Fed sends huge signal to markets, Bush, Congress

Just two weeks ago Johnny D, Terry, Pillow, and others were telling "Lefty Loons" that the economy was great and getting better. Welcome to the Bush economy my friends, all smoke, mirrors and lies. John McCain approved of the direction the Bush Administration took this country. Don't forget that when you go into the voting booth.

At this point..it seems to have helped. The market went to -425 in about 15 minutes. Now it is back around -150. Scary times, except for people like John D who says the economy is just fine from where he lives. How's that 401k John?

I think now is a good time to remind all of our Republic friends who thought that Shrub's plan to privatize Social Security was such a great idea. In case anyone is watching, the market is down over 5% for the year to date. If you had to start drawing down your new 'privatized' social security, it wouldn't be quite so secure, would it?

My point remains: Social Security is a great program because it is immune from market fluctuations. It is supposed to be 1 leg of a 3 legged retirement stool consisting of SS, private pension and 401k. With pensions disappearing, and the market gyrating, having a steady source like Social Security is very comforting.

The huge signal is that we don't know what we're doing, but we've got to do something.

I think now is a good time to remind all of our Republic friends who thought that Shrub's plan to privatize Social Security was such a great idea. In case anyone is watching, the market is down over 5% for the year to date. If you had to start drawing down your new 'privatized' social security, it wouldn't be quite so secure, would it?

My point remains: Social Security is a great program because it is immune from market fluctuations. It is supposed to be 1 leg of a 3 legged retirement stool consisting of SS, private pension and 401k. With pensions disappearing, and the market gyrating, having a steady source like Social Security is very comforting.

Posted by: weinerdog43 | January 22, 2008 11:12 AM

Remind Repubs???? Your point is lost when you say SS a comforting, steady source of income..

DJIA is up + 4000 points in the last 5 years. IF you base your retiremnent decsions on what happened in the last year - you would not OPT for the 401K option that was proposed. have you ever heard of dollar cost averaging or even the concept of their being buying opportunities in this type of market...?

Your said- "..Social Security is a great program because it is immune from market fluctuations...."

SS is not immunue from market fluctuations- inflation being the biggest impacter to SS income- inflation is impacted by changes in the overall market.

Privatizing SS is the only real long term solution- leaving such an important decision ( my retirement) in the hands of government is way scarier then the market adjustment we are going through now...

Debunking the Reagan Myth (and Terry Trickle-Down), again:

http://www.nytimes.com/2008/01/21/opinion/21krugman.html?em&ex=1201150800&en=a3be598123508bda&ei=5087%0A

Privatizing SS is the only real long term solution- leaving such an important decision ( my retirement) in the hands of government is way scarier then the market adjustment we are going through now...

Posted by: heartburn | January 22, 2008 11:42 AM

I'm sure those who trusted their retirement to Enron would have a different opinion. At least there's a chance (though increasingly small) of oversight and accountability with the government.

FOR CHRIST'S SAKE HEARTBURN and WEINERDOG43,
Social Security is not a retirement savings plan. It is pooled risk insurance to prevent retiring in complete and total poverty and gives a source of income to those declared completely disabled.

PS Heartburn, I'm 35 and I've banked $42K in my personal privatized Soc Sec account. How am I supposed to survive on that if I get in a horrible accident tomorrow that permanently disables me? I'm a male so my life expectancy is approx 35-40 using todays standards. How can I eat and pay my mortgage or rent and cloth myself, and pay bills on your wonderful idea to completely privatize SS?

Still treating us like mushrooms, eh?

Still regurgitating the same old;

"The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully".

We all know why inflation has gone out of the ball park. We all know why the world economy is crashing.

Our honorable elected officials have been lying to us for years about:

1. The national debt.
2. The labor statistics.
3. The GDP
4. The effect of making money endlessly (M3, ya know? They don't even report it any more.
5. The consumer price index
6. Restraint of trade.
7. Price fixing
8. Violations of anti- trust.
9. Special interest groups
10. Lobbying.
11. Collusion.
12. The Auto/Oil Cartel.

Democracy without morality will not work.

Presidential candidates, what do you intend to do about this????

We need to know, REAL REAL soon.

"DJIA is up + 4000 points in the last 5 years"

Yes, but it is also true that the DJIA is up less that 200 points in the last eight years. Eight years showing less than 2% total growth. Impressive.

O.K., selfish, greedy, Repubdicks, you broke it, step up to the plate and fix it:

http://www.slate.com/id/2182353

Privatizing SS is the only real long term solution- leaving such an important decision ( my retirement) in the hands of government is way scarier then the market adjustment we are going through now...

Posted by: heartburn | January 22, 2008 11:42 AM

You act as if you are forbidden to invest and/or save for retirement because of social security's existence. It's supposed to supplement your own retirement fund.
Rejoice! You can pick up some good bargains today.

I guess we borrow our way out of this one without paying for the last one yet?

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

❤burn,

You aren't supposed to be relying on SS for your retirement, just a supplement. You should have other pensions, and private savings/investments as well.

You act as if you are forbidden to invest and/or save for retirement because of social security's existence. It's supposed to supplement your own retirement fund.
Rejoice! You can pick up some good bargains today.

Posted by: chimpymcflightsuit'snavigator | January 22, 2008 12:18 PM

I agree it is a supplement-but to look at the recent slump and use this to support all the "comforts" of SS managed by the government does not make sense..

Actually Heartburn, "market" risk and "inflation" risk are 2 different things. So ss is not directly subjected to "market" risk, but does carry "inflation" risk.

But simple cost adjustments performed on a reg basis by the feds to increrase ss funding is what's best. SS is only meant to be a very basic safety-net.

Like insurance products, ss is a "collective" risk pool. If someone who has the same insurance as you gets in an accident, the payment of the claim comes partly from the premium "you" paid into the insurance, not just the individual who had the accident.

SS was meant to work in a similar way.

And even if SS was opened up to individual investing. Who decides what company gets it or who the fund adviser is? The feds.

Are you suggesting there be a portfolio of funds to choose from on the tax form? The gov't would still determine what company get's to hold your funds.

I think there are a lot of questions and risks "private ss" proponents have not thought about.

"Rejoice! You can pick up some good bargains today."

Exactly. Heaven help those that rely only upon SS as their sole means of retirement. I picked this thread to remind folks that Social Security is a SAFETY NET. If you privatize it, you no longer have the safety part. It is a constant struggle to debunk stupid Republic talking points on this.

Heartburn: The stupidity...it burns.

http://www.socsec.org/publications.asp?pubid=507

Because I want to have a decent retirement, I'm heavily invested in not only the market, but also bonds, IRAs, etc... Jethro, please re-read my original post.

David J,

What they really mean by 'privatize' is 'eliminate entirely'.

Oversight and accountability from the government? Have any of these people ever gone to the DMV or the Post Office? Give me the free market, anyday. At least we know what the risks are with it. With SS all we really know is that the trust fund will raided for pet projects at some point.

Jeff,
I have never had a problem at the DMV or the Post Office.

Could your 'personality' have something to do with your problems re. authority?

You would have been funny in the Army!

You would have been funny in the Army!

Posted by: The Lenin Sisters | January 22, 2008 1:59 PM

Young Jeff/Bill still can join the military, but alas this chickenhawk, "let them surge for 100 years", has other priorities.

As if republicans' lies weren't already obvious, what are they going to campaign on now? The economy's great after six years of republican blundering has brought us to this abyss?

Good luck come November. Don't plan any speeches, just your own obituaries.

The Lenin Sisters have never had a problem at the DMV or Post Office. Sure. They say lies like that and then they're criticizing my charm and personality? Please.

But it's really not just me, pinkos. Time to open up those socialist ears and eyes, sisters, this is what Chicago postal system customers have been dealing with for about the last decade:
http://cbs2chicago.com/topstories/U.S.Postal.2.338906.html

Paraphrased for your limited reading comprehension, sisters:

"According to the agency's most recent audit, mail delivery in city ZIP codes remains the nation's worst."

"Chicago and a good number of its inner suburbs still have the country's worst performance scores for overnight mail delivery, according to U.S. Postal Service figures released Monday, Nov. 20" (via WBBM-AM Chicago)

Gosh, sisters, I sure hope they lose some of your packages or items. I'd love to watch your sparkling personalities deal with them.

Hey Look, here's a whole blog on the mess that is Chicago mail service! Remember, the Lenin Sisters have "never had a problem with it." Must be their sparkling personalities, eh?

http://blogs.suntimes.com/neighborhoods/2007/11/chicago_mail_is_still_the_wors.html

Here's a typical post by "southside girl" about our wonderful, socialized mail service. And to think these same people want to manage our healthcare:

When I lived in Naperville, I used to have to trek all the way down Ogden Ave. about 6 miles to go to the Lisle PO where service was what you would expect of the USPS on a semi-bad day. I used to think it was just me or just my address being abused until I happened upon postal worker Patti at the Lisle PO who used to be my mail carrier in Hinsdale where I had my business. She claimed no, there was a problem and reached her hand under the counter to produce immediately and without even looking down, a complaint form to fill out and return to the USPS headquarters. I filled it out. Nothing happened. I continued to go to the Lisle PO. While in line I would catch up with my neibhors and friends who were also avoiding the worse than awful mail service in Naperville.
Oh, how I long for those days!
I went from the frying pan into the fire by moving to chicago a few years ago. So Congratulations to the Wicker Park 60622 post office for being by far, the absolute worst post office in the world! Forget waiting in line there. You will absolutely waste 80 precious minutes (this is not an exageration) of your short life for seemingly, unanswerably no reason. I have to say it is a sight to behold watching the first-time unsuspecting customers having unwittingly wondered in expecting service, twist and flail as they try to comprehend why the line does not move as they watch the glacially slow mail personnel take their sweet time doing whatever it is they do. Once in a while, one will break line and go pound on the counter for service only to be impressively ignored by the USPS personnel guy who's work station AT the counter is no more than 2 feet from the irate customer... or worse, listening to the 60622 PO personnel hiding behind the partition wall making comments and laughing at the frustration of the pounder as if no one can hear! That is a real Chicago experience.
I have actually lost count of how many packages, letters and OVERNIGHT packages show up months later or have been ripped open (contents missing) if they do actually make it to my address. I have people tell me "oh I sent that to you months ago. Didn't you get it?". The answer is always, sadly, no.
My husband and I have decided to move away from Chicago. The mail isn't the only factor but unfortunately for us, our business relies on it much of the time.

Jeff, you're a great capitalist. I applaud you in your fight against the socialist menance.

But we must not stop at the Post Office. We must get to the heart of the socialist attack on freedom and American Values: The Fire Department.

The Fire Department is the most monstrously conceived and dangerous communist plot we have ever had to face. Look at them Jeff, taking away the profit for putting out fires. Do you know how much money corporations could make putting out fires Jeff?

Think the Firemen aren't Commies? Well just ask yourself, what color truck do the Firemen drive around our cities in?

Red, Jeff Red.

Every time you see a fire truck it's a giant symbol of the creeping socialist menace!

Jeff, you're a great capitalist. I applaud you in your fight against the socialist menance.

But we must not stop at the Post Office. We must get to the heart of the socialist attack on freedom and American Values: The Fire Department.

The Fire Department is the most monstrously conceived and dangerous communist plot we have ever had to face. Look at them Jeff, taking away the profit for putting out fires. Do you know how much money corporations could make putting out fires Jeff?

Think the Firemen aren't Commies? Well just ask yourself, what color truck do the Firemen drive around our cities in?

Red, Jeff Red.

Every time you see a fire truck it's a giant symbol of the creeping socialist menace!

* * * * *

Posted by: weinerdog43 | January 22, 2008 11:12 AM

weinerdog:

I would agree with you if investment in the stock market were the only recourse for a privatized social security system. That, of course, is not the case, and I don't think that a reduction in principal would have been as inevitable as you portray it.

A person with the brain capacity of an amoeba could get a greater return on the money paid into social security simply by investing it in cash or government bonds. Unlike stock market ventures, cash investments don't lose their principal. Its just that sometimes one doesn't always get the greatest rate of return. Compared to the pittance paid by Social Security, that wouldn’t be a factor anyway.

A smart money manager would diversify a portfolio to invest in more than the stock market in the first place. Investing in cash is one of the better ways to make sure the portfolio grows in value, even if it doesn’t grow as fast as other, riskier investments. That person would also sell stock and reinvest it when stocks aren’t doing so well. That’s not just good business sense, it is an ordinary duty of those who undertake to care for other’s investments – unless, of course we are talking about the federal government.

Funny, Jack. But in all seriousness can you honestly say you've never had a problem with the post office in this city?

There's a reason these ratings come out, it's because even the government knows it's doing a horrible job.

With the size and scope of everything the invasive federal government's trying to do today (TSA, dept. of education, HHS, centers for disease control) I can't logically see adding more to it. Why not just fix the problems we have now before we create new ones?

p.s. Fire service is the opposite of the post office. It's local government controlled by the people closest to the problems (mayors and city boards). Millions more would die every year if the federal government controlled local fire service.

"If the economy is in a recession or soon to be in one, it will be hard to blame Federal Reserve Chair Ben Bernanke."

I wholeheartedly disagree with this statement.

Those responsible for creating inflation are responsible for any resulting recession. What the Federal Reserve Bank did under Greenspan was keep interest rates low for years. That discouraged saving and encouraged the unreasonable extension of credit. The result was inflation. Inflation – the over-expansion of the money supply – occurs whenever too much money is printed, the economy slows to where the total value of good and services goes below that of the current money supply, or through the artificial creation of money-equivalence through credit.

It is precisely because of the lowering of the FRB’s rates that an entirely new industry was created, whereby the expansion of credit allowed people to invest recklessly in homes they couldn’t afford, and the creation of, and investment in, the housing market and mortgage backed securities. Its failure has severely shaken the economy.

If artificially expanding the money supply through lowering rates was the poison, it cannot now be the cure too. We have seen Bernanke cut interest rates before, just to watch oil prices spike. Why? Because those who make a living on the commodities market expect to get full value for their goods. When interest rates are lowered, they realized the money they get for their goods will soon suffer a depletion in value; in which case they want more money so they receive at least the same value as before. That’s not just true of oil. All commodities, including basic food items, have increased in price because the dollar is substantially weaker.

One would hope that Bernanke and the FRB would have learned from the debacle of the Great Depression. After the stock market crash of ’29, the FRB and the government tried to ease the pain by pumping even more money into the market, in large part by lowering the lending rates and allowing for cheap credit. That had the effect of gasoline on a fire. More cheap money in the market kept necessary economic corrections from occurring. People had the means of avoiding inevitable liquidation of bad debts and the taking of losses for unsound investments. The net result was that the Great Depression lasted much longer than it needed to. A recession turned into a depression that caused a lot of harm that could have been avoided by allowing the natural economic cycle to run its course in a shorter period of time.

So, yes, if we have a recession – and especially a long one – Bernanke will have his share of blame, as is true of his predecessor in office.

Here comes inflation, further devaluation of the dollar (cancel your overseas travel plans) and, gasp!..stagflation. Wall St. run amok.

Julia,

You loon lefties have been saying the economy is horrible since Jan 20, 2001. You guys are like broken clocks - eventually you will be right, and then wrong again.

Wiener or is it Whiner?,

Imagine you are retiring today after 40 years of work and you were able to start you investing when the Dow was at 240 on Jan 23, 1968. Get out you caluculator and compare that to the return of Soc Security and compare that to the return from your link.

Your link was very informaticve, I disagreed with many of their conclusions, but it ws a good link. It does show that there are three financial tools rolled into SS - retirement savings, survivor benefits (life insurance) and disability. Do you see the risk difference between retirement and the other two. Most people will get to retirement, but will not use survivor beenfits. They need to be funded different and should be seperated. Disabliity and survivor benefits are true insurance products while retirement is savings.

SS is one of three legs of the retirement stool - the problem is only two of the legs touch the ground.

Congrats on your diversified portfolio. Wouldn't you like to have 12.4% of your salary to invest, but disablity insurance and life insurance with on your own? Do you think you can do better? I think you could.

Trickled on dt,

Another article by Paul Krugman - how precious. Ol' Paul makes some nice points:

Paragraph 5 - basically he states that Obama is a pander or in the business world we call him a butt kisser.

He later states: "Eventually productivity did take off — but even the Bush administration’s own Council of Economic Advisers dates the beginning of that takeoff to 1995." Why do you think productivity took off in 1995? Ever hear of the personal computer and internet? That is what generated the economy of the 90's.

If the Clinton tax increase and it was a tax increase on everyone - (remember the 4.3 cent/gallon gasoiline tax?), then why aren't all the dems calling for a massive tax increase to goose the economy.

DD (does that stand for dumb-dumb?),

The stock market and Enron are two different things. But I wouldn't expect someone whoe puts his savings in the piggy bank to understand.

Jethro is correct that SS is insurance. It pays like whole life too.

Luke,

Unless you are planning the retirment of a person with an eight year work career, your stmt is worthless - but what else is new.

David J,

Actually what you stated about who decides what investment - "the feds?" was actually proposed by the Clinton Administration as their scheme to "privatize SS". They wanted the gov't to invest the SS funds in the stock market and thus become major shareholders of American corporations - picture that disaster.

http://www.themilitant.com/1996/6046/6046_1.html

David J,

Actually what you stated about who decides what investment - "the feds?" was actually proposed by the Clinton Administration as their scheme to "privatize SS". They wanted the gov't to invest the SS funds in the stock market and thus become major shareholders of American corporations - picture that disaster.

Posted by: Terry | January 22, 2008 9:24 PM

And I disagree with Clinton, as well. Where did I indicate I necessarily follow a particular leader? I just don't think privitization of SS of any kind is the way it should be handled.

Let's expand the rules for private investment vehicles that already exist. While looking for better ways to fund ss that don't involve privitation.

Unless you are planning the retirment of a person with an eight year work career, your stmt is worthless - but what else is new."

Well, Trickle down, what if that eight years was the last eight years of your career? What if in your peeak earning years your porfolio grew at a total of only 2% over that entire period? Eight years is a large chunk of most people's work and investing career. 20 % of your investment time with almost no growth.

Don't delude yourself. The stock market is not a magical growth machine. It's not garaunteed. It's not foolproof, but then you're too much of a fool to realize that.

TD,

Trickled-on? That's supposed to be a comeback? That's exactly what the middle-class is, under Dubya Do-wrong. And come November we'll do something about it. Meanwhile, you keep spouting the corporate line, big boy. Now that you Goopers have failed at every single facet of governance, who ya gonna blame? Where's the party of accountability gonna find their next goat?

Krugman was right about the great "unraveling". You were wrong about...Everything! Republicans can't govern. Every time they get their hands on the wheel they enrich the 1%, screw the middle-class, and deliver a train-wreck of an economy to the Dems to fix. Even the Reich radio noise machine can't save you now.

David J - couldn't agree more.

Luke - Look at my example of the guy that started work 40 years ago today and do the math. If you can't maybe John E will help.

dts,

A little bitter aren't we? Bad sushi by the bay? You are just another broken clock.

Terry...I'm not sure where to begin. Suffice to say, if you read the link, I'm happy.

John W, good posts except I take issue w/1 small section. While you are correct that investing in gov't. bonds and t-bills is bone simple, unfortunately, even that is too difficult for many people. Sadly, if they were given the option of buying an ee bond or a new car stereo, which do you think they would pick? People don't make rational decisions.

As to Bernanke and the Fed, lower interest rates certainly don't help me very much. Those of us who are savers just got whacked again so that the financial big boys on Wall St. can put off this mess a little longer. Grrrr.

Not sure why it takes the SWAMP forever to post items, but her it goes again.

Luke, see my example above when the Dow 40 years ago was 240. The DJ has grown over 10% annually and that includes the last 8 years. Run some math and see what an investment at an annual rate of 4% compounded per year as compared to 10% per year and let me know the results.

The stock market is no magical growth machine in the short-term. However, over a long period of time - say 40 years - the volatility of the market disapates and a good steady return is achieved. Study business history first before you spout off.

dts,

Getting bitter now with the Nazi references, why should I have expected different.

The economy delivered to Bill Clinton was 18 months into recovery while the economy delivered by Bill Clinton to Bush43 was 39 days from recession.

Look at the economy Jimmy Carter delivered President Reagan. Remember, the economy that put the word "malaise" into our vocabulary. The peanut farmer's economy also gave us something called the misery index.

Like I stated above, you libs are like a broken clock, eventually you will be correct (and then wrong again).

have a nice day by the bay.

Economic Malady – Stimulus Insufficient

The underlying problem with the economy is an extreme maldistribution of income between the working class and the capital owners. When a CEO can make 300 million dollars while an average worker's wages haven't even kept pace with inflation what results is a dysfunctional market economy starved for consumption spending. The average American has had to fuel his/her spending with debt obtained by borrowing on the equity within their home - that phantom equity has now evaporated.

In order to correct this out of balance condition there needs to be laws in place (similar to the anti-Trust legislation) that caps the annual income of all capital owners and their surrogates (CEOs, CFOs, etc.) at a specific federal percentage above that of the highest paid worker within their respective firm. Also, we need to eliminate labor arbitrage by canceling all Temporary Worker Visa programs (L-1, H1-B, etc.), and establish tax penalties for firms that expand their workforce above some threshold through outsourcing, or replacement hiring in foreign locations.

Essentially, FDR was accurate when he characterized the Great Depression as an out-of-balance Economic malady. Rural income prior to the Great Depression was significantly lower than urban income, now (overvalued home equity) as then there was unlimited amounts of overvalued phantom equity flowing into the stock market, the income differential between labor and capital while nowhere near the current astronomical level was still much higher than sustainable. There in lies the root cause of the out-of-balance condition that precipitated the Great Depression. Any system including the market economy that gets to far out balance does not function properly. Certain constraints need to exist to keep the market economy from slipping into a dysfunctional state. Balance is the essence of stability nothing short of this will guarantee permanence.

John Maynard Keynes –
 If fiscal policy is used as a deliberate instrument for the more equal distribution of incomes its effects in increasing the propensity to consume is, of course, all the greater.
Aggregate consumption depends mainly on the amount of aggregate income.
Consumption – to repeat the obvious is the sole end and object of all economic activity.
 We cannot, as a community, provide for future consumption by financial expediants [stocks, bonds, 2nd mortgages on home loans, etc] but only by current output.
Capital is not a self-subsistent entity existing apart from consumption.
Consumption is directly tied to the level of employment.

My Proposed Program
• 2 year 800 billion emergency Infrastructure Investment Jobs Creation Program (IIJCP) aimed at building new interstate highways, mass transit systems, schools, bridges, public hospitals, libraries, and assorted public buildings.
• Eliminate labor arbitrage by canceling all Temporary Worker Visa programs (L-1, H1-B, etc.), and establish tax penalties for firms that expand their workforce above some threshold through outsourcing, or replacement hiring in foreign locations.
• Taxation of corporate profits in the amount of 95% for firms that exceed a threshold level of jobs outsourced to a foreign country.
• Taxation at the rate of 80% on individual yearly income received from any corporation, not-for-profit organization, or any form of legal entity where the total income exceeds the U.S. average yearly median individual income by 200%.
• Fair trade agreements that ensure nations will offer decent wages, humane working conditions, and sound environmental policies.
• A nationalized health care system for all U.S. citizens.
• An effective federally funded tuition assistance program for U.S. citizens targeted at professions in demand.
• Repeal all legislation that inhibits the right’s of individuals to organize under labor unions regardless of position or any other currently disqualifying classification.

My Observations:
• An economy can only function when a large proportion of the populace is engaged in the economy thus able to purchase what is produced.
• If price is inelastic and labor remuneration static demand will fall due to reductions by industries in their capital base (the most important being labor).
• Firms forced to compete (those that are not oligopolies) in an economic environment where demand is declining will still compete on price but efficiency gains and operating cost reductions by nature have marginal declining utility whereby a point is reached when the firm's factors of production (land, labor, or capital) must be slashed. These cuts in factors of production will have a multiplicative effect throughout an economy resulting in an ever building 'wave' of economic decline.
• It is important to keep in mind that an economy cannot continue to grow when long-term consumption continues to decline. This in turn ties directly to reductions in the factors of production to accommodate continual long-term reductions in consumption.
• When geographical barriers, constraints to the free flow of labor resources, underemployed resource utilization, similar knowledge distribution across all nation state’s, and nation state governmental inconsistency exists no global free market can exist and thereby at the nation state level no significant corresponding opportunity cost for engaging in one form of economic endeavor over another.