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Goldman: "Some Lessons From The Past Four Years"

Tyler Durden's picture





 

This is the boilerplate: "The following is based on remarks at the University Club in New York at the ceremony for the 2011 Lawrence R. Klein Award for the most accurate forecast over the prior four years to the Goldman Sachs US Economics team. The award was sponsored by the W. P. Carey School of Business at Arizona State University and Blue Chip Economic Indicators, Inc., and was presented by Dr. Lawrence H. Summers, Charles W. Eliot Professor of Economics at Harvard University." Hmm. We assume the University Club in New York did not read the following post. No matter. The attached analysis, ignoring that it is from the team that was 100% wrong less than a year ago, and is 120% wrong now with its ridiculous Nominal GDP targetting proposal, does have its "finer points", and as such is worth of mockery by ZH readers.

From Jan Hatzius

Some Lessons from the Past Four Years

What are the lessons that we and the economic forecasting community have learned—or should have learned—over the past four years? There are undoubtedly many, because a depressing period for the economy is also an instructive period for economists. But I want to focus on three:

First, stability can be destabilizing. There was a big decline in economic volatility in the 1980s and 1990s. In response, consumers and firms sharply increased their leverage and started to run a large financial deficit, i.e. a large excess of spending over income and of investment over saving. This supported both the demand and supply side of the economy and thereby produced very favorable economic outcomes—higher profits, higher stock market valuations, low inflation, and a strong labor market. And the favorable economic outcomes time and time again “proved wrong” the naysayers who thought that the boom would end in a bust.

The process continued until the imbalances in the financial markets, in the banking system, and in the real economy had grown so large that the economy had become extremely vulnerable to even small negative shocks. The resulting downturn has proven deep and difficult to reverse. So in that sense, the initial greater stability of the economy has proven highly destabilizing in the longer term.

The phrase “stability is destabilizing” was coined by Hyman Minsky (1919-1996), a post-Keynesian economist whose work has only become known more widely in the wake of the crisis. But I hope you will forgive me for noting that the basic story was very well laid out by Bill Dudley and Ed McKelvey in a Goldman Sachs study called “The Dark Side of the Brave New Business Cycle” in 1999, when most people were unfamiliar with Minsky's work. In my view, it remains the most important insight into the origin of the crisis.

Second, fiscal stimulus is typically undersupplied after a crisis.

“The central irony of the crisis is that while it was caused by too much confidence, borrowing, and spending, it is only resolved by increases in confidence, borrowing, and spending.” (Lawrence Summers, 2011)

I believe that this is true. But unfortunately, it is probably too much of an irony to resonate with most voters and elected officials. Especially after a period in which some fiscal stimulus has already been applied and the economy is still in bad shape, it is all too tempting to believe that government deficits are part of the problem rather than part of the solution, and that macroeconomics is a morality tale where virtuous governments are rewarded and wicked ones are punished. That view is held more strongly in some countries and cultures than in others but it has been gaining ground everywhere, including the United States.?

We are concerned about the potential impact of a more restrictive fiscal policy on an economy that is still very fragile. The cutbacks at the federal, state and local level have been subtracting close to 1 percentage point from GDP growth over the past year, and are likely to subtract the same or more in 2012 depending on whether the payroll tax cut and the emergency unemploymentbenefits are extended.

And the potential “cliff effect” gets even higher in 2013, when the economy faces potential fiscal retrenchment from the expiring Bush tax cuts, the expiration of whatever temporary measures do get extended in 2012, and the potential automatic spending cuts if the Congressional “super committee” does not come to an agreement. So we suspect that fiscal policy will continue to be “too tight” from a cyclical perspective for the foreseeable future.

Third, monetary stimulus is also typically undersupplied after a crisis.

“[U]nder a fiat money system, a government (in practice, the central bank in cooperation with other agencies) should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest rate is at zero.”? (Ben Bernanke, 2002).

Again, this is true in theory. But it has not proven to be a good guide in practice. Typically, central banks do not generate a sufficient increase in nominal spending when short-term rates are near zero. Just as fiscal stimulus is "undersupplied" relative to the amount that is necessary after a financial crisis, monetary stimulus is also undersupplied.

A very clear piece of evidence is the path of US nominal GDP before and after the crisis. Even three years after the crisis, nominal GDP is still 10% below the pre-crisis trend, with no signs of any catch-up. And most of this is due to the fact that real output and employment are far below their estimated potential. That is a very big problem, not just because high unemployment is very costly in the short run, but also because sustained high unemployment raises the risk that workers will lose their skills and attachment to the labor force and ultimately become unemployable.

So why has the Fed not eased monetary policy more? I think the main reason is that central banks have a bias toward caution in an unfamiliar environment. The best explanation for this bias is the so-called “Brainard principle,” named after William Brainard of Yale University. The Brainard principle says that if a central bank is uncertain about the impact of its instrument on the economy, it should do less than if it were sure. The reason is that the policy instrument itself is an added source of uncertainty in the economy, so using it is “costly.” Inevitably, central banks are much more uncertain about the impact of unconventional monetary policy than about the impact of conventional interest rate cuts. This means that monetary stimulus at the zero bound will be too small in expectation, relative to a situation in which the central bank was sure about its impact.

So how do we overcome this bias toward excessive caution? It’s not easy to overcome because the Brainard principle is a genuine reason for why some caution is warranted. But we think one option would be for the Federal Reserve to focus not only on the setting of the instrument, i.e. the funds rate or the size of the balance sheet, but more directly on the level of nominal demand in the economy--that is, the outcome of its policies. Specifically, we think that the Fed may want to target the level of nominal GDP extrapolated from the pre-crisis trend.

This would be a big step for the Fed, and we don’t think it’s happening anytime soon. But it would be quite consistent with the Fed’s dual mandate to pursue maximum employment and price stability, because nominal GDP is simply the price level multiplied by real GDP, and real GDP in turn is extremely closely related to the unemployment rate.

That said, nominal GDP targeting would be a different interpretation of this mandate than the usual "Taylor rule" interpretation. First, it puts more weight on the employment and output side of the mandate. This is justifiable in an environment where the Fed is missing so badly on the employment side and where high unemployment has potentially large long-term costs. Second, it aims at the price level, not the inflation rate. This has the advantage of providing greater stability to future price level expectations. Third, it is much simpler and more transparent than the inevitably somewhat fuzzier Taylor rule interpretation of the dual mandate.

If the Fed did decide to do something like this, we think they should couple the shift to a nominal GDP target with a promise to use the remaining monetary policy instruments—delay in hiking the funds rate and renewed asset purchases—aggressively to achieve the target over time. Ideally, Congress would also play its part by supplementing the shift via an easier fiscal policy in the near term coupled with a credible plan for restraint in the longer term.

By telling the public that the Fed will pursue easy policies until we are much closer to pre-crisis income levels, we also think that the Fed could increase the public’s confidence in economic recovery and reduce worries in the financial markets about a rapid return to tighter policies if growth does pick up. There is a lot of talk about the central role of “confidence” in economic recovery. The problem is that it is difficult to know what “confidence” means, how one can measure it, and what policymakers can do to improve it. But a nominal income target might help by stabilizing and coordinating expectations around economic recovery, so we think it deserves serious consideration.

Jan Hatzius

 


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Fri, 10/21/2011 - 01:13 | Link to Comment winter is coming
winter is coming's picture

we are at point where it is just annoying...there will be no crash and europe will get bailed out until politicians are killed... until then, people will pay for the bailouts and the markets will not crash

Fri, 10/21/2011 - 01:22 | Link to Comment TruthInSunshine
TruthInSunshine's picture

there will be no crash and europe will get bailed out

 

How that's crack?

That stuff will kill you.

Get clean, sober and wake up to reality, junky.

 

I can sum up Jan Hatzius's speech thusly:

Give us, at Goldman Sachs and our parasitic ilk on Wall Street, more taxpayer money, Bernank & Geithner.

Fri, 10/21/2011 - 01:34 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Give us, at Goldman Sachs and our parasitic ilk on Wall Street, more taxpayer money, Bernank & Geithner.

Here here, my corporatist friend. Those fat, lazy, moronic taxpayers don't realize how good they have it thanks to us. We provide them with soap opera themes, aspirational shopping, and a healthy level of jealousy that keeps them on their toes! And we also fill the world with beauty by spending on things like yachts and hookers. Those turds. 

Fri, 10/21/2011 - 03:56 | Link to Comment AldousHuxley
AldousHuxley's picture
  1. As long as we have GS execs in US Treasury, we will be bailed out
  2. As long as we pump money to K-Street, Congress will not reform our business
  3. As long as we have the Fed, we will profit and get bonuses
  4. As long as we have Clinton's son-in-law employeed, Clintons and Rubinites will defend us
  5. American public is stupid and /or weak
  6. Moral hazard in the land of no morals can happen as often as we request it.
Fri, 10/21/2011 - 10:40 | Link to Comment Harlequin001
Harlequin001's picture

“[U]nder a fiat money system, a government (in practice, the central bank in cooperation with other agencies) should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest rate is at zero.”? (Ben Bernanke, 2002). Again, this is true in theory.'

this is staggering. No it cannot. the limit on spending on credit is not the availability of credit, which is always endless but the ability to make good on the repayment. Which when limited to wages under a currency peg is  a very finite quantum. Where the hell was Snow when he had the opportunity to take on China for fixing it's currency. let me guess, not his fault.

We're going to need a lot of lamp posts before this is finished, because the UK is no better.

Fri, 10/21/2011 - 02:57 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

Somewhere right now in an alternate universe.............................

"As evidenced through testing their economic and monetary theories in real-time live market settings, these brilliant academics have demonstrated beyond a reasonable doubt that their theories while highly lauded in their respective inner circles are completely and utterly full of shit."

Fri, 10/21/2011 - 01:37 | Link to Comment Akrunner907
Akrunner907's picture

Are we still going God's work?  I wonder if Blankenstein still believes that?  Or maybe he is learning that God is angry with him.

Fri, 10/21/2011 - 08:10 | Link to Comment Zero Govt
Zero Govt's picture

once the likes of fleecing-agents Dimon and Blankfein have done their worst with JPM and Goldmans there will nothing left to possibly kick-start of either burnt-out smouldering carbonised carcass of a bank

the economic anarchists of politics and central banks have zero understanding of building customer loyalty and brands because they are monopolists sitting their fat crony arses behind desks all day answerable only to their pea brained peers and not end-users

So they think they're 'saving' these bankrupt fraudsters by plugging holes in their cooked books (balance sheets) but are clueless to these same firms reputations going down the sewer in non-stop market rigging, rule breaking and fraud

Investors invest on reputation as much as balance sheets.. nobody is going to touch Blankfein and Dimons 'nuked' criminal legacies or what Benny has 'saved' with a barge pole

Benny cannot even save the toxic MBS's on his own Fed balance sheet (rumour is pea-brain wants to buy more!!!) or his own nose-diving Kamakazi printer-investor reputation.. however does this chubby chump think he can save other banks while his own Fed sinks to new depths of incompetence and crookedness under his stewardship?

Someone give that toxic crone a bullet

Fri, 10/21/2011 - 01:18 | Link to Comment DaBernank
DaBernank's picture

Let's just add nominal derivatives exposure to the GDP equation.

Fri, 10/21/2011 - 03:56 | Link to Comment Element
Element's picture

dat's jus cwazy talk

Fri, 10/21/2011 - 01:25 | Link to Comment Tsunami Wave
Tsunami Wave's picture

Fourth, Nothing is ever our fault and governments and central banks and the serfs (taxpayers) must bail us out from all of our mistakes. 

Also, we will never acknowledge that Keynesianism in a broad form ever works.  Finally we will also never admit that an economy truly works like an ecosystem or an organism, and not like a complicating machine where we can turn one spigot or a lever and a deired effect happens without consequences.

Fri, 10/21/2011 - 01:29 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Yes. We here in the United States of Corporate Welfare never need to pay atttention to those quaint rules about supply and...what was that other one again? Oh well, doesn't matter anyway. Taxes, rules, economics: those are for the little people. 

Fri, 10/21/2011 - 02:01 | Link to Comment Tsunami Wave
Tsunami Wave's picture

Supply and... more supply! Monetary supply that is, though we don't mind if fiscal [supply] supports us!

Fri, 10/21/2011 - 01:26 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Never thought this would happen, but we're finally reaching Peak Bullshit. 

When BS becomes so bald, so obvious that it gets as silly as playing a game with your 2-year old nephew. 

And it's only sickening the already angry OWC/Indignados/Arab Spring crowd that is going viral around the globe. 

Fri, 10/21/2011 - 01:58 | Link to Comment chump666
chump666's picture

yeah you are right. 

Fri, 10/21/2011 - 10:26 | Link to Comment Harlequin001
Harlequin001's picture

So, - 'and thereby produced very favorable economic outcomes—higher profits, higher stock market valuations, low inflation, and a strong labor market...' is nothing to do with printing money through ever lower interest rates, it was all the fault of a lack of volatility?

Nothing to do with the Fed then. Remind me why did we referred to him as 'Maestro' again...

and this bit, classic - 'And the favorable economic outcomes time and time again “proved wrong” the naysayers who thought that the boom would end in a bust.' So, can someone confirm please  that we didn't actually end in a bust, and that everything is really honkey dorey, because I think I'm missing something...

Now, where are those blasted always wrong 'naysayers' again...

Fri, 10/21/2011 - 02:45 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

Winning by fucking up!!!

Fri, 10/21/2011 - 10:33 | Link to Comment Harlequin001
Harlequin001's picture

“The central irony of the crisis is that while it was caused by too much confidence, borrowing, and spending, it is only resolved by increases in confidence, borrowing, and spending.” (Lawrence Summers, 2011) - might I be silly enough to suggest that too much confidence, borrowing, and spending is only resolved by BANKRUPTCY.

It gets better - 'I believe that this is true. But unfortunately, it is probably too much of an irony to resonate with most voters and elected officials.' That's because it is bullshit, and if this is what's being taught in US universities by this so called fuckin professor, or whatever title he has then it's no fuckin wonder we're in such deep shit and wading deeper still.

Does he drive to work? Why is it you can never find a good car accident when you need one?

Fri, 10/21/2011 - 02:24 | Link to Comment FinHits
FinHits's picture

Sadly "Government's dont rule the world, Goldman Sachs rules the world" didn't make the cut this time around. Where is Alessio when you need him?

More stimulus is bad for the ADHD world markets, but good for Goldie.

Fri, 10/21/2011 - 01:39 | Link to Comment paarsons
paarsons's picture

How dare you mock Larry Summers!

He's brilliant.  Or at least that's what they keep telling me over at CNBC.

Peace.

http://geraldcelente.proboards.com

Fri, 10/21/2011 - 01:48 | Link to Comment Coldfire
Coldfire's picture

Churnside pabulum, worthy of mock.

Fri, 10/21/2011 - 01:50 | Link to Comment Yamaha
Yamaha's picture

Honest to God - where do these guy find all the stupid pills. I just hope most of these idiots don't reproduce.

Fri, 10/21/2011 - 02:13 | Link to Comment Tsunami Wave
Tsunami Wave's picture

It must feel good to be stupidly ignorant like them. Ignorance is bliss.. especially at the expense of everyone else! If only Goldman got into the pharmaceutical business....

 

hmmmmm...

 

That got me thinking.. Then they could come up with their own brand of hopium! They could push it to everyone in congress and everyone in any governmental position around the world. It could save millions in lobbying.. Imagine the profits they'd get, putting the drugs onto some newly created commodity drugs exchange, and constantly frontrunning, shortselling, and pushing their product. That sounds like a great multi-million dollar idea.

Fri, 10/21/2011 - 01:52 | Link to Comment Sequitur
Sequitur's picture

Hey I like reading the institutional reports ZH posts. Remember the Don's wisdom: "Keep your friends close, but your enemies closer."

Fri, 10/21/2011 - 01:56 | Link to Comment chump666
chump666's picture

I actually think the economic doomsday is within 6mths or less.  Nothing is going to stop it, I am not a conspiracy theorist or any of that jazz.   Those maniacs at the FED have gone insane, same sh*t repeated again and again...There is nothing anybody can do anymore.

In saying that, markets should rally into middle next week, flat to end OCt, then major selling/volatlity into Nov. 

Europe will decend into chaos.

Fri, 10/21/2011 - 03:45 | Link to Comment LongBalls
LongBalls's picture

I agree in that we are weeks and months away from resolution. This can't go on for months and years. Investors will reach fatigue of volatility soon enough. It's time to go all cash for awhile IMHO.

Fri, 10/21/2011 - 02:13 | Link to Comment Shock and Awe
Shock and Awe's picture

I love Goldman Sachs. Their presence in China is very positive for the party and the people. We will benefit greatly from their guidance.

Fri, 10/21/2011 - 02:19 | Link to Comment ViewfromUnderth...
ViewfromUndertheBridge's picture

"The problem is that it is difficult to know what “confidence” means, how one can measure it, and what policymakers can do to improve it.

The difficulty is that despite dumbing the sheep down, shearing them repeatedly, giving them bread and circuses, turning them against each other, they continue to try to think...and now they are thinking we have stolen their future and looted their past...what can you do with sheep like this?

You certainly can't assign words like "confidence" their true meaning Jan, that's for sure. But you can mull about it as an ephemeral, abstract and difficult concept. Like trust.

Thanks for posting this Tylers, game-fucking-over and from their own mouths! Again.

Fri, 10/21/2011 - 02:25 | Link to Comment Shock and Awe
Shock and Awe's picture

Game over USA. Game just beginning China. Let's get to work boys!

Fri, 10/21/2011 - 03:15 | Link to Comment slackrabbit
slackrabbit's picture

Agree....I mean Double Plus Good 

Fri, 10/21/2011 - 02:45 | Link to Comment jmc8888
jmc8888's picture

Gotta love your business school sponsoring piece of shit ideas.

So in order to reduce the fraiser crane effect associated with setting monetary (aka bullshit monetarism sophistry) policy from the zero bound during an economic recession (not depression?), we need to change the rules (more sophistry) in order for our ADHD ritalin filled heads to not get scared of our reflection in the mirror so that we may more clearly see that which our goalseeked minds had already come up with?

That my friends is monetary pseudo bullshit.  Create a fake standard so that your bullshit seems believable. Create the authority you need to then use for your next step.  Or Back to the Goalseeked Future.

This now fits our bullshit bankster attempted ball saving approach better than the last sophistry we pulled out of Taylor's ass that even he thought we were crazy to follow.  You know like Moby Dick was about sled dogs in Alaska during the Klondike, or some shit.

We won't notice whether or not the Titanic is sinking, we'll just measure that we're 10 feet above sea level by climbing up to another deck.  Glad we in Ivory tower land have 1st class tickets.  Shame no one else does, but it doesn't matter.  By then we'll be in NY and back on Wall Street pedo-ling shit.

We use this newfound sophistry to funnel more trillions to our bankster friends which of course, is now backed by science*, and promise that we'll force the people to accept bogus cutbacks later to pay it off.  In the meantime happy days are here again. 

It's hard to measure confidence, but if we fudge the numbers, the idiots, I mean citizenry won't be the wiser.  Never mind confidence means dick, we must engineer it because we have no other engineers left building anything in the physical economy.  The people will believe all this chart changing mumbo jumbo sophistry, and let their pent up cage animal demand spirits run wild like it's Ohio. 

It all must be true because it was sponsored by my W.P. Carey School of Business @ ASU.   Excuse me while I puke up my jumbo jack.

There's no solution like Glass-Steagall

There's no solution like Glass-Steagall

There's no solution like Glass-Steagall

Ahhh shucks, I said it three times and I'm still stuck in crazy fucktard mOZetary land still.

Fri, 10/21/2011 - 04:48 | Link to Comment ViewfromUnderth...
ViewfromUndertheBridge's picture

Not only is it pseudo monetary bullshit...it is also lies. The 80s and 90s saw a reduction in volatility???? I think 1982 saw Citibank blow up more money than they had ever made as profit in their entire history...and the 90s had the Savings & Loan...he just means compared to what we just went through the 80s and 90s were a walk in the park.

What's next?

As you say, unless they bring back Glass Steagall the writing is on the wall.

Fri, 10/21/2011 - 02:49 | Link to Comment Temporalist
Temporalist's picture
Revealed – the capitalist network that runs the world

"When the team further untangled the web of ownership, it found much of it tracked back to a "super-entity" of 147 even more tightly knit companies - all of their ownership was held by other members of the super-entity - that controlled 40 per cent of the total wealth in the network. "In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network," says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group."

http://www.newscientist.com/article/mg21228354.500-revealed--the-capital...

Fri, 10/21/2011 - 04:05 | Link to Comment Element
Element's picture

for the most accurate forecast over the prior four years to the Goldman Sachs US Economics team.

 

Well, if you included the surreptitious naked-shorting of Bear Sterns and Lehman Bros ... that's possibly right ... but not so much finance or economics ...

More a type of ... global ... Wreckonomics ...  and having the mint's back-office number also helped ... sshhh!

 

I think I may have just coined a name for a whole neo-Economics Sub-Discipline.

Fri, 10/21/2011 - 04:50 | Link to Comment catch edge ghost
catch edge ghost's picture

I would like to mock it but that would take time away from preparing for it.

See, today I've also learned about cost of living adjustments to Social Security, Federal Uncome Taxes, and IRA contributions. All in one day! Very exciting... So I fed my spreadsheet some wikipedia and it told me the Federal Minimum Wage is about 40% below its trend.  

And since I'm pretty sure that guy on BBC was right about Goldman running the world, I figure this is just Hatzius updating the Owners' manual.

I'm still calling it hyper-controlled inflation. It will require a degree of global price and wage fixing that only 25th century technology could provide. They'll try it anyway.

For now tho, ima stay all freaked out until they're done killing bitchez. (thinking it's best to just avoid anywhere with sand really)

 

Fri, 10/21/2011 - 05:06 | Link to Comment falak pema
falak pema's picture

1°    But I hope you will forgive me for noting that the basic story was very well laid out by Bill Dudley and Ed McKelvey in a Goldman Sachs study called “The Dark Side of the Brave New Business Cycle” in 1999,

2°     The central irony of the crisis is that while it was caused by too much confidence, borrowing, and spending, it is only resolved by increases in confidence, borrowing, and spending.” (Lawrence Summers, 2011)

3°   “[U]nder a fiat money system, a government (in practice, the central bank in cooperation with other agencies) should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest rate is at zero.”? (Ben Bernanke, 2002).

-------------------------------------------------------------------------------------

Point 1° says there was an Oligarchical plan evident in the 80s (Reganomics) whose ramifications/consequences GS saw first and foremost, understood and explained the workings of better than anybody else, to the reigning Oligarchs, making them (GS) the Machiavellian power house they have become : the Consigliere of the New Borgias of the outsourced NWO financial economy. 

Point 2°  Says exuberant and outright hubristic execution of said global plan creates problems that can ONLY be resolved by MORE hubristic affirmation of said mind set and resolute follow on of said plan. (Never change a winning strategy for minor reasons. Go for it all.)

Point 3° Says the nerve of the game financial plan is Monetary control, with cheap money as accelerator and inflation as safety valve for releasing periodically excessive irrational exuberance. That way the plan continues to work for the benefit of the Oligarchs.

Seems like their game plan is working to a T. All we need now is QE-3!!!!

As a slight reminder of historical perspective : all hubrisitic plans end up going the opposite way to that planned. From the house of Atreus, to the fall of colonial Europe, same old story. Now its the turn of USa, USa. Sad to say, for the nation of Jefferson. 

Fri, 10/21/2011 - 05:54 | Link to Comment Market Efficien...
Market Efficiency Romantic's picture

Totally agree. Only I think they were not made the NWO Consigliere due to their precise analysis of the major agenda behind Reagonomics. With JPM, the NWO headquarter moving up the latter from being a flexible and discrete instrument to becoming a controlling body (thanks to Glass/Stegall resolution, again thankfully pushed by Citi, so JPM could sit, wait and see and not become target of public anger in case of failure), the oligarchy needed a new delta squad, that is GS. Power shift and rewarding was managed in the course of the IPO. From then on, GS managed all the dirty work.

Fri, 10/21/2011 - 05:05 | Link to Comment Instant Wealth
Instant Wealth's picture

So how do we overcome this bias toward excessive caution?

Putting LSD in people´s toothpaste ?

Fri, 10/21/2011 - 05:44 | Link to Comment Market Efficien...
Market Efficiency Romantic's picture

And another award for Summers, one of the main engineers of the overall financial deregulation policy started thirty years ago. If it was not so sad, it would be anice peace of comedy, how he wraps the effects of institutional risk-taking, economic unbalancing and major shift of wealth into some academic argument of irresponsible market behavior. Oh yeah, great policy, only that abstract market beast tried to fight our artificially created, but sustainable rewards. But, Larry sure has the answer, fight that beast with another dose of our policy. And can you hear his undisputable reasoning: Either you follow up with more of our policy or you cannot blame us. Only going half-way is not what we prescribed. Unfortunately, going all the Summers way to the end means, there will nothing left, end of the road. Then, people won't care about blaming anyone anyway, as they have more pressing problems such as survival.

Unfortunately, he is untouchable. What an evil bastard.

Fri, 10/21/2011 - 05:56 | Link to Comment Jendrzejczyk
Jendrzejczyk's picture

The "Masters of the Universe" are busy circle jerking each other in a mental masterbation orgy. Mr. Reality is about to spoil their party in an unglamorous fashion.

Fri, 10/21/2011 - 06:15 | Link to Comment williambanzai7
williambanzai7's picture

What a fucking joke.

Fri, 10/21/2011 - 07:17 | Link to Comment Element
Element's picture

Humans can do amazing things with body and mind ... they can CONtort into a snake, and think like one as well ... these people have spent a LONG time mastering the art of the lie and the con ... they are unbelievably skilled and flexible.

http://www.youtube.com/watch?feature=player_detailpage&v=Cb3FHUCORPA

Fri, 10/21/2011 - 06:28 | Link to Comment Jendrzejczyk
Jendrzejczyk's picture

In summary, our global Ponzi must be allowed to continue to destroy the world, in order that we may save it.

Fri, 10/21/2011 - 07:13 | Link to Comment s2man
s2man's picture

I blow my nose in your general direction, silly GS team.

Phbbbbbbbt

Fri, 10/21/2011 - 06:50 | Link to Comment MaggieL
MaggieL's picture

"...fiscal stimulus is typically undersupplied after a crisis..."

 

I keep telling you, the patient died because you didn't apply enough leeches. 

Fri, 10/21/2011 - 06:51 | Link to Comment Mr. Lucky
Mr. Lucky's picture

Complete newspeak.

Fri, 10/21/2011 - 07:01 | Link to Comment BandGap
BandGap's picture

Just listened to an "expert" on the radio telling us everything is rosy as far as the economy.  Again and again, the S&P is up and companies are reporting positive earnings. Things are getting better, just wait and see.  Europe tells us all is well.  This is frustrating initially, then fascinating when you step back.  If/when the house of cards fall, the majority will not know what hit them.  They are still on the "pay no attention to the man behind the screen" scene.  We go over the cliff at the maximum height and with eyes closed.

Fri, 10/21/2011 - 07:01 | Link to Comment karzai_luver
karzai_luver's picture

Nothing succeeds like psychosis.

Can't anyone see Summers is a sick animal?

 

We have Obomber in the big house and his sidekick the Unibomber of eCON, Summers.

 

What a scene.

 

 

Fri, 10/21/2011 - 07:06 | Link to Comment BennyBoy
BennyBoy's picture

The world works according to what academics like Larry and Benny say.

Fri, 10/21/2011 - 07:22 | Link to Comment El Gordo
El Gordo's picture

I'm truly disappointed that no one on this thread seems to be able to recognize and be grateful for the green shoots that our benevolent benefactors are providing for us.  Shame, shame, shame.

Fri, 10/21/2011 - 07:28 | Link to Comment gookempucky
gookempucky's picture

Again and again these lymph nodes are all as per WBs excellent midget expose reminds us , just trying to win the worlds tallest midget contest. As some here have mentioned, the public is fed shit on a stick from the msn and its homemade---sheeple believe the lye and eat it up while saying that smell is hoorible but this fudgesicle sure tastes good. 

These folks are nothing but wasted cock wads.

Fri, 10/21/2011 - 08:04 | Link to Comment Scalaris
Scalaris's picture

The central irony of the crisis is that while it was caused by too much confidence, borrowing, and spending, it is only resolved by increases in confidence, borrowing, and spending.” (Lawrence Summers, 2011) 

I'm going to assume that the audacity of the above quote won’t be lost in its own irony, to whatever audience it was directed to.

I will also assume that said audience can only be comprised by bankers who elect bankers to serve bankers, because for anyone else it will most probably be another round of pseudoidealistic platitudes known as bullshit, from another banker cum governmental cog.

Stating that the crisis was caused by “too much confidence, borrowing, and spending”, implies an unfortunate causality, innocent even, derived from mere naivety or miscalculation in the spectrum of macroeconomic “scientific” forecasting.

It also assumes that the banking industry was simply following its “traditional” structure as a business model, in a “reasonable” capitalistic system of course, and that whatever evolution has undergone, it only did because of the organic growth, technological and scientific ability, were evolved in tandem.

The factual explanation is that the banking industry evolved into nothing short of an abomination, infiltrating the higher echelons of corporatism and eventually managing to erase whatever ethical boundaries were left, by seamlessly blending its administrative layers with the ones of its own government.

And of course since the 80’s and the revolution of leverage, the only “natural” evolution which was achieved was the one in which the “traditional” practice of a fractional reserve system wasn’t enough, even if managed to maintain a more “reasonable” equilibrium in order to project itself as combination of a more “rational economic serfdom” and an economic system, vital for the maintenance and even prosperity of the society.    

So when money renting and quantum mechanics were eventually combined, and whatever endless possibilities they’ve offered, have already being realized, the society is now facing the consequences of the violent burst of 20 years worth of parabolic bubbles, along with its subsequent economic policies which were only implemented in order to keep the growth within “control”, while ensuring, of course, that those who were to benefit the most, did so within the safety of the democratic law, without engaging in any unethical contraventions, evident by the formation of the numerous government agencies who safeguard said law that were “created” by the same bankers cum governmental cogs.

At the same time, these very policies made sure that the American economy is reduced to a money creating industry though the creation and packaging of complex and riskful “assets” and the automatic algorithmic super-speed trading, along with two or three somewhat viable industries, whose growth was formed according to the amount of influence the aforementioned industry exercised within them.

As a result, America’s middle class was reformed into a mould of a new conformity, which was given the choice to educate and train itself accordingly in order to be useful for its corporate employers, or pursuit a path of self-employment, which would of course imply the required capitalization trough monetary leasing.

So in my opinion I’d say that this is a more fitting explanation regarding the central irony of the crisis, Mr Summers.    

 

 

 

Fri, 10/21/2011 - 09:06 | Link to Comment Downtoolong
Downtoolong's picture

Damn you bureaucrats and Fed lackys. Listen up and listen good. The next time we at Goldman incite a financial crisis and sufficient market instability to keep our trading business model going we want you to provide sufficient fiscal and monetary stimulus to support it. How the hell else are we going to keep our stock price out of the double digits?   

Fri, 10/21/2011 - 10:16 | Link to Comment Debtless
Fri, 10/21/2011 - 10:31 | Link to Comment Dr. Nancy
Dr. Nancy's picture

 

All that's happening in the economy is predictable, as

there are 7 stages that every major economy goes through.

Those who know how it works profit & massive wealth

is transferred to them.

Several months ago I learned this information

from a millionaire whose site I found

& am sharing it with everyone I know.

You can see how you too can profit 

like the ultra-rich during these uncertain times.

His free video-

"How To Create Wealth in Today's Economic Crisis"

is at:

http://theelevationgroup.net/presentation/register.php?a_aid=160667&a_bi...

Hope this helps everyone

 as much as it has me.

Dr. Nancy

Fri, 10/21/2011 - 17:34 | Link to Comment Guy Fawkes Mulder
Guy Fawkes Mulder's picture

Not sure how to rate this one...

5 stars for the ZH exposure of inanity

1 star for the actual inanity

...wound up choosing 5 stars

Do NOT follow this link or you will be banned from the site!