Rational Fear: Still “Unusually Uncertain” (November 8, 2010)
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K “Think about it. Some maintain the blind conviction that the business cycle is ordained by nature like the tides to rise after it falls.”
J “Faith in nature. This season is bad so that the next season will be good because that is the way it is. Good luck.”
K “Some desire to return to unrestrained personal consumption and unbridled economic growth. Even if it is attainable at this time it is not sustainable over time.”
J “Faith in unchecked consumption. With oil peaking and a world population that has not peaked, the prospects are not promising. America had its opportunity to consume. Other countries, particularly China and India, now want and have earned their opportunity to consume. If the oil holds out. And if the coal does not kill us.”
K “Some believe that new technology will be pulled out of the hat and pull us out of this mess.”
J “Faith in technological salvation. The technology sector likely will continue to grow but not enough to propel the entire economy. The tech world is producing some sexy developments and neat gadgets.”
K “I’ve always supported free trade when it is truly free. Decades ago, I could see that globalization would shift massive numbers of American jobs overseas. They said the solution is to train and retool the America workforce. The workforce is not retrained and retooled and may not be retrainable and retoolable. Not many commentators in academic economics or in the financial press have a clue.”
J “It is one thing to listen to Greenspan and know that everything he says is wrong, yet who is getting it right. Knowing which way not to go in a maze is not the same as knowing which way to go. Volker has a clue, yet he is on the sidelines.”
K “Bernanke* has a clue. Now that monetary policy has effectively failed, he is enacting what is effectively fiscal policy. Fiscal policy is the province of the legislature, the Congress. But Congress is broken. The Humphrey-Hawkins Full Employment Act, an act of Congress, requires the Fed to promote full employment. Perhaps he is actually trying to stimulate employment.”
J “But there are no jobs, now or in the future. Quantitative Easing II is nothing more and nothing less than TARP II implemented by the Fed rather than Congress. The Fed’s purchase of bonds is nothing more and nothing less than a slick way to provide another bribe and bailout to Wall Street.”
K “That is hard to dispute unless there are a few random hires here and there. And he continues a tradition at the Fed of lying or at least deceiving the public. He can do something. He and the Fed regularly issue ‘Remarks’ and ‘Speeches’ on all manner of topics. He should direct the Fed to issue a finding that a single bank with deposits and assets of more than 100 billion is a clear and present danger to the American economy and to the security and well-being of the Republic. If a bank or other financial institution does not enter into an Enforcement Action with the Fed, close the resources of the Federal Reserve to the bank or financial institution. In effect, require banks to downsize to manageable sizes. They must be small enough to fail and to play well with others.”
J “Won’t happen. Our democracy is now a kleptocracy.”
K “That won’t help employment, however. But he could pull it off. He can be bold. He would have to play all his capital. But for us citizens, however, the only things we have to fear are so many very real fears.”
. . .
Bumper stickers of the week:
The only things we have to fear are so many very real fears.
Don’t end the Fed, mend the Fed.
“And as things fell apart/Nobody paid much attention.” “(Nothing But) Flowers” – Talking Heads
“This country’s hard on people, you can’t stop what’s coming.” No Country for Old Men movie (2007)