After the usual Keystone Kops shuffle, with the Senate parliamentarian nixing a couple items in the House Bill, the Republican Tax Cuts and Jobs Act heads to the president for signature.
Right here, right now, Mr. President, there are two things to do.
1. Get interest rates back to normal. After the Crash of 2008 we have had ten(!) years of low interest rates. And no wonder, for the economy took a while to recover from the credit meltdown. But now we have sensible supply-side policy in place, instead of stupid subsidize-and-regulate. My guess is that the invigoration in economic growth -- already forecast to hit 4% annually in the current quarter -- means that we need to get in front of the business cycle, and increase interest rates now so that we don't have to play catch-up as usual to kill an overheating bubble economy. This time there is going to be an unusual factor, the repatriation of perhaps trillions of dollars in profits of US corporations, that I expect is going to unleash a huge credit boom in the US. Please, Mr. President, get the word out to the Federal Reserve Board that you will give them cover as they bring interest rates back to normal and maybe pitch them up 0.5-1 percent above normal to cool the over-excitement. Oh, and yes, the spending on interest on the National Debt will go from $314 billion a year in FY 2018 to $900 billion and very likely more. You can check out what will happen on my Interest Analysis page at usgovernmentspending.com. But I am sure that your chaps at the Treasury are already eager users of the Interest Analysis page.
2. Start increasing the down-payments on home mortgages. The main cause of the Great Recession was the violation of Walter Bagehot's dicta in Lombard Street about credit. First, all credit should be properly collateralized, meaning that if a loan is terminated, the value of the collateral is sufficient to pay the balance of the loan. Second, borrowers should be able to pay their payments. In the 2000s, as a result of US government policy, people got 100 percent loans, meaning that in any downturn they went underwater and couldn't liquidate their mortgage without somebody getting a haircut, and sub-prime borrowers got about half of the loans, meaning that in a downturn a ton of borrowers would not be able to make their payments. Hello! The whole policy of subsidizing home mortgages has been a disaster, because quite simply the easier you make it for people to get mortgages the higher house prices will go and the more difficult it becomes for young people to buy their first home. And the bigger the financial panic when the music stops, housing prices crater, and the sub-prime borrowers go to the wall.
I don't know whether this policy is possible, or if you care about it, Mr. President. And if you pursue it the Democrats will be all over you as a pal of The Rich, because high interest rates, and a racist sexist homophobe, because sub-prime minority home-buyers. So you will never get the credit you deserve.
But there is such a thing as doing the right thing.
Right here, right now, Mr. President, there are two things to do.
1. Get interest rates back to normal. After the Crash of 2008 we have had ten(!) years of low interest rates. And no wonder, for the economy took a while to recover from the credit meltdown. But now we have sensible supply-side policy in place, instead of stupid subsidize-and-regulate. My guess is that the invigoration in economic growth -- already forecast to hit 4% annually in the current quarter -- means that we need to get in front of the business cycle, and increase interest rates now so that we don't have to play catch-up as usual to kill an overheating bubble economy. This time there is going to be an unusual factor, the repatriation of perhaps trillions of dollars in profits of US corporations, that I expect is going to unleash a huge credit boom in the US. Please, Mr. President, get the word out to the Federal Reserve Board that you will give them cover as they bring interest rates back to normal and maybe pitch them up 0.5-1 percent above normal to cool the over-excitement. Oh, and yes, the spending on interest on the National Debt will go from $314 billion a year in FY 2018 to $900 billion and very likely more. You can check out what will happen on my Interest Analysis page at usgovernmentspending.com. But I am sure that your chaps at the Treasury are already eager users of the Interest Analysis page.
2. Start increasing the down-payments on home mortgages. The main cause of the Great Recession was the violation of Walter Bagehot's dicta in Lombard Street about credit. First, all credit should be properly collateralized, meaning that if a loan is terminated, the value of the collateral is sufficient to pay the balance of the loan. Second, borrowers should be able to pay their payments. In the 2000s, as a result of US government policy, people got 100 percent loans, meaning that in any downturn they went underwater and couldn't liquidate their mortgage without somebody getting a haircut, and sub-prime borrowers got about half of the loans, meaning that in a downturn a ton of borrowers would not be able to make their payments. Hello! The whole policy of subsidizing home mortgages has been a disaster, because quite simply the easier you make it for people to get mortgages the higher house prices will go and the more difficult it becomes for young people to buy their first home. And the bigger the financial panic when the music stops, housing prices crater, and the sub-prime borrowers go to the wall.
I don't know whether this policy is possible, or if you care about it, Mr. President. And if you pursue it the Democrats will be all over you as a pal of The Rich, because high interest rates, and a racist sexist homophobe, because sub-prime minority home-buyers. So you will never get the credit you deserve.
But there is such a thing as doing the right thing.
No comments:
Post a Comment