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Mr Bernanke, please

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September 17, 2007 – Comments (8)

do what you know needs to be done. Cheap credit has caused ridiculous housing overpricing. Everyone earning minimum wage realizes that everything people need to survive has inflated in price and is continuing to do so. Maybe the cost of toys and eating out has stayed the same but healthcare, energy, and a place to live have all gone up. The price of my favorite companys has gone up as well. Food has started to rise. Easy money has made otherwise decent people awfully full of themselves. Poorly run companys are getting investment dollars. Rather than shame their egos and face the mistakes they have made they are begging and crying for more cheap money.

Do what needs to be done. Take care of the people whose jobs earn them more than their stocks. Take care of the peole working 60 hours for minimum wage and getting beat out of their time and a half. Make what little money they earn worth something more. Raise the rate .50 and warn that more raises might be coming. Let the banks struggle and learn to invest money like it is valuable because it will be.

And do not get caught up in the "cheap money is good for America" lie. Do not buy into the idea that giving money to wealthy investors is good for creating jobs for the poorest. The wealthy (people who are good at collecting and keeping money) leave as little of that money as possible to the poorest (people who are not good at keeping money).

Do the right thing. Get on board with Dennis Kucinich. Invest American money into Americans rebuilding American infrastructure and into our schools. Do not make the money available to banks. Make it available to the States. And let the states spend it. And when my friends come home tired from rebuilding the Whitestone Bridge, let them take their familys to Panera. When they come home from drilling geothermal heat wells for the Elementary School, let them drive home in a mid-size Toyota. Because lets face it. There is one thing that these businesses absolutely have to have. More than cheap credit, more than hedge fund investment, more than anything else they need someone who can buy the car and have a sandwich.

Raise the rates. Let the business community cry. And then some of the bankers and appraisers will pick themselves up and start doing the jobs they were supposed to be doing. And some of them will fail. And for their incompetence they can have shovels and brooms. And if they do a good job, I will show them how to fix brakes.

 

8 Comments – Post Your Own

#1) On September 18, 2007 at 1:07 AM, EScroogeJr (< 20) wrote:

After Tuesday's meeting, the Blue Collar Worker was led to his execution. "This year is probably going to be tough" - thought the Blue Collar Worker :)

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#2) On September 18, 2007 at 7:54 AM, rd80 (98.66) wrote:

Raising the rate 50 bps won't protect the people working 60 hours for minimum wage.  It will cost many of them their jobs, raise the rates they pay on loans, and eliminate many of the higher paying jobs that they need to get out of minimum wage.

If the Fed makes the business community cry, who will step in to make up for the lost jobs?

Where's the money for "rebuilding American infrastructure and ... our schools" going to come from if the Fed tips the economy into recession?  Where will the money come from to pay your friend who's rebuilding the Whitestone Bridge or drilling geothermal heat wells when the recession caused (or exacerbated) by a rate cut shrinks the tax base?  Raising taxes won't do it, that would shrink the tax base even farther.

I agree than many bankers, appraisers and financial managers need to fail.  The Fed's challenge is letting that process work without crushing everyone else.  I wish them well. 

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#3) On September 18, 2007 at 8:36 AM, devoish (99.07) wrote:

Where's the money for "rebuilding American infrastructure and ... our schools" going to come from if the Fed tips the economy into recession?  Where will the money come from to pay your friend who's rebuilding the Whitestone Bridge or drilling geothermal heat wells when the recession caused (or exacerbated) by a rate cut shrinks the tax base? 

Did the first link not work? Here, try again.

In June 2004, Congressman Kucinich introduced a bill, Rebuilding America's Infrastructure, H.R. 4631

Raising the rate 50 bps won't protect the people working 60 hours for minimum wage. It will protect the value of what little money they have. It will cost many of them their jobs, It will cause their employers to raise prices to people who enjoy paying for their services. A very small percentage will stop buying those services. raise the rates they pay on loans, They are already at 14% or more on their credit cards and eliminate many of the higher paying jobs that they need to get out of minimum wage General Equivalancy Diploma busperson to hedgefund manager is a career path we cannot afford to lose.

 

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#4) On September 18, 2007 at 8:36 AM, rd80 (98.66) wrote:

Correction - next to last sentence in third paragraph should read "...rate hike shrinks the tax base.."

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#5) On September 18, 2007 at 10:50 AM, floridabuilder2 (99.34) wrote:

i rented until i was in my mid 30s and i did ok... the whole homebuilding / home ownership thing is a scam just like health care for all....  renting makes sense when you are single and want to be mobile and go to where the work is.... bernake would be my hero if he left rates unchanged

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#6) On September 18, 2007 at 12:07 PM, rd80 (98.66) wrote:

Ok, I confess to replying without reading the link first.  Now I've read it and the plan is full of holes.

After the treasuries are transferred to the FBIM, they'll need to be sold on the open market to create the cash for these zero interest loans.  That's effectively what the Fed does to tighten, so not only are you proposing a direct Fed tightening, you're also sucking up additional money supply to fund this zero interest loan program to state and local gov'ts.

This plan would reduce Federal gov't revenues by about $25 billion per year ($500 b program, 5%) because of the interest payments on those securities.  Right now, the Fed's income is returned to the Treasury - when these securities are sold, payments that were going to the Fed will now go to whoever bought the securities.  And there will need to be budget authorization for the FBIM - they need to pay staff and have some provision for defaults.  Does the Fed even have $500 billion of treasuries above the reserves they need for open market ops?  Honest question, I don't know.

This plan is an engraved invitation to fraud and misconduct at the local and federal levels. Think earmarks with free loans instead of grants.

If the gov't were going to make interest free loans to states and municipalities, it would be far more efficient to just do it through the Fed rather than create a whole new piece of gov't. 

"It will cause their employers to raise prices to people who enjoy paying for their services. A very small percentage will stop buying those services"  You've just described stagflation, been there, done that and don't care to go back.

"General Equivalancy Diploma busperson to hedgefund manager is a career path we cannot afford to lose"  Ok, we might have enough hedge fund managers, but add doctor, engineer, manager, financier, public servant and a bunch of others to 'hedge fund' manager and your statement goes from sarcasm to absolute truth.  Minimum wage jobs should be a starting point, not a lifestyle.

I disagree with Congressman Kucinich on nearly every issue, but respect that he's not afraid to state his positions without a lot of spin and distortion.  That's something we could use more of from politicians on both sides.  

Thanks for the debate and have a great day. 

 

 

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#7) On September 18, 2007 at 6:54 PM, devoish (99.07) wrote:

you're also sucking up additional money supply to fund this zero interest loan program to state and local gov'ts.

It is the same money, distributed from the bottom up as opposed to top down.

This plan would reduce Federal gov't revenues by about $25 billion per year ($500 b program, 5%) because of the interest payments on those securities.

It is a ten year distribution of 500b so it reduces Gov't revenue 2.5b per year.

This plan is an engraved invitation to fraud and misconduct at the local and federal levels. Think earmarks with free loans instead of grants

Thank goodness there is no fraud in the current system. 

You've just described stagflation, been there, done that and don't care to go back.

Honest question: when?

Ok, we might have enough hedge fund managers, but add doctor, engineer, manager, financier, public servant and a bunch of others to 'hedge fund' manager and your statement goes from sarcasm to absolute truth. minimum wagew jobs should be a starting point, not a lifestyle

What about an ironworker, tradesman, carpenter, cement worker, or plumber, could those jobs benefit from Kucinichs' plan? Will they pay more than minimum wage? Could they pay enough to afford decent health care? Maybe it is time to meet the people who actually do the work to create the products you are investing in.

I disagree with Congressman Kucinich on nearly every issue, but respect that he's not afraid to state his positions without a lot of spin and distortion

I like Congressman Kucinich on almost every issue in part because he states his positions as opposed to Ron Pauls slogans only site.

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#8) On September 18, 2007 at 7:16 PM, rd80 (98.66) wrote:

"Thank goodness there is no fraud in the current system." - My point exactly. Even if there isn't outright fraud, is there any doubt in your mind that these loans would be distributed based on politics rather than best benefit?  And who gets to decide what gets funded?

"Honest question: when?" - Late 70's, early 80's.

"What about an ironworker, tradesman, carpenter, cement worker, or plumber, could those jobs benefit from Kucinichs' plan?" - I doubt the new jobs from the $50b per year works programs would offset losses due to tighter capital in the private sector.

I have enjoyed the discussion.  Since it's your blog, this will be my last entry and I'll leave you the option of the last word.

Take care, Russ 

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