1. Sandwichman

    Well done. The one question I would have is about what kind of stimulus? Surely not tax cuts. Shovel ready infrastructure projects? Not enough available.

    If you want to get income to those who need it, then Dean Baker’s work-sharing proposal is the idea with the most bang for the buck, IMHO.

  2. Gawain's Ghost

    All I know is that my family owns a small business. It happens to be a real estate company that deals primarily with repossessed homes.

    I walked away from a teaching career that I spent 20 years building to work for my mother shortly before my father died from cancer.

    My mother is 70+ years old, and she doesn’t stop. This woman works constantly. Retirement is not in her vocabulary.

    It’s killing me. People need to get a clue about what it’s like to go from a comfortable job with benefits to being self-employed. The work never ends. It’s one phone call, one email, one report after another. And it doesn’t stop.

    Yet this is the backbone of America. Work. As a libertarian (small l), I don’t favor government intrusion. I understand that government has its necessary role, which is regulatory. But not invasive.

    I seriously doubt I will ever retire. But if I do, it will be with a whole lot of money. Unless the government steals it all, that is.

    1. sgt_doom

      In another age you would simply be called an ignorant scavenger, and I certainly hope you didn’t waste too many students’ time when you were in teacher mode.

    2. Anonymous Jones

      Your ideas of property rights and theft are undeveloped and, not surprisingly, aligned with your (flawed) concept of your own self-interest. Thing is, we live in a democracy, and we don’t have to live life as you do or as you prescribe for us. Ultimately, you don’t have to accept that or deal with that, but I will assure you that you can’t change that.

    3. Evelyn

      The government doesn’t have to steal your money. It can just dilute it do death. I worked for decades to build equity, and now the kind of “money” being created out of thin air is based on nothing.

      It’s not based on anything, so it can be infinitely expanded. It doesn’t even have to be printed.

      You know what would bring this whole derivatives bubble to a halt? If there were a rule that paper money had to be printed to keep pace with the electronic “keystroke” money being wagered and borrowed and leveraged some more. There aren’t enough wheelbarrows in the world that you could fill with thousand dollar bills….

      Oh, and — I worked hard for decades too. worked hard and honest: didn’t get rich.

      Not everyone goes flying along in perfect, energetic health throughout their lifetimes. I suppose as a libertarian you won’t mind dying in a ditch if you happen to get sick. Well, after you dig that ditch for yourself, rather than having some kind of govmint infrastructure like that.

      1. Indigenous Centurion

        dilute it do death. I worked for decades to build equity, and now the kind of “money” being created out of thin air

        Remember on your annual report where it will say, “profits fully diluted”? Is our dollar fully diluted yet?

        Don’t get mad Evelyn.
        get reveling

        Buy inflationary hedge. Buy high beta stocks of companies with real products, real profits, but deep in debt, debt that will be soon fully diluted.

        Good luck

        Not to change the subject, but wasn’t that a great movie of her Iveness herself? She is so brilliant. I just adore the way she thinks so fast. She has every metabolic pathway of our economic system carefully thought out. When we go to sleep at night we can feel safe that she is guarding our World.

        Bless her heart

      2. chris

        Sorry sweetheart, but if we went back to a gold standard we’d be in even deeper trouble. Please, go back to Mises.org

        1. traderjoe

          Where did she mention the gold standard? It was you that brought it up.

          There are other forms of ‘sound’ money.

    4. dbt

      It’s great to know there are hard-working people selling the stolen homes of people who were bamboozled by pencil-necked yankees on Wall Street. That’s the salt of the earth, alright. Pure Americana!

  3. F. Beard

    Forget stimulus! Your opponents will just scream that you are making government bigger. Just say “OK, you’re right. And we don’t want to add to the deficit either so here’s what we are going to do. We are going to instruct the US Treasury to just send every American a huge check of new, debt and interest free legal tender fiat and let them spend it as they will. Any objections? Oh, inflation risk? Good point. We’ll just combine leverage restrictions on the banks to compensate for the new, high powered money.”

    1. DownSouth

      Thanks for the link. That’s a great interview. Almost as good as Yves!

      Matt makes an important point when he says that small business people think the regulators treat the big corporations the same way they treat them. That notion is nonsensical, as Matt makes clear. Equal treatment before the law in today’s United States is a myth.

      I have a theory that small businesses are increasingly feeling the boot to the neck at the same time it’s being lifted from the big corporations. I don’t know if turning up the heat on small buinesses is by design or by accident. If one wanted to turn small businesspeople en masse against the government, there would be no better way to do it. On the other hand, these regulatory agencies have institutional interests, and if they’re called off the big corporations, they turn their guns elsewhere. They have to keep busy doing something, and if they don’t they might get their funding cut.

  4. F. Beard

    The “Christian Right” needs to be queried about their silence on debt forgiveness. It’s Biblical (Deuteronomy 15).

  5. Ted K

    I agree with Joseph Stiglitz on this so much. Like I agree with Stiglitz on this issue 110%. This is maybe the biggest problem facing our nation right now, is no stimulus and no political initiative for stimulus. The other thing is getting the politicians to spend it in TARGETED areas of long-term growth that have practical implications for the future. One of the things where we have a need for supply. The rare earth metals is an obvious choice. You have Nevada which is high unemployment and has at least one location conducive to the rare earth metals mining. The fit is so perfect and we have Harry Reid looking to pull his rear out of the fire up there. Is this not the biggest “no brainer” choice for a stimulus program???? It sure beats spending money on useless “legacy” defense weapons in Alabama.

    President Clinton was really good at finding these little jewels when he made policy. Can’t Obama find these little targeted areas where there is obvious need and present them in a plan to Congress??? Was this not the guy on the campaign trail talking about “using a scalpel”???

    1. eric anderson

      “The other thing is getting the politicians to spend it in TARGETED areas of long-term growth that have practical implications for the future.”

      Ha! If it wasn’t for that little caveat, you would not find so many opposed to stimulus.

      The problem is the quality of the brains we send to Washington are not capable of finding the TARGET even if one assumed they wanted to.

      Stimulus is a non-starter, and you’ve put your finger on the reason why. Because from experience we have learned that government does not spend wisely. At least, that is the perception of a growing number, and I happen to agree with them.

      You got a Plan B?

      1. DownSouth

        Plan B?

        Deflation. Massive unemployment. Idled factories. Stock market collapse. Banking crisis. People losing everything they’ve worked their entire lives for. Social unrest. Political radicalization of the population.

  6. Eric H.

    Yves Smith is promoting more stimulus programs and agreeing with liberal economists such as Paul Kruger. OK, how do you explain that during the depression that FDR has put out 8 years worth of stimulus without something to show for.
    The unemployment rate was still high 19% after 8 years of stimulus programs and the country had accumulated a large percent of debt. Here is FDR’s own treasury secretary Henry Morgenthau quoted in doubting the huge spending schemes in The New Deal that haven’t reduced unemployment and only added debt:

    “We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong … somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. … I say after eight years of this Administration we have just as much unemployment as when we started. … And an enormous debt to boot.”

    It’s the world war II that eventually took away a million young workers and then people rejected new stimulus programs after WWII that actually brought down the unemployment rate. Many economists disagree with Ms. Smith’s positions, including the noted economists Thomas Sowell. Ms. Smith is a classical Keynesian economics believers who disregards past historical lessons. I certainly would not donate to this web site.

    1. DownSouth

      Oh geez! What do we have here? Another Milton Friedman wanna be, conjuring up out of thin air whatever is needed to justify his morally and intellectually bankrupt ideology?

      Let’s just set the historical record straight. Here’s Frederick Lewis Allen writing in Since Yesterday:

      When it came, it came fast–and apparently out of a clear sky.

      Toward the end of August, 1937, the stock market sold off and business showed signs of slackening. After Labor Day the retreat became sharper. Stocks went down fast and far. On the morning of October 19 the market seemed near demoralization, with support for some stocks apparently quite lacking and selling orders pouring in from all over the country; the tape lagged twenty-five minutes behind the trading, and when at last the gong rang for the closing,
      the total of transactions had come to 7,290,000 shares–the biggest total since the collapse of the New Deal Honeymoon bull market in the summer of 1933. All through the autumn of 1937 the decline continued. Only the fact that speculation previous to August had been moderate and well-margined, with the SEC watching carefully to prevent manipulation, kept the annihilation of values from having
      disastrous consequences outside the exchanges. Meanwhile business operations contracted steadily and rapidly. Not until the end of March, 1938, did the stock market touch bottom; not until May did business do so. Never even during the collapse of 1929-32 had the industrial index shrunk at such a terrific rate.


      For new investment still lagged; and what was more, the government spending campaign, which had kept pumping new money into the economic system, had been virtually halted. During the summer of 1937, Henry Morgenthau, the Secretary of the Treasury, had persuaded the President to make a real attempt to balance the budget; and although it did not yet seem to be quite in balance, nevertheless when one took into account the Social Security taxes which were being levied (and were not counted on the credit side of the budget, being set apart in a separate account), the government was for a time actually taking in from the public more than it paid out.

      Result: the goods which were piled up on the shelves moved slowly. Business men became alarmed and cut production. Two million men were thrown out of work in the space of a few months–and became all the less able to buy what was for sale. The alarm increased, for men well remembered what a depression was like and were resolved to cherish no false hopes this time. The vicious spiral of deflation moved with all the more rapidity. Thus out of that apparently clear sky–no great speculative boom in stocks or real estate, no tightness in credit, no overexpansion of capacity for making capital goods (in fact, not nearly enough expansion)–came the Recession of 1937-38.

      1. Eric H.

        I am no Milton Friedman and certainly not pretend to be. However, my thinking are certainly greatly influenced by Mr. Friedman and Mr. Sowell. Two of the most prominent economists of our time.

        For DownSouth,
        Either you purposely left out some facts on various policy factors in the FDR period from the book “Since Yesterday” or Frederick Lewis Allen did. I suspect it is the latter. After all, Mr. Allen was a left-leaning historian of his time (he was the editor of left-leaning Harper’s magazine).

        One can simply look up the wikipedia (I know, people said that it is only 99.5% correct) and see the factors that were in play:

        “Government spending increased from 8.0% of gross national product (GNP) under Hoover in 1932 to 10.2% of the GNP in 1936. Because of the depression, the national debt as a percentage of the GNP had doubled under Hoover from 16% to 33.6% of the GNP in 1932. While Roosevelt balanced the “regular” budget, the emergency budget was funded by debt, which increased to 40.9% in 1936, and then remained level until World War II, at which time it escalated rapidly. The national debt rose under Hoover, and held steady under FDR until the war began, as shown on chart 1.
        National debt from four years before Roosevelt took office to five years after the time that he died in office

        “Deficit spending had been recommended by some economists, most notably by John Maynard Keynes of Britain. The GNP was 34% higher in 1936 than in 1932 and 58% higher in 1940 on the eve of war. That is, the economy grew 58% from 1932 to 1940 in 8 years of peacetime, and then grew 56% from 1940 to 1945 in 5 years of wartime. However, the economic recovery did not absorb all the unemployment Roosevelt inherited. Unemployment fell dramatically in Roosevelt’s first term, from 25% when he took office to 14.3% in 1937. Afterward, however, it increased to 19.0% in 1938 (‘a depression within a depression’) and 17.2% in 1939, and stayed high until it almost vanished during World War II when the previously unemployed were conscripted, taking them out of the potential labor supply number.”

        “The U.S. economy grew rapidly during Roosevelt’s term.[65] However, coming out of the depression, this growth was accompanied by continuing high levels of unemployment; as the median joblessness rate during the New Deal was 17.2%. Throughout his entire term, including the war years, average unemployment was 13%.[66][67] Total employment during Roosevelt’s term expanded by 18.31 million jobs, with an average annual increase in jobs during his administration of 5.3%.”

        “Roosevelt did not raise income taxes before World War II began; however payroll taxes were also introduced to fund the new Social Security program in 1937. He also got Congress to spend more on many various programs and projects never before seen in American history. However, under the revenue pressures brought on by the depression, most states added or increased taxes, including sales as well as income taxes. Roosevelt’s proposal for new taxes on corporate savings were highly controversial in 1936–37, and were rejected by Congress. During the war he pushed for even higher income tax rates for individuals (reaching a marginal tax rate of 91%) and corporations and a cap on high salaries for executives. He also issued Executive Order 9250 in October 1942, later to be rescinded by Congress, which raised the marginal tax rate for salaries exceeding $25,000 (after tax) to 100%, thereby limiting salaries to $25,000 (about $334,000 today). To fund the war, Congress broadened the base so that almost every employee paid federal income taxes, and introduced withholding taxes in 1943.”

        So here are the facts:

        1. FDR did not “balanced” the budget, he only balanced the “regular” budget but increased the “Emergency” budget. and increased the debt by 40% when 1937 rolled around and remain leveled spending until WW2 started. OK, so he stimulated the economy for 4 years and kept the same level of spending for the next four years. Apparently that Mr. Allen were convinced that the inability to put “additional” spending in the latter four years was to blame for the “depression within depression”. Well, there are other factors in play:
        2. In 1932, the top marginal income tax rate was raised from 24% to 62% and in 1936, FDR raised it to 79%. So there was very little left for the private industry to expand. (FDR later raised to 91% during WWII and 100% for anyone earned over $25,000.)
        3. FDR introduced payroll tax in 1937, further suppressed private investments.
        4. Most states also increased income tax and sales tax.
        5. Combined with high tariff at that time, global trade were heavily interrupted between US and other countries. Of course, consumers suffered as well from the high tariff and higher price of goods.

        So there were massive taxation starting from 1932 and made it worse by FDR and many states from 1936 to the end of WW2. To me, it is a very easily understandable concept – 79% top marginal tax rate plus payroll tax plus state tax plus sale tax and high import tariff would certainly stop most of the private growth. That’s what we got in 1937. So when the government severely curtailed private growth and the government is unable to accumulate “additional” debt to stimulate, what do you get? You get “depression within depression”. So what’s left’s prescription to the problem? You guessed it, more spending (and of course more taxation). So yes, Mr. Allen description of the “apparent” trigger of “depression within depression” was not completely wrong but the root of the problem was precisely due to the mentality of needing more “stimulus” programs. We are now falling into the same trap – let’s stimulate and if it doesn’t work, let’s raise some tax and stimulate more. So I disagree with that logic.

        Now let me address Ms. Smith’s points.

        Mr. Auerback is a Roosevelt Institute Senior Fellow so I am not surprised that he defended FDR’s policies. I don’t think that any sane economists would deny that stimulus do provide jobs. However, these jobs, often temporary in nature in the form of many disjointed projects, thus many believed that they are not “real job”, are at the expense of private growth and capital efficiency (forgive me if I misused that word from my chair of amateur economist). This is especially true during FDR years with high marginal tax rate. Even an amateur like me know that central planning and state allocation of resources are terribly inefficient. So my arguments are really come down to these points:

        1. The traditional conservative economists believed that individual entrepreneur knows how best allocate resources than the state and stimulus programs are anathema to that concept. Instead of cutting payroll tax rate for immediate economic impact, government took the capital that could be allocated by individual entrepreneur efficiently and centrally allocated across the nation with terrible inefficiency, wastefulness and slowness.
        2. FDR’s stimulus projects (roads, trees, dams…) do not produce entrepreneurial type of product. So those projects do not produce the growth engine needed to sustain 4-5% growth needed for the US in the long run. So it may work for awhile in the short run but at the expense of long-term prosperity and entrepreneurship. That’s what Europe had experienced in the past 40 years – 2% growth with high unemployment rate versus US 4-5% growth with much lower unemployment rate.

        We need to stimulate efficient entrepreneurial growth via something like payroll tax and personal income tax reduction. The stimulus program we have now is running counter to that and continue us down the road of highly inefficient use of our national capital resources via central planning and distribution. This is my main disagreement.

        1. DownSouth

          Eric H. said: “So here are the facts.”

          Give me a break! You wouldn’t know a fact if it wholloped you upside the head.

          To begin with, if you were interested in the “facts,” you would have provided a link to the Wikipedia web page you reference so we could all go and take a look at your reference material.

          Second, everything you cite expresses debt and spending as a percentage of GNP. Then you make assertions like Roosevelt “kept the same level of spending for the next four years.” But when GNP is a dynamic figure you can’t draw conclusions like that from the data you cite. To take a hypothetical case, if GNP increases from $1 million to $1.5 million, and spending as a percentage of GNP stays constant at 10%, then spending increased from $100,000 to $150,000.

          Third, in one place you say “Roosevelt did not raise income taxes before World War II began.” Then later you claim: “In 1932, the top marginal income tax rate was raised from 24% to 62% and in 1936, FDR raised it to 79%. So there was very little left for the private industry to expand. (FDR later raised to 91% during WWII and 100% for anyone earned over $25,000.)” So what is it?

          Fourth, you assert “there was very little left for the private industry to expand.” Have you ever heard of business tax deductions, investment tax credits and so forth? Again, one needs to look at absolute tax collections and not top marginal percentage tax rates to get a handle on what is really going on. That said, I think the tax code was designed to send a very specific message: Invest it or lose it.

          Then we get around to the point where you start theorizing. Of course when you are so utterly confused about “the facts,” how can you possibly draw reasonable conclusions? The end result is that you fit the Austerian mentality perfectly. You’d rather have 100% of nothing than 50% of a dollar, just so long as you can deprive working class Americans of their 50%.

        2. DownSouth

          But probably the biggest cognitive dissonance is this: You paint Roosevelt with the face of evil for his fiscual stimulus, for his deficit spending and for his raising taxes to the point that “there’s nothing left to invest.” But despite all your butchering of the facts and your abiding faith in your morally and intellectually bankrupt ideology, you can’t change the fianal outcome: “The GNP was 34% higher in 1936 than in 1932 and 58% higher in 1940 on the eve of war. That is, the economy grew 58% from 1932 to 1940 in 8 years of peacetime,,,”

          1. Dan Duncan

            OK, Downsouth (aka Mr. Malaprop), this was not an example of cognitive dissonance. Once again, you are using a word or phrase disincorretingly.

            As to the increase in GNP over those years, I think that was Eric H’s point: It was a ponzi-esque increase that would evaporate without an exponential increase in the debt-load.

            But we quibble, so don’t get me wrong. Keep up the good fight!

            For I love to start the day reading DownSouth after one of his All-Night Pepsi-Cheeto Blog-Binges. I usually start with the 3:00 AM post. By this point, DownSouth has logged at least 10 posts and his agitation is palpable.

            Then, I cut to 5:30-5:45 AM post and DownSouth is DownRight frenzied….The sun is rising now, and there is THAT-LAST-FRANTIC-FLURRY to get in a few more “zingers” before his StepMom calls down to him in his Basement Suite to “turn-off that goddamned computer”.

          2. DownSouth

            Dan Duncan said: “As to the increase in GNP over those years, I think that was Eric H’s point: It was a ponzi-esque increase that would evaporate without an exponential increase in the debt-load.”

            Your reading comprehension skills, and/or mathematical skills, are obviously no better than those of Eric H.

            Here’s what Erich H. (Wikipedia?) said: “The national debt rose under Hoover, and held steady under FDR until the war began, as shown on chart 1. National debt from four years before Roosevelt took office to five years after the time that he died in office”

            So the obvious question is: What “exponential increase in the debt-load” could you possibly be talking about?

            You see, when GNP is growing rapidly, as it did under Roosevelt (except for that unfortunate period in 1937 and 1938 when he was so ill advised by Henry Morgenthau, the Secretary of the Treasur), debt expressed in absolute terms can increase, but debt as a percentage of GNP can stay constant.

            But like I said, that’s a mathematical reality that lies completely outside the mathematical abilities of the Austerite. His ideology dictates that there is a finite amount of production, and for somebody else to get theirs, they have to take it away from him.

    2. Yves Smith Post author

      Counterfactual. And Morgenthau was notably conservative among FDR’s advisors, when FDR deliberately had economic advisors who represented a wide range of views. Morgenthau was ALSO opposed to going off the gold standard, when even JP Morgan, the titan of finance of that day, voiced his approval in one of only two public statements he ever made.

      The economy grew very rapidly from 1933 to 1937 due to various economic stimulus programs, any GDP record will show that. In 1937, over concerns about the deficit, efforts to balance the budget were implemented, and the economy promptly went into a tailspin. The Great Depression showed, contrary to your assertion, a very direct relationship between deficit spending and economic growth. The key is not to abuse stimulus in expansionary periods (as Richard Alford cautioned in another post here, how the Fed misread inflation in the 1990s and pursued overly lax monetary policy).

      Here is what happened in the Depression, courtesy Marshall Auerbach:

      At the outset of the Great Depression, economic output collapsed, and unemployment rose to 25 per cent. Influenced by his “liquidationist” Treasury Secretary, Andrew Mellon, then President Hoover made comparatively minimal attempts to deploy government fiscal policy to stimulate aggregate demand. Further, the Federal Reserve actually sold bonds to push up interest rates in a mindless effort to stem the gold outflows that we occurring as the rest of the world lost confidence in the US economy. So much for the halcyon days of the gold standard!

      This all changed under FDR. The key to evaluating Roosevelt’s performance in combating the Depression is the statistical treatment of many millions of unemployed engaged in his massive workfare programs. The government hired about 60 per cent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York’s Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown.

      It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country’s entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock. So much for the notion that government jobs are not “real jobs”, as we hear persistently from critics of the New Deal!

      The reasons for the discrepancies in the unemployment data that have historically arisen out of the New Deal are that the current sampling method of estimation for unemployment by the BLS was not developed until 1940 (for more detail see here). If these workfare Americans are considered to be unemployed, the Roosevelt administration reduced unemployment from 25 per cent in 1933 to 9.6% per cent in 1936, up to 13 per cent in 1938 (due largely to a reversal of the fiscal activism which had characterized FDR’s first term in office), back to less than 1 per cent by the time the U.S. was plunged into the Second World War at the end of 1941.

      In fact, once the Great Depression hit bottom in early 1933, the US economy embarked on four years of expansion that constituted the biggest cyclical boom in U.S. economic history. For four years, real GDP grew at a 12% rate and nominal GDP grew at a 14% rate. There was another shorter and shallower depression in 1937 largely caused by renewed fiscal tightening (and higher Federal Reserve margin requirements).

      1. Ted K

        Going back to an argument we had sometime before (and one of my MAJOR pet peeves with you Yves) I am wondering if hyperlinks you put in are showing on your screen, but not showing on ours. The link explaining BLS unemployment sampling isn’t there. I am not arguing the data, or your view. I DON’T SEE THE LINK.

        1. Rex

          Geez, it was clearly a cut-and-paste of a different post. It was in the context of a reply. You grade too hard for criticizing that Yves didn’t notice that she copied a link and didn’t go edit in the proper link information.

          If you really cared, it isn’t that hard to fill in the blank. I googled some of the text and found the original post here: http://www.newdeal20.org/2010/08/30/the-real-lesson-from-the-great-depression-fiscal-policy-works-18751/

          You should be able to go there and find the missing link you are lamenting about.

          Yves also makes typos fairly often. I could never find the amount of interesting, relevant information she finds every day, let alone generate unique opinion, post and respond continuously at this rate. I’m willing to cut her some slack for trivial issues.

          1. Ted K

            It’s interesting to me, Yves takes swipes at Morgenson over at NYT all the time, and easy swipes at other MSM outlets. But they don’t often cut and paste and leave out references. If Yves wants to hold others feet to the fire she’s got to be willing to take some fire. And if she’s willing to “borrow” large bites of others writing, I think it’s not so much to ask to include links, especially those which are foundational to her arguments, which obviously the BLS sampling is here.

            I’m not here to create a mutual admiration society.

          2. Ted K

            I should specify here, references meaning links which were in the original piece she is quoting from. In other words “here, here, and here” that go to nowhere, don’t cut it for me, and I don’t think it should cut it for discerning readers.

          3. Kevin de Bruxelles


            Just highlight a paragraph of the text and pop it into Google. You will quickly get the original text (in fact you will get several versions of it). Yves produces an incredible amount of content so I hardly think she has time to cater to every aspergery whim of her readers in comments.

            Acting as if you are entitled to make such nitpicky demands is actually pretty damn bold of you. Why not open your own comments section so I can make similar demands on you?

          4. Patricia

            Ted K: As soon as Morgenson puts out as much broad-ranging and thoughtful material and gives up her paper’s editorial-check and research aides, I’ll do like you and find ways to criticize the quality of her responses in her comment sections. As soon as it happens….

      2. john c. halasz

        As to the 1937-38 recession, it wasn’t just a matter of fiscal retrenchment, but Mariner Eccles and Fed tightening. Seems the latter was especially worried about threatening CIO strike waves and wanted to make sure that industrialists wouldn’t just settle and pass along the wage costs into inflation!

        And, horrible as it sounds, the best effect of fiscal policy then might have been Nazi Germany, where the cartelization of industries formed a basis for industrialists’ support for Hitler’s rise to power. By 1938, German output was 110% of the 1929 level.

  7. i on the ball patriot

    Lose the turkey metaphor … its a Profit Driven Vanilla Greed pig and a Control Driven Pernicious Greed snake … and the pig serves itself as dinner to the snake …

    The negative rhetoric around government is justified. 58% of the electorate didn’t show up because the trust is gone, and rightly so, the government has been hijacked by a hundred and fifty plus years of aggregate generational corruption.

    Further, in the past forty plus years, through an intentional sea change in propaganda, the citizens have been reprogrammed to be not a turkey voting for Thanksgiving, but rather a Profit Driven Vanilla Greed pig, complicit in a system of pecking ordered crumbunism, that, along with other western nations, has pigged out on the world and taken an unfair share of the world’s pie.

    The Profit Driven Vanilla Greed pig now aids and abets the snake of Control Driven Pernicious Greed in its own swallowing simply by not recognizing the depth of corruption and control that the Control Driven Pernicious Greed snake wields through its global banking cartel. The Vanilla Greed pig is in denial and ignorance as it travels through the mouth of the snake of Pernicious Greed still unaware of the snakes camouflage whilst still offering up remedial plans.

    The pig of Profit Driven Vanilla Greed and those who drink and sell its Kool aid are the problem, as they are the only hope to kill the snake of Control Driven Pernicious Greed. Alas they consume themselves with their own actions that help to mask the snakes deceptions.


    Deception is the strongest political force on the planet.

    1. Rex

      “Lose the turkey metaphor … its a Profit Driven Vanilla Greed pig and a Control Driven Pernicious Greed snake … and the pig serves itself as dinner to the snake …”


      Metaphors should be simple and intuitive. Maybe I’m just not smoking what you are smoking.

      1. attempter

        You’re just not familiar with i ball’s terminology. Vanilla Greed and Pernicious Greed are his terms to distinguish normal corruption from fully developed kleptocracy, normal “capitalism” from neoliberal corporate totalitarianism.

        (There are lots of camouflaged pro-bankster types who argue in effect, “It’s always been like this, and everyone’s just complaining about the same old same old.” But that’s a lie.)

        1. i on the ball patriot

          Thanks Attempter, worth repeating …

          “(There are lots of camouflaged pro-bankster types who argue in effect, “It’s always been like this, and everyone’s just complaining about the same old same old.” But that’s a lie.)”

          Deception is the strongest political force on the planet.

      2. i on the ball patriot

        It was not meant to be a direct replacement for the turkey metaphor but rather an explanation of why the turkey metaphor was too much of a scamerican-centric oversimplification that served to mask the greater machinations taking place. Some of which I laid out as being more pig and deceptive snake like rather than turkey and less deceptive Thanksgiving like.

        Yes it is a bit unwieldy, and presupposes knowledge of my terminology, but there are shades of 1938 in the air EVERYWHERE with no FDR to be seen anywhere, and the pigs, still believing that this is just another cyclical crumb supply disruption, are their own worst enemies. This is a MAJOR problem!

        Deception is the strongest political force on the planet.

  8. alice

    great interviews. thanks for the blog.

    so is QE2 just being used to short the very asset prices it is supposed to boost?

  9. Evelyn Sinclair

    Thank you very much, Yves.

    I have tracked Naked Capitalism for a very long time. That interview was truly inspiring, such that I’m insisting a couple of friends watch it, just so they can get a bit of “easy” education in some of the realities being lied about so thoroughly.

    My friends usually wade through the normal media’s muddle of misinformation, false assumptions based on previous rounds of lies, etc. They think that this stuff is hard to understand in the first place, and think I’m weird for enjoying a wonky blog on economics. (I’m not an investor, just hate being lied to and swindled and lied to some more about it!)

    This interview will go in the Keeper pile for me, along with just a tiny handful of other explanatory material.

    The turkey metaphor was just fine. I understood it instantly and I think a lot of people can relate to it.

    Your crisp pace only increases my sense that you know exactly what you’re delivering and simply want to offer as much of it as possible before running out of time. The sense of urgency is warranted.

    Also, your blog gets an amazingly astute and informative set of comments.

  10. Cathryn Mataga

    Politically the problem with stimulus is that it followed
    the bank bailouts so closely. Banks, and AIG got theirs,
    then the government employees got their big payout. The
    outrage was attached to both, and now stimulus is a dead

    Obama, if he was properly socialist, would have done
    better to nationalize and all that, but no, for all the
    talk of change, Obama for the most part was just ‘More
    Bush’ — for Afghanistan, and for the economy. He got
    co-opted early. No leftists can’t go against Obama,
    because that might ‘help the Republicans’, so any
    chance of change from the left is neutralized.

    The Tea Party was there to fill the vacuum, and movements
    that rise from the masses, well, they can be a little
    quirky. You know, deal with it. The lefties
    could learn a thing or two, from how the Republicans managed
    to lever public unease into actual political power.

  11. Bill

    Yves, even with machine gun delivery, you are a joy to listen to and watch. No one that I’ve listened to matches your depth of knowledge, AND lucidity.

    Plus, it seems like you’ve now found your “look” — tres chic mais belle et professionale aussi. Brava !

  12. 60sradical

    Yves, you are a powerhouse! And, just as important,so are the people who blog into this site!
    IMO the most powerful thread you must keep going is the one that covers the following: securitzation(cdos)and its nessesary “legalized” fraud, mortgages/deeds of trust/the promissory note, PSA, MERS, etc.
    As an old 60s radical, I can clearly see the power inherent in staying on this. I actually believe-for the first ttime in a long time-that if you all can keep this level of acumen going re; above topics-this could be the tip of a true, intelligence-drive revolution. This is true, I feel, because tens of millions of homeowners could actually wake up to the shadow bankstaz who have been controlling our little lives.
    Big thanks to you Yves and those that stay at the heart of this mortage/note/ponzi scheme world in which we all participate in one level or another. Please stay on this topic. True, the Fed should be dismantled, fractional/fiat money is rotting us, BUT the homeowner stuff gives Americans a real and connected relationship to the obvious criminal insanity which is raging across the globe.
    I have learned much from you all.

    1. Paul Repstock

      Reply to Eric H above;
      The infrastructure created was absolutly an economic asset, It far outlived FDR and the Depression. In large part this unprecedented Infrastructure Binge paid dividends right into the 1970’s. Good public infrastructure was largly the enabling factor for America’s boom years. Possibly a good part of the economy’s problems now may stem from the very expensive and inefficient, piecemeal approch to infrastructure which has been pursued over the past twenty or so years.

      There is more money to be skimmed from repair than from new construction. New construction is a one time deal with quantifiable and tendered costs. Repair is totally open ended and is seldom completed on time or even close to budget.

      I don’t know of any economists who would argue that infrasturcture spending does not pay for itself quickly. And moreover, it has multiplier effects of greater than 5:1.

      Where are the multiplier effects of TBTF Welfare/Extortion??

  13. unirealist

    Stimulus would only prolong the status quo, and it is precisely the status quo which the electorate voted AGAINST in 2008 and 2010.

    What this country WILL get, one way or another, is a wholesale purge of those who have sold out the law, the Constitution, and future generations for a piece of the gangster action pervasive in this country for the last several decades.

    Either that purge–with trials, prison sentences, and executions for treason–happens within our familiar law enforcement and judicial system…

    Or it rides roughshod over it, as in the French and Russian Revolutions.

    I can think of two explanation why the former and preferable option hasn’t happened. The first explanation is that virtually everyone with any wealth or power would go to prison or hang, because all of them are criminally guilty. The second explanation is that we are no longer a democratic republic–that there was a coup d’etat in 2001 and we now have only the facade of a democratic republic.

    Whichever explanation, nobody in government or in multinational corporations can be prosecuted anymore. Not for anything. Our Vice-President shot a man in the face while drunk, and the victim wound up apologizing for getting in his way. The CIA erased torture tapes that the DOJ had ordered to be preserved, and no one was indicted. BP destroyed the Gulf of Mexico, and not a single person was held to account.

    Anyone who thinks the citizens aren’t figuring out this is just plain wrong, that this is not how America does things, spends way too much time at DC cocktail parties, and too little time in drinking in bars.

    The citizens aren’t petitioning for another stimulus. They are petitioning for justice.

    And they will get it.

    That aside, I’ve fallen in love.

  14. Siggy


    I am retired. A money medium with stable purchasing power is in my best interest. Any government policy, program or law that promotes stable purchasing power of the money medium is something I might vote for. I also know that first effects are not the entire story. Not infrequently it’s those secondary effects that destroy an apparently good idea.

    Now, we have very high unemployment. How do we reemploy all of the unemployed? There is no easy answer and such solutions as present themselves entail very painful dislocations. Given the level of nominal gdp, it strikes me that we have an excess supply of labor. It may well be that we have and excess supply of people. Worse, our excess supply of people and employed and unemployed is of the wrong age; that is, they are approaching retirement.

    It’s very easy to say we need more stimulus. But, what form of stimulus? Contrary to MMT, what the government spends it must ultimately fund with either of taxes or the devaluation of the currency. Helicopter Ben is doing his part with a mere $600 billion. Now what are the Congress and the Administration doing? Nada! What annoys me is that as helicopter Ben makes his rounds, with each drop of his erzatz money, the purchasing power of my money erodes.

    Just what might be end result of taking the ‘primary dealer’ cartel into conservatorship, firing their managements and extinguishing all of the debt, public and private, that can’t be honored? Why nukes would fly and we’d lose 100 million souls in a nanosecond. Maybe that’s the answer. We need an absolute castrophe if there is to be a resolution and extinguishment of the excess supply of credit money that has been created by the Fed and those minions of the financial services industry.

    This is one of those problems that you attack from the inside and work your way out. At the core it’s the fiat currency and fractional reserve banking coupled with an unwillingness to prosecute blatant fraud. TBTF, bullshit! No one, no enterprise, no government is to be to fail! We are failing thru inaction and inane ideology.

    Helicopter Ben believes that by devaluing the currency he can repudiate the Federal debt, lower wages and reclaim internantional purchasing power parity. Helps the banks enormously, screws the population royally.

    Oh, and by the by, I don’t want higher interest rates near as much as I want to be able to say that my meds will only increase by say 1.5% per year over the next five years. That I can handle, but 3%+, that’s a bit much.

    This whole debacle did not arrive like a mushroom, it has been over 60 years in its gestation. At that, however, it is like a mushroom in that its roots are complex and vastly spread.

    Good showing and keep swinging, each performance gets better.

    1. DownSouth

      Siggy said: “Contrary to MMT, what the government spends it must ultimately fund with either of taxes or the devaluation of the currency.”

      That is only true if the fiscal spending doesn’t result in growth of the GNP. Absolute number of dollars spent can grow signficantly, as well as absolute number of tax dollars collected, and yet remain constant as a percentage of GNP if the GNP grows.

      And your gloom and doom predictions, which by the way became a tautology amongst the rich during the Great Depression, certainly failed to come true during the Great Depression. Here’s Frederick Lewis Allen again:

      Footnote upon the prophecies of the wise men of Wall Street: Within the following five and a half years there took place no uncontrolled inflation, no collapse of the credit of the government.


      At last business conditions in the United States were definitely improving. The Federal Reserve Board’s Adjusted Index of Industrial Production (which as you may recall had sunk as low as 58 and 59 in the crises of 1932 and early 1933, had leaped to 100 during the New Deal Honeymoon, had then slipped back to 72 by November, 1933, and had obstinately hung in the seventies and eighties throughout 1934) had now begun to show a pretty definite upward trend. By the beginning of 1935 it had risen as far as 90.
      By the end of 1935 it had reached 101. And after a brief relapse into the nineties, it swept on during 1936 to 104 in June, 108 in July and August, 109 in September, 110 in October, 114 in November, and 121 in December–within striking distance of the record figure of 125 which had been set in 1929.

      But that improved economic situation did nothing to mollify the drumbeat of criticism directed at Roosevelt by the rich and the privileged:

      However economists might disagree upon this point, there was very little disagreement among the potential investors themselves, the possessors of capital, the well-to-do, and especially the very rich. What was wrong, they were sure, was “lack of confidence”—-and this lack of confidence was caused by the arbitrary rule of an Administration which spent money recklessly, followed unsound and inflationary principles of public finance, yielded to the advice of semi-communist brain-trusters, burdened business with grievous taxes, wasted the tax money on crazy boondoggling schemes for the pampering and political bribing of the unenterprising poor, harassed business men with hasty and unpredictable and paralyzing reforms and with government competition, slaughtered little pigs to win votes from the farmers, encouraged labor agitators to tie up industry, generally opposed the “profit system,” and threatened
      American freedom by dictating to Congress, discrediting the Supreme Court, and undermining the Constitution.

      On these and other charges against the Administration endless changes were rung in the conservative press, in the speeches of conservative business men and political leaders, in the circulars of such varied organizations as the Liberty League, the Crusaders, the Defenders, and the American Nationalists, Inc., and above all in the private conversation of the well-to-do.

      That the large property owners and the managers of large businesses should have become indignant was not at all surprising. Buffeted and frightened by the Depression, they had at first hailed Roosevelt as a deliverer. Presently they had discovered that he did not intend the “recovery” for which he was working to be a recovery of things as they had been in 1929; he wanted things changed. He not only continued to press for reforms, he tore to bits the fiscal promises of the 1932 Democratic platform and of his own campaign speeches. He set out to champion the less fortunate, to denounce such financiers and big business men as stood in his way; and as their opposition to him hardened, so also did his opposition to them.

      And Siggy, you might want to consider how the irrational dogmatism exhibited by the rich and powerful in the 1930s worked against them in the political arena, completely turning the public against them:

      Yet to the extent that it stopped factual inquiry and thought, the Roosevelt-hating was costly, not only to recovery, but to the haters themselves. Because as a group (there were many exceptions) the well-to-do regarded the presence of Roosevelt in the White House as a sufficient explanation for all that was amiss and as a sufficient excuse for not taking a more active part in new investment, they inevitably lost prestige among the less fortunate.
      For the rich and powerful could maintain their prestige only by giving the general public what it wanted. It wanted prosperity, economic expansion. It had always been ready to forgive all manner of deficiencies in the Henry Fords who actually produced the goods, whether or not they made millions in the process. But it was not disposed to sympathize unduly with people who failed to produce the
      goods, no matter how heart-rending their explanations for their failure. Roosevelt-hating thrust the owners and managers of business into inaction–into trying to resist the tide of affairs, to set back the clock. It made them conservatives in the sense that they were trying to hold on to old things, whereas before 1929 they had been, in their own way, innovators, bringers of new things. It made them, as a group, sterile. And they were soon to learn that sterility does not stir public applause.

      1. i on the ball patriot

        It depends on whether or not you believe this hijacked government can use the funds in a fair and just manner free of back scratching gangsterism. The present TARP overseer, Kaufman, is already bogged down with investigating big bank foreclosure fraud.

        And where is the FDR to be found in all of the little fascists running around scamerica today?

        Sorry Siggy, retirees are already dead meat. ‘Stable money’, the old Vanilla Greed kind, is history.

        Deception is the strongest political force on the planet.

      2. Siggy

        Down South,

        I’m befuddled by your objection. Do you favor inflation? Do you believe that we can borrow our way out of this financial mess that we are in?

        Do you not understand that helicopter Ben is going to electronically create money in exchange for Treasury instruments? With that new money, the recipients of the Fed’s largesse will be able to buy more Treasuries and thereby the government will be able to spend more money that it doesn’t have and can’t get by way of taxation. Do you not understand that the money helicopter Ben is going to confer upon the banks does not exist? Does that not strike you as being unusual? Does it not occur to you that helicopter Ben has boldly said that above all, he fears deflation the most and that he will inflate the money supply as much as he can to keep that wolf of deflation from our door.

        Critically, do you really want to be made poorer? Is that your schadenfreude?

        1. DownSouth


          Now you’re putting words in my mouth.

          Is it possible to defend fiscal stimulus without being accused of defending the current round of monetary stimulus?

          Your comment that I was responding to, and my response, dealt specifically with fiscal spending. Then you come back and switch the conversation to monetary stimulus, lambasting the latest round of monetary stimulus—-QE2.

          Honestly, sometimes I think you don’t know the difference between monetary stimulus and fiscal stimulus. Or is this conflation of the two deliberate? After all, it’s not too difficult to paint QE2 with the face of evil, because almost everyone agrees it is evil. But then you take the same brush and paint fiscal stimulus with the face of evil. So the wheat gets thrown out with the chaff.

          That’s what happens when you make these broad, sweeping condemnations like “Government is bad, absolutely beyond redemption!” “China is bad!” “Islam is bad!”

          But life isn’t so simple. The paths and byways of life are not so black and white.

          So let me go out on a limb and say that monetary stimulus, well designed and applied at an appropriate time, isn’t bad. (Man that’s going to send the gold bugs—-who have seized upon the ill-conceived QE2 to press their utopian vision and their tautology that “all monetary stimulus is bad”—-ballistic.)

          I know that this is a difficult notion for many to deal with, but to think that we can come up with simplistic little Manichean constructs, apply these to government policymaking and then put government on auto-pilot, set back and enjoy the ride free from the conflict of politics, is a recipe for totalitarianism.

  15. Chyladin

    On stimulus:

    I’m not an economist and can’t crunch the numbers on this, but let me deal with the stimulus of the New Deal.(and other times as well)

    I’m a Tea Party person, but I don’t cringe at the term stimulus reflexively. The main issue is useful stimulus. FDR helped built up American infrastructure to make way from the more integrated and mobile post war economy that followed. Eisenhower built the interstate system to further expand upon the mobile economy. The growing car industry, vacationing, oil, fast food, and multiple other industries grew up because of this spending.

    FDR also spent money in the Manhattan Project. This ushered ended the war and helped usher in an era of greater stability in Western Europe/Japan that fueled greater economic interdependence and growth.

    JFK started the space race spending that helped fuel the eventual development of computers and ultimately the benefits they provide to society. The most important stimulus/infrastructure spending of the last 20 years has been laying fiber optic cables, which has been largely pickup by private industry.

    So, the question I ask of any Stimulus that must be spent is what do you spend it on? Increasingly, the gov’t as shifted away from spending big on long-term infra-structure projects to dolling out benefits to win votes. Obama’s stimulus bill was itself a consumable bill that went pay salaries of state works and not to create anything of value for the country.

    Call me an anomaly but I’m a Tea Party person that is in favor of a stimulus but I want the money spent on something useful. What is one of the biggest long term issues that America faces going forward? Energy. If you believe in Global Warming then you have to agree that we find ways to use less fossil fuels. If you believe that importing oil from countries that don’t necessarily like us is a security risk then you should support increasing our own energy independence by finding ways to domestically produce what we need. This is why we need to make a major investment in Nuclear Energy.

    An investment into the next generation of Nuclear Technology will provide a meaningful improvement to the nation. Couple this investment with an investment into a smarter grid, rare earth metal mining, and the next generation of battery technology and you have the underpinnings of a new economy footstool.

    1. DownSouth


      My first cousin has a son who is a real math and science whiz. He’s from this tiny little town about a hundred miles north of Houston. He got full scholarship offers from several of the major tech schools—-including Cal Tech and MIT if I remember correctly—-but in the end chose to go to Texas A&M and study, of all things, nuclear engineering. He didn’t want to be that far away from his family, plus he’s got this old Chevy Nova he’s rebuilding and that project is a pretty big priority in his life.

      Anyway, I’ve never been a big fan of nuclear. But it will be interesting to hear what he has to say, and I’m sure he’ll have plenty to say after a couple of years in the nuclear engineering program.

  16. gerold k.b. weber

    Great dialogs between You and Paul Jay!

    You analyzed succinctly the crisis of financial and neoclassical economics in your seminal book ECONned.

    But the Keynesian stimulus prescription suffers from some serious flaws too, if the ‘euthanasia of the rentier’ (Keynes) is not part of the medicine.

    First, the relativ weights of this downturns causes are not established, and praised US economists are unable to come up with clear explanations.

    Second, it is highly doubtful that one large Keynesian stimulus would restart a self-sustaining economy, as ever-increasing debt as condition of a full employment economy is not considered.

    Third, in the current political climate a large stimulus is a dead horse, and demanding it might only deliver ammo for the next election, but not solve any problems.

    This distant observers opinion is:
    The current crisis is not sufficiently explained by
    – vast misdeeds of the FIRE industries,
    – the current account imbalances,
    – low interest rates during the crisis run up,
    – ‘affordable housing’ and ‘ownership society’ policy,
    – or bad neoclassical economics

    A potent cause was ever-increasing income inequality resulting in ever-increasing wealth inequality and private debt bubbles, as the rich were looking for economic rent, and middle and lower classes looked for credit to invest into the real estate bubble, and went into ‘debt slavery’ (Michael Hudson).

    If this simple analysis is correct, only significant redistribution of income and wealth to the middle and lower classes will recreate sustainable aggregate demand for full employment, and temporary Keynesian stimulus will not.

    Part of such a solution should be your nytimes op-ed proposal for major loan principal modifications for viable borrowers. Other conventional and unconventional options should be considered as well, such as tax increases for the rich and super rich, helicopter drops of equal amounts of money for all, and negative interest rates (William Buiter).

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