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To The President: URGENT
From The Daily Capitalist
TO THE PRESIDENT: URGENT
The President
White House
Washington, D.C. 20500
Dear President Obama:
I observed with some concern a photo of you and your glum economic team in the White House Rose Garden during your September 3 address on the jobs report.
I am aware that you are gravely concerned about the economy and the employment situation. Understandably so since your policies of fiscal and monetary stimulus have failed to create economic growth or employment. Yet despite such failures you advocate more of the same remedies in the face of their failure.
On Labor Day you announced new spending of $50 billion on infrastructure construction to create "jobs". This is in addition to the American Recovery and Reinvestment Act commitment of $499 billion for similar projects. According to your web site, Recovery.gov, only $296 billion of that amount has been spent so why do we need more?
Yet the economy is stagnant, if not declining, unemployment is high and going higher, and credit is still largely unavailable to most American businesses even if they were willing to borrow. Home buyer credits have failed to stop the decline in home prices and Cash for Clunkers has had no lasting effect on the auto or appliance industries.
I suggest that since existing policies have failed to revive the economy, your Administration should try something different. I offer you several innovative policies that would actually speed a recovery and lead to higher employment.
The problems that we need to quickly solve are:
- High unemployment.
- Declining output.
- Credit freeze.
- Surplus of housing and commercial real estate.
- High private debt load.
- High federal debt.
Until the economy starts growing again, these problems will persist.
Unless we understand the causes of our problems, solutions are not easy. Because you place great emphasis on "what works" rather than economic theory, I will get to the specific issues straightaway.
Here are some guiding principles for "what works":
- Economies can repair themselves without a lot of government help. History has proven this time and again.
- Government interference in the repair process can hinder recovery or even make things worse.
- Government spending is very inefficient.
- Individuals can make better choices about what to do with their money than the government.
- Economic growth only comes from private enterprise. The corollary of this is that government can only spend money, not make money.
- Since government produces nothing, then real growth and real jobs can only come from private enterprise.
- If government spending is inefficient and if economic growth comes only from the private sector, then taking vast amounts of money out of private hands and putting it into government hands will hinder growth.
- Government spending to revive an economy has failed wherever and whenever it has been tried.
- More legislation increases uncertainty for businesses, making them reluctant to expand (called "regime uncertainty" in economic terms).
With these time-tested guiding principles in mind, here are some specific policies that you should immediately implement to allow the economy to quickly recover. They will "work."
Fix the Banks
Cure the credit freeze by eliminating policies that cover up the fact that many of our banks are financially unsound. These policies generally relate to how banks value the assets that secure real estate loans, primarily commercial real estate (CRE) loans. These policies allow banks to overvalue their loan assets. These policies include "mark-to-make-believe" (rather than "mark to market") and "extend and pretend" each of which allow banks to maintain a fiction. If the actual values of these loans were realized, banks would be required to foreclose on these bad assets. By getting these loans off their books, they would be able to recapitalize and become financial sound.
Why is this important? It is the only way to restore credit to small- and medium-sized businesses and resolve the oversupply of CRE. Big businesses have plenty of credit from the big money center banks. It's the regional and local banks which finance the rest of us that are in trouble.
We have just gone through the world's biggest financial bubble. During this bubble, projects that made no sense but for the cheap Fed money and the false appearance of paper prosperity, were hugely over-produced. Now that the bubble has burst, we are in the mopping up stage of recovery. Banks are reluctant to extend credit because they are unsure of their financial future. The longer banks hold on to these malinvestments, their balance sheets will remain clogged up, and credit will remain restricted. Yes, more banks will go out of business; the process is never pretty but it is necessary. It is important to keep in mind that until this done, millions of unemployed Americans will stay jobless longer.
Bring Back the RTC
If you allow banks to fail as did President Bush I (mostly S&Ls actually), then there will be many foreclosed CRE projects that will need to be liquidated by the FDIC. Alan Greenspan, then Fed chairman, for all his faults did the right thing by urging the creation of the Resolution Trust Corporation, a separate entity whose function was to liquidate S&Ls and sell off the foreclosed assets from failed institutions. It actually worked pretty well and a huge slug of bad real estate, mostly apartments, were sold off to investors. The investors got great deals, but, more importantly, the economy recovered sooner.
The RTC dealt with 747 S&Ls with total assets of $394 billion (according to the Wikipedia article). According to the latest FDIC report there are 829 "problem" banks with $403 billion in assets as of Q2 2010. It is conceivable that this idea would work again.
Stop Passing Laws
Surveys reveal that the number one problem for business is uncertainty created by the government. They have been hit with an onslaught of complex legislation the consequences of which they don't understand. This is called "regime uncertainty" in economic terms. The truth is, according to the surveys, that even if credit was available, businesses aren't borrowing because they don't know what the government will do to them next. Consider that three major pieces of legislation have been passed during your administration: the American Recovery and Reinvestment Act, the health care bill, and the Dodd-Frank financial overhaul bill. Further, they are uncertain if taxes on them will be raised.
No new laws are required to allow the economy to recover. I urge you to speak to business and tell them that we Americans trust their ability to drive our economy, and that your Administration will enact no new laws that will create greater burdens on their ability to expand, borrow, hire, and reap profits.
Stop Useless Spending
While your Administration has gamely tried to convince us that you have created jobs, we know that is fiction. The CBO report and claims by prominent economists have no credible evidence that any real jobs were created. If it were the case that government could create jobs then there would be no need for the private sector. Of course you know well that history has proven that policy to be a disaster.
Only private enterprise can create a real job. Having the government pay people to work is not a "job" in the same sense as a job in the private sector. When a business hires an employee, it is because somewhere down the line consumers want the end product of his or her productivity. The job created by the business is generated by economic activity until consumers decide otherwise.
If the government pays someone to do something, it isn't generated by economic activity. When the money stops, the job stops. That has been the case of all of fiscal stimulus spending. While someone is earning money from the government, the money to pay him or her comes from taxes, which ultimately can only be generated from private enterprise.
If the government takes money out of the economy to pay people to do things it wants done rather than let the economic forces of private enterprise work, then businesses who create real jobs will have less money with which to expand their businesses. You should consider what the person from whom the money was taxed was going to do with the money. It would aid recovery to let private enterprise keep their money.
Encourage Saving Rather Than Spending
With historically high debt loads, job uncertainty, a lack of retirement funds, and declining home values, is it not reasonable for people to increase savings? Urging people to spend at this time runs counter to people's innate sense to take care of themselves. While people are trying to repair their financial condition after the housing and credit bubble, urging more spending is reckless advice. People are rightly using their common sense.
There are two substantial benefits to saving. It allows families to reduce their debt burdens. Once they pay down their debts, they will be more willing to spend without the fear that they will end up homeless. Saving also creates the new capital that will be required for businesses when they decide to expand. It is not as if the Fed can just print dollars to create wealth and capital; wealth can only come from savings.
Policies that encourage spending such as Cash for Clunkers or home buyer credits or various tax credits for government-favored projects only encourage spending and thus reduce savings. Furthermore, they appear to have no lasting economic impact.
Don't Raise Taxes
In light of the detriment to the economy of giving the government more of our earnings right now, an increase in taxes would be harmful to a recovery. While we face a serious deficit in the federal budget, the only way to pay down national debt is to have a vigorous growing economy and a reduction of government spending. With the right policies put in place, lower taxes would help create economic growth.
Raise Interest Rates
Fed policies to expand the money supply to create inflation will eventually succeed. Thus they are planting the seeds for perpetual stagnation and inflation. To prevent this new disaster, the Fed should immediately raise the Fed Funds rate and stop new attempts at quantitative easing. This will have an immediate positive impact. First, it will encourage saving as people seek higher, safer returns on their capital. Second, it will unmask malinvested projects, clear away the burden of their related debt load, and allow capital to be redirected to profitable ventures. Third, it will prevent the rise of inflation which robs savers of their wealth. Fourth, it will prevent the creation of a new destructive stagflationary cycle. Fifth, as in the Volcker era, greater savings and low inflation will eventually lead to new economic growth and higher employment.
I strongly urge you to adopt these innovative solutions to solve our nation's desperate economic problems.
Sincerely,
Dr. Jeffrey Harding
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#1 is still Principal Redection at the private level! It remains the first, and far and away most important thing the government could call for.
...and if you (Dr. Jeffrey Harding) want to really blow me away, then call out the real problem of the funding of pension/SocSec and how it's leading to a cascading shortfall that is sooner to come and can't be "PRIVATIZED"! (I'm pretty anti-pension, as it has become an abuse rather then tool for retirement)
Answer that funding issue, and maybe I'll agree with where and how the Gov't should step back.
All the best,
MA/RH
UPDATED CHARTS:
http://stockmarket618.wordpress.com
Tax cuts provide economic stimulus? Didn't George W Bush and the rest of the Republicans tell us that?
Where is it writeen that a tax increase for the top 1% is a bad idea during a recession? Come on, to a conservative there is NEVER a good time for a tax increase.
Aren't we sick and tired of being held hostage by the elites?
Not mentioned was the elimination of income taxes and the transfer of the tax burden to raw land values. See Henry George's "Progress and Poverty" for further explanation.
Not mentioned was the elimination of income taxes and the transfer of the tax burden to raw land values. See Henry George's "Progress and Poverty" for further explanation.
We're most likely too far gone already. At this point it's probably better to just let Liberal Jesus stay at the helm as the U.S.S. America runs up onto the rocks.
I think that's the lowest common denominator method for learning the kinds of lessons that need to be learned in this country...which will be important for whatever comes next.
I mean, look at that sad sack of unicorn-riding ass-clowns up there on the stage. If that's Larry Summers on the right he's the only one who's ever had a real job.
Just stay away Dr. Harding.
To expect those idiots to do anything right would be delusional.
"Only private enterprise can create a real job."
Maybe so, but not every job created by private enterprise is real. Indeed, if the $20 trillion growth in private debt (which equals money) during the last 10 years is to be analyzed carefully, private enterprise is probably (hold your breath) even less efficient than goverment in producing "real" jobs.
?
"Only private enterprise can create a real job. Having the government pay people to work is not a "job" in the same sense as a job in the private sector. When a business hires an employee, it is because somewhere down the line consumers want the end product of his or her productivity. The job created by the business is generated by economic activity until consumers decide otherwise.
If the government pays someone to do something, it isn't generated by economic activity. When the money stops, the job stops. That has been the case of all of fiscal stimulus spending. While someone is earning money from the government, the money to pay him or her comes from taxes, which ultimately can only be generated from private enterprise.
If the government takes money out of the economy to pay people to do things it wants done rather than let the economic forces of private enterprise work, then businesses who create real jobs will have less money with which to expand their businesses."
Not so fast, Mr. ‘Econophile‘,
In addition to individual consumers purchasing products and services, groups or organizations may also purchase products and services.
Were a democratic government working properly, collectively the citizens could pool their resources (taxes and labor) in order to have that which they desire but individually cannot afford (schools, fireman, parks etc.).
Corporate institutions are intrinsically undemocratic, and operate toward a one-dimensional goal of profit. They also ‘pool funds and labor’ to function, and in order to bend government to serve their one-dimensional purpose.
Basically, for business corporations, profit increases as liability for social costs decreases. For corporations, the primary purposes of government are:
to enable the accounting fiction that depletion of society’s natural resources is not a loss of inventory,
to minimize liability for direct and indirect costs of production,
to secure monopoly control of resources and markets both domestic and foreign,
and to promote and protect an upward transfer of wealth and power (so that corporate institutions may provide incentives to their servants, and disincentives to their opponents).
The anarchist dream of being free of government is tantamount to the dream of being free of society. Markets are not “natural” creations, but are man-made. Property, patents, corporations, liability, labor relations, all are established by the community, or if you will, government.
At its elemental root, all corporate activity IS a “government” activity.
It is therefore rather questionable to badmouth the idea of collective action by citizens pooling resources through a potentially democratic government,
and then to extol the idea of collectively pooling resources through undemocratic corporate institutions.
?
I'm sorry, you people are all stupid. You think the gov't creates nothing? What are talking about. Look around: roads, parks, schools, clinics, libraries, police, fire, defense on and on. We pay money, we get (public) goods and services. Workers provide these services. They get paid, the spend money, they pay taxes. If you think a modern society can run with out a substantial gov't you are a delusional idiot. Such nonsense undermines your arguments.
Since government employees are paid WITH taxes, the taxes they pay contribute nothing. All of the money they have is already tax money. They only give back to the government a small portion of the money they get which is extorted from me, and they keep the rest. Government employees are a net negative to me and to the productive economy. The government produces nothing. The base purpose of ANY government is to furnish a functioning justice system and they have obviously failed to do so by any meaningful measure. The fact that everything else they touch turns to either to crap or worse, into some direct physical threat to me, is just further proof.
"When you see that trading is done, not by consent, but by compulsion--when you see that in order to produce, you need to obtain permission from men who produce nothing--when you see that money is flowing to those who deal, not in goods, but in favors--when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you--when you see corruption being rewarded and honesty becoming a self-sacrifice--you may know that your society is doomed."
- excerpt from Francisco's Money Speech http://www.capitalismmagazine.com/index.php?news=1826
"What are talking about. Look around: roads, parks, schools, clinics, libraries, police, fire, defense on and on."
Please tell me you had an auto accident as a child leaving you unable to have children to pass on your vast economic knowledge to.
You forgot to mention the wars, military installations in who-knows-where, black-ops activity, hiring of mercenaries (AKA: private contractors), and stuff that we don't even know about (see missing money at DOD).
When you see people advocating anarchy, then maybe we will entertain your position. Until that day, you can pack up the red herring.
Our discussion is about the scope and extent of government intrusion as well as the efficient and effective use and distribution of resources. Feel free to contribute.
PS, if your assumptions are true, what do you think is the logical conclusion of those assumptions? How does the public fund itself? Why do we not give everything to the government so that it can create more roads, parks, etc.? Eventually there will come a day of reckoning (we're trying to fight it, but it's here). Welcome to the party.
BO's job is to help his bosses make money. And guess what - his bosses ain't us.
how about a move back to the American system:
1. Tariffs or basically running near a closed economy
2. Money/credit reform - 100% reserve banking and consitutional money aka Friedman will allow the retirement of trillions of Federal and Household sector debt in a noninflationary way
3. Change the legal status of corporations and unions below that of citizens
4. You can only contribute to an election if you are eligible to vote in the election.
5. Reduce scope of military to defense, resiliency, sustainability from empire and exhaustion
The Fabian fascists/totalitarians have you and are waging a war of attrition against your economic freedom and personal well being.
The Patriot Act and the Brady Bill takes away a lot of Freedom
we think we still have.. the New health care bill has tax laws
hidden in it that will ruin the country...It will be real hard to
fix this problem...
I enjoyed the letter by Dr. Harding, thank you Econophile.
Two things I would add to the list in the post.
1) Amend 12 U.S.C. 1831(o) to allow prompt corrective action based on asset class valuation, not just book value. The current language opened the door to control fraud by shifting the fraudulent activity to the accounting side.
2) Appoint regulators who will actually enforce the law. This was the failure of the Bush admin. and continues to be the failing of the BO admin. Allowing bad actors to walk away after creating trust in the market and betraying that trust is wrong. Additional legislation or no, the system does not work if people do not act to enforce law.
I think one of the main contributions to the negative swing in the economy is the psychological impact of seeing the degree of lender initiated fraud coupled with the apparent reward of that behavior via TARP etc. The failure to act to bring bad actors to justice may impact an entire generations willingness to participate and tarnishes the reputation of our financial system.
Let's tax finished imported goods to hell and back. Make it impossible to make it cheaper elsewhere. Then Americans can have things like jobs, homes, and secure retirement. You know, the American Dream?
Obama and the illumate have PLANNED this crash. Do you really think they are that stupid? Hell no they are doing this for their masters the banksters!
I politely disagree with the author....
What has to occur is TAX STRUCTURE CHANGE....
ie the individual/corporate taxes have to be replaced by a broad based tax ....perhaps a small monthly basis point charge on cash balances...
This would allow for a maximum effort to rekindle the American spirit of small business and entrepreneurism....
This must go hand in hand with a radical downsizing of the government to no more than 10% of the economy....in that govt. is just an add on to all prices of goods and services....and even 10% is a high number considering the required competion with the likes of India and China....
...................................
The second item is the total revamping of the securities exchanges to better suit RETAIL....Banks should only be allowed to service RETAIL not game them....
This is a must because stock securities are the best leverage of capital and distribution of wealth....
After all what would make for a better marketplace...a hand full of large managers who have captured the regulators ....or 2 billion RETAIL accounts worldwide pressing their own computer buttons on a defragmented, low cost, fair, direct access electronic exchange ????
Give this site a review: http://www.apttax.com/
Good ideas here but you seem blind to the basic problems of USA are.Current economy is unworkable and until we get rid of the cause of the creation of this Frankenstein of NWO/socialist madness nothing will work.
Remove these barriers and our economy heals.
1. Outsourcing of Manufacturing
2. Over regulation..the elimination of most of Fed gov bloated bureaucracy
3. suppression of energy industry esp Nuke and coal oil nat gas
4. Over taxation at every level
5. Policy of free trade alaCFR/NWO..we need more tariffs not less.
6. immigration control we have none now
7. return ownership of private property see
kelo SCOTUS abomination.
"out of control, no shame" r.s "no accountability" (?) .
http://www.progressiveradionetwork.com/the-gary-null-show-wnye/
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The Gary Null Show - 09/08/10
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minute 11. interview robert sheer. "the american stick up"
Please excuse my language
I am so sick of people thinking Obama is concerned. Obama gives a shit about anything except his mide term election chances. If Obama gave a fuck about the country he never would have appointed geithner (for sure this crook would be gone by now), he never would have reappointed Bernanke (how can you reappoint someone in chagre of an epic failure who has an ideology that caused him to ignore all the problems in the run up to the financial crisis). The only reason to keep these two around is to maintain a cover up of failure of epic proportions
Warren would have been appointed by Treasury to head the consumer agency without senate approval (this can be done). But it hasn't.
What Obama has shown is that he is a sociopath. someone who appears charming and can pretend concern and make others believe. While he screws you. The man has no real emotion or soul. It is all pretend for show while he keeps the criminals running the show.
See below as a trait of sociopaths:
Shallow Emotions
When they show what seems to be warmth, joy, love and compassion it is more feigned than experienced and serves an ulterior motive. Outraged by insignificant matters, yet remaining unmoved and cold by what would upset a normal person. Since they are not genuine, neither are their promises. "
http://www.mcafee.cc/Bin/sb.html
TELL ME THAT DOESN'T SOUND LIKE OUR PRESDIENT
Sounds like all the past presidents.
It takes a sociopath to run for POTUS.
Every single POTUS, save maybe Washington, was a sociopath.
Nope. Go read about James K. Polk and cut the generalizations....
His execution of the Mexican-American war would seem to refute that.
Apparently someone thinks Washington was a sociopath as well.
To The Econophile: URGENT
I am doing exactly what I said I would do...."fundamentally change this country"....you did not pay attention.
BO
Great post. Unfortunately, your solutions are based on common sense and thus will not be adopted by an administration led by an ideologue, a feckless, sophomoric boob of a man bent on remaking our nation based on a crazy vision he was spoon fed from a young age.
The misery will end when we take up arms and start killing these despots.
Econophile, none of your ideas will be implemented, because TPTB are willing to destroy the economy to consolidate their power and move us deeper into a totalitarian fascist state.
The prez and his cronies in congress, can't even run the goobermint, let alone, run the country.
The sooner you have figured out these bankster spokesmen, don't work for us, the sooner you can move forward.
The globalists' rule and we peons, drool.
Dear Econophile,
I commend you for your work but I disagree with most of your 9 "guiding principles". They are mainly axiomatic principles and not empirical ones.
Rather than those 9 axiomatic principles, here's one empirical principle which I'm sure we can agree on :
. historic economic data shows that there has never been a sustainable recovery without private investment growing again
Having said this I think it's great you are making this effort as it is the confrontation of a diversity of ideas which will stimulate a new way of thinking about our economic problems.
As long as only the neoclassical mantra is allowed to define our policies and other ideas such as those of the Austrian School, or other non orthodox schools, aren't allowed to be heard we will make no progress.
double post
I honestly believe he has done his best to permanantly wreck the country's economy. More debt the past 18 months than George Washington-Ronald Raygun.
It's the end game of compounding interest in a fiat world.
Unless they pull the plug and let this whole thing fail, it wouldn't matter who the POTUS was right now.
No man nor group of men can beat math.
Pure and simple, either the debt continues to compound, or lights out.
Truth. The can has been pushed for 40 years. Times up. Treasuries are the end of the line... don't see what could be larger.
Bloomberg wrote that $ 72 Billion of the TARP money is
not accounted for... this has not yet been resolved... was it
stolen.. ? did it go to a German Bank.. ? This is a Lot of
money that the States could use.. Think of what this could
have done for Wind Power projects along the USA coastline..
Lots of jobs , Lots of cheap electricity for the future..
Jimbo, that is 10% commission for the deal, spread un-evenly amongst the long list of criminals that are running the country.
Mr president:
Arrest the bakers (all of them) and release only the innocent! This will give you a second term!
If you can make the stretch you will impress!
That is not fair, I enjoy a good loaf of warm bread and some olive oil, hmmm.
Bakers get to have their cake and eat it.
Good story ,,.. don't stop there...
shut down the Dept. of education in washington D.C.
let each state run their schools.. do it on a state level..
cut homeland sec. by 30 % cut the overall staff in all dept.'s
by 30 % . eliminate the Penny ( it costs 1.7 cents to make ) ..
limit each senator and congressman to a staff of 4 each..
cut most gov. pentions by 40 % . many things can be cut..
military .... we don't need 80 + military bases all over the world.
get the overall gov. size back to a 1965 size.... stop funding
Israel ... End the Fed... too many laws on the books..
Legalize Freedom....
Foreign aid, eliminate foreign aid to Israel, Pakistan, Egypt, Morocco, Indonesia, after all fair is fair..
And Mexico, Columbia, Haiti, Somalia, Yeman, Afganistan, Iraq, et. al, after all fair is fair.
Jeff,
"I am aware that you are gravely concerned about the economy and the employment situation. Understandably so since your policies of fiscal and monetary stimulus have failed to (create) allow economic growth or employment."
Fixed it for ya ;-)
The rest is brilliant as usual.
They will shrink government, cut taxes and allow the people to prosper voluntarily or by necessity, but it will happen.
What a sorry lot in that photo! Why don't you reduce your plan to a post card of bullet points, then we can all mail it to the White House.
KEYNESIAN RAPSODY
http://williambanzai7.blogspot.com/2010/09/keynesian-rhapsody.html
I think Obama's problem (and he's not alone in this) is that he has this narrow view about stimulation....and is addicted to the sterile tax cuts v QE debate.
Setting aside the fact that OCarter missed the boat in 2009 on this one (by believing his own 'recovery' fantasy) he needs to open his mind to this sort of stuff:
1. Why is QE only up to Governments? What about all those cash-hoarding corporates?
2. Why only tax breaks for the rich? If you use the folks at 1 above, you can have more money for tax cuts. BUT....
3. ..people may just save it - or buy Chinese. So make the tax cuts conditional.
4. Somejobs are productive, some aren't. Cut the ones that aren't.
5. Directionalise banks legally to lend a certain % of monies available for house purchase, small businesses etc. (Plenty of dough for potash, none for John Doe? Why so?)
But the major point Barack has missed is that a dribble here and an investment there just isn't going to cut it. QE is not a tickling contest - and in many ways it isn't even a job for taxpayer money.
http://nbyslog.blogspot.com/2010/09/wit-and-wisdom-from-robert-reich.html