Some refreshing words from the Treasury Secretary, Tim Geithner this morning on Meet the Press. He had this to say: (15:20 into this clip) Note:It can also be found in this 8 second clip I made: (Link)
We don’t have the ability (because of the overhang in housing and the problems in the financial sector) to artificially engineer a stronger recovery.
Imagine that! Geithner acknowledges what I (and many others) have felt all along. The structural issues in the economy trump the government’s ability to engineer a recovery.
The Fed has taken extraordinary measures on the monetary front. Since 2009 we have had $1.2 trillion of fiscal stimulus measures as well. We have had TARP and the bailouts of Fannie and Freddie. But the evidence is clear that it has not worked. Unemployment is today near a record and the more important measure, U6, is at 16.2% (about where it was a year ago) Nothing that has been done has moved the needle.
Geithner might have put it differently. He could have really put it on the line. I would have preferred that he had said:
"Keynesian economics has not worked. At best, it has given us a small reprieve from the restructuring that must happen. Our government can’t fight the forces of economics any better than we can fight the forces of nature. Large stimulus measures will not bring the desired results. We have to suck it up and take some pain. We can’t go on spending money that we don’t have to fix a problem that can’t be fixed. If we tried, it would be just be a waste of time and precious financial resources. We can no longer afford to throw good money after bad."
Of course Tim was not as blunt as that. But read his words. It means the same thing. Sorry Keynesians, I know the truth hurts.
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Nice catch, Bruce. On the stimulus front, way back when I was in school, we were taught that all deficit spending was stimulus. That would put the figure since 2009 closer to $3 trillion and roughly $7 trillion since that paragon of fiscal restraint Bill Clinton left office.
ReplyDeleteIt seems as if the author never read Keynes, or if he has, he took nothing from it at all.
ReplyDeleteThis administration hasn't tried a Keynesian policy for it to have failed. Monetary policy can get no traction in a liquidity trap and 700 billion is a pittance in a 14 Trillion dollar economy. There has been no Keynesian style expansionary spending. Just some half-hearted measures, which never had a shot.
700 billion was a pittance, eh? Just kind of a "tip" to the corrupt dem cronies and union thugocracy, I guess.
ReplyDeleteYes, $700 billion wasn't nearly enough to get us out of the mess that conservatives have created.
ReplyDeleteWhat has failed are conservative economic policies. The tax cuts and deregulation that conservatives said were going to bring us prosperity, instead brought about an economic disaster and over $14 trillion in debt.
Anon@1:45
ReplyDeleteYou sound like Krugman. He also says that it was a pittance and that was why it failed.
Since 2009 it has been 1.2 Trillion. Plus Tarp. Plus ZIRP. Plus QE1. Plus QE2
Just how much is enough for folks like you? I'm interested what you think. Should we just blast off another trillion? More?
I hear that Krugman is starting a new club. The name will be DEMKEYS. I hear there is a long list of distinguished members of the club.
Demkeys is short for Demoralized Keynesians.
QUOTE OF THE YEAR! YAY!
ReplyDeleteJust shot down the entire ponzi economy, fiat money, salvation-through-debt and assorted baggage IN FLAMES...!
It's like Bastille Day.
We have half heatedly tied Keynesian Economics, and full heatedly tried the monetary prescription of conservative economist Milton Friedman. I am curious why focus on one sides failings, when there is so much blame to go around. More partisan rhetoric is surely the key, if hot air, like the rest of the commodities market, going higher.
ReplyDeleteFailing? What if this is the plan? If a crisis is a terrible thing to waste, why wouldn't they want to create a crisis?
ReplyDeletejust sayin'...
Many of Friedman's policies were Keynesian look-a-likes. REAL monetary policy based upon the nature of REALITY (not bureaucratic enforced political edicts, rules, and regulations that accomplish the opposite of what they intend) can be found in the monumental work of Austrian economist Ludwig Von Mises.
ReplyDeleteIt was as much conservative deregulation as it was Democrat degregulation. I point to the you tube video "Democrats in their own words" where Republicans were calling for MORE regulation of Fannie and Freddie while Frank and the rest of the gang said they were fine. While it could be one side or the other, I blame the Dems.
ReplyDeleteIt never ceases to amaze me how BLIND highly educated academics / economists / politicians can be about our economic problems when the mathematics are simple enough for a 8th grader "A" student.
ReplyDeleteAs long as our money supply is borrowed into existence as DEBT that must be repaid with interest, but the Ponzi scheme system enshrined in the Federal Reserve Act of 1913 ONLY CREATES the principal, then it necessarily follows that the only way interest can be repaid is if there is an exponentially increasing number and size of new loans, (read debt creation) resulting in a DEBT PYRAMID that eventually can not be serviced even at near zero interest rates.
It would seem that we have arrived, or at the very least are VERY CLOSE to the system blowing up, like all PYRAMIDS eventually do.
The AMAZING thing is that we have BOTH a monopoly AND a Ponzi scheme yet no body goes to jail even though laws have been circumvented to allow this travesty of justice to prevail to the benefit of "elites" of maybe 2% to 5% of the population, while the finances of the masses are devastated by deliberately structured inflation that has destroyed 97% of the dollars purchasing power since this iniquitous system, approaching its 100 year anniversary, was initiated.
The top 3% - democrat, liberal, tea-bagger, conservative, republican, vulcan, wizard, etc. etc. - needed time to make as much $$$ as possible, and more of a heads-up that the economy was finally going to crash. The printing presses were fired up so that Wall Street and DC could gorge themselves a few last times on the taxpayer teet before it all ends. Most literally do not CARE if this policy or that policy "works"...unless it can {help them|causes them not} to get re-elected one more time. What else do you need to know?
ReplyDeleteWall Street rap video "Greed Is Good" blames consumer behavior for housing crash - http://www.youtube.com/watch?v=EoMpcz0S3hc
ReplyDeleteThis is the crux of it. The words of Mr. Anonymous should be imprinted on the head of every economist.
ReplyDelete"As long as our money supply is borrowed into existence as DEBT that must be repaid with interest, but the Ponzi scheme system enshrined in the Federal Reserve Act of 1913 ONLY CREATES the principal, then it necessarily follows that the only way interest can be repaid is if there is an exponentially increasing number and size of new loans, (read debt creation) resulting in a DEBT PYRAMID that eventually can not be serviced even at near zero interest rates."
I just love it when defenders of socialism say capitalism has failed when in fact our nation began moving away from capitalism toward socialism back in FDR's day. This was an extremely strong and vibrant country before fed income taxes, social security, Medicare, Medicaid, the multitude of social programs with the expansion of government and waste in military spending. Of all those, the waste in military spending is at least within the rights of the Feds under the Constitution. Blame for our financial woes is due to government, and the majority of that to policies reflective of socialism.
ReplyDelete'artificially engineer' ?? what crap English from our Tsy head. jeez
ReplyDeleteIMO slick Willie opened the barn door with the repeal of the Glass Steagall Act.
ReplyDeleteLooks like the endgame, both here in the US and Europe, is coming closer. A very scary prospect. When Lehman collapsed, as they insured most world trade, the entire system began to lock up, and worldwide everday credit nearly siezed up. More than one collapse can bring on unintended and unforseen negative consequences. As the financial world is now so interconnected and interdependant, this has the potential to be worse than the depression.
ReplyDeleteGeithner: We don’t have the ability (because of the overhang in housing and the problems in the financial sector) to artificially engineer a stronger recovery.
ReplyDeleteGeithner implies that absent certain problems the government would have the ability to engineer a stronger recovery.
So, where is the example of our (or any) government engineering any sort of recovery for anything, other than by throwing billions into a hole in order to take out millions?
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You too can do economics on a cocktail napkin, just like the guys from Harvard Business School. Don't be afraid of a few equations. They are only addition in a form that will impress your friends and the general public.
06/26/10 - Easy Opinions → DIY Stimulus Policy
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Fred: What is your analysis of stimulus spending?
Economist: "4=2+2" so stimulus will increase GDP and jobs.
Fred: Are you nuts?
Economist: Oh, I meant to say "GDP = All production in the U.S.", so stimulus will increase GDP and jobs.
Fred: I don't get it. That's just a definition.
Economist: Oh, I meant to say "GDP = C + I + G + (X - M)", so stimulus G will increase GDP and jobs.
Fred: That's better.
-- --
The comments about the Keynsesian end-game that we are at are spot on- the debt pyramid has to collapse. The comments about how the stimulus was too small are just too depressing - the idea that you can get out of an unpayable debt burden by borrowing more money in to existence, and if it doesn't work you didn't create enough of it, shouldn't last 5 minutes of sensible discussion, let alone be the bedrock of economic policy for the developed world. The history of fiat currencies is untainted by success and this time will be no different, however we have also never had 40 years of a global fiat reserve currency, so the debt bubble has never been allowed to get as big as it is today. The impact of it's inevitable collapse will therefore have to be bigger and more devastating than anything previously seen
ReplyDeleteGeithner is really saying, "I want to preserve some semblence of a political future, therefore I am going to tactfully admit that the policies of my boss are wrong. That way, when I decide to jump from the "SS Obamanomics" as its sinks, the intellectual sloths that make up part of the US electorate will dissociate me from the elitists who, blinded by keynesian principles, ignored the warnings about the "debt pyramids" floating in the world economy which will scuttle and sink the "SS Obamanomics". ....."and the band played on while the passengers and crew manned the lifeboats and watched as the once-believed-to-be unsinkable ship (our economy) sinks into the depths of the murky waters." Free tours now available to the Ludwig Von Mises Center library at Hillsdale College, Hillsdale, MI. There, you will have your answer. Storm Mohrman
ReplyDeleteOnce Keynes was asked, what is the end of your ideas? His reply was: “In the end, we’re all dead.” Anonymous (Mr. A) may “wish” a different meaning for Keynes, yet it is not the real Keynes and his work, for look: today the world economy is in its “a la Keynes” death throes.
ReplyDeleteNevertheless some day Mr. A will be vindicated, for his stance on public works is needed, but definitely not a la Keynes or using Keynes’ methods. Only by a spiritual revival will the country move away from the Dark Ages, from its present low moral stance a la amoral Supreme Court and Federal government. As said before, government spending is reckless! War spending is reckless! And social program spending is reckless! Without America on a moral foundation, the future of big public works:
the free fast trains, free subways and getting rid of cars and wasteful spending is not possible without collaboration and the present reckless every man for himself living. Freedom’s price is morality, not today’s freedom to do whatever hell one wants to do. I hope for America and Mr. A that that Golden Age day comes sooner not later which will begin first by throwing out Keynes and those who use Keynes: the fat cats.
I think Keynes has gotten a bad rap. For one thing he did not say that government(s) should continually accumulate debt as we have done for 80+ years. Yes, now we are on a financial high and it takes stronger and stronger shots to get the desired effect. Keynes said that gevernment(s) should run a stimulative deficit during bad times BUT ZERO THE BOOKS IN GOOD TIMES. That said, I believe the best avenue for goverment stimulation is to run a deficit by lowering taxes for individuals and business. We are better able to make economically sound spending decisions vs the politicinas vote buying pet projects. AGAIN WHEN THE ECONOMY STABALIZES THE GOVERMENT WOULD NEED TO RAISE TAXES TO ELIMINATE THE DEBT IT CREATED.
ReplyDeleteis better to quickly roll out QE3...rather than waiting for a collapse to come. is a better than nothing solution.
ReplyDeleteif not "phase out" Dollar system and put up a new system that maybe come with new world order again...
Here is the bottom line. Obama's policies have increased unemployment by (at present unemployment sits at 9,1% and is climbing) spending money on the things that he is spending them on. You cannot buy a 50,000 dollar car with $20,000 of borrowed money. Thorpe real issue is that he is spending tax payer money on green energy options, options that are far more costly than the oil in use now. To quote him "Oil is the fuel of the past". Why I'd he doing this you ask? Because the lobbyists that funded his campaign all belong to the green movement. He, rather than bring about immediate change by taking steps to bring down oil costs, thusly decreasing cost to the consumer and encouraging consumerism (every good you buy has tied to the oil industry because it must be ran sported to the place it is sold by a truck that runs on oil based fuels, inevitably this cost is passed onto the consumer), he has instead opted to oust the oil industry and make green energy cheaper... Something that would ensure his mark on history and his political reelection both on the front of funding and popular opinion. The only thing that can possibly undermine him ( and the thing he didn't account for) was the resulting inflation and increase in debt that hurts our ability to trade for anything, including oil. His presidency is a disaster and will be recorded in history as such...
ReplyDeletehead just trying to make oil more expensive than green energy options to make his green energy finders more enthusiastic and retain his presidential power for four more years. But in the process our unemployment went from 7.9% president Bush, to high of 10.4% in November of 2011 under president Obama, to a low under president Obama of 8.4% in january of 2012 and is now in March of 2012 at 9.1% and n the rise again. It is projected by May that the national average price for a gallon of gasoline will exceed $5.00 per gallon... What do you think will happen then?
ReplyDelete