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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Archive for October 8th, 2009

Total Credit decline from $2,475 billion to $2,463

Posted by WARREN MOSLER on 8th October 2009


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Two things:

1. Sales remain soft.
2. The federal deficit spending facilitates the same amount of sales with less credit.

>   
>   (email exchange)
>   
>   On Sun, Jul 12, 2009 at 9:20 AM, Dave wrote:
>   
>   Yet another month where the decline in consumer credit comes in worse than
>   expected: Total Credit decline from $2,475 billion to $2,463, with the bulk
>   of the $12 billion decline consisting of Revolving Credit reduction, or $10
>   billion, to $900 billion. Total consumer credit is now back to July 2007
>   levels… and the decline has yet to decelerate. This is the seventh straight
>   month of consumer credit declines.
>   


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Posted in Credit, Deficit, Government Spending | No Comments »

German Industrial Output Increased in August After July Decline

Posted by WARREN MOSLER on 8th October 2009


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This seems to be the current pattern of many stats.

Up a little from the last report, about as expected, but still way down vs last year as the output gap continues neat the wides.


German Industrial Output Increased in August After July Decline

Oct. 8 (Bloomberg) — German industrial output rose in August as domestic stimulus measures and improved global trade lifted demand.

Production rose 1.7 percent from July, when it fell a revised 1.1 percent, the Economy Ministry in Berlin said today.

Economists had forecast an increase of 1.8 percent, according to the median of 36 forecasts in a Bloomberg survey. From a year earlier, production declined 16.8 percent when adjusted for the number of work days.


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Posted in GDP, Germany | 1 Comment »

Blanchflower

Posted by WARREN MOSLER on 8th October 2009


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>   
>   (email exchange)
>   
>   On Thu, Oct 8, 2009 at 7:55 AM, wrote:
>   
>   Check Blanchflower comments … he’s pretty good on the deficit and QE as well.
>   

Yes, refreshing!


Blanchflower Says Now Is Not the Time to Cut Government Deficit

Oct. 8 (Bloomberg) — Former Bank of England policy maker David Blanchflower said it was too soon to cut Britain’s deficit and its debt. “Clearly you need to control the debt, but now?,” he said in an interview with Bloomberg Television today. “I don’t really think so.”

Blanchflower also said the aim of quantitative easing was to raise some asset prices and to restore confidence.


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Posted in Currencies, UK | 1 Comment »

Ritzholtz Blog

Posted by WARREN MOSLER on 8th October 2009


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Mosler: PAYROLL TAX HOLIDAY

Warren Mosler, economist, perturbed by the misunderstanding of monetary policy by the current and past administrations, is running for President in 2012. He has been speaking at the Tea Parties, explaining to taxpayers that Washington is either at best ignorant of economic policy or at worst deceptive.

~~~~

Federal Reserve Chairman, Ben Bernanke, has indicated that the economy is improving and the recession is ending. The media informs us that the stock market has added $2 trillion to national wealth since the market lows in March 2009. However, the stock market is still more than $2 trillion from its previous high in 2008 and real estate values are down $6 trillion and still declining. Not only has nominal wealth evaporated, but incomes are also treading heavy water. The Government informs us that unemployment is up to 9.8% with the only ‘good news’ being that the rate of job loss has declined. In July, there were only 2.6 million jobs available for 14.5 unemployed.

Also many are working part time when they want full time jobs. Americans are taking lower paying jobs and incomes are on the decline, especially when adjusted for the massive bonuses paid to bank employees and CEOs. The Department of Labor reported that young Americans (16 to 24 years old) have the highest unemployment rate ever (25.5%, although the New York Post has it at 53.4%). Regardless, America has a large and growing under utilization of labor among all age demographics.

At the same time, state tax collections have been declining and budgetary constraints (balanced budget requirements) are placing enormous pressures on state finances, especially California. In response, states and local municipalities are cutting jobs (teachers, policeman etc.), services, university, and infrastructure funding. Additionally, the states and municipalities are increasing taxes to gain the additional revenues.

The Administration and Congress are informing the public that everything is beginning to look good because of the trillions of dollars that they provided to repair the banks. The problem is that they have it backwards; the economy is best fixed from the bottom up rather than the top down.

In June 2008, Warren Mosler proposed three ‘bottom up’ policies to fix the economy. The first proposal is for a full Payroll Tax Holiday for both employees and employers. This stops the government from taking approximately $20 billion a week from people working for a living (a total of $600 per month for someone making $50,000 per year) rather than using that $20 billion to keep some bank limping along. The Government would still continue to credit the social security and the Medicare accounts, so employees and employers will never have to pay back the monies they received. The Payroll Tax Holiday would restore income to American workers (and businesses) to help make their loan payments, rents, pay bills, and sustain their households. The real economy would benefit as Americans both reduce debt and resume consumption. Banks will benefit because there will be fewer delinquencies and foreclosures in non fraudulent mortgages, which will also help limit home price declines. The Payroll Tax Holiday would also reduce corporate cost structures and help contain prices and inflation. The payroll tax is regressive (it is not graduated based on income like the income tax), so the Payroll Tax Holiday will benefit those in the lower income levels the most. This “People Power” solution will be far more effective than the Bush and Obama trickle down solution. And the Government can decide to end the Payroll Tax Holiday should the economy become too strong and inflation become a concern.

The second part of the proposal would to assist the states by providing them with $150 billion in revenue sharing on a per capita basis with no strings attached. This will help the states to fund operations, keep workers employed, provide necessary services and fund infrastructure projects.

The third part of the proposal would be to fund an $8/hr National Service job for anyone willing and able to work that includes full federal health care coverage. This, like the Payroll Tax Holiday, addresses unemployment from the ‘bottom up’ rather than the ‘top down’. A determination can be made as to what the jobs will be, but the goal is to improve America by providing useful output. It will also provide for a far superior price anchor, as it has been well documented that private employers more readily hire those already working over anyone who is unemployed. In 2001, Argentina introduced its Jefes de Jugar version of the Mosler Plan that employed nearly 2 million people that had never worked in the private sector, and within two years 750,000 moved up to private sector jobs.

If any of these proposals strikes a personal chord regarding how we can rebuild our economy, please forward them to your elected representatives in Washington. These are not proposals for out of control, top down, trickle down, Government spending on corporate welfare that insults the majority of Americans working for a living, but fundamental, proven, bottom up solutions that reward that vast majority of Americans that work for a living and struggling to make ends meet.


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Posted in Employment, Fed, Recession | No Comments »

Krugman on monetary creation

Posted by WARREN MOSLER on 8th October 2009


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Still chasing shadows?

>   
>   (email exchange)
>   
>   On Wed, Oct 7, 2009 at 4:39 PM, Eric wrote:
>   
>   It’s hard to get it more backward than this:
>   

Yes, this is telling:

“The banks don’t need to sell securitized debt to make loans — they could start lending out of all those excess reserves they currently hold. ”

>   
>   He is asking good questions but with all the wrong reasoning.
>   

Agreed, thanks — waiting for the first Nobel prize that’s given to someone who actually understands basic monetary operations!


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Posted in Banking | 5 Comments »