Charlie Rose

futurevisionaries  04/22/2011 03:09 PM Report

Paul,

Can you help or know of people or companies that can help?

I need to save global FUTURE brands for and by the global people and countries.

My name is Kent G Anderson .

I see where 12 years of my life's work and ideas can help all people in all countries. My goal is to share the global Brand FUTURE... Future is design like a country and people's ideas are the global product. For more information about me and global people FUTURE google Kent G Anderson. My web page is www.futurevisionaries.com .

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925 N Griffin

Bismarck,ND

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milmntec@btinet.net

rojelio  08/19/2010 10:14 PM Report

Paul, I like to hear what you have to say, but I'm a bit frustrated by what I don't hear. Not one word about how peak oil will affect our economy. This is disappointing since running out of cheap oil is one of the most monumental events that we'll face in our lifetimes. You don't mention anything about throwing trillions of war dollars down the toilet. And whether or not the economy can continue to grow infinitely in the face of severe resource shortages and environmental degradation doesn't even seem to be up for discussion. Why not? Surely these thing have some effect upon our economic situation. Another thing I never hear from you "brilliant" guys is what we're supposed to be recovering to? More consumption and filling up the landfills with plastic crap that we don't need? That's the key to prosperity? Really?

fengqin821021  07/26/2010 10:28 PM Report

When Krugman is coming out to the public media very often, we know that government will print money soon again.

NeilMacCallister  07/09/2010 08:44 PM Report

Sorry Franck, ..I do not see what observations or conditions you are measuring with Hegel's comments.

If you are suggesting that America needs to resign itself to inescapable tragedy, ..well, ..I thank you for putting the question mark at the end of that suicidal thought.

We founded America upon freedom of thought and action, right?

We get what we choose.

***

I don't mind mowing lawns, ..it's fun sometimes.

I just don't like people writing me bad checks.

Franck  07/09/2010 03:12 AM Report

Passions, private aims, and the satisfaction of selfish desires are, on the contrary, tremendous springs of action. Their power lies in the fact that they respect none of the limitations which law and morality would impose on them; and that these natural impulses are closer to the core of human nature than the artificial and troublesome discipline that tends toward order, self-restraint, law, and morality.

When we contemplate this display of passions and the consequences of their violence, the unreason which is associated not only with them, but even – rather we might say specially – with good designs and righteous aims; when we see arising therefrom the evil, the vice, the ruin that has befallen the most flourishing kingdoms which the mind of man ever created, we can hardly avoid being filled with sorrow this universal taint of corruption. And since this decay is not the work of mere nature, but of human will, our reflections may well lead us to a moral sadness, a revolt of the good will (spirit) – if indeed it has a place within us. Without rhetorical exaggeration, a simple, truthful account of the miseries that have overwhelmed the noblest of nations and polities and the finest exemplars of private virtue forms a most fearful picture and excites emotions of the profoundest and most hopeless sadness, counter-balanced by no consoling result. We can endure it and strengthen ourselves against it only by thinking that this is the way it had to be – it is fate; nothing can be done. ? (G. W. F. Hegel, Reason in History, 26-27)

NeilMacCallister  07/09/2010 02:01 AM Report

I love you, Rob, you too, Franck, ..for at least you people are debating these issues, and searching for fundamentals!

I care not one whit whether the person who sold us down the river was a Democrat or a Republican,

..I care only that we are drowning.

***

Drowning in polluted Washington wastewater.

"Capital infusion"? .."Capital Relief"??

What is the difference?

Paulson? ..Krugman? ..Bernanke? ..Geithner? ..Obama?

Who really cares, as we lay dying?

***

As a nation, we passed a collection plate,

..and gave every penny to a few "economists" who said they cared.

Their kids go to private schools, ..I mow their lawns.

Franck  07/09/2010 01:54 AM Report

Rob, it’s neither the Bush nor the Obama government that got us into Keynesian discussions. It’s us, consumers leveraging their houses for going to the shopping mall, that are more of a problem than politicians and bankers. Consumers are voters and sovereign in a democracy. Consumer parochialism and greed drives U.S. governance, be it Democratic or Republican. Bankers just exploit the more widespread consumer greed.

Neil, apparently I’m not getting my point communicated to you. It’s not a social right that I’m relying on. I’m just relying (for the moment in this discussion) on the Keynesian/Krugman premise that anti-cyclical government behavior makes sense right now. The politicians have not spend your disposable monies. They spend monies they don’t have, and are no more financially responsible than the consumers voting them in and out of office. Why should they be any better than us, the citizens in he democracy?

I think we need a fundamental fix. I think we need to empower people that are able to educate the young about moral and philosophical issues such as human nature, prudence, (financial) responsibility, and oikonomia (Aristotle’s term for household management, from which we derived the term “economy.” A fundamental fix requires a will of greedy consumers to spend money for education, and presupposes that the finger pointing stops. Whenever you point at Bush or Obama, three fingers are pointing back at yourself.

robdverity  07/08/2010 05:49 PM Report

If we are indeed on the brink of a depression, doesn't that prove Hank Paulson's bailout didn't work, and we are now buried in a national debt that accomplished nothing???? Except the loss of economic tools such as stimulus to try to restart the economy. The Paulson/Bush SOCIALISM got us to the need for Keynesian discussions to begin with.

Obama is indeed between a rock and a hard place due to the inherited Paulson/Bush big bank bailout. The US fails shielding too-big-to-fail banks. Go figure.

Going broke WITH Citigroup is more of a putrefaction than going broke WITHOUT them. Plus we get to retain the moral hazard.

NeilMacCallister  07/08/2010 01:56 PM Report

Franck, your argument that Barack Obama has some kind of SOCIAL RIGHT to spend imagined treasures supposedly gathered during the George W. Bush years is absolutely obscene!

Has anyone else agreed with you?

Last night, on Charlie's own 'Bloomberg News', a financial expert stressed the need for us to cut back on our national deficit spending, ..not because it is "unpalatable", but because it is ruinous to our nation's future.

***

The politicians have by now already spent all our "disposable" monies, and are now well into the body of our survival monies.

Our factories are closing, and our waters are polluted.

The government now wants to tax us more, to ensure their own very large paychecks, ..and then make us seek "applications" to get some of our money back.

But those people now applying, are finding themselves being denied unemployment benefits with more frequency, and more college financial aids are now being rejected.

It is a fight-to-the-finish, Franck, ..Hold on to any money you have! ..Stuff it in a coffee can and bury it in the back yard!

We will soon be like rats in the alley, ..quarelling over crumbs!

Franck  07/08/2010 02:30 AM Report

Neil: Wouldn’t “anti-cyclical behavior” imply that in the Bush boom years the U.S. saves and ends up with a surplus, such that today it could heartily go into spending and stimulating mode? That's what one is supposed to do at home. You save when times are good. I did not say there should be more spending now. I’m just saying that more spending now is unpalatable after all the recent deficit and fiscal irresponsibility, e.g., by parochial bankers and consumers leveraging houses for going to the shopping mall. I am also not saying the current administration is wrong. This seems to be a general, systemic issue in a democracy. Governments cannot really afford to cut back and save because shoppers likely vote them out of office. I am not sure more spending would be the right thing; i.e., I don’t know whether we should follow Keynes and Krugman now. The best the current generation of shoppers can do for future generations might be to educate the young about prudence, (fiscal) responsibility, oikonomia (Aristotle’s household management) and other philosophical topics, so that they are ready to vote for counter-cyclical politicians and for sustaining a democracy.

NeilMacCallister  07/07/2010 09:42 PM Report

Franck? ..google-ing "federal deficit by year" will find you sites which record the previous administration's deficits at about $300 billion a year, or less than 3% of the GDP.

Then they show our current administration as pursuing deficit spending of $1,500 billion a year, or more than 10% of our GDP.

Yet you say the current administration is responsible, and the last administration was not?

How much more money would you like to see us borrow from our children and spend on ourselves? ..And what do you want us to buy?

Franck  07/07/2010 04:40 AM Report

What feels wrong with government spending and more dept now, is that it comes on top of the fiscal irresponsibility particularly during the last years. Perhaps voters and the Senate could be convinced of the spending now, if we would not have had the irresponsibility of the last years and the huge debt already. Counter-cyclical behavior of democratically governed societies seems politically difficult or impossible in general, because people don't think in terms of longer periods of time and cycles in the first place. Keynes and narrow economic "rationality" ignore, among others, this piece of political rationality. In addition, nobody ever wants to cut back on spending. Economists seem to ignore this fact about human nature as well.

robdverity  07/06/2010 04:16 PM Report

Whoops! Timing is everything. Cross-posted in a sense.

robdverity  07/06/2010 03:55 PM Report

Hey Prentice, where's REMant? He's anti-Keynesian as I recall. Miss his input.

Maybe he would agree that it's not too late to incarcerate Hank Paulson for the biggest heist without a gun - ever. His three page ransom note demanding immediate payment or an economic meltdown is guaranteed was honored. But no honor among thieves. We paid the ransom and we're getting the meltdown anyway.

Sheriff - he owns an island down in the Bahamas (that we bought him). You'll need a boat or two. He should be flying a Jolly Roger.

NeilMacCallister  07/06/2010 03:49 PM Report

Sorry, dbalmer, ..I didn't mean it, ..you're actually in great company:

"Hilary Putnam spends his days building complex intellectual hypotheses. For this Harvard professor, it's a search for truth.

"Putnam's journey began in the late 1960's. He became a faculty sponsor for the SDS, and a member of the Progressive Labor Party. But later, Putnam became disillusioned with the extreme left.

"Having run the philosophical gamut from the analytic to the Marxist and found no answers, Putnam has abandoned the certainty of some championed solutions, and hopes of finding a middle ground."

(stolen from A.P. Sanoff, USN&WR, 25APR88)

REMant  07/06/2010 03:41 PM Report

Krugman has accused people who disagree with him of this before. I mentioned a 1998 column last Sept (The Hangover Theory: Are recessions the inevitable payback for good times? http://www.slate.com/id/9593): "The hangover theory is perversely seductive—not because it offers an easy way out, but because it doesn't. It turns the wiggles on our charts into a morality play, a tale of hubris and downfall. And it offers adherents the special pleasure of dispensing painful advice with a clear conscience, secure in the belief that they are not heartless but merely practicing tough love. Powerful as these seductions may be, they must be resisted—for the hangover theory is disastrously wrongheaded. Recessions are not necessary consequences of booms. They can and should be fought, not with austerity but with liberality—with policies that encourage people to spend more, not less. Nor is this merely an academic argument: The hangover theory can do real harm. Liquidationist views played an important role in the spread of the Great Depression—with Austrian theorists such as Friedrich von Hayek and Joseph Schumpeter strenuously arguing, in the very depths of that depression, against any attempt to restore 'sham' prosperity by expanding credit and the money supply. And these same views are doing their bit to inhibit recovery in the world's depressed economies at this very moment....As is so often the case in economics (or for that matter in any intellectual endeavor), the explanation of how recessions can happen, though arrived at only after an epic intellectual journey, turns out to be extremely simple. A recession happens when, for whatever reason, a large part of the private sector tries to increase its cash reserves at the same time. Yet, for all its simplicity, the insight that a slump is about an excess demand for money makes nonsense of the whole hangover theory. For if the problem is that collectively people want to hold more money than there is in circulation, why not simply increase the supply of money? You may tell me that it's not that simple, that during the previous boom businessmen made bad investments and banks made bad loans. Well, fine. Junk the bad investments and write off the bad loans. Why should this require that perfectly good productive capacity be left idle?"

The answer to this is that it obviously is not perfectly good productive capacity, that printing more money or creating more debt is at odds with writing off the debts and is unfair to those who will have to pay for it, and that people will not learn to do better. Krugman, like Keynes, would deny all these things, as well, because for them what matters is employment, not productivity, and the level of debt is of no consequence. Same could have been said for the USSR. Where classical theory may be faulted for concluding that value can be increased without employment, Keynes may be for assuming that employment can without an increase in productivity. Keynes wrote "[f]or the proposition that supply creates its own demand, I shall substitute the proposition that expenditure creates its own income." Ironically, Keynesianism has become a theory of employment via the dole.

The idea that there is something perverse, timid, crabbed and/or self-destructive in the refusal of infinite credit is in line with the sort of "positive thinking" that developed about a century ago in the business community. A business downturn is not the result of overreaching, or of inability, but a of repressiveness or oppression, and one can see here the same ideas associated with progressive schools, political correctness, universal salvation and many liberal causes. Not understanding that money, even when measured in ounces, is always debt in our system, gold came for these reformers a symbol of tyranny, and Bryan's cross no mere metaphor.

Puritans had long been synonymous with spoilsport and in the early 70's the notion captured academia that in their jeremiads colonial preachers exhibited a kind of compulsive spoiling or self-denial, and/or were at least hypocritical, like the clergy ridiculed in The Fable of the Bees. Mandeville, tho, was violently opposed to the idea that sentiment, negative or positive, played any part in economic development. Ditto Smith, in the butcher remark opening The Wealth of Nations. They were opposed to patronizing, but not to virtue. Nor did they believe greed was good, only that it would be impossible to tell how goods should be distributed in a way better than they were, given, as we like to say nowadays, "a level playing field." It was the latter they sought. This idea, however, was pronounced utopian by Keynes, akin to Euclidean geometers in a non-Euclidean world. Markets, for him, did not equilibrate, so any solution must either be delusory or dictatorial, or, it seems in practice, both.

There were twenty-eight consecutive years of budget surpluses after the end of the Civil War, and about 1/4 of the budget was devoted to sinking the accumulated debt. By the end of 1893, it had been reduced by 2/3s. That period is now known as the Gilded Age. Prices declined while wages rose. The same was true of the 1920's and the cause of the stock mkt crash was that this was undermined, as in the late 19th c, and in Japan in the late 20th, by speculation in assets and equities largely with foreign money and unsupported credit completely ignored by the authorities. The problems that emerged in late 19th c probably had nothing at all to do with the elimination of the greenbacks and the Civil War debt, nor certainly did the enormous increase in the supply of gold that occurred at that time prevent calls by Keynesian antecedents for its abandonment in favor of paper or being blamed by them for both poverty and panics.

The real problem leading to the Depression, however, was that so much of the world's gold was here, when it was needed elsewhere, and the reason for that was WWI. One by one, fearing deflation by remaining on gold as others left, countries abandoned it and went (back) on a war finance footing, essentially forcing depreciation, with "investors," of course, making life worse by hoarding it.

It is still not commonly understood that Hoover persuaded business leaders to keep wages up, as he had for the previous decade, and to cut profits instead of dividends, a policy eventually continued by FDR, while the latter's AAA paid farmers to destroy crops, and the NRA ordered firms to limit production to keep prices up. The country clearly feared deflation, not inflation. However the fall in profits further deflated the stock mkt, which had repercussions for the banks holding them. Despite his having criticized Hoover for being in deficit, Roosevelt's election saw 16 consecutive years of deficits, and with the abandonment of gold, an attempt flood the country with money. The result of the latter amounted to a tax of about 60%, but it lifted prices. The payment in 1936 of WWI bonuses over FDR's veto, and the passage of the Wagner Act further raised wages and prices. That along with a flood of gold from overseas, pushed 1937 production to 1929 levels, but the accompanying speculative bubble led the Treasury to sterilize gold and the Fed to double reserve requirements, to which the banks responded by reducing lending. Increasing productivity, tho, should have meant a devaluation of gold, but the admin shrunk from it, fearing deflation. The stock mkt fell in Oct, followed by production, and raising fears for the dollar. Unemployment in 1940 stood at 14.6%, but in fact there was a good deal less unemployment in the 30's than the figures indicate because a large number of government workers were left out, it being assumed I guess that they were not in fact employed, tho of course we would today certainly count them.

Altho WWII can be considered the equivalent of digging holes and filling them in, it was not govt spending, but forced saving, the increased productivity of both industry and workforce, and, of course, demand created by years of deprivation, which can be said to have ended the Depression. Unless you want to consider the draft as employment. Estimates show declines in consumer spending and business investment during the war. The recovery was, nevertheless, unexpected by the Keynesians and mooted the Full Employment Act of 1946. An era of good feelings lasted until the recession of 1958 renewed demands from Keynesians now entrenched in academia and the Kennedy White House, despite showing early signs of stagflation to come. The 1963 tax cut, which supply-siders have hailed, was justified by them as stimulus.

In accord with their theory, Keynesians in both the UK and the US are convinced that the 60's and 70's were decades of great economic expansion and elimination of poverty despite clear historical evidence to the contrary. If any poor were lifted from poverty it was because of transfer payments, which Keynesians think perfectly okay, but it should be obvious to anyone that over the period, into the 80's with the Reagan deficits, and on into the 90's and 00's, the poor just got poorer while the rich got richer, the middle class along with its ethic was destroyed, and their jobs shipped overseas. They were sacrificed on a cross of paper. Debt as much as saving skews the distribution of wealth. Increasing welfare merely increases the need for it.

But the idea that high inflation leads to high employment embodied in the Phillips curve remains gospel to this day, and is the reason why deflation has always been considered bad by them, altho it suggests to me, that it must also indicate a confusion between possessive and productive value. I think we can see it was not fear of gain, but fear of loss that was always the issue, but that liberality was no remedy for it, and consistently made things worse. As in positive thinking, there is a concern with status in all of this, as if networking and dressing for success were all that mattered. And, if salvation WERE really universal, there wouldn't be any need to be dispensing it, would there?

NeilMacCallister  07/06/2010 02:46 PM Report

Wow, d'embalmer, ..that is the thickest congestion of HDL's I've seen in years!

Is that a cut-and-paste from last year's Healthcare Initiative? (see section: 126-(H)-0.12a-3f)

***

Did you really say, "The economy decline has stopped" at the start of your paragraph 16 below???

Followed by: "If the government reduces its borrowing the economy will decline"?

How about: "If the government had not run deficits, consumers would have had less savings"!

***

What is it that you conclude here? ..Is it your "Tax cuts will not produce innovation" propaganda?

***

I think your best insight here is that, "Absent a new stimulus by the government, growth depends on increased productivity and innovation."

That's it!

That's what we need!

Who's ready?

Who still has any money left after all that government borrowing from ourselves and our children?

dbalmer  07/06/2010 12:40 PM Report

Viewing the great recession as arising from too much debt misses the other side of the coin, pressure to lend from too much savings. Borrowing has to equal savings. Three factors contributed to a large savings pool seeking returns through lending. An (1) increased consumer savings pool partly arose from tax cuts for which government had to replace with borrowing. The (2) financial system magnified savings. (3) Trading partner mercantile policies contributed diverted savings from emerging economies to the US. The following provides a simplified macroeconomic model of how wealth and income inequality increased and contributed to causing the great recession.

Macroeconomic analysis starts with four cohorts, consumers (C), businesses (B), government (G), and trading partners (F). To understand the following dynamic, consumers will be divided into two cohorts and businesses will be divided into two cohorts.

The two business cohorts are finance industry (Bf) and non-finance industry (Bn). Understanding the finance industry (Bf) cohort is critical to the following model. The finance industry (Bf) cohort is a conduit for matching savings and borrowing and a creator of an increasing level of funds for borrowing. Money is created by the Federal Reserve. Fractional banking magnifies the funds created. If bank reserve requirements are 10%, the fractional system provides an increase of $10 in loans for every $1 created by the Federal Reserve. The finance industry (Bf) cohort magnified Federal Reserve money creation even further by the creation of shadow banking units, some of which had reserves of about 3% creating $30+ dollars for every dollar of reserves.

For the consumer cohorts, assume a correlation between income level and savings. Stated simply assume low income consumers to be net borrowers and high income consumers to be net savers. Assume some percentage of consumers such as the lowest 90% in income borrow on net an amount equal to the net savings of the highest income 10% magnified through the finance industry (Bf). Whether 90% is the right number is not critical to the following discussion. The consumers cohorts are consumer borrowers (C90%) and consumer savers (C10%).

Some observations about the 2000s leading up to the great recession. Government (G) net borrowing and trading partners (F) net savings in the US were about equal. The finance industry (Bf) accounted for more GDP and profit growth in the 2000s than non-finance industry (Bn). Consumer savings were low and are assumed to be zero for the following discussion. Consumer income and wealth inequality did increase.

Here is a simplified description of what took place.

* Government (G) lowered taxes benefiting primarily the consumer savers (C10%) cohort. This increased the level of savings searching for investment.

* Consumer borrowers (C90%) wanted to buy much of our trading partners (F) products and services.

* For consumer borrowers (C90%) to buy these products and services, savings had to be made available to them.

* As we well know now, the borrowing of consumer borrowers (C90%) greatly exceeded their ability to pay from current and expected income.

* Savings was made available to consumer borrowers (C90%) through the finance industry (Bf) based on expected increases in new and existing home values used as collateral.

* Trading partners (F) on net ran mercantile policies. The US trade deficit (and current account deficit) was financed by trading partners lending to us. In other words our trading partners on net had dollars they wanted to save instead of spend.

* Savings flowed from consumer savers (C10%) and trading partners (F).

* The finance industry (Bf) was a conduit magnifying consumer savers (C10%) savings. Since the finance industry (Bf) is primarily owned by consumers savers (C10%), it can best be viewed as an extension of consumer savers (C10%). The growth of the finance industry (Bf) primarily benefited consumer savers (C10%) cohort contributing to wealth and income inequality.

* High finance industry (Bf) wages and bonuses went primarily to people who were in the consumer savers (C10%) cohort further contributing to wealth and income inequality.

* Non-finance businesses (Bn) were not major borrowers or savers.

* The flow of savings was to consumer borrowers (C90%) and government (G).

* The source of savings was trading partners (F) and consumer savers (10%).

* Trading partners (F) savings went primarily to fund government (G) debt.

* Consumer savers (C10%) (including finance industry (Bf) created money) went primarily to consumer borrowers (C90%).

* When home values ceased to provide collateral for consumer borrower (C90%) debt, consumer savers (C10%) and the finance industry (Bf) suffered the losses. The losses for consumer savers (C10%) were increased by the fact that this cohort was the primary owner of finance industry (Bf) equity and bonds.

What was the role of government deficits in this dynamic. If government (G) had not run deficits, consumer savers (C10%) would have had less savings and trading partners (F) would have had to make up the savings difference (or sell less) taking on some of the consumer borrowers (C90%) credit risk. Trading partners (F) might have been less generous with credit terms. Even if the great recession still happened the risk would have been spread more broadly between beneficiaries of the boom, the consumer savers (C10%) and trading partners (F). Interestingly trading partners (F) savings placed in government (G) borrowing avoided the losses that consumer savers (C10%) suffered as result of placing savings through and having ownership interest in the finance industry (Bf).

With the onset of the great recession, a new dynamic arose. Consumer borrowers (C90%) began to de-leverage thus becoming savers. Suddenly all cohorts except government (G) were savers. The contraction in borrowing was magnified through the fractional banking system. Government (G) through stimulus and Federal Reserve quantitative easing bailed out much of the finance industry (Bf). Since all government spending and transfers must come from taxes people pay (businesses simply pass through the cost of taxes to consumers, employees or stockholders) consumer borrowers (C90%) and consumer savers (C10%) were bailing out the subset of consumer savers (C10%) that were finance industry (Bf) bondholders. (Note: When the Federal Reserve buys treasury debt, is is still ultimately a form of taxation.) Consumer savers (C10%) with equity investments in the finance industry (Bf) suffered significant losses. Consumer savers (C10%) with bond investments in the finance industry (Bf) suffered little loss. With all cohorts savers except the government (G) and since borrowing must equal savings, a contraction in borrowing will destroy savings until they equilibrate. government (G) moved to offset this destruction by substantially increasing its borrowing (including creating money). The resulting contraction is the largest since the great depression with substantial wealth destruction, reduced incomes and high unemployment.

As the economy decline has stopped and some growth has returned the debate has moved to whether the economy will continue to heal and grow, muddle along or decline again. Absent a new stimulus by the government (G) in a high unemployment environment, growth depends on increased productivity and innovation primarily in the non-finance industry (Bn) leading to increases in hours worked and number of workers employed. With increasing hours worked and higher employment incomes increase feeding back into demand for goods and services. Non-finance industry (Bn) management must believe demand will increase to justify investment and increasing production. Consumers (C90% and C10%) have to become confident that incomes will grow to spend and increase demand. Non-finance industry (Bn) and consumers (C90% and C10%) are locked in a feedback loop which causes GDP to contract, stabilize or grow. Recently the debate has moved to whether stimulus conceived in 2009 worked or was sufficient. At one end of the debate spectrum, economists and others including Paul Krugman, Joe Stiglitz, Robert Shiller, Nouriel Roubini, Martin Wolf, George Soros, Dean Baker, John Hussman, Greg Manikew, Christina Romer, Ben Bernanke, Doug Elmendorf, Jarad Bernstein, Timothy Geithner, Lawrence Summers, advocate more government (G) stimulus. At the other end of the debate spectrum political leaders and others particularly in the European Union such as Jean-Claude Trichet, Angela Merkle, David Cameron, Peter Orszag, John Boehner, Alan Greenspan advocate the opposite of government (G) stimulus, deficit reduction.

Without sufficient increasing demand deflation may arise as follows:

With four cohorts as net savers only one cohort, government (G), left to be a net borrower. If Government reduces its borrowing faster than savings and borrowing equilibrates and incomes rise from productivity and innovation, the economy will decline further to a new savings and borrowing equilibration point. To understand the implications of reduced government borrowing without increased income and/or one or more of the other cohorts taking up the slack, consider how wealth is created and protected.

Wealth is directly or indirectly owned by people (consumers). Businesses and government are legal creations which are owned by people.

Consumer savers (C10%) are the primary owners of business wealth in the form of stocks and bonds. Other direct forms of consumer wealth include net house equity, durables and checking and savings accounts. Important indirect forms of wealth include rights to income and services such as pensions, social security, and medicare.

The most important form of wealth is the productive capacity of business and the growth in that productive capacity. As the quantity and value of products produced and services provided increase over time, earned and unearned income increases, earned income in the form of wages and unearned income in the form of dividends and interest. Growth in quantity and value arises from innovation and increases in productivity and employment.

Productivity arises from capital investment and improved management processes. Much capital is currently underutilized resulting in low capital investment demand. Most current productivity improvement is related to improving management processes.

For employment to increase, demand for products and services must increases beyond what productivity improvement can provide.

If four cohorts act as net savers, funding of innovation is not a problem of not enough savings, it is a problem of savers willing to provide the savings to innovators. A tax reduction probably will not motivate this willingness. Perhaps a directed tax credit would.

If there is not sufficient borrowing for the amount of savings available, wealth destroys savings to equilibrate to the level of borrowing. This equilibration creates deflation. Borrowing has to equal savings. If borrowing declines, the savings decline shows up in the form of wealth decline. Some businesses would be unable to pay interest obligations. Incomes and employment would be reduced. Government tax revenue would decline which might defeat any effort to reduce deficits. Some consumers would be unable to meet obligations such as mortgage payments. If business contracts, the value of business equity which is the present value of future dividends would decline. Wealth would decline until savings and borrowing are again equal.

Looking at the two consumer cohorts, consumer savers (C10%) who have most of the wealth would suffer the most wealth loss. Consumer borrowers (C90%) would suffer increased unemployment and reduced incomes.

Other direct forms of wealth such as net house equity and durables would decline more and faster in a deflationary environment that they would do otherwise.

Pensions are dependent on business health and would suffer reduced returns or losses. Social Security and Medicare are funded from trust funds but trust funds have been a net provider of revenue to government. With reduced government revenue in a deflationary environment, pressure to reduce Social Security and Medicare payments would be intense.

NeilMacCallister  07/05/2010 10:42 PM Report

"Slim Pickens", Rob?

I liked him too.

"Yee-Haaaaaaaawwwwwwwwwwwwwwww!!!!!!"

NeilMacCallister  07/05/2010 10:17 PM Report

my2cworth asks, "..how on earth are you going to convert stimulus money into a renewed and competitive economy?"

I agree that is a tall order for those 100 lawyers sitting in the Senate dining hall eating taxpayer supplied steak sandwiches and "freedom fries".

Maybe they should just leave that tax money in the hands of people who still want a job, or want to start a business with their own ideas.

***

Kevin Costner invested his own money in oil/water separators. Louisiana fishermen and women have strung together boats and barges to create wave-breaks to stop oil incursion into their estuaries.

The new iphone-4G came from a company started in a suburban garage, and PCR genetic replication was imagined by a fellow while driving his car up a California coast highway.

None of those people were lawyers, legislators, or tax collectors.

***

Those administration lawyers haven't yet "dreamed up" a way to stop the Gulf oil leak.

Maybe they should ask the rock guitarist Skunk Baxter (now a bona-fide missile-defense consultant), or the fellow Gulf-Aid volunteer and oil-expert Matthew Simmons.

Those fellows' ideas may blow all the government's half-hearted and weak attempts at taking responsibility for stopping that oil-gush right out of the water!

***

I know how those government lawyers could create jobs: Turn that $20 billion dollar government slush-fund over to Louisiana Governor Bobby Jindal (..and maybe James Carville as a co-chair) and let them establish factories in Texas, Louisiana, Mississippi, and Florida to produce a million fool-proof "blowout preventers", oil-skimmers, floating barriers, fish sanctuaries, alt-energy generators, and the like.

Americans need production jobs, not Kenneth Feinberg's "Sorry for your loss" settlement checks.

robdverity  07/05/2010 09:48 PM Report

Hey 2pennies - I too wondered about our competitive wherewithal. But maybe there's some home-baked ideas already out there that aren't getting incentivized (tax help?). Slim Pickens natural gas conversion of diesel engines for openers. Universalizing the broadband internet (rural then ww). Charging and battery exchange stations - concomitant with gas stations - to encourage elec. cars. Larger than life competitively bid projects too big for most corp.s but a having long term beneficial return.

Such stuff would be rife with corruption a la Iraq and Af-Pak contractors. Given the venality of our culture that may be an unavoidable price of dealing with the govt. At least tangible outcomes as opposed to paper-swapping like Credit Default Swaps.

my2cworth  07/05/2010 06:33 PM Report

As a new product developer and former business owner, I have tracked US industial activity all the way to the R&D level across multiple sectors for a very long time. In the past decade there has been an almost unbelievable rate of decline and deterioration in domestic science and engineering innovation with the exception of internet businesses, cell phones and one or two smaller islands of activity. US technical innovation as a whole once represented an impressive standard by which much of the rest of the world measured itself. This is no longer the case and I believe that this is at the core of the true cause of the current situation. I think what Krugman said makes sense as far as it goes. However what really concerns me is that even if there was another stimulus package, just how on earth would you spend it and where in order to now actually stimulate and create a sustainable recovery. This country needs to make real things again - not just video games. It needs to care enough to dream up and invest in new domestic industries that tackle real and fundamental problems. Even the converted supertanker / giant oil skimmer I have heard about recently designed for helping the cleanup in the gulf was in fact developed by a Taiwanese company, not the US. This country did not have wherewithall to do it for itself even though it isn't rocket science. If this country can't clean up some oil without major external help, then how on earth are you going to convert stimulus money into a renewed and competitive economy of any substantial long term value? I'm not an economist but it sure beats me.

robdverity  07/05/2010 05:22 PM Report

If we are indeed on the brink of a depression, doesn't that prove Hank Paulson's bailout didn't work, and we are now buried in a national debt that accomplished nothing???? Except the loss of economic tools such as stimulus to try to restart the economy. The Paulson/Bush SOCIALISM got us to the need for Keynesian discussions to begin with.

Obama is indeed between a rock and a hard place due to the inherited Paulson/Bush big bank bailout. The US fails shielding too-big-to-fail banks. Go figure.

Going broke WITH Citigroup is more of a putrefaction than going broke WITHOUT them. Plus we get to retain the moral hazard.

DavLev  07/05/2010 03:16 PM Report

I disagree totally with Mr. Klugman's socialistic

remedies for all that ails US. Yes, I was a liberal in college, like most everyone else. After working for decades I finally woke up. I am a proud Republican and moderate

Conservative. Simply put, the government wastes most of

its expenditures and destroys everything it puts its hands on. Sure, spend more of (whose) money to get people out of a bind. Its not his money guys, its ours, the people who planned their life from the get go, people who worked hard in school, worked part time, learned alternative crafts and trades, didn't spend lavishly on homes their couldnt afford, took public transporation (and bought US made cars-I have one), will not submit to OPECs extortion, and live within ones means.

I am reminded of a friend who criticizes me when stating that not all people can afford homes even with the low interest rates currently. His comment is that they cannot

put the down payment required (20%) if only earning the minimum wage.

Hey buy, hows about renting and do you need a new car every 3 years?

Mr. Krugman wants another stimulus to bail out more

floundering companies and juice up the economy.

Well instead of paying 200billion yearly for wars

we cannot win, and owing our souls to China (interest payment to them) lets get out and really stimulate the economy.

NeilMacCallister  07/05/2010 03:02 PM Report

The radio just announced that the President and his family enjoyed 4th of July fireworks at the White House last night.

I guess that is good, ..but my own city wasn't able to afford a firework celebration.

Budgets, you know.

***

Does Mr. Krugman feel at home with budgets?

He bills his time at a $1,000-an-hour minimum wage (..see his wikipedia page). That does not create a situation where budgets are a crushing personal concern (..good for him!)

Also, neither he, nor the other economic point-man for team Obama, Robert Reich, is on record as having owned or managed a business.

Although they both constantly plead for the best wages, and the most generous welfare supplements for the poor, have they ever been required to supply those items themselves?

(..Mr. Reich did once attempt to get into a position of management responsibility when he ran for the Massachusetts' governorship, but wikipedia reports that he used his Brandeis University students as his campaign workforce. Do you suppose he paid them generously?)

***

Today, both Messrs Krugman and Reich are administration team players:

Barack Obama is the pitcher, and Krugman and Reich are like the shortstop and first-base “defenders” of President Obama’s day on the mound. They argue vociferously against anyone trying to get onto first-base with a claim that America's recent debt-loading addiction is a perilous pursuit.

Wikipedia reports Mr. Krugman saying, "I’m trying to make this progressive moment in American history a success".

But that statement implies that he imagines America's economic survival is forever a given, and that the only consideration before us is "What shall we do with all this money?"

***

Ha! ..I just heard a commercial on TV advertising a pill that, “Makes you feel as if you have just eaten".

Ah, .."Progress"!!!

charlizecourriers  07/05/2010 02:12 PM Report

Krugman's problem is quite simple. He wants things to stay the same-thus his stimulus fantasies, to bring back the same(good old days). He exemplifies the law of old professors-his truths are yesterday's shibboleths. He may even end up like the Ephraimites. As for Rose, he exemplifies the law of old talkshow hosts-he can't hear himself, so he doesn't want his listeners to hear anyone else. He doesn't even remember T.S.Eliot's advice to old men...be explorers!

JCHoulihan  07/05/2010 01:48 PM Report

Charlie Rose exceeded his usual snarky smugness in this interview by combining it with the intellectual equivalent of a curtsey to Krugman. Perhaps because Krugman takes challengers to his orthodoxy so unkindly? What a sycophantic display by Rose.

UnemployedSoftwareDeveloper  07/04/2010 08:21 PM Report

@terminator

1st - The H1B and L1 visa programs were intended to bring the best and brightest, not a slave labor workforce. They were intended as a temporary help, they were definitely not intended to enrich people like Azim Premji from india... .

2nd - Let me assume that you believe in free markets...

What this implies is that markets would adjust, ..., if there was a shortage in one field say IT than salaries would rise in that field, and consequently many people would major in that field and consequently salaries would go back down, etc... so essentially the market would calibrate itself...

Given that, you don't need to import a slave labor workforce to calibrate the salaries in a specific field...

3rd just look at 2 examples: Microsoft and Apple.

Microsoft uses (especially in the last few years) the H1B and L1 visa model extensively, and Apple does not use that model... You tell me which is a more creative, profitable, and successful company

Take another example the financial industry (especially banks and insurance companies like Citibank, AIG,...) uses the H1B and L1 model very extensively... I am sure you know about the 2008 recession/depression that started from the banking sector...

H1B and L1 visa programs are terrible for The US economy, i even believe that they played a major role in causing this (2008- ...) recession/depression

fengqin821021  07/04/2010 05:36 PM Report

Paul Krugman wants FED print more money and inflate economy.....I think his economic policy will lead all of the middle class American go bankrupt and lead US government go bankrupt too....

breakfromthemaze  07/04/2010 05:34 PM Report

To Dusibello: Krugman is not unintelligible, the problem is the Charlie Rose has to be interrupting all the time with cute restatements of the obvious.

More generally, it is true that Krugman has a singularly high profile as THE economist of the Keynesian tradition, rather than one of many, and his ability to make very clear arguments is constricted by his academic and technical language. For instance: "The war ended the Depression" is a commonplace, and "spent on non-productive stuff" a technical truism: but the reality was that we spent the current equivalent of 2.1 trillion per year for four years keeping a lot of people real real busy (under arms) and built a lot of organizational and human productivity put to work after that war.

And Krugman is too polite (weak) to blow the host out of the water about the craziness of the anti-deficit/austerity/hairshirt consensus of the politicians and the (self-serving) billionaires like John Paulson. Krugman is happy to make the cutsy remark quoting Keynes about madmen hearing voices, and figures that's enough.

But the main problem with this interview is the interviewer: CR is altogether too too comfortable -- and rich -- to take seriously what Krugman AND A LOT OF OTHER ECONOMISTS -- are saying.

terminator  07/04/2010 03:11 PM Report

@UnemployedSoftwareDeveloper:

I agree with you that lots of H-1B and L1 visa holders are sub par. But their pay too is sub par, bordering around the minimum approved pay for that position in a particular area. The unfortunate fact is that this country does not produce entry level software professionals who are cheap. I have also seen American born professionals who are not that cheap but produce sub par output. So there are all sides to the issue.

UnemployedSoftwareDeveloper  07/04/2010 02:06 AM Report

One simple and very easy job creation program would be to cancel the H1B and L1 visa programs. This would create at least 3 to 5 million tax paying jobs.

H1B and L1 visa programs have wreaked havoc on IT as a respected profession. Most if not all the millions of people imported (mostly from india) for the last 12 years, under these programs are definitely not the best and brightest... they are more like a cheap slave labor workforce, that end up sending back all their income to their country of origin, depreciating salaries in the tech sector, and putting millions of capable IT professionals on unemployment...

Stop this craziness... it simply does not make any sense...

montrose  07/03/2010 11:17 PM Report

Per chance the most pathetic Rose performance in recent memory:

defending with his guest the indefensible -

repeating an over-and-over failed policy.

Yuckkkkk!

Charlie - how could you??????

robdverity  07/03/2010 05:20 PM Report

It's time for good old fashioned class warfare, declared by the top 1-5% in the recent Republican-sponsored financial raping and pillaging of the populous under Bush and Hank Paulson with pretty much follow thru by Geithner, Summers, Bernanke et al. Starting with geometrically progressive income and sales or VATs. For example the $700,000 yacht the BP CEO was cavorting on should cost $2.1 billion in the US.

The bailout Paulson, Bush, Geithner et al promised to keep the system afloat is now helping to submerge it / us into a double-dip recession or worse a bona fide depression with the consequent national debt.

TEA partiers, get buffed! Unwarranted preemptive wars and stupidly timed tax cuts got us where we are. And obtuse Obama is no salvation. He doesn't have the gonads to raise taxes, let alone stop the hemorrhaging of money for the mindless Af-Pak war, stupid world-wide troop deployment (Okinawa, Germany etc).

But if you're unemployed due to the actions of the top 5%, buck-it-up cause your unemployment compensation cannot be renewed because the jingo war mongering Republicans want your involuntary contributions for war, more war and readiness for potential wars with costly troop deployments where their presents can create more hatred and enmity (Okinawa et al).

HAPPY FOURTH MY JINGOS! YOUR PRIORITIES ARE PREVAILING.

emkenvin  07/03/2010 04:08 PM Report

Having grown up during the great(?) depression, I agree with Krugman. The WPA, CCC, PWA and other New Deal programs did a lot of good, and although WWII really ended it, things were looking up by 1937. Similar labor intensive programs will probably not work today, but U.S. has to put more $ into job creating research, education and energy programs. During the interview, the optimistic song "Let's Have Another Cup Of Coffee" was mentioned. I remember it from my youth. I recorded an updated version of it on Youtube a few months ago.

http://www.youtube.com/watch?v=ALFd7kQv2Hs

Dusibello  07/03/2010 01:51 PM Report

Mr. Krugman would be more persuasive if he could speak more intelligibly.

Watch how many of his statements begin with disconnected fits and starts. (I stopped counting at a half-dozen.)

Maybe he's just a stumble-mouth. Or nervous? But one would think such a distinguished economist with countless hours experience on TV could speak his convictions with greater confidence and courage...