Thursday, June 4, 2009

Pimco's Gross: Maybe Obama Should RAISE Taxes



Comments on this article from Warren Mosler (below):

RAISE TAXES WITH UNEMPLOYMENT RISING DUE TO A SHORTAGE IN AGGREGATE DEMAND?

JUST IN CASE YOU THOUGHT THE GREAT MARKETER UNDERSTOOD THE MONETARY SYSTEM!!

(Warren calls Bill Gross "The Great Marketer." A well-deserved moniker due to the success, in size, of his Pimco fund and to his high standing in the media.)

I had Gross on my radio show once and he did not understand the distinction between a sovereign, currency-issuing nation and an individual or a family in terms of finance. He equated them as the same.

6 comments:

Jeff said...

Hey Mike! I'm a listener from your Biz Radio show here in Houston. If the show were still on, I would recommend you have on David Rosenberg, former economist with Merrill, now at Gluskin Sheff in Canada. It would be a good debate, as he (like me) sees the force of deflation as more or less primal and Bernanke's efforts as (putting words in his mouth) more or less mirroring the course of action in the Great Depression. The more I read about this period, the more Keynesian theory appears inferior to the Austrian approach, but I'm trying to keep an open mind!

Matt Franko said...

I guess Gross will say anything if he thinks it will help ignite a bond rally.

Mike,
Ive gone over the DTS for June 3 YTD for 2009 and 2008.
Summary $M:

2009:
Total Fed Res Acct Withdrawls: 8,315,053
Incl Treasury Redemptions: 4,813,161
Temp Xfers to Tax Note Accts: 225,223
"Bailout" actually loaned or invested: 432,355*

Nets out to: 2,844,314 actually spent on SS/Medicare/goods/services/salaries etc.
*Source: propublica.org

2008:
Total Fed Res Acct Withdrawls: 6,771,797
Incl Treasury Redemptions: 3,204,168
Temp Xfers to Tax Note Accts: 1,187,049
No "Bailout" in 2008

Nets out to: 2,380,580 actually spent on SS/Medicare/goods/services/salaries etc.

So yoy increase in sort-of "real" Fed expenditures is 463,734 eight months into the FY.
Doesnt sound "inflationary" to me in light of non-govt sector contraction. This YOY increase (so far) represents 3.3% of last years $14T economy.

Resp,

Mike Norman said...

Matt,

Yeah, doesn't sound inflationary nor does it sound particularly stimulative. Moreover, recent DTS suggests that less stimulus is being applied. And the Fed is standing back and allowing Treasury sales to reduce reserve balances. They making a calculated guess, it appears, that the worst has passed. Either that, or they have become hyper sensitive to all the talk about them stoking inflation. Could be the latter given Bernanke's comments.

googleheim said...

balance the budget by letting the tax cuts expire will dampen everyone's earnings and take money out of the system

is this not another way to "mop" up the extraneous crediting or "printing" of monies ?

this is where tax payer would be on the hook - using tax money rather broad economics to balance budgets ?

Mike Norman said...

Jeff,

I don't know what you mean by "mirroring the course of action of the Great Depression."

Fed was constrained by a gold standard--till 1933 domestically, but really, all the way through. Gold standard was abandoned in 1971. How does that mirror? If anything the course followed was the Austrian course by mandate and things were pretty bad until deficits ran up to double-digit percentages of GDP. That's total Keynes. That's totally what brought us out. Furthermore (and I have this graph somewhere on this blog--do a search), the economic recovery of respective countries during the depression can be plotted as to when they abandoned the gold standard. Many countries jettisoned it before us and they started on their recoveries sooner. Again, this dismantles the Austrian argument. Hard to argue otherwise.

googleheim said...

JEFF IS ASKING ABOUT THE 1938 CHANGE OF EVENTS - ROOSEVELT WAS PRESSED TO BALANCE THE BUDGET - SO INSTEAD OF THE LETTING THE "SPROUTS" GET LARGE HE CHOPPED THEM SHORT. AND THINGS WENT DOWN.

does any one know if the FSLIC ( savings and loan version of FDIC )
in the 80's was funded by taxpayers or federal crediting of banks ?

many references indicate tax payers were on the hook for this Republican't fiasco of the 80's ...

but I just want to make sure since the FSLIC was finally abolished but not before being funded several times - either by taxpayers or by credits.

It would be ironic if this was actually paid for by taxpayers during a time that the glorious Reagan tax cuts created the very S & L crisis which taxed them to the gilt !!