October 24, 2010
-- by Dave Johnson
We have a huge deficit because we cut taxes for the rich and massively increased military spending. Therefore we have to cut Social Security.
Posted by Dave Johnson at October 24, 2010 9:12 AM
Freidman is looking at the trees not the forest. the reason we have a huge deficit is because we allowed the Federal Reserve to usurp Article I Section 8 of the Constitution. Had the creation of the nations currency remained with the Treasury and the Congress there would be no debt service on funds required to finance the government.
Mr. Freidman, mainstream economists, financial mavens and talk show pundits cannot articulate the social or economic reasons for the Federal Reserve to charge the public sector interest on funds used to purchase goods and services from the private sector, when those goods and services are legislatively authorized for the welfare of Americans.
The Treasury and the Fed create "fiat" money which when done for the public sector has no opportunity cost. These funds are authorized by the Congress and must be made available.
The Treasury and the Fed can use interest rate policy to ration funds demanded by the private sector.
Moreover, to Mr. Freidman's contention that SS must be reformed to generate savings. Nothing could be further from reality.
The Fed will perform its Quantitative Easing Majic next month for up to TWO TRILLION DOLLARS. The Fed gets to hold worthless, toxic assets. The taxpayers get the bill in higher taxes and diminshed services.
Prithee tell me why theFed's QE Majic cannot do the same to purchase the hundreds of billions in IOU's the government has deposited in the SS Trust fund, after pilfering that fund for 60 or more years?
These are accounting transactions, ledger entries, they are gossomer digits that in a nation with a real unemployment rate of 22% will not raise the spectre of inflation.
The second option is so simple, raise the ceiling so that all pay into SS no matter what there salary of gross income.
Posted by: Robert Bostick at October 24, 2010 12:40 PM
Shorter housing bubble:
"The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." Krugman, 2002
And Barney Frank and Chris Dodd listened to him and implemented his plan (while denying Fannie and Freddie were insolvent) and collapsed the economy.
Why we aren't frog-marching these criminals into a trial dressed in orange jumpsuits is beyond me.
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