Bernanke's comments on US labor market

[ckirk]

Fascinating quote on the US labor market from Bernanke's speech today at the European Central Banking Conference in Frankfurt. Makes you wonder at the deafening silence from US politicians on this topic.

"In sum, on its current economic trajectory the United States runs the risk of seeing millions of workers unemployed or underemployed for many years."

That quote is not out of context. Link is here: http://www.federalreserve.gov/newsevents/speech/bernanke20101119a.htm

 

[dklaiman]

Who cares about that? Clearly the results of the mid-term election demonstrate that the number 1 and 2 issues on the mind of the American electorate are "Obamacare" and gay marriage.

 

[Shavely Manden]

Fascinating quote on the US labor market from Bernanke's speech today at the European Central Banking Conference in Frankfurt. Makes you wonder at the deafening silence from US politicians on this topic.

"In sum, on its current economic trajectory the United States runs the risk of seeing millions of workers unemployed or underemployed for many years."

That quote is not out of context. Link is here: http://www.federalreserve.gov/newsevents/speech/bernanke20101119a.htm

I think politicians don't want to touch that with a ten-foot pole, especially ones on the Right. It just couldn't turn out well for them -- if they disagree with Bernanke, they sound like they're supporting Obama and the stimulus package (and their out-of-work constituents start thinking they're prematurely cheery about the economy), but if they agree with Bernanke, they risk sounding like they support QE2 (which Republicans don't seem to care for). The Left doesn't really want to bring up the fact that the economy is awful (despite it not being as bad as it could've been) and don't want to be too closely associated with QE2 (since most of their constituents probably wouldn't understand why slowly rising prices are supposed to be a good thing). It's really a toxic topic all around.

Who cares about that? Clearly the results of the mid-term election demonstrate that the number 1 and 2 issues on the mind of the American electorate are "Obamacare" and gay marriage.

The results of the mid-term election clearly demonstrate that the electorate is fed up with both parties, and the ruling party took its normal mid-term losses. I'd say that issue #1 for the American electorate is a tie between the economy and taxation (as usual), and the stimulus and the health-care overhaul just play into that. And, sadly, nobody (including Obama) is seriously campaigning for gay marriage equality at the moment, so that debate's a bit moribund.

 

[noahpictures]

Greenspan's deregulation agenda has been responsible for the financial catastrophe that led to the "deep recession" and high unemployment (anyone who thinks that the unemployment rate is around 10 percent, let me know I've a bridge to sell).

There is a great decline that is taking place. If thing don't change we'll be fourth behind China, India and Germany.

Here is what Krugman, a Nobel Laureate in economics has to say:

http://www.nytimes.com/2010/11/19/opinion/19krugman.html?_r=1&partner=rssnyt&emc=rss

 

[BCatl]

Roubini has backed Bernanke. The economy is not doing well, I don't think that's a great surprise to anyone. If the politicians won't provide the fiscal stimulus, then it's left up to Bernanke to provide monetary stimulus. Better the stimulus than anything like 1937 (even a mini-1937 would be bad).

 

[RayH]

Sounds about right to me. Politicians know squat about how help the economy. Biggest problem is that they've allowed the jobs to go overseas to India and China. Running up the deficit during a recession/depression is about the worst thing you can do.

 

[BCatl]

Sounds about right to me. Politicians know squat about how help the economy. Biggest problem is that they've allowed the jobs to go overseas to India and China. Running up the deficit during a recession/depression is about the worst thing you can do.

I have to respectfully disagree with your last sentence. If there is ever a time TO run up a deficit, it's in a recession or depression.

However, that's beside the point at this point!

Congress has not stepped forward to provide more fiscal stimulus, so Bernanke is left to do the job.

 

[IronJohn]

I think politicians don't want to touch that with a ten-foot pole, especially ones on the Right. It just couldn't turn out well for them -- if they disagree with Bernanke, they sound like they're supporting Obama and the stimulus package (and their out-of-work constituents start thinking they're prematurely cheery about the economy), but if they agree with Bernanke, they risk sounding like they support QE2 (which Republicans don't seem to care for). The Left doesn't really want to bring up the fact that the economy is awful (despite it not being as bad as it could've been) and don't want to be too closely associated with QE2 (since most of their constituents probably wouldn't understand why slowly rising prices are supposed to be a good thing). It's really a toxic topic all around.



The results of the mid-term election clearly demonstrate that the electorate is fed up with both parties, and the ruling party took its normal mid-term losses. I'd say that issue #1 for the American electorate is a tie between the economy and taxation (as usual), and the stimulus and the health-care overhaul just play into that. And, sadly, nobody (including Obama) is seriously campaigning for gay marriage equality at the moment, so that debate's a bit moribund.

That was a very measured and well thought out response. I agree the elections show how fed up the electorate is with Washington. I think the interpretation, by both parties, of the results is really off.

I think Progressives stayed home because issues like single payor health care and don't ask don't tell were dropped by a president and congress that could have passed progressive ideas and showed no backbone. The voters stayed home and let them sink.

Meanwhile the far right was motivated to vote for the issues and policies that are dear to their heart. However, they are going to be as disappointed as the progressives I think. I hope I am wrong and they do have a way out of this mess.

I think the next two elections will be interesting as we see voters gravitate toward both extremes and become more disenchanted.

 

[kadett]

1933 here we come!

 

[SRock]

Gents, lets stay on topic. This thread is about the labor market/jobs not ANYTHING else. Please stay on target lest this thread spiral out of control.

 

[the beav]

As someone who knows more than a little about this subject myself, I'll say for the record that Bernanke is living in the Keynesian paradigm (Krugman too, for you NYT readers), which is taking us down into an economic disaster. He has no idea what he is doing, which is why he was probably chosen to lead the Fed after Greenspan's disastrous tenure. Things will get worse next year.

Anyway, back to the labor discussion, here's a little blast from the past--actually it doesn't seem like that long ago, but the average citizen lived in a different world back then and was more susceptible to soaking in government-sponsored fairy tales--not sure they're doing so anymore:

Bernanke sees 'green shoots' of US recovery

(AFP) – Mar 15, 2009

WASHINGTON (AFP) — In his first television interview, Federal Reserve chairman Ben Bernanke predicted that America's worst recession in decades will likely end this year before a recovery gathers steam next year.

The "green shoots" of economic revival are already evident, Bernanke told CBS program "60 Minutes" in the interview broadcast late Sunday, which the network said was the first by any sitting Fed chairman in 20 years.

http://www.google.com/hostednews/afp/article/ALeqM5h0_BVHNrjlYOoncy63c6fZFuXLag

 

[noahpictures]

As someone who knows more than a little about this subject myself, I'll say for the record that Bernanke is living in the Keynesian paradigm (Krugman too, for you NYT readers), which is taking us down into an economic disaster. He has no idea what he is doing....]

The "Keynesian paradigm" is what saved the United States and brought it out of the great depression. That is a fact. The problem is Bernanke hasn't adapted the Keynesian financial policies, which are logical and have a proven record of working.

The reason we're in this mess is because Greenspan and others confused "free market capitalism" with casino style, anything-goes financial anarchy. Mr. Greenspan has publicly (in front of congress after retiring) acknowledged his mistakes.

 

[noahpictures]

i have to respectfully disagree with your last sentence. If there is ever a time to run up a deficit, it's in a recession or depression.

However, that's beside the point at this point!

Congress has not stepped forward to provide more fiscal stimulus, so bernanke is left to do the job.

+1.

 

[Thebigspendur]

The U.S is reaping the results of years of economic policy going back to when Uncle Ronald was president. Joining the world economy, losing our manufacturing base, bleeding jobs overseas, becoming a consumer driven economy, too easy credit. people want someone to blame for the current mess all they have to do is look in the mirror. Think we can get out of this by reinventing and developing tech jobs? Think we can produce more Scientists and Engineers than China?

The fact is folks better get used to the disappearance of the middle class and a daily struggle for survival as members of the lower classes with a small super rich group who controls everything and a small supper middle class made up of folks who are in occupations that earn big money.

Our great grand kids will wonder in amazement when they read books about when the U.S was at the top of the heap instead of it status as a poor second class country.

 

[Shavely Manden]

As someone who knows more than a little about this subject myself, I'll say for the record that Bernanke is living in the Keynesian paradigm (Krugman too, for you NYT readers), which is taking us down into an economic disaster.

I'd say that's a bit of a premature statement -- this crisis is, debatably, the first major test of true Keynesian economics, and everyone to initially address this crisis (including President Bush) addressed it in a Keynesian manner. I'd be genuinely interested in what you'd do differently; after all, Austrian-school solutions are pretty much off the table (the interest rate's cut to the bone and it's not working), classical economics under exactly the same sort of consumer debt-to-income ratio is exactly what lead to the Great Depression, and if you really believe in supply-side economics, you can't really justify lowering taxes at the moment...that's a sure way to make the deficit unmanageable. If you "know more than a little about this subject", I'd be quite interested in what your proposed solution is, since the private sector is in no condition to step up to the plate.

I'm normally pretty fiscally conservative (seriously), but I truly believe there's no way out of the current crisis but a Keynesian stimulus. The Fed really isn't set up for that sort of thing, but since Congress isn't going to be forthcoming soon, it's the next best thing. It is almost undeniable that had we not had a Keynesian stimulus, the financial sector would've imploded and our economy as we know it would've ceased to exist; heck, even the commercial paper market almost shut down. Claiming that the "Keynesian paradigm" will lead us into economic disaster is truly shortsighted and biting the hand that feeds you.

 

[Mink]

Please....we go through this every time we have a downturn and unemployment goes up. By the end of the 70's we had 15% and little more inflation, went off the gold standard and there was a freak out about the dollar, the USSR, OPEC and Japan were about to rule the world, and so on. Things were just awful here. During the 80's, entire industries went away. What keeps us going is transformational change that improves productivity and jobs are created in new areas. The government cannot spend us into a sustained recovery - it always comes from the ideas and work of creative people. Things will improve again. My worry is where are the people and the environment that will be making the changes. If they're outside North America, unemployment could be high for over a decade. To me, our greatest need from the government right now is to improve our relationships with the rest of the world.

 

[the beav]

I'm normally pretty fiscally conservative (seriously), but I truly believe there's no way out of the current crisis but a Keynesian stimulus.

Wow, I'd like to write a lot more but won't have time now. In the interest of brevity I'd like to make a few points:

1. Keynesian has led to overspending in the West, which in turn has led politicians to overpromise on what they can pay for. Thus deficits have increased decade by decade. Both parties are responsible. Europe is being forced to cut back and so will we, probably in 2011. Thus everything that you're seeing in Greece, the UK, and France will soon be coming to the US.

2. The banking fraud was largely created by the repeal of the Glass-Steagall Act of 1932, which in turn was created to undo the excesses of the 1920s which led to the Great Depression. One of the official authors of this 1999 bill was Phil Gramm (R). Political hacks like Rush Limbaugh and Sean Hannity's primary job is to vilify Democrats (which I am not, btw), so they never mention Gramm. Both Greenspan and Rubin promoted the bill. The result was banking fraud so vast that to date no one at the largest banks has even been charged with a crime, although I've heard that a planeload of Wall Street execs flew to Europe for asylum last year with the "goods", so to speak, and that Interpol is building a case against some of the most famous names on Wall Street. Arrests and a few murder "suicides" may be in the offing.
http://www.huffingtonpost.com/2009/05/11/glass-steagall-act-the-se_n_201557.html

2. QE or Quantitative Easing is the same as "a more elastic currency", which was the original purpose of the Fed in 1913. Thus all the Fed knows how to do is to solve problems by increasing the money supply. All it does is paper over the problems until a later date.

2. I agree that the only way out is more Keynesian spending. The problem this time is that it's too late; the amount of dollars "printed" through debt increases will break the dollar this time. The only consolation is that Europe will be forced to do the same thing, like in Greece and Ireland now, and so it's possible that all currencies may go down together. It's "Inflate or Die" time for everyone. BTW, the US will have to bail out states like the EU has done for countries.

Please....we go through this every time we have a downturn and unemployment goes up. By the end of the 70's we had 15% and little more inflation, went off the gold standard and there was a freak out about the dollar, the USSR, OPEC and Japan were about to rule the world, and so on. Things were just awful here. During the 80's, entire industries went away. What keeps us going is transformational change that improves productivity and jobs are created in new areas. The government cannot spend us into a sustained recovery - it always comes from the ideas and work of creative people. Things will improve again. My worry is where are the people and the environment that will be making the changes. If they're outside North America, unemployment could be high for over a decade. To me, our greatest need from the government right now is to improve our relationships with the rest of the world.

I remember all of this, and it's different this time. After a meeting in Belgrade in 1979, Volcker was ordered by Europeans to save the dollar by increasing interest rates, which he did up to around 18 percent. If we did that today the economy would collapse in one month.

Also, a lot of the disappearance of jobs in the 1990s was covered up by various monetary bubbles, first the internet bubble of the late 1990s, then the housing bubble of the mid-2000s. Today, the last bubble standing is the US Treasury bubble. When it blows up--which it probably will--that will not only destroy the savings of a multitude of pension funds, etc, but will destroy the credibility of the dollar at the same time.

I do believe in the creativity of the people but it takes government institutions to support it. Like you said, printing money is not the answer; if it was, then Zimbabwe would have been a very wealthy country. Instead, I think that one of their $100 Trillion notes wouldn't even buy a cup of coffee soon after it was introduced. The rest of the world knows that we are spending (printing) too much money, which is why they are mad at the US. And with good reason. But like John Connally told a group of foreigners back around 1971, "It may be our dollar but it's your problem," but this time the joke will be on us.

 

[the beav]

The "Keynesian paradigm" is what saved the United States and brought it out of the great depression. That is a fact.

Sorry, but that is not a a fact. Unemployment was about the same in 1940 as it was earlier in the Depression. What brought us out of the Depression was deficit spending to finance the war, which through special conditions gave the majority of US consumers a nest egg of savings which in turn reliquified the banks' reserves.

BTW, under the old system of calculating unemployment that was in place around 1980, unemployment is now around 20 percent.

http://en.wikipedia.org/wiki/File:US_Unemployment_1890-2009.gif

 

[Shavely Manden]

Sorry, but that is not a a fact. Unemployment was about the same in 1940 as it was earlier in the Depression. What brought us out of the Depression was deficit spending to finance the war, which through special conditions gave the majority of US consumers a nest egg of savings which in turn reliquified the banks' reserves.

BTW, under the old system of calculating unemployment that was in place around 1980, unemployment is now around 20 percent.

http://en.wikipedia.org/wiki/File:US_Unemployment_1890-2009.gif

Ah, so you're an Austrian! The Great-Depression thing is pretty controversial, but you do say that deficit spending in WWII restimulated the economy (albeit under strange circumstances). FDR didn't really implement Keynesian economics in the New Deal, though -- he wasn't spending nearly enough money (Keynes was a bit peeved at him over that), so that's why I'm saying that this is the first real test of Keynesian economics.

I'm not so sure that QE2 is a bad thing, though -- a bit of inflation would be an lowering of effective interest rates (since the prime rate ain't going lower than 0), which might be just the ticket to get businesses spending. I'm not sure that QE2 is the best idea, but I'm optimistic and willing to give it a chance -- after all, what other options do we have?

ED: I'm not so sure we're in a Treasury bubble, but we're definitely in a gold bubble -- it'll be quite amusing to see the goldbugs writhe when their investments crumble. And, while Zimbabwean hyperinflation isn't good, anyone familiar with economics knows that a bit of inflation (say, 2% or so) is good for an economy, and the current risk, if anything, is deflation. Let's get the patient out of intensive care before we start worrying about him running a marathon...

 

[knlgskr]

The "New Deal" may have been designed to get FDR reelected and was a temporary fix at best if that; unemployment increased after elections in 1940

WW2 did get us out of the depression; we were doing business with both sides prior to becoming involved in Dec of 1941 and the economy was improving. After WW2 we did experience an economic downturn until we changed our industrial base from war to peacetime. However we are not longer a manufacturing nation but a services nation.

It may well take a decade or more to get out of the current economic situation.

We are now financing China's military buildup.

You cannot tax out of a depression but the private sector through freed capital can spend out of it.

The economic philosophies of Adam Smith in "Wealth of Nations" and Andrew Jackson may be the best available.

Printing more/throwing money at is not a solution but a cause.

An economy as in nature abhors a vacuum and allowing companies, banks, etc. to fail enables those that don't to acquire their assets, capital, etc. and utilize them.

Economics ain't science.