Repairing Infrastructure & Interest Rates

From Barry Ritholtz:

What can we do as a nation to take advantage of these interest rates before they return to normal? Choose your favorite part of America that can be upgraded: 

• Our electrical grid consists mostly of wires strung between wooden poles, which may have been innovative in 1850 but is somewhat past its sell-by date today. After Hurricane Sandy, much of New Jersey, Long Island and Connecticut lost electrical service for two weeks. The entire grid needs to be hardened, upgraded against cyberattack — and buried underground. 
• We can make our road system “intelligent” by using sensors and software to move traffic more quickly and efficiently than the current “dumb” system does. The productivity boost and fuel savings make this a big return on investment. 
• Bridges that are well past their life expectancy should not simply wait to fail. We should be actively replacing these. The alternative is waiting for random events — like the truck crash that caused the Washington state Skagit River bridge collapse — to cause a disaster. 
• The United States’ cellular network is a decade behind Europe’s and Asia’s coverage and reliability. Mandate better minimum service requirements and make available cheap financing to wireless providers to do so. We can do the same with broadband as well. 
• The interstate highway system has been one of the lasting legacies of the Eisenhower administration. It is time for a full upgrade of this economic multiplier.

Crumbling Roads, Crumbling Democracy

Why is the economy continuing to only plod along? [But, yes, it is indeed better than it was 4 years ago.]

Why is unemployment looming stubbornly near 8 percent?

Paul Krugman explains:

"For future reference. In a depressed economy, with the government able to borrow at very low interest rates, we should be increasing public investment — the true cost of the resources is negligible, so the rate of return is very high, not to mention the desirability of creating jobs.

Here’s what has actually happened, as measured by the sum of state, local, and federal nondefense investment:

Doing it wrong."

And, yes, Republican obstruction of all Obama's and the Democrat's jobs legislation has a lot to do with this.

According to Republicans, borrowing is bad, even though the cost of money is about as cheap as it gets. There isn't a better time to invest our infrastructure - mass transportation, water and sewer ways, the electric grid, the greening of public buildings, repairing bridges and roads, etc.

Also, according to Republicans, government-induced demand is a bad thing, although no one else (I'm looking at you, private sector) is willing to spend any money at the moment. Yes, for those of you being foreclosed upon, losing your job, already out of work, behind on your bills, you're just going to have to tough it out until the market decides you're worthy of saving.

Ruinous Wall Street

"Plus, there's the fact that the entire industry continues to get preferential treatment from the government -- be it the $700 billion bailout in 2008 or the ongoing right to borrow massive amounts of essentially free money from the Federal Reserve, then turn around and loan it, risk free, to Uncle Sam at 1.5% or more per year, thus pocketing billions in easy money," reports Anthony Mirhaydari.

Wall Street is ruining America.

Nowhere Else To Go

Peter Schiff (as evidenced in the video below) is leading the "treasuries doomsday" scenario. [The idea that the Chinese and other nations will suddenly dump U.S. Treasuries, lowering the dollar, spiking interest rates, and causing stock prices to fall.] Reality isn't quite following his preconceived economic paradigm, so he's manufacturing his own delusional storyline to make his world right again. And, he's hoping you believe it.

The Fast Money host directly discredits Schiff. But Peter wouldn't hear it. Peter's world is what he wants it to be.

We can't make good policy or get it passed when one side of the argument won't even deal with reality. The U.S. isn't flooding the world with money. (An oft repeated claim in the echo chamber is that the U.S. is printing boatloads of money. Thereby, devaluing the dollar.) The Chinese don't actually own that much of our debt. We don't need the Chinese for low interest rates.

Following the initial Fast Money segment, Paul Krugman and Peter Barbera then, also, dismiss Schiff and his unsupported tales.

Incoherence Inflation

I couldn't let more evidence of Paul Ryan's complete incoherence go unnoticed.

For Further Reading:

CBPP Offers Critique of Ryan Roadmap

A Plan That Isn't

Ryan Budget's Radical Priorities

Ryan Pushes Ominous Roadmap

Ryan Roadmap Is Dead End

Unnecessary Pain With No Long-term Gain

Sunday Reading

Explaining The Impact Of Ultra-Low Rates To Greenspan
Government's Share Of Economy, 1950-2075
Has Social Security Begun Tapping Its Trust Funds?
Obama Attacks Wealth Inequality

The Liability Con

Some enlightenment concerning recent deficit hysterics:

1994
Baselines, Counterfactuals and the Stimulus
How I Learned to Stop Worrying and Love the Deficits
No Exit
Notes on the Dollar Panic
The Budget Deficit Crisis

The meme that deficit spending, always, crowds out private investment and is, in general, morally wrong, is both short-sighted and misleading. We are a country - private citizens, business, and government - that has used debt to live a better standard of life, grow companies, and finance operations, especially since WWII. During recessionary episodes, the government accumulates debt to restore employment, fix crumbling bridges, improve water and air quality, provide health care, etc. All quite worthy and important causes for investment.

This false debate about rates, deficits, and "big," "bad" government is deceptive drivel. Just more smoke and mirrors of class warfare. The rich in this country have slowly lowered their tax burden, frozen wages for laborers, and methodically steered more of the country's wealth toward their own pockets. As public money (which would have been used for public goods) finds it's way into private pockets, less of the public commons is maintained. We all end up worse off. As is evidenced by the continually decreasing standard of living for most Americans.

America Without a Middle Class
Household Debt Service
Poverty Facts and Stats
U.S. Business: The American Way of Debt

Usury

What possible reason could 60 senators have for opposing a 15 percent cap on credit card interest rates? It appears, as Dick Durbin has stated, the banks do own Washington.