Mystery Economic Theater 2010

[apocalypse]

Originally Posted by Fusion_power

The end result was an economy that produced surpluses. That is not a credit to a democrat president. It is a credit to a lack of government interference in the economy.

The administration under which we

• Signed NAFTA and GATT
• Passed the Family Medical Leave Act
• Repealed Glass-Steagall
• Raised the top income tax rate to 39.6%
• Passed welfare reform

is now considered a paragon of lack of interference in the economy? It certainly wasn't portrayed as such at the time.

While a booming economy makes it easier to balance the budget, no Republican president in the past 30 years has even proposed a balanced budget - regardless of the economic conditions.

[cheesehead]

Originally Posted by Fusion_power

Cheesehead, deliberate misattribution is not seemly.

Neither is a false insinuation.

I most certainly did not deliberately misattribute anything.

Please apologize at once.

Are you accusing me of misattributing something, yes or no? (I may have unintentionally misattributed something.)

If "yes", exactly what is it that you accuse me of misattributing? And why do you use the term "deliberate"?

If "no", why did you address the above sentence about "deliberate" misattribution to me?

[cheesehead]

Originally Posted by Fusion_power

Go back over the last 30 years administrations and look how many times we had a democrat president and a republican congress or vice versa.

You are familiar with the presidential veto power, I presume.

Any appropriations legislation can be stopped by just 35 people -- the president plus 34 senators. Which party controls Congress is irrelevant. How the 435 House members, or the other 66 senators, vote is irrelevant to this particular numerical reality.

I think you will find that the most prosperous years

I was talking about the national debt and federal budget deficits, in response to your sentence, "He is still correct that the debt burden is approaching a level that can't be sustained." That sentence didn't mention prosperity.

You aren't trying to steer the subject away from deficits and debt, are you?

Bill Clinton was hamstrung by the republican congress.

I challenge you to give us numerical answers to the following two questions:

How many balanced budgets have Republican presidents proposed to Congress since 1980? (I'll settle for how many of those fiscal years -- i.e., the ones for which Republican presidents proposed the budget to Congress -- eventually turned out to have a surplus.)

My memory is that apocalypse is correct (zero) on this, but I could be mistaken.

How many balanced budgets did Clinton propose? (I'll settle for how many of those fiscal years -- i.e., the ones for which Clinton proposed the budget to Congress -- eventually turned out to have a surplus.)

[ewmayer]

The UK Daily Mail reveals that the major public-sector cuts announced by the new coalition government are perhaps not as "irresponsible" as the hue and cry of the public-sector employee unions would suggest, by publishing a damning letter from a whistleblower:

The Great Inertia Sector: A whistleblower's account of council work where staff pull six-month sickies

Monday morning, it's 10am and I'm late for work - but there's no point hurrying because even though I should have been at my desk 30 minutes ago, I know I'll be the first to arrive at the office.

Sure enough, the planning department is a ghost town.
Our department has 60 employees and - until last Tuesday - a budget of £22million.

I've been there for two years and in that period the only time I've ever seen every employee present and correct was at the Christmas party.

At least ten people will be off sick on any one day. The departmental record holder is Doreen - she has worked a grand total of eight days in 14 months.

Doreen must be the unluckiest woman in the country.

In the past year and a half she claims she has: fallen victim to frostbite; been hit by a car; and accidentally set herself on fire.

But she's really pulled out all the stops with her latest excuse: witchcraft. That's right, Doreen believes somebody in Nigeria has cast a spell on her and that it would be unprofessional of her to attempt to do the job she is paid £56k a year for while under the influence of the spell.

She has already been off for four months on full pay. I've no idea how long this spell lasts, but my guessing would be six months to the day - the exact amount of time council employees can take off on full pay before their money is reduced.

Of course they have to provide sick-notes from a doctor, but as you can buy fake ones online for £10 it's never proved a problem.

There are procedures in place to address attendance, but nobody ever follows them through - chances are the person whose job it is to monitor sickness is probably signed off himself.

I've been told by colleagues that I don't take enough sick leave - when I protest that it is because I'm in good health they look confused. What's that got to do with anything?

Jerry is 63 and two years from retirement. He is what is known in the civil service and local government as an 'untouchable' - he's been at the council for more than 40 years, does no work, but would cost an absolute fortune to get rid of.

So he's left alone to play online poker, Skype his daughter in Florida and take his two-hour daily snooze at his desk, no doubt dreaming of the day when his gold-plated public sector pension will kick in.

My Comment: Kafka himself would have been hard-pressed to invent stuff like this.

[ewmayer]

Mish has an interesting letter from a reader, illustrating the important lessons being learned by children as a result of the financial crisis:

Teenagers Scared Over Plight of their Parents; Attitudes - Bernanke's Biggest, Most Futile Fight

Here is a comment I want to share from someone who posts under the name "Nancy Drew" on this blog. Nancy Drew writes ...

Our daughters are 15 and 17. Most of their friends are very concerned about their parents' financial situations and tell me their parents have too much debt. Whether their parents know it or not, these kids know exactly what is going on and they are scared.

My oldest daughter told me this week that her friend "K"'s mother is jealous of me. I asked her why, and she said her friend's mother thinks I never worry about money and seem carefree. I told my daughter that is only because we don't have debt.

I reminded her of the years when her friend K's family went on cruises while we were tent camping in a state park. I told her that her dad and I made a decision when we first got married that we weren't going to buy anything, not even a car, until we had the cash to buy it.

We previously had a mortgage, but we paid it off in 13 years. I told her we just didn't want the stress. She gave me a hug and walked away without saying anything.

[ewmayer]

Fed Made Taxpayers Unwitting Junk-Bond Buyers: Federal Reserve Chairman Ben S. Bernanke and then-New York Fed President Timothy Geithner told senators on April 3, 2008, that the tens of billions of dollars in “assets” the government agreed to purchase in the rescue of Bear Stearns Cos. were “investment-grade.” They didn’t share everything the Fed knew about the money.

The so-called assets included collateralized debt obligations and mortgage-backed bonds with names like HG-Coll Ltd. 2007-1A that were so distressed, more than $40 million already had been reduced to less than investment-grade by the time the central bankers testified. The government also became the owner of $16 billion of credit-default swaps, and taxpayers wound up guaranteeing high-yield, high-risk junk bonds.

By using its balance sheet to protect an investment bank against failure, the Fed took on the most credit risk in its 96- year history and increased the chance that Americans would be on the hook for billions of dollars as the central bank began insuring Wall Street firms against collapse. The Fed’s secrecy spurred legislation that will require government audits of the Fed bailouts and force the central bank to reveal recipients of emergency credit.

“Either the Fed did not understand the distressed state of some of the assets that it was purchasing from banks and is only now discovering their true value, or it understood that it was buying weak assets and attempted to obscure that fact,” Senator Sherrod Brown, an Ohio Democrat and member of the Senate Banking Committee, said in an e-mail when informed about the credit quality of holdings in the Maiden Lane LLC portfolio. The committee held the April 3 hearing.

Bear Stearns Purchase

Maiden Lane, named for a street bordering the New York Fed’s Manhattan headquarters, was created to hold the assets the central bank acquired to facilitate JPMorgan Chase & Co.’s purchase of Bear Stearns.

The Fed disclosed the Maiden Lane holdings in March after Bloomberg News went to court using the Freedom of Information Act, and the U.S. District Court in New York held that the Fed should release documents related to Bloomberg’s request.

My Comment: Note that the Fed fought the Bloomberg FOIA request tooth and nail for a full year ... now we know why. The fact that some of the portfolio had *already* been downgraded at the time Bernanke and Geithner lied their butts off to testified before congress and that a huge portion [e.g.the CDSes] were never eligible for any form of "investment grade" status, even that allowed under the "unusual and exigent circumstances" clause in the Fed charter. But hey, what's breaking a couple of laws when you're trying to save the world?

Now imagine if the Fed’s nearly-$2-Trillion in mystery-MBS purchases from early 2009 to early 2010 are even remotely closely impaired. I think that is not an unreasonable assumption, since Bernanke is on record – I believe it was ~6 months before the MBS shopping spree began, can dig up the link from the 2008 global financial crisis thread on request – as saying the Fed should consider “supporting” the housing market by deliberately overpaying for illiquid (read: crap) MBS.

[Fusion_power]

Read again. Most of the MBS crap wound up in fannie may and freddie mak. As in Willie Makit and Maybe Not. The left hand does not know what the right hand is doing.

I can see what they were trying to achieve. I can even see how they went about it. What I keep shaking my head about is the incredible stupidity of taking on huge levels of illiquid assets at incredible overvaluations. If we really wanted to stop this kind of insanity, we would be prosecuting the jackanapes who started it.

DarJones

[cheesehead]

DarJones,

May I have your apology for "deliberate" and your explanation detail of "misattribution"?

[Fusion_power]

Cheesehead, you spend an inordinate amount of time reading emotional baggage into simple statements. There is nothing for me to apologize for. Here is your statement.

the only balanced budgets during that 30 years were the result of a Democratic administration.

My statement is that it was NOT a result of a democrat administration. It WAS a result of having a loggerhead congress... i.e. a democrat president and a republican congress which precluded many of Clinton's worst campaign promises from coming into being. You also had Greenspan holding down interest rates and blowing economic bubbles. The internet bubble was what balanced the budget during clinton's term. This looks good on paper, after all, the budget was balanced. But it does NOT look good for the long term health of the economy. I remember very well what the collapse of the internet bubble felt like.

Your statement re balanced budgets is a lot like saying "The surgery was a resounding success, unfortunately, the patient died." Maybe we could say "The budge was balanced, unfortunately the economy collapsed".

DarJones

[apocalypse]

Originally Posted by Fusion_power

My statement is that it was NOT a result of a democrat administration. It WAS a result of having a loggerhead congress...

This is demonstrably false. Over the past 30 years, every Republican president had a loggerhead congress.

• Ronald Reagan: Democratic Congress for 8 years, Democratic Senate for 2 years
• George H W Bush: Democratic Congress and Senate for 4 years
• Bill Clinton: Republican Congress and Senate for 6 years
• George W Bush: Democratic Congress for 2 years, Democratic Senate for 4 years

Greenspan was Chairman of the Federal Reserve during all 4 administrations.

You cannot credibly argue that having a President and Congress in opposing parties leads to a balanced budget. You cannot credibly argue that Greenspan is responsible for the balanced budget under Clinton. You cannot credibly argue that a booming economy is responsible for the balanced budget under Clinton.

Every one of these factors was true under Republican Presidents over the past 30 years and none of them ever proposed a balanced budget.

[Fusion_power]

The trees in Alabama grew 3 feet taller in 1999 while corn production was high
The trees in California grew 5 feet taller in 1999 while corn production was low because Cali just doesn't grow that much corn.

Because the trees grew in both Alabama and California and because corn production was moderate in both in 1999, Bill Clinton submitted a balanced budget.

Sound wacky? That is what I hear when I read the Bill Clinton balanced budget claims. If you want to make a real argument, post a chart of the tax revenue the U.S. government collected per year over the last 30 years. Post another of the per capita income per year. Then we will see where the spikes were.

DarJones