# OT: more economic stimulus



## Nick Batzdorf (Nov 2, 2009)

I'm not an economist, yet it seems so simple: economic stimulus works warts and all, and we need more.

It's obvious why he created the left, but why did God create the American right?

http://www.nytimes.com/2009/11/02/opini ... ugman.html


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## madbulk (Nov 2, 2009)

Well, I'm no Krugman, and while degreed in it, perhaps no economist -- but I like the area well enough and would assert that most economists worth a damn would tell you "ain't hardly a damn thing simple." 

And you can start with his premise that the gdp is up 3.5. And well, obviously it is, but there's lies and damned lies and so forth.

So, you may be right, and PK is brilliant and more than likely right, but ain't a damn thing cut and dried about it.

Personally, I'm waiting for the next couple of gdp numbers. That infomercial turkey from the "United States Rare Coin and Bullion Reserve" is kinda starting to look smart.


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## Nick Batzdorf (Nov 2, 2009)

I'm not sure what your position is other than you don't trust anything anyone says  but the 3.5% is real. If you read here:

http://krugman.blogs.nytimes.com/2009/1 ... r-edition/

Krugman says that while you'd prefer economic stimulus to be pump-priming investments, that isn't part of what Keynes said - he only said that stimulus works. So the 3.5% won't last and it's way too small, so we need more.


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## rgames (Nov 2, 2009)

First of all, economics is not a science (a point which, I gather, Brian agrees with).

Second of all, economists are wrong more often than weather forecasters. Yet there's no Nobel prize in weather forecasting. Explain that one to me.

So, with that in mind, and also considering Krugman's obviously liberal bent, let's take a look at the situation.

Krugman states that the Clinton-era average growth is 3.7%. As near as I can tell, that's chained to 2005 dollars (I actually come up with 3.9%). Using the same chaining, Bush 2 comes in at 2.4%, Bush 1 comes in at 2.2%, and Reagan comes in at 3.5%.

Fair enough. Using 2005 as a reference is reasonable, but I wonder how the numbers change if I look at it relative to current dollars? Let's see: well, Clinton gets a 5.8%, Bush 2 gets a 5.1%, Bush 1 gets a 5.5%, and Reagan gets a 7.7%. Whoa! 7.7%!?!?! 50% higher than Clinton using that reference! So, simply by chaning our reference, we've switched from slightly less growth during the Reagan era to 50% more on average.

And what have we learned? What Brian alluded to: lies, damn lies, and statistics. I was looking for that line in Krugman's article where he said "To be fair, if we look at the values chained to 2009 dollars, we see a different story." Alas. I did not see it.

Economics is not a science. Treat it as such.

So is the stimulus working? Sure. Is it the primary cause for economic growth? Who knows. What I do know for sure is that continuing to increase the national debt is a bad thing.

So, here's what we know:

1. Increased national debt = certainly bad
2. Increased stimulus = maybe, according to guys who are usually wrong, helps

Do you really want to go with #2?

rgames


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## Nick Batzdorf (Nov 2, 2009)

Yes I want to go with #2 for the reasons in Krugman's and others' articles (unemployment is far worse than debt), and Reagan's ideas are total failures despite anything you say.

Krugman wasn't bringing up Clinton's 3.5% growth to say that liberals are better (besides, Clinton wasn't very liberal), he brought it up to make the point that 3.5% growth is unacceptable and that we need to put the emphasis on jobs...which is what Obama is now doing.

It's just too bad that there are Republicans and conservative Democrats. They're all bloody useless.


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## rgames (Nov 2, 2009)

Nick Batzdorf @ Mon Nov 02 said:


> They're all bloody useless.



But not as useless as economists 

What evidence do you have that another massive stimulus is going to help anything? I'm not saying it won't - I honestly don't know. Again, though, I am certain that continuing to pile on debt is a bad thing. So I'm incllined to err on the side of avoiding a certainty rather than hoping for an uncertainty.

Don't look to the economists - look at the data - the last time we had unemployment around these numbers was back during Reagan's first term. What was Reagan's stimulus package? Whatever it was it sure got a lot better a lot faster under his administration's economic policies...

Oh yeah, and it resulted in an average of 7.7% increase in GDP, 33% higher than the Clinton "boom" years  Note correction to 50% number above...

rgames


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## madbulk (Nov 3, 2009)

Nick Batzdorf @ Mon Nov 02 said:


> I'm not sure what your position is other than you don't trust anything anyone says  but the 3.5% is real. If you read here:
> 
> http://krugman.blogs.nytimes.com/2009/1 ... r-edition/
> 
> Krugman says that while you'd prefer economic stimulus to be pump-priming investments, that isn't part of what Keynes said - he only said that stimulus works. So the 3.5% won't last and it's way too small, so we need more.



Yeah, Keynes said it, and you can mostly believe it, but that doesn't nearly settle it. He only lived 100 years ago. And through essentially one major economic event. He's not a law of nature yet. Not for me anyway. He does appear for the time being to have been right.
And I agree that the 3.5 is actual. I just don't know how much of it will turn out to have been a phantom in a sense. Sorry for the semantics.
I agree that stimulus works. Sudafed works. But the cold and colds in general remain.
Is that a perfect analogy?... no... Stimulus might cure. But it might be sudafed. And you have to pay for pills. And I'm losing sight of my argument -- getting tired. 
But my position, in addition to that you can't believe anything, is that as brilliant as krugman and you both are, it ain't necessarily so, and definitely ain't simple. Even if lots of the most vocal opponents of it themselves are. The resultant boom is supposed to make the costs vanish from memory.

We'll see.

I think somewhere in my "position" is the growing feeling that Krugman is becoming an entertainer. He's wearing me out.


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## Dan Selby (Nov 3, 2009)

I don't know enough to hold a confident view but I found that article very far from compelling or persuasive - lacking sources or evidence to support the blustering rhetoric.


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## The_Dark_Knight (Nov 3, 2009)

http://www.youtube.com/watch?v=u8XZykSnfmE


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## JohnG (Nov 3, 2009)

Dan Selby @ 3rd November 2009 said:


> I don't know enough to hold a confident view but I found that article very far from compelling or persuasive - lacking sources or evidence to support the blustering rhetoric.



Unsupported except of course by the Nobel prize, a PhD in economics, and so on. Which is not true, I assume of anyone on this forum.

It is amusing to see the same voices now who were saying in autumn 2008 that there was no recession -- that it was a made-up trick of the media. Now it appears that they are saying we need to tighten the government belt. Why? Because we can measure that and it's tough to measure the effect of any stimulus plan? Because that's what Hoover sought to do -- reassure international financiers that the US would balance its budget? And that worked so well.

What I do know is -- nothing. I can only report what the markets are saying (for those who believe in free-market capitalism), which is that the VIX (volatility index) moved up to about 30 yesterday again, and corporate bond spreads are extremely high measured in real terms, so the market mutely is testifying as to the high uncertainty about in the sustainability of the GDP numbers. Meanwhile, the yield on government debt remains extremely low, particularly compared with the yield on corporate debt. To me, that spread is direct evidence that the markets fear much more the inability of the private sector to generate jobs and growth, on the one hand, than possible issuance of more government debt, on the other hand. Absent more demand for labour / job creation, whether by the public sector or private, we are still facing the possibility of protracted anemia and that is what I interpret the markets as saying.

So if you don't like Krugman, fine. But if you believe in markets, at least have a peek at what they are saying, and it isn't very different from Krugman.


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## Dan Selby (Nov 3, 2009)

John,

I'm from and live in the UK. I've not read Krugman's work at all prior to reading that article so I certainly didn't read that piece with any preformed bias regarding his views or his writing. So I don't "not like Krugman".

I also said I don't know enough to hold a confident view. This is true of the economic problems in the UK - much more so of the economic situation in the US.

All that notwithstanding, and given Nick's, shall we say polemical teaser, I clicked on the link to the NYT expecting to read incisive explanation, a devastating (which for me always means evidence based and source) critique, perhaps.

What I read (and again I state, as a non-partisan but interested non-American) was an opinion piece, not citing references using rhetorical language and some disingenuous argument. So I wasn't impressed.

Krugman may very well be right. I don't know. My point was that I didn't know before, I don't know now and his piece disappointed and failed to persuade me.

Perhaps you confused me with someone else, John, but it seems that what was (IMHO) a legitimate response to an article from an "outsider" has you assigning me to an opposing camp... when in truth I wasn't pitching my tent.



JohnG @ Tue Nov 03 said:


> Dan Selby @ 3rd November 2009 said:
> 
> 
> > I don't know enough to hold a confident view but I found that article very far from compelling or persuasive - lacking sources or evidence to support the blustering rhetoric.
> ...


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## JohnG (Nov 3, 2009)

Hi Dan,

I accept 100% your position as an innocent bystander and sorry to have landed so hard on you, when my response was driven much more by other posts on this general topic in the forum broadly, both recent and past. Sorry. 

However, as a point of information, Krugman is a famous Nobel prize-winning economist, so to say that he doesn't cite any evidence leaves aside a vital point, that his opinion is informed and supported indirectly by a career of looking at policy and data. I'm also responding to something else that you are not responsible for -- the habit in the US on the right especially -- of condemning expertise or deliberation as "academic" or "dithering." Instead, we had action, action, action under Bush. Excellent. 

Unlike some of those who reflexively contradict him, Krugman is undoubtedly an expert. He is not some newspaper or television pundit looking for an "angle" or to stir up controversy to boost ratings -- which there is far too much of, I assume you would agree, on both sides of the Atlantic and on both sides of these debates.

Moreover, this is not his first opinion piece on the size of the stimulus, just the latest. Krugman has maintained from early on, around the time that the Bush administration kicked off the stimulus effort and financial system rescue back in the autumn, continuing through the debate as Obama took office and Congress legislated the rescue, that the stimulus would need to be bigger. How much bigger is always a matter of debate, but he has specified his recommendations -- it's easily searchable, and had you looked you could have found it quickly.

Where I would take exception, I suppose, and not to be so harsh about it, is that your post appeared to me to hold Krugman to a standard of evidence that is not common or perhaps even possible in an opinion column, and that given his accomplishments and stature, you perhaps ought to consider giving his opinions and arguments the benefit of the doubt, in the absence of citing evidence to the contrary.

I wish that such standards were being applied to the politicians making these decisions right now in Whitehall and Washington. A lot rides on what they do, and yet much of what we see is childish, slogan-driven, instant-gotcha nattering. 

Personally, I think the markets support exactly what Krugman is saying. That they would prefer to see more stimulus now, even at the price of a further increase in the deficit, than to suffer a protracted period in which GDP technically is growing but doesn't generate many jobs to replace those lost.


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## rgames (Nov 3, 2009)

JohnG @ Tue Nov 03 said:


> Unsupported except of course by the Nobel prize, a PhD in economics, and so on. Which is not true, I assume of anyone on this forum.


One of the ironies of having a PhD or professional accolades is that you should never have to use them as the basis of your argument - the points in the argument should stand on their own. Lots of people have PhD's and lots of people have Nobel prizes in Economics. Not all are worth listening to.



> It is amusing to see the same voices now who were saying in autumn 2008 that there was no recession -- that it was a made-up trick of the media.


The point of those discussions was that an influential person or group of people can, in fact, generate a recession. It's very simple:

1. Consumer spending drives the economy
2. If you convince people they're in economic trouble, they'll stop spending
3. When they stop spending, economic activity will slow
4. QED

Over the last six months, every time I heard someone regurgitate the "in this economy" line, I asked "In what economy? How has the economic downturn affected you?" I have yet to find a single person who can explain it to me. Of course they're out there, but most of that has to do with the fact that the rest of the folks decided they needed to shrink the economy for reasons they couldn't explain.

Also, didn't you find it surprising that once the Obama administration got into office, we heard that suddenly "the economy is strong"? Trying to think of where I heard that before...



> But if you believe in markets, at least have a peek at what they are saying, and it isn't very different from Krugman.


I have - and it showed that the last time we hit this level of unemployment, it was 1982 and Reagan was in the early part of his presidency. His administration got the unemployment levels under control within about 6 months. What was his approach? As you say, shouldn't we have a peek at what the markets were saying? I'm not saying that everything is the same this time round, so maybe a bigger stimulus is necessary. I'm just saying that I haven't seen any compelling evidence that makes me believe so.

Furthermore, what statistics do you want to listen to? The example I gave above shows that you can show whatver you want by picking the appropriate statistics.

I don't care what Krugman's credentials are. I'm an intelligent guy - explain to me why his arguments for increased spending are so compelling. I'm a huge fan of academic deliberation - I see none of that in Krugman's recent articles.

rgames


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## Nick Batzdorf (Nov 3, 2009)

What Keynes showed has been proven. I'm certainly not an economist, but the basic concept behind stimulus is very simple. And it has been demonstrated to work...right now!

http://www.voxeu.org/index.php?q=node/3421


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## Fernando Warez (Nov 3, 2009)

Why would there be a need for an other stimulus package if the first one worked huh? 

Or maybe it only works temporarily? And then what? You keep borrowing and borrowing? How long is that gonna last? 

You need a real solution and it is to get private bankers out of central banking. Support Ron Paul Audit the Fed"s bill. This is the best place to start. And then close the Fed. I'd say auditing the Fed is the single most important issue right now. 

Nobel price? Like the one Obama got for not getting out of Iraq and not getting out of Afghanistan an not being able to stop Israel from building new illegal settlement in Palestine and therefor destroying any chance for peace over there? haha love these Nobel price.


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## Nick Batzdorf (Nov 3, 2009)

Fernando, please do some research - like the article I linked above. You're embarrassing yourself yet again.

***
rgames:



> I asked "In what economy? How has the economic downturn affected you?" I have yet to find a single person who can explain it to me.



My wife lost her job at CBS after 21 years in August. And like everything else supported by advertising, my entire industry - publishing - crashed and burned last year. Most of my colleagues got fired - and these are good people with decades of experience, not deadweight.

This is real, and when I get mad - like I am now at your ridiculous post - it's not some f-ing ivory tower intellectual exercise.

***

The Nobel Prize in economics doesn't make the argument that Paul Krugman is right, but it qualifies him as not just another talking head who gets paid to have worthless opinions.


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## rgames (Nov 3, 2009)

A lot of people lost their jobs - unemployment is ridiculously high. I'm not saying nobody lost a job or that the economy is in good shape (though 3.5% rise in GDP is pretty good, we'll see if it keeps up).

What I'm saying is that a lot of it had to do with the fact that huge numbers of people who *would have been unaffected* were told that they *were* being affected and they better tighten up. And they never stopped to think about it, so they quit spending even though they had no reason to. That enormous reduction in spending trickled through the economy and hurt folks like your wife. People in advertising, entertainment, and other related industries were hit the hardest because that's where folks quit spending first. The point is that they *could have* continued to spend but they were convinced that they *shouldn't* because of the "uncertain economic times."

The vast majority of Americans have basically the same income, same house, same lifestyle, and same economic outlook that they have had for the last several years. But somehow they were convinced that none of that mattered "in these economic times". If people simply hadn't jumped on the Obama election "you're much worse off" bandwagon, things would probably be much better right now. But hey, it got Obama elected. So it's all worth it, right?

Of course a large number of people are in bad shape - the point is that rest of the folks could have prevented their hardship had they stopped to think what is political drivel and what is reality. A huge portion of our economic engine is dependent upon consumer confidence. If you wield influence and have a media barrage behind you, you can undermine that confidence and generate an economic downturn. Then you can flip the influence switch in the other direction, convince everyone that things are getting better, regenerate economic activity (yes, the stimulus helps), and be everyone's savior.

Go back and re-read some of my posts from last fall - it's all playing out almost exactly as I predicted  Which, quite frankly, is more than I can say for most economists. When do I get my Nobel?

rgames


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## JohnG (Nov 3, 2009)

Richard,

I didn't say anything about unemployment or historical figures, just cited figures from the bond and stock markets, reflecting bets of trillions of dollars and the combined knowledge and judgment of millions of investors world-wide, in real time. 

I am not "listening to" statistics, as you put it, just observing the markets. Those debt spreads and volatility numbers are not academic, or a pundit's opinion, they're market data, and they are showing fear of a second round of recession. Conversely, low yields on government bonds demonstrates very little fear of large deficits.

Looking at markets takes a lot of the politics and opinions out of the equation; it's not personal.


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## Nick Batzdorf (Nov 3, 2009)

Richard, there's a rough measure of what you're talking about: consumer confidence. It's very important, but it's only one factor. This has to do with much more than just psychology.

On the one hand the more I read about economics the more I see it as being ethereal; on the other hand money does have a relationship to goods and services. And resources. Especially resources.

Anyway, the reason we need more stimulus is exactly that the 3.5% figure won't last without it. It's not bad, but the point of Krugman's article is that it's not good enough to reduce the unemployment, which is the number one issue in the country if not the world right now.

You say cavalierly that the vast majority of peoples' incomes are just the same as always, but that's crazy. If the unemployment figure is 10%, you know it's really 15%. That's a hell of a lot of people who are really suffering.

The other thing that's just ludicrous is that you want to blame this on the Obama campaign. What an absurd argument. What you said last fall about this all being an illusion is as silly now as it was back then.


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## midphase (Nov 3, 2009)

Richard,

You're wildly speculating about an "alternate reality" which might or might not be even remotely related to our actual reality. It makes as little sense as "if McCain got elected, unemployment would be at 30% and we would be experiencing the 2nd great depression."

We don't know what would have happened, you say that consumers were manipulated by the media to stop spending, but the media had nothing to do with people defaulting on their mortgages or banks going out of business.

Not a single person that I know tightened up their spending based on what the media was telling them...not one. On the other hand, most of my friends are fiscally responsible and were not over-extending themselves with insane debt. The point is that the spending was reduced when most of them started losing their jobs, or getting less work as independent contractors.

Your arguments sound as far fetched as if you said that unemployment is high because gays upset god...it's really that far out there.

The biggest issue is that there is absolutely nothing that Obama can do, that in the eyes of conservatives is right....nothing. It has nothing to do with what he is actually doing, and everything to do with the fact that it's not "your" guy doing it. If Bush was still in power and pushing yet another economic stimulus, guys like you would be praising his actions just like guys like you praised his untethered spending when he decided that a war with a random Middle-East country was a great idea.


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## rgames (Nov 3, 2009)

Look guys - my argument is not one of absolutes but one of degrees. Of course Obama didn't create the recession, and of course he didn't create the rise in unemployment. But I stand by my assertion that he made the situation worse for the sole purpose of winning the election. How much worse? I don't know. But definitely worse.

Consider this:

Last fall, people started seeing signs of economic problems and they became uncertain about their economic futures. Businesses and individuals started to re-think their economic decisions (how much inventory to stock, how many people to hire, how much to spend on a night at the movies, etc.). So let's assume that, without regard to the Obama campaign, some percentage of the people fell on the "stop spending" side and some percentage fell on the "keep spending" side. OK. There's your baseline. Well, there were still a lot of people on the fence, a lot of people who weren't sure what to do.

What do you think those on the fence did in the face of an incessant media barrage telling them that economic armageddon is around the corner? It's those businesses/people on whom Obama's campaign rhetoric had an effect, and that only worsened the economic situation because a lot of those businesses would have made different decisions had they not seen constant predictions about 10,000 failed banks and 30% unemployment.

So it's not a question of did Obama's campaign make the situation worse - it's hard to argue that it didn't (though please poke holes in my argument, I'm open to alternate explanations). The question is how much worse? That's the part that's nearly impossible to explain.

What is certain, though, is that rather than capitalizing on the fears of Americans for his own personal gain, Obama could have used his influence to calm them and reassure them that everyhting was going to be ok.

Oh wait - he did do that, once he got elected 

I'm not an Obama hater - he's a pretty typical politician that probably has some good intentions. And I thnk he's doing OK so far. Not great, but not bad. Basically continuing on where Bush left off and throwing a few new agenda items into the mix (health care, more stimulus). But you will have a very hard convincing me that he didn't push the economic armageddon alarm button more than he should have. But most politicans would do the same thing. Same-old same-old.

rgames


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## midphase (Nov 4, 2009)

I'm still not sure how you manage to ignore the rampant and unsustainable sub-prime mortgage crisis. When your mortgage payments jump from the interest-only $2k/month to over $10k/month, and you default on your loan because you're only pulling $30k/year...that impacts the economy media or no media, election year or not. With most banks way overleveraged, and insurance companies with just a fraction of the money to pay for those bad loans, the underlying economic structure was bound to fail in a big way. I think it will be a decade or more before we all now just how close we all came to going to the ATM to pick up some cash and discovering that all of our money was gone and that the FDIC was going to be useless. Talk about civil war, the guns would have come out if that had happened!


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## Nick Batzdorf (Nov 4, 2009)

Sorry Richard, but saying that Obama made this worse by hyping it is just crazy. Yes some of this was fueled by media; every time you see or read the news that was all they talked about.

But it's all very real, not imaginary. It may be hard to convince you otherwise, but that doesn't change the fact that you're completely wrong. This is as real as a stone wall.


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## chimuelo (Nov 4, 2009)

I can't believe this is even being discussed...
Let me get this right, John Murtha and his associates can get another terminal at his private Airport..? Diane Feinstein's husband can get more inside tips on his confiscation business he owns. Hell he is buying out entire neighborhoods, but wait these guys really care about us and our well being don't they...... :lol: 
They won't get another stimulus, especially after that first feasting went so well.
Their only hope is to take over those evil insurance rackets. There's hundreds of Billions of dollars of profit, that's a no brainer actually. But wait, it's all for our own good and benifit right........Yeah sure.
I am all for it because if we don't do something the Chinese will take over the ports of Miami, and New York. Long Beach is already the soveirgn territory of the PRC.
Don't believe me..? Take a pair of Binoculars down there, because Americans are not allowed access. Then watch the American ships docking far away form the Chinese freighters. We have to pay enrty tarriffs to the Chinese. Do your own research and follow the money.
Dick Cheney tried to scare us into believing they were drilling 60 miles off of the coast of Florida, and while we were watching the dog and pony show China jumped right in and snatched up Long Beach. 100 Billion dollars of trade every year go through there but we dont see a penny, We owe them. They also don't have to abide by our laws and sell us faulty products and dangerous toys. American Unions are only able to access our areas and some 300,000 jobs use to be there, but only maybe 180,000 jobs are for the Americans. Fortunately my Uncle retired, He was a Longshoreman for 35 years at a cush job in Balboa and Long Beach before that. He is in a state of shock.
I would read more of Krugmans " findings " but his Bias is as bad as Rachel Maddow or Bill O'Reilly. Guess who owns the NYTimes....? A Mexican businessman who is politicially active in DC......but I am sure Krugman and Dowd don't listen to anything he says......... :mrgreen: 
I remember when Geitner made his trip to the Kingdom of Saudi Arabia, I assumed they were going to raise the flag in Mecca by the excitement Krugman displayed, but never heard another peep about it until I saw Geitner stumbling in front of a Senate Judiciary Commitee on CSPAN. It appears as though he went begging for money and was turned down. To make things worse, right after he left the Saudis called for a meeting of OPEC members and guess what they discussed...? The possibility of having the purhasing of Oil using other currency than the US Dollar. For decades only the US Dollar is allowed to purchase Oil no matter who you are.
Where O where are the professors and Nobel Prize winners....?
They are just Parrots who repeat what they hear and do as they are told.
I could fathom a second stimulus after the 2010 elections, and only if successful proven businessmen/politicians control the spending.
As Cass Sunstein has stated over and over, the elderly are not cost effective and are bancrupting the Medicare program. Rationing Health care and taking control of the rackets created by the Sicilians 100 years ago is the answer.
Well blame yourself when you sit in Gridlock for an hour because another Chinese Billionaire gets a Diplomatic caravan. That's right..go to DC sometime, or hell try to get near the shipyards that China owns over in Long Beach.
Yeah, I got your stimulus right here............ :mrgreen: 

Peace My Brotha's, I am just a concerned citizen who voted for change.
By the time these clowns in DC are done, change is all I will have left..


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## Nick Batzdorf (Nov 4, 2009)




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