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Dan Kervick: Want Jobs? Forget the Fed!

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Yves here. Late in the afternoon, after three days running of Mr. Market being in a bad mood, the Wall Street Journal sent a news alert titled “Fed Sees Action if Growth Doesn’t Pick Up Soon.” The message:

Federal Reserve officials, impatient with the economy’s sluggish growth and high unemployment, are moving closer to taking new steps to spur activity and hiring.

Since their June policy meeting, officials have made clear—in interviews, speeches and testimony to Congress—that they find the current state of the economy unacceptable. Many officials appear increasingly inclined to move unless they see evidence soon that activity is picking up on its own.

As I sputtered by e-mail:

This would be funny if it weren’t pathetic and real people weren’t being hurt.

The state of the economy is “unacceptable”? Really? Where were you when bank reforms were needed and the Obama administration was too chickenshit to go for bigger stimulus?

And the Fed has already tried every confidence fairy and central bank trick on offer. But Bernanke refuses to believe that loanable funds is a fallacy. Putting borrowing on sale is attractive to speculators, but not to real economy types who don’t see opportunity and/or have legitimate worries re repayment.

The post below is a longer-form treatment of what passes for policy thinking at the Fed. Oh, and it roughs up on Matt Yglesias too.

By Dan Kervick, who does research in decision theory and analytic metaphysics. Cross posted from New Economic Perspectives

Matt Yglesias beats a dead monetarist horse – the same defunct nag whose flogged and forlorn carcass should have been cremated years ago – by again seeming to pin the chief responsibility for attacking unemployment on the Fed, and on its supposed control over inflation and inflation expectations. And yet as is often the case with Yglesias, the elected political leaders of the most economically powerful nation in the world rate no mention in his post, despite their scandalous and incompetent failure to address a national employment debacle.

One of Yglesias’s readers asks a straightforward question in the comments section: “Is it strictly necessary to have inflation to have growth?” Now, while I expect correction from a few academic economists on this score, it seems to me that the correct answer to this question is “Absolutely not!”

First, if an economy is experiencing severe unemployment of human and material resources – e.g. if it is an economy such as the economy we are in now – then it is entirely possible for that economy to grow fairly quickly in response to a surge in demand, without a rise in the price level. The economy can match that demand with new output almost right away, without a significant rise in unit production costs. Unit costs might in fact decline due to increased productivity from more efficient use of existing equipment and workers.

And even in an economy running at full capacity, output can continue to grow without rising prices so long as the increased supply of output is not outpaced by increases in demand. The outpacing of supply by demand can and does occur in a humming economy, no doubt. But there is no strictly necessary reason it has to occur.

But setting aside these hypotheticals about the full capacity economy of our dreams, let’s stay focused on our own present-day society with its weird combination of hyper-unemployment on Main Street and hyper-unconcerned politicians and opinion leaders in Washington. Why are Yglesias and other pundits of the neo-monetarist tendency so insistent on pursuing a policy of growth and employment through central bank-engineered inflation? They have in fact experimented with a few different rationales in defending their approach.

Sometimes they forthrightly advocate achieving full employment by reducing labor costs and the real wages of the employed through inflation. But this is not such an attractive route to prosperity given that we live in an economy already characterized by a skyrocketing income gap and surging corporate profits gained on the backs of abandoned and punished poor and middle class workers. So this rationale is heard less frequently these days – at least in public.

Then there is the theory that higher inflation expectations should lead to a “use it or lose it” attitude among savers toward their money. Savers concerned about the declining real value of their money will presumably spend more of it, and spend it more quickly. That is a plausible, if empirically iffy, hypothesis – so long as the inflation expectations rise sufficiently dramatically. The problem is that Yglesias and the other neo-monetarists have never proposed a plausible mechanism whereby the Fed can raise inflation expectations in any significant way. Even two rounds of QE accompanied by large outpourings of Austrian-libertarian caterwauling and garment-rending about hyperinflation doom scenarios didn’t do the trick.

But the monetarist faithful continue to believe and affirm the creed. The source of the Fed’s power over inflation is supposed, they say, to lie in one of two places: The first is the discredited old model of bank reserves providing a finite stock of loanable funds, with the Fed controlling lending levels in accordance with the “money multiplier” by adjusting reserve quantities. This model has been refuted so many times on this blog that another demolition is hardly necessary.

The other alleged source of Fed power consists in verbal magic. The devotees of the monetarist church believe that the money-using multitudes hang on every word of the Fed Chairman, and adjust their behavior in response to words alone, abiding in firm conviction in the economy-wide potency of the Fed’s mighty syllables. Here’s Yglesias’s latest version of the expectations magic approach:

We should probably just retire the term “QE” at this point. What he’s [SF Fed President John Williams] talking about is going back to doing asset purchases, but doing them in potentially unlimited quantities in order to meet a goal. You say, for example, “we’re going to spend BLAH BLAH a week to try to get inflation expectations up to YADDA YADDA and if after five weeks we’re not there yet we’re going to start spending DOUBLE BLAH BLAH.” This is not my idea of what an absolutely optimal policy agenda looks like, but it would work much better than trying to decide how much to buy in advance. What you want to do, after all, is move markets and coordinate expectations. If everyone who pays attention to these things knows where the captain is trying to steer the ship, then they’ll all adjust their behavior in the direction of the new point that the Fed is trying to coordinate towards. If it’s all done through rumors, signaling, and off-the-record chats with key reporters then it’s much harder.

I have never been able to read this kind of thing without being dumbfounded. Outside of the abstract models found in academic papers in philosophy and economics about otherworldly communities of idealized economic agents, where are all of these people who regard Ben Bernanke as the captain steering the macroeconomic ship, and who coordinate their business decisions to fall in with the course plotted by our great capitalist helmsman? I don’t believe I have ever met one personally. Maybe I spend too much time below deck.

Sometimes the Seekers of the Credible Fed Statement argue that the point is not to produce growth via inflation. They reason instead that the Fed needs to signal it will at least tolerate higher inflation so that potential producers and employers aren’t frightened off of their business investment plans by the concern that the Fed will succumb to inflation fears and put the kibosh on growth, nipping the shoots of economic expansion in the bud before they have fully sprouted.

I find this last approach extremely implausible. I just can’t believe that there is any significant number of real-world business people who currently espy a landscape of promising economic opportunity, but who are being scared off of investment by some vague fears that the Fed might do some vague something-or-other in the future to tamp down demand and price pressure, employing some vague and mysterious Fed mechanisms. I can’t say nobody thinks this way, but my guess is that it is mainly some economists – not the bustling hordes of everyday business folk who pay barely any attention to the yada-yadas and blah-blahs emitted by the Fed.

A business will invest in production whenever they are convinced they are going to have customers willing to buy what the business produces, at a price profitable to the business. The biggest and most awesome customer in existence is the US Government. Those given to focus on authoritative verbal statements and expectations management might do well to realize that the most powerful kind of expectations-management we could get right now would come if prominent neoliberals and conservatives like Barack Obama, Simon Johnson, Ken Rogoff, Tim Geithner, Scott Sumner, Bill Clinton, Erskine Bowles, Alan Simpson and others – who are all apparently fighting a desperate war against everyone to their left, an effort aimed at preserving the neoliberal order and fending off any return to activist government and energetic fiscalism – would stop fibbing about the existence of a long-term public debt problem, and advocate dramatic fiscal expansion instead. The most ill-advised and economy-crippling thing Barack Obama ever did was tell the world the US government is “out of money”. He followed up this false and apocalyptic statement with his decision to fight a protracted war with the Republicans over how best to contract government spending over the long haul. He might as well have told us all that the most important customer in the whole world had just died.

If anyone deserves to be looked upon as the nation’s “captain” it is the President of the United States, and Cap’n Obama needs to reverse course. His faux-responsible budgetary fear-mongering and demoralizing visions of long-term penny-pinching underline and accentuate the even more radical fear-mongering and austerity-hawking of the Republicans. The bipartisan gloom and doom has lowered a cloud over the whole economy. It is slamming business and consumer confidence, and blighting expectations for the future.

There is no long term public debt problem for a country like the US, since the US is – unlike some of its unfortunate European friends – the sovereign issuer of the nominal medium of its own debt. Solvency is no challenge for the US, and borrowing is not required. President Obama should tell the world that if elected along with a Democratic Congress, he and his Democratic colleagues are planning to spend a great heap of public money on everything from eradicating global warming to building bridges to nowhere and escalators on Mars. And he might remind them at the same time that Mitt Romney will likely do the same thing, since the Republicans have a clear track record of believing that deficits matter only when Democrats are in power, and switching to the view that deficits don’t matter once Republicans are in charge.

It’s time for government to go big in its fiscal campaign. Damn the debt and full speed ahead. At the very least, the mere announcement of this born-again fiscal enthusiasm should wake up the hyperinflation hyperventilators – and maybe before a single additional dollar is spent we will get some of those elevated inflation expectations Matt Yglesias says he wants.
By Dan Kervick

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44 comments

  1. psychohistorian

    While I enjoyed the text about Matt Yglesias and his “boarder routing” for the administration and believe that the government should be the employer of last resort, I still have a problem with the depth of perception on the jobs front.

    My concern that I don’t see discussed is the fact that at any sustainable level of global production, there are not nor ever will be enough jobs to employ all who want to work. There is a race to the bottom of the income scale being waged by all countries bidding for manufacturing opportunities. It is being felt most by low skilled labor in the developed countries who have to compete with wages in Asian countries and live in totally different cost of living situations. This is most true in the US where our health care system is operating against the physicians creed of doing no harm to the patient.

    Sputtering along with an economic policy of the public being primarily responsible for the debts created by the corporate and banking machinations of the global inherited rich is a stupid way to exert population control, IMO. The Shock Doctrine event being executed on the US and EU to undermine their social safety nets will make the adjustment for the low skilled/income of those countries to survive at the evolving global minimum wage.

    The whole issue of social contribution, responsibility, education and governance throughout each humans’ life need to be redefined to fit the current world instead of the 15th century that we seem to be reverting to.

    I would like to see society evolve rather than devolve. Addressing inheritance and private ownership of things needs to be at the top of the list of issues that fail to get the analysis and public discussion they deserve in our current mess.

      1. Tim

        Excellent I have a first volunteer to pedal a stationary bicycle with a solar panel strapped to his head in the middle of the Arizona desert for 2 dollars a day.

        There can be many things for people to do, but not many of those things can produce a livable wage or true workman’s pride.

        In the long-long term when innovation has plataued and everything required to survive could be automated (creation and distribution of food shelter water and energy) and most durabable goods. Without proper re-distribution of profits from the machines doing the work, there will not be enough money for the common men to serve each other in the service jobs that remain, making everybody peasants and the machine owners the lord. You can see it headed that way quite clearly already.

        1. They didn't leave me a choice

          Which is precisely why some combination of jobs guarantee and basic guaranteed income becomes necessary. The machines are supposed to create wealth, but if our societies are organised so that they worship the holy cow of production-consumption linkage, they will never find the consumer base for their products. The only rational solution is to kill the holy cow and accept that there will be no system-forced labour for much longer, and the only way people can enjoy the fruits of their own labour is if they *gasp* produce things for fun. Not profit. fun.

          Quite an anathema to the folks on the conservative side. Actually scratch that. Quite an anathema to the vast majority who have been brainwashed to believe in the holy Jobs and their eternal immaculate conception by the most holy of holy Free Markets, if only the confidence ghost is given enough sacrifices.

          Nevermind reality, we have dogma!

  2. eric_edge

    do they not realize that their efforts are futile and the economy will only worsen as the european market slowly disintegrates? on second thought, let’s not spoil the ending for them.

  3. Chris Rogers

    The only way for the Western World to increase employment and sustainable economic growth is by abandoning globalisation and dismantling the World Trade Organisation.

    As with discussions on NAFTA in the early 1990′s, followed by those on GATT, anyone with an iota of common sense was aware that unfettered ‘free trade’ and free movement of capital globally would result in wholesale longterm unemployment and lowering of living standards as the corporate sponsors of GATT/WTO moved production to the lowest cost base and then imported back to their respective host countries.

    While globalisation may have been good for the 1%, its been a disaster for the majority of workers the world over.

    If you want jobs, social welfare safety nets and a sustainable economic model that benefits mankind as a whole, globalisation must be turned back and those that have benefitted prosecuted for crimes against humanity.

    Fat chance of that, but the facts as they stand today cannot be denied or ignored much longer without imperilling the entire planet.

    As I keep reminding greedy bastards, you cannot take your wealth to the grave with you.

    1. Andrew hartman

      Repeal globalization? Repeal trade? Grow coffee in your back yard?
      Everyone a Robinson Crusoe?

    2. ambrit

      Mr. Rogers;
      Not so much repeal globalization as redefine the values underlying such an endeavour. I distinctly remember Walter Cronkite hosting a television programme about the wonders of the future. Increases in every ones’ living standards was the underlying message. Then the Great Leap Backward happened. As Mr. Black so ably outlines in a piece featured in todays’ Links posting, the mantra of deregulation led to most of the disasters now plaguing us. Globalization is like any other tool; how it is used determines the outcome. Setting those parameters is a political act. What happens, or doesn’t happen, in Charlotte will tell the tale for the next few years. As for Tampa; take a look at the demographics of that region.

    3. They didn't leave me a choice

      I wouldn’t worry too much about globalisation, at least in its current reincarnation, it’s already starting to die. It’s in a deathly embrace of a most insidious of addictions, oil. Now that we are past peak oil, its price will only keep on rising, and its only a matter of time until a forceful relocalisation of markets takes place. If we are lucky, this happens gradually. If unlucky, it happens in a rapidly progressing crisis that sweeps away any societies that are reliant on trade for critical things like food and water. Happy fun times ahead.

  4. Max424

    Some kids grow up wanting to play guitar in a rock band, others grow up dreaming of the day they assume the position of … THE ALL-POWERFUL FED CHAIRMAN! … (!!!)

    I think MattY falls into the latter category.

    I must have written four hundred comments on the now defunct Yglesias blog, that basically said, “Matt, how many times do we gotta tell ya, the Fed can’t do diddly shit. These repeated posts on the need for QE 27 and negative ‘real’ interest rates are getting tedious.”

    “You’d achieve much greater success flogging a granite boulder with a feather boa. Give it up, kid. If you don’t, you’ll drive yourself –and everyone around you– needlessly insane.”

  5. joebhed

    Great job of showing the NEED for new ways of looking at how to ensure growth in jobs without resort to the Fed’s dread of inflating the reserve balances of banks that don’t NEED them.
    The focus here is on ‘fiscal’ actions that see more certainty established via direct government expenditure that will effect the money system at the location where increased demand will directly cause an increase in employment.
    The claim is made that this ‘fiscal-monetary’ action is a defeat of the monetarist view of using the money supply to effect broad economic policy objectives. But it merely uses the fuller-employment target to direct government expenditures, apparently by issuing more debt to fund the deficits.
    First, repeating, many monetary economists proposed the same vehicle – direct government expenditure to put idle resources to work – and did so with the stated purpose to increase the money supply without the issuance of more debt. The government creates the money to fuel the job-creation.
    What is needed to achieve that objective is a public money perspective at the center of monetary policy actions, in place of the banker-owned and operated, trickle-downers at the Fed.
    The Kucinich Bill, the National Emergency Employment Defense (NEED) Act of 2011, establishes just such a public money administration, and does so for exactly the purpose laid out in this post.
    So, yeah, Forget the Fed.
    And start to think, Public Money Administration.
    And an end to public debt.

    For the Money System Common

  6. John F. Opie

    Like Yves and others here, I am appalled at the utter disinterest of Washington on jobs. They truly believe, like Matt Y, that if monetary policy is “right”, then everything else behaves like the jack in the box and jobs will suddenly spring up as if they were just waiting there.

    Couldn’t be farther from the truth, of course. Highly qualified people willing (and able because they don’t have a mortgage on a house they can’t sell without losing their shirt) to move don’t have a hard time finding work; that’s maybe 20% of the workforce. Ignoring the other 30% of the above-average earners, the real problem is the lower 50%, those whose jobs have either been exported or outright eliminated, who simply can’t find any work anywhere because those jobs have disappeared and aren’t coming back.

    Obama and his cronies blew it big time with their efforts to make the economy recover, throwing money not at getting people back to work (which Keynes would have approved of: in fact, it’s the whole point of his economics) but rather ensuring that his campaign contributors and capos wouldn’t lose their jobs (which Keynes would not have approved of).

    The solution is easy: the US has a world-class infrastructure that is falling apart because of neglect. Bridges, waterways, rail, it’s all in dire need of repairing and making better. But it’s not sexy, it’s pretty tedious and boring work (for those in charge), and you can’t physically show off repairs and rebuilding of bridges. Being in charge of public works, today, is more akin to being in direct charge of where payoffs happen and to hell with actually doing any of the work.

    Further, the infrastructure needs about 20 years’ of work done before it is really back to par. So much neglect can’t be dealt with in a single legislature period.

    Sure, it’s make-do work and doesn’t address the structural changes that the US economy is going through (and especially doesn’t deal with what to do with the below-average worker when the reconstruction is finished in 20 years’ time). But Christ on a crutch, it’d get people back to work and restart the economy.

    Until one party or the other – or a third one that muscles its way onto the scene (greens? libertarians? GMAFB, that doesn’t play in Peoria) – recognizes that this is the real problem, then this is just pissing on a 12-alarm fire.

    Consider me thoroughly disgusted.

    1. Ms G

      “Highly qualified people willing (and able because they don’t have a mortgage on a house they can’t sell without losing their shirt) to move don’t have a hard time finding work; that’s maybe 20% of the workforce.”

      I’m not sure about this — do you have sources? I know of many highly qualified people willing to move to work who aren’t tethered to mortgages who are unable to find work. That includes tens of thousands of folks in the STEM professions, as per recent articles (don’t have link handy but will dig it up).

      I think the real reality is that the aggregate number of available jobs for anyone (with or without mortgages) has plummeted to hoary depths, and that DisEmployment affects everyone except those lucky enough to be part of crony job networks where failing is no barrier to the next job.

    2. b'emet

      urgent NEED for repairs for sure. But the emphasis on jobs is still misplaced. Wages make only one form of tickets to goods. There will never be enough jobs to employ everyone, never enough NEED for work at wages worth worth the cost. the enduring task remains, to establish systems to distribute tokens to exchang for goods. With debt free money and goodwill it can be done. National dividends is but one old idea, lots of other ways besides, once a commitment is made.

      1. They didn't leave me a choice

        I do have to disagree with you there a bit. There’s always work to do, the problem is that the work may not be “sensible” in the context of capitalist framework. There’s plenty of community and social work to do, plenty of work needed to fix or dampen ecological damage, that sort of stuff. Stuff that’s outside of the paradigm because it’s not productive in the traditional sense, yet definitely work that needs to be done.

        But if you look at this from the narrower point of view of “productive” work, then yes, you are correct, there is not enough work.

  7. kevinearick

    In search of order, gravity, empire capital employs the middle class to expunge labor, creating quantum disorder, strangers, orphans, and widows. Regardless of motive, Bernanke is doing you a favor, creating time, a random generator, which you may employ at will, because the robots are locked up in the status quo of their own decisions, always seeking others to blame. Labor must reflate, but the entire global infrastructure is designed to expunge it. The more money they direct, the more powerful the bomb. That’s it; throw fuel into the FIRE, exponentially.

    Aggregate behavior cannot pilot the ship. Only you can do that, in concert, beyond empire recognition.

  8. Eureka Springs

    I don’t pretend to understand much of these conversations, but I’ve been reading here for a few years in order to learn… That said, after reading this post I have two nagging points.

    First Mr Kervick seems to be asking himself and others to rely upon the very neoliberal criminal villains who got us/keep us here. I refuse to consider that any longer. And he seems to be asking us to pretend much of what they say or do is or will likely ever be about 90 plus percent of the real/peoples economy.

    You don’t wait around or ask a parasites to kindly quit sucking the lifeblood out of you. You remove and kill the parasites. Our neo-parasites are murderers and thieves to their very core… and must be treated as such.

  9. briansays

    mitt has said he would replace zimbabwe ben about the only thing i agree with him about so ben will want to help obama to keep his job

    print more hot fast easy money at zero percent for his bankster friends after they have blow up the economy

    rewarding crime and fraud

    last time they speculated in oil futures and drove up your price of gas

    this time due to the drought it will be corn and grain futures to drive up your food costs

    there is more profit in causing you continued misery

    gotta keep those salaries and bonuses flowing

  10. Bam_Man

    It is all about increasing nominal GDP at this point. Period. That is the Fed’s objective. Meeting its other “policy goals” and ” official mandates” are just knock-on effects. And if higher nominal GDP comes with a boatload of inflation, they couldn’t care less. If it doesn’t, so much the better.

  11. Gil Gamesh

    Any fiscal stimulus that would benefit the majority of American workers and their families is a non-starter. In the parlance of our elites, there is no “political” will for such programs.

    Focusing on the Fed is a convenient red herring tactic.

    1. Ms G

      + 1. And if DisEmployment is indeed part of the “bigger plan” there’s nobody “home” on Jobs anywhere in government … except for friends-family-cronies.

  12. Ransome

    The inflation trick won’t work because we are over consumed and over-indebted in a supply-side economy. A depression mentality sets in. Jettison non or negative performing assets. Houses are considered money pits like a Depression farm. Politicians have kilt the American Dream. The value capture class has been hardly inconvenienced.

  13. Rcoutme

    One “solution” would be to have the federal government guarantee any able-bodied adult who wants one to have a job. This would eliminate the need for a minimum wage (as the wage the government guaranteed would, by default, be the logical minimum–along with benefits). These jobs would need to be organized so that up to 10% of the time could be used to look for employment in the private sector. They would be local employment for local needs. Supervisory jobs would entail ensuring that workers were not “leaning on their shovels.”

    The work done could be damn near anything! File papers, help elderly and disabled people (disclaimer: I am disabled), pick up trash on the street, clear brush away from paths in community forests, shag baseballs at local little league games, take apart and rebuild, brick by brick the buildings in the crumbling downtown regions of the US. There are any number of ways to employ people. There is absolutely NO GOOD REASON to leave 15% or more of the work-capable population either unemployed or underemployed.

    Where will the money come from? Um…as mentioned above, we own the money (i.e. we can print as much of it as needed). What about hyperinflation? Set up the tax code so that excess money (beyond that needed to sustain the economy at a reasonable inflation rate and growth) is collected by the government. If there is no excess money supply, only niche items could undergo drastic inflation. In order for those to inflate in price, other items would, by definition, have to drop in price (since any excess money is taxed out of the system).

    This plan would, probably, require that the Federal Reserve and the Treasury Department be merged (or obliterated and we start with something entirely different) and that the intelligent folks working there figure out the numbers very accurately. This means that, more or less, the politicians would need to be forced to keep their filthy paws off of such an agency (except as oversight and to ensure that the agency is doing its job).

    This has been proposed by several economists (sorry, but I don’t remember all the names). This is the only plan I have seen that looks like it could work.

    Oh–one more thing. The progressive tax rate would probably ensure that the income gap shrank, since the highest earners would likely be the ones who actually had enough money to pay the taxes. As FDR said (paraphrased), “I consider the only determinant factor for paying taxes that they be levied on those with enough money to pay them.”

    1. Klassy!

      Entirely too sensible.
      Honestly, there are a wealth of opportunities there. Perhaps a jobs summit with participants from less rarefied neighborhoods would yield better ideas.

  14. Hugh

    Let’s be real clear. The Fed has never been interested in employment. If you believe in a “structural” level of employment of 7%, which seems to be the new Washington consensus, then your unemployment problem is reduced to 1.2% of the labor force. That’s less than two million people and very much not a crisis.

    And yes, I realize under current conditions the Fed has no monetary tools that would affect or effect employment, outside of sending each of us a big fat check.

    So when the Fed starts talking unemployment, I simply take this as code for another round of QE to goose markets which have been shaky lately due to the slow motion implosion of Europe. If this creates a little pseudo growth at the margins and boosts GDP slightly, that’s a plus but not really the object of the exercise.

  15. F. Beard

    President Obama should tell the world that if elected along with a Democratic Congress, he and his Democratic colleagues are planning to spend a great heap of public money on everything from eradicating global warming to building bridges to nowhere and escalators on Mars. Dan Kervick

    And what if Mittens says “Forget escalators on Mars, if elected I will send stimulus checks to every American adult till this Depression is ended. And if escalators on Mars are what the free market desires then I’m sure some entrepreneurs will get to work on bringing that about.”

    Gee wiz! What’s so hard to understand about the victims of the counterfeiting cartel need restitution, not make-work?

    1. They didn't leave me a choice

      Bro, there’s plenty of room for both. Certainly the theft through interest problem must be adressed and past mistakes (the debt created) must be eliminated. But beyond that we still have to somehow deal with the problem that there’s a limited amount of work in society and thus, limited means of getting consumption power to the population within the straitjacket context of “free market”.

      And since the spending power has to be inserted into the public somehow, and in a long term, permanent basis, I’ve only heard of two ways of achieving this so far: make believe work (Or less so, I’m sure worthy causes could be located that would be far more appealing than merely digging holes in the ground and filling them etc.) and direct, monthly, equal payments to every member of society.

      Looking from this context, is the make believe work so bad an option? Sure, the direct payment without the dishonest intermediary of make believe work would definitely be more honest. But given how backwards our societies are and how long it would likely take for the majority to accept mentally that they will, most likely, never do any real productive work in their entire lives in the context of the “free market”, (whatever we mean by that) it is far more likely that for the forseeable future we’ll have to make do with make believe work. If only to appease the knee jerk reactionists who’d be up in arms over “lazy welfare queens stealing our moneys through government”.

      1. F. Beard

        Certainly the theft through interest … They didn’t leave me a choice

        Charging interest is not the theft; the theft is the unethical creation of purchasing power.

        And every minute wasted doing make-work is a minute that cannot be spent on meaningful work – even if that work is only meaningful to the person doing it.

        You’d best stick with the ethical arguments since the Religious Right cannot defeat them.

        1. They didn't leave me a choice

          >Charging interest is not the theft; the theft is the unethical creation of purchasing power.

          I have two problems with positive interest:
          1) Its existence forces society to have a growing economy. If a debt with a positive interest is allowed to exist, then for it to be realised and paid back in aggregate, the economy must grow. Given that we’re already scraping at the ceiling of available resources in many fields (fresh water and energy being the most critical) don’t you find it immoral to have a mechanism in place that effectively mandates that there be growth?

          2) It’s basically a rent on society, saying that money should be able to earn more money simply by existing. I don’t have a functional explanation for why, at least to me, this feels perverse, and I just cannot escape the feeling that this equation is deeply flawed on a fundamental level. Maybe it’s the concentration of wealth that it drives?

          >And every minute wasted doing make-work is a minute that cannot be spent on meaningful work – even if that work is only meaningful to the person doing it.

          Oh, I agree with you there entirely, but you have to take into account not only what is just, but what is practical. We have centuries, if not millenia worth of cultural programming to undo before even a slight majority might accept the sheer fact that wellbeing of their fellow humans is wellbeing of themselves. It’s an imperfect world, and we cannot cure it all at once. Would you rather that thousands of people are driven to suicide and desperation while we try to achieve the dream of basic income? Or are you betting on everybody ultimately becoming desperate enough that they’d join us and abandon their obsolete world views? How would that make us any better than the kleptocratic elites that use desperation as a whip to achieve ever greater wealth at our expense?

  16. Cassiodorus

    This quote is rich:

    If anyone deserves to be looked upon as the nation’s “captain” it is the President of the United States, and Cap’n Obama needs to reverse course. His faux-responsible budgetary fear-mongering and demoralizing visions of long-term penny-pinching underline and accentuate the even more radical fear-mongering and austerity-hawking of the Republicans.

    Not only is Obama not going to reverse course, but the Republicans are not more radical than Obama.

    Seriousness, anyone?

    1. JTFaraday

      I was going to post something snarky about how none of the “demand” driven BS artistes can even credibly answer the reasonable question “demand for what?” in our current largely post-industrial economy, given that their paradigm hasn’t been updated in something like 70 years.

      But then I decided to save my breath.

      The first tenured economist to say just pay everyone $7 an hour to rake leaves in the fall gets a pitchfork in their ***!

  17. sk

    Calling these bums “chickenshit” is too respectful. Chickenshit can at least provide some useful quality manure.
    No wonder, Ron Paul wants to ambush these crooks and possibly shave their heads for drumming.

  18. mac

    There is a need for jobs that produce something of value by adding value to labor and material , that can be sold at a profit such that more is called for and creates the need for more labor and more material which calls for more labor.
    Perhaps the economists failed or skipped that course.

    1. JTFaraday

      Yeah, I was going to say something about that crime against the English language too.

      But I decided to save my breath.

  19. Paul

    Yves, I’m off-topic here, sorry, but you blogged about us last year & our predicament with Wells Fargo and buying a second mortgage. I’m Paul Whitehead and you are right, there is a ‘really nasty bit’ here. I’m in the process of unraveling it, and would love some advice from you. I put my email address in the reply box… please email me. I’m a friendly, nice guy, and I think your ideas are spot-on.

    “But the really nasty bit here is…both loans on the house were from the same bank, Wachovia, now part of Wells Fargo. The Times story does not draw out the implication: first, that the bank foreclosed on a second, rather than a first (is that a weird way to provide a data point to justify not writing all seconds down to zero? And the fact that the buyers were saddled with the first says, in effect, that Wells defrauded the first mortgage holders, presuming, as is likely, that the first mortgage was part of a securitization, as opposed to on Wells’ books. The proceeds of the foreclosure sale should have gone to the first lien holder, not the second.”

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