Deficit Hawks Ignorant

 

 

Paul Krugman, Laureate of the Sveriges Riksban...
Paul Krugman, Laureate of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2008 at a press conference at the Swedish Academy of Science in Stockholm (Photo credit: Wikipedia)

 

Deficit Hawks Ignorant

 

I’m now 57 years old and the tale of imminent fiscal catastrophe begins with my awareness of its use by Reagan who ran on fixing the deficit and then cut taxes, of course, increasing the debt. And that is how it has always gone. It’s always a apocalyptic event closing in on us like a relentless tsunami, unless there’s an opportunity for a tax cut, in which case, the deficit hawks or deficit scolds (whatever term you prefer) go silent. They are only loud when talking about cutting social programs. They maintain a studious silence when tax increases are discussed. And do you know why, because deficits can be a problem but for these people, it’s a good problem because it’s a club they can pick up or put away as need arises. When there can be tax cuts, the club is put away and when there can be cuts in the safety net, the club can be wielded fiercely and recklessly.

 

They’re not ignorant. They know exactly what they’re doing. It’s just a tactic.

 

James Pilant

 

Krugman: Deficit scolds “literally have no idea what they’re talking about” – Salon.com

 

http://www.salon.com/2013/10/25/krugman_deficit_scolds_literally_have_no_idea_what_theyre_talking_about/

 

Noting the continued endurance of low levels of inflation and low interest rates, which should contradict the expectations of anyone buying into the looming fiscal catastrophe narrative, Krugman ridicules his opponents for having been so wrong for so long, seemingly without ever giving their beliefs a second thought. “It’s actually awesome, in a way, to realize how long cries of looming disaster have filled our airwaves and op-ed pages,” Krugman writes. He then goes on to cite an Alan Greenspan op-ed in this vein, one that was written nearly three and a half years ago, but that for all intents and purposes could have been published just yesterday.

 

via Krugman: Deficit scolds “literally have no idea what they’re talking about” – Salon.com.

 

From around the web.

 

From the web site, Duane Graham.

http://duanegraham.wordpress.com/2013/02/26/ben-bernanke-channels-paul-krugman/

I have been watching Ben Bernanke, chairman of the Federal Reserve Board, testify this morning before the Senate Banking Committee.

 

He has sounded a lot like Paul Krugman.*

 

Krugman, an economist of distinction who also happens to be a liberal, has been telling anyone who will listen that all the scary talk about the national debt is misplaced, considering that we have a genuine jobs crisis going on right now.

 

Bernanke said this morning:

 

High unemployment has substantial costs, including not only the hardship faced by the unemployed and their families, but also the harm done to the vitality and productive potential of our economy as a whole.

 

Ya think? He also said—again sounding like Paul Krugman:

 

In terms of the near-term recovery, there is a sense in which monetary and fiscal policy are working at cross purposes. To some extent, the fiscal policy decisions being made are mismatched with the timing of the problem. The problem is a longer-term problem, and should be addressed over a longer time frame in a way that, to the extent possible, it does no harm to the ongoing recovery.

 

In other words, the actions of Congress (fiscal policy—focusing only on long-term debt) are working against the Fed’s actions (monetary policy—buying government bonds now in order to help stimulate the economic recovery) and the result of those “cross purposes” is sluggish growth and needlessly high unemployment.

 

 

 

Manufacturing Renaissance?

Le vitrail de la renaissance
Le vitrail de la renaissance (Photo credit: Geoffroy65)

Manufacturing  Renaissance?

Is there or isn’t there a manufacturing Renaissance? I would love to give you a simple yes or no response but the fact is, it is just too early to tell. There is a wonderful chart provided at http://www.slate.com/blogs/moneybox/2013/07/26/manufacturing_rennaissance_is_it_really_happening.html from the magazine, Slate, and the article by Matthew Yglesias, that does tend to indicate such a Renaissance is happening. But that is the best evidence I have seen so far, and there is a lot of disagreement.

A manufacturing Renaissance would a game changer in many areas of corporate social responsibility. The idea that global competition is inevitably destructive of the middle class, labor unions and government regulation would be even less intellectually persuasive than it is now.

It would be wonderful for the nation. It would empower American firms and the nation more generally in their dealings with the world. It would increase American revenues and give American workers more income and more bargaining power.

So, I can be hopeful but the evidence is still lacking that this event is actually happening.

James Pilant

(But the idea does have its adherents) –

Monsters Abroadhttp://monstersabroad.wordpress.com/tag/manufacturing-renaissance/

A regular theme in this blog has been that America’s strategic prospects are being revived by the dynamism of its private sector even as China faces a more problematic future.  As earlier posts (here, here and here) have outlined, the marked surge in U.S. oil and natural gas production that has transformed the country’s energy outlook over the last few years promises to have far-reaching economic and geopolitical ramifications.  The bonanza of low-cost energy, which the Wall Street Journal dubs “Saudi America”, has also given the U.S. manufacturing sector a significant competitive advantage.

Separate from the energy boom but fortifying its manufacturing effects are America’s innate advantages in what is becoming known as the “third industrial revolution” – one that is powered by high-skill labor as well as seminal progress in the areas of artificial intelligence, robotics, nanotechnology, composite materials, and “additive manufacturing” or three-dimensional computerized manufacturing.

From around the web.

From the web site, Inside Public Minds.

http://insidepublicminds.wordpress.com/2013/05/03/usa-made-manufacturing-renaissance/

If so, this could mean good news for the economy. Manufacturing represents 67% of private-sector research and development (R&D) spending and 30% of the country’s productivity growth. Every $1 of manufacturing activity returns $1.48 to the economy. For the first time in more than a decade, the number of factory jobs has increased instead of decreased. American productivity growth, compressed wages, and higher energy costs have contributed to the return of manufacturing jobs in the U.S. Some of America’s largest blue chip multinationals, like Ford, GE, and United Technologies, are headed back to the states.

From the web site, Barberbiz.

http://deanbarber.wordpress.com/2013/04/07/is-a-manufacturing-renaissance-real-or-hype/

For awhile there, I was feeling like a voice in the wilderness. I was going against the tide and still am to some degree. But I no longer feel so much alone.

Now others, with more credibility than me, are saying what I’ve been saying in this blog for more than a year. It was a Wall Street Journal last week from which I felt some vindication. Here’s the headline: “Signs of Factory Revival Hard to Spot.”

And here is the first sentence or the lead, which states it better than I ever have: “The idea that American manufacturing is on the cusp of a renaissance is everywhere these days – except in the hard numbers.”

As my friend Paulie on the Lower East Side would say, “badda bing, badda boom.”

From the web site, America and the Global Economy.

http://americaandtheglobaleconomy.wordpress.com/tag/manufacturing-2/

It is still unclear if the “Manufacturing Renaissance” will generate enduring consequences for the U.S. economy—an increase in U.S. industrial production has yet to occur. According to the Federal Reserve, industrial production fell by 0.5 percent in April. Furthermore, although the total number of manufacturing jobs in the United States has increased by 520,000 since January 2010, only 50,000 of those jobs are due to re-shoring. It is therefore disputable as to whether efforts to bring manufacturing back to the U.S. will contribute to profound and lasting benefits for the U.S. economy, or if companies’ current efforts in this capacity will merely amount to a short-lived phase.

From the web site, paco manufacturing’s blog.

http://pacomfg.com/blog/2011/06/21/outsourcing-doesn%E2%80%99t-mean-offshoring-at-least-not-by-us/

Back in May, an analysis by The Boston Consulting Group, was released stating that the rise in China’s labor cost could see a “Manufacturing Renaissance” within the United States, particularly within certain states.  It was an uplifting article as it stated, “We expect net labor costs for manufacturing in China and the U.S. to converge by around 2015.  As a result of the changing economics, you’re going to see a lot more products ‘Made in the USA’ in the next five years.”  The article goes on to state that a number of companies have already begun to rethink their production locations and supply chains for goods destined to be sold in the U.S.  It looks as if a window of opportunity is opening within the manufacturing sector of the U.S. economy, which should be given serious consideration by all.

From the web site, Ryan’s Writing House.

http://ryanmhenry.wordpress.com/2013/04/14/manufacturing-growth-renaissance-or-return-to-normalcy/

In order for the manufacturing sector to truly begin to grow again in the United States, we have to understand where the growth is and promote that. The strengths that we have here is that we are located in a major consumer base, and can produce extremely high quality goods faster than pretty much anywhere else. If the US focuses more on higher end manufacturing, it can still take advantage of the fact that every dollar of manufacturing activity returns $1.48 to the economy, without losing sight of our strengths. This also means that we have to make significant changes to our education system, to ensure that it is giving out the type of education that people need to be successful in this increasingly globalized game.

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Austerians Create Unemployment

 

Two Standards of Justice
Two Standards of Justice

Austerians Create Unemployment

Austerity Has Cost The U.S. Economy 2.2 Million Jobs: Study

Austerian doctrine states that if we can get the deficit down even during periods of economic slowdown and massive unemployment, we shall see an economic upturn. So far this hasn’t happened anywhere on earth. (There are some claims that two former states of the Soviet Union have done okay with it. I don’t believe that. If you want to, that’s okay. It’s just that I don’t go to the former Soviet Union for my economic data.)

But they have managed to move the economy. Their philosophy has resulted in the destruction of 2.2 million jobs and that’s only in the United States. Ideas move the world, and here we have solid evidence that bad ideas can move the world in the wrong direction.

James Pilant

The Real Cost of Austerity

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Two Standards of Justice

Two Standards of Justice

Senator Elizabeth Warren
Senator Elizabeth Warren

Elizabeth Warren: Banks Get Wrist Slaps While Drug Dealers Get Jail

During a Senate Banking Committee hearing about money laundering, Warren (D-Mass.) grilled officials from the Treasury Department, Federal Reserve and Office of the Comptroller of the Currency about why HSBC, which recently paid $1.9 billion to settle money laundering charges, wasn’t criminally prosecuted and shut down in the U.S. Nor were any individuals from HSBC charged with any crimes, despite the bank confessing to laundering billions of dollars for Mexican drug cartels and rogue regimes like Iran and Libya over several years.

Defenders of the Justice Department say that a criminal conviction could have been a death penalty for the bank, causing widespread damage to the economy. Warren wanted to know why the death penalty wasn’t warranted in this case.

“They did it over and over and over again across a period of years. And they were caught doing it, warned not to do it and kept right on doing it, and evidently making profits doing it,” Warren said of HSBC. “How many billions of dollars do you have to launder for drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution like this?”

Elizabeth Warren: Banks Get Wrist Slaps While Drug Dealers Get Jail

We could start by marveling at the idea that any rational human being could contemplate a fine as a penalty for international subversion? This subversion involved laundering money so it could be used anywhere in the economic system, thus, making it available to pay for bribes, drug smuggling, murder and kidnapping.

We could wander casually over to our second problem which is bankers, especially the international and investment variety, and wonder what made them so special? It is a simple matter to document one law for them and one law for the rest of us. That is the why Ms. Warrent’s example hits home. We are living by two sets of laws, one harsh and punitive and another for the banks.

Let us conclude with out third problem, where do get off allowing banks to attack foreign governments? Can there be any doubt in anyone’s mind that laundering billions in drug cartel money is the equivalent of a direct attack on the nation of Mexico and a more minor, by comparison, attack on this country, the United States?

It might be better if instead of thinking of the HSBC bank as a financial institution but more as a hostile foreign power willing to exploit our financial system for profit. I believe that is a more accurate reading of how it views its status in the world.

I don’t think Mexico feels safer after we fined HSBC. They may not feel that we have sent a message to those who would empower those who actively kidnap and murder in their country?

How would you feel about this if you lived in Mexico? Does it make you feel secure in American protection anywhere on earth?

James Pilant

 

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Mortgage Industry as the Wolf?

Mortgage Companies as Wolves
Mortgage Companies as Wolves
Mortgage Industry as the Wolf?

Foreclosure Review In New Settlement Leaves Homeowners In Banks’ Hands

For more than a year, housing advocates and their allies worried that a review of foreclosed loans managed by banking regulators was vulnerable to mortgage industry interference.

On Monday, the Office of the Comptroller of the Currency and the Federal Reserve Board — the two regulatory bodies that had taken the lead in making the nation’s largest banks accountable for rampant foreclosure fraud — announced that homeowners no longer need worry about the independence of the reviews. The regulators, essentially admitting that the reviews were too difficult to conduct, and that assigning appropriate compensation to those most harmed by the banks was no longer a priority, said the mortgage companies themselves will determine how to distribute $3.3 billion to more than 4 million homeowners forced into foreclosure in 2009 or 2010.

Housing advocates, while acknowledging that the foreclosure reviews were flawed, said they don’t understand how turning the process over to mortgage companies improves a system already insufficiently independent.

“The regulators have decided to replace the fox in the henhouse with the wolf,” said John Taylor, president of the National Community Reinvestment Coalition, a Washington-based housing nonprofit. “It is just incomprehensible to me that they could not find a third party that has the wherewithal and independence to fairly determine what the damage is to homeowners.”

Foreclosure Review In New Settlement Leaves Homeowners In Banks’ Hands

Is this good business ethics? Well, let’s look at it from the mortgage companies’ point of view. They made an enormous profit by misleading courts and mortgage holders as to who actually owned the property. In many cases, they told clients that they should skip payments, usually three payments, explaining to them that they would then qualify for government programs like HAMP. Once the home owner had skipped the payments, the bank immediately foreclosed. It terms of money, it was an incredible success.

Let’s analyze based on the Social Responsibility. Social responsibility rests on four pillars: economic, legal, philanthropic, ethical, and philanthropic.

Did the mortgage companies profit? Yes, but it depends on which stakeholders you look at. The shareholders did well. The employees did very well. The customers, at least as far as mortgage holders, were crushed. They are unlikely to ever be customers again. It is very difficult for families to buy a home in the first place. A second bite after foreclosure is not likely. The community was hurt badly by the thousands of empty homes, the collapse of the housing industry and the larger economic bust.

But let us have a special look at our last major shareholder, the regulatory agencies. They came, they saw, they said it was too difficult and gave it all back to the banks after extracting a promise that the banks will be good and give back 3.3 billion of the money they stole in the first place. It would appear the regulators are doing okay. They have shed their responsibilities to the public, which is always much easier than doing your job.

Was it legal? No. The banks violated the law thousands of times, perhaps hundreds of thousands. They lied routinely in official documents requiring affidavits and, for all intents and purposes, were in the business of stealing homes. They have, however, walked away unscathed.

Was it ethical? You have lying on a cosmic scale and theft of the property in the many billions of dollars. I don’t feel further analysis is required here.

And finally, was it philanthropic? Did they give back to the community? This is a pure case of negative philanthropy. The banks often had no concept of what to with the homes they took. They often didn’t care for them. Sometimes, they found it cheaper just to bulldoze them. They took value out of the community and replaced it with negative costs.

This is another sorry episode, which I will wonder if it is wise to mention to my business students? Should I tell them that stealing people’s homes will make you enormously rich while you with virtually no penalties? I am honest. I will. But I would rather not have negative business ethics taught so well by the mortgage companies. It makes what I do look foolish.

James Pilant

From the web site, The Support Center:

Major banks have once again agreed to a settlement, this time worth $8.5 billion, to compensate homeowners whose homes were fraudulently foreclosed upon in 2009 and 2010 through practices such as “robo-signing.” JP Morgan Chase, Bank of America, and and Wells Fargo will pay $3.3 billion to homeowners, and the remaining $5.3 billion will reduce mortgage bills and forgive principals on homes that were sold for less than what the owners owed on their mortgages. 3.8 million homeowners will be eligible to receive compensation ranging from a few hundred dollars to a maximum of $125,000.

In another settlement, Bank of America has agreed to pay the federal housing finance agency, Fannie Mae, $11 billion for selling the agency bad mortgages that defaulted, causing Fannie Mae to assume all the losses. $3.6 billion will be used to compensate for the bad mortgages, and $6.75 billion will be used to buy back mortgages.

Both of these agreements are part of a process to mitigate the impacts of the housing crisis and to hold the banks accountable for their role in both creating the housing bubble and in using questionable, if not fraudulent, methods in servicing their loans and processing foreclosures. Having faced significant losses, Bank of America continues to move out of the mortgage market, and in the deal with Fannie Mae, it agreed to sell the servicing and collection rights for 2 million loans, totaling $306 billion. Some economists and analysts are concerned that as the major banks shift away from mortgage lending, the industry is being consolidated into the hands of a few banks. However, though the housing market is recovering slowly, banks, such as Bank of America, might not be in a position to compete, given the losses they’ve already incurred and the problems they’ve had in servicing loans.

From the web site, Buzz Sourse:

Housing advocates, while acknowledging that the foreclosure reviews were flawed, said they don’t understand how turning the process over to mortgage companies improves a system already insufficiently independent.

“The regulators have decided to replace the fox in the henhouse with the wolf,” said John Taylor, president of the National Community Reinvestment Coalition, a Washington-based housing nonprofit. “It is just incomprehensible to me that they could not find a third party that has the wherewithal and independence to fairly determine what the damage is to homeowners.”

Regulators said the review process, which sought to determine if specific loans were unfairly foreclosed upon, was too costly and time-consuming. Under the new deal, 10 mortgage companies, including Bank of America, Wells Fargo and JPMorgan Chase, will pay $8.5 billion. Of that, $3.3 billion is earmarked for direct payments to “eligible borrowers” whose foreclosures were handled improperly. The remaining $5.2 billion will help struggling borrowers with programs such as loan modifications.

And finally, from the web site, 4Closure Fraud (reprinted from ProPublica):

The Independent Foreclosure Review was supposed to be a full and fair investigation of the big banks’ foreclosure abuses, and it was trumpeted as the government’s largest effort to compensate victimized homeowners. Federal regulators, who designed the review, forced banks to spend billions to carry it out. Millions of homeowners were eligible and hundreds of thousands submitted claims. But Monday morning, the very regulators who launched the program 18 months ago announced that it had all been a massive mistake and shut it down.

Instead, 10 banks have agreed to pay a total of $3.3 billion in cash to the 3.8 million borrowers who had been eligible for the review. That’s an average of around $870 per borrower. But typical of a process that’s been characterized by confusion, delays and secrecy, regulators said the details of how the money will be doled out were not yet available.

The headline number for the settlement is $8.5 billion, but that includes $5.2 billion in “credits” the banks will receive for actions they take to avoid foreclosures, such as providing loan modifications. That’s very similar to the separate $25 billion settlement reached last year between five banks, 49 states and the federal government. That settlement has been criticized for awarding credit to banks for things they were already doing.

 

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