Posts filed under “Really, really bad calls”
While it’s interesting to see how the Fed statement changes from one meeting to the next, it’s also instructive to see how it changes over time. That said, let’s look at almost one year’s worth of commentary on the housing market and see how far we’ve come:
Sept. 23, 2009 (link is to all statements and minutes):
Conditions in financial markets have improved further, and activity in the housing sector has increased.
Nov. 4, 2009:
Activity in the housing sector has increased over recent months.
Dec. 16, 2009:
The housing sector has shown some signs of improvement over recent months.
Mar. 16, 2010
However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls.
April 28, 2010
Housing starts have edged up but remain at a depressed level.
June 23, 2010
Housing starts remain at a depressed level.
Aug. 10, 2010
Housing starts remain at a depressed level.
When something is “depressed” long enough, is it fair to say it’s a “depression”?
And my post would not be complete without a few words about Mr. Hoenig’s dissent (making five in a row). Today’s Yesterday’s release says:
Voting against the policy was Thomas M. Hoenig, who judges that the economy is recovering modestly, as projected.
“As projected?” As projected by whom? Back in April, the Fed upgraded — yes, upgraded — its central tendency for 2010 GDP from its January forecasts. January’s forecasts had been for 2010 to fall in a range of 2.8 to 3.5, and that was raised in April to a range of 3.2 to 3.7. We’ve now got Q2 coming in at 2.4 (with a downward revision likely) and no one looking for anything better for the balance of the year. So what, exactly, is he talking about?
The Treasury Dept today announced that they had begun compiling a list of the economically insane, and will be publishing this list on a regular basis, according to a Washington Post article. The reason for this: Commentaries regarding mortgage refinancing and/or forgiveness — from both political and investment players — that the Treasury department said…Read More
It is a very hot August and the heat seems to be getting to people on Wall Street. In Washington the greater heat stems from fears about the impact of the economy and housing on the mid-term elections. As a result, Wall Street is expecting a big “surprise” in the form of a massive GSE…Read More
Over at Economix, Harvard economics professor Ed Glaeser looks at the ultra-low interest rates of the aughts, and does not find them to be much to blame for the US Housing boom and bust: “The most common explanation for the great surge in prices is the availability of easy credit, which took the form of…Read More
Whenever a company’s executives get caught doing something stupid/illegal, and are forced to pony up a hefty fine, a hue and cry go up: You are only punishing the shareholders. Well, yes, you are. That is, in fact, the purpose of these fines: To punish the companies engaging in violations of SEC laws, and to…Read More
“Our problem, basically, is that we have a very distorted economy in the sense that there has been a significant recovery in a limited area of the economy amongst high-income individuals who have just had $800 billion added to their 401(k)s and are spending it and are carrying what consumption there is. Large banks, who…Read More
Over the years, I have described myself politically as a “Jacob Javits* Republican.” For those of you unfamiliar with the Senator from NY, Javits was a social progressive, a fiscal conservative, “a political descendant of Theodore Roosevelt’s Progressive Republicanism.”
After he “retired” in 1980, the GOP took a very different turn: The emphasis on Fiscal conservatism was lost. Balanced budgets were no longer a priority. In terms of electoral politics, the embrace with the Religious Right was a deal with the devil. It married the party to a backwards combination of social regressiveness and magical thinking. Ideology trumped facts, and conflicting data and science was ignored.
In short, the party became more focused on Politics than Policy.
I bring this up as an intro to David Stockman’s brutal critique of Republican fiscal policy. Stockman was the director of the Office of Management and Budget under President Ronald Reagan. His NYT OpEd — subhed: How the GOP Destroyed the US economy — perfectly summarizes the most legitimate critiques of decades of GOP economic policy.
I can sum it up thusly: Whereas the Democrats have no economic policy, the Republicans have a very bad one.
The details are what makes Stockman’s take so astonishing. Here are his most important observations, of which I find little to disagree with:
• The total US debt, including states and municipalities, will soon reach $18 trillion dollars. That is a Greece-like 120% of GDP.
• Supply Side tax cuts for the wealthy are based on “money printing and deficit finance — vulgar Keynesiansism robed in the ideological vestments of the prosperous classes.”
• Republicans abandoned the belief that prosperity depended upon the regular balancing of accounts — government, trade, central banks private households and businesses.
• Once fiscal conservatism was abandoned, it led to the serial financial bubbles and Wall Street depredations that have crippled our economy.
• The Nixon administration defaulted on American obligations under the 1944 Bretton Woods agreement.
• Who is to blame? Milton Friedman. In 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold.
• According to Friedman, “The free market set currency exchange rates, he said, and trade deficits will self-correct.” What actually occurred was “impossible.” Stockman calls it “Friedman’s $8 trillion error.”
• Ideological tax-cutters are what killed the Republicans’ fiscal religion.
• America’s debt explosion has resulted from the Republican Party’s embrace, three decades ago, of the insidious Supply Side doctrine that deficits don’t matter if they result from tax cuts.
• The GOP controlled Congress from 1994 to 2006: Combine neocon warfare spending with entitlements, farm subsidies, education, water projects and you end up with a GOP welfare/warfare state driving the federal spending machine.
• It was Paul Volcker who crushed inflation and enabled a solid economic rebound — not the Reagan Supply Side Tax cuts.• Republicans believed the “delusion that the economy will outgrow the deficit if plied with enough tax cuts.”
• Over George W. Bush 8 years in office, non-defense appropriations gained 65%.• Fiscal year 2009 (GWB last budget): Tax-cutters reduced federal revenues to 15% of GDP — lower than they had been since the 1940s.
• The expansion of our financial sector has been vast and unproductive. Stockman blames (tho but not by name): 1) Greenspan, for flooding financial markets with freely printed money; and 2) Phil Gramm, for removing traditional restrictions on leverage and speculation.
• The shadow banking system grew from a mere $500 billion in 1970 to $30 trillion by September 2008 (see Gramm, above).
• Trillion-dollar financial conglomerates are not free enterprises — they are wards of the state, living on virtually free money from the Fed’s discount window to cover their bad bets.
• From 2002 to 2006, the top 1% of Americans received two-thirds of the gain in national income.
I find it fascinating that the most incisive criticism of the irresponsible GOP policies has comes from two of its former stars: Bruce Barlett and now David Stockman. Sure, Krugman, Stiglitz, DeLong and others have railed against Bush policies for years. But it seems to take an insider’s critique to really give the debate some punch.
Its funny, but when I criticize Bush, I get accused of being a liberal Democrat (I am not). I am simply giving my honest perspective of an utterly ruinous set of irresponsible policies that did lasting damage to America. The critiques of Obama does not generate the same sort of reaction. I suspect brain damaged partisans of the left suffer from somewhat different cognitive deficits than brain damaged partisans of the right.
Here’s to hoping that reality-based economic policies are somewhere in our future.
Note: Brain damaged partisan comments will be unceremoniously deleted
Four Deformations of the Apocalypse
NYT, July 31, 2010
Today’s must read MSM piece is a brutal takedown on irresponsible tax and spending by Larry Kudlow’s former boss in the Reagan admin, David Stockman. Four Deformations of the Apocalypse DAVID STOCKMAN I’ll have more on this later, but go read what he wrote . . .
(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…Read More
Yet another economist who dines at the restaurant of the free lunch: David Greenlaw of the US Economics Team at Morgan introduces what he calls a “Slam Dunk Stimulus” of sorts: “If it were possible to inject a significant amount of stimulus into the US household sector, and this stimulus had zero impact on the…Read More