“That’s 100% Congress.”
For certain Congress plays its role, and mandates to give high risk loans falls on government, but the trillions bundled up in bad debt deals, while trillions were made trading high risk investments, was both creative and criminal. Bernanke was front and center with the bailout when the house of cards came tumbling down. By all means, stop government from social engineering the market, but also stop it from rushing to bailout the market when it fails.
Yes, oil will cause a rise in all commodities, even though experts here at FR have assured me that won’t happen, and that it isn’t important in the greater scheme of things. QE3 will, if it hasn’t already, causes a rise in the price of oil. The lower value of the dollar will be reflected in higher prices of fuel and food. Of course that will be blamed on crisis in the Mideast and drought, while nothing is done about using food for fuel. At least on that point we can agree, as we agree on a number of points regarding energy and growth.
“The debt crisis will indeed still be here when this is over. And this won’t be over until Congress and/or the Executive wise up about trade and energy policies. But none of that is Bernanke’s fault.”
I’m not blaming the debt crisis on Bernanke, not entirely. I am saying that QE3 is the creation of debt in an attempt to cure what is a debt crisis. I am saying that the attempted cure will lower the value of the dollar. The consequences of that are the equivalent of theft. Regardless of how you wish to defend and justify this latest round of QE3, my initial statement about the effect of it remains obviously correct. People are losing wealth they will never get back, and there are people losing ground who don’t have wealth to lose, not at the pump, not in their energy bills, and not at the grocery market.
I don’t have material pre written, as I don’t claim to be an expert, so I’m going to leave this up to you. Perhaps the fact that that I’m not an expert is the very thing that allows me to understand the street impact of Bernanke’s policies. Theft is theft, and Bernanke shares responsibility in it, along with a lot of people who aren’t in Congress. If QE3 could accomplish what it is purported to do, maybe we could all benefit somewhere down the line, and Bernanke could be let off the hook, but not yet, and probably not ever.
I think this might be the root of our disagreement. It's not a debt crisis, it's an unemployment crisis.
The debt didn't cause the unemployment. And the debt is bad and moving in the wrong direction, but currently it's no worse than an individual having a mortgage a little bigger than your annual salary (Total Debt/GNP).
Or another way to look at it, is Interest to Total Government Revenues. our interest payments in 2012 will be $420 billion, compared to total government revenues of $5 trillion. So the interest portion of our mortgage payment is 8% of our government's income.
It's bad. It's headed in the wrong direction. It's at historic levels for our nation and almost historical levels for any nation. But "Debt Crisis"? No. It's not. We've got room to maneuver, in part because our taxes as a percent of GNP are still low compared to other nations.
This is an unemployment crisis. And the reason we aren't recovering from it like we should is because we've lost and we're still losing manufacturing to foreign countries with much lower wages than we have. We could fix that with import tariffs and put our people back to work, which would cure a lot of government budget ills. But no one seems to recognize the true problem yet.
Cutting taxes and regulations to be more competitive when wage differentials are as large as they are is a joke. Sure I'd like to see them cut, but they aren't the problem. And they aren't going to cure anything. They are a distraction.
Cutting government spending needs to be done and will help us long term. But it's not why we are in this mess. And it's not going to cure anything either. In fact short term, it might cause more pain than it cures if we don't fix the structural issues in the economy first like trade and energy.