TPS

Do you just cut and paste or do you read things first? Here's the key part you pasted: Exactly what I have been saying--you dolt!You'll note your quote also states what I have been saying--QE increases EXCESS RESERVES IN THE BANKING SYSTEM. What you don't understand is that those reserves are held electronically on account at the FED. They only get into circulation when banks make loans--which it seems you are finally starting to get. You should also look up the definition of the money supply, which, for M1, is currency held by the public (in circulation) + checkable deposits (and a few other small components). Reserves held by banks are part of what's known as the "monetary base." Excess reserves, part of the monetary base, represent potential loanable funds, not money in circulation. That's what I've been saying all along, which YOU CAN'T seem to COMPREHEND. If you actually read and comprehend what I wrote, you would've seen that I said, "if the FED directly finances government spending by buying T-Bonds/Bills then it IS printing money." Excess reserves of banks represent potential money creation, and YES, there is close to $1 trillion sitting on account--ELECTRONICALLY- at the Fed, stagnating until banks lend. Your statement that "energy and food aren't included in the measure of inflation" leads me to believe you really don't know what you're talking about. The CPI DOES include E&F. What many analysts CHOOSE to focus on is a sub-set of the CPI called "core CPI," which excludes E&F. They focus on this measure because E&F are so volatile changes in their prices can create significant movements from month-to-month. You might want to check out the BLS web site and actually look at the CPI before you blather on about it. BLS

So when you use the term print, you don't necessarily mean on pieces of paper--that is, you don't really mean the word "printed"? Clarify that please. If you are agreeing with me that that the FED has credited banks' accounts at the FED in your definition of "print," then I guess we agree. But it's not clear what you mean. First, I think you are confusing effects here. I've always said that the FED attempts to control the economy by changing interest rates, and it typically does so by setting and controlling the Fed Funds Rate. In these extreme times, they have tried to bring down longer term rates. They continue to intervene in markets to lower interest rates because the indirect mechanism of lower interest rates has had little effect--there's no loan demand. I'm glad you are finally understanding the way monetary policy impacts the economy, which is through lower interest rates, which is what I've always stated. Money does not fall from trees and into the hands of businessess and households, it is "created and released" when banks make loans. Excess reserves sitting on account at the FED represent the ability of the banking system to make loans, and only when they do, will money be "relased into the economy." Ahhh...here's the nugget. Where is that money now if it's not being released into the economy? Do you really believe there are stacks of notes laying around somewhere? Go back and read everything I've ever stated on this subject. I've alwasy said inflation won't happen UNTIL the economy recovers and resources become scarce--the unemployment rate falls and capacity utilization rates increase. Nice to see that you finally understand how monetary policy impacts the economy through interest rates. If your argument is that the FED has printed money which causes inflation, then how can an increase in interest rates reverse that process? As for Dudley, he never said print, he said easing. The only time the FED "prints" money, in a way, is if they directly lend to finance federal government spending. I assume you were looking in the mirror...

MT was rignt about QEI, as it was a blanket swap of reserves for worthless mortgages. If QEII is about buying long term US T-Bonds, then his point is ludicrous. On Hyper-inflation, until people understand the "nature" of modern money and banking, they will continue to believe the US is on it's way to the Zimbabwe outcome--it's not. The FED has not printed money. Does anyone here understand this? The FED bought bad assets and credited the "reserve account" of banks which are HELD on account AT the FED. The FED now pays interest on excess reserves equivalent to the T-bill yield, so banks are indifferent about using these to buy Treasuries themselves. Almost the entire $1 trillion "given to the banks" through buying MBS is made up of these reserves. Only when banks use those reserves to lend to someone or thing that will spend it, will we see inflation. As long as there are excess labor and capital resources, it won't happen. That said, we are seeing investors increase funds flowing to commodities (including gold), making bets that these prices will rise. Commodities are the next asset bubble.

Probably means they will continue to run their version of a 4-3, rather than the 3-4?

Wouldn't disagree with criminal charges. I think FDIC is going after funds any way it can, and in some way hoping to send a signal about "moral hazard" (a slightly weaker attempt than what Paulson did with Lehman...).

It's about time someone had the balls to do this. Way to go Sheila. Bair

I certainly support the new regime, and still do for the most part. What (now) worries me about the so-called "chix" regime is that it seems it takes them too long to see the obvious. I can give them a slight pass (so to speak) on Edwards, as mabye Gailey thought he could work out his problems. But Lynch vs. Jackson? Did they not look at the tape from last year? His jersey's in the HoF for chistsake! Make this guy the focus of your offense like last year Chan and we'll start winning games (assuming the defense can hold teams to under 30 points...). The Bills will win this week and Jackson will be the main reason why--thus shutting up the me-diots about the Lynch trade.

Not saying it all went, just saying there was a big movement into REITs, which helped make the hot markets even hotter.

Maybe the work at ILB will help his run D skills, as I think he was mainly a "get after the passer" DE in college. Would be a great story if this works out, at least for Moats...

Study I thought this was my line? Nice article. It's too bad they didn't inlcude data on how much money flowed into REITs, but those were some mighty fine returns. I do recall, that with the Enron/Worldcom, etc scandal and the tech bubble burst, a lot of was reluctant to go into stocks. Real Estate became one of the investments of choice. Maybe I'll check the Flow of Funds data and see if I can get that.

Ok, Take government out of the picture--no interest deduction, no implicit backing of gses, no cra, etc. Are you saying a bubble in housing could not be possible?

As I said, I don't know what caused the problems at N-rock. I do know that there was a housing bubble in the UK and in many EU countries. So I guess the real issue I was trying to get at: were governments in those countries also pushing homeownership for low-income residents?

Well I guess we'll have to agree to differ on which source we think is more reliable: Fed researchers vs Washington Post journalist and Ayn Rand institute member. We agree here: Monetary policy has very little effect during a serious recessions when loan demand is flat (which is why there is velocity has slowed and the "money multiplier" is non-existent). I think in my pm to you I mentioned I believe that investors are speculating in commodity futures which could mean a bubble is brewing there. The dollar decline is something the economy needs, as exports have been one of the few bright spots. The other point of disagreement I have is your view of money, specifically that you think the Fed has "printed" money, but we've certainly been down this road before, so I won't rehash.

I have news for you, all economic discussions are political, and all economists, just as everyone else does, have a political bias. Do you think your link was not biased? Because the real unemployment is close to 15%.

Where did I say you said "only"? I know you realize there were a lot of factors, but you did say it (CRA) "played a huge role." As for your articles, from the first one: While they had "goals" the government set, they were pushed by banks to buy their crap, so they could keep the bubble going and continue to generate the fees from the loans. As it also says, they entered the subprime market in 2006/7, and the bubble was already in progress. One might conclude from this article that Fannie went into the subprime market mainly to boost its earnings on higher interest loans becuase of the accounting scandal in which they overstated earnings. your second article is an editorial by someone from the Ayn Rand institute. Very objective. Try reading something a little more objective: Fed president Sure, government policies support homeownership, they always have. You seem to think there were significant changes in those policies that were the "root cause" of the bubble; I disagree. There was a bubble across all segments of the market. Like any bubble, or ponzi scheme, you continually need more players to keep it going. The mortgage finance industry paid a lot of money to pols to keep it going too. An interesting question, that I don't know the answer to: as I recall, the first casualty of the crisis was a British bank (Blackrock?). How was its failure related to the real estate bubble in the US?

They both refer to the impact on savings, not consumption. First, are you saying there was only a bubble in poor neighborhoods? Was it poor blacks and mexicans who bought all those houses in Las Vegas, Florida and California? Is buying a house the only way to invest in housing assets (REITs for example)? I'm talking about all of the **** created based upon the price of the underlying assets--that's what bubbles are about. Speculation about some underlying asset that drives financial assets related to the real asset to higher and higher levels, which drives the price of the underlying assets higher, which drives the paper assets higher, which.... I'm not denying there was some impact, but not the main impact. CRA applies to financial institutions that take in deposits, so they are required to lend some % in the communities where they take in those deposits. The majority of sub-prime loans were generated by mortgage finance companies which are NOT covered by CRA. Even many Wall Street IBs bought their own finance companies to fuel their MBS and derivative markets. The FED and FDIC have done the research (and published papers), and from this both Bernanke and Bair, both appointed by Bush, have testified that the primary factor was not CRA, rather it was predatory lending, securitization, and lax regulation. The right pushes this as the main issue because it plays into the anger of their targeted constituents. I'm not making a subjective claim about those tax cuts, I'm trying to explain how one can make the argument that they impacted the bubble (which I do happen to believe though). This all goes back to a comment by PastaJoe.

You chimed in on the response I gave to GG, which means you got on board the new topic. I'm happy to get back to the original--friggin' hijackers! I don't think we were debating Clinton originally either. The debate, from my end, was whether tax cuts for the wealthy (a part of supply side theory, not the whole of it) can add fuel to the bubble? My contention is that cuts to households at the top create a greater pool of savings which are used for financial investment, which can fuel a bubble. Unless you are a small business owner, savings of households are used to buy financial assets, which increases the demand for those assets (which is NOT the same thing as real investment). Tax cuts for those who save a greater proportion of their income add more fuel to asset prices/bubbles, than tax cuts for those who spend all of their income. That does not mean the tax cuts caused the bubble, rather they add to it. There is nothing at all absurd about that argument--it's a fact that the rich save more than the poor. Btw, the argument about tax cuts for households is not the same as supply-side tax cuts for businesses. There is a marginal impact on real investment from reducing the after-tax return on those productive investments. Gee, such an unbiased source.... This quote about the possibility of increased taxes: "That means small business owners have no idea come January how much capital they will have available to pay their workers and make investments." I thought workers were paid out of pre-tax income? He also says the #1 impediment from government is taxes (I'm sure that's true). However, surveys say the #1 impediment for small businesses at the moment is lack of demand/sales, which is the #1 impediment to investment right now.

Yes, it's a bit more complicated than saying it was the tech boom, but the Roubini link (you can ignore the equations) has a good discussion and links to the debate of the period (including some WSJ editorials).

I knew I should've thrown the "natural rate" term in... I'm not talking about the source of the expansion in the 1990s, which of course was the tech bubble. Up until the mid-90s the so-called "natural rate of unemployment" or "non-accelerating inflation rate of unemployment (NAIRU) was believed to be between 5-6%. In the past, when Unemployment (U) approached 5-6%, the FED would raise rates to slow the economy down. Since inflation was tame in the 1990s, the FED believed that NAIRU was lower, and let the expansion continue. The point is that the FED decides when to let the party stop by raising rates, and in the 1990s they let the party continue because the inflation barrier changed. Maybe you need to do a little more homework... To save you some time, here's a little primer on the debate from that period by Roubini: Nairu

I named one out of the "few others" I said there were. The tech bubble relates to what GG said about capital gains taxes, which I never disagreed with. I believe the unemployment rate falling to 4% was a bigger factor.

I've always argued there are a host of reasons for the most recent crisis, no one single factor can describe the perfect storm. Cutting taxes at the top raised the volume of savings looking for returns--more money for hedge funds, reits, etc. There's a long history of economic thought that focuses on rising inequality of income and wealth to (HELP) explain speculative bubbles and crises.

I thought we agreed there were a few other factors, like the unemployment rate falling to 4%, which both increases revenues and lowers expenditures. I don't recall "crowing" though...

One can make the argument that tax cuts for the class of households that have a higher propensity to save out of income creates a greater pool of savings looking for financial investment opportunities. One can use this argument and provide evidence from the two experiments with supply-side tax cuts to show these experiments ended with speculative bubbles, financial crises and bailouts--the commercial real estate bubble and S&L crisis in the 1980s, and the most recent housing bubble and ensuing crisis. With the exception of small business owners, increasing the "pool of savings" by tax cuts means an increased source of demand for financial assets which might indirectly influence real corporate investment, but more than likely won't, since new business investment is mainly a function of demand for its products (sales). There is a logical case for PJ's argument AND evidence to support it, given two test cases.

The Bills got a sack and allowed a sack. On the offensive side of the ball, this was testament to both improved O-line play and improved QB play. On the defensive side of the ball, this indicates a lack of playmakers in the front 7. The D will be in for a long year if this continues.

I know for a fact that fraud was rampant by direct lenders. Banks and mortgage finance companies input fraudulent data into Fred/Fan proprietary systems (midanet/mornet) because they no longer carried the risk--their goals were to churn assets to generate fee income. And, by the way, these were all loans, not just so-called subprime loans. Now it's possible that F&F execs weren't diligent in weeding it out as well. As I said, everyone was getting rich off this crap. It is a crime that no execs across the spectrum are doing time, which speaks to the bipartisan culpability of this mess. I missed you too AD.