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Printing money makes sense, Dean Baker argues; the Fed has the means and the responsibility to...

Printing money makes sense, Dean Baker argues; the Fed has the means and the responsibility to America's 15M unemployed to pump cash into the economy and control inflation later. But the Fed's "trillion dollar deficits don't matter" philosophy brings economic ruin ever closer, David Stockman counters.
Comments (27)
  • Tack
    , contributor
    Comments (12442) | Send Message
     
    We have a "responsibility" to provide endless payments to people for not working? This is a road to serfdom, both for the payors and payees.
    13 Oct 2010, 06:18 PM Reply Like
  • tunaman4u2
    , contributor
    Comments (2720) | Send Message
     
    Well said Tack. So the 15M unemployed get more eh?
    Sure lets make grocery bills, commodities etc higher for everyone else.

     

    USA = Unicorn land where no pain is ever felt by anybody, its spread to all later.
    13 Oct 2010, 06:20 PM Reply Like
  • Tack
    , contributor
    Comments (12442) | Send Message
     
    Tuna:

     

    When it comes to groceries, there's no "later" to it; it's now.
    13 Oct 2010, 06:29 PM Reply Like
  • ebworthen
    , contributor
    Comments (2811) | Send Message
     
    I agree with you, but the bailouts and money for the banks at 0.25% at the backdoor of the FED are no different.

     

    Are we going to allow individuals and corporate entities the freedom of failure or not?
    13 Oct 2010, 06:31 PM Reply Like
  • Hendershott
    , contributor
    Comments (1473) | Send Message
     
    You don't think there's any pain in the US economy?
    13 Oct 2010, 07:58 PM Reply Like
  • Wyatt Junker
    , contributor
    Comments (4503) | Send Message
     
    Isn't this what the Redistributor In Chief campaigned on?
    13 Oct 2010, 06:28 PM Reply Like
  • MEKhoury
    , contributor
    Comments (173) | Send Message
     
    Baker writes:

     

    "In our demand-constrained economy, however, there is no problem of inflation. The economy can produce more of almost anything right now. The reason that we are not doing it is simply the lack of demand."

     

    I don't see how this validates his point. Firstly, "no problem of inflation" is both temporal and relative, that is, it depends on whose stats you follow. Secondly, if anything, this confirms that the lack of a massive debt-fueled binge exposes the gross overcapacity in our economy. And his theoretical solution to this is to hand out $2trn of counterfeit bills?

     

    What about confiscation of wealth? Dilution of savings? Further currency devaluation? Hot money flows to emerging economies? And how exactly do we make that magic $2trn "disappear"? How do we know when the time is right? Oh yes, that's right, when it's far too late to pull ourselves out of the abyss.
    13 Oct 2010, 06:30 PM Reply Like
  • nobby73
    , contributor
    Comments (1177) | Send Message
     
    History shows that the process of bring inflation under control is very hard and very painful. The Fed must realize that raising rates will cause chronic problems owing to the level of debts in the system.

     

    As for the way the Fed intends to increase inflation, through currency debasement is going to cause the greatest damage to those who were the most prudent. The other point is many people are confident that the Dollar is strong enough, owing to the problems in other currencies, such as Euro and JPY. However, what matters is the external net long Dollar position. Dollars are the main funding currency around the world, so those who are long Dollars can work with Dollar borrowers to repay debts and re-denominate in a different currency. If investors want to exchange Dollars for Euros, for example, a 1% decline in Dollar holdings causes a 2% increase in Euro holdings - this will have a powerful effect on the exchange rate. And you don't want to know what this is going to do to gold and silver....
    14 Oct 2010, 02:19 AM Reply Like
  • If U Say So
    , contributor
    Comments (348) | Send Message
     
    Baker has no idea what he's talking about. QE only leads to more QE. More QE leads to lower interest rates in the short term and virtually NO buyers of Treasuries when QE is over because Foreign money wants nothing to do with something tied to a cratering dollar unless they're paid for that risk. Paying for that risk might mean 6,7, 8% or more on a five year Treasury. Let us not forget we're already spending a trillion and a half more every year than the US Treasury has EVER taken in. That would take some heady amount of economic steam to overcome high interest rates ahead.
    13 Oct 2010, 06:32 PM Reply Like
  • MEKhoury
    , contributor
    Comments (173) | Send Message
     
    Agreed. Two words Baker obviously doesn't understand:

     

    Unintended. Consequences.
    13 Oct 2010, 06:33 PM Reply Like
  • Wyatt Junker
    , contributor
    Comments (4503) | Send Message
     
    Awww, but their heart was in the right place. Doesn't that count for something?
    13 Oct 2010, 06:42 PM Reply Like
  • boxdownbytheriver
    , contributor
    Comments (24) | Send Message
     
    the keynsian's will f...ck us even when we're dead. i'll skip a narrative history where money printing and debasement have never worked since the time of diocletion. we don't know more than that, since it was the first recorded instance in history. meanwhile the next trillion plus is moving to asia and commodities and bubble number 5 of the last 12 years.

     

    thanks ben. you and sir allan taught me well, though rome burns all around me.
    13 Oct 2010, 07:03 PM Reply Like
  • boxdownbytheriver
    , contributor
    Comments (24) | Send Message
     
    i know what i'm talking about. GFY
    13 Oct 2010, 07:03 PM Reply Like
  • I3 Risk Management
    , contributor
    Comments (28) | Send Message
     
    There will be a day of reckoning...

     

    Seems the question is are we going to pay the piper now or are we going to pay the piper later...

     

    Either way the day to pay the piper remains in front of us.
    13 Oct 2010, 07:10 PM Reply Like
  • bluk1
    , contributor
    Comments (24) | Send Message
     
    not just now or later, also a choice of are those how lived within their means and saved for retirement, going to pay for those who did not , accumulated too much debt instead and are still alive and consuming?
    13 Oct 2010, 07:54 PM Reply Like
  • I3 Risk Management
    , contributor
    Comments (28) | Send Message
     
    Amen
    19 Oct 2010, 08:26 PM Reply Like
  • sysin3
    , contributor
    Comments (61) | Send Message
     
    Good lord, it pains me to re-remember (for the 4th time today) that there are people in this world as stupid as Dean Baker.
    13 Oct 2010, 07:10 PM Reply Like
  • Jeff Nielson
    , contributor
    Comments (2464) | Send Message
     
    The second article is a SUPERB piece...and everyone here knows what the FIRST "piece" is (i.e. POS).

     

    Maybe some people thought I was joking with this when I first wrote this?

     

    "U.S. Dollar is the new 'Tulip'"
    www.bullionbullscanada...

     

    For those looking for something newer:

     

    "Competitive Devaluation and Gold, or Gold and the Bond-Bubble(s)"
    www.bullionbullscanada...
    13 Oct 2010, 07:43 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4002) | Send Message
     
    Jeff, I bought Great Panther Silver after reading one of your articles. Any more thoughts?
    13 Oct 2010, 08:54 PM Reply Like
  • davidbdc
    , contributor
    Comments (3139) | Send Message
     
    We have 15 million unemployed because the folks in the driver's seat didn't have the guts to say that people that can't afford homes shouldn't be allowed to buy them. Then they didn't have the guts to tell the banks that were BK that they were BK and the assets would be sold off. Then they didn't have the guts to tell Congress to balance the budget, just vague references to the ills of deficit spending. Then they didn't have the guts to tell the American people the truth.... no matter how much money we print, so many of our industries have left that there simply won't be enough jobs to go around. Better study hard in school and be extremely mobile - otherwise your chances of a "good" middle class life are about 50/50.

     

    Balance the budget, cut spending. Then you'll have an environment where the economy can flourish - instead more of the same will simply keep suffocating the economy.

     

    And we might try following the rule of law also. Just a minor point.
    13 Oct 2010, 07:54 PM Reply Like
  • AxiosCap
    , contributor
    Comments (291) | Send Message
     
    The Keynesians still haven't figured out that liquidity isn't the issue, but too much liquidity will definitely end up being a problem. Also, lower rates aren't going to entice people already up to their necks in debt to add more to the problem. This is the flaw in their thinking. It's as if they opened a textbook and are following the example in the book without allowing for rational, competent thought to enter into the equation. It seems the lessons of history have already been forgotten.
    13 Oct 2010, 08:03 PM Reply Like
  • Hendershott
    , contributor
    Comments (1473) | Send Message
     
    I don't get to make policy, or even influence policy. I am responsible for navigating the markets. The article in the WSJ this morning concerning Bernanke's view of the Japanese experience indicates he believes the Japanese were too timid with their stimulus in the first place and pulled the stimulus too early. Given that he is the head of the Federal Reserve we should plan accordingly with our market strategies. Plan on large and continuing QE and low interest rates. Pretty much what the market looked at today.
    13 Oct 2010, 08:17 PM Reply Like
  • Archman Investor
    , contributor
    Comments (2321) | Send Message
     
    <<Printing money makes sense, Dean Baker argues; the Fed has the means and the responsibility to America's 15M unemployed to pump cash into the economy and control inflation later. >>

     

    This just confirms a very sad truth. We are in an every man for himself society.

     

    The government, powers that be, the FED, et al have completely lost control of the economy, the markets, etc, and they haven't a clue what to do. They are all 100% panicked, without question.

     

    Per ZeroHedge: ICI has just reported the latest in what is now a weekly farce: nobody wants a piece of this market. Nobody. Retail is out permanently, as was confirmed by the 23rd sequential outflow from domestic equity mutual funds, this time redeeming $5.6 billion, the highest since the beginning of September, right before the Fed full blown stock ramp intervention began.
    Thank you to ZeroHedge.

     

    The reality is (for anyone with even a few real brain cells left):
    The stock market is completely owned by our government now, and goes up on nothing more than air. Average Americans are gone. Their wealth has been destroyed twice over the past 10 years by the liars on Wall Street, mutual fund managers (aka asset gatherers) and all the paid liars on CNBC.

     

    It is a known fact that while there are people out there who truly cannot find jobs, there are way to many people out there who have simply decided to stop working and live off everyone else for as long as they can get away with it and then some. Because we have no means in place to even remotely regulate this and all the insurance fraud beyond unemployment benefits out there (disability, etc) things are completely out of control. I happen to know myself, or thru friends, etc, of many people claiming benefits for disability, unemployment, etc who should be locked up for fraud however I know that there simply is no way to charge these people with fraud. The country does not have the resources.

     

    It is every man for himself now.

     

    If you are in the stock market right now, and have been watching your portfolio of non US stocks rocket higher (as mine have) or your gold & silver bullion rocket higher (as mine has) because our government is utterly trying to destroy our way of life here, you have nothing to fear.
    When the smoke clears and the US lies decimated on the ground, many other markets around the world will regain their footing and eventually move higher as the US takes the next 50 years to clean up its act.
    I am laughing all the way to a +20% portfolio return this year and cumulative +300% return since year 2000, while average American citizens have had their wealth stolen from them by the likes of CNBC and all their lying shills.
    Even the once elusive, secretive, and respectable Warren Buffet has been bought off and has become nothing more than a shill for Wall Street. The man who would never give more than one 5 minute interview a year, a decade ago, now is a regular on his long lost "daughter's" Becky Quick's CNBC shill fest.

     

    The US today is a debt laden huge pig whose citizens and leaders are nothing more than dumbed down clowns praying that somehow everything will work itself out.

     

    Look out for yourself. Wall Street is only looking out for itself.
    13 Oct 2010, 08:33 PM Reply Like
  • ebworthen
    , contributor
    Comments (2811) | Send Message
     
    I have a relative who hasn't paid taxes in six years. WTF?

     

    Of course, this relative does not have a mortgage or equity or assets to go after so the relative is a write off? That is the only conclusion I come to.

     

    Do I feel like a fool for paying my mortgage and bills and taxes and investing and saving prudently without fail for 30 years? I'm starting to.
    13 Oct 2010, 10:28 PM Reply Like
  • bdarken
    , contributor
    Comments (401) | Send Message
     
    Lots of fun and interesting public policy talk here, but in the end, the question in the morning will be "what on earth do I long, and what do I short?"
    13 Oct 2010, 11:11 PM Reply Like
  • Donald Ingram
    , contributor
    Comments (3481) | Send Message
     
    Baker: Damn the torpedoes! Full speed ahead!
    13 Oct 2010, 11:51 PM Reply Like
  • Mr. Ed, Jr.
    , contributor
    Comments (745) | Send Message
     
    Mr. Baker, arguing for more stimulus, makes the comparison to a counterfeiter lavishly spending $2 trillion, and what a benefit to the economy that would be.

     

    First of all, we already have a counterfeiter, and his name is known-- Ben Bernanke. But, I digress....

     

    Baker then suggests that the counterfeiter will boost the GDP and get the country back to full employment-- but that the FBI will catch him and collect the counterfeit notes before real damage (like runaway inflation) can be done:

     

    "At that point, the $2tn will be grabbed out of circulation and destroyed. "

     

    Then, Baker adds this gem....

     

    "Il's all very simple."

     

    Mr. Baker, however, fails to point out that we already had a trillion dollars of stimulus, and it produced very little benefit. In fact, unemployment went up, not down.

     

    This is a very dangerous game that our government and the Fed are playing. Betting on them being able to take corrective action when the time comes is betting against their recent history. After all, they never saw the housing crisis coming. When some were raising the alarm, the very same people Baker thinks can rescue us in the nick of time were denying there was a problem. (In fact, Baker was one who DID predict the housing collapse-- but the same people he wants to let gamble with what is left of our wealth would not listen to him. )

     

    Enough with the spending and the debasing of the dollar.

     

    Enough with protecting the banks who, after having been bailed out of their last scam, are now caught engaging in massive foreclosure document fraud. (They walk right into our courts and lie. Repeatedly)

     

    Enough.
    14 Oct 2010, 12:35 AM Reply Like
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