Tag Archives: Mosler 2012

Press release, Warren Mosler

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For immediate release:

Warren Mosler, candidate, Delegate to Congress, USVI

Christiansted, St. Croix-  Warren Mosler has released part I of his 3 part Action Plan for the USVI.  “With closing of Hovensa, we face the catastrophic loss of thousands of jobs, a drop in population of perhaps 3,000 people, loss of an estimated $100 million of annual revenue for our government, untold private sector business closings, a substantial drop of enrollment in our schools, and many other negative social and economic consequences” said Mosler. ‘I have organized a three part Action Plan that I will be releasing–one part at a time as they are completed.  If we act now, we can mitigate some of the potential negative consequences and begin building a prosperous future for our Virgin Islands.”

Action Plan, USVI

Part I:  Hovensa Response
1.  I propose that we inform Hovensa that if they close the USVI will not permit anyone to reopen the refinery.  This will cause Hovensa to reconsider their decision to close the refinery.  However, and more important, if they do close, the possibility of the refinery reopening will impede the effort to bring new businesses to St. Croix.  That’s because there are many businesses that would not want to be located on a small island like St. Croix with the possibility that the refinery might resume operations.  Refineries make an island like St. Croix less valuable.  I’m sure, for example, no one would think a refinery opening on St. Thomas or St. John would add value to those islands.
2.  I propose that we require that the cleanup begin immediately, even with the oil storage facility in operation.  It is important for the territory’s recovery that the unused portion of the facility be brought back to its original condition as specified in the contract with the USVI government as soon as possible.
3.  I propose that we require that current employees of the refinery and residents of the USVI be given priority for the cleanup jobs.  This will provide a multiyear transition period for the qualifying Hovensa employees and the USVI.
4.  I propose that we determine whether there is any residual equipment at Hovensa that might be useful to the USVI and arrange for its purchase.  The prices should be very attractive.

Part II and Part III will be released over the next several days.

Contact:  Reginald Perry, 340 692 7710

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Obama vs the banks

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Looks like a lapse into behavior not becoming a President- name calling, cheap shots, demonizing, and failure to recognize the behavior in question is a consequence of incentives built into the current institutional structure.

The legislation in question completely misses the point.

More and more voters are beginning to believe this is deliberate.

‘True reform’ begins with my previous proposals:

Link

If gold is a bursting bubble rather than a bull mkt correction and the dollar remains firm (which makes sense with crude breaking 70),

psychology could quickly turn deflationary with the concern that the Fed’s tools may be unable to deal with deflation.

And a government and mainstream economics profession that believes the government has ‘run out of money.’

Obama complains about “fat-cat bankers”

Dec 11 (Reuters) — President Barack Obama complained about “fat-cat bankers” and sharply criticized Wall Street banks for paying out big bonuses to executives in a television interview to air on Sunday.

Obama, who has taken some heat from Americans for supporting a Wall Street bailout, told CBS’ “60 Minutes” banks do not understand how angry people are with them.

“I did not run for office to be helping out a bunch of fat cat bankers on Wall Street,” Obama said.

It very much appears that’s what he’s been doing.

The president said it appeared the only firms paying out bonuses and avoiding the caps put on them under the government’s Troubled Asset Relief Program (TARP) were the ones who had paid back their bailout money.

“I think that in some cases (to be able to pay bonuses) was the motivation,” Obama said.

That’s how capitalism is supposed to work- govt. establishes the incentives that determine private sector behavior.

“Which I think tells me that the people on Wall Street still don’t get it. They’re still puzzled why it is that people are mad at the banks. Well, let’s see. You guys are drawing down $10 (million), $20 million dollar bonuses after America went through the worst economic year in decades and you guys caused the problem,” he said.

No, the Bush and Obama administrations caused the problem by not supporting demand at full employment levels.

Obama told “60 Minutes” it was wrong for financial industry lobbyists to try to derail a financial regulatory overhaul that passed the Democratic-controlled House of Representatives on Friday.

It’s up to the administration to use the legal system to get the desired behavior. If what the banks are doing is illegal, prosecute them. If it’s legal but counter to public purpose, implement appropriate law.

“What’s really frustrating me right now is that you’ve got these same banks who benefitted from taxpayer assistance who are fighting tooth and nail with their lobbyists up on Capitol Hill, fighting against financial regulatory control,” he said.

They didn’t make the rules, govt. did. It’s up to govt. to make rules that promote public purpose.

After House passage of the financial overhaul, Obama issued a written statement in which he urged the Senate to join the House in passing what he called a necessary regulatory reform as quickly as possible.

“This legislation brings us another important step closer to necessary, comprehensive financial reform that will create clear rules of the road, consistent and systematic enforcement of those rules, and a stronger, more stable financial system with better protections for consumers and investors,” he said. (Reporting by Steve Holland; editing by Todd Eastham)

Unfortunately, none of them have a sufficient grasp of banking and the monetary system to get it anywhere near right.

For example, how many understand that TARP is nothing more than regulatory forbearance?

How many recognize taxes function to support aggregate demand and not to raise revenue per se?

How many recognize that exports are real costs and imports real benefits?

It continues to be a case of the blind leading the blind.


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Obama vs the banks comment

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Looks like a lapse into behavior not becoming a President- name calling, cheap shots, demonizing, and failure to recognize the behavior in question is a consequence of incentives built into the current institutional structure.

The legislation in question completely misses the point.

More and more voters are beginning to believe this is deliberate.

>   
>   (email exchange)
>   
>   Of course, your reform is vastly superior to anything that is out there.
>   
>   But this criticism of the banks is sheer hypocrisy on the part of Obama.
>   It’s kabuki.
>   
>   It might even be deliberate: see Matt Taibbi’s evisceration of the Obama
>   financial reforms. He’s usually on top of the prevailing zeitgeits.
>   
>   This legislation will be totally ineffective. Interesting today that the
>   bank stocks went UP on passage of the bill.
>   

yes.

Policy just keeps getting worse.

I’ve about lost hope that he can ever get it right, unless accidentally.

The longer term risk is fiscal tightening. So far it’s not actually happening.

A driving force behind tax rate hikes is the misread that the Clinton tax rate hikes ‘worked’ to both spur the economy and drive the budget into surplus.

I suppose a repeat of the massive expansion of consumer debt that reached maybe 7% of gdp by 1999 could
somehow materialize isn’t impossible, but sure seems highly unlikely in the current environment.

Apart from the fact that it’s also not my first choice for supporting output and employment.


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Review of the recession and how to end it

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  1. The problem is suboptimal output and employment which is evidence of a lack of aggregate demand.
     

  2. Less important what caused the drop in aggregate demand

    • The end of the subprime expansion in 2006 reduced the demand for housing
       
    • The wind down of the one time Q2 2008 fiscal adjustment (Q2 2008 GDP was up 2.8%)
       
    • The Mike Masters inventory liquidation that began in July 2008 added supply from inventories, reducing output and employment
       
    • A shift in the propensity to spend due to the pro cyclical nature of credit worthiness

     

  3. My proposals for restoring aggregate demand:

    • A full payroll tax holiday – This tax is taking $1 trillion per year from workers and businesses struggling to make ends meet $1,000 per capita in revenue sharing for the States (approx. $300 billion total).
       
    • Federal funding for a $8 per hour full time job for anyone willing and able to work that includes federal health care.
       
    • Caveat – Unless our demand for motor fuel is cut in half, restoring aggregate demand will also empower the Saudis to set ever higher prices for crude oil which will cause our real terms of trade and standard of living to deteriorate.
       
    • Political options for reducing imported fuel consumption:
       

      • Regressive – utilizing allocation by price (Carbon tax, fuel taxes)
         
      • Closer to neutral – mandating higher fuel economy requirements for new vehicles, offering incentives to trade up to more fuel efficient vehicles
         
      • Progressive – substantially reducing speed limits to discourage driving and advantage public transportation

     

  4. Redirect banking to serve public purpose

    • Ban banks from all secondary markets.
       
    • Allow bank lending only to serve public purpose.
       
    • Do not use the liability side of banking for market discipline.

     

  5. Analysis of current situation

    • Our leaders believe they must first ‘get credit flowing again’ to restore output and employment.
       
    • Unfortunately the reverse is the case; restoration of output and employment will restore the flow of credit.
       
    • Government is removing about $1 trillion per year in payroll taxes from employees and employers who can’t meet their mortgage payments and wondering what is causing the financial crisis.
       
    • All moves to date by the Treasury and Federal Reserve have only served to shift financial assets between the public and private sectors. Nothing has directly added to aggregate demand.
       
    • Therefore the economy has continued to deteriorate, with only the ‘automatic stabilizers’ slowly adding financial assets and income to the private sector, as the counter-cyclical deficit rises.
       
    • The rate of federal deficit spending (not counting TARP and other shifting of financial assets that does not directly alter demand, as above) now exceeds 5% of GDP and seems to have begun moving the economy sideways.
       
    • The new fiscal package starts taking effect in April. While modest in size, it isn’t ‘nothing’ and will further support GDP.
       
    • Employment will not grow until real output of goods and services exceeds productivity growth.
       
    • Fuel prices are already moving higher.

     

  6. Conclusion

    • Leadership that doesn’t understand how the monetary system works has needlessly prolonged the recession and delayed the recovery.
       
    • They have put a premium on ‘confidence’ as the President spends countless hours in front of the TV cameras, when in fact loss of ‘confidence’ means only that federal taxes can be lower for a given level of federal spending:

      lower confidence = less private sector spending = less aggregate demand = lower taxes or higher federal spending to sustain output and employment

    • The headline USD trillions they have directed towards the financial sector has accomplished little or nothing beyond burning up expensive political capital and credibility.
       
    • They are in this way over their heads, and it’s costing us dearly.
       


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