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?
First of all it shouldn’t matter to non-financial corporations how long the Fed intends to keep rates low. They issue 20 year corporate bonds at a fixed rate and then spend the money into existance.
It makes a big difference to banks because they then know how long they can do near risk free speculation in the appropriate financial markets.
“Confidence Fairy with an Iron Fist” is not as far fetched as it sounds. For $2.5 trillion Ben can buy back China’s and Japan’s ownership of the USofA. Then he has only willing players left – the banks making bucko risk free bucks playing in the rigged markets with cheap money. (till something blows anyway).
It wreaks havoc on your retirement planning, however.
Only the very largest corporate borrowers–like Fortune 100– borrow at fixed rates, everyone else borrows at a spread to LIBOR or some other variable rate index. Also, nonfinancial corporations don’t spend anything into existence, the banks create the loan proceeds and then transfer them to the borrower’s account.
Corporate bonds are not bank borrowing. And they might get idle funds from somewhere, or funds converted from other assets (like stock) and spend them into “circulation”.
I was just having fun with MMT Speak.
Word on the street is they are going to Romney?
Obama is stealing Wall Street from Romney
Of course it nevers occurs to gold bugs that the more they hoard money in gold the less demand in the economy and a tipping point reached where even the demand for gold crashes because incomes have drastically declined!
Gold bugs are thinking about what happens after the big crash, when presumably there is a correlation between gun- and gold-ownership. Also, to the extent that cash is more liquid than gold, gold hoarders (or at least the ones that exchange cash for gold) are providing liquidity.
There is no real demand for govt., and the university professors that provide the stage simply cannot and will not accept reality, which they get paid to obfuscate. the story of jesus is the story of a mob voting to crucify the messenger, for their own sin. what’s new? new republic same as the old. of course those who succumb to peer pressure will always blame others for their own choices .
How can you get so many non sequiturs into such a small comment?
Hey, c’mon, be nice. You’d think he’d said “Every slippery slope has a silver lining” or something.
that’s a mixed metaphor.
i appreciate kevin’s increasing comprehensibility and brevity, so
no complaints here.
who says comments have to follow what laws of discourse exactly?
poems work too
(Wish I got paid to obfuscate :-)
“What would have to be true for Bernanke’s decade long promise (of zirp) to be good?” One facilitating condition would be an entrenched, very high unemployment rate keeping inflation in deflation mode. Which is why I often think B is fibbing to us about wanting to do something about unemployment. Another is a political dedication to a devalued dollar for export purposes. I do think this exists now. A third condition to keeping zirp is the 800 lb. gorilla – control of oil. Oil always used to be the great inflator, the fist. Now we (I kinda think) have appropriated it lock, stock and barrel. Pun intended. So we can control the price of oil. And gradually bring it down. And if it is true that all central banks are freaked out, that indicates it is a currency war in a desperate time when population has peaked and in every country people over 60 are the highest, and most rapidly growing, segment of the population. So the demographics are also an ecomomic deflator. We gonna need a wizard.
Bernanke knows that QE doesn’t and can’t do anything. QE addresses liquidity, and as a glance at excess reserves makes obvious, we’ve got enough liquidity to refloat Noah’s Ark until the Second Coming.
So why does Bernanke do it? Because the people who pay his salary expect him to. THEY believe it will do something, so if he doesn’t do it, they’ll find someone else who will.
So if what you are saying is true, that the fasted growing demographic is those of us over 60, then if those people had some buying power, the economy might be restored.
My small business very much depends on two segments of the world’s population: women over 60 on pensions who want books, and the Chinese, who finally can buy books of a metaphysical nature. If Social Security is rolled back (As I am sure it will be) I lose as a business person. I also can no longer go out and work – I have been told to my face that the agencies I apply to don’t want the jump in premiums that hiring someone over 55 would cause them. I actually think that Universal Single Payer HC would have been a boon for the economy. As it is now, many seniors under 65 are on food stamps.
I agree with you that single payer is the single most important thing on the agenda, the delayed agenda. And the conditions that allow Bernanke to do zirp are like a windfall to the banks. Who in turn control politics, as BaL just said.
at lunch with a freshly immigrating canadian today, i got an earful on how incredibly stupid we are with the $$ we literally throw away paying extortion to the “health” cartel. don’t think she fully realizes the extent of the extortion aspect, but her outrage at the waste was palpable.
she also said canada’s going to lose their universal health care. “they’ll miss it when it’s gone.”
she didn’t say so, but judging by her level of upset at stuff that for us is normal, it was clear she’s been accustomed to a higher level of service and quality of care than standard insurance will buy you here.
the rest of the decade?
more of the same
The ranks of the working poor have swelled for sure, because of a financial collapse brought on by unfettered greed and fraud of Wall Street, and a stagnant real median wage for the past 20 years in the face of rising costs, often driven by monopolies, fraud, and cartels.
A kleptocracy is sucking the life out of working men and women by force and fraud. A group of sociopaths, who have committed one of the great crimes in history, not only blithely walk away with their loot unpunished, but come back to rob their victims once again, to finish the job. And they gorge themselves on the public trust even while begrudging the widow her pittance, or trying to steal it.
They pervert and corrupt so many, filling their hearts with their passionate lies, appealing to what is the very worst in them. They are truly a den of vipers and thieves.
“The word ‘confidence’ appears in every chapter, as some sort of leitmotif to remind the reader what Melville is preoccupied with: the meanness and exploitation of his contemporary America. Because for all of the references to the need for people to have confidence in one another, the only type of confidence on the riverboat is that associated with scams.”
I discovered it was quite difficult to learn Japanese due to the Hiragana, Katakana and Kanji. Usually I’ve used dating sims and flashcard apps for learning Japanese. But realistically there are tonnes approaches to practice with. What do most people use?
It’s nearly impossible to find experienced people about this subject, however, you seem like you know what you’re talking about! Thanks