While describing the four "possible actions" the Fed could use to bolster the economy at Jackson Hole yesterday, Ben Bernanke, in essence, said that monetary policy has taken us as far as it can. Even if there was agreement on the Fed's Board — and there isn't — there's really nothing left for the Fed to do.
That leaves Congress — and that means nothing will be done. Political gridlock, which probably will become even worse after the November elections, means there will be no meaningful fiscal policy either. I find it hard to believe the Republicans will be able to take control of both the House and the Senate, so that will let them off the hook for accomplishing anything at all — and I suspect they'll be content to let unemployment remain high for another two years so they can take the White House in 2012.
In the meanwhile, the rest of us can sit around and listen to Obama and Geithner tell us our economy is in "recovery." Well, it doesn't look like a recovery, and it doesn't feel like a recovery, no matter that GDP may be expanding at a glacially slow rate. In the meanwhile, the gap between the rich and the rest of us just continues to grow — the same gap that encouraged workers with stagnant incomes to create the staggering levels of debt that set off the crisis in the first place.
A word of optimism? From me? Surely you jest.
Saturday, August 28, 2010
Tuesday, August 17, 2010
The Islamic Center
I have a problem with the Islamic Center near "Ground Zero." It's the same problem I have with St. Patrick's Cathedral, Temple Emanu-El, and even the perpetually liberal Riverside Church: none of them pay taxes.
Burlington Coat Factory, the putative but discredited "historic monument" that currently occupies the spot of the new Islamic Center, paid both corporate income taxes and property taxes. The new center, being "religious," will pay neither.
Fully half the tax-deductible "charitable contributions" declared on United States income tax forms are to religious organizations. Some of that money goes to people — people who really need help — but much of it goes to maintaining the institutions, their propaganda, and their denigration of competing religious traditions. (How much of the opposition to the Lower Manhattan Islamic Center, one wonders, is funded by tax-deductible contributions? How much is funded by the tax-deductible ADL, for example?)
Like other religious institutions, the Islamic Center probably will deserve part of its tax-free status. If it provides a food bank, relocation of the homeless, day care, dental clinics, or other non-denominational services, support for those projects ought to be tax-deductible. It is entirely reasonable to give tax preference to organizations that benefit the public at large — but not to those which aggrandize their own agendas at the expense of others.
By the way, as I understand it, the Muslims who are sponsoring the Islamic Center are Sufi — ecstatic, non-political, non-violent Muslims who are pretty much the exact opposite of the Salafists of Al Qaeda. That means nothing to Republican opportunists, Fox News, or Harry Reid (who is in a tough re-election campaign.) For the Great American Public, of course, it's all black and white. Muslims are black. So is Obama.
Too bad.
Burlington Coat Factory, the putative but discredited "historic monument" that currently occupies the spot of the new Islamic Center, paid both corporate income taxes and property taxes. The new center, being "religious," will pay neither.
Fully half the tax-deductible "charitable contributions" declared on United States income tax forms are to religious organizations. Some of that money goes to people — people who really need help — but much of it goes to maintaining the institutions, their propaganda, and their denigration of competing religious traditions. (How much of the opposition to the Lower Manhattan Islamic Center, one wonders, is funded by tax-deductible contributions? How much is funded by the tax-deductible ADL, for example?)
Like other religious institutions, the Islamic Center probably will deserve part of its tax-free status. If it provides a food bank, relocation of the homeless, day care, dental clinics, or other non-denominational services, support for those projects ought to be tax-deductible. It is entirely reasonable to give tax preference to organizations that benefit the public at large — but not to those which aggrandize their own agendas at the expense of others.
By the way, as I understand it, the Muslims who are sponsoring the Islamic Center are Sufi — ecstatic, non-political, non-violent Muslims who are pretty much the exact opposite of the Salafists of Al Qaeda. That means nothing to Republican opportunists, Fox News, or Harry Reid (who is in a tough re-election campaign.) For the Great American Public, of course, it's all black and white. Muslims are black. So is Obama.
Too bad.
Saturday, August 14, 2010
Quantitative Easing
The figures keep coming in — and lately, as you may have noticed, they have not been looking too good. The chief problem seems to be that both consumers and producers are more interested in paying down debt than in expanding consumption or production. Some talk about double-dip recession. Some talk about deflation.
Ben Bernanke says the Fed has not exhausted its supply of tools for fighting such threats, but he has not been especially specific. Presumably he is referring to quantitative easing, a central bank policy that, essentially, creates a bit (hopefully only a bit) of inflation and makes the "security" of Treasury bonds less attractive by further lowering the already low rates of interest they currently pay.
The recent Fed announcement that proceeds from mortgage backed securities now beginning to bring in some earnings would be reinvested in Treasuries does not really count as quantitative easing, since it does not really increase the money supply. It suggested, though, that the Fed might be willing to purchase securities with newly created money — how much, or how soon, is anybody's guess.
There are a couple of problems, though, with quantitative easing. One is the possibility that it could stimulate inflation without prompting any increase in productive business activity. If that happened, prices would go up while unemployment stayed high — stagflation, seventies style — and people certainly would feel poorer. Those on fixed or limited incomes would be poorer.
More likely, though, it would accomplish nothing at all — the experience of the Bank of Japan when it used quantitative easing in an attempt to get Japan out of its "Lost Decade" of the nineties and the recession of 2000-2001. While a cheaper dollar ought to stimulate exports, it's just as likely to spark a trade war. Every country in the developed world is trying to export its way out of the current mess, and it's illogical to think they all could succeed.
I'm inclined to think the Fed really is out of ammo, so we're going to have to depend on Congress making intelligent fiscal policy. Since I'm not making predictions anymore, I'll let you decide for yourself how likely it is that that will happen.
Ben Bernanke says the Fed has not exhausted its supply of tools for fighting such threats, but he has not been especially specific. Presumably he is referring to quantitative easing, a central bank policy that, essentially, creates a bit (hopefully only a bit) of inflation and makes the "security" of Treasury bonds less attractive by further lowering the already low rates of interest they currently pay.
The recent Fed announcement that proceeds from mortgage backed securities now beginning to bring in some earnings would be reinvested in Treasuries does not really count as quantitative easing, since it does not really increase the money supply. It suggested, though, that the Fed might be willing to purchase securities with newly created money — how much, or how soon, is anybody's guess.
There are a couple of problems, though, with quantitative easing. One is the possibility that it could stimulate inflation without prompting any increase in productive business activity. If that happened, prices would go up while unemployment stayed high — stagflation, seventies style — and people certainly would feel poorer. Those on fixed or limited incomes would be poorer.
More likely, though, it would accomplish nothing at all — the experience of the Bank of Japan when it used quantitative easing in an attempt to get Japan out of its "Lost Decade" of the nineties and the recession of 2000-2001. While a cheaper dollar ought to stimulate exports, it's just as likely to spark a trade war. Every country in the developed world is trying to export its way out of the current mess, and it's illogical to think they all could succeed.
I'm inclined to think the Fed really is out of ammo, so we're going to have to depend on Congress making intelligent fiscal policy. Since I'm not making predictions anymore, I'll let you decide for yourself how likely it is that that will happen.
Monday, August 9, 2010
College Graduation Rates?
According to recent news reports, the per capita college graduation rate in the United States has slipped from first in the world to number twelve. The President says that's a cryin' shame, and that we ought to do something about it. Okay. I agree. But, what should we do?
Since I am an old fart, I am entitled to talk about "the good old days," and you young folks are entitled to ignore me, so I'd better grab your interest pretty fast.
I went to college for free. It wasn't because I was valedictorian of my high school graduating class (not even close), or because my family was particularly disadvantaged (it wasn't). It was because the colleges of the City University of New York did not charge tuition.
Back in the sixties, there was real interest in helping qualified students complete college. Presumably, it had something to do with the Cold War — competing with the Soviet Union — but more than that, it was the FDR-inspired attitudes that emerged from the Great Depression and World War II.
Granted, not everybody was admitted to CUNY, but if you were in New York City's top 25%, it was pretty much automatic. Since the children of the more affluent usually went to private colleges, there usually was a place for you if your grades and SAT scores put you in the top 35%. Most of us couldn't have afforded college if the tuition were much higher than free — credit was a lot harder to get in those days.
We lived with our parents. We traveled by bus and subway. We got part-time and summer jobs to earn some spending money. We graduated with Bachelor's degrees and no debt.
Was it a perfect system? Of course not. Truly poor and minority students, from the city's crappier ghetto high schools, found it hard to make the cut — but for sons and daughters of the lower middle class who had some talent and ambition, it was an amazing opportunity. Our parents looked on with pride as we pulled ourselves up onto the next step of the socio-economic ladder.
So, how did government afford it? America was flushing money down the Vietnam toilet then just as fast as it's flushing money down the Afghanistan toilet today — but our values, in those days, were different. The tax code had not been Reaganized. Middle class incomes and standards of living were still moving upwards, and taxation was not a dirty word. People were willing to share the burdens, and they did. The United States was a lot more egalitarian in those days, despite the discrimination, segregation, and many other problems.
And so, Mr. President, how shall we solve our college graduate deficit? Well, we can't go back to the sixties.
Maybe we can go forward, though. If college really is that important, let's find a way to make it free again.
Since I am an old fart, I am entitled to talk about "the good old days," and you young folks are entitled to ignore me, so I'd better grab your interest pretty fast.
I went to college for free. It wasn't because I was valedictorian of my high school graduating class (not even close), or because my family was particularly disadvantaged (it wasn't). It was because the colleges of the City University of New York did not charge tuition.
Back in the sixties, there was real interest in helping qualified students complete college. Presumably, it had something to do with the Cold War — competing with the Soviet Union — but more than that, it was the FDR-inspired attitudes that emerged from the Great Depression and World War II.
Granted, not everybody was admitted to CUNY, but if you were in New York City's top 25%, it was pretty much automatic. Since the children of the more affluent usually went to private colleges, there usually was a place for you if your grades and SAT scores put you in the top 35%. Most of us couldn't have afforded college if the tuition were much higher than free — credit was a lot harder to get in those days.
We lived with our parents. We traveled by bus and subway. We got part-time and summer jobs to earn some spending money. We graduated with Bachelor's degrees and no debt.
Was it a perfect system? Of course not. Truly poor and minority students, from the city's crappier ghetto high schools, found it hard to make the cut — but for sons and daughters of the lower middle class who had some talent and ambition, it was an amazing opportunity. Our parents looked on with pride as we pulled ourselves up onto the next step of the socio-economic ladder.
So, how did government afford it? America was flushing money down the Vietnam toilet then just as fast as it's flushing money down the Afghanistan toilet today — but our values, in those days, were different. The tax code had not been Reaganized. Middle class incomes and standards of living were still moving upwards, and taxation was not a dirty word. People were willing to share the burdens, and they did. The United States was a lot more egalitarian in those days, despite the discrimination, segregation, and many other problems.
And so, Mr. President, how shall we solve our college graduate deficit? Well, we can't go back to the sixties.
Maybe we can go forward, though. If college really is that important, let's find a way to make it free again.
Thursday, August 5, 2010
Elizabeth Warren and the Consumer Financial Protection Bureau
Regular readers of this blog probably recall that I have a bit of a crush on Elizabeth Warren. I would have happily supported her for the Supreme Court seat that went to Elena Kagan, and she'd have my full support if she decided to mount a primary contest against Barack Obama in 2012.
If Obama fails to nominate her to lead the new Consumer Financial Protection Bureau — the very same bureau she conceived and fought for — I will be even more pissed at him than I am now. We need Elizabeth Warren in a position of real power.
Some say she doesn't have the "experience" to be an effective bureaucrat. Perhaps that's true, but the experience to become an effective bureaucrat is experience at licking assholes. There are a great many assholes in government, banking, and financial services — and they already are being thoroughly licked. We need someone to come along and shove something very hard, large, and bumpy up those assholes. It's time for them to feel some pain.
Stop being a pussy, Barack. All it's done is reduce your approval ratings. If you turn out to be a one-term president, which looks increasingly likely, at least you should be able to leave saying you'd done something (and I'm not talking about that giveaway to the insurance industry commonly called "Obamacare.")
Elizabeth Warren for President! Hooray!
If Obama fails to nominate her to lead the new Consumer Financial Protection Bureau — the very same bureau she conceived and fought for — I will be even more pissed at him than I am now. We need Elizabeth Warren in a position of real power.
Some say she doesn't have the "experience" to be an effective bureaucrat. Perhaps that's true, but the experience to become an effective bureaucrat is experience at licking assholes. There are a great many assholes in government, banking, and financial services — and they already are being thoroughly licked. We need someone to come along and shove something very hard, large, and bumpy up those assholes. It's time for them to feel some pain.
Stop being a pussy, Barack. All it's done is reduce your approval ratings. If you turn out to be a one-term president, which looks increasingly likely, at least you should be able to leave saying you'd done something (and I'm not talking about that giveaway to the insurance industry commonly called "Obamacare.")
Elizabeth Warren for President! Hooray!
Saturday, July 31, 2010
More structural unemployment on the way
Based on the figures released yesterday for the second quarter, it looks like businesses continue to replace human beings with machines. According to the Times, "[t]he crucial driver of growth in the second quarter was business investment in such things as office buildings, equipment, and software." Such investment roughly doubled over that of the first quarter.
From the perspective of an individual business, it makes sense to replace a human being with a machine. Machines don't call in sick. They don't get time-and-a-half when you need them to work overtime. Once they're programmed, they just keep doing their jobs the same, dependable way, without getting bored and letting their attention wander. They don't go out for lunch and come back with a couple of beers in them.
The drawback of machines, though, is that they don't buy anything. They may create a little demand for energy, spare parts and updated software, but they don't drink Pepsi or eat Froot Loops or wear Levis or talk on cell phones. As consumers go, machines are very limited.
The more of our production done by machines, the less consumption done by our human beings. No wonder the money men are so concerned about our trade imbalance. They're going to have to sell a whole lot of their shit to foreigners because fewer and fewer Americans will have the jobs they need to earn the money they need to buy it.
From the perspective of an individual business, it makes sense to replace a human being with a machine. Machines don't call in sick. They don't get time-and-a-half when you need them to work overtime. Once they're programmed, they just keep doing their jobs the same, dependable way, without getting bored and letting their attention wander. They don't go out for lunch and come back with a couple of beers in them.
The drawback of machines, though, is that they don't buy anything. They may create a little demand for energy, spare parts and updated software, but they don't drink Pepsi or eat Froot Loops or wear Levis or talk on cell phones. As consumers go, machines are very limited.
The more of our production done by machines, the less consumption done by our human beings. No wonder the money men are so concerned about our trade imbalance. They're going to have to sell a whole lot of their shit to foreigners because fewer and fewer Americans will have the jobs they need to earn the money they need to buy it.
Wednesday, July 21, 2010
Shorting Obama
In yesterday's Times, London hedge fund manager Hugh Hendry was quoted as follows: “If there was a way to short Obama, I would."
That got me to thinking — what if there were a way to short sell Obama? The first thing that comes to mind, of course, is a synthetic CDO of sorts. Since you don't actually have own what you're betting on, I'm sure the bright young people at Goldman could come up with something.
An easier way, of course, would be to short any enterprise that might profit from Obama initiatives — wind power facilities come to mind, for example — or just go long on big oil and big banking, since any kind of meaningful energy bill (read carbon tax) is impossible, and the banks will have figured their way around the new financial regulations well before the regulators even are in place.
Hendry, by the way, also predicts that China is "headed for a fall," which presumably would mean the Chinese would pull way back on buying our debt and transfer resources to calming the inevitable social unrest. As regular readers know, I'm not making predictions anymore — except, when I can't help myself, in the most general sense.
Right now, my gut feeling, for both Obama and the United States, is that hard times will be sticking around for quite a while.
That got me to thinking — what if there were a way to short sell Obama? The first thing that comes to mind, of course, is a synthetic CDO of sorts. Since you don't actually have own what you're betting on, I'm sure the bright young people at Goldman could come up with something.
An easier way, of course, would be to short any enterprise that might profit from Obama initiatives — wind power facilities come to mind, for example — or just go long on big oil and big banking, since any kind of meaningful energy bill (read carbon tax) is impossible, and the banks will have figured their way around the new financial regulations well before the regulators even are in place.
Hendry, by the way, also predicts that China is "headed for a fall," which presumably would mean the Chinese would pull way back on buying our debt and transfer resources to calming the inevitable social unrest. As regular readers know, I'm not making predictions anymore — except, when I can't help myself, in the most general sense.
Right now, my gut feeling, for both Obama and the United States, is that hard times will be sticking around for quite a while.
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