note:

the consistent push for
monetary policy solutions
over fiscal policy solutions
to effective demand dirth
has a deep class conflict basis
if the direct effect of policy
is to say stimulate
"... aggregate demand
by raising other asset prices..."
ie provide a market demand
to prop asset prices
versus
job creation programs

put it another way
do u use policy to
effect "inflationary epectations "
or
to effect
employment expectations

which side are u on... pard ????

Posted by: paine | Link to comment | March 19, 2008 at 08:37 AM

paine says...
Sustainability

read carefully and pondered
thru a wage class persepective

you make a second or contradictory
"dual argument "

a non saving majority
ought to provide
a better electoral basis
for macro policy
that directly targets
wage and employment prospects
vs
"real" asset values

Posted by: paine | Link to comment | March 19, 2008 at 08:43 AM

paine says...
it is really absurd
to talk about belt tightening
lessons
aimed at
the bottom (half nots )
of amerika
these boobs rubes chumps
and do hickery docs
haven't seen a real "sustain-ble"
raise
in hourly pay
for almost 30 years

Posted by: paine | Link to comment | March 19, 2008 at 08:47 AM

paine says...
ddt :

"Here's the thing:
you have to actually let those asset prices fall and recognize losses in order to limit inflation"

make way for the somersault !!!!!

asset prices less -> product prices less

now i agree
to hell with
the great rentier bourgeois navel gaze...
to hell with
"where will this put my portfolio ??"

fine now house lots suck horse apples
let all other "unreal asset values " plunge too

its a bifecta turning polyfecta

but
why fight to " limit (product) inflation " ???

the older u saw clearly
its like preparing
for a forest fire
in flood time

Posted by: paine | Link to comment | March 19, 2008 at 08:59 AM

paine says...
"Are we over-invested in the financial sector and under-invested in other areas? If so how do we correct the "national investment portfolio"? "

are you talking about large sectoral
asset price adjustments ..but among assets
or
large adjustments
between asset prices and product prices ??

Posted by: paine | Link to comment | March 19, 2008 at 09:03 AM

paine says...
james

put your "fiat " money mania aside one moment
and help me see where you're coming from

which class of americans
need to take
the "real " hit here

wage earners or rentiers ??

Posted by: paine | Link to comment | March 19, 2008 at 09:06 AM

paine says...
"Real rates are negative, even in some TIPS. Lenders are literally paying people to take loans "

howz that anything but a borrow now
deal ploy
no different then a prez day
" this weelend only
take an extra 30 % all our mattresses "

Posted by: paine | Link to comment | March 19, 2008 at 09:09 AM

paine says...
Gerard MacDonell

credit volume is what
any deals really about

if the rates zero
but you don't get the loan ....
"But if you create a negative real interest rate, then people are forced into spending"

no they can save all they want
they are only forced to avoid unadjustable
fixed dollar pay out instruments
--- for that matter
you could buy any
real store of value ----

don't conflate the need to run a full employment
effective demand policy
with price level management

looked at on its own
its not necessary to maintain
price stablity
just price change predictablity

the policy vice is producing
unanticipated price level changes
blooms of inflation
that over turn
the expected value
of fixed rate dollar denominated instruments
ddt

look at euro commodity prces

is this domestic inflation just part
of the dollar drop price tsunami

if it is

welcome oh big wave welcome

i agree we ought to start working with
realistic "notional " ground zero
dollar asset prices
not the present pro tem
proptronic fed
parachute make nice
sky floatin' 'values '

but i suspect the big boys already are

as the real value of the dollar declines
trillions start to look manageable

Posted by: paine | Link to comment | March 19, 2008 at 05:42 PM

paine says...
"Possibly I am thinking too much of Japan"

anne my dear one can never think to much about japan

for the rest of god's "advanced " nations
japan's wacked out fate
during the past 15 years
acts like the column of smoke that led the hebrews
by day
thru the desert

40 years of wandering ???

yikes

Posted by: paine | Link to comment | March 19, 2008 at 05:46 PM

paine says...
"Ideology run amok. Till the Chicago mafia is usurped, there will be no change. The untold aim of the mafia is to usurp all laws that prevent pillage and looting, all in the name of "choice", "free-markets", "liberty" and what not"

i like your take billy

though i see the chicago types
more as a mad combo
of
temple priests and tent show preachers
then as the real wise guys

"Ideology run amok" indeed

but in the service of
the one and same " chosen of God "
ie
the cross border
limited liability profiteers
released in stages
over the last 35 years ago
from the bindings
of the new deal / kold war
social contract

and Mammon looketh
apon their unboundedness
and saw it was good

Posted by: paine | "Doesn't the falling dollar act as a Smoot-Hawley tariff?"
yes but its only globe macro bad
if others try to counter it
by say
trying to re raise the dollar
or by a similar de-val attempt of their own

only if there;s a pandemic of devals
can we get the menace of chronic era long type
real cross border trade shrink

btw

my take

poor old smoot
and the industrial babbits behind him
get the horse collar
that far better
ought to be hung
around higher necks
hi fi necks
city and wall street necks

t'was the gathering effects of the draught
in cross border credit flows
not trade in real products per se
that killed the 20's boomlet

Posted by: paine | Link to comment | March 20, 2008 at 08:30 AM

paine says...
"This will force foreign central banks to buy our dollars in an effort to rebalance trade."

yes if they choose not to allow the drop
vis a vis their currency
as the euro's have so far

for peggers t'is true

".. in a way inflating the economy, with regard to foreign trade vis-a-vis
the U.S. is a heads I win, tails you loose situation."

that pretty well covers the world reserve currency advantage the imperial dollar holds
regardless of global market conditions
add to it forex manipulation
of low ball traders like china
and we can
live beyond our real makings ...so to speak

paradox by doing so we shrink our capacity for makings however

and must bust the pegs
or burden the non peggers
by a distorted exchange system like we have now

ps caution to exploiters of imperial privilege

the flow size of the advantage will vary

depending on
other nations trade gaps and reserve TARGETS

Posted by: paine | Link to comment | March 20, 2008 at 08:41 AM

paine says...
" Current policy does not differentiate between the two"

really ???

"Default can be very dangerous, as default can eliminate further extensions of credit"

if u'd turned over the present economy
maybe three or five years ago
i bet you'd;ve
found
the above line by price
on the warning label

Posted by: paine | Link to comment | March 20, 2008 at 08:50 AM

paine says...
price
its always a good working principle
to assume speculators exist
and have really good access
to credit lines
just when the shouldn't

speculators are not buying to use but to sell
or to hold
they are often called investors
its a name they like
like hoarders like the name savers

some folks like to say
investors by to hold on
speculators buy to sell out
in other words its all a matter of
how long you intend to
hold on

some say its whether you buy
for intrinsic value
or market fad
in my arrogant opinion

if any one is actually an investor

if one actually exists

she/he's only
not secretly a speculator
because they are either hapless rubes
primed for a skinning
or an even bigger thief
shooting fish in a barrel
like david m reubinstein

anne
i think the optimal forex path
is a very complex critter to locate

indeed

all your plus points are gotten at by other means
then de industrialization
a post industrial policy for say ...las vegas
is one thing
for north american --save mexico -- quite another

beyond a dollar policy that rapidly leads
to an external balance
in the value of our material product trade

i submit
we need a more radical industrial policy

where its technically feasible
build it here
build it green/clean
build it right
and
build it for productivity max

warning this is hardly a jobs protection policy
to the extent we automate out
routine production jobs all the better

provided we the people of earth
rip away the trans nats
national can openers ---their control
thru IP barriers of fronteer techniques ---
the 2.5 billion souls of china plus india
can develop quite nicely without
de facto de industrializing the north of america and the west of europe by export trade booms

where we agree anne you cosmopolite u

i believe we need a statue of liberty immigration policy

every one please come here

now i caution the balance trade dollar will
reduce the "take back home " value
of your compensation
but still...

citizen ship ????
to me this is the real
spartan / helot bug a boo

even full employment of a vickrey kind
prolly won't end effectively
our paleface fears of swamping

Posted by: paine | Link to comment | March 20, 2008 at 10:27 AM

paine says...
" too much is riding on the remnants of the strong dollar policy"

yes the north south capital export friendly
high vs south dollar policy
tasks us
with its haunting haughtiness

its a tans nat gig thru and thru

for those with
a balanced and rebalanceable portfolio
of trans nat issues

what me worry

but we the work a job day weebles
are fast losing our ability
to make our way up in the world by our own products
its detestible to think
this nation that was once the arsenal of democracy
might well become a nation of deputies

deputies
of the globe's self appointed sheriff

Posted by: paine | Link to comment | March 20, 2008 at 10:36 AM

paine says...
"are you saying that you would like to see global creative destruction of the currency regime, rebalancing etc.?"
i think what would be best for the planet and its people
is not possible without a total make over of
the trans nat hi fi system

and without a world governing body
a total make over is also not possible

up shot
"...it seems ...that (any ad hoc posse of north nations ) rebalancing runs a high risk of war and famine."

Posted by: paine | Link to comment | March 20, 2008 at 10:43 AM

paine says...
that being now off my chest

"what would be the best case scenario in your view? What should the fed/government be doing?"

about everything
in the way of credit interventions
it can get to fly politically
both locally and globally
and right now
and multiplied by 100