Fed claims $13B profit on lending facilities

[davelj]

[quote=CA renter]What I’m referring to is the cuts in wages and benefits that the public employees will be taking. It is, essentially, a tax on them, in order to pay for the misdeeds of the financial industry.
[/quote]

Allow me to make a counter argument using California as an example. The reason we have so many public employees (with associated benefits) right now is because of the inflated tax revenues that came in during the late-90s (high tech/stock market bubble) and the mid-2000s (real estate/stock market bubble). Were it not for these bubbles, many of these public employees would not be employed by state and local governments, nor would their comp and benefits be where they are today. The money wouldn’t have been there. Consequently, I could argue that a lot of these folks got jobs and compensation that they never should have gotten in the first place – that is, they received a free lunch courtesy of the bubbles – and that now it’s time to go back to doing whatever they would have been doing had those jobs not been available. That’s the glass is half full argument. Your argument is that the bubble jobs and comp should be continued for the mere reason that they were created in the first place, and anything less than this is an unfair burden placed on public employees. That’s the glass is half empty argument. Which I don’t buy.

My glass is typically half full even when I’m bearish. But that’s just me.

[briansd1]

[quote=patb][quote=briansd1]Give me $1 to $2 trillion over 2 years and I’ll pay you $13 billion.

But still the Fed took a gamble to save the world economy from depression and they succeeded. Millions around the world have been saved from poverty and upheaval.[/quote]

The people of Tunisia,Bahrain,Egypt, Libya, Jordan are so ungrateful.[/quote]

Imagine the level of unrest and insecurity if we had a World Great Depression.

Word GDP went negative for the first time since WWII in 2009.

Policy makers around the world were able to engineer a recovery in 2010.

In early 2009 in the aftermath of the financial crisis, and after corportions cancelled their orders, 10 of millions of Chinese workers were furlowed. Because there are travel permit requirements in China, those same workers were prevented from returning to the cities, after Chinese New Year, where unrest could foment and cause social unrest and perhaps revolution.

Unemployment is causing the unrest in the Middle East today.

In Europe, the right-wing is gaining ground fomenting nationalism, ethic divisions and social strife.

We have the also some extreme right-wing aggitation America thanks to economic inseurity.

To be fair, if ever economic hardships allow the forces of extreme right-wing and left-wing social political trends to coalesce in nationalism, ethnic divisions, and a fervent America-for-Americans-Only, we could see terrible social strife.

Rich or poor, we should all be thankful that world economic growth has been restored.

Sure, as davelj mentioned the richest might more directly pay for the bailouts, but without the masses of poorer consumers, the rich would not be nearly as rich.

The rich are never rich in isolation.

For example, who pays the bonuses of Best Buy executives? The millions of consumers who buy appliances on installment and generate the highest margins for the company.

[briansd1]

[quote=patb][quote=briansd1]Give me $1 to $2 trillion over 2 years and I’ll pay you $13 billion.

But still the Fed took a gamble to save the world economy from depression and they succeeded. Millions around the world have been saved from poverty and upheaval.[/quote]

The people of Tunisia,Bahrain,Egypt, Libya, Jordan are so ungrateful.[/quote]

Imagine the level of unrest and insecurity if we had a World Great Depression.

Word GDP went negative for the first time since WWII in 2009.

Policy makers around the world were able to engineer a recovery in 2010.

In early 2009 in the aftermath of the financial crisis, and after corportions cancelled their orders, 10 of millions of Chinese workers were furlowed. Because there are travel permit requirements in China, those same workers were prevented from returning to the cities, after Chinese New Year, where unrest could foment and cause social unrest and perhaps revolution.

Unemployment is causing the unrest in the Middle East today.

In Europe, the right-wing is gaining ground fomenting nationalism, ethic divisions and social strife.

We have the also some extreme right-wing aggitation America thanks to economic inseurity.

To be fair, if ever economic hardships allow the forces of extreme right-wing and left-wing social political trends to coalesce in nationalism, ethnic divisions, and a fervent America-for-Americans-Only, we could see terrible social strife.

Rich or poor, we should all be thankful that world economic growth has been restored.

Sure, as davelj mentioned the richest might more directly pay for the bailouts, but without the masses of poorer consumers, the rich would not be nearly as rich.

The rich are never rich in isolation.

For example, who pays the bonuses of Best Buy executives? The millions of consumers who buy appliances on installment and generate the highest margins for the company.

[briansd1]

[quote=patb][quote=briansd1]Give me $1 to $2 trillion over 2 years and I’ll pay you $13 billion.

But still the Fed took a gamble to save the world economy from depression and they succeeded. Millions around the world have been saved from poverty and upheaval.[/quote]

The people of Tunisia,Bahrain,Egypt, Libya, Jordan are so ungrateful.[/quote]

Imagine the level of unrest and insecurity if we had a World Great Depression.

Word GDP went negative for the first time since WWII in 2009.

Policy makers around the world were able to engineer a recovery in 2010.

In early 2009 in the aftermath of the financial crisis, and after corportions cancelled their orders, 10 of millions of Chinese workers were furlowed. Because there are travel permit requirements in China, those same workers were prevented from returning to the cities, after Chinese New Year, where unrest could foment and cause social unrest and perhaps revolution.

Unemployment is causing the unrest in the Middle East today.

In Europe, the right-wing is gaining ground fomenting nationalism, ethic divisions and social strife.

We have the also some extreme right-wing aggitation America thanks to economic inseurity.

To be fair, if ever economic hardships allow the forces of extreme right-wing and left-wing social political trends to coalesce in nationalism, ethnic divisions, and a fervent America-for-Americans-Only, we could see terrible social strife.

Rich or poor, we should all be thankful that world economic growth has been restored.

Sure, as davelj mentioned the richest might more directly pay for the bailouts, but without the masses of poorer consumers, the rich would not be nearly as rich.

The rich are never rich in isolation.

For example, who pays the bonuses of Best Buy executives? The millions of consumers who buy appliances on installment and generate the highest margins for the company.

[briansd1]

[quote=patb][quote=briansd1]Give me $1 to $2 trillion over 2 years and I’ll pay you $13 billion.

But still the Fed took a gamble to save the world economy from depression and they succeeded. Millions around the world have been saved from poverty and upheaval.[/quote]

The people of Tunisia,Bahrain,Egypt, Libya, Jordan are so ungrateful.[/quote]

Imagine the level of unrest and insecurity if we had a World Great Depression.

Word GDP went negative for the first time since WWII in 2009.

Policy makers around the world were able to engineer a recovery in 2010.

In early 2009 in the aftermath of the financial crisis, and after corportions cancelled their orders, 10 of millions of Chinese workers were furlowed. Because there are travel permit requirements in China, those same workers were prevented from returning to the cities, after Chinese New Year, where unrest could foment and cause social unrest and perhaps revolution.

Unemployment is causing the unrest in the Middle East today.

In Europe, the right-wing is gaining ground fomenting nationalism, ethic divisions and social strife.

We have the also some extreme right-wing aggitation America thanks to economic inseurity.

To be fair, if ever economic hardships allow the forces of extreme right-wing and left-wing social political trends to coalesce in nationalism, ethnic divisions, and a fervent America-for-Americans-Only, we could see terrible social strife.

Rich or poor, we should all be thankful that world economic growth has been restored.

Sure, as davelj mentioned the richest might more directly pay for the bailouts, but without the masses of poorer consumers, the rich would not be nearly as rich.

The rich are never rich in isolation.

For example, who pays the bonuses of Best Buy executives? The millions of consumers who buy appliances on installment and generate the highest margins for the company.

[briansd1]

[quote=patb][quote=briansd1]Give me $1 to $2 trillion over 2 years and I’ll pay you $13 billion.

But still the Fed took a gamble to save the world economy from depression and they succeeded. Millions around the world have been saved from poverty and upheaval.[/quote]

The people of Tunisia,Bahrain,Egypt, Libya, Jordan are so ungrateful.[/quote]

Imagine the level of unrest and insecurity if we had a World Great Depression.

Word GDP went negative for the first time since WWII in 2009.

Policy makers around the world were able to engineer a recovery in 2010.

In early 2009 in the aftermath of the financial crisis, and after corportions cancelled their orders, 10 of millions of Chinese workers were furlowed. Because there are travel permit requirements in China, those same workers were prevented from returning to the cities, after Chinese New Year, where unrest could foment and cause social unrest and perhaps revolution.

Unemployment is causing the unrest in the Middle East today.

In Europe, the right-wing is gaining ground fomenting nationalism, ethic divisions and social strife.

We have the also some extreme right-wing aggitation America thanks to economic inseurity.

To be fair, if ever economic hardships allow the forces of extreme right-wing and left-wing social political trends to coalesce in nationalism, ethnic divisions, and a fervent America-for-Americans-Only, we could see terrible social strife.

Rich or poor, we should all be thankful that world economic growth has been restored.

Sure, as davelj mentioned the richest might more directly pay for the bailouts, but without the masses of poorer consumers, the rich would not be nearly as rich.

The rich are never rich in isolation.

For example, who pays the bonuses of Best Buy executives? The millions of consumers who buy appliances on installment and generate the highest margins for the company.

[briansd1]

[quote=davelj]
Allow me to make a counter argument using California as an example. The reason we have so many public employees (with associated benefits) right now is because of the inflated tax revenues that came in during the late-90s (high tech/stock market bubble) and the mid-2000s (real estate/stock market bubble). Were it not for these bubbles, many of these public employees would not be employed by state and local governments, nor would their comp and benefits be where they are today. The money wouldn’t have been there. Consequently, I could argue that a lot of these folks got jobs and compensation that they never should have gotten in the first place – that is, they received a free lunch courtesy of the bubbles – and that now it’s time to go back to doing whatever they would have been doing had those jobs not been available. That’s the glass is half full argument. Your argument is that the bubble jobs and comp should be continued for the mere reason that they were created in the first place, and anything less than this is an unfair burden placed on public employees. That’s the glass is half empty argument. Which I don’t buy.

My glass is typically half full even when I’m bearish. But that’s just me.[/quote]

davelj, I completely agree with your assesment of public employees in California.

The problem with our government is that when revenue flows in we spend it all. And when the economy turns bad, they want to tax to continue spending at bubble levels.

Instead, governments should accumulate the savings in wealth funds during to good years so that there’s money to support spending during the bad years, without raising taxes.

[briansd1]

[quote=davelj]
Allow me to make a counter argument using California as an example. The reason we have so many public employees (with associated benefits) right now is because of the inflated tax revenues that came in during the late-90s (high tech/stock market bubble) and the mid-2000s (real estate/stock market bubble). Were it not for these bubbles, many of these public employees would not be employed by state and local governments, nor would their comp and benefits be where they are today. The money wouldn’t have been there. Consequently, I could argue that a lot of these folks got jobs and compensation that they never should have gotten in the first place – that is, they received a free lunch courtesy of the bubbles – and that now it’s time to go back to doing whatever they would have been doing had those jobs not been available. That’s the glass is half full argument. Your argument is that the bubble jobs and comp should be continued for the mere reason that they were created in the first place, and anything less than this is an unfair burden placed on public employees. That’s the glass is half empty argument. Which I don’t buy.

My glass is typically half full even when I’m bearish. But that’s just me.[/quote]

davelj, I completely agree with your assesment of public employees in California.

The problem with our government is that when revenue flows in we spend it all. And when the economy turns bad, they want to tax to continue spending at bubble levels.

Instead, governments should accumulate the savings in wealth funds during to good years so that there’s money to support spending during the bad years, without raising taxes.

[briansd1]

[quote=davelj]
Allow me to make a counter argument using California as an example. The reason we have so many public employees (with associated benefits) right now is because of the inflated tax revenues that came in during the late-90s (high tech/stock market bubble) and the mid-2000s (real estate/stock market bubble). Were it not for these bubbles, many of these public employees would not be employed by state and local governments, nor would their comp and benefits be where they are today. The money wouldn’t have been there. Consequently, I could argue that a lot of these folks got jobs and compensation that they never should have gotten in the first place – that is, they received a free lunch courtesy of the bubbles – and that now it’s time to go back to doing whatever they would have been doing had those jobs not been available. That’s the glass is half full argument. Your argument is that the bubble jobs and comp should be continued for the mere reason that they were created in the first place, and anything less than this is an unfair burden placed on public employees. That’s the glass is half empty argument. Which I don’t buy.

My glass is typically half full even when I’m bearish. But that’s just me.[/quote]

davelj, I completely agree with your assesment of public employees in California.

The problem with our government is that when revenue flows in we spend it all. And when the economy turns bad, they want to tax to continue spending at bubble levels.

Instead, governments should accumulate the savings in wealth funds during to good years so that there’s money to support spending during the bad years, without raising taxes.

[briansd1]

[quote=davelj]
Allow me to make a counter argument using California as an example. The reason we have so many public employees (with associated benefits) right now is because of the inflated tax revenues that came in during the late-90s (high tech/stock market bubble) and the mid-2000s (real estate/stock market bubble). Were it not for these bubbles, many of these public employees would not be employed by state and local governments, nor would their comp and benefits be where they are today. The money wouldn’t have been there. Consequently, I could argue that a lot of these folks got jobs and compensation that they never should have gotten in the first place – that is, they received a free lunch courtesy of the bubbles – and that now it’s time to go back to doing whatever they would have been doing had those jobs not been available. That’s the glass is half full argument. Your argument is that the bubble jobs and comp should be continued for the mere reason that they were created in the first place, and anything less than this is an unfair burden placed on public employees. That’s the glass is half empty argument. Which I don’t buy.

My glass is typically half full even when I’m bearish. But that’s just me.[/quote]

davelj, I completely agree with your assesment of public employees in California.

The problem with our government is that when revenue flows in we spend it all. And when the economy turns bad, they want to tax to continue spending at bubble levels.

Instead, governments should accumulate the savings in wealth funds during to good years so that there’s money to support spending during the bad years, without raising taxes.

[briansd1]

[quote=davelj]
Allow me to make a counter argument using California as an example. The reason we have so many public employees (with associated benefits) right now is because of the inflated tax revenues that came in during the late-90s (high tech/stock market bubble) and the mid-2000s (real estate/stock market bubble). Were it not for these bubbles, many of these public employees would not be employed by state and local governments, nor would their comp and benefits be where they are today. The money wouldn’t have been there. Consequently, I could argue that a lot of these folks got jobs and compensation that they never should have gotten in the first place – that is, they received a free lunch courtesy of the bubbles – and that now it’s time to go back to doing whatever they would have been doing had those jobs not been available. That’s the glass is half full argument. Your argument is that the bubble jobs and comp should be continued for the mere reason that they were created in the first place, and anything less than this is an unfair burden placed on public employees. That’s the glass is half empty argument. Which I don’t buy.

My glass is typically half full even when I’m bearish. But that’s just me.[/quote]

davelj, I completely agree with your assesment of public employees in California.

The problem with our government is that when revenue flows in we spend it all. And when the economy turns bad, they want to tax to continue spending at bubble levels.

Instead, governments should accumulate the savings in wealth funds during to good years so that there’s money to support spending during the bad years, without raising taxes.

[CA renter]

[quote=davelj][quote=CA renter]What I’m referring to is the cuts in wages and benefits that the public employees will be taking. It is, essentially, a tax on them, in order to pay for the misdeeds of the financial industry.
[/quote]

Allow me to make a counter argument using California as an example. The reason we have so many public employees (with associated benefits) right now is because of the inflated tax revenues that came in during the late-90s (high tech/stock market bubble) and the mid-2000s (real estate/stock market bubble). Were it not for these bubbles, many of these public employees would not be employed by state and local governments, nor would their comp and benefits be where they are today. The money wouldn’t have been there. Consequently, I could argue that a lot of these folks got jobs and compensation that they never should have gotten in the first place – that is, they received a free lunch courtesy of the bubbles – and that now it’s time to go back to doing whatever they would have been doing had those jobs not been available. That’s the glass is half full argument. Your argument is that the bubble jobs and comp should be continued for the mere reason that they were created in the first place, and anything less than this is an unfair burden placed on public employees. That’s the glass is half empty argument. Which I don’t buy.

My glass is typically half full even when I’m bearish. But that’s just me.[/quote]

Actually, we agree completely.*

The financial crisis was caused by the financial industry (and their paid-for politicians and regulators), and the Federal Reserve. This is what I’ve been saying all along. It was NOT caused by the public employees.

The Federal Reserve (and financial industry) have created a bubble economy, where anyone who tried to be prudent was punished by below-market returns, and they were forced out. Only those who chased bubbles were rewarded, and they had the Greenspan/Bernanke put at their backs, “guaranteeing” them that they could not lose on the long side. They made foolish mistakes — the actuaries, the pension fund managers, the state, and city governments. As you know, pension funds had to move out on the risk curve when the Fed stomped on rates for prolonged periods of time in order to get returns required to make their numbers work. This is 100% attibutable to the Federal Reserve.

Do realize that public employees were BEGGING the city managers and city councils, etc. NOT to spend the money that the cities were “saving” when the pension fund actuaries were telling them not to contribute anything to the pensions during the bubble (esp. the stock market bubble). The cities, for the most part, didn’t listen, and spent like drunken sailors.

The reason I get so upset with the scapegoating of public sector workers is because it’s designed to deflect attention and anger away from the financial sector, which is the root of our problems.

*The only item I disagree with you about is the *number* of people hired as a result of the bubble. From what I’ve read, the ratio of public sector workers to California residents has been steady or declining over this time. The increased number of employees is largely due to population growth.

That being said, the increases in compensation ARE due to the bubbles, and I have always agreed that some concessions need to be made. But if the public workers make those concessions (let’s say, rolling back compensation to 1997 levels, with adjustments for inflation/deflation and population growth), then EVERYONE else who benefitted from the bubbles needs to take a similar hit. That means that the wealthy would need to see similar drops in their wealth as asset prices revert to ~1997 levels. After all, rolling back public compensation would only be fair if their purchasing power (and that means REAL purchasing power — asset prices, included) was rolled back to the same level. How well do you think that would go over?

[CA renter]

[quote=davelj][quote=CA renter]What I’m referring to is the cuts in wages and benefits that the public employees will be taking. It is, essentially, a tax on them, in order to pay for the misdeeds of the financial industry.
[/quote]

Allow me to make a counter argument using California as an example. The reason we have so many public employees (with associated benefits) right now is because of the inflated tax revenues that came in during the late-90s (high tech/stock market bubble) and the mid-2000s (real estate/stock market bubble). Were it not for these bubbles, many of these public employees would not be employed by state and local governments, nor would their comp and benefits be where they are today. The money wouldn’t have been there. Consequently, I could argue that a lot of these folks got jobs and compensation that they never should have gotten in the first place – that is, they received a free lunch courtesy of the bubbles – and that now it’s time to go back to doing whatever they would have been doing had those jobs not been available. That’s the glass is half full argument. Your argument is that the bubble jobs and comp should be continued for the mere reason that they were created in the first place, and anything less than this is an unfair burden placed on public employees. That’s the glass is half empty argument. Which I don’t buy.

My glass is typically half full even when I’m bearish. But that’s just me.[/quote]

Actually, we agree completely.*

The financial crisis was caused by the financial industry (and their paid-for politicians and regulators), and the Federal Reserve. This is what I’ve been saying all along. It was NOT caused by the public employees.

The Federal Reserve (and financial industry) have created a bubble economy, where anyone who tried to be prudent was punished by below-market returns, and they were forced out. Only those who chased bubbles were rewarded, and they had the Greenspan/Bernanke put at their backs, “guaranteeing” them that they could not lose on the long side. They made foolish mistakes — the actuaries, the pension fund managers, the state, and city governments. As you know, pension funds had to move out on the risk curve when the Fed stomped on rates for prolonged periods of time in order to get returns required to make their numbers work. This is 100% attibutable to the Federal Reserve.

Do realize that public employees were BEGGING the city managers and city councils, etc. NOT to spend the money that the cities were “saving” when the pension fund actuaries were telling them not to contribute anything to the pensions during the bubble (esp. the stock market bubble). The cities, for the most part, didn’t listen, and spent like drunken sailors.

The reason I get so upset with the scapegoating of public sector workers is because it’s designed to deflect attention and anger away from the financial sector, which is the root of our problems.

*The only item I disagree with you about is the *number* of people hired as a result of the bubble. From what I’ve read, the ratio of public sector workers to California residents has been steady or declining over this time. The increased number of employees is largely due to population growth.

That being said, the increases in compensation ARE due to the bubbles, and I have always agreed that some concessions need to be made. But if the public workers make those concessions (let’s say, rolling back compensation to 1997 levels, with adjustments for inflation/deflation and population growth), then EVERYONE else who benefitted from the bubbles needs to take a similar hit. That means that the wealthy would need to see similar drops in their wealth as asset prices revert to ~1997 levels. After all, rolling back public compensation would only be fair if their purchasing power (and that means REAL purchasing power — asset prices, included) was rolled back to the same level. How well do you think that would go over?

[CA renter]

[quote=davelj][quote=CA renter]What I’m referring to is the cuts in wages and benefits that the public employees will be taking. It is, essentially, a tax on them, in order to pay for the misdeeds of the financial industry.
[/quote]

Allow me to make a counter argument using California as an example. The reason we have so many public employees (with associated benefits) right now is because of the inflated tax revenues that came in during the late-90s (high tech/stock market bubble) and the mid-2000s (real estate/stock market bubble). Were it not for these bubbles, many of these public employees would not be employed by state and local governments, nor would their comp and benefits be where they are today. The money wouldn’t have been there. Consequently, I could argue that a lot of these folks got jobs and compensation that they never should have gotten in the first place – that is, they received a free lunch courtesy of the bubbles – and that now it’s time to go back to doing whatever they would have been doing had those jobs not been available. That’s the glass is half full argument. Your argument is that the bubble jobs and comp should be continued for the mere reason that they were created in the first place, and anything less than this is an unfair burden placed on public employees. That’s the glass is half empty argument. Which I don’t buy.

My glass is typically half full even when I’m bearish. But that’s just me.[/quote]

Actually, we agree completely.*

The financial crisis was caused by the financial industry (and their paid-for politicians and regulators), and the Federal Reserve. This is what I’ve been saying all along. It was NOT caused by the public employees.

The Federal Reserve (and financial industry) have created a bubble economy, where anyone who tried to be prudent was punished by below-market returns, and they were forced out. Only those who chased bubbles were rewarded, and they had the Greenspan/Bernanke put at their backs, “guaranteeing” them that they could not lose on the long side. They made foolish mistakes — the actuaries, the pension fund managers, the state, and city governments. As you know, pension funds had to move out on the risk curve when the Fed stomped on rates for prolonged periods of time in order to get returns required to make their numbers work. This is 100% attibutable to the Federal Reserve.

Do realize that public employees were BEGGING the city managers and city councils, etc. NOT to spend the money that the cities were “saving” when the pension fund actuaries were telling them not to contribute anything to the pensions during the bubble (esp. the stock market bubble). The cities, for the most part, didn’t listen, and spent like drunken sailors.

The reason I get so upset with the scapegoating of public sector workers is because it’s designed to deflect attention and anger away from the financial sector, which is the root of our problems.

*The only item I disagree with you about is the *number* of people hired as a result of the bubble. From what I’ve read, the ratio of public sector workers to California residents has been steady or declining over this time. The increased number of employees is largely due to population growth.

That being said, the increases in compensation ARE due to the bubbles, and I have always agreed that some concessions need to be made. But if the public workers make those concessions (let’s say, rolling back compensation to 1997 levels, with adjustments for inflation/deflation and population growth), then EVERYONE else who benefitted from the bubbles needs to take a similar hit. That means that the wealthy would need to see similar drops in their wealth as asset prices revert to ~1997 levels. After all, rolling back public compensation would only be fair if their purchasing power (and that means REAL purchasing power — asset prices, included) was rolled back to the same level. How well do you think that would go over?

[CA renter]

[quote=davelj][quote=CA renter]What I’m referring to is the cuts in wages and benefits that the public employees will be taking. It is, essentially, a tax on them, in order to pay for the misdeeds of the financial industry.
[/quote]

Allow me to make a counter argument using California as an example. The reason we have so many public employees (with associated benefits) right now is because of the inflated tax revenues that came in during the late-90s (high tech/stock market bubble) and the mid-2000s (real estate/stock market bubble). Were it not for these bubbles, many of these public employees would not be employed by state and local governments, nor would their comp and benefits be where they are today. The money wouldn’t have been there. Consequently, I could argue that a lot of these folks got jobs and compensation that they never should have gotten in the first place – that is, they received a free lunch courtesy of the bubbles – and that now it’s time to go back to doing whatever they would have been doing had those jobs not been available. That’s the glass is half full argument. Your argument is that the bubble jobs and comp should be continued for the mere reason that they were created in the first place, and anything less than this is an unfair burden placed on public employees. That’s the glass is half empty argument. Which I don’t buy.

My glass is typically half full even when I’m bearish. But that’s just me.[/quote]

Actually, we agree completely.*

The financial crisis was caused by the financial industry (and their paid-for politicians and regulators), and the Federal Reserve. This is what I’ve been saying all along. It was NOT caused by the public employees.

The Federal Reserve (and financial industry) have created a bubble economy, where anyone who tried to be prudent was punished by below-market returns, and they were forced out. Only those who chased bubbles were rewarded, and they had the Greenspan/Bernanke put at their backs, “guaranteeing” them that they could not lose on the long side. They made foolish mistakes — the actuaries, the pension fund managers, the state, and city governments. As you know, pension funds had to move out on the risk curve when the Fed stomped on rates for prolonged periods of time in order to get returns required to make their numbers work. This is 100% attibutable to the Federal Reserve.

Do realize that public employees were BEGGING the city managers and city councils, etc. NOT to spend the money that the cities were “saving” when the pension fund actuaries were telling them not to contribute anything to the pensions during the bubble (esp. the stock market bubble). The cities, for the most part, didn’t listen, and spent like drunken sailors.

The reason I get so upset with the scapegoating of public sector workers is because it’s designed to deflect attention and anger away from the financial sector, which is the root of our problems.

*The only item I disagree with you about is the *number* of people hired as a result of the bubble. From what I’ve read, the ratio of public sector workers to California residents has been steady or declining over this time. The increased number of employees is largely due to population growth.

That being said, the increases in compensation ARE due to the bubbles, and I have always agreed that some concessions need to be made. But if the public workers make those concessions (let’s say, rolling back compensation to 1997 levels, with adjustments for inflation/deflation and population growth), then EVERYONE else who benefitted from the bubbles needs to take a similar hit. That means that the wealthy would need to see similar drops in their wealth as asset prices revert to ~1997 levels. After all, rolling back public compensation would only be fair if their purchasing power (and that means REAL purchasing power — asset prices, included) was rolled back to the same level. How well do you think that would go over?

[Author]

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