Monday, May 19, 2008

Quotations From Chairman Steve

"Paulson repeatedly says he wants a strong U.S. dollar. ... Here's what Paulson and [Fed] Chairman Ben Bernanke should do: Soak up the excess dollars. Announce to the world that they are doing this and why. Get the G7 to intervene to prop up the buck. The Fed could simultaneously point out that the Bear Stearns operation demonstrates we can take pinpoint action to prevent the financial system from seizing up but that there is no need--if there ever was one--to throw gobs of dollars from a helicopter all over the U.S. and the world. ... Paulson ... has it backwards: The weak dollar is the fundamental problem", original emphasis, Steve Forbes (SF) at Forbes, 19 May 2008.

"But is the biggest entity of all--the U.S. government--heading toward the financial rocks? Moody's, the credit-rating agency, got publicity--for once, not negative--in January when it warned that the U.S. government may lose its triple-A rating within a decade if Uncle Sam doesn't do something drastic about the unfunded liabilities of Social Security, Medicare and Medicaid. ... and let's ignore the fact that the U.S. government can literally print the money to service Washington's Treasury debt. ... Raising the retirement age for Social Security or reducing payouts is also unneccessary. ... If younger workers had their own accounts, Social Security liabilities could be treated as sunk costs to be amortized over the next 30 or so years. ... Moody's, by the way, didn't even mention that other and very real threat to the value of U.S. Treasury's: inflation", SF at Forbes, 19 May 2008.

"Given the turmoil in the credit markets, here's an initiative the White House should adopt: busting up the credit-rating-agency cartel. For more than 30 years the SEC has taken it upon itself the task of deciding who should rate debt instruments and who shouldn't. ... The SEC should step aside and let the financial markets decide which rating agencies should get the business", SF at Forbes, 19 May 2008.

I'll say it again, is SF stupid or crazy? If Helicopter Ben (HB) wants to defend the dollar, all he has to do is nothing. Literally stop printing them. If say, Citigroup fails, so be it. SF is correct, the weak dollar is a serious problem. The Bear Stearns bailout only showed that HB will protect Wall Street at the expense of dollar holders.

What has the potential amortization of prior Social Security (SS) liabilities to do with younger workers having separate accounts? If we don't reduce SS liabilities directly, we will reduce them through inflation. What's not to understand? Inflation is no threat to the nominal value of Uncle Sam's debt.

Hooray SF, something I agree with. See my 28 December 2007 and 14 March 2008 posts.

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