today. He makes the clear case for some quarters of negative growth in
the future, but his view is that a double dip is irrelevant. I agree
with him.
While it may be hard to forecast a double dip it is now a slam-dunk that
we are going into a longer period of sub par growth. That outlook is
even worse than two quarters of negative growth followed by six quarters
of anemic recovery. If we go two years with growth around 1% our fiscal
books will be in the tank. We would be so far off on the critical
issues of total debt, debt service to GDP, debt to GDP, deficit to GDP,
employment and unemployment that I can’t envision how we could dig
ourselves out of that hole. If we don’t grow we die.
Krugman says that we should throw everything we have got at the problem.
It was clear that he was angry at the lack of action at the Fed and the
Administration. I got a sense of trepidation in his words. Here are his
suggestions of what should be done:
The
Administration can use Fannie Mae and Freddie Mac, the
government-sponsored lenders, to engineer mortgage refinancing that puts
money in the hands of American families.
Mr. K we are doing that. The Agencies are 95% of the lending. One can
still get a 96-1/2% LTV loan for heavens sake. QE-1 and now QE-2 have
killed savers and brought mortgage rates to 50-year lows! With HAMP and
HARP nearly anyone who has a chance of landing on their feet can get a
trial modification. The FHA is lending $50k to people in default at zero
interest and the loan is non-recourse and subordinated. What the hell
is that?
Mr. K wants to turn up the dial on this? The only way to do that would
be to drop lending standards. The stupidest thing that we could do. Bad
lending got us into this mess. Bad lending is not going to get us out
it. It will only ensure our demise.
The Fed can buy more long-term and private debt.
Private debt? Who’s private debt? GE’s? BP’s? Citi’s? AIG’s? This is
over the top in my opinion. We have already socialized big parts of the
financial system. Now Mr. K wants everything to be owned by the
government. This is not an idea that will sell in America. There has
already been too much intervention. If the Fed starts buying Wal-Mart
bonds America is finished. And heaven help us if the buy common stocks.
Japan started doing that 20 years ago. Their market is down 70%.
The Fed can raise its medium-term target for inflation.
What does that mean? Does the Fed come out with a statement that says, “Our old target for inflation was 2%, we have changed it to 4%”?
There is only one way to achieve that goal. The Fed would have to print
money. Trillions of it. The fed balance sheet would go to $5T. To me
this is assured destruction. I don’t think we would get to $5t. The
financial system would implode before we got there. America would look
like Argentina in the 1980’s.
Treasury can finally get serious about confronting China over its currency manipulation.
I’m sorry but just shut up with this Mr. K. In the past 24 months the US
has intervened and supported financial markets at levels never before
seen in history. The Federal Reserve bought $1.75 trillion of fixed rate
paper! Have you looked at the tape lately Mr. K? The yields you’re
seeing are in no small part due to those POMO operations. And he wants
to do trillions more? Talk about a double standard. When America
actually stops the intervention in the global credit market it can then
sit down with the Chinese and talk turkey. Before that it is the pot
calling the kettle black. And Mr. Krugman knows it.
These steps are big gambles. The downsides are enormous, the upsides questionable. Krugman acknowledges this:
Nobody
can be sure how well these measures would work, but it’s better to try
something that might not work than to make excuses while workers suffer.
No one wants to see “workers suffer”. I think this use of words was a
cheap shot. The fact is the steps Mr. Krugman is advocating could very
well destroy most of the things we consider important.
Friday evening. The markets are up big. The weather is perfect. But
there are big storms in the Atlantic and I am worried that we are dead
either way.
One of your best pieces. Sometimes I wonder if Krugman could be a covert operative for the gold industry. If he is, he's pretty effective. But the scary thing is, he's not very far from the center of the mainstream.
The appeal to "suffering workers" is so trite, it makes you want to send him out to the Chinese countryside to hoe onions like Mao would have. Him and Leo and all the other chattering class leftists who don't know who the workers are much less care anything about them.
Another alternative to Krugman being an operative for the gold industry is a secret desire to drive the US into a currency crisis. His policies taken to their limit seem to head that way. It is telling that if you google "currency crisis" the third URL points to a paper by Krugman. Now if we would like to be more charitable we could say with his expertise on currency crisis he has a sense that his policy directions will not take us there.
By watching the commissions hearings this week looking into the BP blowout it was sickening to see the Managers and VP above the Well team members claim that they knew nothing specific about the critical decisions before the below out but their job was to ensure resources and personnel were in place. The fat ass VP were on at the rig to "meet and greet" but had no idea material short cuts (no running the liner, not putting in centralizers even when the Hal. report told BP that gas would likely channel during the cement job. This guy Simms was new to the job and had just taken a two week vacation and then focused on the "VP kiss ass trip". So he wanted the rig runnning when the fat asses were on the rig so he ignored safety to save money and look good on the rig trip. BP is trying to blame the poor son of bitch drilling engineer who was getting no help from above. IMO his Manager (Simms) pushed the very risky decisions so he would look good at the rig meeting. The drilling engineer in one memo say.."who gives a damn, its done" He was implying the bosses don't give shit about the risk of cementing w/o proper centralizes, the negative tests, and not having a liner. BP talks a good game.."golden policiies, safety first, etc. But the management's actions and lack of control shows gross negligence on the part of the VPs. They should be criminally held responsible. Don't go after the lowly drilling engineer. He was set up.
b
Yeah, why don't we just give everybody everything they need to live "free." WTF, this guy is a Nobel Prize-winning economist ... oh, yeah, they just give those things away with a million dollars, so when you no longer have to work for living because someone simply gives you a million dollars, I guess you lose sight of the fact that not everyone else is being given a million dollars to loll about.
I really hate this guy. I have said it before, he is a moralist before he is an economist and that position legitimises him to be dishonest fin the name of the greater good.
Run for your life
In the Good Old Days, fuckers like this were deported to small, hot, humid, fetid, bug infested, swampy islands of poison waters to be slowly and painfully consumed by Mother Nature herself.
At least that way his chemical makeup actually would contribute to some legitimate growth of something for a chance - as fertilizer.
Krugman disappointed about what exactly?
The Administration and FED actions have been, and are, extraordinary.
FED:
In reality, FED core business actions are a great success, not one FED centric BHC beyond Lehman has filed for bankruptcy. In fact, through the FED and FASB and SEC side stepping, BHCs had impressive earnings. Insolvent to incredible. Ben spared no expense and even killed any real wall street reform. No small achievement, and not one bank president behind bars. Impressive.
ADMIN:
We are in the sweet spot for ARRA. Every day a lot of money from Treasury is going out the door to support ARRA. In addition to this, the legislators came off break to pass a state bailout package for additional Medicaid relief and union payoffs. The only thing that halted the gravy train allocation of future revenue was the fall break.
If the Krugmiester does not like the structural shorcomings in the economy it is because both the FED and the ADMIN will not address the fundamental problems. For to do so would be to remove the very power they represent and profit by.
It is however, interesting to look at the world through Krugman's eyes. Time and time again real reform has been subverted, and then he is surprised that somehow the powers at be do not act in the best interest of the unemployed. But really, at some point every one who follows finance must ask, is this guy mad, or do they pay him to publish this stuff?
Mark Beck
best comment. the man is limited by his education and ideaolgy, but doesn't have the maturity to either realize it or admit it to himself.
I can't verify this, but he has skind in the game. Obama met with a group of economisits (Krugman, stiglitz) and a few others. It is my understanding Obama adopted mainly the krugman game plan.
So maybe instead of going down in flames and having his ideoplogy fail, he will always throw more money at it than admit being wrong.
every economist has the same answer. throw good money after bad down the drain. Hiw about we do some work on the transmission of monetary policy I wrote on his blog.
The man is a prisoner of his own mind. Very smart but in a limited way.
Nothing about debt forgiveness, banks taking haircuts, controlling credit card interest rates, hft tax, capitial controls. All of these things could be done to make lending a more attractive option than speculation to the big banks.
Sadly like always the answer to them is:
we will make you economicly better by making you poorer. It hasn't really worked for 30 years of stale wages,
I've decided to click my heels together three times and look at the world through the eyes of Cramer.
I'd answer him: 'Yes, because *obviously* the problem is that mortgage and treasury interest rates are just *too high*.
Hey! I like one of Krugman's suggestions: put(sic) money in the hands of American families.
How about an individual and corporate "income tax holiday" for the remainder of the year?
Cut taxes?? Krugster would never stand for that! Why, that would be madness! The government knows far better how to spend your money than you do.
Oh god its more Kruggers prescriptions. Are we not done with him yet? Him, Roubini, Bernanke, they all keep prescribing fixes that just destroy the economy. When owing money means nothing, nobody will lend money anymore. When governments redistribute wealth and bail out the undeserving, they lose authority. Taxes go down, the economy goes off the books. These are simple truths that they should grasp but are too blinded by ideology to do so.
Appropos of your title, here is where Krugman is taking us:
http://www.youtube.com/watch?v=Bmf-HCCZYOg
Perhaps we should call him Pappagallo?
Winston & Julia: "We are the dead..."
Telescreen: "YOU ARE THE DEAD!"
So we need growth or we die... Why?
The solution is simple: lending money has got to cease being a source of income. Only real production of needed real goods - real increases in WEALTH - should confer a rising standard of living.
A commodity-backed currency, in limited supply, would accomplish this. It has often been said (lamented?) that growth was extremely slow under the pre-1914 gold standard. But the world then knew which growth was REAL and which was ersatz...and real production was rewarded with real gains in wealth.
Distinctly unlike today, when we, all and sundry are forced to speculate...
Buy gold now, because it, and only it, represents real wealth.
Doesn't need to be commodity-backed.
Real Bills Doctrine would permit anything of value to back notes.
That said, the mathematics of exponential compounding make default INEVITABLE.
This is why we must ALL reject austerity as all that will do is make everyone into a starving waif while the government and our national income goes to PAY INTEREST.
Right now, we have a functional national economy. Not at the 2007 mania levels, but we do make things, grow things, produce some things. There IS income.
The problem is let's say you're a person and your CC is maxed out. You can cut your food budget to try to continue to "make payments" on that CC but you cannot CUT your expenditures fast enough to keep up with the growth of the debt. This is the FACT of geometric growth compounding. It's a mathematical inevitability. The debt will continue to grow and the interest owed on the principal will continue to grow as interest begets interest. Even your ability to "service" the debt eventually consumes 100% of your income. You can live in the streets, cut every single bill to 0, but you can't keep up with the compounding.
It is important to realize the situation and repudiate the debt, rather than allow the accounting ledger to consume your life. Jew carpetbaggers made hay off of this interest lending during the post-Civil War era, when they lent to black sharecroppers. Just as the payday loan people end up rolling the balance due to the INTEREST they owe and eventually it consumes their entire paycheck and then 2, then 4, etc., so was it with the blacks. The carpetbagger routinely ended up owning the sharecroppers' entire year worth of production. Slave to one guy, free, now slave to another.
People who are short on money get onto the interest merrygoround and if they do not get off after ONE interval, they're mathematically doomed. They end up having to forego FOOD and shelter in order to make INTEREST payments.
The US must NOT attempt to "make good" on its debts to bankers and the elite. It must repudiate them. Otherwise, the elites will do precisely what they have done with Greece, Iceland, Ireland, Argentina, etc., and that's to have us SELL OFF our nation to creditors. Spain currently basically rents Colombia to Colombians. During the last major default/inflation that put all those zeroes onto the local paper, Spanish banks and telcos came in and "bought" a lot of the hard assets, cell infrastructure, mines, banks, etc., simply because Spain had access to the currency that Colombians "owed."
http://www.thedailybell.com/1237/Real-Bills-Revisited.html
Again, I will say there is ABSOLUTELY no need for a gold standard, and one is counterproductive.
Real Bills is, in the abstract, an everything standard. All real things back "money" as we know it.
There's no need for gold to extinguish maturing bills' imbalances. This could be done by coal, oil, wheat, or the services of a dentist. The point is that all things of real value, NOT DEBT INSTRUMENTS, serve as the basis for money.
The reason central banking EXISTS is to charge interest on the existence of money. It's as simple as that. As long as the people honor the debt, the math makes sovereign bankruptcy inevitable because the economy cannot grow at the rate that interest compounds. Perhaps this is by original design or simply the bankers merely desired to take a cut of real production as seigniorage, but that's the end consequence nonetheless.
Again, I will say, given the math of the present situation, either print or repudiate; there are NO other options. We collectively MUST REJECT the notion of austerity or "paying it back."
The Z1 consumer credit metric is around $50T. That is the total amount of money-as-debt outstanding.
It is INARGUABLE that the bank that controls the FRN in which all that $50T is denominated, NEVER had $50T of actual capital or "real" money to lend. The banking system exists by lending entirely fictional money then charging compounding interest on it.
In reality, what we SHOULD DO is charter our OWN bank, and lend ourselves the SAME fictional money that the Fed and its member banks lend, and repay them with that. We must repudiate the FRN as has been done in the past to the paper of previous central banks in the USA.
What a hyperinflation will do is reduce our living standards to what they would be without reserve currency status and to what is commensurate with our debt/equity ratios as a nation. Austerity will only make the banking clan the owners of EVERYTHING.
This is precisely what Jefferson MEANT in his famous quote! Austerity IS the deflation.
If you are a banker and you lend freely, you create inflation via fictional capital. Then, at some point, your loans are repayable ONLY in terms of your own banknotes. So you shut off the supply, creating deflation.
At the time of lending, the money for the aggregate interest owed on all money outstanding DOES NOT EXIST. It REQUIRES perpetual rolling growth of credit! If there is, again, $50T or so of Z1 credit outstanding and let's just say it has an average coupon of 1%, this means there is $50T of debtmoney out there but $50.5T of debt money OWED. The interest hasn't been created yet, and it requires someone else to BORROW it.
So, as a banker, you shut off the supply of credit and your entire note base is in effective default because there isn't enough money to pay all claims. You only lend the principal. By this deflation, you can then force cascading default, call all loans, and acquire collateral. This is the SCAM of lending, it's exactly what it does.
Over the centuries, so many people have seen so many others get caught in this CON that usury or lending at interest was FORBIDDEN by most religions as contrary to social harmony, as an evil. Central banking is merely usury at a national or worldwide level. It MUST be repudiated, once and for all.
OK. Thanks for your elucidation.
+ $1230 Kreditanstalt
But, all .govs before who tried commodity (gold) backed currencies ALL found a way around it, and so their fiats failed anyway.
No need to tell what kind of currency we should have, you already told us the important thing:
Buy gold now.
Some people (like Krugman) have a hard time accepting the fact that a long and painful hangover is unavoidable after a 15-year-plus debt /bubble financed consumption binge. We aren't going back to the previous growth rates or the previous low levels of unemployment. Attempts to avoid the necessary readjustments will only postpone the pain or make it worse, as we have seen with the dumb home buyer tax credit, cash for clunkers etc.
Bending over backwards to lower long-term interest rates so as to stimulate more borrowing is not helpful when everyone already has too much debt. The basic problem is too much debt; the solution is deleveraging. Unfortunately, policy makers see deleveraging as the problem and more debt as the solution. More debt can never be the solution for somebody with too much debt.
Persons (1930. pp. 118-119) describes the fallout from an earlier era of rapid credit expansion as follows:
"[I]t is highly probable that a considerable volume of sales recently made were based on credit ratings only justifiable on the theory that flush times were to continue indefinitely...When the process of expanding credit ceases and we return to a normal basis of spending each year...there must ensue a painful period of readjustment."
Persons, C.E., 1930. "Credit expansion, 1920 to 1929, and its lessons." Quarterly Journal of Economics 45, 94-130.
There is absolutely nothing new about what is going on, including policymakers' failure to learn the lessons of history.
Old Timer,
You're right. The only thing is it hasn't been a 15-year-plus debt /bubble financed consumption binge, it's been a 50 year debt /bubble financed consumption binge.
DavidC
$1 trillion in personal taxes collected - $1 trillion war/military/security machine
Need we say more.
1. The Federal Reserve Bank works in the best interests of its owners (thats NOT YOU). It is a privately owned entity, and not a government agency. If you think I'm lying look it up. Benny does NOT care about you!
2. Big corporations like high unemployment. It keeps the labor cost down.
3. The economy is intentionally imploding so that the middle class becomes poor and dependendent on the government, which will be happy to offer you a military job or a new civilian military job spying on your neighbor.
4. Krugman is a stooge who is in favor of any program that will increase profits for the banksters, the teachers union, insurance companies, and anyone remotedly related to the roachefellers and rothchilds.
5. The bottom line is to intentionally wreck our economy to consolidate power for a world government (new world order). The IMF is already starting their plan to be the Central Bank of the World with a new currency, known as special drawing rights.
6. Did Mr. Freddie Krugerman ever suggest we could try and balance the budget by bringing the troops home?
7. The politicians and economists are just puppets for the global banksters. Do some research, it's all there for you to see. Don't be afraid of the truth.
If the Federal Reserve Bank is a privately owned entity, can you tell me where the state articles of incorporation are? Can you tell me of another "private" entity that does not have state articles of incorporation?
The Fed is a privately owned corporation created by an Act of Congress.
The Federal Reserve Bank was created by an act of Congress in 1913. It does not need articles of incorporation because Congress said it doesn't. It is a banking cartel.
Congress decided in the Federal Reserve Act that all nationally chartered banks were required to become members of the Federal Reserve System. It requires them to purchase specified non-transferable stock in their regional Federal reserve bank and to set aside a stipulated amount of non-interest bearing reserves with their respective reserve bank (since 1980 all depository institutions have been required to set aside reserves with the Federal Reserve and be entitled to certain Federal Reserve services - Sections 2 and 19).
1910. secret meeting. jekyll island, georgia. ... the plot was hatched.
http://www.youtube.com/watch?v=ZsxDmzl19Yo
Can you tell me of another "private" entity that does not have state articles of incorporation?
I smell panic.
"Nobody can be sure how well these measures would work, but it’s better to try something that might not work than to make excuses while workers suffer."
Ok, lets see a show of hands.
Who actually believes that Krugman (or anyone else in this administration) really cares "if workers suffer"?
Once you understand what Krugman really cares about, you understand his logic.
This guy is about a useful as Heather Mills McCartney doing a pantyhose ad with one lost swim fin.
(Primal Scream)
In a cave in Tora Bora there lives a tall, bearded man deserving of a peace offering from America. I'd like to suggest a well respected, liberal, empathetic economist, with whom he would likely to hold numerous philosophical considerations in common, our very own, Dr. Krugman.
(Raucous Sustained Standing Ovation, Balloons Dropping from Ceiling, Band Striking Up Triumphal Music, Announcers Choking Up, Tearingly Proclaiming the Beginning of all Good and Noble.)
(sigh, blood pressure dropping, beginnings of first smile since reading article)
Hopefully the missile exhaust doesn't burn his toes...LOL...ahhh...I feel much better now.
Thanks ;-)
And they said I was off my meds for speculating about hyperinflation . . . (http://gonzalolira.blogspot.com/2010/08/hyperinflation-part-ii-what-it-w...)
USA: Argentina with Nukes. Suck it, bitches!
GL
Default is the only solution. Unless we build a time machine and go forward a year at a time stealing everything they produce up to 100 years into the future to match the 100 years worth of currency we've leveraged out of it. The system can never grow enough, ever.
+1000, or should I say +1.04 x^y
Current concepts of growth are not sustainable. It's time for people to wake up to reality.
LMFAO Crummy!
That was awesome.
Yes, we are in the debt destruction portion of the cycle, no doubt.
On second thought, maybe it's not so wise to wish for Timmah, Ben and Larry's replacement. We just might get this bone head.
I don't see how any of these things will purge the system of unpayable mountains of debt.
It won't! You are on to the simple fact that seems to be eluding the bureaucrats.
If Krugman really want's to put money into the hands of the people there is a very simple way to do it.
Shrink government, cut taxes and allow the people to prosper.
Seems to me they have tried everything except that.
Everything???? You mean everything but means-testing the almost-trillion-dollar annual Pentagon budget????
One of the main reasons for individual states to form into a Federation is to...?
How about means testing the Education Dept. or Energy Dept. or Ag. Dept. or HUD or Congress?
The means test is already complete on the "shovel ready stimulus" for elite professor tenure and bureaucrats, it's a trillion dollar failure Magat.
So I take it with this record intact your ready to repeal O-Care?
Absolutely, unequivocally, undeniably and the only option left untried. Which, IMHO is the only reasonable prescription for economic growth ... increasing employment, disposable income and tax receipts.
QED
You mentioned Argentina... here's what was happening there on Dec 21st, 2001, once hyperinflation kicked in.
This is what happens when the "middle class" revolts.
http://www.youtube.com/watch?v=rH6_i8zuffs
Argentina was/is not a 3rd world country. Advance the movie to about 4:30 and take a good long #uckin look at what our future may entail. Imagine what downtown Manhattan or LA would be like.
web bot
We are starting to see some of this. First comes the desperation. Saw that in Atlanta when 30k people signed up for 800 apartments. Similar stories in LA. The anger will follow. I don't think it is that far away when something like this flares up in a US city. Gulp.
Tks
b
Yep. Amongst those 30K there was more than one hand gun. The ratio in LA would have been higher. One stray shot in error would have started an amazing scene. Talk about your blood in the streets...