Comments on: The many interpretations of Ben Bernanke Sat, 03 Jan 2015 16:42:55 +0000 hourly 1 By: KTX Mon, 27 May 2013 09:21:01 +0000 IMO, the reason mkt got disappointed was they expected much dovish comments from Mr. Bernanke. The mere possibilities of tapering QE can be scary to some in the markets.

By: AZWarrior Sun, 26 May 2013 18:42:47 +0000 So the government has failed and now you want corporations to bail them out. Not going to happen. Sooner or later the government will have to govern instead of endlessly campaigning. No one wants this tar baby when the money printing has to slow or stop altogether. Best that can be hoped for is some sort of “managed decline” of expectations as inflation works it’s terrible destruction of what is left of the once productive middle class.

By: IronHamster Sat, 25 May 2013 02:58:14 +0000 It’s silly to blame corporate America for not paying enough. They pay plenty of taxes. Our government is wasteful. Plain and simple. We have a Present who actually roots against our country, so it’s no wonder why we come up short.

By: EconCassandra Fri, 24 May 2013 21:37:09 +0000 A reality check from the UK Guardian:

What is the economic responsibility of corporate America?

Even Fed chairman Ben Bernanke is calling out the private sector for not doing its part to help the frail economy

Heidi Moore (updated)
Heidi Moore, Thursday 23 May 2013 14.15 EDT
Jump to comments (130)

The best kind of Federal Reserve chairman is the one who doesn’t believe he owes anyone anything. That is when we start to hear the truth about the economy more directly.

Seven years into his term, and unlikely to renew his engagement in Washington, Ben Bernanke has reached this state. He started out as a diplomat and an able politician who avoided offending people and adopted the appropriate Washington plumage to survive. Now he is the truth-teller we need.

He has spent seven years dealing with a do-nothing Congress with little more than perhaps quiet exasperation. Now that his term is nearly over, he is a bolder man. In his testimony before the Joint Economic Committee of Washington, he pulled no punches. He declared:

“Monetary policy is not omnipotent. We are pushing pretty hard at this point.”

Bernanke has chided Congress before, subtly, on its refusal to take action with the budget and revise fiscal policy. He was not so subtle this time. Bernanke noted that long-term health of the economy is “not the Fed’s job” – “that’s the private sector’s job and Congress’s job.”

Congress, we can leave aside. We know that austerity is painful and counterproductive, as the travails of Europe have shown us. If we didn’t know it, Bernanke made it clear. Bernanke’s mention of the private sector, however, is important. While Congress and the Fed discuss what to do about the slow economy, there are a few voices notably absent: those of any important CEOs willing to do their part to increase hiring.

The corporate and financial side of America – the private sector – is not doing its part to help the economy. Congress, as utterly useless as it has been in producing decent legislation, can only do that – legislation. Companies and banks actually hold the purse strings and hiring power, and they are not loosening them to help the economy.

Take a bill introduced by Democratic Representative John K Delaney of Maryland this week. The bipartisan bill – with 13 co-sponsors from the Republican and Democratic ranks – is devoted to improving the country’s weakening infrastructure by luring corporations to contribute to the effort.

Many of these corporations, in protest of “high corporate taxes” that they rarely actually pay, hire expensive lawyers to avoid the entirety of their tax bills. Yet they use the nation’s roads for trucking, our waterways for shipping, our bridges and city streets and airports. In small towns, one big corporation can make the entire economy, as FedEx is in its Tennessee headquarters. But how about the towns and the states that these companies just pass through on their way to making money? They don’t get the same economic benefit to help with their maintenance.

While major corporations are happy to use infrastructure, they contribute very little to its maintenance as long as they don’t pay their full compliment of taxes. Yet convincing these corporations to pay their full tax burden is a lost cause, as was evident yesterday when Apple CEO Tim Cook smilingly explained openly to Congress how Apple uses Irish subsidiaries to lessen its US tax bill. The lawmakers mostly met Cook’s testimony with adoration. The message of his appearance on behalf of corporations everywhere was: allow us to pay lower taxes, and we will stop avoiding them.

As this ego-fed debate continues, the nation’s infrastructure needs repair – hundreds of billions of dollars in repair, according to many studies – and that money isn’t coming from the government. So Washington has to think carefully: how can it persuade corporations to do their duty and pick up part of the tab for the services they use?

The answer is in Congressman Delaney’s bill, which proposes that companies be allowed to repatriate their foreign earnings at a lower tax rate – as low as 8%, probably – if they use some of the money to buy new infrastructure bonds. The bonds, of which only $50bn will be sold, will raise about $750bn for infrastructure investment.

With its bipartisan support and solid negotiation technique – a simple quid pro quo – the Delaney bill is likely to be successful, or at least should be. It is perhaps the first constructive answer to both a government and a corporate problem.

Still, there remains a question of whether the offshore tax holiday was ever really a plausible corporate problem, or one hyped by CEOs as an excuse to inflate their company’s coffers and their stockholders’ wallets rather than invest in new initiatives. Once the offshore-profits issue is out of the way, what excuse will companies have left for not investing money in the American economy and American workers?

The issue of offshore profits and a tax holiday was a red herring: US companies have not been hurting for cash. The stock market is at record highs overall, and particularly so for big companies. The stock market riches are flooding corporations in inflated stock options and paper wealth. Corporate profits, as a percentage of US GDP, are higher than ever, according to the St. Louis Federal Reserve.

The 2004 tax holiday showed that the companies that took advantage actually fired workers, and that was during a good economy. There is no reason to believe they would be any more eager to hire as long as there is the excuse of a weak economy.

The truth is, the weak economy is not out of the hands of corporations. They don’t have a tax problem. They don’t have an economic problem. They don’t have a problem of an unskilled workforce. Instead, they have an innovation problem. These companies could, for instance, invest in new initiatives or expand their business models. Very few, if any, companies are doing that. In fact, a recent study from Accenture raised the question of whether CEOs even believe in innovation as a solution any more. The survey of 512 companies found 51% said they were investing more in innovation but 46% said their companies were becoming risk-averse anyway.

This is fearful thinking, and it’s the same plague that infects Congress. Just as fear has paralyzed Congress, it has scared CEOs. Yet fear is no excuse. Taxes are no excuse. Caution is no excuse.

The excuses have run out. The corporate side of America is not pulling its weight. It is not paying the fair price in economic boosterism or in taxes for all the advantages it enjoys. Instead of hearing Ben Bernanke testifying, or Congress and the Fed trading blame, maybe it’s time to ask some CEOs why they have taken themselves out of the equation of getting America back on its feet.

Even more importantly, it’s worth asking why we have let them.

By: EconCassandra Fri, 24 May 2013 14:27:40 +0000 You state, “The Fed will probably want to see six months of strong employment and at least two quarters of 3 percent gross domestic product growth before it seriously considers tightening.”

Unfortunately, the Fed is presently playing out the tragicomedy of Godot, who waits endlessly and in vain for the arrival of that which will never come.

What is guaranteed to arrive, and much sooner than later, is the collapse of this nation due to unrestrained printing of fiat money.

There is not one single incidence of a “successful” recovery driven soley by increasing the supply of money by printing it.

In truth, we are in a “liquidity trap” and cannot recover without demand.

By: BidnisMan Fri, 24 May 2013 09:47:09 +0000 You should Photoshop some bubbles behind him in the picture.

By: jbone1226 Fri, 24 May 2013 01:57:11 +0000 something has happened in the world today. it seems that there are no printing presses at work in the u.s. just a shift of tradeable asset classes from accounts to accounts. anyone wonder why the dollar doesn’t lose strength? it ain’t because nobody else has crap for assets. this world we live in is full of perceptions. there are no money presses putting out scads of worthless paper. it’s all just a shift of assets. the u.s. is buying 85 billion a month. i know all the conspiricists are salivating, but, if the inflation rate was making the assets worth less or more, which they might be, the stated amount purchased by the fed would fluctuate a heck of a lot more. anybody?

By: VRP Thu, 23 May 2013 19:21:06 +0000 Mr. Kaletsky seems to assume that not only has Fed policy directly boosted stock prices but that it can do so indefinitely. I don’t blame him on the first assumption, but I wouldn’t bet on the second. Which is exactly what an investment in the stock market is today– given the fundamentals of the earning cycle and valuations– an investment in the market today is a speculative bet that Fed policy can keep corporate profits elevated without negative consequences that arise from a heavily managed and uber-easy monetary policy.