"When logic and proportion have fallen sloppy dead"

"When logic and proportion have fallen sloppy dead"
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it's not your job to be as confused as Nigel  

Posted by howard in nyc in , ,

9/9/2011  17:55

yet, our leaders seem to be quite confused this week.

the deficit and the debt ceiling were the recent crisis to be solved.  but now, spending $400 billion is imperative to create jobs.  we must cut spending, so important is this need, a congressional supercommittee has been created.  but we must increase spending, right away.

that was president obama, speaking to congress.  he is not alone.  the ben bernanck was confused.

even though he specified severe unemployment, fallen housing prices, high gasoline and food prices and high household debt as current problems.  yet he was puzzled as to why consumer spending is so weak.

now i have yet another reason for unease.  i have been uneasy, dysphoric, and downright depressed because i see the economic calamity unfolding as, well, calamitous.  but nearly everyone around me in america sees things quite differently.

i figured the folks nominally in charge told a bunch of lies (for our benefit, of course) while understanding the score.  the true state of the economy.

now, i am not so sure.  particularly the ben bernanck.  i have vacillated between thinking him evil, knowing exactly what he is doing serving the banks and speculators, and thinking him incompetent, frantically pulling levers and spreading liquidity, not understanding why his drastic monetary stimulus has failed to promote sustained economic growth and prosperity.

the way he sounded yesterday, now i'm pretty sure it is the latter.  he did everything his lifetime of academic work promised would prevent economic depression and deflationary collapse.  he printed up a buttload of money.  he did everything possible to recapitalize insolvent banks.  he manipulated interest rates and the cost of credit to near zero.  he weakened the dollar as far as he dare.  and all he got was energy and food inflation, severe enough to negatively drag on the economy.  no decrease in unemployment, no increase in exports, no GDP growth once QE2 ended.

no wonder he looks and sounds like a broken man.  and no wonder he has nothing new to offer, despite plenty of opportunities (stock market volatility, big jackson hole meeting).  i am figuring we will get little more than words out of the ben bernanck and the fed over the next year.  because the cost of aggressive monetary policy (printing money and buying treasury securities or other 'assets') has become too great--inflation of oil and food prices, weakening of the dollar toward the breaking point.

even if things get so desperate that he tries QE3, those costs will reassert themselves even more quickly than in previous turns.

as for the other folks who are supposed to be less confused, the president and the leaders of the congress bounce wildly from spending to cutting, in their rhetoric.  the third rail of politics is no longer social security, but it is now raising taxes.  woe to anyone standing for election who dares mention increasing taxes, on rich or middle class.

the superficial nihilism of the gop is fake; no one loves big government more than a republican holding office.  they talk 'starve the beast in the cradle' then when they hold power, they nurture the beast on borrowed money, pushing the due date off to the future.  and the superficial populism of the democrats is equally fake; their true loyalty is to the big campaign contributors and to the status quo.  they push off into the future the recognition on the part of their base that they have been bought off temporarily by 99 weeks of unemployment bennies on the wall and 1 in 7 americans being fed with food stamps is a holding action, not true populism.

but mr. obama, railed all summer about the need to cut spending.  even social security spending.  now, he insists $400 billion in new spending is just the ticket.  and he'll explain in 11 days how he will pay for it.

yeah, sure.  one truism, proven over and over again.  the spending always happens.  the paying for it in the future, never happens.  that is how the deficit doubled since the last presidential election (didn't he promise to cut the deficit in half?)  that is how the unfunded liabilities of the government swelled to $100 trillion with a T.  that is how the literal debt, measured by the treasury bond market, grew to $14 trillion so quickly.

an economy built upon credit, once it begins to fall apart because of too much accumulated debt, cannot be repaired with more debt.  an economy built upon consumer spending and consumption, once it tops out because of too much consumer debt, cannot resume growing with more consumer borrowing.

why is that so confusing?

i nearly forgot.  greece is gonna blow up within a matter of days/weeks.  this could spread slow or quick.  but spread it will.  karl thinks "It's Over" and he may be right. 

and here are three good 9/11 anniversary articles.  the first sums up my thoughts precisely.


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