Announcement

Collapse
No announcement yet.

No correlation between deficit and dollar = weasel words

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • #16
    Re: No correlation between deficit and dollar = weasel words

    Originally posted by Finster
    I'm just saying here that to the extent there are tax receipts to cover spending, there is no deficit to begin with. Deficits are the difference between what the government spends and what it takes in in taxes - i.e. what it borrows. So taxes not an alternative to borrowing or inflation as a means of funding deficits.



    Not disputed; in fact that makes perfect sense. My point was an ancillary one - simply that deficits represent borrowed money, and that that money either has to be foregone by a real lender or created out of nothing (inflation). This is where are lot of that deficit money comes from - right from the thin air of the Fed and banking system. Consequently, we have had rampant inflation, as reflected in house prices, oil prices, etceteras.

    Cool... all better now.

    I was considering the possibility that I was being set up for a *finn*... ;)
    http://www.NowAndTheFuture.com

    Comment


    • #17
      Re: No correlation between deficit and dollar = weasel words

      Originally posted by bart
      Cool... all better now.

      I was considering the possibility that I was being set up for a *finn*... ;)
      Not this time at least ... you still have your get-out-of-finned-free card ... :cool:
      Finster
      ...

      Comment


      • #18
        Re: No correlation between deficit and dollar = weasel words

        Bart, I finally got around to thinking about your graph again. i'm just thinking this out, thinking "out loud" as it were, so i'd be interested in and open to feedback here. i'm trying to construct some theory based way to understand what you've shown:

        you show tic minus [trade deficit+ budget deficit] correlated with the dollar index. First, I’m curious if you tried current account deficit instead of trade deficit. I would imagine that current account wouldn’t be that different, but I’m wondering if it would be even better.

        Anyway, here’s a go at my thinking about this:

        Tic= net change in dollar based foreign portfolio investments. Important to note that this leaves out direct investment, e.g. daimler acquires chrysler.

        Let’s regroup tic-[trade+budget deficits] = [tic-trade deficit]-budget deficit

        Tic-trade deficit = net change in dollar based foreign portfolio investments – the number of dollars thrust into foreign hands via our trade [current account is more accurate] deficit. In order for foreign entities to acquire dollar portfolio investments greater than the trade deficit, the foreign entities must borrow dollars from u.s. domestic lenders. So tic-trade deficit represents excess foreign demand for u.s. dollar loans.

        The budget deficit represents excess domestic demand for u.s. dollar loans. This is a restatement of the “crowding out” description of the deficit.

        If foreign demand for u.s. dollar loans exceeds domestic demand for u.s. dollar loans, the value of the dollar rises. If domestic demand exceeds foreign demand, the dollar index falls. ta-da!

        Comment


        • #19
          Re: No correlation between deficit and dollar = weasel words

          Originally posted by jk
          Bart, I finally got around to thinking about your graph again. i'm just thinking this out, thinking "out loud" as it were, so i'd be interested in and open to feedback here. i'm trying to construct some theory based way to understand what you've shown:

          you show tic minus [trade deficit+ budget deficit] correlated with the dollar index. First, I’m curious if you tried current account deficit instead of trade deficit. I would imagine that current account wouldn’t be that different, but I’m wondering if it would be even better.

          Anyway, here’s a go at my thinking about this:

          Tic= net change in dollar based foreign portfolio investments. Important to note that this leaves out direct investment, e.g. daimler acquires chrysler.

          Let’s regroup tic-[trade+budget deficits] = [tic-trade deficit]-budget deficit

          Tic-trade deficit = net change in dollar based foreign portfolio investments – the number of dollars thrust into foreign hands via our trade [current account is more accurate] deficit. In order for foreign entities to acquire dollar portfolio investments greater than the trade deficit, the foreign entities must borrow dollars from u.s. domestic lenders. So tic-trade deficit represents excess foreign demand for u.s. dollar loans.

          The budget deficit represents excess domestic demand for u.s. dollar loans. This is a restatement of the “crowding out” description of the deficit.

          If foreign demand for u.s. dollar loans exceeds domestic demand for u.s. dollar loans, the value of the dollar rises. If domestic demand exceeds foreign demand, the dollar index falls. ta-da!
          http://www.nowandfutures.com/grins/crowd_cheer.wav :-)

          Nicely done, jk. Your way of looking at it is fine by me and aligns well with more conventional economic thinking too, and would also likely make more sense to those who prefer that view. Ye olde bottom line after all is having your own understanding and not blindly accepting some interpretation that doesn't work for you.

          You're also quite correct that TIC is far from a complete stat and its very possible and likely that if stuff like direct investment was included, the correlation would be even higher. Quite frankly, I was surprised when I put the original chart together and saw how high the correlation was with just the raw numbers.

          As far as using the current account deficit, it may very well be a touch more accurate but it has two severe problems that exclude it for my purposes - its only a quarterly stat and also has quite a large reporting lag after the end of a fiscal quarter.

          But here's the two charts from the Fed - they may help answer your question:








          I'm tempted to add your view as a subnote to the article after some very minor cleanup - if that is ok with you?
          http://www.NowAndTheFuture.com

          Comment


          • #20
            Re: No correlation between deficit and dollar = weasel words

            Originally posted by bart
            http://www.nowandfutures.com/grins/crowd_cheer.wav :-)

            Nicely done, jk. Your way of looking at it is fine by me and aligns well with more conventional economic thinking too, and would also likely make more sense to those who prefer that view. Ye olde bottom line after all is having your own understanding and not blindly accepting some interpretation that doesn't work for you.

            You're also quite correct that TIC is far from a complete stat and its very possible and likely that if stuff like direct investment was included, the correlation would be even higher. Quite frankly, I was surprised when I put the original chart together and saw how high the correlation was with just the raw numbers.

            As far as using the current account deficit, it may very well be a touch more accurate but it has two severe problems that exclude it for my purposes - its only a quarterly stat and also has quite a large reporting lag after the end of a fiscal quarter.

            But here's the two charts from the Fed - they may help answer your question:








            I'm tempted to add your view as a subnote to the article after some very minor cleanup - if that is ok with you?
            sure, it's ok with me.

            Comment

            Working...
            X