Us Shut Down

[narsayya]

intaku mundu vere topic lo post chesindi alage ikkada paste chesthunnanu

[color=#282828][font=helvetica, arial, sans-serif]First US govt has many commitments, payments to make to employees, contractors, social security payments etc. It also has revenue from income taxes, capital gains taxes, corporate taxes, etc..[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]So when they draw up a budget, and allocate their revenues to education, health, which may increase the cash outflow compared to cash inflow. That's called budget deficit.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]They can fund this budget deficit by 1.increasing taxes 2. printing their own money 3. borrowing money.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]The current financial system works in a way that sees borrowing money as the better of all options. But who to borrow from? and why is borrowing better than other options?[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]1. the govt borrows money from itself, or from social security funds, banks. The way they do this is by issuing govt backed bonds at a certain interest rate, say 2%. This means the social security fund is paid 2% returns every year thus securing a stable revenue stream for the future payments to retirees and other savers. (this is one of the reasons why govt borrows money, so they can help the retirees).[/font][/color]
[color=#282828][font=helvetica, arial, sans-serif]Some banks, foreign govts, and even you(an individual investor) can also buy those bonds and fund the govt's plans. ok na.[/font][/color]
[color=#282828][font=helvetica, arial, sans-serif]2. sometimes the Federal reserve itself buys the bonds, by printing money and directly infusing it into the govt. [/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]the legislators fixed a ceiling of how much debt US can take as a percentage of GDP or revenue, etc.., and it has been revised many times in the past decade. This crisis is similar to the earlier crisis.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]The question is, whether the govt should take on more debt or control their spending. If it controls spending, allocation to health care, education will all be cut accordingly. If it takes more debt, it'll have to take on more debt to service it in the future.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]The US govt can solve this by taking federal reserve into control and printing the money themselves, so they don't have to pay interest to others. But it means that all those social security funds, pension funds will have no safe investible assets. [/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]So by borrowing US govt is providing safe investments to the capital sector, which helps in money circulation. Excess debt is not a problem as long as dollar is the reserve currency in the world, and other countries and individual investors are lining up to buy govt bonds. They can simply keep borrowing. [/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]In case of a default, govt will fail to make payments to social security funds (which is the highest holder of US debt), and several pension funds (which collectively own 32% of US debt), and also China, Japan who are major investors in US bonds. This may increase the interest rates for such a borrowing in the future. Which means the interest payments will rise leading to issuing more bonds to service the debt. It becomes a vicious cycle.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]Also when bond rates increase, it'll increase other loans in the system, like home loans, personal loans, industrial loans etc. So these are the people that'll be hit by the default. [/font][/color]

[Vaampire]

[quote name='Kottukusaavandi_01' timestamp='1381861762' post='1304418538']
Thanks...
[size=4]Two more questions....[/size]
[size=4]1. Ippudu critical Fed employees ki sal ekkada nunchi isthunnaru...?[/size]
2. Deal set kakapothey Default antunnaru kada..what does that mean..? what could be the consequences...? I know default means violating the debt agreement... US govt is responsible for whom..? for the countries they owe money to..?
[/quote]
critical fed employees ki salary antey. treasury lo koncham dabbulu untayi kada. avi use chestharu. vallaki salaries ivvadam kosam rules pedhaga follow avvalsina avasaram ledhu. endukantey republicans kaadu kada evadu question cheyyaru daani gurunchi. critical fed employees services antha important.

2. default antey naaku kooda pedha idea ledhu. consequences antey emaina avochu. another big recession a big possibility.
deal set kakapothey china lanti money lenders antha easy gaa loan ivvakapovochu. endukantey future lo republicans win avuthey they may not take responsibility for this debth.

[salsa]

[quote name='narsayya' timestamp='1381861848' post='1304418551']

public debt is $17 trillion undachu..

inka credit card, corporate debts anni add chesthe $70trillion ravachu..

most of the debt is held by social security fund, pension funds, some of it by china, japan, saudi..

recently a lot of debt is held by federal reserve itself.

it means that federal reserve[b] prints the dollar, and buys govt bonds[/b] with it.. and gets interest on it every year from the govt. This is somewhat strange, but mostly designed to keep politcal interference into monetary policy to the minimum
[/quote]

$s print cheyalante gold pettanakkarledu kada vellu? just let me know if i am taking this as wrong.

[narsayya]

[quote name='salsa' timestamp='1381861987' post='1304418571']

$s print cheyalante gold pettanakkarledu kada vellu? just let me know if i am taking this as wrong.
[/quote]

avasaram ledhu.

[Vaampire]

[quote name='narsayya' timestamp='1381861344' post='1304418440']

it is china which voluntarily buys US bonds. US doesn't have to bow before anyone for money.[b] It owns its currency and can print based on its requirements.[/b]

China is immaterial to this whole equation. where else will china invest its money.. No other country provides the kind of huge investment for their excess trade money than US doees.
[/quote]
its own its currency ani cheppi istam vachinattu dollars print cheyyaru bhayya. mana india rupee print cheyyali antey equal amount gold undali. US ki aa avasaram ledhu. they can print any number of $$ on their wish. kakapothey ala lekha lekunda print chesthey $ value padipothadi international market lo. which will be very dangerous for the progress of the country.
china ani just okka example cheppina bhayya. loan ki vere sources kooda unnayi

[salsa]

ila vellu print chesukuntu pote .... $ equals to a waste paper in near future?

[narsayya]

[quote name='Kottukusaavandi_01' timestamp='1381861762' post='1304418538']
Thanks...

Two more questions....

1. Ippudu critical Fed employees ki sal ekkada nunchi isthunnaru...?
2. Deal set kakapothey Default antunnaru kada..what does that mean..? what could be the consequences...? I know default means violating the debt agreement... US govt is responsible for whom..? for the countries they owe money to..?
[/quote]

1. treasury lo dabbulu leka kaadu ee shutdown.. like i said, the budget deal hasn't passed and govt has no legal liability to pay for people who it doesn't have to for the year 2013-14. essential services ki emi dhoka ledhu

2. default chesthe.. US bonds ki higher interest rate ivvalsi vasthundi for the next set of bond buyers, coz koncham uncertainty vochindi kaabatti. This means higher interest should be paid every year, and more money has to be printed.. which is a vicious circle.

as long as there's equal amount of goods,services produced as the amount of money in circulation, this kind of printing isn't a problem. anyway most of the money printed is not in the public market (like in building infra, financing health plans, or other federal programs). Most money printed by federal reserve is hoarded by banks, investment funds, along with social security funds, who get interest for it from the US. If the money floods the public market, like it did during the housing bubble of 2007, then there's a problem.

[narsayya]

[quote name='Vaampire' timestamp='1381862141' post='1304418599']
its own its currency ani cheppi istam vachinattu dollars print cheyyaru bhayya. mana india rupee print cheyyali antey equal amount gold undali. US ki aa avasaram ledhu. they can print any number of $$ on their wish. kakapothey ala lekha lekunda print chesthey $ value padipothadi international market lo. which will be very dangerous for the progress of the country.
china ani just okka example cheppina bhayya. loan ki vere sources kooda unnayi
[/quote]

US doesn't require china.. its china that requires US.. atleast as of now.

[Anta Assamey]

[quote name='narsayya' timestamp='1381862779' post='1304418725']

US doesn't require china.. its china that requires US.. atleast as of now.
[/quote]

I think both of them require each other equally... atleast looking from a trade point of view... Production and Consumers kada

[Picha lite]

[quote name='narsayya' timestamp='1381861897' post='1304418556']
intaku mundu vere topic lo post chesindi alage ikkada paste chesthunnanu

[color=#282828][font=helvetica, arial, sans-serif]First US govt has many commitments, payments to make to employees, contractors, social security payments etc. It also has revenue from income taxes, capital gains taxes, corporate taxes, etc..[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]So when they draw up a budget, and allocate their revenues to education, health, which may increase the cash outflow compared to cash inflow. That's called budget deficit.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]They can fund this budget deficit by 1.increasing taxes 2. printing their own money 3. borrowing money.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]The current financial system works in a way that sees borrowing money as the better of all options. But who to borrow from? and why is borrowing better than other options?[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]1. the govt borrows money from itself, or from social security funds, banks. The way they do this is by issuing govt backed bonds at a certain interest rate, say 2%. This means the social security fund is paid 2% returns every year thus securing a stable revenue stream for the future payments to retirees and other savers. (this is one of the reasons why govt borrows money, so they can help the retirees).[/font][/color]
[color=#282828][font=helvetica, arial, sans-serif]Some banks, foreign govts, and even you(an individual investor) can also buy those bonds and fund the govt's plans. ok na.[/font][/color]
[color=#282828][font=helvetica, arial, sans-serif]2. sometimes the Federal reserve itself buys the bonds, by printing money and directly infusing it into the govt. [/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]the legislators fixed a ceiling of how much debt US can take as a percentage of GDP or revenue, etc.., and it has been revised many times in the past decade. This crisis is similar to the earlier crisis.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]The question is, whether the govt should take on more debt or control their spending. If it controls spending, allocation to health care, education will all be cut accordingly. If it takes more debt, it'll have to take on more debt to service it in the future.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]The US govt can solve this by taking federal reserve into control and printing the money themselves, so they don't have to pay interest to others. But it means that all those social security funds, pension funds will have no safe investible assets. [/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]So by borrowing US govt is providing safe investments to the capital sector, which helps in money circulation. Excess debt is not a problem as long as dollar is the reserve currency in the world, and other countries and individual investors are lining up to buy govt bonds. They can simply keep borrowing. [/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]In case of a default, govt will fail to make payments to social security funds (which is the highest holder of US debt), and several pension funds (which collectively own 32% of US debt), and also China, Japan who are major investors in US bonds. This may increase the interest rates for such a borrowing in the future. Which means the interest payments will rise leading to issuing more bonds to service the debt. It becomes a vicious cycle.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]Also when bond rates increase, it'll increase other loans in the system, like home loans, personal loans, industrial loans etc. So these are the people that'll be hit by the default. [/font][/color]
[/quote]

Awesome post Narasayya, thank you

[bio]

[quote name='narsayya' timestamp='1381861897' post='1304418556']
intaku mundu vere topic lo post chesindi alage ikkada paste chesthunnanu

[color=#282828][font=helvetica, arial, sans-serif]First US govt has many commitments, payments to make to employees, contractors, social security payments etc. It also has revenue from income taxes, capital gains taxes, corporate taxes, etc..[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]So when they draw up a budget, and allocate their revenues to education, health, which may increase the cash outflow compared to cash inflow. That's called budget deficit.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]They can fund this budget deficit by 1.increasing taxes 2. printing their own money 3. borrowing money.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]The current financial system works in a way that sees borrowing money as the better of all options. But who to borrow from? and why is borrowing better than other options?[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]1. the govt borrows money from itself, or from social security funds, banks. The way they do this is by issuing govt backed bonds at a certain interest rate, say 2%. This means the social security fund is paid 2% returns every year thus securing a stable revenue stream for the future payments to retirees and other savers. (this is one of the reasons why govt borrows money, so they can help the retirees).[/font][/color]
[color=#282828][font=helvetica, arial, sans-serif]Some banks, foreign govts, and even you(an individual investor) can also buy those bonds and fund the govt's plans. ok na.[/font][/color]
[color=#282828][font=helvetica, arial, sans-serif]2. sometimes the Federal reserve itself buys the bonds, by printing money and directly infusing it into the govt. [/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]the legislators fixed a ceiling of how much debt US can take as a percentage of GDP or revenue, etc.., and it has been revised many times in the past decade. This crisis is similar to the earlier crisis.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]The question is, whether the govt should take on more debt or control their spending. If it controls spending, allocation to health care, education will all be cut accordingly. If it takes more debt, it'll have to take on more debt to service it in the future.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]The US govt can solve this by taking federal reserve into control and printing the money themselves, so they don't have to pay interest to others. But it means that all those social security funds, pension funds will have no safe investible assets. [/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]So by borrowing US govt is providing safe investments to the capital sector, which helps in money circulation. Excess debt is not a problem as long as dollar is the reserve currency in the world, and other countries and individual investors are lining up to buy govt bonds. They can simply keep borrowing. [/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]In case of a default, govt will fail to make payments to social security funds (which is the highest holder of US debt), and several pension funds (which collectively own 32% of US debt), and also China, Japan who are major investors in US bonds. This may increase the interest rates for such a borrowing in the future. Which means the interest payments will rise leading to issuing more bonds to service the debt. It becomes a vicious cycle.[/font][/color]

[color=#282828][font=helvetica, arial, sans-serif]Also when bond rates increase, it'll increase other loans in the system, like home loans, personal loans, industrial loans etc. So these are the people that'll be hit by the default. [/font][/color]
[/quote]

Terrific post, ok now that we understood how the us economy works, what do you think about the world bank employees who made comments on the hawain gold reserves, these r the comments, in order to pacify the economical crisis, the us govt will mint down the hawain gold reserves. meeru cheppe scenario lo gold ki prominence ledu, if thats the case then y did they pass such comments??

[narsayya]

[quote name='salsa' timestamp='1381862231' post='1304418620']
ila vellu print chesukuntu pote .... $ equals to a waste paper in near future?
[/quote]

most of the printed dollars are hoarded by the banks, and never see the light of the day. There's no danger of $ being devalued in the near future atleast.

[bio]

@ narsayya, why have u said that investment on gold should'nt be considered on the long run??

[Anta Assamey]

Social Security Funds are Controlled by Federal Reserve Right ?

[narsayya]

[quote name='bio' timestamp='1381863732' post='1304418867']
@ narsayya, why have u said that investment on gold should'nt be considered on the long run??
[/quote]

gold is essentially a useless metal, except may be in very tiny amounts as insulator in electronics.

Just track 30yr price of gold, and compare it with other assets like real estate, blue chip stocks.. you'll have your answer. and its too volatile to be held as a long term asset. short term is okay.

but I agree that gold is a very liquid asset, and it helps to have a little bit of gold for emergencies. But not too much.