Comments | jpmassar: Another Fine Mess You've Gotten Us Into

jpmassar

Another Fine Mess You've Gotten Us Into

Sep 02, 2011 08:37

From today's employment and unemployment reportsNo net increase in the number of jobs ( Read more... )

unemployment, lies-damned-lies, economy, another fine mess, economics

Comments 6

hgfalling September 2 2011, 17:34:30 UTC

blah blah negative real interest rates blah blah

I bet you also thought it was a no-brainer for those $20k a year gardeners to have $800k loans on their houses. I mean, they were willing to lend it to them at low rates in perpetuity, right?

jpmassar September 2 2011, 18:00:39 UTC

That's unbelievably stupid on so many levels that I'm surprised you would say it and I am not even going to dignify it with an answer.

jpmassar September 2 2011, 19:16:01 UTC

Let me just clarify that to say that I would in general be surprised you would say anything even marginally stupid ever and am thus extremely surprised at your question.

hgfalling September 3 2011, 00:42:49 UTC

All right, I was being flippant. But I have heard this "rates are really low zomg it's stupid not to borrow a lot and stimulate the economy!" from left-leaning commentators all over the place. I think this is a perilous idea ( ... )

jpmassar September 3 2011, 16:25:13 UTC

2) Say the ten-year Treasury is at 2%. That's not forever. In fact, it's not even a very long time. And there is a lot of reason to believe that rates will be a lot higher in ten years, when it comes time to roll over that debt. So the bar for "we should borrow" isn't set at "we can make 3% and borrow at 2%." It should be much higher than that. That should be the central lesson of the recent credit crisis, that businesses (or governments) who are heavily leveraged in short-term debt are extremely vulnerable.Well, I don't claim to understand exactly what the markets are saying the 10-year treasury bond rate will be ten years hence. But I imagine that it must be pretty low. I don't see any reason to assume that "there is a lot of reason" to assume the rate will be higher than what the market is saying it will be. The best guess of what it will be is what the market is predicting right now. It's obviously subject to variance, but the EV is what it is. The government is a very big entity. It should be willing to bet on that with very ( ... )

jpmassar September 3 2011, 16:51:51 UTC

Even if we are "in the preliminary states of a very real debt crisis" -- a point which I am sure many economists disagree on and which I am in no position to evaluate, it would still be necessary to balance the current suffering (economic, psychological, health) of six million people who are 'unnecessarily' unemployed (compared to a 5% rate) with the possibility of a debt crisis and its effects ( ... )