(Invictus here, kids.  Don’t go bashing BR.)

I learned two interesting things last week:

Erick Erickson told me the following (bold font is mine, bold claim is Erickson’s):

Likewise, after the 2003 tax cuts, the unemployment rate fell to the lowest level since World War II. Let me repeat that: the Bush economic program created the lowest unemployment level ever. In fact, economists liken it to full employment given the demographic composition of those who were left on the unemployment line.

This lie was so important a lie that Mr. Erickson had to repeat it to his readership.  Either Mr. Erickson can’t remember back to just the late 1990s, or someone at the Bureau of Labor Statistics should lose their job.  (As an aside, I’m not sure what to make of Mr. Erickson’s claim that “ever” and “since World War II” are apparently interchangeable.  But I digress.)

Then I learned from Ezra Klein’s interview of Representative Paul Ryan what he would do to get the economy moving again:  Raise interest rates!

I think literally that if we raised the federal funds rate by a point, it would help push money into the economy, as right now, the safest play is to stay with the federal money and federal paper.

It’s unsurprising that Paul Krugman was having none of it:

I don’t even know where to start with this. What does Ryan think the fed funds rate is? (It’s the rate at which banks lend each other money overnight, usually to help meet reserve requirements.) He obviously doesn’t know the the Fed funds rate basically equals the return on federal paper, so that raising that rate would make banks more, not less, likely to stay with that federal paper. I’m sure someone will try to come up with a reason why Ryan is being smart here, but the truth is that he’s stone-cold ignorant.

Many people — myself among them — apparently emailed Klein about Ryan’s remark.  To me, there was only one possible explanation:  He misspoke.  Nothing else would make any sense.  So Klein went back to Ryan for clarification and, lo and behold, he did not misspeak.  Higher rates are his story and he’s sticking to it.  I’m somewhat unfamiliar with the economic principles that call for raising rates to stimulate economic activity; I’d learned it the other way around — lower rates to stimulate, raise rates to decelerate.  But I’m nothing if not open-minded.  Klein then appended his interview with Ryan’s clarification.

In defense of his position, Ryan offered the following:

Of course I do not think increasing the federal funds rate is what one does to spur immediate economic growth.

Although that’s essentially what he said.

But I do think we need to understand that the extremely accommodative monetary policy we have had for the past two years is not risk free.

No monetary policy — accommodative, restrictive, or somewhere in between — is ever risk free.  This is gibberish.

Observers like Kansas City Fed President Tom Hoening have made the case for a modest increase in the federal funds rate to send signals of monetary credibility, get back to normalcy and ward off speculative behavior.

Really, Mr. Ryan?  Really?  You’re going to go with Tom Hoenig?  Tom Hoenig, who has been dissenting on FOMC decisions since January (when he became a voter) because he believed that “economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.”  Tom Hoenig, who only recently took his 2010 GDP forecast down to a still-absurd 3% (a level for 2010 that I assign about a zero percent probability of achieving).  And by the way, Mr. Ryan, you’d have a tad more credibility with me if you spelled Mr. Hoenig’s name correctly instead of referring to him as “Hoening” not once, but twice.  (Apologies to Mr. Ryan in the event that was Mr. Klein’s error, but I suspect the exchange took place by email.)

As Krugman appended his piece after Klein appended his:

And sure enough, Ryan tries to cover himself; see the addendum at the end of Ezra’s interview. But he’s faking it: there’s no way to go from what he now claims he was saying to the words he actually said. So he’s both ignorant and dishonest, which we already knew from the way he tried to deny that privatizing Social Security was actually, um, privatizing Social Security.

And here’s the scary part (as if what’s above isn’t scary enough):  Klein describes Ryan as “…one of the party’s most influential voices on the economy. … soon to be one of the nation’s most influential voices on economic policy.”

Be afraid.  Be very afraid.

Adding:  Mr. Klein verified that Mr. Ryan’s clarification (such as it was) came via email, thereby confirming it was Mr. Ryan, not Mr. Klein, who was ignorant of how to spell Mr. Hoenig’s name.

Category: Current Affairs, Data Analysis, Economy, Employment, Politics, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

85 Responses to “Things I Learned Last Week”

  1. DL says:

    I certainly don’t agree with the proposition that raising the Fed funds rate will increase economic growth in the short run.

    But Paul Ryan’s views on the budget constitute a very different issue than that of the Fed funds rate. The suggestion that we should “Be afraid… be very afraid” appears to be an attempt to link Paul Ryan’s views on the Fed funds rate with his views on the budget and Federal spending. However, I find this very misleading.

  2. barbacoa666 says:

    The ultra-low rates in effect penalize savers and investors and subsidize the banks and the federal government. The banks receive money at no cost to speculate with, or purchase treasuries. And the federal government can continue borrow money for all manner of uses. That’s probably what he was referring to.

  3. dougc says:

    I have a feeling that at least 80% of Americans couldn’t identify the lowest rate, they would rather believe what sounds truthfull;ie truthiness. It is a political talking point aimee at retaining tax breaks for the upper 2%

  4. golden_mean says:

    I live near Milwaukee and the local media keeps trying to promote Ryan as a “deep thinker”. As far as I can tell his philosophy consists of the same toxic deregulation/tax cut mix that brought the economy to its knees. Privatise social security. Set up more health care savings accounts. It’s a tired mishmash but his is a fresh face and he looks so earnest! Plus he has a nice family.

  5. Tarkus says:

    Nah – Phil Gramm is the party’s most influential voice on the economy because we still hear echoes of his great ideology.

    Though maybe Ryan is for making the Bush tax cuts permanent so the top % and large corporations can hoard more and not spend it to stimulate the ‘ol U.S. economy. Yeah…yeah…that’s the ticket…

  6. troubled times says:

    Never let facts get in the way of blind hero worship

  7. dougc says:

    Ryan obviously has confused cause and effect..Higher fund rates don’t result in increased economic activity but increased economic activity can cause fund rates to increase.

  8. Jolly Rancher says:

    Low rates spur economic growth. Because investors can’t earn a living off of bank rate, they decide to invest in business. First, see the stock market rally from S&P 666 to 1,100. Second, notice the growth of corporate capital expenditures. Third, individuals are deleveraging which, later this year or next, should translate into growth of small business investment. Even a double dip recession is not the end of the world.
    JR

  9. Jojo says:

    Colbert on Bush tax cuts expiration, deficits [now] matter and the trickle down economic theory

    http://www.colbertnation.com/the-colbert-report-videos/341481/july-28-2010/the-word—ownership-society

  10. DL:
    It doesn’t matter in the end because Ryan is completely clueless on all of it. You do realize he’s as big an Ayn Rand fan as Greenspan(except for the fact that Greenspan used to be her bottom once), right?

  11. Mannwich says:

    Ryan and his peeps can’t be THAT stupid, can they? I have to believe they’re just being dishonest. Not sure which is worse.

  12. Invictus says:

    @DL

    The suggestion that we should “Be afraid… be very afraid” appears to be an attempt to link Paul Ryan’s views on the Fed funds rate with his views on the budget and Federal spending. However, I find this very misleading.

    It is no such thing. And there was no such implication. Your inference is incorrect. Frankly, I don’t even know what Ryan’s views on the budget and Federal spending are, though I’m sure I could guess. Regardless, someone who a) evidences a total ignorance of fundamental economics and b) cannot even properly spell the name of a Fed governor whose positions he references, does not instill much confidence in me.

  13. Tarkus says:

    @Jojo says:

    Colbert on Bush tax cuts expiration, deficits [now] matter and the trickle down economic theory

    http://www.colbertnation.com/the-colbert-report-videos/341481/july-28-2010/the-word—ownership-society
    ——————————————————————————————————————————–
    LOL – thx, that was good.

    Then next time the “trickle-down” theory is brought up, the answer is “Oh, you mean the ‘Piss-on-you’ theory?”

    The Ownership Society isn’t necessarily incorrect though.

    There’s just a difference in Owning, and Being Owned.

  14. willid3 says:

    jojo that does seem to describe the conservative plan as proposed. some how a lot of the conservatives don’t seem to understand it. not sure why. maybe they had to much libation?

  15. DL says:

    Invictus @ 3:26

    Is it really true that you’re not at all familiar with Paul Ryan’s views on the economic issues that he has spoken about to the MSM…?

    His views on Fed policy are really not what he is best known for.

  16. KentWillard says:

    The interest rate cut that would make sense is for the Fed to stop paying banks to keep the $1.1 trillion in excess reserves at the Fed.

    Doesn’t Ryan’s long term budget plan call for cutting to zero capital gains tax, dividend tax, and estate tax, all while projecting that tax revenue as a percent of GDP will stay constant? And effectively meaning taxes are only due if you worked for the money, while creating a perpetual inherited idle wealthy class.

    And doesn’t he propose issuing tax vouchers for government paid health, but not budgeting an increase in vouchers over time?

    Ryan’s ideas of lower taxes and smaller government are understandably popular. But rather than be honest about the size and specifics of spending cuts that would be required, he pitches absurd revenue assumptions and rations health care under the table.

  17. stonedwino says:

    GOP = Greedy, Obtuse & Petulant…

  18. Invictus says:

    @DL

    His views on Fed policy are really not what he is best known for.

    Well, at least now we know why he’s been keeping them secret.

    I probably should brush up on his other views, painful as that will likely be for me.

  19. clawback says:

    Wow, BR. I’m surprised at you. If you turn off the Fed-Treasury-TARP Bank free money spigot, isn’t there a chance that banks will do something else with the money — like lend more freely? It’s possible I’m missing something, but you seem to assume that Ryan is simply goofing up on the usual relationship between interest rates and economic activity. That’s not what he’s saying. That WOULD be stupid. But surely the Fed-Treasury-TARP Bank circle jerk represents an unusual situation, for which raising rates might be beneficial (to the economy, if not to the insolvent banks).

    Your snark is as good as anyone’s, but what’s so crazy about Ryan’s argument?

  20. Fred Flintstone says:

    Another misunderstanding/dishonesty from the quote about the Bush Boom was that it was tax-cut powered.

    The stimulus from suicide lending was larger by a significant multiplier if not an order of magnitude in some years. I made this chart to visualize it, I wish it would get more mind share since I think it is the most important chart of the decade.

    http://i.imgur.com/hAmYJ.png

    As reported here, there is currently a debt overhang of around $4T with housing. THAT WAS THE STIMULUS.

  21. yoganmahew says:

    @Invictus
    Well, it would be possible to argue that the funds rate (the cost of money) is too low. The reasoning might be along the lines of saying that a funds rate that low only encourages leverage. Small gain plays (based on leverage) become low risk at those levels. Investment, however, retains its overall level of risk (that the investment doesn’t pay off). You can’t lower the risks to investment (and therefore the cost of it), but you can increase the cost of funds so that leveraged arbitrage doesn’t pay off. One might be able to argue that this was part of the reason for the bust – the increase in the funds rate collapsed too many leveraged schemes as cheap money disappeared (too many borrow short, bet long strategies).

    I don’t think this is what Mr. Ryan is arguing, particularly not with the rest of his supply-side nonsense, but it is a case that could be argued.

  22. perryair says:

    So Congressman Ryan is “stone cold ignorant” and “scary” because he misspelled a Fed President’s name and he happens to think that raising the fed funds rate will make more money (or at least interest income) flow from banks into the private economy instead of banks hoarding that money because their cost of funds is now 0 or negative. Even if you disgree with that idea, is it something that is so off the wall as to qualify that thinker as stupid or ignorant?

    Krugman happens to think that a few trillion dollars more debt is what this country needs to get out of its current slump – and there are more than a few people out there who think that he is equally as stupid and ignorant for those viewpoints.

    The fact of the matter is, even if you’re a nobel laureate, to think that you absolutely know what the ‘correct’ answer is in something with a mind bogglingly large number of actors as macroeconomics, that does in fact, make you ignorant. Noone can predict exactly how a certain intervention will work because they could not EVER understand all of the specific millions (billions? trillions?) of factors that exert their influence at any precise moment in time. And that goes for all of the rest of us too, bloggers included.

    So however sanctimonious and deserving of being right that you think that your education and viewpoints of those who have influenced you will grant, you are not – I am not and we are not. Until we can properly discuss other peoples ideas without writing them off as idiots because their ideas are different than our own, we are doomed to ever more stupid name calling blathering nonsense.

    ~~~

    BR: Actually, what Ryan said was that “higher rates were stimulative of economic activity” — I believe that was the point of disagreement that invictus had — but hey, this ain’t my fight !

  23. Invictus says:

    @perryair

    So Congressman Ryan is “stone cold ignorant” and “scary” because he misspelled a Fed President’s name

    No.

    and he happens to think that raising the fed funds rate will make more money (or at least interest income) flow from banks into the private economy instead of banks hoarding that money because their cost of funds is now 0 or negative.

    Yes.

    Even if you disgree with that idea, is it something that is so off the wall as to qualify that thinker as stupid or ignorant?

    Yes.

  24. Petey Wheatstraw says:

    Let’s get this straight before arguing over who killed Cock Robin: We are screwed. We are broker than broke. Interest rates up or down? Either way, what would it fix? As for Bushco creating jobs, where are those jobs now? India? Is your lawn man a Mexican?

    Trickle down did not happen, and until it does, interest rates and arguments over history are a waste of time.

  25. perryair says:

    Barry – I think that most systems tend to break down in their ‘standard’ behaviors when they reach their limits. In this case the Fed has pretty much reached its limit at 0, so the thought that in this case a higher rate could actually stimulate economic activity in the form of money flowing from banks to private individuals and companies isn’t necessarily an absurd thought.

  26. TakBak04 says:

    The way I see it is that both of your posts have some merit as to what’s going on. And “Invictus” post really shows that we need to be aware of LEGISLATION …coming through that might be the kind of Legislation than some of us should be Wary and Watchful of.

    (Always keep a handy guide available to contact your Congress Critters to Tell them of your Approval or Disproval on Legislation)…the Think Tanks have the CongressCritters on ROBO DIAL…the rest of us have to be involved PERSONALLY.

    US Congress. Gov and US Senate.Gov are good sites. If that fails your search ….just do C-Span inquiry to get the path to your Govt. Rep. I’m not a fan of C-Span but they do give very good links to find out who to call and give VENT to your frustrations as a voter.

    # barbacoa666 Says:
    July 31st, 2010 at 1:07 pm

    The ultra-low rates in effect penalize savers and investors and subsidize the banks and the federal government. The banks receive money at no cost to speculate with, or purchase treasuries. And the federal government can continue borrow money for all manner of uses. That’s probably what he was referring to.
    # dougc Says:
    July 31st, 2010 at 1:27 pm

    I have a feeling that at least 80% of Americans couldn’t identify the lowest rate, they would rather believe what sounds truthfull;ie truthiness. It is a political talking point aimee at retaining tax breaks for the upper 2%

  27. TakBak04 says:

    BR: Actually, what Ryan said was that “higher rates were stimulative of economic activity” — I believe that was the point of disagreement that invictus had — but hey, this ain’t my fight !

    ——-

    I think that “some readers” still don’t look to see who is POSTING the SUBJECT. “Invictus” was Very Clear that this wasn’t “BR” posting this.

    The “Age of the Internet” …..where people “Jump to Conclusions” …..before they REALLY READ!

    That’s a big problem with our “Easy Internet”…”Twitter…Face Book” …SOCIETY!

    REACT BEFORE YOU READ! KEEP THE KNIFE SHARP AND HOT…SLAY YOUR OPPONENT because you THINK you KNOW WHAT THEY SAY…BEFORE THEY EVEN CAN POST! Don’t Read “in depth” just REACT…REACT! Then move on to your daily activities and leave carnage in your wake.

    Really we all need to kinda “CHILL”…these days. Myself included.

    READ MORE CAREFULLY and THINK before we are so PROFOUND……for some of us…it’s a caution that needs to be heeded. Again..I am a guilty one…and that why I can see it in others……..

    Let’s CHILL and take some time reading…Not too much to ask to just slooooowwww down.

  28. Vilgrad says:

    What kind of douchebag judges someone by their ability to spell someone’s name correctly? It must be Invictuous.

    A country’s long-term financial success is dependent upon savings and investment. Keeping interest rates at 0% for savers in order to convince people to spend rather than save is an absolutely idiotic policy.

    Keynesians like weasel face Krugman will never be able to spend enough to satisfy their failed theories. They’ve failed miserably and their excuse is we didn’t borrow and spend enough.

    Krugman is a lying two faced scumbag. Anyone who takes this liberal hate spewing loser seriously has the brain the size of a peanut:

    “We have a world-class budget deficit,” he said, “not just as in absolute terms, of course — it’s the biggest budget deficit in the history of the world — but it’s a budget deficit that, as a share of GDP, is right up there. Krugman called the deficit “comparable to the worst we’ve ever seen in this country. … The only time postwar that the United States has had anything like these deficits is the middle Reagan years, and that was with unemployment close to 10 percent.” Take away the Social Security surplus spent by the government, he said, and “we’re running at a deficit of more than 6 percent of GDP, and that is unprecedented.” “We have the huge bulge in the population that starts to collect benefits. … If there isn’t a clear path towards fiscal sanity well before (the next decade), then I think the financial markets are going to say, ‘Well, gee, where is this going?’” If we don’t get our “financial house in order,” he said, “I think we’re looking for a collapse of confidence some time in the not-too-distant future.”

    THE GREAT KRUGMAN – NOVEMBER 2004 (Deficit of $400 billion – 3.5% of GDP)

    “These days it’s hard to pick up a newspaper or turn on a news program without encountering stern warnings about the federal budget deficit. The deficit threatens economic recovery, we’re told; it puts American economic stability at risk; it will undermine our influence in the world. These claims generally aren’t stated as opinions, as views held by some analysts but disputed by others. Instead, they’re reported as if they were facts, plain and simple.” He continues, “And fear-mongering on the deficit may end up doing as much harm as the fear-mongering on weapons of mass destruction.” “There’s no reason to panic about budget prospects for the next few years, or even for the next decade.”

    THE GREAT DOUCHEBAG – 2010

  29. TakBak04 says:

    Tak Bak…REPLY TO @Vilgrad Says:
    July 31st, 2010 at 7:39 pm

    What kind of douchebag judges someone by their ability to spell someone’s name correctly? It must be Invictuous.

    A country’s long-term financial success is dependent upon savings and investment. Keeping interest rates at 0% for savers in order to convince people to spend rather than save is an absolutely idiotic policy.

    Keynesians like weasel face Krugman will never be able to spend enough to satisfy their failed theories. They’ve failed miserably and their excuse is we didn’t borrow and spend enough.

    Krugman is a lying two faced scumbag. Anyone who takes this liberal hate spewing loser seriously has the brain the size of a peanut:

    ———–

    See…you are on a tirade…and what you say is worthy reading..but the HEAT OF IT…does seem to say..

    Sloooowwww Down! We are so angry……..! I am, also……but using Jon Stewart to convey your anger…and is it really Keynesians or something else you are angry about.

    Frankly…Krugman is not someone who inspires ANGER/HATE/REBELLION AGAINST INJUSTICE in my “personal soul.” Have you ever seen him?

    Frankly Bernanke seems more a DARTH VADER than KRUGMAN…the MILD in my readings and view of him.

    I watched Bernanke in the Senate Hearings on the TARP Bailout and when Bernanke was confronted he got into some DARK VISUALS…Man controlling EVIL ANGER… Krugman “the Mild” I’ve seen on ABC and other apperances..and stuff doesn’t jolt out from his eyes when he is confronted by folks questioning him like Bernanke does.

    Whatever…LOL’s ….we all see what we see.. Just Saying…….. I was saying we all might need to “CHILL” because we are SO HYPED it doesn’t WORK! Myself included…as I’ve said.

  30. Petey Wheatstraw says:

    Vilgrad Says:

    “Anyone who takes this liberal hate spewing loser . . .”
    _____________

    Why, yes, just the other day, I saw a clip of him calling for the deportation and/or imprisonment of all of the minorities in our country . . .

    . . . oh, wait, never mind — it was Hitler on the History Channel — not Krugman.

    Sorry for the error, but one must admit, their rhetoric is nearly identical.

  31. Vilgrad says:

    Petey

    Let me guess. If we just borrow another $1 trillion from the Chinese and spend it on unemployment compensation out to 156 weeks, we’ll surely save or create 3 million jobs. Krugman, Blinder and Zandi are nothing but liberal shills paid by the Obamanistas and the Federal Reserve to keep the masses confused and ignorant.

    The ruling elite just called me with instructions for the ignorant masses:

    http://theburningplatform.com/blog/2010/07/30/the-ruling-elite-called/

  32. Invictus says:

    @Vilgrad

    What kind of douchebag judges someone by their ability to spell someone’s name correctly? It must be Invictuous.

    Is that the best you can do? To take a swipe at me for pointing out — correctly, I might add — that a member of the House of Representatives who, according to Klein, holds sway (or will soon) over economic policy, can’t correctly spell the name of a Fed governor whose work he claims to be following and whose opinions he apparently respects? That observation on my part, though meaningful, was really an afterthought to the fact that Ryan has no idea what he’s talking about. Let’s put it another way: Please cite a time in our nation’s history when interest rates were raised to “help push money into the economy.” This is the crux of Ryan’s comment, so if you’d like to have a substantive discussion, let’s have at it. You can rip Krugman all you want. But instead of doing that, I’d prefer to see a defense of Ryan’s position in the Klein interview. After all, my post wasn’t about Krugman, it was about Ryan.

    And when you’re done with that, we can talk about how right Erick Erickson was.

  33. Transor Z says:

    I liked perryair’s defense of Ryan. It’s all so complicated we shouldn’t criticize people who want to just start flipping switches and pulling levers to see what happens.

    What I liked about Hoenig’s dissent is (a) SOMEBODY on the FOMC was dissenting, (b) it forced the issue as to the truth about “green shoots.” IOW, if we’re really on the mend, let’s start to rein in the QE and get this patient off of life support to head off inflation and stop the speculation.

    I say raise rates, open the trapdoor under housing, pull the IV out of the patient’s arm and dump his sorry ass into the physical therapy swimming pool, shrieking, “SWIM, BITCH! SWIM!”

    I do wish Hunter S. Thompson were still alive to reply to Congressman Ryan.

  34. Vilgrad says:

    Invictuous

    You heaped scorn on Ryan for his spelling. You quoted Krugman like he is some kind of God like figure. So don’t tell me to stick to your main point. Your point was lost within your contempt for Paul Ryan. I find it interesting that you have locked onto one quote in a short interview with Ryan and you know nothing about his other ideas. Your love of liberal Keynesian goofball policies that have failed miserably shines through.

    Do you believe that keeping interest rates at zero and fucking senior citizens by paying them 1% on 5 year CDs while rewarding the criminal Wall Street banks is a sound policy?

    Do you believe savings and investment are beneficial to the long-term financial stability of a country? Or do you believe we need to force consumers to borrow and spend by keeping interest rates at 0%?

    Please explain to the unwashed masses how 0% interest rates are good for the country?

    I sure hope I didn’t make any speling errors.

  35. algernon says:

    Well said, Vilgrad. You supply symptoms of the probelm: artificially low interest rates misallocate resources. This makes us all poorer in the long run.

  36. BDW says:

    Krugman was never in favor of 0% rate…he warned and still does of a liquidity trap and that we are down the same path as Japan because we weren’t willing to do a legitimate stimulus or do what the Swedes did with their banking crisis. Perhaps you need to actually read Krugman instead of reading it through the lens of free republic.

  37. Vilgrad says:

    BDW

    I read Krugman’s bullshit everyweek when I’m taking a shit. Then I wipe my ass with his column. His Nobel Prize should be in Fiction.

    “A LEGITIMATE STIMULUS” – $800 billion fucking dollars, every dime borrowed from future generations, wasn’t enough?

    The Fed buying $1.2 TRILLION of toxic mortgages wasn’t enough for you?

    I love Keynesians. When their ridiculous solutions are complete and utter failures, they declare that if we had just spent more, it would have worked. With their warped logic, they can never be wrong. They were just foiled by the austerity police.

    Please enlighten us with your definition of “LEGITIMATE STIMULUS”.

  38. BDW says:

    Vilgard, you have the maturity of grape juice and the intellectual eloquence to go with it.

  39. Vilgrad says:

    BDW

    Answer my fucking question. PLEASE tell us what Legitimate stimulus is. I love to be enlightened by Krugman lovers.

  40. Carse says:

    @TakBak04; until everyone figures out the majority ofAmericans are BROKE, your idea for growth is falling upon deaf ears.

    Saving and collecting a reasonable interest is a very old and out dated tradition. We don’t do American tradition Today, Today we are supposed to spend like there is no Tomorrow.

  41. Fred Flintstone says:

    Legitimate stimulus would be jobs programs that improve the social capital of the masses, advance technology, and leave behind useful public infrastructure and private capital.

    WW2 was of course the greatest Keynesian program. The armed forces trained up millions of Americans, who developed personal discipline and technological and management skills, provided they survived the violent bits.

    New technologies were developed left and right, which set the stage for the resulting half-century of American dominance in aviation, computers, radio, etc.

    If I were king today I would look at seeding investment in alternative energy, intercity mass transit, local transit, energy efficiency increases in transportation and housing.

    But the present economy today simply has too many people and not enough wealth-creating jobs for the middle class. I’m not sure what the overall solution is, probably removing the predatory capitalist element that is profiting from being middlemen wrt banking, energy, housing, education, and transportation of the masses. I think the public sector could do a much better job in this area, or much worse, depending on who is running it and why.

  42. Invictus says:

    @Vilgrad

    You are either going to defend Ryan’s position, or you are not. It’s becoming clearer which way that is heading, but I’ll ask you one more time: Please defend Ryan’s position by pointing to a time in our nation’s history when interest rate hikes were used to stimulate the economy. Can you do that, or not?

    You heaped scorn on Ryan for his spelling.

    No, I heaped scorn on him for being an economic neophyte. I merely observed that he does not know how to spell Hoenig’s name, and that I find that telling. Can we move on, or would you care to dwell on this longer?

    You quoted Krugman like he is some kind of God like figure.

    How do you quote someone “like he is some kind of God like figure”? I quoted him exactly the same way I quote everyone else. Did I mention his credentials? No. His Nobel Prize? No. Seriously, WTF are you talking about?

    I find it interesting that you have locked onto one quote in a short interview with Ryan and you know nothing about his other ideas.

    His “other ideas” weren’t on display in the interview. This one was. And he is wrong. And did I mention he can’t spell “Hoenig”?

    Now, can you please explain the theory behind his comment? Or not?

  43. Fred Flintstone says:

    “A LEGITIMATE STIMULUS” – $800 billion fucking dollars, every dime borrowed from future generations, wasn’t enough?

    The funny thing, compared to the $2T of the Bush tax cuts, and the ~$4T of the suicide lending of 2003-2007, the $800B stimulus, which is half-spent, was clearly not enough.

    Not that what has been spent has been spent well. The overall policy intent is decent enough, but if we don’t face the reality of what this nation is facing — WW3 — we’re not going to really get “out” of this recession.

    What we are facing is the gradual but inevitable meeting of our middle-class economy with the standard of living of India and China. We’ve done integrated our labor markets, so there will be a meeting in the middle.

    This has been a continuous shock to the system since 1995 or so, with both savings and costs. The savings gave us the great Clinton boom, and the costs gave us the 2001-2009 recession, which was only interrupted by doubling household debt from $7T to $14T, 2000 to 2008.

  44. VennData says:

    Invictus,

    I don’t know why this is so surprising, the GOP are the people who claim that “we can’t let people fall off the income tax roles, because then they’ll have no stake in the system…”

    Which is a way of saying we must raise taxes on the lower income folks, while forgetting the pay Social Security, Medicare and sales and gas taxes, etc..

  45. plantseeds says:

    “we can’t let people fall off the income tax roles, because then they’ll have no stake in the system…”
    who said that?
    and how does that translate into – we must raise taxes on the lower income folks?
    just curious

  46. plantseeds says:

    Invictus – you should “spin off”…. you know, get your OWN show like Cleveland Brown did.

    http://www.youtube.com/watch?v=DEjnqsk83dE

  47. lulsh says:

    Invictus,

    I would agree raising rates typically does not help economic output, but perhaps raising the Fed rate would encourage banks to do more than run the Treasury spread strategy they now employ.

    Also, not a big fan of Krugman. Certainly, a Nobel prize on the resume means less than it used to, or ought to…

  48. Rescission says:

    De-leveraging is winning the battle. Keeping the rates artificially low isn’t working. The consumer is tired of over spending. A bad thing short term but a good thing long term. It’s going to take a long time for the de-leveraging to run its course and there is little this government can do about it.

    Obama and his economic team don’t understand it. They keep hoping people will start spending. But they are tired. Bush didn’t get it either. He told Americans to go out and spend more money. He even sent out “stimulus checks” which was foolish and short sighted.

    All of this is just re-arranging the chair on the deck of the Titanic.

  49. beaufou says:

    Vilgrad,
    If this is the kind of reference you’re gonna come up with:
    http://www.zerohedge.com/article/guest-post-ruling-elite-called

    Read the comments, please go away.
    Zero Hedge might recognize racism and other of forms disgusting behavior as freedom of speech, but I think referencing to retarded bigots is consent.
    Again, please go away.

  50. FrancoisT says:

    @Vilgrad,

    What is the policy that, in the last decade, contributed the most to the actual deficit?

    Do you know?

    ‘Cause if you’d know that, you would:

    1) change ass-wipes!
    2) realize that your anger is totally misplaced.

  51. FrancoisT says:

    Erik Erikson is one of the biggest blowhard around. Coming from Dumfukistan, his “facts bout the Bush tax cuts” cannot be true.

  52. wunsacon says:

    The top 1% have nearly all the purchasing power, followed distantly by public workers. We need a reset back to the tax rates from the 1930′s through 1980.

    Tax the rich. Give the purchasing power to the poor. They’ll spend it. The multiplier will increase. And cash-hoarding corporations will invest again in order to win business from the poor. (And we can do this through transfer payments. Higher taxes does not mean increasing the size of government.)

    The alternative to taking from the rich and giving to the poor? The rich might voluntarily hire a few dozen more landscapers. And some bodyguards… And that’s it. Is that what some of you people want? You want to turn this country into a third-world country of have’s and have not’s? That’s the path we’ve been on for 20+ years. Congratulations.

  53. scharfy says:

    lets review the play-by-play….

    #1) Some red-state blogger has put forth the very low unemployment of the Bush era as proof of good policy. Thankfully, the sharp-witted author of this piece has revealed to us the graphic truth(no pun intended), that unemployment was, in fact, .75% lower during the tail end of the Clinton era(he was a Democratic if you didn’t know) and thusly, is full of shit. The defense stipulates.

    You have debunked some blogger named Erik Erikson. not this Erik Erikson right?
    http://en.wikipedia.org/wiki/Erik_Erikson
    I had to look him up

    #2) Paul Ryan cannot spell Hoenig. Another vicious body blow. Paul Ryan spells horribly. Hoenig. One N dude. He is a re’tard…

    But the meat of the story isn’t quite so clear.

    The crux of Ryan’s policy stance is restoring monetary credibility, and staving off speculative behavior.

    Full fucking stop –

    Ryan says accommodative policy isn’t risk free. And that he himself does not think that raising rates will spur economic activity.

    Its about monetary sensibility, not about growth. Drink that in.

    I think this stance will be proven right in spades. I support it.

    Not because I think it will spur lending, but rather because lending is not currently being stimulated by ZIRP. Thus, the risks of ZIRP outweigh the rewards.

    Bottom line is that credit creation is flatlining, and a modest 1% hike in the Fed Funds rate might send the right message, most likely without stifling credit growth. Hell, long rates might even drop more, allowing for increased fiscal flexibility and maneuvering. Nobody “knows” what would happen. Not Krugman, me, Ryan or God himself.

    I get the fact that you have put this question forth “Please cite a time in our nation’s history when interest rates were raised to “help push money into the economy.”?

    Ryan isn’t saying that. Here’s his own words “Of course I do not think increasing the federal funds rate is what one does to spur immediate economic growth.”

    Strawman much?

    Loans will occur when the private sector’s balance sheet is good and ready, and a .25% Fed Funds rate isn’t helping. Not a bit. Its just padding the P&L of the banks at the expense of savers across the nation, and creating inflationistsa’s all over the place.

    I’m with Hoening. Take us to 1.25% captain. This fire has enough lighter fluid, it really needs a spark, not more fuel. So turn the spigots down a bit. You’ll thank me if they ever get the fire lit, and we need to dampen the flames…

  54. troubled times says:

    This debate about debt puzzles me. Are those who think its not a big deal hoping to leave thier kids cash , stocks / bonds and hard assets etc . when they die or bills ? It often looks to me when we , our gov borrows we kinda feel ” it will be some other kids problem ”

    And yes, i beleive Barry first noticed Bush was trying to rewrite history …And now Paulson is…..Whos next ? Rumsfeld ? Will he try to reinvent himself ? Sounds impossible , right ? ..Well never underestimate Fox TV , Glen Beck and the Palin crowd. Never underestimate our ability to blame todays troubles on todays leaders…Never underestimate Roger Ailes , the only true ” master of the universe” . Never underestimate the power of foxification. ….

    I got a question..How many ex pols or government people are now making a living off the Homeland Security budget ? How many security outfits are public and how many ex pols / government types have stock in those companies ? …..I believe there is a story here.

  55. Sechel says:

    Ryan is correct. Aggregate demand is not there for credit is not there. Make the banks pay more by taking away interest on reserves and raising Fed Funds to say 1%. The banks will pay depositors more which puts money into the economy. The modest increase in rates will not make loans materially expensive so this will not be negative and as I said earlier there’s not a great deal of demand for credit. What this does do is take away the banks “carry trade” where they borrow at Fed Funds and invest in Treasuries. The banks would be more inclined to make more loans, and pay out higher interest rates both positives. This isn’t the way it normally works, but this is a new normal.

  56. globaleyes says:

    WHATEVER increases economic velocity is good for America.
    Low rates haven’t worked; increase them now.
    Capital is today’s “shortage” item. Shouldn’t genuine market conditions support higher rates ?

  57. Patrick Neid says:

    Hopefully the idiotic concept that artificially lowering interest rates stimulates the economy goes by the wayside along with the Keynesian’s who have pimped this theory since the 1930′s. The Krugites have it ass backwards but they have had the political winds carrying them forward so these moronic econ policies persist regardless of party affiliation. What political hack/pundit/ economist doesn’t like central planning? Pushing or pulling interest rates is the ultimate gas pedal.

    Once rates short rates are driven down, especially below the inflation rate, you get the appearances of economic growth but in reality you get credit bubbles materializing in whatever the flavor of the day is–tech stocks, housing, commodities, stocks etc. Each bubble in turn determined by the duration of the prior artificial rate. The last twenty years should provide you with enough data to prove this insanity.

    For better or worse the Ryan’s of the day are pushing back against this entrenched madness. He has to be taken down. The bitchy little queens are at work.

    But now worries. The trillions in debt make a return to sanity impossible. We are printing until the ink runs out.

  58. Invictus says:

    @scharfy:

    I get the fact that you have put this question forth “Please cite a time in our nation’s history when interest rates were raised to “help push money into the economy.”?

    Ryan isn’t saying that. Here’s his own words “Of course I do not think increasing the federal funds rate is what one does to spur immediate economic growth.”

    Strawman much?

    What I said Ryan said is, in fact, exactly what he said: “I think literally that if we raised the federal funds rate by a point, it would help push money into the economy, as right now, the safest play is to stay with the federal money and federal paper.”

    What he said afterward — what you quoted — contradicts what he said previously. And is an obvious walk-back of the original statement that came after folks wrote to Klein and voiced “criticism of Ryan’s suggestion that we should increase the federal funds rate to push capital out into the private sector.”

    So, to answer your question, no, I don’t strawman much. You?

  59. Vilgrad says:

    Invictuous

    The purpose of your post was to attack Ryan and make him seem stupid, scary and dangerous. You see him as a threat to your beloved Democratic party. Your true colors show through clearly. This is the classic liberal method of attacking the character of an opponent because the facts aren’t in their favor. It is the exact method used by the NAACP to fear monger about the Tea Party being racist. Because one moron out of a thousand carries a racist sign, the entire movement is racist. Your ideology shines through.

    Your absolutely ridiculous discussion about his spelling abilities is like a husband and wife arguing over whether the curtains in the living room are dark blue or black, while the house is on fire. The vapidness of your discussion is breathtaking to behold.

    To answer your question, yes I believe higher interest rates would be benficial to the economy. A sound financial economy is based on savings and investment. If you pay someone 0% on their savings, they will not save. If they don’t save, there is no money to invest in productive ventures. 0% interest rates force you to gamble in the stock market, pay off your debt, or do nothing.

    Now answer my questions.

    Your use of the words scary and be very afraid prove that you are a pompous fear mongering asshole. It is hard to believe that BR lets you post such drivel.

    If you want to break out of your narrow minded ideological world, learn a little bit more about Paul Ryan. At least he is putting forth ideas, not personally attacking and tearing down people and putting forth no solutions.

    http://theburningplatform.com/blog/2010/07/22/why-we-need-a-3rd-party-in-2012/

    http://theburningplatform.com/blog/2010/07/22/why-you-shouldnt-vote-republican-in-2012/

    http://theburningplatform.com/blog/2010/07/22/why-you-shouldnt-vote-democrat-in-2012/

  60. Vilgrad says:

    beaufou

    Your gullibility is breathtaking. You are referencing the delusional rantings of a 9/11 Truther and telling me to go away. You would make a fine bureaucrat in the Dept of Homeland Security. You can judge who should be allowed to post on the internet.

    Free speech is overrated isn’t it you fucking douchebag.

  61. Darmah says:

    I read this post before any comments appeared. This morning I read the comments. The post didn’t seem like throwing a hand grenade let alone setting off the cluster bomb of comments that resulted. I at least learned another trip word (“Krugman”) to use when I want to watch a finally-oh-so-concerned-about-the-deficit dipstick explode.

    @Jojo — thanks, for the Colbert link — spot on.

    @Invictus — as always a good post, but perhaps you should code another tag to your posts –

    (Invictus here, kids. Don’t go bashing BR.)

  62. Darmah says:

    Hmm took the tag, but ignored it. use the <blink> blink tag</blink> let’s see if this at least works.

  63. Vilgrad says:

    FrancoisT

    As a true liberal, you have concluded that I’m a right wing Republican who favors war. Excellent analytical abilities. I believe that George Bush was the worst President in the history of the country. The Savior is certainly going to give him a run for his money. I love how liberals talk about Bush’s warmongering, when the Obamanistas have put forth a $895 billion Defense Budget for 2011. I believe that is the largest military budget in the history of MANKIND.

    The Obamanistas don’t like the old Guns or Butter choice. They’ve decided to implement the Guns, Butter, Banks, Healthcare, and 99 weeks of Unemployment policy. It is easy when you have a printing press.

    My anger is not misplaced. It is placed squarely on Washington DC and Wall Street. It is placed on both parties. It is placed on the fascist corporate state that our country has become.

  64. Joe Friday says:

    Fred Flintstone:

    “Another misunderstanding/dishonesty from the quote about the Bush Boom…”

    What Bush boom ?

    http://www.princeton.edu/~pkrugman/sixteen.png

  65. Invictus says:

    @Vilgrad

    I am so pumped that you’re here, I can’t even begin to tell you, as you singularly crystalize all that is wrong with discourse in our country today.

    You, like Ryan, demonstrate a fundamental misunderstanding about basic economics. But unlike Ryan, you resort to ad hominem attacks and juvenile name-calling.

    By all means, keep up the good work!

  66. mbelardes says:

    Who is surprised about some Republican that doesn’t know what he’s talking about but adamant about his point to raise interest rates?

    Invictus, stop getting pulled into stupid debates in the comments. Take the BR path of comment to clarify, but don’t argue. If you really need to respond to some new argument, write it down and save the idea for a later post. Especially the “I don’t actually know any of Ryan’s other views” type comments. The GOP and DNC are full of morons. That comment makes it look like you really just pulled out some statement one GOP moron said and ran with it rather than grabbing a guy that holds himself to be the economic genius behind the GOP and using his comments to show he’s a dumbass.

    And drop the, “as you singularly crystalize all that is wrong with discourse in our country today” comments. You said the same thing to me when I made point about your going off on Fareed Zakaria 3 posts in a row.

    The discourse in this country has always been fucked up. Burr shot Hamilton over similar arguments. People disagree. Can’t default to commenters on a blog being the reason nothing in America works. If anything, shitty discourse is a step in the right direction from the decades of no discourse this nation had before the internet.

  67. Invictus says:

    @mbelardes

    Thank you for a thoughtful and well-thought out comment. You’ve given me some food for thought.

    I would, however, disagree with your characterization of our last interaction. If I have it straight, you’re referring to this:

    …you guys come off as asshats attacking a guy [Zakaria] just relaying information.

    This is, perhaps, the saddest and most telling commentary of all, and speaks to how many now perceive the role of journalism and, regrettably, how some journalists see themselves. What manner of journalism is it that simply relays information without doing any critical analysis? Stenographers indeed!
    ———————

    That’s clearly not derogatory toward you, but of how our journalists work these days. If you’re referring to something else, my apologies.

    And I’d suggest that the debates aren’t “stupid.” They give folks the opportunity to see both sides and decide for themselves with whom they agree.

  68. Vilgrad says:

    Invacuous

    I’m pumped to call you out for what you are. You crystallize the ability to tear down someone’s character and then be so brain dead that you can actually preach about what is wrong with discourse today.

    You probably don’t even see the irony of your statement. Do you?

    Telling people to be scared and afraid of Paul Ryan is such civil discourse.

    You didn’t respond to my post because it hit the mark. I’ve got you nailed. The sole purpose of your post was to tear down Paul Ryan, not to debate an economic issue.

    Again, BR must be losing his mind to let haters like you post your bullshit.

  69. Invictus says:

    @Vilgrad

    You’re just too good a target to pass up, with all apologies to mbelardes. I just can’t help myself.

    Ryan made a claim that has no basis whatsoever in economic theory OR economic practice. If it did, you would have been able to respond to my request to point to a time in our history when the Fed has raised rates to push money into the economy. You can’t, because it has not happened. And it likely never will. Even Hoenig, who favors rates higher than where they are now, doesn’t hold that position because he thinks it will push money into the economy. He holds that position because he’s worried about the Fed falling behind the curve and the consequences of leaving rates too low for too long. NOT because raising them will stimulate activity.

    I said nothing about Ryan’s character, unlike the infantile name-calling to which you have resorted. I don’t know the first thing about Ryan’s character. All I know is what he voiced in the Klein interview, which was woefully off the mark.

    There are thousands of blogs out there, Vilgrad. And I’m honored that BR lets me post here. And you should know that he signs off on each and every one of my posts prior to their publication. So, if you’ve got a problem with that, please don’t let the door hit you in the ass on the way out.

    This is where I want to say something about shooting fish in a barrel, but I’ll refrain.

  70. Vilgrad says:

    Invictimus

    You don’t even realize how pompous you come across, do you? You begin your posts by pumping yourself up as someone who can just obliterate anyone’s argument with your massive brain power. You clearly have a very large ego. You must be compensating for something. Why don’t you tell everyone how you got an A in spelling in 3rd grade.

    Your entire post was done to attack Ryan’s character. Anyone with an ounce of sense could see that.

    Your response to me was scorching. You really can shoot those fish in a barrel. You really think highly of yourself and your superior intellect. Most liberals do. Since their failed policies and ideas are so easily dismissed, they resort to attacking those whose policies make sense.

    If Barry wants to give you a forum for your hateful posts, that is his problem.

    It must bother the shit out of you Keynesian Krugman lovers that Barry was one of the stars of Generation Zero, produced by CITIZENS UNITED, a right wing organization.

  71. Invictus says:

    @Vilgrad

    I believe this is still how things work. Apparently you and Rep. Ryan believe differently. Good for you both. Doesn’t make it so.

    A higher fed funds rate means banks are less willing to borrow money to keep their reserves at the mandated level. This means they will lend less money out, and that the money they do lend will be at a higher rate since they themselves are borrowing money at a higher rate. Since loans are more difficult to get and more expensive, businesses will be less likely to borrow, thus slowing the economy. When the Fed raises rates, it is called contractionary monetary policy.

    In addition, adjustable rate mortgages will become more expensive, so home-buyers can only afford smaller loans, which slows the housing industry. Housing prices go down, so homeowners have less equity in their homes, and feel poorer. They spend less, further slowing the economy.

    When the fed funds rate is decreased, the opposite occurs. Since overnight lending is cheaper, banks are more likely to borrow from the Fed to meet their reserve requirement. They lend more and at a lower rate. With cheaper bank lending, businesses expand. This is called expansionary monetary policy.

  72. Vilgrad says:

    Invictus

    Nicely done. You are quite good at cutting and pasting.

    Increased savings leads to increased investment. Increased investment leads to a more robust economy based on a sound basis of growth. Increase the interest rate you are paying people on their money market accounts from .20% to 3.00% and savings will miraculously increase. Those additional savings can then be invested into the economy. Even a liberal ideaologue should be able to understand that.

    I live in the real world. You can find comfort in your theories, Fed models and gibberish from About.com.

  73. willid3 says:

    i wonder do the Tea party and GOP supporters realize they are voting to put them selves out of jobs? do they realize that almost every thing they have proposed will not create new jobs, but destroy more those that doe exist now? until they can show where the demand will come from when they implement their proposals, i begin to wonder what they have been drinking. and the GOP is trying to sell that their tax breaks for the rich will create jobs, when it seemingly never did yet. in fact every time they proposed some policy that was suppose to spur job creation, it was an abysmal failure and a waste of money.
    so when we cut the budget (which i do expect to happen) i won’t be surprised that job losses start snowballing . again

  74. Vilgrad says:

    willid3

    Did the Obama $800 billion stimulus create or save 3 million jobs? Since we lost 3 million jobs since it was passed, I suppose it saved 3 million jobs. Right? You don’t think that enormous spending by the Federal Government may have crowded out Private creation of jobs? Do you think a trillion dollar additional stimulus package will generate jobs?

    The Tea Party is not the GOP. The GOP despises Ron Paul and everything he stands for. The liberals on this site desperately want to tie GOP policies to the Tea Party.

  75. Invictus says:

    @Vilgrad

    Sorry the About.com excerpt didn’t quite do it for you. My bad. How about we just look at what the Federal Reserve [.pdf, Page 4] itself has to say about it:

    If the economy slows and employment softens, policy makers will be inclined to ease monetary policy to stimulate aggregate demand. When growth in aggregate demand is boosted above growth in the economy’s potential to produce, slack in the economy will be absorbed and employment will return to a more sustainable path. In contrast, if the economy is showing signs of overheating and inf lation pressures are building, the Federal Reserve will be inclined to counter these pressures by tightening monetary policy—to bring growth in aggregate demand below that of the economy’s potential to produce—for as long as necessary to defuse the inf lationary pressures and put the economy on a path to sustainable expansion.

    Which of the above scenarios do you envision us in right now?

    Ryan is wrong. And I suspect you know it but will not admit it.

    Look at the example you give. It collapses on itself. Why should we be concerned with increasing savings right now when we’re in the weakest Final Sales recovery on record? Increasing savings by offering a higher return on cash will only suck money out of an already extraordinarily fragile economy. Come on, man, this stuff isn’t that hard.

  76. contrabandista13 says:

    You are all missing the entire point here….

    A global economy requires a global establishment ruling class as well as a policy for global economic parity. You can’t seem to see the forest because of the trees….. Stop the petty political bickering, it’s distracting… All your sovereign rights will be taken away from you generationally and incrementally. “We’ve” been working on this for a long time. A “New World Order”……

    “… Everyone, knows that China will never be able to reach a level of consumption per inhabitant comparable to that of the Americans, with two cars per family, three televisions, four computers and cell phones, a house three times too big for its inhabitants, which generates energy consumption that would be sufficient to the needs of ten, even twenty people on other continents….” Herve Kempf

    Something’s gotta give… However, I’m not giving up my yacht… You can fight amongst yourselves if you want to. It’s the end of American exceptionalism and the beginning of global parity. Manifest Destiny is a myth, a magical explanation for dumb luck. Which brings me back to the topic…. Paul Ryan, dumb and lucky….!

    Best regards,

    Econolicious

  77. willid3 says:

    Vilgrad Says:
    August 1st, 2010 at 4:24 pm

    willid3

    Did the Obama $800 billion stimulus create or save 3 million jobs? Since we lost 3 million jobs since it was passed, I suppose it saved 3 million jobs. Right? You don’t think that enormous spending by the Federal Government may have crowded out Private creation of jobs? Do you think a trillion dollar additional stimulus package will generate jobs?

    The Tea Party is not the GOP. The GOP despises Ron Paul and everything he stands for. The liberals on this site desperately want to tie GOP policies to the Tea Party.

    I seriously doubt that business was doing much job creation in the time when demand was tanking. and since business in theory is suppose to be driven by demand, it means they were n;t going to do any thing but shrink.
    besides they have been creating many more jobs in other countries long before here. and it will matter very little to them what we do.

    and its very hard to tell the difference between the tea party and the GOP. appear to be identical in almost every way. and the GOP seems quite supportive of every thing they want to do. and i have seen many statements from GOP leaders praising you idols son.
    not many liberals on this site at all. most are moderates to conservatives. along with a few who can be liberal.

  78. Vilgrad says:

    Invictus

    You are so caught up in your theory, you can’t see the truth right in front of your eyes. This is a classic crack up boom. The country went on a debt induced trip from 1980 until 2005. Consumer spending went from 62% of GDP to 70% of GDP due solely to debt spending. The savings rate went from 12% to 0%. It came to its logical conclusion with the great 2008 Crash.

    Are you seriously arguing that the way to extract ourselves from a disaster caused by TOO MUCH SPENDING, TOO MUCH DEBT, and TOO LITTLE SAVINGS is to encourage MORE DEBT induced spending by keeping interest rates at 0%? Seriously?

    The sad conclusion is that we have thousands of unnecessary retailers, thousands of surplus offices, millions of surplus houses. Keeping interest rates at 0% will not do a thing to solve this. All it does is allow Wall Street to stay on life support at the expense of senior citizens who can only earn .50% on a CD. But who cares about the real people in the real world. Federal Reserve models are where some people prefer to live their lives.

    Come on dude, you can’t be serious.

  79. contrabandista13 says:

    Vilgrad:

    And the shit will really hit the fan when the people find out that they have 435 unnecessary congressmen, 100 unnecessary senators, 9 unnecessary justices in the Supreme Court and one unnecessary President and Vice President……

    I agree wholeheartedly with your comment above, however, we’re not looking for an effective solution here, we’re looking for a “happy” solution…

  80. bulfinch says:

    More like a quick fix using a known (if totally flawed) framework. If you thought the financial meltdown of 2008 was a harbinger for financial reform or the return to our industrious roots, you, like me, were laughably hopeful and totally mistaken. We are a consumer driven economy locked into a boom/bust cycle. What Invictus seems to be saying is, as long as we are going to slowly dismember ourselves down to little indebted nubbins, let’s at least make sure the cutting apparatus are honed and sterile and that our anesthesiologist is well paid. Otherwise, it’s gonna hurt like hell.

  81. rosey says:

    If one returns to first principles, a sound monetary policy should be judged by two characteristics; the stability in the value of the currency (neither inflation nor deflation), and an adequate amount of currency in circulation. Governments notoriously inflate (debase) the value of their currency to reduce public debt in real terms, as raising taxes (in a democratic republic) – the honest approach, is politically unpopular. In the past, the discount rate and reserve requirements generally controlled how much currency was available to circulate. The 0% FFR seems shortsighted, as it removes one of the primary mechanisms to control the amount of available currency, in dynamic terms.

    As long as the dollar holds its value, dollar denominated debt must be serviced. Every dollar paid to debt is unavailable for investing in an alternative, such as infrastructure.

    So running up the national debt matters, as it must be paid back, unless one is counting on inflation. At the astronomical trillions of dollars the Obama administration has condemned us to, even inflation won’t be enough.

    Yes, be afraid. Be very afraid.

  82. wisedup says:

    Vilgrad, there are no damn ROI guarantees, saving guarantees, investment guarantees. You seem to be the perfect investment queen screeching about the low rate of return. My God, the country is falling apart if you can’t get at least 15% annual over inflation. Well you must have been real happy in 1980 when the prime rate was 21.5%. Get off your damn bitching ass and get to work. Find and finance the great new Fords. Edisons. Rather than Rand’s bat-shit crazy idea, here’s another. Use it or loose it. Since Goldman Sachs can’t do anything remotely legal with money we’ve got to pound the truth in another way. We need to motivate private money into investing in the ole’ USA rather than hairy ass currency swaps or synthetics.

  83. DeDude says:

    If a moron that doesn’t even understand the basics of pre-Econ 101 is going to be in charge of writing laws to fix our economy, then we should all be very afraid. The main cause of the mess we got into two years ago was moronic leaders who didn’t care to understand the issues. He is choosing to follow one specific extreme adviser with a clear record of being wrong, and have not even read enough from that adviser to know how his name is spelled (let alone what his argument is build on) – that is scary, although not uncommon for a GOPster. The ignorance exposed in the rest of that interview is no less scary.

  84. jyc3 says:

    Invictus,

    I’m late to this debate but a couple of observations.

    1. I will not defend Ryan as I will not defend any politician but I can think of at least one instance where raising rates might be a stimulus to the economy, albeit an unintended one. When the Fed has held rates low for some time and the economy is expanding post recession (I’m talking generally here and not necessarily right now), and the Fed hikes rates the first time indicating a change to a tightening stance, it can be a stimulus. Borrowers who have been waiting for rates to hit rock bottom or who have procrastinated about borrowing will move to get deals and loans done before rates rise further. Monetary policy is all about expectations and if the expectation is for rates to rise, it seems obvious that borrowers would want to borrow today rather than wait for rates to rise. Of course, lenders will be more reluctant to lend since they know rates will rise too so the increased demand for credit may not be fully met, but we’ve definitely seen this effect in the past. Since stimulus is usually nothing more than drawing demand from the future, I’d say this scenario qualifies as a stimulus to the economy. Is it what Ryan meant? I have no idea. By the way, I think this scenario is where the old Wall Street saying about three steps and a stumble comes from.

    2. Vilgrad is rude.

    3. But he is right that you seem way too sure that your view of economics is the one truth. He obviously views things more from an Austrian or classical perspective but that does not make him wrong. Economics is a social science not a hard science and anyone studying it should incorporate a huge dose of humility into their analysis.

    4. Current interest rates are a reflection of policy in the recent past. If rates are low it merely means that policy was tight somewhere in the immediate past. If rates are high it merely means that policy was loose in the immediate past. In other words, interest rates are not monetary policy. Monetary policy in the US is the attempt by the Fed to balance the supply of and demand for dollars. Interest rates are merely an indication of the efficacy of that policy. There are plenty of other indicators that provide clarity about policy such as the value of the dollar.

    5. “Increasing savings by offering a higher return on cash will only suck money out of an already extraordinarily fragile economy.” What do you think happens to savings? If I buy a CD does the bank just lock up the cash in the vault? Or do they do something with it? Savings does not suck money out of the economy.

  85. [...] a while back, Mr. Erickson incorrectly claimed that  “after the 2003 tax cuts, the unemployment rate fell [...]