Category Archives: Federal Reserve Bank

‘The Purchase & Sale Of Paper Instruments’

Business, Debt, Economy, Federal Reserve Bank, Outsourcing, Political Economy

It is undeniable that, for better or for worse, economist Paul Craig Roberts is a fiercely independent thinker. Make up your own mind, but I have long agreed that America’s outsourcing and trade deficits—the last being emblematic of a consumer society—are a sickly specter, although I shun Roberts’ illiberal recommendations:

“The main cause of this decline is the offshoring of U.S. high value-added jobs. Both manufacturing jobs and professional services, such as software engineering and information technology work, have been relocated to countries with large and cheap labor forces.

The wipeout of middle-class jobs was disguised by the growth in consumer debt. As Americans’ incomes ceased to grow, consumer debt expanded to take the place of income growth and to keep consumer demand rising. Unlike rises in consumer incomes due to productivity growth, there is a limit to debt expansion. When that limit is reached, the economy ceases to grow.

The immiseration of working people has not resulted from worsening crises of overproduction of goods and services, but from financial capital’s power to force the relocation of production for domestic markets to foreign shores. Wall Street’s pressures, including pressures from takeovers, forced American manufacturing firms to “increase shareholders’ earnings.” This was done by substituting cheap foreign labor for American labor.

Corporations offshored or outsourced abroad their manufacturing output, thus divorcing American incomes from the production of the goods that they consume. The next step in the process took advantage of the high-speed Internet to move professional service jobs, such as engineering, abroad. The third step was to replace the remains of the domestic workforce with foreigners brought in at one-third the salary on H-1B, L-1 and other work visas.”

[SNIP]

Our “moonbat” frequent poster will no doubt agree with the following Robert’s assessment:

What is happening is that the hundreds of billions of dollars in TARP money given to the large banks and the trillions of dollars that have been added to the Federal Reserve’s balance sheet have been funneled into the stock market, producing another bubble, and into the acquisition of smaller banks by banks “too large to fail.” The result is more financial concentration.

The expansion in debt that underlies this bubble has further eroded the U.S. dollar’s credibility as reserve currency. When the dollar starts to go, panicked policy-makers will raise interest rates in order to protect the U.S. Treasury’s borrowing capability. When the interest rates rise, what little remains of the U.S. economy will tank.

'The Purchase & Sale Of Paper Instruments'

Business, Debt, Federal Reserve Bank, Outsourcing, Political Economy

It is undeniable that, for better or for worse, economist Paul Craig Roberts is a fiercely independent thinker. Make up your own mind, but I have long agreed that America’s outsourcing and trade deficits—the last being emblematic of a consumer society—are a sickly specter, although I shun Roberts’ illiberal recommendations:

“The main cause of this decline is the offshoring of U.S. high value-added jobs. Both manufacturing jobs and professional services, such as software engineering and information technology work, have been relocated to countries with large and cheap labor forces.

The wipeout of middle-class jobs was disguised by the growth in consumer debt. As Americans’ incomes ceased to grow, consumer debt expanded to take the place of income growth and to keep consumer demand rising. Unlike rises in consumer incomes due to productivity growth, there is a limit to debt expansion. When that limit is reached, the economy ceases to grow.

The immiseration of working people has not resulted from worsening crises of overproduction of goods and services, but from financial capital’s power to force the relocation of production for domestic markets to foreign shores. Wall Street’s pressures, including pressures from takeovers, forced American manufacturing firms to “increase shareholders’ earnings.” This was done by substituting cheap foreign labor for American labor.

Corporations offshored or outsourced abroad their manufacturing output, thus divorcing American incomes from the production of the goods that they consume. The next step in the process took advantage of the high-speed Internet to move professional service jobs, such as engineering, abroad. The third step was to replace the remains of the domestic workforce with foreigners brought in at one-third the salary on H-1B, L-1 and other work visas.”

[SNIP]

Our “moonbat” frequent poster will no doubt agree with the following Robert’s assessment:

What is happening is that the hundreds of billions of dollars in TARP money given to the large banks and the trillions of dollars that have been added to the Federal Reserve’s balance sheet have been funneled into the stock market, producing another bubble, and into the acquisition of smaller banks by banks “too large to fail.” The result is more financial concentration.

The expansion in debt that underlies this bubble has further eroded the U.S. dollar’s credibility as reserve currency. When the dollar starts to go, panicked policy-makers will raise interest rates in order to protect the U.S. Treasury’s borrowing capability. When the interest rates rise, what little remains of the U.S. economy will tank.

The ‘Democratization Of Credit’: Is It Over?

Affirmative Action, Business, Debt, Democracy, Economy, Federal Reserve Bank

WSJ: “The democratization of credit began decades ago. Federal legislation in the late 1970s required banks to avoid discriminatory lending and meet the needs of local communities, spawning a wave of home buying and entrepreneurship in lower-income neighborhoods. The rate of homeownership in families with incomes in the bottom two-fifths rose to nearly 49% by 2001 from below 44% in 1989, according to Fed data analyzed by Mr. Mann at Columbia.”

[This is not what that ignoramus Michael Moore claims. The sad thing about the man’s propaganda is that nobody among the so-called conservative MSM can refute it with reference to First Principles.]

“But the financial crisis and recession have reversed … the ‘democratization of credit,’ forcing a tough adjustment on both low-income families and the businesses that serve them.”

‘We saw an extension of credit to a much deeper socioeconomic level, and they got access to the same credit instruments as middle-class and mainstream Americans,’ says Ronald Mann, a Columbia University law professor. Now, ‘it will be harder for families at the bottom of the income ladder to get credit cards,’ he says.

The financial crisis has forced lenders to be especially cautious with the riskiest borrowers, a category that low-income families often fall into because their debt tends to be higher relative to income and assets. The ratio of credit-card debt to income is 50% higher for the lowest two-fifths of Americans by income than for the top two-fifths, Federal Reserve data show.”

[SNIP]

The following aside is beside the point, but my guess is that if a multiple regression analysis were conducted, IQ would be the underlying variable that would stubbornly crop up to account for this alarming, yet ostensibly unintuitive, ratio of debt to income in low-income individuals.

IN ANY CASE, do you agree that the democratization of credit is on the wane? I find that a dubious statement. The latest legislation described has not eliminated the imperative to lend to risky entities and individuals, so much as it has created, as ever, unintended consequences. These contingencies have, so far, caused banks to twist like pretzels in order to find legal ways around eliminating risky borrowers.

The 'Democratization Of Credit': Is It Over?

Affirmative Action, Business, Debt, Democracy, Federal Reserve Bank

WSJ: “The democratization of credit began decades ago. Federal legislation in the late 1970s required banks to avoid discriminatory lending and meet the needs of local communities, spawning a wave of home buying and entrepreneurship in lower-income neighborhoods. The rate of homeownership in families with incomes in the bottom two-fifths rose to nearly 49% by 2001 from below 44% in 1989, according to Fed data analyzed by Mr. Mann at Columbia.”

[This is not what that ignoramus Michael Moore claims. The sad thing about the man’s propaganda is that nobody among the so-called conservative MSM can refute it with reference to First Principles.]

“But the financial crisis and recession have reversed … the ‘democratization of credit,’ forcing a tough adjustment on both low-income families and the businesses that serve them.”

‘We saw an extension of credit to a much deeper socioeconomic level, and they got access to the same credit instruments as middle-class and mainstream Americans,’ says Ronald Mann, a Columbia University law professor. Now, ‘it will be harder for families at the bottom of the income ladder to get credit cards,’ he says.

The financial crisis has forced lenders to be especially cautious with the riskiest borrowers, a category that low-income families often fall into because their debt tends to be higher relative to income and assets. The ratio of credit-card debt to income is 50% higher for the lowest two-fifths of Americans by income than for the top two-fifths, Federal Reserve data show.”

[SNIP]

The following aside is beside the point, but my guess is that if a multiple regression analysis were conducted, IQ would be the underlying variable that would stubbornly crop up to account for this alarming, yet ostensibly unintuitive, ratio of debt to income in low-income individuals.

IN ANY CASE, do you agree that the democratization of credit is on the wane? I find that a dubious statement. The latest legislation described has not eliminated the imperative to lend to risky entities and individuals, so much as it has created, as ever, unintended consequences. These contingencies have, so far, caused banks to twist like pretzels in order to find legal ways around eliminating risky borrowers.