Bill Black is the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He blogs at New Economic Perspectives. Here he’s interviewed by Paul Jay of the Real News Network.
The whole piece is rather a “That Was The Week That Was” for alternative finance/political economy geeks, with Lanny Breur, 47%, and QE3 all covered, but even though working out on Lanny Breuer is always good clean fun, this, further into the show, caught my eye:
BLACK: And then the general theory [of QE3] is — interest rates act like sort of a hurdle when you’re investing as a business: you’ve got to be able to get a return that gets you over at least that hurdle of the interest rate. So if you lower the hurdle a lot, then more investment should get over it and you should get a stronger recovery. That’s their hope, at least.
JAY: And that — in theory, why wouldn’t that already have worked better than it has? ‘Cause interest rates have been low for quite some time. The banks are sitting on, what, $1.5 trillion cash, and they’re making very few loans, and I guess because there’s still no real demand, purchasing-power demand in the economy and nobody wants to build anything new.
BLACK: Well, that’s our take on it, as you know. Their take on it is similar, but they add, well, maybe people are not convinced that the interest rates will stay very low for long time. … So the claim is, hey, what’s different this time is this — we’re going to stay the course, guys [confidence!], we’re going to keep these rates down.
JAY: So you can plan on these low rates for, like, the rest of the decade or something.
BLACK: Yeah. Now, of course Bernanke can’t really promise that.
Like the old jokes about economists, assume a Confidence Fairy with an Iron Fist, no? Surely this is not the time to double down on Fed independence? Or is it? What would have to be true for Bernanke’s decade-long “promise” to be good?
And anyhow, when everybody knows the “guys” running the show are all unindicted co-conspirators, how can “confidence” be anything other than another con?