    That’s considered socialist?

    *boggles*

  • Pissedoffchef

    Members of the military get socialized medicine (VA) and socialized education (GI Bill) as well as a host of other benefits.  Civilians get jack.  Its like Starship Troopers.

  • MaryKaye

    I think there are sociological reasons a big corporation cannot stick its money in a safe deposit box–the stockholders will see this as malfeasance.  Also, for the amounts under consideration the “mattress method” would not be free as you’d have to worry a lot about the security of that mattress, hire some guards, build a vault, etc.  And cash is dysfunctional past a certain quantity–suppose you need that money and it’s “only” available in cash?  How will you handle your payroll?

    But still, negative interest is *freakish*.

  • Consumer Unit 5012

    But still, negative interest is *freakish*.

    I’ve certainly never seen it happen deliberately, outside of banks gouging poor customers on ‘service fees’.

    But I do remember Robert Anton Wilson suggesting it in one of his essays, as an alternative to taxation and a way to encourage people to buy things rather than hoard money.

  • Elisende

    Disclaimer: not an expert here.
    But — payments on inflation-adjusted securities aren’t entirely straightforward.  The principal is adjusted based on the Consumer Price Index.  Interest is paid on the adjusted principal.  As long as there is some inflation, you can still make money even with a negative interest rate (the principal rises more than the interest payment.)  At maturity, the security will pay back the initial principal or the adjusted principal, whichever is greater.  This provides protection against deflation — you’ll never lose money.

    I think one of the real problems with the current economy is that the last decade has seen an explosion of private debt (which, oddly, no one ever seems to think is bad.  Why is a business taking out a loan for a capital investment okay but the government borrowing money to, say, improve air traffic control is terrible waste?).  The private debt became unsustainable and now people are trying to deleverage while banks are tightening up lending, pulling money out of the economy.  (The enormous losses from the collapse of the housing bubble isn’t helping here — that money has vanished for the foreseeable future.) 

    Inflation would be very useful for debtors but the people to whom the the debt is owed (i.e., those with power) don’t want the value of that debt to erode.  We are running a trade deficit, so that’s more money draining out of the economy.  The only other place for money to come from is government spending but we’ve had several decades of people being told the government is useless — primarily because those same people in power don’t want to have to pay any taxes.

  • Christina Berg

    I fail to see how its borrowing money for free in a three aspects, first it may be free to a individual but its not free lunch,the dollar bill costs more than the dollar coin so its a tradeoff, second there is time and effort to do the allege method, but not everybody benefits, third a promotion is designed as in the first comment to have an effect, similar but not analogous to a loss leader in stores, the idea was to slow production of the dollar bill to save costs and stop.

    Supply and demand dictates and consumer spending is a high percentage that accounts for the economic downturn, folks can only cut costs so much however, but where it he level playing field, being in speculation on commodities,housing costs down but folks can’t afford rent, health
    etc, money can increase in value if productivity increases , for instance a $1 buying more food but not because there is less money supply but even due to preservation.

  • Lori

    I fail to see how its borrowing money for free in a three aspects, first
    it may be free to a individual but its not free lunch,the dollar bill
    costs more than the dollar coin so its a tradeoff, second there is time
    and effort to do the allege method, but not everybody benefits, third a
    promotion is designed as in the first comment to have an effect, similar
    but not analogous to a loss leader in stores, the idea was to slow
    production of the dollar bill to save costs and stop.

    Huh? At no point does Fred say that the dollar coin => frequent flier miles thing was free overall or that the frequent flier thing was accomplishing what the coin promotion was intended to accomplish. He clearly said that certain consumers were exploiting a loophole to get trips at no cost to them. His point was that if you create the kind of condition where an individual can get something she wants at no cost to her some folks are bound to notice it and use it.

    Similarly (although not exactly the same), the current economy is creating a condition where the government can get money at no cost to the government. It has a cost to the people buying the bonds, but not to Treasury.

  • Nick

    Let’s keep it very simple: TIPS yields are net of inflation. Buyers for TIPS with negative yield are hedging against price indexes inflating faster than growth is generated on investments‡

    The average Ameican household probably feels the same way. Wages may or may not go up a little next year, but food prices are almost certain to rise, and maybe by a lot. Say you do a $100 weekly grocery shop. Usually, if I (a hypothetical 100% reliable individual like Uncle Sam) told you I’d guarantee to pay for your groceries one week in September 2012 if you give me $100 now, you’d tell me where to stick it. But right now, in this uncertainty, that looks like a good offer. Weekly groceries in 2012 might be $110, or more, and you may not be able to afford it by then.

    But anyway, yes, TIPS yields are net, so what Fred was saying about “less than free” is all hogwash. It’s not “free” if you have to pay for inflation into the unforeseeable future.

    ‡ If you’ve believed some previous Fred rants you might have the idea that inflation is impossible during high unemployment. Don’t you believe it.

  • Lori

    Sort of OT, but I’ve been looking at the collections from fashion week and had to laugh. Libertine showed a t-shirt in their men’s collection and a skirt in their women’s collection that said “Tax The Rich More”.

    I’m not sure which aspect of this made me chuckle more—the target audiance for clothes shown at fashion week or the fact that Libertine’s other printed items, a men’s T and a bag in women’s collection, say “herricot vert”. And no, I have no idea why Libertine is selling things that say “green bean” or why someone would want to purchase such an item.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    Not all bonds are TIPS and the “normal” kind of bond has a nominal interest rate that, to first order, has a real interest rate net of inflation. Basically the “normal” bonds have an interest rate that looks like it’ll be about 1% less than inflation.

  • Anonymous

    I see a lot of people talking as if these rates are relative to inflation, and a lot of people talking as if these rates are giving the returns in physical (is ‘nominal’ the right word?) dollars.  I get the impression that these are all inflation-adjusted, and so the government can’t actually borrow $1000, sit on it for five years, then pay back $990 and pocket $10, but I’m hardly an expert.

    This does not appear to actually be about investors being willing to take a small nominal loss in order to give the government money to use to help the economy. This will make them more money than just burying cash in the backyard, but uncertainty is high enough in general that they’re willing to accept pay-outs that don’t keep up with inflation.

  • Lori

     This does not appear to actually be about investors being willing to take a small nominal loss in order to give the government money to use to help the economy. This will make them more money than just burying cash in the backyard, but uncertainty is high enough in general that they’re willing to accept pay-outs that don’t keep up with inflation.  

    I think maybe I was unclear. I don’t think that investors are buying bonds because they’re “willing to take a small nominal loss in order to give the government money to use to help the economy”. Making money available for government programs that can jumpstart the economy is absolutely effect, not cause. 

    That’s why the rest of us should be glad for the current state of the bond market and why the Republicans need to shut the hell up about the damned deficit and let Treasury take the money investors are throwing at it, but it’s not why investors want to buy bonds. As Fred outlined, investors want to buy bonds, even at no or negative interest, because the market has decided that right now US bonds are the best game in town. That’s purely a business decision, not some sort of patriotic or humanitarian sacrifice. (It took some effort for me to even type that without laughing out loud.)

  • http://twitter.com/mattmcirvin Matt McIrvin

    I think MaryKaye has it: It’s probably easier to arrange for security if you have your money in T-bills than if you have it stuffed in a mattress or a giant safe somewhere (or in an ordinary bank account, which is only insured up to the FDIC limit).  That’s worth something, so the market interest rate can actually go slightly below 0%.  

    Now that I think about it, I don’t actually know how these things work in the case of large institutional investments.

  • http://twitter.com/mattmcirvin Matt McIrvin

    Concerning the market bottoming out, I suspect (and this observation is hardly original to me) that extremely rich people actually have an incentive to let the economy crater.  In pure dollar amounts, they lose a lot of money in recessions.  But it hardly matters; they’re loaded, they’ll be fine.  Meanwhile, recessions solve the servant problem.  It becomes easier to get high-quality help when a lot of people are desperate.  Workers are hungry for jobs or scared of being laid off, so it’s easier to break labor organizations, which helps them over the long term.  High unemployment increases inequality and makes them _comparatively_ better off, which for some may be what actually makes them happy.  And so on.

    Now, this doesn’t necessarily mean that they’re sitting around like Snidely Whiplash consciously going “nyah, nyah, let’s destroy the economy, hee hee hee!”  But if they adopt a set of moral principles by which recessions and depressions are our just punishment for our excesses, that they’ll work themselves out all right without government meddling, that the people need to feel the pain and share in their vast dollar sacrifices instead of getting handouts, etc., etc., the world isn’t going to go out of its way to tell them they’re wrong.

  • Anonymous

    Mat McIrvin: Meanwhile, recessions solve the servant problem.

    So basically, the rich, wealthy, and powerful are in the driver’s seat of an economy in free-fall, trying to play a game of ‘chicken’ with the ground.

    Good to know!

  • Anonymous

    Mat McIrvin: Meanwhile, recessions solve the servant problem.

    So basically, the rich, wealthy, and powerful are in the driver’s seat of an economy in free-fall, trying to play a game of ‘chicken’ with the ground.

    Good to know!

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    Andrew Mellon’s statement exemplifies this attitude of the wealthy:

    “liquidate labor, liquidate stocks, liquidate farmers, liquidate real
    estate… it will purge the rottenness out of the system. High costs of
    living and high living will come down. People will work harder, live a
    more moral life. Values will be adjusted, and enterprising people will
    pick up from less competent people.”

  • Tonio

    Ugh. That sounds like the Just World Fallacy in reverse. Perhaps on some level, people like Mellon have guilt pangs for being staggeringly wealthy while others are starving, bothered by the basic injustice of it all. So they silence their consciences by telling themselves that poor people deserve their fate.

    I won’t go so far as to suggest a similar thought process for people like Pat Robertson, partly because of the tribalism involved.

  • Mike Timonin

    The thing is, Mellon is probably right. Certainly that how it has happened in the past. It’s just that most societies have decided that the end result of increased “morality” and adjusted values is not worth the deep pain that the depression entails.

  • Lori

     The thing is, Mellon is probably right. Certainly that how it has happened in the past. It’s just that most societies have decided that the end result of increased “morality” and adjusted values is not worth the deep pain that the depression entails.  

     

    Some of us have decided that Mellon’s ideas about morality are not moral, let alone worth societal suffering to promote. Personally I’ve never noticed that a reduced standard of living ever made anyone more moral. Up to a point it makes them more compliant to the rich and powerful, but that’s not morality. 

    Also, hearing some rich person lecture about how people aren’t working hard enough and they’re too focused on “high living” always makes me want to punch them in a soft spot, even when the asshat is long dead no longer has soft spots. 

  • Mike Timonin

    Some of us have decided that Mellon’s ideas about morality are not moral, let alone worth societal suffering to promote.

    Entirely in agreement. I would include me in that “some of us.” My point was that Mellon’s point, while morally indefensible, was logical and based in past experience. 

  • Mike Timonin

    Some of us have decided that Mellon’s ideas about morality are not moral, let alone worth societal suffering to promote.

    Entirely in agreement. I would include me in that “some of us.” My point was that Mellon’s point, while morally indefensible, was logical and based in past experience. 

  • ako

    Some of us have decided that Mellon’s ideas about morality are not moral, let alone worth societal suffering to promote

    Yeah, one of the first things that popped into my head when I saw that was “What exactly does he mean by moral?”  Because my idea about morality probably doesn’t match up with his.  (For one thing, I’m not a big believer that hard work is, in of itself, morally superior to doing things an easier way.  Sometimes, hard work is better, but sometimes it’s unnecessary hours of tedious and damaging toil ensuring that a person doesn’t get to see their kids for hours and is sick and miserable when they finally do.)

  • Mike Timonin

    The thing is, Mellon is probably right. Certainly that how it has happened in the past. It’s just that most societies have decided that the end result of increased “morality” and adjusted values is not worth the deep pain that the depression entails.

  • Anonymous

    The hilarious (not) thing, is that the wealthiest would laugh at this idea and say ‘You first.’  And heaven help the poor schlub who did indeed go first.

  • HawkerHurricane

    Military socialism?

    How about “From each according to his abilities”.  The military tests you, sees what jobs you are capable of doing, and which jobs the military needs at the time.
    “To each according to his needs.”
    The military provides food, shelter, and medical care.  If you have a family, they provide shelter and medical care for the family also.
    Just off the top of my head.

  • Anonymous

    Aside from these being inflation-adjusted rates, Fred is spot on the nose here.

    In fact, I’d add that the US government, unlike most institutions, actually has a need for gigantic bonds on a regular basis, to build bridges and submarines and whatnot. Even if America had lots of ready cash for these projects, negative interest rates make it a better deal to borrow the money, assuming you don’t have some inflation-lowering plan in the works, which we probably don’t.

    If I were a big investor, I would probably sign up for these “bad deals” too. It’s not like I’m going to invest in Europe right now.

  • http://twitter.com/FearlessSon FearlessSon

    I apologize if I seemed insensitive.  But for some of those people, the treatment they need is not always treatment that they will choose to seek.  For example, a paranoid schizophrenic may, depending on the precise manifestation of their symptoms, see a genuine attempt to help as a further source of harm.  

    The problem that I see with the political right at this stage is that they have gone beyond any attempt to reason with them.  They have gotten themselves trapped in a self-reinforcing cycle of behavior where any attempt to parlay or inform their decisions is seen as treasonous.  Just look at the way they treated John McCain when he tried to call the right’s base on it.  

    I can disagree with people, I can tolerate other people’s opinions without thinking that those people are necessarily mentally disabled.  However, that only applies when such people are actually open to reason and debate.  Where we can actually share an experience of reality from which to make our observations and form our opinions and arguments.  When they reject an objective reality we can all agree on, I can only conclude that they are suffering from some kind of delusion, even if that delusion is not the result of a clinical disorder.  

    When they stay in a self-reinforcing cycle like this, how do you reason with them?  It feels like either you can get them treatment, or their self-reinforcement will eventually escalate to destructive behavior.  

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    A genius way of explaining the budget :D

    Notice that for all the he-man rah-rah oompah oompah the Republicans like doing about cutting spending they have proven it doesn’t even do dick-all to fix the problem of the deficit, never mind the debt.

  • http://blog.trenchcoatsoft.com Ross

    Meh. It feels like the gist of the picture is “We’re not cutting enough!” and totally missing the fact that it’s ludicrous to expect that you can take care of a family on $21k without falling behind.

  • Anonymous

    It’s a pretty good analogy though. The GOP makes a lot of noise about cutting ‘millions’ and sometimes even ‘billions’ (generally from little things like Planned Parenthood, NPR, and the Department of Education) but they never place the numbers into context. They create — falsely — the impression that they’re cutting massive chunks out of the federal deficit but in fact they’re just chipping away at an iceberg with a spoon. (Don’t get me wrong — a lot of those cuts are devastatingly bad news to ordinary Americans, but in the grand scheme of things the sheer amount simply isn’t comparable).

    (The whole — ‘national economy’ = ‘household budget’ thing is stupid, but it makes a good analogy in a very limited sense).

  • http://twitter.com/FearlessSon FearlessSon

    The GOP makes a lot of noise about cutting ‘millions’ and sometimes even ‘billions’ (generally from little things like Planned Parenthood, NPR, and the Department of Education) but they never place the numbers into context. They create — falsely — the impression that they’re cutting massive chunks out of the federal deficit but in fact they’re just chipping away at an iceberg with a spoon.

    As usual, xkcd has a strip about that.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    The rejoinder is that the “family” can earn more money (i.e. raise taxes).

    There is a deft way to overcome the fallacies in the “family income” notion of government budgeting while preserving the kinds of lessons one wants to teach.

  • Anonymous

    Uh, how is the military socialistic? That sound too much like the Tea Partyesque watering down of “socialism” to mean any type of government activity.

    The thread got quite a few secondary notes, but, IMO, missed the most important one.
    Are you under the impression that a, say, tanker actually buys his Abrams from the government?
    The military is socialist in the sense that its members are educated (for free!) in particular fields, and are then freely provided with the materials neccessary to perform their tasks in that field – which they are then expected to do.  And if you define ‘production’ to mean ‘killing people’, the military does indeed collectively own the means of production…

    For one thing, I’m not a big believer that hard work is, in of itself, morally superior to doing things an easier way

    What?  In what messed up universe is it *moral* to work harder for the same result?  That’s just… an utter waste of time and effort, except perhaps effort to create an impressively roundabout form of sloth.  Does he think that Rube Goldberg was a paragon of morality or something?  Obviously, the pinnacle of virtue will be playing Hyper-Crysis 5 & 1/2D on a computer that works by manually switching trillions of levers, each of which is the size of a galaxy.  Now *thats* hard work…

  • Anonymous

    The levers must be flipped by hand, naturally.

  • Anonymous

    The levers must be flipped by hand, naturally.