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Daniel Alpert: Earth to Paul Krugman

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By Daniel Alpert, the founding Managing Partner of Westwood Capital. Cross posted from EconoMonitor

This past Sunday, Paul Krugman penned a screed in the New York Times Magazine (entitled, somewhat unflatteringly in my opinion, “Earth to Ben Bernanke”) that expanded on the content of an ongoing debate in the economics blogosphere over the contents of the mind of Federal Reserve Board Chairman Ben Bernanke.

Professor Krugman has posited for months now that Bernanke has come up short in failing to follow his own prescription for post-bubble, debt-deflationary economies (namely, that of Japan, which the Chairman wrote about as an academic a dozen years ago). In essence, Professor Bernanke’s view was to push both monetary and fiscal stimulus to the point at which it would generate above-natural rates of inflation for a period of time sufficient for such economies to reflate and discount the indebtedness accumulated during credit bubbles.

In the course of Krugman’s commentary he has pushed the notion that Bernanke is either politically intimidated by the right, fearful of uncontrolled inflation, or possessed of a shy personality that is vulnerable to peer pressure within the FOMC (Paul…seriously?).

While some of what is in Ben Bernanke’s mind may be made more clear with tomorrow’s FOMC meeting announcement, in the meantime allow me to rise to Chairman Bernanke’s defense and suggest to Professor Krugman, as I have in the past, a different – yet still quite Keynesian – explanation for our Fed chairman’s current point of view (and in doing so give Paul a piece of my own mind, as I doubt Ben will rise to the bait himself).

Ben Bernanke is neither overly “shy” or out of touch with the world, as Professor Krugman would have us believe. To the contrary, I believe the Chairman has correctly assessed the limitations of extraordinary monetary intervention at the zero-bound (short term interest rates at or near zero) and comprehends a present inability of the U.S. economy to generate the sustainable inflation that the professor correctly notes would help us out of our debt-deflationary slump.

I am sure that Professor Krugman agrees that the Great Recession and its sluggish aftermath saw a mammoth decline in aggregate demand. But if present levels of aggregate demand are insufficient to revive our economy, such demand must be insufficient relative to something else. And in this case – seen from a global perspective – that something else is the global aggregate supply of labor, productive capacity and, yes, even capital. Much of this excess supply can be traced to the historically sudden emergence of the post-socialist nations into the global market economy – which nations are characterized by extremely low wages relative to those of the developed world.

As a result of the foregoing, wages in the U.S. and other areas of the developed world are unable to “track” (that is, to follow along with, even on a lagging basis) the type of inflation resulting from the ocean of liquidity that quantitative and credit easing policy of the Fed, the ECB and the Bank of Japan has produced – generally speaking, inflation in highly tradable commodities and financial assets. No wage growth (because of the dampening effect of excess emerging market labor, always standing by to work cheaply where it can compete with endogenous U.S., European or Japanese labor)…no sustainable inflation. As a result, high levels of inflation tend to collapse economic activity, as limited per capita wages are shunted to oil and food, rather than to more expansionary forms of consumption.

Extraordinary monetary measures will remain a critical weapon in fighting the deflationary pressures that result from our continuing debt overhang and global wage imbalances. But I am afraid – as I believe Chairman Bernanke may well be – that attempts at “reflating-to-recover” are, in the end, somewhat counterproductive under present circumstances.

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58 comments

  1. chitown2020

    These FED crooks are bankrupting the people plain and simple..All under the guise of debt that in reality the FED BANKS owe and they are stealing homes under the color of law while breaking the law…it is all fraud and it is right out of their Nazi Germany playbook. The QUADRILLION+ in fraud committed by the FED banks is debt that can never be repaid. Bernanke is an elite tool and he is following orders to bankrupt the people from his owners and the Obama administration, Congress and the Senate are traitors for allowing this. I agree with what Chris Whalen said in an interview a while back. This is another Hitler plan.

    1. nonclassical

      while I agree the FED has secretly stolen taxpayer $$$ documented here:

      http://www.unelected.org/audit-of-the-federal-reserve-reveals-16-trillion-in-secret-bailouts

      I know even $16 trillion bailout of Wall $treet is not enough to corrupt a U.S. $6.5 trillion, world $16.5 trillion per year economies for nearly 4 years already…

      It takes more like the $680 Trillion documented here:

      http://cje.oxfordjournals.org/content/33/4/563.full

      to destroy world economics, entire countries, for 10-20 more years, whereafter
      nothing will ever be as we knew it…

      But personally, I find Chris Hedges’ perception of “inverted totalitarianism” to be true:

      http://blip.tv/the-sanctuary-for-independent-media/chris-hedges-inverted-totalitarianism-4284853

      ..which elucidates economics dictating to government, rather than hitlerian dictate to economics…seems obvious, as FED is $ub$idizing Wall $treet..

      1. chitown2020

        Absolutely true. It is an outrage. Bloomberg news followed the money and found WE THE PEOPLE are bailing out foreign banks around the world. I agree with Kudlow..that these Globalists are trying to flatten us like Europe. This is all being accomplished by mass deception and lies about debt that can never be repaid. All we have to do is look around our cities and towns to see they are outright stealing America by FRAUD..LIES…..and MASS DECEPTION. Nearly all that is left standing are the banks and large multinational owned corps and a lot of empty homes and small businesses. The Government is a corrupt failure and they all need to be removed.

        1. chitown2020

          You might find it over the top that CNBC reported over a year ago that Wall Street made $60 trillion dollars in the year 1999 off of derivatives. I wonder how much fraud it takes to make $60 trillion dollars in one year? BTW…that is the same year that Congress and the Clinton administration repealed Glass-Steagall. I would like to add these banks are bankrupt on paper…They have mass wealth hidden in overseas bank accounts. Did you know that the Patriot Act allows the banks to hide massive wealth overseas with no accountability? Everyone should read the Patriot Act. Many experts have stated the Patriot Act is fascist and must be repealed. I along with millions of Americans called and e-mailed the White House and asked Obama not to sign it. If you remember he signed it anyway with his robot pen from Europe. Now that is over the top IMHO.

    2. sujay

      Neither Ben nor Paul r fools. There is nothing one can do in present worst situation created by mad spending by all. No one can make right the wrongs made. Simply we have to go through the pain. Austerity is the order of day. Learn for future.

      1. F. Beard

        Simply we have to go through the pain. sujay

        Why? The only problem is lack of money in the right hands and the unjust means by which that lack occurred.

        Austerity is the order of day. sujay

        Baloney. All that is lacking is justice, not real goods and services.

          1. F. Beard

            This world can’t find solution by blaming others. sujay

            Actually, I abstain from judging others as much as possible. But I have no shyness about judging corrupt systems and our money system is inherently corrupt.

          2. chitown2020

            No I am sorry but the American people absolutely DID NOT cause this. Even Obama, who I am not a fan of, stated publicly that the American people got into this mess through NO FAULT OF THEIR OWN. We took one mortgage..these greedy crooks oversold interests in our notes hundreds of times per note. One attorney found his clients note was sold 607 times. That is why the mortgages are insolvent and the debt of the banks can never be repaid. That is also why there are no LEGAL ASSIGNMENTS …… and they are robosigning docs…..and how they committed 700 TRILLION DOLLARS IN MORTGAGE DERIVATIVES FRAUD…..AND SECURITIES FRAUD WITHOUT OUR KNOWLEDGE..The total derivatives fraud debt of the FED is around a quadrillion dollars because they sold interests in and gambled on anything with a money flow. .Don’t insult my intelligence by telling me to look inward for taking out one mortgage 19 years ago that I fully qualified for and I put 40% down on my home. These crooks caused a living nightmare.

          3. NotTimothyGeithner

            The American people are ultimately at fault. We vote for people who might be neat at parties, and we are an ignorant lot at every level. Only 28% of people could identify John Roberts as Chief Justice when given a multiple choice option. I’ve known a few politician over the years, and they are great representations of the American people even the so-called good ones.

          4. Jill

            Absolutely sujay! I am waiting for members of the US govt. the banksters, the contractors etc. to look inward and submit themselves openly to the courts for trail as war and financial criminals. Instead they have rigged the system to avoid such introspection. They must have very poor yogis who won’t push them towards blaming themselves for the crimes they commit!

          5. chitown2020

            Sorry…I do not agree. You are blaming the victims who were not insiders and could never have known all of this fraud was occurring in our names by these sneaks. The deception was massive and we could have never known that the politicians threw us under the bus. These politicians and the media DECEIVE, LIE and COVER UP the truth. They are ALL liars and the elections are rigged. Do you honestly believe that the people have never elected a third party candidate in history? Its all a rigged game. As far as the mortgage fraud is concerned..the courts are well settled on the fact that… “Deception is evaluated from the perspective of an unsophisticated consumer.” (FTC-V-STANDARD EDUCATION SOCIETY, 302 U.SM 112, 115 (1937), (CLOMON-V-JACKSON 988 F. 2d. 1314, 1318-1319 (2nd Cir 1992), (Gammon-V- GC SERVICES 27 F. 3d. 1254, 1257 (7th Cir. 1994). There were no protections for consumers from fraud being committed in our names and we could never have known what they were doing with our notes. It was all WELL HIDDEN.

          6. NotTimothyGeithner

            I’m not talking about not holding people accountable, but to pretend the American electorate didn’t bring this on themselves is to blame shadows and myths. Cutting taxes on the wealthy, deregulation, phony free trade, and our various wars have been done with the complicity of the American people and done in broad daylight. They weren’t written in invisible ink which appeared at a later date. Instead, the voters keep sending their asshole because he’s better than the other guys’ asshole.

          7. chitown2020

            What I am saying is it is a rigged game. Max Keiser and other financial experts have stated that the loans made to people who did not qualify was 20%. Not nearly enough risk to collapse the World Economy. I believe those loans were made just in order to blame the victims. These criminals knew exactly what they were doing and never thought they would get caught.

          8. Nathanael

            NotTimothyGeithner:

            The problem, then, is not the people but the electoral system. When perople are presented with two bad options in a gerrymandered district where massive barriers are raised against third party candidacy, and a massive media propaganda campaign is added to prevent any real change, what do you THINK is going to happen?

            First-past-the-post election systems already prevent third party candidates from winning most of the time (see Duverger’s Law) — this is actually made worse by state laws designed to hurt third parties.

            The only non-revolutionary strategy I see for getting out of this is to make one of the parties stone cold dead, unelectable, so that a new Second Party can arise (as in the 1860s ant the death fo the Whigs) — and we have to get rid of the Republican Party because if they get into full power, they’ll abolish elections (they’ve made that abundantly clear).

        1. Eric377

          To a comment above, if you took out a mortgage 19 years ago, even if it is for 30 years, you are probably minimum 35% done with the principle on it. Then add in the 40% down and bounce that against the price way back then and I can’t see what your problem could possibly be. Sure, the property is probably not as valuable as you thought it was in 2006. Now it is a living nightmare? Are there a few steps in the process not fully explained? Like cash-out re-fi? Home equity loans?

          1. chitown2020

            We refied in 2007. Got a check for 20% of the current value of our home which was valued at $550,000.00. The check was for $87,000.00 which was less than the equity we paid in..We paid $292,000 for the home in 1992 and put $100,000.00 down…After the refi we ended up with a $550,000.00 first mortgage and a second note for our own equity of $87,000.00. I knew we got rang up by Amcore Bank who is now a failed bank. We are now in fraudclosure because when Wells Fargo bought out WAMU they pulled our credit lines and put us out of our 25 year business. We rented out the commercial property but Cook County raised the property taxes by double overnite…from $16000.00 to. . $32000.00. Then we were $2000.00 a month short on the commercial property. The loss in income put us behind on the home mortgage. We tried for the loan mod and were told we were approved then we were told we were denied at the last minute by the U.S. the TREASURY DEPT. As a result of all of this and so much more I could write a book I am fighting both foreclosures pro se. There are no attorneys fighting the fraud in Chicago. I have been to at least 7 attorneys and have complained to every politician and agency imaginable. The FBI gave me a good piece of advice and put me on the right path. They told me it is the Origination Fraud. It is a nightmare but, I have learned a lot. In fact the State AGs office offered to hire me when I am done fighting my fraudclosures.

          2. chitown2020

            I should say I did realize we could not owe them that kind of money. We did not ask enough questions.

      2. redleg

        Of course there is something that can be done besides austerity, you just have to realize that your definition of the problem is wrong. We are facing a huge debt problem, but the public debt is about half the size of the amount of PRIVATE debt that is out there. There is too much private debt, and austerity does not do anything to address the private debt problem.

        What is the solution to a private debt crisis? Print money and instead of handing it to the bankers (that caused the problem), you hand it to the people with the condition that it be used to pay off debt first. This would:
        1. reduce the amount of private debt,
        2. provide overstretched banks with an infusion of capital,
        3. leave people with lower debt burdens (or cash if you are not in debt), which increases the amount of disposable income available,
        4. provide a boost to the economy as spending would pick up,
        5. increase tax revenue as the eceonomy improves.

        The scale of the benefit increases with the amount of money handed out. This is damn near right out of Steve Keen’s last 5 years of talks/books.

        Not perfect, but it’s a better alternative than the status quo. I mean, if we are going to print it anyway, why give it to the banksters?

        1. jonboinAR

          Someone on another thread somewhere posed a possible difficulty with this solution. What’s to stop the public from going right back into debt as they were before? It could end up being a bailout leading to one more consumer junk buying credit splurge.

      1. chitown2020

        I think it is the psychopaths who are running the country and the politicians who allowed this to happen along with the crooks on Wall Street who caused this that need to be locked up in rubber rooms. Pretending they all did nothing wrong is PSYCHOPATHIC BEHAVIOR along with the FED who continues to pretend they are doing nothing wrong while bankrupting the people for massive, unsustainable debt THEIR BANKS CREATED out of thin air and stealing homes and businesses from the American people they have no legal right to take. Then there are the fraudclosure Judges who are literally stealing the property of the American people for the crooks who robbed us with NO LEGAL DOCS.

  2. YankeeFrank

    If economists like Bernanke think that US wages will rise in response to price inflation he is even more cut off from reality than I thought. But then again, this is the same Bernanke who thinks the mass of the citizenry can borrow at will at competitive rates in order to increase their purchasing power. And any attempt to filter the thinking of Bernanke through Krugman is truly the blind interpreting the blind: Krugman actually asserted recently that all of the QE over the past 3 years was harmful to the banks:

    http://krugman.blogs.nytimes.com/2012/04/20/plutocrats-and-printing-presses/?gwh=216803048C3ADC3D9114701E72E27302.

    As a nice refutation of that piece, read this:

    http://www.counterpunch.org/2012/04/23/why-paul-krugman-is-full-of-shit/

    1. votersway

      I gather you are asking Bernanke for more counterfeit.
      Presumably because there will be no rising wages and thus no inflation.

      Um, Bernanke is well aware of it. He is also aware that inflation is NOT rising wages but rising prices – as we have it now.

      What happens when prices rise and wages don’t? A race to the bottom happens, that’s what. The US salaries race down to “reach” Chinese levels. Similar equalization happens with respect to government corruption, political and economic freedoms.

      Krugman and Bernanke disagree not about “if” but “when”. The race to the bottom is a political decision – very well visible in the US industrial, energy and monetary policies. Krugman and Bernanke disagree only about the speed of this social engineering project. Krugman wants it fast and painful. Bernanke wants it slow and invisible.

      That’s all.

  3. Declan

    The argument seems to be that it is hard (impossible?) to get money into the hands of workers. But since giving it to them directly is always an option, I’m still inclined to go with the opinion that ‘depression is a choice‘ as Steve Randy Waldman recently argued.

    1. Foppe

      Steve, however nice a guy he may be, commits a fallacy of composition there, though, by suggesting that the leaders speak for the whole of society (“we”) in any more than a legalistic sense.
      There is a nice article by Bruno Latour called “what if we talked politics a little” that goes into that point a bit more.

  4. steelhead23

    This seems an odd posting. First, Bernanke has limited ability to generate financial stimulus and that which he has done (allowed insolvent banks to continue operating) seems at best, risky. Further, the very concept of fiscal stimulus (Keynesian) is the very simply question of precisely what is it we should stimulate? Do we wish to buy, on credit, more stuff we do not need from those cheap labor ex-socialist countries? Look, let’s cut to the chase, we need jobs, well paying jobs, to rekindle the economy. Being ADHD I’ll just blurt it out – we need to reconstruct our manufacturing economy. Otherwise the income gap will grow, we’ll be mired in debt forever, etc. In a word, protectionism. Protectionism here in the US would be good for labor across the globe.

    1. Cynthia

      Ben Bernanke and other doves at the Fed are working in overdrive firing up the printing press to warp speed, cranking out billions in free money to the major banks. This is not only causing oil and other commodity prices to rocket to the moon, but it’s also causing the stock market to break loose from all things that are real and growth producing about our economy, where it’s now living in its own little bubble world, just one needle prick away from going pop!

      Ground Control to Major Tom
      Your circuit’s dead, there’s something wrong
      Can you hear me, Major Tom?
      Can you hear me, Major Tom?
      Can you hear me, Major Tom?
      Can you….

      http://www.youtube.com/watch?v=WApmrN4jdXg&feature=related

    2. jonboinAR

      I agree. Protectionist policy, belated though it is, is an important part of the answer. Also, mandate a 35 hour work week.

  5. Fiver

    I just put in a response on NC’s prior “What happens if rates you up” story and posted Krugman’s crazy piece with its total denial of the fundamental facts of the GFC story and the enormous role of Bernanke and the Fed in it and its stupendously lucrative, looting aftermath. I briefly wondered if Krugman was even serious about the proposition, or whether he was part of the Rehabilitate The Image of The Fed campaign underway given his fawning praise. Good to see NC take it up, though I note in this piece, too, the Fed is viewed as benevolent.

    1. Foppe

      Of course he is serious. After all, there is no oil speculation going on either… (In other words: who cares if he is serious? He says it.)

  6. Literary Critic

    Daniel Alpert sounds like he has been observing this Earth. How can his opinion be worth anything?

    I stopped listen to Krugman back when he was reminding everyone what a “Liquidity Trap” was and then went on to say we should do ZIRP and massive QE anyway – and that the Taylor Rule still works.

    Then there is the “target nominal GDP crowd”. The ultimate in if you do enough of something that doesn’t work – somethin’s gotta break!

    sheesh.

    Course it’s not all bad – corporations can borrow cheap to invest overseas – consumers can borrow cheap (maybe – credit card rates are credit card rates) to buy the stuff.

    1. chitown2020

      Bloomberg reported yesterday the Big Banks are not lending to small business. Obviously the U.S. TREASURY and Congress refuse to back the American people. Here is an example …I applied for a loan mod and was told I was approved and then I was told I was denied at the last minute by the U.S. TREASURY DEPT. I told that story to the Judge in fore closure court and he seemed appalled. I guess that also explains why Wells Fargo pulled our small business credit line after they bought out WAMU and put us out of business that we owned for 25 years. I blame the traitors from within, the politicians for all of it. Blankfein being interviewed right now on CNBC. This should be interesting.

    2. votersway

      The domestic producers can’t borrow cheap and they are being suffocated by red tape anyway. Everything goes to the multinationals which produce low quality products and hire abroad. This is labor arbitrage, it’s a race to the bottom and it ends when everyone become equal in poverty and corruption. Equality… at last…

  7. drb48

    @DA – “No wage growth (because of the dampening effect of excess emerging market labor, always standing by to work cheaply where it can compete with endogenous U.S., European or Japanese labor)…no sustainable inflation.”

    “Where it can compete…” being the key. If globalization is a major component of the squeeze on wages and the shrinking of the middle class, then why doesn’t this problem cry out for a solution – i.e. either impose more restrictive trade policies to level the playing field or more redistributive income policies to augment the lack of wage growth? Or both? The benefits of “free trade” having proved to be illusory for the majority of workers in the developed world, is it not past time to reverse course on these policies?

    1. chitown2020

      The debt and fraud that has been committed by these financial criminals is so massive that they are literally being allowed by the traitor politicians to hand America over to the foreignors on a silver platter. Time for some real audits. They are all getting wealthier while siphoning off our remaining wealth and assets under the guise of debt that can never be repaid. Everyone should look into the China gold and 9/11 connection. These crooks stole from everyone and are making all of us pay for it and they are destroying us to cover up for all of their massive fraud.

  8. Hugh

    This is all exceedingly goofy. Bernanke has done everything he can for the banks. It has always been about the banks. He let them blow the housing bubble and the derivatives bubble on top of it, leading to the housing bubble bust in 2007 and the meltdown in 2008. In the aftermath of the meltdown, Bernanke cycled something like $28 trillion to the banks through the emergency programs he was running. And those were just the emergency programs. We don’t know what the activity was through the regular programs. He increased the size of the Fed balance sheet by a couple of trillion and increased in numerous bouts of QE variously called. He has promoted a carry trade and further bubble blowing in stocks and commodities via the ZIRP. More recently he has restarted the dollar swaps program which amounts essentially to a subsidy to foreign banks. It is a pretty impressive list and it has all been banker oriented with nary a whiff of reform in the lot of it or a single action to reduce unemployment.

    The only thing Bernanke has done is pay occasional lip service to the idea of fiscal stimulus but it is hardly an issue he has pushed.

    As for Krugman, God, what a train wreck. He has avoided direct criticism of Bernanke for years because he owes his position at Princeton and hence much of his subsequent success to Bernanke. So we get this weird, schizophrenic piece where Krugman tries to stay true to professor Bernanke while criticizing somewhat Chairman Bernanke. At the beginning of the article, he brings up what Bernanke said in the past about Japan but he can’t bring himself to say what Bernanke has been doing wrong now. So in these places, he substitutes “the Fed” for Bernanke. Reverse the substitution and see how much clearer the post becomes.

    Then there is all the stuff about whether Bernanke was captured by the Borg at the Fed. If that’s not a WTF moment, what is? There is also the signature Krugman act of blaming the Republicans for whatever goes wrong in the Krugman-verse.

    And this is how he ends his largely incoherent rambling discourse:

    “The Fed under Bernanke is by no means the worst sinner in this failure of intellect and will, and you can argue that Ben Bernanke has done a better job than anyone else who might have held his position. Yet the fact is, he has not done remotely enough. The Fed, under its eminent chairman, was supposed to be an important part of the solution to mass unemployment. That isn’t happening.”

    Oh! The pain! The merciless strokes of the wet noodle lash! Note the agentless finish: “That isn’t happening”, not “Bernanke hasn’t done it” or “Bernanke has failed to do it”.

    What gets obscured in all this is how whacked out Krugman’s own plan to stoke inflation is. The counterpunch article cited above is a pretty good critique of it. Krugman completely ignores the levels of debt in the country and how stoking inflation would simply destroy what little wealth remained with the 99%. Why? Because wages would not increase to match inflation, because wages have been stagnant for 35 years. So what would be inflated away would be savings and the ability to keep up with debt.

    And of course, none of this addresses kleptocracy, wealth inequality, and class war. Add these in and you can see how irrelevant and unreal this three way debate between Bernanke, Krugman, and Alpert is.

    One final point, Alpert raises the issue of labor/wage arbitrage, but he does not draw the fairly obvious conclusion from it. It is impossible for American workers to compete under conditions of such skewed wage arbitrage. So why should we even try? Why should we not simply protect essential US industries and workers against such arbitrage? I mean I know this won’t happen with the current kleptocracy but it is something to think about for if and when that kleptocracy is overthrown.

    1. kabosht

      The Counterpunch article was ridiculous, and Krugman has been critiquing Bernanke in his blog for years, not months. Also, inflation reduces the real value of debt. Also, Krugman has argued *for* your protectionism strategy on various occasions– not for the economy as a whole, but for selected industries under all conditions, and more broadly during liquidity traps. There are many valid critiques of Krugman– yours are not those critiques.

      1. Hugh

        Apparently you read neither my comment nor the article at the Times. Or maybe you are so used to letting people like Krugman do your thinking for you that you have forgotten how.

        We haven’t been in the Kansas of neoclassical economics for a long time now. If, as we have been seeing, you have price inflation without corresponding inflation in wages, all that happens is the ability of people to pay off their debts is further impaired. The “real value” of the debt, whatever that is, is completely irrelevant to the debtor in present circumstances or under those Krugman is advocating.

        Counterpunch is not my go to site usually but the criticism of Krugman in this instance is spot on. Krugman has had a paricularly bad run lately of idiot posts. Don’t blame us for pointing this out. As for the Krugman-Bernanke angle, he admitted in an online chat after I and a friend had been beating up on Bernanke that A) he owed his position at Princeton to Bernanke and B) he just wasn’t going to criticize him. This occurred a little after the announcement of his Nobel and I have watched his treatment of Bernanke since. Krugman either pulls his punches or doesn’t punch at all. Just look at the lame defense he puts up blaming Republicans for Bernanke’s fecklessness and then there is that last paragraph where Krugman can’t help invoking Bernanke’s greatness. Real hardhitting puffery.

        1. kabosht

          I read both, hence my initial response; in fact, I simply disagree with you, even after reading your comment (I know, that seems impossible; but perhaps it is merely my inability to think for myself). In any case, we haven’t had price inflation without corresponding wage inflation; we’ve actually had deflation or no inflation outside of energy prices, no? Regardless of wage stickiness, the point is that if inflation incentivizes businesses to spend stockpiled cash (which it demonstrably does), and is thus stimulative, a recovering job market will put upward pressure on wages, and the value of debt will decline. Equally important, however, *more people would have jobs.* Thus modest inflation is a net positive. How you get there is another question, which Alpert is justifiably raising, but Alpert himself acknowledges the value of sustainable inflation. As to how long Krugman has been critiquing Bernanke (however arguably over-mildly), that is a question of fact that can be answered by reference to his blog archive.

          1. votersway

            No inflation outside of energy? That’s an oxymoron of the year. Food, commodities all rose partly because of energy and partly because of the wanton money printing. Housing is still falling because of oversupply. You can’t fix that, Wall Street burned the non-offshorred remains of the economy by fraudulent lending. They were rewarded for that and for their continuous support for unbalanced trade. That’s how the politicians work.

            In these condition, inflation simply reduces the real wages – the race to the bottom picks up speed. It can’t fix anything except shifting more from the poor to the rich. But you know that.

          2. chitown2020

            The Corporate Globalists are stealing it all….even the air that we breathe. They are covering up massive criminality and slowly and methodically murdering and suffocating 99% of humanity by secrets, lies and deceit. They are using a fake war on terror and an engineered financial crisis to wage global mass genocide. Half of the country is oblivious. That is what they are counting on to carry this out. I heard our fake financial collapse is coming at the end of the year after they have completely robbed us. I know we have heard it before but from the looks of things that would appear to be their way to control the masses who are waking up. Then they will offer to fix the crisis they created which would make as much sense as what Bernanke and the FED are getting away with right now. They are a quadrillion in debt and we are broke….? Stop the insanity. BOYCOTT THEM and STOP PAYING THE CROOKS. I wouldn’t even show up in the Red Zone for the NATO SHOW. They are setting us up.

  9. Lafayette

    In essence, Professor Bernanke’s view was to push both monetary and fiscal stimulus to the point at which it would generate above-natural rates of inflation for a period of time sufficient for such economies to reflate and discount the indebtedness accumulated during credit bubbles.

    Given that Industrial Capacity utilization is languishing nationally at between 75 and 85% of total (see here), it will take a lonnnng time before inflation raises its ugly head.

    Wage inflation could be a problem inevitably, but it is at the first signs of such that interest rates could rise in accordance.

  10. Mac

    If we put Krugman aNd Bernanke and all the clever thugs they support in pink jumpsuit an housed them in tents behind barbed wire out side Gila bend Arizona, perhaps these folks would wise up.

  11. Norcal_Steve

    Chitown2020, your numbers totally fail to add up, unless you did multiple cashout refis to get to a first of $550/k and a second of $87k, unless you leave out that you took out the $87k PLUS another some $250k cash.

    By your account the house appreciated from $290k to $550k, and you refi’ed to a $550k first plus the $87k second which you say you took out most of your downpayment. Well, the first you cite would have been a refi of about $190k (purchase price minus your $100k down) to $550 means you would have taken out about $360k. Unless you had already taken out that equity, it does not make sense.

    Maybe you were defrauded, but by your own story you had to have taken out $350k+$87k downpayment. Maybe you put in into your business or whatever, but as far as the house is concerned, it sure sounds like you cashed out big time at the top. It also sounds like you had zero equity left in the house at the top so if you got out with a clean forclosure and no clawback of the cash you took out, you made out like crazy on the house. Nothing wrong with that per se, I just don’t get where your pissing and moaning is coming from, given your account of the refi.

    Or maybe i got it wrong, but how the heck do you refi a $190k loan into a $550k plus $87k loan position and only take $87k out???? Huge math fail. Puhleeze, you are not dealing with the financially ignorate here, please make some sense if you want to post your financial woes.

    “We refied in 2007. Got a check for 20% of the current value of our home which was valued at $550,000.00. The check was for $87,000.00 which was less than the equity we paid in..We paid $292,000 for the home in 1992 and put $100,000.00 down…After the refi we ended up with a $550,000.00 first mortgage and a second note for our own equity of $87,000.00.”

    1. Norcal_Steve

      edit — sorry, obviously the equity growth from $290 to $550 was $260k, not $360k, so it’s really where that extra $250k cash out went that is the big hole in your story, it’s roughtly $250k, not $350k, but still there is a lot of cash that went somewhere you did not describe where. Your description leads me to believe you took out the $87k, most of what you had in it, plus another $250k. Well done, but piss poor description – unless you want me to believe the bank gave you a check for $87k when you signed a new first for $550k and a second of $87k on the refi of a $190k note.

      1. Eric377

        An odd story. The case that it is a living nightmare for the counterparties seems more realistic – don’t have a lot of sympathy for them, but it seems our friend got approximately a net $550K + $87K – $100K – $192K = $345K out of this property, plus got to live there for a good long time. I assume that he/she let the second note go belly up. Sounds like he/she may have pumped it through a struggling business, so quite possibly aren’t sitting on cash (or loan-free child’s education or a boat or whatever), but sentiment aside, it seems like a good deal to exchange ownership in an overvalued asset for unrecoverable cash. Of course when you refi out of purchase price mortgage you can do yourself out of non-recourse.

  12. mm

    As a broker I have seen first hand the incredible destruction of homes and communities at the hands of Wall Street and Washington. Both are to blame. There seems to be a revolving door between Wall Street and Washington. government officials have taken so many jobs on Wall Street that there is no fairness to this elite group. The Stimulus package is only a fraction of the perks Wall Street got, how much money has the FED lent at close to 0% interest, the QE programs, the Fannie and Freddie ciaos. No mater what is said from these idiots the one thing that is clear is Wall Street stole the life dreams of millions of Americans, Washington gave them the vehicle to do it and no one will be jailed because of it. This is the privilage of being the 1%. The rest of us will continue to suffer economically.

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