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John Lindauer  

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  • Krugman, Keynes, And The Economy [View article]
    You read Keynes correctly. The most important single concept Keynes wrote about was the reality that employers, both private and government, need to take in more revenues if they are to hire more people, produce more goods and services, and pay more taxes. He then asked the rhetorical question as to who could provide the necessary additional revenues when there is a depression - and pointed out that it would have to be either consumers, foreigners, investors (buying inventory, plant and equipment) or the government.

    Every businessman is a Keynesian even if they don't realize it - they know they must either actually take in more revenues if they are to produce more and hire more people (or expect to take them in if they produce inventory or borrow money to invest). The only people who complain about Keynes are those who haven't (or can't) read what he wrote and the Socialists/Communists who became distraught and his biggest critics because he said depressions could be ended without government regulations and government ownership so there was no reason for capitalism to fail.
    Jan 29, 2014. 12:17 PM | 2 Likes Like |Link to Comment
  • Ignore The Low Employment Ratio [View article]
    This article is a good example of the views of a well meaning person who has never studied macroeconomics presenting an intelligent analysis based on a useless indicator - the official rate of unemployment which every trained economist knows is meaningless and the "World Bank" is an agency staffed by third world bureaucrats whose projections have proven very consistent - always wrong.

    Even if the "official" unemployment rate of the past is significant, which it is not, trying to project the future by looking at the past is like trying to drive the road ahead by looking in the rear view mirror. Sooner or later the road bends and you crash.

    Every trained economist with real world experience knows we are stuck in a deep and worsening economic malaise with nothing on the horizon to pull us out. The continuing slow decline of the real economy that ultimately underpins the markets suggests a bleak future for security prices. Maybe the departure of Bernanke and the arrival of three new Federal Reserve governors means we have a hope. Until they act investors would be wise to be cautious.
    Jan 17, 2014. 10:51 PM | 1 Like Like |Link to Comment
  • The Future Of Social Security [View article]
    the more you pay in the more you receive under the current formula. And like any insurance policy, those who live long enough to draw the benefits get more than those who don't (who don't get anything). That's how congress set it up.
    May 25, 2012. 08:17 PM | Likes Like |Link to Comment
  • The Future Of Social Security [View article]
    You just made the case - Social Security is not a liability of the government just as the military and agriculture budgets are not on-going liabilities of the government. They are all federal spending programs whose amounts are subject to the whims of Congress which can increase, decrease, or eliminate them. And Social Security is available to serve all Americans just as Defense does, and certainly more Americans than farm subsidies. The key item is that long ago Congress, for better or worse, did away with the original trust fund concept and made it just one more of the many federal programs. We still have actuarial naifs at Social Security drawing salaries to tell us when it would run out of money if it was still a trust fund. Their role is similar to the naifs in the military who probably still calculate the price of hay and swords if we still have a calvary. We have neither. And yes the program has expanded - so has agriculture, the military etc etc as our congressmen pack the programs with whatever their constituents and donors want. In other words, its time to let go of the 1930s concepts which were abandoned more than forty years ago. Any politician who claims Social Security is in trouble is either to dumb to serve or thinks the voters are too dumb to know better.
    May 23, 2012. 09:01 PM | 2 Likes Like |Link to Comment
  • Fears About Bankruptcy, Depression And Inflation [View article]
    You are correct. That is the biggest single sector with a problem - But if more people had jobs and more businesses had profits there would be more buyers eligible for for mortgages and willing to buy houses and fewer people losing their jobs and becoming unable to make their payments. Prosperity for all via the Fed is available faster than if we try to help one sector. But if we do want to channel new money directly it might well be the best one to concentrate on.
    Mar 15, 2012. 06:07 PM | Likes Like |Link to Comment
  • Fears About Bankruptcy, Depression And Inflation [View article]
    Please read the reply I just submitted to the comment preceding yours. It totally applies. Since I think its decisionmakers are gross incompetents I can indeed believe the Fed uses some meaningless "official" calculation of the unemployment rate type you cite. An accurate rate can only be obtained using labor force participation rates. The so-called unemployment rate the government issues each month is an inaccurate travestly that insults the intelligence of every American high school graduate. We don't need more federal spending and federal regulations and federal deficits - we just need a few competent people appointed to the Fed.
    Mar 15, 2012. 03:08 PM | Likes Like |Link to Comment
  • Fears About Bankruptcy, Depression And Inflation [View article]
    Please reread what I wrote. The Fed can "unwind" QE1, QE2, QE3 and all thereafter within minutes (minutes, not weeks and months, minutes) if it ever finds it wise to do so. The Fed has two big weapons that it can use instantly - open market sales and reserve requirement increases. Both instantly take loanable funds out of circulation - reduce the money supply in other words. Your concerns about the debt are equally unwarranted - you are confusing private and state and local debt with federal debt. Very very different. The federal debt mostly came about by the Fed creating the necessary additions to the money supply as our economy grew. The Fed can instantly pay off all or part of that debt with the stroke of a pen and simultaneously totally offset the expansionary/inflationary effect that might otherwise result. For example, much of the debt is held by the Fed as required by congress which wanted to pretend there were assets backing our currency. No need to pretend. Our currency is worth what you can buy with it - not more, not less. Many many years ago I suggested that course of action in the first edition of the first book I wrote. It's not a new idea. We don't need inflation or unemployment or deficits (at today's tax rates we would have surpluses if we had full employment) and we don't need foreclosures and bankruptcies and bank failures because people lost their jobs and incomes. With modern macro policies we can have prosperity with inflation. We're overdue for intelligent policies that support free enterprise - not silly policies that lead to ever more government spending and regulations.
    Mar 15, 2012. 03:03 PM | Likes Like |Link to Comment
  • Fears About Bankruptcy, Depression And Inflation [View article]
    I am not at all sure the Fed is limited to funding "commercial banks" in an emergency and massive unemployment would certainly qualify as one to any macroeconomist. In any event, if the Fed and Treasury can pretend Goldman and AIG are commercial banks they certainly can pretend anyone or anything else is one also.

    You are right about the last bit of content - I was venting my frustration at the imcompetence and inadequacy of today's Fed's governors and speculating as to why it exists and what can be done about it.
    Mar 14, 2012. 05:54 PM | Likes Like |Link to Comment
  • Fears About Bankruptcy, Depression And Inflation [View article]
    There are seven governors so its a matter of only one missing leader. Yes new governors (or enough resignations) are needed but recess appointments could occur. I was not thinking of the discount window but rather of a direct provision of liquidity similar to that sent to those great U.S. commercial banks Goldman Sachs, AIG, and Deutsche Bank.
    Mar 14, 2012. 05:48 PM | Likes Like |Link to Comment
  • Fears About Bankruptcy, Depression And Inflation [View article]
    I believe that if you look elsewhere in the statutes you will find the Federal Reserve has both the authority to determine what is acceptable collateral and to do whatever it thinks best in an emergency. Thus it could act quickly just as it has recently done.

    In any event, it took the Fed and Treasury less than 48 hours to proclaim Goldman Sachs to be a commercial bank and have its eligible for billions in Federal Reserve financing based on its various asset holdings and the Treasury the same less-than-48 hours to "guarantee" Goldman's notes. The Fed and Treasury could do the same for any other public or private recipient to whom they wish the Fed to disburse funds.

    If the White House appointees can help Goldman and AIG they can certainly help everyone else. What's missing today is Fed decision makers with appropriate educations and real world experience in business and COMMERCIAL banking. Until they are appointed by the President and approved by the Senate we will continue to have unemployment in the twenty percent range with no light at the end of the tunnel - and continuing lower-than-possible tax collections and profits and higher-than-necessary welfare and "make work" spending, foreclosures and bankruptcies.

    Historians will not be kind to Presidents Obama and Bush and messrs Geithner and Bernanke. They have failed us by confusing the welfare of investment banks which primarily deal with the buying and selling of previously issued securities with the commercial banks which primarly deal with consumer and business loans. Such ignorance is inexcusable and suggests a massive failure on the part of our economics departments to properly educate their students as to the application of economic theory to the real world. It also suggest economists need a code of ethics to prevent people who are not macroeconomic experts with appropriate experiences from accepting positions for which they are patently unqualified. (Dentists may be doctors but they would be censured if they got near an operating room without ever having studied or practiced surgery. People like Geithner and Bernanke should not be allowed near the Fed for the same reason.)
    Mar 14, 2012. 04:35 PM | Likes Like |Link to Comment
  • Congressman Ryan And Gold Vs. The Keynesians [View article]
    Eric Maria Remarque was an author of fiction. He never studied economics. The causes of the German hyperinflation are well known - massive printing of money to pay war reparations to France and the UK. There is no doubt that massive excess spending can cause prices to be bid higher across an entire economy.
    Mar 12, 2012. 08:06 AM | Likes Like |Link to Comment
  • The United States Has Two Choices: Depression Or Bankruptcy [View article]
    Prices are in most cases set in markets by the basic forces of supply and demand. Governments can and do intervene (and typically to favor cronies and inevitably make things worse). But demand only increases generally and causes an economy's general level of prices to rise when the central bank creates too much money. That is certainly not the case today.
    Mar 7, 2012. 12:44 PM | Likes Like |Link to Comment
  • The United States Has Two Choices: Depression Or Bankruptcy [View article]
    What the public sees as "trained economists" are typically not so from a real economist's viewpoint. All too often they are jumped up bank tellers and brokerage salesman being appointed as their banks/brokerage's "business economist" to give economic speeches at rotary clubs and Junior Chamber of Commerce meetings and "publish" canned columns in the local weekly paper. Being as they are equally qualified as "business dentists" or "business lawyers" one would assume the next set of their speeches would cover dental and courtroom procedures and they would have an equally bad record there as well.
    Mar 7, 2012. 12:40 PM | Likes Like |Link to Comment
  • Why India Is Not A Meaningful Alternative To Investing In China [View article]
    Every tenth car on the road may be an import but the other half the population works only for barely enough food. And that population half is growing in size as fast as the "modern" half - so for India to grow 8 percent per year overall means the more modern half will have to grow 16 percent. No growth at all is more likely, particularly without more electricity and the rule of law.
    Mar 7, 2012. 12:29 PM | 1 Like Like |Link to Comment
  • Congressman Ryan And Gold Vs. The Keynesians [View article]
    I agree with much of what you say and the idea the Fed should stop paying interest on reserves is an excellent idea under today's unique circumstances. Raising the Federal Funds rate is totally irrelevant except, at best, as a signal of the Fed's intentions. (The Fed use of the FF rate is a holdover from the early UK-sourced textbooks which were writing about the Bank of England wherein the bank rate is important). I totally disagree that the Fed's balance sheet is "shaky." It is in wonderful shape. The answer today, and the only answer so far as I can see, is for an actual Quantitative Easing. Contrary to the common knowledge such an easing would be the first since QE1 and QE2 were more than totally absorbed by the simultaneous increasing of bank reserve requirements and loan requirements. In today's world the economy has sunk so badly that even a traditional quantitative easing might not work. That appears to leave a quantitative easing going directly to actual worthy recipients as the ONLY solution left. Perhaps 3 percent of the required 5 or 6 percent annual increase in liquidity needed for transactions to proceed without causing excess spending resulting in inflation could be channeled directly to the very elderly social security recipients. But something must be done and only the Fed can do it. Our problem, in a nutshell is the weak, unqualified, and unworldly political appointees who dominate the FOMC. Know any influential Obama people? He needs to act or Bernanke and his other Fed appointees are going to have him in real trouble because of their gross ineptitude.
    Mar 7, 2012. 11:09 AM | 2 Likes Like |Link to Comment