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HANG IN THERE AND GIVE THANKS…..TIME FADED PARIS AND WE CAN DIM KIM, the Kartrashian’s leading useless narcissist and rotten role model for young impressional, dumb girls. KIM KARTRASHIAN’S insanely promoted “brand” is showing signs of wear and tear as the sheer phoniness of this massive butt and tiny-brained creature cavorts all over the globe, selling products and acting sad over her 72 day “marriage.” It is most telling that her former publicist, Jonathan Jaxson, with her from 2007 to 2009, admitted setting up a false “engagement story” about her and NFL star Reggie Bush using a ring similar to the one poor slob Kris Humphries gave to his creepy love. It is a hollow hoax getting attention from stupid viewers. KIM HAS A GREAT NOSE JOB, based on pix of her teenage years, but she needs a brain job, and a morals job, and hey, maybe even a real job! What has been foisted upon us is a relentless push from Momager from Hell Kris Jenner offering her daughters’ intimate moments for a jaded audience to see via E! that photographs anything that moves. AND WHAT DO WE SEE FROM THE KARTRASHIANS? Me, me, me….I want more, and better and do not disrespect me by being a real person or living a real life. Garbage in and garbage out and it is all packaged as if it is an honor to be sharing time with these shallow, boring, sad tribe of misfits making millions. WHAT’S WRONG WITH THIS PICTURE? That there is even a picture showing selfish, greedy sisters and a mother who guides them as they screw up their lives. Gee, they cried when Kim’s sex tape with Ray J surfaced in 2007 and they are supporting Kim as she survives her latest money-making marriage. She and Kris have a pre-nup. Can we have one too, so we don’t have to live in her world anymore? How many millions is that worth? GOSSIP, GOSSIP, GOSSIP WHO IS THE MATURE, WELL KNOWN ARCHITECT who is dumping his wife because he found his soulmate in Paris? WHO IS THE SUPER-RICH YOUNGISH WIDOW, known for her philanthropy, who has found love? Her smile would light up Detroit. THE GOOD NEWS…..”PERSONHOOD” flunked in Mississippi. [...]
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AS IF WE DIDN’T KNOW THAT WEALTHY FAT MEN are found desirable by husband-hunting women, a study by a Columbia University researcher, Pierre-Andre Chiappori, confirms that the physical picture may not be appealing but the cash makes overweight males highly eligible. OF COURSE BOTH MEN AND WOMEN PREFER slim, attractive, rich, rich mates, to poor fat mates, but socio-economic appeal allows fat men, and women, to be at the top of desirability. They don’t have to settle for less desirable partners. MEN COMPENSATE FOR FLAB with cold, hard cash, reports a story in the New York Post, while women make up for their extra poundage with an extra year of education. “Our findings tell us that physical appearance is not such a big deal, and it’s easy to compensate for,” said Chiappori. A hefty woman can make up for her less-than-perfect body by being more educated. IN THE DATING MEAT MARKET, a sense of humor, a kind heart, don’t cut it like big bucks. Think of couples you know. Many of the men are bald, fat, and have trophy wives – – all because they can offer a lavish lifestyle. Donald Trump isn’t too fat, and he’s married his choice of trophy femmes, but even if he gained another 100 pounds, he’d be at the top of the marriage game. Fame, and fortune, are hard to resist. Sport and rock stars, TV and movie performers, internet giants are worth zillions. DO MOTHERS STILL ADVISE DAUGHTERS, “IT IS JUST AS EASY TO LOVE A RICH MAN AS A POOR MAN”? Perhaps they should say, it is just as easy to love a fat, rich man. There are more of those than millionaires who look like trim hunk George Clooney. WHO CAN DENY THAT MONEY is the greatest aphrodisiac? There is a proverb, “IF YOU ARE RICH, YOU ARE HANDSOME, WISE, AND YOU SING WELL, TOO.” ADD, AND THAT BRIONI SUIT DOESN’T MAKE YOU LOOK FAT. GOSSIP, GOSSIP, GOSSIP WHO IS THE YOUNG [...]
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(AP & Staff) — There have been only a few simultaneous knockouts in the history of boxing. Fortunately, there’s still time to pray for another one Saturday night when Jose Canseco steps back into the celebrity ring against Lenny Dykstra in Hollywood. Seriously, who are you supposed to root for? The superstar-turned-snitch who’s always low on money and already beyond embarrassment? Or the superstar-turned-swindler who’s under indictment for grand theft auto, drug possession and indecent exposure and possibly on his way to the slammer for a very long time? And that’s just the main event! In what could be an evening-long orgy of faux-celebrity self-destruction, the undercard also matches convicted felon Joey Buttafuoco against Lou Bellera, husband of his former lover and current porn actress Amy Fisher, who went to prison as an 18-year-old in 1992 for shooting Buttafuoco’s then-wife, Mary Jo, in the head; plus the “Long Island Lolita” herself, taking on “Octomom” Nadya Suleman; and Tareq Salahi, half of the White House party-crashing couple, squaring off against former O.J. Simpson guest-house squatter Kato Kaelin. This thing is wrong on so many levels that anyone who shells out $19.95 for the pay-per-view should get a free towel for the shower they’re going to need afterward. The cast of characters reads like a remake of “The Grifters.” Then again, if it catches on, think of the possibilities: Shaq vs. Kobe, Frank McCourt vs. Bud Selig; Latrell Sprewell vs. P.J. Carlesimo; Barry Bonds against the world. Sure, FOX tried to make a go with a “Celebrity Boxing” show in 2002, but it lasted only two episodes before cancellation. Despite that small sampling, it managed a sixth-place finish on TV Guide’s 50 worst all-time shows list. “It’s an interesting card, a battle of train wrecks,” is how promoter Damon Feldman described the upcoming event to the Philadelphia Daily News, and he should know. Feldman just happens to be the go-to promoter for down-on-their-luck celebrities, having previously staged fights between Rodney King and a retired cop as well as Tonya Harding and a waitress, among others. Feldman also pleaded no-contest earlier this year to charges of staging some of those bouts without a license, but why let details get in the way of a story about redemption? Feldman won’t — despite the fact that the last time he lined up a fight for Canseco, the disgraced slugger sent his identical twin, Ozzie, INSTEAD [...]
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THE IDEAL MALE WOULD BE LOYAL, savvy, kind, monogamous, handsome wouldn’t hurt, honest, realistic, romantic, well adjusted – – and darn near perfect. WE FOUND A VIABLE CANDIDATE – – ACTOR ANTONIO BANDERAS. Why this tall, dark handsome, 51-year-old husband of actress/mother Melanie Griffith? RARE BREED ANTONIO is sensitive, caring, unselfishly wed for 17 years and determined to make his Hollywood marriage sound and rewarding not only for himself, but for his wife and kids. What is his secret? “LOVE AT THE BEGINNING IS A RUSH,” he has said. “It’s big, full of energy, beautiful. But it doesn’t last like that.” He insists that he and Melanie, learning from past mistakes, chose to look ahead and find something even better. “We discovered the value and warmth of family and home….and that we can be stronger together. That thing that you thought was gone comes back again, and you fall in love again….Even in crisis, we see the light at the end of the tunnel…Melanie’s addictions….which she has overcome, make me love her even more because she was a lion fighting.” WHY DO MEN CHEAT? What drives men behaving badly like Arnold Schwarzenegger, Anthony Weiner, John Edwards, Tiger Woods? In an interview in AARP magazine, Banderas suggested, I think men are drawn to the hunting- -the psychological reaffirming of themselves in their manhood…..You have to ask yourself if you are willing to damage what your have – -your family, your friends….How rich can you make your own sex life so you don’t have to look for something outside your marriage?….A man should be honest with his wife….yeah, sometimes I walk into a party and there are very beautiful women…but you must know your limits. “I ADMIRED MELANIE LONG BEFORE I MET HER,” ANTONIO ADMITS. “I saw her in “Working Girl” in Madrid and thought ‘wow, she’s so beautiful, so special.’ ” They starred together in 1995 in a comedy, “Two Much.” Banderas recalls, “She was sweet, vulnerable, also smart and generous. I saw her with her kids, and she was so beautiful as a mom. We kept calling each other….it was not easy to confront our feelings.” [...]
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WHY DID ONE MARATHONER DIE while competing in the Bank of America race? WHY DID THE WINNER, RUNNER KENYAN MOSES MOSOP VOMIT as he crossed the finish line? BECAUSE OUR BODIES ARE DAMAGED when forced to run 26.2 miles, sometimes so severely punished that they can never be repaired. DON’T GET US WRONG. WE ADMIRE AND RESPECT every person who trained, ran, completed this agonizing, grueling race, but is it worth the pain and suffering that follow? OPPOSED TO MARATHONS that can cause serious injuries to legs, body, and result in knee and hip replacements later on, is lifestyle expert, author on health and fitness, Jim Karas, who heads an experienced staff of personal trainers in Chicago and New York City. He has guided Diane Sawyer, Hugh Jackman, Candice Bergen, Emma Thompson, during his 22 year career, and laments the result of repetitive pounding on the joints that a long marathon demands. “MEN AND WOMEN IN THEIR 40s AND 50s tell me about their need for surgeries and repair, because they were runners,” reports Karas. “And running is no way to lose weight. Only short bursts of running are beneficial, some times, and there are far more effective ways to achieve a metabolic workout without the stress and pounding of running.” Karas has written five books about exercise and health and fitness, including “Business Plan for the Body,” “The 7-Day Energy Surge,” “The Cardio-Free Diet.” “EVERY RUNNER FELT A HUGE LEVEL OF ACCOMPLISHMENT,” said personal trainer and expert on sports injuries Pete Maltese. “I had friends in the marathon and I cheered them on and offered support, but I worried about their physical condition after the event. As in many other grueling sports, they took their bodies to a level that is risky. We would like to think all athletes are fit and healthy and many are, but even extended sets of tennis on a blistering hot day can be very dangerous. [...]
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WHAT LOVING GRANDPARENT WOULD NOT ANSWER A CRY FOR HELP from a frightened, desperate grandchild? THAT’S WHY “THE GRANDPARENT SCAM” HAS BEEN SO SUCCESSFUL the past few years and that’s why the U.S. State Department keeps issuing warnings about it. SUDDENLY, OUT OF THE BLUE, an unsuspecting grandpa or grandma gets a phone call, or an email, from a frantic “grandson” or “granddaughter” saying something like “Help! My wallet has been stolen and I need money to come home from California (or New York ). Please wire me some money, and don’t tell my parents.” MOST POPULAR IS THE PLEA, “I am in Mexico (or London, or Canada, or Greece) and my passport and wallet have been stolen and I can’t pay my hotel bill.” THE EMAIL USUALLY HAS A FEW FACTS ABOUT THE PERSON from stolen information that also provided the names of the grandparents. GRANDPARENTS ARE SO SHOCKED AND CONCERNED THEY OFTEN WIRE MONEY without realizing they should check with their kids to see if the grandkids are really out of the city. Checking with relatives is a “must.” WE WERE TARGETED four months ago. At 3 a.m. on a Sunday morning we got a call from our grandson, Brian, asking us to wire him $1,200 because he was stranded in New York City, was robbed of his wallet, couldn’t pay his hotel bill, needed airfare, and was crying and upset. “You don’t sound like yourself,” we stammered, confused and sleepy. “There’s noise here from the subway,” the voice continued, “and I am on a borrowed cellphone…mine was stolen with my wallet.” WE SUDDENLY REMEMBERED HEARING ABOUT THIS SCAM and since we knew our grandson would never leave town without telling us, we told the caller we didn’t believe he was “Brian.” He hung up instantly. [...]
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In the real world, millions of people have lost their homes and jobs and the number of bankrupticies and layoffs continues to grow. Whether or not our recession continues or ends will not be much affected by whether taxes or spending go up or down. Congress and the President often claim their actions, such as lowering deficits and increasing spending and taxes, can help achieve full employment. This is “common knowledge.” It is also basically wrong. The president and congress make the speeches and certainly pass the laws that restrict activities within the economy and decide which people and businesses are to get special breaks. And hundreds of billions of spending or tax changes sounds like a lot even when they tend to offset each other. The problem is that hundreds of billions of federal spending increases or tax cuts, even when they are real, is relative chump change in a $16trillion economy which needs another $4 trillion to get the available labor force generally back to work. In the real world hundreds of billions of additional spending is needed every year just to employ the increase in the labor force as people reach working age and immigrate. In the real world the responsibility and tools for achieving full employment belong exclusively to the Federal Reserve. The Fed is supposed to use its ability to instantly increase liquidity when people and businesses don’t have enough money to spend and it is supposed to instantly reduce liquidity when there is so much spending that inflation will otherwise result. Neither activity requires action by the congress or the president – although they being politicians always claim credit when the Federal Reserve is successful and blame others when it is not. The president is responsible when the economy is in recession in that he appoints the Fed’s governors and sends their names to the Senate to approve. President Obama has, amazingly, retained/promoted those appointed by his predecessor on the basis of political correctness and claimed expertise rather than people with macroeconomic educations and real world experience. Some people, including many pundits and self-proclaimed “experts” believe that the Fed increasing the supply of money either by pouring it into banks or by directly funding spending, will cause inflation in the future. That’s also “common knowledge.” It is also basically wrong. In the real world the Fed can pour money into the banks and economy in a matter of hours (hours, not days or weeks). Similarly it can withdraw money from the banks and economy in [...]
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There is an important reality that the 2008 presidential campaign did not bring out and the “beltway pundits” and news readers seem naively unaware: Mrs. Palin had more executive and international decision-making experience than Obama, McCain, and Biden put together, and then some. Alaska is not like the other states with checks and balances and numerous elected officials – we elect a “czar” who is responsible for all decisions. The governor is the one of only two elected statewide officials. And he/she appoints all the other officials and they and all the state employees serve at the governor’s pleasure and so do exactly what the governor orders (The one exception is the Lt. Governor who runs on the governor’s ticket and effectively has no responsibilities except to wait for the governor to die or resign). The governor controls everything because the governor appoints and approves the salaries and continued employment of every state employee including all the judges, the attorney general, all regulatory commissioners, all heads of boards and agencies, the state prosecutor, the head of the state police, the commissioner of education, the state’s budget director, the state treasurer, and on and on and on to include all, repeat all, state employees except the Lt. Governor. And Alaska has more government employees per capita than most states as the state owns and operates, and the governor is effectively CEO of and makes all the major decisions for, a huge mega-billion investment fund generated by oil revenues, a major railroad, the leasing and sale of the state’s oil gas and coal and the prices and terms at which it is sold (its mostly on state land), 1/2 of the world’s entire supply of coal, all licensing agencies, the ports, a large ferry system with ocean-going vessels, a commercial fishing and agricultural bank, control of all fishing and mining in Alaska’s coastal waters, and on and on and on. The fact is that Alaska operates as a mini-nation with embassies in Japan and Korea and the governor appoints the ambassadors/directors and decides whether or not their nationals can have access to the state’s resources such as coal (now Korea) and natural gas (now Japan) and oil (now UK). The governor as the state’s sole decision maker prepares the budget and has line item veto powers to make sure the legislature enacts the laws and budgets the governor decides. The governor even has the power to [...]
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One of the rating companies lowered the rating of US bonds. So what should a prudent person do? N othing. Continue to put your money in the same places as before. Don’t be stampeded – there is a huge huge difference between a country such as the United States that controls its own central bank, and thus can always pay its debt as it comes due, and a country such as Greece which does not have its own central bank and so cannot always roll over or pay its debt as its debt matures. The process is incredibly simple and takes only minutes and no effort: the Federal Reserve puts a credit into the governement’s bank account for whatever billions it needs to pay and the government puts a note for that amount in the Federal Reserves account. Done! Some people wrongly believe that creating such additional money will cause inflation. Not so. The Federal Reserve also has the power to soak up money and instantly take it out of the system using Open Market Sales and changes in the reserve requirements. The idea that debt cannot be paid and deficits cause inflation by resulting in too much money in circulation is true in Europe but not in the United States. Personally, I attribute the misinformation to the media pundits and journalists who are long-ago college graduates. Their schools once used textbooks from English economists before American economists began writing widely used textbooks based on our system instead of theirs. You can see traces of similar misplaced economic understanding whenever you read comments as to how central banks control the economy by raising and lowering interest rates. That is how the UK and European central bank operate and what our elderly media and “experts” learned years ago. The US central bank, operates differently – it operates by increasing and decreasing liquidity in the economy through its open market and reserve requirement operations. In fact, the Federal Reserve, unlike the UK and European central banks, has no power to set interest rates. The only rate it sets is the rate at which banks loan to one another overnight to meet their Fed-set reserve requirements. Anyone who thinks a banker will loan more money out for months and years because they can borrow it for 24 hours is quite naive. That money has to be repaid the next day and they won’t be able [...]
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Millions and millions of Americans are having their lives and families ruined by losing their jobs, their homes, and their savings. And many hundreds of billions of “stimulus” dollars have been authorized for the relief of a few banks and industries represented by a handful of powerful lobbyists. The tragedy of it all is that the “stimulus” packages were never necessary in the first place and are not necessary now. All this time there has been in place a fully operational mini-agency within the Federal Reserve System that has many trillions of dollars of financial ability in hand that could be immediately pumped into the economy to end our depression, bank problems, and foreclosure crisis virtually overnight – the Open Market Desk. No amount of federal spending can offset inadequate levels of liquidity; and the Desk’s operations are the only way to get that liquidity. The operations of the Open Market Desk are directed by a committee of 12 bureaucrats, all of whom are employees of the Federal Reserve System and led by the Fed’s Chairman. The job of the Open Market Desk is to provide whatever additional money and credit our economy needs without providing so much there is inflation. It does this by literally creating liquidity and then getting it into our economy by buying financial assets in our financial markets where such assets are openly traded and priced. The assets “back” the liquidity the Desk creates. That is exactly how our economy’s supply of money and credit has expanded for almost a century to meet the needs of our growing economy. Thus the Desk could each day pump more money and credit into the economy than the entire stimulus package will over the next three or four years. And the Desk could keep doing this every day until the depression and credit crisis are ended. Similarly, if there comes to be too much liquidity in the economy such that it might cause inflation because the economy is closing in on full employment, the Desk can reverse the process and just as quickly take out the excess money. No new federal regulations, authorizations, or taxes are required for the Desk to increase the amount of money and credit in our banks and economy to adequate levels. The Desk has been doing this for years and its staff knows how [...]
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The lack of official growth in the American labor force is just another indication of how grossly inaccurate and misleading the official unemployment rate is. Counting officially unemployed, those only working part-time but want full time jobs, and those who want jobs but haven’t looked lately because they rightly think there are none – the American unemployment rate is over 20%. The Federal Reserve is trying to pump up the economy but the FDIC is forcing the banks, under threat of closure, to hold the additional money the Fed is supplying. Where does Obama find these doofus people??
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The value of money is whatever one can buy with it. Money gets its value from the willingness of others to accept it. In the United States since 1913 money has been primarily created by the Federal Reserve. It creates the money for the Federal Government so our economy will have enough money in circulation. It puts additional money into circulation by buying federal bonds either new bonds directly from the Treasury or in the open market buying existing bonds from their holders . Congress requires the Federal Reserve to “back” each dollar of money it creates with an asset worth at least one dollar. Thus the Treasury gives the Federal Reserve an interest bearing note to hold to “back” each dollar. Over the years as the economy has grown and more dollars have been needed the Federal Reserve has created more and more money and accumulated more and more hundreds of billions of government debt to “back” it. Not to worry – the Federal Reserve pays a 100% tax rate on its interest earnings so its all a charade designed to alleviate the fears of those who want the dollar “backed.” Indeed it has been suggested that the Federal Reserve should periodically wipe out the-creating portion of the resulting portion of the “national debt” because the same people who want the dollar “backed” also want the resulting so-called “national debt” limited in size. Look at in simple terms – whenever the Federal Reserve determines the economy needs more money its “Open Market Desk” creates money and uses it to buy some national debt in the “open market” or from the Treasury. The money goes into the economy and the government note it buys goes into the Federal Reserves vaults. No big deal and certainly no reason to worry about the “National Debt.” But what if the Federal Reserve creates too much money – so much that spending in the economy begins to bid up prices (inflation). Also not a problem. The Federal Reserve merely goes into its vaults, selects some notes, and sells them in the Open Market. The money it receives is then out of circulation and the inflationary level of spending it would cause is choked off. Worries that the Federal Reserve is today putting “too much” money into the economy to increase spending such that sometime in the future there will be inflation are not warranted. [...]
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I’m a long-time macroeconomist and businessman – taught macro at major universities, wrote books, testified at congressional hearings, ran companies, etc etc. But for the life of me I do not understand what the latest ”rescue” is supposed to accomplish or why the White House says the United States might “help.” Why should a government which carefully watches it finances bail out one that does not? And why should the Federal Reserve step in, as it has, with emergency loans to foreigners when our own “main street” consumers and business cannot get loans and mortgages? In the USA’s dollar zone Texas does not bail out spendthrift California so the State of California can keep on spending without charging its citizens higher fees or taxes. What’s different in the Euro zone such that Germany should bail out Greece or Spain or anyone else? What am I missing?? What I suspect is that the politicians calling for the bailouts are not trying to help Greece and Spain but rather a handful of shareholder cronies and executive-position cronies in banks that were either dumb enough to loan money to the Spanish or Greek governments or did so at high interest rates believing they would be bailed out when the default came. But it is exactly such poorly run institutions that should take a hit. Asking those that are well-run and profitable to pay more taxes to help their poorly run competitors merely rewards failure and penalizes success. Exactly the reverse of a rational policy. Equally disastrous is how the conflicted European Central Bank responds when one country’s economy is doing quite well and needs no additional liquidity while another is having a recession because its banks don’t have sufficient money to loan. Does the ECB increase liquidity to help Greece and cause an inflation in Germany or does it hold down liquidity to fight inflation and Germany and so make things even worse in Greece. It can’t do both. A country with its own central bank and currency, such as the US, the UK and Switzerland, can expand its money supply when needed to fight off unemployment caused by inadquate customer spending and hold it steady or reduce it when necessary to fight inflation from overspending. The UK and the US would be well advised to have nothing to do with the Euro and its bailout madness.
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Action needs to be taken when the economy goes bad. The hard part is knowing who should act and when. Here’s the view of most macroeconomists, those people who have actually studied monetary and fiscal policies – as opposed to the business school students who end up working for investment firms and pontificating about economic policies on network talk shows. Here’s a general summary: 1. The congress and president are responsible for the laws, regulations and taxes which determine the total capacity of the economy to produce goods and services. Congress and the President cannot affect whether that capacity is used or not as they have no tools to fight unemployment or inflation – Congressmen and the White House can only make speeches and pretend to be doing something such as providing a fiscal “stimulus” when there is massive unemployment. (those who say their fiscal policy such as lowering taxes or increasing spending will provide a stimulus are naive – any tendency towards that is instantly and automatically offset by the open market desk whose standing order is to maintain the status quo until the open market committee orders a change.) 2. The Federal Reserve and only the Federal Reserve has the responsibility and power to increase or decrease spending (consumers, business, government) to insure that the economy’s production capacity and workers are fully employed. It can and does within minutes offset any fiscal move made by the congress or president that might otherwise affect total spending. Conclusion: Each has a specific role: congress can only determine the economy’s capacity, the Federal Reserve can only determine whether the capacity will be fully employed or not and whether spending will be too high so that prices are bid up – inflation or too low – so that businesses lay off .
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Recently a number media types have written and pundited about the very important subject of quantitative easing wherein the Federal Reserve increases the supply of money in the economy. But what they largely did was repeat the prevailing conventional wisdom about the FOMC – that the Federal Reserve mainly operates via changing interest rates. Thus, for example, they seriously discussed the “impact” of the Federal Reserve lowering its overnight interest rate from 1.5% to 1.3%. Firstly, the Fed doesn’t change interest rates such as those charged for mortgages or auto loans or working capital loans - because it can’t. The only rate the Fed sets is the overnight rate on loans between banks and a knowledgeable banker will have a hard time not laughing if you tell him the Fed expects him to change his loan rates or make more business or consumer loans just because he can borrow money he has to pay back 24 hours later at a slightly lower interest rate. Secondly, and more importantly, most consumers and businesses are motivated by the availability of credit rather than its interest rate cost. Today the banks do not have more money to loan despite the Fed’s so-called “quantitative easing.” Yes, the FOMC (the Fed’s Open Market Committee) has increased bank liquidity. But simultaneously other offices of the Fed and the FDIC are encouraging the banks, under very real threats of closure, to hold the additional liquidity as tier one capital. So what on balance is the Fed actually done to increase the loanable funds banks use to fund increased business and consumer spending and end the recession - virtually nothing. And another note for another story: pouring money into the banks which are short of loanable funds does not somehow mean inflation in the future even if the Fed initially provides too much. That’s another conventional wisdom. Just as the FOMC can pour liquidity into banks within hours when there are not enough customers for our employers such that a recession occurs, so it can remove it in hours if spending begins to look excessive so that inflation will occur. The Federal Reserve’s job is to see that there is enough money in circulation, not too little to cause a recession nor too much to cause inflation. It has failed because the President has mostly appointed, and the Senate approved, Federal Reserve governors who are not macroeconomists with real world experience. The naive decisons they are making are comparable to the decisions we would get from the Supreme Court if the president appointed dentists and chiropracters as [...]
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It is an article of faith in some quarters that the increases in the level of prices over the past 80 years have been caused by too much spending caused by an increase in the money supply. This particular bit of “common knowledge” results from the failure of our insufficiently worldly macroeconomists to convey the complexity of a dynamic economy such as ours to our decision-makers. The source of this failure is the failure of most of our graduate schools to adequately train worldly macroeconomists instead of model building mathematicians. In fact, there are many many causes of inflation. So if you base your policies on only one cause of higher prices such as too much spending caused by too much money in circulation you will fail to stop inflation most of the time. For example, about 2% per year of the general increase in prices in a dynamic economy such as ours is inherent in customer demand switching to new and newly favored goods and services – their prices get bid up while the prices of the items now unfavored tend not to fall due to embedded labor contracts, unchangeable property taxes, etc. If the prices of some items in an economy rise and others do not fall, the result is an increase in the general level of prices – inflation. Another example, consider the so-called inflationary period Nixon faced when he took Office. The prevailing view of the cause of the inflation then, as now, was too much spending. There was initially not much inflation but a great fear that the country had been alerted to by politicians concerned about government spending that an inflation was coming. So the Federal Reserve acted prudently – it tightened up the supply of money so interest rates began to rise. And when it turned out that it had started too late the Fed continued tightening until it finally “squeezed the inflation out of the economy” and interest rates no longer needed to rise. Congress did its part during those years by raising taxes on tires, movie tickets, gasoline, etc. But you reach a very different conclusion if you take apart the Consumer Price Index for that period and look at the prices that increased and those that did not. It turns out that most of the increase in the general level of prices was caused by the higher interest rates (which made [...]
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Keynes entire thrust was that of the pragmatic speculator that he was. Today he would be called a hedge fund operator. In his day he was equivalent to a Warren Buffet and a great economist. Cutting through all the equations and diagrams Keynes fundamental point, one known to every businessman today even if the Geithners of the world don’t get it: Business organizations whether profit-oriented or non-profits must take in enough money in exchange for whatever they produce if they are to stay in business and keep employing people. If their sales fall so they get less money they will have to reduce output and layoff people. If their sales grow the pursuit of profit will cause them to expand output and hire more people. Not enough customers and the economy recedes or is depressed. Too much customer spending and inflation will result a buyers competing to buy bid up prices. But he was smart enough to know that many other things could cause prices to rise (such as laws setting them higher) or cause unemployment (unions and governements pushing up costs) Keynes looked at who the buyer’s are of an economy’s business – he classified them as consumers (the biggest and thus the most important), investors (those who bought plant equipment, and services so they could maintain or expand their output – not gamblers speculating on stock prices, horses, and cards); governments as they buy tanks and roads; and foreigners as they buy wheat and planes. If an economy has massive unemployement and idle production capacity, according to Keynes, it needs to increase the spending from one or more of these buyers. Nothing else will work. There are no exceptions to the rule that business firms must take in enough money to cover their costs. Thats Keynes in a nutshell: those who say it is Keynesian to increase government spending or run deficits or have job training programs just plain don’t know Keynes and, worse, don’t understand the basic relationships that exist between producers and their customers. Lately most of these naive souls are either in congress, working a commentators on talk shows, working for the Federal Reserve, or awarding each other nobel prizes for building mathematical models that look only at a world without black swans such that inevitably they fail. Keynes would have rolled his eyes in dismay at all the professors who have awarded each other [...]
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It is an article of faith in some political quarters, many universities and most central banks that the inflation of the past 80 years has been caused by too much spending caused by an increase in the money supply. This particular bit of “common knowledge” results from the failure of our macroeconomists to convey the complexity of a dynamic economy such as ours to our decision-makers. The source of this failure is the failure of our university graduate schools to adequately train worldly macroeconomists instead of model building mathematicians. In fact, there are many things that can cause a country to have higher prices. So if you base your policies on there being only one cause of inflation, such as too much spending caused by too much money in circulation, you will fail to stop inflation most of the time. For example, about 2% per year of the general increase in prices in a dynamic economy is inherent in consumers and other customers switching to new and newly favored goods and services – their prices get bid up while the prices of the items now unfavored tend not to fall due to embedded labor contracts, unchangeable property taxes, etc. If the prices of some items in an economy rise and the prices others of other items do not fall, the result is an increase in the general level of prices – inflation! Another example, consider the so-called inflation America experienced during the Carter/Nixon/Ford years. The prevailing “common knowledge” view of the cause of the inflation then, as now, was too much government spending. In fact, prices had not been previously rising rapidly before the beginning of that inflationary period but there was a great fear of inflation in certain political quarters because of government spending. So the Federal Reserve dutifully acted – it tightened up the supply of money so interest rates began to rise. And then when despite that effort the consumer price index began to rise the Federal Reserver did not give up the fight. It continued tightening until interest rates hit all-time highs. Congress did its part during those years by raising taxes on tires, movie tickets, gasoline, etc. etc. Even the White House did its part – it called for a price freeze and appointed a former Texas governor as an inflation “czar” charged with jawboning businesses to stop increasing their prices. Sound familiar? It should [...]
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Banks and other financial intermediaries are the traditional source of funds for business working capital lines, equipment purchases and consumer finance such as credit cards and home mortgages. The banks and other intermediaries traditionally obtain their funds from depositors and from the Federal Reserve. The Federal Reserve creates money and uses it to buy assets such as government bonds when it feels the economy needs more money in circulation. The Fed is our central bank and its job is to provide our economy with whatever its governors think is enough money – not too much and not too little. The Fed creates money and puts it into the economy by buying assets. The assets the Fed buys with the money it creates are typically sold by banks which then have more money to loan or by individuals and businesses such as insurance companies. Individuals and businesses which sell assets to the Fed tend to deposit the money in their banks. As you can see, no matter whose assets the Fed buys, the banks end up with more money. Being profit seekers, banks tend to loan out all the money they can safely loan in order to earn interest income. The banks do so in order that the borrowers – people and businesses and local governments – are able to increase their spending. As a result of the additional spending, businesses can then sell more goods and services and so they need to hire more people to produce them. Production and employment rises. The Federal Reserve operates its Open Market Desk every day during banking hours. Under the direction of the Federal Reserve Open Market Committee (FOMC) the desk buys and sells assets, usually treasury notes, minute by minute to fine tune the amount of money in the economy so there is not too little to cause inadequate levels of production and emmployment nor too much to cause inflation. The procedure normally works. But not always. Recently the Fed’s efforts to increase the banks’ loanable funds in order to encourage more spending to stop the recession have been thwarted by the FDIC and other regulators who have been trying to “help” keep the banks ”safe” by requiring them to hold the additional money as additional reserves instead of loaning it out. The “helping” of the banks become safer hasn’t made the banks safer. To the contrary, the lack of customers due to the lack of normal loans has been causing businesses and other organizations to to cut back and, in many cases, fail. Failed businesses [...]
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Some of the Federal Reserve presidents such as Tom Hoenig think that interest rates should be “raised” by the Federal Reserve. His reasoning is convoluted but understandable – he is apparently one of the many Federal Reserve and FDIC decison makers who never studied macroeconomics and/or never had any experience in the real world of business and banking. His uniqueness is that he presents the “common knowledge” that is at the other end of the usual and similarly ignorant Federal Reserve/ FDIC “common knowledge” which says that the Federal Reserve should set interest rates even lower. Contrary to the “common knowledge” prevailing among most journalists and other non-macroeconomists, the Federal Reserve does not set the American economy’s interest rates either up or down. It only control one rate – the overnight rate banks charge each other when banks short of reserves borrow reserves for 24 hours from banks with excess reserves. Mr. Hoenig, Mr. Bernacke, and our journalists may be naive enough to think banks will borrow money for 24 hours and loan it out for months and years for consumer and business loans, but bankers are not so dumb as to loan out money they will have to repay in 24 hours. The Federal Reserve’s primary tool to affect the economy’s employment and production levels is not its imaginary interest rate setting powers, its primary tool is the Federal Reserve’s control of the quantity of money in the economy. The Federal Reserve’s Open Market Committee primarily does this via by buying assets with money it creates to put more money into the banks and selling assets to soak up money which it then effectively destroys. Today some banks have loanable liquidity on hand and the Federal Reserve says it will increase the total liquidity in the system by another $600 billion or so – which sounds like a lot but is actually a mere drop in the bucket compared to the amount of money already in the economy, probably not even enough to cause an economic expansion sufficient to soak up our recent graduates let alone turn around the continuing decline in jobs and reduce bankruptcies and business closures. Normally such a $600 billion expansion of the money supply would cause a small but rapid expansion of bank loans as the banks put the additional liquidity to work earning interest for them – but not today. Today another department [...]
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Revaluing the Yuan. Congress and the Secretary of the Treasury Geithner are as wrong about the yuan as they have been about TARP and monetary policy – Congress probably because they listened to too many uninformed speakers at Junior Chamber of Commerce lunches and Geithner probably because he studied how to extract money from deals at Goldman Sachs instead macroeconomics at a reputable university. That’s why they both advocate policies based the common knowledge that a Yuan revalued upwards against the dollar will somehow help the United States economy and balance of payments. What would actually happen, of course, depends of the elasticity of demand – economist speak for the effect of a changed relationship wherein the Yuan revalues upwards so it takes more dollars to buy each Yuan – thus making the chinese products cost more dollars. The common knowledge view is that this would cause Americans to buy more at home instead of from China. But think about, for example, what would happen if Walmart had to pay 25% more dollars to buy what it now buys in China. Walmart would then have to raise its prices by 25% to keep covering its costs. What if Americans only cut their Walmart purchases of Chines goods by 10%? That is the likely outcome – so as a result of Geithner’s “help” prices would be 25% higher at Walmart and our balance of trade deficit would grow by another 15%. In other words, Geithner screws the public once again. Moreover, it is highly unlikely that in the long run that the 10% reduction in chinese production would move to the United States. Instead Walmart would probably buy from Thailand or India or whereever – leaving us to permanently pay higher prices for the same stuff. Higher prices for some items while the prices for the rest of the stuff we buy remain the same means the average price people pay for goods and service (the cost of living) will rise. Higher general price levels is otherwise known as inflation. So Geithner in his uneducated naivete is advocating a policy of increased trade deficits and a higher cost of living. Obama should have promoted him to the Supreme Court wherein he would be equally qualified to serve since he also did not study law.
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Its “common knowledge” the Federal Reserve affects the economy by lowering interest rates. In fact, the only rate the Fed sets is the overnight rate between banks and only the most naïve beltway pundit could think bankers are so dumb they will borrow money for 24 hours and loan it out for weeks and months for working capital and consumer loans. The FDIC would close them if they did. Rather, the main power of the Federal Reserve is to expand or contract the money supply so we have enough spending – not too much to cause inflation or not too little so the economy recedes below its full employment level of output. The three people who got us into our current recession are Bernacke, Geithner as the head of the NY Fed and a member of the open market committee, and the lawyer running the FDIC. All three were appointed by Bush and retained/promoted by Obama. Unfortunately the additional reserves Bernake is proposing two years after the fact are too little and too late. And in any event will be held by banks as tier one reserves instead of being loaned out because of the bankers’ fear of FDIC seizure trumping the laws and regulations requiring banks to invest (read loan) to businesses and consumers in their communities. Conclusion of a professional macroeconomist: Obama’s presidency is doomed because the economy will continue to operate with massive unemployment unless he replaces these unqualified appointees with macroeconomists with real world experience. Moreover, more fiscal actions such as tax cuts and more spending which “common knowledge” holds to be expansionary may be good political theatre but it will have not cause employment to grow because the standing order to the Fed’s Open Market Desk is to maintain the status quo – so the Fed will automatically soak up any expansionary fiscal impact unless Bernacke and cohorts order them to do so. For four years there has been no such order. so all we got were bigger deficits and more regulations and unemployment and foreclosures and bankruptcies. Shame on them all. John Lindauer Macroeconomist
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