JohnL

Grand Illusion: The Federal Reserve (Part 3)

Me too. It's amusing to watch one person make logical arguments in 100 words while another drones on for pages without saying anything of import. :-)


On Mar 12 02:59 PM PROXIMO wrote:

> I've had a blast watching Aristophanes and the author go back and
> forth for the past couple of days.

Bernanke Fires a Shot Across Summers' Bow

Leftfield has it right: "Only real Constitution-based principles will really restore us."

I continue to be amazed at the endless debates about which system or program or other intervention will be most effective. There has been virtually no discussion of the constitutionality of all these policy ideas. Aren't we missing a key first step? Show that Congress (and the Fed) has the legal authority for these wealth transfers before worrying about policy effectiveness.

I don't see how anyone can read the Constitution and the commentary of the Founding Fathers without feeling disgust over all of this. A side benefit to restoring constitutional government will be regaining lost competitiveness and addressing the imbalances. Bernanke recognizes the imbalances, but when it comes to upholding the Constitution, he and most of the other politicians and bankers are clueless.

A Scenario for a U.S. and Global Recovery, Part 2: Banks

-- Textbook economics tell us that the role of government is to intervene when there is a failure in free markets. --

Why do you put much faith in textbook economics? With so many economists in academia, government and banking, how did we get into such a predicament? Based on their recovery efforts to date, does it seem like those textbooks have brought them clarity on the root cause of the problems or effective solutions?

I submit that those textbooks can't tell us where government intervention has ever worked to cure an economic slump and they can't tell us that the free market actually failed. Isn't it more likely, after decades of continuous growth in government, that we are actually experiencing a failure of government and it is now time to let the free market intervene?

U.S. Dealing with a Boatload of Debt - Moody's

On Feb 05 11:11 PM Crocodilian wrote:

>US Federal debt went from %52 of GDP in 1940 to %121 of GDP in >1946."

I don't think debt levels starting in 1940 are relevant to the early 1930s when the Keynesian stimulus was being applied.

> 9 out of 10 economists will tell you that cutting government spending
> in the middle of what was then a severe recession was a contributing
> factor in making it the great depression.

Government spending did not get cut during the beginning of the Great Depression. According to the White House document you referenced, it climbed dramatically from 1929 ($3.1B) through 1939 ($9.1B). The federal budget went from a surplus in 1929-30 to deficits starting in 1931 and every year after that. In 4 of the 5 years, 1932-36, the deficit was larger than all federal receipts! All of this deficit spending did not end the depression. The depression did not really start easing until 1939-41.

>Despite what you seem to think, this was not financed by "funds >provided by the Allies" -- what are you thinking? The UK was broke, >and the Soviet Union wasn't buying Treasuries . . .both nations were >buying a lot from the US, and had nothing much to sell; in the end, we >ended up "lending" them quite a lot.

>Lend-lease added up to $50 billion in 1940 dollars (GDP at the time >was about $200 billion, so the loan -- which was effectively a gift, ended >up being %25 of GDP. %25 of today's GDP would be $3 Trillion.

FDR began selling (not lending) war material to the allies in 1939 under the Cash and Carry law. Almost $4B of goods were sold to Britain alone in 1940. Meanwhile commodity and industrial prices began rising around the world due to preparations for the war (source BLS, Census Bureau, Forestry Service, Dept of Minerals Management) and trade started increasing at the same time. Lend-Lease did not start until 1941, after the recovery had already started.

So I respectfully continue to question this premise that borrowing and deficit spending ended the Great Depression. Despite massive stimulus, the 1930s were essentially a "lost decade" and I think it will happen again with all the crazy talk coming out of D.C. right now.

U.S. Dealing with a Boatload of Debt - Moody's

"9 out of 10 economists will tell you that cutting government spending in the middle of what was then a severe recession was a contributing factor in making it the great depression. It was only when the US took on unprecedented amounts of debt and put people to work building roads, bridges, tanks, and ships that the depression ended."

And 9 out of 10 economists watched and said nothing as this whole Monetarist-Keynesian fraud fell on its face. I don't believe the idea that we borrowed our way out of the Great Depression is not supported by the facts. Ramping up for WWII with funds provided by the Allies, and the liquidation of malinvestments over a ten-year period, ended the depression.

Will Obama's Solution Finally Save the Banking Sector?

"Unfortunately, the economy and the financial markets have reached a point of fragility where government policy has become paramount."

The banks were always fragile! it is just recently that most investors became aware of the fact. If they were inherently stable, would they be in this mess? The fragility stems from the morally, legally, financially and economically questionable practice of loaning out on-demand deposits. They are playing a confidence game and always subject to a credit contraction and "run on the bank." If you're not familiar with the issue, please research Austrian economics on this question -- particulary von Mises, von Hayek and Rothbard.