OBOF SS & MORE PART 38

WELCOME TO OPINIONS  BASED  ON FACTS (OBOF)

Name	Published
OVERVIEW	Dec. 28, 2010
SOCIAL SECURITY PART 1	Dec. 30, 2010
SOCIAL SECURITY PART 2	Jan. 10, 2011
SOCIAL SECURITY PART 3	Jan. 17, 2011
SOCIAL SECURITY PART 4	Jan. 24, 2011
SOCIAL SECURITY PART 5	Jan. 31, 2011
SOCIAL SECURITY PART 6	Feb. 07, 2011
SOCIAL SECURITY PART 7	Feb. 14, 2011
SPECIAL ISSUE	Feb. 18, 2011
SOCIAL SECURITY PART 8	Feb. 21, 2011
SOCIAL SECURITY PART 9	Mar. 01, 2011
SOCIAL SECURITY PART 10	Mar. 07, 2011
SS & MORE PART 1	Mar. 14, 2011
SS & MORE PART 1A	Mar. 21, 2011
SS & MORE PART 2	Mar. 25, 2011
SS & MORE PART 3	Mar. 29, 2011
SS & MORE PART 4	Apr. 04, 2011
SS & MORE PART 5	Apr. 11, 2011
SS & MORE PART 6	Apr. 18, 2011
SS & MORE PART 7	Apr. 25, 2011
SS & MORE PART 7A	Apr. 29, 2011
SS & MORE PART 8	May 02, 2011
SS & MORE PART 9	May 09, 2011
SS & MORE PART 10	May 16, 2011
SS & MORE PART 11	May 24, 2011
SS & MORE PART 12	Jun. 06, 2011
SS & MORE PART 13	Jun. 20, 2011
SS & MORE PART 14	July  05, 2011
SS & MORE PART 14A	July  18, 2011
SS & MORE PART 15	July  19, 2011
SS & MORE PART 16	Aug. 03, 2011
SS & MORE PART 17	Aug. 15, 2011
SS & MORE PART 18	Aug. 29, 2011
SS & MORE PART 19	Sept. 12, 2011
SS & MORE PART 20	Sept. 26, 2011
SS & MORE PART 21	Oct.   10, 2011
SS & MORE PART 22	Oct.   24, 2011
SS & MORE PART 22 EXTRA	Nov.  04, 2011
SS & MORE PART 23	Nov.  07, 2011
SS & MORE PART 24	Nov.  21, 2011
SS & MORE PART 25	Dec.  05, 2011
SS & MORE PART 26	Dec.  19, 2011
SS & MORE PART 27	JAN.  03, 2012
SS & MORE PART 27A	JAN.  05, 2012
SS & MORE PART 28	JAN.  17, 2012
SS & MORE PART 29	JAN.  31, 2012
SS & MORE PART 30	Feb.  14, 2012
SS & MORE PART CL1	Feb.  21, 2012
SS & MORE PART 30 EXTRA	Feb.  23, 2012
SS & MORE PART 31	Feb.  28, 2012
SS & MORE PART CL2 - 59	Mar.  06, 2012
SS & MORE PART 31 EXTRA	Mar.  07, 2012
SS & MORE PART 32	Mar.  13, 2012
SS & MORE PART CL3 - 1	Mar.  20, 2012
SS & MORE PART 32 EXTRA	Mar.  24, 2012
SS & MORE PART 33	Apr.  10, 2012
SS & MORE PART CL 4 - 2	Apr.  17, 2012
SS & MORE PART 34	Apr.  24, 2012
SS & MORE PART CL5 - 49	May  01, 2012
SS & MORE PART 35	May  09, 2012
SS & MORE PART CL6 - 19	May  15, 2012
SS & MORE PART 35 EXTRA	May  18, 2012
SS & MORE PART 36	May  22, 2012
SS & MORE PART 36 EXTRA	May  25, 2012
SS & MORE PART 36
EXTRA II	June 01, 2012
SS & MORE PART 37	June 05. 2012
SS & MORE PART 37 EXTRA	June 07, 2012
SS & MORE PART 38	June 12, 2012

 IN  THIS  ISSUE

1.  Follow - up on economy from Part 37 EXTRA

2.  From Ezra Klein's Wookbook.

3.  Economic view - - It's time for the Fed to lead the fight.

4.  Final observation form Floyd.

5.  Parting thought.

~~~

"VOTE, AN  EDUCATED  VOTE"

What is an educated vote?  It is one that has been made with as much knowledge, based on facts, not misinformation, that an individual can obtain.

~~~

FOLLOW - UP ON ECONOMY

FROM

PART 37 EXTRA

First, a quick reminder & abbreviated points set-forth in PART 37 EXTRA.  I talked about a two-part action that needed to be taken, simultaneously.  A LARGE stimulus coupled with a meaningful deficit reduction plan, but the deficit reduction plan not to be implemented until the economy is back in full swing.

Now there is a great deal more detail to that, and if you need to refresh your memory more, look back at 37 EXTRA.

Those who would disagree with this approach will say, "We are already too much in debt, where are we going to get the money for a LARGE stimulus package?  They will refuse to even consider this approach until we cut other spending.  They will say, the deficit reduction must come first. 

That is the exact opposite of what should be done.  Government should reduce spending when the economy is good and start or keep spending when the economy in the drink.  Businesses won't expand and hire until there is demand and there can't be a demand until the middle class has enough disposal income to buy more than just bare necessities.

Naturally, this approach will require an increase in the National Debit Ceiling.  I can tell you this, and mark my words, no matter who becomes President, and no matter who controls Congress, and no matter what is or is not done about the economy, THE NATIONAL DEBIT CEILING WILL BE RAISED.  It has to be and there will probably be quite a fight about it, BUT IT WILL BE RAISED.  THERE IS NO ALTERNATIVE.  My real concern is, when they raise it, will they raise it enough and will they raise it soon enough to save this democracy?

I know that there will be a lot of talk about how will we pay this debit back, that we are putting our children and grandchildren in an impossible situation.  I want to tell you that I turned 88 on the 10th of June, and I can remember when I was a teenager in High School hearing my parents and other adults saying the exact same things in 1939 and 1940.  Folks, the National Debit will never be paid-off, just as most home owners, will never pay off their mortgage.  As long as the debit is in a compatible relationship to GDP, it's not to worry. 

Going back to the two-step action, once the economy would totally recover, and I believe that this system would see a total recovery, we go into the deficit reduction package.  In a short time, we could start to pay down the debt.  It will never totally be paid-off, in my opinion, but it can certainly be reduced, which will reduce the amount of interest we pay, for which we get nothing.

~~~

FROM,  EZRA KLEIN'S

WONKBOOK

Published 6-11-2012

Washington Post

Ezra Klein is a brilliant man, in my opinion.  He writes for the Washington Post, he is often a guest on various MSNBC shows and, it so happens, this week he is the guest host of the Rachel Maddow's show.  He has an ability to write in a manner that provides a clear picture of a situation.  The following sets up where we are, regarding our economy, it's relationship to Europe's economy and growth, or lack thereof, and the effect on our, upcoming, election. 

Floyd

The idea that the 2012 election in the United States will be decided by the actions of a handful of leaders in Europe is gaining traction.  Fast.

"Could Europe cost Barack Obama the presidency?"  Asks Niall Ferguson in Newsweek. In the Washington Post, Dana Milbanks writes, "if you really want to know who will win the White House in November, you should ask the Europeans."  Politico's Ben White agrees: "If Europe takes a sharp turn for the worse...the American economy could easily slip back into recession or even depression and a very close election would likely slip out of the president’s grasp."

Wonkbook readers will know I've long been in sympathy with this argument.  Back in October, I wrote, "in 1992, James Carville, an adviser to Bill Clinton’s presidential campaign, used to constantly remind his candidate, 'It’s the economy, stupid.' In 2012, it may well be the European economy, dummkopf."

A caveat, though: It doesn't have to be this way.  Europe is an economic shock.  But policymakers have a range of shock absorbers meant to help the United States ride out bumps in the global economy. Congress can cut taxes, put people to work building roads and bridges, and provide money to state and local governments, who might, otherwise, have to make layoffs, to name just a few options.  The Federal Reserve can cut rates, tell the market to expect an extended period of easy money, or buy assets.

But while policymakers have these shock absorbers, they don't seem interested in using them.  Republicans in Congress are staunchly opposed to further bills to support the U.S. economic in the short-term. That's what President Obama's now-infamous Friday press conference was actually about.  "Given the signs of weakness in the world economy, not just in Europe but also some softening in Asia, it's critical that we take the actions we can to strengthen the American economy right now," he said. But then he said that "the private sector is fine" -- a statement he later walked back -- and his original message got lost.

Mangled messaging aside, it's a case Obama has made before: More jobs spending, in addition to helping a weak labor market, would provide insurance against further turmoil on Europe. But no one expects Congress to take his advice.

Similarly, the Federal Reserve is practicing a form of "watchful waiting."  If economic conditions get much worse, they promise they'll do more, probably.  But they're not pulling out the stops right now, nor are they expected to unleash any particularly massive policy response even in the event that they do act.

So amidst global economic turmoil, America's economic policymakers are likely to do nothing, or close to it.  That means the future of our economy -- and arguably the outcome of our election -- is in the hands of others. It doesn't have to be that way.  But, for now at least, it is.

~~~

Economic View

 

It’s Time for the Fed. to Lead the Fight

 

By CHRISTINA D. ROMER

Published: June 9, 2012

Christina D. Romer is an economics professor at the University of California, Berkeley, and was the chairwoman of President Obama’s Council of Economic Advisers.

Considering the last two paragraphs above, this article takes us right into discussing what the FED can and might do.  All that I wrote in Part 37 EXTRA about the economy, plus what I have written here, certainly provides a pretty good picture of where we are and what can be done about it.  In my opinion, the Fed is going to be our only hope to move this economy forward, as it is clear, the Republicans certainly are not going to do anything, no matter how bad the economy gets.

Floyd

THE next meeting of Federal Reserve policy makers, on June 19 and 20, will probably be contentious.  The latest employment report, showing anemic job growth for a third consecutive month and an uptick in unemployment, will surely make some Fed members want to take additional expansionary action. Others, however, appear steadfastly opposed.

The argument for additional monetary action is straightforward. By law, the Fed is supposed to aim for maximum employment and stable prices. But the unemployment rate is 8.2 percent — a good two percentage points above what even the most pessimistic members say is its sustainable level. Moreover, the spate of disappointing data and the deepening crisis in Europe make continued weakness all too likely.

What about the arguments against further action?  I don’t think they are convincing enough to win the debate.

Some Fed members contend that monetary policy has already done its share.  Other policy makers, they say, need to step up. Both the Fed’s chairman and its vice chairwoman have talked about the need for additional near-term fiscal stimulus as part of a gradual deficit-reduction plan.  And many Fed committee members have called for a more aggressive housing policy. Indeed, the Fed raised some hackles in January when it sent an unbidden white paper to Congress, outlining possible administrative and legislative initiatives to deal with problems like foreclosures and underwater homeowners.

I agree that we need more effective fiscal and housing policies. But neither is likely to happen, at least not before the presidential election.  As a result, the Fed is the only plausible source of immediate help for the American economy.  It was set up as an independent body precisely so that somebody can do what’s right when politicians can’t or won’t.

I find a related argument even more frustrating: that the Fed shouldn’t act because Congress wouldn’t like it and might retaliate.  This argument exposes the important truth that the Fed is only as independent as Congress lets it be.

But it also raises a key question: what are Fed policy makers saving their independence for? If rescuing millions of Americans from the torment of unemployment isn’t a reason to risk their independence, what is?

In 1958, when the Fed was taking an unpopular stand to fight inflation, a very wise Fed chairman, William McChesney Martin, said this: “If the System should lose its independence in the process of fighting for sound money, that would indeed be a great feather in its cap and ultimately its success would be great.”  The current Fed chairman, Ben S. Bernanke, should add the phrase “and full employment” after “sound money,” and paste that line on his bathroom mirror.

MANY Fed officials contend that additional action might push up inflation. But right now, the inflation measure that the Fed watches is a bit below its target of 2 percent, so that isn’t an immediate issue.

Furthermore, most analyses suggest that the main determinant of inflation is the state of the economy.  With continuing high unemployment at home and slowing growth abroad, inflation seems more likely to fall than to rise.  And there’s no evidence that a modest relaxation of the Fed’s vigilance could cause inflation to jump suddenly.  Inflation is likely to rise only if the economy takes off — an outcome to pray for, not fear.

More fundamentally, the Fed’s dual mandate doesn’t say it should care about unemployment only so long as inflation is at or below the target.  It’s supposed to care about both equally.  If inflation is at the target and unemployment is way above, it’s sensible to risk a little inflation to bring down unemployment.

Beyond worrying that expansionary action might cause some inflationary pain, many Fed officials argue that the benefits, in terms of reduced unemployment, are likely to be small.

The academic literature shows that monetary policy can be very effective at reducing unemployment in situations like ours. In the recovery from the Great Depression, for example, aggressive expansion of the money supply played a large role in lowering the real cost of borrowing and in spurring growth.

After the Fed has pushed interest rates down to zero, its main remaining tool is communications.  It can affect expectations of future growth and inflation, which can have powerful effects on consumer spending and business investment today.  But to have a big impact, the monetary actions need to be bold — and pursued with gusto. In an earlier column, I discussed one of economists’ favorite examples of such a policy: setting a target for the path of nominal gross domestic product.

If the Fed doesn’t want to do something as drastic as adopting a new operating procedure, it could at least make any smaller actions it takes more effective.  The previous rounds of quantitative easing may have done little to improve expectations because their size and duration were limited in advance.  If the Fed does another round, it should leave the overall size and end date unspecified.  Or, better yet, the ultimate scale and timing could be tied to the goals the Fed wants to achieve.

Likewise, the Fed’s statement about the federal funds rate has seemed almost intended to undermine any positive confidence effects.  It says the Fed expects a low rate through late 2014, which is supposed to give people hope.  But the low rate is then justified by invoking continued weakness in the economy, which is likely to make people want to hide under the covers.

Instead, the policy-making committee could adopt the proposal of Charles Evans, the president of the Federal Reserve Bank of Chicago, that the Fed pledge to keep rates near zero until unemployment is down to 7 percent or inflation has risen to 3 percent.  Such conditional guidance assures people that the Fed will keep at the job until unemployment is down or the toll on inflation becomes unacceptable.

The Fed meeting will be the first for two new governors, Jerome H. Powell and Jeremy C. Stein. It would be a great time to confront some of the faulty arguments being made against aggressive Fed action.  For all our sakes, I hope Mr. Powell and Mr. Stein jump right in.

~~~

FINAL  OBSERVATION

FROM

FLOYD

Now, I admit that all this, plus my rambling about the economy in Part 37 EXTRA, can be a little wearing, but folks, all this is going to affect every single person, in one way or another, in this country.  It takes a little concentration, but as responsible citizens, as I know you are or you wouldn't be following my blog, I know it will be worth your time. 

Just think what all these writings have done for us.  It tells us the effect all this can and may have on our election.  It tells us that many responsible people, in the economy field, know that something must be done and that they know the Fed is the only resource left.  And it tells us that we had better do all we can to get Democrats in Congress and in the White House. 

I have been through the Great Depression, even though I was young I remember it well, and World War II with the terrible affect on our country and our people, but this has the potential to do much more harm to us than all our wars.  For if we finally wind up in a full depression - - well, who knows what it will be like.

~~~

PARTING  THOUGHT

Age puzzles me.  I thought it was a quiet time.  My seventies were interesting and fairly serene, but my eighties are passionate.  I grow more intense as I age.

Florida Scott-Maxwell

~~~

If the good Lord is willing and the creek don't rise, I'll talk with you again next Tuesday the 19th of June 2012, or before.  Until then:

God Bless you all

&

 God Bless the United States of America

Floyd