I wish I could say that the following were the dumbest things I read last month, but the longer this Depression lingers the more lost experts and pundits appear to become. 


Excerpt from "BOE's Bean Says More Stimulus May Be Needed to Sustain Economic Recovery" on Bloomberg.com.  Link

Bank of England Deputy Governor Charles Bean said more monetary stimulus may be required to sustain the recovery as the aftermath of the recession continues to hamper the economy.

"The deleveraging process is incomplete, the recovery remains fragile and a considerable margin of spare capacity is yet to be worked off,” Bean said in a speech at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming today.  “Further policy action may yet be necessary to keep the recovery on track,” but “normal times will surely return in due course.”


There is no fundamental economic recovery to be sustained.  Monetary stimulus has done nothing to resolve the economy's problems, while it has created a new set of impediments to a rebound.

If Charles Bean or anyone else doubts this reality consider the following.  During the second quarter GDP expanded by 1.6%.  The second quarter also marked:

• Peak stimulus spending
• The zenith of Census hiring
• The acme of housing stimulus 
• Record low mortgage rates resulting from the Government's guarantee of 95% of home loans issued
• The continuation of historic monetary stimulus

Without the most aggressive fiscal and monetary policy in U.S. history, what would the GDP figure have been during the 2Q?  It is likely that Gross Domestic Product would have declined without record deficits, unsustainable hiring, and distortive housing policies.

Furthermore, the notion that "the deleveraging process is incomplete" is absurd.  The Government is accumulating debt far more quickly than individuals are able to personally deleverage.  Yet individuals are responsible for servicing and repaying the Federal debt.  In addition, declining house prices and low down payment mortgages are increasing leverage within the housing market.  In large swaths of the economy the deleveraging process has yet to begin.


The following is an excerpt from a well-intentioned Bloomberg article entitled "Retiree Ponzi Scheme Is $16 Trillion Short" by Laurence Kotlikoff

The author may have meant to say something else, but rarely have I read a proposed concept so detached from reality as the following:

"Social Security’s objective -- forcing people to save for retirement -- is legit.  Otherwise millions of us would seek handouts in our old age."

Forcing people to save for retirement was never the objective of Social Security and the program has accomplished the diametric opposite.

Social Security is the antithesis of savings.  Not one dollar contributed to the program in 70 years may be considered to have been saved.  Social Security is a tax.  The tax receipts are used to fund the Government's general operations.  One of those expenses is servicing Social Security's optional and unfunded pension payments. 

There is no ownership of purported "savings", nor does there exist a legal claim to receive Social Security benefits even if one has spent a lifetime paying the tax.  Worst of all, no capital is accumulated while "saving" via Social Security taxes.  The money is spent.  It is not available to finance new businesses.  It is not allocated to projects or companies capable of generating attractive risk-adjusted returns.

Actual savings are replaced with the expectation of receiving unfunded pension payments in the future financed by more taxes paid by people who have yet to be born.

Real savings are vitally important because they finance capital formation which in turn fuels growth, the creation of wealth and prosperity.  China's future is bright partially because its citizens save money which may be invested.  Social Security squanders potential savings, starves a capital hungry economy and places an undue financial burden on future generations.  In many respects Social Security is the origin of "The Death of Savings in America" (future article). 

Higher taxes, more Government spending, less savings and rapidly growing unfunded pension liabilities.  This is Social Security's legacy.