Susan Lee Demolishes Greenspan
David Henderson (disapprovingly) links to Susan Lee’s Forbes piece where she deals a death blow to the “savings glut” theory of the housing boom. Assuming her data are correct, I think hers is the single best indictment of Greenspan I’ve read, including my own articles.
My favorite part of the article is her chart of global savings rates, going way back. As with several other elements in this debate–like Chicago’s Casey Mulligan declaring that mortgage rates weren’t unusually low during the housing boom–it turns out that the “savings glut” claim is exactly backwards. See for yourself. Does it make sense to blame the worst crisis since the 1930s on a global savings glut in the mid-2000s?
NOTE: I don’t understand how global investment can be consistently higher than global savings. At the EconLib thread I asked if the planet ran a trade deficit with Mars.
UPDATE: Here is Henderson and Hummel’s response to a lot of these issues, including the drop in the global savings rate.
Kid Glove New Deal Revisionism
The New York Times can’t believe it: a growing number of economists and historians actually think the New Deal was bad for the economy. (HT2MR)
But even this type of “it’s about time!” piece is still annoying:
In this interpretation Roosevelt is a well-meaning but misguided dupe who not only prolonged the Depression but also exacerbated it. For many people, it’s like hearing that Little Red Riding Hood’s grandmother and not the wolf is the rapacious killer.
Do you see that? In the NYT view, the absolutely complete reversal would entail demoting FDR from “saintly savior of capitalism,” down to the level of “well-meaning but misguided dupe.” That demotion is, in their minds, equivalent to swapping the grandmother with the wolf.
So what happens if I think FDR was not misguided, and knew exactly what he was doing? That he realized the key to his political success was to keep the American public in a prolonged panic for as many years as possible?
The Force Is Strong in This One…
I refer to surprisingly young* Jonathan Krohn. Let’s hope the Jedi can keep him devoted to his principles.
* I’m sure he gets sicked of being referred to as “13-year-old.”
"Tom Woods, Good Writer or Bad, I Ask You…Pat Buchanan!"
(Possibly obscure SNL reference…)
Buchanan praises Tom Woods’ book Meltdown, and reminds us of the prior incarnation of the Fed:
Of Nicholas Biddle’s Bank of the United States, the great Andrew Jackson was eloquent.
“It has tried to kill me,” he said. “But I will kill it.” And he did.
Should not this creature from Jekyll Island, for all its manifold crimes and sins against the republic, also be summarily put to death?
Colbert Destroys Glenn Beck
Wow, I don’t know if I can take Glenn Beck seriously after this dismantling. I listen to him on the radio, but I don’t have a TV so I had never seen the antics below. Oh man.
I suppose Beck would say, “Hey, I really do believe in the cause, but on TV you have to put on a show to get viewers and thus spread the word.”
Other Branches of Government Push Back on Bernanke
In a previous post I recommended viewing Fed behavior as if Bernanke is another political actor who is trying to expand the power of his agency. (Economists have no problem deploying such “public choice” analysis to conventional politicians, but for some reason they think the Fed chief is guided solely by economic efficiency.)
The Senate has just pushed back in a major way:
In an unusual political challenge to the Federal Reserve, the Senate on Thursday called on the central bank to disclose the names of institutions that receive emergency loans and pushed for a study to determine the “appropriate” number of regional fed banks…
“Fifty-nine senators believe the discount window should be made public, which is a rejection of a fundamental way the Fed operates — it shows the Fed has no support in the Senate for one of its core principles,” said a Senate aide who spoke on condition of anonymity.
The part I put in bold is what really surprised me. It’s one thing to say, “Whoa, tell us who’s getting all this money you’re dishing out!” It’s quite another to say, “Do we really need a Fed bank in St. Louis? What does it do?”
Jobless Claims "Unexpectedly" Jump
Whoa, I don’t get it? Just because the government nationalizes the banks and car companies, flushes a few trillion down the toilet, and promises to raise taxes and take over the energy and health care sectors… All of that’s somehow supposed to adversely affect the productivity of labor? Apparently. It’s just so strange, because if there was one thing I thought all free market economists could agree on, it was that printing new money brought down unemployment.*
I am tempted to say, “This ‘unexpected’ jump should be no surprise to Free Advice readers,” but such cherry-picking is unbecoming of a financial blogger.
* A warning to the newcomer: I am being sarcastic. I am poking fun at many colleagues who say, “Don’t get me wrong, there will be inflation down the road, but the recession is over since Bernanke started pumping in money.”
Social Security Is Already Broke
Tim Swanson sends this alarming article. While (almost) nobody was looking, the Social Security “surplus” disappeared in February. You know, the event that wasn’t supposed to happen for another ten years or so?
And also, don’t reassure yourself with the existence of the “trust fund” to keep the Social Security deficit from affecting the rest of the government’s finances. Up until now, every year Social Security took in more (from payroll withholding etc.) than it paid out in benefits. So in theory, that means there should be a huge stockpile of savings that the SS administrators can draw down, now that they have to pay out more in benefits each month than they are taking in from workers’ contributions.
Ah, but there’s the rub. Do you know that the Social Security trust fund consists of government IOUs? Yep. So as a taxpayer, don’t worry: The feds won’t need to cut spending or raise taxes because Social Security is now running deficits–they’ve got a bunch of claims on the federal government to get out of their hole. Phew!
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