The Influence of the Sub Prime Fiasco on the Last Business Cycle
Posted by WARREN MOSLER on January 5th, 2011
I recently sent this with regard to the question of how high the deficit might need to be for full employment, as per my earlier post showing we may be needing ever lower taxes for a given size govt (a higher deficit) for full employment:
The federal surplus years of the late 90′s were supported by the private sector willing and able to borrow to both fund consumption and fund impossible and often fraudulent .com business plans. Private sector debt was growing at about 7% of gdp into y2k, with 2% of gdp being eaten up by the federal surplus, and the other 5% and more by other demand leakages/net savings of financial assets- trade deficit, pension fund contributions and asset appreciation, etc.
This unsustainable process bled us dry and shortly after y2k it all went bad. Near 0 rates and a small ‘stimulus’ did nothing to close the output gap. Finally, in 2003, Bush came through with a then massive fiscal adjustment that got the deficit up to about 8% of gdp (annualized) for q3 03 which was enough to turn things around, and the economy improved enough to not cost him the election.
But it was pretty modest growth, like today, until it picked up to a respectable pace with the agg demand created by what was later to be recognized as the housing fraud. The borrowing to buy housing binge was the consumer debt expansion that drove gdp growth for the year or so before it was discovered.
After the frauds were discovered, maybe in mid 06 or so, the new borrowing to buy housing fell off. With that support from aggregate demand pulled, there was no longer enough demand to sustain employment and home prices, which leveled off and began to fall, undermining the asset side of the banking system. The 170 billion stimulus in the first half of 08 worked to support demand, allow people to make mtg payments, etc. and gdp returned to about +2.5% in q2 08.
However, the fall in real estate values took down Bear and Lehman, and the fed failed to adequately support the liability side of its banking system (that is, provide continuous liquidity regardless, and do the deed on the asset side- wiping out shareholders and other capital including bond holders to absorb losses, liquidate insolvent firms no one wants to buy, put people in jail, etc. etc. but NEVER allow even the implication of a liquidity crisis. This was done during the s and l crisis which prevented that from spilling over to the real economy the way this one did.) Around July/aug 2008, in fact, is when I began calling for a full payroll tax holiday as the right response to a financial crisis like the one we were in. The real economy needed the people who were working for a living armed with enough income to make their payments (if the wanted to) and do their normal shopping from income rather than credit which the banking system was failing to provide. That simple keystroke could have prevented the entire real sector collapse, and the financial sector could have been left to more or less fend for itself and hopefully come through in a greatly reduced fashion.
So my point is, the mtg fraud first accelerated the economy, and then when that support was pulled the economy collapsed when govt was not forthcoming with a fiscal adjustment to replace the lost aggregate demand.
That is, the sub prime fiasco first added support to gdp that would not have been there, and then that support was removed when the frauds were discovered.
I see the real lesson to be learned as the govt always has the means and even responsibility to make immediate fiscal adjustments to support demand. In other words, make sure there are enough consumer spending dollars for business to compete for.
And, at the same time, to not support moral hazard by letting companies (particularly financial institutions) fail and investors take all the losses first during organized insolvency proceedings.
If govt. had done this in mid 08- provide the continuous liquidity to the banking system and suspend all FICA contributions- it all would have been much different. The fall in housing prices and new construction would not have been nearly as severe, delinquencies and foreclosures would have been much lower, far fewer banks would have failed, car sales would not have fallen nearly as far and the car companies would not have needed bailouts, and so on down the line. Note that even the crash of 1987 did not take out the real economy, even though it followed the then staggering losses from the s and l crisis, as bank liquidity was never allowed to be in question.
January 5th, 2011 at 7:53 pm
Mish just crushed president obama versus his remarks as senator Obama – what a joke all you politicians/economists/forecasters are:
http://globaleconomicanalysis.blogspot.com/2011/01/playing-chicken-with-debt-limits-obama.html
Austan Goolsbee, the chairman of the White House Council of Economic Advisers, said that refusing to raise the debt ceiling would essentially push the country into defaulting on its financial obligations for the first time in its history.
“The impact on the economy would be catastrophic,” Goolsbee told “This Week” on ABC. “That would be a worse financial economic crisis than anything we saw in 2008.”
LOL! But that oracle dude mosler told me we were going to muddle through, the automatic stabilizers were enough to take the enterprise through the kobayashi naru nebula at warp 5 mr. sulu! What is this WORSE than anything we saw in 2008 crap? Holy smokes talk about a NO WIN scenario!
Mr. Mosler, are you ready to take off your rosy colored glasses and stop listening to the fleetwood mac 8 track and get off your winged unicorn and face reality?
Flashback March 20, 2006 – U.S. Senate Floor
Inquiring minds just may be wondering what the president’s position was when he was a senator, just a few year’s back.
Please consider Flashback: Previous Debt Limit Votes Have Not Been Good Ones
March 20, 2006: This was the last stand-alone debt limit vote on which then-Senator Obama voted. He was one of 48 members to vote against the increase, which passed with 52 votes.
He said: “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”
Truer Words Never Spoken
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January 6th, 2011 at 6:26 am
Strawberry Picker, I’m guessing you’ve never read about how a fiat currency operates. It’s worth reading some of Warren’s mandatory readings before posting. I’ll leave you with the following questions to ponder.
1. How could the government ever not pay it’s own bills if it creates the currency? This is exactly why the debt ceiling will have to be increased. There’s no operational reason that the government should default on it’s debts.
2. How do foreign governments finance US fiscal policy? If the US government creates the currency and only issues debt in the currency it creates, how could other countries possibly finance anything?
3. What is government debt and who is the money owed to? When you answer that, you’ll realize that it’s a strange concept for any institution to be obligated to pay back itself sometime in the future.
4. What burden is being shifted to our children and grand children? When you find the answer to number 4, you’ll realize this is another fallacy.
Cooper
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Ivan Reply:
January 6th, 2011 at 10:54 pm
Cooper:
I’ve been thinking about #4 for quite some time and I’m still troubled. While we don’t leave our children with any real debt, our fiscal policy today can certainly leave them with a reduced standard of living in the future. Most of us equate a spike in oil prices to a tax. If running large deficits puts trillions of dollars in the hands of the Chinese, they become a competitor for the same resources we need. Their demand for oil increases and the price rises (as it has). As their population grows and becomes more affluent, their demand for a limited food stock drives prices higher as well. In the very long term, the roles of China and the US could conceivably be reversed where we go to work to send goods and services to the Chinese. A worst case scenario is one in which our “need” for cheap Chinese goods, 5 flat screen TV’s per house, multiple 27″ PC monitors, etc etc allows other countries to act in a manner contrary to our best interests. On the one hand, the Chinese may see the economic benefits of trade with the U.S. and continue their current policies. On the other hand, the Chinese may accumulate dollar wealth to strangle us economically through a dominant military sphere of influence in Africa and the middle east. As we get soft sitting on our furniture made in Vietnam watching our TV’s made in Korea surrounded by our sheet rock walls made in China, we slowly concede the future. That is what we leave our children. Poorer…more vulnerable…not as strong. It is in that way that our children pay back the “debt”. According to Warren, “There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.” I would argue that there is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot NOMINALLY deal with it. At some point, those large deficits can become a hinderance in REAL terms. Our children will be living in the REAL world. They may have $millions and it might not be enough for them to enjoy the standard of living we have today.
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Peter D Reply:
January 7th, 2011 at 12:53 am
Ivan, I agree with a lot of what you’re saying, but this “If running large deficits puts trillions of dollars in the hands of the Chinese, they become a competitor for the same resources we need.” The Chinese and other foreigners are net holders of US dollars not because we’re running large [domestic] deficits but because we’re running trade deficit. In other words, even if not a single dollar was spent on Social Security, Medicare, defense, unemployment benefits, salaries of congressmen etc, the fact that we import more than we export makes the foreigners holders of US dollars. So, domestic deficit (which I assume you’re talking about) has nothing to do with Chinese holding US dollars.
Trade deficit, on the other hand, is not “discretionary”, unless the govt steps in with protectionist policies.
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Ivan Reply:
January 7th, 2011 at 9:09 am
Peter:
I’m with you. However, Warren, Jorge, and the MMT guys seem to feel that the best of all worlds is one in which we run a deficit large enough to buy everything we produce plus everything the rest of the world is willing to sell us. In that way, the budget deficit contributes to the trade deficit. Warren has historically believed the trade deficit was harmless. I remember him saying back in the 90′s, and I paraphrase, “if the Japanese give us everything we need and want for free, would that be a bad thing?” The answer in a perfect world is no. However, we don’t live in a perfect world. According to Colonel Nathan R Jessep, “Son, we live in a world that has walls. And those walls have to be guarded by men with guns. Who’s gonna do it? You? You, Lt. Weinberg? I have a greater responsibility than you can possibly fathom. You weep for Santiago and you curse the Marines. You have that luxury. You have the luxury of not knowing what I know: that Santiago’s death, while tragic, probably saved lives. And my existence, while grotesque and incomprehensible to you, saves lives…You don’t want the truth. Because deep down, in places you don’t talk about at parties, you want me on that wall. You need me on that wall.
We use words like honor, code, loyalty…we use these words as the backbone to a life spent defending something. You use ‘em as a punchline. I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very freedom I provide, then questions the manner in which I provide it! I’d rather you just said thank you and went on your way. Otherwise, I suggest you pick up a weapon and stand a post. Either way, I don’t give a damn what you think you’re entitled to!”
But I digress…
Peter D Reply:
January 7th, 2011 at 12:37 pm
Colonel Nathan R Jessep is good with empty rhetoric. When he has objective tools with which to measure how many lives he saves by his actions, then maybe we can talk. Otherwise he just recycles excuses that have been employed through history to justify all kind of atrocities.
But I, too, digress…
Richard Cooper Reply:
January 7th, 2011 at 1:42 pm
I agree that current policy leaves a burden on our children and grand children, but not in the way we are told. If we don’t put unemployed people to work on infrastructure then we leave a run down country and a culture of unemployment. Bill Mitchell talks about this better than I ever could. If we don’t invest (through deficit spending) in education, science and technology then we will hurt the future of the country. There’s no reason to cut spending on these essential things except for the ignorance of politicians and mainstream economists.
What I think you’re talking about is sustainability. If you are, then that makes an even better case for deficit spending in renewable energy and scientific research. I believe that only the governments are capable of this because the oil companies have too much influence in the private sector and as long as the Saudi’s keep ramping up the oil price, the oil companies will never allow renewable energy to thrive.
Neil Wilson Reply:
January 7th, 2011 at 3:06 pm
What we should be doing is getting all the best brains on the planet together with as much money as they can swallow and working on the one thing that gets us out of the mire permanently – nuclear fusion reactors.
Ivan Reply:
January 7th, 2011 at 7:39 pm
Peter:
Don’t tell me you didn’t think that was one of Jack’s all time great scenes!
Richard and Neil: I think you both make excellent points. There is no question that government plays a role in projects where the payback is so far in the future and difficult to measure that the private sector just won’t pursue them. For example, we’d be better off with natural gas powered cars but the cost to the private sector to build the infrastructure would be enormous. The government needs to be involved. The same holds true with nuclear power plants and fusion research. I certainly see these projects as far better policy than cash for clunkers. Problem is we can’t afford them :-)
Tom Hickey Reply:
January 7th, 2011 at 8:14 pm
Ivan, I was listening to a discussion of alternative energy on NPR some time ago. One of the participants was VP in charge of alt en at Exxon. He said that Exxon is an energy company, not an oil company, and they were committed to dominating the energy field in the future.
The discussion was about hydrogen-powered vehicles. The Exxon VP said that they had already planned that out and were ready to implement as soon as it was cost effective. He said that would take a big spike in oil or a government mandate. Otherwise the public would balk at the cost, since creating a whole new infrastructure is very capital intensive. But he saw no problem with the technology at that time, which was several years ago.
If government were to underwrite the infrastructure it would be affordable, and it is now if one computes the true price of petro given the huge externality involved.
Peter D Reply:
January 8th, 2011 at 4:01 am
Ivan
Yes, Jack is awesome, agreed.
WARREN MOSLER Reply:
January 8th, 2011 at 9:47 am
the only way we can be forced to net export is at gunpoint.
but real terms of trade are another story.
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Ivan Reply:
January 8th, 2011 at 2:49 pm
That’s a two way street Warren. If we don’t allow our trading partners with dollar reserves to spend those reserves, they become worthless…along with the dollars we hold. Nobody will sell us oil, electronics, consumer goods, capital goods etc. The result is the same only quicker and more drastic. Our standard of living collapses. You don’t need a gun to rob a bank and you don’t need a gun to destroy the US economy.
WARREN MOSLER Reply:
January 8th, 2011 at 3:03 pm
glad you agree with my statement.
:)
January 6th, 2011 at 10:48 am
Strawberry:
I’m not quite following you. What in that article even remotely contradicts Warren?
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strawberry picker Reply:
January 6th, 2011 at 3:00 pm
As already stated above, warren said we would/are muddle through, that the automatic stabilizers worked/working/continue to work, although not his first choice. But here is goolsby saying something completely different, that if we don’t bailout more banksters (who have been and will ultimately be the beneficiaries of all the corruption/bailouts/etc) – that we are gonna see a gotterdamerung to make 2008 pale in comparison. Here Warren is talking about housing YEARS after the fact, but I remember peter schiff being ridiculed my mike norman and others years ago that housing was just a small blip, they laughed him off the show. But Schiff predicted it BEFORE it happened, and here is warren, norman and crew trying to do a 20/20 hindsight. It makes them look intellectually dishonest and silly in my mind. Others and myself were telling warren back on the old BBS to take off his rosy colored glasses, things were about to blowup, he kept saying no – everything will be OK, but now he is changing his tune. Anyone can do what he just did and repeat the facts that already happened, but when it comes to predictions, warren’s batting average aint so good dude.
Anyways the bigger take away from that Mish piece is either how spineless your President is, one second he is all deficit terrorist, crossing party lines to vote against a debt raise – that is important to remember Ivan and now doing a 180 turnabout. So now you have to ask yourself punk, are you feeling lucky? Is Obama really a deficit terrorist and just pretends through goolsby he is sucking up to his bankster overlords so they will keep money and power flowing his way? You have to be careful about President Obama dude, he is a very passionate man in some things(remembering his dad – he sent back the bust of Winston Churchill that has been in the whitehouse for decades because he hated that dude – screw our foreign policy relations)
Obama is a master of chicago politics too and even beat out hillary at her own corruption game. All I know is Dr. Malveaux told me face to face she was on his and bidens economic team and that china is calling the shots in washington now, so everytime Mosler says those washington boys are ignorant to money, that may not be the case, they may know what is going on, but thier asian overlords have different plans.
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Ivan Reply:
January 6th, 2011 at 4:52 pm
If they believe they have Asian overlords, then they can’t possibly get it. Do you think the Chinese are going to cut off trade with the U.S.? If not, they can’t help but to be left with dollars at the Fed. Maybe they’ll burn them…just to show us!
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strawberry picker Reply:
January 7th, 2011 at 1:50 am
Do you think the Chinese are going to cut off trade with the U.S.?
I used to know a drug dealer, and for awhile he gave drugs to his girlfriend so she would give him sexual relations. After a while he tired of what she had to offer and no longer gave her what she wanted, and in the end he wound up doing his own product for his fun and then he died. There is a REAL hard physical limit to resources out there in the universe, the chinese can’t give us rare earth metals in infinite amounts. At some point they will have used the USA for all they want out of her, and will cast her aside.
Peter D Reply:
January 7th, 2011 at 12:57 am
I agree that Obama is either totally clueless or is pulling our leg. But I disagree that he was right back in 2006 and is wrong now. It is the other way around. The debt ceiling has to be lifted. The fact that this could allow bad policies is true but is neither here nor there – there is always that risk. On the other hand, without raising the debt ceiling (and without the govt realizing that we don’t need to issue debt to spend) we’re in deep sh*t.
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WARREN MOSLER Reply:
January 8th, 2011 at 9:31 am
As you know in mid 06 I stated the deficit was too small, and agg demand would start falling until the deficit worked its way to something north 5% of gdp or so to reverse the cycle, as it always does.
and the economy did muddle through, helped by the 170 billion stim package in q2 08 where real gdp grew at maybe 2.5%.
No, I didn’t see Lehman/Bear Stearns completely pulling the rug out from under the credit structure all at once, almost entirely due to the atrocious
policy response of the Fed and Congress.
The Fed failed to provide liquidity to its member banks in perhaps the worst blunder in Fed history, and Congress failed to repeat the stimulus that worked so well just 3 months earlier.
Any forecast of the kind of collapse we had was also a forecast of the policy response, and I haven’t yet seen any of the ‘successful’ forecasters with the right reason for the collapse.
In fact, I have yet to see the Fed or Congress properly criticized for what it did, which includes what it did after the initial credit crash.
But in any case demand did slow to the point of the deficit getting just north of 5% of GDP at the end of 08 which turned the economy in q1 09, all as forecast on this website.
As they say, Shiff, Roubini, etc. have successfully forecast 25 of the last 2 recessions. And missed all the recoveries. And always for the wrong reasons.
And I did say the sub prime problem was fraud as soon as it was discovered, also on this website, and not lax lending standards as everyone was initially claiming.
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January 6th, 2011 at 12:18 pm
Warren – The housing bubble made prices too high. They need to come back down. Keeping prices at an inflated rate is not good policy. Helping those who bought at an inflated rate perhaps is good policy. It matters who bought them, how much of their income is going to housing and so forth.
My point is housing is finally coming down to reasonable levels. Even if it is still 10% too high.
The housing bubble was one of the biggest mistakes of the 2000s. What a waste of a decade.
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Adam Reply:
January 6th, 2011 at 3:58 pm
I have a cousin who came back from Iraq and bought during the bubble years to live with his young family. He is now underwater and paying more than the house is worth.
I have a friend who bought in 2006 who can’t make payments because of lack of work.
I have another friend who refinanced then got divorced. He is now underwater. He is working weekends just to make the stupid house payment which is more than the house is worth.
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WARREN MOSLER Reply:
January 8th, 2011 at 9:07 am
Agreed that ‘Keeping prices at an inflated rate is not good policy’
I’ve never proposed that?
My fica suspension keeps demand at levels where we can all pretty much stay employed producing the goods and services we want to buy.
Housing prices would have still come down, though perhaps not as much, as they tend to settle in at something somewhat resembling not much more than an affordable monthly payment.
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January 6th, 2011 at 1:07 pm
Adam:
Not to say that home prices won’t fall further due to the technicals but housing affordability is at a 30 year high. You can’t buy the land, raw materials, and labor cheaper than you can buy in the secondary market. The population continues to grow and the people being evicted through foreclosures still need shelter. The tax code of 86 disallowed the use of passive losses against ordinary income (along with accelerated depreciation). Reversing the 86 change will bring in investors in greater numbers than they’ve already been in the market. I don’t know that “overpriced” is a term that can be used generically. Within the framework of tax policy, fundamental value can change dramatically.
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Adam Reply:
January 6th, 2011 at 4:01 pm
I matters where you are talking about. I am in California and from many fundamentals housing is still priced higher than 2000.
I know – I did the math – it is about 5-10% back to where it would be if it followed inflation.
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Ivan Reply:
January 6th, 2011 at 4:42 pm
But income is higher, population is larger, and rates are lower. Home prices should be higher. There’s nothing particularly magical about the 2000 prices that indicate we need to go back there. There’s also nothing to say we won’t overshoot to the downside and go below 2000 prices.
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January 6th, 2011 at 3:16 pm
@ Strawberry
Apples and Oranges
And trust me…I am no MMTer. I come here and make many comments about “the economy”…and of course what I am commenting on is really politics and cheating and graft and fraud and theft, etc. But what Warren talks about is just basic accounting and operational truths in a fiat system. YES, at least at this point I still believe that MMT has an overly simplistic view of macro-economics—especially with regard to how the Ponzified international finance is, and how this massive fraud cannot be cured so easily—but operationally speaking MMT speaks the truth.
Also…Tom Hickey made a very good point the other day. He essentially (Tom, correct me if I am off base) said that folks like Mike Shedlock are begging for austerity, and if they get their wish we’re in for some awful, awful times in this world. I concur with Tom.
So one question is: How do we reign in the greed that creates banana republics and massive poverty, but not create an environment of austerity in which extremism and ultra-nationalism bring us to abyss? In this regard, MMT is spot on. There is no need to cut social security spending, etc., because those programs are NOT funded by tax monies, they are funded by government monetary operations. At least in the near term this kind of thinking provides a reprieve from the kind of cataclysmic austerity-minded thinking that seems to prevail.
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strawberry picker Reply:
January 6th, 2011 at 4:01 pm
How do we reign in the greed that creates banana republics and massive poverty,
Arnold Kling had an article about 250 states, saying we have too few congress people – around 500 – and that we need around 5000 – that would make it much harder for the unions, special interests, lobbyists to corrupt, it would just be too costly and with 5000 congresspeople the congressmen would be much more beholden to thier voting agents – unlike now. He said as our nation has grown, our representative congress people have not scaled well. Jefferson said you better control the population or you would be just as corrupt as europe. Where is anyone talking about population control legislation?
There is no need to cut social security spending, etc., because those programs are NOT funded by tax monies, they are funded by government monetary operations.
Warren used to have a quote by greenspan saying you can print however many dollars you want – talking to congress, but that you can’t gaurantee thier purchasing power. Quit trying to play games with the american public, it insults them and makes them angry at you.
Like George Bush once said – this sucker is going down – measures that needed to be taken in the past were not – and now mother nature is taking over where mankind failed.
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Tom Hickey Reply:
January 6th, 2011 at 6:20 pm
Hey, we have the technology. Why not go to direct democracy? Oh right, we can’t trust the American people to know what is good for them.
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WARREN MOSLER Reply:
January 8th, 2011 at 9:35 am
And my proposals here go a long way towards taking away the institutional structure that supports unnecessary aspects of the financial sector:
http://www.moslereconomics.com/?p=8968
The problem is the institutional structure that supports the above mentioned negative enterprise most would like to see eliminated.
I have presented numerous proposals to directly address those issues.
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January 6th, 2011 at 3:43 pm
Dan:
I’ve given a fair amount of thought to the practical limitations of MMT…at least what I view as practical. I believe the single greatest risk to the American economy would arise if our politicians and population fully understood that “debt” really is not debt. The drumbeat for lower taxes, increased government spending on anything and everything, and endless entitlements would create the ultimate “free lunch” state. Inflation would spike, the dollar would collapse, and our standard of living would plummet. Compare this to the risk of politicians seeking “austerity” which they’re incapable of implementing and I’ll take “austerity” any day. Warren and all the MMT guys are 100% right about monetary operations and the understanding that spending is not constrained by taxes. Where I believe they’re off, and perhaps this comes from their idealistic vantage point, is the real world problems this bit of knowledge could cause. In many ways I wish that MMT were treated the same way as security briefings for the president and members of congress. They really get it but they can’t tell the American public because the consequences could be so dire. Short of that, I’m somewhat relieved if they just don’t get it.
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strawberry picker Reply:
January 6th, 2011 at 4:07 pm
They really get it but they can’t tell the American public because the consequences could be so dire.
Dude I just saw a special on the black tom explosion – where german terrorists blew up many ammo dumps in many USA cities around 1916. Wilson was running on a anti-war platform so lied to the american public so he could try and get re-elected. Germany paid us back in 1979 with 50 million dollars according to the show history detectives. Being lied too is better citizen, don’t trouble yourself with the truth, let us create a fantasyland for you and make all your stress go away. MMT can be another way to make your stress go away, why even sell treausry bonds.
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Tom Hickey Reply:
January 6th, 2011 at 6:18 pm
“I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he would say “uh, oh what you have done” and James Buchanan argues in those terms. I have to say that I see merit in that view.” – Paul Samuelson, quoted by Randy Wray here.
The elite is watching out for you.
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Matt Franko Reply:
January 6th, 2011 at 7:39 pm
Tom,
In the footnote on page 140 of the Nelson book, Nelson states that Paul Samuelson is CEA chairman Larry Summers’ uncle on his fathers side. All in the family.
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Matt Franko Reply:
January 6th, 2011 at 7:54 pm
To be clear I should have typed: the late Paul Samuelson, sorry, Resp
Nelson book published 2001,
January 6th, 2011 at 3:55 pm
@ Ivan
Fascinating take. I cannot disagree with you. But the choices seem bleak.
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January 6th, 2011 at 4:08 pm
Knowing that politicians are all about self preservation, I’m less pessimistic in the short run. Extending the Bush tax cuts is a prime example. Not good enough mind you but a prime example!
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January 6th, 2011 at 11:09 pm
History has shown repeatedly that a deregulated banking/financial sector can destroy an economy.
The system we have in place is actually very good. It just needs adjustment and better regulation, a lot of which Warren addresses in his banking proposals.
When you look at the alternatives, they fall apart even worse.
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January 10th, 2011 at 9:37 pm
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