By Monty Pelerin, on February 24th, 2010
In Jimmy Carter’s reign, the Wall Street Journal editorialized about “Ratcheting to Ruin.” The title derived from the fact that each cycle high in unemployment was higher than previous ones, and each cycle high in inflation was also. “Stagflation” was coined to describe what up until then was believed to be impossible in the Keynesian world. This period ushered in a new era in both politics and economics. Carter was replaced by Reagan, and Keynes was replaced by Friedman.
Thirty years later Keynes is back in vogue, Obama has ascended to the White House and times are again reminiscent of the Carter era. The economy is awful. Fear and dissatisfaction prevail. Politicians are held in contempt. There is one major difference – Carter did not face an “ides of March” event.
In Shakespeare’s Julius Caesar, a soothsayer warned Caesar to “beware the Ides of March.” The prescient warning did not help Caesar. As Obama approaches his March moment, no warning can change his fate.
Ben Bernanke promised to end Quantitative Easing (the printing of money to stimulate the economy and fund the deficits) by the end of March. Some believe his commitment was a “campaign promise” to ensure his Senate reconfirmation. Others believe it was a real commitment, necessary to maintain a stable dollar. Shortly, the world will find out.
Mr. Bernanke, quite unintentionally and through no fault of his own, will be Obama’s Brutus, regardless of his decision. To understand why, some numbers are necessary. Government needs funding this year
Continue reading Obama’s “Ides-of-March” Moment is Near
related_posts();
By Monty Pelerin, on February 18th, 2010
Image via Wikipedia
Nothing has changed in Washington as evidenced by the Reuters article below.
The government is still run by the banking industry. What happened to the good old days when you bought a politician and he didn’t stay bought? That was the kind of corruption that worked, at least partially for the people. They took money, but sometimes they turned on their benefactors. Apparently not so much any more.
Is it because the banking industry pays so well for their support? Is it because touching these sacred cows would stir up such a mess that would destroy many politicians? Or is it just that our pols are comfortable the way things are and don’t want any changes?
The answers to these questions are unknown. What is known is that without putting something back in place comparable to the old Glass-Stegall rules, we have solved nothing.
If we ever get out of this mess, we will be right back on the road that led us here.
Washington is a disgrace!
The Volcker Rule: It’s not happening
Feb 16, 2010 14:07 EST
2010 election | financial regulatory reform | Paul Volcker
A few points:
1) The much-hyped Volcker Rule proposal is failing fast in the U.S. Congress. But Paul Volcker himself probably isn’t that surprised. The former Federal Reserve chairman joked he was “just a photo op” even after President Barack Obama’s public embrace of his proposal to limit bank proprietary trading. More evidence that the moment for sweeping reform has probably passed.
2) The
Continue reading Washington Cesspool
related_posts();
By Monty Pelerin, on December 14th, 2009 Are the adults starting to stir? In a post entitled Volcker a Tipping Point? written on September 21, 2009, I speculated whether or not a particularly influential grownup, Paul Volcker, was breaking with the Obama Administration. On subsequent occasions, Volcker expressed various degrees of disagreement/dissatisfaction. According to Barry Ritholtz: “Mr. Volcker has become quite vocal lately. Be sure to check out the interview he has with Der Spiegel and in Monday’s WSJ.”
Undoubtedly many business figures are disgusted with economic policies, but few are willing to speak up. Less than a month after Volcker intially spoke, David Farr, CEO of Emerson Electric, bravely (foolishly?) blasted away with both barrels:
“Washington is doing everything in their manpower, capability, to destroy U.S. manufacturing,” Farr said today in Chicago at a Baird Industrial Outlook conference. “Cap and trade, medical reform, labor rules.”
“I’m not going to hire anybody in the United States. I’m moving. They are doing everything possible to destroy jobs.”
“We
Continue reading Grownups, Principles and Revolt
related_posts();
By Monty Pelerin, on September 26th, 2009
REVIEW & OUTLOOK
SEPTEMBER 26, 2009
Too Big to Ignore
Volcker says Treasury’s reform will lead to future bailouts. He’s right.
President Obama’s economic advisers are struggling to sell their financial reform plan to . . . an Obama economic adviser. Paul Volcker, the Democrat and former Federal Reserve chairman who worked with President Reagan to slay inflation in the 1980s, now leads President Obama’s Economic Recovery Advisory Board. He warned in Congressional testimony Thursday that the pending Treasury plan could lead to more taxpayer bailouts by designating even nonbanks as “systemically important.”
“The clear implication of such designation whether officially acknowledged or not will be that such institutions . . . will be sheltered by access to a federal safety net in time of crisis; they will be broadly understood to be ‘too big to fail,’” Mr. Volcker told Congress.
Rather than creating broad bailout expectations destined to be expensively fulfilled, the former Fed chairman wants Washington to draw a tighter circle around commercial banks with insured deposits. Those inside the circle get heavy oversight and are eligible for assistance during a crisis. Assumptions that various other firms also enjoy the federal safety net “should be discouraged,” said Mr. Volcker.
We don’t agree with all of Mr. Volcker’s prescriptions—nor he with ours—but on too big to fail he’s exactly right. As he also told Congress, regulators are unlikely to correctly guess which firms will pose systemic risk, and the implicit protection by taxpayers could put firms not
Continue reading WSJ on Volcker
related_posts();
By Monty Pelerin, on September 21st, 2009 Has a grownup finally shown up?
Paul Volcker dropped a bombshell on Friday. The importance of his pronouncement is less economic than political. It appears to indicate a serious rift between him and the Administration. A post by Larry Doyle provides some details and analysis of the economics. Here is an extract from Doyle’s piece:
Mr. Volcker takes on the White House and Congress with his proposal. We know Volcker is no favorite of Larry Summers. Knowing the explosiveness of his proposal, Volcker is not bashful in addressing the discomfort his proposal would create for the Washington insiders who are in Wall Street’s pocket. The WSJ sheds further light on this point:
Mr. Volcker said he would appear before Congress next week to discuss his views in more detail. A Treasury Department spokesman declined to comment.
Asked after his speech if his comments represent a break with the White House’s proposal, he replied: “Nothing I said today should be a surprise” to the administration.
In the future, this announcement may viewed as the beginning of the end of Obama’s presidency. While other factors will certainly play roles, the importance of this event is easily overlooked. The event’s importance derives as much from the messenger as it does the implications of the message. It is the first shot fired from a highly qualified and credible figure, who also happens to be on the Obama team. First some background on the messenger, and then an explanation as to
Continue reading Volcker a Tipping Point?
related_posts();
|
Friedrich von Hayek
Friedrich von Hayek founded the Mont Pelerin Society.
“Monty Pelerin” is a pseudonym chosen by this blogger to convey general agreement with the philosophy, goals and spirit of the Mont Pelerin Society. No other connection exists between the blogger and the Society.
|
