The Weiner Component Vol.2 #10 – The Fed: Saving the Country & the Future

English: Janet Yellen being sworn in by Fed Ch...

English: Janet Yellen being sworn in by Fed Chair Ben Bernanke (Photo credit: Wikipedia)

Ben Bernanke, the Federal Reserve Chairman from 2006 to 2014, had developed the Bernanke thesis based upon his conclusions about the reasons for the Great Depression of 1929.

 

Official portrait of Federal Reserve Chairman ...

He found that the financial disruptions of 1930 to 1933 reduced the efficiency of the credit allocation process. The Fed had raised interest rates and made borrowing money more expensive. This resulted in higher costs and reduced availability of credit, which acted to depress aggregate demand. When banks face a mild downturn they are likely to significantly cut back on lending and other risky ventures. This further hurts the economy and creates a vicious cycle turning a mild recession into a major depression. When the Federal Reserve did that it far worsened conditions during the 1929 Depression.

 

Or to state the above simply: fear of a depression can turn a mild recession into a giant depression. Seemingly this is what occurred again in 2008. It would seem that Ben Bernanke was in the right place at the right time. He was able to utilize his principles and bring about a softening of the 2008 Crash from a major depression into a Great Recession.

 

What he did was drop the interest rate that the Fed charges banks to 0 and in his last two years as Fed Chairman he added 80.5 billion dollars a month to the National Cash Flow.

********************************

There were two major problems that emerged from the 2008 Housing Disaster. One dealt with the billions of pieces of mortgage paper that the banks had created from the mortgages. Left to itself it would take decades for this problem to be resolved. No one really owned the mortgages that had been broken up into hundreds of pieces and applied to multitudinous Hedge Funds. There were not even real records of their existence. The assorted houses would eventually go to foreclosure for none payment of property taxes. And no one knew when that could occur for the majority of them. They then would or could be sold for the price of the back taxes. The deserted homes would go first, after three of so years. The others, several years after people stopped paying property taxes on them. It was an impossible mess.

 

The second problem was that there was not enough money in circulation and the banks did not consider home loans safe investments. Money had to be loosened up.

 

What Bernanke did during his last two years in office was to add 85 billion dollars a month to the economy, an additional 40 billion was deposited in the banks, causing them to loosen up with financing new homes and refinancing old ones and 45 billion was spent buying up the multitudinous mortgage pieces.

 

The program was ended in 2014 by reducing the amount spent each month until 0 was reached in both categories. In February 2014, when Janet Yellen became the new Chairperson in charge of the Federal Reserve, she spent the first two months of her four year tenure ending the program. She also gave herself the option of renewing the program if she and the Fed Board felt it was necessary.

 

The mortgage pieces were at some point or points destroyed by the Fed. The Federal Government did not want to go into the real estate business, it wanted to get rid of this quagmire that was hanging over real estate in the U.S. After a little over two years this problem largely disappeared. Two years after that when Donald J. Trump became President no one seemed to remember it.

 

In essence while the Federal Reserve spent about six trillion, three hundred billion dollars straightening out the mortgage debacle a good percentage of that money came back in taxes. It was spent within the country on goods and services indirectly creating jobs and increasing the GDP. The Government did not waste the money; they expanded a shrinking economy.

 

The same can be said for the 40 billion a month being deposited in banks across the country. The approximately five trillion six hundred million dollars spent here tended to loosen up the banking attitude toward housing and got that industry growing again. It also added positively to the economy. In addition it also did not stir up any real inflation in the economy. Neither policy did.

 

This was the application of the Bernanke economic principle. It prevented the economy of the United States from collapsing and similar actions did the same thing for foreign economies. This action also made use of money as a tool to keep countries functioning and avoiding major depressions. Money was no longer an object of value for governments. Each government could produce it at will. It now became a means that could be used to control economic conditions. This action became Bernanke’s contribution to the principles of economics.

*******************************

Janet Louise Yellen assumed office as the Chair of the Federal Reserve on February 3, 2014. She had been the Vice Chair from October 4, 2010 to February 3, 2014. Prior to that she was President of the Federal Reserve Bank of San Francisco from January 11, 2004 to October 4, 2010.

 

Dr. Yellen is married to George Akenlof, a Noble prize-winning economist who is a professor at Georgetown University. Their son, Robert Akenlof teaches economics at the University of Warwick.

 

During her nomination hearings on November 14, 2013 Janet Yellen defended the more than three trillion dollars in stimulus funds that the Fed had been injecting into the U.S. economy. She also testified that U.S. Monetary Policy would revert toward more traditional monetary policy once the economy returned to normal.

 

Yellen is the first woman to hold the position of Chairperson of the Federal Reserve. On December 16, 2015, with Yellen as Chairperson, the Federal Reserve raised its key interest rate from 0% to ¼ of one percent. Since that time the interest rate has been raised twice, each time by ¼ of one percent. It now stands at ¾ of one percent. It has been announced by the Fed that there will be additional increases over the year 2017.

 

My overall impression of the Chairlady is that she is very caucus in all her actions. She initially misinterpreted the overall effects of the 2008 Housing Debacle feeling that it would not be that serious. She doesn’t want to make another mistake.

 

While the cost of a non-existent or very low interest rate has kept the cost of borrowing money down and has led to a resurgence in home buying it has also kept down the cost of interest the banks pay their depositors from whom they get the funds to lend out. Banks have and are paying as little as 1/10 of one percent interest to many of their depositors. In essence interest that the banks pay to their depositors is so low that the financial institutions are just about getting their money for free.

********************************

After the Presidential Election in 2016 of Donald J. Trump to the presidency Dr. Yellen vowed to protect Dodd-Frank, the law that limited the actions of the banks that was passed after the Housing Debacle of 2008.

 

Trump had denounced Dodd-Frank, stating that he will do away with it. Trump has also stated that he will not reappoint Janet Yellen in 2018, when her current term ends.

 

Janet Yellen is a Keynesian economist and advocated the use of Monetary Policy in stabilizing the economic activity of the business cycle. She has also stated that occasionally letting inflation rise could be a “wise” and humane policy if it increases output. She has stated that each percentage point drop in inflation results in a 4.4% loss of the Gross Domestic Product (GDP).

*************************************

Dr. Janet Yellen’s term ends in 2018. It is then up to the President to reappoint her or to appoint someone else as Chair of the Federal Reserve. President Donald Trump, if he is still President and if he follows his pattern of appointments, will probably appoint a non-economist to that position. It might even be a banker. What will the result be both to the country and to the Federal Reserve?

The Weiner Component Vol.2 #10 – Part 9: The Fed: Saving the Country & the Future

 

Ben Bernanke, the Federal Reserve Chairman from 2006 to 2014, had developed the Bernanke thesis based upon his conclusions about the reasons for the Great Depression of 1929.

 

He found that the financial disruptions of 1930 to 1933 reduced the efficiency of the credit allocation process. The Fed had raised interest rates and made borrowing money more expensive. This resulted in higher costs and reduced availability of credit, which acted to depress aggregate demand. When banks face a mild downturn they are likely to significantly cut back on lending and other risky ventures. This further hurts the economy and creates a vicious cycle turning a mild recession into a major depression. When the Federal Reserve did that it far worsened conditions during the 1929 Depression.

 

Or to state the above simply: fear of a depression can turn a mild recession into a giant depression. Seemingly this is what occurred again in 2008. It would seem that Ben Bernanke was in the right place at the right time. He was able to utilize his principles and bring about a softening of the 2008 Crash from a major depression into a Great Recession.

 

What he did was drop the interest rate that the Fed charges banks to 0 and in his last two years as Fed Chairman he added 80.5 billion dollars a month to the National Cash Flow.

********************************

There were two major problems that emerged from the 2008 Housing Disaster. One dealt with the billions of pieces of mortgage paper that the banks had created from the mortgages. Left to itself it would take decades for this problem to be resolved. No one really owned the mortgages that had been broken up into hundreds of pieces and applied to multitudinous Hedge Funds. There were not even real records of their existence. The assorted houses would eventually go to foreclosure for none payment of property taxes. And no one knew when that could occur for the majority of them. They then would or could be sold for the price of the back taxes. The deserted homes would go first, after three of so years. The others, several years after people stopped paying property taxes on them. It was an impossible mess.

 

The second problem was that there was not enough money in circulation and the banks did not consider home loans safe investments. Money had to be loosened up.

 

What Bernanke did during his last two years in office was to add 85 billion dollars a month to the economy, an additional 40 billion was deposited in the banks, causing them to loosen up with financing new homes and refinancing old ones and 45 billion was spent buying up the multitudinous mortgage pieces.

 

The program was ended in 2014 by reducing the amount spent each month until 0 was reached in both categories. In February 2014, when Janet Yellen became the new Chairperson in charge of the Federal Reserve, she spent the first two months of her four year tenure ending the program. She also gave herself the option of renewing the program if she and the Fed Board felt it was necessary.

 

The mortgage pieces were at some point or points destroyed by the Fed. The Federal Government did not want to go into the real estate business, it wanted to get rid of this quagmire that was hanging over real estate in the U.S. After a little over two years this problem largely disappeared. Two years after that when Donald J. Trump became President no one seemed to remember it.

 

In essence while the Federal Reserve spent about six trillion, three hundred billion dollars straightening out the mortgage debacle a good percentage of that money came back in taxes. It was spent within the country on goods and services indirectly creating jobs and increasing the GDP. The Government did not waste the money; they expanded a shrinking economy.

 

The same can be said for the 40 billion a month being deposited in banks across the country. The approximately five trillion six hundred million dollars spent here tended to loosen up the banking attitude toward housing and got that industry growing again. It also added positively to the economy. In addition it also did not stir up any real inflation in the economy. Neither policy did.

 

This was the application of the Bernanke economic principle. It prevented the economy of the United States from collapsing and similar actions did the same thing for foreign economies. This action also made use of money as a tool to keep countries functioning and avoiding major depressions. Money was no longer an object of value for governments. Each government could produce it at will. It now became a means that could be used to control economic conditions. This action became Bernanke’s contribution to the principles of economics.

*******************************

Janet Louise Yellen assumed office as the Chair of the Federal Reserve on February 3, 2014. She had been the Vice Chair from October 4, 2010 to February 3, 2014. Prior to that she was President of the Federal Reserve Bank of San Francisco from January 11, 2004 to October 4, 2010.

 

Dr. Yellen is married to George Akenlof, a Noble prize-winning economist who is a professor at Georgetown University. Their son, Robert Akenlof teaches economics at the University of Warwick.

 

During her nomination hearings on November 14, 2013 Janet Yellen defended the more than three trillion dollars in stimulus funds that the Fed had been injecting into the U.S. economy. She also testified that U.S. Monetary Policy would revert toward more traditional monetary policy once the economy returned to normal.

 

Yellen is the first woman to hold the position of Chairperson of the Federal Reserve. On December 16, 2015, with Yellen as Chairperson, the Federal Reserve raised its key interest rate from 0% to ¼ of one percent. Since that time the interest rate has been raised twice, each time by ¼ of one percent. It now stands at ¾ of one percent. It has been announced by the Fed that there will be additional increases over the year 2017.

 

My overall impression of the Chairlady is that she is very caucus in all her actions. She initially misinterpreted the overall effects of the 2008 Housing Debacle feeling that it would not be that serious. She doesn’t want to make another mistake.

 

While the cost of a non-existent or very low interest rate has kept the cost of borrowing money down and has led to a resurgence in home buying it has also kept down the cost of interest the banks pay their depositors from whom they get the funds to lend out. Banks have and are paying as little as 1/10 of one percent interest to many of their depositors. In essence interest that the banks pay to their depositors is so low that the financial institutions are just about getting their money for free.

********************************

After the Presidential Election in 2016 of Donald J. Trump to the presidency Dr. Yellen vowed to protect Dodd-Frank, the law that limited the actions of the banks that was passed after the Housing Debacle of 2008.

 

Trump had denounced Dodd-Frank, stating that he will do away with it. Trump has also stated that he will not reappoint Janet Yellen in 2018, when her current term ends.

 

Janet Yellen is a Keynesian economist and advocated the use of Monetary Policy in stabilizing the economic activity of the business cycle. She has also stated that occasionally letting inflation rise could be a “wise” and humane policy if it increases output. She has stated that each percentage point drop in inflation results in a 4.4% loss of the Gross Domestic Product (GDP).

*************************************

Dr. Janet Yellen’s term ends in 2018. It is then up to the President to reappoint her or to appoint someone else as Chair of the Federal Reserve. President Donald Trump, if he is still President and if he follows his pattern of appointments, will probably appoint a non-economist to that position. It might even be a banker. What will the result be both to the country and to the Federal Reserve?

The Weiner Component Vol.2 #8 – The Federal Reserve During the Bernanke Years: 2006 – 2014

English: President Barack Obama confers with F...

English: President Barack Obama confers with Federal Reserve Chairman Ben Bernanke following their meeting at the White House. (Photo credit: Wikipedia)

In 1935, Cret designed the Seal of the Board o...

In 1935, Cret designed the Seal of the Board of Governors of the Federal Reserve System. (Photo credit: Wikipedia)

On January 31, 2006, Alan Greenspan retired or resigned as Chairman of the Federal Reserve and on February 1, 2006, Ben Bernanke became the new Chairman. He served two four year terms, initially being nominated by George W. Bush and being re-nominated the second time by President Barack Obama. Chairman Bernanke would find, among other things, the means to avoid a depression far greater than that of 1929. He would do this through the use of Creative Monetary Policy; that is, essentially by flooding the economy of the United States with money.

 

To understand in detail what he did one has to read his 2015 book, The Courage to Act. In this work he explained how the world’s economies came close to collapse in 2007 and 2008. Bernanke explained how it was the efforts of the Federal Reserve utilizing Monetary Policy and cooperating with other national agencies of the U.S. and agencies of foreign governments that prevented an economic catastrophe far greater than the Great Depression of 1929 which lasted for over ten years.

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Generally speaking: in 2008 the Housing Crash came. It had gradually been developing since the 1980s. While President George W. Bush and his Secretary of the Treasury, Hank Paulson, made large loans to banking houses to keep them from failing Bernanke bailed out AIG, the largest insurance company throughout the United States.

 

If AIG went bankrupt millions of people would have lost their insurance coverage and the premiums they had paid over the years. AIG had also insured some of the Hedge Funds that went under. They had wanted some of the profits that the banks were making from the Housing Market and their actuaries had no experience in dealing with Hedge Funds. I assume that Bernanke wanted to avoid the misery this would cause nationwide.

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It is important to keep in mind that the Federal Government under Presidents Bush and Obama were making loans to the banks, AIG and to the auto industry. These loans were repaid by all three groups with interest.

 

President Obama set a condition on the loans that Bush did not. That was to limit compensation packages for the executives of these struggling institutions. To the President it seem ridiculous that CEOs and other bank executives should continue to receive salaries of over a million dollars after bring the banking houses to the point of bankruptcy.

 

The CEO of the Bank of America complained bitterly about this. He wanted to pay off the Government loan quickly so the leading executives could go back to salaries in the multi-millions. Today in 2017, and for a number of prior years, their remunerations go from about four million up.

 

It should also be noted that the banks, taken together, have paid multimillions in fines for illegal practices. And no one has ever gone to jail but the banks have paid at times massive fines.

***************************************

The Housing Debacle and the increase in unemployment (up to 10%) that accompanied it should have been handled by both the Federal Reserve applying Monetary Policy and the Congress and the President applying Fiscal Policy, Congress passing spending bills and the President signing them. From 2011 on, when the Republicans gained control of the House of Representatives there were no Fiscal Policy Bills passed through Congress.

 

The year 2011 on was an ideal time to begin rebuilding the infrastructure of the United States. Most of the infrastructure had been built in the late 19th and the first half of the 20th Century. The population had practically doubled since then and a good part of the infrastructure of the country was well out of date.

 

The National Highway System had been built by President Eisenhower in the 1950s. By 2009 most of the airports, railroads, government buildings, the electric grid, many public schools, even the education system was/is grossly out of date. In fact, for what it’s worth, President Donald Trump has defined the infrastructure of the country as a “disaster.”

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After the bank bailouts the Obama Administration expected the banks to return to a reasonable level of what they had been doing before the crash. This did not happen. The banks became ultra conservative in their lending policy. People buying new homes had to have a fairly large percentage of the cost of the new home. Chairman Bernanke lowered the interest rate the Fed charges banks to 0% giving them free money.

 

From this point on in approximately 2010 the banking houses looked for new way to make profits with their funds. What they came up with, among other things, was the Futures Market.

 

Future Markets are exchanges that buy and sell future contracts. A future contract gives the buyer an obligation to purchase an asset and the seller an obligation to sell an asset at a set price which is to be delivered at a future point in time. The purchasers are interested in selling the asset the future time at a profit. They are often blamed for big price swings in the Futures Market.

 

The assets underlying future contracts include food commodities, stocks and bonds, grain, precious metals, electricity, oil, beef, orange juice and natural gas to name a few. They are bets that the price of the product at the eventual delivery price will far exceed the earlier purchase price.

 

It can be assumed that the rise in food and gasoline prices after 2010 exceeded what they would have been if the banks had not been involved. In essence the banks exploited the general homeowner up until 2008 and from 2010 on they exploited the general public whose tax dollars had bailed them out of the economic disaster which they had caused in their perennial search for more and more profits.

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In the year 2010 the American public elected a Republican majority to the House of Representatives. With their ascension to the House in 2011 all possibilities of Fiscal Policy Bills ceased. The Republicans wanted to reduce government spending and make President Obama a one term president by not allowing him to succeed in anything. In fact what the House of Representatives did was to worsen the Housing Debacle by reducing, forcibly at the time, government spending. They even shut the government down by not funding it.

 

President Obama offered an Infrastructure Bill that never even came up in the House of Representatives. The fact that President Obama and Chairman Bernanke were able to turn the Housing Crash and limit initial unemployment to only 10% with actual opposition from the Republican House of Representatives was itself miraculous. What the Fed and the President did was to turn a possible depression into the Great Recession. Even though economic conditions were far from ideal this was truly an act of wonderment.

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What happened with the Housing Crash was a situation that looked like it might take decades to straighten out. Virtually overnight the value of homes deflated at the speed of an exploding balloon. Many people who had financed and refinanced their property more than once suddenly discovered that they were underwater, that is, that they owed more on their homes than they were worth. A percentage of these people just walked away from their property, leaving it deserted.

 

This raised an interesting problem both for these properties and for those in which the people continued living. Who owned these mortgages? Remember the mortgages had been divided up into innumerable fractional pieces. In order to control any one of these property mortgages one needed to own over 50% of it. No Hedge Fund owned that much of any one property. The records of mortgage ownership were highly inaccurate. Consequently in point of fact no one really owned these properties.

 

Most of the banks that had been charging endless fees to administer these mortgage loans felt that they could foreclose on these properties, either because they were deserted empty houses or because the inhabitants could, for one reason or another, no longer afford to make their monthly payments. A goodly number of these people had lost their jobs.

 

The banks used their computers to generate the needed documents since no real records of ownership existed. The banks had earlier been in too great a hurry to generate loans than to keep accurate records.

 

Some of these cases went to court and initially the judges felt that a solid institution like a bank would do nothing illegal. Some of the attorneys who made this point were declared to be in “contempt,” and were disbarred. Eventually after a large number of cases were determined in favor of the banks the evidence of their wrongdoing was acknowledged by the Courts. Whether the disbarred lawyers got their licenses back I don’t know, but the banks were severely fined for wrongdoing and the illegal foreclosing ended leaving a lot of people living in homes for which they were not paying.

 

The problem was left up in the air. As long as the people living in these homes paid their property taxes no one could legally disposes them even if they never made another house payment on the mortgage. Most of the Hedge Funds had gone bankrupt; they didn’t own enough of any property to foreclose on it. Of course no one knew which properties these were and which actually had owners of the mortgages. Some of the banks had owned some of the Hedge Funds.

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What generally happened across the nation from that point in time on was interesting. Numerous individuals, generally not being employed, no longer paid their mortgages. If they were reemployed or eventually got a job they still did not make payments. Why bother? No one had foreclosed on them. In essence these people now had extra cash which they tended to spend. Suddenly, among other things, eating out with their families became very popular. A good part of their housing funds were being spent. The National Cash Flow or the amount of money available in the general society increased with all this spending and it helped keep the level of national unemployment to no higher than ten percent. This was an interesting irony that was initially funded by the banks but ultimately payed by the taxpayers in the bail outs.

 

Had the House and Senate passed the Infrastructure Bill that President Barack Obama suggested then the overall effects of the Great Recession would have disappeared by the end of his first term in office and the country would have dropped to a 2 ½ percent unemployment level which is considered full employment because it is the rate generated by people normally retiring, changing jobs, and first entering employment.

 

The result would have been more taxes being paid which would have largely offset the increased government spending. But the Republicans dominated House of Representatives was penny smart and dollar stupid. By forcing down government expenditure they also cut down the Gross National Product (GDP) and shrank taxable income throughout the United States, keeping unemployment higher.

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On August 25, 2009, President Barack Obama announced he would nominate Bernanke to a second term as the Chairman of the Federal Reserve. He stated, with Ben Bernanke standing at his side that Bernanke’s background, temperament, courage and creativity helped to prevent another Great Depression in 2008.

The Weiner Component Vol.2 #6 – Part 3: The Purpose of the Federal Reserve

The title page to Keynes' General Theory.

Unemployment rate in the US 1910–1960, with th...

Unemployment rate in the US 1910–1960, with the years of the Great Depression (1929–1939) highlighted. (Photo credit: Wikipedia)

The Federal Reserve was established on December 23, 1913. Its major mission was to avoid panics or major recessions in the future. It would at that time do this by being able to move money quickly anywhere throughout the National Economy. In essence since the nation functioned through its banking system the new Fed would protect its financial institutions from runs or panics where the depositors could all withdraw their funds, generally following a rumor that the bank was on the edge of failing.

 

In addition the United States economy had/has systematically gone through regular business cycles of recession, slump or depression, recovery, and boom. Invariably each of these stages of the economy leads to the next stage. During a boom period overproduction is invariably reached, workers are laid off, there is less income available, which accelerates the recession. This, in turn leads to a trough or low economic point which can be a depression with high unemployment. Eventually there is a shortage of goods and the amount of money being spent in the National Cash Flow increases; people are hired; there is more and more money available and recovery begins, continuing until a peak or production boom is reached again. The duration of the cycles can and do vary, going from less than a year to over ten years as the Great Depression did from 1929 to 1940. It was ended by World War II. These depressions can be regional or they can cover the entire nation, if not the world, as it did in 1929. They generally last between the two periods given above.

 

In simple terms this is the economic pattern of every industrial nation. Does it have to continue? That’s an interesting question. The probability is that it can be controlled by the Central Government’s actions.

 

In 1929 the science of economics was generally not understood well enough to determine exactly or why the depression was happening. In 2008 when the country had what is now called the Great Recession, enough was understood to avoid a greater depression than that of 1929. This depression was avoided by actions of the Federal Government.

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Even today economists disagree as to what caused the Great Depression and how it should have been dealt with. There are numerous theories. Probably The Keynesian theory is the most accepted. Keynesian economics deal with the various theories about how in the short run, mainly during recessions, economic output is strongly influence by aggregate demand or total spending. Aggregate demand does not necessarily equal the productive capacity of the economy. Instead it is influenced by a host of factors that can behave erratically, affecting production, employment, and inflation.

 

Keynes theories were first presented during the Great Depression in his 1936 book, The General Theory of Employment, Interest, and Money. Keynes’ approach contrasted with classical economics. Keynesian economists believe that the private sector’s decisions sometimes lead to inefficient economic outcomes which require active policy responses by the public sector (government). It is a combination of the two that stabilize output with the government exercising control over the private sector. Monetary policy actions are needed at times by the Central Bank and fiscal policy actions (Government spending.) in order to stabilize output over the business cycle. Consequently Keynesian economics requires a mixed economy, predominantly private sector with a strong role for government interventions during recessions and depressions.

 

Traditional or classical economics as developed by Adam Smith in his 1776 book, An Enquiry Into The Wealth of Nations, set the Market making all the societal decisions. The motivating force, according to Smith was the “invisible hand,” the profit system. Adam Smith was responding to an economic system called mercantilism, where gold was considered the basic wealth of the nation and the economic decisions were being made by the kings of the various countries.

 

John Maynard Keynes during the world economic disaster called the Great Depression was questioning the validity of this system, saying what was needed to solve this problem was a combination of private enterprise balanced by state control of the marketplace. To him unfettered classical economics had brought about the Great Depression.

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The actual causes of the 1929 Great Depression have been extensively discussed by economists and remains a matter of intense debate. In fact they are part of the larger debate about economic causes. The economic events that took place at that time have been studied thoroughly: a deflation in assets and commodity prices, dramatic drops in demand and credit, disruption of trade, widespread unemployment, over 13 million by 1932 the lowest point of the economic decline, and hectic poverty.

 

There is no consensus as to overall causes other than it started with the initial stock market crash that began on Black Tuesday, October 29, 1929 when panic selling of securities led to a continued dropping of value of the securities until the end of 1932 when it reached its lowest point. The Crash triggered the depression which had reached a high level of deteriorating economic conditions such as rising unemployment, over production, a totally unequal distribution of incomes, under consumption, and extremely high debt.

 

Both the stock market and the economy would slowly improve after 1933 with the new President, Franklin D. Roosevelt. It would rise to new heights after 1939 with the outbreak of World War II in Europe. The stock market and the economy would rise to new heights with a massive infusion of money for goods and services within the United States. War will have brought about its end within the U.S. It is interesting to note that it was the money spent during the war, first by European and Asian nations, then after December 7, 1941 also by the United States that specifically ended the Great Depression.

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Once the Great Depression had started there were massive mistakes made by the Federal Reserve. The Fed actually caused a shrinkage of the money supply and greatly exacerbated the economic situation. Deflation caused people and businesses to owe ever increasing amounts upon money they borrowed actually shrinking the money supply in the U.S. by about 1/3.

 

With the election of Franklin D. Roosevelt to the presidency in 1932 a form of Keynesian economics became the policy of the President from 1933 on when he assumed power. Roosevelt’s policy was the “3 R’s: Relief, Recovery and Reform.” This comprised Roosevelt’s “New Deal;” his attack upon the Great Depression, which essentially lasted from 1933 to about 1938. The Federal Government put itself in a position to help turn the country around. It brought about great improvement but not a complete end to the Great Depression.

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Toward the end of 2007 in the last year of the George W. Bush’s Presidency what is generally called the Great Recession began. The Housing Market in the United States collapsed. A great many people had been using their home as bank or checking accounts generally from the 1980s on, constantly refinancing their home and taking their equity out as property values continually increased. People bought the toys they always wanted: new cars, fancy trucks, boats, expensive vacations; just about anything they felt was desirable.

 

This had been going on for about thirty years, the entire career of many people in banking had taken place during this period. Housing loans or second mortgages were divided into miniscule fractions, put into a multitude of different Hedge Funds and sold to the general public as safe interest paying loans. The process brought the value of the home loans up millions, if not billions of dollars. The banks were earning large amounts in fees as the demand for loans actually forced up the value of the homes. By 2007 the end had been reached, property values had been raised beyond the point of sanity. The bankers were in denial that conditions could possibly change. Some banks were lending out 125% of the appraised value of the properties, working on the premise the housing values would rise endlessly.

 

The economic collapse began during the second week of March, 2008. It tended to be worldwide. In the United States, on Tuesday, with the encouragement of the President, George W. Bush and the Secretary of the Treasury, Hank Paulson, the Chairman of the Federal Reserve, Ben Bernanke injected $236 billion dollars into the American banking system. Citigroup, the world’s largest bank spent one billion dollars bailing out six of its hedge funds. Lehman Brothers, America’s fourth largest bank went under. AIG, the world’s largest insurance company, had moved into the business of insuring leveraged debt right at the time when the financial system was at the point of collapse. When the Housing Bubble burst Ben Bernanke, as chairman of the Fed, announced an $85 billion loan for them. Hank Paulson, the Secretary of the Treasury proposed buying up hundreds of billions of dollars’ worth of toxic assets.

 

With the accession of Barack Obama on January 20, 2009 as President of the United States that country and the rest of the Industrial Nations continued to hover on the point of economic collapse. This would have occurred if the governments had not interceded with masses of cash. They prevented, using taxpayer money, a depression that would have made the Great Depression of 1929 look like a weekend holiday. It would have been the total collapse of the banking systems which, in essence, run the economies of all those nations.

 

(Interestingly Donald Trump’s administration wants to do away with all the regulation in the U.S. which came about to avoid a repeat of this situation. Memories are short!)

 

President Barack Obama continued the bailout, saving the banks from their own stupidities, and he added the American automobile industry which was also on the point of total collapse. The governments of the various countries spent a lot of money saving their economies and returning the world to economic sanity.

 

Recently President Donald Trump commented in one of his speeches that President Barack Obama increased the National Debt more than any other prior President. He did so cleaning up the financial messes that they had helped to create.

 

We have passed beyond Keynesian economics to the point where the Free Market is today a farce. The governments of the United States and of the other industrial nations have assumed responsibility for the welfare of both the rich and the poor within their societies. How long will it take for the populations to understand this?

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In the United States and in most industrial nation there are groups that want to return to the good old days. Whatever they were. Everything is changing. The 21st Century will be completely different from the 20th Century.

 

It should also be noted that it was the Federal Reserve, under Chairman Ben Bernanke, who used creative Monetary Policy in a period of a little over 24 months, with strong encouragement from President Obama, to buy up the toxic mortgage pieces throughout the United States at the rate of 45 billion dollars’ worth a month and also he added another 40 billion dollars a month directly to the National Cash Flow.

 

The Republican dominated House of Representatives from 2011 on did nothing to help the situation. They should have applied Fiscal Policy, creating jobs by spending money on infrastructure modernization. Instead they tended to cut government spending and worsen the Great Recession. Mitch McConnell, the Republican majority leader in the Senate, announced that they would make Obama a one term president by not cooperating with him on anything. To them no price was too high in order to make Obama a one term president. Somehow the needs of the American people were lost.

 

It was the Federal Reserve and the President who saved the country from falling into the worst depression in its history. The Republicans, once they got control of the House of Representatives, refused to pass anything that would make President Obama look good. This was true even if it had a negative effect on the country and hurt the majority of its citizens. President Obama offered a Bill that would engender spending on our decaying infrastructure. It did not even come up for discussion in the House of Representatives.

The Weiner Component #162 – The Presidential Election Conventions: Part 1: The Republican Convention

The candidates for the 2016 Presidential Elections have been chosen.  The National Party Conventions are over; the balloons have all been dropped and the candidates are officially named.

 

The Republicans met in the second week of July 2016 in Cleveland, Ohio; the Democrats convened in the third week of that month in Philadelphia, Pennsylvania.  Not surprisingly the Republicans chose Donald J. Trump and the Democrats picked Hillary Rodham Clinton.

 

Donald Trump and the Republicans tended at their Convention to present a dark picture of the United States being taken advantage of by both its allies and its enemies.  The Convention lacked major politicians like the two living former presidents, the Bushes, both father and son, or other political figures.  Minor TV reality performers and some actors made presentations to the Convention.  Trump seemed to be stage-managing on all four nights.  The House Speaker, Paul Ryan, and the majority leader of the Senate, Mitch McConnell, both gave conditional support to Donald Trump, stating essentially that given the choice, Trump was better than Hillary Clinton, who the Convention strongly verbally attacked from the first day on.  In fact one of the main themes at the Convention was denouncing Hillary Clinton and voicing a need to put her into jail or even executing her.

 

As the last speaker, on the first night, Trump had his wife, Melania, make a presentation.  She, in her speech, plagiarized statements that Michelle Obama had made in 2008.  It seemed that two professional speech writers had written a speech for Melania but she was uncomfortable with it and decided to write her own with the help of a friend who had helped Trump write one of his books.  The woman researched prior speeches for her and Melania produced her own presentation which no one saw beforehand.  She gave the speech and the plagiarism was almost immediately discovered and discussed on all the TV networks that covered the Convention.  In fact they played Melania saying that part of her speech on half the screen and Michelle Obama initially saying those words on the other half of the screen.

 

Melania did not reappear until the fourth night at the Convention.  The woman, who had helped her offered to resign.  Trump told her to forget it.  He initially denied that there had been any plagiarism.  It also helped to set a grim note to the overall Convention.

 

Still the four days which were supposed to set Trump up as the greatest individual possible as the next president but instead the Convention set up a grim tone about America as a country that had lost its prominence in the world, currently being taken advantage of by both its friends and enemies and run by a failed president.  It was a dark and dismal version, low on facts and rich in generalities.  Trump would be the savior of the United States.  He and he alone could save the country from where it presently was.

 

He strongly made the point that if Hillary Clinton were elected she would continue the “failed” policies of Barack Obama.

 

I found it interesting that the presidency of George W. Bush was never mentioned.  It was as though he never existed.  Presumably the country went from the time of William Jefferson Clinton to that of Barack Obama and nothing that had happened in those 16 years was positive, had helped the people in the United States in any way.

 

In 2009, when Barack Obama became President of the United States, he inherited from former President George W. Bush an economic calamity later called the Great Recession.  It was the complete collapse of the Housing Industry in the United States, which was at the point of taking down virtually all the major banking houses in the U.S. and Europe.  Had it occurred the industrial nations would have faced a depression greater than the 1929 Great Depression.  It would have totally destroyed banking in the United States and slowed the flow of money to a trickle.  Unemployment would have gone well over 50% of the work force.  And the probability is that we would still be there today.  In fact Trump’s hotel business would, among many other businesses, have probably gone under.

 

The Obama Administration saved the banks by lending them billions of dollars.  It also saved the American automobile industry by similar lending policies that kept them from going bankrupt.  And with the Federal Reserve the Obama Administration largely solved the housing crisis by purchasing and then discarding the millions of mortgage loan pieces which the banks had sold as hedge funds.

 

During his first two years in office President Obama had a Democratic majority in both Houses of Congress and was able to get the necessary legislation passed to do this.  In addition they brought Affordable Health Care (Obamacare) into existence.  After 2011 the Republicans by gerrymandering gained control of the House of Representatives and Obama was no longer able to get any legislation passed.  In fact under Ted Cruz’s leadership the House of Representatives closed down the government by refusing to pass the appropriate funding bills necessary to keep it functioning.  All this in attempts to force Obama to sign bills that they wanted, like doing away with Affordable Health Care or defunding Planned Parenthood.  They were successful in getting some things through, like Sequestration which attempted to bring across the board spending cuts.

 

One of the Republican goals was to reduce government spending by shrinking the Federal Government.  In a manner of speaking they were “penny wise and dollar stupid.”  By reducing the size of government during a period of Great Recession they helped worsen the unemployment situation in the country.  In addition to decreasing the number of Federal jobs they also cut the amounts of monies they sent to the states, thus causing the states to also cut their payrolls.  Not a clever thing to do during a period of depression.

 

During the Republican Convention President Barack Obama was charged with not passing the necessary laws to keep the country healthy.  The Republicans blamed him for what they themselves had not done.

 

In 2008, even before Obama took the oath of office, the Republican legislators from both Houses of Congress met in a two House caucus and all took an oath to make Barack Obama a one term president by not supporting any measure or program he put forth; and that is what they did.  The Republicans placed their political aims over what was necessary for the people of the United States.  They all ignored their oath of office for the next four years and beyond.

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The Republicans met in their National Convention between Monday and Thursday, July 18 and 21 at the Quicken loans Arena in Cleveland, Ohio.  While Donald J. Trump was the clear winner of the state primary elections and caucuses there was some doubt among many Republicans whether he should be their candidate for the presidency.  The movement, however, failed and Donald Trump became the 2016 Republican candidate for the presidency of the United States.

 

A number of prominent Republicans announced that they would not be attending the Convention.  Among these were the former Republican presidents and many prominent Republican Congressmen, including John Kasich, the governor of Ohio, and Marco Rubio, who had run against him as presumptive Presidential Candidates.  Six major companies withdrew their financial support of the Convention.

 

The Platform Committee tended to move to the far right.  They came down on LGBT, taking a strict traditional view of social issues and ignoring Supreme Court decisions.  The Committee supported marriage between a man and a woman only, proposing a Constitutional amendment to bring this about.  They opposed abortion in every case.  They called for the appointment of only conservative judges who respected family values.  They wanted federal lands turned over to states so they could be privatized.  In foreign policy they were national security hawks, wanting increased military spending, a more isolationist approach, and called for a wall between the U.S. and Mexico.

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On Monday, July 18th the Convention began with a voice vote to accept the platform with a loud protest from the anti-Trump opponents who wanted a roll call vote.  Donald J. Trump was nominated and won the presidential nomination on the first ballot with 69.8% of the delegates.  The Vice Presidential ballot was held immediately afterwards, choosing Indiana Governor Mike Pence.  Pence won by acclamation.

 

Trump had earlier vowed to bring showbiz pizazz to the 2016 Convention.  He stated that the 2012 one was boring.  Many of his speakers were minor or has-been figures: Don King, former Alaska governor, Sarah Palin and Tom Brady, a New England Patriots quarterback and other equally unknown or dimly remembered individuals.  Many prominent Republicans refused to attend the Convention.  Ted Cruz addressed the Convention but did not endorse Trump.  Marco Rubio finally released his 173 delegates to Trump and spoke via a short recorded video.

 

Some of Trump’s adult children spoke on different days telling how wonderful their father was.  Paul Ryan, the Speaker of the House of Representatives spoke on Tuesday giving Trump a limited almost negative endorsement; saying he was better than Clinton.  Mitch McConnell, the Republican majority leader of the Senate, did the same thing.  Both would later object to Trump’s criticism of the Gold Star Muslim Khan family.  Gold Star families are those who have lost a parent or child in the current wars in which the U.S. is currently involved.

 

On Wednesday the main speaker was Mike Pence accepting the Vice Presidential candidacy.  But Ted Cruz stole the spotlight by giving a rousing Republican speech which ended with him asking the Republicans to vote their consciences.  He did not endorse Trump.

 

Also on that night Chris Christy, the governor of New Jersey, gave a speech that was a mock trial of the Democratic candidate, Hillary Clinton, in which the entire Convention served as the jury and he was judge and prosecutor.  Naturally they voted her guilty on every count.

 

I found this approach interesting because Christie may well have brought about the Bridgegate Case in his own state where traffic on the George Washington Bridge was purposely slowed to a crawl and Christie was either directly or indirectly involved.  That case is still slowly winding its way through the New Jersey courts and Chris Christie could conceivably be criminally charged before it’s over.

 

The highpoint of the Convention was Donald Trump’s final speech where he formally accepted the Republican position of candidate for the presidency of the United States.  Trump’s older daughter, Ivanka, introduced her father.  Trump spoke for 75 minutes; one of the longest acceptance speeches ever given at a nominating convention.  He emphasized the crisis the country was facing by attacks on the police and terrorist assaults in our cities, stating that he was the “law and order” candidate.  He promised to limit U.S. participation in global crises and to renegotiate international trade deals.  He continually attacked President Obama and Hillary Clinton, stating that the world had become less safe during their time in office.

 

Going back to Franklin D. Roosevelt’s “forgotten man,” a term that Trump used, he offered, in addition, to support both Bernie Sanders’ supporters and those who were “down and out” by being their voice in Washington, D.C.

 

The speech had tones of the technique Hitler used in Germany in the 1930s.  It assumed powers for the leader that are not present in the Constitution.  Donald Trump presented an image of current gloom, saying that he was the agent of positive change while Clinton would continue, what he called, Obama’s failed presidency.

 

With the dropping of the red, white, and blue balloons the Republican Convention ended and Trump went on to campaign for the presidency.

 

As a sort of addendum or footnote on Donald Trump and his daughter, Ivanka, it should be noted that in her introduction of her father while she spoke of him bringing manufacturing jobs back to the U.S. and other commendable things he will achieve as president she was wearing (or modeling) a dress which her company produced overseas in an Asian country like Vietnam where labor costs are very low compared to the United States.  I suppose one could argue that those jobs wouldn’t have to be brought back to America because they never existed there.  Therefore they could stay overseas.  Her company sells many millions of dollars’ worth of clothing every year.

 

It would seem that Donald Trump believes in projecting all his personal negative features onto his opponents.  He has had well over 2,500 lawsuits and out of court settlements so far in his lifetime, going from not paying taxes to New Jersey for his Taj Mahal Casino, where the state settled for seventeen cents on the dollar, after Chris Christie became governor, to not paying overtime to his employees, to not paying his bills or fully paying off his construction contracts, to innumerable other negative treatment of people, both employees and nonemployees.  The probability is that if he wasn’t rich and had a large number of lawyers working for him he could well be in jail instead of running for the presidency.  While he call Clinton “Crooked Hillary” she could easily call him “Disreputable Donald” or, since he seems to be a pathological liar, she could easily dub him as “Lying Donald.”