No. of Recommendations: 39
The Fed, by announcing in advance that they'll be there to extend cheap credit no matter how much or how little politicians tax or spend, is merely encouraging bad behavior. Or, as suggested below, it has created a case of ""Münchausen syndrome by proxy."

The Fed is repeating the same mistake that banks did in 2003-2007 by extending Home Equity Lines of Credit to homeowners who were funding lifestyle off their soon-to-be-diminished "home equity." We all know how that turned out.

Now, all the politicians need to do (to make sure they can keep kicking the can down the road) is make sure their policies will keep unemployment high enough to stay above 6.5% (which, according to Pimco's El-Erian is probably the "new normal" unemployment, anyway).

If the Fed were going to announce something that would be beneficial (long term), the Fed should have said "we will stop buying Treasurys on June 1, 2013, unless before then the Congress can come up with a fiscal deal that will balance the budget within 10 years." That might have started some serious fiscal adjustments. Instead, the Fed has promised more rewards for bad political/fiscal behavior.

Promising an addict that you will keep supplying him drugs so long as he continues to be bed-ridden gives the addict no motivation to try and get out of bed.

More accurately, the Fed has turned the entire political class into a neurotic/psychotic entity exhibiting symptoms of "Münchausen syndrome by proxy (MSbP/MSP), which refers to the abuse of another person, typically a child, in order to seek attention or sympathy for the abuser. It is an obsessive [desire] to create symptoms for the victim in order to obtain repeated medication or even operations."

http://en.wikipedia.org/wiki/M%C3%BCnchausen_syndrome

So long as the politicians know the Fed will continue to give them cover to spend money we don't have - to buy votes and keep them in office - they will make sure the "sick child" of America's fiscal condition continues to elicit the sympathy of the good Doctor Bernanke.

Look for the markets to rally every time new layoffs are announced and to fall every time an improvement in the job numbers comes out.

Has no one in Washington, D.C. ever even taken a single college-level course in behavioral psychology?

Apparently not - and we're all the worse off for it, too.

:-o
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No. of Recommendations: 1
If the Fed were going to announce something that would be beneficial (long term), the Fed should have said "we will stop buying Treasurys on June 1, 2013, unless before then the Congress can come up with a fiscal deal that will balance the budget within 10 years."


stylish dog

You just gave me a brilliant idea!!!!

If y'all want to use a bit of "behavioral psychology" to really crank up the economy short term (six months) as well as balance the budget "within 10 years" announce that there is going to be a 5% national sales tax beginning 1 July 2013. Y'all might even consider allowing states to piggyback on it and you could call it the "Harmonized Sales Tax" or HST.

People will use the threat to run around buying all sorts of stuff to "get ahead of the tax" and once it is actually implemented they will forget that bit and keep on spending anyway. Meanwhile the new revenue will really help out both the Feds and the states to "balance the budget within 10 years".

Surprised nobody else has thought of it? }};-D


Any <if they need details have them call me> mouse

http://en.wikipedia.org/wiki/Harmonized_Sales_Tax
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... a 5% national sales tax... Surprised nobody else has thought of it?

Oh, several folks have thought of it - and it's been promoted. A national sales tax even became a popular idea for a while (until its main proponent had to drop out of public view due to unfortunate past over-friendliness to staff members of the opposite sex).

A lot of USians still support the idea:

http://en.wikipedia.org/wiki/9%E2%80%939%E2%80%939_Plan

;-)
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(until its main proponent had to drop out of public view due to unfortunate past over-friendliness to staff members of the opposite sex).

Ah yes, Nelson Mandela is reputed to have consoled Bill Clinton back in the days when a certain party didn't like him <paraphrasing> "Ah you Americans, we South Africans like when our leaders a virile".

Of course you left out the smiley face on my "Surprised nobody else has thought of it?" as just about every nation nowadays has a national sales tax of some sort or the other. It is a great way to collect money as long as you don't put the tax on food and rent it makes it somewhat voluntary.


Tim
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No. of Recommendations: 7
Has no one in Washington, D.C. ever even taken a single college-level course in behavioral psychology?

Suggesting psychology implies that the incentives and behaviors are not obvious to the bad actor. I propose that it is not psychology, but simple microeconomics. Someone profits from every dollar the government spends, and someone profits from every dollar of tax cuts. There is *no* consensus to cut spending, and there is *no* consensus to increase taxes, because either would hurt someone's profits. The current debate over the "fiscal cliff" should make that obvious as there is a constant din of whining how this spending cut or that tax increase will "kill the economy and destroy jobs". There is a national consensus, both by TPTB and the mob to continue $1T+ deficits to the end of time, because they all profit from it.

More accurately, the Fed has turned the entire political class into a neurotic/psychotic entity exhibiting symptoms of "Münchausen syndrome by proxy

Workers have been used as pawns as long as I can remember, but, again, the actions taken by government or TBTP are clear and calculated, not the result of psychosis.

The auto industry has responded to every government regulation, no matter how trivial, for 40 years with wails of "it will destroy the industry and put tens of thousands of people out of work". Recently, a business owner publicly stated he would lay employees off if his favored candidate lost, and he carried through on his threat.

Irresponsible, unfunded, tax cuts are sold as "creating jobs". Wasteful, porkbarrel projects are sold as "creating jobs". Any sort of responsible action is criticized as "destroying jobs".

This is all propaganda, disseminated by wildly self interested parties. The only cure is to give all 300M USians a knife, lock them all in a room, and when the backstabbing is done, and there is only one person left, there will be a consensus...and it will be that that one person gets all the government handouts, and pays no tax.
/rant

Steve
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No. of Recommendations: 5
notehound wrote:
If the Fed were going to announce something that would be beneficial (long term), the Fed should have said "we will stop buying Treasurys on June 1, 2013, unless before then the Congress can come up with a fiscal deal that will balance the budget within 10 years." That might have started some serious fiscal adjustments.

I think that many of the Fed's policies of having the opposite of the intended effect and that they would improve the situation with tighter instead of looser policies.

For example, I know that I would like to buy a bigger house sometime in the next couple of years and I've been saving up a down payment. Because the Fed has explicitly said that they will keep rates low until 2015, I'm in no rush to find a house because I know cheap loans will still be available in 2014. If I thought that the Fed might start raising rates next year, I would set a goal of finding a house in the first half of 2013. Instead, I'm putting off that decision until 2014 and I'm going to keep saving up more money in the meantime.

Rimpy
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I think that many of the Fed's policies of having the opposite of the intended effect and that they would improve the situation with tighter instead of looser policies.

I disagree with the first part of this. I think the Fed has smart people, and the actual results match the intended results.

However, what they CLAIM as the intent does not necessarily match the intended results.
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announce that there is going to be a 5% national sales tax beginning 1 July 2013

On Canada!

Desert (also willing to raise taxes on other people) Dave

"Nothing is so permanent as a temporary government program."
Milton Friedman

www.brainyquote.com
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No. of Recommendations: 4
Rumpy says:
I think that many of the Fed's policies of having the opposite of the intended effect and that they would improve the situation with tighter instead of looser policies.

Warrl responds:

1 I disagree with the first part of this. I think the Fed has smart people, and the actual results match the intended results.

2 However, what they CLAIM as the intent does not necessarily match the intended results.


I agree with Warrl's @1 response, there ARE smart people in the Fed;
and disagree with #2.

What is lost or forgotten in the dialogue is the 'soft landing for the US economy'

Back in mid 2008 to late 2008, when it became obvious that we were in for a REAL economic problem, the official, government response was to develop a plan for a 'soft landing'.

In 1st Quarter 2009, a public speach (along with written pieces) reiterated this goal 'soft landing for US economy', and added that many people would continue to be unhappy.

This public prediction that many would be unhappy has come to pass.
AND - the goal of 'soft landing for US economy', at this point in time seems to have been successful.

Therefore, the claimed intent MATCHES the intended/achieved results.

fwiw
ralph
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announce that there is going to be a 5% national sales tax beginning 1 July 2013

On Canada!

Desert (also willing to raise taxes on other people) Dave




Oh we already have ours thanks.

In fact I have a vague memory of when Ontario first implemented a provincial sales tax at 3% over 50 years ago (I was 14).

The Federal version was brought in by our Conservative party under Mulroney. He did reduce the income tax at the same time but still got slaughtered in the following election... however the replacement government didn't keep their election promise to cancel it. "Things are worse than we thought".

Y'all are a bunch of whiners anyway.


**** absolutely not signed ****

http://en.wikipedia.org/wiki/File:Tax-Revenues-As-GDP-Percen...
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announce that there is going to be a 5% national sales tax beginning 1 July 2013

On Canada!

Desert (also willing to raise taxes on other people) Dave

Oh we already have ours thanks.


No problemo, raise it again!

After all, if you're ready to raise taxes on people in other countries y'all ought to be willing to raise your own.
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Soft landing success --- we will see. Four years isn't a very long time frame. Nor has it been a soft landing for many. Maybe for politicians and bankers.
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Soft landing success --- we will see. Four years isn't a very long time frame. Nor has it been a soft landing for many.

It certainly hasn't been a soft landing for a lot of small businesses and entrepreneurs who have either gone out of business or are operating on a fraction of the cashflow they had built up from before the banks blew up the world.

It also hasn't been a soft landing for savers who had built their retirement plans based on a reasonable expectation of a 4% risk-free return, which was quite predictably within the realm of possibility before the banks blew up the world.

Plus, it hasn't been a soft landing for the folks (including formerly relatively high salary middle-management soft skills types) some still unemployed after being laid off after the banks blew up the world.

Finally, it hasn't been a soft landing for the many many under-employed folks who are working as independent contractors or doing high-skills "project" work because businesses don't like to hire permanent skilled employees despite the "recovery" that has occurred since the banks blew up the world.

But hey - the good news is this: the Too-Big-to-Fail (and more recently, with the HSBC money laundering settlement) the Too-Big-to-Jail bankers are doing just fine.

It has been a very soft landing success indeed for the banksters.

;-)
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Steve203, that is the best description of the way things are in
the U.S. that I've read.

I don't think any future authors are going to be writing any books about the current generation of adult Americans and title it "The Greatest Generation".
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After all, if you're ready to raise taxes on people in other countries y'all ought to be willing to raise your own.


Oh were fine but thanks for your concern. We had our party back in the 80s and 90s but paid for it after.

I don't think your congress would be willing to delegate that authority yet and I seem to recall that they are the only body that can actually do that?
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So long as the politicians know the Fed will continue to give them cover to spend money we don't have - to buy votes and keep them in office - they will make sure the "sick child" of America's fiscal condition continues to elicit the sympathy of the good Doctor Bernanke.

==========================

I do not understand - are you saying the politicians are buying votes to stay in office?

jaagu
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