Where is the US economy headed?

I happen to think that the home you kick off your political career has some significance, even if it isn't much more than being symbolic. I think for example that any politician should recognize the political effect of kicking off ones career in the home of a known past terrorist? Maybe not, but that would speak more to the issue of ignorance than intent, which is still not very flattering to Obama, is it?

Fairly commonplace to take over a government building or attempt to overthrow the government? You have to be kidding, I hope, JPB? I guess I came from a very conservative area. I attended Oklahoma State University, and I do not recall any demonstrations against the war, none at all, nor were any students taking over buildings. Most were more interested in partying or studying so that they could keep their student deferment.

I don't think it matters. I think the important thing is that he knew him later, and he should have known or did know who he was and what he had done. I never knew of anyone that admired those people. I knew some guys in SDS, but they were kind of a couple of losers and so I never took the time to figure out what their organization was about.

cicerone imposter wrote:

If any of you can defend okie on the transfer of wealth from the rich to the poor based on income taxes, I'd like to hear it. What we are essentially doing is transferring current debt to our children and grandchildren.

Even Warren Buffet said he's willing to pay more in taxes, because he understands that the remaining 98% of Americans are having difficulty. Why does okie know better than one of the richest men in the US?

I don't believe that rich people are necessarily more reliable sources than poor folks or those of more modest means. I suspect that Warren Buffet will notice the effect of higher taxes far less than will a "rich" family taking in $275,000 per year.

Frankly I haven't followed your dispute with okie over this matter - too much invective and name calling for my taste. Our taxes do indeed involve wealth transfers both from rich to poor and from the yet unborn to the living. It isn't an either/or situation.

Initially, I was even somewhat elated when he gained the advantage over Hillary, as I was hopeful we would be rid of the Clintons for good.[/quote}

You and me both!

[quote]To make a long story short, to this day I am not real sure what the man is totally about, although I think he harbors some fairly radical beliefs. That does not mean he will be able to get them instituted. So far, he hasn't been real successful in doing all that he has wanted to do. I am convinced Obamacare is no good, and I know cap and trade is a terrible policy. I remain hopeful that we can get through the next 2 years without any more real big flub ups, and maybe he will even learn more on the job. Maybe he will turn out better than the worst scenario feared.

Are we to be judged by who we are willing to be associated with regardless of their current occupations and beliefs? Ayers was a militant radical. That's not debatable. He's well respected today in his field, however. You don't accept that, perhaps, and don't agree that we can sit beside someone whose policies and practices we don't endorse, but I think that's a good thing not a bad thing.

Thanks for the discussion. I've enjoyed it.

So... where do you think the US economy is headed?

I don't honestly know, so this is a guess. I think it will rock along the bottom or near the bottom for the next year or two. It may improve marginally, but only slightly, with unemployment remaining above 5 or 6% for the next year or two. At some point, the economy will take off again, depending upon Congressional policies, regarding taxes and other things.

I hate to make this political, but I truly think it might take off with a new president that is conservative, that believes in the American people and the business community, and what they can do if the conditions were made right for them.

I don't look for any great improvement in the deficits or debt, unfortunately. I fear that we do not have the political will as a people to do anything big. I am fearful of inflation at some point, perhaps in a big way.

Economists call the Fed's effort QE2, because it tried something similar in the middle of the financial crisis. Starting in 2007, the Fed bought $1.7 trillion in mostly mortgage bonds from banks, helping stave off a wider banking collapse. Studies show it also pushed mortgage rates to historic lows, though it has not revived the housing market. The Fed expects the much smaller QE2 to end in June.

At that point, if the economy still looks weak, Prudential's Krosby says we'll have a new question to consider: "Will there be a QE3?"

In the meantime, foreign central banks and a group of U.S. economists have called for the Fed to cancel its QE2 program. Ahead of the G-20 summit in Seoul last week, governments including Germany, Brazil and China called the plan wrong-headed and said it risked sparking inflationary pressures in their countries.

Monday, the Wall Street Journal published a letter to Bernanke from a group of influential economists who said the plan should be "reconsidered and discontinued."

"The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment," the letter said.

The Fed responded by saying it is mandated to help promote higher employment and price stability and that its plan reflects those mandates.

"The Federal Reserve is committed to both parts of its dual mandate and will take all measures to keep inflation low and stable as well as promote growth in employment," said the Fed. Source (emphasis added)

"The planned asset purchases risk currency debasement and inflation...

There's zero evidence of inflation right now and no reason to worry about it.

Bill Bonner, The Daily Reckoning
Agora Financial
Nov 12, 2010

As of this writing, it takes more than $1,400 to buy a single ounce of gold - a new record. Why? Isn't it obvious? People are losing faith. Last week, the US Federal Reserve said it was creating another $600 billion to buy US Treasury debt. That will mean a total of $2.3 trillion added to America's monetary footings since the Fed began its QE program almost two years ago. This will also mean that Ben Bernanke has added three times as many dollars to America's core money supply as ALL THE TREASURY SECRETARIES AND FED CHAIRMEN WHO CAME BEFORE HIM PUT TOGETHER.

"Easier financial conditions will promote economic growth," wrote Mr. Bernanke, in The Washington Post, "...higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion."

Where is the proof? Where is the controlled test? Where is the peer review? Such an extravagant assertion ought to be accompanied by extravagant evidence. But there is none at all. Throwing virgins into a volcano would be no less scientific. The virgins appeased the gods; that was the theory. Mr. Bernanke has a voodoo theory too. He says all that new money will make people feel richer...and then they will act richer...and then they will be richer!

John Hussman, also an economist with a loyal following of his own, read Mr. Bernanke's explanation and pronounced judgment: "the most ignorant remarks ever made by a central banker." The latest $600 billion gamble may or may not increase stock market prices, he says. Even if it does, it is unlikely to produce the "wealth effect" that Ben Bernanke is counting on. People spend and borrow when they think they have permanent wealth. World stock markets have suffered two major shocks in the last ten years...with no net gains for investors. An increase in stock prices now - driven by the Fed's printing press - is unlikely to create the kind of expectations that lead people to spend money. Especially when they don't have any. Source

"Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion."

Federal Reserve Chairman Ben Bernanke, Washington Post 11/4/2010

Last week, the Federal Reserve confirmed its intention to engage in a second round of "quantitative easing" - purchasing about $600 billion of U.S. Treasury debt over the coming months, in addition to about $250 billion that it already planned to purchase to replace various Fannie Mae and Freddie Mac securities as they mature.

While the announcement of QE2 itself was met with a rather mixed market reaction on Wednesday, the markets launched into a speculative rampage in response to an Op-Ed piece by Bernanke that was published Thursday morning in the Washington Post. In it, Bernanke suggested that QE2 would help the economy essentially by propping up the stock market, corporate bonds, and other types of risky securities, resulting in a "virtuous circle" of economic activity. Conspicuously absent was any suggestion that the banking system was even an object of the Fed's policy at all. Indeed, Bernanke observed "Our earlier use of this policy approach had little effect on the amount of currency in circulation or on other broad measures of the money supply, such as bank deposits."

Given that interest rates are already quite depressed, Bernanke seems to be grasping at straws in justifying QE2 on the basis further slight reductions in yields. As for Bernanke's case for creating wealth effects via the stock market, one might look at this logic and conclude that while it may or may not be valid, the argument is at least the subject of reasonable debate. But that would not be true. Rather, these are undoubtedly among the most ignorant remarks ever made by a central banker. Source

I don't see why there is so much fuss over eliminating the deficits. Clinton did it with little difficulty, creating large surpluses at the same time.

just because there's no sign of inflation now,