Does the Fed chairman inspire confidence?
America's top banker says the country's biggest economic problem is confidence. But is he doing enough to inspire it? Ben Bernanke's analysis is that after what he calls the "eruption of the Panic of 2008" (his capital letter), the world rose to the challenge and by the end of last year, economies were growing and international trade was expanding.
But now he says it is clear that "economic recovery and repair is far from complete". His summary of what has not been going so well makes gloomy reading at the end of a week of fairly dreadful statistics.
America's top banker says "growth... has been too slow", labour market figures "have remained disappointing" with private-sector jobs growing "only sluggishly" and he was "surprised by the sharp deterioration" of the balance of trade, concluding that "the economy remains vulnerable".
His essential analysis is that "the pace of recovery in output and employment has slowed somewhat in recent months, in part because of slower-than-expected growth in consumer spending". The worry over jobs is central.
"The prospect of high unemployment for a long period of time remains a central concern of policy. Not only does high unemployment, particularly long-term unemployment, impose heavy costs on the unemployed and their families and on society, but it also poses risks to the sustainability of the recovery itself through its effects on households' incomes and confidence."
To me, this comprehensively depressing outlook seemed to be the top line of the story, so I was surprised to see the headline "Chairman: Fed 'will do all it can' to stimulate economic recovery" in the respected online newspaper The Hill.
It's true he certainly said it, and The Hill is not alone. The Wall Street Journal picks up the same line and the Washington Post has a toned-down version of it.
Perhaps it is just a question of gloomy Brits versus ever-optimistic Yanks, but the Economist is right to point out in its detailed take on the speech that when you look at how the Fed might support recovery, Bernanke rules out three of the four options he puts forward and suggests that the fourth will only be needed if things get much worse, and then it has some downsides.
I am not qualified to comment on his economic analysis but it seems odd to me that the speech is oddly unspun. The media have been allowed to pick and choose whatever interpretation they choose. There is no juicy soundbite, because the whole thing was "off camera". He doesn't appear to have given any interviews afterwards. No other member of the administration has felt moved on this Friday afternoon to come forward to offer his or her gloss.
So if you feel more confident as a result of the speech, fine. But no-one is prepared to guide you that way (except some journalists). Good economics? I don't know. But it's bad politics.
I’m Mark Mardell, the BBC's North America editor. These are my reflections on American politics, some thoughts on being a Brit living in the USA, and who knows what else? My 
~RS~q~RS~~RS~z~RS~38~RS~)
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The engine that drives our economy is consumer spending, without it our econmy falters. Every time consumer confidence has gone down in the past it resulted in instant reductions in spending, which in turn cause companies to stop investing, re-stocking, and hiring. If the problem lasts several months it leads to layoffs and eventually a recession.
The Fed Chairman was reiterating the obvious. It should be noted, however, that he was very careful and avoided saying anything that would cause additional panic. In fact, it looks like Wall Street reacted favorably to his speech.
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The economy is the number one issue on America's mind. Not global warming, not Pakistan, (Iraq is off the radar screen) not health care, not embryonic stem cell research but the economy. The US economy is the composite of 310 million personal economies and most of them are not doing well. The President has focused his attention on every issue except the one that is by far the largest engine pulling the rest of his political train and it is sputtering out.
Mr. Bernanke who was supposed to be an expert on the great depression was among the architects of the one we are in now. Along with Geitner, Paulson, Greenspan, and a host of other so called economic experts, they advocated and got the dismantling of every obstacle the US government had put in place in the 1930s after the depression hit to prevent another one. It took more than them though, it took a the collusion of Republicans and Democrats, liberals and conservatives, Presidents in at least three administrations to pull it off. The liberals colluded to divert trillions to build houses for people who couldn't possibly afford to own them on the idiotically naive belief that somehow they would manage and things would work out. The conservatives were sold on the equally idiotic belief that the financial markets could regulate themselves without going bankrupt. As a result we got what Alan Greenspan said he didn't understand about markets, people in control of vast amounts of money taking enormous gambles with it on their employers' behalf for quick personal financial gain for themselves in what seemed in the short term like successful get rich quick schemes that turned out to be in the long run go broke for sure schemes instead.
The damage to America's economy is not what is happening now, the real damage was done when all of this was going on over a period of over a decade, maybe two decades or more. What is happening now is the decision of who will feel the pain for it. And the pain is being diverted away from the banks and other financial institutions and onto everyone else on the naive belief that if those institutions failed, the world would end and we'd never have other financial institutions to replace them. That decision has been agreed to and is being implimented by President Obama. And so the banks and insurance companies are being recapailized at the expense of everyone else. The solution, the printing and circulation of many more trillions of dollars to write down the past debt to make it worth much less, to devalue the currency, to create real economic stimulus and start prices, wages, and interest rates rising, and to devalue the US currency drastically against all other currencies. Combined with protectionist tarriffs, this would bring investment back to the US at the expense of the rest of the world, people we as Americans should by now be entirely indifferent to. This is the only way to get out of the depression. It is how we got out of the last one. It wasn't WWII that ended it, it was the spending of money the government didn't have but eventually printed that got us out of it. And Smoot-Hawley being in any way responsible for exascerbating the great depression is the biggest lie American economists ever told. If you want to fix America, you can start by closing down all of its business schools and firing all of their professors and graduates from whatever jobs they hold.
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Jeez Marcus, you seem even more bitter than usual. What happened? Did you have to trade in the Lincoln for a horse?
We're still sitting pretty up here in the Great White North. The virtues of prudence and no Imperial over-reach, I guess.
Cheers,
Pinko
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Bad politics? I dunno -- I think people know the doo-doo is deep. No sense in sugar coating the sh--, ehm, you know.
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Does the Fed chairman inspire confidence? In a word: "no".
Ask the average person what the Fed does and they'll tell you they aren't sure but it has something to do with interest rates. Force them to sit down and listen to a speech made by the chairman of the Fed and their eyes will start to glaze over because although the words may be English he might as well be speaking in tongues. The people who can listen and understand are the same folks who led us down the garden path to economic chaos in the first place; brokers and bankers, and no one has much confidence in them these days.
I'm amazed that Bernanke was surprised that individual savings rates were up. How dare people save when the Fed has slashed interest rates to the bone? Pay no attention to the unemployment rate behind the curtain!
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I enjoy your posts, Marcus, but you need to provide a little support for your 'solution' in order for me to judge it merits. Same thing for your smoot-hawley tarrif argument.
I agree we spent our way out of the derpession printing money to finance our WWII effort, but that was 65 years ago and things were different and so were markets and international trade. We were mostly self-sufficient then, but we aren't any more.
How would you make your solution work? It seems to me it would just make thing worse.
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d_m
"It seems to me it would just make thing worse."
How could they get worse? By Clinton's own admission about 2 trillion dollars of bad mortgages were written. When Fanny Mae and Freddy Mac went broke they held about half of the ten trillion dollars of mortgages in the US. CityGroup, one of the half dozen or so largest money centered banks is still in grave jeopardy of going bankrupt. Housing prices continue to fall but the unemployment rate is not falling, banks are not lending to business, and the economy is collapsing. An 800 billion dollar "stimulus" barely made a dent and it is now petering out. there are still 50 trillion in CMOs and 650 trillion in CDSs if I understand the terminology of the acronyms right, tell me how it could get any worse that it is already and is on course for. Something drastic has to be done to change that.
Government living beyond its income is nothing new, the financial crisis has simply accelerated the consequences as most states are now bankrupt and the US government is about 11 to 14 trillion in debt. Marginal savings won't matter.
Market economies are governed by the law of supply and demand. The market charges what the traffic will bear. There is a balance between real wealth like houses, cars, buildings, machinery, appliances, and abstract wealth like cash, bonds, stocks, CDSs, CMOs, and anything that can be turned into cash quickly, so called liquid assets. This includes most importantly credit. In the bubble economy for real estate, the increased quantity of real assets drove up the value of liquid assets. When the market for houses collapsed, so did a vast pyramid of liquid assets that relied on those houses for credit. Not only did credit dry up in an instant, it got so tight banks wouldn't even lend to each other overnight because they didn't know if the borrowing banks would still be solvent to pay them back the next morning. This precipitous collapse in the supply of liquid assets effectively froze the entire economy not just in America but around the entire world. Banks all over were playing the same gambling game, some large ones in Europe for even higher stakes than American banks as measured by their leveraging.
In all recessions since the great depression we've gotten out of it by printing money, the so called pump priming. This is how government injects money into the economy, by deficit financing. It hardly matters what it is spent on so long as it is spent. With the multiplier effect, within about 3 months of being doled out it has been spent by the recipients on something else, the velocity of money. The government has to do it again but this time on a much larger scale. Yes there will be major dislocations to those whose assets are in cash and cash equivalents especially to banks. Those assets will drop in value as the increased quantity of them without a corresponding increase in real assets dilute them. But it will make cash much easier to obtain to pay back old debts with newly minted dollars of far less value. Tarriffs on imports will assure that it will be desirable for anyone wanting to sell in the United States to produce in the United States and that will create jobs and businesses here that would otherwise go overseas. The only people who will need special relief are those who live on fixed incomes. Those will have to be adjusted for the inevitable and highly desirable inflation that will follow. You see contrary to what you've been told, when there is inflation there are winners as well as losers.
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We worry about confidence and the economy, and I suppose that's understandable. But seriously: how many of us have problems that come anywhere close to that family in Pakistan that just lost everything, including their crops, house, only cow -- not to mention their youngest child to cholera? Or the young couple in Haiti that's still living in a tent and needs to walk two blocks to get water or go to the toilet?
I don't doubt that a dose of somehow-justified confidence would do us all good -- but I think a dose of -perspective- would be even better.
My God -- we complain about "hard times" as we drive to the local fast food joint for lunch while we talk on our cell phones.
Are we really that lame anymore?
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3. At 01:04am on 28 Aug 2010, chronophobe wrote:
"We're still sitting pretty up here in the Great White North."
[[Tempting fate there, Pinko.]]
The virtues of prudence and no Imperial over-reach, I guess.
[[Imperial = Exxon in America-speak, unless referring to gallons, in which case 1 US Gal = 7/8 Imp. Gal.
Alternatively, Imperial might refer to margarine "fit for a King", but in that case over-reach with the butter-knife is quite common.]]
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I guess this means recovery summer was a bust. Things are simply not figuring the way they figured over at the White House.
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re: 9 Tempting fate there, Pinko.
What? I always knock on wood when I say such things.
Alternatively, Imperial might refer to margarine "fit for a King", but in that case over-reach with the butter-knife is quite common.
As long as one doesn't put one's elbows on the table, such over reach is of no consequence. And no crown wearing a table, neither, please!
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Fed Chairmen can be like this. The machinations Alan Greenspan went through to avoid saying things directly, even years later, was something to see. Master politicians when it comes to avoiding politics
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The economy is shaking down and clearing out after a major collapse in the new addition that was added on over the last few years. We’ve lost a lot of living space (credit cards) and structure (jobs) that leaves holes, debris everywhere, and some uncertainty about the place’s stability.
A proper job of clearing up and reconstruction will take some time – and although the holes can be temporarily patched (stimuli, etc), some planning needs to be done if we expect to get on well in the future. The structural weaknesses that caused the problem must be removed or shored up (via proper regulation and discipline). We have to be careful how much we borrow for the project. A quick job would not be advisable, although some are already impatient – those who are sleeping outdoor (the unemployed) and those who want to make the new management look as bad as possible (you know who).
We will have to change the way we do a lot of things, maintenance, inspections, sudden urges to expand with the help of shady contractors. It may be a long while before we have as big a place as we had before, especially if we want something that will last.
KScurmudgeon
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30. At 5:22pm on 27 Aug 2010, ukwales wrote:
- a great post. Please go into ‘the process of wealth creation’ a little more – the bare bones of survival are hard for some of us to visualize.
Sorry to hear you get your goods from China just like us. Two blocks away and visible outside my window is an elevated rail that was constructed to carry 100 car trains north through town from Houston to the middle states. Five or six of them go by each day, mostly carrying intermodal boxes with Far-east logos. I can’t look at one without seeing the billions of dollars flowing south and out the port simultaneously.
Imagine Mao wearing a Santa Claus suit.
KScurmudgeon
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* 77. At 1:42pm on 27 Aug 2010, MagicKirin wrote:
“ref #72 KScurmudgeon wrote:
(Listen to far more accomplished Republicans like romney, Gingrich or Scott Brown; all of whom would be doing a far better job than Chicago con man)”
Thanks MK, I will do that.
KSc
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"But it's bad politics." -MM
4. At 01:09am on 28 Aug 2010, chronophobe wrote:
"Bad politics? I dunno -- I think people know the doo-doo is deep. No sense in sugar coating the sh--, ehm, you know."
I agree with chronophobe. Ben Bernanke appears concerned about the monetary confidence of the public, but it clearly can be seen that the financial landscape in the US is fairly bleak for most people at this time, and for Mr. Bernanke to speak in terms of anything but the obvious truth could only serve to undermine the very confidence which he seeks. In this case perhaps blunt honesty could be his best political choice.
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7. At 02:16am on 28 Aug 2010, MarcusAureliusII wrote:
d_m
Thanks for your reply Marcus.
Sorry for the delay, it seems a husband's work is never done.
Just for the record, however, I have faith that things can always get worse. Well, that would be short of gettng hit by a giant planet-killing asteroid, which as you may recall almost happened a year or so ago, a near miss at only a few hundred thousand miles. What's worse, no one noticed it until it had passed. Oh well, if that happens, none of this will matter at all.
I'm unable to find the 650-trillion dollar number you mention. The best I can come up with puts the value of CDSs in the US at somewhere between 33- and 37-trillion dollars. So maybe I'm missing something.
I agree that we need to do something about the debt. The federal governmnet should continue to inject money into the economy, but republicans in congress seem not to agree with that sort direct pump priming. They prefer priming the pump indirectly by extendng the Bush-era tax cuts. And I for one don't think we should do that. Tax cuts to spur investment sound good, and maybe they were good once, but the reality is probably different. With so many 'American' companies (not just multi-nationals) manufacturing their products or portions of them overseas, or contracting for their manufacture overseas, there is no way to know what country your investment will actually end up benefiting. Chances are though, it won't be the US. And that's assuming people even use the money to invest, let alone, invest in US companies.
I understand the idea of devaluing currency, and paying off debt with cheaper dollars. And I know devaluation also encourages the purchase of domestic goods over foreign goods. So, in a way, it's a kind of tarriff. But tarriffs turn trade into a zero-sum game. The tarriffs I use to benefit me are used at the expense of my trading partners. Perhaps we should simply say other countres. Somehow I don't think they are going to sit still for that. And even if we could use tarriffs to force companies, foreign and domestic, to build their factories here in the US, would it happen fast enough to help us. And in the meantime, it would likely seriously damage those companies we do have that are manufacturing products here in the US and selling those products into overseas overseas markets. The damage we could do to our viable companies by starting a trade war might well undermine any benefits we would see from protectionist policies.
I don't know if inflation will be a problem or not, but if it is we'll just have to deal with it. So, if it comes to that, I'm all for helping people on fixed incomes. After all, that's a fairly large portion of the population--and growing.
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On the issue of savings I would say that while it is wonderful that my fellow Americans finally remembered the advice that our parents and grandparents gave us long ago, the real reason the savings rate in the USA is going up is because people are afraid of losing their jobs and decided it was prudent to set some money aside for rainy days.
I agree with what MAII said about Mr. Bernanke, his predecessor, and several other Fed Chairmen. These gentlemen, other bankers, and inept or easily manipulated Presidents and members of Congress have been playing with our national treasure for decades and are a major factor for the economic mess we are in.
That, however, does not exempt us - the people - from responsibility. Our insistence on lower taxes while insisting on having the most powerful military in the world, engaging in foreign adventures without funding, and demanding social services without paying for them is a recipe for disaster. The worst part is that we continue to demand lower taxes while our economic ship is sinking because of a debt overload.
In the end, politicians in a democratic Republic do what their constituents want them to do. As for the "Fed", I would much rather have a Central Bank.
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The fed speaks to banking. The banks are calling notes on projects that were not over-leveraged 5 years ago, but that now are at 100percent or more loan to value. The FDIC is requiring the banks to call the notes so that the banks 'appear' stable on paper. The FDIC is not letting the banks loan at more than a 70-75percent LTV. No one can refinance because their projects are under water. Buying more toxic securities wont help the people on the ground, nor will calling their notes.
If the banks are unstable use an RTC structure - save the assets, save the people, do not save the 'banks' http://en.wikipedia.org/wiki/Resolution_Trust_Corporation
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d_m
The 650 trillion is the aggregate risk in the derivatives market. Derivatives are extremely complex investment instruments that few people understand. They are therefore by nature highly risky but they do have legitimate functions in the workings of our markets. They are used by among others hedge funds. They are unregulated and most people who invest in them take their worth on blind faith including some pretty sophisticated institutional investors.
CNBC has some excellent programs on how the financial collapse was engineered and how events evolved. The invention of subprime mortgages was a scheme to extend credit to buy houses to people who couldn't get credit by ordinary means because their credit rating didn't qualify them. They were to pay very low "teaser" rates initially but much higher rates later on to make up for the lost cash flow at the front end of the mortgage. The higher rates also included the added risk so monthly payments would really go up when the teasr rates expired. They were therefore virtually guaranteed to go into default. These mortgages were chopped up into small pieces and then repackaged with a very large number of similar mortgages each one supposedly being only a samll percentage of the overall risk. Since mortgage failure rates were usually low because the borrowers qualified for the loans by having jobs and other assets and becuase the houses themselves were collateral and usually go up in value, superficially there seemed like little risk. The credit agencies like Moodys and Fitch didn't do their due dilligence by investigataing these instruments and small wonder, each one of them would have been an enormous research project all by itself. They were engineered that way. So they just rated them AAA based on the reputation of the originator. The beauty of these Colateralized Mortgage Obligations or CMOs is that bankers and other investors would buy them on blind faith because of their trippe A rating. The insurance companies invented a scheme to make money on them as well but rather than just buy them also they invented an insurance policy called a Credit Default Swap which in effect guaranteed that these CMOs would pay off. Because the risk was believed to be minimal, the premiums were relatively low so an enormous amount of money was virtually guaranteed to be lost although most finance experts never suspected it. Congress encouraged this with the backing of the Presidents in several administrations, the Fed, and the Treasury department. This was done to encourage people to buy homes. This is how the housing bubble got started. Because of the increased demand for houses, not only did builders expand heavily but speculators began to buy up lots of houses to "flip" as soon as they were built or after some repairs were made. Equity in some houses was often used to obtain credit to buy more of them. The government removed the barrier between Commercial banks that traditionally made only the most solid loans to home buyers and were federally insured by the FDIC (the insurance that gave Americans great confidence in the solvency of commercial banks) and investment banks who could speculate all they wanted to but were not insured. So there was no due dilligence and this pyramid continued to build unitil September 2008 when Lehman Brothers collapsed and it looked like the entire financial market would collapse with it. In fact the bailout of AIG who had invested heavily in CDSs was to the tune of about 185 billion of American taxpayer money. European governments begged President Bush to take this step of bailing AIG out because if it had failed, most of Europe's banks would have failed with it. So where are these toxic assets which are worth much less now than they were just two or three years ago? The US taxpayer owns many of them. But banks still hold a lot of them. You can see how the banks want one set of rules for themselves, another for everyone else. If you ever apply for a mortgage to buy a house or refinance one, they will carefully and professionally appraise it looking at every aspect of it including how it is built, what condition it's in, the location, the land, comparable recent sales. But now that they own them, they don't want the market value to be used to judge what they are worth. The words "Mark to Market" is an anathema to them becuse it shows that the banks themselves are worth much less than they would like the world to believe.
I repeat my suggestion that the only real way out of this is to print enough money and get it into circulation in the US and keep it there in order to get prices back up to where they were and to make credit available for businesses including those that have nothing to do with real estate to resume normal operations. Until that happens we will continue down from recession to depression. The current plan to save the banks isn't working and it is killing everything else.
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hahaha speaking of speaking, the honorable Tea Party candidate for the Senate just called the honorable Senator for Alaska a 'you know what' -
http://www.themudflats.net/2010/08/27/joe-miller-calls-senator-lisa-murkowski-a-whore/
one thing's for sure, all of our honorable govt' reps including the economists need to grow up.
"True terror is to wake up one morning and discover that your high school class is running the country." - Vonnegut
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MAII wrote: I repeat my suggestion that the only real way out of this is to print enough money and get it into circulation in the US and keep it there in order
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So how would you distribute/circulate the money?
Give it to the states or to the people directly?
I believe we need to focus on getting all our states out of debt first, then focus on the national debt...
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Mark:
"Good economics? I don't know. But it's bad politics."
The Fed is designed to be apolitical. It is not the Chairman's job to say anything but what the Feds believe is the truth about the economic situation. If Bernanke had made any attempt to spin the facts, that would have been seized on in a second by the opposition (especially in an election year) and might even lead to the downfall of the institution itself.
The Journal and other media outlets do have the job of interpreting what the Fed says for their readers. Bernanke has tried to make the actions of the Fed more transparent, but like all Chairmen, he is concerned with the effect his words may have on the economy. Indeed it is this very power that led to the Fed's creation in the first place. So, the Fed communicates in very carefully chosen terms. Unfortunately, most Americans (including myself) are not capable of parsing those terms in any truly meaningful way because we just don't have the education.
The Press helps its readers by parsing the Chairman's testimony for us.
As for whether the American Press is more optimistic than the British press, well, I've been working up to a post on that for a while. I'm hoping it will be the topic of one of your entries some day.
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14. At 05:25am on 28 Aug 2010, KScurmudgeon wrote:
Please go into ‘the process of wealth creation’ a little more – the bare bones of survival are hard for some of us to visualize.
After the American war of Independence,the new US wanted & had to get away from buying manufactured goods on credit from the Mother country.
Artisans soon copied the original British & produced their own products,
or the folk did with out.This can do mentality coupled with thrift not only gave local employment to increasingly skilled crafts people but increased the value of its currency over time.Local employment gives stability to any community,youth unemployment is a recipe for disaster.These lessons have been forgotten.The US plays by the Marquee of Queens-bury rules on free trade policy,but not the East.
My views on wealth creation could be called "state the blooming obvious".
You can only truly speak on a subject as deep as your experience has taken you,for personal wealth creation,I left school at 15 with my headmaster`s words ringing in my ears,"you are no good & never will be"it
was a great spur.No one owed me anything, after 30 years in business I retired at 46.I took the financial risks young & borrowed money the old fashioned way,
I payed it back!.
My final word on wealth creation or this post in a nut shell,
For goodness sake if possible buy American..
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LJ;
"So how would you distribute/circulate the money?
Give it to the states or to the people directly?"
It almost doesn't matter. It's like getting an injection. Doesn't matter if the medication enters your bloodstream in your arm or your leg as long as it gets in. Once it does, it begins to circulate quickly. Of course it would be nice if the government bought something useful for it but that might be much too slow. Those so called shovel ready projects didn't seem so shovel ready after all once the money was approved by Congress. You have to wonder how much of the 800 billion stimulus was actually spent and how long it took. It was too little and not nearly fast enough.
AP, the Fed has spent its ammo and is on empty. Interest rates are practically at zero. The fed fine tunes the economy. Fuel (money) can't be throttled anymore with fine tuning the carburator, this calls for a larger fuel pump. This is up to the Treasury Department which controls the money supply. That is under the direction of Geitner and ultimately the President. It is also up to Congress to recognize that the outflow of jobs from the US has gone much too far. It is time for protectionism and and end to this foolish talk about free trade and how everyone will be retrained to be computer geniuses. People who do ordinary work in America need jobs that pay a living wage too. It is also in the national interest that industries vital to the military and national security be brought back to America where the government will be able to assume complete control over them if it has to. The power of large corporations to dictate American trade and tax policy has to come to an end. Their interests and America's interests no longer coincide.
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Ref 24, UKWales
"For goodness sake if possible buy American."
Easier said than done. Many of the products we buy and use are no longer built in the USA, and even when the manufacturer is an "American" company, that company is likely to be a multinational owned by American and foreign investors.
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Ref 25, MAII
"Fuel (money) can't be throttled anymore with fine tuning the carburator, this calls for a larger fuel pump."
I agree. The way I see it, Bush's $700B TARP, Obama's $800B stimulus, and heavy infusions of money by the Fed prevented a second Great Depression, but that was not enough to sustain an economic recovery considering the magnitude of the problems we have.
Unfortunately the political climate in the USA does not lend itself to doing what we need to truly stimulate the economy, or at least give it a fighting chance. What dominates political debate today is individual tax reduction, smaller government, and spending cuts. Good to see people who until a few months ago had no problem borrowing and spending suddenly become fiscal conservatives, but it is a little too late to prevent collapse and what we need now is large infusions of cash to get things going again.
I think they have to appropiate more money and earmark it for things such as the $8K incentive for first time homebuyers, tax credits to businesses that keep their facilities in the USA, and tax credits to companies that hire an X amount of people. We should also invest heavily in infrastructure to put people back to work.
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"The way I see it, Bush's $700B TARP, Obama's $800B stimulus, and heavy infusions of money by the Fed prevented a second Great Depression, but that was not enough to sustain an economic recovery considering the magnitude of the problems we have."
That is correct. Not only will an infusion of money make it possible for both private individuals and government to pay down debt with cheap new dollars, it will bring in more tax revenues as business picks up, incomes increases, and the economy reverts to a normal pace of business. Tarriffs will keep it in the US. The US is still the world's largest importer and in any trade war, the US (as opposed to multinational corporations based in the US) will win and everyone else will lose. Seems only fair to me, it's been the other way around for far too long.
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26. At 8:15pm on 28 Aug 2010, SaintDominick,
Sir, with the greatest respect,
If excuses are made on why one cannot, increasing numbers of young folk are going to have no future,
America, like the UK, needs every job going.
Even low skilled manufacturing/assembly work is vital and must not be exported east.
The financial sector gets zillions at 'crunch o'clock'.
The manufactures on the other hand, if it cannot compete with slave labor rates, it's let the devil take the hindmost.
If products are built in the US by foreign companies, then ok.Buy them.
The UK, after the marshall plan and WW1&2 war debts, owed the US. At least you were benign, but many times our foreign policy had to toe the line and ask the US for it's nod of approval. Suez comes to mind when it was not.As for China, if you want to remain independent, you are going the wrong way.
He who plays the piper calls the tune.
Whatever problems the founding Fathers had, the rock on which they stood on still holds.
Be beholden to no one.
Make it yourself or do without..
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Don't need to print money, need to keep it in circulation at the ground level, that means the wealth hoarders need to let go - tax cuts for the wealthy expire, estate taxes kick in, corporate taxes kick back in, put the bad banks into receivership, extend the notes and let the bank shareholders take the hit, put the toxic securities into a gov't receiver and extend the notes - let these 'investments' retrieve some value since all of our pension plans, widows and orphans hold big chunks of them, and regulate regulate regulate - cap utility charges, tax luxuries, put the tax breaks into alternative energy generation only, keep oil out of government, and open the squashed patents.
What we don't need to allow is the current trend for the surviving banks to take tarp and bailout money and create REO holding companyies that buy foreclosed properties from each other on the cheap and hold them.
And what we really don't need is for crazy mouthpieces to stamp the name of christianity on their political policies - been there, done that - burning crosses, lynchings and holocausts result.
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Yeah, we need more Progressives, just like one buried in the Kremlin wall. Jack Reed. Funny, liberal progressive ideas were called socialism, it failed. Now like some new found mantra, the businesses are leaving your countrys. Tax what? They leave go elsewhere. It is a balance. Now the Obamanists have done a real fine job. The two party system is filled with the slobs of the political elite. You people are sheep. While you are ranting about socialists as some Messanic vision. Yeah Stalin and Hitler, Mao were all socialist, and brutal murdering socialist progressives. What a laugh, the new progressives must be like Hugo Chaves. So take the big pile of money and stack it up to spend on the poor American people, money is an illusion. Without a viable economy it is worthless. Ask the Germans, their the one voice in the European wilderness of idiots. Because they don't want to relive it.
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Obama, Pelosi, and Clinton have invested in infrastructure, to bad it is in Iraq, Afghanistan, Pakistan, and anywhere but here. Stimulus only kept government workers in jobs. Now the towns and states are raising taxes, deinflation, more unemployment. The Feds are hiring more IRS agents, another idea 1099's for over $600 in money spent by businesses. More paperwork for the business, that is okay, just move it to China. Build another warehouse in the US. Good job bill. Meanwhile the Indian tiger, and the Chinese dragon still grow. The UK guy had it right, so did Perot. Your economic basket has to be diverse. The Germans have their niche economy and have for a long time. It is a multitude of different skills,diverse technology, and basic practical business sense. Labor, business, and government working together. Here government now wants to run everything! No partnership. The only organised labor left is state and government employees. Union membership for private Unions is pretty much dead in the US. Business is leaving, or being globalized and leaving. But it is all because of consumer spending.......what a house of cards.
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It's not the money, it's jobs...How does one create jobs when manufacturing has been exported to the Dragon and Tiger economies.
On top of this is the fact that most jobs still in existence in the USA are "sitting" jobs...i.e. in front of a computer...This is fine for the likes of MIcrosoft and Intel, but how can companies pay for people to sit in front of those screens and not produce anything.
The 3 most important issues are JOBS + JOBS + JOBS....
Printing more Dollars has not created jobs...only created larger horders of cash in the name of Banks, and so the Government's solution is to repeat the prescription even though it does not seem to be working.
So the Banks will not fail...But Main street America is going to suffer...Wall Street not.
Throwing money at a debt laden society seems just crazy...It appears logic is turned on it's head...To get out of debt...Solution...Increase dept.???!!!
Perhaps the solution was to have let the failed institutions fail and then let the free market take it's course...This would have been uncomfortable but at least it would have levelled the playing field...Rather than, what we have now is an increasingly divided society between the have's and the have not's.
I would hazard a guess and prophesize that America is heading for a dictatorship in the name of law and order.
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ref #26
SaintDominick wrote:
Ref 24, UKWales
"For goodness sake if possible buy American."
Easier said than done. Many of the products we buy and use are no longer built in the USA, and even when the manufacturer is an "American" company, that company is likely to be a multinational owned by American and foreign investors.
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Dominick is right about this, the companies I represent with one exception are North American based and manufacturer in North america.
I do this for soci economic, environmental and quite frankly because qc is still better here than in China.
Of course my industry has sucessfully resisited unions so we can be competitive.
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Ref 29, UKWales
I agree. The problem we have is that the pride we once felt when we bought products with a label that read Made in the USA is gone. Today, our top priority is to make sure we have a credit card with a large enough credit limit to ensure we can buy the latest gimmick, and when that piece of junk breaks or it is no longer the rage we borrow more to buy the next piece of junk.
Not only does the average person don't care where it is made, most don't care if they really need the junk they are buying or how deep they are getting in debt.
We talk about national and corporate debt, we do exactly the same. The only reason spending has gone down in recent weeks is because people are afraid they may lose their jobs, not because of a sudden infusion of wisdom.
Part of the solution is to offer tax incentives to corporations and help them reduce operating costs by embracing a universal healthcare system similar to what exists in most industrialized nations. At the present time wour companies are trying to compete with foreign companies that do not have to borne the cost of healthcare insurance and on top of that pay lower wages and often get government subsidies. Not surprisingly, even our companies decided it is greener on the other side of the fence!
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31. AmericanGrizzly:
"Tax what? They leave go elsewhere."
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They can and do. The Obamas played board games when the storm hit during their vacation. Let's hope they played "Monopoly" and Obama got a crash course in competition.
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Ref 31, AmericanGrizzly
"So take the big pile of money and stack it up to spend on the poor American people, money is an illusion."
No, you spend that pile of money in things like education and infrastructure. The first would prepare our people for the jobs that are currently going to foreigners because we don't have enough qualified doctors, nurses, engineers and scientists to fill them. The second would result in more efficient roads, bridges, tunnels, power grid, water management, levees, dams and industrial modernization, which would put our country in a better position to compete and would make jobs available for our unemployed semi-skilled workforce.
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America's top banker says the country's biggest economic problem is confidence.
Wrong!
America’s biggest problem is loose financial regulation which the recent financial reforms have done nothing to tighten. Banks are still not lending and consumers are still not spending. Some countries are growing and international trade expanding, but the United States has been left in the dust.
I truly enjoyed Bernanke’s understatements:
- Economic recovery and repair is far from complete…
- Growth has been too slow;
- labour market figures have remained disappointing with private-sector jobs growing only sluggishly.
And then, and then, he appends the most surprising (perhaps alarming) part of this economic summary: He says that he is "surprised by the sharp deterioration" of the balance of trade, concluding that "the economy remains vulnerable".
The Fed 'will do all it can' to stimulate economic recovery" (online newspaper The Hill), and what would that be – more bail-outs?
Do I feel more confident about the United States post Bernanke’s speech?
Nope.
The most interesting (scary?) part of Bernanke's speech comes where he discusses the FOMC's policy options (FOMC - Federal Open Market Committee). In the event that weakening conditions warrant more EASING, the FOMC has recently decided to stabilize the Federal Reserve's securities holdings.
What does this mean?
It means the additional purchases of longer-term securities. (aka EASING, aka additional STIMULUS, aka a further expansion the Fed's balance sheet).
So, back to your question: Do I feel more confident about the United States post Bernanke’s speech? My conerns are associated with additional security purchases. Substantial further expansions to the Fed balance sheet definitely reduces my confidence in the Fed's ability to execute a smooth exit from its interventionist policies: Where does it end, “it” being stimulus under one thousands different names.
If the foregoing happens, expect inflation.
Another option for further monetary EASING is to lower the rate of interest that the Fed pays banks on the reserves they hold with the Federal Reserve System. Inside the Fed this rate is known as the IOER rate, the "interest on excess reserves" rate. The IOER rate, currently set at 25 basis points, could be reduced to, say, 10 basis points or even to zero. This reduction should cause banks to lend. BUT, the effect of reducing the IOER rate on financial conditions in isolation would likely be relatively small, infact invisible. Banks simply need greater incentive.
Economists want the Committee increase its medium-term inflation goals. There is zilch support for this under FOMC, but I support it because higher inflation for a time, by compensating for the prior period of deflation, could help level out prices to what was the norm before the deflation began. The United States cannot EASE AND MANIPULATE FIGURES FOREVER, and most certainly it cannot keep printing more and more money, as though this new money was backed by anything.
My faith in the American economy is “check”, waiting for “mate”.
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St. Dom wrote:
The first would prepare our people for the jobs that are currently going to foreigners because we don't have enough qualified doctors, nurses, engineers and scientists to fill them.
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Why don't we have enough 'qualified' American workers now? Is college too long and costly? Are we simply more lazy? After all, in the past, the majority of our docters, nurses, engineers and scientists were American. (I say the majority, not all.) So what has changed? Why do we not have them anymore?
Back in the day, Docters actually used to make house calls. Yes, house calls! They certainly don't do that anymore. But there was not a shortage of Docters then when they had to do all that- so why now?
How many of our docters, nurses, engineers and scientists in America are American-born?
I suspect one day people will not even have to see doctors anymore- they will step into a computer scanner which diagnoses and treats their condition- thus eliminating all human positions of doctor and nurse. That will be a sad day, indeed, when we leave our major problem solving up to computers and do not exercise our own brains. I would rather have a human, foreign born or not, check me out, rather than a computer anyday.
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The second would result in more efficient roads, bridges, tunnels, power grid, water management, levees, dams and industrial modernization, which would put our country in a better position to compete and would make jobs available for our unemployed semi-skilled workforce.
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This is good, Dominick, but once the work is done, its mostly done and this will help our country, but it will only help the job force temporily. The job force needs good, stabile jobs that will not only be seasonal- need jobs that offer health care- need jobs that they do not hafta worry about losing...
The factories that have left have costs us millions of jobs. The workers had those kinds of skills- not medical, etc., so where does this leave them? Many have become truck drivers or other things to make ends meet, but it is incredibly tragic, as some of these people, like my dad, had worked at a factory for twenty years plus and he always thought he would retire there, like the others. Then, out of the blue, the factory shut down and said it would resume making the rollers and other heavy American machinery they made (my dad helped build the machines that lay down the roads, the oil, cement, etc.) in China. Now my dad works part time at an auto shop getting minimum wage, no benefits. Fortantely, my mom works at university, so they have health care, thank goodness. But this is not just him- it is happening to millions of Americans, who have had the carpet swept out from under their feet, as companies shift overseas and Americans lose all retirement and benefits they have worked for years and years out of their life for, to be rewarded with nada.
So far, how has Obama worked on bringing our American companies back to America or on creating new American companies to replace our old ones?
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This may be of interest or not & may be the future or not.
I have supported a feeding center in Moldova for some years now.
Moldova folk have a GDP of less than many African Country's but with winters at 40/Centigrade below.
Its borders the Ukraine & Romania so is not in the EU & the Russians are not too keen on further Western expansion East,so its a back water that no one cares about.Many of the small towns have no running water & limited power supply.
The rule of Law is there but you really would not want to come to the attention of the police.
If a business is set up there is every chance you will get a visit from
a group of guys who will roll up in a black BMW or Merc,& be told that
you need insurance against fire,it is wise to pay up,even the Law is afraid of these people.This tends to put a dampener on enterprise.
The people are the most industrious & hard working lot I have ever met.
Nothing goes to waste they grow pickle every thing.What they grow & preserve in summer they eat in winter,no grow & work = no eat.
They dig there own wells by hand,raise small herds of sheep & goats for
meat,Bees for honey,fruit for preserving or making delicious fruit drinks.The gardens are a site to behold,potatoes,beans,carrots,onions every thing you can imagine all done by hand.
But the young people want more,& tend to go abroad for an education then
say away from the grinding poverty.
Some times the man of a young family will go abroad looking for work,& sends the money back this helps,but some times they forget their commitment for what ever reason.This leaves a young mother unable to
look after small children & tend the garden sufficiently.
This is when the Church helps out with a main meal for the mothers & children each day with no cost,you do not have to be a Christian for
this help just hungry.
Being self sufficient with very little money can be done,I have seen it,
but honestly,it is a romantic dream for all who are fortunate enough not
to have to do it...
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ref #37
No, you spend that pile of money in things like education and infrastructure. The first would prepare our people for the jobs that are currently going to foreigners because we don't have enough qualified doctors, nurses, engineers and scientists to fill them. The second would result in more efficient roads, bridges, tunnels, power grid, water management, levees, dams and industrial modernization, which would put our country in a better position to compete and would make jobs available for our unemployed semi-skilled workforce.
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You can't do it by just spending money.
we have to get out of a mind step that protect special interest.
That means among other things:
Firing incomptent teacher
Having a fair leval playing field (no PLAS)
Enforcing current regulation but don't place unfair burdens on business
Less goverment blockage so petty tyrants like Mayor Menino of Boston doesn't stop commercial development because he doesn't like the developer
Privatise whenever possible, get rid of fat goverment workers
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" No, you spend that pile of money in things like education and infrastructure. The first would prepare our people for the jobs that are currently going to foreigners because we don't have enough qualified doctors, nurses, engineers and scientists to fill them. The second would result in more efficient roads, bridges, tunnels, power grid, water management, levees, dams and industrial modernization, which would put our country in a better position to compete and would make jobs available for our unemployed semi-skilled workforce." Saint Dominick
I agree with education, but do you force business to invest? That smacks of Obamanism. Besides I agree more engineers , doctors, nurses, so forth would be great. ONE problem, do you lower standards, social promotion? Some people should not be in these positions, alot of kids, don't want to study engineering, and such. With the new healthcare bill, there isn't incentive to be a doctor. General practice doctors, are leaving in droves for specialties. Or not becoming doctors at all, so the best and brightest are changing their education plans for more lucrative careers. So what now? My doctor himself told me healthcare will never go down, only up. So either we get budget witchdoctors, less care for all, socially promoted, imported doctors, or just kick the bucket due to lcak of treatment. Insurance for the viable population, and let the surplus population nonessentials die? The money isn't there unsustainable, esspecially with these nitwits currently in power.
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Some of the best wines I have had UKWales came from Moldova. Good for you. One person caring can help change someones life.
I mean who cares about poverty when it hits white people? It is not the status quo, pc, , oppresses, and all the rest of the crap that goes with it. Poor, is poor. It hits all people. I find it refreshing to see you relate these everyday truths. Just most don't have sympathy for European raced people doesn't fit in with this blue eyed bad guy propaganda of the left.
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Ref 42, AmericanGrizzly
"I agree with education, but do you force business to invest? That smacks of Obamanism"
No, you use public funds to repair and modernize our infrastructure to 21st century standards, and lead the way in developing new technologies by lending money to private firms or by providing tax incentives. Private investment will follow as consumer confidence is restored and the economy stabilizes.
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