Brad DeLong

David Stockman: Mitt Romney Not a "Job Creator"

2012-05-22T19:31:30-07:00

Indeed not. That's not what Bain was about--or supposed to be about.

David Stockman:

I don't think that Mitt Romney can legitimately say that he learned anything about how to create jobs in the LBO business. The LBO business is about how to strip cash out of old, long-in-the-tooth companies and how to make short-term profits…All the jobs that he talks about came from Staples. That was a very early venture stage deal. That, you know they got out of long before it got to its current size.

VIDEO: http://www.youtube.com/watch?v=Fu4-6o44d6M

DeLong-Summers Smackdown Watch: Raghu Rajan Says: "Be Sensible!"

2012-05-22T12:20:48-07:00

UPDATE: Paul Krugman points out that:

More than half the US population lives in states with more than 8 percent unemployment.... Less than a tenth of the population lives in states with less than 6 percent unemployment...

Raghu Rajan:

Sensible Keynesians see no easy way out: [W]hen persistent high unemployment leads the long term unemployed to lose the habits and skills that make them employable. This is probably the more pertinent case in several industrial countries, such as the US and Spain. Increasing employment in a sustainable way today could more than pay for itself if people who would otherwise drop out of the workforce earn incomes.

The key question then is whether more government spending can make a real difference to the most severe employment problems. Here the case for a general stimulus becomes less compelling. In the US, demand is weakest in communities where a boom and bust in house prices has left an overhang of household debt. Lower local demand has hit employment in industries such as retail and restaurants. A general increase in government spending may be too blunt – greater demand in New York is not going to help families eat out in Las Vegas (and hence create more restaurant jobs there). Targeted household debt write-offs in Las Vegas could be a better use of stimulus dollars…. Policy should instead help workers move where there are suitable jobs – for instance, by helping them offload their homes and the associated debt without the stigma of default….

Japan, which had a huge property boom and bust in the late 1980s, provides a salutary warning of the difficulties of stimulus through infrastructure spending. Even though Japan covered much of the country with concrete, it never fully emerged from the crisis. For the Japanese, the long run has arrived, and they are older, fewer and have the highest government debt in the G7.

The US government can still spend. The UK is more on the margin. With a huge financial sector dependent on the government’s financial standing, it can take fewer chances with its finances. Austerity is painful, which is why austerity tomorrow is not credible….

Targeted government spending, or reduced austerity, along the lines suggested by sensible Keynesians, might be feasible in some countries and helpful in speeding recovery. But we should examine each policy based on a country’s circumstances. We should be particularly wary of populist Keynesians, who parrot “in the long run we are dead” to justify any short-sighted government action. They do the world a disservice by suggesting there are easy ways out. By misleading people and their leaders, they may well precipitate revolution rather than recovery.

Difference Between Alesina-Ardagna Outcome-Based and IMF Action-Based Measures of Fiscal Consolidation

2012-05-22T11:19:01-07:00

Source: IMF (2010), "Will It Hurt?"

Exchange Rates and Economic Recovery Blogging

2012-05-22T11:04:04-07:00

See Eichengreen and Sachs (1986), "Exchange Rates and Economic Recovery in the 1930s". History repeats itself, the first time as tragedy, and the second time as… tragedy.

Paul Krugman:

Let's All Devalue Against Each Other: Jeremy Siegel echoes a lot of what some of us have been saying for years about the infeasibility of internal devaluation, but then argues that the answer is devaluation of the euro as a whole. Um, against whom? I mean, it’s not as if America or Japan are towers of economic strength, easily able to provide the demand Europe lacks. That leaves emerging markets. And while I and others have been pushing for years for an end to Chinese currency manipulation, China is at this point (a) not looking very strong itself (b) just not that big in the world economy — not yet. More generally, Europe as a whole, like America, remains a relatively closed economy. Its salvation must be mainly internal.

Now, if devaluation is a code word to mean raising the inflation target, fine.

The last time I got to hear the late James Tobin, he gave a talk in which he joked that as far as he could tell, all the world’s major currencies needed to devalue against each other. This is sort of one of those times — and what that actually tells you is that we need fiscal and monetary stimulus.

Indeed

Hysteresis in Output in Korea, 1997-2004

2012-05-22T09:21:42-07:00

From Abdul Abiad, Ravi Balakrishnan, Petya Koeva Brooks, Daniel Leigh, and Irina Tytell, "What’s the Damage? Medium-term Output Dynamics After Banking Crises", cited as IMF (2009):

Yes, the Multiplier Is Likely to Be Very Small Away from the Zero Nominal Lower Bound on Interest Rates. Why Do You Ask?

2012-05-22T08:21:03-07:00

In trotting around the country giving versions of DeLong and Summers, “Fiscal Policy in a Depressed Economy”, I have found that a point that seemed completely obvious to us is not obvious at all to many.

Here is the point: an optimizing central bank that cares about inflation and unemployment but not about the level of interest rates will, as long as it does not find itself at the zero nominal lower bound, engage in full fiscal offset: will take care to make sure that the net-of-monetary-policy-reaction fiscal multiplier is very close to zero by making the monetary policy reaction function in (r, Y) space nearly vertical.

Here is the argument

Menzie Chinn Reads the IMF on How the Multiplier Is Bigger in a Depressed Economy

2012-05-22T08:09:12-07:00

Menzie Chinn:

Econbrowser: State Dependence and Fiscal Multipliers: I found this graph from the April IMF Fiscal Monitor of interest…. The authors describe the results underpinning this graph thus:

The model finds significant evidence that the impact of fiscal policy on economic activity varies with the business cycle and that the effect of fiscal policy on output is nonlinear. Average fiscal multipliers in G-7 countries are significantly larger in times of negative output gaps than when the output gap is positive…. Assuming… that two-thirds of the adjustment comes from spending measures, a weighted average of spending and revenue multipliers in downturns yields an overall fiscal multiplier of about 1.0. In line with the bulk of the previous literature (including the survey by Spilimbergo, Symansky, and Schindler, 2009), short-term spending multipliers are found to be significantly higher than revenue multipliers….

What I find of interest are the US results…. [G]overnment spending has large output effects, particularly in the presence of a negative output gap, once nonlinearities are allowed. Tax revenue changes have much smaller impacts (which are nonsignificant statistically in the linear specification). Similar results are obtained by Auerbach and Gorodnichenko (AEJ:EP, 2012) (ungated version), who use a similar methodology:

Our findings suggest that all of the extensions we developed in this paper—controlling for expectations, allowing responses to vary in recession and expansion, and allowing for different multipliers for different components of government purchases— all have important effects on the resulting estimates. In particular, policies that increase government purchases have a much larger impact in recession than is implied by the standard linear model, even more so when one controls for expectations, which is clearly called for given the extent to which independent forecasts help predict VAR policy “shocks.” Given the historical experience of the US economy, our preferred estimates of the government spending multiplier are between 0 and 0.5 in expansions, and between 1 and 1.5 in recessions.

One interesting implication of these results, beyond the fact that further spending cuts now would be disastrous, is that the hundreds of billions of stimulus during the 2004-08 period –- during which the output gap was slightly positive -- could have been better spent now. (After all, publicly held Federal debt increased by $3.4 trillion going from 2001Q1 to 2009Q1.) Or, as I wrote nearly six years ago:

What we can be certain of is that the choices made by policy makers in the past five years have circumscribed our ability to manage a downturn.

Republicans Who Do Not Like Mitt Romney's Bain Capital

2012-05-22T07:37:46-07:00

A tag team. Via Judd Legum:

Republican Texas Governor Rick Perry: “The idea that you’ve got private equity companies that come in and take companies apart so they can make profits and have people lose their jobs, that’s not what the Republican Party’s about.”

Republican former House Speaker Newt Gingrich: “The Bain model is to go in at a very low price, borrow an immense amount of money, pay Bain an immense amount of money and leave. I’ll let you decide if that’s really good capitalism. I think that’s exploitation.”

Republican Texas Governor Rick Perry: “It’s all about how much money can we make, how quick can we make it, and then get out of town and find the next carcass to feed upon”

Republican former House Speaker Newt Gingrich: “We find it pretty hard to justify rich people figuring out clever legal ways to loot a company, leaving behind 1,700 families without a job.”

Republican Texas Governor Rick Perry: “Now, I have no doubt Mitt Romney was worried about pink slips — whether he was going to have enough of them to hand out because his company, Bain Capital, of all the jobs that they killed”

Republican former House Speaker Newt Gingrich: “He claims he created 100,000 jobs. The Washington Post, two days ago, reported in their fact check column that he gets three Pinocchios. Now, a Pinocchio is what you get from The Post if you’re not telling the truth.”

Republican Texas Governor Rick Perry: “There is something inherently wrong when getting rich off failure and sticking it to someone else is how you do your business, and I happen to think that’s indefensible”

Republican former House Speaker Newt Gingrich: “If Governor Romney would like to give back all the money he’s earned from bankrupting companies and laying off employees over his years, then I would be glad to then listen to him”

Republican Texas Governor Rick Perry: “If you’re a victim of Bain Capital’s downsizing, it’s the ultimate insult for Mitt Romney to come to South Carolina and tell you he feels your pain, because he caused it.”

Republican former House Speaker Newt Gingrich: “I think there are things you can legitimately look at in Bain Capital. I think there are things you can legitimately look at in anybody’s record including Mitt Romney’s record.

Republican Texas Governor Rick Perry: “They’re vultures that sitting out there on the tree limb waiting for the company to get sick and then they swoop in, they eat the carcass. They leave with that and they leave the skeleton”

Me? I don't think it's Bain Capital's business to worry about the overall level of employment in the country, or about whether the labor market is tight enough and the educational system strong enough to provide labor with the appropriate bargaining power vis-a-vis capital. Bain Capital is not the Federal Reserve, and it is not responsible for funding and staffing America's educational system.

I do think that there is every sign that while at Bain Capital Mitt Romney became convinced that the only real stakeholders in the economy are investors, financiers, and top executives. That's an OK attitude to have if you are running Bain Capital--and if the Federal Reserve is doing its monetary-policy job and if the legislature of California is doing its education-system staffing-and-funding job.

That's not an OK attitude to have if you are the President of the United States. You need to be the president of all the people--not just of the investors, financiers, and top executives.

In Which the IMF Takes Its Place at the Head of the Sixth International, and Calls for a Less Destructive and Contractionary Monetary Policy in Britain

2012-05-22T07:07:40-07:00

Via Duncan Black, The Manchester Guardian on the eurocrisis:

Eurozone crisis live: IMF warns UK may need fiscal stimulus: 2.18pm: The Ernst & Young ITEM Club has welcomed the Christine Lagarde's recommendation that UK interest rates should be cut. Andrew Goodwin, its senior economic advisor, said:

Cutting interest rates from 0.5% would certainly be a good place to start – the Fed's target range is 0-0.25% and we have always said that ours should be the same. It won't be the solution on its own, but would certainly send out the right signal.

Goodwin is less convinced that yet more quantitative easing would work (another proposal from the IMF today). Instead, he favours more spending on infrastructure projects, such as high-speed broadband networks, the smart grid and the revival of projects for Carbon Capture at power stations, or new nuclear plants….

1.55pm: Here's economics editor Larry Elliott's take on this morning's announcement from the IMF:

Britain needs a plan B. That was the stark message from the International Monetary Fund on Tuesday as it announced the findings of its checkup on the UK economy. The Washington-based Fund says growth is weak, unemployment too high and the risks are clearly weighted to the downside. Extra stimulus, it says, is needed and needed now.

So, game and set and match to the shadow chancellor, Ed Balls, who has been warning George Osborne for the past 18 months that the government's austerity package is too much, too soon for an economy as enfeebled as Britain's at a time when its major trading partner, Europe, is involved in a life-or-death struggle to save the single currency?…

11.50am: Here's a quick summary of what happened at the International Monetary Fund's briefing in London this morning. The IMF has warned that the UK government should consider a new fiscal stimulus plan, if the British economy does not recover. Should growth remain below target, new fiscal easing measures should be considered -- including temporary tax cuts and more infrastructure spending.

Christine Lagarde, head of the IMF, said that economic growth was currently too low, while unemployment (especially among young people) was too high. The IMF also urged the Bank of England to stimulate the economy through another round of quantitative easing, and to also consider fresh interest rate cuts.

The IMF also congratulated the UK government on its progress in dealing with the crisis, but argued that Britain's current record low interest rates gave it the opportunity to borrow more today. As the FT puts it, Britain "should prepare for Plan B" (although Lagarde didn't put the issue such political terms)….

11.22am: You can also read the full details of the conclusion of the IMF's mission to the UK, here on the Treasury's website. The key points with regard to a new fiscal stimulus are number 12:

There is scope within the current overall fiscal stance to improve the quality of fiscal adjustment to support growth

and number 13:

Fiscal easing and further use of the government's balance sheet should be considered if downside risks materialize and the recovery fails to take off. In particular, if growth does not build momentum and is significantly below forecasts even after substantial additional monetary stimulus and further credit easing measures, planned fiscal adjustment would need to be reconsidered

11.12am: The UK Treasury has uploaded a copy of George Osborne's remarks at today's press conference, here on its website. They show that Osborne did not respond to the IMF's argument that a new fiscal stimulus could be required, but instead focused on the recommendation for the Bank of England to cut rates or create more electronic money now....and on the crisis in Europe. Osborne said:

The IMF identifies setbacks in the euro area as the key risk to the UK's economic prospects and financial stability. In the UK, we have a flexible exchange rate and independent monetary policy, which allows us to ease the process of fiscal adjustment with a lower exchange rate and supportive monetary policy. The IMF has advice for the Bank of England on that today. But in the eurozone, indebted countries have to deal with high budget deficits without that support.

Behind the scenes, Treasury officials are also briefing that the IMF has not made a dramatic change in position, and still supports the government's plans.

Greg Mankiw's Memory Seems Faulty Indeed...

2012-05-22T06:02:00-07:00

Greg Mankiw today denounces the faulty memory of "Democratic partisans". Kettle, meet pot:

Greg Mankiw, May 2012:

Greg Mankiw's Blog: Faulty Memories: [A]s I recall, President Bush did not spend as much time blaming his predecessor for bequeathing him a sick economy as President Obama has.

Greg Mankiw, working for George W. Bush, January 2004:

Econbrowser: The 2001 recession revisited: [Data] revisions… strongly suggest that the business-cycle peak was before March 2001. The median date of the peak for the five series discussed here is October 2000. Other data support the notion that economic activity had slowed sharply or even begun to decline by this point, including the stock market, business investment, and initial unemployment claims. For these reasons, the analyses throughout this chapter (including the charts that compare this recession to past recessions) use the fourth quarter of 2000 as the peak of economic activity and the start of the recession…

Mankiw appears to forget not only what he wrote in 2004, but that bequeathing your successors with an unemployment rate rising to 10.0% within a year is very different than unemployment bequeathing your successors with an unemployment rate rising to 5.7% within a year…

Liveblogging World War II: May 22, 1942

2012-05-22T06:00:00-07:00

The repaired U.S.S. Saratoga (CV-3) departs Puget Sound for San Diego:

Yes, I Am Increasingly Embarrassed by My Profession. Why Do You Ask?

2012-05-21T07:52:07-07:00

Paul Krugman:

None So Blind: Eddie Lazear has an op-ed in the WSJ on the fiscal cliff that, among other things, pooh-poohs any concerns that sudden cuts in spending might hurt the economy. He weasels a bit, but basically conveys the impression that there’s no evidence for Keynesian effects. What this signifies to me is the politicization and corruption overtaking the economics profession…. [I]n the midst of a crisis that has both provided overwhelming evidence for Keynesian views of fiscal policy and inspired a great deal of empirical work that also confirms the case for a Keynesian view, the right wing of the profession is just covering its ears and yelling “La, la, la, I can’t hear you.”

Indeed.

Now how do I structure things so that I keep effectively marking my beliefs to market as we learn more about the world and also as the world changes? How do I keep from becoming a crazy old man yelling at the clouds?

Best Photos of Yesterday's Anular Eclipse

2012-05-21T06:14:26-07:00

Macro Policy Disasters: The Manchester Guardian's Observer Is Super-Shrill

2012-05-21T06:10:46-07:00

The Observer:

The economy: a calamitous strategy, with no end in sight: The economic conditions through which Britain is living reflect a disgraceful abdication of responsibility by a government that has consigned millions of lives to unnecessary and avoidable hardship and great anxiety about their future prospects….Britain confronts [today's] risk[s] from a position of great weakness in substantial measure because of the economic strategy being pursued by the coalition government, whose leaders shamelessly blame an event that has not occurred for their mistakes. The true problem is that the framework in which economic policy is cast is 100% wrong.

At the heart of this calamitous strategy is a wholesale misdiagnosis of how the market economy functions and a complete failure to understand why the financial crisis took place…. For a generation, business and finance, cheered on by US neoconservatives and free market fundamentalists, have argued that the less capitalism is governed, regulated and shaped by the state, the better…. The lesson of the financial crisis is that this is complete hokum that serves the political and personal interests of the very rich. It has been an intellectual carapace to permit the creation of dynastic personal fortunes while dismantling the social contract…. Yet it has been this flyblown thinking that has informed British monetary, fiscal and financial policy for the last two years – uniting the governor of the Bank of England with the equally bewildered George Osborne. Both are at sea.

The lesson of the financial crisis is unambiguous. Risk – the existence of incalculable unknowns – cannot be handled by markets alone. It has to be socialised…. For 20 years, the titans of high finance assured governments, central banks and regulators that no longer did they have to worry their bureaucratic heads over systemic risk in finance…. The genius innovators of finance, informed by Nobel prize-winning free market economists, had created new financial instruments that worked so effectively distributing risk around the financial system that banks could grow their balance sheets to hitherto unheard of levels, underwritten with ever-less capital.

It was dangerous nonsense, but it did serve to make those at the top of finance very, very rich….

Dismantling a position that has taken a generation to build was obviously going to take at least a decade. Worse, the task was superimposed on another calamitous mistake originating from the same mindset. Britain had vastly overinvested in the business sectors that benefited from rocketing and unsustainable credit growth….

Britain's stock of public debt was modest, giving an intelligent government flexibility in how quickly it lowered the deficit. Britain had a private debt crisis, not a public debt crisis. The intellectual lesson was clear – states, business and society are interdependent; risk has to be socialised.

Instead, the government has done the exact opposite. It has abandoned the scope to manage the economy intelligently and pursued a scorched earth policy of trying to eliminate the structural deficit in four years. It claims that the lowest interest rates for 300 years demonstrate its credibility: rather, they prove the depth of Britain's problems….

We have seen two years of torched economic forecasts – and this unbalanced, stricken economy has yet to be hit by the bulk of the spending cuts. There is still no serious new framework in which innovative businesses can be built and financed. The Lib Dems are threatened with extinction as a national party, proper reward for complicity in such epic mistakes. The Tories should be no less concerned. Their capacity to exist outside the gilded constituencies of London and the south-east is under threat. In democracies, the neglected can hit back and hit back they will.

Hoisted from Comments: A Grumpy Dsquared Defends His Profession

2012-05-21T05:47:46-07:00

dsquared:

What Are the Core Competences of High Finance?: Harrumph; I could just as easily say that the core competences of academic economists were a) playing office politics with journal editors and b) recycling the same two or three ideas in irrelevant models. It would be just as kinda-sorta-but-not-really true.

I don't parse the "but not really" in that sentence.

I am reminded of a professor in 1984 telling me that there were good careers to be made reading Keynes's General Theory and stopping every five pages to write an article mathing-up what you had just read.

The baseline for finance is that nearly everybody should be doing buy-and-hold dollar-cost-averaging with a portfolio that is the appropriate for them mix of a Vanguard equity index fund and safe money. But finance does not make it easy for people to do that, and not many people do.

Hoisted from Comments: Finance Alternate Universe Jamie-Dimon-with-a-Beard Blogging

2012-05-21T05:41:47-07:00

dsquared writes:

Limits to Arbitrage Bites Again: "In what universe do they have to pay off the protection and not make a fortune on the bonds?"

The universe in which they got the hedge ratio wrong, as they did according to the conference call.

Let me rephrase: in what universe does a well-run hedging investment bank put on a hedge that requires you go far out into the tails on one leg--a 20-to-1 hedge ratio, or more--without worrying about model uncertainty?

Liveblogging World War II: May 21, 1942

2012-05-21T04:26:59-07:00

The San Francisco Chronicle:

Last Japanese Leave San Francisco - 1942: For the first time in 81 years, not a single Japanese is walking the streets of San Francisco. The last group, 274 of them, were moved yesterday to the Tanforan assembly center. Only a scant half dozen are left, all seriously ill in San Francisco hospitals.

Last night Japanese town was empty. Its stores were vacant, its windows plastered with "To Lease" signs. There were no guests in its hotels, no diners nibbling on sukiyaki or tempura. And last night, too, there were no Japanese with their ever present cameras and sketch books, no Japanese with their newly acquired furtive, frightened looks.

A colorful chapter in San Francisco history was closed forever. Some day maybe, the Japanese will come back. But if they do it will be to start a new chapter—with characters that are irretrievably changed. It was in 1850 — more than 90 years ago — that the first Japanese came to San Francisco, more than four years before Commodore Perry engineered the first trade treaty with Japan. The first arrival was one Joseph Heco, a castaway, brought here by his rescuers. What happened to Heco is, apparently, a point overlooked by historians. He certain came and probably went – but nobody seems to know when or where.

Not for another 11 years did the real Japanese migration begin. In 1861, the second Japanese came here. Five years later, seven more arrived. The next year there were 67, and from then on migration boomed. By 1869 there was a Japanese colony at Gold Hill near Sacramento. In 1872 the first Japanese Consulate opened in San Francisco – an office that passed through many hands, many regimes, and many policies before December 7, 1941. On that fateful day, according to census records, there were 5,280 Japanese in San Francisco.

They left San Francisco by the hundreds all through last January and February, seeking new homes and new jobs in the East and Midwest. In March, the Army and the Wartime Civil Control Administration took over with a new humane policy of evacuation to assembly and relocation centers where both the country and the Japanese could be given protection. The first evacuation under the WCCA came during the first week in April, when hundreds of Japanese were taken to the assembly center at Santa Anita. On April 25 and 26, and on May 6 and 7, additional thousands were taken to the Tanforan Center. These three evacuations had cleared half of San Francisco. The rest were cleared yesterday.

These last Japanese registered here last Saturday and Sunday. All their business was to have been cleaned up, all their possessions sold or stored. Yesterday morning, at the Raphael Weill School on O'Farrell Street, they started their ride to Tanforan. Quickly, painlessly, protected by military police from any conceivable "incident," they climbed into the six waiting special Greyhound buses. There were tears – but not from the Japanese. They came from those who stayed behind – old friends, old employers, old neighbors. By noon, all 274 were at Tanforan, registered, assigned to their temporary new homes and sitting down to lunch.

The Japanese were gone from San Francisco.

The Post-Recession Trough Labor Market: Another Cut at the Data

2012-05-20T11:46:38-07:00

The Los Angeles Times Gives John M. Ellis and Charles L. Geshekter a Platform to Oppose a Just, Free, and Equal Society

2012-05-20T11:23:54-07:00

If Ellis and Geshekter think that America should not aim to be a "just, free, and equal society", they need to take it up with Thomas Jefferson.

It really is remarkable the tripe that the Los Angeles Times will print:

UC system faculty replaces academics with activism: [T]he tilt to the left among college faculty members has been growing nationwide for several decades. At UC Berkeley, the ratio of Democrats to Republicans even in the hard sciences had grown to 10 to 1 in 2004…. The visible signs of activism at work are shocking. Why should the mission statement of the sociology department at UC Santa Cruz claim that a "just, free and equal society" may require "fundamental social change"? Sociology classes should help students understand how societies work, but at Santa Cruz, the mission seems to be enlisting students in activism…

Why oh why can't we have a better press corps?

Hermann Goering Liveblogs World War II: May 20, 1942

2012-05-20T11:14:18-07:00

Hermann Goering:

Of each of you individuals of the home front I demand the same hardness as is displayed out there at the fighting lines. This includes, above all, that same hanging together which can be found out there in the fighting lines, forged with blood. With proud contempt we shall refute all enemy propaganda, for it consists of nothing but lies, after all. Those who are sending this propaganda to us are the same men who could perform in this same theater in the streets of Berlin during the period of the System. Just as his newspapers at that time, proficient in lying, were full of lies, in the same manner the Jew is lying today, denying the blue of the sky, just as he did then, with the only exception that he can not do it today in our midst, thank God. So he tries to force this garbage originating from his brain by all possible means of propaganda upon the German people. He is mistaken….

The people… will abide by the war laws which had to be passed…. They have been decreed because they were necessary in order to uphold the life of a German people and to assure its victory…. Because the leadership is doing all in efforts to take care of the people, therefore the people has to be sufficiently well behaved and decent and to have understanding and confidence in the action of the leadership. There are always the same few, who exclude themselves from the community. We know them since the war period, yes, we know their previous attitude….

The time has passed when the German people could be fooled; as was the case in the years of 1917-18, and when it finally perished because of its foolishness. We are quite well aware of the fact that the German people are willing to bear the necessary hardship of this war and to hold out during the war, irrespective of its duration, with stern determination. The Fuehrer expressed gratitude and appreciation for this to the German people recently in the session of the German Reichstag. But in this hour the German people, all its fronts and all its classes, have all reason to thank the Fuehrer, and his titanic performance should be visualized by them.

He is the foremost and greatest producer of arms in our war production, he is the brilliant, heroic commander of our armed forces; above all he is the guarantor of German victory. A little while ago I gave you a demonstration of the tremendous shocks to which the Fuehrer is exposed. I showed how strong he has been and how able to bear the hardest, yet to conduct all to a good end as he has mastered all obstacles from whatever source they may have come, as he has exterminated weakness where he has been present. Such a Fuehrer is the guarantor of victory, and the German people, and no other one, has such a Fuehrer. And alone for this reason, we may look forward with a proud sense of security toward the outcome of this fighting, as one of victory…