Ben Slade

I just love these quotes from Paul Krugman. This one from a June 17, 2010 Op Ed article

"In America, many self-described deficit hawks are hypocrites, pure and simple: They’re eager to slash benefits for those in need, but their concerns about red ink vanish when it comes to tax breaks for the wealthy. Thus, Senator Ben Nelson, who sanctimoniously declared that we can’t afford $77 billion in aid to the unemployed, was instrumental in passing the first Bush tax cut, which cost a cool $1.3 trillion."

In the absence of the authority and political courage required to write off mortgage related losses, the Fed has been reduced to using short term solutions that - while allowing the extent of losses to remain concealed - postpone the moment of truth and the inevitable compromise the dollar.

Ultimately, the Fed and even the US government doesn't have enough money to bail out the subprime market, bond insurance contracts, and associated overleveraged hedge fund investments. Printing more money will inevitably hurt the value of the US dollar.

If Bernanke does this, he will instead export the crisis and stoke a global inflationary fever, risking a devastating boomerang: the rejection of the dollar as the global reserve currency and the possible crash of the global economy.

By Paul Krugman in the NYTimes.com (12/3/07):

...nobody knows where the [subprime mortgage] financial toxic waste is buried. Citigroup wasn’t supposed to have tens of billions of dollars in subprime exposure; it did. Florida’s Local Government Investment Pool, which acts as a bank for the state’s school districts, was supposed to be risk-free; it wasn’t (and now schools don’t have the money to pay teachers).

How did things get so opaque? The answer is “financial innovation” — two words that should, from now on, strike fear into investors’ hearts.

O.K., to be fair, some kinds of financial innovation are good. I don’t want to go back to the days when checking accounts didn’t pay interest and you couldn’t withdraw cash on weekends.

But the innovations of recent years — the alphabet soup of C.D.O.’s and S.I.V.’s, R.M.B.S. and A.B.C.P. — were sold on false pretenses. They were promoted as ways to spread risk, making investment safer. What they did instead — aside from making their creators a lot of money, which they didn’t have to repay when it all went bust — was to spread confusion, luring investors into taking on more risk than they realized.

Why was this allowed to happen? At a deep level, I believe that the problem was ideological: policy makers, committed to the view that the market is always right, simply ignored the warning signs. We know, in particular, that Alan Greenspan brushed aside warnings from Edward Gramlich, who was a member of the Federal Reserve Board, about a potential subprime [mortgage] crisis.

Also, from a similar column by Paul Krugman (on 12/21/07):

"Given the role of conservative ideology in the mortgage disaster, it’s puzzling that Democrats haven’t been more aggressive about making the disaster an issue for the 2008 election. They should be: It’s hard to imagine a more graphic demonstration of what’s wrong with their opponents’ economic beliefs."

From the article Does the U.S. budget reflect the best investments for our future? in the San Francisco Chronicle:

This isn't meant to say that defense is not important. But it's a matter of balance.

Whether you care about safe workplaces or farmers' markets, public parks or domestic abuse shelters, the programs that you care about are at risk from a bill that would create a backdoor for their elimination. Without you or your representatives' say, programs and even whole agencies could be killed or restructured to the point of making their work impossible.

A threat is now building in the House of Representatives: some lawmakers are pushing legislation that would force all federal programs--from Head Start to Even Start; from EPA to OSHA; and from urban development to rural healthcare--to defend themselves before an unelected commission. This one "sunset commission" would make recommendations to kill, consolidate, or "realign" all programs (with rare exception), and would have the power to force its recommendations through Congress, limiting your representatives' ability to save important programs from the chopping block.