Charlie Rose

NeilMacCallister  01/09/2013 04:43 PM Report

Don't we all KNOW that we ALL hilariously jumped off the "Fiscal Cliff" (..like a Hollywood rock star) the day we elected a proponent of "Let's steal all the money we can, and live LARGE!!!"

And all the other Federal Employees (..like Austan Goolsbee) clapped their hands loudly, and shouted "Yeah! More!!!"

**

What we need is to replace all those "Departments of Federal Paychecks"

..with a "Department of American Survival"

But then, ..Who really wants THAT?????

Gelles  01/09/2013 05:30 AM Report

I see my friend Ricardo_Amaral is still hoping military Keynesian theory as practiced by America will find a rival to make him happy. I hope the opposite. Military Keynesian practice here is necessary. Democracy needs to prevent a world war.

But no other nation or treaty organization needs to be born. One is enough -- and it is now NATO. I would like to see it include all the BRIC's--but maybe not too soon, or before all the members look more like Denmark than themselves.

Gelles  01/09/2013 05:13 AM Report

David Leonhardt and Austan Goolsbee do not support AUSTERITY THEORY which predicts that government spending and investing is more likely to cause inflation than a more rapid recovery from deflation.

FUNCTIONAL FINANCE theory, on the other hand, sees spending and investment as absolutely necessary when others counsel "WAIT AND SEE" to allow consumers and profit seeking business to bring on recovery while unemployment destroys people and their families.

The profound shock of unemployment is ignored by people like REMant, as they chatter about raising interest first without arranging to pay that interest with debt-free money.

Raising interest with debt-based money is not possible until profit streams are repaired by forcing government to act when markets fail.

REMant and the economists he presents never ask for forced private sector spending and investment because casino capitalism has no experience with such a concept. I am not recommending it for the same reason.

But government support for Keynesian deficit spending and investment OR Functional Finance OR KEYNES WITHOUT DEBT (see this solution by Morrison via Google) is how recovery can be achieved over night to protect democratic free enterprise systems.

The urgency of these matters for the unemployed is missing from these comments. That is a disgusting fact. We have all the tools to prevent deflation and inflation with production and purchasing power managed by human thought not by invisible hands and brainless hopes of living and dead economists.

I'll have to check on my Brazilian friend's piece in the Elite Trader. Has he come to value debt-free money injections--or not?

tabs  01/08/2013 07:51 PM Report

The Passengers on the Titanic fully realized that the ship was sinking when the steel plates started to groan and buckle under the stress of having taken on too much water. Then the panic began, and there was no place to run, not even for the first class passengers. Everybody was going to be in the freezing water.

Ones commentary over the past few weeks has once again brought up the the ramifications of a US debt crisis causing a world wide economic tsuami and that the USD is a WMD waiting to go off. One has reiterated ones commentary to bring light to the fact that the American discussion of the "fiscal cliff" and out there "fiscal abyss" is insular in nature. Americans should realize that this is not just an American problem but the world is standing right along with Americans on that deck. As such the economic, political and social structures of the world are at risk. In the end Western Civilization might not remain to be the dominant civilization in the world. One might surmise that Islam might become the predominant civilization. One even notes that the President himself might have gotten a whiff of this commentary as he made comment that a failure to act on the debt ceiling "could cause a CATASTROPHE for the world economy," and Mr Allison of the CATO institute made a short comment during his vistit to CNBC this morning that he, "feared for Western Civilization."

MisterMittster  01/08/2013 07:20 PM Report

That withstanding, I think we should invade and steal it from the Chinese.

MisterMittster  01/08/2013 07:18 PM Report

These two guys is like watching one guy with a dual personality disorder; like Me, Myself and Irene.

That withstanding,

rtb  01/08/2013 05:49 PM Report

David's comment that the American public is partly to blame because we are unwilling to give up our entitlements is a red herring. There are two points here:

1. Ask anyone to give up their income, their bonus, their coupons, their perks, their parking spot and they'll say "no". It's a pointless question.

2. We elect our representatives to gain expertise and perspective to make complex, but necessary decisions. Most Americans do not have the time, inclination, expertise or perspective to make these decisions and turning to the ignorant masses for guidance is a cop out. See #1.

SharkswithfrikingLazers  01/08/2013 03:28 PM Report

We shall respond in editorial cartoons:

http://media.townhall.com/townhall/car/b/sk121012dapr20121209064523.jpg

http://examiner-enterprise.com/sites/files/article/448263_web_12-27-12-THUR-Gamble_T20121227.jpg

http://www.oakridgenow.com/wp-content/uploads/2012/12/cartoon-120812.jpg

JimBullis  01/08/2013 02:32 PM Report

I appreciate the discussion, particularly regarding the lack of public support of real budget action, whether by taxes or spending for the big things looming in the future.

But also, some specific solutions for a better way forward stated by Prof. Goolsbee which included expanding exports and improving education could be further discussed. Education seems to not be improving due to the burdening of the education system to improve social failures of various sorts, and ever more, the centers of higher learning are trending toward being entertainment centers as promoters of semi-professional sports spectacles. But not wishing to flail away at our cultural fixations, I go on to the issue of exports.

-

Expansion of industrial products seems limited by competitive forces on the world market. But export products are also possible on the agricultural side of the ago-industrial potential of the country.

We might consider how effective a stimulus program could be if it were devoted to expanding agricultural production, particularly by putting the vast areas of under-used land to higher purpose by making water available on a scale that would enable universal irrigation. This goal need not be limited to any area, but rather, it could support agriculture nation wide, whereby effects of drought and flood could be mostly ended. I hasten to add that not only could water be distributed more extensively, in an effective system, it also would be better controlled in the process.

Of course there is a need for a new kind of thinking here. Past notions of how water should be handled have to be reconsidered. However, priorities might change when it is fully realized how important this kind of project could be for the economy as well as the global warming concerns.

A vast increase in the standing vegetative mass, particularly wood of forests and orchards, would do a lot for capturing and holding CO2. With some sensible planning this could enable us to continue to supply energy, as needed until we establish better systems for providing and using energy.

This approach could enable us to cure the economy in an ecologically sensible way.

Ricardo_Amaral  01/08/2013 01:44 PM Report

Gelles, I just posted this info at the Elite Trader:

January 8, 2013

SouthAmerica: “Central Banks and US Dollar” is a thread started by SouthAmerica and it has been going on since December 4, 2006, but the Elite Trader moderator of the economics forum closed that thread today.

I guess they are afraid of the information on that thread, and they don't want people to read the material on that thread.

The thread is too popular and informative, and a lot of people are following that thread.

Central Banks and US Dollar

http://www.elitetrader.com/vb/showthread.php?s=&threadid=81958&perpage=6&pagenumber=109

*****

January 8, 2013

SouthAmerica: Max Keiser and Stacy Herbert discuss the United States war economy.

Why the Pentagon budget is off the table?

Because it is where the real money is!!!!!!!!!!!!!!!!!!

Keiser Report: Deadly Deflation – January 8, 2013

http://youtu.be/cFW61imqV8Y

<iframe width="560" height="315" src="http://www.youtube.com/embed/cFW61imqV8Y" frameborder="0" allowfullscreen></iframe>

In this episode, Max Keiser and Stacy Herbert discuss the butch welfare Queens in Virginia, Maryland and DC who rely on the 'untouchable' Pentagon budget. They also discuss the US deploying both its FMDs -- "financial extortion", "monetisation" and "devaluation" -- to finance its debt and deficit requirements and its troops to 35 African nations.

In the second half of the show, Max Keiser talks to Dan Collins of TheChinaMoneyReport.com about the petro-yuan, China's gold and the problem with the fact that nobody in Africa wants to buy America's opium - credit default swaps.

*****

Here is a reality check regarding what still left today of the US economic system:

The Crumbling of America

http://www.elitetrader.com/vb/showthread.php?s=&threadid=222491&perpage=6&pagenumber=29

.

Ellen_Dibble  01/08/2013 11:38 AM Report

For one thing, it seems you had David Leonhardt running for office, ha-ha, in his gym clothes for this interview. And Austan Goolsbee does seem to explain a couple things that seem to me important to understand. (1) that the cut to the FICA taxes which surely did not improve the prospects for Social Security were chosen over a greater stimulus package at the beginning of Obama's presidency due to a couple of votes that mattered among the voting congresspeople. (2) that the American people have not coalesced around what the Congress should do to address the deficit, and therefore we get the waffling, oh, let the president put this or that unpopular alternative on the table, where there is zero popular choice. As long as the public is for no tax increases, graduated or otherwise, and no entitlement cuts, graduated or otherwise, the congress reflects that. Duh! As he says, Medicare is the least feasible to address in that it is, I don't know what he said, like quick sand. I have a certain nephew who is dyed-in-the-wool gun rights, and gathering steam for arguing every side of that, so I suggested every senior citizen have a gun, to save Medicare untold billions, and he agreed that would be good. I see the problem as being right there. It is possible to extend the most extenuated state of barely being alive, pretty much as long as Medicare is willing to pay for it, and as long as the loving family hangs on. Permission to die, or to let people die, has to be on the agenda now that we have the ability to let people breathe on and on and on. Once we get that on the table, with the hugely profitable health care industry on one side, and people seeing it rip off the potential of the country to be strong and vital, I think we'll figure out the answer. Supposedly it is pretty easy to starve yourself, but I'm not sure of that. If I were confronting a military/medical establishment determined to keep me alive, I might want a more drastic method.

REMant  01/08/2013 11:18 AM Report

The Democrats, however, are reportedly gunning for $1 trillion in spending cuts and another trillion in increased taxes, which doesn't exactly add up to getting any debt reduction. What needs to happen is for interest rates to rise to where they ought to be. The bond rating agencies can do that for us, and I suspect, in the end, as in Europe, they will. What I worry about though is that "investors" are more interested in preserving their share than they are in what that share may in the future purchase, and that more dollars will come flooding back here as in 1935-6.

Over the holidays I read a book by Chester Phillips and a couple other prominent conservative economists published just before the 1937 crash. Phillips was long-time dean of the Iowa business school and served as an economist for the Chicago Fed'l Reserve Bank from 1937 to 1942. The authors demonstrated how the passage of the Federal Reserve Act caused the Depression by not allowing post-WWI deflation to run its course, pointing out, incidentally, that consumption did not decrease up for several years after 1929 (and also that no mutual savings banks failed in the Depression). All of the problem came as a result of debt pyramided by fractional reserve requirements, causing malinvestment in areas like construction, and stock market speculation, exactly the same as this time. Worse Max Wirth and Alfred Marshall had explained this in the 1870-80s.

Phillips et al concluded: "The fact would seem to be that the authorities who are undertaking the 'management' of the current recovery, and congratulating themselves that prosperity is returning because they 'planned it so,' are utterly oblivious of the fact that recovery is being engineered largely by the same means which produced the last boom-and depression. With this difference: whereas the banking system during the 'twenties was producing an investment credit inflation by extending credit to business men and corporations, Government is now assuming the role of inducing new deposit currency in the banking system and thereby producing a consumption credit inflation. The Federal Government, instead of private corporations, is issuing the bonds which the banks are now purchasing, thereby inflating the deposit currency structure all over again. These 'created' funds are in this instance being used principally to finance consumption expenditures through relief disbursements, makework projects, and the like. This newly created Bank Money, in circulating through the economic system, is ultimately finding its way into corporate treasuries in the form of newly created profits and into individuals' bank accounts as newly created monetary income. The profits are again being used to finance new capital development, and the enhanced income of individuals is helping to promote the stock market boom. Thus the inflationary procedure of the current cycle reverses somewhat that of previous ones, when the new credit first entered the system through the capital goods industries and from there filtered through the economic system to the consumption goods field and to the stock market. Perhaps the boom will thereby be a little slower in gaining headway than previous ones; but the point to be noted is that the two procedures are in essence the same: they both depend upon an inflation of bank credit at a rate faster than the rate of increase of physical production. And the fact to be emphasized is that the current inflation tends to conceal and to preserve the fundamental disequilibria which so prolonged the Great Depression and which we are now carrying over therefrom without having once squarely faced the problem of correcting them. It is doubtful whether any given amount of inflation will cure these disequilibria. When the inevitable depression succeeds such an artificially created boom as is now being engendered, we may no doubt expect the 'managers' of the recovery, judging by their published and spoken utterances, to assess blame for that depression almost anywhere but where it rightfully will belong.

"...The underlying philosophy of the Administration's attempts at recovery rests in the underconsumption theory of depressions. The familiar 'prime the pump' argument is but an expression of this idea: all that is necessary, it is argued, is that new monetary purchasing power be generated in the economic system, and the pump of production will again function. This neglects the fact that if the pump were in good working order, priming would be unnecessary, and that if the pump is not in order, then it were better to find out why it is not. For if its continued functioning is dependent only upon continued priming, then the priming deserves to be termed by its proper name, inflation; and as soon as the priming ceases, so will the pumping.

"...We have pointed out that when the banks purchase new bond issues, they thereby increase bank deposits, just as when they increase their loans. In the one case, corporate credit is being monetized by the banking machinery; in the other case, it is the Government's credit which is being monetized; in both cases, new monetary purchasing power is being created in the form of deposit currency. Specifically, when the Government issues ten billion dollars in Government bonds and sells them to the banks, the banks in purchasing these bonds give the Government new deposit credit on their books to the extent of ten billion dollars. Against this ten-billion-dollar deposit credit the Government may now write checks to pay relief recipients, WPA workers, bonuses for not raising wheat or cotton, or any of the many disbursements now being assumed by the Government.

"...The important thing to note is that the Government, in its policy of financing relief and recovery by issuing bonds which are purchased principally by the banks, is aiding in the creation of new deposits in the banking system, which begin by being a credit to the Government's account and continue as credits to individuals and corporations. For one thing is certain: these newly created deposits are not self-liquidating in character; once ten billion dollars in new deposits has been created in this fashion, that amount of deposits continues in the banking system so long as the deficit borrowing continues and the bonds are not retired (or unless the bonds are sold by the banks to the public, who pay for the bonds by writing checks against deposits)

"...It is gross folly to expect genuine and balanced recovery to flow from conditions and measures which maintain the disequilibria which characterize depression...

"The pressing need is still to restore a measurable state of economic balance within the system, rather than to restore superprosperity. Prosperity of the 1927-1929 sort can wait; indeed, it may even be hoped that that particular brand of prosperity never returns. What is now essential is to put men back to work — in a word, to produce; and the restoration of employment, and production, are dependent upon equilibrium. At the same time, it is imperative to eliminate the inflationary uncertainties inherent in the continued unbalanced budgets and deficit borrowing that constitute ominous threats to the future stability both of the currency and the credit of the Federal Government, and also to discontinue the damage to the public morale inherent in our Americanized system of the dole under the thinly disguised name of relief work.

"...The fact that general disequilibrium has persisted, particularly that between costs and prices, is the reason why so little new investment has been made for a number of years; and because investment activity is still at a low ebb, unemployment has continued. To recover from depression it is necessary that the capital-goods industries should revive and that investment activity should again proceed under its own power. In other words, we must save our way out of depression, we must increase the real savings that make the creation of real capital possible, instead of spending our way to recovery by cumulating governmental deficits which concentrate attention on consumption as has now been done for five years. But in order for real savings to be forthcoming (or to be used) to finance new investment it is first essential that at least relative equilibrium be restored."

Nothing has changed there either. Tho IMHO the real reason it persists is that those in power remain convinced some people are just nasty and grasping, and so...Off with their pocketbooks!

The book can be dowmloaded free from Mises.org: http://mises.org/document/3046/Banking-and-the-Business-Cycle

Leonhardt and Goolsbee and other "Keynesians" then are just plain wrong about the short-term, and the AAA, BTW, attempted to make farmers more liquid, not liquidate them, tho in many cases by liquidating their crops (and I don't mean turning them into hooch).