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12:56 AM on 05/04/2012
Yep, another smart guy who thinks Bernanke is an idiot. Wake up, guys. Like all central bankers, he is charged with the responsibility of two things: printing money and managing inflation expectations. Bernanke has been brilliant on both counts.
07:50 AM on 05/04/2012
LMAO
12:54 AM on 05/04/2012
In all of this, it should be noted that central planning doesn't work since no one has enough information to do it accurately. This includes the Fed unfortunately.
09:03 AM on 05/04/2012
If 'central planning' doesn't 'work', then every single company on earth should immediately stop what it is doing, because every single company does 'central planning'. Think about it. Should corporate strategic strategy be 'planned' by the workers on the factory floor? Probably not (although I would certainly get them involved).

The reality is that, yes, there is a need for central planning, but not central micro-managing. There is a big difference. I was laid off twice, but still prefer that to, say, working in a Soviet tractor factory, building tractors that no one can use.

Finally, the Fed has done a wonderful job of containing inflation for a generation, and remains wary of it. Good. The Fed has also done about all it can to with the monetary tools at its disposal, but the real solution for recession is fiscal, not monetary.
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Viper
Former repub, still repenting
11:11 PM on 05/03/2012
Economist Mike Kimel notes that the five former Democratic Presidents (Bill Clinton, Jimmy Carter, Lyndon B. Johnson, John F. Kennedy, and Harry S. Truman) all reduced public debt as a share of GDP, while the last four Republican Presidents (George W. Bush, George H. W. Bush, Ronald Reagan, and Gerald Ford) all oversaw an increase in the country’s indebtedness.[18] Economic historian J. Bradford DeLong, former Clinton Treasury Department official, observes a contrast not so much between Republicans and Democrats, but between Democrats and "old-style Republicans (Eisenhower and Nixon)" on one hand (decreasing debt), and "new-style Republicans" on the other (increasing debt).[19][20] David Stockman, director of the Office of Management and Budget under President Ronald Reagan, as op-ed contributor to the New York Times, blamed the "ideological tax-cutters" of the Reagan administration for the increase of national debt during the 1980s.[21] Bruce Bartlett, former domestic policy adviser to President Ronald Reagan and Treasury official under President George H.W. Bush, attributes the increase in the national debt since the 1980s to the policy of "starve the beast".[22][23] While noting that that George H.W. Bush's budget deal was one of the main reasons for improvement in fiscal situation in 1990s and ultimately for budget surplus, Bartlett is highly critical of George W. Bush for creating budget deficits by reducing taxes and increasing spending. [24][25]

... http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms
09:05 AM on 05/04/2012
Read "Broken Government" by John Dean.

It has been the strategy of the Republican Party for a whole generation (over thirty years) to strangle the federal government in debt, so it must slash spending to survive. That strategy has worked well for them, and they have nearly destroyed the country as a result.
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montestruc
War is the health of the state--Randolph Bourne
09:06 AM on 05/04/2012
Congress has far more control over spending than the president. Doing it by presidents that way is dishonest.
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Viper
Former repub, still repenting
11:10 PM on 05/03/2012
2001 vs. 2012

The U.S. budget situation has deteriorated significantly since 2001, when the CBO forecast average annual surpluses of approximately $850 billion from 2009–2012. The average deficit forecast in each of those years as of June 2009 was approximately $1,215 billion. The New York Times analyzed this roughly $2 trillion "swing," separating the causes into four major categories along with their share:

Recessions or the business cycle (37%);
Policies enacted by President Bush (33%);
Policies enacted by President Bush and supported or extended by President Obama (20%); and
New policies from President Obama (10%).
Wiki... http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms

Wall Street spent 300 million to do away with regulation and this mess is what they bought, just like 1929!



Note Bush was handed 5.6 trillion in surpluses for next ten years. Turned that instead into 6 trillion in new debt, Handed a 1.7 trillion deficit to Obama in Bush last budget year(2009, began 2008, OCT 1.. before Obama even elected) and 12 trillion in new projected debt.

Population under Bush increased 30 million, private sector jobs created inder Bush... - 500K.

Government jobs under Obama and Clinton down, stock markets more than doubling...Lowest increase in government spending per capita under Obama and Clinton(lowest ever ) over the last 50 years.
Highest.. Bush last Budget years and under reagan!


Regards
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montestruc
War is the health of the state--Randolph Bourne
09:05 AM on 05/04/2012
Years BHO was in office.

I can agree that considerable waste of public funds took place on Bush43 's watch, but he did not crash the planes, and Clinton did not end the standoff with Iraq on his watch. He could have pulled US troops out of Saudi Arabia and Kuwait, had he done so, OBL probably would not have attacked us.
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Viper
Former repub, still repenting
11:02 PM on 05/03/2012
The Pew Center reported in April 2011 the cause of a $12.7 trillion shift in the debt situation, from a 2001 CBO forecast of a cumulative $2.3 trillion surplus by 2011 versus the estimated $10.4 trillion public debt we actually face in 2011. The major drivers were:

Revenue declines due to the recession, separate from the Bush tax cuts of 2001 and 2003: 28%
Defense spending increases: 15%
Bush tax cuts of 2001 and 2003: 13%
Increases in net interest: 11%
Other non-defense spending: 10%
Other tax cuts: 8%
Obama Stimulus: 6%
Medicare Part D: 2%
Other reasons: 7%[39]
09:17 AM on 05/04/2012
Thanks for the post.

Several things jump out at you, looking at these numbers.

1. If we really want to address the debt, then it is important to address the biggest drivers that caused it: revenue decline in recession, Bush tax cuts, and military spending.

Note that the biggest factor of all is decreased revenue, due to recession. That tells me right off that stimulating the economy to get growth back on track is more likely to be successful than pursuing austerity policies that are guaranteed to slow growth.

I would argue that the Bush tax cuts should go away. All of them. Yes, it might slow down things a bit, but not for long. The resulting tax rates would still be waaaaaay lower than they were in the American economic heyday.

Regardless what the warmongers tell you, we DON'T need a military budget larger than the next four largest militaries on earth, or whatever it is.

2. The increases in net interest, at 11%, is a time bomb. Right now, interest rates are low. What happens to the cost of servicing the debt, when interest rates return to historic norms? That would make this number explode, for sure.

I suspect that there are several of you readers (and former homeowners) out there who can tell us what happens to your budget when your ARM rates jump higher, while your revenue stays about the same! Same effect.

So look out!
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HUFFPOST SUPER USER
PotomacOracle
Monetary Sovereignty and MMT
08:27 PM on 05/04/2012
An autonomous currency issuer like the U.S. is not constrained by revenue to spend. You've been mislead if you think that a fiat currency nation needs revenue to fund its expenditures.
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Viper
Former repub, still repenting
11:01 PM on 05/03/2012
Recessions Since 1950 and Party in WH at Onset

Jul 1953 - May 1954 Republican
Aug 1957 - Apr 1958 Republican
Apr 1960 - Feb 1961 Republican
Dec 1969 - Nov 1970 Republican
Nov 1973 - Mar 1975 Republican
Jan 1980 - July 1980 Democrat
Jul 1981 - Nov 1982 Republican
Jul 1990 - Mar 1991 Republican
Mar 2001 - Nov 2001 Republican
Dec 2007- Jun 2009 Republican

There have been 22 recessions since 1900.
16 have started under Republican leadership, 6 under Democrat leadership
http://www.nber.org/cycles.html

Based on 100 years.. it seems the cause is Repubs!
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Viper
Former repub, still repenting
11:00 PM on 05/03/2012
October 14, 2008
Bulls, Bears, Donkeys and Elephants

By TOMMY McCALL
Since 1929, Republicans and Democrats have each controlled the presidency for nearly 40 years. So which party has been better for American pocketbooks and capitalism as a whole? Well, here’s an experiment: imagine that during these years you had to invest exclusively under either Democratic or Republican administrations. How would you have fared?




As of Friday, a $10,000 investment in the S.& P. stock market index* would have grown to $11,733 if invested under Republican presidents only, although that would be $51,211 if we exclude Herbert Hoover’s presidency during the Great Depression. Invested under Democratic presidents only, $10,000 would have grown to $300,671 at a compound rate of 8.9 percent over nearly 40 years.

I would say its because under repubs polcies over 100 years, the stock makrte and he economy fails badly!

Have to prop up a money supply becuase of half of all finanical welath in the world going poof under repubs.. ist just part of very bitter medicine.. ist the result of deregualtion, no jobs created under Bush and turning masive surpluses into massive debt under Bush..
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HUFFPOST SUPER USER
MassWG
01:48 AM on 05/04/2012
...here’s an experiment: imagine that during these years you had to invest exclusively under either Democratic or Republican-controlled Congresses. How would you have fared?
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04:24 AM on 05/04/2012
Ask Senator Lamar Alexander how he fared? They trashed the United States with this default non-sense and he ran far away from the the lunatic fringe of Team Republican.
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Viper
Former repub, still repenting
10:57 PM on 05/03/2012
We are in this mess, because of Finance going from 5% of our economy in 1980 to 40% of our economy now( or more) and industry down from 40% to just 5% private industry. the resulting massive trade deficts, the cause of deficits and of course the cost of the economy detroyued by repub economics along with demand from a shrinking and increasingly poor middleclass.

Stagnant wages for 30 years. A deregulated Wall Street which makes nothing, CDOs, derivatives , synthetic derivatives, thats supported outsourcing, sent U.S. capital to China, building new plants there... Deregulated commodities since 2001, that increased oil/energy and food 400% under Bush along woth 300% increases in helath insurance, such that once paymenst people could afford they cant now..

Actaully the stock market has had the best year since the last time there was a Dem president!

I could not read all you wrote.. too painful.. when to i get to the part that 6500 was down... 13,300 is not and where Wall Street killed the conomy and that will take decades to repaid as do all Finanical Depressions...
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HUFFPOST SUPER USER
MassWG
01:51 AM on 05/04/2012
"Finance going from 5% of our economy in 1980 to 40% of our economy now( or more) and industry down from 40% to just 5% private industry. the resulting massive trade deficts,
A deregulated Wall Street which makes nothing, CDOs, derivatives , synthetic derivatives, thats supported outsourcing, sent U.S. capital to China, building new plants there..."

Good thing Clinton had nothing to do with this.
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HUFFPOST SUPER USER
PotomacOracle
Monetary Sovereignty and MMT
08:33 PM on 05/04/2012
We don't send capital to China. That's nonsense. www.moslereconomics.com "The Seven Deadly Innocent Frauds of Economic Policy"
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realitytrumpsbull
Two 'alves of coconut!
10:19 PM on 05/03/2012
So, the DOW's at record highs, and stocks are 'depressed'? I see. But, I'm not entirely sure I understand....
12:08 AM on 05/04/2012
not when priced in gold, euros, oil. It is inflated by a weak $
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montestruc
War is the health of the state--Randolph Bourne
09:12 AM on 05/04/2012
As the other fella said, the Dow is in free fall in terms of value when measured in weight of gold.

http://www.gold-eagle.com/editorials_08/hickel112108.html
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HUFFPOST SUPER USER
PotomacOracle
Monetary Sovereignty and MMT
08:34 PM on 05/04/2012
Thye DOW is fixed by the Fed's Plunge Protection Team. Check it out...Google
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Steelsil
Warren/Grayson 2016! Yes We Can!
10:01 PM on 05/03/2012
What perfect timing - the Dow just returned to its all time high.
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montestruc
War is the health of the state--Randolph Bourne
09:13 AM on 05/04/2012
Low in terms of value in weight of gold.

http://www.gold-eagle.com/editorials_08/hickel112108.html
09:21 AM on 05/04/2012
Not yet.
09:54 PM on 05/03/2012
Money generated from deficit spending and loose monetary policy is just like the "Jelly Donut" the author talks about--it's EMPTY CALORIES.

If we were talking about making an adjustment as a correction of an economic blip, OK, stimulate away.

But our economy has deep-seated structural problems that aren't going to be solved by quick, painless fixes. We've already stimulated more than enough to solve the kinds of problems stimulus can solve, and it hasn't worked. By throwing all this funny money around, we're masking and perpetuating and even institutionalizing the structural problems in our economy, and in so doing, they're never going to get fixed. They're only going to get worse.

I'll give you a great example--the housing bubble. As home prices skyrocketed, TRIPLING in a six year period, people had money to throw around, from refinances, home equity loans, sales proceeds, AND the real estate industry as a whole boomed.

This gave the economy a gigantic shot in the arm, but it was dependent, not on the development of new industries, new markets, new services, but on a short term, unsustainable, inflationary increase in home prices nationwide. And it went bust. And it took a lot of other stuff down with it, like a lot of banks. And Shearson-Lehman. And over a trillion in taxpayer dollars.

THAT'S the kind of "economy" you generate by overblown Fed actions and deficit-spending "stimulus"--an unsustainable, short term bubble that ends up causing more trouble than it solved.
12:52 AM on 05/04/2012
People understandably want to avoid pain. What they really should want to avoid is the bubble. Pain is inevitable after that.
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HUFFPOST SUPER USER
lw1
Jobs! Jobs! Jobs!
09:37 PM on 05/03/2012
It seems strange there is no talk about jobs and making and selling stuff in the USA that people need. Wall Street seems much more concerned about replacing Main Street with Corporate strip malls filled with good from china and other cheap labor sources. Can we really trust a Wall Street guy to save us?

The gop's push for austerity has cut 400,000 government jobs at all levels. Is our economy no longer about jobs?
http://www.salon.com/2012/05/03/behind_our_stalled_economy/
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MassWG
02:02 AM on 05/04/2012
Well, which do you want: real jobs that make stuff to export and reduce the twin deficits, or make-work government jobs that produce nothing and ADD to the twin deficits?

I hope you make the right choice.

Mr. Reich is under the mistaken impression that consuming more than you produce is the road to prosperity, even though that is exactly what has led to the ten trillion dollar trade deficit, which is essentially financed by the national public debt. Since the county began, we have saved/invested/produce our way to greatness. It is only since around 1970 that we changed that to a mode of borrowing/spending/consuming as a means to economic growth... and here we are. Why is anyone surprised?
09:30 AM on 05/04/2012
This all started with the inflation of the 70's, caused by our dear Saudi friends.

Our government inflated the currency wildly, in order to prevent financial collapse. If the currency had not been rapidly inflated, the spike of oil prices would have been HUGELY deflationary, and would have caused economic chaos.

That financial shock in the 70's was used to good advantage by the right to drive doubts about the economic policies that stood us in such good stead since FDR. This led to the destruction of the unions, destruction of American jobs, tax rollbacks for the wealthy, etc., which have all resulted in hollowing out the middle class and creating an incipient banana republic of the United States

This is what many of us predicted when Reagan took office.

Indeed. Why is anyone surprised?
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lw1
Jobs! Jobs! Jobs!
10:50 AM on 05/04/2012
The gop have been the big borrowers. The man that took us from being the world's largest creditor to the world's largest borrower in 8 years was Reagan. Nixon took us off gold in the 70's. And since the economy always does better under Democrats, yes I hope everyone makes the right choice. Right now our economy needs stimulating every way possible. And many government jobs like teachers for instance, are important to our future and should be well paid.
09:27 PM on 05/03/2012
Let me sum this guy's argument up for you in a nutshell. Low interest rates have an immediate stimulus effect on the economy, but that effect is brief and quickly fades away. Low interest rates have a persistent negative effect on the economy as well, because people aren't getting any return on bonds, bank accounts and CD's, and therefore, have less money to spend, and this effect lasts as long as interest rates are kept artificially low.

The persistent negative effect of low interest rates has superseded the immediate positive effect of low interest rates. But because the housing market was allowed to superinflate (among other reasons), the Fed simply cannot raise interest rates to normal levels--levels that allow for reasonable borrowing costs and reasonable returns on investments.

Our economy will remain dangerously on the edge of meltdown, and will stay sluggish, until the Fed can normalize interest rates, because they've utterly abused their power to lower rates, and there is no prospect of that happening in a perceivable future.

And this is why Paul Krugman and his ilk are DANGEROUSLY wrong.
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HUFFPOST SUPER USER
MassWG
02:09 AM on 05/04/2012
In addition, low interest rates are part of the feedback loop of increased importing, which leads to surplus dollars abroad, which leads to continued demand for buying our government debt, which feeds back into continued government spending and downward pressure on interest rates.

Paul Krugman and his ilk believe destroying wealth takes precedence over creating wealth, and THAT is DANGEROUSLY wrong.
ubrew12
that crazy uncle from Amarcord
08:50 PM on 05/03/2012
Imagine that the global economy is a balloon. Everything inside the balloon is us, including our money, our 'dollars'. We trade in those dollars, we save them, and some of us, a very few, get to create them, in the trillions, out of thin air. The balloon does not exist in a vacuum. Inside the balloon, complexity is being created - the purpose of all life. To do this, something must pass through the balloon, to get turned into complexity. What is this? Raw materials: energy, sunlight for crops, fresh water, minerals. Now, if since the year 2000 these materials haven't really changed in their usage. Sure, they might have grown some, but that's because the balloon itself grew. So, in proportion to the balloons size they really didn't grow, they remained constant. Well, if their demand is constant, and their supply is constant, why not use THESE external inputs to our balloon as our 'reserve currency'? Don't they constitute inputs to the balloon that don't really change in their value and need? Don't they, thus, represent TRUE value, rather than the dollar bill, which has whatever value Ben Bernanke puts on it? So consider: since 2000, the stock market has been falling continuously. That's when its valued in silver, gold, or oil. These items may WELL be a better 'reserve currency' against which to measure the stock market than dollar bills. If so, what they say about our economy is not good.
09:32 PM on 05/03/2012
Correct. The increase in stock prices right now are illusionary. They simply reflect inflation.

And by the way, guys like Krugman will continue to argue, misleadingly and disingenuously, that the Fed has done just right with all this artificial stimulus because the US hasn't had any inflation problems. Paul, bubbie, you know as well as I do that the housing bubble WAS inflation, of course, and exactly the kind of inflation the Fed is tasked to avoid.

The Fed's loose monetary policy and artificially low interest rates caused the housing bubble. To say their policies were vindicated because the US hasn't been troubled by inflation is the most dangerous kind of lie--the kind of lie Fox News tells all the time, just like Krugman.
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Steelsil
Warren/Grayson 2016! Yes We Can!
10:03 PM on 05/03/2012
I remember when a candy bar cost a nickel.  Inflation has been constant all of my life, and I'm 61 years old.
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Viper
Former repub, still repenting
11:12 PM on 05/03/2012
2% annual inflation is almost a planned rate ... its considered necessary for growth... the worst situation is deflation, no demand, thats called a depression...
08:29 PM on 05/03/2012
The S&P just hit a new high and this guy says stocks are depressed. Baloney.
09:34 PM on 05/03/2012
They are depressed, if you measure them by oil, commodity, and precious metal prices. In other words, this "high" is just inflation--a decline in the real value of the dollar. Check out gas prices lately?
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HUFFPOST SUPER USER
Steelsil
Warren/Grayson 2016! Yes We Can!
10:04 PM on 05/03/2012
In other words, the stock market is undervalued.  No wonder the Dow is climbing.  Here's how you make money in the stock market - buy low, sell high.  So buy!
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Viper
Former repub, still repenting
11:14 PM on 05/03/2012
Oil was 147/bbl in July of 2008, now 4 years later 105/bbl...

Gasoline in June 2008 was 4.10, now under 3.90 4 years later... and gasoline prices are up becuase its now are largest export, we are awash in it
LibertyWorksBest
All socialism---is crony socialism!
10:19 PM on 05/03/2012
Ahhhhhhhhhh, David Einhorn is the King of the Wall Street shorters. This guy made a fortune for himself & his investors calling the banking crisis, especially Lehman Bros. Call his opinions baloney at your own risk, he's one of the shrewdest investors in the business.
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HUFFPOST SUPER USER
Steelsil
Warren/Grayson 2016! Yes We Can!
01:33 AM on 05/04/2012
In other words, he is trying to manipulate the market, which he has probably sold short.