Category Archives: Federal Reserve Bank

UPDATED: The GDP Gambit

Official GDP numbers are deceptive because they chart—and include—the growth of government debt. In order to come to grips with America’s real economic prognosis, you must tease apart modest economic growth from the monstrous accretion of public debt.

In his latest book, “The Real Crash: America’s Coming Bankruptcy, How to Save Yourself and Your Country,” financier Peter Schiff does just that, noting that, “From 2008 to 2009 our national GDP (of around $14 trillion) contracted by $212 billion. To prevent any further dips, the government aggressively spent, borrowing heavily to do so. To the relief of just about everyone, these moves did stop the nominal contraction. From 2010 to 2011 the U.S. GDP expanded by $502 billion, and from 2011 to 2012 it added an additional $508 billion. All told, from the end of 2008 the U.S. economy added a cumulative $798 billion in GDP. But those gains came at a very high price.”

“The combined federal deficits for the same time frame come in at a staggering $4.2 trillion! In 2009 alone the feds chalked up a chart breaking $1.4 trillion in debt (the deficit was a mere $161 billion in 2007). In other words, we borrowed five times more than we grew. This ‘strategy’ for growth is no different from an individual who loses half his income, but continues to spend by running up credit card debt.”

Could this be described as economic growth? But that’s just how we are describing our current economy, and for the large part, expert economists, politicians, investors, and academics all agree..”

UPDATE (May 30): Writes Nixter Jeelvy on Facebook : “GDP = Aggregate Demand = all the money SPENT within a year, within the nation. It’s no measure of wealth, Lord Keynes and his pipe dreams be damned.”

Austrian Analysis Seeping In To Mainstream

Debt, Economy, Federal Reserve Bank, Media, Reason

You know the country’s commentariat has traveled some distance when PBS’s Paul Solman concedes that, given the role of the Federal Reserve (and, presumably, Fractional Reserve Banking) in the economy, it is “not a zero probability event here in America” that “the US could go the hyperinflation route of a Zimbabwe or Germany, freeze, face increasingly punitive interest rates and eventually require drastic overhauls.”

Solman, who still invests in Treasury, and is optimistic against all odds, also admits that “Since the Federal Reserve was created and got into the act in 1913, the U.S. dollar has lost somewhere between 94 percent and 99.7 percent of its value. (See MeasuringWorth.com for a range of conversion options: constant basket of goods, unskilled wage, etc.)”

But because Solman thinks that the debasing of the coin by the Fed also coincided with America’s becoming “the world’s dominant global economy,” he is not that concerned. That’s what happens when correlation is confused with causation.

The Republic has managed to thrive despite the Fed, not because of it.

Budget Baloney

Conservatism, Europe, Federal Reserve Bank, Feminism, Uncategorized

If Barack Obama gets reelected, he will face two Republican Houses. Thus his budget plan has no hope of ever being put to the vote. “It’s all about election year 2012, not fiscal year 2013,” writes CNN’s Alan Silverleib, about Obama’s $3.8 trillion budget.

Obama’s plan hikes taxes on the wealthiest Americans to the tune of roughly $1.5 trillion. It ends the Bush-era tax cuts for families making over $250,000 annually while enacting the so-called Buffett Rule, requiring households earning more than $1 million to pay at least a 30% rate. …
The administration is proposing to spend billions on infrastructure, education and domestic manufacturing. Among other things, Obama’s budget includes $30 billion to modernize schools, along with another $30 billion to hire and retain teachers and first responders….
It also includes an extension of long-term unemployment benefits and the current payroll tax cut, something Congress is expected to take up this month.
“Congress needs to pass an extension of the payroll tax cut and unemployment insurance without drama and without delay and without linking it to some other ideological side issues,” Obama declared Monday morning. “The time for self-inflicted wounds to our economy has to be over. Now is the time for action.”
Now is not the time, however, for new details on deficit reduction.

NATURALLY.

More details from Larry Kudlow. Veronique de Rugy has her say at National Review too.

Recent Fed Revelations Should Shoo-In Ron Paul

Economy, Federal Reserve Bank, Media, Political Economy, Ron Paul

I wonder if the king of Keynesianism, economist Paul Krugman, is reading the report by his New York Times colleague, BINYAMIN APPELBAUM. The report revolves around the utter ignorance evinced in the 1,200 pages of transcripts of the “conversations between Federal Reserve Chairman Ben Bernanke and his colleagues at the Fed Board of Governors in 2006.” Krug should!

As PBS’s RAY SUAREZ’s reports, “They discussed the changing conditions surrounding an overheated housing market.”

The question really is this: Why, in the presence of a presidential candidate such as Paul, does APPELBAUM and his interlocutor find the complete lack of understanding of the housing crisis among the Board so “striking”? Isn’t it time to admit that one current frontrunner spoke to these facts and to the economic truths they portend?

HERE ARE SOME particularly jarring excerpts from the exchange between these two blind mice of mainstream media, jarring because of the half truths they represent. The man missing from this report is also the reason the minutes are now available:

“… these minutes show us the extent of their misunderstanding of the health of the economy. They show us how badly they misunderstood the way that the economy was working, how badly they misunderestimated the impact of the housing crash.

And it shows, you know, a group of very intelligent, very thoughtful people, you know, talking about the economic situation in the country in a considered way, evaluating what might happen, and having a discussion that, it turns out in retrospect, was far removed from the reality of the actual situation.

… it’s so striking. If you kept reading from that quote, what you would see is that she went on to say, basically, but this is a small problem. The market as a whole is doing fine. The overall quality of these securities is very good. I’m not worried about the housing market.

In fact, at one point, she said that if there was a mild correction in housing, it would benefit the economy by moving resources to healthier sectors of the economy. You’re right. They saw it. They saw that housing was crashing. They joked about the problems that home builders were having in selling homes

…To be fair, a lot of other economists at the same time were talking about blue skies, soft landing, moderation in the coming years. It wasn’t like there were just a bunch of clods sitting around this table, and everybody else could see it, right?

MORE.