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Tag Archives: Bernanke

The median American household earns 1/3 less than in 2007

I graduated from college right after the Tech Crash and I experienced the mild 2001 recession first hand. That was the first time we heard the term “jobless recovery.”

Then September 11th happened and in the wake of all the fear both the Fed and the federal government pulled out the stops. The Fed cut rates sharply and soon we were in the midst of a wide reaching war which though they wouldn’t say it out loud, many of the Bushites hoped would have a “stimulus” effect.

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Memo to the Political Class: You Can’t Be a Hero and a Thief

Washington and the Fed think they can plan out society. That they can manipulate the levers of the economy to elicit positive outcomes (mostly for them). That leaving the world to the “whims of the marketplace” is madness. That dispassionate managers (no one is dispassionate, especially political managers) can and will make the world anew. There is no God. Government is God and it will giveth and taketh as it pleases.

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Influential Economist Warns, Civil Unrest Is Rising Everywhere: “This Won’t End Pretty”

Truly it will not end well if people keep buying into the simple minded notion that the government is somehow their friend. That the state will mete out justice on behalf of the “people.” That somehow by expanding the power of the politicians life will be made better.

The government is to be tolerated. There are things it must do. But it is not your friend unless you are in the political class. Most of us are not.

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End the Fed: “We do not need ‘monetary policy’ any more than we need a paintbrush policy, a baseball bat policy, or an automobile policy.”

Indeed we don’t. But we are so conditioned to the idea that the cost of renting money fundamentally should be determined by a central bank that most don’t think anything of monetary policy. When the economy tanks, the Fed’s supposed to ease, when the economy gets too hot it’s supposed to raise rates. This is what we were all taught in our macroeconomics courses. Makes sense…I guess.

Actually not at all. These fluctuations, the business cycle, are created by the world’s central banks.

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Malinvestment: “Today’s asset bubbles in stocks, junk bonds, housing, art, bat guano futures, etc. are being driven by the Federal Reserve”

Malinvestment is a very important concept to understand. It simply means the allocation of capital in ways which appear to be (and may be) rational in a period of artificially cheap credit, but in ways which in the end prove to be inefficient once the market corrects for artificially low rates. (Created by a central bank.) Malinvestment is a symptom and a driver of economic bubbles.

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Tim Geithner is no hero, no matter how many times he says that he is one.

TARP was the absolute height of crony capitalism. Many of the big banks should have gone down, but in the midst of a “Blackberry panic” – as David Stockman puts it – the masters of the masters of the universe lost sight of reality and the nature of markets. Yes, Goldman Sachs would have gone down. But this would have been a GOOD THING. The blood which should have filled the the streets of Downtown Manhattan would have washed the unsustainable leverage clean from the system (for a while). Giants are meant to fall. It would have been good for the economy.

It would have been terrible for Wall Street of course. Banks, livelihoods, careers, and reputations hung in the balance that fall of 2008. For the bankers the world was indeed ending. So in a selfish act of desperation they forced the American public to save them.

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