Letters to the Editor
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A Few Economic Myths
Rising home prices are a benefit to consumers. Rising home prices do not contribute to personal wealth, they are inflationary, like every other price increase, they constitute a tax on wealth.
Stimulating consumer demand, is the same as stimulating corporate spending, and will add jobs to the economy. The downsizing in American corporations has been going on for twenty years. The reason this recession won't end, is that there is not enough (demand) money coming into American households to meet the supply of products available.
There is still demand for credit. There is a bear market in credit, which is why interest rates keep falling. People who sell credit are being continually required to lower the price. The market solution would be to allow demand and supply to level off, but the Federal Reserve intervenes on the behalf of buyers, with the equivalvent of credit price controls. Price controls don't work.
The Federal Reserve can print money and reflate this economy. Bernanke has by now wished he had never said that. How do you get cash money into the economy? The process by which credit is first created, out of thin air, come about through selling bonds and extending credit to the banks. That new debt is then monetisized. To circumvent the first steps, and skip to the last step, means you simply hand money to people without recording a debit on the other side of the balance sheet? That requires FISCAL policy, and is in the control of the COngress. Monetary policy may be the Fed's particular authority, but it requires a number of steps, and handing money to banks, much less individuals, violates all of them. The Fed can't simply give money away, it can only facilitate credit, and when no one wants that credit any longer, they are foolish to continue.
This won't end soon. Even those who believe we can behave as badly as the authorities in Argentina, haven't taken account of the fact that there was a global economic system to back up Argentina. Who's got our back?
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This is your Creditor speaking
Dear Sirs,
Speaking on behalf of one of the East Asian economies whose lending has financed and indeed enabled your lavish lifestyles, we write to you as a concerned friend and long-standing business partner. We are starting to suspect that you are no longer ... how shall I put it ... good for the money. Things were still palatable under the previous Administration (what with a budget surplus and all) but ever since you collectively decided that unusually dim cowboys and their cronies best represented what you stand for as a nation, we may have to seriously reconsider our options. In particular, with the rise of China and India (each representing industrial powerhouses and potentially huge markets) there are now real alternatives.
However, we would hate to leave a friend in the lurch, particularly in their moment of need. So we are willing to consider continuing to keep up the credit lifeline (albeit reduced). However, quid pro quo, we would like to see some reciprocity on your part. We have a few pet concerns that you might wish to address, and which will go a long way in convincing us to hold on to our greenbacks. Specifically:-
a. Your contribution to climate change is embarassing. Your unwillingness to change is galling. While the rest of the world has long since realised the economic and ecological sense of driving smaller cars, you still insist on SUVs as a God-given right. We, unfortunately, have to share this planet with you, and the rising sea levels are making us uneasy. Please pull your own weight. And don't tell us you aren't signing Kyoto because you are 'pursuing technological solutions'. In the final analysis, your lifestyles are unsustainable (economically or ecologically) and some short term pain and long term lifestyle adjustments are inevitable. I believe the term in the American venacular is "Suck it Up";
b. Please refrain from invading foreign countries if your intelligence is faulty, or you do not have the stamina to commit to a decades-long reconstruction project. And hire better reconstruction experts. And intelligence experts. And foreign policy experts (READ: NO NEOCONS). Actually, what say you fire all the hacks currently on staff and start from scratch?
c. We understand that you have a long-term committment to Israel, and we admit that they are easily the most civilized nation in the neighbourhood. However, please give the Palestinians a fair shake.
d. Quit the democracy doubletalk. Its very hard for us to stifle our sniggering when you talk about being the champion of democracy while having President Musharraf at your side. Or when you punish countries who have the nerve to vote the wrong way (Hamas). Or with your track record in Central and South America. What say you come clean and admit that you are the champion of your own national self-interests and will only intervene for the greater good if there are no negative reprecussions. Its quite alright. Thats what we do too, we just don't have the audacity to claim otherwise.
We are confident that you were simply misguided by your current leadership. We understand. We've had our share of bad leaders too. Granted, our bad leaders were usually foisted on us at the point of a gun and occasionally with outside help(BTW, tell your CIA friend to stop looking nonchalant. He's not fooling anyone). We don't usually vote for them. But, hey, no one is perfect. The important thing is you realise the error of your ways and commit to your rehabilitation ... or else.
Regards,
The Fellas you owe SH*T loads of money to
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we are dumbass
Americans have been 'indulging the inner dumbass' since Reagen was elected. A vanity war (Grenada), tax cuts for the rich, deficit spending, corruption (Iran Contra) - that was the model for the incomparably incompetent Dubya.
We have been avoiding the serious issues for decades. The Republican party is an intellectual joke (on us). The Democrats aim to use the Republican play book with Wall Street and they turn the Rovian tactics on each other.
Our political system is paralyzed and corrupt.
The whole Clinton impeachment was just a demo of how spin replaced integrity - all the Republican adulterers and closet cases trying to hang a Dem on the basis of 'moral values'. Sick.
So can we deal with real problems?
Katrina? Iraq?
Depression?