The Keynesian State Wreck Ahead David Stockman’s Contra Corner

15 Фев 2015 | Author: | Комментарии к записи The Keynesian State Wreck Ahead David Stockman’s Contra Corner отключены
Adler MBS 250 Favorit
Adler MBS 250 Favorit

by David Stockman • 7, 2013

Remarks of David A. at the Edmond J. Safra Center for Harvard University, September  26,

The median U.S. household in 2012 was $51,000, but that’s to crow about. That figure was first reached way in 1989— meaning that the standard of Main Street has gone nowhere for the last century.  Since there was no span in U.S. history real household incomes …-in-the-water for 25 years, it cannot be that the great American machine has stalled out.

worse, the bottom of the socio-economic has actually slipped lower by some measures, significantly so. The poverty rate of 15 percent was 12.8 percent back in there are now 48 million people on stamps compared to 18 million and more than 16 million lived in poverty households year or one-third more a quarter century back.

last year the bottom of households struggled to make meet on $11,500 annually —-a 20 percent lower than the of constant dollar income the 20 million households had available on twenty-five years ago. 

again, not all of the vectors have south. Back in 1989 the index was at 3,000, and by 2012 it was up to 15,000.  Likewise, the aggregate of the Forbes 400 clocked in at $300 back then, and now stands at than $2 trillion—a gain of 7X.

the big gains were not just to the 400 billionaires.  We have had a share the movement of sorts— at least the top rungs of the ladder. By contrast to the of the lower ranks, there has nothing …-in-the-water about the of the 5 million U.S. households comprise the top five percent.

enjoyed an average income of last year, representing a 33 percent gain from the inflation-adjusted level of 1989.

The top tier of households had combined net of about $10 trillion back at the end of Reagan’s second term.  And by the of Barack Obama’s second that had grown to $50 trillion, that just the  $40 gain among the very top 5 rung is nearly double the current net worth of the remaining 95 of American households.

So, no, Sean need not have fretted the alleged left-wing disciple of Alinsky and Bill Ayers who to the oval office in early During Obama’s initial years, in fact, 95 percent of the gain in household income in was captured by the top 1 percent.

Some things were rising during the last quarter too.  The Pentagon was $450 billion in today’s during the year in which the Wall came tumbling

Now we have no industrial state left on the planet: Russia has a kleptocracy led by a thief who prefers from his own people rather his neighbors; and China, as the Sneakers and factory of the world, would into economic chaos instantly—if it were actually enough to … its 4,000 outlets in America.

Still, no serious military threat to the the defense budget has risen to billion —-that is, it has ballooned by than 40 percent in constant since the Cold War ended 25 ago. Washington obviously get the memo, nor did the Harvard “peace” elected in 2008, who promptly the Bush national security and then beat his mandate for shares into an even sword than the one bequeathed him by the from Yale he replaced.

have been heading . as well.  The top six Wall Street in 1989 had combined balance footings of $0.6 trillion, 30 percent of the industry total.  their combined asset are 17 times larger, amounting to $10 and account for 65 percent of the industry.

The that the big banks led by JPMorgan and of America have been the incredible sum of $100 billion in settlements and penalties since the financial crisis suggests in bulking up their girth have hardly become any safe, sound or stable.

there’s the Washington DC metropolitan where a rising tide did lift a lot of boats. Whereas the real median income, as we seen, has been stagnant for decades, the DC metro area’s income actually surged $48,000 to $66,000 during same interval or by nearly 40 in constant dollars.

Finally, we the leading growth category all others—-namely, debt and the cheap bank money that it.  Notwithstanding the eight of giant Reagan deficits, the debt was just $3 trillion or 35 of GDP in 1989. Today, of course, it is $17 where it weighs in at 105 percent of GDP and is heft more rapidly Jonah Hill prepping for a casting call.

Likewise, US credit market debt—including of households, business, financial and government— was $13 trillion or 2.3X income in 1989. Even then the national leverage had already reached a new historic exceeding the World War II peak of national income.

Nevertheless,  1989 total US credit debt has simply gone  Today it is nearly $58 trillion or GDP and represents a leverage ratio far the historic trend line of national income—a level held for most of the century to 1980.  In fact, owing to the of our rolling national LBO over the quarter century, the American is now lugging a financial albatross amounts to two extra turns of or about $30 trillion.

In due course we identify the major villainous behind these lamentable but note this in passing: The Reserve was created in 1913, and its first 73 years it grew its sheet in turtle-like fashion at a few dollars a year, reaching billion by 1987—at which Alan Greenspan, the lapsed bug disciple of Ayn Rand, took the Fed and chanced to discover the printing in the basement of the Eccles Building.

the Fed’s balance sheet is now $4 trillion, meaning that it by sixteen hundred percent in the 25 years, and is currently emitting $4 of make-believe money each and business day.

So we can summarize the quarter century thus: has been growing is the wealth of the the remit of the state, the girth of Street, the debt burden of the the prosperity of the beltway and the sway of the great branches of government are domiciled there—that is, the warfare the welfare state and the central

What is flailing, by contrast, is the expanse of the Main Street where the great majority has stagnant living standards, job insecurity, failure to accumulate any savings, rapidly approaching old age and the of a Hobbesian future where, taxes will rise and benefits will be cut.

 And what is positively is the lower ranks of society prospects for jobs, income and a living standard have steadily darkening.

I call condition “Sundown in America”. marks the arrival of a dystopic normal” where historic of perpetual progress and robust growth no longer pertain. more crucially, these realities are being dangerously by the ideological nostrums of both and Right.

Contrary to their talking points, what fixing is not the remnants of our private economy —which both propose to artificially goose, incentivize and otherwise levitate by of one or another beltway originated interventions.

Instead,  what is is the American state itself —-a leviathan which has been one assignment after another the past eight decades to the business cycle, even out the roll out a giant social blanket, end poverty, save the house the nation, flood education with hundreds of massively subsidize medical prop-up old industries like and the merchant marine, foster new like wind turbines and cars, and most especially, the world and bring the blessings of the ballot box and satellite TV to the backward of the earth.

In the fullness of time, the Federal government has become and distended —a Savior State can no longer save the economy and because it has fallen victim to its own shortcomings and inefficacies.

Taking on too functions and missions, it has become by political conflict and decision Swamped with insatiable on the public purse and deepening resistance, it has become unable to even a semblance of balance its income and outgo.

Exposed to raids by powerful organized groups, it has lost all pretenses the public interest is distinguishable private looting.  Indeed, the that Goldman Sachs got a billion tax break to subsidize its new in the New Year’s eve fiscal cliff legislation allegedly to save the class from tax hikes— is the most recent striking odorous case.

Now the American agency which was supposed to capitalism from its inherent and imperfections—-careens wildly into and incoherence.  One week proposes to … a nation can’t possibly harm us and the week it floods Wall speculators, who can’t possibly us, with continued flows of monetary stimulus.

Meanwhile, the House pompously eschews the responsibility of government—that is, to make an budget, which is the essence of the Tea Party is demanding in return for yet debilitating increase in the national

To be sure, the mainstream press is to dismiss this latest of fiscal mayhem as evidence of irresponsibility—that is, a dearth of “statesmanship” presumably could be cured by backbones and greater enlightenment. to use a phrase I learned from Patrick Moynihan during my days here, “would it were”.

What is really is that  Washington’s machinery of governance is literally melting  It is the victim of 80 years of Keynesian of it nurtured in the environs of Harvard about the nature of the business and the capacity of the state—especially its central branch— to ameliorate the alleged of free market capitalism.

As to the we need look no further last week’s unaccountable by the Fed to keep Wall Street on its … addiction by continuing to $85 billion per month of government and GSE

Never mind that  the $2.5 trillion of QE has done nothing for jobs and the Main economy or that we are now in month 51 of the current economic recovery — a that approximates the average duration of all ten business cycle since 1950. So why does the Fed the stimulus accelerator pressed to the board when the business is already so long in the tooth—-and it is evident that the problem is not cyclical?

The answer is captured,  that is, it is doing the bidding of Street and the vast machinery of funds and speculation that built up during decades of money and financial market by the Greenspan and Bernanke regimes. truth is that the monetary of 12 men and women holed up in the Eccles is terrified that Wall will have a hissy fit if it its daily injections of dope.

So we now the spectacle of the state’s central branch blindly adhering to a that has but one principal effect: the massive and continuous transfer of and wealth from the middle and ranks of American society to the 1

The great hedge fund founder and legendary trader who the Bank of England in 1992, Druckenmiller, summed-up the case after Bernanke’s abject last week. “I love stuff”, he said, “…. (Its) for every rich person. the biggest redistribution of wealth the poor and middle classes to the ever”.

Indeed, a zero funds rate and a rigged for short-term repo finance is the milk of the carry trade: can buy anything with a yield—-such as notes, Fannie Mae MBS, debt, junk bonds and busted commercial real securities— and fund them 90 or better on the dollar with repo loans costing ten basis points.

 Not do speculators laugh all the way to the bank this huge spread, but sleep like babies at because the central banking of the state has incessantly promised it will prop up bond and other assets values hell or high water, keeping the cost of repo at essentially zero for years to

If this sounds like the best thing to legalized robbery, it is. And dubious economics is the half of it.

This  reverse Hood policy is also an affront to the essence of political .  After all, the other of the virtually free money manufactured by the Fed on behalf of speculators is thievery from savers. of millions of the latter are earning returns on upwards of $8 trillion of deposits not because the free in the supply and demand for saving bank account yields of 0.4 but because price controllers at the Fed decreed it.

For all intents and purposes, in the Fed is conducting a massive fiscal from the have nots to the without so much as a House or even a Senate filibuster. The of the transfer—upwards of $300 billion per most other Capitol pursuits to pale into and, in any event, would be down in a hail of thunderous were it ever to actually be put to the representatives for a vote.

To be sure,  all of this madness is by our out-of-control monetary politburo  in of a specious claim that makes them do it—that is, money until unemployment disappears or at least hits target rate which is ever-changing and impossible to consistently over time.

In fact,  this ballyhooed statute is a elastic and content-free expression of sentiment.   In their wisdom, our essentially said that inflation and more jobs be a swell thing. So the act contains no targets for unemployment, inflation or else and was no less open-ended Paul Volcker chose to the speculators of his day than it was last when Bernanke elected again) to pander obsequiously to

In truth, the  Fed’s entire management enterprise is a stunning of bureaucratic mission creep has virtually no statutory mandate. the author of the Federal Reserve the incomparable Carter Glass of fame, abhorred the notion the central bank would a tool of Wall Street.

To end, the Fed originally had no authority to own debt or to conduct open operations buying and selling securities on Wall Street. And Glass would be rolling in his upon discovery that the Fed was interest rates, manipulating the curve, providing succor to speculators by propping up risk markets, placing a Put under the SP 500 or as Bubbles Ben did recently, that he had an ultra-speculative stock index the Russell 2000.

Summing up a opposite Congressional intent in the 1920s, Senator Glass was lyrical:    “We cured this … by making the regional banks, not Wall Street, the of the nation’s reserve funds… by making them minister to and industry rather than the of speculative adventure. The country were made free. was unshackled.

Aspiration and enterprise loosened. Never again there be a money panic.”

that the Fed eventually strayed its original modest mandate to be a bank”—-and in due course we got the crashes of 1974, 1987, 1998, and 2008,  to name those so  In the original formulation, however, cycles of bubble and bust not have happened: the Federal only job was the humble matter of supplying cash to member at a penalty spread above the market interest rate.

In modality, the Fed was to function as a redoubt of not the committee to save the world. bankers would dispense at the Fed’s discount window upon the presentation of good Moreover, eligible collateral was to in trade receivables and other paper arising out of the ebb and flow of enterprise commerce throughout the not the push and pull of confusion and among monetary central domiciled in the nation’s political

Accordingly, the Federal Reserve Carter Glass built not have become a serial machine like the rogue banks of today. The primary is that under the Glassian the free market set the interest not price controllers in Washington.

meant, in turn, that  any outbreak of speculative excess—- Alan Greenspan once was “irrational exuberance” and then hit the delete button when Street objected—would be crushed in the bud by money market interest In effect, leveraged speculators cure their own euphoria and by pushing carry trades—that is, long and borrowing short—to the where they would upside down. When went negative, the bubble promptly stop inflating as exuberant speculators were off to meet their financial at least their banker.

yes, Carter Glass’ Fed did under the ancient regime of the standard, but there was nothing “barbarous” about it—-J. M. to the contrary notwithstanding.  It merely that if the central bank was tempted to violate its own rules and interest rates in order to speculators and debtors, more members of the financial community dump dollar deposits for thereby bringing bank expansion up short and aborting financial bubbles before swelled up.

Needless to say, a bank which could not credit-fueled financial bubbles not have become today’s central planning agency,  Indeed, the remit of the Glassian bank did not include managing the cycle, levitating the GDP, the unemployment rate, goosing the market or fretting over the of monthly consumer spending.

it did not involve worrying whether the rate was coming in below 2 current inexplicable target of the Fed Paul Volcker has rightly out amounts to robbing the typical man of half the value of his savings a working lifetime of 30 years.

In in the Glassian world  the had no dog in the GDP hunt: whether it grew at an rate of 4 percent, 1 percent or backwards was up to millions of producers, savers, investors, entrepreneurs yes, even speculators on the free market.  Indeed, the macroeconomic aggregates—-such as national total employment, credit and money supply—-were passive on the market, not active targets of policy.

Needless to say, no central banker would ever dreamed of levitating the aggregates through the Fed’s radical, anti-democratic doctrine “wealth effects”.

Under the the 10 percent of the population which 85 percent of the financial assets—and the 1 percent which owns of the so-called “risk assets” by hedge funds and fast speculators—are induced to feel by the deliberate and wholly artificial of financial asset values.

In the of the Russell 2000 which is favorite wealth effects for instance, the index gain 350 in March 2009 to 1080 at amounts to 200 percent and that is for holdings; the Fed-engineered windfall amounts to a 400 or 500 percent gain typical options, leverage and based strategies employed by the money.

In any event, feeling the rich are supposed to spend on high-end restaurants, gardeners and instructors, thereby causing a jolt to aggregate demand and a virtuous circle of rising incomes and consumption—-indeed,  always consumption.

Having been in another radical experiment in down”—-the giant Reagan tax of 1981—-I no longer believe in economics.  But at least the tax cuts were voted by a democratic legislature. The Greenspan-Bernanke-Yellen of “trickle-down”, by contrast, is a pure from a handful of central apparatchiks to the super-rich.

Nevertheless, the virulent form of “trickle-down” practiced in 2013 is rooted in the erroneous predicate as the mistake of the Keynesian gospel that the enterprise economy is inherently to business cycle instability and under-performs its so-called “potential” employment growth rate. enlightened intervention—if that is not an by the fiscal and monetary branches of the is claimed to be necessary to cure existential disabilities.

The truth of the matter, however, is Keynesian monetary and fiscal has never really been in the post-war world.  Among the ten cycle contractions since two of them were unavoidable, dislocations resulting from the cooling down of hot wars in and Vietnam.

The other eight were actually caused by the Reserve, not cured by it.  the Fed first got carried away too much stimulus and credit in 1971-1974, for example, it had to trigger a inventory correction to halt the inflation and speculative excesses in labor and commodity markets. But these necessary inventory ran their course, the economy on its own each and every time.

To be the Reagan tax cut intervention of 1981 in a quasi-libertarian guise. By getting the out of the way, GDP growth was supposed to be throughout the economic hinterlands, by something crazy like 5 annually— forever and ever, without end.

But  in practice, was just Keynesian economics for the classes —that is, it ended up a scheme to goose the GDP aggregates by down Uncle Sam’s card and then passing the borrowings to so-called “job through tax cuts rather to dim-witted bureaucrats thru schemes.

Indeed, the circumstances of my own from the supply-side church the Reaganite embrace of the Keynesian The true-believers—led by Art Laffer, an economist a Magic Napkin, and Jude an ex-Wall Street Journal man who chanced to stuff said into his pocket— were opposed to spending cuts to offset the revenue loss the Reagan tax reductions.

They this “root canal” and insisted that the Republican could never compete the Keynesian Democrats unless it its historic commitment to balanced and fiscal rectitude, and instead, on tax cuts everywhere and always and a free lunch owing to a cornucopia of economic growth.

So became just another slogan —a competitive entry in the beltway enterprise of running up the debt in order to perfect and upon the otherwise inferior of the free market economy. In the of time, of course, supply-side degenerated into Dick fatuous claim that proved “deficits don’t

From there came two unfinanced tax cuts and two pointless wars under George W. And then there arose, the GOP’s descent into know-nothingism during the Obama wherein it refused to cut defense, law veterans, farm subsidies, the patrol, middle class loans, social security, the SBA and export-import bank loans to and General Electric, among others— while insisting no tax-payer should suffer the of higher taxes to pay Uncle bloated bills.

We thus up with the New Year’s Day Folly of Save for the top 2 percent of taxpayers who being generously taken of by the Fed already, all of America got a huge tax cut—-amounting to $2 trillion over the decade alone.

Never that the Democrats had spent the prior decade denouncing the tax cuts as fiscal madness. the tax bidding war which had started in the White House in May 1981 institutionalized in the Oval Office.

The Progressive Left was in charge of the pen . of course, but the latter was found for ink and in that outcome the nation’s demise was sealed. There was no case whatsoever for extending the tax cuts because, as Willard M. had so inartfully taught the nation the Presidential campaign, the bottom 47 of households don’t pay any income tax in the place!

In short,  the most President ever elected in was showering the upper middle-class trillions in extra spending for no reason of policy—-except to ensure they would buy more Bags and flat screen

The fiscal end game—policy paralysis and the bankruptcy of the state—thus became All of the beltway players—-Republican, Democrats and bankers alike—-are now so hooked on the Kool-aid that they imagine the Main Street standing on its own two feet without massive injections of state

Indeed,  the lunacy of the Fed’s the-rich was justified last by Bernanke himself on the grounds the minor fiscal pinprick to the budget sequester was keeping the GDP growing at its appointed rate.

on the same logic the GOP’s fearsome fiscal hawk, Paul Ryan, proposed a which actually increased the by $200 billion over the three years on the grounds the economy was too weak to tolerate rectitude in the here and now.  In the of St. Augustine, the Ryan budget got to in the by-in-by—that is, in 2037 to be exact— “Lord, make me chaste— but not now”.

In other words, the fiscal and monetary apparatus of the has become a jobs program. pleasure households earning a million dollars annually tax cuts so that they hire another gardener; support modernization of our already fleet of 10,000 M-1 tanks to the production line open in Ohio—-notwithstanding that no nation in the can invade the US homeland and that the people are tired of invading the of innocent peoples abroad.

In the vein, by all accounts  the US income tax is a disgrace — a milk-cow for the K-street a briar patch of screaming and the leakiest revenue raising ever concocted.

But it also to 70,000 pages of jobs  None of these can be spared, to the beltway consensus, so long as GDP and job is not up to snuff—that is, as long as they short of the American economy’s full employment potential. The is an ethereal number known to the Keynesian priesthood, led by the great current vicar on earth, Larry Summers, who during his in the White House turned Art napkin upside down and “$800 billion” on the back.

was the magic number which, multiplied by another magic called the fiscal multiplier, generate an amount of incremental GDP equal to the gap between actual GDP in 2009 and potential GDP, as by the vicar.

This might be the bath-tub theory of macroeconomics according to Summers and the White it didn’t matter much was in the $800 billion package—-the matter was to get Washington’s fiscal machinery operating at full-tilt.

once the magic number had scribbled on the White House the nation’s check-writing pen was handed off to Nancy Pelosi and Harry who conducted the most gluttonous  frenzy every witnessed the corridors of K-Street.

In exactly twenty-two days the inauguration, the new administration conceived, circulated, legislated and signed law an $800 billion omnibus of spending and tax cutting that to nearly 6 percent of GDP.   I had part of a new administration that way too fast on a grand plan and had the peril first hand. But the fiscal mishap did not even compare to the reckless, unspeakable conducted by the Obama White

In fact, the stimulus bill was not a economic plan at all; it was a eruption of beltway larceny has now become our standard form of

Stated differently, the stimulus was a Noah’s ark which had welcomed every single pet project of any domiciled in the nation’s capital a K-street address.  Most were boarded without any review or … supervision, a rank exercise in political that proceeded straight the gang planks to the bulging below.

Indeed, the true of the Obama stimulus was not merely its girth, but the cynical, helter-skelter by which the public purse was At the end of the day, it was a startling demonstration the power of a bad idea—-the Keynesian coupled with the massive power of the PACs and K-Street has rendered the nation fiscally

This unhinged modus undoubtedly accounts for the plethora of deals that an allegedly White House waved Thus, the homebuilders were “refunds” of $15 billion for taxes had paid during the bubble manufacturers got 100 percent first tax write-offs for equipment that have been written off a decade or longer; and crony investors got $90 billion for uneconomic wind and electric vehicle under the fig leaf of “green

Likewise, insulation suppliers got a $10 hand-out via tax credits to homeowners to the thermal efficiency of their own congressman on the public works got $10 billion earmarked for pork water and reclamation projects in the districts; and the already corpulent of the Pentagon was handed another $10 for base construction it most didn’t need—to say nothing of a new for the insanely bloated  and Homeland Security Department.

the big ticket stuff was far worse. $50 billion was allocated to highway of it for repaving highways that need it or building interchanges the traffic didn’t warrant it; in any event, it should have paid for with user taxes, not permanent debt on the public.

Still, the real building gambit was the $30 billion or so for and high speed rail.  years of mucking around the abomination known as Amtrak unequivocally that cross-country can never be viable in the US because it compete with air travel the overwhelming majority of city-pairs.

every single ticket on the Sunset Limited from New to Los Angeles, for example, requires a that is nearly double the of an airline ticket, and is indicative of why we $1 billion down the drain year subsidizing the public myth —a boondoggle that become all the greater owing to the of billions of high speed “stimulus” funds which not subject to even a single of hearings.

Then there was $80 for education but the only rhyme or to it was the list of K-Street lobbies had lined-up outside Speaker door: to wit, the National Association, the school superintendents the textbook publishers, the school industry, the special education the pre-school providers association, and more.

In a similar manner, the home lobby, home providers, the hospital association, the and hip replacement manufactures, the scooter hawkers and the Medicaid mills all delighted to pocket an extra $80 of Federal funding, thereby pressures for reimbursement reductions the regular state Medicaid

Finally, there was the Obama drop” whereby $250 was dispersed in helicopter fashion to 140 tax filers and 65 million citizens who social security, veterans and benefit checks. But there was no relationship to need: tax filers incomes up to $200,000 were or about 95 percent of the population.

Adler MBS 250 Favorit

And the beneficiary population receiving a stimulus check, less 10 percent were actually while millions of these went to affluent social retirees happy to have Sam pay for an extra round or two of golf.

there was no public policy at all to Obama’s quarter trillion money drop except the Keynesian bathtub with believe income, hoping citizens would use it to buy a new lawnmower. a comforter, dinner at the Red Lobster or a new of shoes.

Yet ensnared in the Keynesian that society can create by mortgaging its future, the stimulus-besotted of the beltway blew it entirely on the one domestic function of the state—even the regime of crony capitalism now prevails.  That imperative is to and adequately fund a sturdy net to support citizens who cannot due to age or health, and to supplement the incomes of whose marketplace earnings below a minimum standard of

Yet notwithstanding the feeding frenzy on to fill-in the Keynesian vicar’s billion blank check in a twenty-two days, only 3.8 of the total—-a mere $30 billion—was to means-tested cash benefits actually fund the safety net for the  Yet with $17 trillion of debt on the books already, and the that will double or in the decades immediately ahead, filling the Keynesian bathtub borrowed money is not only but also a cruel insult to any standard of equitable justice.

The madness of the Obama era cannot be on the grounds that the nation was with Great Depression We weren’t and the widespread belief we were so threatened is almost attributable to Ben Bernanke’s faulty about the Fed’s alleged of not undertaking a massive government buying spree to counter-act the Depression.

The latter, in turn, was almost entirely from Friedman’s primitive quantity of money which was wrong in and ridiculously irrelevant to the circumstances of Nevertheless, it was the basis for Bernanke’s flooding of Wall Street indiscriminate bailouts and endless liquidity after the Lehman

But what was actually happening was the giant credit and housing which had been created by the Fed in the wake of the bursting dotcom which it had also created, was liquidated. Most of the carnage was within the … halls of Street because it was the wholesale market and the shadow banking that was experiencing a run, not the banks of main street

The so-called financial crisis, consisted first and foremost of a mark-down of hugely leveraged, Wall Street balance that were loaded toxic securities— that is, the of speculative trading books and underwritings of sub-prime CDOs, bonds, commercial real securitizations, hung LBO bridge CDOs squared—- and which had recklessly funded with dollops of overnight repo and short-term wholesale money.

was just one more iteration of the age old folly of investing long and and funding short and hot.

By the of the frenzied bailout of AIG on September 16 th. led by and Hank Paulson, the most unguided missile every to down on the free market the third floor of the Treasury it was nearly all over except for the Bear Stearns, Lehman and Lynch were already because they were and should have been the bondholders who have foolishly in their junior capital for a few points of extra yield.

Morgan Stanley was bankrupt, up ultimately by $100 billion of Fed and guarantees that accomplished no purpose whatsoever, except to a … house alive the nation doesn’t need, and to the value of stock held by and bonds owned by money who had feasted for years on its reckless and rickety balance sheet.

at the end of the day the only real purpose of the 2008 bailouts was to rescue Sachs from short-sellers who have taken it down, had not and Bernanke bailed out Morgan first, and then outlawed the of free citizens to sell the stock of any financial companies the crisis had passed.

The case for out AIG was even more sketchy.   It had $800 billion of mostly assets in the form of blue stocks, bonds, governments, GSE and long-term, secured aircraft among others.

So the great empire of dozens of insurance and companies that Hank had built over the decades really insolvent: the problem was its holding company, which had hundreds of billions of credit swaps, was illiquid.

It couldn’t met calls against the CDS it had written state insurance commissioners in wisdom had imposed capital and dividend stoppers on AIG’s far insurance subsidiaries—-precisely so that couldn’t be fleeced by holding executives and Boards needing to their … debts.

In virtually none of the AIG subsidiaries have failed; millions of insurance policies and retirement would have been good, and the fire insurance on in Peoria would have in force.

The only thing really happened was that like twelve gunslingers in London, who sold massive of loss insurance on sub-prime bonds to about a dozen global banks, would had to hire protection on their in the absence of the bailout. These CDS issued by the AIG holding company, in were almost completely and would have generated $60 billion in losses among JPMorgan, Barclays, Deutsche SocGen, BNP-Paribas, Citi and a handful other giants combined balance sheet of $20 trillion.

So the loss would been less than of one percent of the aggregate balance of the global banks impacted—that is, a Whale or two, and nothing

But by dishing out around $15 billion of money to each of the above institutions, the American taxpayer protected the PL of these banks a modest one-time hit, and executive bonuses in the money,   It also left AIG the care of unreconstructed princes of Street whose claims to know no bounds, as exemplified by Mr. recent stupefying inability to between a lynching and the loss of bonuses.

But as they say on late TV, there’s more. We were that ATMs would go big companies would miss for want of cash and the $3.8 money market fund would go down the tubes.

All of legends are refuted in the section of my called the Blackberry Panic of title being a metaphor for the that the Treasury Department of the US was in the hands of Wall Street who could not keep their off the swooning price charts for the SP 500 and Sachs flickering red on their screens.

But just consider Fully $1.8 trillion or 50 of total money market was in the form of so-called “government funds or Treasury paper. Not a net dime left these during the panic and for the good that treasury interest were never in doubt.

the other half of the industry of so-called “prime” funds included modest amounts of paper along with and bank obligations.  About billion or 20 percent of these did leave these “prime”

Yet, the overwhelming share of withdrawals—upwards of 85 percent—simply migrated money fund companies slightly risky “prime” to virtually riskless “government funds.  In effect, the much flight from the money funds consisted of professional hitting the “transfer” button on account pages.

Worse the only significant investor in this $4 trillion sector, was supposedly ground zero of the was on about $800 million of commercial paper held by the largest operation called the Prime Fund.  The loss to 0.002 percent of the money industry’s holdings on the eve of the crisis.

In a vein, the $2 trillion commercial market was said to be melting but this too is an urban legend by the nation’s leading crony Jeff Immelt of GE. Unaccountably, the did manage to secure $30 billion of Fed for General Electric’s AAA balance thereby obviating any need to do the free market thing—that is, to a dilutive issue of stock or debt to pay down some commercial paper that not be rolled during the crisis.

GE Capital’s practice of funding sticky assets with hot money should have shareholders to take a hit, and the executives to be brought up short on the front.

Instead, the bailout of commercial paper gave to the urban legend that could not fund their when the truth is that single industrial company had a commercial paper facility had back up lines at their bank, and not a single bank to fund, meaning no payroll was ever in jeopardy.

What shrank, and deservedly so, was the $1 trillion commercial paper market —a where banks go to refinance card and auto loan so that they can book the profits on these loans the instant your card is under the “gain-on-sale” accounting

Consequently, the subsequent sharp of the ABCP market has been a matter of bank profit It never prevented a single from swiping a credit or obtaining an auto loan.

In by the time of TARP and the massive injections into Wall by the Fed——when it doubled its 94 year-old sheet in seven weeks October 25, 2008—the meltdown in the of Wall Street had pretty burned itself out.

Had Mr. been allowed to have his way the street, a healthy purge of worth of speculative excesses have occurred.  Indeed, the effect would be that a half-dozen “sons of Goldman” be operating today, not the vampire which remains—-and they be run by chastened people who would lost their stake the free market’s cleansing

In a similar manner, the one-time hit to GDP and which resulted from warranted collapse of the housing, real estate and the consumer bubbles was actually over nine months.

The ensuring that incepted in June reflected the regenerative powers of the market, and not the Fed’s mad-cap printing or the Obama fiscal The Fed did lower interest rates to and thereby it revived the speculative on Wall Street. But the plain is that household and business continued to contract on Main long after the June bottom, and for good reason:  sectors were massively after three decades of pell mell credit

The household sector, for example, had $13 of debt which represented 205 of wage and salary income—compared to the ratio of under 90 percent had prevailed during healthier prior to 1980. So the Fed’s balance sheet expansion did to cause higher borrowing, output or employment on Main even as it put the hedge funds into the carry-trade business—now essentially zero cost of

By the time the rebound began in 2009 not even $75 billion of the bill—that is, one-half of one percent of had hit the spending stream, meaning, that the recovery already  was self-generating.

As it happened, the initial of business inventory liquidation and triggered by the Wall Street had burned itself out quickly the first nine months the Lehman crisis. Thus, inventories totaled $1.54 in August 2008, and dropped by a of $215 billion or 14 percent the course of the recession. Yet fully billion of that liquidation before June 2009, and started to actually rebuild a few later.

The story was similar for payrolls. Nearly 7.6 million were shed during the Recession but fully 6.6 million or 90 of the adjustment was completed by June Indeed, the idea that short but sharp recession had to do with the Great Depression is ludicrous, and fails completely to the vast structural differences the two eras.

 During the early the US was the great creditor and exporter to the with 70 percent of GDP accounted for by production industries—-agriculture, mining and which have long of crude, intermediate and finished

 By the time of the 2008 Wall meltdown, however, the primary sector had become a mere of its former self, accounting for 17 percent of GDP.  Accordingly, recession hit the American economy time, the downward spiral of liquidation was muted—-with the total liquidation amounting to 2 percent of GDP in compared to 20 percent in the early

Indeed, the inherent recession of the contemporary US service economy— its massive built-in stabilizers in the of transfer payment and huge payrolls— militated against the scare story of a Great 2.0.

 During the nine through June 2009, for example, transfer payments for foods unemployment insurance, Medicaid, assistance and social security soared at a $300 billion rate, thereby more off-setting the $275 billion in total wage and salary

Likewise, government wages and actually rose during the and the vast US service sector were tapered back rather than going in the form of traditional factory Aerobics class instructors, for experienced modestly reduced hours, but unlike factories and fitness centers did not go dark in to burn off excess inventories; stuck to burning off calories at a reduced rate.

In fact, by China, Australia and Brazil had the world’s new mining and manufacturing is, the US economy of the 1930s. When of 50 million Chinese migrant were sent home idle Chinese export the villages of China’s vast became the “Hoovervilles “of the present

 In short, Bernanke’s depression was reckless and uninformed.  The challenge facing the American was to get off the massive credit binge had bloated and inflated output, and incomes for more than two

Instead, Washington poured on the fire, thereby re-igniting an greater bubble that ultimately end in state-wreck—that is, in the thundering of the financial markets.  Indeed, the rogue central bank eventually be engulfed in the Wall hissy fit it fears—undone by waves of selling when the monetary finally loses control of day traders and raging robo machines.

Likewise, the Federal has become a doomsday machine the processes of fiscal governance are and broken. There will be debt ceiling and shutdown like the carnage scheduled for week, as far as the eye can see.

Indeed, the assurances of debt deniers professor Krugman, the honest deficit is $1-2 trillion for the next decade and then it get far worse.  In fact, when you set the Rosy Scenario used by CBO and its Keynesian assumption that we reach full employment in and never fall short of GDP ever again for all eternity, the equation is irremediable.

Under conditions what remains of our enterprise economy will under the weight of taxes and  Sundown in America is well-nigh

Reprinted with permission .

Adler MBS 250 Favorit
Adler MBS 250 Favorit
Adler MBS 250 Favorit
Adler MBS 250 Favorit
Adler MBS 250 Favorit
Adler MBS 250 Favorit
Adler MBS 250 Favorit
Adler MBS 250 Favorit
Adler MBS 250 Favorit
Adler MBS 250 Favorit
Adler MBS 250 Favorit

Interesting articles

Other articles of the category "interesting":

Our partners
Follow us
Contact us
Our contacts

Born in the USSR


About this site

For all questions about advertising, please contact listed on the site.

Motorcycles catalog with specifications, pictures, ratings, reviews and discusssions about Motorcycles.