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David Stockman On The New Deal Myths Of Recovery
In chapter 8 of David Stockman's new book The Great Deformation, the power-that-be-turned-anti-establishment-reality-seeker explains his perspective on the myths of the New Deal Recovery: "The new deal was a political gong show, not a golden era of enlightened economic policy. It shattered the foundation of sound money and inaugurated a régime of capricious fiscal and regulatory activism that inexorably fueled the growth of state power and the crony capitalism which thrives on it. But it did not end the Great Depression or save capitalism from the alleged shortcomings which led to the crash. In fact, the New Deal introduced a severe dose of economic nationalism and autarky at a time when the only hope for speedy recovery was a reopening of world trade and reestablishment of a stable international monetary régime.... in reality, the notion that the New Deal had pioneered a road map to recovery by means of countercyclical fiscal policy is mostly a postwar academic legend."
David Stockman Book - Chapter 8
(h/t The Circle Bastiat blog)
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We Neanderthals don't use buses. We use rocks.... Shinny rocks formed from gold and silver.
Finished the book two weeks ago and loved it. Strongly recommend it for those that can handle a former Reaganite that admits he blew it.
You missed his first book, Triumph of Politics, 20+ years ago. Totally apology.
It's not a New Deal it's a Raw Deal
You should not drink and bake bitches!
http://www.youtube.com/watch?v=w9V0FOYkE2I
all cupcakes and marshmallows from here on in merika, TPTB rule
http://www.polyconomics.com/index.php?option=com_content&view=article&id... :
"Wealth brings its own problems, however. In the U.S., in particular, farmers were being hurt by the falling farm prices that were doing so much to raise the standard of living for the rest of the country. The Republican Party in 1928 looked at this phenomenon as something to be corrected by governmental action, and decided to attempt to adjust the imbalance in wealth between farm and city by raising the protective tariff on foreign agricultural products..."
"Falling farm prices..." is asserted by Wanniski but explained here by Stockman.
"Most one-term Presidents only have time for one truly disastrous decision. Herbert Hoover squeezed in two. Having crimped international trade, he proceeded in 1932 to squeeze the domestic economy directly by pushing through Congress a measure to boost the income-tax rate back to 63% from 25% and piling on business taxes too. His aim was to reduce the budget deficit of the preceding 18 months, caused by the gathering slowdown. With ample help from the Democrats, Congress approved the tax increase. Under Roosevelt, economic management was only slightly improved, for even as he and his party chipped away at Smoot-Hawley, they again and again added to internal taxation during the following eight years, and the depression lengthened into war."
This path is explored greatly in _The New Dealer's War_. Highly rec'd
Oh! I forgot! "That was a long time ago."
CW
hey tyler!
did you know the stuff about KOCH an how they fund libertarian stuff?
http://www.youtube.com/watch?v=oYLaN7tbFFY
How many chapters are in this book? The problem is that there should been another New Deal in 1970s and then another one in 2008.
Wickard v Filburn...everything else is just noise.
Very big part of the problem of federal government encroachment on everything. But I would say other Constitutional issues also play a big role, like the idea that the National Defense authorizes all manner of tyranny.
With a ruling on a law (which was a revision of an unconstitutional law to achieve the same purpose) unconnected to any nationwide commerce is set as precedence, from which all other SCOTUS rulings must flow under our jurisprudence system, sets us on a course for government involvement in any and all things commerce, we wind up with tyranny...not anything resembling a free market as that was not the intent of the original or revised law.
Wickard v Filburn is as much or more a part of what has happened to a once free people as any national defense authorization with frilly admirality falgs as a backdrop.
There is no such thing as binding precedent for SCOTUS. They occasionally claim to give deference to past Supreme Court decisions, but they routinely change course and there is no "higher authority" to tell them they cannot. For example, various religious groups have been trying to get an abortion case to the current Supremes in the hopes that Roe will go the way of the Dodo.
30 million fetuses sacrificed to Moloch. We are a nation wallowing in moral degeneracy, led by an elite that is playing with occult forces that are rapidly slipping out of their control.
So you're not a Libertarian. You just want your own rules to govern us, like most of your ilk.
Libertarianism is about non-aggression. That fetus is a child of God, and abortion is murder.
What about rape?
What about duty? Honour? Sacrifice?
What about rape? Hang rapists. Hang them in the town square. Actual rapists, that is to say, and not some guy who didn't pull out during consensual sex even though he promised to.
Exactly. This guy has a very limited narrow rule of freedom and personal expression/choice that if it violates his narrowly prescribed views it should be outlawed/prevented espeically if it is concerned to homosexuals. Funny but that doesn't sound like freedom to me.
BB, for thousands of years, including through the Christian era, the poor took their unaffordable or deformed infants and exposed them or simply let them die. That is how the parents or single mothers dealt with starving times or other similar pressures. Since, face it, sex today is for relationship and pleasure 99% of the time, the issue of first trimester abortion of a fetus which has not yet 'quickened' doesn't hold the moloch label for many. I personally feel 3rd trimester is simply infanticide, but I consider that a separate issue. When a typical middle or upper-middle class family believes they can raise only two or three children, a marriage is either going to be sexless for fifty years, or abortion will not be outlawed. If the rich really want a growing lower labor force so much, let them produce the children themselves, these husbands and wives, using their own biological parts.
"There is no such thing as binding precedent for SCOTUS."
You-are-fucking-high.
Are you saying Wickard v Filburn did not set precedent for the current interpretation of the "commerce clause" by Congress?
Nana Pelosi, Harry Reid and The One will disagree and have. Roberts concurred, wiggling through on its (Congress') power to tax a commercial activity...MANDATED BY CONGRESS!
Is this, or is this not...tyranny?
Either you don't understand or you don't want to. The Supreme Court can change its own precedent any time it wants. And by the way, Congress is only constrained by the Constitution insofar as its laws are deemed Unconstitutional. They can pass a law today that is flagrantly Unconstitutional, but it will be enforced for another decade or so until it winds its way up through the Court system to be knocked down. Then they can pass a similar but slightly different law and declare it Constitutional. Did you learn about the law from the same place you learned about economics?
So it is your opinion we should resolve ourselves to enslavement & tyranny of ANY law passed that will eventually be repealed when precedent is overturned as they deem fit.
Did you learn law & economics at the hand of Keynes or Mao?
LTER taking it in the ass today.
Admiralty law has almost completely superseded Common law. They've walked the law backwards almost all the way back to the Magna Carta.
You know as much about the law as you do about economics. That whole admirality law thing is a joke. Perpetrated on the gullible.
Holy shit you are an ignoramus.
Do you even know what Admirality Law is?
Ummm, Magna Carta is a basis of Common Law.
Do explain that please it is most confusing. Common Law exists but Magna Carta does not. It was repealed by Statutes after 1829. Magna Carta NEVER bound the Crown. Common Law pre-dates Magna Carta
the Magna Carta is nevertheless used by countless websites to propagate the concept of a conflict between "ThePowersThatBe aka The King" against "The Barons" aka the recipients of their message
since the model of the underdog is of armed individuals, it's very popular, and it's suggestive powers are greater than the concept of a more moderate conflict between "The State" and "The Citizen" - particularly if the messenger is not so keen on maintaining a "Res Publica" as an ideal and is more intent in demonizing all "Tyrannies on individuals"
btw, the historic main difference between a Baron and a Citizen is not the size of the castles and weapons, it's... serfs
A "proto-baron" has typically no issue with citizens selling themselves into bondage as long as contracts and property rights are upheld, while the Citizen has a "bleeding heart" and some principles of equality and fraternity on this matter touching his co-citizens
On a similar matter, a Citizen usually starts to be concerned if too many of his brethen are incarcerated or deported, while a Proto-Baron applauds this kind of policies
Magna Carta is such fun and the original was loaned to the US during the World's Fair in 1939 and kept in the USA during the war years, so I guess they felt it was somehow special. The brutal reality is however that England had to behead a King and have Military Government to get some sort of control. The first regicide in Europe predated the French Revolution which is why History in British Schools starts with France 1789 rather than England and Scotland and Ireland 1641.
We are nevertheless at the 1641 Moment when Taxpayers are deeply unhappy with Arbitrary Government and I doubt a 1688 Fudge will resolve this problem of Overmighty Executive and Corrupt Legislature spending without accountability and using Coin Clipping by the Central Bank to circumvent all control over Spending.
It is an Ongoing Coup d'Etat
indeed, it is fun and the one copy that travelled in 1939 was very useful to reforge the Anglo-American bonds, then Anglophobia was rampant in the US, then. So much that for example all very popular mementos of how the Redcoats burned down the White House in 1812 were ereased or showed in the attic. The King's visit was the turning point - funny how Royalty still touches the masses
Taxpayers particularly unhappy? You mean in the US or in the UK? Can't judge properly, but I sense anger in the first and fear in the second
meanwhile the eurozone is in a completely different set of moods, that's for sure. I'd like to clump them together into "dogged stubborness", but I sincerily feel only the "dogged" part
"In chapter 8 of David Stockman's new book The Great Deformation, the power-that-be-turned-anti-establishment-reality-seeker explains his perspective on the myths of the New Deal Recovery:"
The MYTHS of the new deal recovery!
WE Live on Myths, our whole existence is based on Myths, Myths expressed by Metaphor.
Since our day to day reality is delivered by TV, and everything, politics, religion, economics,,,etc ` now comes to us as a reality TV show! it is obvious to me, if not to you, what we need are some new writers, we have been plagued with bad scripts for a long time, scripts which can only end in disaster, let us demand a new script, one with at least the possibility of a happy ending.
The World of Reality TV is populated by Celibrities and Stars, all Stars are Celibrities yet, not all Celibrities are Stars, Celibrities and Star celibrities receive somewhat equal treatment, (Politicians are Celibrities but few Politicians are granted the accolade of Star) Who is really more important, Lady Gaga, reputed to be, as reported on TV, the eighth most influencial woman in the World, or Hillary Clinton, much higher than eighth place in the influence department I'm sure, Still Gaga is a Star, I've heard that said many times, no one has ever called Hillary or Obama stars,,, If we put some genuine stars in these roles perhaps reality, as interperated by TV, could be a more satisfying experience for a lot more people, if some changes are not made very soon the nhilism as expressed by our present writers will result in the loss of TV, when the TV is gone the reality we will face will very difficult to adjust to! Just a word to the wise; Let us change the script now before the TV goes out!
Don't agree with everthing Stockman says but at least he puts Greenspam and Paulson in their places. He appears to have a blind spot for Reagan though....
To bad the Republican party will not listen to him....
NO one in power will speak the truth because it is too destructive to their positions of power. Some are simply bad people with an agenda while others are deluded to believe that through constant capitulation to political pressure they are somehow retaining the power to ultimately do the right thing. The mentally weak are the easiest to corrupt but they are all claim to be "doing it for the children".
No one will ever listen to anything anymore "Race to the Bottom", this truly is the "Race to the Bottom".
"No man is an island, entire of itself; every
man is a piece of the continent, a part of the
main. If a clod be washed away by the sea,
Europe is the less, as well as if a promontory
were, as well as if a manor of thy friend's or
of thine own were: any man's death diminishes
me, because I am involved in mankind, and
therefore never send to know for whom the bells
tolls; it tolls for thee."
John Donne
He said it better than anyone else.
Chickenshit bullshit. The New Deal rawked, austerity sux, and everybody goddamn well knows it.
I'd say the Great Depression was caused by the belief that you didn't have to work hard for a living and save, but go deep in debt on credit buying things you didn't need, and get rich through the ever rising stock market believing it would pay off your debts in full.
The 20s was a grand experiment of attempting to seperate the masses from their money and transfer it to European bankers.
People left the farm to work in factories producing the goods bought with the abundance of credit. When the credit dried up, the jobs were lost. Jobs that never would have existed had it not been for the overproduction of virtually everything. The bubble burst, the debt came due, and there wasn't enough cash in the system to pay for it. The only way out was to clear the debts and bankrupt the financial system.
The exact same situation repeated leading to 2008.
"Neither had any compunction at all, however,about using the taxing, spending, regulatory, and money-printing powers of the state to achieve their domestic political and electoral objectives."
Which is why all the hubbub about "economic theory" is nothing more than self-serving drivel.
If you can't get to the point where you see the Self-Absorption, process it and interpolate AND extrapolate the results...
you are missing the whole show.
Don't think for a second that chaos is not the endgame.
Chaos must be the end result, the belief `Myth` is that after chaos things will somehow right themselves and todays rulers will still be the rulers, somehow strengthened by the chaos they are percipitating, This is delusional behavior!
You can't fix stupid with this bread an circus administration What people don't realize is just how little choice they have anymore . I no longer have the least bit of sympathy for American$ who have given up their liberties in exchange for perceived security . Just remember Gobment is watching every move you make every E-mail every transaction an don't mention patriots or conservative party in your communication
thanks ZH'ers
There was no pandemic starvation in the US in the thirties .... LTER, do have any data on how many Americans starved to death ? We had beans, corn meal mush, oatmeal and a lot of stuff to eat .... there was no widespread starvation .... just the usual anomalies !
David (Not Crazy Enough to Stay in Saint Ronald's Cabinet) Stockman. When he begins a paragraph with 'No one can argue with (MY revision of history)', I know he is still full of it, but scrolling down through the right wing, gold bugged. 'free market' let them starve if they won't work cause if MY charity doesn't like them they arent worth saving bunch of lunatics here is something to behold. You best hope government sticks around, because a lot of you are going to find out your next door neighbors wouldn't piss on you if you were laying in the front yard burning. The fire dept still gets paid to do shitty jobs.
This is not a trick question .... how many jobs have you created for others ?
Job creators don't pay out of their own pockets, do they? They do line their own pockets with the sweat of their employees labor and enrich themselves while the state and 90% of the populace drown in debt.
False. Actually almost all private sector jobs are created by small businesses. Large corporations generally acquire other companies and rationalise numbers (down). There are exceptions but the research evidence on this is very clear.
Most small businesses are established with the capital (eg home equity) and sweated capital of their owners, who don't "enrich themselves" at the expense of others. In fact, most small businesses go broke, consuming their owners' capital. A few of them make it big.
Don't confuse job creators with senior executives of big business, big unions and big governments. The former take large personal risks, create jobs and occasionally get a big payoff. In the main, all the others are in low risk employment, playing with other people's money, and destroying employment.
"...the notion that the New Deal had pioneered a road map to recovery by means of countercyclical fiscal policy is mostly a postwar academic legend."
i would have called it a goddamned lie from the pit of hell...the depression was the crisis which could not be wasted....it was planned for numerous reasons, all of which led to the vast increase of power of the plutocrats who engineered it.
Fucking FDR; only sign you need to know that he turned the country in the wrong direction was attempting to confiscate privately held Gold.
On top of that a ton of FED jizz and gravy to "create" employment rather than not bailing out corporations with government money in a round-a-bout way.
According to Deutsche Bank:
http://fs1.hidemyass.com/download/mrO2Y/adaqnrrv5bi21c176ems987q84
The lack of confidence in final demand that seems to justify corporate reticence has a mirror image in the financial sector’s liquidity trap – the fact that corporates prefer to save and not to leverage and invest. And it seems reasonable to justify the lack of confidence in the context of ongoing and unresolved fiscal tightening; household savings rates that are “naturally” capped not to go to zero or below this time; and a global sector that seems decidedly weaker. In other words, of all the Keynesian circular flow of income external drivers there are none doing any driving except corporate investment. But the Catch 22 is that corporate investment itself is restrained by the fear for the lack of the other drivers! The answer might be waiting for a pick up in the external sector; it might be seeing through the fiscal austerity and or at least suspending or reversing some of it; or it might be further improvement in the household balance sheets via housing. However all of these likely need time.
In this context we can then handicap central bank reaction functions. While we wait for something to give positively in favor of a stronger recovery, policy stays unusually easy. This then creates the dichotomy of buying more time in the near term through easier policy to deliver a proper recovery whilst potentially running the risk longer term of too much inflation the other side. The pent up monetary stimulus that exaggerates a liquidity trap now becomes a challenge to control on the other side. This schizophrenia has been played out numerous times since 2008. And it defines the unusual dislocation between ultra low real yields and high inflation expectations (inflation risk premia) that is also known as financial repression. Financial repression being one of the metrics that is supposed to encourage more risky lending and to break the liquidity trap.
The consensus of course is that after a certain amount of financial repression, the world will sufficiently improve and central banks have the tools to contain inflation so that the bulk of financial repression is contained to ultra low real yields rather than ultra high (realized) inflation. In this spirit Bernanke and now Kuroda are extremely confident. However we would actually go one stage forward. In the current low growth equilibrium there is a good chance that there is jolt to higher growth because the fiscal dynamics can never be resolved. This is particularly true for peripheral Europe and Japan; less true for the US but then partly depends on the willingness to address structural contingent liabilities. Absent that, the US might well be in the same boat as the others. In this case, the only solution is for the central banks to end up holding the majority of government claims and to consolidate their balance sheets with the government. In one fell swoop, cumulated deficits that may stretch back several years are ex post deficit financed. This would almost certainly break the liquidity trap in that it would represent a massive relief to expected fiscal tightening for the private sector. The central banks would quickly need to use their “tools” to contain a splurge in lending and control inflation. Ex post however there is no reason why inflation would materially rise, as long as liquidity was tightened commensurately with the debt relief implied by consolidated balance sheets of the central banks and the government. Moreover if G3+ acted synchronously, at least for the currency majors there may be little fall out.
So the interesting question is why not? Is there any cost of consolidation when we are otherwise in an eternal liquidity trap? The answer is, unfortunately yes. This would have to be a one shot game. Going forward governments’ would unlikely be able to borrow from the private sector for a long long time precisely because it threatened financial repression, even if only in the kind of negative real rates ex ante rather than even more negative ex post. Instead, government would be obliged to run balanced budgets. These authors don’t think this is necessarily a bad outcome. However it does mean that if and when consolidation comes, as much as possible needs to be consolidated otherwise fiscal policy would be on a perpetual tightening path to run the extant liabilities down. If you are going to consolidate, do it big because you are likely to have only one chance. It may seem extraordinary to think about consolidated balance sheets but there are plenty of examples in history, particularly during wars, of deficit financing. And however outlandish and non consensus it is, remember that a few years ago we talked about QE never ending, which at the time was also outlandish. Consolidation sounds an anathema to consensus but it is a logical conclusion to the liquidity trap and the probability rises each day that growth disappoints.
According to Bank of America Merrill Lynch:
http://fs1.hidemyass.com/download/h8Cqx/1s3nkvl62fipb7krsefh0bajr1
Easy Fed policy: too much of a good thing?
The costs of easy Fed policy
Fed policy is aimed at stimulating economic activity, which involves incentivizing households, businesses and investors to take more risk. Investors have obliged, resulting in low rates, tight credit and mortgage spreads, and new all-time highs for major stock indices. But some worry the Fed is causing a dangerous search for yield that could lead to new asset bubbles and financial instability. Our assessment is that Fed policy has not led to an increase in systemic risk.
Risk-taking is good; systemic risk is bad
This piece provides a guide for monitoring financial stability and the linkages between asset markets, financial institutions and the real economy. We believe the ultimate question is whether the Fed’s policies have increased systemic risk.
This depends on the following, which we address in the note:
- Do market valuations appear overstretched and are there signs of asset
bubbles forming?
- Is there an increase in leverage in the market or an overreliance on short term funding? Would systemically important institutions be at risk of failure?
- How are the beneficiaries of easy credit using the proceeds? Are they using debt to fund risky investments, buy homes they can't afford or go on a consumption spree? Or is issuance going toward improving their balance sheets and lowering their vulnerably to the eventual rise in interest rates?
Risk transfer underway, but systemic concerns muted
We argue that Fed policies have encouraged a transfer of risk from borrowers (indebted households and corporations) to creditors (investors) who are willing to accept lower risk premiums. Increased real money participation in credit markets mitigates the systemic implications of this risk transfer. Corporate and household balance sheets are healthier, thanks in part to easy Fed policy, but signs of increased appetite for leverage in the corporate sector bear close monitoring.
Fed to stay the course
Our survey of financial conditions and systemic risk supports our base case that the Fed will maintain its asset purchase program at the current pace of $85bn/month through March 2014, followed by a 6-8 month tapering period.
QE will limit the upside in yields
The potential for a sizable rise in yields will be limited if the Fed maintains QE well into next year as we expect. We forecast a gradual rise in 10y rates by year-end.
Another thing left out of the propaganda narrative is the FACT that Adolf Hitler, unlike FDR, was successful in boosting Germany's economy after its 1921-1923 collapse by doing the very same "federal" borrowing to spend on infrastructure, but unlike the pretty buildings and murals here, the Germans used the borrowed money (aka money printing) to build canals, bridges, and autobahnen.
FDR and Hitler both came to power in 1933. FDR failed to end the Great Depression while Hitler's economic policies were a smashing success ... and the trains ran on time.
The only reason the Great Depression ended was WWII, and the only way Obama can get the economy out of the doldrums is to start WW3 by pitting Israel against Russia.
Keynesian economics is what allowed National Socialism. Just as the US is emulating the Third Reich in too many ways to enumerate.
If you don't believe me read J.K.Galbraith (1975), Money: Whence it Came, Where it Went.
Only hitler had extra cash comming in from the conquered contries being looted. Otherwise i suspect he would have had the same lack of success that FDR did.
Hitler and Hitler's era Germany never could, nor did payback floated money. Hitler according to Shacht started his planned war three years,early because Germany/Hitler couldn't make interest payments on New York/London money.
It was go home Adolph, or go big. War thefts kept, for a while, German Muppets dumb and happy.
The war was planned for 1947 but it was Chamberlain that declared war not Hitler - Chamberlain was dead by November 1940. Had Daladier not inveigled Chamberlain into getting him out of treaties France did not want to honour - with Czechosloavkia and Poland - there would have been no war.
Czechoslovakia had defence treaties with France and the USSR. The treaty with the USSR stated France had to declare war first to activate the clauses with the USSR; France did not want to go to war and wanted to get off the hook - the same France that had invaded Germany in 1923 chickened out in 1938.
Hitler wanted alliances with Britain and Italy to isolate France - Mein Kampf Chapter 13 - France needed Britain as a Locarno Power to prevent British neutrality. Britain declared war on 3 September 1939 at 11am - France hesitated until 5pm.
wake up trampy. there are over a million russians living in israel as you speak. they keep their language and live amongst each other. how many relatives do yiu think they have back in russia??
For those commenters who disagree with Stockman's position, you might want to read the paper by Lee Ohanian and Harold Cole: "New Deal Policies and the Persistence of the Great Depression", May 2001. Essentially, Ohanian and Cole argue that FDR's radically disruptive experimentation and intervention in the economy prolonged the Great Depression from the mid-30s when it would have otherwise ended until the beginning of WWII, when Roosevelt and the Democrats were distracted from inflicting further damage to the economy.
There may be business cycles and recessions from time to time, but to turn a recession into a depression (like the current one) takes a Democrat politician.
I would not argue with you about the pros and cons of statist interventionism after the 1930s depression except to point out TWO things :
1° Its Laissez faire Oligarchy economics that created BOTH the 1929 crisis and the post Reagan current one for the same reasons: irrational hubris and laissez faire monetarism under Greenspan et al today, as under Coolidge/Harding/Hoover then.
2° When the private business world is virtually bankrupt, now as then, ONLY the state can step in to provide reset. There is nobody else and you cannot leave those who created the mess in power to continue doing their devlish work.
So whatever monday morning quarterbacking can teach us on the 1930s depression and FDR's play, one thing remains certain in a democratic frameworked economy : the iniative HAS to come from state to obtain reset; after free enterprise fed mayhem, with malign not benign statist laissez faire cronyism has wrecked the ship of nation.
It had a new name in current period : Reaganomics.