主题：【原创】数字来说话--为子玉兄的美元理论做注解 -- 种植园土

will come and must come.

1. Bush tax cut will expire. All rates will come up automatically, on capital gains as well as ordinary income. Currently, we only get one-year extension.

Obama will have to raise tax after election. If he does not, the next Republican president will have to do it--esp., if there is strong pressure from Europe with its competing currency.

Last time it was Bush Senior who raised tax after election. His campaign slogan is "Read my lips: No new taxes". And finally he still raised taxes in a desperate fight against German Mark in late 1980s.

--And he is a die-hard REPUBLICAN. Today's republicans are just performing political show.

2, tax code reform: mostly in various tax expenditures--it is a very technical term, and it is NOT gov. spending.

Congress has put various tax incentives on the table for cut. One is the mortgage interest deduction--it is like a tax shelter for rich Americans. To eliminate this tax expenditure itself, you will save 100b in 2010 and around 140b(in 2013), according to some Treasury studies.

100b is 1/14 of the 1.4t deficit here.

BTw, we can also eliminate the tax deduction for home equity line of credit. Another "tax expenditure" there to encourage excessive living.

BTW, Congress can also eliminate the State Income tax deduction. Another "tax expenditure" hidden in Schedule (not in the form per se). Another 20-40b every year in tax revenue saving.

If you consult your tax accountants, you will see many tax loopholes are there in the US income tax code. Some are kept there intentionally, some are results of mistakes by legislators (e.g., 401(k)).

If you want to raise tax revenue, filling in these "small holes" can save you tons of money.

Another trick: eliminate DEDUCTIONS and converted them into 10-15% tax credits. Very small technical change, but bring in at least another 100 billion of additional revenue from RICH AMERICANS.

Canadian gov. first introduced that dirty trick in late 1980s (under Mulroney gov.) to balance budget. Hehe, very very smart--because it only hurts the rich families, WITHOUT EVEN RAISING any marginal tax rate.

3. 美国联邦政府：财政支出3.6万亿美元，财政收入2.2万亿，赤字1.4万亿美元；

--very good point. But annual deficit will not always be 1.4t--that's a recession year data.

大项支出包括：军费7000亿，政府医疗计划8200亿，社会福利7200亿；

--According to David Walker, former GAO head, the most serious challenge to budget is actually medicare Prescription D). You should focus on that part--That's a true cancer. American gov. will have to eliminate the lobbying from AARP(老不死协会) and DRAMATICALLY CONSTRAIN/cut Prescription D benefit--that's also David Walker's main target.

Welfare will be cut and Democrats will give concessions soon--just wait and watch the news.

国债余额14.35万亿美元，占GDP比例98%。

--98%. This number depends on definition, and various calculations will give you various ratio. Net debt/GDP ratio will be lower (gov. is using social security surplus to buy gov. debt since Clinton Administration). USA still has large social security surplus every year now (on the contrary--Shanghai gov. is now has large deficit from its SS fund and need to allocate ANNUAL OPERATING BUDGET money to pay pension to average Shanghainese. My parents are just some of those receivers. You just need to read the news in Chinese--my point--Shanghai's SS is in even worse shape).

As Hullo said, US's advantage: 二是最不坏. So compared with most EU nations, in terms of debt/GDP ratio under OECD definition, only Germany is better. France and UK are close. All others are worse than America (actually Spain has lower debt/gdp ratio--but its treasury yield curve is heading towards disaster now).

利率每上涨1%，美国联邦政府利息支出增加1435亿美元。

--Very good point! Actually, American financial elites already worried about that since 2007. Greenspan has made it very clear: 10year note rate above 5%, absolute disaster for America.

My estimation: 4.5% is already red zone and 4% is warning level.

Next Question: Can American Fed/banking elites manage this 10year rate below those thresholds to avoid squeeze on US gov.--based on past 3 year record, I will say I have confidence in their "dirty" tricks.

http://finance.yahoo.com/q/bc?s=^TNX&t=5y&l=on&z=l&q=l&c=

When the rate touches 4%? woow, early 2010. Then Euroland crisis starts. Do not worry--global capital will be scared into holding US treasury bonds for a while with a slow drama in Euroland. It will be in America's best interests, if the Euro drama played for another 2 years--and it will, because all Europeans are kicking the can along the road.

ECB knows clearly that Euroland's problem needs POLITICAL solution from Germany and Germany WILL NOT OFFER it (last time Germany also sabotaged European exchange system in 1992 by behaving selfishly and crashed Italian/Finnish/UK/French currencies). History is just a lesson and IT REPEATS. Just watch the current German PM.

Key tip: Portugal, Greece, Ireland, Italy are all on the road to banking destruction. Spain--may be the 2nd stage candidate. Key: check their treasury yield spread. You are smart, you will figure out what I mean. (BTW, a recession is also looming in Brazil. It will come. There are too many bubbles in so-called emerging markets.)

As we enjoy our chat in North America, thousands of Portugals/Greeks/Irishmen/Italians/Spaniards are driving their hard-earned CASH into Germany/Switzerland and UK...The implosion of PIIG's banking system is happening day by day. When Big Bangs finally arrive, Europeans will be shocked to see that all their rich people have fled to America/Canada/Norway/Some Asian nations/Switzerland, together with their massive capital...

Key statistic: interest cash outflow/budget revenue when you analyze sovereign debt status. Absolute number is not meaningful. In 2010, the US fed gov. debt service rate is around 9%. Still quite safe, as good as Canada. Canada is now a AAA nation.

4. 州及地方政府：财政支出3.3万亿美元，财政收入2.3万亿美元，赤字1万亿美元，债务余额3万亿美元。

--Absolute numbers do not make sense. Debt/GDP ratio is key--as 井底望天 always say. Another key indicator is interest expense/total budget revenue. Most states are required by state constitution to balance the budget, and their debt issuance capacity is often limited. But if those state gov. change constitutions, then some problems will go away.

Let me pick one state you might live in (NJ) and then compare with another Province in Canada (where there is MUCH MORE BUDGETING FLEXIBILITY TO PROVINCIAL gov.). I only have data up to 2009.

Moody09Rating Pop GDP debtfromDeficits/gdp

New Jersey AA- 8.7m 474.9b 10.8%

Quebec (CA) AA 7.5m 284.9b 32.4%

My point: a richer province in States with MUCH LESS debt load has EVEN LOWER credit rating than a well-known debt-ridden Canadian province! If you read US newspaper about the state budget crisis in NJ as claimed by its popular FAT governor, you will easily believe that NJ is hopeless... While it is more a show by the governor--NJ has large capacity to borrow. And its current annual interest exp/tax revenue is only around 2% (in Quebec, it is 15%-excluding fed free money).

BTW, I forget to mention that according to OECD definition, Quebec's Total Debt/GDP ratio(if federal debt allocated to the province) is 94% in 2009. ONLY the following nations/provinces have Debt/GDP ratios higher than it.

1. Japan 172%

2. Italy 114%

3. Greece 102% (we now know this number is a BIG LIE)

4. Iceland 96.3%

Last time when I was in Quebec (early this year), people were cheerful and in party mood. Crisis? Not one single Quebec Canadian believes it...

Summary: When you list data, you need to use KEY STATISTICs.

5. 政府财政总支出（联邦、州、地方）占GDP比例46%，政府财政赤字占GDP比例16.2%。

--one year data. Not the same for next 10 years. And adjustments are coming: crack on public sector unions, cut on education budget, hike for tuition...

6. 石油进口每年耗费4600亿美元。

--very good point!!! Short term solution: shale gas movement (Please drive to Pennsylvania, North Dakota, Colorado...)

--America still needs to control mid-east and suck the cheap oil from them

--Only hope is energy revolution.

7. 其中个人债务16万亿美元，每家庭债务20万美元。金融危机以来，美国储蓄意识增强，每家庭平均储蓄余额达到6000美元。

--American family now has the same debt rate compared with Canadian family (Canadian trends up and American trends down). Both are still in orange zone, not red zone. Most lending rates hinges on 10-year treasury rate--let's wait and see how Wall Street play magic.

8. 更糟糕的是，由于大量baby boomer进入退休潮，预计医疗保险体系及社保体系亏欠资金的现值达到115万亿美元

--David Walker is lobbying Congress heavily now, so are some wise men from previous administrations. 医疗保险体系--as I said, key is the Prescription D benefit. Cut MUST COME!! Curse the AARP!

社保体系亏欠资金--is a joke, based on various assumptions. It is not a problem at least for another 15 years. America is still enjoying annual surplus now.

And elites are playing dirty with "SS contribution base". check this,

http://en.wikipedia.org/wiki/Social_Security_Wage_Base

key column: wage base--very very trick American gov. It never changes the rate, 6.5%!

Other tricks that could be used:

increase retirement age;

tightening qualification to receive benefits;

eliminate inflation indexing;

intentionally using underestimated inflation index for adjustment (1970s).

Buddy--those elites are dirtily smart.

7. 不贬值不通胀，如何支付债务？

--definitely inflation will come. Inflation is Fed's best friend. But it must be mild, not runaway ones. 1970s will revisit America. That's why I am buying gold and do not trust dollars.

如何支付债务？--if the world is turbulant enough (and will be given the forthcoming Euro debt crisis), then printing new money to repay old debt is not too difficult. Currently, it is clear that Japan and China will not commit suicide by dumping dollars, so wait and see how it plays out.

贬值通胀--is coming all to nations. All fiat currencies are trash, some are more trash-like. And all fiat money depreciated against gold in the last 10 years. Some depreciate more against pork, such as our beloved RMB, ^-^.

If we are not president/prime minister, the correct question one should ask: HOW TO PROTECT MY PURCHASING POWER AND MY WEALTH in this dangerous world??

9. 如果通胀，又怎么维持美元币值的稳定？

--ever since we have the fiat system, 币值的稳定 is a joke. It is never in the FEd mandate. Fed's mandate is to stimulate economic growth and fight against "inflation".

Who defines inflation? The U.S. gov.!! In China, it is the Chinese gov.

US gov. intentionally CHANGED THE DEFINITION OF BOTH UNEMPLOYMENT RATE AND INFLATION under Ronald Reagon in early 1980s!! Why people do not check the history? It is there.

US CPIs in 2007 were all jokes. Actually all CPIs since early 1980s are jokes.

So is China's recent CPI reading! (oh, my god, I should self-censor myself by giving this line. 你的帖被举报2.1.4 涉嫌恶意损害、诽谤中伤、诋毁他人声誉；散布谣言。--but is that truly a 诽谤???).

Key: Fed is intentionally managing a slow inflation process. It is playing all dirty tricks to hide the truth: mild inflation is eating away American's purchasing power EVERY DAY. 币值的稳定 IS A JOKE EVER SINCE THE GREAT PRESIDENT PRESIDENT REMOVED USD FROM GOLD STANDARD AND DEPRECIATED IT BY AROUND 30% in early 1930s!

It is there in the history.

10, 如果人民生活水平急剧下降，华尔街最憎恶的一人一票民主制度下，会如何反应？

--人民生活水平急剧下降--人民生活水平下降 happened and is happening. Necessary cost after a crazy credit expansion. It happened in 1970s, during the high inflation-high unemployment period.

US gov. can only alleviate the pain of average Joes(prolonging unemployment benefits). Pain in recession is inevitable, it is a necessary evil in a business cycle. Most previous credit crisis in States history resulted in 5 year of stagnation on average (I mentioned that in another post). This round of recession is very mild compared with the history.

--The mass voters are easy to manipulate. Anyway, monetary policy is not in their control, not even in Congress control. Never mind.

--一人一票, no, president is decided by causus vote, not popular vote. Al Gore won popular votes by large margin, but still lost to Bush.

You know that clearly, so I guess your comment is purely out of emotion.

As founding father Benjamin Franklin said before, America is a republic and NOT a democracy. Americans just have the illusion that they have voting power to change. They do not. In early years, presidents were voted by Congressmen and senators.

Voters have put blah-blah talker Obama there. Anything change in Washington? hehe.

11. 大力缩减军费--Yes, America must do that.全球后果, while if all capital flow back to America and America returns back to late 1990s, shining again with POLITICAL STABILITY and new innovation financed by those "foreign investors", it is not bad for America.

Rule 1. Americans are selfish, very selfish. Americans maintain global order not for fairness, but for its own interests.

So should or were Chinese in Asia.

Rule 2. America has two oceans and two allies around it.

Final comment: we are both smart. As I said before, where talents put their ass signaled to you where they believe will provide best return/safety and growth opportunity.

子玉 despict America like a hell, an empire to collapse in the next year. It is not surprising to me since he has put his ass in China. 因为大部分人的观点都是跟屁股有关 (of course including me)，能够超越屁股看问题的智者这个世界不太多。(zt from Blah blah)

But I am surprised that you chose NY and are still so pessimistic about dollar. To be frank, in the next 5 years, the most worry-free currency will be the dollar in North America (US and Canada--anyway, two closely linked nations with closely linked currencies).

Final advice: buy gold for your pension account. Do not sit on cash only. Do not trust ANY gov., because any gov. is a liar. All of them are going to use inflation to rob you off, some are more aggressive, such as 津巴布韦, some are still pretending, such as US gov. and China gov.

In the end, it is your SAVINGS AND PENSION NET EGGS, that will guarantee a cheerful and happy retirement life for you. Patriotism will not pay your retirement benefits and medicare bills, esp., according to the historical performance in one Asian country.

Of course, if you are the big boss as the PM, president, minister, then your life will be different. Thumbs up here.

经济预测的东西，可以当作心灵鸡汤文章来看，那篇看了感觉好，干活特别有力气，生活特别有兴味，就多看看，至于真相如何，反正最后咱们都要死的，干吗不得过且过活得开心点。(zt)

--hehe, relax for fun.

BTW, only robust economic growth will save America, as well as its federal and state fiscal situations. And such growth can only be pushed by technological breakthroughs. We have to live with 10 years of global turmoil.

wait and see.

• key word, 4.5%