Rolling US Economy Into The Shitbin Thread

Indeed.

So, now I'll comment on it. You may or may not care.

...the flood of liquidity, instead of spurring banks to lend and corporations to spend, has stayed trapped in the canyons of Wall Street, where it is inflating yet another unsustainable bubble.

First, this flood of liquidity has been loosed on the world by the Federal Reserve Bank far more than by the federal government's deficit spending. The federal government has been spending its borrowed money on such frivolities as extending unemployment benefits to people who go out and use it to pay for food, gas, utilities and rent. They also have been buying concrete, steel and labor to build or repair roads and bridges. iow, they've mainly been putting liquidity into the real economy, where it buys useful stuff. That doesn't create Wall Street bubbles.

otoh, the Fed has been buying many trillions of dollars of shaky bank assets, propping up the banks' balance sheets and helping to keep them solvent. The Fed has also kept interest rates near zero, hoping to entice borrowers to borrow and spend money in the real economy on stuff like cars, homes, furniture and appliances, or on services.

The problem with economic pump-priming mainly through monetary policy is precisely that the Fed has no control over who takes out loans or what they spend that money on. Right now, because of misguided Reaganomic policies, the only people in the USA who can get a big bank loan are the rich and the super-rich. These folks do not need another home, another car, or another vacation. They are already glutted with stuff. And they can't figure out how to invest in the real economy, because the real economy requires demand from the 99%.

The stupid thing is that all this is straight, basic Keynesian 101, and the Republican party of David Stockman has decided that Keynes was wrong. So they keep shoving money at the super-rich instead of at the 99% on whom the economy rests, expecting that the super-rich will do something with other than play the markets and create bubbles.

If I didn't care, I wouldn't post it. I figured all the criticism of Republicans in that article, particularly against Reagan and Bush, would appeal to people around her.

The Fed buying trillions of dollars of shaky bank assets is Keynesian?

midcentury golden era of sound money and fiscal rectitude with Dwight D. Eisenhower in the White House

top marginal tax rate under Ike: 92%

The state-wreck originated in 1933, when Franklin D. Roosevelt opted for fiat money (currency not fundamentally backed by gold), economic nationalism and capitalist cartels in agriculture and industry.

lol

There was never a remote threat of a Great Depression 2.0 or of a financial nuclear winter, contrary to the dire warnings of Ben S. Bernanke. (referring to 2008-9)

This is the strangest assertion I've read in a long time. From Sept 08 through April 09 the US economy lost 4.6 million jobs and no one has more than a foggy idea of how many tens of trillions of dollars worth of assets on the books of US banks and insurance corporations evaporated off their balance sheets. Every major US auto manufacturer was effectively bankrupt. And so on.

If Stockman asserts that this set of facts never once for a moment constituted even a remote threat of a Great Depression, then I think it is safe to toss out all the rest of his article as bullshit, because that assertion is so blatantly off base, you cannot trust a single other conclusion he is peddling.

yeah, i couldn't get through the second page. i'm sure he manages to make a few valid points in there but the bullshit alarms got too loud and frequent

nah this guy's just straight up nuts, whole thing is basically a ron paul economic history rant

it was nice of the New York Times, a noted authority on matters of the day, to feature his piece so prominently today.

ya wtf nytimes

The Fed buying trillions of dollars of shaky bank assets is Keynesian?

Not really.

Keynes stressed the need for active government borrowing and spending during times of cash famine. The Fed buying trillions of dollars of US bonds and monetizing the necessary debts incurred by the federal government as it expands its spending would have been far more Keynesian. But the Congress is controlled by Republicans who, just like 1930, think the solution to sharply reduced revenues is to balance the budget.

C'mon, don. Stop acting like you're talking to children. Contribute something useful for a change.

You guys the NYT publishes Ross Douthat so his opinion on things is very very important

Stockman may have finally admitted a few years ago that the trickle-down economics he helped institute while working for Reagan didn't work, but his views can still be crazy enough that I don't care for them.

Hey Aimless, you're the one who said it was Keynesian. That's why I asked for the clarification. I'm not trying to talk down to you.

Also, I'm sorry that my comments aren't useful to you. And if it makes you feel better to put me down about it, I'm glad this forum allows that.

Yikes.

And I will read stuff I don't agree with in the NY Times or elsewhere, sometimes Don.

you're the one who said it was Keynesian

No, I merely assumed you had at least the minimal acquaintance with Keynesian ideas required to understand what I did say.

Do you expect me to believe you are that ignorant?

I went to Krugman's blog expecting a takedown of the Stockman thing, but mostly he just shakes his head:

Actually, I was disappointed in Stockman’s piece. I thought there would be some kind of real argument, some presentation, however tendentious, of evidence. Instead it’s just a series of gee-whiz, context- and model-free numbers embedded in a rant — and not even an interesting rant. It’s cranky old man stuff, the kind of thing you get from people who read Investors Business Daily, listen to Rush Limbaugh, and maybe, if they’re unusually teched up, get investment advice from Zero Hedge.

Sad.

No, I merely assumed you had at least the minimal acquaintance with Keynesian ideas required to understand what I did say.

I do. Your post was not clear. Seems like you usually present your opinions on economic stuff better than than you did.

Do you expect me to believe you are that ignorant?

I assume that you believe I am ignorant, given your dismissive nature towards me. That's ok.

So kind of you to forgive me for what you assume I believe.

http://24.media.tumblr.com/c2ac124e748cbbfa800c4350f9bc3e44/tumblr_mkjnb4mP8g1qdmmiqo1_500.gif
http://24.media.tumblr.com/c2ac124e748cbbfa800c4350f9bc3e44/tumblr_mkjnb4mP8g1qdmmiqo1_500.gif
http://24.media.tumblr.com/c2ac124e748cbbfa800c4350f9bc3e44/tumblr_mkjnb4mP8g1qdmmiqo1_500.gif

http://www.dailykos.com/story/2013/04/01/1198391/-Krugman-Stockman-Piece-Pathetic-and-Embarrassing

Washington is piling a soaring debt burden on our descendants, unable to rein in either the warfare state or the welfare state or raise the taxes needed to pay the nation’s bills.

the gains in productivity over the next 30 years will dwarf the "soaring debt burden" of the wars in Afghanistan and Iraq, and even of whatever taxes might need to be raised to pay for Medicare and Medicaid. The issue is whether most workers will share in those productivity gains, or whether the gains will continue to get funnelled to a tiny elite

like, this elite runs our economy over a cliff and now we're expected to believe that the big problem is poor people, and their bizarre expectation that they should receive the pension fund they've been paying into their entire lives? like, QU'EST-CE QUE TU RACONTES, MANGGGGG

like sorry, the whole thing is just tl;dr after a sentence like that

This is the introductory paragraph of my 4 page op-ed on Star Wars for the New York Times. Star Wars, directed in 1983 by Steven Spielberg, is a black and white documentary set in the fields of Avalon in a post-industrial...

So Tracer, you're pretty convinced that we can grow our way out of any sovereign debt levels that were to become problematic?

if we can't we're screwed regardless

fuck the rich

As far as I'm concerned the US can be infinity dollars in debt and everything will be fine.

We could mint a platinum infinity dollars coin!

Sadly even if we paid our creditors our infinite debt with our infinity dollar coin we'd still have infinite debt. The good news is that if we keep the infinity dollar coin we can write infinite infinity dollar checks.

the only thing that can break this terrible cycle? infinite love.

//easter 2013
//praise

Somewhat more prosaically, debt is the other side of credit and credit is a form of trust. Dollars, in which our country's debts are measured, are largely composed of trust. The loud gnashing of teeth by the deficit doomsayers is a reflection of their own personal loss of trust, which they project upon the markets, thinking that if their trust is so radically compromised, the markets must surely be feeling the same way because markets are rational and must see how reasonable it is to mistrust the dollar.

As Krugman never tires of pointing out, this projection has proved to be a total delusion and the markets feel entirely different than the deficit doomsayers. This fact does not penetrate the doomsayers' minds, because the strength of their projection requires that the markets feel as they feel. If the markets do not now, then they soon must. There is no alternative scenario that the doomsayers can accept as true. Stockman is true to his type and his tribe in that.

The disaster is always in the imminent future, no matter how many imminent futures have come and gone without its arrival.

chicken little bullshit about the debt is just a way for the rich to make sure the cards stay stacked against everyone but their own kids, who they deal royal flushes generation after generation. same as it ever was

Political life without the doomsayers would be tragically boring and nothing would "get done".

I think there's a tendency to conflate "we won't default on our debt" with "everything will be fine." Obviously we can monetize our debt forever, but at SOME hypothetical point that would have SOME consequences.

not before jellyfish take over the earth I would think

How do we prevent the rich from stacking the cards?

big, powerful blower fans, iirc

if the debt rises at a rate that is less than wealth creation that is financed with such debt, why couldn't debt be monetized forever?

Political life without the doomsayers would be tragically boring and nothing would "get done".

― The Great Forgiver (dandydonweiner), Monday, April 1, 2013 3:08 PM (7 minutes ago) Bookmark Flag Post Permalink

what exactly is "getting done" right now iyo

not much

Oh wait, it looks like there might be some federal gun control coming.

if the debt rises at a rate that is less than wealth creation that is financed with such debt, why couldn't debt be monetized forever?

― Philip Nunez, Monday, April 1, 2013 3:17 PM Bookmark Flag Post Permalink

Not really sure what you are asking. Monetizing debt = increasing money supply to pay for debt. If "wealth" is rising faster than debt, you wouldn't really be monetizing debt, you'd be paying it off with the new "wealth" in your scenario, as I understand it. So far, what you're describing is not happening though.

x-post to dandy don
Nah, Republicans are blocking background checks now

i don't mean necessarily wealth in govt coffers, but wealth creation as a whole.

So Tracer, you're pretty convinced that we can grow our way out of any sovereign debt levels that were to become problematic?

i'm not an expert obv but I find Dean Baker convincing on the debt. Here's what he wrote a couple of weeks ago in response to a Steve Rattner column about the demographic "threat" to the federal balance sheet. He beats the same drum pretty regularly so apologies if you've read similar before:

We have seen an enormous upward redistribution of income over the last three decades. As a result most workers have seen little of the benefits of economic growth. If this upward redistribution continues, then our children are unlikely to see much of the gains of growth in the future.

Rather than have people focus on the policies that have led to this upward redistribution (trade policy, too big to fail banks, patent policy etc.), wealthy people like Rattner use their money and power to try to divert attention to the cost of Social Security and Medicare. They have thrown enormous resources into trying to scare people with the prospective burdens posed by these programs. For example, Rattner today tells us that with Social Security:

"The present value of the unfunded liability is 'only' $9 trillion."

Are you scared yet? After all, it's "only" $9 trillion. Didn't you love that sarcasm? Yes, $9 trillion is a lot of money, none of us will ever see that much money, even Bill Gates or Warren Buffet. But if we are having a serious discussion, we would talk about this as a share of future income. It's about 0.7 percent of future GDP. Does that scare you?

That's a bit less than half of the cost of the wars in Afghanistan and Iraq over the last decade, that's hardly trivial, but that expense would not impoverish our kids. Medicare and Medicaid are projected to cost more but that has nothing to do with the old stealing from the young, their higher costs are the result of doctors, drug companies, medical supply companies and other providers in the industry charging us two to three times as much as their counterparts in other wealthy countries. If we paid the same amount per person for our health care as people in other wealthy countries then we would be looking at long-term budget surpluses rather than deficits.

The reality is that the hit to future living standards from demographics is relatively modest. It is easily dwarfed by the gains from projected productivity growth even under very pessimistic assumptions. Even if productivity just grows at the same rate as it did in the slowdown era from 1973-1995 the gains from productivity growth through 2035 would be more than three times the potential hit that our children would face from supporting a larger population of retirees. And after 2035 productivity continues to grow, even as the demographics barely change.

But this story depends on our children being able to capture the gains of productivity growth rather than seeing them all go to the top. That requires a reversal of the policies of the last three decades. But rather than having people talk about the policies that are causing this massive upward redistribution, Rattner is trying to set children against their parents and grandparents. And the NYT is apparently happy to give him the space to do so.

good book

http://www.cepr.net/index.php/publications/books/the-end-of-loser-liberalism

The debt is mostly owed TO OURSELVES. China owns 8 percent of the debt total. It's mostly owned by rich Americans that have been fucking the country over from the beginning and will continue fucking it over until the end.

But yeah, poor people want money and it's an ENTITLEMENT. This poor person feels ENTITLED to money. They don't really deserve it but they think they do.