Sovereign(age) Default



With mounting debts, high current account deficits, and an angry population carrying a lot of private debt, the U.S. monetary and financial authorities are squirming. For a while, I’ve been predicting that the only way the U.S. will get out of the vortex of rising debt is by cheapening the dollar massively.

In the long run, a country carrying trillions of dollars of debt and populated by an indebted populace cannot be trusted to fulfil its obligations. Sovereign default has always been a problem in the developing world - and even sometimes in Europe. The U.S., which has avoided crippling levels of debt, has never defaulted, and probably never will - technically. There's a much cleaner way to get away from debt.

A massive, rapid dollar inflation will effectively shrink the amount of debt carried by anyone who owes dollars. Thus, a 50% devaluation could drop the U.S. public debt from 66% of GDP to 33% of GDP, once prices adjust*. Borrowers would win big - half their debts would effectively be written off. Lenders would lose big - half their dollar assets would disappear.

This scenario has never developed because most of U.S. debt has been held by Americans, and there's a hefty deadweight loss associated with inflation. However, if the government keeps doling out trillions, and American debt (public and private) is held increasingly by China, Dubai, and Russia, the benefits of devaluation begin to outweigh its costs to Americans.

How would the government do this? Usually, the Federal Reserve likes to change the value of the dollar the classy way, by shifting interest rates and buying and selling Treasury bills. When that doesn't work, they've got to do it the Robert Mugabe way, by printing greenbacks. And in case you think they'd never do that - or it wouldn't work - check the news today. The Fed used the promise of printing money to achieve a 3% one-day drop against the Euro.

It may be 10 or 20 years before debts get so cripplingly large that the president starts to pressure the Fed into abandoning its non-inflationary mandate. In all likelihood, the bank will never have to respond: when holders of U.S. dominated debt (read: China) get antsy about the future prospects of the dollar, they'll dump them at a loss, causing a devaluation the same as if the Fed printed money. We might get a devaluation much sooner than we'd planned just because our creditors lose faith. In the short term, at least, this is a more likely scenario, similar in spirit to Krugman's 1979 effort "A Model of Balance of Payments Crises".

Whether it's a sneak attack by the printers at the Fed, or a pre-emptive strike by Beijing, look for the dollar to depreciate - a lot - in the coming decades.

* It's unlikely that the benefit of devaluation would be 1-for-1: the chaos, loss of trust in the dollar, and retaliation by other countries would eat up a big chunk of the gains.

Posted by Chops at December 18, 2008 9:41 AM
Comments
Comment #272298

The courage of the modern American citizen will demand effective and responsible political solutions to our fiscal problems.


Yeah. I’m afraid that is a joke.

Posted by: Lee Jamison at December 18, 2008 9:57 AM
Comment #272301

One thing to do would be to redefine debts in ways that make them easier to pay down, but possible to pay down. Take for example the credit card market. These bozoes have been trying every trick in the book to inflate the person’s debt that they can find, from moving the dates of bills so they can charge interest and late fees, to raising interest rates on their credit card debts as punishment for a failure to pay a bill or keep up with a loan elsewhere.

More than anything else, we need to figure out what’s real debt out there, and what’s just the financial companies using BS claims and operations to make their balance sheets look better (look here, we’ve got these payments and fees coming!)

We should also reduce payments and interest rates for those involved to a sustainable level. Lower incoming profits from your debtors is better than none at all.

We have to figure out exactly who owns what, and who owes what. That may help us on the credit card front.

We should also reform bankruptcy and credit rating laws, and regulate the systems by which risk is offloaded. The biggest problem right now is not indebtedness; America recovered from a far greater spike of such in the wake of WWII. It’s uncertainty about who has money, who can lend, and who must hold back. The transformation of informational black holes into certainties, whether good or bad, which can establish the real health of the economy is incredibly important. Ignorance is not bliss, when it comes to debt.

People need to know what they owe, and have some means of paying it back. The corporations need to know this, too, because that will both give them a clear idea of their bottom line, and a good idea of what are good debts and bad, with more good debts in the system than bad.

Regulation of the markets, properly done, is crucial. Our whole problem is that we let wall street create a system of such clever complexity that now even the PhD.’s can’t even figure out what their debts are worth to them in future repayments. We need to figure out what condition our condition is in. Then we can think out what our solution to the problems of our debt will be.

Posted by: Stephen Daugherty at December 18, 2008 10:47 AM
Comment #272313

Then why has the dollar been strengthening so much of late?

I must admit I understood these debates alot better when they were about Palin.

Posted by: Schwamp at December 18, 2008 1:01 PM
Comment #272320

Schwamp,

The answer to your question gets into techincal concepts like the “velocity” of money, which is low right now because of the worldwide economic slump.

Basically, though, the U.S. is the place investors see as the most stable strong economy, the haven of last resort. Since we are the world’s consumer marketplace everybody suffers if we suffer.

In a prosperous, low-risk worldwide market it is not hard to invest in Belize or Viet Nam. When those countries’ markets are not buying what they make, though, investors withdraw to perceived strength. That’s why they invest in dollars.

Our current monetary strength just means we are the best of a bad lot.

Posted by: Lee Jamison at December 18, 2008 1:28 PM
Comment #272327

Lee -

The dollar’s actually been dropping for the last three weeks, probably because investors expected inflation and rate cuts.

Posted by: Chops at December 18, 2008 2:03 PM
Comment #272337

Chops, good insight in this article.

However, your article presumes a negative outcome based on continuous high levels of deficit spending. I see nothing over the next 4 years to indicate that this presumption will be the case, nor need be the case.

Massive deficit spending today will begin to be cut back in 2011 as the economy regains a sound footing of low but stable growth, and some pretty dramatic tax increases to come a year or two after that will dramatically slow the growth of deficit spending. If, we are successful in lowering the inflation of health care costs, which is to be a major priority over the next 4 years, our government could turn the corner and hold the line on deficit spending, producing a number of years of surpluses interspersed with low deficit spending years, avoiding future implosion under the weight of unsustainable debt.

When and if our debt to GNP ratio approaches that of post WWII, then we can all sign up for passports to move to China where prosperity potential will still be in the offing. Until then, however, I don’t see any rational defense for a “sky is falling” scenario. That scenario leaves the stage with Pres. GW Bush, thank Buddha.

Posted by: David R. Remer at December 18, 2008 3:23 PM
Comment #272338

Chops:

Actually not so much. Currently the market is predicting inflation of .7% for the next 30 years. You get this by subtracting the 30 Treasury TIPS rate from the non inflation protected rate. (Today’s 30 non inflation protected rate is 2.54% and the 30 year treasury TIPS rate is 1.84%).

Currently there is a shortage of US Treasury debt on the market.

Printing money out of no where is appropriate when faced with negative inflation. Remember the Feds job is to have stable prices and economic growth. They are signalling that we are not going to have negative inflation in our country.

Also, a low dollar is a problem because? If we let the dollar rise, others will export their way out of this recession on our backs. Actually your article that you quoted makes that exact point. A declining dollar spirs our exports and helps combat negative inflation. Disinflation?

With interest rates at effectively zero, this is the next logical step to keep the economy afloat. The opposite occured in the last great crisis in 1980. You will remember that at that time inflation was double diget as well as unemplyment. Carter used the term “misery index”. This came back to bite him as the misery index increased during his presidency.

Carter’s misery index reached a peak in 1980 at 21.98% (Inflation plus unemployment). It is currently a moderate 7.7%.

http://www.miseryindex.us/

Volker used the opposite extreme tactics by shutting down the money supply and forcing a deep recession in order to avoid run away inflation. He put interest rates through the sky. Now Bernanke is doing the opposite by opening the flood gates of money to stop something like the 1930’s from repeating.

I don’t agree with your premise that inflationary practices are wrong at this time. However when the economy returns to normal GDP growth, if the fed were to continue this policy, then I would be in agreement with you.

Posted by: Craig Holmes at December 18, 2008 3:24 PM
Comment #272341

Chops,
Good article. I like the idea of paying pack my two mortgages with inflated dollars. It seems as if lenders are going to lose big no matter what. At least if the rate of mortgage defaults keeps going as it has been.

I don’t see how we can expect anything other than inflation, in the next few years. At present, we are seeing a deflationary period, driven by low oil and falling real estate. But, as you have pointed out, the government outright admits it will print money as necessary to attempt to ease the credit problem. I’m not an economist, but I do have a firm grasp of the following principle; for each dollar printed above a baseline amount, all the other dollars are worth just so much less. I.E having a ten trillion dollar money supply, and printing two trillion more dollars, will effectively reduce the value of all the other dollars by about 20 percent. Is this not so? If it is, we are in for some SERIOUS inflation in the not too distant future.

I keep hearing about bonds being sold, in billion dollar increments, offering 0 percent, or even negative yields. I have never before heard anything like this. It seem to me also that if the price of gold does go up, (as it must with inflation) that this would have a bad effect on the dollar.

I would love to hear anyone’s thoughts on these issues. Regardless of politics, we’re all in the same boat, and will have to deal with the same economic tide.

Posted by: steve miller at December 18, 2008 3:40 PM
Comment #272343

Chops, P.S., I just saw that the cost of deleveraging now has a dollar figure attached. Between 10 and 20 trillion dollars. If handled right, the shedding of those bogusdollars of fantasy wealth will be shared proportionally by everyone according to their wealth. If that is the case, the nation can survive and continue and the economy find a true asset value backed floor upon which to build going forward with some desperately needed changes like non-profit health care delivery and universal health care coverage and dramatic increases in educational quality and therefore creativity and productivity.

The fact that we are all going to be poorer going forward is a given consequence of the last 8 years of fabricated wealth out of thin air. Were we to protect the wealth of the wealthy putting the deleveraging costs on the consumers and middle class workers, our economy would come to abrupt bankrupting halt.

What the likes of Larry Kudlow and Lafferites don’t get, is that this recession is not caused by supply shortages or the absence of wealth looking to invest, but by consumer demand and fears. The way out is to build strength in consumer demand and confidence so that businesses can have justification for existence, and the newly less wealthy Gates, Bush, and Cheney families have a reason to work for their earnings again.

Fortunately, we have a president coming into office who gets this, and will move our nation in that direction toward sustaining economic viability while writing down the bogusdollar wealth of 10 to 20 Trillion dollars necessary to put confidence and strength back into our balance sheets as well as our creditors. And eventually taxing wealth to repay the lower and middle class consumers for their enormous burden shouldering all this deficit spending required to save our economic future from the wealthy and greedy who knew no bounds, and whose wealth accrual cared less whether real asset collateralization supported that wealth or not.

Madoff is the poster child for the financial industry, real estate, military industrial moguls, and oil industry speculators who bid the price up with no intention of taking delivery at those prices. The days of the Madoff’s are coming to an end with the departure of Pres. GW Bush and removal of Republican two faces from power. The day of the modest but productive working middle class is coming with their champion Pres. Obama leading the way.

It is not yet assured that Democrats will get behind Obama and dispense with their old wasteful ways of managing the nation’s interests, but if Democrats fail to save us from this Republican legacy of devastation to our infrastructure, economy, opportunities and choices, and lost international respect and standing, it won’t be for lack of effort and right direction from the Obama White House over the next 4 to 8 years.

Posted by: David R. Remer at December 18, 2008 3:52 PM
Comment #272346

David -

Not being a prophet, I can’t say exactly what the future holds. However, if we follow Japan’s route from the 1990’s (when they faced a comparable crisis), debt could reach untold highs.

Craig -

You misunderstand my article. I’m not saying that there’s anything wrong with the Fed’s current actions. But there’s a vast difference between a 3% adjustment and a 100% inflation (= 50% devaluation). Presently, the Fed is trying to keep our currency in line with others. Abandoning that goal for wholesale inflation is something we haven’t attempted in a very long time (it was rampant during the Civil War, among other periods).

Posted by: Chops at December 18, 2008 4:12 PM
Comment #272354

“Back in 1990, plenty of people thought that Japan would overtake the U.S. as the world’s economic superpower. That’s not a worry you hear much anymore.”
They were buying up california in the 1980s remember the movie Bladerunner after the wall came down and all those millions of lost defense jobs and other factors property values went way down in california from 1990_1997.

Posted by: Rodney Brown at December 18, 2008 5:44 PM
Comment #272357

Remer writes; “Massive deficit spending today will begin to be cut back in 2011 as the economy regains a sound footing of low but stable growth, and some pretty dramatic tax increases to come a year or two after that will dramatically slow the growth of deficit spending.”

I find it difficult to believe that a government, once accustomed to “massive deficit spending”, will have the discipline to ever stop. What spendthrift have you ever known that has stopped profligate spending on their own? And what “dramatic tax increase” has ever promoted national economic growth?

As for NHC, please describe which huge national entitlement program is working well without being nearly buried in red ink.

Magical thinking is Mr. Remer’s forte. His abounding faith in Mr. Obama’s financial acumen is not based upon anything but blind hope. BHO has a background and education in constitutional law if I am not mistaken.

Any damn fool can spend other people’s money. Where’s the expertise in that? My faith remains in the wisdom of the American people rejecting trillions of dollars in spending to create artificial jobs. Real jobs are created by real people willing to risk their capital in a favorable business environment.

And…thank God for that.

Posted by: Jim M at December 18, 2008 6:33 PM
Comment #272359

Jim M, damned fools as you call them have spent tax payer’s money for more than 230 years and created the wealthiest and most influential nation on the planet as a result. Now if you want to talk about damn fools, let’s talk about those who both gave and allowed Madoff to continue receiving investor’s money after 3 inspections of his operation.

Your comment as usual is full of critique and no answers. Obama has some answers which is why he is president-elect. There is no arguing away that historical fact. Nor his popularity and approval in the polls for the solutions he has already outlined.

Sorry, you feel the smarting of minority status, but, hey, get used to it, or it will wear you down. :-)

Posted by: David R. Remer at December 18, 2008 6:58 PM
Comment #272360

Chops, if you look closely at Japan’s actions in the 1990’s you will see that they metered out debt too little too late repeatedly for years, accounting for their miserable return on deficit dollar.

Not so with the U.S. at this time. Not even a close comparison in how Japan handled their recession and capital crunch, and how we are handling ours, despite Sen. Shelby’s efforts to repeat some of the mistakes of Japan.

Posted by: David R. Remer at December 18, 2008 7:01 PM
Comment #272363

Remer responds to me by writing; “Your comment as usual is full of critique and no answers.”

I was just following your lead Remer, you posed no answers either, just blind faith. I did ask two questions however with no answer from you.

By the way, I am not “smarting of minority status” as you imagine. While the presidency and congress may have swung to the liberal extreme…the American people clearly have not.

I have noticed that Mr. President-elect has already backtracked on some of his liberal campaign promises now that he is facing reality and the difficulties in actually leading the nation in these difficult times. Floating trial balloons while waiting in the wings is easy…it’s coming up with viable solutions and convincing the American people to buy them that is the hard part.

Six months into his administration we will see how many of his current proposals are still flying.

At this point the President-elect has my blessing and hopes that he will be a great leader. He is a blank slate and only history will reveal what he writes.

I have no confidence in him at this point and am hoping he will give me reasons to award that honor as well.

Posted by: Jim M at December 18, 2008 7:33 PM
Comment #272367

Jim M., you obviously missed my and America’s solution, Obama and the complete removal of Republicans from control of our government and nation. How you missed that is beyond me.

Posted by: David R. Remer at December 18, 2008 7:59 PM
Comment #272374

Chops:

You misunderstand my article. I’m not saying that there’s anything wrong with the Fed’s current actions. But there’s a vast difference between a 3% adjustment and a 100% inflation (= 50% devaluation). Presently, the Fed is trying to keep our currency in line with others. Abandoning that goal for wholesale inflation is something we haven’t attempted in a very long time (it was rampant during the Civil War, among other periods).

The fed has no “direct” authority to manipulate the currency. It’s mandate is stable prices and full employment. Should they directly attempt to manipulate our currency without congressional approval, they should be replaced.

Obviously pursuing their mandate effects currency valuations.

Posted by: Craig Holmes at December 18, 2008 9:59 PM
Comment #272381

Another way to counter deflation is to increase wages. Wages have been flat for too long and that is one reason we are in this mess. If you earn enough money credit cards have less appeal. If you earn enough money mortgage payments are not a problem. When you earn enough money discretionary spending increases. There are a number of ways the government can help wages rise,among them is increasing the minimum wage to a livable wage,strengthing prevailing wage law and enforcing them , remove impediments to union organizing,insist on “fair trade’ in treaties,etc.Higher wages are also the best way to reduce debt and increase savings. This does not necessarily mean American products would increase in cost. It would mean that profits are more equally distributed.High time working Americans got a bigger slice and beats the hell out of Mugabe money printing.

Posted by: bills at December 19, 2008 6:58 AM
Comment #272394

bills:

Increasing wages would simply mean layoffs. Besides why? In deflation, if you have constant wages your purchasing power is rising. So if employees are able to purchase more with their wages that means their standard of living is rising.

So my question would be why raise wages when their standard of living is going up anyway?

By the way, your idea was done in the Great Depression and is one of many reasons why there was such high unemployment.

Posted by: Craig Holmes at December 19, 2008 12:09 PM
Comment #272395

Craig, agree with your last comment but you have to include fighting inflation as part of the FED’s mandate, because it is central to their mission as well. Of course, they are in the position of having deal with inflation consequences AFTER preventing the economy from entering a depression and credit lockup which would halt economic activity with the same effect.

Posted by: David R. Remer at December 19, 2008 12:12 PM
Comment #272396

Bills, quite right. But that is a matter of fiscal and private sector policy, not FED Reserve policy, of course.

And the effects of globalization’s intensified downward pressure on our wages for nearly 2 decades now, is what must be countered. The primary way is to innovate products which other nation’s don’t produce. The secondary way is trade agreements that insist upon other nations raising their worker wage and living standards. Obama intends to work both those fronts on the wage front.

Completely over most Republicans heads, who still see this economic crisis as one caused by a shortage of supply and capital expansion, since they insist the way forward is cutting taxes on the wealthy and business so they can expand their business in the face of falling demand. They just don’t get it. Larry Kudlow was singing the Republican tune just yesterday and today he is damning the White House bridge funds to the Auto industry as blackmail by the UAW. He just doesn’t get it.

Posted by: David R. Remer at December 19, 2008 12:18 PM
Comment #272410

David,

The primary way is to innovate products which other nation’s don’t produce.
Amen to that, but there are also innovations that lead to greater efficiencies in the manufacture, packaging, marketing, and sale of existing products as well. Almost nobody buys frozen dinners like the ones we made forty years ago but frozen dinners are a tremendous time saver for busy families today. That is a product of dozens of innovations from the key innovation of the inexpensive microwave to high temperature thermoplastics (can anyone say “military/industrial complex”?).

It’s awful hard to manage innovation. Twenty years ago the food processor was going to change our lives forever. Most people hardly ever use one. Thirty years ago I remember people saying how a microwave was really interesting, but there were so many things it couldn’t do. The difference is the more compelling innovation is the one to which we adapt ourselves.

That is terribly hard to predict. The Segue has not changed my life. The cell phone has.

Changing wage structures is simply trying to jump ahead of innovation, to make things the same, but better. That is impossible. Improvement requires dynamism. Dynamism causes disorientation and reorientation. It demands flexibility, education, and intelligence.

I’m not talking off the top of my head here. I’ve been a professional artist all of my adult life. That is not one thing, though it has been one career. It has meant associations with galleries, and loss of those associations. It has meant stages spent as a landscape painter, as a muralist, and as a theatrical artist. It has meant finding new paradigms for being the creative person I am as old paradigms fell to economics, family situations, and the like.

If we prepare the people around us to be cared for in a certain way for tomorrow we are really setting them up to be crushed by a changing world in a more distant future.

Innovation is not just about products. It is about our own personal lives, too.

Posted by: Lee Jamison at December 19, 2008 1:20 PM
Comment #272412

David:

Craig, agree with your last comment but you have to include fighting inflation as part of the FED’s mandate, because it is central to their mission as well.

I would presume that stable prices gives the fed the mandate to fight inflation and deflation.

Posted by: Craig Holmes at December 19, 2008 1:29 PM
Comment #272432

Remer writes; “Jim M., you obviously missed my and America’s solution, Obama and the complete removal of Republicans from control of our government and nation. How you missed that is beyond me.”

Remer seems so elated, Or should I say “Inflated” with the recent lib victory that he ignores the facts. Here are a few;

“The 2008 election resulted in a change in administrations, but recent polls show it didn’t change the nation’s ideological balance, which is still very much right of center.

A post-election Pew poll finds that while the Democrats’ advantage in party identification has risen, “the share of Americans who describe their political views as liberal, conservative or moderate has remained stable.”

Pew says that just one of five Americans say they are liberal (21 percent), while 38 percent call themselves conservative, and 36 percent say they are moderates — a ratio that has remained unchanged over the past eight years.

Until Barack Obama’s decisive victory, Democrats had won just three of the previous 10 presidential elections.

“Many Democrats have predicted the Republicans were finished after some devastating defeats, only to see them quickly recover and win again.

No one gave the Republicans a snowball’s chance in hell after Lyndon Johnson crushed Barry Goldwater in a landslide in 1964. Democrats said the GOP was finished, perhaps for a generation. But the Democrats’ archenemy, Richard Nixon, took back the White House in 1968 and won re-election in a landslide four years later.

Then came the Watergate scandals that pundits said would sweep the Democrats into power by a landslide in 1976, but Jimmy Carter defeated Gerald Ford by an eyelash, though the elections swept an army of Watergate Democrats into Congress.

Democrats said the Watergate scandals had consigned the Republicans to the wilderness for many years to come. In their dreams. Ronald Reagan rode out of the West four years later to easily beat Carter and recapture the White House for the GOP, which made significant gains in Congress.”

“In politics, timing is everything. It can work for you or against you. Barack Obama was running in a perfect storm that gave his candidacy three things that would have swept any challenger to power: a deeply unpopular president, an unpopular war in Iraq and an economic catastrophe of a very high order.”

So…rave on Mr. Remer, enjoy it while you can. While a chorus of liberals sing, the congregation remain deaf to their liberal message.

Excerpts from: http://townhall.com/columnists/DonaldLambro/2008/12/19/history_points_to_gop_gains_in_2010?page=1

Posted by: Jim M at December 19, 2008 3:47 PM
Comment #272434

David Remer,
How, exactly is printing money at will consistent with fighting inflation?

It’s not as if the Fed’s policies are in any way the cause of the deflation we are now (all too briefly) experiencing. Fractional banking, derivatives, credit default swaps, these are the fruits of deregulation. “Leverage” everything to the nth degree and hope that the shit never hits the fan. The collapse of this giant shitpile is the cause of the current deflationary period.

I predict massive inflation, only alleviated eventually by high interest rates, as the only possible outcome of this situation.The shit having already hit the fan. At least higher interest rates will get people saving again.

Is the American paradigm (not uniquely American, just look at China) of constant growth predicated upon consumerism, going the way of the dodo bird?

Posted by: steve miller at December 19, 2008 4:10 PM
Comment #272458


“Jim M., you obviously missed my and America’s solution, Obama and complete removal of Republicans from control of our government and nation.”

Many people assumed that would be the case when the majority voted Obama and the Democrats into power. However, the word from Obama and many of his supporters is that he will work with Republicans. This seems to imply that the Republicans are not completely removed from power, just as the Democrats who cooperated with Bush and Republicans were not completely removed from power.

My self-control mechanism is getting old and leaky. Even blue dog Obama got in on that act. He wasn’t going to support the Bush spy on America act and immunity for corporations who spied on Americans but, he did support both with his vote.

Posted by: jlw at December 19, 2008 11:16 PM
Comment #272479

Jim M, there is no substitute in governance or politics for the grandaddy poll of them all, The Election.

Pew can pew all over itself trying to fudge the questions to achieve a different polling result. But, the election is now history, and the majority chose a more liberal course. End of history lesson.

Posted by: David R. Remer at December 20, 2008 1:38 PM
Comment #272481

Steve asked: “How, exactly is printing money at will consistent with fighting inflation?”

It isn’t. The Fed is charged with the often contradictory tasks of fighting unemployment and inflation, with a set of tools which can only accommodate one of those missions at a time with deleterious effects on their other mission. Such is the case at this very moment.

The greatest immediate threat to the economy is rising unemployment. The Treasury’s printing of money so that Congress, the White House, and the Federal Reserve may infuse that money into the markets and consumer hands to stimulate consumption and BtoB economic activity increases the risks of inflation, even hyperinflation.

But, to fight inflation now by allowing the economy to slip into a depression is no solution at all. The human suffering and cost of a depression is equally as bad or worse than an economy in which people are employed but losing purchasing power faster than wages are rising.

The FED can only fight for one of its missions at a time, and with its limited tool set, by definition, if it fights for one mission it exacerbates the risk of its other. Infusing increased money supply into a recession mitigates job losses and hopefully prevents a domino effect of collapse from spreading throughout the economy. The cost of doing so is increasing inflationary pressures. And vice versa. Drying up the money supply and making the cost of borrowing money higher and higher effectively wards off inflation, but, at the cost of jobs and new capital formation.

But the FED was never meant to manage the economy alone and with its small set of tools. Fiscal policy is vastly more important in the long run to economic health than efforts by the FED which are much shorter range and goals. The fiscal policies of the last 16 years, save ‘99 and ‘00, have been horribly mismanaged, spending and indebting the nation for consumables to please today with little to no investment return on shoring up and strengthening the economic infrastructure, tax payer base, and workers wages of the future.

Obama has pronounced that the latter is precisely what he intends to accomplish with his budgets going forward. To make every as many dollars which need to be spent to shore up the present economy do double duty in shoring up the strength or lowering costs of the future as well. Ergo, creating jobs today by rebuilding the infrastructure needs of tomorrow.

Posted by: David R. Remer at December 20, 2008 1:54 PM
Comment #272482

jlw, what a simple minded view of how legislative bills are put together and voted on. I cannot remember, it has been so long, since a major important legislative bill was drafted as a single purpose, single function bill.

Bills to day are crafted to cover hosts of goals, objectives, and motives, such that to vote for anything in a bill is to be forced to vote for much else one wouldn’t otherwise vote for. Or, alternatively, as Obama did often, vote present, but, neither for nor against the pork laden, multi-faceted, hodge podge of objectives contained within a bill.

There isn’t a Senator in the Congress today who cannot be ridiculed for the contents of some bills they voted for, including pork and wasteful spending. That includes every Republican in the Senate as well.

So, while I can’t and won’t refute your claim about Obama’s votes, I will simply respond that there isn’t a single other Senator who has not acted with their vote as Obama did, voting for one thing of importance and by default of the way the bill was drafted, voting for many contents they did not support. As one Senator amongst 99 others, there was nothing about this horrible structure to legislation that Obama could change.

As president however, with the power of the veto, there is vastly more potential for his bargaining with the Congress to get their collective crap together. Thank Buddha he won.

Posted by: David R. Remer at December 20, 2008 2:04 PM
Comment #272540

CH
The myth that reasonable wage increases lead to layoffs has been debunked consistantly. Its just no how it works. Sometimes less wealth goes to the top management but not always. Also esentially worthless middle-management has to start producing. States that have raised the minimum wage above the shameful federal level have actually gainned employment.
The problem during the depression was not that wages were to high but to low.To get the economy moving people need to have money to spend. Its common sense.

Posted by: bills at December 21, 2008 6:53 AM
Comment #272556

Remer writes; “Pew can pew all over itself trying to fudge the questions to achieve a different polling result. But, the election is now history, and the majority chose a more liberal course. End of history lesson.”

Kind of sounds like Remer is whistling thru the cemetery and has chosen to attack the poll rather than all the historical facts that were presented as well. That’s OK…I don’t wish to spoil his Christmas good humor.

Oh wait, with his often used “Thank Buddah” I must assume that he doesn’t honor Christmas. Just when is Buddah’s birthday…I can’t find it on my shameful religiously biased calendar?

Posted by: Jim M at December 21, 2008 2:11 PM
Comment #272576

Bills:

When prices are falling purchasing power is rising for those whose wages remain the same.

Using your logic right now we can fix the big three simply by raising union wages.

Of course reasonable (key word) do not lead to layoffs. If they did they would not be called reasonable!!

What you are saying is that companies like the big three facing bankruptcy should raise wages in order to fix the economy.

Right now since prices are likely to fall, holding wages steady is a pay increase. (filled up your gas tank lately?)

Posted by: Craig Holmes at December 21, 2008 6:46 PM
Comment #272712

>Oh wait, with his often used “Thank Buddah” I must assume that he doesn’t honor Christmas. Just when is Buddah’s birthday…I can’t find it on my shameful religiously biased calendar?
Posted by: Jim M at December 21, 2008 02:11 PM

Jim M,

You haven’t found ANY religious figure’s birthday on any calendar you would normally use. The last I heard, Jesus may have been born in early summer, but even that is in doubt. Come to think of it, I wonder if he was really born a Jew…he might have been an Arab or even a Greek or Roman…or, or, or…what if he was never born at all, and was only the figment of a culture in depression…?!? Much like Obama being born in Africa, and losing his citizenship in Indonesia, and/or coming to earth in a spaceship…or, or, or…can you get Rush/Bill/Anne et al, to set us straight on this matter?

Posted by: Marysdude at December 22, 2008 6:32 PM
Comment #272746

Sorry marysdude…you’re way out of your depth on Christian historicity. Those voices in your head may just be someone trying to get out. But, Merry Christmas anyway.

Posted by: Jim M at December 23, 2008 11:36 AM
Comment #272747

From an article on AOL this morning; “Against the advice of most of his staff, Obama will also be sworn in while wearing a comically tall top hat, and has asked to give his inaugural address from a podium made from a series of interlocking “logs.”

According to the article PEBO will use Lincoln’s swearing-in bible, wear a Lincoln type top hat, and have a interlocking log podium. I wonder what’s going on here.

Posted by: Jim M at December 23, 2008 11:46 AM
Comment #272750

marysdude writes; “what if he (Jesus) was never born at all, and was only the figment of a culture in depression…?!?

I suggest marysdude and others consider;

Nineteen centuries have come and gone, and today he is the central figure of the human race, the leader of mankind’s progress.

All the armies that ever marched, all the navies that ever sailed, all the parliaments that ever sat, all the kings that ever reigned, put together, have not affected the life of man on earth as much as that One Solitary Life.

Simon Gathercole, a scholar at Cambridge University, explained that people today are cynical because they don’t realize the origins of Christianity are entrenched in real history. Gathercole admonished: “Jesus was born while Augustus was emperor of Rome, just before Herod died. … We’re talking about events that are anchored in real history, not in ancient Greek myths.

Dr. Edwin Yamauchi — a professor of history at Miami University, in Oxford, Ohio — said: “The fact is that we have better historical documentation for Jesus than for the founder of any other ancient religion.

That is why F.F. Bruce, late professor at the University of Manchester, concluded: “Some writers may toy with the fancy of a ‘Christ-myth,’ but they do not do so on the ground of historical evidence. The historicity of Christ is as axiomatic (universally a statement of fact) for an unbiased historian as the historicity of Julius Caesar. It is not historians who propagate the ‘Christ-myth’ theories.

Posted by: Jim M at December 23, 2008 1:05 PM
Comment #272760

Jim M,

>You haven’t found ANY religious figure’s birthday on any calendar you would normally use.

My statement, which is true…

>All the armies that ever marched, all the navies that ever sailed, all the parliaments that ever sat, all the kings that ever reigned, put together, have not affected the life of man on earth as much as that One Solitary Life.

Your statement, which may or may not be true…remember there are still more Islamists, and more Budhists, and perhaps as many Hindi as there are followers of Christ. What you say may be true, but may not as well.

>“The fact is that we have better historical documentation for Jesus than for the founder of any other ancient religion.

Came from your post…again may or may not be true. The most cited references to Christ’s physical presence, in written word is from Flaveous Josephus, a Greek historian and soldier. Mostly His being is represented by folk lore, speculation and mythology.

I’ll give you one thing only as fact…because Islamists and Christians found their respective religions on the same God (Allah), there are more people who have been affected by their belief in ‘one god’ than all those things you so dramatically presented.

Posted by: Marysdude at December 23, 2008 2:33 PM
Comment #272774

marysdude writes; “Mostly His being is represented by folk lore, speculation and mythology.”

Perhaps that is your description of the New Testament wherein the writers disagree with your weak and unsubstantiated assessment. Physical evidence of the followers of Jesus abound. Take a walk through historical Rome as just one example.

I wonder how many liberals today would face death, as did many early Christians, rather than deny their truly phony philosophy? Convince yourself that thousands of people are willing to die for “folk lore, speculation and mythology.”

First person written accounts are hardly “folk lore”. Get a subscription to Biblical Archaeology Review for some interesting reading by those currently in the field. You may be surprised by what is known by archaeologists working in the field as it relates to biblical accuracy.

Posted by: Jim M at December 23, 2008 8:25 PM
Comment #272778

Are those the same archaeologists who claim that life began on earth an eon or more ago? Almost eighty percent of religious artifacts being presented today are just as fake as Faux News, and Rush Limbaugh’s sleeping pills. Fake religious artifacts are a huge business.

Frankly, I don’t give a hoot if Jesus was a live, walking, talking man or not, but you still have not seen his birthday on a calendar…because no one knows that he was born, let alone when it may have happened.

My apologies to Chops for going so far astray…

Posted by: Marysdude at December 23, 2008 9:42 PM
Comment #272791

MARYSDUDE WRITES; “Frankly, I don’t give a hoot if Jesus was a live, walking, talking man or not…”

That’s obvious marysdude, but many millions of us do, and to all of them, and even to you, may we all be blessed on this day that we celebrate as the birth of our Savior.

Posted by: Jim M at December 24, 2008 11:49 AM
Comment #272812

Jim M,

Blessed? What an irrational concept. But, Happy Holidays to you too…

Posted by: Marysdude at December 24, 2008 5:13 PM
Comment #272813

PS:

Thanks for changing it from a birthday to the day we celebrate it. Still along way to go, but as intelligent as you are, you’ll get there eventually.

Posted by: Marysdude at December 24, 2008 5:15 PM
Comment #272818

Keep those sugarplums dancing in your head marysdude and try to keep your chestnuts out of the fire.

Posted by: Jim M at December 24, 2008 5:41 PM
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