Ben Bernanke vs. Wilbur Ross: Good vs. Bad "Black Swans"

Below is a comment from my friend and co-author Fred Feldkamp -- Chris

On Thursday, Commerce Secretary Wilbur Ross made a speech that upset the Chinese delegation attending the periodic US/China discussion of trade issues in Washington DC.  The point Wilbur Ross and others in the Trump administration appear to misunderstand is highlighted by the attached comment discussing events of the "mini-crisis" of July to September in 2007.

US financial markets began to fall apart in July 2007 as the housing "bubble" began to burst.  People in DC were grumbling about China, in line with the mistake Sec. Ross made yesterday--they "blamed" Chinese trade deficits without understanding the "flip" side of trade imbalances.

On September 11, 2007, Ben Bernanke made a speech that included the first of the attached 5 quotes.  That quote is an axiom of international accounting that the Bush administration in general, and Hank Paulson in particular, failed to grasp.  They were mistakenly thinking in the same manner as Wilbur Ross stated yesterday.  

Both China and Germany have been angered by Trump team statements about trade deficits NOT because they disagree with good US economists on what "should be."  They disagree with Trump's team (including Ross) because what they are saying indicates that they are shockingly uneducated on the matters of basic economics by which Bernanke and others literally "saved the world" in 2007-9.

TRADE SURPLUSES AND DEFICITS, IN AND OF THEMSELVES, ARE SIMPLY ISSUES OF SUPPLY AND DEMAND.  IT IS ONLY THE WAY NATIONS "INVEST" THE FUNDS WHICH NECESSARILY BALANCE TRADE SURPLUSES AND DEFICITS THAT CAUSE HARM.  TRUMP, ROSS AND TEAM HAVE NOW PROVED THAT THEY DON'T GET IT.

The note attached does not touch on the current discussion.  What it says is that "we've been on this path before."  

We'd be idiots to accept what Trump and Ross are now saying because Bernanke was right in 2007.  Bush and Paulson finally figured that out a year later, but by then the world was at the depths of the worst financial crisis in history.  Obama's team proved they "got it" (Bernanke's point from his September 11, 2007, speech) when Obama named his economic team on November 20, 2008.

Because Paulson, Bush, Obama and Bernanke's successor (Yellen) all understood what Trump and Ross are now obviously missing, the world has now recovered from the Great Financial Crisis of 2008.  By their now obvious stupidity, however, Trump, Ross and this new team seem destined to push the entire world right back into that 2008 "hole."

May God help us, please.

Comments

venturen Fri, 07/21/2017 - 10:46 Permalink

you seem to think 2008 was bad...2008 was good...the rescues are the BAD PART. We are saving the  criminals at the expense of people! Capitalism ONLY works by allowing crime and gambling to fail.You appear to think we need to rescue the failed gamblers?

MalteseFalcon venturen Fri, 07/21/2017 - 11:12 Permalink

Because Paulson, Bush, Obama and Bernanke's successor (Yellen) all understood what Trump and Ross are now obviously missing, the world has now recovered from the Great Financial Crisis of 2008.  By their now obvious stupidity, however, Trump, Ross and this new team seem destined to push the entire world right back into that 2008 "hole."There was no recovery.  The world was not saved, but merely reprieved from a debacle that is inevitable.  The debacle is due to the actions of the world's "saviors" from 1987 to 2008.  So the can has been kicked another 8 years, and the price will be a much more serious debacle.The author is part of the campaign to blame it all on Trump.  This campaign will fail.

In reply to by venturen

Stackers MalteseFalcon Sat, 07/22/2017 - 17:05 Permalink

Are you fucking kidding me with this pile of nonsense ?
The only thing Ben saved in 2008 was his own ass and those of his puppet master banksters and their fundamentally flawed money system and currency exchange / trade system charade born out of the collapse of the previous charade concocted at the end of WW-II by the so called "people who get it" of the time.

Go sell that shit somewhere else

In reply to by MalteseFalcon

RagaMuffin Fri, 07/21/2017 - 10:51 Permalink

Curious article where critic and criticized are both wrong. Trump and  Ross may not get it but coming from anyone who says "the world has now recovered from the Great Financial Crisis of 2008" is not re-assuring.......

aqualech Fri, 07/21/2017 - 10:55 Permalink

Article is bullshit.  There are taxes and other restrictions on imports into China and Germany that we don't have.  They might not call them "tariffs" but they are there. They are unilateral and hamper the competitiveness of US exports. And it is not true that the "world has recovered from the 2008 crisis".  The world is on borrowed time, and just 10x more in hock to the Central Bank.  That's it.   We learned nothing but to look to the Central Bank for help which comes in the form of more indebtedness.

hooligan2009 Fri, 07/21/2017 - 11:16 Permalink

so... the author considers that using price fixing, tariff barriers, dumping, rigged exchange rates, slave labor etc which results in the creation of profit (by a communist country) simply has to be recycled into countries that have been exploited via buying of fairly valued assets - call the recycling of criminal profits INVESTMENT - and that makes everything alright?it is money laundering.the author is living in cloud cuckoo land and seeks the destruction of "closer to honest" trading in favor of state legislated foreign monopolies.naive as fucksomeone send him a couple of big dogs to teach him the meaning of debt servitude from overidulging in welfarism and overindulgence in theory of "oh that would be nice" - yah right, nice forever? when they shit on your carpet and bite your kids.

Solio Fri, 07/21/2017 - 11:17 Permalink

The U.S. will admister all of the justice that is required and bruild a big, beautiful world!We've got CGI and talking heads!

Umh Fri, 07/21/2017 - 18:38 Permalink

Bernanke is a part of the problem not the solution. We are still 'recovering' because they bailed out the big guys that fucked up.

Of course bailing out the government is the FEDs job. It is like trying to watch a shell game.