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mises
Joined: 05 Nov 2007
Location: retired
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 Posted: Wed May 26, 2010 6:02 pm Post subject: |
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| The Happy Warrior wrote: |
| mises wrote: |
http://www.ft.com/cms/s/0/69bb33d8-678b-11df-a932-00144feab49a.html
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Obama adviser calls for new �mini-stimulus�
By James Politi and Edward Luce in Washington
Published: May 25 2010 00:41 | Last updated: May 25 2010 00:41
The Obama administration made a strong plea to Congress on Monday to grit its teeth and pass a new set of spending measures � dubbed the �second stimulus� by some economists � in order to help dig the economy �out of a deep valley�.
The call for action, which was made by Lawrence Summers, Barack Obama�s senior economic adviser, who urged Congress to pass up to $200bn (�138.9bn) in spending measures, came at the same time as Mr Obama asked Capitol Hill to grant him powers to cut �unnecessary spending�. |
Just enough to get them through the next election. |
Are you serious?
This makes me angry. The first stimulus was a mistake, but the second stimulus is holding our fiscal future hostage to the Democrats' political ambitions. |
Don't forget Bush's first stimulus (the rebate), cash for casa's, cash for clunkers, cash for washers, QE, MBS purchases. Democracy doesn't do severe structural adjustment very well. |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Thu May 27, 2010 7:44 am Post subject: |
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| mises wrote: |
| The Happy Warrior wrote: |
| mises wrote: |
http://www.ft.com/cms/s/0/69bb33d8-678b-11df-a932-00144feab49a.html
| Quote: |
Obama adviser calls for new �mini-stimulus�
By James Politi and Edward Luce in Washington
Published: May 25 2010 00:41 | Last updated: May 25 2010 00:41
The Obama administration made a strong plea to Congress on Monday to grit its teeth and pass a new set of spending measures � dubbed the �second stimulus� by some economists � in order to help dig the economy �out of a deep valley�.
The call for action, which was made by Lawrence Summers, Barack Obama�s senior economic adviser, who urged Congress to pass up to $200bn (�138.9bn) in spending measures, came at the same time as Mr Obama asked Capitol Hill to grant him powers to cut �unnecessary spending�. |
Just enough to get them through the next election. |
Are you serious?
This makes me angry. The first stimulus was a mistake, but the second stimulus is holding our fiscal future hostage to the Democrats' political ambitions. |
Don't forget Bush's first stimulus (the rebate), cash for casa's, cash for clunkers, cash for washers, QE, MBS purchases. Democracy doesn't do severe structural adjustment very well. |
Cash for the constitents of quivering incumbents ... the Kleptocratic Party's incumbent bailout package ... The 2010 votebuying fund. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Fri May 28, 2010 10:24 pm Post subject: |
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http://www.marketwatch.com/story/congress-weighs-pension-bailout-2010-05-27
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WASHINGTON�U.S. lawmakers are laying the groundwork for a possible federal bailout of some faltering pension plans that are jointly run by companies and unions.
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A 2009 study from ratings firm Moody's Investors Service estimated that the country's largest multi-employer plans have long-term deficits of about $165 billion. Some employer groups that are supporting efforts to help the plans question whether that estimate accurately reflects the government's potential exposure, however.
At a Senate hearing Thursday on the matter, Sen. Mike Enzi (R., Wyo.) termed the possibility of a broader taxpayer bailout "extremely dangerous." While expressing concern for workers, Mr. Enzi added: "We have to ensure the taxpayer is not on the hook."
Legislation sponsored by Sen. Bob Casey (D., Pa.) would provide federal financial assistance to a few of the more troubled multi-employer plans, including a Teamsters Central States fund and another Teamsters pension plan in western Pennsylvania. Labor officials said another 10 to 20 smaller plans also could benefit, though they would add relatively little to the proposal's cost.
Mr. Casey said his approach is not a federal bailout. He said troubled plans taking advantage would have to pay the first five years' worth of retiree benefits themselves.
His bill would make a federal agency, the Pension Benefit Guaranty Corp., responsible for the longer-term costs, and would cost taxpayers an estimated $8 billion over the next decade. It would cover workers in the plans whose employers have gone out of business. It also would boost benefits available to affected retirees to about $20,000 a year. Currently, when the PBGC helps a beneficiary of a multi-employer plan, the benefits are limited to $12,870.
A separate provision moving through Congress would buy time for struggling private pension plans through accounting changes that would let them spread recent losses over longer periods. That provision is part of a bigger economic-relief package sitting in Congress.
Although the outlook for Mr. Casey's proposal is uncertain, Congress likely will be forced to address the problem soon. The Moody's study estimated that multi-employer plans in the construction industry are only about 60% funded, with long-term liabilities of $158 billion versus assets of $85.5 billion. In the transportation industry, including many Teamsters plans, the overall funded status was 58.6%. |
Belligerent public policy. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Jun 01, 2010 6:13 am Post subject: |
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http://www.ecb.int/press/key/date/2010/html/sp100528.en.html
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Challenges for the Euro Area, and the World Economy
Speech by Lorenzo Bini Smaghi, Member of the Executive Board of the ECB
at �The Group of Thirty�, 63rd Plenary Session, Session I: The Crisis of the Eurosystem,
Rabat, 28 May 2010
The strategy is based on a model which may turn out to be inappropriate in the current conjuncture. Let me discuss some of the underlying assumptions of the model. First, the initial fiscal impulse was successful in avoiding a depression because it helped to coordinate agents� expectations, in the Keynesian or Knightian way of reducing uncertainty, thereby avoiding a vicious circle of recession and deflation. The direct impact on domestic demand may have been more modest, as shown in countries where the size of the fiscal stimulus was more contained but nevertheless fared equally well. Second, potential growth might have been severely affected by the crisis. As a result, the pre-crisis level of output, achieved in a bubble economy, would not represent a sustainable objective over the policy-relevant horizon. Third, the level achieved by the public debt in many countries may have impaired the effectiveness of further expansionary fiscal policy.
To sum up, while the fiscal expansion was successful immediately after the Lehman crisis, it may not be sustainable over time and may have to be corrected rapidly. Financial markets seem to be giving increasing attention to this hypothesis. And they have started to test it. |
This has been my argument from day 1. Using stimulus to try and return the economy to pre-bust levels (bubble levels) is a fools errand. The sustainable level of economic expansion will be the 2007 level minus the amount of that expansion that was due to the credit bubble (meaning debt - future consumption brought forward). Our governments are borrowing our future and blowing it.
The speech also indirectly covers the marginal productivity of debt, also called debt saturation. Someone on here (bacasper?) posted the graph a while back. New debt issued in a time of debt-saturation will impair future growth and not stimulate it.
In short, the speech is a large deviation from the Keynesian religion of central banks. Debt matters.
http://www.guardian.co.uk/business/2010/may/30/financial-crisis-again
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A worldwide financial crisis couldn't happen again. Could it?
Is this Global Meltdown part II? Unsurprisingly, most economists say no: stop that alarmist talk, ignore fresh signs of trouble in Spain, and look at the improving data. But with Britain and other countries barely back on their feet after the deepest downturn in decades, the doomsayers see double-dip recession, contagion, market mayhem and no easy way out.
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The bears are not so sure there are solutions, at least not any obvious ones. They argue that all the rescue remedies enacted in the first phase of this crisis � guarantees and recapitalisation for the banking system, public-sector assumptions of private-sector liabilities � cannot be repeated. In Crisis 2010, there is no obvious candidate to shoulder the burdens that governments took on in 2008 and 2009.
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It is a Japanese-style scenario where the state buys its own government debt, the private sector deleverages, risk on the taxpayer's balance-sheet rises and growth is hampered. When authorities print money to create inflation, there is little good news for households.
"In aggregate, this all has to be paid for by society as a whole. It's either going to be paid for by high tax rates or going to be paid for by inflation running ahead of wage growth," says Cooper.
A time of payback also means slower growth. "What this debt crisis is telling us is growth over the last couple of decades has been artificially elevated by excess debt and we now have to start paying that excess debt back by having a couple of decades of subdued growth."
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Janjuah stresses that concerns over sovereign debt have moved from being a future risk to a clear and present problem. Also, he argues that global growth will "slow hard" into the year-end as the impact of fiscal stimulus evaporates, and that Greece's woes will drain more money still from northern Europe.
"My fear � as seemingly supported by the political noises out of Europe over the last few days � is that when, come September/October, once we all realise Greece is badly failing its budget austerity targets, the politicians in Europe again usurp the sane eco-based voices and keep pumping money/wealth into a bottomless pit," he writes.
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However containable Greece's problems may be at the moment, the latest red flag raised in markets has worried even the optimists. Spain, with an economy four times the size of Greece, is widely recognized as the domino that must not be allowed to fall.
But there are worrying signs. The country has been hit by a property slump and with it the breakdown of a sector that once accounted for almost a quarter of the economy. Real-estate companies owe about $300bn to Spanish financial institutions.
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With unemployment above 20%, and draconian budget cuts � including a 5% salary cut to thousands of public sector workers � few believe that Spain will generate enough growth over the next few years to service its debt.
More turmoil may be ahead if the socialist government of prime minister Jos� Luis Rodr�guez Zapatero cannot reach an agreement on labour reform with the unions, who have threatened to call a general strike. The government's �15bn (�12.7bn) package of cuts squeezed through parliament by just one vote last week.
The government has reiterated its solvency and commitment to pay its debts, but investors want results, not promises. Spain is already being forced into paying higher interest rates to find buyers for government bonds. And the International Monetary Fund, fresh from approving a Greek rescue loan, is urging Spain to liberalise its rigid labour market and reform the regulation of cajas.
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If the market manages to move on from Madrid, politicians had better hope it does not turn its attention to the United States, the looming, silent presence in the crisis debate. Economists point out that the US, whose treasury secretary Timothy Geithner has just toured Europe to talk about debt, has yet to lay out its own fiscal consolidation timetable.
Tim Drayson at Legal & General Investment Management is worried that a lack of political will to tackle the US deficit will prompt a damaging spike up in American bond yields.
"Just the sheer size of the US would have global repercussions," he says. "Investors tend to be myopic and can only focus on one thing at one time. The focus right now is on Europe. If it moved to the US it would make what we have seen in recent weeks look mild."
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Debt is very important. We all have to live within our means. That includes states. When we do not live within our means, we suffer severe consequences. This includes states. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Jun 05, 2010 6:25 am Post subject: |
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It looks like I'm going to get my way:
http://www.ft.com/cms/s/0/786776b4-708f-11df-96ab-00144feabdc0.html
| Quote: |
G20 drops support for fiscal stimulus
By Chris Giles and Christian Oliver in Busan
Published: June 5 2010 11:54 | Last updated: June 5 2010 11:54
Finance ministers from the world�s leading economies ripped up their support for fiscal stimulus on Saturday, recognising that financial market concerns over sovereign debt had forced a much greater focus on deficit reduction.
The meeting of the Group of 20 finance ministers and central bank governors in Busan, South Korea, also dropped proposals for a global banking levy, instead giving countries leeway to do what they thought best for their domestic circumstances.
The communiqu� of the meeting made it clear that the G20 no longer thought that expansionary fiscal policy was sustainable or effective in fostering an economic recovery because investors were no longer confident about some countries� public finances. �The recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability,� the communiqu� stated.
�Those countries with serious fiscal challenges need to accelerate the pace of consolidation,� it added. �We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions�.
These words were in marked contrast to the G20�s previous communiqu� from late April, which called for fiscal support to �be maintained until the recovery is firmly driven by the private sector and becomes more entrenched�.
After the meeting, finance ministers acknowledged that the landscape had changed. George Osborne, British chancellor, claimed credit for the change. The new words were a �significant success in getting endorsement from the G20 for � a significant change in tone in the language on fiscal sustainability�.
Many other finance ministers accepted market realities had changed the G20�s policy, Christine Lagarde, French finance minister, said: �There�s a large majority for whom redressing the public finances is priority number one. For a minority, it�s supporting growth�.
Even Dominique Strauss Kahn, managing director of the International Monetary Fund who championed fiscal stimulus since January 2008, recognised the world was suddenly different. Asked whether he felt comfortable with the change in tone from the G20, he replied: �Totally comfortable. I am not the champion of fiscal stimulus, but the champion of right fiscal policy�.
But there were concerns around the G20 that the rush to reduce budget deficits, necessary though officials now thought it was, would undermine the recovery in the near term.
In a letter to the rest of the G20, Tim Geithner, US Treasury secretary, argued: �Concerns about growth as Europe makes needed policy adjustments threaten to undercut the momentum of the recovery�.
Ministers from many countries stressed the need for structural reforms to boost the potential for private sector growth
In private, G20 officials said that the US had been the country most concerned about the new austerity drive and feared for the momentum for global growth. In the meetings it had been frank in the meeting in calling for China to revalue the renminbi and for Germany to boost domestic demand, officials said.
Mr Geithner, himself, was open about his fears in his letter to the G20. �Concerns about growth as Europe makes needed policy adjustments threaten to undercut the momentum of the recovery,� he wrote, adding that fiscal tightening won�t �succeed unless we are able to strengthen confidence in the global recovery.�
When discussing reforms to the financial system, the G20 found there was no consensus for a global levy on banks. The decision to allow countries to pursue their own domestic agendas on new taxes on banks was particularly pleasing for Canada, which has long opposed the idea.
Jim Flaherty, Canadian finance minister, said: �The debate on � bank levies has been a distraction form the core issues and it has been apparent again from out meetings that most of the G20 members do not support the concept of a universal levy�.
Instead, the G20 �recognis[ed] there is a range of policy approaches� and that countries could develop their own thinking, �taking into account individual country�s circumstances and options�.
For countries such as the US and UK still wanting to go ahead with unilateral banking levies, the G20 agreed that they should be devised within a set of principles to minimise the opportunities for banks to pick and choose between different jurisdictions depending on the levies introduced. |
They'll turn of the monetary stimulus.
Anyways, this is on balance good news. The US is, as usual, being ridiculous with regards to macro policy.
This is the only way out. States, households and firms must decrease debt and return to sustaniability. This course of action will be extremely painful in the near term. If this FT piece is right, the EU is going to feel horrible pain.
Or maybe it will get really bad:
http://www.risk.net/credit/news/1652759/german-economic-strength-fallacy-charles-dumas-interview
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The only way it is going to get the population to feel confident in this set-up will be to re-establish the deutschmark. The Germans never wanted this thing in the first place. It was foisted on them by their government and by the great minds of Brussels. If the government had been rash enough to have a vote on the euro it would have lost it. The thing is even more unpopular now than it was then; they don�t really like having their wages suppressed in order to subsidise Italy and Greece. So in order to get the imbalance of the German economy rectified, you need to get consumption up. And one of the best ways to do that has to be to give the Germans back their currency.
In the medium term, the prospects are high that Germany will leave. The ECB is now, against even the will of its future president Axel Weber, buying government bonds. Now while that was presented and intended as a relief mechanism to support the markets and keep rates down for Greece, it is also, as it happens, a natural preliminary to splitting up the euro, since it socialises the losses. Essentially the ECB gets dumped with all of these bonds that are currently in the hands of the French and German banks. If the whole thing is dumped on the ECB at least you�ve created a situation where you�ve split up the euro without having a banking crisis on top.
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Sergio Stefanuto
Joined: 14 May 2009
Location: UK
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| Posted: Sat Jun 05, 2010 7:44 pm Post subject: |
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| Imagine being a reader of al-BBC and al-Guardian and seeing the socialist/federalist dream go up in flames. That's gotta suck. I bet they haven't been this depressed since Climategate. Just 10 years ago they were calling anyone who had misgivings about the euro xenophobic |
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chellovek
Joined: 29 Feb 2008
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| Posted: Sat Jun 05, 2010 9:13 pm Post subject: |
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| Sergio Stefanuto wrote: |
| Imagine being a reader of al-BBC and al-Guardian and seeing the socialist/federalist dream go up in flames. That's gotta suck. I bet they haven't been this depressed since Climategate. Just 10 years ago they were calling anyone who had misgivings about the euro xenophobic |
Good nod to Arabia with the whole "al-" thing, the further connection you then go on to make with Socialism is completely logical  |
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Sergio Stefanuto
Joined: 14 May 2009
Location: UK
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| Posted: Sat Jun 05, 2010 9:21 pm Post subject: |
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| Well, they've got to find some backward poverty and genocide cult to glorify. A few decades ago it was the Great Leap Forward in China that was a misunderstood quest for equality and social justice. |
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chellovek
Joined: 29 Feb 2008
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| Posted: Sat Jun 05, 2010 9:26 pm Post subject: |
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| First supporting the Great Leap Forward, now advocating more aid for Africa and suggesting the environment is in jeopardy! Is there no depth they won't plumb? |
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Sergio Stefanuto
Joined: 14 May 2009
Location: UK
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| Posted: Sat Jun 05, 2010 9:29 pm Post subject: |
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| chellovek wrote: |
| First supporting the Great Leap Forward |
The biggest ever manmade disaster
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| more aid for Africa |
goes straight into the pockets of governments, who are basically the Mafia
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| suggesting the environment is in jeopardy! |
Yes, we need to immediately implement the economic ideas of leftists in order to save the planet
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| Is there no depth they won't plumb? |
No |
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chellovek
Joined: 29 Feb 2008
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| Posted: Sat Jun 05, 2010 9:36 pm Post subject: |
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| The biggest ever manmade disaster |
What are you talking about? By most accounts it was an unmitigated success.
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| goes straight into the pockets of governments, who are basically the Mafia |
Governance in Africa is nothing short of honest. That's why there are many African immigrants back in West- to spread good governance to we stupid folk.
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| Yes, we need to immediately implement the economic ideas of leftists in order to save the planet |
Finally, somebody who understands it. Regulation and more dirigiste economic policies are the answer! |
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The Happy Warrior
Joined: 10 Feb 2010
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| Posted: Sat Jun 05, 2010 9:40 pm Post subject: |
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| chellovek wrote: |
| Sergio Stefanuto wrote: |
| Imagine being a reader of al-BBC and al-Guardian and seeing the socialist/federalist dream go up in flames. That's gotta suck. I bet they haven't been this depressed since Climategate. Just 10 years ago they were calling anyone who had misgivings about the euro xenophobic |
Good nod to Arabia with the whole "al-" thing, the further connection you then go on to make with Socialism is completely logical |
Please don't do this in this thread. The work mises and others have put into it is substantial. Its a quality link mine. I'm asking nicely. |
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chellovek
Joined: 29 Feb 2008
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| Posted: Sat Jun 05, 2010 9:46 pm Post subject: |
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| The Happy Warrior wrote: |
| chellovek wrote: |
| Sergio Stefanuto wrote: |
| Imagine being a reader of al-BBC and al-Guardian and seeing the socialist/federalist dream go up in flames. That's gotta suck. I bet they haven't been this depressed since Climategate. Just 10 years ago they were calling anyone who had misgivings about the euro xenophobic |
Good nod to Arabia with the whole "al-" thing, the further connection you then go on to make with Socialism is completely logical |
Please don't do this in this thread. The work mises and others have put into it is substantial. Its a quality link mine. I'm asking nicely. |
Yeah fair enough, sorry.
My truncated two-pence on the Depression question is that basically we got what was coming to us. If I were looking back on this from remote posterity, it would be hard to feel sorry for our society. I remember the boom years as being so smug, greedy, and self-satisfied that it made my head spin. I see it as being a general social failure, led by the finance sector on the one hand, and poor government on the other, but personally I see culpability in this mess running right through society.
Alas, being caught up in the middle of it, it's hard to see a way out in the near future. |
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The Happy Warrior
Joined: 10 Feb 2010
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| Posted: Sat Jun 05, 2010 10:04 pm Post subject: |
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| chellovek wrote: |
| The Happy Warrior wrote: |
| chellovek wrote: |
| Sergio Stefanuto wrote: |
| Imagine being a reader of al-BBC and al-Guardian and seeing the socialist/federalist dream go up in flames. That's gotta suck. I bet they haven't been this depressed since Climategate. Just 10 years ago they were calling anyone who had misgivings about the euro xenophobic |
Good nod to Arabia with the whole "al-" thing, the further connection you then go on to make with Socialism is completely logical |
Please don't do this in this thread. The work mises and others have put into it is substantial. Its a quality link mine. I'm asking nicely. |
Yeah fair enough, sorry.
My truncated two-pence on the Depression question is that basically we got what was coming to us. If I were looking back on this from remote posterity, it would be hard to feel sorry for our society. I remember the boom years as being so smug, greedy, and self-satisfied that it made my head spin. I see it as being a general social failure, led by the finance sector on the one hand, and poor government on the other, but personally I see culpability in this mess running right through society.
Alas, being caught up in the middle of it, it's hard to see a way out in the near future. |
I agree, especially with the part I bolded. We blame Bush too much, and though many of his personal qualities weren't representative of society's wishes, I do believe his most prominent policies were (tax cuts, the fully televised but voluntary participation Iraq War, spending > taxes).
I remember I was doing title abstracting in near D.C. in 2003, my first job after graduation. I would look at all these properties that halved again in value during the four years I went to school, and I'd shake my head. 'How could I afford a home in this market?' I wondered. So I opted out of the madness and elected to try my luck in South Korea.
But, things were supposed to change during the Depression. We were supposed to get a handle over ourselves and learn that it wasn't all about income. Instead, we still have frightening fiscal and financial policies, public and private. We still don't have the courage to tackle the big problems and make the big changes we need to make.
I'd despair if it were a healthy or productive response. |
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bucheon bum
Joined: 16 Jan 2003
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| Posted: Sun Jun 06, 2010 6:01 am Post subject: |
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Right now I'm reading a book about Robert Moses, who was responsible for building most of NYC's modern infrastructure. He also is responsible for most of the parks on Long Island and NY.
Anyway, a lot of his work was done during the Great Depression and it is interesting to read because it is so reminiscent of now. The Dems were going crazy with their spending, the GOP was whining about fiscal restraint (and consequently the WPA got killed), and in the early 30s they actually thought they were on the way to financial recovery.
And FDR apparently wasn't an intellectual powerhouse, just an excellent politician. Like every nearly ever other politician out there, self-interest was #1.
Do I have a point? I think people should familiarize themselves more on the Great Depression. I think it would be good guidance on what's going on now. The times are similar, but I don't think any politicians are cognizant of that. |
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