Agreed. It is unfortunate that John's book is no longer available. Cheers, Lawry
On Sep 11, 2012, at 10:41 AM, Ray Harrell wrote: > Things are not automatic. You have to want things to get better. When > there is a political agenda that reacts in opposition, nothing works. > Markets aren't natural institutions. They are formed by arbitrary decisions > based on many things. They are mega systems. One problem is incompetence > but another is recalcitrance and class war. John Warfield's "A Science of > Generic Design" is a masterful exploration of mega systems and how they work. > They only people who seriously study him is the Department of Defense and > the Chinese Government. He's like Deming with the Japanese. > > REH > > From: [email protected] > [mailto:[email protected]] On Behalf Of Arthur Cordell > Sent: Tuesday, September 11, 2012 10:13 AM > To: [email protected]; 'RE-DESIGNING WORK, INCOME > DISTRIBUTION, EDUCATION' > Subject: [Futurework] Central bank money machines fail to spur global economy > > Central bank money machines fail to spur global economy > > by John W. Schoen, NBC News > Sept. 11, 2012 > Read Later > > Stelios Varias / Reuters rile > > By John W. Schoen, NBC News > > Economics 101 says a massive dose of easy money is supposed to be a reliable > cure for a sluggish economy. For the first time in decades, the prescription > isn’t working, to the rising frustration of central bankers in the U.S. and > Europe. > > Four years and more than $2 trillion after the Federal Reserve opened the > money spigots following the financial collapse of 2008, the U.S. economy > remains stuck in the mud. > > Fed Chairman Ben Bernanke, in a widely-watched speech last month in Jackson > Hole, Wyo., defended the central bank’s past decisions to churn out > record-breaking volumes of cash -- a process known as “quantitative easing” > -- saying the policy had prevented a much more painful recession. Bernanke > also left little doubt that more money may be coming, as early as this week’s > regular Fed policy meeting. > > "It is important to achieve further progress, particularly in the labor > market," Bernanke said. "The Federal Reserve will provide additional policy > accommodation as needed." > > Maintaining steady job growth is half of the Fed’s so-called “dual mandate,” > the other being inflation control. Based on Friday's monthly jobs report, > showing fewer than 100,000 new hires in August, the Fed has a lot more work > to do. > > All of which has Wall Street convinced it’s a pretty sure bet that the Fed is > about to fire up its money machine once more, forcing cash into the system by > buying hundreds of trillions of dollars’ worth of bonds. > > “That employment report kind of nailed it,” said Michelle Girard, RBS senior > economist. “The Fed laid out the criteria: we need to see a sustained and > substantial improvement. And that labor report didn’t show it. So the Fed is > going to have to make good on their intentions.” > > But roads paved with good intentions don’t always lead to good places. Though > investors have bid up stocks on the theory that another massive wave of cash > has to go somewhere, there’s widening doubt that another money flood will > boost growth or create more jobs. > > “What central banks everywhere are doing is trying to make sure people are > not focused on the world breaking apart,” said Dinakar Singh, CEO of TPG-Axon > Capital. “Ultimately I don't think lower rates make that much difference > anymore. There aren't that many people left that haven't borrowed money -- > companies or people -- but would if rates were lower. “ > > On top of another massive money drop, the Fed may extend its stated promise > to keep interest rates ultra-low further into the future. Some market > watchers, and a few Fed policy makers, have expressed concerns those moves > could do more harm than good. > > Even as low rates have failed to spur growth, they’re penalizing savers. > Insurance and pension funds have been hit hard by record low returns needed > to fund long-term obligations. And, at some point, the Fed will have to start > selling its massive holdings in bonds, forcing rates higher and producing a > drag on growth. Discussions about that "exit strategy," frequent following > the Fed's first round of bond-buying, have all but disappeared from recent > Fed deliberations. > > Europe’s central bank, meanwhile, is also embarking on its second round of > bond buying to try to head off a deepening recession. But the ECB's easy > money efforts appear to have had even less impact on the eurozone crisis than > its American counterpart. > > Central bankers there face a different, and thornier, set of problems. So > far, they’ve been badly hampered by restrictions on their mandate preventing > them from intervening to help bail out specific countries in trouble. > > They’ve also been hamstrung by politics, as wealthier northern nations led by > Germany have opposed the kind of big-money stimulus pioneered by the Fed. > > Further action could be hampered by a German high court ruling expected this > week on the constitutionality of a key bailout fund. No matter which way the > court rules, central bankers in Germany’s Bundesbank -- along with millions > of that country’s voters -- will likely oppose further ECB proposals to flood > the continent with money, much of it coming from Germany. > > “The Bundesbank is now becoming the voice increasingly of conservative > Germany,” said Jim O'Neill, chairman of Goldman Sachs Asset Management. “It’s > the early stages of heading toward what ultimately will be some referendum in > Germany on a closer euro in which Germany, as part of its DNA has to support > the others.” > > ECB intervention to drive down interest rates could worsen the crisis by > protecting free-spending governments from the financial market punishment > needed to enforce tighter budget controls. > > “Its massive support may well discourage profligate governments from meeting > their fiscal objectives,” said David Rosenberg, chief economist at Gluskin > Shiff. ”Italy is already backsliding on this front.” > > Central bankers in China, trying to revive a slumping economy by pumping more > money into the system, face yet another set of problems this time around. > Following a series of monthly data showing China’s once-hot growth winding > down, Beijing last week announced a series of new infrastructure projects to > try to reverse the downturn. > > But the measures are much more limited than the massive stimulus undertaken > following the 2008 collapse. That spending spree left China with more roads, > bridges, airports and rail lines than it needs. Now, as growth has slowed > again, inventories of raw materials and finished goods are piling up. > > Additional government lending and spending risks igniting another round of > the kind of consumer inflation that swept through China in 2010, forcing up > food prices and inflating a rapidly expanding real estate bubble. > > Chinese consumer price inflation appears to be moving higher again, bumping > up to annual rate of 2.0 percent last month from 1.8 percent in July, and is > likely to rise above 3 percent early next year, according to Mark Williams, > chief Asia economist at Capital Insight. > > “This won’t prevent further stimulus if the economy remains very weak, but it > does make large policy moves less likely,” he said. > > Faced with an ongoing global slowdown, though, central bankers around the > world are loathe to do nothing. Despite the limited impact of dumping more > money into the economy, even easy-money skeptics at the Fed will likely go > along with another round, according to Neal Soss CSFB chief economist. > > “Even those who doubt the efficacy of monetary policy under current > circumstances may well feel obliged not to disappoint financial markets,” he > said. “First, do no harm.“ > > Jim McCaughan, Principal Global Investors CEO, explains why further Fed > easing is not the best policy decision. > > More money and business news: > > > _______________________________________________ > Futurework mailing list > [email protected] > https://lists.uwaterloo.ca/mailman/listinfo/futurework
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