Bernanke wants the deficit cut

I posted this because if you watch right-wing youtube channels or blogs they blame Bernanke for every ill known to man. The reality is the budget was balanced, there would be little or no quantitative easing.

Congress controls 100% the debt of the United States. That debt along with all other debt makes up most of the money supply.

Full reserve checking and brokerage accounts and close to a balanced budget will solve almost all the problems of the economy, including economic growth.

So who is the villain congress or Bernanke?

The villain is the MAJORITY OF PEOPLE who are too dumb or ignorant to support a sane organisation of the society.

Bernanke is not an idiot. He supports loose monetary policy simply because that is the only way a person could become a chairman of the federal reserve. Neither are the congressmen idiots. They support loose fiscal policy simply because that is the only way they can become elected. The voters want to hear, "everything is OK, you are going to keep your lavish lifestyle, everything is the fault of rich people and terrorists but we are dealing with them".

What happens if you tell them, "Listen up folks, you have simply lived beyond your means and you are simply going to have to tighten up your lifestyle, and I mean by A LOT. There will be a big wave of layoffs, big drop in everyone's income, big drop in social security, medicaid and medicare."? What happens is you simply don't get elected. Noone wants to hear that.

Blaming Bernanke or the congress doesn't make sense. What happens if Bernanke actually did suddenly start supporting responsible monetary policy? He'd just lose his position. What happens if any of the congressmen started truly supporting responsible fiscal policy? They simply wouldn't get elected. Pleading that they suppor sane measures is meaningless, because if you actually did manage to persuade them, all that will happen is that they will lose their position and that's all you achieved by persuading them. Nothing will change unless the MAJORITY OF PEOPLE get a better understanding of the situation. Of course, sooner or later that time will come. Let's hope it's sooner rather than later that people get their head down from the clouds and their feet on solid ground.

All this being said, if you actually wanted to persuade majority of people, yeah, you should say that everything is the fault of Bernanke and the big corporations. Never tell people it was their fault if you want to get them on your side! But this is econ forum of 2+2 so... we say how it is. People wanted bread and circus... well, at least they are going to keep getting the circus. Quite a bit of it.

+1 ^

It was good until this paragraph. Sound monetary policy means you can actually improve your lifestyle. The GPD of the country will improve. The middle class was build on sound money. Not passing jobs bills, will actually increase employment. Social security is safe and never has been threatened, other than politicians using the funds for other spending.

This government spending helps no one but government insiders. It is robbery. They say 50% of vote for people younger than 49, goes to Ron Paul. But, the people who are losing their life savings vote for Gingrich the one that caused the problem. So I think it is more of a problem of being bombarded with propaganda and education than doing what will benefit them. Yes, Gingrich take my money and spend it on gambling and hookers, says the religious right.

I agree that long term it will grow, but immediately, won't unemployment skyrocket?

Is "sound" monetary policy necessary while you control the world's reserve currency?

You don't have to do it fast. Not passing the 500 billion jobs bill, is causing job growth in the private sector, which will lead to job growth in the public sector when the revenue flows in to the States.

Goodness, of course. The longer this nonsense goes on, the worse it is for the people, politicians are just trying to preserve an illusion of people having easier life. I meant, people ask what they think will benefit them. Which, because they don't really think, is some naive "evil capitalists are out there to get you, government is going to save you! but most importantly, we want bread and circus!" ridiculousity.

I feel people's own understanding of the world is the real limiting factor here. Even if the politicians were angels and tried to sell the sincerely best policies... I feel people simply would not buy it. They would still ask for stupid policies. So many people really do sincerely believe that price controls would help them. So many people really do sincerely believe that rigid labour laws mean that it's easier for them to get a job. Don't like high prices? Ban them! Don't like getting fired? Ban it! Nothing significant will change until people's understanding of the world improves (which I believe in the long run is happening). If anything, in many countries I actually see some politicians in certain ways favouring policies which are better for the people, than the ones that people themselves ask for.

Not so much robbery, but waste IMO. I mean I don't know so well how it is in the US, I'm from Europe actually. But I doubt corruption comes close to being as bad as just the utter waste of resources on government programs and regulation. Even then, usually it's honestly not that bad IMO, but aging and lazying population in rich countries has created a situation where usual expectations of growth and increasingly lavish life can't be maintained... But short-sighted people are asking for increasingly ridiculous policies to maintain the illusion that it can be maintained. The reality will hit them sooner or later.

Recently, I have had some thoughts about how population dynamics might really be the biggest issue here. It seems easy to me to imagine how a large part of the population being old might sway policy more toward a nanny state. Not to mention the slowdown of (REAL) economic growth. And we have not seen such huge percentage of old people in the history in mankind, as we have had past few decades in the rich countries. Other than that, I really don't see a big systemic pattern that might explain the shift toward more government regulation and increasingly socialist policies, as well as economic slowdown in rich countries these last few decades. But this is just a random thought I had. What do you think?

Only if you cannot guarantee being the reserve currency in the future.

True. I guess it depends on the time frame. All indications that I can think of or see point to the statusquo remaining for the foreseeable future. Of course drastic events can change that sooner than later.

But, as long as dollar demand is high I don't see much deficit work coming to light by our Congress. Unfortunately, when the time is needed to act these things may require more thought than time will allow.

US has dropped considerably in the last decade.

Plenty of countries are wanting to see the US be driven away from being the largest reserve currency. Russia, China, India, Brazil are all shying away very publicly.

If you don't reign things in, then you increase the incentives that others move away. It will not be pretty once that happens.

1. You take the current lavish lifestyle we are suppose to have now. If we removed many policies, the lavish lifestyle would become even greater. China has a lot less of these policies, that is why they are going to pass the U.S.A. big time, this is despite the communist government that is holding them back. The problem is all government monies come from the most productive areas of society, the savers and taxpayers of corporations. If you spend the government money to improve the country that is one thing, but to spend the money to create "jobs" it will only lead to make us weaker.

2. Jeremy Siegel wrote a whole chapter on the aging population. But the reality is the lifespan might have been 40 in 1900 and 80 today, but that is only a double. Machinery to produce food, steel, energy, has increase productivity 10x-20x since 1900. Seigel in his debate vs. Schiff also said productivity today is like 9%. It is very unlikely the average lifespan will increase to 120, 160, 200, or 240. As we remove more government boondoggles, I think you could lower the retirement age to 60, 50, or even 40 and people would be living richer lives than those on SS in the 1980s.

There was an article in Bloomberg Businessweek about Argentina U.S. dollar sniffing dogs to try and collect money leaving the country.

The world and poor of the world need a reliable currency. All the U.S. government has to do is maintain a deficit within about 3% and the U.S. government would have an extra $500 billion to spend. It is so sick that they want to jeopardize this free money. Instead everyday people are looking for a new currency such as gold, silver, bitcoin, or anything else with a fixed supply. As all other countries ruined their currency, they have always looked at U.S. greenbacks to save them from tyranny and starvation. Obama and congress, lets just spend a little more on our friends.

I am sympathetic with a lot of your views, but

1. I don't see how you can be so certain that reduced government would have such drastic improvement. I agree it would help, but it wouldn't be very drastic. There are many countries where government spends more than US, and they have as good economy or better (I mean healthier, not nominal per capita). There are many countries where government spends a lot less, and they are not better off. I remember having some discussion in politics forum with someone where I said that government is wasteful because of carelessness and lack of incentives. He said private sector is also wasteful because of competition. I think that's an awesome point. The size of government has gotten to a point where it seems clearly excessive, but it's not like reduction will make a huge difference, just a small one.

2. It's of course not just the age, but also laziness/neediness. People in rich countries have gotten lazy and used to a very sweet life. The difference between China and US is not a policy difference, but more like people in China work their ass off while putting up with very poor conditions. If people in US did that, economic growth in US would be higher than China. I think US still has better policies than China. They are getting worse but they are still pretty good. However, when people are lazy and used to a very sweet life, then no matter what policy you make, economic growth will simply slow down, there is absolutely no way around it.

Speaking from experience of living in Argentina for 5 months. All the ATMs there are out of cash (both peso and usd). The banks are shutdown and have lines 100s of people long to be able to withdraw a maximum of like 100 usd in pesos from their accounts. They are not allowed to get the rest of their money. The subsidies they put in 2001 to quiet the people (bread and circus) were close to free utilities (which just elapsed and utilties went up 300-400 pct on Jan 1 of this year) and free endless soccer games on television.

The government hired a team of like 4000 tax collector/money inspectors to go around looking for people hiding their money or people buying/selling USD on the black market. The entire economy is collapsing, has hyper inflation, and I believe there will be much worse riots than in 2001.

Whaat? I googled around a little bit and nothing of the kind seems to pop up...

Well, I experienced it first hand. I was there August thu December of 2011. I have no reason to make it up. I liked living there but the civil unrest was becoming too much to stay.

I am not arguing, just surprised it's not being talked about much in western media. I was under the impression Argentina was doing pretty good.

I saw demonstrations and one small riot while there, and I was living in the absolute richest, nicest area of downtown BA with a cop on every corner. No one will accept anything but USD cash for rent payments, banks are frozen, food prices skyrocketing, and the utilities thing pushed it over the edge.

http://www.economist.com/blogs/ameri...rency-controls

I'm trying hard to find a correct statement in that post.

If you missed that one then you aren't trying hard enough.

Taxes if spent wisely on the nations public lands, health, and education will probably improve the country. However, the goal should not be to create jobs, but to make an asset for the lowest possible cost. Paul Krugman, just said we spent $700 billion on a stimulus and it appears the only thing they did was change a few light-bulbs at the Amtrak station. We built the Panama canal with no fed, no income tax, and about taxes equal to about 3% of gdp.

But the richest countries of the world also seem to have the highest corporate health. China never progressed without the Chinese stock market. The U.S. has 6000 stocks and 10000s more private companies.

The problem is the government themselves. They gave every union increase they wanted. They doctored the inflation numbers. End the unions in Argentina and balance the budget and they would not have those problems, U.S. citizens would be buying their currency. Argentina citizens would be using their own currency. Argentina needs a silver standard.