This is a very good, high level interview of Jamie Galbraith by Paul Jay of Real News Network. It explains how the fiscal cliff scare was created and why Obama and the Republicans are united in fomenting a false sense of urgency. This is the sort of piece I’d suggest sharing with friends and relatives who’ve been unable to miss the news coverage and want to get up to speed.
The “fiscal cliff” is a scam propagated by rich “Malignants” who don’t want to pay taxes. All that matters is that there’s sufficient “interactant” in an economy that enables labor to be instructed to turn resources into goods and services and to enable savings ( for foreseeable and unforeseeable events ) and reserves to operate the payment clearance system. Since bank loans on aggregate net to zero through repayment that “interactant” or money can only come from government creation of money and its spending into the economy or it must come from export earnings or both. If inflation is a threat some “interactant” must be withdrawn or temporarily side-lined through taxes or bonds ( savings accounts ).
I threw this bad ass off the Fiscal Cliff yesterday, because I didn’t like him.
I said, “Hey buddy, have fun falling to your doo…..”
Boom, he hit me right in the nose.
After falling. And climbing back up. I tell ya, I don’t believe you could crack an egg if you tossed it over that thing.
Maybe they should call it, the Fiscal Curb, but that strikes me as a wee bit too extreme. The Barely Detectable Fiscal Undulation, perhaps, would be the most precise.
Barely Detectable Fiscal Undulation LMAO… good one!
Some advice from Onyx on the ‘fiscal cliff’…
music has come a long way since Bing Crosby
Where is the fiscal cliff anyway? What states is it in? and how high is it?
There must be a picture of it somewhere, but I can’t find one when I google it.
I’m trying to figure out where it is. It sounds like something west of the Mississippi.
I remember when they used to worry about the Beatles. They thought all those screaming girls would lose their minds and next their virginity. But I could handle that.
I can’t find the fiscal cliff either. I think they are pulling our leg.
I don’t think you searched very hard ;)
Some cliffs of note (not to be confused with Cliff Notes)… followed by some cliff quotes…
The Cliff Palace in Mesa Verde Nat’l Park http://d1vmp8zzttzftq.cloudfront.net/wp-content/uploads/2012/10/the-Cliff-Palace-in-Mesa-Verde-National-Park-Colorado-US.jpg
A cliff with hanging coffins, somehow very appropos http://www.agefotostock.com/en/Stock-Images/Rights-Managed/PCV-1925594
I call this, the Rorschach cliff. What do you see in it? Jesus, The Green Man, Bigfoot or something else? http://doctore0.files.wordpress.com/2011/11/jesuscliff.png
For you Monet fans, The Cliffs at Etretat http://www.claudemonetworks.com/painting/the-cliffs-at-etretat
“Let go over a cliff, die completely, and then come back to life – after that you cannot be deceived” – Zen proverb
“O hark, O hear! how thin and clear, And thinner, clearer, farther going! O sweet and far from cliff and scar, The horns of Elfland faintly blowing!” – Lord Tennyson
Jeez! A Giant Butterfly!
Eric Johnson – Cliffs of Dover – live 1990
“The Harder They Come” Jimmy Cliff http://www.youtube.com/watch?v=xGE4dnrPPZQ
The Fiscal Slope. The Fiscal Grassy Knoll.
Nonetheless, it’s pure marketing genius. Short, pithy, and makes the exact point desired. And once again, it connects the idea of debt and obligation at the federal level to the personal level that millions of Americans (and others) are experiencing daily. That further exploits working class Americans’ idea of relative fairness (which is what economics is or should be really about), in that they think that if they’re being forced to live within their means, then the “big bad gubmint” should be forced to live within it’s too, even though that’s obviously suicidal for their own best interest. Yes, I’m well versed in MMT and the idea that government is not a household, but for nearly all of the voting public that idea is so foreign to their experience and their attention span and comprehension levels are so low that it will NEVER, EVER get traction.
I fear that the New Deal round of American “democracy” is over now for good and the usual suspects have won again. It was always a war of attrition anyway, unfortunately one side had all the weapons and was the only one that was fully aware that it WAS a war in the first place. The “middle class” was nothing more than a post WWII illusion fostered by the elite to get the wealth pump flowing again, and now that it’s served its purpose, enough is enough. The new middle class (which is to say, the new debt slave class with enough resources to pay their bills and continue the illusion) is better termed “the courtier class,” as their only interest is to beg for table scraps and maintain their shrinking amount of privilege. No surprise that they will turn on each other and those of lesser status like the mongrel dogs that they are. For everyone else, might as well say that we’re just waiting (or praying) to die if we’re living within the system, and the system itself is increasingly ubiquitous in all facets of our life.
In the end, global climate change and a mass extinction event might be the only thing that can extinguish such a monstrous evil and might turn out to be a blessing in disguise – for humans at least. Too bad it had to come to that, but a society built on unbridled greed, lust, and hubris was always headed down this road, we’re just the generation (un)lucky enough to witness the arrival at its natural termination point.
Wow! Extremely well written and pithy.
Like most of our Politics, just like selling laundry soap!
“Yes, I’m well versed in MMT and the idea that government is not a household, but for nearly all of the voting public that idea is so foreign to their experience and their attention span and comprehension levels are so low that it will NEVER, EVER get traction.”
Having decided that one may not succeed in convincing a layman that the government is not like a household, I try to show what is needed to be added to their incomplete concept to make their household function like a government. And that is there is an Uncle Moneybags who is a family member who lives upstairs and is the sole source of paper money and credit that the family is allowed to use.
Except that at some point running extreme deficits will cause America to be cut off from imports, after which foreign creditors will begin their asset stripping operations in America.
Although if that is your goal I have to say I really admire it; Americans have become too fat and deluded thanks to their suckling off the rest of the labor and resources of the world. A brush with reality will do them some good. Those that are still around anyway.
No, the restovus just need to establish an alternative economy, and let the Grifters stew in their own toxic juices. Where there’s a will, there’s a way.
What other import markets would replace the US?
Getting away from the nasty particulars of your question for a moment, do you think that it’s ethical for humans to rape the earth of irreplaceable natural resources, from all over the world, in order to create and export garbage to America that will end up in a landfill in a year or two?
I asked an honest question.
Yes, it’s horribly unethical for the US to be the large import market it is. Agreed, yes?
My question still stands. The export nations have an interest in exporting to the US, so what nation would be their alternative, given that ethical interests will not play a role in the decision?
Companies can’t sell below cost for an extended period of time, and they do catch inflation in their country from doing biz with the US.
In other words, they have a problem.
There are plenty of middle class workers around the world who could step up to consume if the U.S. market became unavailable.
I don’t know if you have missed the past years/decades but, asset stripping has been in full force for quite some time. The legal separations between banking/insurance/investment banking came crashing down a while back – GE financial had internally been set up prior to the collapse of these legal boundaries in order to take advantage of these changes. In effect, your statement regarding deficits causing the cutting of imports is plausible except that USA is a sovereign currency creator – I think IMO that the the high debt most Americans have running via less incoming is forcing those imports to decrease because demand is down – if your market can not afford your product you will not sell into the market – generally.
I would say that your definition of foreign creditors needs updating – In effect – foreign creditors should include our out of control TBTF institutions because, in practice, they choose not to live within the laws of man. Maybe better to describe them as alien creditors who are actively stripping the assets of humans – stripping the very right to stand on the planet without toll.
I seriously hope that you’re joking about that, but then again most Americans are in fact incredibly deluded and ignorant about reality, as I stated above, so I’m guessing that you’re not.
Did you miss the part where I mentioned that America will be cut off from imports. What exactly do you imagine will happen when, not if, 2/3 of our energy is suddenly cut off from us? Because that’s what we’re talking about here. Holy crap, but not even being in the tiniest bit aware of what the likely consequences are of a policy prescription you’re parroting tends to put you in a bad light you know.
“What exactly do you imagine will happen when, not if, 2/3 of our energy is suddenly cut off from us?”
It really doesn’t take much imagination to answer that, and to understand why that will never happen. Have you been paying any attention to any US foreign policy for the past 50 years?
You simply keep repeating “America will be cut off from imports” with no support of that assertion. You aren’t convincing anyone by trying broken record here.
Who are you kidding? Nobody, and I do mean nobody, will cut off 2/3rds of our energy supply. Our entire food system to feed our people moves mostly by truck. Our leaders will not be able to sustain the people and theat would require the most powerful military in the world to go and secure our energy needs.
Secondly, as a sovereign we will print money and the Chinese (and anyone else) will have to accept it. They won’t be asset stripping. I mean, they could conceivably TRY to come over here to seize assets but somehow I think they would be on the bottom of the Pacific long before they could get here.
We could also take a different approach and effectively cut off any nation that is attempting to cut us off by assuring them – including and especially China – that we would sink every boat coming and going from their nation.
Why you would expect that the United States, and especially its people, would say “oh well, I guess we will have to do without” and just accept the will of some foreign creditors demanding assets is beyond crazy. It just won’t happen.
Are you seriously proposing that the US government will sit idly by while the Walton family (amongst others) loses billions? That’s almost enough to diagnose insanity. If it only affected to bottom 99.99% then no problem. But if it so much as costs one of the 00.01% a penny in income growth there will be hell to pay. Forget about how severe that hell will be if the 00.01% actually lost a penny of wealth.
You are trying to paint a picture as if foreign creditors wanting to be paid would have abilities like a bank reposessing a car. It isn’t like that. Not even remotely close.
The only way countries have been able to pull off embargos (like OPEC did in the 1970s) is because we let them do so. It had much to do with the population of our country being much better off than our oligarchs were comfortable with and leaping inflation was but the first step in their “cure” for their uncomfortableness.
All you have to do is see what happens in this country when oil goes up a little. It trashes the rest of the economy in mere weeks – hitting the people much closer to the top of the food chain. So the opportunity to allow such cutoffs in the near to mid term future is simply not there.
But besides all of that, the easiest path is to simply print money and pay off all debt in existence. It won’t change the money supply because the money supply is (currency + debt) and it would become (currency + zero) that is all currency but still the same total money supply. There would simply be no claims on future tax revenue at that moment. And, the holders of all the cash we just paid to them would now be looking to lend it to someone (guess who?) so that they could make money. It really is that simple.
But I don’t think that our government would want to miss out on an opportunity to see how all of those expensive weapons systems we have (or will have) perform in actual warfare.
Sorry replied to the wrong comment there. That was meant for the one below yours.
As for the financial system, these guys live in a fantasy world. When the bloated semiotic system the American and British wizards of finance are currently parasitizing off of implodes, they will be pathetic nobodies. At that point the engineers and scientists who actually know what real value means will come in and start hauling off entire factories and everything else they want.
If only there was some way the US could pay its debts. For instance, by printing some sort of paper that had value and using that to pay off its obligations. Green paper, perhaps, adorned with pictures of past presidents.
Of course that’s only wishful thinking, because such a thing is totally impossible.
Actually the Treasury has the ability to print a $2 trillion platinum coin and pay off the debt. As a sovereign nation – why not? The debt has been manufactured from phony assets, so why not pay it off with real money as opposed to using more debt based money?
I suggest we auction off Texas to pay the debt.
Or auction off our five largest banks?
My pet fantasy is they take over the TBTFs (temporarily) and find where that $20T -$40T in tax dodge money is hiding (per Treasure Island book) and rightfully steal it back from it’s owners.
Or cardboard, rather than green ornate paper. A truckload of cardboard is worth 12 grand or more. Easy to recycle, everybody who’s anybody – not exactly human, but with more rights than humans – needs it and is willing to pay for it. So it’s just where to find it in quantity.
One of the plans I’ve heard of, besides cat-fud for seniors, is to go into all the
HooverObama villes, under all the bridges, etc., and reclaim cardboard the swinepeople are living in that rightfully belongs to the corporations that produced the “stuff” that came in it.
… or by increasing the (horror of horrors!) Capital Gains Tax, for instance.
Why so-called ‘Benefits’ for the poor/middle class (ie. SS/Medicare/Medicaid/Mortgage Interest, social programs, etc…)are on the table when the real tax benefits to the Ultra Rich, ie. Carried Interest, CapGainsTx, etc… are NOT, is ridiculous.
… that being said, I really don’t give a sheet about balancing the budget during The Great Recession anyway. It’s a ridiculous Red Herring thrown out there to instill fear in the public and focus them on imaginary problems to ensure the success of the status quo. The Fiscal Cliff/Debt Crisis is the Government’s version of another Lindsay Lohan story. Complete crap.
If the working class was alive and conscious, they wouldn’t be on the chopping block.
Life ain’t so bad, and it’s gonna be a good Christmas. Retail will do just fine, and there lots of Chinese-made crap under the tree this year.
What’s a little credit card debt between friends?
You missed the part about being cut off from imports. That is the consequence of what your advocating. And in a country that can only supply 1/3 of its energy needs domestically, being cut off from imports will be a horrifying experience for most people. Since I am aware of what’s going to happen, I expect my situation to improve quite a bit though.
Nice smug attitude there.
You haven’t proven your argument. The US is Saudi Arabia’s best friend, and we have huge influence in Iraq. Those have the #1 and #2 biggest proven reserves in the WORLD.
Did you miss the part where we are the hegemon, with nukes, and the only navy capable of moving enough troops for large ground invasions? And we have enough influence that we’ve gotten Iran cut off from international bank networks?
This is all you have and it’s utterly unconvincing.
Two words: peak oil.
Once Saudia Arabia’s reserves begin to noticeably decline, international trade will contract. Experts suggest that Saudia Arabia’s oil production could start declining in the next five to ten years.
The limited availability of cheap liquid energy, in the form of the conventional oil that Saudia Arabia puts constraints on growth. Without increasing growth, how can large private and public debts ever be paid back?
“Did you miss the part where we are the hegemon, with nukes, and the only navy capable of moving enough troops for large ground invasions?” Nukes kind of make large ground invasions obsolete because other countries have nukes. Large ground invasion capacity did not allow us to win the Korean War, or the Vietnam War, at the peak of our power. China at this point is destined to surpass the U.S. in the metric of manpower anyhow. In addition to that, the entire U.S. military runs on oil. If oil becomes too expensive, too difficult to come by, it will become a burden to maintain and its advantages may vanish.
In the long term, we face declining U.S. military and economic power for a variety of reasons. Let’s suppose the U.S. economically becomes a third world country in forty years but there is still enough petroleum to run the global economy. Do you think a third world country’s military will help you fill up your (pretend you’re not upper middle class for a second)gas tank by manipulating suppliers or make sure U.S. still has access to imports? Aren’t the militaries of third world countries sort of weak internationally and domestically repressive?
Do you seriously believe we would let this happen? Just what army are we to tremble from and roll over to?
With any luck, our food exports will go down to zero to match our stuff imports. Then all y’all good people can have zero to do with us altogether.
“This is the sort of piece I’d suggest sharing with friends and relatives who’ve been unable to miss the news coverage and want to get up to speed.”–Yves
Hahaha. You are a funny one, Yves Smith. thx 4 the giggles.
You beat me to it – I was just about to remark on the same phrase …:)
This rather adroitly demonstrates the pausity of the intellectual process. With enough practice, anyone can manipulate any idea in order to effect an outcome such as the one we enjoy in the United States today.
How many people in this country actually particupate in wealth producing activities? This is the basic problem, i.e., an entire society infected with terminal parasitism, top to bottom.
well, my simple act of breathing ,seems to be producing wealth for someone….That is what my monthly bills seem to indicate.
Ha! Me too.
“…an entire society infected with terminal parasitism, top to bottom.”
Ah, but those at the top are so much more EXPENSIVE.
I’m not trying to point this out like it’s something new. The “fiscal cliff” is a real world application of a psychological experiment of long ago, beautifully demonstrated here.
The “visual cliff” experiment was devised by Eleanor Gibson at Cornell. Luckily, her husband, James (also brilliant), had been granted tenure, unlike her, and so we got the benefit of this classic experiment.
It was new to me. Thank you for the insight.
Gets at the importance to them of keeping control of media and the value to We the People of websites like NC.
I have to admit I was a little worried about what Jamie might have to say, but was pleasantly surprised to get a reality based, straight shoot’n, recap of events and fantasy.
I’ll decompose the fiscal Cliff here for completeness
1) Bush tax cuts end, finally!
2) Spending cuts total about $100B – $50B on defense, $50B on all other “discretionary spending” (ex-“entitlements”)
3) 2% Payroll tax ends
4) Long term unemployement insurance ends
5) Corn Ethanol tax credits end
6) SS and Medicare not touched
Jamie is right. Whatever they don’t do now they can do later. Also, whatever they do later, good or bad, can be undone again, for that matter.
That last sentence is a very important one to tell every LOTE Democrat one knows every chance one gets (and no few Republicans would do well to hear it too), especially around election time. Remembering this very true fact takes a lot of wind out of the sails of the two-party duopoly.
A Question for Yves: I understand the Keysian perspective and appreciate the logical flaw in the “austerian approach”. Here’s where my “understanding” breaks down: We are told that nations that have their own currency can print money and can hold interest rates down as long as they need/want and then “poof” – everything can “magically” work out. But, – when interest rates are held down all types of “income based assets/instruments” (pensions, insurance products, annuities, etc.)suddenly provide inadequate revenue and then we apparently find ourselves in a different type of “austerity” situation. Help me understand the path out of the labyrinth.
Sounds like a textbook market failure to me, to be handled by cookbook means. Namely, if a social good is a) needed and b) can’t be provided successfully and reasonably profitably in a market regime, it’s a good candidate for provision by the nation-state itself.
Somebody please correct me if I’m wrong…..
With MMT, the money printed is NOT debt based money. Sovereign governments don’t need to borrow money/issue bonds to perform govt obligations when they can print currency. Only banks issue debt-based money (at interest) to private borrowers. Therefore sovereign governments aren’t forced to hold interests rates down to keep debt service affordable, as our Fed is doing right now.
This isn’t classic Keynesianism though. Keynes saw the economy as cyclical, with booms and busts. He advocated running surpluses during the good times to make up for deficit spending required during hard times. The US has followed the views of Friedman the last 30 years or so, not Keynes, who advocated free markets, rejecting the use of fiscal policy to influence the economy. He saw the Fed’s control of the money supply (“helicopter Ben”) as the primary intervention to be used, with increased money supply increasing production, but also inflation.
Somebody please correct me if I’m wrong…..
Sorry, but that is wrong. It encapsulates a lot of what people on the web think is MMT – but isn’t.
With MMT, the money printed is NOT debt based money.
Money is NEVER, cannot be, “debt-based money”. Money IS debt. A dollar bill and a bond (“government debt”) are EXACTLY the same thing. Dollar bills aren’t “backed by” or “based on” bonds. That’s as crazy as saying $1 bills are “backed by” or “based on” $10 bills. A government bond is just a dollar bill for rich people.
The people who speak of “debt-based money” or alternatively “debt-free money” do not understand what they are talking about. Ignore them!
Only banks issue debt-based money (at interest) to private borrowers.
Banks issue bank-money. A bank IOU: say a bank account or bank-note of $100, usable NOW. The borrower “issues” borrower-money in the form of a loan-note: an IOU for $110, due in 1 year say. The borrower and the bank are doing the same thing, except that the borrower’s note is for a year in the future, and for more money. Banks are private enterprises run for profit. They want to get more money in a year – that $10. That is the only way that their money is “debt-based”. If they lose money constantly, by making bad loans, an honest government will close the insolvent bank.
This isn’t classic Keynesianism though. Keynes saw the economy as cyclical, with booms and busts. He advocated running surpluses during the good times to make up for deficit spending required during hard times.
No, (fake) “Keynesians” love to say Keynes said this. But they never ever say where, never with a quote. He didn’t. He said the government should spend less in booms & more in busts – just common sense. Whether this turns out to be a surplus or deficit overall at each time – who knows? Keynes was basically MMT.
The US has followed the views of Friedman the last 30 years or so, not Keynes. Right.
Thanks, C. for clearing that up. What you said about debt-based money makes perfect sense, of course. Sovereign governments don’t need to borrow money would have been more accurate, correct?
No, this is 100% incorrect. Money is not debt. Debt is a promise to pay principal and interest on a specific schedule. I may take to deleting stuff like this because all you do is confuse readers.
And banks do not “issue money”. This is American Monetary Institute nonsense, and I do not have time to debunk it now.
The Federal government can deficit spend without incurring debt.
What makes money “money” is that government accepts it to pay taxes.
… “Ex scientia pecuniae libertas.”… “Out of knowledge of money comes freedom.” —Unknown
I have an abiding belief that this knowledge is carefully and artfully kept hidden from us for reasons that are themselves unclear.
Watching how the negotiations progress is fascinating…. or more accurately, how they are being portrayed as progressing since they are behind closed doors so what is being reported should be taken with a grain of salt. First Boehner “leaks” Obama’s proposal and both Congressional leaders slam him for not throwing in enough of the cuts they want. Oh, and he’s doubled the revenues he wants since last year. They are shocked he didn’t go into negotiations offering what the other party wants. Why would they think that? Oh yeah, Obama has done that in the past. Well, it seems he’s taken a new strategy. He’s decided he will wait for them to propose the cuts they want. Ouch, that puts them on the spot for making unpopular proposals.
Then by last night, Obama releases his version and the terms are rather different. Did somebody not tell the truth? Tell me ain’t true. The cuts aren’t cuts in benefits but come from “increased efficiencies”. To rub in who has the leverage this time around, Obama throws in a request for power to raise the debt ceiling. Its understandable why McConnell would’ve laughed. It was pretty funny, esp. considering Obama taught Constitutional law.
So today there are some cuts on the table from GOP. You figure they’ll meet in the middle. Probably by Christmas, though perhaps the tax reform will be deferred until next year, with only $ figures to target. Not good for that uncertainty that business hates if its not going to be out of marginal rates, but unspecified deductions. Obama may drive a hard bargain, not because he cares about the middle class, but because he can. I peeked in over at another forum where I used to post. The moderator said that Boehner and McConnell should tell Obama to FOAD. After explaining Obama had the support of the people to raise taxes and leave entitlements alone, I wrote that I thought that was what Obama had said to the GOP leaders.
My post was promptly bilged. Brown-nosing has never been my style. Oh well…. the Neanderthal mindset that seems to prevail is hard to swallow anyways. It reminds me how much I appreciate NC. Thanks, Yves, for all you do.
“Cut through the fog, and here’s what to expect: Taxes will go up just shy of $1.2 trillion — the middle ground of what President Barack Obama wants and what Republicans say they could stomach. Entitlement programs, mainly Medicare, will be cut by no less than $400 billion — and perhaps a lot more, to get Republicans to swallow those tax hikes.”
Since taxes go up automatically unless the cuts are renewed, Obama is effectively getting NOTHING for slashing the social safety net. Which means Obama is doing is because he wants to do it.
If taxes go up to Clinton rates on those making over $250K, the claim was that would bring in $700B revenue. Where will the other $500B come from? Or has there been a revision in the numbers? Anybody know?
Because under “Sunset Bush Restore Clinton”, taxes would go back up on everyone making UNder $250K as well. And that is most of us. Including my $34,000/year self. Which is fine with me.
I’ll bet they all know what they want, what they’ll get, and when they’ll get it. Blankfein included. If it weren’t that simple, you’d see them sweat a little bit. Instead we get to see those goof f*** you grins.
This scam was easy to identify. Right after the election, the staid media dutifully and unabashadly rolled out this fraud scheme in drum beat with the White House and then the Republicans who are hand-in-hand. A crisis-induced scame so much like the post-911 scam, the Iraq war, the market collapse of 2007-08, and others since Obama took office. Giving themselves away are the same familiar clown faces — Geithner, Obama, Durbin, Schumer, Boehner, McConnell, Pelosi, and yes, even the affable Bernie Sanders doing his thing.
While the population at large has been gullible and soft-hearted in previous scams, I think by now most of us are onto this schtick. If these characters, and I include O’drama at the top of that list, believe this schtick will work smoothly this time around, they have another thing coming. This should not go unpunished.
I think your onto somthing there when you say that the public is catching up to the defict racket. Thank the internet for that one, and of course Naked Capitalism and a couple other sites. The WH was astonished at the amount of flak it got from the left during and after the obamacare fiasco and it was entirely due to the web. I think the they are less astonished this time around but still hoping they can put one over. However, its not just the left when it comes to Social Security and Medicare,and many more people have caught on since 2010, that their elected reps dont represent them. This was never meant to be a one time “slam dunk” scam. They hoped to play the fake crisis out for several years into the future and do some real damage. I dont think many of them (except maybe alan simpson) have much hope of that any more.
Money is not debt. But neither is it wealth.
Take it down a notch and put politics aside.
If you spend more than you bring in.
You will have to deal with a ‘fiscal’ cliff.
Sooner or later.
Just saying .. hypothesis aside.
Cliff’s do occur on every natural and human level.