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Many of us are big fans of Paul Krugman. Since Obama's election, his writings have given words to our frustrations about the state of the economy, executive and congressional missteps, and the acrid political climate that has time after time limited or thwarted what likely would have turned things around quite a bit more by now.

His latest NYT's piece is a masterpiece of analysis about what the Fed could have done and still could do to help more, why it hasn't, and why Ben Bernanke, who in his writings prior to becoming the Fed chair about Japan's 1990s  missteps, hasn't followed through with the kinds of stronger prescriptions he advocated then.

As Mr. Krugman has pointed out a number of times, a little more inflation than the current target helps the middle class a lot more than the monied class because it lessens that segment's debt burden and frees up more spending to fuel more growth. This is the major theme of the article.

I hope Mr. Bernanke reads the piece. If he does, it could get him thinking, reconsidering, maybe even willing to take more bold action.

As Mr. Krugman has pointed out a number of times and does as the main theme of this article, a little more inflation than the Fed's target would lessen the debt burden of the middle and lower class by gradually eroding it and freeing up more consumer spending, the fuel for the economy that isn't in strong enough supply.

Here's some excerpts to whet your appetite. It is well worth your time to read the entire 4-page article here:

http://www.nytimes.com/...

Bernanke may have pulled back from his earlier activism years ago, but given the scale of our economic catastrophe, he might well have returned to his earlier views if the political climate hadn’t been so hostile. So I wouldn’t fully discount the importance of right-wing bullying. As for his insistence that it’s not about politics — could he really get away with saying, or even hinting, that pressure from the likes of Paul Ryan is keeping him from pursuing full employment?

My best guess is that the disappointing response of the Bernanke Fed represents the effects of both bullies and the Borg, a combination of political intimidation and the desire to make life easy for the Fed as an institution. Whatever the mix of these motives, the result is clear: faced with an economy still in desperate need of help, the Fed is unwilling to provide that help. And that, unfortunately, makes the Fed part of a broader problem.

The Fed under Bernanke is by no means the worst sinner in this failure of intellect and will, and you can argue that Ben Bernanke has done a better job than anyone else who might have held his position. Yet the fact is, he has not done remotely enough. The Fed, under its eminent chairman, was supposed to be an important part of the solution to mass unemployment. That isn’t happening.

Poll

If Ben Bernanke read this Krugman piece

43%20 votes
2%1 votes
4%2 votes
0%0 votes
36%17 votes
10%5 votes

| 46 votes | Vote | Results

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Comment Preferences

  •  Bernanke and the business media and others (3+ / 0-)
    Recommended by:
    erratic, praenomen, Russgirl

    of his ilk work to convince us to accept the fantasy that the economy follows the projections of the stock market,   because the stock market is mostly about the enriching the elite.    

    The stock market from 1981 climbed as many US jobs and the real economy was off shored.   The market should work in tandem with the real economy and instead policy has been turned to first stimulate the stock market and make investors rich and screw the real economy.    

    The USA is in trouble because the Wall Street marketeers have made lots of money at the expense of the USA jobs shipped off shore.   We've gone into debt as a people and nation to create the false illusion of a robust economy.   That's why 50% of working Americans pay no income taxes.  They don't make enough at Wal-Mart and McDonalds and other service jobs to qualify for such a tax bracket.    

    Both Parties play into this fiction.  

    Victims of bigotry are the poorest, least influential members of society.......never the wealthiest, most educated, most overrepresented in high levels, and most influential. Bigotry hurts the least influential. To claim or say otherwise is absurd.

    by dailykozzer on Tue Apr 24, 2012 at 07:45:38 PM PDT

    •  At least half of the work force has a 401k (2+ / 0-)
      Recommended by:
      leftreborn, word is bond

      or 403b and when the stock market rises so does their (our) net worth and retirement prospects. The wealth effect of the stock market is important to more than just the rich.

      •  But the negative impacts of offshoring (0+ / 0-)

        have certainly affected the 99% much more seriously. Do you have the numbers on the relative worth of 401ks and 403bs for low- and middle-income workers, comparing then and now?

        •  Then and now over what time period? (1+ / 0-)
          Recommended by:
          erratic
          •  I'd be happy with a chart (2+ / 0-)
            Recommended by:
            David PA, wsexson

            showing 5 or 10 year benchmarks, going back 20-50 years. But it would have to be broken down based on income groups. Otherwise, the profits of the wealthy could blur out how well lower income groups fared.

            Granted, I don't know the history of 401ks and 403bs, so depending on how long they've been around, more generic data on retirement savings would be more relevant.

            I may be having a knee-jerk reaction to what I interpreted as a "rising tide floats all boats" perspective on the stock market. I've not yet seen data that convinces me that's anything but 1%er skullduggery...

            •  The 1%ers get more, they own more. But, the rest (0+ / 0-)

              of us have our best chance of earning on our savings through the stock market. Over the past six months, the stock market recouped its recessionary losses. Home values or other places average people invest haven't recovered like that - not even close.

              Historical average earnings in the markt with dividends was 11% until 2007. Now, people are saying its probably only 5% per year. But, where can you do better than that unless you happen to invest in a growth industry. Where is that?

              ABut, more importantly, Krugman's article isn't about making the market grow more strongly. It is about how a little more inflation and lowered long term rates such as for homes help the middle class by lessening debt burden, because with an increase in inflation a debt is gradually worth less. Slightly higher inflation is not favored by 1%ers - lenders because their share shrinks. So, the Krugman prescription is very progressive as long as inflation does go much beyond 3%.

              •  as long as inflation does *not* go much beyond 3% (0+ / 0-)
              •  The Krugman article doesn't (1+ / 0-)
                Recommended by:
                David PA

                directly address the offshoring issue, but that was core to to the comment that you initially responded to:

                The stock market from 1981 climbed as many US jobs and the real economy was off shored.   The market should work in tandem with the real economy and instead policy has been turned to first stimulate the stock market and make investors rich and screw the real economy.    

                The USA is in trouble because the Wall Street marketeers have made lots of money at the expense of the USA jobs shipped off shore.   We've gone into debt as a people and nation to create the false illusion of a robust economy.   That's why 50% of working Americans pay no income taxes.  They don't make enough at Wal-Mart and McDonalds and other service jobs to qualify for such a tax bracket.

                The profits of the 1% aren't solely based on the simple math of their owning more - they have the resources to game the system in their favor, wielding significant financial and political clout.

                Given your obvious knowledge and experience in this realm (based on this thread), it seems disingenuous for you to focus on tinkering with minutiae, eg earnings relative to the historical average without acknowledging the big picture of a widening income gap that increased significantly over the last 12 years.

                Earnings on 401ks don't matter to the people who can't afford them.

                •  Unless the tax structure changes, the gap (2+ / 0-)
                  Recommended by:
                  erratic, word is bond

                  will continue to widen. Krugman has time and again argued for a more progressive tax structure to reverse that trend.

                  This article, calling for an economic stimulationhrough a carefully controlled slight increase in inflation is also progressive and would help the middle class.

                  This article is only indirectly related to stock values. The real issue is bringing back jobs. Offshoring is a problem, and a big one. The way to bring jobs back to the US is through better tax policies. Whether that can happen is another subject altogether.

                  Krugman is talking in this article about other ways to bring back job growth. The way advocated is an excellent practical way because the Fed can act without congressional approval. A jobs-friendly tax policy tat could ameliorate offshoring has no chance at all with the current House & Senate.

            •  401K's have been around since the 80's, (1+ / 0-)
              Recommended by:
              DRo

              another way to steal the money of the middle class and force it into Wall Street.  The problem with the scheme is that Boomers will be taking their money out pretty much at the same time and force the bubble to burst.  Who is going to buy that stock they need to sell when they need it to live on.  It was NEVER about funding retirement and all about funding the greedy 1%.  There is not an institution in this country that is not broken.

              •  Demographics are against the stock market (0+ / 0-)

                unless the laws of human behavior have been repealed.  As boomers retire and age they will want security and income which requires liquidation of equity.   The stock market will face enormous overhead and be under pressure.   The market went up because of the Fed interest policy and tax deferred accounts, and the bull became self sustaining until it cracked in 2001 and then 2008.  

                Matt Taibbi and others have competently explained how Greenspan and Bernanke and the Federal Reserve have intentionally created the needed bubbles and liquidity for the benefit of its Wall St partners (and politicians) at the expense of the 99%.  

                Victims of bigotry are the poorest, least influential members of society.......never the wealthiest, most educated, most overrepresented in high levels, and most influential. Bigotry hurts the least influential. To claim or say otherwise is absurd.

                by dailykozzer on Wed Apr 25, 2012 at 05:58:39 AM PDT

                [ Parent ]

                •  The demographic problem can be overstated (1+ / 0-)
                  Recommended by:
                  David PA

                  Retiring boomers will want to liquidate their investments as slowly as possible, so they can keep earning income on the principal and in the hope that the value of their stocks will rise. They may reallocate from equities to bonds or CDs, but they will try to keep a portion of their nest eggs in stock.

                  The baby boom spanned 18 years, so the boomers are not retiring all at once. If the pressure of boomer retirements affects the stock market, it is more likely to be a slow fizzle than a pop.

                  •  They may want to retain their equity but that (2+ / 0-)
                    Recommended by:
                    word is bond, entrelac

                    may not be possible, most people own funds and not stocks that pay dividends.  The average retirement account is so small as to not pay enough to live on even if you put it into a CD that  pays 6%.  You are quoting what they people in the top 5% of the Baby Boomers are able to do, not the average Baby Boomer.

                    •  These are genuine problems (1+ / 0-)
                      Recommended by:
                      lakehillsliberal

                      Aside from the fact that most funds also pay dividends, I agree with your points. Few Americans will be able to live on the income earned from their retirement accounts, but at least they may be able to deplete their accounts over a period of years. If their accounts are really small, the impact on the stock market will also be small.

                      The real crisis is that too many Americans simply can't set aside enough - through any method - to support a retirement, and Social Security payments are not adequate for a reasonably comfortable life, especially with the cost of medical care (even with Medicare coverage). People will be depending on their overburdened children, if they have any, and reverse mortgaging their homes, if they have one, and still end up dependent on public assistance or charity. It's a problem that should get at least as much attention as the so-called impending bankruptcy of Social Security.

              •  Ways to fund retirement (1+ / 0-)
                Recommended by:
                David PA

                401K's did not really change the ways a worker can try to fund retirement.  If you try to fund retirement with an annuity or insurance, or by purchasing real estate, or by putting money in the bank, you are simply giving your money to a financial institution that will invest in stock, bonds, real estate, loans, etc. - exactly the same places a 401K can invest.

                The main effect of 401K's was to reduce current income taxes and use the money to try to fund retirement. It's true that 401K's resulted in more money going to Wall Street, but otherwise that money would have gone into the Treasury.

      •  Well you just have to ask yourself (0+ / 0-)

        oneyourself one question. If the government offered to borrow all the 401K and 403b anyone wanted to lend it in the form of a tax-free 10-year bond paying 3% p.a., how much of the $7-8 trillion invested in these funds would the government raise? My guess is several trillion because the return is better than anything around right now and it would be secure. So that scenario is an indication of just how poor retirement funds are performing today. Of course, the idea that the government would issue such a bond is a fantasy. What would it do with several trillion? Why, we would have to invest in education or something dumb like that! Crazy talk!!

        Fructose is a liver poison. Stop eating it today.

        by Anne Elk on Wed Apr 25, 2012 at 01:38:11 AM PDT

        [ Parent ]

      •  401Ks / IRAs were created for one purpose (0+ / 0-)

        They were used to involve the masses in the stock market, and provide political support for both a Federal Reserve that will cut the throat of savers,  and of special tax benefits for the "real" investment class.    Overlooked is that those holding tax deferred accounts pay the full freight earned income tax on their withdrawals, while the stock market insiders typically pay 15% or less on massive after tax investments.  

        The stock market is a casino manipulated by insiders who purposely shake the tree occasionally and take profits from non-insiders.    Connection to the stock market also creates other "INTENDED" consequences such as accepting grossly overpaid financiers and CEOs, crony capitalism, and the outsourcing USA jobs for the sake of more profits.    

        Creating stock market involvement by the masses was a fundamental requirement of creating a new world order where CEOs of mega multi-national corporations control non-sovereign governments and the media for their benefit,  and to reduce political support for organized labor.

        Victims of bigotry are the poorest, least influential members of society.......never the wealthiest, most educated, most overrepresented in high levels, and most influential. Bigotry hurts the least influential. To claim or say otherwise is absurd.

        by dailykozzer on Wed Apr 25, 2012 at 05:44:51 AM PDT

        [ Parent ]

        •  More effective government regulation (1+ / 0-)
          Recommended by:
          David PA

          is the solution to stock market manipulation. Unfortunately, attempts at restoring and extending regulation did not go far enough and are now being watered down.

          We need better Democrats in Congress and more courageous regulators, because the stock market is not going away.

        •  "New World Order" (0+ / 0-)
          Creating stock market involvement by the masses was a fundamental requirement of creating a new world order where CEOs of mega multi-national corporations control non-sovereign governments and the media for their benefit,  and to reduce political support for organized labor.
          Which one of these New World Orders do you mean?
          •  It's called the NWO (0+ / 0-)

            and it is where those who do the least work,    for the least in society (as in a productive career) and as compared to society at large earn the most,   because they are typically a subversive club that gets paid much more than they are ever worth because they can and will get it.    

            Why are the members and partners in the financial community receiving compensation that is much superior to any others in society who work for a living and expect to be productive.

            Victims of bigotry are the poorest, least influential members of society.......never the wealthiest, most educated, most overrepresented in high levels, and most influential. Bigotry hurts the least influential. To claim or say otherwise is absurd.

            by dailykozzer on Fri Apr 27, 2012 at 04:45:34 PM PDT

            [ Parent ]

            •  Your NWO is neither New nor World (0+ / 0-)

              Every society I can think of, now and in the past, has included some individuals who are ambitious, competitive, selfish and inclined to do the least work possible. These people gravitate to the places in their society where the tools of power are to be found: the priesthood, the feudal military, the party bureaucracy of totalitarian states, and the financial system in capitalist economies. Your criticism of the 1% is valid, but doesn't equate to "new".

              Nor are the overpaid members of the financial community 1% a "world order". Their power is centered in North America and Western Europe; the powerful forces in Russia, China and the Middle Eastern oil producers fall into different categories. Also, their goals mostly seem limited to amassing and protecting their wealth and the influence that goes with it; I don't see why they would be considered "subversive".

              As noted in the link in my previous comment, "New World Order" has several established meanings, but your use of the term doesn't conform to any of them. Maybe you are using it in a sense that I believe is current among supporters of Ron Paul: the idea that there is a conspiracy to use financial means to create a world government.  Or maybe you are just using the term loosely, or maybe you haven't provided a full explanation of what you mean.

  •  If state governments had spent on jobs like (3+ / 0-)
    Recommended by:
    David PA, erratic, word is bond

    They did under the Reagan recession, we'd be well on our way to recovery now.  The private sector is doing well compared to then.

  •  The Fed doesn't care as long as the bank robbers (0+ / 0-)

    & evil rich people are happy. They make money no matter what. Who cares if the American middle class is destroyed? All we are is wage slaves.

    The radical Republican party is the party of oppression, fear, loathing and above all more money and power for the people who robbed us.

    by a2nite on Tue Apr 24, 2012 at 08:08:36 PM PDT

  •  Has Krugman lost his mind? (0+ / 0-)

    The Federal Reserve has kept interest rates at zero for the past three years, and further they have bought trillions of dollars in doubtful bonds.

    And now we are really really seeing their work in the grocery store.  Prices are up big time.

    But Krugman don't worry we don't have inflation, pink slime is just as good as rib steak.  Or so does that compute the CPI insist.

  •  Who caused the economic meltdown of 2008? (2+ / 0-)
    Recommended by:
    lakehillsliberal, word is bond

    I looked back on explanations provided by the press in the months immediately after September 2008 on what caused the sudden meltdown.  On September 16, headlines around the world noted that Lehman Brothers had collapsed, AIG, one the world's largest insurance companies needed a $40 billion (or $80 billion) bailout and the stock market was nose diving.  Lists of those to blame included Bush, Wall Street CEOs, Countrywide Financial's CEO, greed, speculators, deregulation, and us, the American public.

    Find a more current list and you'll see that the blame has shiffted to Freddie and Fannie, Barney Frank,  the regulators. Obama, the revolving door, and the Fed.

    Somehow, we're being asked to believe that the worst economic crisis since the Great Depression happened without a single business corporation in sight.  It was all the public sector's fault.  It's a narrative carefully tailored to the rightwing agenda and it's pure bullshit.

    In this narrative, the Fed prints money.  In real life, it does no such thing.  But the rightwingers persist. The Fed is causing inflation by printing money.  In reality the Fed conducts monetary policy to achieve multiple goals.  Inflation has been kept fairly low for decades.  Some economics assert that rising wages cause inflation.  Is that why rightwingers believe that workers should never have pay increases?  And then there are the tales of the trillions in "secret bailouts."  Except they were neither secret nor bailouts.  

    I like seeing Krugman talk about the Fed doing more because it will drive rightwingers nuts.  They can't stand the idea of an entity that operates for the public good and that turns over its profits to the US Treasury.  

    "Those who deny freedom to others, deserve it not for themselves." - Abraham Lincoln

    by leftreborn on Tue Apr 24, 2012 at 10:29:23 PM PDT

    •  The Fed lending the banks our money at 0% is a (1+ / 0-)
      Recommended by:
      dailykozzer

      form of a bailout.  If the FED had lent the money to homeowners so they could pay their mortgages until the economy got better, we would be in better shape.  Instead the FED lent the money to banks who took it and speculated in the stock market including in commodities and that is helping drive gas and food prices up and the market up.  As soon as the FED starts raising interest rates, the bubble will burst again.  We are in an unsustainable mess.

      •  I have no desire to argue with you (1+ / 0-)
        Recommended by:
        David PA

        I run into many people who make statements similar to yours. Discussions I have with them don't turn out well.

        I suppose that it would be very upsetting to me if I were in your place and some random person on the internet told me that nothing I had written was true.  So I won't tell you that. Is there any way that you can check your statements to verify them independent of the source where you got them?  

        I'd like to share something with you. Modern Monetary Theory (also referred to as the Modern Monetary System.)  This is the discipline under which the Federal Reserve Bank operates today.

        http://pragcap.com/...

        I know it's a little intimidating and lengthy. I don't recommend to anyone to read it from start to finish.  Instead, I suggest scrolling down to stop randomly to read just one paragraph.  You may see some words you recognize.  Or you may see a statement that looks impossible or untrue to you.  Those are good places to start too.  

        It helps people to know that the Fed uses a system of debits and credits.  A credit cannot be created without a corresponding debit somewhere else.  The Fed is after all is said and done, a bank. Its customers are the depository banks that operate in this country. Every penny has to balance.

        In your anecdote, it's apparent that something is amiss because the credits and debits don't balance. If the Fed lent money to bank borrowers, the two sides of that transaction are represented as a credit and a debit.  Then the bank invested it creating a debit. That debit has to be balanced.  You may doubt but look carefully at your own words.  You said that the Fed lent. That means the money has to be repaid at some point.  So the story doesn't add up unless you want to believe a sort of folk tale about what causes an economic crisis and you don't care that it's not literally true.

        Everything that the Fed does is an obligation known as a statutory duty. The Fed was given its duties and responsibilities by law and the law requires that the Fed fulfills its obligations.  If the Fed did not do what it does routinely it would literally be against the law.

        The Fed lends money to its customers just as any other bank does. It never lends at 0% though I have heard people claim that it does many times.  It currently lends at very low rates but it's not accurate to round them down to 0%.  Even if the rate was 0.05% it's a huge dollar amount in interest because the principal amounts are big.  The Fed lends for very specific purposes and a borrower bank doesn't have the discretion to use the funds for speculating.  Most often, the funds are lent overnight to provide liquidity for a large transaction where the terms specified "same day settlement."  In 2009, there was an increase in this routine activity but all of the funds that were lent were repaid to the Fed.  The Fed also documents that the loans were properly collateralized.

        The Fed doesn't use public funds.  It's not "our" money when it lends.  If it was, the amounts would have to show up in the deficit and the debt. There are no increases there that correspond to the amounts often quoted in stories about the Fed's "secret bailouts."  There's no short or easy explanation that covers the various types of lending that the Fed must do.  It's better to read about Modern Monetary Theory because you will have questions and the link has answers.

        "Those who deny freedom to others, deserve it not for themselves." - Abraham Lincoln

        by leftreborn on Wed Apr 25, 2012 at 03:30:28 AM PDT

        [ Parent ]

      •  They also lent to the wives of banksters (0+ / 0-)

        Google - Fed Reserve gives loans to Morgan Stanley wives.

        Rollingstone had an article on the outrage.

        Victims of bigotry are the poorest, least influential members of society.......never the wealthiest, most educated, most overrepresented in high levels, and most influential. Bigotry hurts the least influential. To claim or say otherwise is absurd.

        by dailykozzer on Wed Apr 25, 2012 at 07:56:58 PM PDT

        [ Parent ]

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