Tweet
House leaders have agreed on a compromise continuing spending resolution at the same level as before from October 2012 through March 2013. It’s likely now that the President(s?) will probably try to make the money available for deficit spending, as of today, last through the time period of the continuing resolution so that one deal including both the budget and raising the debt limit can be made by March of 2013. According to the August 2, Daily Treasury Statement, there’s $528,508,000,000 of deficit spending left until the debt ceiling is reached. In addition, there’s an additional 58,993,000,000 available in reserves, for a grand total of $584,501,000,000 available until the debt ceiling is reached. That’s an average of $73,062,625,000 deficit spending per month for the next 8 months, ending March 31, 2013.
For the past 10 months, average deficit spending was at $114,802,300,000 Billion per month, and that amount was not enough stimulus for a full recovery. So, the likely 36% reduction in average deficit spending over the next 8 months is unlikely to be any more effective in pulling us out of the extended employment recession we are experiencing, than the deficits in the preceding 10 months were. On the contrary, deficit spending over the next 8 months is unlikely even to allow us to maintain the unemployment levels we have now, provided private sector net spending doesn’t increase to compensate for less Government spending. What would have to happen for private sector spending to increase?
That’s an easy one to answer. The government deficit for the past 12 months, in rough terms, has been about 8% of GDP. The planned spending would be about 5.5% of expected GDP. If the Government sticks to its deficit spending targets, then the private sector will have to save less and import less, to avoid demand leakage which would place greater fiscal drag on the economy. If imports come in at 3% of GDP, then private sector savings will have to decrease to 2.5% or less of GDP if the economy is to expand faster than it is now, and to create lower unemployment.
This conclusion isn’t set in stone because there are distributional effects to consider, but it’s also true that private sector attempts to continue to save say 6% of GDP and to import 4% of GDP will cause slower GDP growth, higher unemployment, and more rapid government spending than planned in the shorter run, bringing on the debt ceiling problem sooner than expected, and, in the absence of Congressional, or Executive, action allowing more deficit spending, forcing the Government into surplus, and the economy into even more rapid decline prior to March 31, 2013 due to fiscal drag.
In short, the recent jobs report notwithstanding, looking at the economy from the viewpoint of the sectoral financial balances model, and taking into account the likely spending plans for the next 8 months, the economy looks bleak even if we assume that the Eurozone will hang in there, and avoid a financial crash, forcing us to face, once again, the question of whether the big banks should be bailed out again, or whether this time, they should just be taken into resolution and the TBTF ended.
I don’t believe it makes much difference to this prediction of how the economy will go whether President Obama or Romney is elected, as long is there isn’t a big change in the Congress, or a big change in the stated views and behavior of whichever candidate is elected; both of which are very unlikely as far as we can see at this point. It’s as if we have entered the 1930s with only different versions of Herbert Hoover, without half the integrity and good will old Herbert had, to lead us.
We are nearly four years into the crash now, and real unemployment rates are approaching depression levels. Working Americans could well lose a decade, as Paul Krugman has been warning, before this is over. And if Americans don’t rouse themselves to either take over or destroy both these sorry excuses for political parties over the next four years or so, we could be looking at a longer period of blight than that.
(Cross-posted from Correntewire.com.
71 Comments
Thanks! Rec’d.
I seem to recall something you posted a couple of months ago that indicated that Obama was holding back on spending. It looked to me as though he was going to do a burst of spending just before the elections. These numbers seems to say the opposite. Did I misunderstand that previous post?
Also, note that Bernanke’s QE1 and QE2 took at least $1.5T of net financial assets out of the private sector of the economy and sequestered them as interest-earning reserves. That has to be a hell of a blow to the economy. WTF is that guy trying to do?
First, I think Bernanke just doesn’t understand how the monetary system works. He’s demonstrated that very well up to now.
Second, you recall correctly I thought he’d start spending big in July – September to goose employment, then cut way back in October, and plan to hit the debt ceiling in the middle of November, having the big political fight then.
But, I guess he decided he could get re-elected anyway even if U-3 stayed up over 8%. I think it was another example of Obama stupidity, risking his re-election to hit his 1.2 T deficit forecast made earlier in the year. When October rolls around he’ll probably claim victory for containing the deficit to his forecast. Anymore victories like that and we’ll be right into that double-dip.
It’s really pretty bad when one gets the feeling that so many of us would have made a better President/politician than this man. What an over-rated empty suit he is!
You need to pay attention to Dmitry Orlov. He is probably one of the few that really understands the situation.
The problem with this diary and ones like it is it’s based on crap numbers from the government(s). They will NOT tell the truth about the economy because if they did a panic would ensue and bank runs and what ever else and the whole thing would come crashing down.
Kind of a self fulling prophesy. It what they in Washington and elsewhere have been trying to avoid at all costs from the get go.
Because then people would go into the streets and start yelling for heads to roll.
If anyone believes government numbers, they’ll believe anything. Bernanke was a sock puppet in the Bush Administration. He does whatever the hand in the sock tells him to do. Now if you can just find that hand.
We are screwed, and there is nothing we can do about it. This party or that party are the same parties, “Now watcha gonna do”. A third party? Sounds good, now where do we go from here.
My post sounds confusing because I responded to several comments, I’ll let you separate them.
Quite depressing, although realistic. Maybe that’s what makes it so depressing. You are right, this presidential race is between Herbert Hoover and his neo-liberal dopple-ganger. Both sides can tell you how bad things are and cite effectively all the bad performance measures of the economy, but they haven’t got a clue as to how to change the numbers, nor is that an actual objective of either. Same as it ever was. Good piece lgid.
Thanks CM for the Orlov reference. I took in the interview and also read “The Joy of National Default” a pretty good blog post. I liked the post better than the interview. In my view the interview lumped a lot of different categories together, and I found myself wanting to do a detailed a critique, but lacking the transcript, I ended by thinking it would be too much work. The blog post focused much more on the systemic factors involved in a possible collapse, and painted a much more persuasive picture of what might happen.
Having said that, it also seems to me that Orlov doesn’t emphasize enough the possibility that the political systems can stop the collapse. In the United States, the big banks can be taken into resolution literally over a weekend, and the Government workers can make sure that the supply of credit will not stop. Will they act that fast? I think they will. If Obama sees things collapsing at the speed Orlov indicates he will not hesitate to do what’s necessary to stop the collapse of credit. I don’t think bank bailouts would work this time, because Orlov’s credit collapse scenario would move at a greater speed than what we saw in 2008. On the other hand, Obama can move faster than Bush in taking unilateral action to take over the banks and defuse the crisis because Dodd-frank, a terrible law in most respects, does provide greater authority for taking the big banks into resolution.
On fuel self-sufficiency, if after the US financial system is saved by the Government, the Saudis don’t want to sell us oil, then I think we can get along on our own oil, oil from this hemisphere, and conservation/rationing/price controls. I vaguely remember WWII and what rationing was like then. I know that in an emergency rationing can be used again, if people view it as temporary. We can ensure that it is temporary by introducing energy conserving measures, and by developing solar, wind, and geothermal power sources on an emergency basis. I estimate that within 5 years a combination of these measures can replace middle eastern oil.
Of course, I’m assuming that others, at least Canada and Mexico, will export some oil to us, and will at least cover 20% of our energy needs. I then figure that more energy conserving use of our resources and rationing can give us another 20%. I also think that within 5 years we can expand alternative sources of energy to 20% of our needs. That leaves 40% of our needs which I think can be supplied by existing domestic fossil fuel sources. After the first five years of this I’d continue the emergency program to shift to alternative sources of energy so that within an additional 10 years fossil fuels aren’t fulfilling more than 20% of our energy needs.
So, to summarize, I don’t see that the United States or Canada, must collapse if there’s the kind of catastrophe Orlov identifies. Also, if the US, Canada, and Mexico stick together, then North America will be alright too, and would be reasonably self-sufficient, compared to many other areas of the world. furthermore financial collapse could be averted in many other nations apart from ours. Australia, the UK, Japan, China, New Zealand, all have financial systems with the necessary fiat currency capability, to survive banking collapses if they will only take over their banks during the crisis. China already has control of its banks, and the others can easily grab control of theirs if the political will is there. So just taking these nations into account and adding them to the nations of North America, we can easily envision a trading bloc that would be financially stable.
Other nations can also easily be added to that bloc. For example, Norway, Sweden, and Denmark are still using stable fiat currencies. They also have sufficient control over their own banks, so that their financial systems will not collapse.
Now let’s turn to the prospects for Europe. Here the issue is whether the ECB and the Eurozone can solve its political problems, or whether the monetary union collapses. Orlov talks about Greece, and tacitly equates the situation of Greece with what can happen in all nations. But all nations are not like Greece. Many of them have sovereign fiat currencies. They can control bond interest rates if they want to. They can set them. They can cease borrowing if they want to and just create the money they need for effective fiscal actions to lift their economies.
Greece can do none of these things right now because it is subject to the Euro which it does not control. This is true of Spain, Italy, Ireland, and all the other Eurozone members. They have all given up their currency sovereignty. So now they have a problem. In the event of a collapse, quick decisions will have to be made. Either the Eurozone will have to enable a central fiscal authority so that it can control the bond vigilantes or it will have to dissolve and each of the individual nations will have to revert to their currencies. Reversion will be painful. There will be economic contraction all over Europe, but the recent experience of Argentina suggests that it will take the nations of Europe only a year to recover if the individual governments use their fiat currency to support vigorous fiscal action to end unemployment and let their currencies float. At that point, the nations of Europe will have no problem entering a re-invigorated international trading system in which nations like Italy, Spain, and Ireland will do just fine even without cutting their social safety nets.
There’s much more to say about Orlov’s views and I don’t have the time to expose problems here. But, in general, I’ll say that his thesis is too much about the abstract global system and his theory about its dynamics. Reality however, is about more complex system dynamics at a number of levels of analysis. The components of the global system are not so well-integrated and so interdependent that a collapse of the financial system in many nations will spread to the whole system. Yes, there will be adjustments and some of them will be wrenching. But if the Governments react vigorously and in way that sets aside the false neoliberal paradigm and creates full employment is each of their nations, then most nations will be fine and Orlov’s projection will simply not be realized. What he says can happen. His scenario can be played out. But his result is neither inevitable nor highly probable. It’s going to take a lot of stupidity and evil on the part of political leaders to bring it about.
Oh, one more thing. Orlov’s emphasis in “debt” is too gross. To do an intelligent analysis of the significance of “debt” you have to distinguish between currency user debt and sovereign currency issuer debt. Currency user debt is way too high right now in most nations and certainly in the United States. We badly need a debt jubilee and a redistribution of nominal wealth. However currency user debt isn’t important financially, only politically. It’s not important financially because governments that control bond market interest rates and create their own money have an unlimited capacity to both issue and repay debt. For example, this fiscal year the US Treasury has repayed $56.2 Trillion in debt. No problem. Current interest rates at historical lows. Japan has a debt-to-GDP ratio of something like 230% (haven’t checked recently), and has bond interest rates just above zero.
On the other hand, public debt can be a political problem, as it is here, because people erroneously think that federal Government debt is analogous to household debt. That’s why I propose the $60 T platinum coin to pay off all the debt and remove the need to issue any more for 15 years. It’s easier to mint the coin and fill the public purse than it is to educate people about the government’s powers to create unlimited currency, and to get them to force Congress to give the Treasury back the power to create currency by re-locating the Fed within the Treasury Department.
Anyway, this became a much longer reply than I intended, so I’ll end here.
I believe the Daily Treasury Statement. It uses a system that goes back many years and is directly related to actual Treasury accounts. I also believe in the debt ceiling amount. Since those are the only numbers I use in this except others I’ve calculated, I don’t think this reply is relevant to the diary. However, I do agree that much Federal data has incorporated far too much pro-government spin over the years.
“Credit” should be given to our corporate media for keeping so many Americans in favor of trillion dollar “defense” budgets– and for keeping so few in favor of taxing the wealthy.
If our esteemed economists were frank, they’d say,
“You might as well have our decline tattooed on your forehead.”
I’m skeptical of economists– keeping in mind that a dire forecast, regardless of inevitability, could be costly to ones career.
I expect an unreasonably cheerful forecast from these educated idiots of the status quo.
BINGO ! You hit the nail on the head. Ain’t no one – no economist and no one in Washington – gonna tell the truth about how bad the economy really is or where it’s headed.
But to “save the system” the president would have to nationalize the financial sector (which should have been done in 2008) and possibly the energy sector as well. Which would require putting the country under national emergency and using emergency powers.
Do you honestly see anyone in Washington, anyone who is or is likely to become president ever doing this ?
NO
I thought the point of the “collapse” was the Shock Doctrine — just like with Greece you have all of these major corporations salivating at the prospect of buying Greek assets at bargain prices. For much of the same reasons, numerous forces within government are trying to privatize the Post Office and the public school systems.
When you have four decades straight of declining global growth (averaged out, of course — so for instance ’06 was a good year but ’08 was a contraction), the investor class has gotten rather protective of its profit mechanisms. It isn’t like it was in the 1960s when we could pretend that a rising tide lifts all boats — Ponzi schemes are now the norm, and failing those, there has to be a way to steal from people outright. The health insurance mandate ought to start a new phase — increasing people’s taxes if they don’t buy a pricey corporate product.
Lgid, have you considered cross-posting to Voices on the Square?
http://voicesonthesquare.com/
I’m sure they’d welcome your input.
Comrades and compradors, you are too slowly coming to the apocalyptic realization. Capitalists know the capitalist system cannot continue. You know they know. The sheep and cattle and donkeys and elephants cannot be told the truth because it would not be good for them. This is the way of the masters.
Pity the comprador, dear comrades. He is the one abandoned to his delusions as the great capitalist heist/final enclosure is enacted. The best the bourgeosie could manage in the capitalist bloom was regulating the bourgeois gang-competition amongst themselves. Look at the Italian way of life. There you will find the symptoms of decadence, the overweening church, the Mafia, the corrupt banking, the bipolar escapism, resulting from the decadence of the capitalist metastasis.
The bourgeois were never capable of anything greater. The cynical paradise of progress it fed the livestock was always an essential illusion, a mask for the barely contained carnival behind scenes. The word of prophets who looked at their larger destiny was made blasphemy by inhumane blasphemers.
You may hope that technocratic rectification would restore the days of license. Impossible. The larger story must be told. Without it, you only invite more delusion and willfully acquiesce to another corralling for the master’s benefit.
Make your stand, comrades and compradors.
They cannot be told the truth because they would totally lose it if they found out.
Because They Can’t Handle The Truth.
I am very sure that Bernanke understands the economy and his policies at least as well as the French officials who allowed continuous generosity and monetary benefits to the French Aristocracy back in the Seventeen seventies and early eighties. Any one who understands basic body language and facial reading of expressions can see that this rat bastard lies every time Congress calls on him, at least if the C Span televised proceedings can be believed.
I am sure that in his blackened heart of hearts, he is often quoting the French: “After me, the deluge.”
Comrade, these days I see unconscious sarcasm in the mask of cynicism. It may be, sadly, misplaced. Here’s Jack’s message:
Rather, they are denied the truth, because what would comprador order-keepers do otherwise.
And, let me tell you, Jack does play one of the few good men, because there are evil compradors out there who would eat that puke Scientologist for lunch and pick their teeth afterwards.
No, Jack compradors, stop your f**cking gatekeeping.
Just an opinion:
Before they will get better? Before?
This of course assumes things will get better.
On this we can (with all due respect to a different perspective) agree to disagree.
I don’t see it getting better at any point.
Sure when the whole system crashes and we have massive destruction at biblical levels, and then things “bottom out”, maybe things will be “better” relatively. But that’s a weak position IMO.
I see we got another 10 years of this. Yes, I see the system surviving another 10 years. Sure it’s a scam and the whole is rot, but we have that now, (and we had it 10 years ago), and the system keeps on putting.
One thing is for sure, relying on people to wake up is delusional thinking, IMO. It won’t happen until things get so bad, ie. the tipping point has been reached, and at which point them “waking up” will be pointless.
System crashes in 10 years (maybe).
Biblical Scale apocalypse.
And then the same people, who finally woke up (only because they had no choice), will choose a system of governance even worse. They will call it progress. The more things change … mix, repeat, … blah, blah, blah
My only consolation is that due to simple chance (biblical scale apocalypse), I won’t be around. (How’s that for a silver lining?)
Doom and gloom I know. Even if, through some “act of God”, we got Rocky or Jill into the WH, the entire system, every dept., regulators, inspectors, judges, … the whole thing has been corrupted to an unimaginable level over the last few (yes few) decades. No one can fight this level of corruption. The number of arrests … is ROcky or Jill literally going to arrest every … Senator, Rep, (and all their aides?) … most judges (SC?), … most, if not all, regulators and inspectors, … all the generals, colonels, majors, captains, (and what about all the grunts who followed the orders???), … most (yes most, because they knew about it) of those who work for the various depts in the USG, … and what about the corporations? (that arrest list is going to be miles wide), and what about the good corporatists who did their “job” and followed those orders (not enough jails in the world for the numbers I’m talking about)…
This can only turn out one way, … and boy I hope I’m not around to see it.
Long before this f**cker made it clear it wasn’t going to last, there were people who knew it wasn’t going to last.
How come we’re still hearing it could last?
Sure! Depends on how bad things get, and who’s President. I do see Obama doing this to the banks if they’e collapsing again. I don’t think a bailout would be possible this time. If the Congress did it they’d be risking bodily harm. No, this time, if there’s a banking crisis the Big banks are going into resolution, and good riddance to ‘em.
The energy sector will take a little longer. But once Wall Street is in ruins and the Big banks are out of the political picture then the oil companies will be a lot more vulnerable and I think it will be much easier to compel them to do various things necessary for the economy.
That would be completely out of character for O.
I don’t see our lobbyist system of government getting better. How can it post-Citizen’s United?
The banks have more influence than the people; hell, Walmart may have better representation.
It’s like my old, gray-haired granny used to say, “Hope in one hand, poop in the other, and see which one fills up first.”
I won’t apologize for being disillusioned. But what’s the alternative? For me it’s an acceptance thing. We’re fu@ked.
Obama will do what Kissinger tells him to do. Any contemplation of Nationalizing any banks – “Socialism” (screamed at screamer pitch) – will result in more bailouts. “Smaller” (they’ll say) Bailouts on the backs of the public, of course. (pending Austerity is the soup du jour). We all must tighten our belts, they’ll say (not the MIC, not Big Oil, not AHIP, not WalMart).
America is number one and we always come out on top. /S
This system “works” for the political class and for the 1%. Recession works for the cheap labor conservatives and their fears of inflation and their hatred of regulation. This article argues that they are coming for our Social Security too.
There is a nice link to a 1993 op ed by Galbraith on how the wealthy really like recessions, for protecting their wealth.
The point is the shock doctrine, but that only works if the fear people are feeling is stronger than their anger. Their anger is growing now, I don’t think their reaction to a new bank crash is going to be as benign as their previous ones, especially after four more years of experiencing bank foreclosures, rising health insurance rates and gouging from the credit card companies.
Thanks for suggesting Voices on the Square. I’ll think about it, but I’m already posting at 4 places, so I think it’s time to swap rather than add.
Well, let’s tell them the truth and let the chips fall where they may!
Maybe, but I wouldn’t bet on it!
I’m not saying you’re wrong, but as Jamie Galbraith says: “We must make an honorable fight.” So, I’m making that fight. Join me!
O doesn’t have character; he has no religion. If the banks are collapsing and he thinks it’s too risky to save them, then he’ll take them down.
“Do not go gentle into that good night . . . ”
We’ll see . . . .
None of this is new including the article that they’re coming for our social security now. Shit they’ve been coming for it since Clinton was President. They may make it this time. But if they do, they may just bring down the whole system around them. We’ll have to see.
I’m not sure I got why the banks will fail but that aside, there is no doubt we will have a double dip or at least a high probability. I saw Romney wants to postpone the spending cuts for a year. Incredible. A conservative wants to avert the on coming recession while Obama wants to hang tough and put more people on the street. Shit we already have twenty five million looking for work
It is hard to process the idea that a democratic president is going along with this nonsense rather than standing on his soap box. The problem though with running to Rommey is also believability, if the Rs control congress and the presidency we will be in for a decade of hurt.
No doubt about that. They are coming for all of it, including SSMM and even unemployment insurance. Bc you know the unemployed are just plain lazy. Every once and awhile one of the wing nuts even wants to eliminate the minimum wage, not that it is worth much I mean try paying your rent with it. I mean who do you think the Kochs and Paul Ryan are anyway? Choir singers.
Most of the people on this blog hate inflation about as much as the Kochs. That gives them an opening. We need to be smart about it.
That’s why I think TPTB want Romney.
The gloves are coming off. The House looks like it will stay Republican and the Senate looks like it will go Republican.
Than it’s ram, ram, ram everything through they can until the middle class is a memory in this country.
Yes, it’s coming. Get ready.
See the graph on this page?
http://www.politicalcompass.org/uselection2012
About $3 billion is going to be spent this year convincing voters of the life-and-death difference between (+6, +6) and (+7, +6.5). And if Obama wins as predicted we can expect another four years of verbal combat between those who think Obama is a liberal (excuse me, http://www.dailykos.com/story/2012/03/30/1079054/-What-if-Barack-Obama-weren-t-a-leftist ) and those who think Obama is a Muslim.
Public outrage has already been anticipated by the co-ordinated response to Occupy. We need new tactics.
Why imagine that only the Republicans are capable of delivering such a decade?
Did you just say our government is , how you say, dysfunctional?
Bc they are infinitely worse than the dems. That is not to say the dems are good but IMO the Rs want to make you subservient, you know no voting rights, no safety net, no min wage and …. Well fill in the blanks.
I am hoping the Republicans win everything and the blood bath begins so the illusion can be shattered for the Right that Republicans are for anyone but the rich.
Once this happens we all need to join together and fight these evil bastards with everything we have.
You are assuming you will be able to fight back. I am not at all confident. In fact, once they have the,power they will take all steps necessary to ensure you never again can chamge anything. The first thing, already in progress, is to stop you from voting. Then take a look at what happened to the Occupy movement and they face a relatively benign governemt.
Won’t be easy. And you’re right we seem to be already rendered powerless.
But to fight back effectively at all I really think the scales need to fall from the eyes of Americans about the two corrupt parties. Until that happens we have nothing to work with as we are like blind people who can’t see who are enemy is.
Many on the right will find employment as camp and prison guards, personal body guards, servants and all those positions the rich find necessary for a comfortable life. USA, USA, USA is the Sieg Heil of the U.S. Empire.
That dark road we cannot go down.
It’s crucial all of us are educating our Right Wing friends and family now who the enemy is as this unfolds in the next few years.
I do think we are at risk. No way on earth can I give it up to the right wing. Lose now and the lights go out just like in Europe in the thirties.
Here’s how I fill in the blanks:
http://www.politicalcompass.org/uselection2012
And you appear to me as one of quite a few (probably) sincere souls trying to tell me how much worse (+7, +6.5) is than (+6, +6).
Politics under Obama is, moreover, dramatically worsened by the fact that half the public thinks he’s a liberal and the other half thinks he’s a Muslim. There’s nothing like willingly-subscribed delusion to keep everyone passive.
Because they are no solvent. They have no money. Broke.
But on top of that our financial system IE the banks are debt based. In order to function, there has to be a growth economy. We have no had that a couple of bubbles ago.
But the government is “fixing” the figures and stats and the FED keeps propping them up.
It cannot go on indefinitely.
No to another sock puppet political party – Regime change.
My only question is whether we’re in a controlled slide to a new gilded age, or just a haphazard one.
Hey Blue and Ready ,the reason we are like blind people is because of a well-conceived concept known as inverted totalitarianism.It was designed to not have a a demagogic face.One could blame Obama or fear Romney .but we refer to the MOTU for a reason Fascism.privatization ,austerity ,indentured servitude ,moral -hazard socialism and its bailouts ,the terrorism bugbear shredding the constitution ,and all other structural tyranny will increase regardless of which Wall St. pitchman is prez .As the blog notes so well , there must be a party/movement that has spoiler leverage .Everything else is just pissing in the wind until the most violent outbreak in history occurs in several years and give something unplanned and horrific that makes us beg for military rule .
Richard Lichtmann speaks eloquently on inverted totalitarianism .Find him on KPFA archives in 2012 speeches ,if really serious about change that matters .
Hey lets ,thanks for the blog .However ,I think we are in complete denial when concluding that Bernanke or any of TPTB don’t get it or are misguided .I can explain a rationale for every policy pursued .I won’t however ,because we have different world views .You presuppose well-intentioned motives and I don’t .The point is not whether you are too idealistic or I’m too cynical .but to show why two guys who agree on the need for a two -party option will never agree on how to achieve this goal .I think we both represent huge schools of thought …all the best.
The banks will fail because more bubbles will burst and the Eurozone where they’re heavily invested is likely to crash.
New post on Minwage here.
No! But what a good idea!
Yes we do! I think a lot of people are trying to solve that problem!
The direction is controlled; but the movement is haphazard, and the frogs are not being boiled gradually enough.
Actually I don’t presuppose good intentions. Not even on Bernanke’s part. But, I just don’t think he understands money that well. If he did he wouldn’t have bothered with QE.
Hey lets ,that is an excellent case in point .I think QE was a success,because I believe his goal was to inject massive liquidity into global capital markets and deal with some solvency threats along the way .We got the speculative blowback in the form of commodities inflation while poorer countries got food scarcity that triggered the Arab Spring and the poorest countries got mass starvation .Obviously energy inflation then further exacerbates food value .
I think political stability impacts his QE3 actions .Reich wrote that Bernanke has used regulatory stricture and system incentive for banking carry trade to ensure QE injections remained in a wholesale credit loop with bond purchasing latitude .My conclusion is he is using an inverted form of the Philips curve to have unemployment combat the inflation from keystroking trillions .That sir is a profile of a traitor who has betrayed our nation interests to serve international banking interests .Unless you believe the Fed had no tools to ensure direct and hence affordable retail credit ,come on over to the dark side .
Hey lets, as has been mentioned I think bernake knows what he’s doing. That’s the only area where we differ.
It’s a ugly but cynical truth. They’re simply engaging in gradually moving the wealth into the hands of the few. Not too outrageously so as to trigger a revolution, but fast enough.
Well framed inquiry lgid. Many good comments above. Recommended.
The S+L,LTC and Enron meltdowns and the MERS/Mortgages/Wall St.pump and dump debacle of 2005-2008 with follow-up nobody goes to jail/Fed multiple QEs since late 2008 onwards while American homeowners ride the ToHell rollercoaster suggests the pattern is to plunder,sack and pillage then repeat. The Phony Austerity politics are a companion to the post Jan.20,2009 Obama WH dither while things whither with the Rs and Ds in Congress acting out scene after scene to a UniParty script where the long goal is to play teeter-totter endlessly.
POTUS Clinton failed to protect the small American during his time in the WH and being followed by G.W.Bush ensured that failure would be amplified repeatedly and it was.
POTUS Obama has proved with his being in the WH that G.W.Bush and R.B.Cheney had no reason to ponder any justice being done for what they signed off on with the post 9/11 unreeling of GWOT and the mindless attack on Iraq,the war crimes this act opened upon and the untold billions of $$ gone missing since the early 2003 attack and sacking of Iraq.
Will things get worse? Barack Obama finds plenty of support on these comment boards and a good many others across the Inet. Despite all the plain to see reasons that Barack Obama is all in for the One Percent and is doing what the imperialists,militarists and corporatists want done,not stopped or made wider and deeper. So where is the outrage? Where is the absolute refusal to take more?
Where?
Currently the USA is under great a great drought duress which is going to translate into higher costs,prices and stay even/not fall behind levels for millions of Americans in the coming months well into 2013-1014 yet POTUS Obama seems indifferent to this being so.
Those Americans who blindly insist on voting for Barack Obama to be POTUS for four more years at this point deserve Barack Obama.
Mitt Romney? Excellent choice for UniParty misdirection efforts to give Barack Obama a WH win in November 2012 being POTUS Obama seems quite willing to severely undermine Social Security for starters or to make it a political target for extreme reduction,termination.
A D POTUS doing what a R POTUS could only do with much more difficulty. Barack Obama should be voted out of the WH just on the basis of the record Obama owns as POTUS since Jan.20,2009. Yet here we are being repeatedly led to think and act to give Barack Obama four more years as POTUS. It is a ludicrous piling up of suspended disbelief linked with misdirection of who is doing what and why.
Will things get worse? Seems to be the only way ahead.
You’re right.
defogger, QE is a swap of assets, mostly bonds for reserves. So what it did was to change the composition of bank portfolios, not add to bank net financial assets, for the most part. Some economists still have a residual belief in the Quantity Theory of Money, which Keynes refuted about 80 years ago now, so they believed that an injection of money into the banking system, and a subtraction of securities somehow added to banks’ freedom to speculate and increase profits on speculation, get bonuses, drive up commodity prices and so on.
Well that happened, but not because of QE which actually had an overall deflationary impact. It happened due to TARP, TALF, and especially the whole range of credit facilities the Fed made available to the banks during the past few years. That is the real scandal and the real corruption, not the QE, which had only minor impact. Randy Wray writes it about it here. And here he explains why Bernanke doesn’t know what he’s doing, and also why the reserves provided by QE can’t cause inflation or speculation for that matter. (Guess what, the reserves are locked up in the banks.)
Oh yeah, Reich is a great guy whose heart seems to be in the right place; but he doesn’t understand banking either as evidenced by his silly statements from time-to-time about the debt-to-GDP ratio.
My claim is that he doesn’t know what he’s doing with respect to QE or he wouldn’t have bothered with it. On other matters involving bank bailouts and supporting the mortgage frauds, I’m afraid I think he did know exactly what he was doing.
Unless there’s very strong wave of continuing public anger and total rejection of one’s own representatives in polls, I think the way ahead looks very dark. To expand a bit, polls show that Congressional approval is at very low levels. But people feel much more favorable to their own Senators and Representatives. I think that’s the tipping point. When polls show that most incumbents’ approval ratings are down around 20% so that most og them can anticipate defeat the next time around, then I think the behavior of many will change. In short, people have to recognize that the poor performance of the Congress is due to their Congressperson and Senators, because whatever their voting record is specifically, their acceptance of the present legislative system in Congress enables the continuation of that system. Congresspeople and Senators have to refuse to collaborate with Party leaderships until those leaderships deliver legislation that the majority of people clearly want.
Hey lets ,your response appears to be a cagey way of saying that you have no response to my Fed deconstruction.Unless you believe Reich was lying about the facts I adduced via Huffpo archives .then you used him for a straw-man evasion.I believe we might be entering a zone of ego and polemics .As I initially said ,we have different views of the system ,one seeing it as clueless and the other seeing it as corrupt .
OK, defogger, I’ll take this point-by-point
First, he did not inject massive liquidity through QE. That is a mistake, because the quantity of reserves vs. the quantity of securities has nothing to do with liquidity. Nor did he handle solvency issues this way. Rather, he handled both liquidity and solvency by extending $30 T of credit and counting to the big banks through TARP, TALF and special credit facilities offered by the Fed. Why did he increase reserves? Because he believes that credit extensions depend on reserves. But this is not true, they depend on credit worthy borrowers. Once a loan is made and a demand deposit is created, then banks get the reserves from each other or from the Fed discount window if necessary.
That happened, but not due to QE. It happened because the credit extensions enabled speculation by organizations, including Golden Sacks, who by itself has done massive speculation in commodities. I have no idea what the HuffPo archives have to with the above. Perhaps you can make that clear?
Please clarify the above statement since it makes no sense to me. The Fed has used unemployment to combat inflation since the 1970s. It’s all part of the NAIRU BS. But, in this case, there was no inflation due to QE because the reserves provided to the banks through QE had to remain in the banks as reserves. The commodity inflation was cost-push inflation due to the huge amounts of credit the banks could call upon to fuel their speculation. here’s quote from Randy Wray from the one of the links I supplied above on what happens to QE created reserves:
Or any commodity inflation either. Defogger, you’ve got the causation wrong.
Back to you:
I think the claim that Bernanke has done things to serve international banking interests rather than American interests is an easy case to make, but I think the evidence of that is in the realm of extending credit facilities to foreign banks and also in linking some of the bailout funding facilities to LIBOR. Here’s Randy again from the other link I gave you above:
So Bernanke did sell-out American interests, but in the other things he did to bail out the banks, not in QE.
Back to your reply #68:
So, in view of what I said above, I wasn’t being cagey. I was telling you that you have your causation wrong. The villain wasn’t QE it was something else Ben did. On Reich, I don’t think he lies. I think he errs because like many economists, including Krugman, he doesn’t understand the banking system or accounting. Finally, I don’t see the polemics, I just see us exchanging views, and just to put a finer point on this., I think that clueless vs. corrupt is a false dichotomy. A person can be both, and I believe that Ben was clueless when it came to QE and corrupt when it came to bailing out the banks.
Hey lets ,thanks for such a substantive response .I ‘m glad I perused the thread again.I have been terribly busy but I look forward to commenting by this evening .I never leave anyone hanging who tates political economy seriously .Was it Randy Ray to whom you referred ?
Hey lets ,I asked the question to ensure you around to read my reply.It will be fun if I still have you here .