Friday, August 27, 2010
Friday, August 27, 2010 No comments
The Commerce Department has said they will dramatically increase the enforcement of trade rules on the dumping of cheap products into the US that harm domestic manufacturing. In fact they have been bringing dozens of cases, okay last year it was 19 cases and this year it’s 35 but in eight years of Bush the number of cases brought was zero despite thousands of complaints and accompanying over 40,000 factory closings.
The number of factories currently at risk of closing is estimated to be about 90,000. If Obama slaps a 99% tariff on dumping violators as he did on Chinese steel pipe it would be a finger in the dike but the flood is already coming over the top. Even a 35% tax on Yuan to USD currency conversions as some economists propose would not really fix the problem of US companies outsourcing production. Outright tariffs and a crack down on transnational companies dodging US taxes is what is required.
The stock market rose 1.5% today and the excuse was that the GDP numbers weren’t as bad as the economists had predicted. That big bronze bull in front of the NYSE leaves copper cow patties. The real reason the market is up is the Fed Chairman came out with four “new” solutions to stave off economic collapse. First they are going to buy long term Treasury debt and lots of it, he didn‘t say how much but we‘re talking trillions.
Second Bernanke said they will announce that the funds rate will be effectively kept at zero for a “long” period with the hopes that will bring down interest rates charged by banks. Third the Fed will cut the interest rate they are paying banks on the trillion dollars in excess reserves the banks have on deposit with the Fed with the hope banks will start lending it out instead. Even Bernanke didn’t seem to think this would have much effect and said it ran the risk of freezing up the credit market.
Fourth the Chairman discussed a controversial proposal, advanced by some economists, for the Fed to set a medium-term inflation target “above levels consistent with price stability.” But he dismissed that strategy as “inappropriate for the United States in current circumstances.” Of course this completely contradicts the first three parts of his plan because this is exactly what they are doing.
The Federal Reserve is printing money big time to try to keep deflation from taking hold and Bernake acknowledged we are already having some deflation, (do you suppose his house is under water) . Without any restraint on Wall Street they will use these new trillions to inflate commodity markets which will trickle down (alright more like a torrent) into consumer price increases on inconsequential things like food and fuel. Corporations will probably manage to keep “wage inflation” in check however.
The fact is the Fed had a big hand in causing the problems but they didn’t do it alone. Reaganomics or the de-criminalization of predatory capitalism is what really put the world in this mess and the then Fed Chairman Alan Greenspan was the “expert“ everybody used to justify modernizing the economy or rather undoing that old fashioned New Deal regulation. But Mr. Bernanke’s comments today did make Wall Street happy, even the bronze bear out front is smiling or is he just licking his chops? www.prairie2.com