Someone gave me a link to David Stockman’s Opinion piece on the Sunday New Yoork Times, “Sundown in America.” I’ve always like Stockman in overview, ever since his “pigs at the trough” opinion of the “reforms” of the early Reagan years. I still can recall watching him through C-Span telling Congress to stop lying about unfunded liabilities, and getting fired for it.
But several things he gave as “givens” in this piece are as illusory as the Ryan budget.
Citing them by direct quote, here is some specific insight for the prudent speculator”
Here is the place where Greenspan, tho morally corrupt, was noetically sound:
” Federal Reserve have expanded their balance sheet sixfold (to $3.2 trillion from $500 billion). Yet during that stretch, economic output has grown by an average of 1.7 percent a year (the slowest since the Civil War); ”
No. Not at all. By pretending that dollars are real, when he has just said they are not: ” an egregious flood of phony money” he can now go on and say whatever he wants to, since nobody is supposed to notice the big lie.
Let’s make this “real” : the price of the computational power in your i-phone has fallen in the last 14 years from roughly $40k to 1/2K–”therefore” you are 80 times worse off than in y2k, making this period the worst time in the gross economy simnce 11k bC when an asteroid exploded over the Canadian ice shield.
Greenspan’s argument, early on, was that wages that went up as productivity went up are non-inflationary. Since money is nothing but a proxy for energy, the productivity of the goods and services is a natural multiplier for the “correct” amount of money for the economy.
“So the Main Street economy is failing while Washington is piling a soaring debt burden on our descendants”
OR: the federal government has added $10 trillion in debt, all of which was transferred from the “future” to the balance sheets of the top 0.05–5% of economic entities, “households.”
“But the flood of liquidity, instead of spurring banks to lend and corporations to spend, has stayed trapped in the canyons of Wall Street, where it is inflating yet another unsustainable bubble. ”
Yes. The tactical question then is “Who is preventing any other event?” and the answer is purely the Wall St contingent running the GOP. This is perhaps nowhere more clearly shown than in the impediments created to bring a more than a year delay in implementing the capital formation provisions on the 2012 “Jobs Act” which disintermediate Wall St from the actual “job creation” of starting new businesses, rather than leaving “small business” as low hanging fruit for the Bain Capitals of the financial world to rape.
“[p]ropping up old industries (agriculture, automobiles” Well, yes. So let’s stop agricultural subsidies, starting perhaps with such things as the tax subsidy given to the hedge fund that rolled up so much of the Michigan blueberry industry, extending to stopping subsidies for the fuel production being diverted to food growing, thence to the depreciation allowance of farm equipment that has been such a driver of unemployment in the past 50 years. In prudent speculation
you don’t get to pretend people can stop eating as a means of achieving fiscal order, or that the entire economy can work from home and ship on EBay.
“The state-wreck originated in 1933, when Franklin D. Roosevelt opted for fiat money (currency not fundamentally backed by gold)”–that is when FDR declared gold at $32, rather than the standing $20, and told those who didn’t like it to suck it, since those opposed were almost universally bankers trying to bail themselves out of the AIG like disaster of Credit Anstalt.
“Under the exigencies of World War II (which did far more to end the Depression than the New Deal did),”
Right, because wars always create so much more new wealth and life expectancy. Someone rational might note the tax rates of WWII and its debt retirement–rather than raping the future as Bush II did to pay for a larger war machine than it took for WWII–had something to do with stabilising the economy, as well as the billions in federal subsidies to heavy industry having a rational Keynesian effect on the 85%, at small cost to the 15%.
“Then came Lyndon B. Johnson’s “guns and butter” excesses, which were intensified over one perfidious weekend at Camp David, Md., in 1971, when Richard M. Nixon essentially defaulted on the nation’s debt obligations by finally ending the convertibility of gold to the dollar” for exactly the same reasons FDR had–gaming by European bankers. The difference is that Nixon imposed a “free market” solution to replace the “rigged market” plan favoured by Wall St types in London, Paris and Bonn.
It surprises me that Stockman glosses over, by dint of some emotional prejudice that creates self-denial that the real culprit was the 1967 changes to Federal book-keeping that put unfunded liability off-book (a felony for you, me or the current GE) allowing Viet Nam to be fought with a never ending series of new credit cards being used to make minimum payments on the old–exactly Stockman’s problem with Congress in the 80s.
“— arguably a sin graver than Watergate” Anything is “arguable” –or elsethe laughable sociopathy of a Paul Ryan would be a cause for his commitment to an institution other than Congress.
” as they did after the 1987 stock-market crash — was reinforced by the Fed’s unforgivable 1998 bailout of the hedge fund Long-Term Capital Management. ” The only thing “unforgivable” about that was Greenie’s simultaneous insistence that the games that created the LTC disaster could not be regulated, made transparent, or criminalised; since they suited the movement of wealth from actual producer–labour–to the self-entitling Ayn Rand master class of sociopaths. I have argued here previously that the unconstitutionality of ex-post facto law should be suspended until AG and Paulson are executed for this.
” Had President Bush and his Goldman Sachs adviser (a k a Treasury Secretary) Henry M. Paulson Jr. stood firm, the crisis would have burned out on its own and meted out to speculators the losses they so richly deserved.”
That’s a wonderful idea. A desirable outcome, and a complete denial of the economic reality showing those same speculators still feeding from the CDOs they invented then traded then leveraged from 2004-2008.
It’s a a marvelous idea, except for the economic reality that the public private pension systems across America would have been destroyed, rather than merely mortally wounded by the invented expected rates of return Wall St had sold its managers.
To conclude, while I have the highest respect for Stockman, sometimes he’s just wrong. The main place he has been wrong was letting himself be effectively muzzled when he was fired for telling Congress the truth about the real deficit while he thought he was serving Reagan, who had already defaulted on his duty to America by engaging in a massive Keynesian stimulus to the MIC, while efficiently pretending to be a Chicago style monetary hawk.
Posted under business
This post was written by admin on April 3, 2013