The assumption that we can sustain the retirement of the baby boomer’s without a balanced workforce (unskilled, semiskilled, skilled, and intellectual) is going to cripple the U.S. economy. The people of my generation always thought they deserved a free ride and still do. My father’s generation gave us T.V., jet planes, nuclear power, interstate highways,satellite and many more. My kid’s generation gave us the PC, micro chip, semi conductor, the internet and many more. If you consider the advantages we had and what we accomplished we babyboomers have been the most incompetent parasitic generation the world has ever known.

I agree with the general tenor of your observations, but details are incorrect. The semiconductor, microship, PC and the internet grew out of NASA research … additional inheritances from our father’s generation.

I’m having a hard time understanding your logic, perhaps you can explain?

I’m not an economist, but it seems like the idea of loaning money in the first place is based on risk. By bundling many smaller loans into a larger financial implement (like a CDO) you’re placing many small small bets, and hopefully mitigating some of your risk – as I understand it.

Though it’s possible to loose the $10 the bank loaned out, isn’t it also possible that the money is repaid, and the risk pays out interest? Further, even if the bank loans out the money, and the consumer defaults on the loan, isn’t the very fact that the money was put into circulation a boon for the economy?

The trouble is each time it is bundled it can be moved to a different kind of instrument and leveraged again because of the mitigation of risk. The bank loaned $30 dollars it only had $10 Costumer has $30 bank makes $.50. Circulation may or may not be a boon to the economy. In the case of the 1st bank and costumer probably so, as you go up the chain probably not. As it goes up the chain its " leveraged value" is increased but it’s real value has decreased due to cost of administration. When it is insured with an uncapitalized agreement it is no longer covered by the fed or any capital. The $30+ loss is complete but the investment of the $30 and the nickel mitigate the loss in part. That’s why I said $10 loss. Like I said one theory does make the assumption that any money moved in an economy is a “boon” or net asset, I personally find that short sighted.

If I may weigh in on the subject, I wouldn’t call it the Romer- Bernanke position, it is simply the prevailing practice on Wall Street, which at its worst bundled sub-prime loans with “good” assets as CDOs(a type of derivative). The interest rates are the lure and, at least prior to the meltdown the 3 rating agencies(Moody’s et.al.)were giving AAA ratings to packages containing a lot of bad loans.(read Michael Lewis’ "Panic")
Romer, herself,was famous for her research on the Great Depression and advocated a giant stimulus(as opposed to current small stimulus) to get us out of current “Great Recession”. She also argued against tax cuts for the wealthy. It is probable that we need some risk to get out of current economic mess and much of the debate is about “how much”risk. Even if the formula is changed someone will be left holding the bag. Currently it’s the taxpayer because the banks(and financial institutions) themselves have been deemed “too big to fail”. In answer to you question, Joey, about the proverbial $10.00, yes it is possible to be repaid and yes, the money put into circulation is a temporary stimulus, but, in theory,it should be the greedy that get caught holding the bag, not the taxpayer.

I used Romer-Bernanke because that’s what the article was about. You made some very good points. I have read some on both sides of the discussion about stimulus there seem to be a small minority that thinks it’s unnecessary. The majority seem to be split as to where to put it. The prevailing practice has been to stimulate threw financial manipulations. They were used in the 30’s and 40’s along with direct Job creation to create slow sustained growth. The down turn in the mid and late 50’s wasn’t. Ike and Kennedy combined to achieve more vigorous and stable growth with capital improvements (interstate system) combined with long term funding of technological development (space program).

Fair enough, Preston, that’s the kind of spending I believe we need. I could be misrepresenting Romer’s position(massive spending on infrastructure/ end Bush tax cuts for wealthiest Americans)as I haven’t seen any direct quotes, but it is her stance according to journalists I respect. Although I’m a confirmed capitalist, sometimes I can sound like a bit of a Bolshevik on this issue.