Conservatives wants to stop government spending, but the market needs demand. The Fed responded with monetary stimulus, injecting 6 billion into the economy by printing money and buying our own bonds. Now Greenspan, former head of the Fed, said publicly that increasing our deficit may drive investors away from the US bond market.
What does all of this mean?
First, does buying our own bonds increase our debt? Yes. We are basically borrowing from ourselves to pay ourselves back at a later date with interest.
Increasing our money supply decreases the value of our dollar. This is where the international community ties into our economy.
Remember the gold standard? That is gone, because the natural boom and bust cycle of economics needs some magic cheating power...that is monetary policy, the ability to raise or lower interest rates and control for inflation and deflation...HOPEFULLY preventing total economic collapse like the depression. (Unfortunately, history has not proven any safety net for global economic security).
The US has been lucky, because the rest of the world, since WWII, has thought of the US dollar as a universal safety net. Most global economic dealings are in US currency, and most economies keep their investments in US dollars- THROUGH THE BOND MARKET, because they expect that they can depend on the safety of their investments-that the US economy will always be okay-that they will get a good return on their investment. These countries are basically buying our debt and propping up our economy while we spend spend spend ourselves out of our wits.
Why is the US lucky again? Because, other countries cannot accrue such debt, they don't have others propping them up like rich aunts and uncles; and because most other countries deal and invest in US dollars THEY DO NOT WANT THE VALUE OF THE US DOLLAR TO GO DOWN, which means they will most likely want to invest in our debt, to keep the value of their investments up. Whew. Oh the tangled webs we weave.
So, what are the dangers of our ever increasing debt and monetary policy that decreases the value of the dollar? Simple- others won't want to invest in our bonds, and BOO! our economy collapses like a house of cards.
This is why we have such an affection toward China, they are our dearest lending Uncle. Woe to us if they decide to invest in the Euro.
Thursday, November 18, 2010
Wednesday, November 17, 2010
The 'New Republicans' Listening to the People
Mitch McConnell (R-Kentucky), says he's been protesting for the government to listen to the people for the past two years, and he's not going to stop now.
Really? Have the Republicans been listening to the people? I argue that they have just been playing a game of catch. They throw out soundbites through Fox News, Newsmax and other conservative media outlets, and then catch them back from the millions of people who listen to those outlets and think they are 'Fair and Balanced' news.
Are these the same Republicans whose credo is 'the people can't think for themselves...that's why they elect leaders'? I argue yes, but in disguise.
What is the result? Republicans new slogan- "Rein in spending and shrink the government." I haven't heard that from the Republicans before.
What is the consequence? Our congress is now about to embark on a major debate about shrinking the size of government and curbing spending. A great idea and quite an ideal, but this is not the ideal time for this micro-tuning of the government. Now, I know, our congressmen and women should be able to walk and chew gum at the same time, but....we have a lot of problems at odds with cleaning house right now. It's like trying to buff the floor before you clean up the spilled beer cans and pizza boxes.
Economically speaking, government spending is what is needed now to help ease us out of the recession...that is what has been easing us out so far.
The big argument against my point of view is Alan Greenspan's recent assessment that our debt is going to drive investors away from our bond market (which is what has been keeping the dollar afloat since the 1970's). That will be the subject of tomorrow's blog.
Really? Have the Republicans been listening to the people? I argue that they have just been playing a game of catch. They throw out soundbites through Fox News, Newsmax and other conservative media outlets, and then catch them back from the millions of people who listen to those outlets and think they are 'Fair and Balanced' news.
Are these the same Republicans whose credo is 'the people can't think for themselves...that's why they elect leaders'? I argue yes, but in disguise.
What is the result? Republicans new slogan- "Rein in spending and shrink the government." I haven't heard that from the Republicans before.
What is the consequence? Our congress is now about to embark on a major debate about shrinking the size of government and curbing spending. A great idea and quite an ideal, but this is not the ideal time for this micro-tuning of the government. Now, I know, our congressmen and women should be able to walk and chew gum at the same time, but....we have a lot of problems at odds with cleaning house right now. It's like trying to buff the floor before you clean up the spilled beer cans and pizza boxes.
Economically speaking, government spending is what is needed now to help ease us out of the recession...that is what has been easing us out so far.
The big argument against my point of view is Alan Greenspan's recent assessment that our debt is going to drive investors away from our bond market (which is what has been keeping the dollar afloat since the 1970's). That will be the subject of tomorrow's blog.
Tuesday, November 16, 2010
Rand Paul defends his comments on Face the Nation
Rand Paul on Face the Nation
Rand Paul corrected and apologized for two of his most widely criticized comments. Bob Schieffer, Face the Nation's host opened the topic by asking Rand Paul what he thinks the Federal Government is, or is supposed to be, considering his comment about the Obama administration putting so much pressure on BP to take responsibility for the oil spill. The comment from the Administration was made by Interior Secretary Ken Salazar, who said, "...our job is to keep the boot on the neck of" BP to ensure it meets its obligations."
Paul, in response, said that the Administration's pressure on BP was unAmerican. Paul's comment was widely seen to mean that government should stay out of corporate business- that government has no role in this disaster. To the contrary, Paul submitted to Face the Nation that he does think that BP should be help accountable to clean up the mess, but that the language Salazar used, specifically the 'boot on the neck' part, paints the government as the enemy of business and is too harsh for American politics.
I agree with this sentiment. After all, it is largely business that allows countries to maintain treasury. Dangerous, but true, and worth common respect.
The second comment, about mine accidents, Paul defended and apologized for. Coal mining is a large industry in Kentucky, but also a source of severe environmental degradation and health risks to workers and surrounding communities. After a tragic mine accident in Kentucky, where two coal miners were killed, Paul made this statement on Good Morning America, "We had a mining accident that was very tragic, but then we come in and it’s always someone’s fault. Maybe sometimes accidents happen." He apologized, admitting that saying 'accidents just happen' does not "make anyone feel better", but reasserted that, as a medical doctor, he knows there are certain risks to every activity, and "Sometimes accidents just happen." The trouble is, in the case of mine accidents, there are usually multiple lapses in safety regulations that lead to tragic deaths. Mining is part of big energy and has had corruptive forces on Capital Hill since they started digging into the mountains. Looks like coal may be one of Paul's corrupting influences. "I guess I'll learn to choose better words," Paul said, concluding the matter with Schieffer.
The program went on to ask Paul and colleague Charles Shumer, D-New York, what they can agree to in Obama's Deficit Reduction Commission report. In the spirit of compromise, Paul suggests that conservatives will have to reduce military spending and Democrats will have to reduce domestic spending. He eludes that military and entitlement spending are "exploding problems, getting worse as we speak."
This is definitely true.
However, Paul then goes on to say that he will endorse no new taxes, even a .10 increase in the gas tax, because the deficit should be reduced by cuts in spending and not increases in taxes. Paul wants to "decrease the inefficient sector of our economy" - the government, and keep as much money as possible in businesses.
I wonder if Paul is for eliminating tax cuts meant to spur business growth, or should businesses pay no taxes? When are taxes appropriate and how much? That is the question at the core of this matter. Paul also says he would not favor eliminating the Mortgage Interest Rate tax credit for homeowners, calling that tactic a tax increase. Following this logic, Paul would not support eliminating tax breaks for businesses to spur jobs. So, again, when is taxing and tax forgiveness appropriate? Once a tax break is given must it always remain permanent, because to re-inact the tax would be leveraging a tax increase? Things just aren't that simple, Tea Party Patriots. Paul goes on to endorse increasing the retirement age, but in a much shorter time frame than the Committee suggests, and decreasing government payrolls by 10%.
In a counterproductive closing comment Paul said he would compromise, "not where you increase taxes, but where you cut spending." Unfortunately, the Commission says that to shrink the government to 21% of GDP (which is one percent over where Paul wants it), cuts in spending must be accompanied by strategic tax increases.
Shumer, the Dem. spokesperson in this debate (and head of Dems messaging if Reid stays in leadership) would not make any specific comment on where he or Dems would agree to cut/tax, saying that making specific statements now undermines cooperation later. The existence of the bi-partisan deficit commission and their findings are enough of a signal to me that the Obama admin. is serious about decreasing the deficit in a bi-partisan fashion.
Rand Paul corrected and apologized for two of his most widely criticized comments. Bob Schieffer, Face the Nation's host opened the topic by asking Rand Paul what he thinks the Federal Government is, or is supposed to be, considering his comment about the Obama administration putting so much pressure on BP to take responsibility for the oil spill. The comment from the Administration was made by Interior Secretary Ken Salazar, who said, "...our job is to keep the boot on the neck of" BP to ensure it meets its obligations."
Paul, in response, said that the Administration's pressure on BP was unAmerican. Paul's comment was widely seen to mean that government should stay out of corporate business- that government has no role in this disaster. To the contrary, Paul submitted to Face the Nation that he does think that BP should be help accountable to clean up the mess, but that the language Salazar used, specifically the 'boot on the neck' part, paints the government as the enemy of business and is too harsh for American politics.
I agree with this sentiment. After all, it is largely business that allows countries to maintain treasury. Dangerous, but true, and worth common respect.
The second comment, about mine accidents, Paul defended and apologized for. Coal mining is a large industry in Kentucky, but also a source of severe environmental degradation and health risks to workers and surrounding communities. After a tragic mine accident in Kentucky, where two coal miners were killed, Paul made this statement on Good Morning America, "We had a mining accident that was very tragic, but then we come in and it’s always someone’s fault. Maybe sometimes accidents happen." He apologized, admitting that saying 'accidents just happen' does not "make anyone feel better", but reasserted that, as a medical doctor, he knows there are certain risks to every activity, and "Sometimes accidents just happen." The trouble is, in the case of mine accidents, there are usually multiple lapses in safety regulations that lead to tragic deaths. Mining is part of big energy and has had corruptive forces on Capital Hill since they started digging into the mountains. Looks like coal may be one of Paul's corrupting influences. "I guess I'll learn to choose better words," Paul said, concluding the matter with Schieffer.
The program went on to ask Paul and colleague Charles Shumer, D-New York, what they can agree to in Obama's Deficit Reduction Commission report. In the spirit of compromise, Paul suggests that conservatives will have to reduce military spending and Democrats will have to reduce domestic spending. He eludes that military and entitlement spending are "exploding problems, getting worse as we speak."
This is definitely true.
However, Paul then goes on to say that he will endorse no new taxes, even a .10 increase in the gas tax, because the deficit should be reduced by cuts in spending and not increases in taxes. Paul wants to "decrease the inefficient sector of our economy" - the government, and keep as much money as possible in businesses.
I wonder if Paul is for eliminating tax cuts meant to spur business growth, or should businesses pay no taxes? When are taxes appropriate and how much? That is the question at the core of this matter. Paul also says he would not favor eliminating the Mortgage Interest Rate tax credit for homeowners, calling that tactic a tax increase. Following this logic, Paul would not support eliminating tax breaks for businesses to spur jobs. So, again, when is taxing and tax forgiveness appropriate? Once a tax break is given must it always remain permanent, because to re-inact the tax would be leveraging a tax increase? Things just aren't that simple, Tea Party Patriots. Paul goes on to endorse increasing the retirement age, but in a much shorter time frame than the Committee suggests, and decreasing government payrolls by 10%.
In a counterproductive closing comment Paul said he would compromise, "not where you increase taxes, but where you cut spending." Unfortunately, the Commission says that to shrink the government to 21% of GDP (which is one percent over where Paul wants it), cuts in spending must be accompanied by strategic tax increases.
Shumer, the Dem. spokesperson in this debate (and head of Dems messaging if Reid stays in leadership) would not make any specific comment on where he or Dems would agree to cut/tax, saying that making specific statements now undermines cooperation later. The existence of the bi-partisan deficit commission and their findings are enough of a signal to me that the Obama admin. is serious about decreasing the deficit in a bi-partisan fashion.
Monday, November 15, 2010
Should Pelosi and Reid remain leaders in the Democratic Party?
I don't think so. They have not stood the test of leadership. In the last weeks of the health care debate accusations flew that Obama was not leading his party, that he needed to show more face on capital hill to influence the party to stand their ground and pass the bill. Rallying Democratic Party members on the hill for the Presidents agenda is the job of the Majority/Minoity Leaders in Congress.
Issue after issue, it seemed the Democrats were afraid of their own shadow. That fear does illustrate a lack of leadership, but I argue, not on the Presidents Part. The Dems should have had no problem feeling confident about the Presidents agenda, and legislation on the floor, considering the circumstances which propelled them to victory in 2008. Astonishingly, Obama's supporters, both citizens and Congresspeople abandoned him as outrageous criticisms flew through the House and Senate floors. Am I the only one who watches C-Span? Dems did not refute publicly the cries from the right about Socialism and even the correlations between Obama's policy actions and the coming of the Anti-Christ. Yes, on our Senate and House floors, these were the debates being pummeled into a desperate representative body. Desperate on the Republican side to take the power it so tactically gained in Bush's neo-conservative decade; and desperate on the Democrats side to make the moves necessary to, as SNL Weekend Update anchor would say, "Fix it!" I know there were Republicans desperate to 'fix it' as well, but they were not the vocal majority. Where were Pelosi and Reid on combating this irrational onslaught of criticism? Republican fear tactics and rhetoric worked on the Dems in Congress, and they seamlessly passed it on to their constituents. Bad job Pelose and Reid, you should've been there to FIGHT for your President, and your constituents.
Nancy Pelosi and Harry Reid are nice. That's nice. But, the Republicans have been mean and dirty. If Democrats want to get control of the national agenda, they need to control unruly Republicans with a strong hand, and if necessary a big stick.
One thing the Republicans did cunningly in the last election was put specific faces on the failures of the government- Nancy Pelosi and Harry Reid. It worked for two reasons; one, it gave the Republican rhetoric traction. For people listening to soundbites, who do not really follow politics, a reference to a specific person for blame carries more weight than targeting the Democratic Party as a whole; and two, it destabilized the Democrats. Being connected with Pelosi and Reid drove down support for fellow Democratic candidates, so many Dems defected from their 'leadership'. Of course, considering their lack of leadership to begin with, I am not sure this could've been avoided even sans the Republican campaign to "Fire Pelosi and Reid!"
I argued during the Bush administration for the very same strategy. What happened during the Bush years was extremely complicated, and blaming the Bush Administration or Republicans as a whole, did nothing to help the people understand cause and effect. If opponents of Bush era policies pinned those policies to their brain masters- Rove and Cheney, then I propose that we would not have seen so much of Rove and Cheney's faces on FOX news criticizing Obama's policy actions. May I just insert here- What gall! I assume this tactic is unprecedented, though I am not sure.
In conclusing, a final reason why Pelosi and Reid should be replaced is just for sheer convenience. The bad feelings left after the viciousness of the last congress and election need to be minimized. Compromise with Pelosi and Reid will be too difficult for the 112th congress.
Issue after issue, it seemed the Democrats were afraid of their own shadow. That fear does illustrate a lack of leadership, but I argue, not on the Presidents Part. The Dems should have had no problem feeling confident about the Presidents agenda, and legislation on the floor, considering the circumstances which propelled them to victory in 2008. Astonishingly, Obama's supporters, both citizens and Congresspeople abandoned him as outrageous criticisms flew through the House and Senate floors. Am I the only one who watches C-Span? Dems did not refute publicly the cries from the right about Socialism and even the correlations between Obama's policy actions and the coming of the Anti-Christ. Yes, on our Senate and House floors, these were the debates being pummeled into a desperate representative body. Desperate on the Republican side to take the power it so tactically gained in Bush's neo-conservative decade; and desperate on the Democrats side to make the moves necessary to, as SNL Weekend Update anchor would say, "Fix it!" I know there were Republicans desperate to 'fix it' as well, but they were not the vocal majority. Where were Pelosi and Reid on combating this irrational onslaught of criticism? Republican fear tactics and rhetoric worked on the Dems in Congress, and they seamlessly passed it on to their constituents. Bad job Pelose and Reid, you should've been there to FIGHT for your President, and your constituents.
Nancy Pelosi and Harry Reid are nice. That's nice. But, the Republicans have been mean and dirty. If Democrats want to get control of the national agenda, they need to control unruly Republicans with a strong hand, and if necessary a big stick.
One thing the Republicans did cunningly in the last election was put specific faces on the failures of the government- Nancy Pelosi and Harry Reid. It worked for two reasons; one, it gave the Republican rhetoric traction. For people listening to soundbites, who do not really follow politics, a reference to a specific person for blame carries more weight than targeting the Democratic Party as a whole; and two, it destabilized the Democrats. Being connected with Pelosi and Reid drove down support for fellow Democratic candidates, so many Dems defected from their 'leadership'. Of course, considering their lack of leadership to begin with, I am not sure this could've been avoided even sans the Republican campaign to "Fire Pelosi and Reid!"
I argued during the Bush administration for the very same strategy. What happened during the Bush years was extremely complicated, and blaming the Bush Administration or Republicans as a whole, did nothing to help the people understand cause and effect. If opponents of Bush era policies pinned those policies to their brain masters- Rove and Cheney, then I propose that we would not have seen so much of Rove and Cheney's faces on FOX news criticizing Obama's policy actions. May I just insert here- What gall! I assume this tactic is unprecedented, though I am not sure.
In conclusing, a final reason why Pelosi and Reid should be replaced is just for sheer convenience. The bad feelings left after the viciousness of the last congress and election need to be minimized. Compromise with Pelosi and Reid will be too difficult for the 112th congress.
Sunday, November 14, 2010
No Blog Sundays
No Blog on Sundays, folks. Sundays are all family, all the time:)
Coming next week:
More on the economy, with currency and trade deficits; and my view on whether Nancy Pelosi and Harry Reid should maintain their leadership in the Democratic Party.
Coming next week:
More on the economy, with currency and trade deficits; and my view on whether Nancy Pelosi and Harry Reid should maintain their leadership in the Democratic Party.
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