Stockman on stimulus, borrowing and Dart Vader

David Stockman? As in Reagan Administration and general business failure David Stockman? Really scraping the bottom of the barrel here.

David Stockman has become a liberal. He is now against virtually every Republican economic policy under the sun.

"You're kidding yourself if you think cutting taxes is really cutting taxes," says David Stockman, the former budget director for Ronald Reagan, in a recent interview with Reason.Tv.

"We're simply deferring massive taxes unfairly and immorally putting huge debt burdens on future generations and that is just wrong."

Read more: http://articles.businessinsider.com/2011-01-04/wall_street/30051947_1_bush-tax-cuts-budget-director-tarp#ixzz1ZaLeNdNu

And if you think Stockman is harsh, you should read some of what Bruce Bartlett, also a Regan advisor, has said about Republicans. He has totally trashed the policy and called Republicans absolute idiots.

>David Stockman has become a liberal. He is now against virtually every Republican economic policy under the sun.

That happened after Collins & Aikman, right?

"David Stockman has become a liberal. He is now against virtually every Republican economic policy under the sun."

So, if you fail at business, you become a liberal. Interesting...

Right. Like Warren Buffet.

If you fail at business you become the Governor of Texas.

And if your the CEO of a healthcare company that committed MASSIVE Medicare fraud, you become the Tea Party Republican governor of Florida.

Riversider: Did you see Michael Lewis on Charlie Rose last night?

Very informative about how Iceland, Ireland and Greece all failed in different ways.

But Ireland has a business friendly corporate tax of only 12%. Certainly they shoukd be booming right now!

Will watch tonite on-line truth. thanks for the heads up. I like shows like this.

I like the comment about Ireland. Some people will use every specious argument under the sun to avoid paying taxes.

Riversider: Lewis was excellent. He explains it all: how they got into that situation and why they failed.

tommy2: I suggest you watch that interview with Lewis. He explains each country's failure.
Ireland is much different than Greece, as is Iceland different from the others.

Riversider: Please put up the link to the show. Thanks.

http://www.charlierose.com/view/interview/11924

I find Lewis very entertaining but don't eat everything he serves you uncritically. German banks' financial woes stem from their fascination with scheiss? Really?

The mid tier/local German banks (not Deutche bank) were notoriously bad bankers. They gobbled up subprime without understanding it. The American banks knew this and took full advantage. When Bank America recently called them sophisticated investors they were using a legal term not one baked in reality.

Thanks, Riversider.

malthus: I don't eat anything served to me, only if it's what I order.
Riversider explained the German banks' situation.
I was referring to the history and insight into the mentality of Iceland, Greece and Ireland that Lewis explained in a very understandable way.

Lewis is a good story teller. Nothing new here, but he does have a certain talent and ability to personify global/national failures. He picked a good profession, the world seems to provide new material on a daily basis.

hmmn. try this one.

Shakespeare is a good story teller. Nothing new here, but he does have a certain talent and ability to personify global/national failures. He picked a good profession, the world seems to provide new material on a daily basis.

hmmmn. try this one.

Jackie Collins is a good story teller. Nothing new here, but he does have a certain talent and ability to personify global/national failures. He picked a good profession, the world seems to provide new material on a daily basis.

Great piece by Zulauf on Europe. It's sober and detailed. A definite must see if you need to understand Euro dynamics.

http://www.youtube.com/watch?v=JSfJR6yR7p0&feature=player_embedded#!

More David Stockman

http://www.youtube.com/watch?feature=player_embedded&v=I3AKiWGawGs#!

"Bernanke is so bad that we should wish to return to the age of Marriner Eccles in 1935 - a fiscal Keynesian who believed that money-printing would fuel speculation and inflation; if the government were going to rob the people, it should do it the honest way - through taxes"

What does Stockman say about the Romney and Ryan budgets? RS will ignore this.

"Paul Ryan’s Fairy-Tale Budget Plan
By DAVID A. STOCKMAN
Published: August 13, 2012..."

http://www.nytimes.com/2012/08/14/opinion/paul-ryans-fairy-tale-budget-plan.html

http://online.wsj.com/article/SB10000872396390444180004578016200287341688.html?mod=googlenews_wsj

With the Republican Party committed to a gold commission and the Federal Reserve committed to easy money, a substantive debate about the principles underpinning our monetary system is finally in the offing. For sound money to carry the day, Republicans will need to do more than point out the still-hypothetical risks of easy money. The GOP will have to detail the harm that the middle class has already suffered as a result of a policy of low but persistent levels of inflation.

A little inflation appears to be a free lunch, lubricating the economy and gradually erasing past financial mistakes. But the nature of the free lunch is that its costs aren't absent—they're just distributed broadly. And in the case of low but steady inflation, the broadly distributed costs are borne by the middle class. Over time, rising prices have eroded American workers' standard of living. And, over time, the Federal Reserve's persistent easy money hurts the very person it is presumably intended to help, the American worker.

The notion that modest inflation is helpful to labor dates to John Maynard Keynes's "General Theory of Employment, Interest and Money." Keynes pointed out that the supply of labor is not a function of real wages alone. Rather, the instance in which the supply of labor is determined solely by real wages is a special case that fits into his broader "General Theory," which showed the strong influence that observed wages have over the supply of labor.

The problem not fully recognized by either Keynes or Mr. Bernanke is that the low level of inflation necessary to anesthetize the American worker to declining real wages also has the long-run side-effect of anesthetizing the American worker to price signals needed to compete in the global marketplace. Inflation's subtle corruption of these price signals at the heart of the market's purpose underlies the unhappy situation in which both real wages and employment ratios have been in decline for decades.

The more than five-fold increase in the median income of the American household since 1971, to $50,000 from $9,000, certainly provides the clear appearance of progress. But after the dollar's 82% loss of purchasing power over the same period is factored in, the median household income rose just 12%. This much more modest increase is largely the result of the growing prevalence of two-income households.

The median real income for working men over the same 40-year period rose just 8%. And that improvement only accrued to the ever-shrinking percentage of men fortunate enough to still have full-time jobs—just 67%, according to the latest data from the Bureau of Labor Statistics, within a percentage point of the lowest level on record since the figure was first recorded in 1948.

In the past four years alone, since the Federal Reserve started aggressively expanding its balance sheet, the declines in the middle class's real income have been particularly severe. With American median household income unchanged at roughly $50,000 since 2008, inflation has been steadily chipping away at middle-class earnings. Adjusted for inflation, the real income of the average American household has fallen each of the past four years, resulting in a cumulative real decline of 7% since the Federal Reserve embarked on its experiment in money printing

Is this for real?

So declining real wages for ordinary Americans has nothing to do with destroying the unions; failing to increase the minimum wage; the "employment at will" rule that employers can downsize or fire without any limit; an out-of-control medical sector that costs double any other country's; reduced public support for higher education, schools, transit and other essential middle class services; the end of the one-company career; employer-based health care and pensions that put our companies at an international disadvantage and therefore are in a slow-motion collapse; high dollar policies that create incentives to shift jobs abroad; "free" trade policies stacked against ordinary workers and in favor of professionals and patent/copyright monopolists; deliberate decisions by the Fed to keep unemployment high (and, therefore, employee bargaining power low); changes in law and corporate governance to enhance the power of investors and top managers to "mine" corporations at the expense of employees; privatized prisons and primitive drug laws that incarcerate vast numbers of potentially productive people; changes in patent and copyright law to increase incumbents' ability to charge for past work and burden current creativity; the massive misallocation of resources resulting from the housing bubble; cutbacks in Federal and private support for the research and development that increase productivity; a generation long shift in taxation from corporate and upper-class income tax to payroll taxes that fall mainly on the middle class; the largest military-industrial complex in the world sucking resources unproductively; "deregulation" designed to shift resources to the unproductive and dishonest; automation that has eliminated many relatively well-paid skilled working class jobs; subsidies for productivity-reducing sprawl and oil-fueled waste; the absence of a large government source of demand or adequate investment in infrastructure; and an exploitative finance sector?

And the decline in incomes in the last 4 years had nothing to do with the collapse of the housing bubble and the massive recession resulting from the collapse in bubble-generated demand? Or the cut-backs in government employment resulting from Congressional Republicans' refusal to help the state budgets? Or the losses from the massive incompetence of the finance sector in financing the bubble in the first place?

It's all because of 1.5% inflation.

I used to think that moderate inflation was good for debtors, because it reduces the cost of repaying debt; that employees should be delighted to accept a reduction in the real burden of their debts in return for higher employment and the bargaining power that follows; and that it's good for business because it makes adjustments easier and, of course, well-paid employees are better customers.

Thank the good Lord for RS and the WSJ editorial page or I'd never have known that we should, instead, crucify mankind on a cross of gold. After a century and a half, we are back to understanding that what is good (in the short run) for bondholders is all that matters.

F.G.
We're taught the virtue of saving, and that private capital is the fuel for free enterprise and market based interest rates the discipline of CAPM decision making. The middle class attempts to squirrel away with save investments such as bank cd's, tax free bonds, treasuries and maybe a some mutual funds. Someone should tell the middle class that Bernanke has declared war on savers.

Babble babble

David Stockman? As in Reagan Administration and general business failure David Stockman? Really scraping the bottom of the barrel here.

RS -
As you say, it's a free market. CAPM has its problems, but it is quite right to contend that in free finance markets investors should be paid for accepting risk, not for lobbying the government to protect them from it. If you don't like getting zero percent real interest for government-guaranteed short-term savings (which is not bad by historic standards) you are free to do something more socially useful with your money, like invest it in a productive activity or spend it so that someone else can do something productive.

The middle class, meanwhile, is trying to pay down the loans they took to pay for bubble-priced real estate or to make up for a generation in which all the incremental rewards from their hard work went to their bosses and rentier-investors.

For the Fed to raise interest rates now -- that is, to use its power to redistribute wealth from middle-class borrowers and productive firms to you and the unproductive rich, at the cost of mass unemployment, lower growth and unnecessary burdens on productivity -- would be truly cruel.

Just because someone told you that saving is a "virtue" doesn't mean that you are entitled to a subsidy from the rest of us.

--

And, anyway, in what sense is saving a "virtue"? Caring about others and helping them are virtues. Self-sacrifice for others is a virtue. Educating your children or other people's children is a virtue. Making the world a better place is a virtue. Honesty, honor, fair dealing and paying your taxes are virtues. But hoarding?

Saving is highly advisable. It may even be a necessity in a society that has abandoned its duty to help people protect themselves from the vicissitudes of life, especially when one political party has pledged to dismantle our already inadequate social insurance systems.

But is <2% inflation really a reason for savers to be applying for Purple Hearts and invoking the international norms against aggressive war?

Congress should vote to tax savings, instead of having the Fed doing it through covert means many are too naive to understand. It's a shame that granny has to invest in junk bonds to sustain her basic necessities during her retirement years. Government should not be picking winners and losers. By the way, its' not over-leveraged consumers that are being helped here, as most can't qualify for a decent loan, also note that credit card debt is in the double digits, no it's banks with impaired balance sheets that are the intended target. The Fed has too much power for an unelected body, it would be more honest if Congress mandated a surplus tax on savings.

And more babble

Riversider:
I just thanked "the good Lord" for you.
The good Lord said :"Truth, you're welcome."

Even Jim Grant thinks the Fed is dangerous.(thanks Truth)

http://wealthtrack.libsyn.com/james-grant-2

Riversider: Don't thank me, thank the Lord.

RS- "It's a shame that granny has to invest in junk bonds to sustain her basic necessities during her retirement years."

Well, I'm glad that you at least agree that we need to increase social security benefits.

Well, I'm glad that you at least agree that we need to increase social security benefits.

Hah!
To argue that the Fed destroying savings and private capital as a reason for an increase government role in providing for retirees is the hilarious. Thanks for the laugh.

"destroying savings and private capital" -- I think you have confused the Fed and the banks.

It was private banks that destroyed the country's savings and wasted capital by investing it in the real estate bubble.

No thanks to folks like Frank, Dodd, Clinton, Cuomo and Rubin, right?

The banks destroyed their own balance sheets. Now the fed is intent on helping them restore it at the expense of just about everyone else. The purpose of QE is to lower risk spreads and raise the price of risk assets so banks can increase earnings by writing up the value of assets...Which is what has been occurring as banks increase earnings by reducing reserves set aside for future loses, or raising the price of valuations for assets on their books.

The average American's earnings has not gone up as a result of QE and is not likely to. Nor is the average American able to refinance as most properties are under water or does not have the best credit score. But what is happening is that any savings Americans have at banks does not get credited with any interest.

So...your theory is that bernanke is secretly in the employ of the banks. how much do you figure they're paying him?

So sad to see columbiacounty be this frustrated consistently without even the slightest reprieve from his misery.