The Sequester

[dalem]

I'll translate Chimpy McObamaHitler's words:

"This is exactly what I wanted, exactly what I demanded months ago in exchange for tax hikes, and now I will lie my pig ass off about it in front of everyone to try and blame those eeeeeeevil Republicans that I hate."

Press-chorus: "We are the chorus, and we agree, we agree."

-dale

[snapper]

Watch out for some more dodgy IMF 'forecasts' going on here... The sequestration, which amounts to a reduction in spending of 2.4% overall (although only around 1% this year) predicts that this will cut US growth by 'at least 0.5%' this year. This is based on what the IMF calls the 'fiscal multiplier'. The IMF originally predicted that the Greek economy would contract by the exact same amount; for every 1% of spending cuts the economy shrinks 0.5%. They have since had to re-estimate this 'fiscal multiplier' for Greece three times. The current 'model' predicts that in Greece a 1% reduction in spending shrinks the economy by 1.2%. I suspect that the IMF forecast for the US will be nearer the mark though as the Fed is pumping in $85bn worth of QE every month, which will allow Obama to spend more on some 'social programme' or other since he is no longer allowed to spend it on the military. Come the next 'stimulus package' expect to see this invented money spent on gay single fathers or some such.

I sympathise with the those wabbits who are getting hit by these 'cuts' (though really spending is still increasing just not as much). The UK armed services have been hit too and all British civil servants have had three years of pay freezes - which means a cut in real terms as inflation is running at 2.7%. At the same time our Government is busy increasing overseas aid! For sure the deficits and debts need to be addressed but to me it seems wrong to cut spending on defence and pay for those who serve others while (in the UK's case) giving more money to people abroad!

Sadly for us all I fear this is just the start and we are fighting off an inevitable default in the medium to long term. I hope that when this happens the central banks, which have directly contributed to our crony capitalism and bubble economics, will be abolished.

[astralis]

dale,

"This is exactly what I wanted, exactly what I demanded months ago in exchange for tax hikes, and now I will lie my pig ass off about it in front of everyone to try and blame those eeeeeeevil Republicans that I hate."

well, funny thing is that republicans WANT to own this, at least a certain part whom think the sequester is perfectly acceptable-- including you.

so if you really think that this is exactly what obama wanted-- well, here's news for you-- probably first time you agreed with him on anything, with OBL's death being perhaps the only exception...:)

[Doktor]

I am lost.

So not dale is in agreement with Obama, but Asty is in agreement with dale, too?

Where is this world going to?

[astralis]

doktor,

So not dale is in agreement with Obama, but Asty is in agreement with dale, too?

no.

dale's assertion is that the sequester is exactly what obama wanted. dale is okay with the sequester. i just pointed out that IF THIS IS TRUE (and I don't think the first part is), then dale and obama agree on something. :)

i am not OK with the sequester, thus i disagree with dale. but -that- part isn't surprising.

[leib10]

I think dale's upset because Obie is trying to pass the buck off to the Republicans.

[dalem]

I think dale's upset because Obie is trying to pass the buck off to the Republicans.

No, that doesn't "upset me" - that's just the politics Obama's playing. What upsets me is the fact that he'll likely not get called on it by the MSM.

And as far as the sequester, I place myself in the camp that believes it's an incredibly stupid WAY to cut a little growth, but it's not the end of the world.

-dale

[snapper]

I place myself in the camp that says it's a lot of fuss over very little but that this hits the wrong public servants.

The really scary thing is the Fed has never had "assets" valued this much before ($3trillion - ish). This is feeding both the bond bubble and what astralis regards as the return of the property market (the Fed is also buying mortgage based 'assets'). There is NO RISK in system where you buy your own debt or there is TOTAL failure. The problem is that the extra 'money' created is imaginary - nobody's made anything or sold more cars or something - it's all fictional.

Just try a very simple a very simple analysis for yourselves - it's not hard: Look at Fed interest rates since the so called 'dotcom bubble' in 1999-2000. Well they burst that bubble when rates started to rise then after it bursts the rates go right down again... the 'dotcom bubble' got fed into the 'property bubble'. When rates start rising again in 2006 it takes what? a year or two to burst another bubble... interest rates hit the floor again. Now we have a bond bubble which the Fed (and BoE) is feeding at the rate of $85bn per month. Who will pay when this bubble goes? Us as usual. Anyone with savings in $ or £ will see them devalued away as Governments try to pay for their commitments without being actually able to do so; their only option is to print more paper (otherwise there is serious 'civil disorder' risk). The Fed itself has following a Keynesian strategy but has got to the point where it's eating it's own tail just to stop a recession. This is NOT 'capitalism' - some people have been imprisoned for what this already. Others have so far got away.

Here's the engine to look for yourself; United States Interest Rate. Just plug in 1999 to now and trend at the bottom. On the same engine then look at bond rates - you can check other things such as inflation etc...

[snapper]

sry dble post

[JAD_333]

Woodward's earlier point was that the White House came up with the idea of the sequester and that Biden in selling it to McConnell said a final redistribution of cuts would NOT include raising taxes. Ever wonder why the GOP leadership agreed to the sequester in the first place? Woodward had plenty of inside information to go on, and now he's taking heat for his comment that Obama has "moved the goalposts". Someone is pitching heat and I doubt it's Woodward. So, Obama can cry about the heartless GOP, but he shares as much blame for the stalemate as the GOP. He could relent and stop all those poor people from suffering. It's not like the GOP holds all the keys to solving this mess.

Woodward takes heat over White House e-mail flap
The Oval
David Jackson10:08a.m. EST March 1, 2013


Washington's most famous investigative reporter is now getting some scrutiny himself.

Bob Woodward made news this week by protesting White House pushback on his criticism of the administration's actions on the sequester, saying one senior official warned him in an e-mail that "you will regret doing this."

Disclosure of the e-mail, however, shows a mostly friendly message to Woodward from White House economic adviser Gene Sperling. He said Woodward would "regret" his comments because they were wrong, not as part of any kind of threat.

"I'm sure this has happened to a thousand people in Washington," Atlantic columnist Jeffrey Goldberg told Politico. "The whole thing seems like a tempest in a teapot."

Politico obtained the e-mail exchange in question, starting with the missive Sperling sent Woodward on Feb. 22:

"Bob:

"I apologize for raising my voice in our conversation today. My bad. I do understand your problems with a couple of our statements in the fall -- but feel on the other hand that you focus on a few specific trees that gives a very wrong perception of the forest. But perhaps we will just not see eye to eye here.

"But I do truly believe you should rethink your comment about saying saying that Potus asking for revenues is moving the goal post. I know you may not believe this, but as a friend, I think you will regret staking out that claim. The idea that the sequester was to force both sides to go back to try at a big or grand bargain with a mix of entitlements and revenues (even if there were serious disagreements on composition) was part of the DNA of the thing from the start. It was an accepted part of the understanding -- from the start. Really. It was assumed by the Rs on the Supercommittee that came right after: it was assumed in the November-December 2012 negotiations. There may have been big disagreements over rates and ratios -- but that it was supposed to be replaced by entitlements and revenues of some form is not controversial. (Indeed, the discretionary savings amount from the Boehner-Obama negotiations were locked in in BCA: the sequester was just designed to force all back to table on entitlements and revenues.)

"I agree there are more than one side to our first disagreement, but again think this latter issue is different. Not out to argue and argue on this latter point. Just my sincere advice. Your call obviously.

"My apologies again for raising my voice on the call with you. Feel bad about that and truly apologize.

"Gene"

Woodward responded to Sperling the next day:

"Gene: You do not ever have to apologize to me. You get wound up because you are making your points and you believe them. This is all part of a serious discussion. I for one welcome a little heat; there should more given the importance. I also welcome your personal advice. I am listening. I know you lived all this. My partial advantage is that I talked extensively with all involved. I am traveling and will try to reach you after 3 pm today. Best, Bob."

[astralis]

snapper,

The Fed itself has following a Keynesian strategy but has got to the point where it's eating it's own tail just to stop a recession

this demonstrates a fundamental misunderstanding of what Keynesianism is.

the policies of the fed is classic monetarism of the Friedman school of thought. Keynesian theory advocates a fiscal response to recessions and depressions, not a monetary response.

[astralis]

as for bob woodward, this article describes him well:

What the Hell Happened to Bob Woodward? -- Daily Intelligencer

[leib10]

No, that doesn't "upset me" - that's just the politics Obama's playing. What upsets me is the fact that he'll likely not get called on it by the MSM.

And as far as the sequester, I place myself in the camp that believes it's an incredibly stupid WAY to cut a little growth, but it's not the end of the world.

-dale

And I agree- the co-opting of the MSM by this administration is shameful. A true disservice to the American people.

[snapper]

snapper,

this demonstrates a fundamental misunderstanding of what Keynesianism is.

the policies of the fed is classic monetarism of the Friedman school of thought. Keynesian theory advocates a fiscal response to recessions and depressions, not a monetary response.

Yep... easing money supply (creating a stimulus) to couch another bubble - when did he mention that? Which book? I mean I have read more Freidman than Keynes but I can't see how an engineered interest rate is Chicago school nor Austrian. Freidman advocated the abolition of the Fed! It may be that I have misunderstood Keynes but you have certainly misread Freidman. Perhaps you think they'd agree on this? The great fiction is that the Fed, owned by the banks, buys Government bonds also (partly) owned by the banks... The average dog is eating it's marginal tail.

If Keynesian theory was followed only by the Government it might not be so bad... the risk of over borrowing would be reflected in the cost of borrowing more. The easing of 'monetary policy' as a response to downturn in the economy by the Fed - and QE at $85bn per month is pure stimulus - it is no longer monetary policy - the Fed entered the fiscal policy realm. The truth is of course that difference between fiscal and monetary policy is only a banks profit. The Government owns the banks and the banks own the Government. The Fed it the Governments largest creditor... Where does fiscal policy end and monetary policy start when you are buying the debts that you create to spend more? Neither Keynes nor Freidman advocated this.

[astralis]

snapper,

Brad DeLong : Milton Friedman Supports Ben Bernanke on Quantitative Easing

David Laidler: Many commentators are claiming that, in Japan, with short interest rates essentially at zero, monetary policy is as expansionary as it can get, but has had no stimulative effect on the economy. Do you have a view on this issue?

Milton Friedman: Yes, indeed. As far as Japan is concerned, the situation is very clear. And it’s a good example. I’m glad you brought it up, because it shows how unreliable interest rates can be as an indicator of appropriate monetary policy.

During the 1970s, you had the bubble period. Monetary growth was very high. There was a so-called speculative bubble in the stock market. In 1989, the Bank of Japan stepped on the brakes very hard and brought money supply down to negative rates for a while. The stock market broke. The economy went into a recession, and it’s been in a state of quasi recession ever since. Monetary growth has been too low. Now, the Bank of Japan’s argument is, “Oh well, we’ve got the interest rate down to zero; what more can we do?”

It’s very simple. They can buy long-term government securities, and they can keep buying them and providing high-powered money until the high powered money starts getting the economy in an expansion. What Japan needs is a more expansive domestic monetary policy. The Japanese bank has supposedly had, until very recently, a zero interest rate policy. Yet that zero interest rate policy was evidence of an extremely tight monetary policy. Essentially, you had deflation. The real interest rate was positive; it was not negative. What you needed in Japan was more liquidity.

LOL. anything else you want to know about Friedman and monetarism? :)