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Stiglitz Pans Obama's State Of The Union Address, Calls Focus On Jobs "A Little Late", Sees Bankers Creating Bubbles
The Nobel laureate points out the obvious: with the stimulus coming to an end and states facing major shortfall, the president's actions are a "big move in the right direction but not enough." Stiglitz calls for more intervention, and the real question is how to spend the money: says critical rate of return on public investments to have lower long-term national debt is only 6%. Therefore must direct money on technology, infrastructure, education. Yet by plowing money into banks, the return was zero (if not negative). "When putting banks on welfare, there were no condition like -they out to lend." Another observation: banks which borrow at zero rates, "look around the world where to invest and put their money abroad- they create bubbles in emerging markets, earning the angst and anger of people in those countries as the same time as they earn the angst and anger of people in the US."
Lastly, to the question if the president is being too populist with his approach, Stiglitz responds with a resounding no.
Interview courtesy of Bloomberg
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If politicians keep attacking, Blackstone's (BX) Steven Schwarzman says, bankers are going to cut lending and risk the recovery. “Financial institutions will feel under siege and they will retreat ... Their entire world is being shaken and they’re being attacked personally. We don’t need those financial institutions insecure.”
no comment needed
Really? Banks are LENDING?
And all this time, I thought they were stuffing themselves with excess reserves via Treasury holdings.
Sure they are lending. Ken Lewis was banging on my door last night with a sack of money trying to lend me 350,000 so I could purchase an overpriced home.
He personally told me, "Hey were not concerned with you guys paying us back or anyone else in the nation for that matter since we know you are all good for it since jobs are flourishing, credit is immaculate and home prices are actually worth their current "faslified value."
Property valuations consume Aspenites
Nationally prominent, did NOT get an adjustment
— Kenneth D. Lewis: residence valued at $19.6 million, no adjustment. Lewis is CEO and president of Bank of America.
There are 15,818 parcels of property in Pitkin County. After estimating their market value, the county assessor sent out his numbers. In return, he got 4,597 valuation protests.
http://www.aspendailynews.com/section/home/135606
looks like ken lewis thought he purchased an over priced house and had his attorney file a protect with the pitkin county assessor. but rejected. so cheap he didn't want to contribute to his new community. these guys are just a joke caring about anyone else than themselves. aspen is where ken "crooked E" lay suffered a heart attack - R.I.P.
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Well apparently they can't find enough credit worthy borrowers who are willing to take on more debt which is prudent on their behalf, only that the timing is wrong.
Here's a novel idea. Why can't the public borrow directly from the FED, at current interest rates (governed by the 10 year bond), backed by the full faith and credit of the US government? Why does the system insist on being smothered by FIRE fees and taxes?
http://jessescrossroadscafe.blogspot.com/2010/01/tale-of-two-economies-a...
Yeah I saw this threat this morning from Steve " Geronimo Head" Schwarzman.
Right, Schwarzman. Because if the bankers feel insecure, it will be different...how, exactly?
That's rich. I just read this book: The Buyout of America after reading the blog at this site.
I've got to send Schwarzmann a copy.
Listen Joe you better stop talking logically in an illogical world.
Obama to the masses: All government all the time; whatever’s wrong the money will be there. And every dime of course comes from punishment of the private sector where the unemployment is already climbing.
Obama’s program is to soak the rich but the Democrat definition of the rich family keeps falling. Now it's those "rich families" above $85,000, or in some cases $115,000--in high cost-of-living areas such as San Jose, California, the average individual annual wage is $82,420--that need to share with Obama's "middle class."
Speaking of the state of the union, here’s an excerpt regarding yesterday from Nate’s take on Nathan’s Economic Edge.
“Yesterday’s FOMC announcement was more of the same, bottom line is that they are still claiming to end many of the support programs. HOWEVER, should the economy not hold up they are ready to jump in, steal some more and will continue to destroy the rule of law along with what’s left of our economy. Isnt’t that what you heard? That’s what I heard.
“Then we had to endure the most bizarre State of the Union Speech I have ever witnessed. The vast majority of it was spent talking about the economy. What I heard are the same old tired central banker boxed in arguments. In what was simply a redress of his worn out campaign rhetoric, he talked mindlessly about spending massively to help this group, then swung wildly to keeping our deficits under control, and then back to massive spending, yet more lip service to being fiscally responsible…”
As for the State of the People, here’s some news from the week:
http://economicedge.blogspot.com/
http://jobs.aol.com/jobs-by-city/san-jose-ca-jobs
Woo hoo. Honey, we're sending the kids UCSD and moving to Oregon.
;)
Another take on the speech may be found here. They are kind of Hunter S. Thompson-ish and amusing...
D'oh. Comment input box ate the URL:
http://the-web-walker.blogspot.com/2010/01/potus-does-sotu.html
How come this guy is such a boner all the time.
I didn't see his disclosue statement. Is he long .gov employment applications?
...unexpectedly...
It must be nice to be a Keynesian, they are never, ever, wrong. If any program fails, it was only because they didn't throw enough money at it.
I believe you've got your economists mixed up. Keynes only believed that federal funds should be used to tweak sectors of the overall economy -- he never suggested the finance industry should be subsidized along with the rest of the plutocrats by government monies.
Keynes also matured to believe speculation was bad and acted to destablize markets, and drew a dramatic distinction between "uncertainty" -- which is what they bet on today -- and "risk."
Friedmanite -- I believe that's what we've had in the White House, and Fed, over the past thirty-some years.
John Maynard Keynes asked, Why should anyone outside a lunatic asylum wish to “hold” money? That to me is his ongoing argument for zero or negative interest rates. As to your point, Keynes did believe that it was flight into cash and people's unwillingness to spend that made interest-rate policy an uncertain agent of recovery, which became his main argument for the use of government stimulus to fight a depression.
Keynes, of course, is so modern and, as Hazlitt proved, still so wrong. As to Keynes' views on interest rates, Keynesian N. Gregory Mankiw, professor of economics at Harvard and former Bush economic adviser, wrote last year in the NY Times, “The idea of making money earn a negative return is not entirely new.”
Among those he cites arguing for a tax on holding money to keep people from hoarding it, are the German economist Silvio Gesell who argued for a tax on holding money AND John Maynard Keynes, who “approvingly cited the idea of a carrying tax on money.”
Says Mankiw, “If all of this seems too outlandish, there is a more prosaic way of obtaining negative interest rates: through inflation…
“Ben S. Bernanke, the Fed chairman, is the perfect person to make this commitment to higher inflation...the goal could be to produce enough inflation to ensure that the real interest rate is sufficiently negative.”
On the other side of the financial coin, Rothbardian, in an Amazon review, writes: Henry Hazlitt's "The Failure of the New Economics is an excellent discussion on the many Keynesian fallacies. Hazlitt clearly explains that the The General Theory by John Maynard Keynes is perhaps the most destructive book ever written and that Keynesian economics inevitably leads to socialism. Like Marx, Keynes attributes the business cycle to the market economy. Throughout The General Theory, Keynes emphasizes the superiority of government and the inadequacy of individuals operating in free markets…
"Hazlitt illustrates Keynes's utter confusion on the Savings = Investment issue. Keynes foolishly argued that Savings did not equal Investment in A Treatise on Money. Keynes was embarrassed to admit his confusion in The General Theory and states that Savings does equal Investment. Of course the whole Keynesian theory of unemployment rests upon Savings being unequal to Investment, so Keynes contradicts himself and returns to his older concepts in the latter part of The General Theory.
"Hazlitt points out that the Propensity to Consume is littered with fallacy. In short, The Consumption Function declares that consumption, extravagance, and improvidence are virtuous while savings, frugality, and financial prudence are society's great plagues. Hazlitt shows that the whole concept of the Propensity to Consume is meaningless if Savings=Investment. Hazlitt continues by showing that the spending Multiplier (1/MPS) would be infinity if the MPS was zero. Translation: if individuals chose not to save any portion of their income, a small expenditure on public works by government would increase income without limit. This proposition is obviously ridiculous."
http://www.amazon.com/review/R1TVURKTRRC9SU
Did ZH post this just to watch the fireworks? This guy is another Nobel-laureate Keynsian fraud economist like Krugman.
As opposed to the Chicago school frauds led by their Nobel laureates?
As opposed to the Chicago school frauds led by their Nobel laureates?
Yes, he's a globalist Friedman, U. of Chi. fraud, but Stiglitzless is not a Keynesian. Although he is suddenly repositioning himself lately.
But as H.R. "craphead" Haldeman used to say: "Too little, too late."
What was this guy saying in 2007-2008?
Obama's attack on the Supreme Court in the middle of a State of the Union address last night was unprecedented.
It was also a signal of a major problem for the incumbents in the November elections.
The current administration is planning to plunder corporations and banks for capital to pay off the debt.
But the Supreme Court has given them the right to spend without limit to defend against the demagoguery coming out of the White House.
This has the potential to be REAL interesting.
Dood, are you with the US Chamber of Commerce or the Financial Services Roundtable?
Plunder.....right....like someone's taken off with between $13.5 to $17 trillion and that's not plunder??
Arithmetic certainly wasn't your strong suit, sonny.
sgt_doom, LOL, I can't stop laughing! Thanks!!!!
Hey sarge thanks for helping me out with that math thing...
The point is that the banks are going to have some very interesting things to say about the White House's attempts to take $117 Billion of their profits come November.
This administration was stupid enough to give them the money without a penalty clause. WTF did they expect?
I love the part where that douchebag who's the interviewer claims Stevey Schwarzman is running scared! Hmmm...so it is possible Stevey, while dining on the finest filet mignon in Gstaad with his number three mistress after this forum, might actually experience a touch of indigestion?
Doubtful, as he's topped the CEO list for 2009 as highest paid, thanks to all those private prisons Blackstone has purchased, and refineries they've shut down, and people they've laid off, and how about that drop in corporate taxes paid out in Denmark?
Not to worry, doesn't Blackstone have the market cornered with their purchase of that anthrax vaccine corporation?
Naaah...I really don't think that douchey interviewer read Schwarzman's body language too well....maybe because that interviewer was too interested in Stevey's bod????
Anywho, Obama too populist?? They must be smoking some serious stuff in that interviewer's neaty Swiss chalet he's sharing with the other biz kids.....
If you want to break free from the Private Banking Scam, just follow the lead from a candidate from Florida...the real solution, just apply to ech state and to the Federal Goverment. Time to break the shackles of the private banking system...
The era of the commercial banking system is over because of:
In contrast, the Khavari Economic Plan, proposes a state run bank that will:
We will put the power of modern banking to work for the people of Florida, not for Wall Street.
Over the years, interest has been the biggest cost most families have had. Interest paid to the bank means less money for your family. Reducing interest costs can save a family hundreds of thousands of dollars.
Scenario 1 Let’s take a $100,000 mortgage, for example. With a 30-year fixed rate 5.5% mortgage, your monthly payment is $567.79 and you will pay $104,404.40 in interest on that loan.
Scenario 2 With a 2% fixed rate 15-year mortgage, your payment would be $643.51, the total interest would be only $15,831.80 – and the mortgage would be paid 15 years sooner! You would save 88,572.60 in interest. After you’ve paid off your mortgage, if you continue to make monthly payments of $643.51 to a BSF savings account earning 5% interest, at the end of 15 years you will have more than $160,000 after taxes in your account—just by having your mortgage from the Bank of the State of Florida.
In scenario 1, after 30 years of payments, you would own your house. Given scenario 2, after 30 years of payments, you would not only own your house, but also have more than $160,000 in savings.
How could the BSF do this? It’s called “fractional reserve banking,” the same principle all banks use to operate. If you have $100 in reserves, you can loan out $900 or more. That means you collect interest on $900 but you pay interest on only $100 at most. If the bank pays you 2% for your CD and lends it at 5% on 9 times as much money, you can see this is a really good deal – for the bank.
Now our Bank of the State of Florida does not need to be greedy. It is not going to get involved in shenanigans like bundling and selling mortgages, taking out weird insurance policies and general practices that have caused the mess we are in today. When we make a mortgage, that asset remains right on our books and the paperwork is right there on file. We are going to pay good dividends and the highest rates in the market for long term deposits. We are going to loan out 9 times our reserves. And we are going to make billions of dollars for the State Treasury while we save Floridians a trillion dollars—and that trillion dollars becomes many trillions in Florida’s economy.
Let’s say we pay 5% for our $100 and loan out our $900 at 2%. We pay out $5 in interest, and we take in $18 in interest. Can we make money at that? You bet we can.
We could make the $3.6 billion we are short this year on just a couple of million 2% mortgages. We can do even better on 3 – 4% commercial financing and vehicle loans.
And all the money the bank earns goes directly into the State Treasury, to work for Floridians, not to Wall Street.
Where do we get the reserves? The State of Florida has billions invested with Wall Street. 5 or 6% guaranteed looks pretty good these days compared to a 50% decline in the stock market. Look at what long-term bonds are paying, look at CD’s—we will have no problem attracting all the long-term deposits we need to get started, simply by paying good rates.
Now look what happens. With a 2% fixed rate 15-year loan, the buyer has paid off over 11% of the principal within 2 years. That means we have more than enough reserves to make a new mortgage for someone else, without having to pay interest for the reserves! (In comparison, a 5.5% 30-year loan takes 7 years to pay 11% of the principal).
Now some people might think that low interest rates will just raise the price of homes. That would be true if the 2% loan was for 30 years. But the payment on the 2% loan for 15 years is a little bit higher than the payment for 5.5% 30 years, so this tends to hold prices down. It also tends to eliminate speculation that messes up the market every time. As long as prices are stable, we can offer mortgages with low down payments, so homeownership can be as easy as paying rent.
What the Bank of the State of Florida does is transfer hundreds of billions of dollars away from Wall Street directly into the pockets of Floridians by reducing interest costs… and it puts hundreds of billions into the State Treasury, too. We will have stable, fair prices for homes and take 15 years of slavery out of the process of owning a home.
Consumer financing is another area where Wall Street and the big banks are costing us way too much. Banks charge huge interest on credit cards, for example, where the cost of money to the bank is really zero. If a family has $10,000 in credit card debt at 25% interest, that’s over $200 per month in interest alone. At 6%, the monthly interest is only $50. This family could reduce monthly payments by $50 and pay off the debt years sooner. The State earns billions of dollars per year while saving Floridians billions and billions more.
The Bank of the State of Florida will earn billions of dollars per year for the taxpayers of Florida, not Wall Street fat cats. At the same time it will reduce interest costs and save Florida families hundreds of thousands of dollars per family. Who needs that money more? You or Citibank?
The Bank of the State of Florida can handle checking accounts and ATM’s too. The other banks will have to become competitive, and there is no reason why they cannot.
Couldn’t the federal government do the same thing? Actually, the federal government could do even better and they could do it immediately at huge benefit to the U.S. Treasury. Do you think we should wait around for them to do it? We can have this program in effect in Florida within a year, at no cost to the State
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