Robert Rubin, every liberal politician's favorite economist and financial
insider, had an article he wrote published in a special Davos magazine for this
week's World Economic Forum in Switzerland. Among other things, he said the
following:"...our structural fiscal trajectory is unsustainable
with multiple, serious risks (while at the same time, our large cyclical
deficits are exacerbating debt levels and interest costs)..."In
simple terms, we are on the path to economic collapse unless something happens
very soon. That "something" cannot be in the form of more large debt
(think QE3) because of interest costs and because monetizing more debt will
almost certainly cause interest rates to rise:"Most
dangerously, there is a risk of disruption to our bond and currency markets from
the fear of much higher interest rates due to future imbalances or from fear of
inflation because of efforts to monetise our debt."I don't know
how you might read this article, but to me it looks like the U.S. economy is
Do I detect some bitterness, Lew? If you want to go on believing in the fantasy
of government statistics, knock yerself out. Before you discount the work of
John Williams, though, you ought to see how he comes up with those figures. It's
actual statistical analysis, not dart-board throwing.I'd be happy to
show you sometime how inflation of the money supply is at the root of stagnant
wages, high unemployment and runaway price inflation. By the way, I'm very much
a part of the working class, so I don't know where that accusation comes
from.When government agencies (I know, Iknow, the Fed is
"private") interfere in the money supply, interest rates and other
components of the economy like they do, normal economic activity is disrupted.
Government then tries to compensate for those disruptions, making thing actually
worse. I know you're a die-hard Keynesian who truly believes that capitalism is
a cruel taskmaster and needs taming by the central banks. He was wrong about a
lot of other things, too.
"The current crisis was first and foremost caused by excess money created
by the Fed." It was just as surely created by the fantastic profits
generated the last 30 years by stagnant real wages. But them I can't expect
Earl to have much sympathy for working class people.
"...under the old system the official rate wouldn't be 1.5%. It would be
closer to 10%. " I think this overstates the case. Nevertheless I think
the rate of infation is being low balled.
If you think our inflation rate is benign, think again. Maybe this will help.
It's from one of the money management websites I'm not allowed to name:"Over the past 30 years, the federal government has made a lot of changes
to the way it calculates inflation. It's taken place under presidents of both
parties. Each change in methodology has come with plausible-sounding
justifications. But, as if by magic, each change has had the effect of
flattering the numbers. Funny, that."According to one rogue
economist, John Williams at Shadow Government Statistics , if we still
calculated inflation the way we did when Jimmy Carter was president, the
official inflation figures would look about as bad as they did when ... Jimmy
Carter was president. According to Mr. Williams's calculations, if we counted
inflation under the old system the official rate wouldn't be 1.5%. It would be
closer to 10%."So believe whom you wish, but it would be better
to look for the truth and prepare yourself for the consequences of it.
Mr. Llosa to bad you do not have a seat on the Federal reserve. In fact your
observances were those of Mr. Bernake before he became chairman. Now, he seems
to have forgotten. Thanks for the article maybe he and others in the Fed will
read and observe. Sad, Sad day when the USA is leading this irresponsible
The current crisis was first and foremost caused by excess money created by the
Fed. Everything else followed because the banks had to figure out how to make a
quick buck with so much new money sloshing around. They found willing
accomplices in congress and in the Bush administration, and now the Obama
administration. If interest rates hadn't been so outrageously low and new money
hadn't been so plentiful, bankers wouldn't have had the means to create the
mischief they did. Nothing good comes from flooding the economy with newly
printed money. Nothing.
The current crisis was largely created by banks' marketing of complex
unsupportable derivitives. This was a willful act; all that was important to
them was to make a quick sale and let the chips fall on the purchasers. Of
course, such is the nature of our system, these crooks, er bankers, had to be
rescued first (women and children last). The system is flawed because it
rewards first and always fraud.