Volcker: There's No Growth Other Than What The Fed's Pouring Into The Economy

[AllentownJake]

SPIEGEL: The US has not yet instituted any kind of reform policy. What we see is the government and the Federal Reserve pouring money
into the economy. If one looks beyond that money, one sees that the economy is in fact still shrinking.

Volcker: What should I say? That's right. We have not yet achieved self-reinforcing recovery. We are heavily dependent upon government support so far. We are on a government support system, both in the financial markets and in the economy.

SPIEGEL: To get the recovery to the point where it is right now has cost a lot of money. National debt will probably reach $12 trillion in 2019. Just serving the debt costs $17 billion a year -- at least according to this year's forecast. That's difficult to sustain.

Volcker: You've got to deal with the deficit and you've got to deal with it in a timely way. Right now, with the unemployment rate still very high, excess capacity is still evident, and the economy is dependent on government money as we said. We are not going to successfully attack the deficit right now but we have got to prepare for attacking it.

http://www.businessinsider.com/volcker-theres-no-growth-other-than-what-the-feds-pouring-into-the-economy-2009-12

[Skittles]

1. smoke and mirrors

:thumbsdown:

[AllentownJake]

5. Summers isn't going to be happy

He got Volker in the corner, forgot to muzzle him.

[andym]

2. Volcker --- Jimmy Carter's man at the Fed, who beat stagflation

is always worth listening too. Too bad Reagan by being in the right place at the right time got the credit for Volcker's good work.

[Metta]

3. Yes, Obama's into bandaids, a flag pin and a scripted response.

Happy karma, O, from a former fan.

[Zynx]

4. That's really no secret. Of course the economy would be shrinking in the absence of government

intervention. That's why it was necessary in the first place. No recovery induced by government intervention will be self-sustaining three months into it.

[bvar22]

6. We would be much better off....

...if the government was pouring the money into a Bottom Up stimulus instead of just re-inflating the failed Wall Street Banks.

[Mist]

11. Yes, trickle-down stimulus isn't helping much. But then I'm forgetting--helping 99% of

the pop. isn't on the agenda...

[kenny blankenship]

7. ...and that's just been going to reflate the stock market bubble, so banks can claim to be solvent

We sure took a wrong turn somewhere. The problem isn't that the govt.'s borrowing is the only source of growth it's that the money is ALMOST ENTIRELY GOING TO THE WRONG HANDS. It's a "supply side" driven deficit, not a demand growth driven deficit. Someone at the top drank the supply side Koolaid back in the 80s and 90s and neglected to tell us Democrats what he really thought about economics, and now it's "trickling down" on us. It's the worst of Reagan-Bushonomics, but on speed.

[David Zephyr]

27. You may be right, kenny.

.

[Democrats_win]

8. Factories sit idle or are working under full capacity. Problem is the people have no money.

It really isn't rocket science. It is obvious to everyone except those making the choices in Washington. M$M has even reported that the rich are increasing their spending while the middle class and poor are buying less. The economic equation must be changed. The government must stop giving money to the rich and the military and start giving it to the people through government jobs or simply doling it out to the poor.

[leftstreet]

9. Who is this 'we' he speaks of?

Volcker: What should I say? That's right. We have not yet achieved self-reinforcing recovery. We are heavily dependent upon government support so far. We are on a government support system, both in the financial markets and in the economy.

:shrug:

It's certainly not us peasants

[AllentownJake]

12. The most interesting thing here

Is that Volker is saying this, he is part of the administration as he is the head of the Economic Advisory Board. This is either a single of administration action or going on the record of his displeasure of it.

Time will tell what it is.

[Octafish]

10. Servicing the debt costs about $400 billion per year, not $17 billion.

We the People could do a LOT with that money. Instead, those tax dollars go straight into the pockets of the big corps and foreign nations that can afford to lend Uncle Sam some scratch.

SOURCE: http://www.federalbudget.com/

[AllentownJake]

13. I beleive 17 billion is just the intererst

The $400 billion includes past principle payments, which are refinanced.

[exboyfil]

14. When I first saw the $17B figure

I did a back of an envelope calculation, and I thought it should be around $500B. In a sense the $17B is irrelevant since, as you point out, we just keep selling additional treasuries to cover the interest as well as this year's operating shortfall.

I think we will try to inflate ourselves out of it (going to be hard with both Social Security and Federal pensions inflation adjusted).

[AllentownJake]

15. It will blow-up before they become an issue

on the account of other things.

[dysfunctional press]

16. there are also a lot of VERY rich americans who hold a whole lot of t--bills.

which is another big reason that the 'national debt' will NEVER be 'paid off', if they have anything to say about it.

[AllentownJake]

17. A safe investment with an interest rate and insurance you never lose your principle

Nope, I doubt the insanely wealthy would want that to go away.

[exboyfil]

21. I would not consider myself wealthy,

but my TIPS are the cornerstone of my retirement investments. I have been tempted to sell them because they have appreciated so much in value, but I find I like the inflation hedge they offer (more so than gold). Don't want anymore at current prices, but I will jump back in with both feet if they get back up to inflation+3% (of course my current holdings would take a hit).

[AllentownJake]

18. Kick for the evening folks

[Overseas]

19. K&R. //nt

[Fumesucker]

20. To paraphrase Roseanne: We are so far beyond screwed..

That the light from screwed won't reach us for ten billion years..

[Vidar]

22. Nice to hear some honesty on the subject.

[HughMoran]

23. Read Part I & II - interesting

There's quite a lot more to this than the headline you've extracted. I found the below to be another good quote:

SPIEGEL: What is the difference between this deep recession and all the other recessions we have seen since World War II?

Volcker: What complicates this situation, as compared to the ordinary garden variety recession, is that we have this financial collapse on top of an economic disequilibrium. Too much consumption and too little investment, too many imports and too few exports. We have not been on a sustainable economic track and that has to be changed. But those changes don't come overnight, they don't come in a quarter, they don't come in a year. You can begin them but that is a process that takes time. If we don't make that adjustment and if we again pump up consumption, we will just walk into another crisis.

[cutlassmama]

24. Yes, 10 years, like the other GREAT DEPRESSION

[HughMoran]

25. That's why they're calling it the Great Recession

Let's hope it doesn't double-dip into a depression as there will be much suffering and likely violence.

[roamer65]

26. Volcker still won't tell the honest truth.

The American big banks are still "zombie banks" and need to be nationalized to clear out the bad loans. These banks then should be broken up and sold. We are making the same mistake the Japanese made in the early 1990's with their banking system.

Volcker is the "tool" who singlehandedly destroyed the industrial base of this country, so I am not surprised at his half truths. At least he agrees that Glass-Steagall should be re-instated.

[HCE SuiGeneris]

28. self-delete.

[Mithreal]

29. K&R for more discussion

[nilram]

30. "There is a lot of concern about the dysfunction of the political system."

Volcker: As an American, I have to be an optimist. But we have got a big challenge and we have to face up to it. And as you know, there is a lot of concern about the dysfunction of the political system.

SPIEGEL: So it is becoming harder to be an optimist?

Volcker: It's a challenge.

Roger that, Paul.