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Will Obama win or lose the election

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leanlifter1
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Response to Will Obama win or lose the election 2012-10-10 16:20:18

At 10/10/12 04:16 PM, TheMason wrote:
At 10/9/12 06:18 PM, leanlifter1 wrote: All Taxes are unconstitutional and literally against the law that is until they rewrote the law book to suite the need's of the Fascist Nationalist agenda. See it's a fairly simple philosophy in Taxing the middle class until it disappears.
I did a text search of the Constitution for the term 'tax' and cut and pasted the relevent passages here. But pretty much...taxes ARE constitutional.

and you never once thought for even a moment that they might have re ratified the rule book to suite there agenda. Keep drinking the koolaid.


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TheMason
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Response to Will Obama win or lose the election 2012-10-10 16:48:11

At 10/10/12 04:20 PM, leanlifter1 wrote:
At 10/10/12 04:16 PM, TheMason wrote:
I did a text search of the Constitution for the term 'tax' and cut and pasted the relevent passages here. But pretty much...taxes ARE constitutional.
and you never once thought for even a moment that they might have re ratified the rule book to suite there agenda. Keep drinking the koolaid.

1) Extraordinary allegations require extraordinary proof. If you have some sort of proof...please present it.

2) The correct terms would be 'edited' or 'amended' instead or 're ratified' [sic]. Also a true intellectual would know it is suit instead of suite and their instead of there.

3) The majority of what I cut & paste was from the text of the Constitution...not any admendents. Only the 16th Amendment was ratified after the original Constitution.


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Feoric
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Response to Will Obama win or lose the election 2012-10-10 17:46:44

At 10/10/12 04:02 PM, TheMason wrote:
At 10/9/12 08:45 PM, Feoric wrote: What makes you think the national debt is meant to be repaid? The government doesn't manage finance like a household.
Yes...the US government is a legalized Ponzi Scheme.

Oh come on man....I thought you were smarter than this.

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Response to Will Obama win or lose the election 2012-10-10 17:52:05

At 10/10/12 05:46 PM, Feoric wrote:
At 10/10/12 04:02 PM, TheMason wrote:
At 10/9/12 08:45 PM, Feoric wrote: What makes you think the national debt is meant to be repaid? The government doesn't manage finance like a household.
Yes...the US government is a legalized Ponzi Scheme.
Oh come on man....I thought you were smarter than this.

And while yes, there are some differences between households and the federal finances, I thought you were smarter than your post indicates. :)


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Response to Will Obama win or lose the election 2012-10-10 18:58:45

At 10/10/12 04:02 PM, TheMason wrote: But here's a huge problem: CHINA. At some point they are going to want their money back...and at the same value they lent it to us (ie: not in dollars whose value has been deflated). Things are not going to be pretty when China turns us over to their collections agency. There will be a day of reckoning.

I.....

China and Hong Kong hold about 7.5% of the U.S. debt. That's all. The debt China owns is just an agreement which is this: "you give us $x today (buying the bonds), and we'll give you $y every six months for z-years (interest), and then give you $x back at the end of those years (bond maturation)". It's really that simple. That's how bonds work. It's not some power transfer that can be used to force the US Government to do anything. China having X% of our debt does not give them any sort of leverage over us. It's actually in China's best interest to keep the US economy healthy, as they depend on those interest payments from their investments in US treasuries to support their social programs and infrastructure projects to keep their population happy. China should be the one worried, not us.

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Response to Will Obama win or lose the election 2012-10-11 09:20:28

At 10/10/12 06:58 PM, Feoric wrote: China and Hong Kong hold about 7.5% of the U.S. debt. That's all. The debt China owns is just an agreement which is this: "you give us $x today (buying the bonds), and we'll give you $y every six months for z-years (interest), and then give you $x back at the end of those years (bond maturation)". It's really that simple. That's how bonds work. It's not some power transfer that can be used to force the US Government to do anything. China having X% of our debt does not give them any sort of leverage over us. It's actually in China's best interest to keep the US economy healthy, as they depend on those interest payments from their investments in US treasuries to support their social programs and infrastructure projects to keep their population happy. China should be the one worried, not us.

I know how bonds work, and yes it is that simple.

I also know how the Chinese government...excuse me; Chinese Communist Party...works and how they define their self-interest. They are terrified of unrest, and therefore they are terrified of fluctuations in their domestic economy. Deflating the value of the dollar, considering China pins the value of its currency on ours, causes their economy to experience inflation.

One of the things that policies like Quantitative Easing does is causes deflation, therefore effecting China's currency. That 7.5% will be paid back in dollars that are not worth as much as the dollars they invested in our bonds. They are getting shafted, which then inspires bad trade behavior. Beijing understands this principle...it seems the American Left does not.


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Response to Will Obama win or lose the election 2012-10-11 11:09:39

At 10/11/12 09:20 AM, TheMason wrote: They are getting shafted, which then inspires bad trade behavior. Beijing understands this principle...it seems the American Left does not.

You kidding?! China LOVES the US debt. The US debt that China holds allows China to lower its currency value and undercut the rest of the world. If China were to ask for the US to pay back its debt, they would be crippling their exports, and thus destroying their economy. China's ownership of our debt is of no worry to us at all.

leanlifter1
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Response to Will Obama win or lose the election 2012-10-11 11:29:18

At 10/11/12 11:09 AM, Camarohusky wrote:
You kidding?! China LOVES the US debt. The US debt that China holds allows China to lower its currency value and undercut the rest of the world. If China were to ask for the US to pay back its debt, they would be crippling their exports, and thus destroying their economy. China's ownership of our debt is of no worry to us at all.

Until China stops sending the 90% of the goods you Americans take advantage of everyday.


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Response to Will Obama win or lose the election 2012-10-11 12:48:08

At 10/11/12 11:09 AM, Camarohusky wrote:
At 10/11/12 09:20 AM, TheMason wrote: They are getting shafted, which then inspires bad trade behavior. Beijing understands this principle...it seems the American Left does not.
You kidding?! China LOVES the US debt. The US debt that China holds allows China to lower its currency value and undercut the rest of the world. If China were to ask for the US to pay back its debt, they would be crippling their exports, and thus destroying their economy. China's ownership of our debt is of no worry to us at all.

Sorry...but you're grossly underinformed here. The global financial crisis has shaken their faith in getting into bed with us. Further policies such as QE3 has effected the value of their currency domestically. Leaders of the CCP are nervous about our financial health and policies. You're thinking sooo 2007. :)


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leanlifter1
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Response to Will Obama win or lose the election 2012-10-11 13:20:36

At 10/11/12 12:48 PM, TheMason wrote:
Sorry...but you're grossly underinformed here. The global financial crisis has shaken their faith in getting into bed with us. Further policies such as QE3 has effected the value of their currency domestically. Leaders of the CCP are nervous about our financial health and policies. You're thinking sooo 2007. :)

I agree although I have not done research on the "QE3" I wholeheartedly agree on the getting into bed part LOL and the old way of thinking 07 and prior.


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Response to Will Obama win or lose the election 2012-10-11 13:24:58

At 10/11/12 01:20 PM, leanlifter1 wrote: I agree although I have not done research on the "QE3" I wholeheartedly agree on the getting into bed part LOL and the old way of thinking 07 and prior.

See...not all fascists are bad? lol


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Response to Will Obama win or lose the election 2012-10-11 13:34:42

I'm going to go out on a limb here (whatever that means) and say that Obama will probably win the election. I guess it's good Romney doesn't have a Vice Presidential mate as dumb as Sarah Palin, but who knows? I at least give Romney credit for not being as crazy as someone like Santorum. Of course, if I had my way, Ron Paul would be President, which will never happen.


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Response to Will Obama win or lose the election 2012-10-11 13:43:03

At 10/11/12 01:24 PM, TheMason wrote:
At 10/11/12 01:20 PM, leanlifter1 wrote: I agree although I have not done research on the "QE3" I wholeheartedly agree on the getting into bed part LOL and the old way of thinking 07 and prior.
See...not all fascists are bad? lol

We take part's and pieces from all the "ism's" of the past and current that have proven to work infallibly in practice and that are agreed upon by that vast majority and then slap a label on it let's just call it "thenewism" and this could be the best system human's ever devised to date IMHO because there are good part's even to communism etc.... and many things we can learn and use from bygone civilizations.


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Response to Will Obama win or lose the election 2012-10-11 15:59:04

Obama definitely spent too much time fighting with this stupid congress but I hope he wins. Romney can't even explain how he's going to implement a simple tax plan and would rather target fringe TV stations consuming next to nothing for the cutting rather than big businesses or the military spending.


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Response to Will Obama win or lose the election 2012-10-11 17:13:57

At 10/11/12 03:59 PM, naronic wrote: Obama definitely spent too much time fighting with this stupid congress but I hope he wins. Romney can't even explain how he's going to implement a simple tax plan and would rather target fringe TV stations consuming next to nothing for the cutting rather than big businesses or the military spending.

Real presidents don't have problems with "stupid congresses". Only dumbass ones do.

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Response to Will Obama win or lose the election 2012-10-13 02:51:15

At 10/11/12 09:20 AM, TheMason wrote: Chinese Communist Party

oOOOooooOoo, scaryyyyy.

They are terrified of unrest, and therefore they are terrified of fluctuations in their domestic economy. Deflating the value of the dollar, considering China pins the value of its currency on ours, causes their economy to experience inflation.

And this is a perfect example of China not having leverage over us. Read this over a few times and demonstrate to me how this makes China somehow a threat? Yes China definitely does have protectionism but what does this have to do with them somehow fucking us over on bond deals? They rely heavily on them because they're incredibly safe, cheap and pay out steady returns. They're not going to jeopardize a good deal going for them.

One of the things that policies like Quantitative Easing does is causes deflation

What the hell are you taking about? QE doesn't cause deflation. QE is actually a countermeasure to deflation. Sometimes it goes awry like in Japan. We're not Japan.

That 7.5% will be paid back in dollars that are not worth as much as the dollars they invested in our bonds. They are getting shafted, which then inspires bad trade behavior. Beijing understands this principle...it seems the American Left does not.

They're getting paid interest. They're going to make billions of dollars by the time the bonds mature. What exactly do you think is occurring right now?

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Response to Will Obama win or lose the election 2012-10-14 23:40:18

At 10/13/12 02:51 AM, Feoric wrote:
At 10/11/12 09:20 AM, TheMason wrote:
They are terrified of unrest, and therefore they are terrified of fluctuations in their domestic economy. Deflating the value of the dollar, considering China pins the value of its currency on ours, causes their economy to experience inflation.
And this is a perfect example of China not having leverage over us. Read this over a few times and demonstrate to me how this makes China somehow a threat? ...

In order to be deft at international relations and foreign policy you have to be able to empathize with other ways of thinking and try to think outside of the box of your culture/civilization's box. What you and Camaro makes perfect sense when looked at through the prism of the Western/Euro-American concept of 'self-interest'. However, the CCP does not share this concept of 'self-interest'. One of the things that confounds Western observers and policy makers when it comes to China is just how bizarre it behaves on the international scene. We scratch our heads whether we are in academia, State Dept or DoD. "Why are they doing that...that's not in their self-interest!" However, those of us who think outside the box realize that they place more emphasis in keeping their domestic population happy...over what makes sense (militarily, economically, etc) internationally.

Afterall, we're talking about a country that builds entire cities just to keep people employed...and thus happy...even though there is no one to live in them.

For a good read may I suggest: China: Fragile Superpower by Susan L. Shirk


One of the things that policies like Quantitative Easing does is causes deflation
What the hell are you taking about? QE doesn't cause deflation. QE is actually a countermeasure to deflation. Sometimes it goes awry like in Japan. We're not Japan.

When I spoke of deflation...I meant of the value of the dollar not the cost of goods. A devalued/deflated currency can lead to inflated costs of goods...kind of a double edged sword.


That 7.5% will be paid back in dollars that are not worth as much as the dollars they invested in our bonds. They are getting shafted, which then inspires bad trade behavior. Beijing understands this principle...it seems the American Left does not.
They're getting paid interest. They're going to make billions of dollars by the time the bonds mature. What exactly do you think is occurring right now?

You're correct. Some treasury bonds have fixed rates which means that they earn a fixed percent. Now if the dollar's intrinsic value decreases China and other bond holders are getting hosed because they are receiving money that is worth less then as it was when they purchased the bond. Think of it this way: you're the Emir of an oil rich Persian Gulf country and OPEC has set the price per barrel at $100. But then QE3 causes the value of the dollar to decrease by 10%...so now your $100 only buys $90 worth of stuff. Each barrel of oil still produces the same amount of gas, diesel, lubricant and/or plastics...so your product's value has not gone down. So are you going to trade your products, whose value is unchanged, for the same amount of a devalued currency? No; you're going to raise the price of your product by 10% to $110 to compensate.

And so is everyone else. However, if you've bought a $100 Series EE Bond at 4.6% interest when you go cash it in you're going to get $104.60 (assuming you've only held it for that year)...which will only buy you $94.14 worth of stuff. You're in a worse position than you started! Even though you have 4.6% more dollars than you started...it's worth less.

Now Series I bonds have a fixed and variable interest rate component. The problem is deflation can wipe out the fixed rate's return.

Also you have T-Notes which are considered safe investments with a fixed interest rate. The problem is since it is safe; the interest rate is not going to be all that great. It is designed to keep up with inflation at that time period. Now if inflation increases, especially b/c of the devaluation of the dollar, when you go and cash these bonds in you will have more than you started. However, now since the dollar buys you less...you are in a worse position than you started.

So yeah...they'll make billions but billions that are worth far less then than they are now. And that effects China's future stability. They get this concept...too bad the American Left does not.


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Response to Will Obama win or lose the election 2012-10-15 00:04:25

At 10/14/12 11:40 PM, TheMason wrote: And so is everyone else. However, if you've bought a $100 Series EE Bond at 4.6% interest when you go cash it in you're going to get $104.60 (assuming you've only held it for that year)...which will only buy you $94.14 worth of stuff. You're in a worse position than you started! Even though you have 4.6% more dollars than you started...it's worth less.

Let me clarify this even further using examples that are relatable to a larger audience than just you and I. Say you wanted to save for the XBox 720. You read where analysts predict it will cost $650 in 2014. It's 2011 so you put $600 in Series EE Bonds at an interest rate of 3.6%. You calculate that this will yield about $640-645 when it's time to buy. You figure you'll just pay the tax out of pocket as well as make up the $5 difference.

However, let's say that the strength of the dollar decreases relative to other currencies (which happened last week) so now it only at 90% of its 2011 value. So now since it costs 10%more dollars to buy the same components to make a XBox 720...Microsoft raises the MSRP to $720.

Now instead of being $45 better off...you find yourself $75 behind where you wanted to be.

And yes...this is, while simplified somewhat, illustrative of how it works when one government buys another government's bonds.

No imagine you're China and bought $100 Billion in bonds, expecting to be several billions richer in 10 years. While you are that several billions richer in 10 years...that several billions in 2021 dollars covers less of your rising pension (ie: Chinese Social Security) cost than it would've in 2011. And since about 2025 is when their pension system is set to explode because of a population boom supported by a 'one-child policy' that has less workers supporting pensioners (not to mention a huge imbalance of more males to females) you have a China ripe for civil unrest on a magnitude that keeps Chinese leaders up at night.

Therefore, a war with someone (India, Russia, or the US) could solve some of their problems: A) rally the population against an outside threat (which they have been known to do during economic hardtimes: mostly the US and Japan) and B) bring the genders back into balance. A third possible benefit would be if they enlisted/drafted the elderly pensioners to ease the strain on their version of Social Security.

The scary thing is if China were to decide to go to war with Russia and/or India...they could drag the US in as an ally due to our indebtedness to them. After all, our politicians want to remain in power too and if there is a promise of debt forgiveness...they may jump at the chance be the Republicans or Democrats in charge.


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Response to Will Obama win or lose the election 2012-10-15 11:14:33

At 10/15/12 12:04 AM, TheMason wrote: The scary thing is if China were to decide to go to war with Russia and/or India...they could drag the US in as an ally due to our indebtedness to them.

No chance.

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Response to Will Obama win or lose the election 2012-10-15 14:05:01

At 10/15/12 11:14 AM, BumFodder wrote:
At 10/15/12 12:04 AM, TheMason wrote: The scary thing is if China were to decide to go to war with Russia and/or India...they could drag the US in as an ally due to our indebtedness to them.
No chance.

And what makes you so sure that there is 'No chance' of this occurring?


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Response to Will Obama win or lose the election 2012-10-15 19:30:16

I know this prediction is a bit late, but there's a pretty big anti-Obama mood sweeping over the country, even in the Democrats. I think Romney's got this one. I don't know by how much, but he'll win.


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Response to Will Obama win or lose the election 2012-10-15 22:25:08

At 10/15/12 02:05 PM, TheMason wrote:
And what makes you so sure that there is 'No chance' of this occurring?

Well to add on, why would China want to go to war with either Russia or India? After all Russia just wants a closer relationship as does India (aside from the whole Kashmir thing, but China has taken more of a high road since it its war with India it just kept the status quo in terms of territory meaning there is no longer as much of a conflict). Even if that were to happen you're acting like China can force America to do anything, it has some leverage but this hasn't stopped America from supporting Taiwan and selling arms to Taiwan. Not to mention what's China going to do with all the US"s debt? Force them to default and go belly up? Well then as goes America as goes China because their #1 buyer can no longer buy their products.


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Response to Will Obama win or lose the election 2012-10-16 11:46:03

At 10/15/12 02:13 PM, 24901miles wrote:
At 10/15/12 02:05 PM, TheMason wrote:
And what makes you so sure that there is 'No chance' of this occurring?
America would go to war with two fully nuclear nations? Are you mad?

First of all...I'm not saying that we would start it. Nor am I advocating it.

But here's the geostrategic/political picture:
China shares a border with both India and Russia...a tense border.

India and Russia are not really our friends. Yes, we trade with India and have relations. However, once you dig into the history of Indo-American relations they followed a policy of nonalignment. And I get why: they were recovering from European Colonialism and was thus hesitant to trust England's spin-off. So during the Cold War they were nonaligned a little more with the USSR than the USA. And I get that too...it actually makes sense even though India is democratic and more capitalist than socialist/communist.

But that's over...right? Not necessarily. India and Russia are developing the next generation of MiG together while China is developing a copy of the F-16. So some of those old Cold War lines are still drawn.

Furthermore, prior to WWI the Balkans in Europe was the tender box to start a world war. I think that has shifted East. Both India and China are rising stars...which means they are competitors...overpopulated competitors. Also, the India/China tension is not the only one going on. You've got the Pakistan/India quandry. If something happened there, there is a potential of the US and China getting involved on one side and Russia coming in on the other.

But hey...what do I know? It's not like I've spent the last six years of my life studying the region both academically and for my military job. ;)


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Response to Will Obama win or lose the election 2012-10-16 11:56:11

At 10/15/12 10:25 PM, Warforger wrote:
At 10/15/12 02:05 PM, TheMason wrote:
And what makes you so sure that there is 'No chance' of this occurring?
Well to add on, why would China want to go to war with either Russia or India? After all Russia just wants a closer relationship as does India (aside from the whole Kashmir thing, but China has taken more of a high road since it its war with India it just kept the status quo in terms of territory meaning there is no longer as much of a conflict). Even if that were to happen you're acting like China can force America to do anything, it has some leverage but this hasn't stopped America from supporting Taiwan and selling arms to Taiwan. Not to mention what's China going to do with all the US"s debt? Force them to default and go belly up? Well then as goes America as goes China because their #1 buyer can no longer buy their products.

1) Russia and China does not look at foreign relations like we do. It is not only about economics...but power. The 'closer relationship' is not because they want to go hand-out and drink Vodka together. It's all about keeping your enemy closer.

2) A war to China's East or North could draw us in a la WWI, especially considering that our economies are so closely linked.

3) There are two areas where our interests militarily bump against China's: Taiwan and Korea.

4) China's trade abroad is of secondary priority to domestic tranquility. Even though their economic health is tied to ours...a desperate CCP could quite conceivably act what we consider irrationally if it looks like they could lose power.

Finally, I'm not saying that this is going to definately happen. Geopolitical/strategic studies is a lot like watching fault lines along the San Andreas or New Madrid fault. You know there are stressors...but you cannot predict when it will flare-up.


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Response to Will Obama win or lose the election 2012-10-16 11:57:37

At 10/15/12 11:14 AM, BumFodder wrote:
At 10/15/12 12:04 AM, TheMason wrote: The scary thing is if China were to decide to go to war with Russia and/or India...they could drag the US in as an ally due to our indebtedness to them.
No chance.

Despite other's comments, I'm still curious what special insight you have that makes your argument so a priori...am I missing something?


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Response to Will Obama win or lose the election 2012-10-16 19:54:28

At 10/16/12 11:56 AM, TheMason wrote: 1) Russia and China does not look at foreign relations like we do. It is not only about economics...but power. The 'closer relationship' is not because they want to go hand-out and drink Vodka together. It's all about keeping your enemy closer.

Except Russia is not looking to make China an enemy, China and Russia alone don't pose as much of a threat to the US as much as an alliance of China and Russia vs. the US. And again, China and Russia don't have any dispute, they essentially side with each other every time. And China at the end of the day knows that whatever they do they cannot go to war as it will hurt the entire country, I mean hell the PRC has actually had improving relations with Taiwan. Russia on the other hand wants China to be an ally, much more than China wants Russia to be an ally.

2) A war to China's East or North could draw us in a la WWI, especially considering that our economies are so closely linked.

That's simplifying WWI too much. Some guy did not get assassinated and all of a sudden every country went to war with each other out of nowhere. The countries had had long standing tensions and rivalries, they had been building up their militaries for decades just for the war, they had been conquering the world for themselves etc.. The assassination was not a reason for the war, but an excuse for the war. Russia and China have nothing of the sort. China and India somewhat but the PRC was smart not to make India hostile after it destroyed India in the Sino-Indian war.

3) There are two areas where our interests militarily bump against China's: Taiwan and Korea.

And like I said, The PRC is warming relations with the ROC, as with Korea. To take such a simplistic view of the conflict is to ignore all the changes in attitude in the PRC favoring pragmatism.

Finally, I'm not saying that this is going to definately happen. Geopolitical/strategic studies is a lot like watching fault lines along the San Andreas or New Madrid fault. You know there are stressors...but you cannot predict when it will flare-up.

You haven't identified any significant stressor however.


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Response to Will Obama win or lose the election 2012-10-17 09:08:26

At 10/16/12 11:57 AM, TheMason wrote: Despite other's comments, I'm still curious what special insight you have that makes your argument so a priori...am I missing something?

What makes you think that your premise that makes no sense in the real world may happen? Countries dont go around looking for wars, they try to trade with eachother. You just pulled a stupid scenario out of your ass.

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Response to Will Obama win or lose the election 2012-10-17 16:57:55

At 10/16/12 07:54 PM, Warforger wrote:
Except Russia is not looking to make China an enemy...China and Russia don't have any dispute, they essentially side with each other every time. ...

Simply inaccurate.

1) Russia and China already are enemies. Starting in the 1960s tensions got so tense between them that they were having tank battles along their borders. During Afghanistan...China provided the AK-47s and Soviet-style small arms that the US sold/gave to Pakistan and the Mujahideen. We didn't sell them Western stuff (other than Stinger anti-air missles) because we didn't want them to know we were actively supplying their enemies.

2) China and Russia have disputes going back eons. They are not friends, they may not be shooting each other at the moment...but don't make the naive, ignorant mistake that this means they are friends.

That's simplifying WWI too much. ... The assassination was not a reason for the war, but an excuse for the war. Russia and China have nothing of the sort. China and India somewhat but the PRC was smart not to make India hostile after it destroyed India in the Sino-Indian war.

1) That the assassination was an excuse for the war is pretty much the entire point. The point was not the reasons for the war...but rather to demonstrate that a simple little spark can touch off larger events.

2) Russia and China do have tensions. Russia is in bed militarily enough with India to be jointly developing next-gen weapons. India and China relations are not stable like US-English or even US-Sino relations...it is a delicate peace.


And like I said, The PRC is warming relations with the ROC, as with Korea. To take such a simplistic view of the conflict is to ignore all the changes in attitude in the PRC favoring pragmatism.

I disagree, I'm not being simplistic just looking at the common trends. The PRC is very pragmatic...mixed with very much realism. They will warm to the ROC and ROK...but they still return N. Korean 'illegal immigrants' in defiance of international will/pressure. They still inflame anti-Japanese passions when it suits them.

The point is: the PRC understands that what is pragmatic can change from moment to moment.


You haven't identified any significant stressor however.

* Economic upheaval (domestically or globally).
* Flare-up of Indian-Pakistan hostilities.
* Famine and/or regime collapse in N. Korea.
* Flare-up of Sino-ROC tensions.
* Collapse of EU which leads to financial collapse of US.

The point is there are many significant stressors...and not all can be identified/anticipated/predicted. A key to understanding International Relations is to know you don't know everything.


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Response to Will Obama win or lose the election 2012-10-17 17:00:50

At 10/14/12 11:40 PM, TheMason wrote: When I spoke of deflation...I meant of the value of the dollar not the cost of goods. A devalued/deflated currency can lead to inflated costs of goods...kind of a double edged sword.

Deflated and devalued are not interchangeable terms. Simply, deflation occurs when the supply of money and credit decreases relative to the supply of goods and service. Devaluation is a reduction in the value of a currency with respect to those goods and services.

You're correct. Some treasury bonds have fixed rates which means that they earn a fixed percent. Now if the dollar's intrinsic value decreases China and other bond holders are getting hosed because they are receiving money that is worth less then as it was when they purchased the bond. Think of it this way: you're the Emir of an oil rich Persian Gulf country and OPEC has set the price per barrel at $100. But then QE3 causes the value of the dollar to decrease by 10%...so now your $100 only buys $90 worth of stuff. Each barrel of oil still produces the same amount of gas, diesel, lubricant and/or plastics...so your product's value has not gone down. So are you going to trade your products, whose value is unchanged, for the same amount of a devalued currency? No; you're going to raise the price of your product by 10% to $110 to compensate.

And so is everyone else. However, if you've bought a $100 Series EE Bond at 4.6% interest when you go cash it in you're going to get $104.60 (assuming you've only held it for that year)...which will only buy you $94.14 worth of stuff. You're in a worse position than you started! Even though you have 4.6% more dollars than you started...it's worth less.

Okay but you've yet to demonstrate to me that inflation is somehow going to make China go batshit insane and control America or whatever? US Bonds have been exceptionally cheap since 2000, and the Chinese government has needed a stable investment. The increased budget deficit because of TARP, bailouts, and stimulus in the US gave them more bonds to buy, as well. However, it's not like they were just swimming in money and gobbled up our bonds; the Chinese government knew that American bond purchases would continue to keep American markets open and lending to American consumers who buy their goods moving. And like I already noted, US bonds are also an extremely stable and return-generating investment for anyone holding them (their government). China's currency (the Yuan) gives it a pretty significant advantage in exchange rates; its labor costs are remarkably low, they have an incredible integrated supply chain and material transportation infrastructure. Many of the companies that are based there are neither American nor Chinese, but entirely multinational. The CCP has enough sway in commercial banking and national regulatory management to shape their industrial policy in ways we cannot. This is not a simple problem with an easy explanation, and is only distantly related to jobs/recession or to spending/debt, and is not the result of a rouge Chinese economic insurgency or what have you.

Now Series I bonds have a fixed and variable interest rate component. The problem is deflation can wipe out the fixed rate's return.

Uhh no, devaluation will do that, not deflation. The only scenario in which this will happen is some runaway hyperinflation scenario which is virtually impossible. Please demonstrate to me projected inflation rates and show me how much it will cut into China's profits adjusted to inflation.

Also you have T-Notes which are considered safe investments with a fixed interest rate. The problem is since it is safe; the interest rate is not going to be all that great. It is designed to keep up with inflation at that time period. Now if inflation increases, especially b/c of the devaluation of the dollar, when you go and cash these bonds in you will have more than you started. However, now since the dollar buys you less...you are in a worse position than you started.

Except the real interest rates are actually negative. A negative interest rate means the interest rate is lower than the rate of inflation. TIPS are bonds that pay a fixed coupon rate, but adjust the principal based on the movements of the CPI. Let me just demonstrate how this works so other readers know what the hell this technobabble means.

Let's say you're buying a $1000 bond with a 10% coupon rate (a coupon rate is the interest rate that the borrower pays the lender). YouâEUTMd get $100 per year in interest. Now let's say hypothetically that the inflation rate is 5% over the course of that year. The principal ($1000) is adjusted to $1000*1.05 = $1050, to reflect the inflation. The 10% coupon rate is now worth $105 per year. The coupon rate is adjusted to inflation as well.

All Treasury securities are issued via auction. The interest rate is determined by the price that the buyers are willing to pay. For example, if buyers are demanding a high interest rate on the bond, theyâEUTMll be willing to pay less than the principle. Here's how that would work:

Let's say IâEUTMm auctioning $1000 bond with a 10% coupon rate and 1 year maturity (maturity is when the bond expires and pays out), and the market is only willing to pay me $990 for it. It's demanding a higher effective interest rate. So in this scenario, I would be forced to lend out $990. I get paid $100 interest (note: coupon payment is based on the coupon rate and the face value, not the selling price). At the end of the year, I get the $1000 back (again, I don't get only $990 because the selling price isn't what matters in this case, it's the face value of the bond). In this scenario, this is how you would calculate the actual interest rate: ($1000 (face value of the bond is what's owed to me, not selling price) + $100 (amount of interest) - $990 (how much I loaned)) / $990, which would be 11.11%.

The exact opposite of this is happening with US bonds. The buyers of the bonds are willing to accept a negative interest rate on their investment, which means they're willing to pay more than the face value of the bond. Using an interest rate of -1.36% (the 5-year quote for 9/5), a face value of $1000, a maturity of 5 years, and a bond valuation formula, we get an auction price of $1006.83. That means, currently, people are willing to pay the US Federal government $1006.83 under the stipulation that the Federal government would pay them $1000 in 5 years. The Treasury is also considering selling government debt for negative interest rates since its T-Bills (which have an essentially zero interest rate) are being bought as fast as they can offer them. People will literally be paying $101 today for $100 in 5 years time. This is a perfect time to spend money to get us us out of this hole we are in. People would not be doing this if they had the same fears you have. There's essentially zero fear of high inflation rates. China understands this as well as the US markets do.

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Response to Will Obama win or lose the election 2012-10-17 17:08:39

At 10/17/12 09:08 AM, BumFodder wrote:
At 10/16/12 11:57 AM, TheMason wrote: Despite other's comments, I'm still curious what special insight you have that makes your argument so a priori...am I missing something?
What makes you think that your premise that makes no sense in the real world may happen? Countries dont go around looking for wars, they try to trade with eachother. You just pulled a stupid scenario out of your ass.

Actually, I brought up that scenario out of an understanding of the region that comes from being a scholar who specializes in Asian politics, member of the military, and having lived over there.

As for the point about: "Countries dont go around looking for wars, they try to trade with eachother." That's not entirely accurate. The notion of make trade not war...did not exist until after WWII. Up until then...you increased your trade through war. If anyone is making a premise that makes no sense in the real world...it is this notion of yours about trade.

And again...you're just throwing about slogans and catch-phrases. You're not offering up any argument, it's like you assume that the Neoliberal worldview is correct and this post-WWII, post-Colonial, and post-Cold War paradigm is correct. That we can just stand athwart history. And if anyone offers a scenario that comes from a different perspective it is automatically 'stupid', baseless, or otherwise worthy of auto-dismissal because it conflicts with your rosey worldview.


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