Posted on 05/14/2015 6:15:18 AM PDT by Freedom56v2
Sounds like stagnation for the rest of our lifetimes, really.
Great comment. Its always about them, not us.
The best bet here is for a conservatives in congress to develop an “economic emergency circuit breaker” to protect the US from any international economic catastrophe.
They can ignore the cries from internationalists that it is better if the world’s economy all sink together, by pointing out that if the US is insulated from the catastrophe, it will be in a far better position to manage a worldwide recovery.
Importantly, the biggest problem the US faces is multinational corporations that are “too big to fail”, yet are engaged in extremely high risk financial gambits like the derivatives markets.
This can be addressed by forcing them to create “firewalls” between their domestic and foreign operations. This means that even if *all* of their foreign operations collapse, with insurmountable debt, they cannot be saved with so much as a dime from their US operations. Their US operations will have zero liability from the risk taking in their foreign operations. If the circuit breaker is engaged, in effect they will all become two companies.
And the risk taking by their US domestic operations will be strictly regulated. No more gambling. And if they fail, then they will fail. No government handouts or loans.
On the international scene, all foreign trade treaties will need to be renegotiated to incorporate the circuit breaker. At the same time they will have strict trade deficit limits, so that if one partner either exports or imports to much, their ability to continue to do so will be restricted.
Importantly, does as a program, the wisdom of this circuit breaker is such that it will encourage other countries to create their own equivalent. This will make it much harder for their to be multinational economic collapses in the future.
the unemployment rate at the beginning of 2008 was under 5%, which the Fed considers to be (I think they are wrong, though) “full employment”. In 2006, Bernanke explained that the reason why the Fed had raised its funds rate over 400% in 2 years from 2004 to 2006 was because he wanted to “slow the economy through HOUSING to keep WAGES from rising at full employment”. That’s the real reason why fast growth leading to low unemployment rates ends up in one big crash after another.......but neither McCain nor Romney could counter Democrat talking points which blamed “tax cuts for the rich” & “fast growth” for the boom & bust cycle caused by bad Fed policy.
And that’s why Bill Clinton said in 1992 after GOP warned against his tax increase causing slower growth that “That’s what we want......slow, steady growth is better than fast growth”.......Greenspan raised interest rates on Clinton & caused him loss of Congress in 1994, same as Greenspan being slow to lower rates after raising them caused George H W Bush to lose in 1992 (along with “Dan Quayle is just a heartbeat away from the presidency”/Murphy Brown all-out effort to beat him.
In Clinton’s second term, we had fast growth after he cut the capital gains tax from Reagan’s 28% to 20%...and the fast growth led to a balanced budget, but not only that....the price of gas fell UNDER $1 in 1998, causing Greenspan to cut interest rates while warning against “irrational exuberance” in the stock market. (For the record, the price of gas in 1981 was $1.11...in 1989 after 8 yrs of Reagan, it was $1.04........& in 1993 after Greenspan had raised rates to 9.75% then lowered to 3% before Clinton took office....gas price still was only $1.07)
After lowering interest rates in 1998, Greenspan raised them to 6.5% in 2000 & the NASDAQ crash that was WORSE than 1929 happened & a recession exacerbated by 9-11-01 & public division over the 2000 election & budget surplus & peace leading to war & deficit spending again before the Boomers retired.
Greenspan was slow to cut rates....and the price of gas in 2001 was $1.29 even as the unemployment rate had fallen to 3.8%. The price of gold had fallen from over $1,000 in the 1970s, to $800 when Reagan took office in 1981....to $500 when Reagan left office, down to $300 during the 1990 Savings & Loan crisis recession, ...fell to about $250 during the Nasdaq crash recession caused by Greenspan’s “oil standard” & believing the the price of gas never should rise during a boom....but then letting it rise to over $2 per gallon before the end of the 2000-2003 recession. So the price of gas actually rose more than it would have if Greenspan hadn’t raised interest rates in 2000 & caused a recession which permitting him to cut them again from 6.5% down to 1% between 2003 and 2004.
Going back to the beginning of this post, at the end of 2007, Ben Bernanke—after having raised interest rates with Greenspan over 400% between 2004 & 2006 _——and many parts of the country weren’t feeling “full employment “ at all........and when prices in general really had stopped rising because the spike in gas price really came earlier than 2004...........Bernanke at the end of 2007 began to violate the Federal Reserve dual mandate of 1977 by easing before the unemployment rate had started to rise & before consumer prices had started to fall. Then in 2008, he quickly cut from 4.5% down to ZERO percent before Obama became president. And the result of Federal Reserve violating its “dual mandate” by easing before the unemployment rate rose & before consumer prices fell...was to ruin BOTH the supply side of the economy (money fleeing into foreign markets & currencies, or oil & gold) AND also destroy the demand-side of the economy by driving up the price of gas to $4 & above to kill consumer confidence & consumer spending & destroy profit margins and ability of employers to keep & hire workers because of a huge spread between so-called “core inflation” (which is rigged by Keynesians to over-value the price of homes as a consumer price instead of an asset price, while omitting the price or FOOD & GAS which people MUST buy every day or week & notice the price of more than anything else)...compared to “consumer price index” gauge of inflation...and the “producer price index” of inflation. The reason why we had such a long & deep recession from 2008-2011 was NOT because “housing crashes are worse than other recessions” (Keynesian self-fulfilling prophecy bullcrap)....but because you had “core inflation” reading Zero percent, consumer price index at 4% and producer price inflation rising at 8% to ruin the economy. Then the Fed just kept on “quantitative easing” to keep the price of gas over $ 3.50...and then when the Fed ended QE2, the price of gas instantly dropped to around $2 to cheer the economy & consumers.
The recession ended in 2009-— 6 months earlier than predicted BECAUSE the price of gas had fallen to $1.85 before Obama took office..and the unemployment rate would have stayed under 8% if the Fed and Obama had done nothing after 2009. But Obama passed his “stimulus” and the Fed started QE, and gas price rose from $1.85 to $4 again & gave the economy the same result as stimulus and easing gave us in 2008! The economy TANKED after 2009 gas rise, and unemployment rose from 7.5% to 10%....and that was NOT “on Bush and the Republicans” but on Democrats, Obama and Bernanke’s Fed. The economy stayed bad and slow to recover because of high gas prices because the FED shouldn’t ever have lowered interest rates to zero or kept them at zero after the recession ended. Bernanke should have raised interest rates in 2009......but then used slow growth as an excuse not to raise them when in fact it was Fed policy and Obama deficits causing the slow growth.
Greenspan got too tight in 2000, but otherwise, Greenspan’s “oil standard” worked a lot better than Bernanke’s pseudo-intellectual no standard which only helped money men & banks. One couldn’t help but see all the new bank branches being built during this recession on spots where restaurants were closing down because of high wholesale prices that consumers couldn’t bear to pay for.
Greenpan’s recessions were short & shallow because he waited for prices to fall & unemployment rate to rise substanially before he would slowly ease, whereas Bernake slashed rates and eased when unemployment was below 5% and before prices began to fall—thus driving food & gas prices through the roof and making dollars flee our economy at the worst possible time.
Greenspan was criticized for cutting interest rates in 1998 against falling gas prices and a balanced budget, but his mistake was not cutting rates in 1998, but because he raised them too far, too fast in 2000. If the price of gas rises during an unprecedentedly good economy and low unemployment, one can expect that. It’s not inflation so much as supply and demand for oil......and killing the great economy hardly is a solution for rising oil prices. And the irony is that because Greenspan didn’t want to let gas price rise even to $1.50 by 2001, he ended up letting gas price rise to $2.50 by 2004, and then we got $4 gas by 2008 not having anything to do with “demand from India and China”.
The fact is—Bernanke raised interest rates over 400%-—1% up to 5.25% from 2004 to 2006 and aimed his tightening at housing and caused a housing market/bond market crash that cutting rates and over-easing wasn’t ever going to put Humpty Dumpty back together again....he just helped billionaires and put the burden of losses on the middle class instead of Wall Street campaign donors.
They called it TARP because it was nothing but a cover-up of a virtual Ponzi scheme involving the Fed itself and big Wall Street/banker donors.
The problem is that after 2006, the Fed made rosy predictions about the economy, but proceeded to ruin it for us and set us up for the next crash. We’re better off with Yellen at the Fed now because at least she seems to intuit that markets don’t move in 6 week increments and raising rates incrementally but 400% over just two housing market years might not be such a good idea. Fed should raise, but only ONE TIME ONLY, then leave it alone for at least 2 years. We probably are going to have another recession, but we are not anywhere NEAR “full employment” on a state-to-state, city to city, region to region basis. Arizona’s unemployment rate was 3.7%at the beginning of 2008 and rose to 11% under Obama’s non-leadership with Bernanke. The Phoenix metro area had just 2.7% unemployment rate at the beginning of 2008!
A related story FYI....
http://finance.yahoo.com/news/stan-druckenmiller-sees-massive-problem-130107781.html
Cut the cable to the anchor of gov’t intervention.
A better solution is massive overhaul in our tax system so it encourages savings and capital investment staying in the USA. That means no more taxes on bank account interest, capital gains and stock dividends; the result would result in a gigantic liquidity bonus as our banks are fully-funded and our stock market is way stronger.
Wow, quite a compare and contrast!
Policy makers = central planners with Titanic-size egos.
That would be midterm goals. The first order of business is to protect the economy from catastrophe. Right now, the US economy is threatened by foreign markets and economies out of our control, unregulated multinational actions with zero concern for our economy and people, and massive exposure to “other people’s debts”.
When we act for our own prosperity, we must first make very sure that we control our own destiny, not dissolute multi-billionaires willing to cripple us for their own purposes.
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