Tue 2010-10-12 16:01 EDT

billy blog >> Blog Archive >> Iceland ... another neo-liberal casuality

...For a real world example of the benefits of adopting a floating, sovereign, currency we can look to Argentina....At the time of the 2001 crisis, the government realised it had to adopt a domestically-oriented growth strategy. One of the first policy initiatives taken by newly elected President Kirchner was a massive job creation program that guaranteed employment for poor heads of households. Within four months, the Plan Jefes y Jefas de Hogar (Head of Households Plan) had created jobs for 2 million participants which was around 13 per cent of the labour force. This not only helped to quell social unrest by providing income to Argentina's poorest families, but it also put the economy on the road to recovery. Conservative estimates of the multiplier effect of the increased spending by Jefes workers are that it added a boost of more than 2.5 per cent of GDP. In addition, the program provided needed services and new public infrastructure that encouraged additional private sector spending. Without the flexibility provided by a sovereign, floating, currency, the government would not have been able to promise such a job guarantee. Argentina demonstrated something that the World's financial masters didn't want anyone to know about. That a country with huge foreign debt obligations can default successfully and enjoy renewed fortune based on domestic employment growth strategies and more inclusive welfare policies without an IMF austerity program being needed. And then as growth resumes, renewed FDI floods in...sovereign governments are not necessarily at the hostage of global financial markets. They can steer a strong recovery path based on domestically-orientated policies -- such as the introduction of a Job Guarantee -- which directly benefit the population by insulating the most disadvantaged workers from the devastation that recession brings...

Billy Blog; blogs Archive; Iceland; neo-liberal casuality.

Fri 2010-10-08 21:53 EDT

MERS 101

MERS - Mortgage Electronic Registration Inc. - holds approximately 60 million American mortgages and is a Delaware corporation whose sole shareholder is Mers Corp. MersCorp and its specified members have agreed to include the MERS corporate name on any mortgage that was executed in conjunction with any mortgage loan made by any member of MersCorp...Thus in place of the original lender being named as the mortgagee on the mortgage that is supposed to secure their loan, MERS is named as the ``nominee'' for the lender who actually loaned the money to the borrower. In other words MERS is really nothing more than a name that is used on the mortgage instrument in place of the actual lender. MERS' primary function, therefore, is to act as a document custodian. MERS was created solely to simplify the process of transferring mortgages by avoiding the need to re-record liens -- and pay county recorder filing fees -- each time a loan is assigned. Instead, servicer's record loans only once and MERS' electronic system monitors transfers and facilitates the trading of notes...MersCorp was created in the early 1990's by the former C.E.O.'s of Fannie Mae, Freddie Mac, Indy Mac, Countrywide, Stewart Title Insurance and the American Land Title Association... MERS, as has clearly been proven in many civil cases, does not hold any promissory notes of any kind. A party must have possession of a promissory note in order to have standing to enforce and/or otherwise collect a debt that is owed to another party. Given this clear-cut legal definition, MERS does not have legal standing to enforce or collect on the over 60 million mortgages it controls and no member of MERS has any standing in an American civil court. MERS has been taken to civil courts across the country and charged with a lack of standing in reposession issues. When the mortgage debacle initially, and inevitably, began, MERS always routinely brought actions against defaulting mortgage holders purporting to represent the owners of the defaulted mortgages but once the courts discovered that MERS was only a front organization that did not hold any deed nor was aware of who or what agencies might hold a deed, they have routinely been denied in their attempts to force foreclosure. In the past, persons alleging they were officials of MERS in foreclosure motions, purported to be the holders of the mortgage, when, in fact, they not only were not the holder of the mortgage but, under a court order, could not produce the identity of the actual holder. These so-called MERS officers have usually been just employees of entities who are servicing the loan for the actual lender. MERS, it is now widely acknowledged by the courts, has no legal right to foreclose or otherwise collect debt which are evidenced by promissory notes held by someone else...

MERS 101.

Fri 2010-10-08 21:27 EDT

Bank of America Suspends Foreclosures in All States >> naked capitalism

Yves Smith

...The robo signing of affidavits was clearly done across all sorts of court actions. As we indicated, the bogus affidavits are used in all foreclosures in judicial states; they aver various things about the plaintiff's indebtedness, including the plaintiff's ownership of the debt that are integral to the process. Providing an improper affidavit is considered to be a fraud on the court...affidavit abuses are mere symptoms of much deeper problems with the mortgage securitizations. Why, pray tell, are law firms and servicers engaging in false representations and widespread document forgeries? It is because, as we have stressed, they made a botch of getting the notes (the borrower IOU) into the trusts, and simple fixes don't work, hence the need to create a phony document trail. The Bank of America suspension of foreclosures in all states appears to be a tacit admission that the problems are as pervasive as we have suggested...

America suspends foreclosures; bank; naked capitalism; state.

naked capitalism Thu 2010-09-30 08:22 EDT

Why Backstopping Repo is a Bad Idea

The normally sound Gillian Tett of the Financial Times endorses an idea that is both dangerous and unnecessary, namely, government backstopping of the system of short-term collateralized lending called repo, for ``sale with agreement to repurchase.''...But the real problem is that the only securities that were once considered to be suitable were those of the very highest quality, namely Treasuries. The real problem is in widening the market beyond that. If you have absolutely impeccable collateral, you don't care if your counterparty goes belly up if you aren't at risk of losses on the assets you hold...the real problem is the use of low quality collateral...why would we possibly WANT a system that might down the road encourage the pledging of less than stellar instruments as repo?...we need to go back and look hard at why the need for repo has risen since 2001, and how much is related to legitimate activity. The fact that it grew much more rapidly than the economy overall suggests not...official efforts should proceed...to shrink the repo market (as we've recommended for a market that has contributed to the growth of repo, credit default swaps)...our efforts NOT to restrain banks leads to a tremendous tax on all of us...a banking industry that creates global crises is negative value added from a societal standpoint. It is purely extractive...

Backstopping Repo; Bad Ideas; naked capitalism.

Christopher Whalen Sat 2010-09-25 09:52 EDT

Double dip or global deflation?

Christopher Whalen

...Let's start with the term ``recession,'' which itself reflects the assumption that economic growth is always positive and the trend line is always upward sloping. While many economists in the U.S. remain convinced that this is an accurate descriptor, what Americans and many other people of the world need to consider is whether the assumption that the economy will grow endlessly is reasonable...much of what Americans think was real growth supported by real income and real work was, in fact, the result of deficit spending and reckless monetary expansion by the Fed, first under Alan Greenspan and now Ben Bernake...some of the leading experts in the housing sector believe that the U.S. is less than 25% through the restructuring of defaulted loans on commercial and residential real estate, and that the backlog is growing...Just as the housing sector and the related debt was the driver of the U.S. economy over the past several decades, I believe that the deflation of the housing market could spell an equally drastic period of shrinkage in economic activity in the U.S. and around the world...

Christopher Whalen; double dip; Global deflation.

Mon 2010-09-20 10:12 EDT

Mish's Global Economic Trend Analysis: Fiat World Mathematical Model

...Conditions today are essentially the same as during the great depression...It is the destruction of credit, coupled with the fact that what the Fed is printing is not even being lent that matters...we are in deflation based on the following definitions: Inflation is a net expansion of money and credit. Deflation is a net contraction of money and credit. In both definitions, credit needs to be marked to market...the mark to market value of credit is contracting faster than base money is rising...The Fed tries to hide the contraction in the market value of bank credit by its Don't Ask, Don't Sell policy...The credit bubble that just popped exceeded that preceding the great depression, not just in the US but worldwide. Thus, it is unrealistic to expect the deflationary bust to be anything other than the biggest bust in history. Those looking for hyperinflation or even strong inflation in light of the above, are simply looking at the wrong model...

Fiat World Mathematical Model; Mish's Global Economic Trend Analysis.

naked capitalism Mon 2010-09-20 09:24 EDT

Theoclassical Law and Economics Makes the Law an Ass

William Black

...The Supreme Court's Citizens United decision allows businesses to make unlimited political contributions to judges and politicians. When judges are elected, the need for these contributions inherently turns judges into politicians. Sympathetic judges are corrupt businesses' most valuable allies. Corporations and their senior officials can commit civil or criminal wrongs with impunity if their case is assigned to a friendly judge...Yves noted that the Chamber of Commerce was leading the effort to elect CEO-friendly judges...The Chamber distributed a plan for a hostile takeover of university departments of economics and finance (and the courts and the media) proposed by Lewis Powell (the soon to be Supreme Court Justice). Extremely conservative ``law and economics'' proved to be central to this effort. The law and economics movement began as a non-ideological approach to explaining and aiding judicial decision-making. The scholars leading the movement had diverse views. The Olin Foundation transformed law and economics into an ultra ideological field dominated almost exclusively by passionate opponents of government ``interference'' in ``free enterprise.'' Olin specialized in creating well-funded positions in academia for scholars that had an ``Austrian'' approach to economics...Law and economics has, for over two decades, been dominated by theoclassical economic dogmas that have proved false...There are now tens of thousands of law and economics graduates that have taken a class in theoclassical law and economics. They were taught that theoclassical economic assertions (often falsified decades ago) were objective facts devoid of ideological content. They have been taught that economics has proven that regulation is unnecessary, hopeless, and harmful...

ass; economics make; Law; naked capitalism; Theoclassical Law.

billy blog Sat 2010-09-18 10:52 EDT

There is no solvency issue for a sovereign government

Bill Mitchell

...There is no debt crisis in sovereign nations. The only public debt problems that have emerged in the current crisis have been in non-sovereign countries and even then with appropriate ``fiscal support'' those crisis were managed. I am referring to the intervention by the ECB when they decided to purchase outstanding public debt in the secondary bond markets -- which amounte to a fiscal act within a flawed monetary system. But blurring the distinction between sovereign and non-sovereign nations is the starting gate for this absurd journey in self-importance...From a Modern Monetary Theory (MMT) perspective public Debt/GDP ratios have no relevance at all. What exactly do they tell us? The implication is that the bigger the economy the larger the tax base and so the government can support more debt. But a sovereign government does not need to tax to spend and its taxation powers serve different functions...It might be that the size of the economy limits nominal government spending because it provides some indication of the real resource base but that doesn't tell us anything about the capacity of the government to service any outstanding debt. A sovereign government can always service its nominal debts. It simply credits a bank account when the interest or maturity payments are due...

Billy Blog; solvency issue; sovereign Government.

Fri 2010-09-17 19:26 EDT

Memo to Obama: time to break the refinance strike by the big banks

Christopher Whalen

...The Obama Administration and the Fed have taken the position that the crisis affecting the U.S. economy and the financial sector is slowly ending. In fact, the largest banks remain profoundly troubled by bad assets on their books as well as claims against these same banks for assets sold to investors. By allowing banks to ``muddle along'' and heal these wounds using low interest rates provided by the Fed, the Obama Administration is embracing a policy of deflation that has horrible consequences for U.S. workers and households...the Obama Administration has been providing political cover for the Fed to conduct a massive, reverse Robin Hood scheme, moving trillions of dollars in resources from savers and consumers to the big banks and their share and bond holders...the Obama Administration should use the power provided in the Dodd-Frank legislation to force an accelerated cleanup of bad assets and to mandate refinancing and principal reductions for performing loans with viable borrowers...President Obama also needs to focus on the growing competitive problem in the U.S. mortgage sector...now dominated by a cozy oligopoly of Too Big To Fail banks (TBTF)...Why is there no antitrust investigation of the top banks by the Department of Justice?...

big banks; break; memo; Obama; refinance strike; Time.

naked capitalism Thu 2010-09-16 17:05 EDT

Elizabeth Warren on Way to Being Sidelined as Head of Consumer Protection Agency, Relegated to ``Advisor'' Role

The body language of the Administration has been clear from the outset on the question of whether Elizabeth Warren would get its nomination to head of the new financial services consumer protection agency. Despite the occasional public remark regarding her undeniable competence, which really amounted to damning her with faint praise, Team Obama has never been on board with the idea...The reality is that the Administration was never going to appoint her; the only question is whether she can be kept in their orbit and not be a net negative as far as their dubious priorities are concerned...the Warren marginalization isn't about personalities, although the powers that be love to pigeonhole thorns in their side that way. The clashes reflect fundamental differences in philosophy. Geithner, the Administration that stands behind him, and Dodd all are staunch defenders of our rapacious financial services industry, even though they make occasional moves to disguise that fact. Warren, by contrast, is clearly a skeptic, and a dangerous one to boot, because she understands the abuses well and is able to communicate effectively with the public. Expect Warren to be pushed further to the sidelines, just as Paul Volcker has been (oh, and pulled out of mothballs when the Administration desperately needed to create the appearance it really might be tough on banks)...

advisors; consumers protection Agency; Elizabeth Warren; Head; naked capitalism; relegation; role; sidelined; way.

China Financial Markets Wed 2010-09-15 19:28 EDT

What do banking crises have to do with consumption?

Michael Pettis

For the next several years, as Keynes reminded us in the 1930s, savings is not going to be a virtue for the world economy. It is more likely to be a vice. In order to regain growth the world desperately needs less savings and more private consumption, but I think it is not going to get nearly enough to generate growth. Why? Because in all the major economies the banking systems are largely insolvent, or about to become so, and desperately need to rebuild capital...With all of the major economies facing banking crises, they must clean up the banks by forcing the household sector to pay the bill. This will put downward pressure on household disposable income and wealth for many years...For twenty years Japanese consumption growth has limped along [due to paying for] their banking crisis...Chinese consumption dropped from a very-low 45% of GDP ten years ago to an astonishing 36% last year just as -- no coincidence -- Chinese households were forced to clean up the last banking crisis...

bank crises; China Financial Markets; consumption.

Mish's Global Economic Trend Analysis Mon 2010-09-13 15:53 EDT

Debating the Flat Earth Society about Hyperinflation

Michael Shedlock

Over the past few weeks, many people have asked me to comment on John Hussman's August 23, 2010 post Why Quantitative Easing is Likely to Trigger a Collapse of the U.S. Dollar. Most wanted to know how that article changed my view regarding deflation. It didn't...I was asked about a guest post by Gonzalo Lira on Zero Hedge. I had seen the article and I made an off-the-cuff statement that the post was so silly it was not worth commenting not...Commenting on the above is tantamount to debating the flat earth society. The premise is so silly it's not worth discussing, yet here I am trapped into discussion by a mischaracterization of my statement "Hyperinflation Ends The Game"...The commonality between Zimbabwe and Weimar is they are both political events. In Zimbabwe a political event triggered capital flight, in Weimar a political event started massive printing, triggering hyperinflation...To understand how powerless the Fed is, one needs to understand the difference between credit and money, how much the former dwarfs the latter...Hyperinflation could theoretically come from massive sustained political will to bail out the little guy at the expense of the banks, the wealthy, and the political class. However, unlike Mugabe and Zimbabwe, neither the banks nor the Fed nor the political class wants to bail out the poor at the expense of the wealthy. Indeed, Bernanke's, Paulson's, and Geithner's actions to date have done the exact opposite!...

Debate; Flat Earth Society; Hyperinflation; Mish's Global Economic Trend Analysis.

The Baseline Scenario Wed 2010-09-08 10:36 EDT

Irish Worries For The Global Economy

Peter Boone and Simon Johnson

...Ireland's difficulties arose because of a massive property boom financed by cheap credit from Irish banks. Ireland's three main banks built up loans and investments by 2008 that were three times the size of the national economy; these big banks (relative to the economy) pushed the frontier in terms of reckless lending. The banks got the upside, and then came the global crash...Today roughly one-third of the loans on the balance sheets of major banks are nonperforming...The government responded to this with what are currently regarded as ``standard'' policies in Europe and America. It guaranteed all the liabilities of banks and began injecting government funds to keep these financial institutions afloat. It bought the most worthless assets from banks, paying them government bonds in return. Ministers have promised to recapitalize banks that need more capital. Despite or perhaps because of this therapy, financial markets are beginning to see Ireland as Europe's next Greece...Until very recently, Ireland was seen as Europe's poster child of prudent reforms...The ultimate result of Ireland's bank bailout exercise is obvious: one way or another, the government will have converted the liabilities of private banks into debts of the sovereign (that is, Irish taxpayers), yet the nation probably cannot afford these debts...The idea that Ireland, Greece or Portugal can cut spending and grow out of overvalued exchange rates with still large budget deficits, while servicing all their debts and building more debt, is proving -- not surprisingly -- wrong...

Baseline Scenario; global economy; Irish worries.

Mon 2010-08-16 13:54 EDT

Could The US Become Another Ireland? >> The Baseline Scenario

Peter Boone and Simon Johnson

As Greece acts in an intransigent manner, refusing to act decisively despite deep fiscal difficulties, the financial markets look on Ireland all the more favorably. Ireland is seen as the poster child for prudent fiscal adjustment among the weaker eurozone countries...Ireland's perceived ``success'' is partly due to its draconian fiscal cuts...Ireland's difficulties arose because of a massive property boom financed by cheap credit from Irish banks...Today roughly 1/3 of the loans on the balance sheets of banks are non-performing or ``under surveillance''...The government...guaranteed all the liabilities of banks and then began injecting government funds...it is planning to buy the most worthless assets from banks and pay them government bonds in return. Ministers have also promised to recapitalize banks than need more capital. The ultimate result of this exercise is obvious: one way or another, the government will have converted the liabilities of private banks into debts of the sovereign (i.e., Irish taxpayers)...The government is gambling that GDP growth will recover to over 4% per year starting 2012 -- and they still plan further major expenditure cutting and revenue increasing measures each year until 2013...The latest round of bank bailouts (swapping bad debts for government bonds) dramatically exacerbates the fiscal problem...

Baseline Scenario; Becomes; Ireland.

Mon 2010-08-16 12:56 EDT

Help:How to research U.S. corporations - SourceWatch

This Guide, consisting of this main article and three more in-depth sub-articles, is designed to help researchers and activists gather essential information on any type of U.S.-based company, whether small or large, privately held or publicly traded. The resources listed here are all, in one way or another, part of the public record. The first part covers leading sources of basic information on companies of all kinds. The second part focuses on information sources relating to the key relationships every company must have in order to function. The final part shows you how to gather information about a company's "social responsibility" record. Together, these sections will help you find all the basic information needed to support efforts to get companies to do the right thing. Happy hunting!...

help; research U.S. corporations; SourceWatch.

naked capitalism Fri 2010-08-06 19:34 EDT

Auerback: The Real Reason Banks Aren't Lending

Marshall Auerback

...there is a widespread belief that government fiscal stimulus has run up against its ``limits'' on the grounds of ``fiscal sustainability'' and the need to retain ``the confidence of the markets''. Consequently, goes this line of reasoning, as private credit conditions improve the private sector must pick up the baton of growth where the public sector leaves off. If this proves insufficient, there is room for an expansion of monetary policy via ``quantitative easing``...The premise is that the central bank floods the banking system with excess reserves, which will then theoretically encourage the banks to lend more aggressively in order to chase a higher rate of return. Not only is the theory plain wrong, but the Fed's fixation on credit growth is curiously perverse, given the high prevailing levels of private debt...credit growth follows creditworthiness, which can only be achieved through sustaining job growth and incomes. That means embracing stimulatory fiscal policy, not ``credit-enhancing'' measures per se, such as quantitative easing, which will not work. QE is based on the erroneous belief that the banks need reserves before they can lend and that this process provides those reserves. But as Professor Scott Fullwiler has pointed out on numerous occasions, that is a major misrepresentation of the way the banking system actually operates...We would like to see the Obama Administration at least begin to make the case that fiscal stimulus, whether via tax cuts or direct public investment, is still required to generate more demand and employment...deficit cutting per se, devoid of any economic context, is not a legitimate goal of public policy for a sovereign nation. Deficits are (mostly) endogenously determined by the performance of the economy. They add to private sector income and to net financial wealth. They will come down as a matter of course when the economy begins to recover and as the automatic stabilizers work in reverse...

Auerback; Lends; naked capitalism; real reason Bank.

Wed 2010-08-04 20:48 EDT

Janet Tavakoli: Stranguflation: Deflation and Inflation Where it Hurts America Most

Janet Tavakoli

The U.S. is suffering from high unemployment combined with too much consumer debt in a weak economy...our bloated financial sector has been sucking the life-blood out of the U.S. economy for years, and recent decisions insure it will continue to feed off taxpayers, while the host economy struggles for life...The bailouts were a perversion of capitalism and the principles upon which The Republic was founded. This was the result of influential interested parties reaching into the U.S. Treasury with no accountability. Capitalism doesn't call for bailouts, instead investors take losses. Shareholders in failed financial institutions should have been wiped out, debt holders would have had to accept discounts combined with debt for equity swaps, and financial institutions would have then been recapitalized without taxpayers footing the bill. Instead banks lobbied for relaxed accounting and ineffective "financial reform." No one, including bank managers, can tell how much capital is truly needed, and taxpayers' ongoing heavy subsidies give these financial institutions the appearance of stability.

deflation; hurting America; Inflation; Janet Tavakoli; Stranguflation.

Tue 2010-08-03 14:34 EDT

Rajiv Sethi: The Economics of Hyman Minsky [2009-12-03]

There has been a resurgence of interest in the economic writings of Hyman Minsky over the past few years, and for good reason...Minsky's theoretical framework combines a cash-flow approach to investment with a theory of financial instability...expectations of financial tranquility are self-falsifying. Stability, as Minsky liked to put it, is itself destabilizing...An essential feature of Minsky's financial instability hypothesis is that a long period of sustained stability gives rise to changes in financial practices which are not conducive to the persistence of stable growth...A sustained period of stability gives rise to optimistic expectations and a rise in speculative financing...if a large number of investments which are prompted by the availability of speculative finance are found to be inept, so that immediate cash flows are significantly lower than expected, then the need for short-term refinancing becomes acute while at the same time banks are less willing to roll over existing debt. A sharp rise in short-term interest rates occurs which can lead to present value reversals, a rush towards liquidity, a plunge in the prices of illiquid assets, both real and financial, and a corresponding drop in new investments...described as a credit crunch, a state of financial distress, or a financial crisis...

2009-12-03; economic; Hyman Minsky; Rajiv Sethi.

New Economic Perspectives Tue 2010-08-03 14:12 EDT

The CBO's Misplaced Fear of a Looming Fiscal Crisis

Eric Tymoigne

The Congressional Budget Office (CBO) has just released an 8-page brief titled "Federal Debt and the Risk of a Fiscal Crisis." In it you will find all the traditional arguments regarding government deficits and debt: "unsustainability," "crowding out", bond rates rising to "unaffordable" levels because of fears that the Treasury would default or "monetize the debt," the need to raise taxes to pay for interest servicing and government spending, the need "to restore investor's confidence" by cutting government spending and raising taxes. This gives us an opportunity to go over those issues one more time...

CBO's Misplaced Fear; looming fiscal crisis; New Economic Perspectives.

Wed 2010-07-28 10:55 EDT

Economics: No, America lacks the necessary commitment to stimulus | The Economist

Richard Koo

...the US today is suffering from a balance sheet recession, a very rare ailment which happens only after the bursting of a nationwide debt-financed asset price bubble. In this type of recession, the private sector is minimising debt instead of maximising profits because the collapse in asset prices left its balance sheets in a serious state of excess liability and in urgent need of repair...fiscal stimulus becomes indispensible in a balance sheet recession. Moreover, the stimulus must be maintained until private sector deleveraging is over...When the deficit hawks manage to remove the fiscal stimulus while the private sector is still deleveraging, the economy collapses and re-enters the deflationary spiral. That weakness, in turn, prompts another fiscal stimulus, only to see it removed again by the deficit hawks once the economy stabilises. This unfortunate cycle can go on for years if the experience of post-1990 Japan is any guide. The net result is that the economy remains in the doldrums for years, and many unemployed workers will never find jobs in what appears to be structural unemployment even though there is nothing structural about their predicament...

America lacked; economic; Economist; necessary commitments; stimulus.

Sat 2010-07-24 16:01 EDT

The Center of the Universe >> Blog Archive >> We need YOU!

MISSION: To deploy an army of MMT proponents to respond to deficit terrorism on the web. Go to offending articles. Neutralize flaws. Report back to home base...

blogs Archive; center; needed; universities.

Thu 2010-07-22 10:39 EDT

A Dual Mandate for the Federal Reserve, The Pursuit of Price Stability and Full Employment

Willem Thorbecke (2000)

Federal Reserve currently has two legislated goals--price stability and full employment--but a debate continues about making price stability the Fed's primary and overriding goal. Evidence from the recent history of monetary policy contradicts arguments in favor of assigning primacy to inflation fighting and supports giving full employment equal importance. Economic performance under the dual mandate has been excellent, with low unemployment and low inflation, while many European countries whose central banks focus solely on inflation are experiencing double-digit unemployment. The costs of unemployment are high, but the costs of even moderate inflation are estimated to be low. Central bankers, who tend to be inflation-averse, need to be prodded to consider goals other than inflation. And, if the Fed pursues price stability exclusively, the price level is not free to increase in the event of an adverse supply shock to prevent large increases in unemployment. A dual mandate allows the Fed to focus on one goal or the other as conditions demand and to balance policy effects.

dual mandate; Federal Reserve; full employment; priced stabilize; pursuit.

Wed 2010-07-21 10:30 EDT

More On Deficit Limits - Paul Krugman Blog - NYTimes.com

Jamie Galbraith responded to this post in comments; what he said, and my counter-response...Galbraith: ...The so-called long-term deficit is not a real problem. And the capital markets demonstrate every day that they agree with this judgment, by buying long-term Treasury bonds for historically-low interest rates. My response: there's no question that right now there is no problem: if the Fed issues money, it will in fact just sit there...But we won't always be in this situation -- or at least I hope not!...At that point, money that the government prints won't just sit there, it will feed inflation, and the government will indeed need to persuade the private sector to make resources available for government use...

com; deficit limit; NYTimes; Paul Krugman Blog.

Mish's Global Economic Trend Analysis Fri 2010-07-16 18:59 EDT

Expect Second-Half Housing and Durable Goods Crash

Michael Shedlock

Those who think manufacturing is going to lead the way to a sustainable recovery need to think again. Data suggest durable goods sales are about to collapse...if consumers are not going to be buying appliances (or cars according recent surveys), and if commercial real estate is going to remain in the dumps, technology spending is likely unsustainable, and states will be laying off workers to balance budgets, pray tell where is the second half growth or jobs coming from? Here's a hint: Don't expect miracles from further stimulus either. The current Congress is not much in the mood and the next Congress is likely to be downright hostile to significantly more deficit spending. All things considered, earnings estimates and the stock market are both priced well beyond perfection, as are forward GDP estimates.

Durable Goods Crash; expectations; Housing; Mish's Global Economic Trend Analysis.