Volcker Sounds Off 29 comments
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Thank God we still have Paul Volcker out there throwing out a few straight comments from time to time. In an era when the likes of Tim Geithner can speak volumes and put themselves on record on both sides of every issue, it’s refreshing to see the great man speak his mind.
Today, some comments from a coming interview with Charlie Rose have been showing up in the blogosphere.
Among them, Volcker suggests that it’s time to look at either a carbon tax or VAT to solve the long term problem with deficits. He says that he would prefer to see spending reduced but I suspect he’s been around far too long to believe that will occur.
On banks, Volcker is in the bring back Glass Steagall camp. His thesis is that we insure banks' deposits in order for them to make loans to credit worthy borrowers, not to take outsized risks in proprietary trading. He also admits that his view has zero support within the administration.
I’ve posted on taxes before. It is a foregone conclusion that the government is operating on a revenue base that will be insufficient to fund both the current level of expenditures and the prospective level that is going to result from the more activist and interventionist bent of the Obama administration. The income tax cannot be stretched to the extent necessary to fund the increasing requirements of government.
Of the two alternatives suggested by Volcker, I find the carbon tax more appealing. It can be a big revenue producer and it’s relatively transparent in a way that a VAT is not. The VAT is beloved by politicians simply because it can be broken down throughout the chain of production disguising the overall impact of the tax. The carbon tax, on the other hand, is out there for all to see and the impact on the taxpayer is readily apparent. For this reason alone I think that the VAT is very much going to become a reality in a second Obama term.
Volcker is right on Glass Steagall, bank risks and misallocation of FDIC insurance. It was never intended to insure against failure from investment banking activities, yet that activity was at the root of the near meltdown of the big banks.
Nevertheless, the big banks wield formidable power and the political class is apparently unwilling to make any stand. Any sort of meaningful reregulation of the industry is quickly going by the board and if the numbers are to be believed, the banks are taking on risk at a pace that rivals if not exceeds the bubble years.
It may be years or decades before another crisis of this magnitude reappears or it might be just around the corner. There is no way of knowing when it will recur but this much we can know. A chance to reform the industry and limit the damage in the future is quickly passing if not already gone. The next time we might not be so lucky and may well find the damage much more intense and costly. I suspect that by that time, Mr. Volcker will no longer be with us but I hope that a few remember his advice and have the courage to act that is sorely missing now.
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This article has 29 comments:
I hope his being more vocal is a signal from the administration that they are more willing to hear what he has to say, and for him to say it publicly.
It is interesting that in the Joint Economic Committee session on 02/26/2009, Volcker said the he agreed with much of what Ron Paul had said.
www.youtube.com/watch?...
Neither option, VAT or a carbon tax, layered on top of our current income tax system has any appeal from my point of view. It's not just because I am against increased taxes. If higher taxes would actually be allocated in such a way as to solve problems and help keep our nation safe, I wouldn't mind so much. But we already have a government that is too big and inefficient to deal with real problems in an efficient manner. We already have tremendous waste in government spending. We already have one of the highest corporate tax rates in the industrialized world. Bigger government and higher taxes are not the answer.
The real solution is to oust the current elected leadership from the House of Representatives, both parties, and start over with some people who will actually represent the needs and views of their constituents who voted for them instead of the lobbyists and big contributors to election campaigns. The only cap we need is one on how much can be spent on an election campaign...from all sources, including PACs for any one candidate.
We also need term limits set to regain some semblance of service to politics and to get rid of the career politicians who are so focused on getting reelected that they don't understand the issues, don't even read the bills they vote upon, and don't care what we the people think.
Check out goooh.com for a novel concept for which the right time is coming.
I actually supported Mr. Obama (reluctantly) because of Volker's endorsement and implied promise of being involved in policy decisions.
I guess as I grow older I can put the Volker integrity myth along with the Easter bunny and Santa.
I wouldn't judge Mr. Volker too harshly. After all, he can give all of the advice he wants, but its up to TPTB to take it. And should he become too strident/vocal, he risks being marginalized even further by the administration, which would lessen even further the chances of his advice being listened to.
On Sep 30 01:19 PM enigmaman wrote:
> Considering that Paul Volcker was touted as one of the persons Obama
> would go to for advice on how to handle the economy nad banking its
> a shame that we didnt understand what the words " Going to" meant,
> to most of us it meant Obama would give serious consideration to
> what Volcker had to say, to Obama it meant give the voters what
> they wanted to hear, that he had credible mainstream advisors which
> he would get advice from, I guess Obama showed us
Balderdash.
Giving the current government a new tax stream is like throwing gasoline on a fire.
Early hopes that it would amount to any substantive direction faded fast. We're stuck with a Greenspan protege and a Larry Summers directed mess!
On Sep 30 01:19 PM enigmaman wrote:
> Considering that Paul Volcker was touted as one of the persons Obama
> would go to for advice on how to handle the economy ...
Coming up with clever taxes isn't hard. Increasing liberty, productivity, efficiency, and competitiveness is. I'll reserve "great" to describe those working on the later.
I refuse to root for one type of shackle over another.
On Sep 30 01:27 PM ron_paulite wrote:
> who wants to follow Volcker's advice and ends up as a one-term president?
> politics rule, my friend.
I doubt a carbon tax or a VAT tax will answer the question of the government's deficit. The government spends more than any tax system can generate. We have a 15 trillion dollar economy, and we want to create 3 trillion of waste. As the government spends more, it implicitly moves resources away from the things that produce the 15 trillion dollars.
Jesus Christie!!! Haven't you noticed that Nixon took us off the Gold Std in 1973? Nations with non-convertible, floating Fx currencies are NOT REVENUE CONSTRAINED. Go write that 1000 times on a blackboard or blog before posting again. In efficient tribal or modern currency regimes, budgets are simply something you make up once you decide where you want to go. How much currency is needed is simply that amount needed to denominate all necessary transactions. Currency is NOT, repeat NOT, real wealth.
Weepin' Jesus. Is that "budget deficit" nonsense the best you boys can come up with? Subsets of a national economy have to worry about a budget. Public populations that print their own monopoly currency do not. To even equate the two is utter nonsense.
Interesting that someone on the Obama team finally admits that the carbon tax has nothing to do with "global warming".
The only purpose for "Cap-And-Trade" is to impose a stealth tax so the corrupt politicians can keep up their incontinent spending.
Interesting that someone on the Obama team finally admits that the carbon tax has nothing to do with "global warming".
The only purpose for "Cap-And-Trade" is to impose a stealth tax so the corrupt politicians can keep up their incontinent spending.
Think about public lands. Let's say the lands were rather productive, but since the title belonged to the government, there was no market developed to buy and sell land.
All of a sudden, the government decides to auction off its land holdings. Essentially, by doing so, they've created value where none existed before.
Now replace "land" with carbon rights.
I'm not saying I agree with the policy, but it certainly is possible to create value where none existed before.
On Sep 30 05:16 PM a fat panda wrote:
> You can't get blood from a stone, and you can't get 4 trillion dollars
> from a 15 trillion dollar economy.
>
> I doubt a carbon tax or a VAT tax will answer the question of the
> government's deficit. The government spends more than any tax system
> can generate. We have a 15 trillion dollar economy, and we want
> to create 3 trillion of waste. As the government spends more, it
> implicitly moves resources away from the things that produce the
> 15 trillion dollars.
Personally VAT basically adds protectionism and would be a counterweight to Europe's protectionism. If you think inflation is bad think about paying Europe's prices for everything. Can you say 20-30% higher prices instantly. If that's not inflationary I don't know what is. But perhaps Volker has given up on the idea the Federal Reserve will cut money supply to reign in inflation as well. A VAT tax will certainly cut consumption and thus lower GDP and inflation.
As for a carbon tax. It's in the works. If it's not too onerous it will help dampen carbon being spewed into the air. However, most of that is coming from cars, coal mines, and China. We need technological innovation to tackle global warming more than a carbon tax which will just add costs and tokenistic emmisions controls.
Anyway, we now see Volker taken in by Obama is like putting lipstick on a pig.
On Sep 30 01:44 PM tripleblack wrote:
> Cap and Trade to solve deficit spending?
>
> Balderdash.
>
> Giving the current government a new tax stream is like throwing gasoline
> on a fire.
With the top 5 Banks trading Trillions of dollars of unregulated derivatives, and the thousands of unregulated Hedge Funds using 30/1 leverage, funded by loans from the same banks, and the Government spending Trillions of dollars which it does not have, it is only a question of what default will set off the financial implosion.
All of a sudden, the government decides to auction off its land holdings. Essentially, by doing so, they've created value where none existed before.
Now replace "land" with carbon rights."
If the lands were already "productive" then there is no value added by creating a lands market that merely shifts ownership of the productive lands. If you meant "potentially productive" then you could add value by selling the land to someone who would actualize the potential.
There is no similar possibility of actualizing a potential value by putting a price on carbon and creating a market to trade it. It is a tax to everyone, as we all use hydrocarbons, but it is a massive benefit to the algores who have been trying to sell us global warming bullshit in order to "actualize" their enormously lucrative stake in the "potential" carbon trading market. All this does is suck money from the economy (you and me) and funnel it into the pockets of the algores. Hell of a deal if you're an algore.
We need a new economic model to base future blood money investments or we are throwing away our future. We've given away our valuable manufacturing base and now we are in deep szxt. We've created a financial nightmare that only inflation will relieve..and..we need guidance and not from the established interests both in and out of government...MarvinMBA
Otherwise, a more productive use of his time would be to take a nap...
It's not just real estate, investments, and banking that are the problems. Consider some of the following:
1) The US healthcare system at 16% of GDP, poor outcomes, and large uinsured is at least 4-10x more expensive and ineffective than any other developed country in the world.
2) The US military budget is larger than all other countries in the world's combined military budgets.
3) US multi-national fast food companies such as Macdonalds, Coke, Wendy's, TacoBell, etc. are creating the fattest, most unhealthy population in the world.
4) Lawyers/litigation - the US has something like 100x the per capita number of lawyers than a country like Japan has. A hugh waste of talent and resources and productivity.
5) Large scale fraud, corruption, lobby driven advantages, etc- From Enron, Worldcom, dotcom frauds, Pfizer, Madoff, securitized mortgage frauds, rating agency frauds, and on and on. Losses in the tens of trillions over decades.
6) Massive devaluation of the dollar since Fed control in 1913 in conjunction with out-off control government since at least the mid-1980's.
7) And the list could go on and on.
No, what we need in the US is probably a benovalent dictatorship for a period of maybe 10-15 years and a complete dismanteling of the corrupt two party system and the related corruption of lobbyists and a tiny minority of the wealthy oligarchs and public company executives. How about we put say the Supeme Court in charge for 10 years and have them revamp the whole US system to something more workable? Surely they could do no worse than our politicans have done for decades now.
Who knows, but the glidepath going forward for the US is pretty dire unless some pretty substantial changes are made and it certainly appears to be getting worse with each passing year now.
On Sep 30 11:46 PM MarvinMBA wrote:
> Under the present situation, tightening would certainly be the thing
> to do but the fragile recovery (?) if you can call it that would
> certainly be compromised. The next level of money creation should
> be directed at education and industries that could provide future
> jobs...we need a panel of experts to develop a plan for making the
> USA competitive in the world and it has to be outside of real estate
> and investing and banking which were our downfalls.
> We need a new economic model to base future blood money investments
> or we are throwing away our future. We've given away our valuable
> manufacturing base and now we are in deep szxt. We've created a financial
> nightmare that only inflation will relieve..and..we need guidance
> and not from the established interests both in and out of government...MarvinMBA
I'm a pretty open minded person whose first inclination is to be the devils advocate. I have looked for reasons to deny Global Warming as that would make me smarter then the masses but after my own research of both sides arguments I conclude it is foolish to think otherwise. That doesn't mean I agree we can do anything about it but taxing fossil fuels for the damage they cause seems like an appropriate measure. Otherwise, its like we are subsidizing them. We don't let P&G dump their trash into the Ohio river and have someone else pay for the cleanup?
On Sep 30 08:41 PM Freedom Fan wrote:
> "Among them, Volcker suggests that it’s time to look at either a
> carbon tax or VAT to solve the long term problem with deficits."
>
>
> Interesting that someone on the Obama team finally admits that the
> carbon tax has nothing to do with "global warming".
>
> The only purpose for "Cap-And-Trade" is to impose a stealth tax so
> the corrupt politicians can keep up their incontinent spending.
What about air waves? The government assigns rights to certain bands of the spectrum, and then auctions them off. Once out of government hands, private entities are able to sell these rights as if they were property.
Here again, value did not exist until the government allowed private enterprise to participate. (of course the technology to take advantage of radio waves is another pre-requisite...) Without getting into a thorny discussion about maximum utilization, I'd at least point out that there is an obvious addition to asset values where none existed before.
Agreed that the economics seem to be reversed for carbon taxes. We're no longer talking about productivity here.
On Sep 30 11:06 PM derryl wrote:
> Ricard wrote, "Think about public lands. Let's say the lands were
> rather productive, but since the title belonged to the government,
> there was no market developed to buy and sell land.
> All of a sudden, the government decides to auction off its land holdings.
> Essentially, by doing so, they've created value where none existed
> before.
> Now replace "land" with carbon rights."
>
> If the lands were already "productive" then there is no value added
> by creating a lands market that merely shifts ownership of the productive
> lands. If you meant "potentially productive" then you could add
> value by selling the land to someone who would actualize the potential.
>
>
> There is no similar possibility of actualizing a potential value
> by putting a price on carbon and creating a market to trade it.
> It is a tax to everyone, as we all use hydrocarbons, but it is a
> massive benefit to the algores who have been trying to sell us global
> warming bullshit in order to "actualize" their enormously lucrative
> stake in the "potential" carbon trading market. All this does is
> suck money from the economy (you and me) and funnel it into the pockets
> of the algores. Hell of a deal if you're an algore.
On Oct 01 06:41 AM gotnoshoes wrote:
> I'm a pretty open minded person whose first inclination is to be
> the devils advocate. I have looked for reasons to deny Global Warming
> as that would make me smarter then the masses but after my own research
> of both sides arguments I conclude it is foolish to think otherwise.
How about the fact, well documented by Scientists and government data, that the Globe has been cooling for the last decade? This destroys the carbon/warming correlation. The terminology by carbon advocates has been changed appropriately to climate change, another fact.
i would begin by rereading the period when europe went global,
seized the gold and silver of the americas, imported tens of millions of slaves to plant and harvest sugar cane, tobacco and cotton, and then produced new global powers who controlled trade from sea to shining sea...
currency and wealth are very different things. the spanish and the portuguese had all the currency (gold and silver) but in the end it was the british who captured most of their wealth (gold and silver) and put them into debt by selling them what they were not producing...
the americans control the seas militarily, they control the currency (because we are off the gold standard), and their client states (saudi arabia, iraq, etc) have the oil (the gold othe day) and reinvest their profits through the american banking system....
government debt is not the problem. the problem is who controls the world's new gold and silver.....
this is why we are fighting a "global war on terror" lol gag etc....
to control these raw materials.......
which is why the british took over the middle east during and after ww1, and why we started displacing the brits ever since then....
not by coincidence kissinger-nixon took us off the gold standard while solidifying our alliance with the saudis and israelis at the same time....and opened up china for cheap labor intensive manufacturing production (read the sugar cane, tobacco and cotton of our times) resold the world over at astronomical markups by american multinationals...
that was only 36 yrs ago....
What we need is real leadership from the White House and the cowards in congress brought to task.
President Obama needs to get off the fence and lead. He might tell his cabinet members to reduce their departments' spending by 6% yearly for the remainder of his term or go look for other employment. I'm sure he can find good people to get the job done. He will also need to call in Nancy and Harry and have a real heart to heart talk with them, explaining which way he wants to take the nation.
The buck stops on the desk of the Oval Office no matter how much the President might try to convince us otherwise.