Busted: Bankers and The Global Economy

February 4, 2011

Bernanke: Catastrophic Implications for U.S. Economy

Filed under: banking, business, corporatism, economy, federal reserve, government, money, recession — Tags: , , , , , , , , , — digitaleconomy @ 6:09 am

 

USA facing debt crisis

Ben Bernanke of U.S. Federal Reserve has warned that the failure to promptly raise the national debt ceiling would catastrophic.  This catastrophe would clearly have a negative impact on paper assets denominated in dollars and other fiat currencies.

Bernanke was blunt about the threats by some congressional Republicans to use the upcoming debt-ceiling vote as sledgehammer to force harsh spending cuts:

“I would very much urge Congress not to focus on the debt limit as being the bargaining chip in this discussion, but rather to address directly the spending and tax issues that we have to deal with in order to make progress on this fiscal situation,”

“Beyond a certain point … the United States would be forced into a position of defaulting on its debt. And the implications of that on our financial system, our fiscal policy and our economy would be catastrophic.”

It’s important to realize that Bernanke did not use his typical conservative language regarding the necessity of addressing U.S. fiscal challenges. To the contrary, he painted a bleak picture of the possible consequences of failing to act:

“… if government debt and deficits were actually to grow at the pace envisioned, the economic and financial effects would be severe. Sustained high rates of government borrowing would both drain funds away from private investment and increase our debt to foreigners, with adverse long-run effects on U.S. output, incomes, and standards of living. Moreover, diminishing investor confidence that deficits will be brought under control would ultimately lead to sharply rising interest rates on government debt and, potentially, to broader financial turmoil. In a vicious circle, high and rising interest rates would cause debt-service payments on the federal debt to grow even faster, causing further increases in the debt-to-GDP ratio and making fiscal adjustment all the more difficult.”

Advertisements

November 10, 2010

Obama: Embrace Globalism And The Emerging One World Economy

Barack Obama made some interesting comments about the USA economy and American attitudes during a joint commentary in Mumbai, India.

President Obama made these comments about the Federal Reserve, effectively a “no comment” statement.

The Federal Reserve is an independent body. It doesn’t take orders from the White House, and it’s important as a policy matter, as an institutional matter, that we don’t comment on particular Fed actions.

About offshoring or outsourcing, President Obama made the following remarks:

I don’t think you’ve heard me make outsourcing a bogeyman during the course of my visit. In fact, I explicitly said in my address in Mumbai to the Business Council that I think both countries are operating on some stereotypes that have outlived their usefulness.

I want to be able to say to the American people when they ask me, well, why are you spending time with India, aren’t they taking our jobs? — I want to be able to say, actually, you know what, they just created 50,000 jobs. And that’s why we shouldn’t be resorting to protectionist measures; we shouldn’t be thinking that it’s just a one-way street. I want both the citizens in the United States and citizens in India to understand the benefits of commercial ties between the two countries.

Essentially, the attitude of President Obama and Indian Prime Minister Singh is one of tough nuts to America. They advertise outsourcing as good for India and the world.

November 7, 2010

Obama Admits Decline of US Dominance

Filed under: business, corporatism, economy, globalization, government, money, politics, recession — Tags: , , , , , , , , , — digitaleconomy @ 6:27 pm

Today, President Barack Obama said that the USA was no longer in a position to “meet the rest of the world economically on our terms.”

Speaking at a town hall meeting in Mumbai, he said,

“I do think that one of the challenges that we are going face in the US, at a time when we are still recovering from the financial crisis is, how do we respond to some of the challenges of globalization? The fact of the matter is that for most of my lifetime and I’ll turn 50 next year – the US was such an enormously dominant economic power, we were such a large market, our industry, our technology, our manufacturing was so significant that we always met the rest of the world economically on our terms. And now because of the incredible rise of India and China and Brazil and other countries, the US remains the largest economy and the largest market, but there is real competition.”

“This will keep America on its toes. America is going to have to compete. There is going to be a tug-of-war within the US between those who see globalization as a threat and those who accept we live in a open integrated world, which has challenges and opportunities.”

President Obama disagreed with those who saw globalization as evil. He did warn that protectionist impulses in the USA will get stronger if Americans don’t see trade bringing in gains for them.

“If the American people feel that trade is just a one-way street where everybody is selling to the enormous US market but we can never sell what we make anywhere else, then the people of the US will start thinking that this is a bad deal for us and it could end up leading to a more protectionist instinct in both parties, not just among Democrats but also Republicans. So, that we have to guard against.”

President Obama noted that America could not continue to promote trade at its own expense at a time when economic power in India and China is rising. “There has to be reciprocity in our trading relationships and if we can have those kind of conversations – fruitful, constructive conversation about how we produce win-win situations, then I think we will be fine.”

November 5, 2010

USA Economy: Bernanke Gets ‘Creative’

The Federal Reserve has been mandated by Congress to reduce unemployment while holding their interest rate near zero.  They plan to buy $600 billion in Treasury securities to keep prices from falling and reduce further the long-term borrowing costs, even as 8,000 commercial banks are being locked out of the money flow that could be used to begin financial healing on Main Street.

Bernanke plans to use the tools created during the recession to pump life into the USA economy. They have been projecting that the USA economy has been expanding for 15 months, but not to their satisfaction. They want the USA economy to grow at a larger rate. The reaction of the market has caused the dollar to fall and stocks to rise, as if Wall Street is a true measure of the USA economy. The focus is on Wall Street. Main Street be damned.

Bernanke hopes that he can encourage Wall Street investors to take more risks without risking inflation or encouraging price bubbles of assets by pushing the unemployment rate, which has been above 9 percent since June 2009.

Allen Sinai, the chief global economist at Decision Economics Inc. in New York claims that the Federal Reserve is not working up to standard. He criticized that they are paid to do the job more effectively, but their work is not up to standard. The fact remains that no human institution is truly equipped to deal with the crisis. We are in new economic territory with a global currency at stake, currently propped up by Wall Street as a distraction from the truth.

To push the rate of unemployment down, the central bank wants to spur the rate of US economic growth above a 2.5 annual growth rate.

September 25, 2010

Ralph Nader Debunks Free Market Economy

Filed under: banking, business, corporatism, economy — Tags: , , , , , , , , , — digitaleconomy @ 3:00 am

Ralph Nader speaks in Stockholm, Sweden, where he debunks the myth of the free market.

Blog at WordPress.com.