It was only six days ago I warned that the world had put the US dollar on a death watch. At that writing, a UN panel, backed by Russia, was pushing to replace the US dollar as the world’s reserve currency with a basket of international currencies instead.
In a not so surprising move, China joined the choir, advocating the dollar demotion, but with a twist. Bejing’s central bank governor, Zhou Xiaochuan, proposed creating a currency made up a basket of global currencies and controlled by the International Monetary Fund … saying it would help “to achieve the objective of safeguarding global economic and financial stability.”
Zhou did not mention the dollar by name. But in an unusual step, the essay was published in both Chinese and English, making clear it was meant for a foreign audience.
China has long been uneasy about relying on the dollar for the bulk of its trade and to store foreign reserves. Premier Wen Jiabao publicly appealed to Washington this month to avoid any response to the crisis that might weaken the dollar and the value of Beijing’s estimated $1 trillion in Treasuries and other U.S. government debt.
~~~
To better insulate countries from the ills of one country or one currency, Zhou said the IMF should create a “reserve currency” based on shares in the body held by its 185 member nations, known as special drawing rights, or SDRs.He said it also should be used for trade, pricing commodities and accounting, not just government finance.
As of yesterday, Treasury Secretary Geithner and Fed Reserve Chairman Bernanke both stated they would renounce any any proposal to move towards a global currency. The top EU economist also added his support for the dollar.
UPDATE: Apparently not every EU official is thrilled with the US spending plans… news today of the EU President labeling the Obama spending plans “the road to hell”.
The head of the European Union slammed President Barack Obama’s plan to spend nearly $2 trillion to push the U.S. economy out of recession as “the road to hell” that EU governments must avoid.
The blunt comments by Czech Prime Minister Mirek Topolanek to the European Parliament on Wednesday highlighted simmering European differences with Washington ahead of a key summit next week on fixing the world economy.
It was the strongest pushback yet from a European leader as the 27-nation bloc bristles from U.S. criticism that it is not spending enough to stimulate demand.
During Obama’s press conference ( Transcript here) later that evening, Obama found himself caught in one outright lie, followed rapidly by pronouncing the dollar “strong”. This was in response to a question by FOX’s Major Garrett on the proposal to move away from the dollar as the reserve currency, and in the wake of the EU and G20 countries refusing to follow Obama down his government spending spree.
The first reponse right after the CNN question is the outright lie about asking other countries to spend…
Well first of all, I haven’t asked them to do anything. What I suggested is, is that all of us are going to have to take steps in order to lift the economy. We don’t want a situation in which some countries are making extraordinary efforts, and other countries aren’t, with the hope that somehow the countries that are making those important steps lift everybody up.
What a crock of doublespeak. As I pointed out in my post yesterday that Obama had penned an international op-ed to the masses, attempting to gin them up against their leaders who are resisting the call by both Geithner and Obama for their increased spending. And by doing so, he was setting them up to be the scapegoats if his lone ranger spending policies failed.
Obama then followed it up – using approx 2/3rds of his answer to justify and cite support for the global spending – the same spending he said he didn’t suggest – by like the minded, recently elected liberal leaders of Australia (Kevin Rudd) and Britain (Gordon Brown).
By dancing with words, Obama sought to deny his actions by backing up his actual intent – done so by “circling the wagons” in conjunction with other leaders.
Either Mr. Garrett was unaware of Obama’s op-ed plea, or he had no opportunity for a follow up question.
But the art of word parsing is this TOTUS’ specialty. In Obama’s language, because he did not specifically did not use the words “spend more” means he wasn’t telling them to spend more. Yet others don’t hear it that way. Time Magazine interpreted Obama’s statement: “It’s very important to make sure that other countries are moving in the same direction, because the global economy is all tied together.” as an insistence that the world’s top economies adopt aggressive, America-sized spending programs. And the EU countries have accepted his “global” ovatures as meaning the same.
After the two minutes of deny/redefine, Obama addressed the dollar’s health…
…. I would just point out that the dollar is extraordinarily strong right now. And the reason the dollar is strong right now is because investors consider it – the United States – the strongest economy in the world.. and with the most stable political system in the world. So you don’t have to take my word for it. I think that there is a great deal of confidence that ultimately, although we are going thru a rough patch, that the prospects for the world economy are very very strong.
Were that true, why are we having this conversation? Why is China, our largest investor, plus Russia and the UN floating the very serious proposal to knock the dollar off it’s lofty perch?
Well… that was then, and today’s a new day. And evidently the parsing of words means a great deal. Because Geithner does a 90% turn in a CFR interview chit chat, suggesting that he is “open” to the Chinese compromise proposal.
“I haven’t read the governor’s proposal. He’s a very thoughtful, very careful distinguished central banker. I generally find him sensible on every issue,” Geithner said, saying that however his interpretation of the proposal was to increase the use of International Monetary Fund’s special drawing rights — shares in the body held by its members — not creating a new currency in the literal sense.
“We’re actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union,” he said.
“The only thing concrete I saw was expanding the use of the [special drawing rights],” Geithner said. “Anything he’s thinking about deserves some consideration.”
The continued use of the dollar as a reserve currency, he added, “depends..on how effective we are in the United States…at getting our fiscal system back to the point where people judge it as sustainable over time.”
Apparently the absolute confidence in the dollar stated in the preceding hours has it’s caveats….
Despite all the Obama administration denials, everything they are doing – in conjunction with “Helicopter Ben” Bernanke, busy in the back room printing an overabundance of US currency in order to meet Geithner’s toxic asset buy up – is laying the foundation for the creation of a global currency. The dollar devaluation depends upon the bet that flooding the world with undervalued US dollars will result in the ability to repay that debt quickly with increased revenue from a rejuvenated US economy.
In light of much of the world’s vote of “no confidence” in the dollar… most especially that of our largest foreign investor… the gambling stakes are especially high. Obama and his economic team can mouth all the positive platitudes in the world, but it will still not “change” the course they have chosen to trod with unprecedented spending, instead of Congressional belt tightening.
Playing with the status of the dollar is a large gamble for Obama to take using the taxpayers’ earnings as the ante. And that is indeed “change” we can believe in.
What the politicans are doing in DC with our currency is TREASON.
Talk about America dying from within.
Rome fell internally long before it was conquered.
One world currency followed by one world government. Do not take the mark of the Beast!!
A world currency would at least stop all the costs we have to pay each time money is converted to another currency – and would stop the damage done that badly effects business over flunctuating currencies.
The Treasury seems to have no qualms with expanding the money supply by $500 billion US to $1 trillion, which it has to do to finance the vast majority of the cost (as “low” as 93%, up to 100%,) of the toxic assets held by troubled banks, according to the PPIP (Public-Private Investment Program) white paper that they recently published. These toxic assets must be in pretty bad shape if the Treasury feels they have to offer such huge discounts in order to lure private investors.
But wait! “Not so fast!” say the banks, wanting to get top dollar for these toxic assets. All of a sudden, these toxic assets aren’t so toxic? WTF is going on? Surely the banks aren’t trying to double dip by having it both ways, are they? Just how much of this crisis is manufactured, and how much is real?
It gets even stranger. The Treasury wants to kick off PPIP by first selling the least toxic of the toxic assets, those rated at origination at AAA.
Now, correct me if I’m wrong, but something doesn’t “smell” quite right. How can a triple-A rated asset be toxic? Or asked another way, how can a toxic asset have a rating of AAA? Wasn’t the issue of “phony ratings” part of the cause of the collapse? Why not at least attempt to do a mark-to-market on these assets? Are banks so afraid that the assets will be shown to be worthless? So once again, why are the assets AAA rated, and why are the banks complaining about the possibility that they won’t get top dollar for their assets if they’re not willing to determine the market price?
This situation stinks so bad, yet nobody’s covering it in the MSM! Rest assured the asset valuation won’t be done in the light of day. Is it any wonder why China is concerned about US investments right now?
What a sick, frickin’ joke on the American taxpayer. I agree with Timothy; this IS treason on the American taxpayer!
Jeff V
UK,
If that’s all you can say to defend a one-world currency, it’s a pretty weak argument.
I don’t think you see the big picture about a one-world currency.
Losing some money from currency transactions is chump change when compared to the loss of liberty when the global central banks start calling the shots and not your own government (people who will answerable to no one, no checks or balances, nor elected by the people). It would be the ultimate wet dream for George Soros!!! Instead of multiple piggy banks to raid, you’ll now only have one bank to raid.
Also, by “equalizing the currency” you will have to bring down the industrialized world to the level of the third world….NO THANK YOU. Instead, they should find ways to build up the third world (like more free markets, private ownership, micro loans, and capitalism) instead of tearing others down.
This is one of several reasons why France, Denmark and Ireland (even the UK) said no thanks to the EU constitution. They didn’t want to be driven down to the levels of the poorer, Eastern European countries (aka: The “polish plumber” scenario) by all the stipulations, currency downfalls, and outside paperpushers running key sectors of their economies. Remember when West Germany merged with East Geramy and the difficulties they had (and still do) normalizing the economies and currencies? Imagine that on a global scare.
This whole mess started when governments, corporations and citizens got GREEDY with the temptations of easy, cheap money. This is no better than a drug dealer shoving crack on the streets.
These people in charge in Washington favor a one world currency, probably one controlled by the United Nations. Liberals have always favored a one world government and this would be the first step—how far are the blue helmets from main street.
Perhaps what’s needed is attention to the nuanced words… ala “global currency” vs a change to a “basket of currencies” as a “super-sovereign reserve currency” not tied to any individual nation, and controlled by the IMF.
Note that Geithner’s “open to” comments include references to this super-sovereign reserve currency, aka the SDRs (Special Drawing Rights) which the IMF already has (created in 1969), and operating as a supplement currency to the dollar reserve.
Yves Smith over at Naked Capitalism also blogged on this on the 23rd, wryly commenting that their blog posts noting the precarious position of the dollar as the world reserve resulted in many calling them “daft”. They also call this a Chinese shot over the bow, and far from “trival” in import. They also state:
I look at it this way. Whether it was an absolute change to global currency, or a change to a basket of currencies, both result in the dollar’s removal from reserve currency in status. No matter how you look at it, that reality is not good for the American economy.
Mata,
Re: “The Road to Hell”
Your post cites the President of the EU attacking the Obama administrations economic management. A simple review of the very article you link to provides context for these comments:
“Shocked by the outburst, other European politicians went into damage control mode, with some reproaching the Czech leader for his language and others reaffirming their good diplomatic ties with the United States. The leaders of EU’s major nations — France, Britain and Germany, among others — largely ignored Topolanek and his remarks . . .
*Topolanek spoke the day after he was ousted by his own parliament.* The Czech Republic currently holds the six-month rotating EU presidency but its leadership is in question, with Topolanek hanging on to a caretaker government at home after losing a “no confidence” Tuesday.”
I’m afraid Mr. Topolanek doesn’t speak for the EU. In fact, he doesn’t even speak for the Czech Republic.
The Treasury Secretary says:
“The continued use of the dollar as a reserve currency, he added, “depends..on how effective we are in the United States…at getting our fiscal system back to the point where people judge it as sustainable over time.”
And this is the task before the President. His performance of this task is something he will and should be judged on.
Does that make you feel better, Dave Noble? Having some of the others tut tut the still in power EU President is like Obama making comments, and having Congress correct him.
That said, you’ll note I began the UPDATE with the words “Apparently not every EU official is thrilled …”. Have a problem missing that? Or must you constantly leap to your all or nothing perception?
Least you think the EU Prez is the only odd man out, you should go back to my other post and pick up on some other choice comments about US spending… ala Germany, Sweden, and the Brussels think tank economist.
Well duh…. thank you for that enlighting viewpoint, Dave Noble. The dilemma is the results of failure present damaging high stakes for America’s economy. Note my last paragraphs.
BTW… as an example of damage that can occur to the dollar value, one only needs to examine the immediate response to Geithner’s “open to” stance resulting in an immediate .07% drop against the Euro. It did not go back to rally’ing until Geithner started backtracking on his comments 30 minutes later…. when he said “‘I think the dollar remains the world’s dominant reserve currency. I think that’s likely to continue for a long period of time.”
I just heard on the news that it also dropped against the Japanese yen simultaneously.
We have a global currency. It’s called gold.
Item: No fiat paper currency has ever survived.
Item: The dollar lost the last connection to reality, when Nixon took the dollar off what remained of the gold standard and closed the gold window.
Item: Inflation is not an increase in prices, it’s the increase in the amount or supply of money. Price increases are a result of inflation, not inflation.
The US Dollar was doomed by Nixon back in 1971. It’s just that there’s a lot of ruin in a nation and the Federal Government, especially Obama, is determined to find out just how much.
@Timothy
The EU constitution is a different issue (besides they simply repackaged it as the Lisbon Treaty – not that the Brits got a chance to vote on that). France and Ireland have been using the Euro for some time now. And most, if not all, of the Eastern European states will follow in time.
As for 3rd World countries – like Eastern Europe – you don’t immediately include them until they are ready and don’t overly impact a global currency when they do join. Only start with countries that can agree and are ready. Besides other countries may start to peg their currencies to a new emerging global currency.
Imagine if all the states in the US has their own currencies? Of course the US is one country and I don’t want to see the end of nationhood. But in a modern world where more trade is being done across more countries it will make sense eventually for this to happen I believe. Probably not in our lifetime. At the moment – because of the current state of the dollar – more jobs are being lost in the US as its cheaper to have work done elsewhere. Depending on what state the currency is in – it either hurts exporters or importers. I don’t care about losing some money being transfered when going on holiday but for business these flunctuations effect us all – and they do make a big impact.
As for government controlling the levers of currency. Well I think this is left better to a freer market and not for governments to intervene and change things – often for their own political ends. There would lots of issues to resolve over a central bank etc etc but I think these could be solved.
UK
I disagree…the EU constitution, and its currency, are linked issues. It deals with centralized control. A kind of control I want the US not to be part of.
I really don’t think you’re getting this. This is slipping OUT OF the hands of governments and into non-elected organizations & “policy wonks”. Currency is part of a nation’s soverignty, just because the EU has unified it’s currency doesn’t mean it’s a good thing. Last time I checked, Euroland isn’t exactly a hopping place. Currency melding comes with uber-socialism and bureaucratic nightmares. You may say, “Let the little countries in when they’re ready”…but WHO says WHEN they’re ready? WHO determines this? WHO sets the conditions, the paybacks, the kickbacks, the price of admission and so forth. And WHAT “conditions” have to be placed in order to get into the “uber currency” system? What if a country says “no”? What if a coutnry gets in and has second thoughts? What nightmare scenarios of blackmail and coercion could countries be facing?
If you think I’m being paraniod, my defense is simply history, the human heart, greed and its desire for control.
I didn’t elect the IMF nor do I recall electing a Federal Reserve chairman. Who do they serve and who will be pulling the strings once we give over the economic keys to them? I don’t believe people are thinking this over: giving up potential rights in exchange for short-term feel goodisms. After the feel good smiles end, you’re in uncharted waters and you’ll be swimming with the sharks.
The Roman empire was once a “unified” system, so was the English Empire, the Greeks, the Spanish, Sultans, etc.., Where are they now?
You see UK, humans are pretty adaptive creatures. Once they get a good thumping, the brain cells tend to adjust. The cause of the crisis was simple: GREED and MISTRUST. Greed, because everyone wanted the pie but didn’t want to work for it and mistrust because people don’t believe the other guy’s bookkeeping. The economy needs to reset and simply throwing money, or offering a unified currency, is only putting a patch on the problem, forestalling the inevitable.
This is all total BS — the dollar is the ‘reserve currency’ because the US is the world’s biggest economy.
The EU or China isn’t going to fit that crown for some time to come yet, and this idea that anyone is going to trust a basket of fiat that is not backed by anyone in particular instead is at best amusing.
Mata,
First, it’s not about how I feel. It’s about accurate reporting on your part. If you’re going to be an alternative journalistic source, you should follow the rules of responsible journalism.
If the other comments from members of the EU were signifcant, why not cite them instead of the more inflammatory comments of a debunked official? That’s a rhetorical question to which the answer is obvious. Because Topolanek’s coments are more dramatic. That’s deceptive on your part.
With respect to your “Well duh” comment. Sometimes the blindingly obvious has to be stated when someone chooses to be blind to the obvious. Obama has been in office for a little over two months. Wouldn’t it be more reasonable to wait to judge his efforts? If a quarterback throws an interception in the first quarter, do you pull him? Do you throw your hands up and say “We’re going to lose!”
I may not have been happy with the results of the 2000 election, but I didn’t start criticizing President Bush before he even had a hundred days under his belt.
@Dave Noble:
If I were you, if there is any time left, I’d remove the undeserved insult.
Here we have it, the burr under your blanket:
Mata calls it as she sees it, I’ve never known her to be deceptive in any of her postings, also, she has supported the present president in some areas of his foreign policy. Reasonable enough?
What he has done with the economy in his first two months in office gives one plenty enough to judge him on even a number of congressional democrats have been alarmed. Are they unreasonable or starting to wake up. Wanting to sit back and watch him take us over a cliff is insane.
You began your latest post with an insult to Mata and end with frustration:
And, I’m a six foot tall, toned and tan blonde supermodel and you have no way of proving me wrong. Isn’t the internet fun?
Dave,
The analogy is greatly flawed. It’s more like the quarterback has lost his mind from taking one too many hits, and is babbling on about how in the next play, he’s going to have his tennis partner go long and throw the hockey puck to him for the hole-in-one (situated in the opposing team’s endzone).
Should the play be carried out or should we bench him and have his head examined?
I don’t recall Bush annoucing how he was going to invade two countries, create a new dept and increase the size of government, increase record deficit, etc. all within the space of 100 days. If you had known then in foresight what you only know now in hindsight, would you have wanted Bush’s policies to succeed or would you have obstructed to see them fail?
Oh wait…many of you did obstruct, changes stretched out over 8 years, not major changes to how we live, heralded within the first 100 days.
This just in:
Dave Noble, the poster-child of Internet deceit, shamelessly insults FA author while carrying Obama’s water.
Coming up on FA News at Noon Dave Noble analyzes his lost credibility and how his own actions caused his decline into public scorn, irrelevance, and lack of worth.
Also at noon, we examine the resurgence of the knee pad industry, the importance of this industry to the current administration, and how the blindly loyal supporters of this president are avoiding painful and embarrassing callouses through the use of this product.
Don’t miss it.
At the risk of double posting (If I do, I apologize).
Word,
If your analogy works for you, that’s fine. I would definitely give it points for creativity. As I noted to Mata, only time will tell whose analogy is more accurate.
I didn’t want to get into Bush/Obama comparisons, because then is then and now is now. However, since you brought it up, I’ll address it. Bush came into the White House with a nation at peace and a budget surplus. Obama came into office with two ongoing military engagements, a national debt that had doubled in eight years, and a stock market whose value had been cut virtually in half in two years. Putting the responsiblity for those differing scenarios aside for the sake of argument, the starting point for each President on their respective Inauguration Days was radically different.
Missy,
If I hadn’t meant what I said, I wouldn’t have said it.
Responses to Dave Noble…
By gawd, Dave. You are an embarrassment to the public education system. Let’s address the Topolanek comment, which you find “deceptive”….
Do you see the large bold “UPDATE” in the title? That’s a hint. Scroll down to the Topolanek section. See the UPDATE that precedes it? That’s the second hint. The post was published without the Czech PM’s comments (BTW, he’s center-right PM who has undergone several attempts at the confidence bit by his Democrat-socialist Parliament… despite the fact they are one of the more economically sound countries under his governance).
It was an “UPDATE” to add further proof of dissent not only to this post, but to the two other posts on this subject….*both* linked in this post.
This then answers your first comment about citation. Both posts with add’l citations are linked. Tho you say you click on links, the majority of the time proves you don’t read thoroughly, but merely scan for opposition fodder.
Therefore, knowing you are a man of relatively limited curiousity, I’ll repeat them for you again.
Some are linked in my original Dollar on death watch post on March 19th The saga continued with Obama, pushing back against the uncooperative G20 leaders by penning an int’l op-ed to set them up as the catalysts for his spending failure.
Learn from world history, Dave. Only a fool attempts the same mistakes made by other nations thru time, anticipating a different outcome. I might point out that outcomes of sporting games does not fall into the same category.
But since the average American has the historic memory span of a gnat, I’ll simply remind you of Sweden, Iceland and the krona in the past year or two. Personal experience is behind Sweden’s PM, Fredrik Reinfeldt, opposition to Obama’s over-the-top spending when he says, ““You can’t think you can solve everything with taxpayers’ money. Stimulus packages are already in place and taking us through this challenging time” (cited in the Obama int’l op-ed post)
I’d say Missy and Word covered this adequately… Missy by pointing out you have no way to prove you were not unduly critical, and Word noting that the Bush policies you seem to object to the most strenuously did not commence until after we were attacked on 911.
Therefore, I will criticize any POTUS of any political stripe when I believe he is implementing dangerous policies… as is still my 1st Amendment right. And, if I listen to the liberal/progressive/socialists since 2003 … my patriotic duty.
I am not a journalist, Dave Noble. I am a blogger that contributes to a site featuring op-eds and commentary from a conservative slant. Since you don’t know the difference between a blog, comment and post – refer to comments on this thread – I am probably expecting something above your pay grade when I expect you to know the difference between journalism and commentary on any informational media…. blogs/WWW or print/TV/radio.
And I am very responsible even in that by providing links that I used to form my opinion piece for others to read.
Naw, my analogy’s chock full of holes.
Dave,
Every administration inherits the baggage and gains of the previous one, as well as all those who came before. I found it whiny for Obama in his 60 Minutes piece:
No administration starts with a blank slate. You inherit and build upon the baton that was passed to you by all others that came before. You might try and redirect, change courses, whatever; but you basically start from where the previous president left off.
We can still whine about suffering the legacy of the Carter years, the growth of terrorism under Clinton, etc.
You can also look at it this way: Obama inherited the tools he’ll need for the war on terror, however much he may tweak them around, created by the previous administration. He also doesn’t have to deal with a world with Saddam; and he comes into office with a much more stabilized Iraq; an emerging U.S.-India strategic partnership, more equal partnership with Latin America, strengthened ties in Asia over the past eight years…decline in teenage drug use, abortion rate, homelessness….
The last 8 years wasn’t all doom and gloom- I thank God it was Bush and not Gore or Kerry governing.
I’m not one of those who holds Clinton responsible for 9/11; but given that the machinations happened under his watch….come again?
You might perceive Bush inherited a world of daffodils and fuzzy bunnies, cotton candy clouds and gumdrop roads, but the utopian 90′s had its own set of baggage passed on to Bush, including a recession that began somewhere around Oct of 2000 and a metasticizing threat from takfiri Islamic terrorists.
And now we’re facing an Iranian threat which is a legacy of Carter’s failures.
If you’re going to look at the world this way, then do it thoroughly and bipartisanly.
Obama’s Bush-blame is only going to go so far; in fact, I think he’s already spent that capital, and now he owns the mess including what will be an unprecedented increase to our deficit and passing the problems onto future generations- our grandchildren and their children- to deal with. He may deny he’s kicking the can down the road; but that’s because he’s the one who is creating the can to be kicked.
And speaking of analogies, I will concede Bush created a can he kicked to Obama; but now Obama’s taking that can and creating a lunch pail which will become a barrel by the time he shoves it down the hill for future generations to play with.
I find it odd that all those from the left (not the ones criticizing about it from the right) who made it a point to rightly criticize Bush on a ballooning deficit, are now on board with Obama’s spending proposals. So if Bush’s spending was the problem, the answer to solving that is…..8 times more spending?!!! Wtf? Oh…I see: when it was Bush, it was known as “wasteful spending”; under Obama, outdoing Bush’s spending by 8 times the amount is known as “an investment for the future”.
WS, do you subscribe to “Clinton Hangover” and the possibility of “Bush Hangover”? Another author here referred back often to a “Clinton Hangover” when Pres Bush took office. If there are such things as “hangovers” economically… how long to they last, how long of a hangover do you think Pres Obama inherited from former Pres Bush?
Present.
Word,
I never knew you to be a multiple punctuation “wtf” kind of guy. I would have assumed the natural level-headedness evident in your posts here and elsewhere would have immunized you against that. Don’t let the American Mike style of hyperbole rub off on you. You know what that leads to – silly nicknames, lots of capitalization, embedded graphics. It’s not a pretty sight.
Ribbing aside, thank you for the substantively reasonable response, Word. Obama, in addition to his comments about the Bush legacy, has stated explictly that’s it’s on him. That’s what I’ve been trying to emphasize. He has stated that he is responsible for leading our country out of the current crisis and will be judged for how well he does four years from now.
Re: the efficacy of his efforts to date. Without getting into the specific methodologies and stimulus amounts applied to date or planned, I believe he is on the right track. The private sector will not jump start the economy, so the public sector has to. The much vaunted private sector was largely responsible for putting us where we are. It’s time to look elsewhere, small government idealogy aside. And that elsewhere is the federal government.
There is a precedent in 1933 (and not 1933 Germany). FDR, despite the revisionist protestations of Monica Crowley, Fox News commentators, and a couple of UCLA professors, pulled the United States out of a far deeper depression with government stimulus. It was what we needed then and what we need now. The devil is in the details. Ideology is a distraction.
Actually, President Bush came into office to a recession, by no means did he have the luxury of a surplus. The Clinton surplus was and continues to be, a myth as explained in the following two articles:
http://www.craigsteiner.us/articles/16
http://www.craigsteiner.us/articles/30
Then we have this excellent 1998 article chock full of warnings for the Clinton administration and Congress. Discussed and explained were the government’s careless budgeting practices and the timely forecast of the potential Fannie/Freddie crisis. So, we were cautioned in 1998 and this eventually led to a Bush/Obama inheritance of the Fannie/Freddie crisis, part of the economic problems we face today.
Clinton’s Sperling gushed as this was waiting in the wings:
http://www.govexec.com/story_page.cfm?filepath=/dailyfed/0198/012098t1.htm
Here we have reason for part of the Bush deficit spending, building our defense forces back up while fighting terrorism. This is only just a small portion of the national defense problems Clinton left behind:
Investor’s Business Daily aptly described the problem–and its consequences–in an editorial published earlier this year: In the first six years of the Clinton administration, Bush 41′s budget projections for weapons procurement were slashed by $160 billion. For fiscal 2000, the Congressional Budget Office said $90 billion a year was needed to hold procurement steady. The Clinton procurement budget was a mere $55 billion. During the Reagan buildup (fiscal 1981-87), we spent an average of $131 billion on procurement.
And Obama kicks the can:
http://formerspook.blogspot.com/2009/03/procurement-holiday-begins.html
Yep, President Bush had it made. Left with rainbows and cotton candy.
Actually, I see him as talking out of both sides of his mouth. Yes, he’ll say he’s now to be held to account; and at the same time he continues to disown and blame others. Case in point,
from his press conference:
And then he goes on to never address the question, but fillibuster through his “distractions”: polished talking point rhetoric that doesn’t really say anything.
You don’t think government interference in the first place might have had some hand in the mess we find ourselves in?
Didn’t FDR’s “solution” prolong much of the Depression? And isn’t it more than just the “revisionist” history of the few you cited who think so?
Stuck in spam.
Dave, perhaps you could match the frequency of remarks in which Obama takes responsibility to his negative remarks of what his admin inherited or the failed policies, yada, yada, etc. What are we sitting at, 75 to 1, the one coming after internal polling?
I bailed you out, Missy.
Missy,
I will respond shortly.
Word,
If you know of a study, a monograph, or any other credible academic source, other than a 2004 study by two UCLA economists, Harold L. Cole and Lee E. Ohanian, that argues that FDR’s actions prolonged the Depression, please let me know. To the best of my knowledge, this single study has made the rounds of conservative blogs, ultimately leading Monica Crowley and a Fox commentator to nod their heads in self-satisfied, but erroneous, agreement that “all kinds of studies” have shown that FDR prolonged the Depression and that there is general agreement in the academic community to that effect.
The historical facts are that over the course of FDR’s two terms, the economy grew at a rate of 9-10% each year with the exception of the period from 1937-1938 when believing that recovery was well on its way, FDR, as Paul Krugman notes, cut spending and attempted to balance the budget. That is, the recovery stalled when FDR pulled back from his stimulative actions which had been successful to that point.
BTW, I enjoyed the animated GIF. Good joke.
Word,
I failed to add that I suspect Democrat protection of Fannie and Freddie from oversight did contribute to the mix of factors that led to our current economic crisis.
Missy,
Congressional Budget Office projects higher 2000 budget surplus
May 12, 2000
Web posted at: 4:01 p.m. EDT (2001 GMT)
WASHINGTON (CNN) — The Congressional Budget Office said Friday that the projected U.S. budget surplus will exceed $200 billion for this fiscal year, up from its previous estimate of $179 billion.
The CBO, the nonpartisan budget analysis arm of Congress, also said that the portion of the surplus excluding Social Security reserves should top $40 billion, up from its previous $26 billion estimate for fiscal 2000, which ends September 30 . . .
The new figures could be good news for Texas Gov. George W. Bush, the likely Republican presidential nominee, who has agreed that there is enough of a federal surplus to pay for his five-year, $483 billion tax cut as well as spending proposals on education, health-care, housing and the environment.
However, the CBO cautioned in its monthly report that it remains unclear whether there would a long-term surplus improvement because of economic uncertainty. ”
http://transcripts.cnn.com/2000/ALLPOLITICS/stories/05/12/cbo.surplus/index.html
Given the choice between the Congressional Budget Office and Craig Steiner, a software developer with his own website, I’m going to go with the CBO, Missy.
President Bush tried to have his cake and eat it too – fight a war, while cutting taxes. In doing that, he funded the Iraq War “off the books”, not including it in his official budget. This exercise in voodoo accounting created real national debt, a debt he doubled in eight years.
Please see my note above re: the Democrats and Fannie and Freddie. They were just part of a much larger problem, driven by deregulation and Wall Street Gone Wild. Wall Streets’ insatiable hunger for mortgages to convert to collateralized debt obligations, regardless of their intrinsic value, caused them to turn to independent mortgage originators. Those completely unregulated originators made Fannie and Freddie look like tight-fisted bankers of old.
Now the party is over.
Some good stuff on how FDR prolonged the depression:
http://www.floppingaces.net/2008/12/06/obamas-describes-his-new-deal-program/
http://mises.org/freemarket_detail.aspx?control=258
And a good book:
http://www.amazon.com/FDRs-Folly-Roosevelt-Prolonged-Depression/dp/0761501657
But the left will always believe, no matter the evidence, that FDR was the savior. Waste of breath to argue the fact with them, hell….they fell for another Socialist in Obama so what do you expect?
As Wyoming’s own Sen. Mike Enzi, who loves to describe himself as “the only certified accountant in the US Senate” said back in the late 90′s when his colleagues were patting themselves on the back because they had a surplus, and they were going to put that surplus in Social Security….
“The surplus IS in Social Security. All we have to do is leave it alone.”
The only reason there was a surplus during those years is because the Clinton administration started counting Social Security as part of the federal budget. Previously, it had been counted separately, but by combining its surplus numbers (which were a product of population trends, not fiscal responsibility) with the rest of the federal budget (together with Gingrich’s contract with America that cut federal spending) the Clinton White House quite effectively convinced the American people that he had created a surplus in the federal cash flow.
Yes, there was deficit spending during the years that Republicans controlled both congress and the White House, but these were wartime years, which is very typical given the historical effect of war on a nations budget. Since the beginning of 2007, however, when the Dems regained control of congress, the spending has accelerated beyond anyone’s wildest imagination, and the spending in the last two months dwarfs even that of the last two years.
President Obama, who is so quick to remind everyone that he “inherited” the fiscal nightmare, is also quick to ignore the fact that he was a member of congress during those years, and that no spending bill can ever be signed by the President until it has been passed by congress. He either voted “yes”, “present”, or didn’t vote at all for every spending bill that passed through congress, except, of course, for a bill to fund troops. That he voted against.
Maybe you didn’t, but I was at the 2001 inauguration, and the Left Wingnuts were already out in force protesting Bush’s policies, even though he hadn’t made any yet. It is not our job to roll over and let the government implement policies that we are fundamentally opposed to, let alone policies that we believe will be dangerous and destructive.
Anything that decreases the USdollar’s demand as a safe haven or reserve currency will be disastrous for it, and thus very bad for america.
Geithner should never have said that.
Sorry americans, one cannot really blame the mainlanders for getting upset with the USD, they are already upset with their US treasuries and worried about what the Obama admin has been doing—they believe he will destroy the value of their US assets with his crazed socialist policies and general mismanagement and ineptitude.
Back in the late 90′s, while most of his colleagues, on both sides of the aisle, were slapping themselves on the back because they had a surplus, and many were claiming that they would use the surplus to save Social Security, Wyoming’s own Sen. Mike Enzi, who likes to point out that his is the only certified accountant in the Senate, pointed out that, “The surplus IS in Social Security. We just need to leave it there.”
The surplus from the SS Trust Fund (a Ponzi scheme by which Madaff’s pales by comarison) was never a product of good governance by either the Dems or the GOP, it was a product of population trends. The surpluses in the Treasury in the late 90′s were simply the product of combining the General Fund numbers with the SSTF numbers, a practice that continues today.
Yes, when the Republicans controlled both the White House and congress from 2001-2006, they had deficit spending, but that is typical of historic war time budgets. However, since the time that the Dems took over congress in 2007, spending has accelerated at a pace beyond anyone’s wildest nightmares, and the pace of spending since they also took control of the white house, only two months ago, has outpaced even that.
President Obama is quite fond of pointing out that he “inherited” this fiscal crisis, but he is also quite fond of ignoring the fact that he was a member of congress during the last several years of spending growth. Remember, no appropriations bill has ever been put on the President’s desk to sign until it has been passed by congress, and while he was there, Obama never came across an appropriations bill that he didn’t vote “yes” on, except the one that funded our overseas troops.
Bush could have vetoed the bills, yes, but he was suckered by the vampiric lure of “bi-partisanship” and chose to work with the Dems. Sadly, McCain would have done the same thing. As Ayn Rand wrote, “Any compromise between good and evil only hurts the good and helps the evil.”
Sorry about the deja vu posts. 38 was lost in the spam filter, but I thought it had vanished completely so I rewrote it as 41. Reading back, I can’t decide which one was better…
I dug it out of the spam filter, Wisdom. Since you can’t decide… I’ll leave them both! LOL
Just feeling a bit schizophrenic today is all
@Dave Noble:
Is there something wrong about Cole and Ohanian’s analysis that you reject them?
Aside from Curt’s links, you may skeptically scoff at this, but Michael Medved’s book “10 Big Lies About America“, CH6 discusses how Roosevelt’s “alphabet soup” of bold new government programs and doubling of government spending only prolonged the Depression. Before you reject Medved as nothing more than a talk show pundit, you should know that Medved graduated from Yale with departmental honors in American history and also attended Yale Law School. His book is richly sourced. One of the economists he cites is Jim Powell, whose book Curt linked to. He also cites Amity Shlaes, The Forgotten Man, Stanford historian David Kennedy in Freedom from Fear, economic historian Lester V. Chandler, and big-time liberal Arthur Schlesinger Jr., the most acclaimed and authoritative New Deal historian, who as far back as 1963 detracted New Deal policies. The Brookings Institute is also cited from 1935 as producing a 900 page report on the impact of the most ambitious and controversial New Deal programs and concluded that “on the whole it retarded recovery.” These are only some of the sources used and cited. It’s a good read; especially if you disagree. I think disagreement only enriches perspective.
I missed the FOX news reportage. But it does seem that “all kinds of studies” are out there, and not just recent “revisionist” studies.
@Dave Noble:
Of course you want to rely on a 2000 newspaper report on the CBO’s forecasts, predictions, estimates, whatever, that, at the time did not include the downturn of manufacturing, the tech bubble burst or the recession we were beginning to slip into at the time your article was written.
Wisdom is right, the Clinton surplus was Social Security and other trust funds held by the treasury. Maybe you should have read the sources Craig Steiner supplied.
From The Center on Budget and Policy Priority, March 13, 1998
http://www.cbpp.org/cms/index.cfm?fa=view&id=1654
http://mises.org/story/542
And, here is Fritz Hollings on the floor of the Senate, one month into the fiscal 2000 budget process, railing about the deficit that isn’t supposed to be:
http://www.c-spanarchives.org/congress/?q=node/77531&id=8712130
@Wordsmith:
Thanks Word, now would you bail me out of the filter again.
Wisdom,
Guess you better talk to those guys over at the CBO. And I guess if they said there was a surplus when they’re really wasn’t one, their figures showing that Obama’s deficits will be larger than he says they will are suspect as well. You can’t have it both ways, dismiss CBO statements when they don’t support your argument and adopt them when they do. As someone said “that way lies madness”, or at the very least, intellectual dishonesty.
You’ll note in one of my earlier posts on this thread, I am more than willing to leave the Clinton surplus off the table for the sake of argument and merely point to the difference in the scenarios facing Bush and Obama to explain why Obama is taking radical action.
Word,
I’m not dismissing the UCLA study out of hand. I merely point to the fact that it’s just one study and not the general academic consensus as was asserted on Fox News. Watch the segment on YouTube and I’m sure you’ll agree they treated David Sirota as if he had said that Nixon won the Vietnam War: “Everyone knows FDR prolonged the Depression.”
Re: Michael Medved. I’m afraid I’m going to fulfill your expectation. I remember having made this observation on this blog before, but since you bring Medved’s book up again, I need to make it again. When looking for a source of solid, objective economic analysis (or any other kind of analysis), I am not going to turn to a book with “10 Big Lies” in its title. I would immediately recognize it as a polemic whether it supported or disputed my thesis. I know you’ve had a formal education. Would you cite Medved’s book in a paper in an Economics class? I don’t think you would, because you’d know it wouldn’t help your grade.
Word, let me pose a counterexample that I think fits well: Frank Rich. Medved was once a movie reviewer. Rich was once the culture editor for the New York Times. Medved, as you have pointed out, has a degree from Yale in history and attended Harvard Law School. Rich earned a B.A. degree in American History and Literature from Harvard College graduating magna cum laude.
Rich has written a book called “The Greatest Story Ever Sold” which “examines the trail of fictions manufactured by the Bush administration from 9/11 to Hurricane Katrina, exposing the most brilliant spin campaign ever waged.” If I cited Rich’s book as an authoritative source, you would rightly point out to me how blatant Rich’s bias is. It doesn’t matter that he footnotes other more credible sources.
FDR was improvising to deal with an unprecedented crisis. Nothing in his prior political experience prepared him for the task before him. He made mistakes. You rightly point to that.
But to argue that the idea that substantial government intervention is the proper response to a depression was proven wrong by FDR actions, is to fly in the face of economic and historical facts.
I’ll close with a short excerpt from an article on John Maynard Keynes in the Economist:
Keynes helped set up the Bretton Woods framework, but he is best known for his General Theory of Employment, Interest and Money, published in 1936 in the depths of the Great Depression. This invented modern macroeconomics. It argued that economies could sometimes be stable (in equilibrium) even when they did not have full employment, but that a government could remedy this under-employment problem by increasing public spending and/or reducing taxation, thereby increasing the level of aggregate demand in the economy. Many politicians picked up on these ideas. As President Richard Nixon observed in 1971, “We are all Keynesians now.” However, it is much debated whether Keynes would have supported the way many of them put his thoughts into practice.
Curt,
You can find a book to support any thesis you might want to advance. And you damn sure can find a couple of blog posts.
Obama is not the savior. You can keep throwing up that strawman until your arms get tired. He is the President and he has a job to do. He did not create this crisis, but he took the job knowing he would have to deal with it. It remains to be seen how well he will do.
Re: FDR promoting socialism. Since you seek idealogical purity, how about the Republicans try campaigning to abolish “big government” programs like the FDIC, the Federal Reserve, the SEC, Social Security, and Medicare? Think that would sell?
How about Bush’s idea to replace Social Security with private stock accounts. How’s that looking right about now? Think anybody would want to buy that one?
Another blatant attempt to mislead.
At no point did President Bush propose a plan to “replace” Social Security with private stock accounts. He wanted to give people who are forced to pay in to Social Security the option to control a small portion of what they are compelled to invest.
Why do you feel compelled to twist the facts in order to try and make points?
Do you really think you’re going to get away with that here?
As to FDR’s actions in relation to the Great Depression, the opinion of economists supporting your contention is 50/50 at best.
There are boatloads of economists who disagree with the contention that FDR’s actions made things better.
@Dave Noble:
I replied to you in regards to the source you gave citing the CBO but the post is in the spam filter.
CBO figures are absent the results of things that happen throughout the year. Laws enacted, disasters, overspending due to increased costs, etc, CBO figures are estimates. Missing from your outdated news item was the recession we were slipping into at that time, the dot com bust and loss of manufacturing revenue.
I also included paragraphs from sources used by Craig Steiner that were also sources. Bottom line, Clinton used Social Security and other off budget trust funds held by treasury to balance the budget and claim a surplus. All administrations do the same.
Mata Musing: found you amongst over 200 spam messages, Ms. Missy. You are always worth looking for. So it’s appearing now. Good thing…. lots of info and typing there, eh?
Aye Chi,
There are boatloads of scientists who dispute the well-established theory of evolution. But I’ll bite – who’s in the boat?
And it would have made a difference to the folks who chose the private account option and retired December 2008 and had to start living off an account that had lost half its value (assuming it was an index account)? They would be thanking Bush for giving them that wonderful choice? Again, if Republicans had the stones to live according to their ideological purity, they’d being campaigning against all those big government programs I cited. And you know what would happen? They would doom themselves to being a permanent minority party.
Missy,
I didn’t mean to ignore you. I don’t doubt there is some truth to your more nuanced view of the Clinton surplus. But as I note, I am willing to take that off the table as a point of argument.
I am far more concerned with arguing that Obama is reacting with radical solutions appropriate to a radical crisis.
@Dave
First, my issue isn’t with CBO numbers. They are merely a snapshot of what todays numbers will look like carried out over a period of time, assuming no other variable is changed. My issue is with how those numbers are interpreted and manipulated, and then used to justify those “radical solutions”. While you say that I can’t have it both ways when looking at the CBO numbers, I am saying the same thing about the left. You pointed out that Bush doubled the national debt in eight years, but Obama’s spending plans promise to do that yet again, in even less time. And don’t forget, the largest years of Bush’s spending increases happened while the Democrats controlled congress, including Obama.
I argue that doing nothing would have been better than what Obama has done. Economic circles are fickle, and have a tendency to find balance. What we have had is an artificially induced economic imbalance created by a housing bubble and price fixing of oil by the middle east, exacerbated by the doom and gloom congressional campaigns of 2006 and 2008 and the hellfire and brimstone doom and gloom presidential campaign of 2008. Had we let the wave run its course without Obama’s “radical solutions”, I believe we would have forged through the recession by the middle of this year without the destructive devaluation of the dollar and the coming risk of hyperinflation.
@Dave Noble:
You bring up a fair point; but do yourself a disservice by outright rejection without researching. Read the book. Take issue with the message rather than the messenger. Discover for yourself whether he is cherry-picking his facts or misrepresenting them; or if he’s presenting to you information that rectifies versions of history that you’ve embraced as the defacto correct ones to believe.
Credibility is earned, and I think Medved is head and shoulders above most pundits. We all cite journalists and other researchers quite often in a similar spirit that we cite from academics. Some of it has to do with lack of time to pour through hundreds of pages of legislative bills ourselves; so we rely upon those we trust to do it for us, then give it to us in bite-size digestible talking points. In other cases, I simply don’t know enough to read legislative material and know what it is that I am reading about. I simply do not have the time to become an economic historian on FDR, so I rely upon the information and research of others to do that legwork.
But even academics and so-called “experts” get it wrong. Perspectives change; historical interpretation can be fluid.
Simply because they have that PhD by their name doesn’t mean automatic credibility. Take Howard Zinn, Juan Cole, Ward Churchill, for instance. Is it right that Noam Chomsky is read in college history courses? Why them?
Medved’s book is aimed at the layman, not academia. He’s bringing the information of academia and presenting it in a format that has popular appeal. Perhaps you’re right about the title, and he should have titled it in more dry terms. After all, Howard Zinn titled his book “A People’s History of the United States”, rather than “An anti-American history of the imperialist United States”.
In some cases, Medved does one better, and does the job of academic researchers and reads from the same documents, journals, diaries, and sources that scholars base their interpretations and knowledge from. Ward Churchill is a professor. On the issue of (re: slander) infecting Native American Indians with small pox who has more credibility: Churchill or Medved? Will you reject Medved and accept Churchill’s view because one you dismiss as a mere “movie critic” while the other has the academic doctorate? Medved’s not the one making things up out of thin air.
For this matter, why listen to anyone about anything when we’re speaking outside our field of expertise in terms of tenure, profession, or professorship? Why should I listen to you regarding FDR? Why should you listen to me? Why read FA regarding what the Phase II final Senate Select Intell Committe’s report on prewar intell says? Why trust what a journalist says about it when the journalist probably is only regurgitating a list of bullet points- if even that? Whereas Scott (FA author) has the non-doctorate, non-certified expertise of spending an inordinate amount of time pouring through intell reports, and probably knows more about the subject matter on pre-war intell and the run-up to war than anyone else?
What I’m getting at here, is don’t dismiss Medved because you only see him as a movie critic. Read his book and judge for yourself. Look at the list of resources cited in the back of his book.
If Medved is wrong more often than he’s right, then yes, I’d be more skeptical than trusting of anything else he says. Again: Credibility is earned. Which is why the image of so many newspapers has been damaged over recent years.
And once again: Credibility is earned. Not automatically given. It does matter that “he footnotes other more credible sources”; because if what he says is baloney, then so are those so-called “credible sources”, unless he’s misrepresenting them.
Whose facts, Dave? What I’m saying is don’t reject before you research. Take a look at the “economic and historical facts” cited so that you know exactly what it is you are rejecting. You haven’t even bothered to peruse the pages of Ch6 in Medved’s book, have you? Why reject the views of the economists Medved is looking to for his knowledge because he isn’t the economists themselves?
And from what I recall, you were just as wrong then.
But what do I know?
China is simply flexing its economic muscle before the G20 meeting.
http://pacificgatepost.blogspot.com/2009/03/chinas-weak-gambit-on-currency-shift.html
The U.S. Dollar is not about to be replaced, regardless what China’s wishes might be.
BTW, thanks for the note on Obama’s lying.
He seems to tell some huge lies on a fairly regular basis … something that perhaps comes with moving into the White House. No one in the MSM is even close to breathing a word about it. Sighhh.