Larry Summers

The heart of the matter is “Big fish eat little fish.” There’s not enough tax money to continue swelling the fortunes of the super rich while making even a pretense of saving enough to pay the pensions and related social support that North American and European populations have been promised. Something must give.

This is an article I did for a local newspaper for which I write a regular column on economics. It was meant for a general audience. Size limitations required the article to be very concise, thus a "deep" philosophical treatise on theory, epistemology, and intellectual trends was not possible. But I think it came out well. What do you think?

We take a few minutes from our readers' busy time, to recommend they watch the movie Inside Job, which is probably one of the best documentaries on the market crash (this is a completely unsolicited and unpaid recommendation). If nothing else (and there is much else) the key redeeming feature of the movie is the complete obliteration of any credibility that former Fed director Fred Mishkin (and rumored Larry Summers replacement) and current Columbia business school dean Glenn Hubbard may have had.

The scam started at the top ...

Great idea ... Not!

William Black continues with his campaign to not only bring sanity and transparency to an administration wrapped in secrecy, legacy cover ups and fraud, but to finally do what had to be down two years ago: bring down the big banks, force a balance sheet restructuring at the TBTFs, and force a systemic reset which is the only thing that could bring the much promised "change for good" to this country. " Don't talk about doing the right thing -- do it -- and do it to a major contributor. Don't do it because it's a contributor, but because a bank that commits tens of thousands of frauds should immediately be placed in receivership." We once again hope that more people like Bill Black (if not he himself) will decide to run for president, and make the difficult choices necessary to begin the impossible task of truly fixing the mess this country finds itself in.

"In fairness, Larry [Summers] did a heck of a job," --Barack Obama-- "You don't want to use that phrase, dude."--Jon Stewart

The Treasury Secretary who surfs. The crisis was caused by excessive debt levels, the adjustment of which is now mostly behind us. Permanent investment tax credits for domestic R & D are on the way. So is a one year tax credit for capital investment. Stepped up spending on infrastructure is a big priority. The US will not engage in a debasement of its currency. There will be no non dollar reserve currency in our lifetimes. By any measure, the Chinese Yuan is undervalued. Promises, promises. Don’t expect to see any Geithner signed dollar bills soon.

After repeated admonitions from Larry Summers, Tim Geithner, and even President Obama to engage in more Keynesian stimulus, Germany's Chancellor Angela Merkel firmly rejected those demands and had the gall to suggest that such policies weren't right for Germany. Now she has the last laugh as Germany is recovering and we slip back into recession.

I have one question: Are Lloyd Blankfein, Lawrence Summers and Robert Rubin members of the NYC Harvard Club? If not, they should be...

• We hope SocGen accepts checks: Kerviel gets three years, told to repay $6.8 billion (Bloomberg)... does that mean Bernanke, one day, will be told to repay $23 trillion?
• Another predicition by Zero Hedge coming true - wifebeating Judge Peck will soon be forced to undo Lehman bankruptcy sale (Bloomberg)
• Soros Op Ed: America needs stimulus not virtue (FT)
• It's October. Is it time for a stock market crash? (Fortune)
• Art Laffer: The Bill Gates Income Tax  (WSJ)
• Bernanke Says Fiscal Limits Can Improve Federal Budget Path (Bloomberg)
• The Federal Reserve is selling paper gold and buying physical gold (Financial Sense)
• See what happens when you don't kill your currency fast enough - Europe Services, Manufacturing Cool as Retail Sales Decline (Bloomberg)
• Is 'Stupid' Replacing 'Silly' Good for Stocks? (RCM)

Let's cut to the chase: Larry Summers is leaving the Obama administration because he simply could not destroy the US economy fast enough. Which is why the next director of the National Economic Council should not be allowed to do a half-assed job. With that in mind, here are the best replacements for the now vacant post as suggested by Bloomberg's Jonathan Weil.

A week ago we wondered how it was that Pimco's Bill Gross, who is now rumored to be Larry Summers replacement as the QE infinity whisperer on the right side of President Obama, had an advance look into how the Fed will adjust its GDP forecast ahead of the general public. Today, we got the first half of the response: in a speech to the European Economics and Financial Centre in London, Minneapolis Fed president Narayana Kocherlakota has just lowered his GDP forecast from 3% to 2.5%. And most importantly, the Fed President's speech in decidedly QE-negative: our favorite quote on QE from a Fed president so far: "The Fed cannot literally eliminate the exposure of the economy to the risk of fluctuations in the real interest rate. It can only shift that risk among people in the economy. So, where did that risk go when the Fed bought the long-term bond? The answer is to taxpayers." Thank you Fed.

Rumor making rounds now that either of Pimco's top two men could replace the man who destroyed Harvard's endowment. Should either of these two be forced to quit Pimco, it would mean that QE would have to be massive to make sure that the Fed is a backstop of last reserve in case the next head of Pimco is unable to replicate his predecessor's success.

Guess the old man is not going to fill Larry Summers sweaty shoes:

• Volcker: "So Difficult" To Dig Out Of Recession
• Volcker: Will Take "Long Time" To Repair Economy
• Volcker: "Underlying" market problem is "too big to fail" issue

and FTW:

• Volcker: Mortgage market is "absolutely broken"