Comments on: Obama forgot Samuelson when he told fat cats to start lending

By: gregor.us

gregor.us — Wed, 16 Dec 2009 19:16:00 +0000

Nice description of the interplay between a wide-band oscillation of the price of a depleting resource, with its reaction effect in policy and the social economy. So depressing!

Best,

By: Edward Harrison

Edward Harrison — Wed, 16 Dec 2009 19:00:00 +0000

Gregor, you and I both know that is never going to happen because the Obama Administration is too wedded to the status quo to make any bold changes. What I anticipate will happen from an energy perspective in spite of peak oil is this:

We will bump along in the semi-deflationary environment until a renewed trigger causes recession at which point the mountainous debt will move center stage again.

Consumers will retrench and energy prices will collapse until another recovery and peak oil causes them to soar again to a higher price point. This will be followed by another economic downturn and a falloff of demand and a renewed price collapse to a higher price point.

At some point, we will get the message and make a correction.

By: gregor.us

gregor.us — Wed, 16 Dec 2009 18:39:00 +0000

It’s all so very depressing. No pun intended. Sigh. Talking my own subject area, I would say that from the current juncture where there is little prospect for escape from debt deflation until a few more years passes, the objective of a US Admin should be as follows: do everything we can to widen back out the spread between energy input costs and wage income. In other words, develop NG resources, build trains to help people dump their cars, get electricity prices down or keep them stable, invest in the power grid, and employ people in the process. The number one policy should be thought of as National Energy Abritrage Policy. If it’s too hard to get wages higher, then work on getting energy costs lower. Sadly, our Fiscal, and Monetary institutional structure now seems uniquely unsuited to this task. Depression economics indeed.Best,G

By: demandside

demandside — Tue, 15 Dec 2009 17:40:00 +0000

I think he is being blown there by the political winds. “We want safe and sound lending practices first and foremost.” When the CRE stuff hits the fan, will we be talking about deadbeats and people playing the victim? Maybe. Still. It is the huge debt in the household sector that is the major weight on the economy going forward, not the health of the banks. Getting this debt down will happen because it is unpayable. Doing it in an organized way would be nice.

By: dansecrest

dansecrest — Tue, 15 Dec 2009 13:11:00 +0000

Excellent post. Nice job of tying together recent events…

By: Edward Harrison

Edward Harrison — Tue, 15 Dec 2009 12:49:00 +0000

You have to take Rosenberg’s pro-bank rhetoric with a grain of salt. He is a banker after all. And his comments about deadbeat borrowers (in original but not in my quote) are of a similar vein. But, the basic analysis is right – namely that we want safe and sound lending practices first and foremost. You are unlikely to get that if the President of the United States uses his bully pulpit to defame bankers as fat cats and exhorts then to start lending more. It strikes me as inappropriate for the President to insert himself in the situation in such an aggressive way.

By: LavrentiBeria

LavrentiBeria — Tue, 15 Dec 2009 07:40:00 +0000

Rosenberg is right to see the problem as more fundamentally political than economic, something you might expect when prostitution is the governing principle in “public service”. And you are right that jobs are the solution but that would mean our on-the-take politicians would have to acknowledge their complicity in eviscerating the manufacturing base in this country over the last three or so decades and that in favor of some imaginary “new economy”. Now, in order to hold onto some modicum of self-regard, these scum are forced back again and again on the same lies. The ones I feel the most sorry for are the young people who have bought the lie that an education beyond high school was going to be critical to their survival. Great for the elitist academicians with the six figure salaries but really, education for what, ubiquitous outsourcing and a graveyard shift hash slinging job in some out of the way Dennys? There, it seems to me, is our problem. These vermin have been paid-off to provide the legislative and policy initiatives required to gut our economy and now when the only certain way out of our dilema is to lean on the very thing they’ve helped destroyed, there’s nothing there to steady them. Jobs, schmobs. There are no industries to support jobs and short of CCC or WPA type projects and a kind of Five Year Plan to reindustrialise this country, there won’t be any. Its too late.

By: demandside

demandside — Tue, 15 Dec 2009 05:08:00 +0000

Well, he’s either their back pocket or he is expecting too much of them. As to Rosenberg’s point, everybody is an adult, but spending all that money on the banks did not get the real economy going again. Doing something on a similar scale for homeowners would have had a bigger impact. Nothing meaningful has been done for them.

The banks are not lending because they don’t have to. They are getting money at zero and lending it at high margins. It is the continued giveaway by the Fed. The banks are victims? If, like in 1994, short-term rates were to go up, there would likely be a search for appropriate borrowers.

As to the bonuses, perhaps we should get back to the high marginal tax rates and equal treatment for capital gains for everyone. This benefiting the elites because they were leading us into prosperity hasn’t worked out too well. (Greed is good …. Why was that again?)

Obama’s comments should be viewed as any politician’s, an indication of which way the wind is blowing. In this case, there is a stiff breeze up the Hudson. Perhaps we will see some bank restructuring.