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Posts Tagged ‘larry summers’

Esther L. George Is The Lone Hero Within the U.S. Federal Reserve

September 19th, 2013 Comments off

The recent conclave of the Fed’s FOMC (Federal Open Market Committee)  that met and rendered a decision  has sent the Dow Jones index soaring to record levels. The Fed, under the chairmanship of Ben Bernanke, is continuing its asset buying program, calibrated at $85 billion per month, as a monetary stimulus to goose and prop up the American economy, still on life support five years after the implosion of Lehman Brothers, previous claims of “green shoots” and economic recovery notwithstanding.

Wall Street is obviously delighted. The claim that the expansion of the Fed’s balance sheet by $2.5 trillion since 2008 is not inflationary is untrue. Inflation there has been, but it is primarily confined to the equity markets, where a new asset bubble is being cultivated by Ben Bernanke and company, to the pleasure of Wall Street, which scored big through the FOMC decision on maintaining the $85 billion per month asset buying program.

The FOMC’s vote was almost unanimous in favor of continuing the money printing frenzy at the Fed-but not quite. There was one lone dissenter who voted against the continuation of the asset buying program; Esther L. George, President of the Kansas City Federal Reserve Bank.  According to the Fed’s official release, “Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.”

It would appear that Ms. George is the sole rational member of the FOMC, with the ability to look beyond the horizon and recognize that the massive economic and financial imbalances being created by the Fed spell catastrophe in the future. Could that be the authentic reason why Larry Summers withdrew his name from consideration as the replacement for soon-to-retire Fed Chairman Bernanke?

If Hillary Clinton runs for President of the United States  in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:

Hillary Clinton Nude

HILLARY CLINTON NUDE

Hillary Clinton Nude

WALL STREET KILLS--A CHILLING NOVEL ABOUT WALL STREET GREED GONE MAD

To view the official trailer YouTube video for “Wall Street Kills,” click image below:

In a world dominated by high finance, how far would Wall Streetgo in search of profits? In Sheldon Filger’s terrifying novel about money, sex and murder, Wall Street has no limits. “Wall Street Kills” is the ultimate thriller about greed gone mad. Read “Wall Street Kills” and blow your mind.

Obama’s Top Economic Advisors Start Abandoning a Sinking Ship

August 9th, 2010 Comments off

Within the past  few days, two of the four most important economic advisors and policymakers within the Obama administration have resigned. They are Peter R. Orszag, budget director at the U.S. Office of Management and Budget, otherwise known as OMB, and Christina Romer, who chairs the Council of Economic Advisers. Remaining on the economics team is Treasury Secretary Timothy Geithner and Larry Summers, Director of the White House National Economic Council. Supposedly, Romer and Orszag are leaving of their own accord, to pursue “other opportunities.” Some speculate that policy differences with Larry Summers and even President Barack Obama were a factor. My own sense is that the worsening economic crisis in the U.S. as well as the overall global economic crisis were leading factors in their resignations, amid the increasing evidence that massive increases in public debt by Washington has not only failed to end the recession and restore robust economic growth; the risk of a sovereign debt crisis in the United States is now a reality.

The resignations of Romer and Orszag are the first ramifications of a failed economic policy. The more tangible result will be the upcoming midterm congressional elections in the U.S., which will almost certainly witness the Democrats losing control of the House of Representatives. From there, things will get worse, as America enters a double-dip recession, while Congress is mired in gridlock and imposes paralysis on the remaining two years of Obama’s presidential term.

As the economic clouds darken in America, it is likely that the resignations of Orszag and Romer are the crest of a wave.

Tập tin:ChristinaRomer 20090105 EconMeeting-9208.jpg

Alan Greenspan, Ben Bernanke and the Coming Economic Depression

April 5th, 2010 Comments off

Ben Bernanke, Larry Summers and Timothy Geithner, the Obama administration’s economic triad, are predicting a steady recovery from the Great Recession. The March employment numbers, suitably manipulated by PR spin masters, are being heralded as proof that the recession is over. Should we believe them? Well, let’s look back at recent history.

Just a few weeks ago, Bernanke’s predecessor as chairman of the Federal Reserve, Alan Greenspan, stated that “nobody” predicted that the subprime housing situation in the United States would lead to a financial and economic implosion. Greenspan said, “Everybody missed it, academia, the Federal Reserve, all regulators.”

Not everybody. Actually, a number of observers predicted what would ensue, well in advance of the financial disasters of 2008, which culminated in the downfall of Lehman Brothers. I include myself in that list which the former Fed chairman wished everyone would ignore. In a book published in 2006, two years before all hell broke loose on Wall Street, I wrote the following:

“The American economy will almost certainly, in the next presidential administration, come to a very hard landing. The decline in housing prices, which while ascendant created the illusion of national prosperity, is a clear and foreboding marker to a dark and austere future for the American people.”

Now that Bernanke, Geithner and Summers are preaching the gospel of economic green shoots, I published my own prediction in my book, “Global Economic Forecast 2010-2015: Recession Into Depression.”  The essence of my prediction is that massive U.S. government deficits, replicated in other major economies, will precipitate a devastating sovereign debt crisis by 2012, plunging the world into a synchronized global depression. If I am proven right, however, don’t expect the potentates of the Federal Reserve and U.S. Treasury to utter any mea culpa. If an economic depression does afflict us,  Ben Bernanke will likely mimic Alan Greenspan’s lame protestation that “nobody” could have seen such a disaster coming.

Economic Forecast 2010

December 14th, 2009 Comments off

President Barack Obama’s chief economic advisor is Larry Summers, the man who served as Treasury Secretary to Bill Clinton. It was during the Clinton administration that Summers led the drive to deregulate the financial industry, a policy measure that contributed significantly to the financial collapse of 2008. This same Summers, speaking on behalf of Obama, is now doing the rounds, providing the media with his characteristically optimistic economic forecast for 2010.

According to Summers, the Great Recession is already over, and job recovery will gather momentum during 2010. For those seeking fact based economic forecasts in lieu of happy talk from Larry Summers, I suggest getting a hold of my new book, “Global Economic Forecast 2010-2015: Recession Into Depression.”

 

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com   

Larry Summers in Winter

July 19th, 2009 Comments off

The speculation after the November presidential election was that Barack Obama originally wanted  Bill Clinton’s former Treasury Secretary, Larry Summers, to serve in the same capacity in his administration. When criticism arose within his own party due to Summers’ strong ties to Wall Street, Obama selected  Timothy Geithner as Treasury Secretary and appointed  Larry Summers to serve as Director of the National Economic Council. In essence, Summers is serving as the principal economic advisor to President Barack Obama. In that role, Summers was undoubtedly one of the principal architects of the Obama administration’s so-called Economic Recovery Act, the $787 billion deficit-driven stimulus package that was supposed to put the brakes on the free fall in employment numbers in the United States.

Increasingly, many critics, not all of them Republican, have raised serious doubts as to the efficacy of the Obama stimulus plan. However, the Obama team is not about  passivity and turning the other cheek in the  face of public doubts. They are pushing back, and taking the lead in connection with the stimulus plan has been Larry Summers.

Appearing before the Peterson Institute for International Economics, Larry Summers wanted to make the case that the Recovery Act was, in fact, working. One would expect a man with as brilliant an intellect as Mr. Summers is alleged to possess to offer convincing analysis based on solid macroeconomic data. However, if that was your expectation, you are out of luck. This is what President Obama’s lead economic advisor had to offer as irrefutable “proof” that the administration’s Recovery Act was functioning according to plan: the number of people conducting Google searches for the term “economic depression,” which had increased last fall in the wake of the demise of Lehman Brothers, was now “back to normal.”

Is Larry Summers serious? This is the strategic data point that the key actor within Obama’s team of economic advisors is fixated on? Google searches are now the leading indicator and most persuasive metric of what’s happening to the real economy? Well, Mr. Summers, last fall, when you noticed  a spike in Google searches related to an economic depression, I established a new website on the crisis, GlobalEconomicCrisis. Com.  During the first few weeks that the website existed, there was hardly any traffic. Now, months afterwards, the site receives hundreds of thousands of hits per month.  Is that indicative of economic trends? Of course not. But neither is Larry Summers’ “observation.”

A far more relevant indicator of what is occurring with the real economy is the unemployment rate. Contrary to the declarations of the Obama administration that passage of the Recovery Act would stem the tide of job layoffs and stabilize the official unemployment rate at 8%, this sobering statistic has now increased to 9.5%, excluding the long-term unemployed and underemployed unable to find full-time jobs. All indications are that this number will exceed double-digits by the end of the year.

The attempt by Larry Summers to utilize nonsensical data in defence of the core economic policy of the Obama administration in addressing the most severe economic contraction in American history since the Great Depression not only fails to reassure an increasingly uncertain public; it increases scepticism regarding the suitability of Larry Summers to serve as the White House point-person on the economy. Those who had pre-existing doubts regarding Summers due to his role in dismantling the  Glass- Steagall Act ( which eliminated the  longstanding separation between investment and retail banks, leading to the subprime implosion that sparked the current economic crisis) will see them reinforced by the bizarre rationalizations he is now  increasingly resorting to in defence of the Obama administration’s economic policies.

Perhaps we should not be surprised by the convoluted logic Summers invokes in support of  his view of reality. After all, a major factor in his fall from the presidency of Harvard University was his “explanation” for why females were grossly under-represented in tenured academic positions in the sciences and engineering: “the different availability of aptitude at the high end,” according to Summers.

Starting with Alan Greenspan as long-serving Fed chairman, and continuing with the likes of Rubin, Paulson, Bernanke, Geithner and now Summers, the public has been subjected to propaganda from the political establishment that presents those who have been selected to design our economic architecture as being brilliant beyond all measure. If we have learned anything over the past year, it is that these supposed geniuses of macroeconomic policy are in fact highly fallible. If nothing else, Larry Summers’ perplexing descent into meaningless trivialities suggests that this key economic policymaker is as detached from reality as most of his recent predecessors. Rather than being reassured by his reference to Google searches that bright rays of sunshine are about to dissipate the dark economic clouds hovering over the nation, I see Larry Summers’ ascendancy  in the economic policymaking hierarchy of the Obama administration as the harbinger of a long recessionary winter which still lies ahead.

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com 

 

 

Obama’s Economic Crisis Team is Full of Green Shoots

July 9th, 2009 Comments off

Larry Summers, Timothy Geithner and Ben Bernanke may be fated to go down in history as the three horsemen of the global financial and economic apocalypse. Though Fed Chairman Bernanke was inherited by the Obama administration, Geithner, Summers et al were the chosen economic team of the Obama administration. In effect, their selection was the single most important decision made by President Barack Obama  in response to the Global Economic Crisis. Regrettably, thus far their performance has been found wanting. Most disconcertingly, many of their public statements are Bush 43 redux, a smorgasbord of overly-optimistic platitudes utterly dichotomized from economic realities. Perhaps the one phrase that is most likely to haunt the Obama administration is one uttered originally by Ben Bernanke in the spring; those perennial “green shoots” that the Fed Chairman could see sprouting amid the recessionary quicksand engulfing the global economy.

Like a barbershop quartet, other senior Obama economic policymakers and advisors sang the happy melodies of these enigmatic green shoots. This happy talk was not without its effect; in large measure the bear market rally on Wall Street, what others have referred to as a “dead cat bounce,” was a by-product of investor optimism fuelled by the green shoots serenade flowing from the banks of the Potomac.

As Yogi Berra would say, “it’s déjà vu all over again.” George W. Bush’s economic team was also full of joyful verbiage, until the floor literally collapsed from under them with the disintegration of Lehman Brothers. In the case of the Obama economic crisis management team, however, this theory of hope triumphing over reality has been executed with even more creative dexterity. With all credible mathematical indicators revealing that most of the largest U.S. banks are functionally insolvent, the Treasury Department concocted a totally cosmetic set of so-called “stress tests” to “prove” that these insolvent banks were, actually, “solvent.” In addition, by forcing changes in the FASB rules through political intervention, some of these banks were even able to show a profit in their Q1 results.

The June unemployment numbers, however, are throwing a cold dose of reality in the direction of the pontificators of ephemeral green shoots. With the publicly released U3 Labor Department jobless report showing the level of U.S. unemployment having risen to 9.5%, and the less publicized but far more accurate U6 report showing actual unemployment and underemployment now at a staggering 16.5%, it is quite clear that the American economy, along with most of the planet, is still undergoing a painful contraction. The fact that one in six Americans is either unemployed or trapped in low-paying part-time employment due to the lack of full-time positions, is a far more significant economic indicator than short-term gyrations on Wall Street or periodic upward anomalies confronting an otherwise downward economic trend.

Amid all the green shoots fantasizing, it must be recalled that the United States economy depends on the spending of the U.S. consumer for more than 70% of its aggregate demand. The real significance of rising unemployment, exchanging full-time jobs for part-time employment and the fear factor inhibiting spending by those who think they may lose their jobs, is a radical contraction in consumer spending. It is this reality more than any other that is weighing heavily on the nation’s economic superstructure. Not only is joblessness rising. After years of American consumers spending more than they earned, they have now shifted radically towards a high level of savings. Transitioning from a negative savings rate, the U.S. wage earner now banks nearly 7% of his/her declining take- home pay, despite virtually zero interest being offered to savers due to the Federal Reserve’s zero interest monetary policy.

The American consumer is scared, and is not being seduced by talk of green shoots emanating from Washington. With consumer spending undergoing significant contraction not only in the United States but in virtually all major economies throughout the globe, increasing pressure will bear on securitized investments based on loan portfolios directly or indirectly linked to consumer spending. Retail and shopping mall mortgages will witness higher levels of defaults, in conjunction with the already virulent afflictions  hammering sub prime and prime residential mortgages, commercial office space mortgages, consumer loans and credit card debt.

The Obama administration apparently believed that the original $700 billion TARP Wall Street bailout passed by Congress in the last weeks of the Bush administration, and President Obama’s $800 billion stimulus spending bill, would suffice to stabilize the economy and put the brakes on the free fall in employment numbers. However, jobs are still being shredded each month by the hundreds of thousands, while banks still suffer from balance sheets saturated with toxic assets. The FDIC has already closed more U.S. banks this year than in all of 2008.

As I indicated in a recent piece, there is already serious discussion occurring in the corridors of power in Washington on the necessity of a second stimulus spending package. This is an acknowledgement that the Obama economic crisis team, thus far, has been an abject failure. However, with so much money already having been borrowed by the U.S. government on a variety of schemes supposedly aimed at saving the economy, further large doses of public debt bring along very dangerous negative implications of their own.

In a recent column in the Financial Times of London, Mohamed A. El-Erian, chief executive and co-chief investment officer of PIMCO, the world’s largest bond trading firm, offered the following observation:
“The bottom line is a simple yet powerful one. The global crisis is morphing again. Having already contaminated (in a sequential and cumulative manner) housing, finance and the consumer, it is now threatening the potency and credibility of the economic policy making apparatus. As far as I can see, there are no first best policy responses that are readily available and easy to implement. Instead, the economy will continue to struggle, navigating both the adverse implications of last year’s financial crisis and the unintended consequences of the experimental policy responses. Given the inevitable socio-political dimensions, this story will play out well beyond the realm of the economy, policymaking and markets.”

Mohamed El-Erian is not offering green shoots, but he does speak the truth. Unfortunately, the truth is so bitter, it is unlikely that President Obama’s principal economic advisors will face up to the harsh and even brutal realities of the Global Economic Crisis until it is far too late for any policy response to be effective.

 

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com 

 

 

U.S. Economy Risks Hellish Prospect of Hyperinflation

May 24th, 2009 Comments off
The global financial and economic crisis arose out of radical deflation in the U.S. housing market, as the real estate asset bubble split asunder. With the collapse in housing prices came the contraction of another asset bubble; equities. The ongoing demand destruction has also deflated commodity prices from their recent peaks, giving rise to a collective view among economic policymakers that deflation represents the single greatest risk to the global economy.
In itself, deflation is a dangerous economic phenomenon. Historians of the Great Depression often refer to deflation in the 1930s as a contributing factor to the prolongation of that epochal downturn in the world’s economy. Looking closely at the dynamics of deflation, it is not difficult to see why this is a dangerous economic state to be in. When prices of major durable goods, especially homes, continue to decline, this inserts a strong dose of uncertainty into the human decision-making process. Not many consumers are likely to take out a mortgage on a home that they believe will actually decline in value right after the legal papers are signed. Or so the classical economic theory goes.
However, though not downgrading the danger of deflation, I believe policymakers are ignoring other factors regarding this economic and financial condition. Furthermore, the U.S. government and Federal Reserve in particular, are taking steps to “cure” deflation that will inevitably lead to hyperinflation, which in the long-term may prove far more destructive to the long-term health of the U.S. economy.
History demonstrates that deflation is not a permanent condition. Market forces, unencumbered by fiscal and monetary intervention, eventually restore pricing equilibrium. At a certain point prices of major durables such as homes are low enough to encourage new categories of consumers to enter the marketplace. As demand is restored, prices stabilize and then resume their upward ascent. It is all a question of time. However, key decision-makers in the United States are not paragons of patience. They want deflation cured immediately, which explains why the U.S. Treasury and Federal Reserve are hell-bent on policies that are guaranteed to be inflationary. The question is how bad will inflation ultimately be.
Massive quantitative easing by the Fed is pouring trillions of fiat U.S. dollars into the money supply, essentially conjured out of thin air. This is being done without transparency, the rationale being that frozen credit markets require a vast expansion of the money supply in an attempt to get the arteries of commerce flowing again. Similarly, the U.S. government is spending vast amounts of money it does not have, with the Treasury Department selling unprecedented levels of government debt in a frantic effort to fund the wildly expanding U.S. deficit. These two forces, quantitative easing and multi-trillion dollar deficits, are the core ingredients of an explosive fiscal cocktail that I believe will ultimately lead to hyperinflation.
What exactly is hyperinflation? Economists disagree on a common definition, so I will offer one myself. Double-digit inflation extending over a period of at least two years would arguably be a hyperinflationary period. It can get much worse, witness Weimar Germany in the early 1920’s and Zimbabwe at present. The most recent experience the United States had with this unstable economic condition was in 1981, when the annual CPI rate exceeded 13%. The cure was draconian; Federal Reserve Chairman Paul Volcker engineered a severe economic recession that created the highest level of U.S. unemployment since the Great Depression-until now. The federal funds rate, currently near zero, rose to above 20% under Volcker’s harsh discipline. Eventually high inflation was purged out of the system and economic growth was restored, however the monetary regimen was punitive for several years.

The current monetary and fiscal policies being enacted by the key economic decision-makers in the United States are laying the groundwork for a far more dangerous inflationary environment than anything encountered by Paul Volcker. The explosive growth in the money supply and government debt is simply unsustainable without severe inflation. It must be kept in mind that the Federal government is not the only public authority engaged in massive deficit spending. Throughout America, state, county and municipal governments are faced with imploding tax revenues and lack the ability or political flexibility to cut services to a level commensurate with revenue flows. Both the Fed and the public sector are engaging in a reckless gamble; borrow like crazy in the hope that this overdose of economic stimulation will restore growth to the economy and normal tax revenues, leading to a decreased and sustainable level of public sector indebtedness.

If one believes that the policymakers running the Federal Reserve, Treasury and Federal government, the same architects of the Global Economic Crisis, are smart enough to now get everything right, perhaps we may escape the worst consequences of their turbo-charged fiscal and monetary policies. However, there are growing indications that global investors and the broader market are beginning to reach a far more sobering assessment.

In an interview with Bloomberg News, Bill Gross, co-chief investment officer of PIMCO (Pacific Investment Management Company) suggested that the coveted AAA credit rating U.S. government debt now benefits from will eventually be downgraded. “The markets are beginning to anticipate the possibility of a downgrade,” Gross said.

China, the major purchaser of Treasuries and holder of $1 trillion of U.S. government debt, is already on record as expressing concern for the integrity of its American investments, and has begun actively exploring alternatives to the U.S. dollar as the primary global reserve currency. These moves by China are not based on fears of expropriation of its U.S. assets, but focuses on the specter of hyperinflation destroying much of the value of assets denominated in U.S. dollars. No doubt China’s economic experts are well aware of the growing number of economists who are convinced that the U.S. will be unable to service its rapidly expanding debt burden without significant inflation. Inflation in monetary terms means the erosion of the intrinsic value of the American dollar.

What is most frightening about the policy moves being enacted by the Fed and Treasury is that their actions may not be a reckless gamble after all. They may have come to the conclusion that only hyperinflation will enable the United Sates to avoid national insolvency. In effect, they may be pursuing the exact opposite course undertaken by Paul Volcker in the early 1980’s. If that is their prescription for the dire economic crisis confronting the U.S., then one must conclude that Ben Bernanke, Timothy Geithner and Larry Summers have learned nothing from history Once the spigot of hyperinflation is tuned on, it becomes a cascading torrent that is almost impossible to switch off, and which in its wake inflicts inconceivable levels of economic, political and social devastation. Before it is too late, President Obama should put the brakes on his economic team’s dangerous gamble with the haunting specter of hyperinflation. If he fails to act in time, a hellish prospect may be his economic and political legacy.

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com