Tuesday, November 23, 2010

Murphy Swings---And Misses Badly

Murphy just has to take a swing at Paul Ryan.

Too bad Murphy doesn't quite get it. Maybe he doesn't know the definition of "history."

The ghost of Herbert Hoover is haunting certain Republican leaders and Wisconsin’s Republican congressman from Janesville, Rep. Paul Ryan. Hoover, of course, was famous for his solution to the Great Depression – cutting government spending – which just made the Depression worse

But that's not what Hoover did. He actually INCREASED Gummint spending: classical Keynes. However, Hoover also screwed up royally by increasing the bank-reserves requirement, making bank lending disappear. That's history. In-the-book, written for all to see.

Then Murphy makes it worse.

...The Fed has been aggressively lowering interest rates, given that the unemployment rate is nearly 10 percent. But interest rates have already dropped to nearly zero, so nothing further can be done on that front. Hence the Fed’s new strategy to pump $600 billion of new money into the economy through “quantitative easing” - buying up long-term debt. Both its critics and defenders concede this will devalue the dollar in the short term...

Yah, the Fed lowered ITS OWN interest rate (the one it charges banks for overnight loans) to near-zero. However, if Murphy would bother to take a look at 10-year US notes, he'd find that since QE2 was rumored, their rates have gone, ah, straight up. UP. And guess which rate mortgage loans' rates are based on. Go ahead. Guess.

So. Mortgage debt will be more expensive. And higher interest rates are a sign that investors expect the dollar to be worth LESS, not more, Bruce.

Oh, but he delivers yet another gem:

...the current, catastrophically-high rate of unemployment means inflation has gotten so low it barely exists.

Actually, what it means is that DEMAND for goods is lousy. Crappy. Awful. Thus prices are not climbing, unless you buy groceries, (which GHWBush and Murphy, evidently, do not do). Adding labor to idle factories is.......ahhh.......not smart.

More to the point: When James E. Carter was President, both inflation AND unemployment were very high. But that's only a matter of history. In-the-book, written for all to see, and memorialized by the "Misery Index" which cost Jimmuh the election.

OK, Bruce.


Billiam said...

He must be smoking something. Inflation IS on the rise. The Feds changed the way they calculate it. It no longer includes the cost of food or energy. Anyone who's gotten gas or food or fuel oil lately knows this. Typical Government LIES.

J. Strupp said...

Hoover's (Mellon's) defense of the gold standard was more to blame for the collapse in global markets and the depth of the depression. There was no way Hoover could spend enough to combat the deflationary spiral following the financial crisis of the late 20's while still adhering to the gold standard at the same time. He chose to defend the currency and put millions of Americans out on the streets in less than 2 years. Which is, of course, why we adhere to a floating exchange rate today. Because changes in currency prices are the primary mechanism of adjustment for a system of floating exchange rates. It's that simple.

In short, this nation is pursuing a weak dollar policy because the alternative to a weak dollar is reduced output, lower GDP growth and higher unemployment. This is a simple economics 101 equation. One that Bernanke understands along with most honest economists and people who can do math.

According to this Sunday's MJS, Paul Ryan's "first love" is montary policy. It's probably better for all of us that he chose to follow his second love. Ryan seems to believe that a magic fairy is going to come in through his window in the middle of the night and grant the U.S. governemnt a strong dollar, the ability to put the some 25 million Americans back to work and cure this nation's "debt crisis" all at the same time. It doesn't work that way. 0+0 does not equal 2. Not in real life it doesn't.

Finally, I see Rep. Ryan would also like us to, "Name me a nation in history that has prospered by devaluing it's currency". Apparently, Mr. Ryan not only has a difficulty with basic econ., but is also unaware of current events. Last I checked, a hundred million Chinese citizens have prospered very well under the iron fist of a devalued currency. Maybe he forgot about them. I have my doubts.

Dad29 said...

100 million in "prosperity"--have you tried to sell that line to the AFL-CIO?

capper said...


You're just cranky because he also picked on your little buddy P-Mac.