October 20, 2013

The Centerpiece Of A Long-Running Debate

Reader suggested a topic on direction. “What is the answer and who has it? Are there any adults any longer in this country? You can say what you want about the Tea Party but at least they are trying to make a difference. For those of you who think the ACA will not add to the debt in this country you are just wrong.”

“Do we have a revenue problem? A spending problem? Both? Let’s hear your solutions. Yes, I’ve seen them before on the HBB. Let’s cut off all foreign aid. (works for me) Let’s bring our troops home and not be the world’s policeman. (check) Ok…..what happens when we bring the troops home? Who is going to employ them? There are no effin jobs!”

“Maybe we just inflate our way out of this. Is that going to work? I know there are many folks on the board who say the thing needs to be blown up……the sooner the better. But what does that really mean? You think our President, Congress or the Fed has the answer? These a-holes think that keeping housing prices propped up is the answer? Can they really be that effin stupid? Really? Is there any leader out there who has the balls or the brains to get on the national television shows and say this is the stupidest f’n idea we have had in ages?”

A reply, “I personally believe that the time for any solution to fix our present problems is now gone. We don’t get out of this. Nobody in Washington, including the tea party guys, are ever going to stop the continued entrenchment of government or stop the spending because too many Americans are now on the Government dole and our ‘leaders’ aren’t going to risk early retirement by rocking the boat.”

“Across this Country many people, including some on this site, are still trying to debate one side of the aisle against the other, like it matters, while the oligarchs steal what little wealth we have left. However, perhaps I am wrong in my pessimism. Google just blew through $1,000.00 a share today, so that is proof that things must be getting better, right?”

One said, “I think those with the money control our policy, so they don’t like the solution even though it might be best for the country. If we had to make our own stuff there would be plenty of jobs, even though it might mean less profit at the very top.”

And another, “There is no solution, but there is one guaranteed outcome: Permanent Democrat Supermajority. Another HBB poster countered that it would inevitably split into factions, which I correctly replied will be the Free Sh*t Army versus the More Free Sh*t Army.”

“The 0.1% will still own and control everything. 85% of this country will be poor or working poor, kept alive with just enough free sh*t in a manner structured to continue the enrichment of the 0.1% at the expense of the 14.9% that is the hollowed out carcass of what was once the American middle class.”

One suggested, “The other solution is outright armed revolt. Two different times in our history where this was the solution eventually taken, so precedent exists. Our history shows a 50/50 chance of success, not great odds if one were risking life and limb, but there it is. Of course, on a long enough time-line, the survival rate for everyone drops to zero, so maybe it’s not such terrible odds after all.”

And finally, “There is a solution. Call a general strike and let it last for at least 17 days beginning on Thanksgiving Black Friday. It’s the silver bullet of death to the vampire squid. If the nexus of our problem is the collusion between a bunch of morally corrupt capitalist and their political minions then a economic body blow of a general strike should work. The object is to seize control of our economic and political freedom.”

“The majority of us are afraid of freedom. Afraid to even limit what they can pay for. An army of Debt Zombies? Unlikely.”

The Wall Street Journal. “Alan Greenspan, the former chairman of the Federal Reserve, goes to a lot of parties. He and his wife ’sort of get invited everywhere,’ he says, sitting in front of the long bay window in his office in Washington, D.C. Lately, though, cocktails and dinners seem to have guest lists drawn almost exclusively from one political party or the other. ‘It used to be a ritualistic 50-50 at parties—the doyennes of culture and partying were very strict about bipartisanship,’ he adds. ‘That doesn’t exist anymore.’”

“In his new book, Mr. Greenspan, goes on a hunt for what has gone wrong in American politics and in the U.S. economy. He doesn’t blame the current administration for today’s partisan divide. The culprit? ‘It’s the benefits,’ he says, pointing to the disagreements between Republicans and Democrats over how to deal with the growth of entitlements.”

“In the book, he also ponders why the Fed failed to predict the financial crisis, where he himself went wrong and how that discovery has completely changed his worldview. Mr. Greenspan’s biggest revelation came one day about a year ago when he was playing with gross domestic savings numbers. What he found, to his surprise and initial skepticism, was that an increase in entitlements has closely corresponded to a decline in the country’s savings. ‘We had this extraordinary increase in benefits, with each party trying to outbid the other,’ he says. ‘That practice has been eroding the country’s flow of savings that’s so critical in financing our capital investment.’ The decline in savings has been partly offset by borrowing from abroad, which brings us to our current foreign debt: ‘$5 trillion and counting,’ he says.”

“He said he is baffled by all the blame that has been piled on him. Since the recession, critics have said the increased money supply and low interest rates during his tenure at the Fed from 1987 to 2006 led to bubble investments. Mr. Greenspan first heard that theory, he says, in 2007, when John Taylor, a professor of economics at Stanford University who has advised Republicans, made the connection between easy money and the housing bubble. ‘It had absolutely nothing to do with the housing bubble,’ he says. ‘That’s ridiculous.’”

“This disagreement is now the centerpiece of a long-running debate among economists, even inside the Fed today, that has yet to be resolved. After the Fed’s model failed to predict the financial crisis, he realized that there is more to forecasting than numbers. ‘It all fell apart, in the sense that not a single major forecaster of note or institution caught it,’ he says. ‘The Federal Reserve has got the most elaborate econometric model, which incorporates all the newfangled models of how the world works—and it missed it completely.’”

“And as late as 2007, the International Monetary Fund also said that global risk was declining. ‘A few days [after the crisis hit], I run into an article, and it is titled, ‘Do we economists know anything?’ he says.”

“Mr. Greenspan set out to find his blind spot step by step. First he drew the conclusion that the nonfinancial sector of the economy had been healthy. The problem lay in finance, because of its vulnerability to spells of euphoria and irrational fear. Studying the results of herd behavior provided him with some surprises. ‘I was actually flabbergasted,’ he says. ‘It upended my view of how the world works.’ He concluded that fear has at least three times the effect of euphoria in producing market gyrations. ‘I wouldn’t have dared write anything like that before,’ he says.”

Bits Bucket for October 20, 2013

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