January 8, 2012

You Have Three Minutes, Give It Your Best Shot

Readers suggested a topic on future film plots. “Here’s an actual suggestion: movie plots for a decade from now, either set at that time or looking back as the 2000s. Here’s one: ‘Back to Vietnam.’”

“The head of the Chinese politburo calls the President of the United States. The Vietnamese have revolted and overthrown a Bejing-friendly puppet, and the Chinese want the interim regime overthrown. Send in U.S. special forces, he says, the they’ll allow the U.S. to skip a year of interest payments, with the resulting temporary tax breaks and spending helping to ensure the President’s re-election.”

“The rest could be a conventional war/action movie, until the final battle scene when the young hero/victim who joined the special forces because it was the only way to get a job and provide hope for his family, lies dying on the battlefield. A Vietnamese fighter takes the American flag from him and starts to rip it in half. Then he realizes it is two American flags stiched together on the outside, with another flag in the middle. He pulls out the Chinese flag, and roll the credits.”

A reply, “And as the credits roll the camera moves in for a close up of the flags and the audience gets to learn that all three of them were made in China.”

The Columbia Spectator, April 2011. “When filmmaker Charles Ferguson asked Business School Dean R. Glenn Hubbard to discuss the roots of the 2008 economic crisis with him, Hubbard was happy to oblige. Hubbard, the former chairman of President George W. Bush’s Council of Economic Advisers, sat down with Ferguson for an on-camera interview. The conversation, portions of which appeared in Ferguson’s 2010 documentary ‘Inside Job,’ started out calmly. But when the director asked Hubbard why his paid consulting arrangements with financial services companies were not disclosed on his curriculum vitae, Hubbard grew angry.”

“‘This isn’t a deposition, sir … I was polite enough to give you my time,’ he said. ‘You have three minutes. Give it your best shot.’”

ProPublica May 2011. “HBO’s ‘Too Big To Fail’—I just caught up with it last night; thank you, HBO On Demand—is extraordinarily revealing about the financial crisis. Only its revelations are almost entirely inadvertent. There’s Treasury Secretary Henry Paulson, steely eyed at the moment of truth. There’s New York Federal Reserve head Timothy Geithner, the athlete (he doesn’t just jog, but also plays what appears to be squash). And then there’s Federal Reserve chairman Ben Bernanke, the professor with a heart of gold and secret knowledge of the Great Depression.”

“The Movie isn’t the story of how the Three Musketeers saved the global economy. It’s a story of how the three didn’t see the financial crisis coming; hadn’t prepared for it; made mistake after mistake as it was cresting; and then, in their moment of triumph, made their most colossal blunder of all.”

The New York Times, August 2002, by Paul Krugman. “If the story of the current U.S. economy were made into a movie, it would look something like ‘55 Days at Peking.’ A ragtag group of ordinary people — America’s consumers — is besieged by a rampaging horde, the forces of recession. To everyone’s surprise, they have held their ground. But they can’t hold out forever. Will the rescue force — resurgent business investment — get there in time?”

“The screenplay for that kind of movie always ratchets up the tension. The besieged citadel fends off assault after assault, but again and again rescue is delayed. And so it has played out in practice. Consumers kept spending as the Internet bubble collapsed; they kept spending despite terrorist attacks. Taking advantage of low interest rates, they refinanced their houses and took the proceeds to the shopping malls.”

“But predictions of an imminent recovery in business investment keep turning out to be premature. Most businesses are in no hurry to go on another spending spree. And those that might have started to invest again have been deterred by sliding stock prices, widening bond spreads and revelations about corporate scandal.”

“Will the rescuers arrive in the nick of time? Not necessarily. This movie may not be ‘55 Days at Peking’ after all. It may be ‘A Bridge Too Far.”’

“As I’ve repeatedly said in this column, the arguments of the double-dippers made a lot of sense. And their story now looks more plausible than ever. The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance.”

“To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble. Judging by Mr. Greenspan’s remarkably cheerful recent testimony, he still thinks he can pull that off.”




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27 Comments »

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-08 08:48:17

“August 2002

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble. Judging by Mr. Greenspan’s remarkably cheerful recent testimony, he still thinks he can pull that off.”

How is centrally-planned bubble creation working out for the Fed these days?

Op-Ed Columnist
Running Out of Bubbles

By PAUL KRUGMAN
Published: May 27, 2005

Remember the stock market bubble? With everything that’s happened since 2000, it feels like ancient history. But a few pessimists, notably Stephen Roach of Morgan Stanley, argue that we have not yet paid the price for our past excesses.

I’ve never fully accepted that view. But looking at the housing market, I’m starting to reconsider.

In July 2001, Paul McCulley, an economist at Pimco, the giant bond fund, predicted that the Federal Reserve would simply replace one bubble with another. “There is room,” he wrote, “for the Fed to create a bubble in housing prices, if necessary, to sustain American hedonism. And I think the Fed has the will to do so, even though political correctness would demand that Mr. Greenspan deny any such thing.”

As Mr. McCulley predicted, interest rate cuts led to soaring home prices, which led in turn not just to a construction boom but to high consumer spending, because homeowners used mortgage refinancing to go deeper into debt. All of this created jobs to make up for those lost when the stock bubble burst.

Now the question is what can replace the housing bubble.

Nobody thought the economy could rely forever on home buying and refinancing. But the hope was that by the time the housing boom petered out, it would no longer be needed.

But although the housing boom has lasted longer than anyone could have imagined, the economy would still be in big trouble if it came to an end. That is, if the hectic pace of home construction were to cool, and consumers were to stop borrowing against their houses, the economy would slow down sharply. If housing prices actually started falling, we’d be looking at a very nasty scene, in which both construction and consumer spending would plunge, pushing the economy right back into recession.

 
Comment by 2banana
2012-01-08 08:49:07

How as US Government and personal debt has exploded

Our standard of living has only gone down and how our society has become more coarse…

Comment by scdave
2012-01-08 09:35:57

Our standard of living has only gone down ??

I would tend to agree with that although technology has improved our standard in transformational ways…

how our society has become more coarse ??

Due to the Bush II presidency IMO…Eight years of arrogant emperorship in our democracy (particularly the last four) set the table for what we have today….

He saw himself as the great “decider”…I see him as the great “divider”…The greatest divider of our society at least in my lifetime and likely the worst President ever….

Comment by mmmarvel
2012-01-08 13:59:47

My guess is that I’m a bit older than you, I remember Jimmy Carter, the man that until now held the title of the worst president ever (and I lived with and through some presidents before Carter too). No, from my perspective, Obama is the worst president of all time. He billed himself as the ‘great uniter’ but has become the ‘great divider’, yes, in my circles an even greater divider than Bush II.

Obama was uniquely unqualified for the job which he sought and ultimately got. He has shown no clue that he knows how business works. His policies have been and continue to be a millstone about the neck of US businesses.

Comment by WT Economist
2012-01-08 19:00:52

Any President during the worst recession since the Great Depression would be known as the worst President since Hoover.

Neither Carter nor George HW were as bad as remembered either. They confronted problems that they did not create.

And Clinton was not that good. I’d even say that Bush II was not that bad, despite all his mistakes — he inherited the first bubble burst and 9/11,

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Comment by seen it all
2012-01-08 19:15:54

re: carter
you’re probably right that he wasn’t that bad, but as a focal point of the country, he did nothing to improve the country’s elan.

I don’t think obama looks so bad, especially next to the house republicans. i’m disgusted enough to say i’m voting for ron paul, not that he’s worse than carter.

 
Comment by WT Economist
2012-01-08 19:49:17

Jimmy Carter was a man who called on Americans to put their responsibilities, to their country, communities, and families first, and themselves second. That’s what Americans voted for, but their actions indicated the majority actually didn’t want.

Obama called for Americans to put aside partisan differences and work together to solve problems. Again, that’s what Americans voted for but the news channels they watch indicate that isn’t what the majority want.

Reagan promised to balance the budget. He was smart enough to figure out that’s not what people actually wanted.

 
Comment by mmmarvel
2012-01-08 20:14:12

No, Carter was elected because his competition was Gerald Ford, a nice man who made the monumental error of pardoning Nixon. After eight years of the republicans, including a criminal offense that Nixon committed, the resignation of one vice-president (Agnew) over criminal offenses, then Nixon resigned for criminal reasons and Ford pardoned Nixon. Well, by then the American public had had it with the republicans, you could have put Bozo the clown in against Ford and he would have had a very good chance. Carter actually looked pretty good on paper, he was a former governor and time spent in the Navy as a junior officer on a nuclear submarine, his credentials looked good, but looks can be deceiving. The job (of President) was way over his head, to his credit, he quickly figured it out and tried to surround himself with people that could help him out (didn’t make great choices, but at least he knew). In contrast, Obama is in over his head but has an ego that constantly says and acts like he’s the smartest man in the room, regardless of the subject matter.

WT says, “Obama called for Americans to put aside partisan differences and work together to solve problems.” Actions speak louder than words and his actions say, put aside our differences and do what I think is right and correct. While I’ll admit that the republicans haven’t made it easy, all one has to do is revisit the way Obamacare was shoved down our throats to get an example of how Obama works. God willing, we won’t have to put up with four more years of this ego maniac.

 
Comment by 2banana
2012-01-08 20:26:25

Reagan promised to balance the budget. He was smart enough to figure out that’s not what people actually wanted.

Source??? Reagan promise to cut the size and scope of government. And to rebuild the military.

Jimmy Carter was an unmitigated DISASTER. As time goes on - the scope of this disaster keeps growing.

Obama will rival Carter. And he still has 11 months to go.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-08 20:47:10

“Obama will rival Carter. And he still has 11 months to go.”

11 months seems like ample time to convince the voters that Obama has finally succeeded in turning around the deep recession he inherited from George W. Bush. And there is a pretty good chance his record on defense will trump the armchair quarterback Republican candidates’ saber rattling in the voters’ assessments.

Denial is not a river in Egypt, 2banana. Happy Days are Here Again!

Posted on Fri, Jan. 06, 2012 05:21 PM
Will U.S. economic recovery keep accelerating?
By KEVIN G. HALL
McClatchy Newspapers

Can it last? That was the question everyone was asking after the Labor Department reported Friday that employers added 200,000 jobs in December and the unemployment rate fell to 8.5 percent.

The improvement on the jobs front is the latest sign that the U.S. economy is solidly on the mend. While shadows remain over the future - continued weakness in housing, Europe’s debt crisis and possible recession, and a slowdown in China - the U.S. outlook is brighter than it’s been in years. If this continues through the next 10 months - a big if - it could strengthen President Barack Obama’s chance of re-election.

Mainstream economists had expected job growth of 140,000 to 160,000, so private-sector growth of 212,000 was a surprise. The overall new-jobs total was dragged down by government layoffs, which eliminated 12,000 positions.

Healthy hiring numbers across a wide range of sectors heartened economists. Transportation and warehousing led all sectors with more than 50,000 hires, while hard-hit sectors such as manufacturing and construction posted gains of 23,000 and 17,000, respectively. Health care added almost 23,000 jobs. Retailers hired almost 28,000 workers

“You don’t have to be a rocket scientist to interpret today’s number, just check off the boxes: a pick-up in non-farm payrolls, another drop in the unemployment rate, a tick up in hours worked and a mild gain in hourly earnings,” Neil Dutta and Ethan Harris, top economists at Bank of America Merrill Lynch, wrote in a research note. “Today’s report extends the steady diet of solid economic data, and suggests the U.S. economy built up momentum as we closed out the year.”

 
Comment by Happy2bHeard
2012-01-08 21:19:28

“we won’t have to put up with four more years of this ego maniac”

Is there any candidate for President that is not an egomaniac?

If a Republican manages to defeat Obama, he is guaranteed to be more inexperienced than Obama is now.

 
Comment by Happy2bHeard
2012-01-08 21:24:17

“WT says, “Obama called for Americans to put aside partisan differences and work together to solve problems.” Actions speak louder than words “

Obama reached out to Republicans and offerred them positions in his administration. Most declined due to partisanship.

It took him much too long to recognize that the Republicans had no desire to work with him.

Obamacare was derived from Republican ideas. Democratic ideas would have given us single payer. Even when implementing Republican policy, the Republicans won’t work with him.

 
Comment by Happy2bHeard
2012-01-08 21:27:57

I talked today with a Republican friend. She listened to the debate last night and liked Huntsman and Santorum. She can’t stand Romney.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-08 22:27:00

“Even when implementing Republican policy, the Republicans won’t work with him.”

Once a Democrat adopts a Republican policy, the Republicans distance themselves from it and pretend they did not invent it.

Obamacare, Romneycare, Obamneycare — Never Mind
By Jill Lawrence
January 8, 2012 | 10:29 AM

To think that Tim Pawlenty’s campaign went into a death spiral because he refused to confront Mitt Romney on “Obamneycare.”

Now that Michele Bachmann is gone, practically the only person who mentions Obamacare is Romney. And he doesn’t do it much. He might not even need to do it at all.

There were plenty of TV ads denouncing Obamacare during Sunday’s NBC News/Facebook debate, including one from 2008 contender Mike Huckabee. But it’s not like Romney’s five remaining rivals are jumping all over him for enacting the template for the Affordable Care Act so reviled by conservatives.

For all the problems it was expected to cause him, it is the least used line of attack against him. Newt Gingrich says Romney is timid and also mean. Santorum says he’s got the wrong skill set to be commander in chief.

Everything but Romneycare. Nobody even raised a peep about it when Romney, asked in the debate how people can trust that he’s a true conservative, replied: “They’ve got my record as governor.”

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-08 20:17:20

“No, from my perspective, Obama is the worst president of all time.”

Let me guess: You are judging his performance strictly based on what happened while he was in office; never mind the complete disaster he inherited from his predecessor.

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Comment by mmmarvel
2012-01-09 10:29:53

“Let me guess: You are judging his performance strictly based on what happened while he was in office; never mind the complete disaster he inherited from his predecessor.”

The discussion is NOT what his predecessor did or did not do, he had pretty good idea of the job when he was running for it. If he didn’t he shouldn’t have been running, if he didn’t think he could turn it around he shouldn’t have been running. Bottom line is that 4 years later we are worse off (much worse off for many of us) than we were when Obama took office; for that we should give him 4 more years??? I don’t think so.

Lee Iacocca took over a failing company and turned it around (and yes, he had had failures - for which he had been fired). When you are hired your employer doesn’t want to hear that every problem that comes up is the fault of the fellow who had the job before you. Especially after 3 years, at what point do you FINALLY quit pointing the finger at the other guy?

Obama has failed to turn the country around, in fact it’s gotten worse during his term. He has embarassed us in the face of other countries time and time again. He has no idea what it’s like to earn $50K a year or less (not that any other politician does). His policies continue to hurt businesses and hurt the economy - and you want to give him 4 more years??? Obama fooled this country once, shame on him. If we let him fool us again, shame on us. While I’m not thrilled about ANY of the republican candidates, I already know that 4 more years of Obama will cut us to the bone and cause hurt that will take decades and decades to fix, if we ever do fix them.

Oh, and wanna know how bad Carter was? I bought a house while he was president with a 9.5% interest loan and was THRILLED by it. Why? Because the going rates on home loans was 13 - 15%. Under Obama we don’t have the crushing interest rates, we just have a housing market that has crushed itself under it’s own weight - and Obama’s “fixes” continue to make it worse, not better.

 
 
 
 
 
Comment by SDGreg
2012-01-08 09:20:36

“Steele said last month that the administration is primarily concerned with becoming more familiar with the University’s current policy and making sure “that we have the policies that would help us as an institution protect against unseen conflict of interests.””

“Bollinger would not comment on the specifics of Hubbard and Mishkin’s cases, but he told Spectator in a recent interview that the University should establish what paid consulting activities need to be disclosed.”

Full disclosure would seem to be the minimum acceptable standard. But if an educational institution really wants to protect its academic integrity, such activities with such obvious conflicts of interest should be prohibited under terms of employment. Those professors aren’t just prostituting themselves, they’re also prostituting the name of their academic institutions.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-08 11:48:56

They also prostituted the name of the economics profession into disrepute.

Comment by Carl Morris
2012-01-08 14:42:11

You could call it a house of disrepute?

 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-08 11:47:22

Political Economy
Fed Independence Is A Myth
John Tamny, 08.03.09, 12:01 AM EDT
The Constitution didn’t intend it to be autonomous.

In a recent opinion piece on the Federal Reserve for the Wall Street Journal, authors R. Glenn Hubbard, Hal Scott and John Thornton argued that the “Fed must above all maintain its political independence in conducting monetary policy.” What the authors missed is that the Fed has never been non-political or independent, nor was it intended to be autonomous.

The Fed is not an independent body free of political coercion, but rather an institution whose actions have long been dictated by the president and politicians in power. More important, since Congress is empowered through the Constitution “To coin Money, regulate the Value thereof,” it’s folly for general defenders of central bank independence to presume that this applies to our own Federal Reserve.

On Jan. 31, 1970, Arthur Burns was sworn in by President Richard Nixon as chairman of the Fed. And while the Fed was at least nominally known as an independent entity, Nixon and others were well aware that the Fed’s alleged independence was purely symbolic.

As Nixon noted at the time, excitement over Burns’ nomination was “a standing vote of appreciation in advance for low interest rates and more money.” Nixon made plain that he had “strong views” on the economy, and said about Burns that while “I respect his independence … I hope that independently he will consider that my views are the ones that should be followed.”

Fast forward to August of 1971, and Nixon was moving in the direction of severing the dollar’s all-important link to gold. Burns strongly defended the existing Bretton Woods monetary order, and as Rice University historian Allen Matusow wrote in his book Nixon’s Economy, “Burns shrewdly played on Nixon’s fears of political injury if he quit the gold standard.” Burns pointed out that Nixon would be condemned for “devaluing the dollar,” that “Pravda would hail these developments as a sign of disintegrating capitalism,” plus it would be “hated by business and financial people.”

But as is well known now, Nixon got his way despite Burns’ protests against the U.S. leaving the gold standard. Fed officials surely talk up the central bank’s freedom to administer monetary policy as they see fit, but as the Nixon years showed, the Fed is very much an agency coerced by politicians.

Comment by Carl Morris
2012-01-08 14:43:35

The Fed is not an independent body free of political coercion, but rather an institution whose actions have long been dictated by the president and politicians in power.

And now the dictation goes the other direction.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-08 16:15:57

It is hard to tell who is really calling the shots. Remember the Treasury Secretary is a former New York Fed President. What is certain is that Wall Street has a pervasive and powerful influence on U.S. government policy.

 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-08 12:09:28

“…open its kimono a bit wider…”

Blech!

The Fed Wants More Power
Reuters
Adam Clark Estes
Jan 3, 2012

The Federal Reserve is preparing to open its kimono a bit wider in order to offer more information to investors, in an effort “to magnify the power of those actions by shaping the expectations of investors,” The New York Times explains. Reporting on some details from an internal meeting in December that were made public on Tuesday afternoon, Benyamin Appelbaum offers the broad strokes of the Fed’s plans “to publish a forecast of its own actions:”

The change in communications policy is part of a broader effort by the Fed’s chairman, Ben S. Bernanke, to improve public understanding of the central bank’s goals and methodology. …The Fed said that it would now publish information about the expectations held by members of that committee for the future path of monetary policy over the current year and the following two years. The first forecast will extend through 2014.

The forecast will be included in an existing set of predictions about future economic conditions that the Fed already publishes four times a year.

The Fed’s new approach shouldn’t change too much for the average American. But the notion that Fed chairman Ben Bernanke and friends are making any kinds of moves to “magnify the power” is certainly going to trouble folks who don’t even think the bank should exist. Ron Paul, for example.

Comment by seen it all
2012-01-08 19:23:24

Say what you will bout the desirability of central bank intervention, if the bank can move the market (i.e. announce “twist”) and let the investors “frontrun” or move the market- the bank can just goose it along the way.

We know about the pound and soros a 20 yrs ago.
i wonder if the swiss and jap central banks will avoid any more currency strengthening. kinda curios what the real dollar target is for the fed.

 
 
Comment by ecofeco
2012-01-08 19:04:51

“A Bridge Too Far”

Without a doubt.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-09 00:01:42

Some academic economists are “giving it their best shot” to keep their good names clear of the appearance of conflicts of interest.

EDUCATION
JANUARY 9, 2012

Economists Set Rules on Ethics
By BEN CASSELMAN

CHICAGO—A leading group of academic economists has adopted conflict-of-interest rules in response to criticism that the profession not only failed to predict the 2007-2008 financial crisis but may actually have helped create it.

The new policy stops well short of the broader ethical guidelines demanded by some in the field.

Many economists serve as consultants to companies, governments and other groups outside of their formal academic work. Critics both inside and outside the profession have argued those relationships—often lucrative and sometimes undisclosed—may have influenced economists’ work, leading them first to miss signs of the impending crisis and then to recommend policy prescriptions that served their clients’ interests, at the expense of the economy as a whole.

The criticisms were made most prominently in the 2010 film “Inside Job,” which won an Academy Award for best documentary in 2011. The movie highlighted prominent economists’ ties to companies and governments that later collapsed in the financial crisis. Director Charles Ferguson has accused academic economists of “corruption” that directly contributed to the crisis.

Under new rules adopted by the American Economic Association at its annual meeting here last week, economists will have to disclose financial ties and other potential conflicts of interest in papers published in academic journals. Backers argue such disclosures will help restore faith in the profession by giving both policy makers and the public more information with which to evaluate economists’ advice.

“The people hearing what we say have a right to know who we are, what entanglements we have, what reasons they might have for being suspicious,” said Michael Woodford, a Columbia University professor who serves on the association’s executive committee, which unanimously approved the policy. “There’s probably been a certain amount of naiveté. Many of us thought: ‘Well, we think we’re irreproachable so that should be obvious.’ ”

 
Comment by doom
2012-01-09 09:54:10

It has to be understood that the power of the people is no longer in play because the gov’t fiqure out a long time ago keep people spending and in debt.
The press will let us know just what they want us to know, they are more interested and it is cheaper to have talking heads all day on cable rather then have the real journalist fight for us.
In the end the gov’t controls the printing of money and the banks world wide control who get what and in what decade the next crisis happens.
It sounds hopeless but really in 2012 it is, not enough folks really have the time to investigate how they are being ripped off they are to busy with divorces,childern in debt,spending, and still trying to keep up with the Jones?

 
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