Monday, November 30, 2009

Wherein the Media Gets Things Wrong wants us to believe that the current post-bubble deflationary, weak economy state of this country that has led to record low Treasury rates is due to the great job that Tim Geithner is doing running Treasury (and note how little credit his boss or Gentle Ben get), in te sycophantic In-Geithner-We-Trust Bond Market Gets Lowest Yield:

Less than a week after deflecting calls for his resignation, Timothy Geithner sold bonds on behalf of U.S. taxpayers at the lowest yields on record in a show of confidence in the Treasury Secretary’s policies.

Even as the nation’s debt increased by $1.15 trillion this year to $6.95 trillion in October, the government’s interest expense under Geithner dropped 15 percent, the biggest decrease since before 1989, according to data compiled by Bloomberg. The Treasury auctioned $44 billion of two-year notes Nov. 23 at a yield of 0.802 percent, the lowest on record.

Rising demand shows investors believe Geithner, 48, is striking a balance between policies to promote growth and the borrowing needed to finance a $1 trillion deficit.

DoctoRx here. Wait! TG has no role in setting the budget. Where is the credit to Congress and the President for these wise policies? The conclusion here is that this article is a plant to fight back against calls for Mr. Geithner to leave (a position that EBR advocated before he was confirmed).

There is much more sycophancy in between the below-the-fold criticism from what we are led to believe are only Republicans:

For Representative Kevin Brady of Texas, the senior House Republican on the Joint Economic Committee, rising demand for bonds reflects the state of the economy and the inability of the Obama administration to turn it around. Former Connecticut Republican congressman Rob Simmons, who is seeking to unseat Democratic incumbent and Senate Banking Committee Chairman Christopher Dodd in the 2010 election, said earlier this month that Geithner should resign over his role in the AIG bailout.

Simmons cited a Nov. 16 report by the Troubled Assets Relief Program special inspector general that faulted the New York Fed, with Geithner at its helm, for making “limited efforts” to protect taxpayer funds during the rescue of AIG. . .

“For the sake of our jobs, will you step down from your post?” Brady asked Geithner at a hearing of Congress’ Joint Economic Committee on Nov. 19. “The public has lost all confidence in your ability to do the job,” and that “is reflecting on your president,” he said.

Geithner dismissed the suggestion and blamed policies of President George W. Bush for the financial crisis. Republicans “gave this president an economy falling off the cliff,” he told Brady. “I can’t take responsibility for the legacy of crises you bequeathed the country.” . . .

Actually, criticism of Mr. Geithner, both in his role as head of the N. Y. Fed and as Treasury Sec'y has come from many quarters. Yet this article transitions promptly from the above quotes to pointing out the good stuff:

Lower Treasury yields have helped to push down borrowing costs for companies, local governments and consumers.

No mention that banks and credit card companies nowadays primarily want to lend to those who don't need to borrow. You, I and small businesses hardly have the Treasury's borrowing costs.

The truth is that the Administration and Congress told the public 9 months ago that just give us "stimulus", and the unemployment rate would peak at 8.0%. It is this slack in the economy, with labor, real estate and industrial capacity currently in oversupply relative to demand, that has led by default to "demand" for Treasuries.

If there were really confidence in our economic policy, the dollar would not have been weakening against gold, and the 10-30 year part of the curve would be much lower.

This article is a disgrace.

Also misguided, though not a disgrace, is A world awash in debt by Canada's Globe and Mail. It somehow finds that the possibility that governments will shrink their deficits to be calamitous:

The financial crisis provoked a global front to stimulate economies through massive spending. But this was fuelled by a staggering amount of borrowing. Now governments are realizing that a new calamity looms - higher taxes and slashed social programs.

If you believe that per capita GDP of over $40,000 in the U. S. and Canada is a calamity and that people living longer and healthier lives is a calamity, well then, the Globe and Mail has it right.

The Globe and Mail is just scaring you. We have plenty of capacity to provide for the elderly, but yes, more retirees as a percent of the population has obvious implications for GDP. But what of it?

Maybe we should work either less hard or for fewer years, or some combination of the both.

The great achievements of the modern world in bringing longevity to the masses of course provide new challenges, but calamity? Hardly.

Copyright (C) Long Lake LLC 2009

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