Tag: Housing bubble

May 22 2013

John T. Harvey: Austerity Leads To… Austerity!

In the real world and the reality based community, there is talk about austerity from people who understand the nuances of it and macroeconomic accounting identities. They point out the undeniable fact that there is austerity in the UK, the Eurozone, and yes, the United States. This interactive chart will show this, though I can’t embed it here. So instead, I will add a small snapshot of some of the data.

Net spending in the United States has steadily declined since it rose from 2008 to 2009 when the inadequate stimulus(only $500 billion of direct spending at about 1.5 percent of GDP) was passed. Stimulus packages don’t exist in a vacuum, and you have to count all government spending, which basically shows how exactly the numbers, including the stimulus as this does, didn’t close the output gap. And since the numbers didn’t, that is actually austerity. After all, spending went up in the UK and Eurozone from 2008 to 2009 as well, and since then, their spending has declined. Even though it is on a higher level, it is being cut at an even more alarming rate with its fate set to go below our miserable level by 2017.

I have pointed this out before. Sometimes I get frustrated, and point this out harshly, because some pride themselves on denying this established data to support whatever a politician in their party says or does. I don’t know why. Denying reality is not going to give resources to people who need them. There is a reason my last diary has been cited by the reality based Post Keynesian MMT community, in which I am truly grateful for and humbled by; it is the truth.

The real economy of jobs and wages continues to go nowhere thanks to the lack of deficit spending and an illogical debate in DC about how much austerity we need to appease the invisible bond vigilantes and confidence fairies. It is neoliberal deficit terrorist economic insanity based on lies. And on that note, it is my pleasure to republish a piece by someone in the reality based economic community whom I can now proudly say is a friend of mine, Post Keynesian MMT economist John T. Harvey. He, once again, brings clarity to these matters in a way that only he can.  

Nov 12 2009

Government efforts at re-inflating the housing bubble may have peaked

  After posting massive losses, yet again, Fannie and Freddie have warned that they will be needing another round of bailouts in the near future.

  Fannie Mae and Freddie Mac, already reeling in red ink, are warning they could face additional losses from the weakening condition of mortgage-insurance companies.

  Fannie and Freddie together have required capital injections from the Treasury of $112 billion since the government took them over through conservatorship last year. Their need for government support would have been greater without collecting on claims from mortgage-insurance companies. Fannie and Freddie have received payouts of $2.3 billion and $658 million, respectively, from mortgage insurers through September this year.

  But as conditions for mortgage insurers deteriorate, Fannie and Freddie have warned that their claims against the insurers may not be paid in full.

 

Aug 29 2009

Ben Bernanke Saved Whose World?


Secrets Of The Federal Reserve

President Obama has re-nominated Ben Bernanke to sit as Chairman of the Federal Reserve for another four-year term, following glowing praises of Bernanke’s supposed financial genius in most of the media for his handling of the current economic crisis, while Obama himself has suggested that Bernanke helped save the US from another Great Depression.

Paul Amery commented the other day at Seeking Alpha that:

Federal Reserve Chairman Ben Bernanke’s speech to the Jackson Hole symposium, delivered on Friday, has already been dubbed a “we saved the world” declaration by some commentators.    

In fairness to Bernanke, nowhere in his remarks does he make such a grandiloquent claim, unlike British Prime Minister Brown, who did just that last December in the U.K. parliament.

However, underlying Bernanke’s narrative of events is the U.S. central bank’s conviction that the panic that hit global markets last fall was a kind of act of God, a phenomenon that was “collectively irrational”, and which the Fed contained by its policy of “lending freely against sound collateral.”

Is this fair, or does Bernanke’s speech signify that U.S. policymakers have understood nothing and learned nothing?

[snip]

Bernanke asserts in the final paragraph of his speech that “we have avoided the worst”. He may be right, but I wouldn’t bet on it. I’m more inclined to agree with Willem Buiter, who wrote recently in the Financial Times that “[t]he US Treasury, the Congress, the Fed and the other financial regulators have, through their behaviour since August 2007, confirmed and re-inforced the incentives for excessive risk taking by crossborder banks and any other financial institution deemed too systemically important to fail. The groundwork for the next financial boom and bust cycle, worse than what we are just emerging from, has been put in place.“

So exactly whose world has Bernanke “saved”, if anyones?

Jun 26 2009

“The great vampire squid wrapped around the face of humanity”

Writing in the the current print issue of Rolling Stone, journalist Matt Taibbi exposes Goldman Sachs, the “world’s most powerful investment bank”, for the “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money” that it truly is.

In “The Great American Bubble Machine”, Taibbi outlines how Goldman Sachs has either influenced, shaped, or simply created five market bubbles since 1929 and how now, the bankers are planning to use the greenhouse gas emissions cap-and-trade scheme as their penultimate bubble.

While I do not agree with some of the conclusions he makes, there is enough in his 9,700 word essay that can make the blood boil.

“The first thing you need to know about Goldman Sachs is that it’s everywhere,” he begins. But, “any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything.”