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making the bankers regurgitate all their obscene bonuses, I wouldn't have been so offended. An individual citizen needs help as a result of occurrences beyond his control and it's "welfare," a whole industry, as a result of intentionally reckless conduct gets in trouble and it's good government to save them. Harrumph!
If you think you're too small to be effective, you've never been in the dark with a mosquito.
by marykk on Sat Mar 22, 2008 at 05:37:57 AM PDT
from Zuzu http://www.boingboing.net/... (note: some good points - others not - I would have verbalized differently but not in the mood to do so )
From about 2001 - today the United States has funded a comprehensive restructuring of domestic government agencies (i.e. Homeland Security) with new and far-reaching "anti-terrorism" programs (e.g. Federal subsidy of enlarged state and local police, USVISIT, etc.), funded an invasion and ongoing active occupation of Iraq (at a cost of about $1 billion per month), while at the same time cutting taxes, and in September 2007 Congress raised the debt ceiling $9.815 trillion. The U.S. Government went from an ostensibly balanced budget in 1999, to a mind-boggling increase in spending, while at the same time collecting less revenue (i.e. taxes). How do they afford it? They increase the supply of money and credit through the Federal Reserve. This is a stealth tax. By debasing the fiat currency of the dollar, they spend the new dollars on the military-industrial complex to "keep us safe"*, which dilutes the value of the dollars we save in our bank accounts (or that we negotiated with our employers to earn in our paychecks), but all of the other goods and services are still just as scarce, so more dollars are needed for the same value to exchange for them, which is inflation.
(*Recently "keep us safe" has been extended to including bailing out financiers such as Bear Stearns and soon Lehman Brothers.)
The "Three Trillion Dollar War" or whatever you want to call it was all paid with inflation, which explains why the price of gold went over $1000/oz, why oil and food prices are up, but people are still generally acting as if dollars are worth what they used to be worth before the new money was created. (Arguably his is also why the Federal Reserve ceased publishing M3 data in March of 2006, and why the Department of Labor and Statistics has redefined the Consumer Price Index (CPI) to exclude energy (i.e. oil) and agriculture from its "basket of goods" estimation of dollar purchasing power.)
The economic crisis the United States can no longer ignore is the unwinding of this inflation. However, economists who speak on television or for politicians will tie themselves in knots and circular logic to avoid ever saying the word "inflation" -- it's like a taboo. So first they pitched this problem as a "sub-prime mortgage crisis", until now the problem is obviously not contained to just that market sector. Recently I've heard people start saying "contagion" like when the Asian Tigers melted down from their inflationary bubble in the 1990s.
But the crisis is simply that the Bush-Cheney administration has spent more money than God by borrowing and printing it (i.e. creating inflation), which in the central banking system of fractional reserve multiplies several times over into even more inflation. This creates an enormous market bubble -- that so-called "economic recovery" Bush has claimed in his speeches of yore. So this bubble didn't even feel like a bubble so much because the "improvement" was marginal over the pre-existing recession from the previous dot-com bubble and housing "foam" created by Alan Greenspan. But soon all of that inflation is about to collapse.
by 4km on Sat Mar 22, 2008 at 07:49:45 AM PDT
[ Parent ]
according to remarks made by Carol Shea-Porter on NH Public Radio on Thursday by phone -- she was returning from a visit to Iraq this week. $1 billion every two and a half days.
Politics is the art of preventing people from taking part in affairs which properly concern them. - Paul Valery
by inclusive on Sat Mar 22, 2008 at 08:04:13 AM PDT
would not act in a fiscally responsible manner. I had to laugh, apparently it was fine for Bush to increase the national debt by trillions but Barack has to balance the budget from day one.
Love that "power of the purse!" It looks so nice up there on the mantle (and not the table) next to the "subpoena power."
by Sacramento Dem on Sat Mar 22, 2008 at 10:35:49 AM PDT
It's been long established that the Republicans talk about "Fiscal Responsibility" only to score points against Democrats. Reagan made a big stink about the failure to pass a Balanced Budget Amendment, but never reflected on the obligations it would impose on himself. I dare say that if such an amendment had been ratified when he took office and it had required a 60% "Supermajority" to pass a dbudget that increased the deficit, he would have run up an even bigger one. Getting a superminority to approve his tax cuts and defense spending increases would have called for more pork to more Democrats trying to exploit his priorities.
I'm not asking you to take the country back, I'm asking you to take it forward-Van Jones.
by Judge Moonbox on Sat Mar 22, 2008 at 11:10:25 AM PDT
when such whiplash producing hypocracy was frowned upon.
by Sacramento Dem on Sat Mar 22, 2008 at 11:36:20 AM PDT
If you like Iraq, you're gonna love Iran.
by FundaMental Transformation on Sat Mar 22, 2008 at 12:17:11 PM PDT
"If it walks like a duck and quacks like a duck, it's a duck"
Now we're told that "the US doesn't torture".
by Sacramento Dem on Sat Mar 22, 2008 at 02:18:23 PM PDT
"I'm not opposed to all wars; I'm opposed to dumb wars." -- Obama in 2002
by Frank Palmer on Sat Mar 22, 2008 at 08:35:30 AM PDT
But soon all of that inflation is about to collapse.
Can you explain what this means? Does it mean that the rate of inflation will go back down? The dollar back up? Gold and commodities back down?
Chomsky Fever! John McCain sucks.
by miasmo on Sat Mar 22, 2008 at 08:52:46 AM PDT
I believe what the author of the post means is that continued massive market bubbles ( e.g. stocks, real estate ) are unsustainable when the US economy
Hope that helps...
by 4km on Sat Mar 22, 2008 at 09:02:49 AM PDT
But the statement, "But soon all of that inflation is about to collapse" is a prediction. I'm still not sure what exactly is being predicted. The strength of the dollar is inversely tied to inflation. The price of gold and other commodities are inversely tied to the strength of the dollar. My question is: Does "But soon all of that inflation is about to collapse" mean that the rate of inflation will decrease, thus strengthening the dollar and lowering commodity prices?
by miasmo on Sat Mar 22, 2008 at 09:25:49 AM PDT
going to his personal blog to ask this question-if he takes them.
by mouser68 on Sat Mar 22, 2008 at 10:36:26 AM PDT
which was the underlying condition of the Depression.
That happens when goods become worth less because the demand for them dries up by virtue of intense consumer retrenchment caused by catastrophic market conditions.
But for that to happen, intense unemployment needs to ensue first, which is where the market catastrophe comes in.
"Well, yeah, the Constitution is worth it if you can succeed." -Nancy Pelosi, 6/29/07.
by nailbender on Sat Mar 22, 2008 at 10:05:34 AM PDT
I think it's possible to get at least some deflation without a massive wave of job losses.
The tank is still draining, and bankruptcies will only increase the rate of drainage.
Think of the economy as a typical septic system, but filled with debt instead of ....
Anyway, when you flush the toilet, more debt pours into the tank. The more you flush, the more it fills. If the outlet is blocked (say, by loosening credit standards), then the then the rate at which the tank empties is slowed, and the economy continues to fill the tank until it eventually reaches the top. When it gets there, and ... stuff ... starts to overflow, someone cleans out the blocked outlet, and voila! the tank drains back to normal levels.
In this case, tightening lending standards (drastically) has unblocked the outflow.
In the mean time, fewer and fewer people can get any more credit, so the toilet is being flushed less. As bankruptcies and foreclosures increase, thereby further decreasing the number of flushes, the debt-based economy will continue to recede toward the bottom of the tank, even without anyone losing their job.
However, if there are massive increases in unemployment, it's possible that large numbers of toilets will be removed entirely from the system, causing the ... stuff ... level to fall more dramatically.
Dump Steny Hoyer
by mataliandy on Sat Mar 22, 2008 at 11:28:33 AM PDT
The Debt Delusion Excerpt: The new business cycle also embeds a monetary policy that replaces concern with real wages with a focus on asset prices. Whereas pre-1980 monetary policy tacitly aimed at putting a floor under labor markets to preserve employment and wages, it now tacitly puts a floor under asset prices. This is not a matter of the Fed bailing out investors. Rather, the economy has become so vulnerable to declines in asset prices that the Fed is obliged to intervene to prevent them from inflicting broad damage. All these features have been present in the current economic expansion. Wages have stagnated despite strong productivity growth, while the trade deficit has set new records. Manufacturing has lost 1.8 million jobs. Prior to 1980, manufacturing employment increased during every expansion and always exceeded the previous peak level. Between 1980 and 2000, manufacturing employment continued to grow in expansions, but each time it failed to recover the previous peak. This time, manufacturing employment has actually fallen during the expansion, something unprecedented in American history. The essential role of asset inflation has been especially visible as a result of the housing bubble, which also highlights the role of monetary policy. Despite the massive tax cuts of 2001 and the increase in military and security spending, the US experienced a prolonged jobless recovery. That compelled the Fed to keep interest rates at historic lows for an extended period, and rates were raised only gradually because of fears about the recovery’s fragility. Snip! So, even if the Fed and US Treasury now manage to stave off recession, what will fuel future growth? With debt burdens elevated and housing prices significantly above levels warranted by their historical relation to income, the business cycle of the last two decades appears exhausted. It is not enough to deal only with the crisis of the day. Policy must also chart a stable long-term course, which implies the need to reconsider the paradigm of the past 25 years. That means ending trade deficits that drain spending and jobs, and restoring the link between wages and productivity. That way, wage income, not debt and asset price inflation, can again provide the engine of demand growth.
The Debt Delusion
Excerpt:
The new business cycle also embeds a monetary policy that replaces concern with real wages with a focus on asset prices. Whereas pre-1980 monetary policy tacitly aimed at putting a floor under labor markets to preserve employment and wages, it now tacitly puts a floor under asset prices. This is not a matter of the Fed bailing out investors. Rather, the economy has become so vulnerable to declines in asset prices that the Fed is obliged to intervene to prevent them from inflicting broad damage.
All these features have been present in the current economic expansion. Wages have stagnated despite strong productivity growth, while the trade deficit has set new records. Manufacturing has lost 1.8 million jobs. Prior to 1980, manufacturing employment increased during every expansion and always exceeded the previous peak level. Between 1980 and 2000, manufacturing employment continued to grow in expansions, but each time it failed to recover the previous peak. This time, manufacturing employment has actually fallen during the expansion, something unprecedented in American history.
The essential role of asset inflation has been especially visible as a result of the housing bubble, which also highlights the role of monetary policy. Despite the massive tax cuts of 2001 and the increase in military and security spending, the US experienced a prolonged jobless recovery. That compelled the Fed to keep interest rates at historic lows for an extended period, and rates were raised only gradually because of fears about the recovery’s fragility.
Snip!
So, even if the Fed and US Treasury now manage to stave off recession, what will fuel future growth? With debt burdens elevated and housing prices significantly above levels warranted by their historical relation to income, the business cycle of the last two decades appears exhausted.
It is not enough to deal only with the crisis of the day. Policy must also chart a stable long-term course, which implies the need to reconsider the paradigm of the past 25 years. That means ending trade deficits that drain spending and jobs, and restoring the link between wages and productivity. That way, wage income, not debt and asset price inflation, can again provide the engine of demand growth.
http://www.project-syndicate.org/...
We need to change the economic model away from Reagan's bubble economy to improve the employment part of the picture.
Since both Hillary and Obama's camps have economic advisers that are pretty conservative and heavy on the "free market" verbage of the last 25 years, my concern is will the "change" either of them will bring be enough to bring real fundamental economic change rather than a just softening of current economic thinking.
by Flint on Sat Mar 22, 2008 at 12:16:37 PM PDT
How did you come up with that shit?
Actually, your analogy breaks down (pause) at the outflow pipe. I think you meant to put the blockage at the toilet, not the leach field.
But I get your point. Still, we share many economic characteristics with the runup to the Great Depression, including massive leveraging. But there is already significant retrenchment in spending without huge unemployment numbers. Us working stiffs are living on a fine edge right now and it doesn't take a psychic to see that we better cut back if we want to ever retire.
by nailbender on Sun Mar 23, 2008 at 10:33:35 AM PDT
dunno what the official line is, but i just finished a temp gig that was advertised as a two-week position. they received over 80 resumes.
that says something...
"Government, like dress, is the badge of lost innocence; the palaces of kings are built upon the ruins of the bowers of paradise." Thomas Paine, Common Sense
by Cedwyn on Sat Mar 22, 2008 at 11:50:31 AM PDT
I would be more sanguine. According to news accounts, those firms that take advantage of the expanded Fed lending are not going to be publicly revealed. Why not?
This isn't like Reserve Banks who use the Fed to handle their day to day business on a pro-forma basis; any investment firm that takes advantage of this (and who wants to bet that the list is already pretty long) is signaling the weakness of their portfolio.
Investors should be aware of this in order to better inform themselves of a firm's relative strength and liquidity, and the public should be likewise made aware of these loans in order to be apprised of how much of the public purse is being used by the private gambling sector.
How am I off base? bd?
by nailbender on Sat Mar 22, 2008 at 09:57:23 AM PDT
I think calling this a bailout of Bear Stearns is a misnomer. I've heard the right-wingers on TV argue that Bear shareholders (and likely management/employees) took a big hit.
That is irrefutable -- Bear was not bailed out. The bailout was much bigger than that!
The bailout was of the rest of the banks that did business with Bear, and whose positions would have unwound with terrible consequences for all.
And definitely, the bailout was aimed at Lehman, Morgan Stanley and a dozen other investment banks that would have surely gone under the next day, but for the Feds action.
I don't mind the bailouts ... I just want the Feds to heavily tax the profits of these suckers in the good times so that they can be bailed out when the going gets tough.
See you at the debates, bitches!
by Bronxist on Sat Mar 22, 2008 at 11:00:51 AM PDT
bailed out, it was 'wiped out.'
In youth we learn, in age we understand.
by Jbeaudill on Sat Mar 22, 2008 at 12:36:18 PM PDT
...protecting his pension, maybe? Maybe the ones left at the bank holding the empty bag have less to do with it than the ones driving off in a Rolls.
Remember Soc Gen? They did it early to try to avoid the scrutiny and lumped all there toxix on one guy. Did he do some of it, yeah. Did he do 7B in two days (or something) probably not. Not if he was planning on getting away with it anyway.
by FundaMental Transformation on Sat Mar 22, 2008 at 01:50:09 PM PDT
Debt-Gorged British Start to Worry That the Party Is Ending ( but I think America and Americans should be worrying more ... )
http://www.nytimes.com/...
As the United States economy weakens, many Americans are being overwhelmed by personal debt, but Britons are even more profligate. For most of the last decade, consumers here went on a debt-financed spending spree that made them the most indebted rich nation in the world, racking up a record £1.4 trillion in debt ($2.8 trillion) — more than the country’s gross domestic product. By comparison, personal debt in the United States is $13.8 trillion, including mortgage debt, slightly less than the country’s $14 trillion G.D.P. Britons are spending more than they earn, racking up a household debt-to-income ratio of 1.62 compared with 1.42 in the United States and 1.09 in Germany.
As the United States economy weakens, many Americans are being overwhelmed by personal debt, but Britons are even more profligate. For most of the last decade, consumers here went on a debt-financed spending spree that made them the most indebted rich nation in the world, racking up a record £1.4 trillion in debt ($2.8 trillion) — more than the country’s gross domestic product.
By comparison, personal debt in the United States is $13.8 trillion, including mortgage debt, slightly less than the country’s $14 trillion G.D.P.
Britons are spending more than they earn, racking up a household debt-to-income ratio of 1.62 compared with 1.42 in the United States and 1.09 in Germany.
IMO the Fed will continue to lower interest rates and Bush admin say spend spend spend because they don't want the party over until 2009 when Cheney bolts to Dubai ( Halliburton's new HQ), Bush is off to his compound in Paraguay, and middle class America ( what's left of it ) is left holding the bag !
by 4km on Sat Mar 22, 2008 at 10:09:12 AM PDT
And then forbidden to take any other jobs in the financial industry for five years?
A bit unconstitutional, unfortunately, as they've committed no actual crimes.
But in some alternate realities, this would at least be fleetingly satisfying.
"Think. It ain't illegal yet." - George Clinton
by jbeach on Sat Mar 22, 2008 at 10:30:28 AM PDT
I'm not so sure. Of course, there would have to be a prosecutor willing to investigate. And I bet if one did, there'd be plenty of good ol' mail fraud, for starters. But given the administration's complicity, don't count on seeing any US Attorney opening a file.
by marykk on Sat Mar 22, 2008 at 10:39:29 AM PDT
with fraudulent accounting. There's no way all this bad paper got stuffed into the system without people in positions of responsibility knowingly looking aside while inaccurate numbers were peddled.
by mataliandy on Sat Mar 22, 2008 at 11:32:43 AM PDT
that makes it a crime with hard time to operate a business that can't pay its bills.
by SingleVoter on Sat Mar 22, 2008 at 12:49:46 PM PDT
by FundaMental Transformation on Sat Mar 22, 2008 at 02:00:30 PM PDT
is that in most cases, the current board is not the same board that was in on all this. Take a look at the jump in board member shifts from around Dec. '07 to Feb 15, '08.
In the cases of trials that get going regarding this kind of thing, they always change out the board because they get an extension while the new board comes up to speed. How's that for a briefing.
Plus then, the new board can deny guilt honestly. They honestly didn't know. It's part of the strategy to keep some in the dark.
by FundaMental Transformation on Sat Mar 22, 2008 at 01:59:39 PM PDT
A presumably solvent public company got sold off, overnight, because what they had been booking as assets weren't worth near what they paid for. Meanwhile, the employees who bought and sold these assets -- who could reasonably have been expected to know better -- were rewarded lavishly. As a result, shareholders (including employees of the company) lose most of the value of their investment - billions of dollars worth.
Might that be enough for the executives and the board to be determined to be criminally negligent? I mean, it's not the usual class-action situation where, say, a recent startup didn't recognize that some of their market expectations weren't realistic and the stock price took a hit. This is a massive, almost complete, destruction of shareholder value in an 85-year-old firm. Would that open them up to being held personally liable?
RV
Al Gore is running for Gray Champion.
by RanxeroxVox on Sat Mar 22, 2008 at 12:50:54 PM PDT
wide narrow
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