Peter Bromberg's UnBlog

According to Keynes, the root cause of economic downturns is insufficient aggregate demand. During  World War II and it's immediate aftermath, Keynes was immensely influential. By the 1970's when the great inflation was unfolding,even Keynes' chief critics such as Milton Friedman or Robert Mundell still retained many Keynesian assumptions. With the crisis of 2008, Keynesian policies came back with a bang and reoccupied center stage. Following the Crash of 2008, these policies are no longer satisfactory. If the entire global economy is to follow Keynesian medicine, which requires more money printing, spending, borrowing and bailing out - on top of all the money printing, spending and borrowing that preceded the crisis, then we need to look at them with fresh and critical eyes. The place to begin is with what Keynes actually said. First of all, Keynes did not believe that fiscal stimulus alone could ‘kick’ the economy into full employment equilibrium as many of his mode...

A couple of years ago, Newsweek had a cover story, “We Are All Socialists Now.”  The basic themes of huge stimulus package, ObamaCare, and government overregulation leading once-capitalist America down the dangerous road to socialism  is quite well worn.  There’s some truth to the basic theme:  the state is getting more and more deeply involved in business, even taking controlling interests in some private companies.  And the state is even trying to "make policy" for private companies they do not control.  So state power is growing at the expense of corporations. The problem is, that isn't socialism.  Socialism rests on a firm concept:  the abolition of private property.  What is happening now - particularly in the Obama administration - is an expansion of the state’s role, an increase in public/private joint ventures and partnerships, and much more state regulation of business.  It’s very "European," and some Eur...

Republicans stink. This, in a nutshell, is what Democrats are running on in 2012. Republicans are mean. They're obstructionists. They don't care about the elderly and they don't care about the middle class. They're dangerous ideologues looking out only for the rich. The country faces serious economic challenges and catastrophic debt. Homes are worthless, jobs are scarce and collapsing European social-welfare states are providing frightening previews of what Americans can expect if Washington doesn't dial back its deficit spending. But Democrats are unwilling to engage in serious, honest debate about their vision for the country. Instead, they just criticize Republicans. What's even more repulsive than this juvenile approach to governance and campaigning? The fact that a huge chunk of the electorate actually buys it. If there's a lesson in all this, one year before Americans go to the polls to again decide the direction of the country, it's that...

This is a great letter, and it is real. To All My Valued Employees, There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn't pose a threat to your job. What does threaten your job however, is the changing political landscape in this country. Of course, as your employer, I am forbidden to tell you whom to vote for - it is against the law to discriminate based on political affiliation, race, creed, religion, etc. Please vote for who you think will serve your interests the best. However, let me tell you some little tidbits of fact which might help you decide what is in your best interest.First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a backstory. This back story is often neglected and over...

Income tax returns are the most imaginative fiction being written today.   - Herman Wouk I heard a good piece about “zombie banks” this morning on NPR. "Zombie banks" was the term for Japanese financial institutions propped up by government in the '90s despite their basic insolvency after their real-estate bubble. In a financial "revenge of the living dead", these unprofitable banks cast a decade-long pall over Japan. US banks like Citgroup, Bank of America and others are now in the realm of the living dead. US officials urged Japan to give up on failed institutions. Instead, it pumped 12 percent of its gross domestic product into saving the banks and received a "lost decade" of economic stagnation in return. Sound familiar? Economic analysts across the board agree that the Japanese example must not be repeated - even as our government proceeds to do precisely that! Members of the House Financial Services Committee grilled banking CEO's abou...

A government that robs Peter to pay Paul can always depend on the support of Paul.   - George Bernard Shaw Our new Administration has set a record:  it’s railroaded legislation through Congress that confers the mandate on Government to spend more in it’s first month of office than the previous Administration spent on all of the Iraq war since 2003 . Not a single House Republican voted for this legislation. Most all Senate Republicans held this line. I’m glad to read that Republicans seem to be sticking to their “small government” principles. It’s too bad that they waited until Mr. Obama got elected to have their epiphany —and suddenly find them again! Not only was the last Administration rampant with runaway spending and printing of money by government on both sides of the aisle, you can bet that the Obama-Pelosi cartel will expand this premise in the months ahead. This represents the biggest increase in the size of our Government’s reach in over 60 years, possibly the...

"Olim habeas eorum pecuniam, numquam eam reddis: prima regula quaesitus" (Once you have their money, you never give it back: the 1st rule of acquisition) The U.S. Savings and Loan crisis of the 1980s and 1990s was the failure of 747 savings and loan associations (S&L's) in the United States. The ultimate cost of the crisis is estimated to have totaled around USD$160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government -- that is to say, by you and me, the U.S. taxpayers, either directly or through charges on our savings and loan accounts. This contributed in a major way to the large budget deficits of the early 1990s. The resulting taxpayer bailout ended up being even larger than it would have been because moral hazard and adverse-selection incentives compounded the system’s losses. Moral hazard is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk....

The real art of conversation is not only to say the right thing at the right place but to leave unsaid the wrong thing at the tempting moment. - Dorothy Nevill Economic wisdom's rule of thumb for a recession is two consecutive quarters of negative economic growth. Problem is, by the time the data finally gets in so those pencil-head economists can draw the grey shaded area on the charts, its six months too late. The stock market is a better indicator - a 20% decline from the high being an indicator we're in a bear market, and a bear market being a pretty good indicator that we've entered a recession. We haven't quite reached the 20% mark yet, but it could be here in another week or so. In a Yahoo Finance poll I saw today, 67% of respondents felt the market would continue to go lower. That's not bearish enough for a bottom - you need to have something like 90% of the respondents throwing in the towel, and we are far from there yet. I don't want to sound alarmist...