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Archive for the Economics Category

The Meltdown Continues, Subtly (Sept. 14, 2009)

Posted in Bailout/Bribe, Bernanke, Economics, Federal Reserve on September 14, 2009 by e-commentary.org

We mark 9/15 tomorrow as the day Lehman Bros. failed. By then, America had failed. Senator McCain had proclaimed the fundamentals of the economy to be sound, although they were fundamentally unsound. A “red-letter day” marks the day when America did something to stay “in the black,” albeit a small step, by not doing something. Lehman failed and was allowed to go the way of all flesh in a capitalist system; Lehman was allowed to die and file a petition in bankruptcy. One wonders if Lehman received this “special treatment” because of a personality dispute between its then president Fuld and then Secretary of Treasury Paulson. America would have been better off with more such personality disputes.

Bribing the perpetrators of other failed financial institutions was not the appropriate strategy to purge the poison in the financial system. Bush, Paulson and Bernanke should have done nothing prior to and after Lehman. Only the market could flush the filth out of a broken financial system.

Doing nothing would have had immediate and negative economic and thus political consequences. Doing something will have much greater and much graver economic consequences for a generation or more.

The appropriate decision is part economic and part moral. Future (and present, subtly) generations were jettisoned to keep a failed financial system limping along today and to delay the day of reckoning until someone else’s watch.

The Economic Terrorists own Congress and control O’Bama lock, stock and sinker. There is not much hope of change.

Bumper sticker of the week:

America: California Writ Large

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Bernanke 2.0 (August 31, 2009)

Posted in Bernanke, Economics, Federal Reserve, Greenspan, Volker on August 31, 2009 by e-commentary.org

Bush’s best appointment is one of O’Bama’s better reappointments. Bernanke is not the best choice yet is the right choice at this time. Yet there should be some reservation about and reflection on the entire Federal Reserve scheme.

The Founding Fathers as they are known could not agree on the creation of a central bank. The issue was at the heart of many early presidential elections. Every sovereign nation needs a central bank. The bankers created a central bank in 1913 and filled the vacuum. America must examine the role of the Federal Reserve and incorporate it into our constitutional system characterized by a separation of powers and accountability to the populace.

The central bank has a history of competent and independent chairmen such as Paul Volker who pursued some harsh policies with painful but necessary consequences without any significant political intervention.

Alan Greenspan, a conservative Republican, acted as the “central planner” of the economy for far too may years with devastating consequences. At least he has enough integrity and self-awareness to admit some mistakes. Some thoughtful political intervention was appropriate and necessary during his tenure.

Faith in the Fed. has dissuaded Congress from taking more direct control and dictating policy. Legislation such as the Humphrey-Hawkins Full Employment Act does set some guidelines and parameters. However, the Fed cannot and should not attempt to establish full employment.

At this time, Ben Bernanke is determining both “monetary policy” and “fiscal policy.” Fiscal policy has been and should be the province of Congress. Monetary policy should focus on price stability.

Who should address these matters? The politicians. That should give one pause and yet motivate us to act.

Bumper sticker of the week:

Price stability

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He’s Doin’ Okay (July 20, 2009)

Posted in Economics, Health Care, O'Bama on July 20, 2009 by e-commentary.org

O’Bama ran as a moderate and is running the country as a moderate. Six months into his first term, he’s doin’ okay.

O’Bama is trying to unwind World War III. Those who want America constantly at war are furious. America was once regarded as the “city upon a hill” by people and by peoples who had never heard of the notion of the “city upon a hill.” Talk to citizens overseas. In past years, they said that they liked individual Americans but not America. Now they like America. That sentiment may keep individual Americans from getting killed.

O’Bama is trying to right a wrong economy. Neither he nor his advisors recognize how thoroughly eviscerated the economy is today. Paul Krugman is getting a lot of air time contending that the country should spend, spend, spend, spend and spend. The country should not and cannot continue to spend, spend, spend, spend and spend without any real or realistic goal or strategy. The economy is far more intractable than they acknowledge. The Depression II is inevitable. The growing number of long-term unemployed will impact O’Bama’s employment. The undoing of the economy could be O’Bama’s undoing.

O’Bama has a healthy attitude toward health care reform. The cost of doing something is a concern, yet the cost of doing nothing is an even greater concern. He has not yet brought his trademark “Change” to the challenge of global climate change. In time, one assumes. He does seem inclined to reform such laws as the Mining Law of 1872 which has done much to ravage the environment. Little things are revealing.

Not a bad start, O’Bama.

(This is the 40th anniversary of mankind landing and walking on the moon. The “space race” may have been a continuation of diplomacy using other means. NASA followed the Biblical directive to turn military rockets into civilian space ships. The populace watched with awe and wonder at an awesome and wonderful achievement.)

Bumper sticker of the week:

One small step . . .

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Housing Revisited (June 22, 2009)

Posted in Case-Shiller/S&P Index, Depression, Economics, Greenspan, Housing, Recession on June 22, 2009 by e-commentary.org

Four years have past, four summers, with . . . the housing market continuing to deteriorate. The cover of the June 18 – 24, 2005 edition of “The Economist” depicts a falling brick with the words “House Prices” on it and leads with an article entitled “After the fall.” The article and earlier articles in the magazine were prescient in warning about the explosive rise and pending collapse of house prices. In conclusion, the article notes:

“Of course, by the time American prices begin to fall, probably sometime next year [2006], they will not be Mr. Greenspan’s headache. He will have retired and someone else will be in his job. If weaker house prices push the economy towards recession, the awkward truth is that America’s policymakers will have much less room to manoeuvre than they did after the stock market bubble burst. Short-term interest rates of only 3% leave less scope for cuts. In 2000, America had a budget surplus. Today, it has a large deficit, ruling out big tax cuts.

The whole world economy is at risk. The IMF has warned that, just as the upswing in house prices has been a global phenomenon, so any downturn is likely to be synchronized, and thus the effects of it will be shared widely. The housing boom was fun while it lasted, but the biggest increase in wealth in history was largely an illusion.”

In the last few weeks, when someone applied for a building permit to construct a 12 by 16 foot shed, too many commentators were ready to proclaim the housing crash ended. Few seem to realize that the housing market is just starting to crash. The infection is now impacting families with reasonable fixed-rate 30-year mortgages and long-term ties to their communities who are losing their jobs and will soon lose their homes.

Until housing prices drop to at least the extrapolated historical levels of a bench mark such as the S&P/Case-Shiller Home Price Indices, the decline in prices will continue. The Federal Funds Rate is zero which eliminates the primary tool to shape economic events. The Fed is creating other gimmicks to stimulate the economy that are unwise, unwarranted and unfounded in law. More later.

Bumper stickers of the week:

Still pushing hard on a string

Everything that goes down does not necessarily go up

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The Play For Our Age (June 8, 2009)

Posted in Economics, Health Care, Housing, Society on June 8, 2009 by e-commentary.org

The play to define and describe our generation is set in a mock up of a blighted and unkempt McMansion surrounded by an unlandscaped dirt yard. The first floor is exposed on the stage, the basement is below and out of sight, and the second floor is partially revealed. Each floor is stratified by age – the grandparents hide upstairs, the parents cope on the first floor, and the children/grandchildren exist in the basement and escape through their own side stairwell.

No generation can afford to live in the cave alone. The grandparents cannot afford any end-of-life convalescent care and must pass away at home. The parents transition from periods of employment to underemployment to unemployment and back. The kids cannot find steady employment and work part-time and odd jobs to contribute some rent.

The dialogue revolves around and keeps returning to the elusive American Dream and the ever-present American Reality. (Insert here: Witty and mordant asides, pithy and painful dialogue and trenchant and truculent commentary. Use incidents, comments and details to reveal and elucidate Truth.)

[See the “e-ssay” dated April 24, 2006 entitled “McMansions and the (Extended) Family of Tomorrow.”]

Bumper sticker of the week:

Life in the land of the freeway and the home of the Wave

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The Humongous Gamble (June 1, 2009)

Posted in Debt/Deficits, Economics, Spending on June 1, 2009 by e-commentary.org

Consider this obscenely gross and simplistic survey of recent presidents and the economy.

Reagan – pawned the future of the children. (“Deficits don’t matter.”)

Bush II – pawned the future of the grandchildren. (Encouraged deficits and the Debt to grow unchecked.)

O’Bama – pawning the future of the great grandchildren.

The economy and the budgets limped along during the Bush (“Read my lips”) I administration and grew at a promising but unsustainable and unsustained rate during the Clinton administration. O’Bama genuinely believes that he can pull off the “Great Hat Trick” and rescue the futures of three generations of children by spending federal money and stimulating economic growth. There is not enough unused productive capacity. The numbers simply do not add up no matter how you add them.

Bumper sticker of the week:

Watch Inflation Next

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Drought (May 25, 2009)

Posted in Economics, Global Climate Change on May 25, 2009 by e-commentary.org

From Tibet to California, drought seems to plague many agricultural areas in the world today. Crops are failing and will fail. Too little food is being raised and far too many dollars are in circulation. We will need a wheelbarrow of money to buy a bushel basket of wheat. A loaf of bread could cost $20 in a year. Food is a critical part of our national defense. An army marches on its stomach; civilians play and work on their stomachs. Things are drying up. Something is going on.

Bumper sticker of the week:

Boycott plastic water,

Boycott water in plastic bottles

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Beans and Bullets (April 6, 2009)

Posted in Depression, Dollar - World's Reserve Currency, Economics, Society on April 6, 2009 by e-commentary.org

The Democrats seem to be responding to the coming economic collapse by stockpiling rice and water. The Republicans seem to be responding by storing guns and ammo. Now may be the time to be bipartisan. Beans and bullets.

Will lead replace copper, nickel, silver and gold? Will daily transactions be conducted using 12 gauge shells and .22s as the medium of exchange, unit of value and store of account? Will the 12 gauge itself be used to facilitate exchanges? And will the 7.62 x 39 emerge as the world’s reserve currency?

The signs are unpromising, yet one sure hopes that these are not a sign of the times.

Bumper sticker of the week:

Guns and Butter

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1000 AUSAs (February 9, 2009)

Posted in Bailout/Bribe, Crime/Punishment, Economics, Economics Nobel, Law on February 9, 2009 by e-commentary.org

Some commentators are suggesting that the current economic crisis is a result of amnesia. Too many years have passed since the failure of Long-Term Capital Management, a business that pursued a short term business scam, they say. LTCM followed an economic formula developed among others by Robert Merton and Myron Scholes who both won the Nobel Prize in Economic Sciences in 1997. They won for “a new method to determine the value of derivatives.” Derivatives are a steal for those who do the stealing and costly for the taxpayers who ultimately bail them out. Their “value” to society: pricey. Does the Nobel Committee ever revoke its prize?

The problem, so the thinking goes, is that everyone simply forgot. No one needs to remember. Business types respond to current incentives and disincentives not to moral intoning or calls to virtue. The message being sent today is simple and straight forward: Crime pays. Not only the criminal act itself but the cost of remedying the criminal act.

The Justice Department should hire 1000 new Assistant United States Attorneys (AUSAs) to prosecute the massive fraud that has been perpetrated on Wall Street for the last half dozen years. This is not some undigested populist anger. Without the restoration of the rule of law, the economic culture of the country will continue to rot.

Bumper sticker of the week:

Crime pays in the US of A.

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The TARP Is A Trap (January 19, 2009)

Posted in Bailout/Bribe, Economics, TARP on January 19, 2009 by e-commentary.org

No one has offered a plausible explanation of or justification for the continuing Bailout/Bribe know as TARP (Troubled Asset Relief Program). [See the e-ssay dated October 6, 2008 entitled “A Bleak Day: The Trillions Dollar Tragedy”]. What was the problem in September, 2008 that had not been there for years and continues unabated today? A “credit crunch”? For the first time in years, the availability of credit was at a rational level. Those who were creditworthy were able to obtain credit; those who were not were not. We burned more money and more daylight while the underlying conflagration continued to rage.

Bumper sticker of the week:

Pouring water into a watering can does not water the plant; pouring water around the roots of the plant waters the plant.

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Archive for the Economics Category

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