Posted on 06/10/2005 4:32:57 AM PDT by paudio
Former Fed Chairman Paul Volcker said he doesn't see how the U.S. can keep borrowing and consuming while letting foreign countries do all the producing. It's a recipe for American economic disaster.
On Thursday the Wall Street Journal reported bluntly that "Mr. Volcker thinks a crisis is likely."
Volcker believes that investor confidence could fade "at some point," he said, with "damaging volatility in both exchange markets and interest rates."
He believes a serious economic crisis is likely unavoidable as the U.S. economy is struggling with what Volcker sees as a hopelessly unsustainable relationship with the rest of the world.
(Excerpt) Read more at newsmax.com ...
We're becoming a service economy. Unfortunately those service jobs are the "jobs Americans won't do" and we know what happens next.
I fear that as well
I agree.
We don't have near the manufactoring base we used to. A trade war with China would bring this country to its knees VERY fast.
But Reagan thought Volker went too far. There was serious talk about removing Volker by the White House and Congress. But I agree with your other points.
The real long term cure for inflation was the economic growth that resulted from Reagan's policies. That's right, economic growth is deflationary, contrary to what the central bank and politicians would have you believe. Your belief is necessary for you to allow them to micromanage the economy.
Growth is not necessarily inflationary, but large growth can be inflationary if you do not have the labor supply to support it. But in general the fed tends to be overly cautious tightening monetary policy at any signs of decent growth. Of course the fed is made up of bankers who fear inflation more than anything, which causes them to do that.
A fed chief will almost never do anything the president doesn't want done. Most likely he agreed to take the heat for the recession that followed in return for rewards later. They didn't have a Martha Stewart to blame then.
And when it comes to bankers on the FOMC their fear isn't inflation, but taking the blame when something goes wrong, or incurring the wrath of someone more powerful than them.
Hey Volker, I got some Euros I'd like to sell you :)
Finally - a voice of sanity !
"The only significant threat the US economy has ever faced is a federal government that grows too much, regulates too much, and taxes too much."
I don't really think one can look at the condition surrounding severe economic crises in our history and come to this conclusion.
He is right. Greenspan knows it too, that's why he cannot explain why his fed rate increases don't appear in the 10 year note. Greenspan keeps saying our economy is strong, the market through the 10 year says they see weakness/recession. I don't think Greenspan can figure out how to take out the housing bubble without throwing the rest of the economy into recession - all these refi's, now we have interest only mortgages inflating the bubble, we pushed the string with fiscal policy - we give Intel tax cuts and they build plants in China, and we give consumers tax cuts and they use a good portion of each to buy imported goods - doesn't leave much fiscal policy left to stimulate our own economy.
something has to give. politically, this may all fall apart and give Hillary a clear walk to the white house.
Well, pick a crisis and let's go over it. Hoover gave instructions to the Federal Reserve to attack the stock market once he was elected. Of course, they gave out several warnings first over a period over months. When that happens, they turn everybody into speculators and make the problem worse, much as what Greenspan did in the late 90's. When the Fed finally nailed the stock market in 1929 interest on margin loans got as high as 60%.
Ironically, the hard recession Volcker's initially high interest rates caused greatly contributed to Carter's defeat by Reagan.
Volker is an old fashioned mercantilist who thinks the balance of payments deficit matters more than IMHO it does. Greenspan and the Wall Street Journal disagree with him about that.
no it wouldn't. in fact, a recession in the US might not be a bad thing. before anyone overreacts, I say that because a recession here would really hurt china, because they have to import to us at an ever increasing rate to sustain themselves. a recession here would hurt our citizens somewhat, but it might be just what we need to implode all this excess productive capacity being built in china, and that economic turmoil might stir up political unrest there.
I can remember when that was considered a virtue around here.
Are you really going to take the position that increasing the discount rate on speculative loans caused the Depression? I presume that's what you mean by "attack the Stock Market - tell me if you mean something else.
1929 and the Great Depression are two different things, though one was the first major event that led to the other, but read my post again. The mere mention on numerous occasions that the government was going to attack the market greatly increased speculative behavior, and then the final act that led to the Crash was an act of government. They warned about it frequently and then they did it.
Bttt!
I guess the institution of market regulation in response to the crash has made the market more threatened, according to the theory.
Balderdash.
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