Bill Gross: Bond Vigilante, Minsky Convert

Cross-posted from Credit Writedowns

In the end, I hearken back to revered economist Hyman Minsky – a modern-day economic godfather who predicted the subprime crisis. “Big Government,” he wrote, should become the “employer of last resort” in a crisis, offering a job to anyone who wants one – for health care, street cleaning, or slum renovation. FDR had a program for it – the CCC, Civilian Conservation Corps, and Barack Obama can do the same. Economist David Rosenberg of Gluskin Sheff sums up my feelings rather well. “I’d have a shovel in the hands of the long-term unemployed from 8am to noon, and from 1pm to 5pm I’d have them studying algebra, physics, and geometry.” Deficits are important, but their immediate reduction can wait for a stronger economy and lower unemployment. Jobs are today’s and tomorrow’s immediate problem.

Those who advocate that job creation rests on corporate tax reform (lower taxes) or a return to deregulation of the private economy always fail to address dominant structural headwinds which cannot be dismissed: 1) Labor is much more attractively priced over there than here, and 2) U.S. employment based on asset price appreciation/finance as opposed to manufacturing can no longer be sustained. The “golden” days are over, and it’s time our school and jobs “daze” comes to an end to be replaced by programs that do more than mimic failed establishment policies favoring Wall as opposed to Main Street.

School Daze, School Daze, Good Old Golden Rule Days, Bill Gross, Investment Outlook Jul 2011

Bill Gross has certainly continued to have a populist flair to his writings since the credit crisis began. However, the conclusion of his latest missive on education and debt, that the government should offer a job guarantee to workers, is surprising because Gross has been much more concerned with the issues of financial repression and fiscal profligacy in his most recent writings.

I first mentioned this job guarantee idea (promulgated by the MMT school) in November 2009. See Unemployment insurance for the 21st century. Marshall Auerback also talked about this in his post More on Unemployment Insurance for the 21st Century just last month. Given Bill Gross’ comments about fiscal profligacy and my own concerns about malinvestment, Marshall’s last paragraph was interesting:

Given the nature of today’s “predator state” (to use Jamie Galbraith’s felicitous phrase), politicians have a proclivity to reward those who “pay to play”. They tend toward wasteful spending and give goodies to campaign contributors. But we could take this power away from sock puppet politicians through a mechanism that automatically adjusts to insure the private sector can actually realize its desired net nominal savings position. This would help to free the system from political parasites while increasing the freedom of the private sector to achieve its savings goals. What better way to celebrate the anniversary of the WPA’s inauguration?

To me, Marshall’s commentary ties all of these subjects in together.

First, as Marshall points out earlier in his post:

The Obama Administration remains fixated by deficit reduction at the expense of reducing unemployment. This is not helpful to recovery: In addition to inflicting lasting damage on an individual’s labor market prospects, unemployment is associated with increased rates of physical and mental illness, alcohol and drug abuse, child and spouse abuse, failed relationships and family dissolution, suicide and attempted suicide, and a host of other personal and social ills.

Jobs have to come first. We are already seeing cyclical unemployment turn into structural unemployment – and that permanently lowers output and increases deficits. Stephanie Kelton is right when she says that “as long as unemployment remains high, the deficit will remain high.”

The jobs crisis is not just about demand though. It is also about debt. Differences within the G-6, within the euro zone and between the U.S. and Germany, “speak to the over-riding importance of high private sector debt and deleveraging after a credit bubble.”

If the US wants job growth, it will need to reduce private sector debt levels – and that takes time. It does not follow "that the central objective of national economic policy until sustained recovery is firmly established must be increasing… borrowing and lending," as Larry Summers asserts. The government can act as a counterweight to the demand drag but I am very sceptical of claims like Summers’ that doing so would solve a jobs crisis borne out of a debt crisis.

If you look at Felix Salmon’s charts on structural unemployment, combine that with David Beckworth’s link to research that estimates 40% of the current jobs problem in the U.S. is structural in nature – as should be anticipated after a credit crisis.

It makes sense then to have unemployment insurance in the 21st century focused on maintaining employment, reducing skills loss, and re-tooling people for employment in other fields. I do think there are Lessons We Can Learn On How Stimulus And Jobs Programs Failed in Eastern Germany as the Germans dealt with their own structural unemployment problems. We should not expect miracles overnight. However, when people ask Why is Germany doing so well?, I believe it is “about investment in human and physical capital. And that is definitely worthy of emulation.” These results are bearing fruit – five, ten and fifteen years later.

To me that’s the larger story, that we will have high unemployment levels in the U.S. for some time to come.

Rather than adding stimulus with the aim of goosing demand by whatever means available to help the economy reach escape velocity, I would say that the central objective of economic policy is to help the economy reach full employment. Doing so will increase demand, increase output, and cut budget deficits tremendously.

Roach: Return of the Living Dead

I think this is a very important point because of the anti-government rhetoric coming from different circles. So let’s finish this off by talking about malinvestment. 

As I said two years ago:

in theory, fiscal stimulus can cushion the downturn and hasten real recovery by preventing a spiral into a non-equilibrating economic state.  However, in practice, stimulus has been used as an excuse to maintain the status quo, prop up zombie companies and forestall the inevitable.  This only lengthens the downturn, misallocating even more resources to less efficient uses. And all of the worries I had about social unrest, populism, and protectionism are coming true nonetheless…

Rather than use the period of fiscal stimulus to promote private-sector deleveraging and saving and to purge malinvestment, politicians will simply use this period as a way to continue business as usual, making the problem even bigger down the line

Moving away from stimulus happy talk to focus on malinvestment, Dec 2009

Isn’t this the case with the financial sector bailouts, the HAMP programs and so on? Moreover, in terms of actual stimulus, as early as February 2009, I argued that the President took a middle road on stimulus and taxes that leads nowhere which would discredit stimulus as a policy tool. And that is indeed what has happened. Fiscal stimulus is off the table because President Obama has discredited it by continuing the bank bailouts, by providing a stimulus package that was too little by half, and by not focusing on jobs.

What is the Fed to do in that scenario if they have a mandate to support economic activity? Politically, the whole thing looks a lot like Japan. To my mind, the right approach then is to de-emphasize “increasing… borrowing and lending” and re-emphasize increasing jobs and employment. Whether we choose work sharing as we see in the Netherlands and Germany or a job guarantee, this could deal with the deficit and structural issues that conservatives care about and the demand issues that liberals care about.

P.S. – for a juxtaposition to this post, see Bill Gross: Deficit Hawk, Bond Vigilante from January. I think these two posts put his public statements in the fullest context.

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About Edward Harrison

I am a banking and finance specialist at the economic consultancy Global Macro Advisors. Previously, I worked at Deutsche Bank, Bain, the Corporate Executive Board and Yahoo. I have a BA in Economics from Dartmouth College and an MBA in Finance from Columbia University. As to ideology, I would call myself a libertarian realist - believer in the primacy of markets over a statist approach. However, I am no ideologue who believes that markets can solve all problems. Having lived in a lot of different places, I tend to take a global approach to economics and politics. I started my career as a diplomat in the foreign service and speak German, Dutch, Swedish, Spanish and French as well as English and can read a number of other European languages. I enjoy a good debate on these issues and I hope you enjoy my blogs. Please do sign up for the Email and RSS feeds on my blog pages. Cheers. Edward


  1. Moopheus

    “Those who advocate that job creation rests on corporate tax reform (lower taxes) or a return to deregulation of the private economy always fail to address dominant structural headwinds which cannot be dismissed: 1) Labor is much more attractively priced over there than here, and 2) U.S. employment based on asset price appreciation/finance as opposed to manufacturing can no longer be sustained.”

    Sure, because there’s no evidence those who advocate corporate tax reform are actually interested in job creation. They have to say they are, but their agenda is not job creation. Far from it; they want labor to be cheap, and as long as their own assets appreciate the rest of us can go hang. And Bill Gross would certainly be in a position to know that.

    1. Just Tired

      Like many things known to people who “get out of the house” from time to time, job creation with corporations is counter-intuitive. HIGH CORPORATE TAXES LEADS TO JOB CREATION in practice, even though it is believed to be to be the opposite. Now before all of the resident geniuses on this board tell me I know not of what I speak, let me say that I am a CPA with an MBA in Taxation. I spent most of my career actually working in the area. In the real world, up until the 1980’s (The time that most people ascribe to the beginning of the demise of the middle class), effective corporate taxes (and not only nominal rates) were very high, and there were far fewer loopholes. One gigantic loophole that did not exist was for offshore income. Thus, hiring employees, and indeed American employees, was a gigantic tax subsidy. With an effective tax rate of 50% (plus state and local levies) an employee hired at the margin cost less than $.50 on the dollar. Corporations were into growing their business internally and not by using today’s financial shenanigans. Unfortunately, like so many things that worked better for us in the past, once the geniuses who change things do something, it must forever be discredited so as to not lose face. A vibrant middle class in America — been there, done that – but, my God, we can’t possibly go back to those horrible days.

      1. readerOfTeaLeaves

        One gigantic loophole that did not exist was for offshore income. Thus, hiring employees, and indeed American employees, was a gigantic tax subsidy. With an effective tax rate of 50% (plus state and local levies) an employee hired at the margin cost less than $.50 on the dollar.


    2. Blissex

      «they want labor to be cheap, and as long as their own assets appreciate the rest of us can go hang.»

      The big political problem is that 70% of voters believe this describes them, because they are middle aged or retired property owners.

      For them anything that leads to capital gains on their houses and their pension accounts is very good, and anything that leads to lower salaries and welfare is also very good, because salaries and welfare are their costs.

      For a “F*ck you! I am fully vested” 50+ property owner, higher asset prices for houses and shares mean a better lifestyle for them, and lower salaries for maids, nurses, gardeners, factory workers, etc. also means a better lifestyle for them.

      Their dream is to live in splendour in an appreciating McMansion served by really cheap immigrant servants. They vote accordingly.

  2. joebhed

    It’s probably immaterial to a lot folks, especially MMTers with their particularly pleasant view of government debt, that the accomplishment of the government’s employer of last resort policies can only be envisaged with the concurrent explosion of government debt.
    And it’s not necessary.
    The need to issue governmnet debt is tied to the debt-based fractional-reserve banking system, and both ought to be ended in one fell swoop.
    The legislation proposed last year by Congressman Dennis Kucinich is a full-employment Bill.
    I think Bill Mitchell called it – A Sort of Full Employment Bill.

    The difference is Kucinich’s Bill ENDS government debt and the existence of a private central bank by establishment of a debt-free-at-issuance system of public money creation.
    The National Emergency Employment Defense act of 2010 is available here.

    Would that Bill Gross and Dennis Kucinich were momentarily on the same page.

    1. bill n

      Ahhh. Yes. Stamp out FR banking… Back to reading by candle light, Cavalry charges, non-anthesia operations, the good old days when men were men and women knew their place. Excellent.

      1. joebhed

        Cute – candlelight stuff.
        You could use some.
        Both under the Monetary Control Act of 1934 and the 1939 Program for Monetary Reform, authored by some of the most prominent Chicago, Princeton, Berkeley, etc. school economists at the time, very sound proposals were made to end FR banking.
        Bank of England Governor King recently backed such a proposal in his Buttonwood gathering speech.
        Milton Friedman supported such a program for over 30 years.
        See his Fiscal and Monetary Framework for Economic Stability.
        The macro-economic results from a switch to debt-free money, publicly-issued and to full-reserve banking has been modeled by what Australian economist Steve Keen has called the most sophisticated modeling he has seen, show a long term trend to achieving potential GDP (full-employment) while liquidating all government debt without inflation or deflation.
        See Prof. Yamaguchi’s paper here:

        Read the Kucinich Bill and the Yamaguchi paper and give an intelligent reply.

      2. Daniel Pennell

        Actually, I think that there is something to the lmitiation if not the elimination of fractional banking.

        And..I think we have reached the end of the benefits of supply side economics and wage inflation control.

        It is time to start focusing on demand side economics. We need the supply of wages to grow and we need the scope of wages to expand.

        It seems to me that we have plenty of money but that it is all sitting because it is to highly centralized in the hands of too few. It needs to move. The only way to do that that I can see is either through direct wealth transfer and/or by taxing money that is not moving. In other words make holding money more painful than distributing it.

        From a policy perspective that may mean looking at trade restrictions, taxes and tariffs on foreign services provided into the US. It may mean raising the tax rates on the upper brackets while simultaniously using tax policy to reward those who hire and provide benefits.

        We have run our ecnomy on the ability to borrow and continually reduce costs and increase productivity for the last 20+ years. We have a Walmart economy of lower prices and lower wages but we have hit the wall with that model.

        Now we need to start focusing on jobs and accept that double digit returns are not sustainable indefinately.

        Time to move away from the expectation of fast growth in asset values and toward a more sustainable model focused on the distrubution of dividends. We need to move to a value focused economy.

      3. F. Beard

        If FR banking is not banned then at the very least ALL government backing of it should be abolished including a lender of last resort and government deposit insurance. Furthermore, insolvency laws should be rigorously enforced.

      4. Armchair Revolutionary

        If you would walk from the dark to the candle light, you would see that fractional reserve banking is nothing more than counterfeiting. Ending fractional reserve banking is not light versus dark; it is truth versus corrupt.

    2. F. Beard

      The need to issue governmnet debt is tied to the debt-based fractional-reserve banking system, and both ought to be ended in one fell swoop. joebhed

      Agreed. But since ending FRL (fractional reserve lending) would be massively deflationary as existing credit was repaid with no new credit to replace it then a bailout of the entire population would be justified to keep the money supply from shrinking.

      1. joebhed

        The move to full-reserve banking is well achievable without deflation for sure. It is all laid out in the Kucinich Bill.
        Irving Fisher taught the concept for decades and it was proposed under both the Monetary Control Act of 1934 and the 1939 Program for Monetary Reform, even backed by Milton Friedman.
        It is readily done without deflation.
        All bank credits of demand deposits are monetized into real United States Money.
        There is no loss to anyone, and the money gets repaid to the government.
        It’s not the Austrian solution.
        It’s the alternative to the Austrian solution.

        1. F. Beard

          It’s the alternative to the Austrian solution. joebhed

          And what solution is that? Austerity for the innocent? An even worse Depression?

      1. Peripheral Visionary

        Edit: Spoke too soon, please ignore the snarky reply. Kucinich’s proposals appear to be better than the usual there-really-is-a-free-lunch proposals floating around the blogosphere these days, but it’s not exactly a straightforward proposal, and the full implications will take some considering to figure out.

        1. joebhed

          Thanks for that.
          As to the figuring out, that’s why we’re here.
          The soundness of the Kucinich proposal is what we should be talking about.
          We need an exit strategy from the debt-money system of fractional-reserve banking.
          Anyone who doubts so MUST take the time to consider the work of Dr. Bernd Senf, prof.em. at Berlin School of Economics.

          It’s titled:
          On The Deeper Roots of the World Financial Crisis.
          It’s not on the cause of the crisis, but its roots.
          And there lies debt-money.
          And fractional-reserve banking.
          Thus, the need for an alternative.
          And an exit strategy, as laid out in the Kucinich Bill.

    3. Jeff65

      In terms of the original meaning of ‘fractional reserve banking’ where warehouse receipts were backed by some smaller proportion of gold, FRB disappeared completely in the US when Nixon closed the gold window. A lot of people seem not to have noticed there is a huge difference in supply constrained reserves like gold and the reserves we use now which are not supply constrained because they are just accounting entries. The reserve requirement whether it’s 0%, 10% or 100% is now simply an accounting convention.

      1. F. Beard

        The reserve requirement whether it’s 0%, 10% or 100% is now simply an accounting convention. Jeff65

        Only because the Fed/Treasury combo is willing and able to provide those reserves to the banking system. Who says they should?

        1. Jeff65

          F. Beard said:

          “Only because the Fed/Treasury combo is willing and able to provide those reserves to the banking system. Who says they should?”

          Aren’t you saying they should? Abolishing FRB just means changing to 100% reserves, i.e. just changing the accounting convention. If you mean to change more than that, you should come up with more descriptive terms for your prescriptions than the ‘end FRB’ mantra.

          1. joebhed

            If you think that the ending of the immoral and unsustainable contract relationship that exists under fractional reserve banking is an accounting adjustment, then get the new books ready.

            There certainly is an accounting adjustment that takes place. But in so doing, you end the privilege of private bankers to create the nation’s money , which is what they do using bank-credits under fractional-reserve banking.

            The struggle for economic democracy will be much greater than its impacts on FASB and GATT.
            It restores the money system to the people.
            And that’s an accounting that is long overdue.
            The Money System Common.

          2. Jeff65

            joebhed said:

            “you end the privilege of private bankers to create the nation’s money , which is what they do using bank-credits under fractional-reserve banking.”

            Not without changing many more rules than a simple change of the reserve requirement to 100%. If you wish to change other rules, you should say what they are. Otherwise, people who know what the term ‘fractional reserve banking’ means will misunderstand.

  3. Eleanor

    I am certainly in favor jobs programs for the unemployed, but I am not sure about paying them to study math and physics. I don’t think it will do any harm, but I’m not sure it will lead to a new career. How about studying environmental science, political science and sociology? Add in my favorite, accounting, since contemporary economics does not seem worth teaching. Then you might end with people who understand the world they live in. A huge amount of the work that needs to be done in the country is repairing infrastructure, developing new sources of energy and creating sustainable agriculture. Math might help here, so would the skills of the building trades. And there is huge work to be done in the area of education, health care and human services. We don’t have to train people to be rocket scientists, until we refund NASA. But we do need to train them to do the work obviously in front of us.

      1. Just Tired

        Learning about accounting and getting a degree in accounting are two different things. How can any person who expects to understand the world not have a smattering of accounting education? It is clear from blogs such as this that there are an awful lot of people that know far less about accounting than they think they do. That is unfortunate in terms of having an intelligent discussion on matters that concern accounting and accountants. As far as our universities and degrees, it should be fairly obvious that they long ago became trade schools for the privileged and what is left of the upper middle class. You can’t dance without a ticket to the ball!

        1. bill n

          Obviously you did not take my advice and read Menand. :-)

          I myself have suffered from not being exposed to Accounting earlier. However I hold that education is education and trade school is trade school. Education attempts to teach one how to think. Trade school teaches one how to do something that will get them some money. The two are related somewhat. I agree that many colleges and universities are confused about this, but not the good ones. I do -not- think the two can be mashed together neatly. Read Menand…

          1. Just Tired

            Obvious, was it? Menand said:

            “In a society that encourages its members to pursue the career paths that promise the greatest personal or financial rewards, people will, given a choice, learn only what they need to know for success.They will have no incentive to acquire the knowledge and skills important for life as an informed citizen, or as a reflective and culturally literate human being. College exposes future citizens to material that enlightens and empowers them, whatever careers they end up choosing.”

            Sounds like a trade school to me!

            “It’s possible, though, that the higher education system only looks as if it’s working. The process may be sorting, students may be getting access, and employers may be rewarding, but are people actually learning anything? Two recent books suggest that they are not. They suggest it pretty emphatically.”

            “Sixty per cent of American college students are not liberal-arts majors, though. The No. 1 major in America is, in fact, business….Neither Theory 1 nor Theory 2 really explains how the educational system works for these non-liberal-arts students.”

            If it walks like a duck, sounds like a duck…’s a trade school! Any notion that education is in large measure turning out people who have a well rounded education designed to function in a modern society is truly quaint.

          2. bill n

            Replying to myself since the NC system won’t let me do a 4th level reply; actually replying to -Just Tired-. This will be my last post on this, as I’m sure will be a relief to some, perhaps all (perhaps none?).

            Well, I don’t understand Mr. Tired’s last post (I assume, politically incorrectly, the Tired is a Mr.). He seems bound and determined to read Menand (good for Tired! He did read Menand!) as in support of the conclusion that “Any notion that education is in large measure turning out people who have a well rounded education designed to function in a modern society is truly quaint.”

            I, for the record, do not at all read Menand that way. M, at the beginning of his piece, posits two versions, actually visions, of “What College is For”. The first is the trade school idea. The second is “In a society that encourages its members to pursue the career paths that promise the greatest personal or financial rewards, people will, given a choice, learn only what they need to know for success. They will have no incentive to acquire the knowledge and skills important for life as an informed citizen, or as a reflective and culturally literate human being. College exposes future citizens to material that enlightens and empowers them, whatever careers they end up choosing.”

            The latter sounds suspiciously like the notion that Tired says is quaint.

            Quaint it may be. I’m into quaint. And so is Menand, because he says he favors version two in his last paragraph.

          3. Just Tired

            I favor Menand’s ideals also, I also favor a good job for everyone. Not sure what our favorites have to do with reality though. That said, neither of our favorites appear realistic in the near future.

    1. Cynthia

      All of our public works projects are aimed at boosting either our national security apparatus or our medical-industrial complex or our too-big-to-fail banking system. But neither our armed forces nor our medical professionals nor our casino banksters can do anything to boost production in our economy. Our addiction to war, pills, and easy money is what’s driving us to do this. And this will ultimately lead to our demise.

      Speaking of public works projects, I strongly recommend watching the 1960 film “Wild River”. This film, which centers around the making of the TVA, reminds us that our federal government, despite its reputation for being one big bureaucratic black hole, is no slouch when it comes to getting the production side of our economy back on its feet again. It also reminds us that most the top-rated American films today, both in terms of acting and film-making skills, including overall creativity, are second-rate compared to most of the top-rated ones from the 40’s and the 50’s, up into, at most, the early 60’s. So if today’s American films are any reflection of our nation’s economic health, we, as an economy, are laid up in bed sick with little to no chance for recovery.

      1. Jim Tarrant

        Building on what you wrote, it’s also worth noting that the right wing love of all things Defense as investments is a poor way to maximize employment (not that they care). Defense procurement tends to be hugely capital-intensive so that the actual employment per dollar invested is far smaller than the equivalent investment in, say, renewable energy or urban renewal or almost any other industry (except the mining/oil industries. Relatedly, GOP policies are clearly deigned to destroy the economy by destroying Main Street. Why they are doing this reflects either utter cynicism or a complete lack of understanding about the fundamentals of economics.

        1. Billions for me, None for you

          I disagree completely. The fundamentals of economics can be summed up in the 6 words of my handle

          –Billions for me, none for you

  4. DP

    I question the idea that the high level of unemployment is entirely a function of lack of education and particular job skills. We are churning out college grads who are capable but can’t find suitable employment. There are plenty of unemployed in their 50’s with education and skills that businesses have no interest in hiring. I think the problem is that demand for many, if not most, goods and services was gradually inflated for 2-3 decades by the expansion of easy credit and the housing bubble. Business created capacity for what looked like normal demand, but was actually bubble induced demand. Now middle class consumers whose incomes have been stagnant are trying to pay for their past consumption, not buy more stuff.

    I’m sure in specialized fields there are shortages of people with very specific skill sets, but what are the employment sectors that can absorb material numbers of new workers, i.e. hundreds of thousands? Somebody please enlighten me.

    1. ScottW

      Your comment raises the interesting question I never seen discussed with any specificity–how would American society have evolved between 1995 and 2008, had we not created the funny money economy that has been so well documented? How much of that lost wealth during the 2008 collapse was artificially created and never really existed once people decided to start cashing in their chips? Would unemployment have remained low?

      Most articles merely conclude the evils of the financial industry have resulted in economic collapse without analyzing how the economy would have grown, or not grown, absent these artificial sweetners. Stated another way, much is written why high unemployment resulted from the horrible financial policies, but no one really has any specific suggestions about how to bring it back down to 4% or 5%. And if and when we reach more robust employment numbers can it possibly occur without another bubble and impending collapse?

      1. Just Tired

        Excellent point! Do you think that at some point people will finally understand that Supply Side Economics is pure bullshit? Supply Side Economics is about getting people with enough stuff to buy more that then either don’t want or don’t need, while telling those who don’t have stuff that they need to get more education and training. Ronald Regan said that “Economists are people who see something work in the real world and then set out to prove it is impossible”. Supply Siders see something that does not work in the real world and have been unsuccessfully trying to prove it can work. Which is worse?

      2. ambrit

        Dear ScottW;
        This is where the wonder of past knowledge, painfully learned through actual hard times, comes into play. Lots of ‘Important Personages’ pontificate that Keynsianism is a discredited system. Yet they put up no believable evidence to back the assertion up. I contend that the history of the ‘New Deal’ proves Keynsianism to be the best economic system to have come along yet. Austerianism is being debunked as we speak in the UK. Play around with the parameters, (neo-Keynsianism?) but you still use the basic insights Keynes promulgated ‘way back when.’ The Japan issue, and the present American half hearted stimulus, both reinforce old fashioned Keynsian methodology. Where the Keynes prescription was used fully, it worked. (For example, I know I’m going to get hammered on this, but oh well, someone has to do it; The Cash for Clunkers Stimulus worked exactly as expected. Nothing much was expected, but it did support the auto industry when it needed it. Likewise, the Auto bailout saved tens of thousands of jobs here in America. This was the basic requirement for success, and it did succeed.) Essentially, Keynsianism meets Churchills definition of Democracy. Most of these competeing economic systems are being argued from ideological grounds. Well, if we wish to have economics treated as a science, we have to judge from evidence. From the track records I can see so far, I’m with John Maynard.

    2. Peripheral Visionary

      Good points.

      Unfortunately, one of the verboten topics in the current debate is our current standards of living. Suggest that the solution may be for people to downsize their lifestyles and fill the jobs which are available but pay less than what they think they are worth, and you are likely to be lynched.

      But the jobs are available, although by and large they are filled by immigrants, most of whom are illegal. But I strongly suspect most employers would prefer legal residents who both speak the language and are not a legal liability; but too many people will not look at any job that does not allow them to maintain their current way of life, so here we are.

      1. DP

        When most jobs have dozens of applicants, employers don’t tend to want to hire people who are obviously overqualified for them even when the person is willing to do the work and accept a cut in pay. Most employers are going to expect that the overqualified applicant will continue looking for other work and leave as soon as he/she finds something better or be disgruntled/embarrassed and be bad for morale.

        But even if people are willing to accept lower level jobs and employers are willing to hire them, I still question the notion we regularly hear and read that we have to retrain and upgrade the skills of the long-term unemployed as if there are all these better jobs waiting if only they could sharpen their skills. I think it’s complete BS that politicians say because the reality is too unpleasant: in the vast majority of occupations and industries there are more qualified and willing workers than there are jobs that pay a living wage.

  5. Dan Kervick

    This post warms my heart. When people aren’t working, it is always a social and economic waste. Everyone can do something valuable. If present private sector incentives fail to align in the direction of hiring the unemployed, then the public sector needs to be prepared to step in and provide the work.

  6. bill n

    I agree that some commentators are frustratingly Janus-faced. Some of the things Gross has said are astonishing, coming from the same pen. Have you read Mauldin? Much worse. When folks stop making sense or go all ideological on you (ZH, Mish) I for one move on.

    Old YS keeps on keeping on. Yea! Sometimes, though, too many notes, as the emperor said to Motzart in the movie. My tolerance for non-soundbite news has frustratingly, though interestingly, dropped. Me, or computerdom?

  7. Ishmael

    Do we really have any goal to employ Americans. Having worked in several countries, I will say the US has the easiest standards for foreign workers to enter this country and take jobs away from Americans.

    If we really want to generate jobs why don’t we first (1) shut the door to foreign workers and force those who are here to leave which will create jobs for the educated (as well as increase compensation and (2) shut the borders and deport those who are here illegally even if they do write for the Washington Post.

    Not only would both of these not add to the deficit but number 2 in the long run would decrease the deficit since illegals are a major drain on the budget.

    I know all of the lefties will start having a hissy fit but hey do you want a solution or don’t you.

    1. Just Tired

      This debate always morphs into a food fight. The issue is simple. A very large group of otherwise employable people is doing virtually nothing right now and it is costing the government a lot to maintain the status quo. If the unemployed people do something meaningful while that money is being spent, we have nothing to lose and very likely something to gain. Go to Golden Gate Park in SF and see with your own eyes what the CCC built. Build a beautiful park or argue endlessly the beauty of your theories? I’m with Gross.

      1. shoogie

        The end of the line for 99ers was reported way back in June 2010:

        “Frazee, 50, has applied for work at more places than he can remember since he lost his construction job two years ago. He has tried car dealerships, Kmart, Home Depot and the funky shops on the boardwalk in Seaside Heights, near Toms River. He looked into becoming a commercial crabber, working in title insurance and as a bail bondsman. But no dice.

        While searching for work, he lived on $585 a week in unemployment payments. But the checks were cut off in May when he reached 99 weeks. Now Frazee, who is married and has a 5-year-old daughter, is in a financial free fall with no safety net.

        “My life has been total stress. I sleep maybe four hours a night, worrying about money,” he said. “I understood the president and Congress had to stabilize the banks, get Wall Street going. I figured something would be done for middle-class Americans, that they couldn’t abandon us. But I was wrong.””

        I recently visited a state park built by the CCC that is still quite beautiful and a source of pride today. There is an historic plaque displaying photographs of the men and women who worked on the project along with educational information for the future public.

        1. Just Tired

          In the interest of accuracy, I am not certain that the CCC did any work at GG Park. My statement was based on the fact that my late father-in-law told me of the work he did there and I knew that he was in the CCC. My wife corrected me. He worked for both the WPA and the CCC, and it was the WPA that did construction at GG Park. Not sure it makes a difference but, my bad.

      2. Peripheral Visionary

        I agree with you.

        The problem is, as soon as you begin discussing the reality of the government putting people to work doing things that need to be done, out come the people who were born yesterday but spent all night reading Dickens, shouting about “the poorhouses” and the terrible abuse you are putting the poor unfortunate unemployed souls through.

        Unfortunately, there is a very strong sentiment against tying government assistance to work, particularly to menial labor, even if–like building national parks, working in recycling, maintaining government properties–it is ostensibly work that needs to be done. It is seen as an insult to imply that someone should have to push a broom to get a paycheck from the government; the only true government assistance should, apparently, involve sitting at home watching television while the government pretends they’re looking for work.

        I am of the old school that believes that the best and most honorable way to provide assistance to the unemployed is to provide them with employment, even if it is difficult and not exactly enlightening work (and I have filled such jobs in the past), but anyone publicly proposing such had better be prepared for a lot of resistance.

  8. RueTheDay

    I get annoyed by all of the shovel and pick imagery. It seems like no one thinks about fiscal stimulus in terms that do not involve the improvement of existing highways and bridges. Same for the employer of last resort stuff.

    Meanwhile Japan is investing billions in a 55o km/h MagLev Train, we have nowhere near the fast wireless 4G and other broadband of many Asian and European countries, and we have engineers and technologists out of work.

  9. Skippy

    Ummm…bigger, more complex, more socially important, Moi = (insert competition for grandeur / control) got us here…GDI was a different planet (literally)…GDII[2] will take a departure from the past, as input values and outside potential have been greatly diminished.

    Skippy…can’t even hop in a canoe, its the same where ever you point your bow.

  10. F. Beard

    If the US wants job growth, it will need to reduce private sector debt levels – and that takes time. Bill Gross

    Not necessarily. It could be done very quickly:

    1) Ban the banks from any further so-called “credit creation” pending fundamental reform. This would be massively deflationary as existing credit was repaid but please continue.

    2) Every month send every US adult citizen an equal check of fiat equal in total to the amount of credit paid off the previous month. Continue until all credit was replaced with fiat.

    3) After the so-called “credit” is paid off then implement fundamental reform in money creation including separate government and private money supplies.

    Our banking and money system has cheated savers of honest interest rates and driven borrowers into odious debt. Therefore both groups are entitled to compensation.

    1. Tom g

      If only we had the world’s fastest super computer so that we could see how this would play out. Unfortunately, we only have the world’s 3rd fastest super computer available to us here in America.

      I’m actually extremely curious to see how this would work and what undesired side effects such a tectonic shift in monetary policy would have on our citizens.

  11. Amit Chokshi

    The bottom line is any non Keynesian or MMT advocate is an utter moron, albeit very likely an employed utter moron. It’s pathetic the world is run by those that can’t understand these basic and effective remedies for combating this. US can do a $8T fiscal stimulus, yes $8T, and the treas market wouldn’t even blink but Obama is a loser centrist coached by Rubinites and the republicans want to lord over a bunch of impressionable ignorant fools.

  12. alex

    All of the cited evidence for structural unemployment is based on the IMF paper by Chen, et al. Has anyone read it, or provided a decent synopsis? Even a quick skim yields this nugget:

    “Assuming that stock markets are efficient, so that shocks to the expected profitability of an industry are reflected in its stock market return, and assuming that these shocks are followed by changes in that industry‘s use of inputs such as labor, their hypothesis is that the dispersion of stock returns across industries can be used as a proxy for shocks to the desired allocation of labor …”

    Those are some very questionable assumptions, hence any inferences drawn from it aren’t worth discussing. Why not just look at unemployment in various sectors? Measure things directly instead of making hokey inferences. The rationale is that the method used should give a rapid indication, but there’s been enough unemployment for long enough that the last thing you need is a rapid indicator.

    Based on what I’ve seen from people who take the simple and direct approach of just looking at BLS data, I’m convinced that structural unemployment is but a small part of the problem. But structural unemployment remains, even if not so used by authors cited above, a dandy excuse for not doing much about it.

  13. Tortoise

    I am not in favor of guaranteeing everyone a job and I am not in favor of paying some people to dig holes and paying some other people to fill them.

    But we have gone way too far in eliminating USEFUL jobs in the name of the false god of “efficiency”. I work at a top research university that the last few years has eliminated hundreds of critical support jobs. While at some point a research group of about 20 people (faculty, staff scientists, and graduate research assistants) could expect to have one administrative assistant, we now are down to almost 40 for one administrative assistant. It is absolutely ridiculous and has affected productivity. Not only we let good people go but efficiency has gone down. I wish we had 1 administrative assistant per 10 researchers — we certainly could use them in freeing the hands of researchers to do the productive work they were trained for. We also could use staff in the shops, laboratories, computer network support, and software applications. (For example, until twenty years ago we had people in charge of doing the drafting. Now, everyone has to waste time learning how to use ever-changing graphics software.)

    1. Just Tired

      Put your head back in your shell Tortoise. Obviously you have declared that your job is “useful”, but in order to make a sensible comment you must be able to maintain a consensus. I submit that anyone with a job considers it “useful”, and any job that is available to be taken is “useful” to the applicant. People who live in glass houses…..

  14. Andrew P

    Hate to be the pointer outer of the obvious here, but there’s a reason why full employment never happens. If you had the government acting as an employment guarantor you would be giving working people enormous leverage over the capitalists. I’m totally fine with this as I’m all for expropriating their butts. However, this will lead to declining profit margins. It would be the same old situation we saw in the 70s. Keynes’ policies faltered when capitalists realized that they couldn’t make enough money with all these uppity workers. That’s what sparked the neoliberal revolution. That’s why social democracy was such an ephemeral thing. It could only work for a short time until it led to a crisis of profitability. That crisis should have heralded capitalism’s abolition, but well, we didn’t think it through and we went with Milty and the friedmanites instead.

  15. JGM

    Plenty of jobs here in the US, most Americans just won’t do them. Just last year the Migrant Farmworkers set aside 3,000 jobs in the CA central valley exclusively for US citizens (only 30 jobs were filled). Some backbreaking labor is good every once in while, it teaches you the value of the dollar and consumption habits.

    There are lots of jobs out there – just none that people are willing to stoop to.

    1. hermanas

      I’ld like to see that segment on “Real Housewives”. Are you suggesting Chairman Mao had it right with his re-education program?

    2. F. Beard

      Some backbreaking labor is good every once in while, it teaches you the value of the dollar and consumption habits. JGM

      That is irrelevant. The US population has been systematically looted by the counterfeiting and usury cartel. But you wish to punish the victims with backbreaking labour?

      It is typical of villains to blame their victims. After all, SOMEONE must be at fault and it can’t possibly be the fault of the villains.

      1. Ishmael

        F. Beard thinks those jobs are not good enough for fat lazy ass Americans to do. Those jobs are for other people.

        Americans are only allowed to work in nice air conditioned cubicles and they must have breaks so they can shoot some hoops and suck down 32ozs of cola.

        1. F. Beard

          Americans are only allowed to work in nice air conditioned cubicles and they must have breaks so they can shoot some hoops and suck down 32ozs of cola. Ishmael

          Irrelevant. The US population has been stolen from. They deserve restitution regardless of any personal failings.

  16. Blurtman

    As consumption is the biggest component of GDP, and as consumers drive consumption, why not bail out the consumer to move the economy forward?

  17. Paul Tioxon

    Since maintaining high employment levels is one of the main missions of the Federal Reserve, its role of lender of last resort takes on 2 meanings. The first is the technical adjustment for the reserve and other compliance issues for a solvent banking system. The second of no less importance, is to lend to put people to work, so they have money to spend to create demand of goods. The virtuous cycle of receiving new orders and hiring more people to handle the increase of manufacturing transporting and retailing of new goods should be obvious, since we are witnessing the complete opposite of that. Namely, the with holding of capital investment by the private sector to hire and expand allowing the economic recovery of Main St to be left dead in the water. And the contraction of public spending for operations such as education, public safety, health care as well as the contraction of public investment in infrastructure maintenance drains more cash out of the money supply, further dampening demand for goods.

    In the absence of the private sector engaging in the economy to its full capacity, the Federal government must fill the void. The private sector has abandoned adequate economic activity, for what ever reason, deliberate, inadvertent, or simply misguided but in good faith, unemployment must go away by means of Federal investment.

  18. anjon w

    Seems to me that Gross has been reading Yves’ and Ed’s writing! He hasn’t quite gone full MMT Warren Mosler, or even Marshall Auerbach as of yet, but he certainly seems to understands that Asset Inflation is not an economic policy to effectively create jobs and stable economic growth. He actually said somewhat similar things in years past, so this isn’t necessarily a tectonic shift for Gross

  19. abprosper

    All jobs are not equal and employment per say is not a useful goal in and of itself. Good paying useful work, yes… Poor paying jobs, no.

    Low paying jobs (like the Ag labor some are talking about) often pay so poorly that they do little to help the economy by creating demand and even increase the pathologies that poverty brings to a country.

    The problem is the lust for cheap labor has been a driving pathology since the foundation of the US. If its not outright slavery it was indentured servants, conviction labor, unsafe and exploitive labor conditions, mass immigration anything to avoid giving the working man a buck.

    The worse part is that its simply a destructive behavior, selfish and short sighted. In a normal economy generally wages are about 90% recouped, all that money gets spent and capital gets it back.

    The issue of course here being the status seeking behavior of the wealthy. They wanted to be kings and to be a king requires serfs.

    On these grounds, we’d be far better off with a citizens wage, simply taking say 20% of the economy in taxes and redistributing it to any who has been a US citizen for 18+ year.

    This combined with closed labor doors (a low immigration policy) would empower labor far better than social democracy and be cheaper to administer to boot.

    However its a lot less likely than total collapse, dictatorship and or civil war.

    A last aside, to all those who think the US is a Christian nation, well no. Otherwise they might remember the parts in Luke and Matthew and Timothy about the Workman being Worth of His Hire …

    1. F. Beard

      A last aside, to all those who think the US is a Christian nation, well no. abprosper

      Christian? That’s laugh. We haven’t even mastered “Thou shall not steal” when it comes to money and banking.

      1. Frank N. Steen

        Yeah, and let me know when your country obeys “thou shalt not kill” for 24 consecutive hours.

      2. Laughing Swordfish

        Could that possibly be that the “lenders” are NOT “Christian” but members of what we might otherwise refer to as “The Tribe”?

    2. John A

      A citizens wage? You say it as if it would be a good thing. That is completely sick. What the hell would the point be of working hard and trying to achieve something when you can just sit on your ass and collect your “wage” for doing nothing?

      Way to provide an incentive for the people who were lucky enough to not lose their jobs to “Go Galt.” I certainly would. My job is to provide for myself and my family, not anyone else’s. I’m sure the vast majority of posters here would call me heartless but there it is.

      It would be way more heartless to tell someone who works his ass of that, “hey, we’re going to take what you’ve earned and spread it around to whoever we want and if you don’t like it you can refuse pay your taxes and go to federal pound-me-in-the-ass prison.”

      The mere thought that people actually believe that everyone owes some kind of debt to their fellow citizen makes me ill.

      1. Billions for me, None for you

        I hear you John, and I’m with you. Not only should there be no charity, but it’s everyone for themselves!

        I don’t work myself. That’s because I’m more powerful than you. I just collect the surplus value of your labor. I feel glad knowing that you’re working hard, paying your taxes so I can get rich doing nothing but sipping tropical drinks in my island taxhaven paradise.


        1. John

          Heh, I did genuinely laugh at that, your sarcasm was funny. :)

          However, it seems that you’ve fallen into the Marxist trap of believing that there actually is a struggle between labor and business. The actual struggle is between the people and the state. The state being people like you who want to “make the world a better place” using money that you did not earn.

          You would have no problem stealing money, at gunpoint, that I earned and give it to someone who did nothing to earn it. Then you call is a citizens “wage,” as if the person receiving that money actually earned it. I guess a “living wage” is a human right too? How can you call that moral?

          I’m not an anarchist, I don’t believe that it’s every man for himself. I’m also not an apologist for the FIRE industry. They all should have been allowed to go down and to hell with the consequences.

          1. Billions for me, None for you

            You really are clueless. I like that.

            But just in case you’re wondering…
            There is no struggle between labor and capital anymore. Labor lost. Forever. Also, I own the state. And you peasants lost that battle too. Forever.

            I can do anything I want with my money. Sometimes I even kick a few crumbs back to the peasants so they don’t get uppity. Don’t mistake that for charity. It just makes good business sense.

            If you object to a living wage, I’ll just lower yours until you can’t afford food anymore. Problem solved!


        2. John

          What if I refuse to make my “contribution” to someone else’s citizens wage? What happens to me then?

  20. Doug Terpstra

    Excellent post, Edward — an involuntary head-nodder of self-evident logic. Rue and Amit also have crucial insights on stimulus.

    Your point here nails it: “…the President took a middle road on stimulus and taxes that leads nowhere which would discredit stimulus as a policy tool. And that is indeed what has happened. Fiscal stimulus is off the table because President Obama has discredited it by continuing the bank bailouts, by providing a stimulus package that was too little by half, and by not focusing on jobs.”

    How true. After so rutted a broken record, one can only infer nefarious design. Everything he’s done is a betrayal of pledges and vision, and clearly counterproductive. In concert with Fed policy, such a fast-track to economic destruction is a dangerous experiment in social engineering. It’s hard to comprehend, because the damage must ultimately affect all but a very tiny sliver of the elite.

    1. armchair troll

      dangerous experiment in social engineering. It’s hard to comprehend, because the damage must ultimately affect all but a very tiny sliver

      Good Juan

  21. from a distance

    de-emphasize “increasing… borrowing and lending” and re-emphasize increasing jobs and employment. Whether we choose work sharing as we see in the Netherlands and Germany or a job guarantee,

    ~~Edward Harrison~

    U Bet! But was that the original plan of attack? Did World Bank and central banks the World Over conspire to develop a strong job market inside indigent developing parts of the World first? Develop job growth in India and China by bailing out the Zombies that were busy at making loans to these developing areas? Would that have been the modus operande of J M Keynes? Move the liquidity from the fat banks to the destitute and hopeless? Hopeless with a 99% marginal rate to consume? Did the money quantum-leap from our banks to their workers? Jet-stream over the heads of our labour leaders? Our union bosses bent on calling strikes in the middle of a glut of workers? A glut of unemployment?

    Here at home our myopic perspective may forget how it all went down. But I think that the rehiring will now return to developed countries as World Wide Demand locomotives all countries forward.

    Tell me something! Does your limousine have 20% USA content or 40%? Does the gasoline in your tank have 10% Venezuelan content?

    Then again, Congress would do well to cut your taxes to 10% of what they are now. No American is safe until Congress runs out of other people’s money

  22. scraping_by

    “Labor is much more attractively priced over there than here…”

    While I realize this is a phrase one needs to use to be taken seriously, with a little more looking we see that:

    1. Labor is a minute part of most products, save for artisan work, so to save even 90% doesn’t mean much to the consumer. It’s not a competitive advantage in the marketplace, as is often presumed.

    2. While reducing labor cost looks good on the balance sheet, it usually just a shift of costs from labor to transportation, handling, logistics, missed deadlines, loss, and other distance-related costs. While that can be hidden in general overhead, it’s still a real world cost.

    3. The offshoring of services has a decidedly mixed record, almost always a drop in quality, sometimes a complete bust as far as fulfillment. This may be teething pains, as is normally given, or may be unavoidable, as is beginning to look likely.

    As far as unexamined precepts go, the overpaid American is one that would likely yield more counterintuitive results. But most economists, journalists, and other chattering professions have gone barn sour and keep recycling the same ideas.

  23. Laughing Swordfish

    It’s well and good to talk about the causes of the crisis.

    What has been lacking in this thread is the question of “What Is To Be Done”?

    Herewith a few solutions (all of which provide employment):

    1) Turn over border control and all immigration enforcement to the Army. SEAL the border and eliminate or liquidate all

    2) Recruit a new Internal Security Service with a military rank structure under the DHS – a land-based analogue of the Coast Guard. Fold in the Border Patrol, DEA and BATF to this new force, and charge them with providing law enforcement support to the ISS troops, who will be charged
    with rounding up the 12+ million illegals currently in this country for forced deportation;

    3) Cancel all H1-B Visas and deport their holders. Charge the employers of the visa holders with all expenses related thereto;

    4) Drumhead,no-constitutional-rights trials of those employers guilty of hiring illegals. Penalties should
    not only include fines and prison terms but denaturalization and deportation as well – families included;

    5) Limit legal immigration to no more than 50,000 individuals a year including families, and impose both a wealth and a skills test for admittance. Those admitted
    shall be barred for applying for citizenship for ten years,
    and should be considered legally to be “on parole” in this country. Further, they shall enjoy no rights or protections under our laws, be required to procure an “internal passport”, and be subject to examination or interrogation at any time by the ISS or any local law enforcement body, with or without cause. Violation or infraction of any law, no matter how minor, shall be grounds for expulsion and permanent ban on re-entry;

    5)Visa-free admittance to the US shall be granted only to citizens of Canada, the UK, Australia and New Zealand – countries with whom we share ties of language, culture and kinship. Visas for all others shall require security, military and intelligence clearance, with minimum 90-day
    wait time.

    Just a few suggestions….

  24. Dennis

    Jesus Christ, sure are a lot of weird neo-nazis on this site lately. Cross pollination with zerohedge?

    1. Laughing Swordfish

      Nazi? The immigration policy I outlined happens to be the immigration and naturalization policy of MEXICO – the source of most of our immigration problems.

      We can’t provide enough jobs paying a living wage to our OWN people – let alone the peoples of every third world country that manage to swim the Rio Grande or Tijuana rivers.

      At some point we have to stop with all the “multi-culti” nonsense – as a NATIONAL people, we are under NO OBLIGATION WHATSOEVER to welcome those who by language,culture, habit and disposition have neither the intention or ability to become Americans.

      The rentier and financial classes, of course, have no problem with this – if they can’t offshore the job, let the foreigner immigrate here through “Open Borders” and “non-enforcement” of laws already on the books. The new State laws in Arizona, South Carolina, Georgia and elsewhere
      criminalizing illegal presence in the US are only the beginning of a much-needed backlash against this flagrant abuse of the rights of native US citizens.

      Time is running out on this. Let times get much harder (and they will, under a Republican/Financier/Rentier Administration) and the nation will explode in in some much-deserved violence and bloodshed.

        1. F. Beard

          Those dang goo-backs!

          But on a more serious note:

          The stranger who resides with you shall be to you as the native among you, and you shall love him as yourself, for you were aliens in the land of Egypt; I am the LORD your God. Leviticus 19:34

  25. Philip Pilkington

    Whatever else you can say about Gross and his blatant flip-flopping, you’ve got to appreciate that he actually READ Minsky rather than just genuflected. Minsky’s become a household name — well, in certain households — and yet no one seems to know what he actually wrote.

    Job Guarantee program? Yeah. It takes the best of what fiscal stimulus can achieve. You let it be run by Big Guv’ment and you’ll just have fiscal stimulus for the military-industrial-financial complex. You make Big Guv’ment fund it while allowing it to be run by local government (my preference is local activist groups) and you’ve got a public policy winner.

    Still a little skeptical if local-level graffiti-cleaning can replace the likes of GM as a GDP-grower (if you’re concerned about that). People should be aware that many MMTers don’t think that significant trade deficits are a bad thing — indeed, they view them as a net gain (more goods flow in than flow out, so people consume more). So a lot of them wouldn’t mind seeing dizzy giants like GM fall apart and nothing replace them (because nothing would — we need to be quite clear on that).

    I’m not so sure about this. It seems to me that having large corporations is important for a number of institutional reasons. Not least of which is keeping up with technological innovation and hiring highly educated people (outside of finance… you financial-welfare NC readers [yeah, I know where a lot of you work!]).

  26. Steve

    But check out the Conservative economist Richard Duncan’s book “The Corruption of Capitalism” for a macroeconomic analysis of how really terrible the world and USA economies really are. He predicted the 2008 Depression years before the collapse and is of the opinion so many trillions of private wealth was wiped out in 2008 that without major government deficits and spending for years the whole economy collapses. Very disheartening for conservatives. We are in a battle for the very survival of the Republic, especially with a black hole of a 700 TRILLION $$$ worldwide derivatives market no doubt rife with corruption, manipulation with criminal conflicts of interest, absurd leverage ratios, unexpected counterparty risks and who knows what else: fiat currency plus the utter madness of financial institution deregulation has taken the Republic over the cliff. And let’s not forget the hollowing out of the manufacturing heart of the Republic: globalization and that giant sucking sound.

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