Rob Paris Blog

Rob writes about news, economics, politics and other things

Bernanke quotes

Jan 4

Posted by robparis in General | 3 Comments

Here’s a select collection of Bernanke quotes from 2005-2008. For similar quotes from the Great Depressions, see my earlier post.

7/1/05  – Interview with CNBC

“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”

10/20/05 –  Testimony before the Joint Economic Committee

“House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”

11/15/05 -  Nomination of ben s. bernanke, of new jersey, to be a member and chairman of the board of governors of the federal reserve system

“With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly. The Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well-managed and do not create excessive risk in their institutions.”

2/15/06 – Hearing before the Committee on Financial Services

“Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”

2/15/07 -  Semiannual Monetary Policy Report to the Congress

“Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.”

3/28/07 -  Testimony before the Joint Economic Committee

“At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”

5/17/07 -  At the Federal Reserve Bank of Chicago’s 43rd Annual Conference on Bank Structure and Competition

“All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.  The vast majority of mortgages, including even subprime mortgages, continue to perform well.  Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”

8/31/07 -  At the Federal Reserve Bank of Kansas City’s Economic Symposium

“It is not the responsibility of the Federal Reserve–nor would it be appropriate–to protect lenders and investors from the consequences of their financial decisions.”

1/10/08 -  Q&A after speech

“The Federal Reserve is not currently forecasting a recession.”

2/27/08 -  Q&A after testimony to Senate Banking Committee

“I expect there will be some failures [referring to smaller regional banks]. Among the largest banks, the capital ratios remain good and I don’t anticipate any serious problems of that sort among the large, internationally active banks that make up a very substantial part of our banking system.”

6/10/08 -  Boston Federal Reserve’s 52nd annual economic conference

“The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”


7/18/08 -  Remarks to the House Financial Services Committee

“The GSEs are adequately capitalized. They are in no danger of failing.”

Many of these quotes were found across the Internet and have been compiled before. Thanks to the following sites for source material:

The Market Oracle
Center for Economic and Policy Research
Bernie Sanders: US Senator for Vermont

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On holidays and gift giving

Dec 30

Posted by robparis in General | No Comments

It’s the end of the year. Time for the wasteful, inefficient tradition of exchanging presents. If you disagree, try reading Jeffrey Tucker’s Is Christmas Inefficient?, Bob Murphy’s Putting the Economics Back in Christmas or Joel Waldfogel’s Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays.

Don’t get me wrong; I enjoy getting a good gift. To me, a good gift (assuming it’s tangible), like a good purchase, is something that I value more than the cost of the gift itself. A good gift is something that I would have purchased myself had I known about it. If the gift is something I wouldn’t have bought on my own, then it’s likely that I value the money spent on the gift more than the gift itself. Accordingly, I would have been happier with the money.

As anybody familiar with the holiday tradition knows, in most cases, exchanged gifts between two people should have approximately the same value. It’s this rule that’s put me in an awkward situation. Somebody who I didn’t plan on exchanging gifts with got me something. This something was expensive. Just how expensive? $42,105. A $42,105 gift is very expensive, especially coming from somebody who I didn’t plan on exchanging gifts with in the first place.

Just who spent $42,105 on a gift for me this year? Well it was the generous federal government. The government has “spent, lent or committed $12.8 trillion… The money works out to $42,105 for every man, woman and child in the U.S.” This gift was so generous, that Bloomberg decided to write an article about it!

Like most holiday gifts, it wasn’t something I wanted. In fact, I wish I’d never received it.

So now I’m in an awkward situation. The government spent $42,105 on a gift for me, and I got it nothing in return… and the year is almost over. I did what any prospective gift-buyer does. I snooped around. Trying to find out what the government really wanted, I started searching. On the FAQ’s for the Treasury, down at the very bottom of the page, I finally found it. The government wants more money! Even with the ability to make an infinite amount of worthless green paper, the government still wants more of it. Why? So it can go waste it on something else that we didn’t want in the first place.

The final Frequently Asked Question about the Public Debt:

Q. How do you make a contribution to reduce the debt?

A. Make your check payable to the Bureau of the Public Debt, and in the memo section, notate that it is a Gift to reduce the Debt Held by the Public. Mail your check to:

Attn Dept G
Bureau of the Public Debt
P. O. Box 2188
Parkersburg, WV 26106-2188

So that’s what it wanted all along. As I write a check for $42,105, I wonder how this can possibly be a Frequently Asked Question. I wonder how many people would actually mail the Treasury more money than it already steals.  I wonder if anybody has ever used P.O. Box 2188 in Parkersburg, West Virginia. I get my head back together and focus in on the task.  I make sure to write a cheery holiday letter. I even throw in some holiday cookies. As I get ready to mail $42,105 to a P.O. Box in West Virginia, I try not to think about how shady a P.O. Box in West Virginia really is. Or even worse, how the government who thinks it can solve problems by throwing money at it, somehow thought it knew what I wanted for the holidays.

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Happy Holidays!

Dec 24

Posted by robparis in General | 4 Comments

And many more!

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College Football Playoff Act of 2009

Dec 9

Posted by robparis in General | No Comments

H.R. 390: College Football Playoff Act of 2009 approved legislation to force college football to ban the promotion of a postseason NCAA Division I Football Bowl Subdivision game as a national championship. The bill favors a switch to a ‘more fair’ playoff system.

I don’t see what the real objection is. Congress has nothing else on its plate now. And anyway, its right there in the Constitution :

U.S. Constitution – Article 1 – Section 11 – Clause 3

The Congress shall have Power To Define and Regulate all Competitive Collegiate Activities that Define a National Champion for the common Entertainment and general Welfare of the United States. All Championship Competitors must be Drawn in uniform throughout the several States, and with the Indian Tribes.

The Congress shall have Power, by and with the Advice and Consent of the Senate, to Declare a National Champion upon Completion of the Competition, provided two thirds of the Senators present concur.

That’s right, the Constitution gives Congress the express power to determine how a college football playoff system should work.

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Bank failures 10/2009

Oct 25

Posted by robparis in General | 2 Comments

The seven new bank failures on Friday, October 23, 2009 brings the total for the year up to 106 – the most bank failures since the savings and loan crisis in 1992. 106 is still small compared to the 416 unnamed banks on the FDIC’s watch list. Which way is the trend going? Where are the bank failures taking place? See below.

Which way is the trend going?

During the current recession, the month with the most bank failures (so far), was July 2009 with 24. Although failures have slowed down, the six month trend is still upward.

bankfailurestime

Where are the bank failures taking place?
bankfailuresstate

unemploymenthousingMost of the bank failures so far have taken place in the southeast (Georgia and Florida) and southwest (California and Nevada). Illinois also ranks high on the list. What do these states have in common?

These states are suffering from a severe housing bust, and are suffering from the highest unemployment rates. There are currently only 14 states with unemployment over 10%, and all five of these states fall into that category.

Where are we going from here?
The facts end here. Now it’s a matter of prediction. I don’t see any “green shoots”. I don’t expect a quick turnaround. I expect bank failures to continue and become more frequent. I expect the FDIC to run out of money shortly. The FDIC will either require multiple years of pre-payments from the banks, or it will tap into its credit line with the US Treasury. If the FDIC asks for bank pre-payments, the stuggling banks will come under even more stress. I expect the FDIC to tap into its $500 billion credit line from the US Treasury. What happens if that credit line runs dry? There will be an even bigger one.

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A response to the comments on Daily Finance: Social Security COLA

Oct 16

Posted by robparis in General | 7 Comments

A response to the comments on Daily Finance

The comment I posted on Daily Finance mentioning my recent post on the Social Security COLA has received a lot of comments. I won’t be responding to every comment, but I think it’s fair to group the comments into three types:

  • ad hominem (abusive and circumstantial): the fallacy of attacking the character or circumstances of an individual who is advancing a statement or an argument instead of trying to disprove the truth of the statement or the soundness of the argument. Often the argument is characterized simply as a personal attack.
  • argumentum ad misericordiam (argument from pity or misery) the fallacy committed when pity or a related emotion such as sympathy or compassion is appealed to for the sake of getting a conclusion accepted.
  • actual coherent arguments – these arguments I appreciate and will respond to

The ad hominem attacks criticized me as a person, instead of arguing about what I said. I won’t bother responding to each of these attacks. Additionally, they were frequently misspelled – disiably for disability, diaphers for diapers, and my favorite, retarted for retarded. I’m sure most of these were typos and nothing more, but amusing none the less.

Examples of ad hominem:

linda said…
ROB, your evidently not retirement age, so that is why your thinking that way. just wait til your retirement age and then you will not be talking like that.

cynthia Flanagan said…
you sound like a lazy un-employed stiff…a baby who never knew hard work..

jerry said…
You probably voted for Obama & are on a disiably. Above the neck that is. One day you will be in the seniors place & then you can relate to your pass mistakes

ycav4424 said…
Rob is probably somebody’s snot nosed kid that has snuck onto their daddy’s computer to rile up people just for fun before he changes his wet bed sheets again so he can sleep dry for awhile.

MO said…
Once an idiot, always an idiot. I’m 66 yrs. old and worked all my life to get something I deserve. When you retire in a few years after you get out of your diaphers, are you going to turn down SS? Go crawl back under your rock you moron.

d r heller said…
rob and all the other imbeciles who have that type of attitude have to be living off their parents and have no concept what it is to be a retiree!

Mary said…
You are an jack ass.

gary said…
A LOT of folks here believe you are an asshole for making that remark. So it’s probably true. Have a nice day asshole!

Tom said…
Rob enjoys making idiot comments to see the reactions he gets…

EL said…
DUMB ROB, WAIT UNTIL YOU RETIRE, OR ARE YOU ONE OF THE LAZY ONES ON WELFARE?

ANDY said…
AREU RETARTED, OR AN ILLEGAL IMMIGRANT…

Les said…
What a dumb ass!!!!! I bet you still live with your mother. I hope you get sick and can’t work.

Slightly better than the ad hominem attacks, are the argumentum ad misericordiam. These arguments appeal to pity and sympathy to win an argument.

Examples of argumentum ad misericordiam:

lvn said…
At the senior complex I live in everyone got a letter stating…”due to the downturn in the economy there will be no more surplus food bags delivered to seniors.” 90% of the seniors here depend on that food to last them till the next SS check. At times (too many)cans were dented and once the soup can was not only caved in and rusted but expired 3 1/2 years prior. Weevils and bread smashed beyond recognition and 99% of all other foodstuffs were expired. Yet, if farmers were to give the animals this digusting food, government agencies would be down on them right away. Had one woman say she knew there were bugs and rancid food, but even the dog food she used to buy was too expensive now.

mary myers-agati said…
MY rent will go up next year and so will many other things food and other necessities. I am slowley going blind and cant afford surgery.

Susan said…
SAY THAT WHEN YOU RETIRE ASSHOLE AND YOU GET THE SAME AMOUNT OF MONEY EVERY YEAR… I TAKE CARE OF MY MOTHER WHO HAS ALZHEIMER’S. MAYBE WHEN YOU RETIRE, THERE WON’T BE ANY SOCIAL SECURITY LEFT, WHO YOU GONNA CRY TO THEN???

EL said…
SS IS NOT ENOUGH FOR HALF OF THE PEOPLE ON IT. SOMETIMES WE CAN T EVEN GET OUR MEDICINE

Finally come the actual coherent arguments. I will respond to these. Most people who tried to use coherent arguments had their comments voted down. If it wasn’t vicious or sympathetic, it just isn’t made for the Internet.

Bruce said…
If we happen to receive the $250 stimulus adjustment proposed by the President, please remember: this is a GIFT; you did nothing to EARN it; it is not now or in the future an ENTITLEMENT.

Bruce – The government is unproductive. It isn’t producing any of the ‘gift’ it gives you. It needs to raise money using its only three methods, inflation, taxation or borrowing. None of these are good. Since the money the government is gifting is taken by force from everybody else, it is not so much a gift, as it is theft.

Akela said…
So Rob, are you ready for YOUR parents, and or grandparents to move into your home with you?? I hope so ..

Akela – My parents saved throughout their lives so that they could be self-sufficient when they retired. If, for whatever reason, they were unable to provide for themselves, I would take them in without hesitation.

cruisedoc said…
…Payments need to be adjusted for inflation for obvious reasons. However, when their is no inflation, or negative inflation (deflation) as their is this year, then there is no rational argument for an increase. There should be no COL increase when the COL doesn’t increase. If I were on SS I would just be glad that I get it when the COL goes up and don’t get it decreased when the COL goes down. It’s kind of like getting your cake and eating it too. I think America is fair w/ seniors, after all, they paid in pennies on the dollar for what they get out; now they should in turn be fair and be thankful that it is tied to the inflation rate.

For making a coherent argument, cruisedoc had his comment voted down with mine.

Jenine said…
You just need attention. What a very ignorant remark to make. Some of these seniors get checks for less than $200 a month. Did you realize that before you mouthed off? Can you live on $187.00 a month? NO. Before you make comments without all the facts you should look and listen. Back when these people started working they made less than $1.00 a day!! Most states now the minimum hourly wage is $7.00 an hour. You should apologize to those people. You expect a raise and they deserve every one they get.

Jenine – Social Security (assuming it must exist), should serve as a supplemental income source, not as the single income source. I can’t live on $187 per month, and for that reason, I am saving money each month. So I can provide for myself. I don’t expect SS to provide me benefits when I’m older. Social Security has created a moral hazard where people have become entirely reliant on Social Security and can expect large increases. Once this system is in place, people feel little need to save and provide for themselves. Social Security is a self-perpetuating moral hazard.

Then came the group of attacks explaining that SS needs to be raised because the cost of living has gone up and the private sector has been increasing wages.

redconvoy said…
They need the increase to live. You can’t live on the same thing year after year with the cost of living going up and their Medicare premiums. So where ever you work, maybe you shouldn’t have a raise. See how you could live on your same salary year after year!

Teresa said…
Why would you say such a thing. Doesn’t cost of living go up each year. How do you expect people to survive if the cost of living goes up every year but yet the income does not go up.. mmmm If you know a trick please fill us fixed income ppl in. We would love to know how to do that.

BEAR said…
TELL ME SOMETHING BOY, DO YOU GET A COST OF LIVING RAISE OR ANY TYPE OF RAISE.

Sue said…
Last year I got a 3 cent raise. After 3 years with the company. The SS crowd needs to realize that those of us PAYING for them are having a hard time. I will never retire.

These arguments fail to note that many large companies in the private sector did not receive raises for two years. In fact, many companies are having pay cuts across the board. See the articles from Time and CNN. Of course, there are also the millions of people who received 100% pay cuts in the past 18 months. Sue made a similar argument, and accordingly, had her comment voted down.

I appreciate constructive criticism and other feedback on my article. However, it seems that most commenters prefer to just complain. If you have an opinion about my writing, please use a valid argument. Don’t just make personal attacks and pleas for pity.

For all of the people making constructive arguments, both for and against me, thank you.

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Response to the comments: Social Security COLA

Oct 15

Posted by robparis in General | No Comments

I received a few great comments. Since a lot of these responses were too long to re-comment, here they are.

#1 by JJ Skittles on October 15, 2009 – 1:32 pm

Interesting thoughts, and interesting site! I’d like to see your opinions a little more frequently, and I’d be curious to hear your opinion on how Social Security is similar or different than a Ponzi scheme. Are we just using today’s money to pay for yesterday’s workers, praying the money won’t run out, or is it more complicated?

Thanks for the kind words! See below for my thoughts on comparing Social Security to a Ponzi scheme. I think it’s more complicated than praying the money doesn’t run out since Social Security is run by the same people who run the printing press!

#2 by Scott on October 15, 2009 – 3:00 pm

SS is not a ponzi scheme for a number of reasons:

1) A ponzi scheme enriches all of the people who pay in an equal return (unless they are the one’s that get nothing back–i.e. they got in too late.) SS will give the highest contributors a lower return (about 1% APR I believe) while giving people with lower contributions much higher returns and people who become disabled huge returns.

Scott – Social Security might not be a Ponzi scheme by definition, but it’s pretty much the same thing. Close enough that I’d still call it a Ponzi scheme. However, I agree with most of your arguments.
1) A Ponzi scheme doesn’t need to pay each person an equal return. Although it’s often the case, it’s not a necessary condition. It would be interesting to see the expected APR of SS – especially if the odds of survival until payment are accounted for. I’d actually expect it to be much less than 1%, I’d expect it to be negative.

2) Ponzi schemes do not force you into them. This is why SS “contributions” should be called taxes, because the correlation between contribution and benefits is poor.

2) Same as Point 1, voluntary is not a necessary condition, although it often is the case. Like any Ponzi scheme, SS relies on the assets of new investors to make payments for the old investors. Since the SS trust fund is full of IOU’s, it relies on new money. I agree with your point about calling SS a tax and not a contribution. We all know what would happen if somebody decided that they no longer wanted to contribute.

3) Ponzi schemes don’t bet on people dying before they become too much of a burden on the system. The only reason SS is collapsing is because the average life-span has increased more than the people who made it thought it would. Essentially SS was a bet that enough people would die before they collected more benefits than the “contributions” would cover. Ponzi schemes ALWAYS collapse because they don’t last long enough for death to be a significant factor.

3) Ponzi schemes don’t bet on people dying, but SS wasn’t supposed to either. People dying early is just an added benefit! Even if it were the case that SS is a bet on people dying early, SS would still fail. As could be expected, the government was unable to properly assess increasing life expectancy. If a non-government entity were to make the same mistake, it would fail. Other companies don’t have access to the beautiful money-spouting machines that the government does.

4) I doubt SS will die, politicians will find a way to increase “revenue” by stealing more money; and decrease benefits by only reducing to those people they feel don’t “need” their money back. Unless the whole country collapses, SS will just become more and more like welfare, only for the disabled (and that doesn’t take much to qualify for under SS) and the elderly.

4) I’m not too sure on the life expectancy of Social Security, but I believe that it will survive. It won’t be the same beast as we know it, but it will survive in some form as long as the same federal government does. I agree with most of your point except with the piece on reducing benefits. SS taxes will go up, but I’d be surprised to see a decrease in “benefits”. It’s more likely to just become an entitlement program where the government prints enough money for any “benefits” not covered by the existing funds.

#3 by cdg on October 15, 2009 – 5:50 pm

The annual social security benefits increase (as well as adjustments to various income tax rates) is based on an artificial “cost of living” index, which is NOT representative of true costs. It is particular hurtful to those who rely on social security and disability benefits. Their basic costs (food, utilities, rents, medical) have sky-rocketed this year, while the government reports demonstrably fictitious inflation rates.

cdg – Your complaint should be with the way that Social Security payments are calculated, not with the $250 payment. I agree that CPI is often a horrible one-size-fits-all approach to estimating changes in cost of living. However, as per the current law, CPI is the only factor in Social Security payments. You should be a happy a clause was written in saying that payments can’t be reduced!

I think the underlying problem is not that people need the SS money because they are relying on SS. The problem is that the government has created a system where people are no longer able to provide for themselves.  With the SS safety net in place, the people that would otherwise be able to provide for themselves often choose not to. Rather than spending and planning accordingly throughout their lives, people are free to spend away and not save. Why depend on savings when the government will bail you out? It’s a very similar symptom of what happened to the banks.

The Democratic majority in Congress voted themselves a large raise last year, citing increased costs as their rationalization. Of course, they use a different cost-of-living index than the Social Security Administration and the IRS. The latter two use an index which is much lower than the actual inflation rate, so that Congress can pretend that benefits and tax rates are indexed, without impacting government revenues.

Comparing the wage raise in Congress to the lack of a wage raise in SS is an interesting point.

Obama (and others) have acknowledged the inaccuracy of the COLA by suggesting another $250 payment to cover increased costs. It won’t even come close to covering the true increase in the cost-of-living for seniors, but it’s better than nothing. It can be paid for by reducing government spending in other areas (for example, goverment staff including “czars”, endowments for studying porcine flatulence, and $2,000,000 trips to NYC for dinner and dancing.

Social security is a Ponzi scheme, but we still owe something to those who were forced by the government to participate.

Obama wasn’t acknowledging the inaccuracies of COLA by suggesting another payment. He was acknowledging his desire to have another four years. I agree that there are many places where government can cut spending, including the unconstitutional czars and outrageous expenses, but those savings won’t come anywhere close to paying off the almost 100 trillion in liabilities the government has built up. Imagine if they used the same GAAP that they required all public companies to use… instead of the 1+ trillion deficit, we’d be looking at 10+ trillion. Not that the word trillion means anything anymore.

I completely disagree with your argument that “we still owe something to those who were forced by the government to participate”. I don’t owe anything to them. I didn’t promise to provide their retirement payments – although I’ll probably be forced to anyway.

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Social Security COLA

Oct 10

Posted by robparis in General | 18 Comments

The Social Security COLA is one tough drink to swallow. That’s why it’s being forced down our throats.

Every year since 1975, Social Security recipients have received a cost of living adjustment. According to the official website of the Social Security Administration,

Legislation enacted in 1973 provides for automatic cost-of-living adjustments, or COLAs. With COLAs, Social Security and Supplemental Security Income (SSI) benefits keep pace with inflation.

The same site goes on to say,

The Social Security Act specifies a formula for determining each COLA. In general, a COLA is equal to the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one year to the third quarter of the next. If there is no increase, there is no COLA.

The COLA has added up over the years. The following chart shows the annual COLA and the value of $100 in Social Security payments in constant 1975 dollars. A $100 payment in 1974 has increased four-fold, now valued at $407.

Social Security Cola

According to the Social Security Administration, the COLA is given to ensure that people dependent on Social Security are able to maintain their standard of living. Accordingly, the claim is made that, “If there is no increase, there is no COLA.” That’s their statement and they’re sticking to it. Instead of giving a COLA, Oregon Congressman Peter DeFazio is proposing a one-time payment of $250 in 2010. This one-time payment ignores the $250 one-time payment to Social Security recipients paid as part of the American Recovery and Reinvestment Act of 2009. DeFazio’s new payment is suggested in H.R.3597 – Emergency Senior Citizens Relief Act of 2009. Emergency relief? Will $250 make such a difference that this should be qualified as an Emergency? No. Emergency is just the default first word of any new legislation.

To pay these 50 million Social Security recipients, the legislation is proposing an increased Social Security payroll tax. The tax will include incomes between $250,000 and $359,000 in 2010, instead of the regular, first $106,800. This is another tax on the productive, to pay the unproductive.

According to 68 year old Vermont Senator Bernie Sanders who introduced similar legislation to the Senate.

The bottom line is that seniors deserve a fair increase in benefits to keep up with these added costs and economic hardships

Since in 2009 there is expected deflation of 1.5%, Social Security payments should be cut. In order to maintain the standard of living, Social Security recipients should receive a 1.5% reduction in payments. Instead, they’ll receive no reduction and a one-time two-time stimulus of $250. This is legal.

According to Section 215(i)(1)(B) of the Social Security Act

the term “cost-of-living computation quarter” means a base quarter, as defined in subparagraph (A)(i), with respect to which the applicable increase percentage is greater than zero; except that there shall be no cost-of-living computation quarter in any calendar year if in the year prior to such year a law has been enacted providing a general benefit increase under this title or if in such prior year such a general benefit increase becomes effective

It’s only a matter of time before we see the third one-time Social Security stimulus.

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Jim Rogers on banking

Sep 30

Posted by robparis in General | No Comments

This video is over two weeks old, but it’s new to me. This all makes too much sense for the government to listen. Instead, they’ll do the opposite. Here are two great quote from the video.

“How can the solution for debt and consumption be more debt and more consumption? How can that be the solution to our problems?”

“Banks have been going bankrupt for a few hundreds years. The way the system works is when somebody fails you let him fail. What we’re doing now is we’re taking the assets away from the competent people and giving them to incompetent people and telling them now you can compete with competent people with their money.”

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Select quotes from the Great Depression

Sep 23

Posted by robparis in General | 7 Comments

… and why I don’t believe a word Bernanke says.
According to Bernanke,
“…from a technical perspective the recession is very likely over at this point”
and
“… there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery”

I’ve seen these quotes time and time again… from during the Great Depression. They were just as wrong then.

I planned on making this in flash and laying the quotes over the corresponding time on the chart, but due to limited flash abilities, I didn’t. Does anybody want to make it for me?

Before looking at the quotes below, take a look at the stock market performance during the time frame in which the quotes were made.

1928-1932

With a chart like this, you’d expect the economists too be pessimistic. That’s not the case.

These quotes are all over the Internet. I’ve found the original source for some, and for others, I’ve just posted the source where I found them. Collections of these types of quotes already exist, but I’ve chosen the ones that stood out the most to me. I’ve included the date and occupation of the person where I could.

Economist John Maynard Keynes in 1927

“We will not have any more crashes in our time.”

President Herbert Hoover on August 11, 1928

“Unemployment in the sense of distress is widely disappearing…We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poor-house is vanishing from among us. We have not reached the goal, but given a chance to go forward with the policies of the last eight years, and we shall soon with the help of God be in sight of the day when poverty will be banished from this nation. There is no guarantee against poverty equal to a job for every man. That is the primary purpose of the economic policies we advocate.”

President Calvin Coolidge on December 4, 1928

“No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment…and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding.”

Financier, Bernard Baruch, June 1929

“The economic condition of the world seems on the verge of a great forward movement.”

Economist Irving Fisher on September 5, 1929

“There may be a recession in stock prices, but not anything in the nature of a crash. Dividend returns on stocks are moving higher. This is not due to receding prices for stocks, and will not be hastened by any anticipated crash, the possibility of which I fail to see. A few years ago people were as much afraid of common stocks as they were of a red-hot poker. In the popular mind there was a tremendous risk in common stocks. Why? Mainly because the average investor could afford to invest in only one common stock. Today he obtains wide and well managed diversification of stock holding by purchasing shares in good investment trusts.”

Economist Irving Fisher on October 17, 1929

“Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.”

Banker Arthur Reynolds, October 24, 1929

“This crash is not going to have much effect on business.”

Financier, J. L. Julian, October 26, 1929

“The worst is over. The selling yesterday was panicky brought on by hysteria. General conditions are good. Our inquiries assure us that throughout the country business is sound.”

Analyst R. W. McNeel, October 30, 1929

“This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan… that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years.”

Businessman J.D. Rockefeller, Sr., October 30, 1929

“Believing that the fundamental conditions of the country are sound and that there is nothing in the business situation to warrant the destruction of values that has taken place on the exchanges during the past week, my son and I have for some days been purchasing sound common stocks. We are continuing and will continue our purchases in substantial amounts at levels which we believe represent sound investment values.”

Newspaper, The Times of London, November 2, 1929

“Hysteria has now disappeared from Wall Street.”.

Magazine, Business Week, November 2, 1929

“Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before.”

School, Harvard Economic Society (HES), November 2, 1929

“…despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation…”

Economist, Irving Fisher, November 14, 1929

“The end of the decline of the Stock Market will probably not be long, only a few more days at most.”

President, Herbert Hoover, December 1929

“I am convinced that through these measures we have reestablished confidence.”

Government agency, U.S. Dept. of Labor, December 1929

“[1930 will be] a splendid employment year.”

Treasury Secretary, Andrew W. Mellon, December 31, 1929

“I see nothing in the present situation that is either menacing or warrants pessimism… I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.”

Treasury Secretary, Andrew W. Mellon, February, 1930

“There is nothing in the situation to be disturbed about.”

President, Herbert Hoover, May 1, 1930

“While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.”

President, Herbert Hoover, June, 1930

“Gentleman, you have come sixty days too late. The depression is over.”

Economist Irving Fisher in September, 1932

“As this book goes to press recovery seems to be in sight. In the course of about two months, stocks have nearly doubled in price and commodities have risen 5½. European stock prices were the first to rise, and European buyers were among the first to make themselves felt in the American market.”

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