“The United States must increase its national saving rate. Although we should deploy, as best we can, tools to increase private saving, the most effective way to accomplish this goal is by establishing a sustainable fiscal trajectory, anchored by a clear commitment to substantially reduce federal deficits over time.”
The quote came from Fed Chairman Ben Bernanke while giving a speech at the Conference on Asia and the Global Financial Crisis on October 19, hosted by the Federal Reserve of San Francisco. Bernanke also stated, “We were smug”, referring to the years of feckless lending practices when the U.S. economy was bubbling over with easy money from cash-rich countries. I imagine the statement was said rather smugly.
It’s a mystery as to how Bernanke expects consumer saving rates to increase given the lack of jobs and a questionable revival of pre-recession wages for the still-employed considering their sizable pay cuts and reduced hours.
Personal savings of disposable personal income was 3% in August, down from 4% in July and significantly lower than the peak rate of 6.9% in May. Fueled by income tax refunds and stimulus package disbursements, critics at the time suggested consumers were slighting the system by saving rather than spending the money to get the economy moving.
Whatever savings people have managed to accumulate will soon be spent to pay winter heating bills, higher gas prices, medical bills, credit card debt, etc., and quickly consumed during the holiday season to give families a temporary, but desperately needed, good-time feeling.
The sole means by which large numbers of consumers will have the ability to add to their savings is through working. The only way the President could possibly deliver on a promise to create or save 3.5 million jobs by the end of 2010 will be by out-of-focus hocus-pocus employment figures. Obama is not a magician.
Much of the blame to shame goes to Henry Paulson, Ben Bernanke and Timothy Geithner. These overlords of taxpayer moneys squandered their opportunities to leverage the recipients of TARP funds to allocate the handouts where they were intended. Rather than renegotiate home mortgages, banks deliberately refused to accept their part in correcting the fallout from the their historic lax lending practices, which led to millions of residential and commercial toxic loans and a near global collapse of financial markets.
Rather than use relief funds as intended, banks have hoarded the bailouts, denying credit lending to American consumers and restricting lending to small businesses to invest in future growth to create jobs. Wall Street is doing one heck of good job of staying on track for self-propelled titanic gains, assured that Bernanke and Geithner will not allow banking markets to sink, as they had infused banks with the $700B Troubled Asset Relief Program. America is essentially frozen in a void of economic stagnation.
Instead, investment bankers are on another unhealthy round of risky bets that have catapulted the DJIA to over 10,000 points from a low of 6,470 in March as they care more about their own interests than propelling economic growth. The Oganisation for Economic Co-operation and Development leading indicators don’t jibe with the worldwide numbers of unemployed, homeless and destitute citizens.
Thus far this year, banks are so comfortable with the status quo that they have supplied lobbyists with over $220M in a concerted effort to thwart meaningful financial reform.
Be rest assured, our economic whizzers, Ben Bernanke and Timothy Geithner, are on the same scripted page of advising world financial markets that the United States has targeted American consumer savings as a strategy to offset the imbalance of global trading.
"Everyone is going to have to come to terms with the fact that we are going to save more in the United States," Geithner chimed during an interview on October 6 with German weekly newspaper Die Zeit. In other words, don’t count on American consumption to fuel worldwide economic recovery.
“China will carry out the exchange rate regime reform and the United States will increase saving rates so as to promote balanced and strong growth and prosperity in the two nations," read a fact sheet released after the China-U.S.A. Strategic Economic Dialogue held in Beijing where the ‘special representative’ of President George W. Bush was then-Treasury Secretary Henry Paulson, That goes way back to December 15, 2006.
Of lesser importance and with a great amount of vanity, on June 2, 2009, prior to addressing graduates of his alma mater, Harriton High School in Rosemont, PA, Economic Advisor Larry Summers said, “…a higher savings rate can still go with a rising standard of living as long as income is growing.”
C’mon, Larry, you must realize that it’ll be quite some time before “income is growing”. The only things growing are the undeserved Wall Street bonuses and the egos of you and your fellow economists.
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Sunday, October 25, 2009
Sunday, August 30, 2009
Ben Barnanke, A Has Been?
Politics aside, or not, Ben Barnanke, Chairman of the Federal Reserve, is on a campaign trail to reassure investors that his monetary policies of the past, present and future have and will continue to guide us out of the recession. His messages aren’t meant to save the economy, but to save his job when his four-year term comes up for re-selection in January.
He’s faced Congress to substantiate, or defend, his worthiness. His words have appeared on editorial pages in newspapers across the nation. He’s done TV interviews on ‘60 Minutes’ and ‘The News Hour with Jim Lehrer’.
During his confirmation hearings in 2006, Bernanke espoused his views on economic theory and policy, stressing the importance of communication and transparency. But he also said the final say on government debt and deficits lie with the President and Congress.
Having written numerous books and articles, he frequently focused on limiting inflation to no more than 2% over any given two-year period. For now, there appears little concern. As a matter of fact, many economists feel the risk of deflation is more worrisome. Deflation occurs when consumers hold off buying big-ticket items with the belief that during an economic downturn prices will continue to fall. The result is lower demand so job losses increase, employers then curtail investments because demand is low resulting in higher unemployment, foreclosures and bankruptcies.
Synopsis: no spending = no demand = no need to increase supply = fewer jobs, and so forth. The spiral ends when inflation appears.
Other economists are fearful that actions taken to fight deflation in the long term will result in runaway inflation. This would be the beast that puts the economy at risk for many years to come. A couple of indicators suggest we’re on our way. In January the 30-year fixed mortgage rate climbed from 4.96% to 5.12% within a week’s time. It stabilized in May just below 5.0% but it as of July 29 it stood at 5.56% per Bankrate’s weekly survey. This is a vast improvement from 6.77% a year ago, bringing down monthly payments by $158 on a $200,000 mortgage, but it may turn out to be short-term relief.
The Fed is printing more and more stimulus money, which means increased government borrowing, resulting in an ever-growing portion of tax dollars being paid toward interest. This could mean more printing of money and an increase in debt. Another stimulus package would exacerbate the situation.
Since Sept. 2007 the Fed interest rate has been cut nine times from 5.25% to near zero in Dec 2008, significantly adding to the prospects of deflation. There’s nowhere to go but up, which will certainly bring down the stock market.
To worsen matters, this past week China, which holds an estimated $1.5 trillion in Treasury securities, sought a guarantee that the U.S. will cut its debt. Timothy Geithner gave his assurance that, as economic recovery strengthens, debt reduction will follow. As consumer confidence continues to wane, the prospects are anything but positive.
Alan Greenspan, whose actions are said to have been a large contributor to the current recession, admitted he “made a mistake” in opposing regulation of derivatives and acknowledged that financial institutions didn't protect shareholder investments as had been expected. He said that he and other economists are in “a state of shocked disbelief”… “that regulation in the banking industry led to meltdown of U.S. credit markets”.
Greenspan was supportive of sub-prime lending practices that led to the housing bubble. He was also at the helm of the Fed when the dot-com bubble burst.
And yet he says the Fed was blameless for the housing bubble that began in 2006. It’s a little hard to accept since he was Chairman for 18 years, going back to his appointment in 1988 by President Reagan up until the appointment of Bernanke in 2006, at which time the President Bush said, “Ben Bernanke is the right man to build on the record Alan Greenspan has established." This should have rung a few bells that the economy would continue to sputter, falter and come to a near standstill.
Where does that leave Bernanke? With President Obama’s tendency to recycle past Democrat influences, odds are that he’ll appoint Director of the National Economic Council Larry Summers. This is the same guy that, as Treasury Secretary during the Clinton administration, had supported the 1999 Gramm-Leach-Bliley Act. This bill repealed the 1933 Glass-Steagal Act, which had taken actions to correct the conflicts of interest and fraud in banking institutions that had allowed them to own other financial companies. See where we are now? There’s plenty of blame from every which way you choose.
There’s an excellent possibility that Barnanke’s campaign scheme to keep his job as Fed Chairman will be for naught. Ben may become a has-been.
He’s faced Congress to substantiate, or defend, his worthiness. His words have appeared on editorial pages in newspapers across the nation. He’s done TV interviews on ‘60 Minutes’ and ‘The News Hour with Jim Lehrer’.
During his confirmation hearings in 2006, Bernanke espoused his views on economic theory and policy, stressing the importance of communication and transparency. But he also said the final say on government debt and deficits lie with the President and Congress.
Having written numerous books and articles, he frequently focused on limiting inflation to no more than 2% over any given two-year period. For now, there appears little concern. As a matter of fact, many economists feel the risk of deflation is more worrisome. Deflation occurs when consumers hold off buying big-ticket items with the belief that during an economic downturn prices will continue to fall. The result is lower demand so job losses increase, employers then curtail investments because demand is low resulting in higher unemployment, foreclosures and bankruptcies.
Synopsis: no spending = no demand = no need to increase supply = fewer jobs, and so forth. The spiral ends when inflation appears.
Other economists are fearful that actions taken to fight deflation in the long term will result in runaway inflation. This would be the beast that puts the economy at risk for many years to come. A couple of indicators suggest we’re on our way. In January the 30-year fixed mortgage rate climbed from 4.96% to 5.12% within a week’s time. It stabilized in May just below 5.0% but it as of July 29 it stood at 5.56% per Bankrate’s weekly survey. This is a vast improvement from 6.77% a year ago, bringing down monthly payments by $158 on a $200,000 mortgage, but it may turn out to be short-term relief.
The Fed is printing more and more stimulus money, which means increased government borrowing, resulting in an ever-growing portion of tax dollars being paid toward interest. This could mean more printing of money and an increase in debt. Another stimulus package would exacerbate the situation.
Since Sept. 2007 the Fed interest rate has been cut nine times from 5.25% to near zero in Dec 2008, significantly adding to the prospects of deflation. There’s nowhere to go but up, which will certainly bring down the stock market.
To worsen matters, this past week China, which holds an estimated $1.5 trillion in Treasury securities, sought a guarantee that the U.S. will cut its debt. Timothy Geithner gave his assurance that, as economic recovery strengthens, debt reduction will follow. As consumer confidence continues to wane, the prospects are anything but positive.
Alan Greenspan, whose actions are said to have been a large contributor to the current recession, admitted he “made a mistake” in opposing regulation of derivatives and acknowledged that financial institutions didn't protect shareholder investments as had been expected. He said that he and other economists are in “a state of shocked disbelief”… “that regulation in the banking industry led to meltdown of U.S. credit markets”.
Greenspan was supportive of sub-prime lending practices that led to the housing bubble. He was also at the helm of the Fed when the dot-com bubble burst.
And yet he says the Fed was blameless for the housing bubble that began in 2006. It’s a little hard to accept since he was Chairman for 18 years, going back to his appointment in 1988 by President Reagan up until the appointment of Bernanke in 2006, at which time the President Bush said, “Ben Bernanke is the right man to build on the record Alan Greenspan has established." This should have rung a few bells that the economy would continue to sputter, falter and come to a near standstill.
Where does that leave Bernanke? With President Obama’s tendency to recycle past Democrat influences, odds are that he’ll appoint Director of the National Economic Council Larry Summers. This is the same guy that, as Treasury Secretary during the Clinton administration, had supported the 1999 Gramm-Leach-Bliley Act. This bill repealed the 1933 Glass-Steagal Act, which had taken actions to correct the conflicts of interest and fraud in banking institutions that had allowed them to own other financial companies. See where we are now? There’s plenty of blame from every which way you choose.
There’s an excellent possibility that Barnanke’s campaign scheme to keep his job as Fed Chairman will be for naught. Ben may become a has-been.
Monday, January 5, 2009
Stooges
Boy, would I just love to slap around a few people for the economic tailspin that has put in jeopardy the well-being of millions of Americans who had entrusted their life’s savings to their misguided judgments.
Benanke, Paulson and especially Greenspan are all dirty words on my 401(k) balance sheet. Ya, ya, they’re degreed but they’re more pedigreed assailants in financial dealings than what learned men of prestigious halls of education should be. You can bet they’re losses have affected their lives a lot less than the men and women put on the street from foreclosures. No, they can still eat high at restaurants on the top floor of a Manhattan building and afford whatever costs they incur from poor health conditions.
These three stooges are no better than any other millionaires of the Bush era of tax cuts for the wealthy. Unfortunately, President Obama will find it very difficult to end the tax-deferred status enjoyed by high-income earners; you don’t raise taxes in financially challenging times because it may further hinder the circulation of money to the economy when it’s so desperately needed. But it’s not very likely their expenditures will trickle down to the poor – it’ll circulate within the domain of other wealthy parties.
No, there’s no threat of me doing physical harm to anyone, but only because I have no desire to have a criminal record with jail time. They’re wouldn’t a bailout opportunity for me. But I sure would like to see them break down and cry for the mishandling of the billions of dollars swindled from hard working Americans. To hell with alligator tears - theirs’ would be from dry-eyed snakes. No apologies necessary, guys, because it just wouldn’t cut the cheesy losses of millions of taxpayers.
If Bernanke, Paulson and Greenspan are three stooges then Bush and Cheney are like Laurel and Hardy, respectively, but not respectfully suggested.
Benanke, Paulson and especially Greenspan are all dirty words on my 401(k) balance sheet. Ya, ya, they’re degreed but they’re more pedigreed assailants in financial dealings than what learned men of prestigious halls of education should be. You can bet they’re losses have affected their lives a lot less than the men and women put on the street from foreclosures. No, they can still eat high at restaurants on the top floor of a Manhattan building and afford whatever costs they incur from poor health conditions.
These three stooges are no better than any other millionaires of the Bush era of tax cuts for the wealthy. Unfortunately, President Obama will find it very difficult to end the tax-deferred status enjoyed by high-income earners; you don’t raise taxes in financially challenging times because it may further hinder the circulation of money to the economy when it’s so desperately needed. But it’s not very likely their expenditures will trickle down to the poor – it’ll circulate within the domain of other wealthy parties.
No, there’s no threat of me doing physical harm to anyone, but only because I have no desire to have a criminal record with jail time. They’re wouldn’t a bailout opportunity for me. But I sure would like to see them break down and cry for the mishandling of the billions of dollars swindled from hard working Americans. To hell with alligator tears - theirs’ would be from dry-eyed snakes. No apologies necessary, guys, because it just wouldn’t cut the cheesy losses of millions of taxpayers.
If Bernanke, Paulson and Greenspan are three stooges then Bush and Cheney are like Laurel and Hardy, respectively, but not respectfully suggested.
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