The View From 1776

The Myth of the Multiplier

Why the stimulus package hasn’t reduced unemployment

Robert Stapler, in a comment on an earlier post, alerted us to this article on the website.


Overall, government spending doesn

Posted by .(JavaScript must be enabled to view this email address) on 10/24 at 05:51 PM
  1. Of course it's a myth. It sounds good to the drones who happily nod their heads in agreement with whatever the statist tyrants tell them to believe. The details of fiscal and monetary policy are the perfect vehicles to confuse the masses into believing it's right to hand over their liberty. It's just so 'complicated'!
    Posted by .(JavaScript must be enabled to view this email address)  on  10/24  at  08:05 PM
  2. Something to think about in the jobs arena

    the dominant reason for unemployment in the current economy is permanent separation. Permanent separation is when a job is cut and it
    Posted by JanPBurr  on  10/25  at  10:27 AM
  3. Without the stimulus money the unemployment rate would probably be more like 15% or higher.

    For you who don't understand, the economy had the stuffing kicked out of it. The trust and confidence it needs to recover will take years to rebuild because of the depth of the problems. All sectors, consumers, business and government behaved like drunken sailors prior to the collapse, destroying a lot of the underlying value. So it is no wonder that the stimulus is not creating the jobs that were forecast.

    At best the stimulus is a stopgap. Things would be worse without it. It is no myth as some of you think.

    The myth is that you people think business alone can induce a recovery. What a fantasy! But mean while the economy and the country would really go over the edge, perhaps never, ever to recover.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/25  at  02:50 PM
  4. I agree, David, that things would have been worse. Also, without the bailout of the banks, the financial system would have collapsed.

    The problem is that this just delays and makes worse what has to come.

    You can't tax or grow out of this and Congress has been told that for years. You have to cut spending and that means a major depression. We have to have a major depression either now or later.

    The fact that it took 10% growth in debt to get what they hope will be a 3% growth in GDP for this quarter's report coming up, doesn't register with most voters. They would crucify Congress and the President if he did nothing, even though it just makes things worse.

    The depression will mean a decade of pain that our voters aren't prepared for. Thus, they want "something" to be done even if it is wrong and only delays and makes things worse. Why? Because they still hope for some kind of miracle that will allow them to avoid the pain.

    The President has no choice if he wants to satisfy the majority of the voters. That won't really help anything but, it will at least show the voters he is trying to do "something" to ease the pain.

    Business, nor government can cause a recovery. It takes consumers and jobs and it takes tax revenues that exceed government spending. None of those things are present, nor will they be for at least a decade according to our government's accountants and Congressional Budget Office.

    Government can no more help this without making things worse when it can't be delayed any longer, than FDR did in the Great Depression which was the only other "credit expansion collapse depression" we have had in the last 100 years. "Inventory recessions" are nothing like what we have, now.

    Also, regarding any stimulus that is actually helping, we have learned from history that when it is attempted to be pulled back, it causes the next crisis. So, government has chosen to keep growing debt and delaying the most pain for later on.

    That has finally got to the point where debt bubbles are needed to just create an illusion of growth and now we are running out of lenders. Our deficits exceed the world's trade surplus that we depend on for loans to come from.

    That is why the FED is forced to monetize debt in a last ditch attempt to avoid the collapse in our ability to get loans for more deficit spending and why the world is moving away from the dollar as fast as it can.

    The attempts, like Canada's recent purchase of dollars to shore the dollar up, isn't having the same affect it would have just a few years ago.

    There are just too many nations making non-dollar trade agreements to get much of a rally in the dollar. The only way, now, to get a major dollar rally is if the equities and commodities markets drop significantly for a long period.

    Even the analysts that are predicting exactly that, say the dollar will again, then start down when the markets start up the next time.
    Posted by JanPBurr  on  10/25  at  03:24 PM
  5. "The problem is that this just delays and makes worse what has to come."

    At least that indicates a future. Without the bailout or stimulus there may not be a future to worry about or the room to maneuver.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/25  at  04:53 PM
  6. Delaying the inevitable is not a solution, it will only make matters worse. The banking system,as supervised by the FED and the regulators, is busted. The system is defective. From the central bank on down.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/25  at  05:12 PM
  7. Mr. Airth:

    Think for a moment longer about your statement, "The myth is that you people think business alone can induce a recovery. What a fantasy!"

    There have been economic recessions here and abroad as long as there have been banks extending credit to businesses. At no time before Herbert Hoover (1929-32) and Franklin Roosevelt (1933-45) had a government ever thought to attempt managing the economy out of a recession by employing pump-priming, deficit spending. Yet business always recovered via the natural process of cutting costs and liquidating excess inventories in order again to be able to produce at a profit.

    Before the Hoover-Roosevelt New Deal, no depression ever had been so prolonged or so severe.

    The real myth is to think that government intervention can substitute for economic reality.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/25  at  07:44 PM
  8. David said
    At least that indicates a future. Without the bailout or stimulus there may not be a future to worry about or the room to maneuver.

    What? You think that because America has a depression it just disappears of the face of the earth? You think all the people die? We just rebuild.

    By delaying the inevitable we only make the depression worse and make rebuilding take longer.

    If you think what we would have now without the stimulus would end "the future" of the U.S., then just wait until it collapses from its own weight.

    Don't sell the American people short. They can rebuild this nation and make it stronger and better in a very few decades. We already have the infrastructure, though it needs updating and all we need to do is return to sound monetary and economic policies.

    Not one policy that got us in this mess is being reformed and we are still using more debt to cure "too much debt."
    Posted by JanPBurr  on  10/25  at  08:40 PM
  9. "The real myth is to think that government intervention can substitute for economic reality."

    Mr Brewton, you have not explained what economic reality is. I mean, your statement sounds like a deviation or an avoidance.

    My sense is that if economic reality was just left to the business community alone America would really be in trouble. If reality is about the survival of the fittest as you seem to suggest, then, according to your logic, there wouldn't be many people left around to rebuild the economy.

    Posted by .(JavaScript must be enabled to view this email address)  on  10/25  at  10:41 PM
  10. That is what you get for assuming.

    We have to have a depression (a long time a go, a recession would have been enough) to cleanse the debt from the system and to wake the voters up to the fact both parties are bad because they both use bad monetary and economic policies the CFR and Trilateral members (non-partisan think tanks) tell them is best even though decades of history show they drive jobs out of the U.S. and destroy the nation with debt that can't be paid.

    The American people aren't able to get the nation going again until you get the Federal policies out of the way that put us in this depression and it is a depression, not a recession even if we delay it for awhile.
    Posted by JanPBurr  on  10/25  at  10:54 PM
  11. Mr. Burr,

    I think you are overly pessimistic. Housing is showing glimmers of recovery, the market appears to be stable and trending generally upward, inflation remains relatively low, Obama is trying to get us out of Bush's unnecessary wars, and the Yankees won the pennant. Could be much worse.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/26  at  09:33 AM
  12. I agree, I am being overly pessimistic. That is because I have seen what happened in the last "credit expansion collapse." There was the very same period and hope of recovery. Remember what Hoover said, and others?

    # "The spring of 1930 marks the end of a period of grave concern...American business is steadily coming back to a normal level of prosperity."
    - Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930

    "... the outlook continues favorable..."
    - HES Mar 29, 1930

    # "... the outlook is favorable..."
    - HES Apr 19, 1930

    # "While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us."
    - Herbert Hoover, President of the United States, May 1, 1930

    " May or June the spring recovery forecast in our letters of last December and November should clearly be apparent..."
    - HES May 17, 1930

    "Gentleman, you have come sixty days too late. The depression is over."
    - Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

    # "... irregular and conflicting movements of business should soon give way to a sustained recovery..."
    - HES June 28, 1930

    # "... the present depression has about spent its force..."
    - HES, Aug 30, 1930

    # "We are now near the end of the declining phase of the depression."
    - HES Nov 15, 1930

    That is the only other "credit expansion collapse" in our history we can use as a gauge. The total debt then was 270% of GDP and this time it is 370% of GDP and it takes years of deleveraging.

    We are facing continued rising unemployment if from no other place than cities and states cutting spending. That not only lays off people in direct government jobs like education, city services, etc. but all businesses that sell asphalt, chemicals, business supplies, business equipment, etc. to the cities and states. That reduces tax revenues again and causes more budget problems with the governments.

    With rising unemployment comes for home mortgage defaults which means more loss of tax revenues and consumer spending. We just saw a major financial institution, Capmark go under

    Capmark Financial Group Inc., one of the largest commercial real-estate lenders in the U.S., has filed for bankruptcy protection,

    ....Capmark, formerly GMAC's commercial property arm, had recently reported a second-quarter loss of $1.6 billion.

    This and option ARMs and Alt-A's are all still ahead of us and that means a lot more pain for banks and the economy as all those properties are tied to tax revenues.

    As we saw in the last depression, it happens in waves of hope and despair because of the cyclic nature of it.

    But, I don't deny it is possible to delay this. I have said we could have a delay of anything from months to a couple years as we did in the 30's where we saw years of apparent recovery and then the collapse again in 1937 when they tried to unwind the help to the economy.

    The thing is that every month of delay requires more deficit spending. For example, we have a deficit of 10% of GDP ($1.4 trillion) that we hope will give us 3% growth. The deficits are expected, by the President and CBO to continue for a decade and the expectation of growth to be 3% or just slightly more during that time if no unforeseen circumstances happen.

    That means 10% more debt year after year for 3% growth and that is not sustainable. We couldn't grow or tax out of this according to what Congress have been told by the GAO, CBO and Bernanke. We have to cut spending and deficits dramatically by trillions. Currently 40% of the budget is funded by debt which is the normal rollover point for a nation where it collapses.

    That is the video with John Maudlin that provides that 40% stat. and in which he talks about debt and the huge problem debt is causing.

    That is why the longer we delay this, the worse it gets. Just as the delay by Bush made this crisis worse, delaying this one makes what is coming worse.

    We need 5 to 10 years of deleveraging and there is no way we can borrow enough to keep the spending going for that long. There simply isn't enough money in the trade surpluses of other nations to fund our debt with. If we print the money then we will hyper-inflate the currency. If we don't, then we collapse the nation's economy much worse than it is now.

    Obama is not trying to get us out of the Bush wars. He is just moving the theater because he need defense industry jobs. If he does cut defense spending and I hope he does, that means hundreds of thousands of layoffs and even if he cuts defense spending 50% it still doesn't solve the debt growth problem because tax revenues would fall even more.

    No matter what the government does, they make it worse, either now or later. The only thing I can think of that wouldn't is tax code reform. When businesses spend 400% more in tax compliance than in the tax they pay, there is a huge potential for more tax revenues by simply making the tax code simple and much less costly to comply with. A 17,000 page tax code is ridiculous.
    Posted by JanPBurr  on  10/26  at  10:47 AM
  13. By the way, the international banking cartel that controls both parties didn't think the Iraq war was unnecessary. Saddam had started selling oil in euros, undermining the dollar.

    I am sure you saw articles before we ever went to war how we would go to war over the dollar. Because we were already at war with Iraq and only under a cease-fire, all we had to do is convince the U.N. that the decade of U.N. cease-fire violations was resulting in a possible nuclear option by Saddam.

    Of course we now know that was true since we found and shipped the nuclear material out of the nation.

    he last major remnant of Saddam Hussein's nuclear program - a huge stockpile of concentrated natural uranium reached a Canadian port Saturday to complete a secret U.S. operation that included a two-week airlift from Baghdad and a ship voyage crossing two oceans.

    The removal of 550 metric tons of "yellowcake" - the seed material for higher-grade nuclear enrichment - was a significant step toward closing the books on Saddam's nuclear legacy. It also brought relief to U.S. and Iraqi authorities who had worried the cache would reach insurgents or smugglers crossing to Iran to aid its nuclear ambitions.

    What is now left is the final and complicated push to clean up the remaining radioactive debris at the former Tuwaitha nuclear complex about 12 miles (19 kilometers) south of Baghdad - using teams that include Iraqi experts recently trained in the Chernobyl fallout zone in Ukraine.

    "Everyone is very happy to have this safely out of Iraq," said a senior U.S. official who outlined the nearly three-month operation to The Associated Press. The official spoke on condition of anonymity because of the sensitivity of the subject.

    So, while our motivation was to get oil sales back into dollars to satisfy the banking community that used the dollar as the world's reserve currency, esp. for oil sales, that in turn led to the money being available for loans to us, the U.N. was satisfied from a WMD standpoint and could use that as the public excuse to resume the war. Remember Clinton bombed Iraq because of violations of the cease-fire and promised we would return if Saddam didn't stop the violations.

    Afghanistan is about the pipeline routes through that nation that are proposed. In the case of Afghanistan, we use the terrorists as the excuse but, the President as most of the troops stationed in the areas where the pipelines will go. Again, this is to serve the banking cartel that wants to control oil supplies in that region one way or another.

    While you and I may not see that as justification, the international community our government works for does think it is justification.
    Posted by JanPBurr  on  10/26  at  11:01 AM
  14. "...the international community our government works for does think it is justification."

    I think this is silly talk, rather conspiratorial, like 9/11 was an inside job or that JFK was killed by the CIA. In other words, it is nonsense.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/26  at  01:53 PM
  15. Not really. It isn't so much conspiracy as it is group think. In 1921 the CFR was created as a non-partisan think tank specifically to help both parties make economic and monetary decisions.

    You are probably aware of how much the CFR is the source of our cabinet members but, in case you aren't are others aren't, this gives you an idea of how much it is depended on. Again, this is a group of people who believe in a certain economic and monetary theory and thus, the tell both parties that this is the only theory that is best for America. At the heart of this is stimulus spending, using debt for growth and inflation to reduce the problems defaults on debt would cause.

    First this quote

    President Franklin D. Roosevelt wrote to an associate, in a letter that is recorded on pg. 373 in his book containing his personal letters, the following,
    Posted by JanPBurr  on  10/26  at  02:55 PM
  16. David,
    You are either the world
    Posted by .(JavaScript must be enabled to view this email address)  on  10/26  at  06:14 PM
  17. Jan,
    I do not know where you got that "quote" about nuclear material (no reference provided), but Saddam had no centrifuges, so he was incapable of concentrating anything. We also now know that Bush's fairy tale about yellow cake was just that, and got Cheney's boy Libby in the slammer for lying about the efforts to out the CIA wife of a man who revealed it was a lie.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/28  at  08:27 AM
  18. The yellow cake was reported in some articles when the move was completed. That link to one of the articles is there for you to read. But, it isn't important, oil being sold in dollars is why the resumption of the war took place.

    Possibly you are putting too much importance on the yellow cake instead of his intentions as it was old yellow cake and the 1st war upset his plans.

    This is the report the Defense Dept. had on it.


    Defense Personnel Transport Uranium Ore Out of Iraq

    By Jim Garamone
    American Forces Press Service
    WASHINGTON, July 7, 2008
    Posted by JanPBurr  on  10/28  at  09:36 AM
  19. Jan,

    While you may believe that Bush went to war to support dollar-denominated oil trading, you would be a voice crying in the wilderness to make that claim credible.

    There is great debate why Bush went to war. It is generally believed to have been an irrational act. He is on record as having asked NONE of his advisers in the defense department, state department or anywhere else whether we SHOULD go to war.

    A number or reasons have been hypothesized, among them, to revenge Poppy Bush, to show his machismo, to show he was stronger than Poppy Bush, because Cheney told him to, to satisfy the Neocon's New American Century Plan -- but mostly because he was dying to be a "War President."

    Bush and Iraq will be a truly sad chapter in American history.
    Posted by .(JavaScript must be enabled to view this email address)  on  11/01  at  08:51 PM
  20. I was going mainly by the articles written before the war as to why we would be doing so. Why do you think Clinton bombed him or why did we immediate switch the sales to dollars in the new government.

    Why did we step up the rhetoric on war with Iran when they then started selling euros

    Remember our foreign policy is set by the international banking cartel. Both parties fill their cabinets from the CFR and Trilateral Commission.

    When you study the history of why we go to war, you see the handprints of banking all over it.
    Posted by JanPBurr  on  11/01  at  11:14 PM
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