On CNN today and tomorrow. Here is the condensed version:



http://www.iousathemovie.com/

1/10/2009 2:43:19 PM

literally just finished...its pretty good...are there other videos like this online?

1/10/2009 2:49:09 PM

We had it at Galaxy a while back. People really liked it.

1/10/2009 3:01:12 PM

Only solution is to poison the baby boomers

1/10/2009 3:01:46 PM

Along that note, I found it interesting that ending all "Pork" earmarks, the Iraq war, and reversing the Bush tax cuts would only cut into the projected deficit by 13%.

THAT is depressing

1/10/2009 3:28:11 PM

conservative leaders are telling me privately that they were pleased with obama mentioning entitlements in his speech the other day

1/10/2009 3:33:37 PM

The government should stop spending and dramatically cut welfare benefits (medicade, medicare, SS, etc). However, the assertion that foreigners owning our debt is in any way a threat to national security is absurd. If anything, they owning our debt weakens their position because it grants the U.S. a strong weapon in the form of debt repudiation, which we would like to do even if our independence was not being threatened at the time.

It is also absurd to include welfare promises as a form of outstanding debt. Your welfare benefits are not a legal claim against the U.S. Government; all it takes is a 51% vote to strip you of every single one of them and you would have no ground from which to sue to get it back.

1/10/2009 4:10:35 PM

Ahh, everyone's favorite theoretical economist has made an appearance.

Quote :

"It is also absurd to include welfare promises as a form of outstanding debt"

Not if the political will to repeal them does not exist. The entire point of the movie wasn't that the situation was hopeless but that there is not, at present, the political will to do anything about it.

The point is, political will or not, we cannot deliver on those promises.


What are the secondary effects of debt repudiation however? Countries decide to protect their assets by calling on the US to pay its debts and our response is to not cover our debts? While that would work in the short term, it would again require either the raising of taxes, or printing of money to maintain the already unsustainable deficit if no foreign investment is available.

1/10/2009 4:37:42 PM

Quote :

"The point is, political will or not, we cannot deliver on those promises."

And my point is that we are not being asked to deliver on those promises. If future voters choose to continue making such welfare payments that is their perogative. If we slash such spending today what is to stop future voters from reimposing them?

Quote :

"What are the secondary effects of debt repudiation however? Countries decide to protect their assets by calling on the US to pay its debts and our response is to not cover our debts? While that would work in the short term, it would again require either the raising of taxes, or printing of money to maintain the already unsustainable deficit if no foreign investment is available."

Think about this for a bit. If relations between American and China go sour, maybe war is imminent, U.S. officials are not going to field it as debt repudiation. What it will be called is siezing Chinese government assets. Now, if all money that belongs to China in any U.S. bank is siezed by the U.S. government, how is China going to unload these treasury bonds? I do not know if the ownership of treasury bonds is tracked by their serial numbers, but if they are then an asset freeze and siezure would mark these particular bonds unclaimable. In effect, repudiation of only the debt held by China. We would continue borrowing from the rest of the world and Americans.

On the other hand, if treasury bonds are anonymous and ownership is untracked, it is still an effectual repudiation, as any third party accused of conducting business with China would find its own assets frozen (just as things currently stand with Cuba).

Unless China wins a land-war in North America, China will always be nothing more than an economic actor here (in effect nothing more than a super-rich Bill Gates). And as everyone should understand, economic actors only ever survive at the mercy of the political class. If Bill Gates came to be hated by everyone in America, he would find his assets siezed and divided up among city, county, state, and federal treasuries, and himself serving prison sentences for poorly defined charges (all his great wealth might let him do is flee the country). The same applies to China.

Remember your Mark Twain, "no mans life, liberty, or property is safe while the legislature is in session."

1/10/2009 5:41:41 PM

Quote :

"And my point is that we are not being asked to deliver on those promises."

At present, since the reality of the moment is all we have, we are expected to deliver on these promises. There isn't much to argue there.

The point of the movie is to illustrate what will happen if the present course is not altered. That's it. So I'm confused as to why you're disputing their math.


Also, since the number one consumer of our debt is also our number one provider of consumer goods, and since the number two consumer of our debt is also a large provider of our petroleum needs, the idea of debt repudiation shouldn't be tossed out casually. Furthermore, I'm baffled by the idea that you simply conjure up a conflict between the United States and China, use it as a debt write-off scenario, and completely ignore the other effects such a conflict would have on the economy as a whole. Yes other suppliers exist, and we could consume from them, but the long-term geo-political ramifications would be far different than the Cold War conflict with the Soviet Union, whose worldwide economic impact was significantly smaller then than the impact of China today. Also, you're assuming foreign countries would prefer to lend to us, over China, after we simply wrote off their assets, even if we used a politically clever means of doing so.


Which brings us back to the point that, if current spending trends continue as they do, the situation will likely get quite painful. So what is your point here?

1/10/2009 6:03:02 PM

I didn't watch the video in the OP--I may later. But I see the initial screen concerning the drop in the personal savings rate. Are personal investments factored in?

Just asking.

1/10/2009 6:10:11 PM

Quote :

"At present, since the reality of the moment is all we have, we are expected to deliver on these promises."

I guess I was not clear enough. We are not expected to deliver on those promises, the tax payers of 2040 are. As whatever we do will have almost no impact upon what tax payers of 2040 decide to do, this entire activity is useless. If you think we should spend less on old people right now, then say that; say what else we could spend the money on. But don't pretend what we do today will impact voter opinion in 2040.

Quote :

"Also, since the number one consumer of our debt is also our number one provider of consumer goods, and since the number two consumer of our debt is also a large provider of our petroleum needs, the idea of debt repudiation shouldn't be tossed out casually. Furthermore, I'm baffled by the idea that you simply conjure up a conflict between the United States and China, use it as a debt write-off scenario, and completely ignore the other effects such a conflict would have on the economy as a whole."

The question was China using our debt as a weapon in some future conflict. As such, to analyse what the effect would be in such a conflict I conjured up a conflict. That soldiers would later die in battle and the government would borrow heavily, print money heavily, a completely wreck the productive capacity of the planet was irrelevant to the debt-as-weapon question. The breakdown of the peaceful social order is always catastrophic, I trust that is not in dispute. What seems to be in dispute it my assertion that owing trillions of dollars to your enemies would not make the catastrophy measurably worse.

Quote :

"Which brings us back to the point that, if current spending trends continue as they do, the situation will likely get quite painful. So what is your point here?"

That when anyone ever utters the phrase "if current...trends continue as they do" they are usually making a fallacious argument.

[Edited on January 10, 2009 at 6:31 PM. Reason : .,.]

1/10/2009 6:28:59 PM

^ Our situation with China is much more complicated than that. If we ever got to the point where we were considering seizing chinese assets, the debt would be the least of our worries.

Their example of the Suez Canal incident though seems compelling to me. They weren't discussing if we were at war with China, but if we WEREN'T at war with them, and they wanted to make us do something, the amount of our debt that they hold gives them leverage.

1/10/2009 6:57:20 PM

It does, but not much. Remember, it would be devastating for the U.S. to seize the assets of China, turing the trillions we owe them into shit; something our politicians would feel compelled to do if China ever implimented its debt-dumping threat.

But, ok, let us assume the U.S. government does not do this, for whatever reason. What exactly would be the result of China dumping a large volume of U.S. treasury bills on the floor of the world's exchanges? Why, even the hint of such an eventuality would cause the price paid to the sellers of such bonds to collapse. This would not be debt repudiation in a classical sense, as the U.S. government still owes the money, but China would raise far less than face value for the bonds, perhaps pennies on the dollar.

Now, yes, this would eliminate the U.S. Government's ability to borrow money as long as this persisted, but other than an externally imposed balanced budget, would there be any negative impacts upon the U.S. economy? When you sell a $100k T-bill for $10k in dollars, you have sucked $10k in dollars out of the money supply; if you then dump that on the world's currency exchanges, you have pushed $10k in dollars back into the money supply and pulled $10k in yuan out of the money supply. Net effects: you bid up the value of the yuan, causing the Chinese to lose even more of the stored-value and temporarily decimating China's competitiveness in export markets; meanwhile, the dollar relative to non-yuan currencies would rise as the non-chinese respond to absurdly low-priced Treasury Bonds by selling their native currencies to buy dollars with-which to buy T-Bills from the Chinese. This may induce a temporary recession in America as most U.S. citizens also respond to absurdly low-priced Treasury Bonds by cutting back consumption, such as on imports, to buy them.

Now, if you read the history you will see why Great Britain was unsure about following a similar course during the Suez Crisis. At that time, America held more than just British Bonds, but cash currency as it was helping to maintain the fixed exchange rates at the time. As such, the U.S. could have pushed down the value of the Pound relative to all currencies, not just the dollar. Also, and far more important, the British were at that time trying to maintain an over-valued fixed exchange rate, which the Americans would have burst (and did burst without American help soon there-after).

As such, since America enjoyed free-floating exchange rates with everyone, and there is no evidence the Chinese posess large stores of U.S. currency relative to U.S. trading volume, I can say such behavior would be devastating for the Chinese and merely an entertaining fiasco from the average Americans perspective.

1/10/2009 7:52:35 PM

that shit is depressing as hell

too bad you could never get elected promoting ideas to stop this trainwreck from happening

1/10/2009 9:54:05 PM

^ that is what's most depressing.

1/10/2009 10:19:43 PM

Quote :

"If anything, they owning our debt weakens their position because it grants the U.S. a strong weapon in the form of debt repudiation, which we would like to do even if our independence was not being threatened at the time."

uh..... wot?

1/10/2009 11:02:22 PM

i wonder if we could get some serious communes going here

1/10/2009 11:21:40 PM

If the US government were an actual person, I wonder what its credit score would be... probably something abysmal.

1/11/2009 12:10:10 AM

sometimes i feel like i'm the personification of the us debt issue

but i actually want to get out of debt and haven't bought anything on credit in like 6 months

1/11/2009 12:11:41 AM

EuroTitToss, the debt owed to China is uncollateralized debt. It is akin to credit card debt, only there is no court with the authority to punish the U.S. for refusing to pay the Chinese; if we decide to stop making the montly payments, what do you think the Chinese can do about it?

1/11/2009 1:21:02 AM

^ China COULD do a lot of things.

They probably WOULDN'T though for various reasons.

1/11/2009 1:45:06 AM

exactly. Military invasion for failure to pay ones debts went out of style at the end of the 19th century.

1/11/2009 2:24:11 AM

Yes, however, the government suddenly refusing to recognize any type of debt as legitimate would do what exactly to future foreign investment?

1/11/2009 5:37:29 AM

Quote :

"Yes, however, the government suddenly refusing to recognize any type of debt as legitimate would do what exactly to future foreign investment?"

1/11/2009 10:04:01 AM

here's a good interview from last week discussing China's influence in America, past, present and future
http://www.npr.org/templates/story/story.php?storyId=99039196

1/11/2009 10:35:54 AM

Quote :

"Yes, however, the government suddenly refusing to recognize any type of debt as legitimate would do what exactly to future foreign investment?"

I gave three scenarios. None of them involved "the government suddenly refusing to recognize any type of debt". In scenario #1, only the debt held by china was being repudiated due to the onset of war. In scenario #2, no debt was being repudiated at all, merely the Chinese were being cut off from the means with-which to collect by siezing their assets. In scenario #3, all contracts were being honored as written, that the Chinese chose to dump them on world markets at a ruinous pace was their choice and they chose to suffer the consequences.

In none of these scenarios would there be any impact upon future foreign investment from anywhere but China. Afterall, in 1941 the U.S. engaged scenario #2 against the Germans and Japanese (siezed all assets and made it illegal for U.S. citizens to engage in any activity with citizens of same) and there has been no long term negative outcome in terms of foreign investment from these two countries. Scenario #2 is currently being used against North Korea and Iran. It is also being used (to a lesser extent) against Venezuela on behalf of Exxon.

As such, you cannot argue these actions will kill foreign investment when they have been used repeatedly throughout history and never killed foreign investment.

Foreign investors always take into account the chance of scenarios #1 and #2. That is why third world dictators tend to not keep their bank accounts in New York banks (opting instead for regions with banking secrecy laws) but citizens of Canada and Mexico do. And in the event relations between China and American turn hostile, Chinese citizens will be seen liquidating their U.S. holdings, while U.S. citizens do the same with their Chinese holdings. We instinctively know that one of the first weapons countries use against each other is revoking the rights of each others citizens.

[Edited on January 11, 2009 at 11:09 AM. Reason : .,.]

1/11/2009 11:05:58 AM

We are simply a growing nation of children. No one wants to save for thier future they want to enjoy everythign NOW, and thier money is for things they want, for stuff they need someone should provide that for them.

Side note. I had a medicaid kid friday, 12 yrs old got an xbox 360 and a couple games for xmas. He had a pretty good change in his glasses so I took him and his mother to optical to get a new rx. They came back and said that medicaid doesnt pay anything until july so they will just come back then to get his glasses. So they have money for xboxs but not 40 bucks to help her kid see better... SO typical of todays mindset imo.

1/11/2009 12:11:48 PM

^ I couldn't agree more. I'm partially the same way, don't wanna save, want the benefits now. So I certainly need to adjust my attitude.

But I can't say the same for everyone else understanding they need to do the same.

1/11/2009 1:28:02 PM

We need $175,000 per taxpayer to back government promises? D'oh!

1/11/2009 2:31:43 PM

Quote :

"We are not expected to deliver on those promises, the tax payers of 2040 are."

Since I'll only be 61 in 2040, I fully expect to be a taxpayer in 2040. Furthermore, Social Security will begin to cost us money as early as 2017, so decisions made today will directly impact the options that I, as a taxpayer in 2040, will have.

No-one disputes LoneSnark's mastery of theoretical economics, but your assumption that a conflict with China and a theoretical debt repudiation scenario brings up the prospect of a return to at least a bi-polar world. With multiple choices of currency to invest in and a debt of (as they projected) 100 - 200% of GDP, why would foreign investors continue to buy US currency? At this point the two options I see (and I could be completely wrong) are to either a) print more money or b) reduce / eliminate benefits. The latter of which becomes a crisis when tied in with the larger, non-governmental problem, of a negative savings rate and the former when related to those who have chosen to save.


Maybe I'm just confused as to what you're getting at, but other than your initial "government needs to cut spending," the entire thrust of your argument appears to be, "if we ignore the problem long enough, future voters / citizens can figure it out." I find this puzzling since pretty much everyone on TWW is a future voter. Or is your argument that this current level of spending is sustainable?

1/11/2009 3:08:50 PM

Lunak, I think we all are that way to some extent. Its not fun to save your money instead of blowing it on fun stuff, but that is the responsibility that comes with adulthood, which is why I say we are rasising a nation of children. However, there is a big difference from admitting you arent saving enough and just saying I dont want to save.. So Im someone elses problem they should take care of me while I do whatever I feel like doing. Which seems to be a growing attitude in this country. And while this attitude grows, politicans seem to be right there reenforcing it.

Shit Obama wants to delay the TV crossover bc the Fed ran out of money. I think they spent over a billion to make sure people can fucking watch TV and people want MORE? GTFO. It seems we are in a move away from personaly responsiblity, the constitution, and common sense. imo

[Edited on January 11, 2009 at 3:21 PM. Reason : .]

1/11/2009 3:20:32 PM

Quote :

"With multiple choices of currency to invest in and a debt of (as they projected) 100 - 200% of GDP, why would foreign investors continue to buy US currency?"

JCASHFAN, there are a few nations in Europe with debt in excess of 100% and they don't have trouble attracting foreign investment. And the reason anyone ever buys U.S. currency is because they want to buy something with dollars. As long as we are a free people with functionally free markets we will always be a productive people.

And yet again, I was not speaking in any-way in terms of the result of a war with China other than to conclude that Chinese ownership of our debt would not make things significantly worse (however bad they ended up getting on their own; nuclear exchanges tend to be bad).

Quote :

"the entire thrust of your argument appears to be, "if we ignore the problem long enough, future voters / citizens can figure it out.""

No, the thrust of my argument is that "things that are not a problem should not be treated as a problem." The argument being made in the video is the same kind that drive doomer theories over peak oil or the like. Rational discussion should be limited in time over relevant problems. A lot can and will happen between 2009 and 2040, stuff that might alleviate or exacerbate the problem of deficit spending in the year 2040. As such, we should stick to policy problems we are close enough to address: deficit spending is a problem today, that it might be a bigger problem in 2040 is a distraction from today's problem of overly generous government programs; especially the lie that SS will only start consting us money in 2017: all taxes are taxes, payroll and income taxes.

Again, when anyone ever utters the phrase "if current...trends continue as they do" they are usually making a fallacious argument.

1/11/2009 5:13:15 PM

Quote :

"The government should stop spending and dramatically cut welfare benefits (medicade, medicare, SS, etc)."

Unemployment benefits? Cause if that's on the block too, then I don't know what to say. I really don't know what to say about any of this unless you're going to encourage people to go private which is fine. You can't just say "cut all that shit" and not push people towards the private sector, it makes you sound like a sociopath.

Read the book. Warren Buffet's parts were the best. Paul Volcker is smart as usual. Ron Paul is...Ron Paul (time to put away the gold gin, grandpa).

[Edited on January 12, 2009 at 8:20 PM. Reason : .]

1/12/2009 8:19:30 PM

I just watched this movie tonight. I gotta say it's pretty depressing. At the end I was like "damn I need to get up and do something to solve this problem!!! this is going to end horribly!!!" Then i realized there really is nothing I can do about it...so I resorted to posting this sad addition on TWW.

3/7/2009 3:12:09 AM

^ that's about how my wife and i felt when we watched it last week

3/7/2009 2:13:06 PM

"huh huh... 69 billion..."

3/7/2009 2:18:00 PM

where can I watch the whole thing?

3/7/2009 4:55:50 PM

I'll just comment on the personal savings rate graph.

Given inflation it seems like the people that did save are getting screwed while the people that borrowed have a bit of silver lining. If you saved $10,000 it's not worth anywhere near as much as it used to be. If you owe $10,000 it becomes easier to pay off.

Of course it is always, always better to be in the black. And maybe it isn't easier to pay off the $10,000 in debt because salaries sure haven't risen commensurate to inflation over the past decade.

3/7/2009 5:30:51 PM

I peeped out the whole thing here...

http://www.megavideo.com/?v=QC8UV1IR

[Edited on March 7, 2009 at 11:13 PM. Reason : .]

3/7/2009 11:13:19 PM

^^ exactly how many people do you know who were able to borrow $1, much less $10,000, at an interest rate lower than inflation.....?

(personally, I have $4000 outstanding of a student loan at 2%. I'm not aware of rates that low for commercial credit for normal loans, though)

3/7/2009 11:24:18 PM

there's a lot of places that offer 0% financing.

3/8/2009 12:21:08 AM

Links?

3/8/2009 9:55:28 AM

For those of your in the Greensboro/Triad area:

IOUSA will be showing at UNCG on April 8, though I'm not sure where. It was mentioned in a newsletter I got recently from the Grad School here. I'll keep you posted.

I'm not sure if it's a part of the Concord Coalition's Fiscal Wake-Up Tour, but if so, expect a panel discussion involving experts and politicians. So far discussions at other schools have involved people from The Brookings Institute, The Heritage Foundation, former Treasury Sec. Paul O'Neil, Mel Martinez, John Glenn, George Voinovich, and others from both the Democratic and Republican parties.

http://www.concordcoalition.org/act/fiscal-wake-tour

[Edited on March 9, 2009 at 12:19 AM. Reason : .]

3/9/2009 12:18:49 AM

my bad, its actually on 4/20 (snoochie boochies)

3/23/2009 1:28:43 AM

There was an excellent econtalk podcast with Todd Zywicki of George Mason University Law School on the subject of debt and bankruptcy in American society.
http://www.econtalk.org/archives/2009/03/zywicki_on_debt.html

The point is that Americans have always made use of debt and that today's citizens are not behaving much differently than those that came before us. The only difference has been the rise of credit cards which has allowed us to dramatically improve competition by separating the act of purchasing goods from the provisioning of credit. No longer do you buy a refrigerator by paying $50 a month to the retail store, using pawn shops as lenders, or resorting to layaway plans. Now you put it on your credit card at a much lower interest rate due to competition among lenders to buy cheaper goods because retailers are forced to compete on price.

Quote: "What we see is that the growth in credit card credit has been a substitution from all these other motley forms of credit that consumers have had in the past. And the reason they have done it is because, although you think of credit cards as being expensive forms of credit, they really are much less expensive than a loan that you got when you bought a refrigerator or personal finance loan..."

[Edited on March 23, 2009 at 12:39 PM. Reason : .,.]

3/23/2009 12:29:30 PM

Quote :

"The point is that Americans have always made use of debt and that today's citizens are not behaving much differently than those that came before us. The only difference has been the rise of credit cards which has allowed us to dramatically improve competition by separating the act of purchasing goods from the provisioning of credit. No longer do you buy a refrigerator by paying $50 a month to the retail store, using pawn shops as lenders, or resorting to layaway plans. Now you put it on your credit card at a much lower interest rate due to competition among lenders to buy cheaper goods because retailers are forced to compete on price."

Don't get me wrong, I'm no anti-debt person. I actually told someone last week that I identify politically as a "Hamiltonian". I just think that we are looking at unprecedented foreign debt which could compromise our ability to have an active (but still limited) government promoting commerce (through the profound infrastructure challenges we face) and prosperity (which could be threatened by the consequences of record debt ie: higher taxes, a stressed safety net, etc).

The credit card trend always comes up as the tipping point in our attitudes about debt. I've always seen it moreso as a psychological boost to the consumer. Without the tangible dollar to spend, you think less about what other practical uses it could go to. Indeed, that credit card dollar doesn't exist at the time of purchase.

3/23/2009 6:32:44 PM