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Santelli & Schiff: "A Messy Exit Is A Given... Ending QE Will Plunge US Into Severe Recession"
"Markets are slowly coming to grips with reality is not going to be as easy as everybody thought," Peter Schiff tells CNBC's Rick Santelli, noting the pick up in volatility across asset classes recently. What The Fed clearly does not understand, Schiff blasts, is that "you cannot end quantitative easing without plunging the US into a severe recession." Because of the Fed's extreme monetary policy and the mal-investment that flows from it, Schiff says, "The US economy is more screwed up now than it's ever been in history." Most prophetically, we suspect, Santelli agrees that "a messy exit is a given," and Schiff believes they know that and that is why QE4 is coming simply "because it hasn't worked and they can't admit it's been a dismal failure."
The two oddly-similar-tie-wearing skeptics go on to discuss the catalysts for slowdown aside from QE exit and the endgame...
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Rick for GOD'S sake, you tell us there are 92 million out of work, people working at McDonald's supporting a family, people working ten part time jobs, husband and wife working multiple part time jobs, and then there are all the problems with the job market you don't mention and then you say, "but there has been improvement". WHAT? Really Rick? I mean I'm sure Jeffrey Immelt probably wrote your script but really Rick? I mean WHO are you talking to? Is your actual viewing audience comprised of either retarded people, cops (same as retarded people), politicians (same as retarded people), or people who can't speak or understand english? There have been improvements? What? seriously? Dude, stop smoking dope before you go on TV, statements like that could get you hanged when the revolution starts and we start sorting out the traitors.
POP goes the Weasel and the Weasel goes POP.
http://www.youtube.com/watch?v=HzXI_ApY4dY
They should give Santelli some sound buttons to push like Cramer
http://www.cnbc.com/id/100000942
Peter Shiff's argument is incoherent. On one hand, QE has performed this amazing feat by propping up the economy and inducing higher priced assets. But QE has also destroyed the economy. So QE, which also according to Shiff has accomplished nothing, has singlehandedly been able to reflate the economy and destroy it at the same time.
You see, for incoherent thinkers like Schiff, QE is used as a container to fill up with any idea, any theory, any claim you want to stuff inside it.
Wouldn't be easier to be more accurate and say: 1. QE has not accomplished what it's boosters said it would. 2. QE has not done the damage its critics said it would. 3. Hey, perhaps their is a bigger problem out there that can't be solved by QE, or the lack of QE. You think?
GG
Do more reading.
The FED will never exit their ZIRP policy because:
1. they are ideologically opposed to free-market based interest rates, regardless of what the conditions are in the financial system & economy
2. they know that if they did end ZIRP and return to free-market based interest rates, then the resulting unwinding of the HUGE carry trades & record high leverage will crash the financial markets & economy
Americans will NEVER AGAIN earn a decent return on their savings, UNLESS they lock n load, go to WADC and take back their earnings, government spending, monetary policy, etc.
If Americans do not have the brains + balls to take back what the politicians have stolen from them, then they deserve to be struggling impoverished slaves to politicians, ie elected gangsters.
Every word he said makes sense to me.
Peter Schiff for President!
I agree with your comment 'Peter Schiff for President!'....only for the fact that he could pardon his father....the real brains of the operation.
Cheaper & easier to buy a pardon from the professional scalliwags.
The guy makes sense, essentially QE is just a mirage, a placebo, all the real problems return once the QE ends and it cannot continue forever... FED policies have been a disaster not just for the US, but for the entire world, but what can you expect from a private banking cartel...
How many times, and over how many years have ZH'ers claimed the currency race to the bottom is the beginning of the end? Well, here we are.
In the meanwhile the US will enjoy 2.75/gal gas and cheaper prices for crops arriving at the Wal Mart while the rest of the world gets their ass kicked trying to stay warm and fed.
Will the "extra disposable income" translate into more auto loans, home motrgages and sales, or will it go to MacRonalds and Pizza Hut?
I'll be watching retails sales numbers for the holidays. That could help to dictate the timing of another large monetary injection. Those Q4 earnings ought to be a hoot with balance sheets being engineered like never before.
vincent - yes they will be - and THE LOWER GAS PRICES - YOU GUYS - MARK MY WORDS - THAT IS THE QE4!!. sorry about the caps - i mentioned it before, but nobody that i saw picked up on it.
lower gas prices - more consumer 'discrentionary' spending (that was tough to spell). they are hoping that all those lovely people with huge credit card debt, living in mcmansions and haven't paid a mortgage debt in 4 or 5 years, will load up at x-mas because they saved at the pump.
and guess what? they will!!
and then they can blast - 'GDP up!! consumer is back'
wow.
wow.
can i have a puff?
It's true we can't Zimbabwe cause we all use debit cards, right?
The Federal Reserve won't live to see the next decade. The destruction it is doing to the global economy will make it enemy numbe one in the eyes of a public that will be out to take its pound of flesh once the economy crashes.
http://www.globaldeflationnews.com/the-creature-from-jekyll-island-the-e...
With 6 (going on 7) years of near zero interest rates, the Fed has created an economic environment that has been/is extremely friendly to mal investments; and they must be corrected before the economy can return to what it was before zero rates. And, that doesn’t even get close to fixing the economy: mal investments fostered during the Great Depression have never been corrected; they were papered over by artificial stimulation of WWii (and murder of 10-20 million young white males).
All that we have to do now is redress grievances that have accumulated for more than 80-100 years.
But, so what? All that matters now is that there is no way to stop the storm that thunders on the horizon; and that you stand to profit from the inauguration of the next dark age…
But there is one thing you over looked. I mean, what good is it if you don’t have the health and physical condition of a teenager to enjoy your profits?
That is, you forgot to reduce your biological age.
If you’ll follow my health regimen, you can reduce your biological age as much as 50 years – as I have done.
My health regimen involves no actors, no cosmetics, no wishful thinking; instead, I support it with real action. I’ve had many former pro and college players tell me that if I played competitive ball at the level of a major college, I would “wreck” or “lead” the league and hit “0.700”. Players at this level range around the age of 20; I’m 70 years of age. Who else on the planet can do that? Why do they say that? Perhaps, it’s the fact that I’m currently putting on a show hitting 117-121 mph pitches (of 25 pitches, I routinely hit 15-20 into fair territory); major league hitters can hardly match my numbers.. as they struggle to hit 95 mph pitches. Go to YouTube, search “1668-85” for verification; it will lead you to a web page that explains my regimen in some detail.
I don’t promise to make anyone a professional athlete, or more beautiful… just give them the health and physical condition of what they should have had as a teenager.
I thought QE4eva was QE4. So this one has to be QE 5 is Alive - no more Short Circuits!
So, QE is running around $200 billion or about 1% of GDP. That's around 2.5 now, so 2.5 minus 1 equals . . . .
The grass is always greener somwhere . Go see:
https://www.academia.edu/8872647/Non-Aristotelian_Universes
But regardless of what you think of the arguments of Santelli and Schiff, the appearance of this conversation is typical during a correction and is most often a signal that equity bears are about to get mowed down again. You can see how this would be: those waiting for inflation and a stock market crash and higher gold prices have been waiting for a long time. This market correction looks like it wil fulfill long held views of that ilk. I think we can be sure there will for sure be a market crash at some point, inflation will eventually tick up a little, and gold wil get its footing. But maybe the waiting has another year or two. Wake me when these guys throw in the towel, and don't even bother appearing on TV anymore. Was anyone on TV in 2004 talking about the new gold bull market and commodity bull market? Very few.
But regardless of what you think of the arguments of Santelli and Schiff, the appearance of this conversation is typical during a correction and is most often a signal that equity bears are about to get mowed down again. You can see how this would be: those waiting for inflation and a stock market crash and higher gold prices have been waiting for a long time. This market correction looks like it wil fulfill long held views of that ilk. I think we can be sure there will for sure be a market crash at some point, inflation will eventually tick up a little, and gold wil get its footing. But maybe the waiting has another year or two. Wake me when these guys throw in the towel, and don't even bother appearing on TV anymore. Was anyone on TV in 2004 talking about the new gold bull market and commodity bull market? Very few.
more like QEForeign
There's something seriously wrong with Mike Norman's brain. Does he even have a soul? He's saying don't worry about the US debt because they can always print the money. Let's think about this for a second. Before QE started, the total supply of US dollars was less than 1 trillion. What do you think happens if the government were to print 15 trillion dollars to pay off the debt? Applying some elementary school math, we would expect the dollar to lose at least 90% of its value. It doesn't matter if they do it in one year or 20 years. In the 1970's, it took about 10 years for this rapid devaluation to happen. How safe do baby boomers feel right now? You work your whole life, you save your money, you only make safe investments in government bonds, and guys like Mike Norman want to trash your retirement fund and nest egg. Him and Corzine would make great friends.
What do they expect when the money is not filtering down into grassroots? Seriously how stupid are these ppl.
Its like only watering a plants leaf, the root system still dies.
CNBC vids don't play in my browser. So I got that going for me, which is nice.
Finance industry is the direct beneficiary of QE. Connected corportations are the direct beneficiaries of QE.
When QE ends everyone who was getting that free money in the past will cease getting it. Everyone whose business depends on contracts and purchases from those lucky recipients will suffer. Everyone who works for those businesses, in turn, will suffer.
The issue is that what the Finance industry produces, and the QE-connected corporations produce, is not what people would voluntarily buy, but their (illicit) profits reflect a business that does not exist. And whole sectors of the economy have grown to service these entities. This whole chain of production, from the lucky QE recipients, those who services them, tothose who service the ones who service them are only productive because of QE.
All of that economic structure has to collapse, all of the people working in those business lines have to get unemployed from doing unproductive things before they can get reemployed doing productive things, ditto to the monetary and physical capital.
There will be some form of money printing. They can't raise interest rates because that will Definately put us into Reccesion. QE4 or whatever they want to call it IS coming.........
"severe recession' - say the effin word already it's called a DEPRESSION
Ending QE will set off the derivatives bomb that everyone seems to have forgotten about. It will be like what happen with GT Advanced and Apple times 1000 - billions will be wiped out in the blink of an eye and will set off a chain reaction with a massive stampede for the exits. But the doors will be shut!
good
Peter Schiff is, in reality, Donald Rumsfeld in a very clever disguise.
Socialism only works until you run out of other people's money.
Margaret Thatcher.
http://m.youtube.com/watch?v=okHGCz6xxiw
Governments don't work for taxpayers, just taxeaters.
Dude, their neckties are no way near the same!
Schiff & Santelli for Pres. & VP 2016!
Because Schiff is relying on bogus gov't numbers, those numbers wiil prove him right. But if he were to get those numbers true, then the end of QE would be welcomed.
You see its not only "the currency" that the Fed controls, its also the inflation deflator, then its the inflationa-adjusted GDP which is overstated by NOMINAL $300 Billions of dollars, Biderman's tax witholding numbers are the only current NON adjusted by any bullshit metric ...
We're at a point where we need to revamp everything, and judge Schiff on his own benchmarks. Its an imperialistic statement on the surface, but if you got Schiff, Santelli, Stockman, C. Biderman and Ron DeSantis in the same room as a committee, then you'd really be on to something. Get Ron Paul as an advisor, and Jesse Ventura to speak his mind without a script, and geez......
And just then, I woke up, damn....
Painful and slow and very long .... D-E-P-R-E-S-S-I-O-N.
I suggest that everyone re read this article: http://www.zerohedge.com/news/2014-05-22/connection-between-oil-prices-debt-levels-and-interest-rates
Santelli's constant yelling has probably driven away as many of CNBC's viewers as Joe Kernan's childishness. They need to find some professionals to replace these two clowns.
Throwing good money to a expanding totalitarian government never ends well.
Grab your popcorn and watch history repeat.
The really sick joke is... there was no taper. Or to be more precise, the federal reserve tapered their visible asset purchases while simultaneously boosting their hidden asset purchases.
This was done to create the false impression that the economy is improving. However, the economy has been getting worse, so when they turn around and QE-next, they'll have both visible and hidden asset purchases (meaning, even bigger QE than ever).
The predators-that-be absolutely, positively REFUSE to let the structural problems in the economy heal, because that would require THEY (the predators-that-be) not continue to steal such massive quantities of wealth from those who produce. They would rather destroy EVERYTHING and EVERYONE than even take a break in their practices of gluttonous theft.
And so, the entire economy will continue to collapse until the entire house of cards collapses. At which point, they will declare open warfare against everyone, and kill off most humans on planet earth. Sadly, the human species is so completely stupid, ignorant and braindamaged at this point in history, they will not do what is actually easy to do --- eliminate the predator class.
They've coexisted with the predator class for millions of years.
Change is not imminent.
SANTELLI ! It's time to remind the sheeple who started the world down this path of fiscal deflation.
Mr Schiff is telling the truth.
Start teching people about Inverse ETF's. Put 'em in a ROTH IRA and start taking some money back from the FRAUDSTERS!
Who cancelled Graham/Stegall?
Who cancelled Mark-to-Market Accouning?
Who ignored truthful GAAP financial reporting?
It's time for a credible news reporter to wonder why the Financial markets have not blownup yet.
Look at the ‘traditional’ stuff that’s ignored! Consider what would happen if the OLD Ways were still functional?
1999 Glass/Stegall gutted, cancelled. Comml banks can use depositer funds for speculation;
2001 ClearingHouse review of Security on Derivatives shelved. CounterParty Risk ignored;
2002 Issuance of Derivatives contracts goes wild;
2003 Mark-to-Market cancelled. Investment ‘mistakes’ don’t get reported or used in Financial
statements. Losses stay SECRET!
2004 Zero% interest rates on Federal Debt explained as GOOD!
2005 Bankruptcy laws changed. CounterParty failures superior to Depositer losses.
2008 Banks get Bailed out by Treasury/Fed-Reserve for their Stupidness. TBTF widely believed.
Huge failures in Collateral Chains IGNORED;
2009 European problems become much more visible;
2010 Federal Reserve starts buying short term Treasury debt from TBTF banks, QE1;
2012 Obama/Eric Holder say TBTF banks Too Big To PROSECUTE.;
Fed starts buying MBS crap from TBTF banks No recognition of investment quality.
Draghi has published a PLAN that ignores these issues as well as the feasibility of ever implementing it. ;
2013 Banks get penny on the $Thousand fines for Civil charges, No Criminal charges;
2014 CNBC starts Bleating about the inevitable correction that has been given to the top 1%.
Playbook!
Next chapter is?
The Federal Reserve has failed to take serious efforts in pushing the government to take the necessary reforms needed to move the economy forward. Policy makers aided by the media thrive at presenting simplistic answers that solve both economic and society’s problems with little or no effort required from the masses.
What started as a program to support and prop up the economy has morphed into the main driver of economic data. Between the low interest rates that has propelled investors into high risk assets in search of a positive return on their money, and money being pumped into the system, the markets have become distorted and disconnected from the economy. The idea that investors will continue to pour money into the sky high equity market is flawed. More concerning this subject in the article below.
http://brucewilds.blogspot.com/2014/06/exit-strategy-from-qe-remains-elusive.html
Where is the inflation, hyper or otherwise, going to materialise from? If it doesn't happen people will stay stuck in bonds and pile in even more into bonds.
Is the problem when they try to rotate out? If there's no Fed QE'ing then who will buy the bonds then? The Fed doesn't want yields rising. QE4 is a given.
Yeah, we know that the Feral Reserve is going to launch QE 4ever, but why don't these two talk about why there has to be a reset; we simply cannot sustain QE 4ever. We're going to have to go through some tough times and if fidouchebags had done their due diligence in 2008 and let the banks fail, we'd already be in a real recovery instead of this fake shit.
check your spelling...that should be Fecal Reserve.
BIT COIN WILL RULE....
It really does feel like he's contradicting himself. He said there have been no improvements and QE hasn't worked, then he said the improvements were caused by QE and removing QE will cause a recession. Throughout the video, it seemed like he wasn't having a conversation with Rick. It was more like when a politician completely ignores a question then continues talking about whatever they had planned to talk about.
I like Peter, but this is not one of his best interviews.
I think it's kinda like if I "improve" my lifestyle by using my credit card to eat at a fancy restaurant every night. Schiff might say "The increase in meal quality was caused by that credit card, when the credit card gets cancelled he won't even be able to afford the ramen noodles he started with".
I think Peter Schiff is absolutely dead on here. In fact it was Greenspan himself who said: "It is the job of economic policymakers to mitigate the fallout when itoccurs, and, hopefully, ease the transition to the next expansion." http://www.bis.org/review/r990707a.pdf
Anything Peter Schiff says can be boiled down to one message: BUY GOLD. Such a bore...
Bore with an offshore ponz.., I mean bank.
Rick Santelli is the only reason I even tune into CNBC. Why they give his guest and his segments less then three minutes is criminal. Nobody can talk about anything intelligently in less than three minutes. In other segements they give these morons 15 minutes. Like that IBM CEO, today. She went on and on.
The truth, they don't want to hear what Rick says or any of his guests. It is all for "show."
Gresham’s law is a statement of the “principle of substitution” applied to money or in other words, that a commodity (or service) will be devoted to those uses which are most profitable. It is another one of the paradoxes of money that, unlike articles in the market, the bad drives out the good.
The Fed will never end QE, but I still would not send any money to Peter's offshore bank. Even though I'm sure Allen St.., I mean Peter, make people lots of profits.
It is not possible for the Fed to 'not understand'. 'Not truthfully explain'...yes, but not understand is impossible. QE4 will have to come, hyperinflationary collapse is recognized (per Kyle Bass). This is a globally observed event at the central bank level. They will never tell the people because governments want as much of the largess of a collapse as they can garner. Those who see the same events begin that have been seen in every (of the dozens ) of hyperinflationary events of the past century will prepare and benefit. Those who choose to listen to the official version will experience the same outcome as the people of the Weimar, Argentina, Bolivia, Russia, Romania, Hungary, Zimbabwe and more than 30 other countries. THIS IS NORMAL!!! Stop acting surprised! Just because it is horrible does not mean it is not both common and natural.
We need to stop with the deflation boogeyman. Deflation is only bad for the oligarchs. "But deflation makes to harder to pay debts!" they say.. Well, to paraphrase Mr. Keynes, if I owe the bank $1,000 I have a problem, if I owe the bank $1,000,000 THEY have a problem.
Besides, markets adjust to inflation expectations, if you take out a 30 year mortgage inflation expectations are baked into the cake with the terms that are offered. Inflation doesn't make it "easier". If the bank wasn't expecting inflation, you would get much better terms in the first place. Under a rational capitalst system, loans are ONLY made under terms which the lender expects can actually be met. Here we have a situation where lenders screwed up and expected more inflation than they should have, but instead of eating their losses and possibly going bankrupt, as they're supposed to (weeding out bad decision makers is a GOOD thing), they have strongarmed the government to produce the previously expected inflation, come hell or high water.
Schiff is confused about QE and, surprisingly, so are many people making comments here.
"Exiting QE" is about exiting the E, not the Q. The stock will not change.
The Fed is leaving an easing phase (balance sheet expansion) and entering a maintenance phase (balance sheet stays the same). Asset purchases will not stop, but are being tapered back to the amount required to roll the existing balance sheet.
QE(asing) -> QM(aintenance): an easing of flow not stock. (This is a simplification because flow is sensitive to the maturity of assets on the Fed's books, which is a qualitative decision. It's possible to alter flow and stock independently of one another using programs like Operation Twist).
QE is not crazy money printing (which is why Schiff et al thought it would be inflationary and ending it will be deflationary). It was originally about clearing for the shadow banking system and had the Fed not started QE during the crisis, the impact would have been equivalent to shutting the Discount Window during a systemic bank-run of the traditional banking sector: deflationary collapse.
This is the crisis state, (which surely Schiff does understand), but during a normal state the effect of QE depends upon what proportion of economic activity is being funded through traditional channels vs shadow channels. In an economy with a large shadow banking system, the inflationary effect of QE, (during a stable period), will be minor because QE boost traditional reserves while subtracting shadow reserves. It can even be net deflationary as Fed competition for assets subtracts from the asset pool available to shadow banks for rehypothecation and those channels are significantly more complex than traditional ones (hence more brittle).
Even this talk of reserves is largely irrelevant because Central Bank provision of reserves has very little to do with inflation (something Schiff et al still do not get despite years of evidence from Japan and the USA). The Central Bank is NOT the primary source of money. It is the banks (shadow and traditional) when they create loans.
The credit creation process accounts for >95% of all the money out there in the world and this LENDING IS NOT RESERVE-CONSTRAINED! (Ie, the "money multiplier", that terrifies people so much, is a myth). Banks don't care about "minimum reserve requirement" or some such nonsense, they loan first and worry about finding reserves later to satisfy the regulators, typically via interbank markets or, in a pinch, from the central bank itself. Even when they appear to comply with regulations, they're not really, they're just using tricks, like sweeps to window-dress on a daily basis. (Note: the FX ramifications given that interbank, even central bank, "reserve" supplies can be international).
When the Fed deposits funds into a member bank's reserve account during QE, it subtracts an equivalently valued asset, hence the process is not inflationary at face value. Where an argument can be made for money printing is that the face value of non-TSY assets is often bogus. If the Fed subsequently writes down the asset without fining member banks to cover the loss, then yes, money has been printed. It is for this reason that I have been calling for all QE to be done as repos since 2008. In the panic, the Fed didn't do this.
If you understand what I have said here (Peter Schiff and the Austrians do not), then it should come as no surprise that QE, in both the US and Japanese realities, has minimal effect on inflation. A central bank can juice reserves (be they shadow or traditional reserves) all it wants, but it does not translate into greater money creation by banks because said banks' lending activites were never reserve-constrained in the first place and, most importantly of all, if potential borrowers aren't prepared to borrow then the CB is just pushing on a string. Even the Fed itself doesn't seem to appreciate the gravity of this one simple point: Main St (the host) is dead.
The asset stock that has been built by the Fed is now a Reserve for the shadow banking system. It will never be eliminated so long as shadow banking still exists. The exact size of the reserve will change over time, growing with "easing" programs and shrinking with "braking" programs. The qualitative composition of the reserve will most certainly change as shadow banking continues to evolve, with a shift towards TSY preference during tranquil periods. The QE program did not begin life with this outcome in mind, but it is what has evolved over time. The Reverse Repo Facility is the shadow-window into this shadow-reserve just as the Discount Window is the window into the traditional reserve pool.
ZIRP has much more impact than the QE programs, so talk about ZIRP. Even so, both ZIRP and QE are not particularly meaningful as they are reactions rather than causes. Better to discuss the disastrous effects of neoliberalism and globalisation (which, ironically, the Schiffs of this world support), and their roles in supporting financialization.
The one thing I do agree upon is the disastrous and obviously present impact of misallocation, but this is more a consequence of fiscal policy rather than monetary policy. The Fed's TSY POMO program supports deficit spending but it is how that spending is allocated (qualitative) that matters, not the fact that it is spent at all (quantitative).
Deficit spending that leverages greater economic activity is desirable (spending on R&D and education for example), as expanded activity supports expanded credit generation and increased tax revenues in the future, that easily cover the deficit, with any surplus being available for tax cuts. This is no different to a business borrowing for capex to realize profits sooner.
Deficit spending to piss money up against the wall (the reality of America today), only destroys the economy further. It is for this reason that I have maintained, since 2008, that $s being funded to Treasury through TSY QE would be better off just being handed out as citizen dividends weighted by prior taxation contribution.
Rather than leaving spending decisions up to a small number of treasurers (controlled by bureaucracy), just hand it out to a much larger number of people who have a proven track record of being productive and honest: taxpayers. They paid tax (honest), had to have something worth taxing (productive), and their exact contributions and account details (for deposits) are already known by the IRS. These people are much more likely to know where to spend $s effectively and it does not take a big government to make this happen.
Meanwhile, slam tariffs on imports to inhibit a current-account bleedout until such time as America's manufacturing sector has rebuilt. That is how to get an economic recovery, by pumping money where it is most likely to be productive for domestic America and keeping it out of Wall St.
Simple, effective plan, guaranteed to never be implemented because doing so first requires kicking the banksters and other power-mongers out of positions of influence.
Mediocritas, good plan. Ironically, that was kind of what Geoff Whitlam tried to do in Australia before the CIA and State Department got rid of him.
Rudd kind of did it with the $900 hand out but there was no qualitative aspect to it, beyond being a registered taxpayer. Nor was there any attempt to stop it bleeding out into the current account deficit. Had it been a regular dividend or a prolonged tax-cut, then I might have believed he had Main St's interests in mind, but it was probably more driven by his desire to be popular.
Still, it was an interesting case-study and it most certainly had a stimulative effect in the short term (if only Aus made plasma TVs, it might have been really worthwhile).
Too right on Whitlam. Oz could have been a different place, but now Oz policy just imports US policy. Throw in Swiss and Chinese interests with a smattering of local Randroids and the place is fucked.
The big 4 banks have > 60% exposure to real estate and something like only 1.5% capital? Doomed mate, doomed.
After I wrote the comment it occurred to me Whitlam got off easy. Had he dug in they would have gone JFK on him.
Edit: agree on the doomed part.
This is just MMT neo-Keynesianism and it is crrect to a point. I agree with your analysis on money "creation" and the "pushing on a string" analogy when there is no demand for loans. And I agree that the "host is dead." But it isn't neoliberalism that is responsible, it is the progressive anti-capitalist agenda that has driven the jobs overseas, not free trade (per se). Cut regulation, streamline tax laws and support a strong dollar (which brings investment in rather than driving it overseas). That is what worked for Reagan and that is what worked for Clinton, regardless of whether one is Austrian or MMT, one should support what works - not some neo-Keynesian faith that just the right mix of "stimulus" will magically heal the economy (and pay for itself). That is absurd...
I don't deny that the regulatory environment is a horrible mess and that this translates into many stupid costs for employers that inhibit employment (for example, why on earth do US employers have to concern themselves with employee health insurance?), but I absolutely object to the notion that this is the primary force behind jobs going overseas. The primary force is a pull, not a push, it's the cheapness of foreign (particularly Chinese) labor rather than the expense of US labor.
Corporations will not onshore jobs until US labor is cost-competitive with the cheapest foreign labor. The neoliberals and globalists (which includes the Miseans) oppose minimum wage and want to strip worker protection regulation away in an effort to "increase the competitiveness of US workers" (which really means impoverish US workers to foreign standards).
US labor share of income is already at record lows (coincident with corporate profits at record highs). A quick look at this plot decimates the right-wing "poor victim corporations!" propaganda that these guys love to parrot:
http://static1.businessinsider.com/image/503e269669bedd2839000012/image/jpg
As does this:
http://www.conservativemyths.com/union-graph1.png
To bring US labor down to a competitive level with cheap foreign labor is to erode labor share even further. The poverty this causes can only be sustained under a strong Authoritarian State that provides goods and services in place of what people cannot afford and/or uses brutality to suppress dissent. Feudalism, Communism, Fascism, take your pick. As it is playing out now, America is transforming into a Fascism to compete against China's Communism. In both cases, oppression is rampant, but the Chinese are actually less worse-off.
This is why I oppose the Austrian School so strongly. Their neoliberalism demonstrably leads straight to the forms of governance they claim to oppose. They are FAKE libertarians, authoritarians in disguise, the sad thing is that some of them believe their own bullshit.
A vibrant middle-class is essential for optimising economic activity and this cannot exist when capital share of income vastly exceeds labor share of income (inequality is perfectly fine with the Misean assholes). Said another way, when Capitalism is too successful it destroys itself, Marx was right about that. As is so often the case, the optimal state is not at the extremes, it's somewhere in the middle.
Producers must remember that their profits depend on their customers being able to pay. When labor share is reduced, profits can only be maintained by consumers running up debt to replace lost income. At some point private debt burdens becomes excessive and a private sector crisis occurs. Government then steps in to take over the debt, providing welfare payments in place of lost incomes. This flow then supports further consumption of production and keeps corporate profits alive, which is why Walmart, McDonalds et al LOVE the welfare state, despite pretending otherwise. In time, public debt can reach a crisis point and it no longer becomes possible to service prices at a level that covers the cost of production. The system collapses, producers go bankrupt in droves and unemployment soars.
The global labor pool presents a Tragedy of the Commons problem. Each individual producer has a profit incentive to cut labor costs, but when they do so they also cut the ability of consumers to spend (because workers ARE customers), therefore they cut the profits of some other producer. Soon every producer starts doing the same and the Commons is destroyed, leading to ultimate destruction of the producers too. The only proven way to stop a Tragedy of the Commons is appropriate regulation of the Commons, be it a fishery, a field or a labor pool. The short-sightedness of Capitalism isn't smart enough to protect itself long-term.
If US labor is not competitive with cheap foreign labor then it is NOT the proper approach to cut US labor down to foreign wages. The proper thing is to identify truly stupid regulations that are just getting in the way of both employees and employers and remove them (enhances profitability without cutting wages), and place tariffs on foreign-sourced goods and services where labor is employed in a state that would be illegal in the USA until such time that these nations lift their games. Bring them up rather than bringing the US down.
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My second point of objection is your inference that govt stimulus can not pay for itself. As a blanket statement, this is false. It's the equivalent of saying that no business loan can ever generate a profit to pay the loan back. The outcome of stimulus depends entirely on the quality (not quantity) of the stimulus. Intelligent deficit spending can indeed "magically heal" economic wounds (not all, but certainly some). Stupid deficit spending, on the other hand, just makes things worse.
An example of intelligent spending is scientific research which provides an enormous ROI. Backtrace any of the technology around you to find the origin of funding in the research tree and you will find that it is overwhelmingly from the public purse because the govt is much more prepared to take a risk than, say, venture capital.
http://www.amazon.com/The-Entrepreneurial-State-Debunking-Economics/dp/0...
The private sector avoids basic research because exploration into the unknown does not guarantee profit, instead the private sector excels at optimising the output from basic research. Big pharma, for example, circles around the NIH like sharks, picking off any promising drugs developed on govt money. The number of innovative drugs that these corporations develop by themselves can be counted on one hand each year. They then market themselves as innovators (which is total bullshit) and avoid paying their dues in the form of tax avoidance.
http://www.amazon.com/The-Truth-About-Drug-Companies/dp/0375760946
What is absurd is govts cutting R&D funding to innovators during a financial crisis while handing out free-passes to gamblers in the financial sector. The quality of such stimulus is terrible, hence cannot heal the economy. If you criticise this form of "stimulus" then it is indeed a well-founded criticism.
You mean when QE goes away the prosperity's going away too?
QE is the latest iteration of an economy that hasn't grown net of debt for decades. All of you can keep dreaming, though.
What?! Oh, right..
http://market-ticker.org/akcs-www?get_gallerynr=4987
listening to this video clip is like having Rick Santelli talking to himself.
This is one of the few times I don't hear Rick ranting.
Go Rick and Pete!
I prefer Rick when he's ranting, he seemed to be playing Devil's Advocate, when on CNBC the Devil already has a team of advocates that would put OJ Simpson to shame.
they have known its not working for a long time, but the goal now is to keep it afloat until the election than make it the Republicans problem.
Even now they know they cant get hillary or anyone else on their team in now obo has hope and short changed everyone.
Who does either party have though, to stand against Hillary? Is the GOP brave enough to run Rand Paul? He's too much like a statesman, has to be buried.
I know the dems won't give Biden a real chance, he's so gaffe prone he even accidentally told the truth a few times. He may have apologized and retracted, but in that town there's no way he'll live down accidental honesty.
It makes sense. We have been in recession the entire time - but it was masked through the wealth effect of QE. Take away the wealth effect of QE and all that's left is the underlying recession. Lets just take it and get it over with...
Paging Captain Obvious, We're gonna need Al Sharpton, Jessie and Moochelle to straighten this shit out. No mo free money?? WTF?