I'd love to see Kyle Bass on w/Steve Liesman. I'm pretty sure "Fed/Treasury Stooge" Liesman would be reduced to a quivering ball of tears after having to go a couple of minutes w/Bass. Even better, let Bass do the next interview w/Geithner.
Cases in point - Western Europe vs USA, it seems pretty clear the last 20-30 years that the higher taxes in the EU have resulted in slower growth. And Singapore/Hong Kong vs USA/Japan/W Europe. With a flat tax in the mid-teens the Asian city states seem to have prospered more. Since there is so much government waste in places like USA and W Europe, it's hard to imagine one couldn't slash spending 10-20% without seeing any issues. You'd just be eliminating wealth-destroying, disincentivising pork. It will be interesting to see what happens with Eastern Europe and Russia in 10-20 years, which introduced flat taxes on exactly these arguments. Economic growth isn't everything, and Europeans like to point to the extra "security" you get from a welfare state. However, over the long-term, general wealth levels create more security than a welfare state does. A small government economy with a GDP per capita of 1 million dollars is better off for all strata of society then a cradle to grave welfare state with a GDP of $1k per capita.
Well, krugman agrees with my view that Koo is lost when it comes to monetary policy http://krugman.blogs.nytimes.com/2010/08/17/notes-on-koo-wonkish/ he talks a lot about the interest rate effects but to me that is only secondary the biggest influence comes from the fact that by boosting nominal incomes people will have an easier time servicing debt and delevering(decreasing the downward spiral of bankruptcies and collateral/asset liquidation)
Koo again http://www.economist.com/economics/...ibutions/fed_should_ask_fiscal_policy_support He claims "The only way to keep money supply from shrinking is for the public sector to borrow money. Indeed the US money supply grew after 1933, following the worst balance sheet recession in history, precisely because of governmentâs New Deal borrowings. Japanâs money supply never contracted after 1990 in spite of massive private sector deleveraging, also because of government borrowings." I'm not sure how he reached this conclusion. If the primary buyer of the gov bond are banks(using bank reserves), then yes this will increase the money supply(reserves will turn to M2 as the government distributes the cash through wages, transfer payments,etc) But no fiscal stimulus is necessary for this, banks can swap reserves to low risk assets at any time and they do on occasion If banks are not financing the deficit, I dont see how that increases the money supply, M2 will be borrowed from the private sector and turned over to it again, leaving that static. It will help with the delevering and possibly bringing the date that delevering ends(making private M2 creating possible again) forward but that doesnt seem to be the argument he is making
Well, he is a Keynesian saying fiscal policy isnt the only game in town. That adds some credibility to his argument. Also he could have been a great economist if he didnt keep swinging between showing tons of rationality and intelligence with blindness and politically motivated excuse making
Another reason the Fed might never exit from its current balance sheet. http://online.wsj.com/article/SB10001424052748703649004575436950880560936.html The new capital requirements will get the banks to cut down on loans in order to retain earnings and buildup capital The private M2 creation engine might be damaged for a long-time
Hindenburg omen fooling people http://www.bespokeinvest.com/thinkbig/2010/8/18/know-your-indicators-hindenburg-omen.html