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To: THE ANT who wrote (95706)	10/21/2012 11:51:01 AM
From: elmatador	Respond to of 217977

Inflation in the U.S. has historically been a wartime phenomenon, including not only shooting wars but also the Cold War and the War on Poverty. There was a time -as shown above- when Moving Volumes of Money caused inflation. That’s when the federal government vastly overspends its income on top of a robust private economy—obviously not the case today when government stimulus isn’t even offsetting private sector weakness. Government stimulus is Moving Volumes of Money

To: THE ANT who wrote (95706)	10/21/2012 12:23:58 PM
From: elmatador	Respond to of 217977

The Debt of the rich is something else Nobody is fooled. The huge debt the rich world will last many years, perhaps decades, and a quick adjustment and painful for Americans, Europeans and Japanese will be painful for everyone - Chinese, Brazilians, Mexicans, Koreans and who else has some connection with the market internationally. Recognition of this fact - the solution will be delayed - is probably the best argument in favor of medium-term programs with clearly defined goals and believable. The Debt of the rich is something else October 19, 2012 \| 11:40 Rolf Kuntz Nobody is fooled. The huge debt the rich world will last many years, perhaps decades, and a quick adjustment and painful for Americans, Europeans and Japanese will be painful for everyone - Chinese, Brazilians, Mexicans, Koreans and who else has some connection with the market internationally. Recognition of this fact - the solution will be delayed - is probably the best argument in favor of medium-term programs with clearly defined goals and believable. Some figures may be more convincing that most speech. To bring back to the U.S. debt equivalent to some 60% of Gross Domestic Product (GDP) by 2030, the government must obtain a primary surplus of just over 6% in each of the next 18 years. For Japan, the primary outcome - the money set aside for debt service - would be around 14% of GDP. Estimates were presented last week by the secretary general of the OECD, the Organization for Economic Cooperation and Development, Angel Gurria, at the meeting of the International Monetary Fund (IMF) in Tokyo. In Japan's case, the estimate is obviously a mere exercise argumentative. Gross debt has already surpassed Japan 180% of GDP in 2007, when the banking crisis began, reached 210.2% in 2009 and will reach 250.3% in 2017, with no sign of stabilization, according to projections presented in the Fiscal Monitor IMF. The American case is very different. The gross debt of the United States government was much lighter before the crisis. Corresponded to 67.2% of GDP in 2007 and weighed little more than Brazil, 65.2%. But the Brazilian debt grew until 2009, declined thereafter and should continue to decrease in the coming years, if the government maintains a minimum of austerity. In the rich world is a different story. The debt / GDP ratio of the United States reached 102.9% in 2011 and only should stabilize in 2015-2016, remaining at 114.2% of GDP over two years, before going into a slow decline. The peak of Italian debt, 127.8%, is planned for next year. What the Spanish, 101.4%, to occur in 2016, according to IMF projections. The debt of the advanced countries of the Group of 20 (G-20) should reach the top, 121.9% in 2014. Projections of this type always depend on complex assumptions and are risky, but serve to give an idea of ??the size of the problems and difficulties of adjustment. In general, the tables show a strong contrast between the rapid growth of debt from the beginning of the banking crisis in 2007 and the expected slow decrease from the peak. In most cases, just to stabilize the debt / GDP ratio governments still have to work hard and to impose considerable sacrifices to the population. Tables Fiscal Monitor expire in 2017. The projections are consistent with the growth conditions examined in the IMF's World Economic Outlook. Advanced economies are expected to grow 1.3% this year and 1.5% next year, according to new estimates, lower than the April and July. In 2017, the GDP of these economies will still grow 2.6%, below the average pace from 2004 to 2007 (2.9%). The projection for the United States is returning to the historical pace of around 3.3%, while the countries of the eurozone will continue slowly. But until the expansion of 1.7% estimated for 2017 will be much better than that observed from 2008. For 2012 and 2013, calculations show a contraction of 0.4% followed by an insignificant increase of 0.2%. The bad news beyond those numbers. All these projections depend on assumptions rather optimistic. Europeans will have to move the joint fiscal and banking unification. Moreover, they must eventually use the new financial stabilization mechanism and the new monetary policy to help indebted. In the American case, the condition is a political agreement to avoid the so-called fiscal gap, a disastrous combination of spending cuts and tax increases scheduled to take effect in 2013. Such a pact before the election is almost unimaginable. There is no avoiding the storage of public accounts in the rich world. That is beyond dispute. The problem is the pace of adjustment. There is much less debate whether some economies of lesser weight had to face two or three years of sacrifice to fix their budgets. The case is different, when the stabilization programs of several major powers affect the entire world. There are two weights and two measures, but the Brazilian government supports the recommendation of the IMF adjustments longer and less recession in advanced economies. A greater decrease in major markets would be very costly for emerging, including Brazil. blogs.estadao.com.br

To: THE ANT who wrote (95706)	10/22/2012 7:15:35 PM
From: elmatador	Read Replies (1) \| Respond to of 217977

there is no way on this earth that Bernanke will be able to unwind a $5 trillion balance sheet (which is what it will be in 2 years), without destroying every last trace of the equity (and likely) other capital markets, unless there is a concurrent bout of hyperinflation. And here is how the Fed's total assets will hit $5 trillion as Zero Hedge demonstrated before. zerohedge.com

To: THE ANT who wrote (95706)	10/23/2012 3:33:52 AM
From: elmatador	3 Recommendations Read Replies (2) \| Respond to of 217977

The next crisis Sponging boomers The economic legacy left by the baby-boomers is leading to a battle between the generations Sep 29th 2012 \| from The Economist the print edition ANOTHER economic mess looms on the horizon—one with a great wrinkled visage. The struggle to digest the swollen generation of ageing baby-boomers threatens to strangle economic growth. As the nature and scale of the problem become clear, a showdown between the generations may be inevitable. After the end of the second world war births surged across the rich world. Britain, Germany and Japan all enjoyed a baby boom, although it peaked in different years. America’s was most pronounced. By 1964 individuals born after the war accounted for 41% of the total population, forming a generation large enough to exert its own political and economic gravity. These boomers have lived a charmed life, easily topping previous generations in income earned at every age. The sheer heft of the generation created a demographic dividend: a rise in labour supply, reinforced by a surge in the number of working women. Social change favoured it too. Households became smaller, populated with more earners and fewer children. And boomers enjoyed the distinction of being among the best-educated of American generations at a time when the return on education was soaring. Yet these gains were one-offs. Retirements will reverse the earlier labour-force surge, and younger generations cannot benefit from more women working. There is room to raise educational levels, but it is harder and less lucrative to improve the lot of disadvantaged students than to establish a university degree as the norm for good ones, as was the case after the war. In short, boomer income growth relied on a number of one-off gains. Young workers also cannot expect decades of rising asset prices like those that enriched the boomers. Zheng Liu and Mark Spiegel, economists at the Federal Reserve Bank of San Francisco, found in 2011 that movements in the price-earnings ratio of equities closely track changes in the ratio of middle-aged to old workers, meaning that the p/e ratio is likely to fall. Having lived through a spectacular bull market, boomers now sell off assets to finance retirement, putting pressure on equity prices and denying young workers an easy route to wealth. Boomers have weathered the economic crisis reasonably well. Thanks largely to the rapid recovery in stockmarkets, those aged between 53 and 58 saw a net decline in wealth of just 2.8% between 2006 and 2010. More worrying is that this generation seems to be able to leverage its size into favourable policy. Governments slashed tax rates in the 1980s to revitalise lagging economies, just as boomers approached their prime earning years. The average federal tax rate for a median American household, including income and payroll taxes, dropped from more than 18% in 1981 to just over 11% in 2011. Yet sensible tax reforms left less revenue for the generous benefits boomers have continued to vote themselves, such as a prescription-drug benefit paired with inadequate premiums. Deficits exploded. Erick Eschker, an economist at Humboldt State University, reckons that each American born in 1945 can expect nearly $2.2m in lifetime net transfers from the state—more than any previous cohort. Boomers’ sponging may well outstrip that of younger generations as well. A study by the International Monetary Fund in 2011 compared the tax bills of a cohort’s members over their lifetime with the value of the benefits that they are forecast to receive. The boomers are leaving a huge bill. Those aged 65 in 2010 may receive $333 billion more in benefits than they pay in taxes (see chart), an obligation 17 times larger than that likely to be left by those aged 25. Sadly, arithmetic leaves but a few ways out of the mess. Faster growth would help. But the debt left by the boomers adds to the drag of slower labour-force growth. Carmen Reinhart and Kenneth Rogoff, two Harvard economists, estimate that public debt above 90% of GDP can reduce average growth rates by more than 1%. Meanwhile, the boomer era has seen falling levels of public investment in America. Annual spending on infrastructure as a share of GDP dropped from more than 3% in the early 1960s to roughly 1% in 2007. Austerity is another option, but the consolidation needed would be large. The IMF estimates that fixing America’s fiscal imbalance would require a 35% cut in all transfer payments and a 35% rise in all taxes—too big a pill for a creaky political system to swallow. Fiscal imbalances rise with the share of population over 65 and with partisan gridlock, according to other research by Mr Eschker. This is troubling news for America, where the over-65 share of the voting-age population will rise from 17% now to 26% in 2030. That leaves a third possibility: inflation. Post-war inflation helped shrink America’s debt as a share of GDP by 35 percentage points (see article). More inflation might prove salutary for other reasons as well. Mr Rogoff has suggested that a few years of 5% price rises could have helped households reduce their debts faster. Other economists, including two members of the Federal Reserve’s policymaking committee, now argue that with interest rates near zero, the Fed should tolerate a higher rate of inflation to speed up recovery. The generational divide makes this plan a hard sell. Younger workers are typically debtors, who benefit from inflation reducing real interest rates. Older cohorts with large savings dislike it for the same reason. A recent paper by the Federal Reserve Bank of St Louis suggests that as a country ages, its tolerance for inflation falls. Its authors theorise that a central bank could use inflation to achieve some generational redistribution. Yet pressure on the Fed to cease its expansionary actions has been intense, and led by a Republican Party increasingly driven by boomer preferences. The political power of the boomers is formidable. But sooner or later, it cannot escape the maths