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August 29, 2011 / 74

Obama Picks New Head of Economics “Advisors” Team

First let me just say that if the current economic “team” gave Obama any advice that he took, they should ALL be fired!

So – he’s nominated a Princeton Econ Professor to advise him on the economy. The guy’s name is Alan B. Krueger. You know… like Freddie Krueger? Since Obama’s boy Alan has been around for a while, he’s written a lot of stuff – so we can look it up and read it and get some idea of how good, or bad, he is.

Let’s just pick a pertinent article he wrote – and a critical juncture in the development timeline of our deepening depression and see how good our boy Alan is – in January of 2009 he proposed a 2% to 5% “future consumption tax” (ie sales tax) which would take effect in January 2011. (NY Times – 1/12/2009 “A future Consumption Tax to fix today’s economy.”)

So this past January we’d have been hit with a National Sales Tax. Which demonstrates to me that Mr Alan totally misread the depth and nature of the economic crisis over a year after it began! And by that time, we had some pretty good indications of what the cause of the crash was.

It was emerging as a bit complex, and some of it didn’t come out for another year or two – but we had the biggest part of it, at least those of us who aren’t Keynesians. To me it looked like “Housing bubble combined with Mortgage Backed Securities bank fraud on a massive scale.”

In December of 2008, just 13 days before Alan published his paper, I published the following on MSNBC’s Newsvine:

In 1982, the Democrat Congress, together with the Republican Senate, and signed by Ronald Reagan, enacted the Alternative Mortgage Transaction Parity Act of 1982. This legislation took a mortgage industry that had ticked along in fine fashion for a long time, and turned it upside down by allowing the creation of “new” kinds of mortgages such as Adjustable Rate Mortgages, (ARMs), interest only mortgages, & etc which led directly to the present “fine kettle of fish” we find ourselves in today.

Note the collegial involvement of a strong Democrat House, a Republican Senate, and a “conservative” Republican President? So – you cool aid drinkers who want to blame the Democrats/Republicans/Capitalism for the mess have to suck it up and admit that ALL of Congress and the Sainted Ronald Reagan are ALL involved in this disaster!!!

And then, building on that, we have the Democrat Congress and Bill Clinton passing a change in the rules regarding loans made under the Community Reinvestment Act (or CRA, Pub.L. 95-128, title VIII, 91 Stat. 1147, 12 U.S.C.  sec 2901 et seq.) in 1995. (GW Bush had a say in it along the way too.)

In October 1997, first Union Capital Markets and Bear, Sterns & Co launched the first publicly available securitization of Community Reinvestment Act loans, issuing $384.6 million of such securities. The securities were guaranteed by Freddie Mac and had an implied “AAA” rating

Which led to the proliferation of commercial paper that everyone bought that wasn’t worth squat!

Then later as the full details became known, and ignored by the government, I posted a piece that told the dirty little secret of the base cause of our present difficulties – that the banks had essentially created their own currency – the mortgage backed securities – and floated about $50 TN of the stuff around the world. And when the housing bubble collapsed… well… as they say the rest is history. (Some at the time were asking how a US housing crisis could bring down the economies of most of the world… it becomes obvious when you know the details and the implications of those details.)

Another aspect of the total picture that I missed at the time is being rammed down our throats today – the repeal of Glass-Steagall by the Congress (mixed) and Bill Clinton in ’99 just before he left office – which led to the creation of the Mega-banks (TBTF).

So since by Krueger’s  associations he seems to be yet another of those idiot Keynesians, my call is that things are NOT looking up for the Obama “economic team.” In fact, this appointment shows that Obama does not understand that it is he and his economic team that are driving the economy DEEPER into the mud.

Looks like we’ll have a new president in 2013.


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