Two days ago I posted something that people found offensive, vulgar, and homophobic. To anyone I may have inadvertently offended with my words i am truly sorry. I honestly didn’t realize it would be taken in that manner.

I didn’t stop to think, and filter out what might be offensive. I shot from the hip while my temper was up. Thank to those that informed me of my errors, I have learned a valuable lesson that I could only learn through making such a mistake.

  1. lizard19

    CFS, you might want to steer clear of drawing attention to the derivative black hole that insidious wealth-transfer mechanisms like QEII have perpetuated, and made worse.

    why? because nothing will ever be done about it. it’s too complicated for your average disenfranchised voter to wrap his/her head around, so instead let’s talk about the debt ceiling and gutting entitlements.

    fraud is so systemic, it even affects the president, like for example people still assume Obama is a “liberal”.

    he’s not. and we really should stop pretending, even when stupid comments come in bashing this website for whatever perceived transgression we have allegedly committed.

  2. Hyperbole aside, QEII hasn’t caused much damage yet and, at its root, is exactly one of the tools that Lord Keynes would have endorsed to fix the Aggregate Demand problem. That said, I’m not so sure it won’t end very badly.

    I also won’t trash Krugman on the specifics here but I’ll say he used to be an economist. Not so much any more. If you really want to read rational reviews of economic policy you should look to Scott Sumner who is more a monetarist than a Keynesian but does not discount fiscal stimulus as a boost to AD.

    But I have to say that the reason that Wall Street gets let off the hook time after time is because of the symbiotic relationship of government and finance. The Treasury issues increasing amounts of debt each year and in the current year will sell roughly $1.6 trillion (I’ll ignore the part that the Fed through QE!! has bought 70% of that debt over the last six months.) But with such large bi-weekly auctions what happens is the banks that act as primary Treasury dealers buy about 70% of each auction and then sell the bonds on the secondary market. This insures that the Treasury has a smooth bid-to-cover ratio. That is to say that there is adequate demand for Treasury debt. One can think of it as the big banks are extending short term credit to the Treasury for the 70% of debt sold that isn’t purchased by “direct bids” (non-dealers.) In effect what there doing is outsourcing the distribution of national debt. But, as any business person can attest, it’s a tricking business fucking with your banker.

    There’s a few solutions to this problem: 1) have the federal government set up their own distribution system where buyers can bid on debt on a continual basis, 2) extend primary dealerships franchises to regional banks or 3) (and this would be my preferred yet improbable solution) stop selling so fucking much debt. If I had to take a “second best” I’d opt for #2 and, in the process bust up the large money center banks. If they’re too big to fail they’re too big to exists and they hold all the cards.

    But right now the government needs Wall Street more than Wall Street need it. Wall Street doesn’t make much money on this “service” but, it appears that they do it as the price of their rent-seeking. And we can only blame anyone who ever voted for deficit spending who didn’t consider the debt distribution model.

    • carfreestupidity

      All I will say for the moment in response is… We are in a liquidity trap, the best thing we could possibly do is end QE so that the average person starts seeing a return on their savings and some semblance of balance returns.

      I sure hope we don’t get a QE3, although once you become addicted to crack…

    • Dave…

      I never said that QE caused any damage, rather that it simply hasn’t accomplished what was originally advertised as its benefits. It has created a split within the financial markets between those whom have direct access to free money (Wall Street and multi-nationals) and those who don’t (the rest of use). An advantage has always been present for the latter group regarding access to liquidity. But now banks that have access to free are passing those savings on to most of their customers via increased interest rate for credit cards, home equity, etc. In fact the banks have tightened their standards regarding who the lend to.

      I tend to think stricter standards for loans is a good thing, but it doesn’t change the fact that the money the banks are being given for free is not reaching the pocket books of their customers and thus is not circulating in the wider economy where it can help to spur economic activity.

      You also say that “Wall Street doesn’t make much money on this “service””. What they get out of QE is access to 0% overnight loans from the fed discount window. I would say that is a fairly large perk.

      As for the remainder of your points I tend to agree, D.C and Wall Street are intimately connected and their is little that will change that, even if D.C was built partly to separate national politics from the financiers present in New York.

  3. I’m not so convinced that we are in what Keynes would call a liquidity trap. Neo-Keynesians (like Krugman) admit that there isn’t the phenomenon of cash hording (stuffing the cash under the mattress.) Instead it almost all cash is “invested” in financial assets (bank accounts, bonds, commercial paper, etc.) In the current system a great deal of cash is held in excess reserves with the Fed. The problem is that there’s a Catch 22. If the Fed raises rates (decrease the money supply) it theoretically will slow the economy and risk killing whatever growth we have going. But if they don’t raise rates there will continue to be unfair punishment to savers.

    Economist who embrace The Austrian School of thought say that the quickest cure is to let rates go to where supply meets demand – no intervention. The pain will be harsher but, they contend, it will be significantly shorter.

    But Krugman has no problem with a QEIII. In fact, he’s been busy making fun of economist that worry about inflation as a result. So I have to warn you that invoking Krugman in an appeal to authority isn’t helping your case here.

    And for the record, I don’t have any answers. That said, I don’t any economist do either. The state of modern macro is that there’s a bunch of people who think they know the math. But fi they did we wouldn’t be where we are.

    • I agree with you about Krugman, I use his blog mainly as a resource to other people’s work. If you follow the link I provide you will see he gets his numbers from the Bureau of Economic Analysis.

      And while Krugman may be the person screaming the loudest about a liquidity trap, he is not the only one. Hell the New York Fed has a white paper on their website that takes a look at how monetary policy was used in the Great Depression which discusses at length the problem of a liquidity trap…

      Click to access palgrave.pdf

      and this piece comes from bloomberg recently…

      Hell, I remember spending a week on the theory back in an economics class I took in college that focused on the history of the Great Depression.

      And situations change, Keynes came up with his General Theory in a time when debit cards, credit cards, electronic banking, money market accounts, and complex derivatives didn’t exist. In a normally functioning market, my savings held in a bank are out there circulating within the broader economy helping to spur economic activity. But today, that same savings, because the market is not functioning as it once did, is as good as being stuffed under the mattress. Those savings might be circulating within the financial market, but they are not being loaned out to the broader economy.

      The basics of the liquidity trap it that there is excess savings and low interest rates that results in further monetary policy being ineffective. That is exactly where we are now. People aren’t spending they are saving, mainly because they no longer have access to credit, and Corporate America is hoarding cash…–20100329_1_economists-firms-companies

      If you want I’ll put on some lederhosen… extreme economic pain worked once when Volcker raised interest rates sky high to combat inflation, lets try it again

      • I’m very familiar with the liquidity trap discussion but I find its usefulness nearly meaningless since there isn’t a constant definition – as you showed by the reality differences between now and when Keynes wrote The General Theory.

        I would refer you to Arnold Kling. You’ll have to read the whole piece (it’s worth reading) to understand it in context. But he concludes in using different definitions:

        What difference does it make, for policy purposes? On the one hand, for fiscal policy it makes little or no difference. In all four of the cases listed above, a fiscal expansion involving deficit spending will do little or nothing to crowd out private investment. In the first case, the economy is so far from full employment that the excess capacity in the economy absorbs the deficit spending with very little increase in interest rates. In the second case, interest rates may rise, but investment will not be affected. In the third case, interest rates will not rise until the economy gets closer to full employment. In the fourth case, foreign capital will finance the deficit without raising the interest rate.

        However, there is a difference with regard to monetary policy. In case (1), monetary policy can still get you to full employment.


      • Oh, I had meant to mention this earlier. $357 billion in “stimulus” is actually 2.55% of GDP. That’s the kind of mistake I would make. But I think it’s important to note.

  4. Ingemar Johansson

    This is what Krugman just said.

    “So what happened to the stimulus? Much of it consisted of tax cuts, not spending. Most of the rest consisted either of aid to distressed families or aid to hard-pressed state and local governments. This aid may have mitigated the slump, but it wasn’t the kind of job-creation program we could and should have had. [E.A.]

    Read more:

    Versus what he said two years ago.

    “Now the centrists have shaved off $86 billion in spending — much of it among the most effective and most needed parts of the plan. In particular, aid to state governments, which are in desperate straits, is both fast — because it prevents spending cuts rather than having to start up new projects — and effective, because it would in fact be spent; plus state and local governments are cutting back on essentials, so the social value of this spending would be high. [E.A.]

    Read more:

    Dave’s right Krugman’s a political hack.

    • Dem Antidote

      I don’t get “hack” out of that. The rationale behind Krugman’s thought is that tax cuts as stimulus are not nearly as effective as direct investment in the pockets of consumers or jobs projects. This is well-known, but since the capitalist accumulators have more power than the government, it’s impossible to do anything worthy without shoveling money to the wealthy too.

      Our best jobs program would be to raise taxes to pre-Reagan levels, giving investors an ‘out’ if they invest in plant and equipment or make charitable contributions. They would then either flee the country (good riddance) or invest in our people and country. When left to their own devices (cutting taxes to stimulate investment), capitalists don’t normally look for socially beneficial investments. They have to be trained, like puppies, to behave responsibly.

      • Ingemar Johansson

        From Mament’s new book.

        “We cannot live without trade. A society can neither advance nor
        improve without excess of disposable income. This excess can only
        be amassed through the production of goods and services necessary
        or attractive to the mass. A financial system which allows this leads
        to inequality; one that does not leads to mass starvation.

        • Dem Antidote

          Apparently your thought processes are caught in an infinite loop. Yes, trade is essential. Korea, which is protectionist, developed it’s trade that way. Yes, finance is essential to advance the general welfare. But financiers should be our servants, and not our masters. When they are the latter, Inequality of wealth arises, and is soon followed by financial capture of government by the capitalist class, thereby ending republic/democratic governance.

          Case in point: USA, 1981 forward.

          • Inequality in income arises out of the division of labor and the increasingly complex nature of society. You will notice that the current rise in income inequality began in the ’70s, about the same time when American companies started to become much larger and international in scale resulting in a much more complex organization and a much larger division of labor.

            Financiers certainly exacerbates income inequality, but they are not the cause of it.

            • Dem Antidote

              Then don’t exacerbate.

              It’s just life, and not an ‘ism’ that causes wealth to accumulate in various quarters, usually in a random manner (Bill Gates is neither a genius nor a visionary, but was in the right place at the right time). We should allow accumulation to a certain level, say $3 million, as in the fifties, and then levy high taxes. The other illusion fostered by the capitalist accumulators is that investment only happens when people are allowed to accumulate massive fortunes. Many small estates produce as much capital as a few large ones, and the role of financiers is to ration that capital to it’s highest and best use. Servants, not masters.

  5. The trillions spent by our military to stabilize other countries is counterproductive to stimulating jobs in ours.

    I am betting america would start looking pretty good as factory locations and corporate headquarters if we withdrew from providing security overseas.

    Our diplomats and military have no business providing cover for corporations overseas. If they want security, they should pay for it by investing in america.

  6. By the way cfs. The women in my family and myself are pretty much disgusted with your analogy here. Good article and great comments but it would have been much better without referencing male anatomy here. Too many of those in the internets these days.

    I speak from experience…….
    I am guilty of similar overthetop allusions re: max baucus and every reader admonished me. it didn’t help my case.

  7. It would be nice to get more participation from women at 4/20 cfs and those allusions pretty much guarantee a sausage fest.

  8. Quest

    I’m all for free speech, but honestly I really dislike the graphics used and homophobic tone to this post. I was pretty offended by it when I got it and will not continue to read post that are this ugly and vulgar. I don’t think this is the place for it.

    I waited a couple of days to see if maybe someone would take it down or see if I’d feel the same way later. I still find it repulsive and honestly if you want women to comment more on here, you need to tone this kind of graphics and language down.

    We can use words that are much less offensive than those chosen here by CFS. I know it takes more time to think creatively rather than using vulgar graphics, but I’m thinking blogs are supposed to be a bit less graphic.

  9. Quest

    THANK YOU! For the apology and taking it down. It is appreciated.

  10. JC

    Thanks CFS for the apology. Most of us bloggers have made similar mistakes in the past, and realizing it and owning up to them is part of the learning experience. And we’ll all make stupid mistakes going forward. But we can learn from them and be better bloggers for them.

    FWIW, I found the information and discussion in the post (outside of the offensive stuff) to be good stuff. Hate to see that disappear down the rabbit hole because of a bit of indiscretion.

  11. Ingemar Johansson

    Some balls are held for charity.
    And some for fancy dress.
    But when they’re held for pleasure.
    They’re the balls that I like best.

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