Dan Kervick: Yellen Needs to Tell Politicians to Stop Passing the Buck to the Fed

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

Evan Soltas is hoping that President Obama’s appointment of Janet Yellen signifies a new administration commitment to jobs and economic growth.

Unfortunately, Soltas seems to be one of those folks who is convinced that our failures over the past five years have much to do with a monetary policy that has been insufficiently “accommodative”, and he strongly suggests that the national plague of mass joblessness and stagnation could be alleviated if the Fed would only do more aggressive quantitative easing without political pressure to taper prematurely.

It’s a sad fact that, five years into his presidency, Obama has shown little interest in nudging monetary policy toward growth — or even just appointing growth-minded policy makers. Yellen changes that. She has been outspoken about the need for the central bank to support a U.S. economic recovery with accommodative monetary policy — and, in particular, to reduce unemployment. Meanwhile, Obama has been an outspoken, if not well-argued, advocate for the hawkish view that continued easing creates risks of financial bubbles and instability.

Those comments aren’t at all out of place in the Obama administration’s view of monetary policy. You can hear his emphasis on risks that would cause the Fed to tighten. It’s strange to see the president, who you would think wants the economy to grow, so ready to throw away his best option to realize that outcome. And it is a particularly egregious error when, as Obama knows, Republican opposition means fiscal policy cannot ride to the rescue. With Yellen, though, Obama has been forced by members of his own party to hand over the top job in monetary policy to someone decidedly not of his persuasion.”What I’m looking for” in a Fed chief, he told the New York Times back in July, is somebody “to keep inflation in check, to keep our dollar sound, and to ensure stability in the markets.” Amid high unemployment, Obama wanted someone who’d still “keep an eye on inflation, and if it starts heating up, if the markets start frothing up, let’s make sure that we’re not creating new bubbles.”

Notice the pooh-poohing of concerns about bubbles and froth, as though somehow a strong preference for financial stability and sustainable patterns of investment and growth goes hand-in-hand with a stodgy taste for stick-in-the-mud stagnation and “tight money”. It’s dispiriting that so many of the young, center-left thinkers seem unable to escape from the dominant neoliberal frameworks of mainstream neo-monetarist economics. In the mental model these writers constantly bring to bear there seem to be just two basic camps: On the one side you have “easy money”, higher inflation, bubbles, instability, growth and high employment. On the other side you have “tight money”, lower inflation, sound finance, lower growth and higher unemployment. The suggestion seems to be that bubbles, instability and inflation are just the price we have to pay for a dynamic and growing economy, and so fighting bubbles means suppressing growth. And the story goes that the difference between tight and easy money is supposed to have something to do with direct Fed control of the money flow.

But there is no reason that aggressively pro-growth, demand-side policies need promote bubbles and financial instability. Targeted, committed and sustained federal spending could drive powerful, innovative growth and job creation without promoting bubbles. The United States could launch a new program of mission-oriented public investment in which the government bears much more of the economic risk as the financier of last resort, while the risks to the private sector are greatly lessened as private firms are able to get their own investments in line with a clear and predictable national strategy. And given the government’s nearly infinite capacity to absorb financial burdens, the risks that the public sector bears on this approach are just the risks of inadequate investment outcomes, not the risks of financial fragility, collapse and debt deflation. The downside can be covered with stabilization programs if the public consumption and investment programs don’t succeed as well as hoped. But such programs have succeeded in the past, and continue to succeed in hungry countries with a “developing country” mentality. The US could use a lot more of this attitude.

It is a trait of neoliberal thinking to believe that the US economy is all about shot-in-the-dark risk-taking, as bold entrepreneurial heroes sally forth on a wing and a prayer to develop new kinds of pet rocks, video games, online retail sites and tastier taco fillings, and that frequent bubbles and failures are the inevitable cost of ready financing and “accommodative” monetary policy. This is the kind of giddy and historically uninformed free-market fundamentalist thinking that has gripped the US during our recent and highly regrettable neoliberal era, and it is depressing that many of our younger thinkers have swallowed so much of this story. It is responsible for a period of national devolution and failure bordering on an embrace of barbarism.

But returning now to Janet Yellen, Soltas is made hopeful by some of her statements:

Compare that to Yellen: “My colleagues and I are acutely aware of how much workers have lost in the past five years,” she told the AFL-CIO in February. “These are not just statistics to me. We know that long-term unemployment is devastating to workers and their families.”


It’s never been clear why Obama has talked like a hawk — or why, as Matthew Yglesias pointed out in a 2011 piece in the journal Democracy, why the left hasn’t fought more aggressively for more growth-oriented monetary policy. But maybe Yellen will help him change his tune.

Soltas isn’t specific about what, exactly, he is hoping Yellen will do, but he seems to be angling for little more than the same kinds of string-pushing and asset swapping that the Bernanke Fed has tried, but with a stronger commitment to doing them harder and longer. But more monetarist re-hashing won’t cut it. The most important thing Janet Yellen could do upon assuming her new position at the Board of Governors, if she really cares about growing the economy and creating jobs, is to march right over to some live Congressional hearing and publicly lambaste both Congress and the White House, in the most strident terms becoming her position, for spending five years doing a criminally crappy job on our economy, and for smothering US growth, well-being and national development under the wet blanket of debt hysteria. Really, Congressional Republicans, Congressional Democrats, Obama … for shame!!!! What in the world have they been doing? They have responded to a crisis calling for bold government action and epochal transformational initiatives with a ridiculous campaign of white-knuckled bipartisan bean-counting, debt hysteria and obsequious servitude to the crony stake-holders in the same rotten economic order that generated the crisis. It’s been a two-party No-We-Can’t agenda that would make even Herbert Hoover blush with embarrassment.

And if Yellen wants to be really bold, she could offer the Fed’s assistance in launching a special program of mission-oriented public investment, with creative forms of public financing directly organized through the central bank. She could break with the current global wave of financial sector hand-wringing over the lost “independence” of central banks and remind Congress that the Fed is a creature of Congress; that it exercises every power it has by virtue of the legislated delegation of Congress’s constitutionally granted monetary authority; and that Congress can and should re-structure monetary policy and public financing institutions when the national interest calls for such a step. It’s calling now.

Yellen might also mention that continued Fed asset purchases, while they might be marginally helpful in holding down long-term interest rates – for what that is worth – also drain financial assets from the economy as the other side of the same swaps that add them, and that these asset purchasing programs are a rather weak, trickle-down economic tea whose effects are primarily limited to the financial markets and wealth extraction rackets. Trading dollars for very liquid bonds in an overly-financialized system that is primarily devoted not to jobs and growth, but to extracting every free cent that flows onto corporate balance sheets for the benefit of shareholders and executives, and that is already sitting on mountains of liquid assets, is no substitute for a jobs program and no substitute for a growth program.

The best thing Janet Yellen can do at the Fed? Tell the political branches to stop punting their responsibilities over to the Fed! The Fed simply can’t do what an energized and progressive national government can do. The center-left strategy of pretending that it can empowers reactionary politics, buttresses the reign of corruption and privilege, validates inequality and exploitation, and points toward generational failure.

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  1. craazyman

    I have come to the conclusion that the epicenter of the entire national monetary/fiscal political-economic mind-flail is the fundamental failure to understand excactly, in the strictest and most accurate terms, just what money really is.

    The failure to understand the essential energetic structure of the substance makes all references to its quantity and composition (whether stocks, flows, cash or debt) almost meaningless.

    This is quite a strange situation, actually. Watching the hard money/easy money debate is like watching two insane people arguing over who of the two is the real Napolean and who is only the imposter.

    This is not a critique of Mr. Kervick’s post at all, which accurately describes the current situation, the post is the point of departure for my observation.

    1. from Mexico

      craazyman says:

      I have come to the conclusion that the epicenter of the entire national monetary/fiscal political-economic mind-flail is the fundamental failure to understand excactly, in the strictest and most accurate terms, just what money really is.

      I vehemently disagree.

      Even before the Age of Keynes there was an elaborate and virtuoso full-court-press to misinform and confuse the American people, and indeed the world, when it comes to money. Can we say “Milton Friedman”? It is no accident that Friedman, with his completely defactualized theories about money, became an overnight rock star. He was a made man, because his pseudo-science served the interests of the American rentier patriciate.

      The misinformation, misdirection and confusion when it comes to money are done deliberately, intentionally, and maliciously.

      Mark me up with Michael Parenti with this:

      So, I can say to you that school teachers are concerned about their salaries and they’re organizing and they’re threatening a strike and they’re pressuring. I can say to you that farmers are doing this and looking for subsidies and facing certain policies. But the minute I say to you that the very people at the top, the plutocracy, the very rich and powerful, the ones who own most of America, they are consciously pursuing power and wealth, someone will come along and say: “What do you have, a conspiracy theory?” Or they’ll say you’re cynical and paranoid. They’re view is that stuff just happens. Things just happen due to unintended consequences or our leaders are just stupid, and they’re jerks, or they’re confused and they don’t know any better… People who operate in this world operate with intent. There’s no such thing as imperialism without imperialists. There’s no such thing as capitalism without capitalists. There’s no such thing as rulers who are somnambulant who walk around in their sleep.


      Or this:

      And then there were a whole crop of liberal publications… And the charge was to criticize the empire, but never criticize it in the way it was really happening. Criticize the empire because the people who are building this empire, the people who own most of the world, the people who destroyed whole countries and walked away fabulously rich, the people who developed new means of undermining any kind of independence anywhere in the world, these people were stupid. They’re not as smart as those of us stuck away at various universities who are writing these little books, like Chalmers Johnson.

      And so we got critical analyses of American policy, but the criticism was always about how confused our policymakers were. The liberal critics are never happier than when they can rock back on their heels and say: “How confused these leaders are.”…

      And I did a little gathering of the adjectives they used from these various books I mention… Their critiques of US empire characterize US interventionist polices as, quote…”reckless, misguided, inept, bumbling, insensitive, overreaching, self-deceptive, deluded, driven by false assumptions, and presuming a mandate from God.” This policy “was laden with tragic mistakes, and imperial hubris”… They saw this as “a mindless proclivity embedded in the American psyche or culture.”

      Well, I want to argue, and I did argue in this book, and I think I showed it, that empire is not something that is done just because people are overambitious or misguided or inept, or they don’t have your guidance…because you’re so much smarter than all those guys are… It’s imperialism. The empire does imperialism. That’s the process of empire… There are real material interests at stake. There are fortunes to be made many times over. Behind Colonel Blimp there stood the East India Company and the Bank of England. Behind Teddy Roosevelt and the US Marines there stood the United Fruit Company and Wall Street. The intervention is intended to enrich the investors and keep the world safe for their system, for their system of investment, for their system of expropriation, their system of trade, their system of misusing labor and the like.


      1. craazyman

        Yeah I see your point and agree with a lot of it. I’d only observe there are many power-hungry souls who simply don’t care what money is. But I think a lot of the brain-jail inmates working the money-magic-technocratic machine really don’t think very well about money, but would if they could because their souls are total wastelands but their minds are.

        1. from Mexico

          Well I think your comment works if we want to talk about proximate causes.

          But if we are to have any success whatsover in countering the rentier patriciate, I believe it’s necessary to explore ultimate causes. Otherwise we just end up battling symptoms and not the disease.

          1. skippy

            For you Mr Mexico…

            Neoliberal capitalism andmiddle-class punitiveness:Bringing Erich Fromm’s‘materialisticpsychoanalysis’topenology
            Leonidas K Cheliotis
            University of Edinburgh, UK


            Why is it that imprisonment has undergone an explosive growth in the USA and Britainover the last three decades against the background of falling crime rates in bothcountries? And why has this development met with a significant and escalating degreeof support among the public? To the extent that governing elites on either side of theAtlantic have been eliciting public support for their authority by inducing concernsabout issues of crime and punishment, what explains the selection of crime as ameans to this effect, and in what precise ways do crime and punishment fulfil theirhidden political function? Moreover, how do Americans and Britons legitimate theirconsent to objectively irrational policies and the elites responsible for their formula-tion? In seeking to advance the study of these questions, the present article rediscoversthe method and key findings of Erich Fromm’s ‘materialistic psychoanalysis’, bringingthem to bear upon insights produced by political economies of contemporary punish-ment and related scholarship. Particular attention is paid to the hitherto understudiedthemes of the political production of middle-class support for punitive penal policiesunder conditions of neoliberal capitalism, and the crucial role played in this process bythe privileged position accorded to violent street crime in the public domain


            skippy… Questions – Questions – Questions or Not Thingy

            1. from Mexico

              @ skippy

              That’s a long paper so will take some time to read and digest, but I have printed it out and will do that.

              Thanks for the heads up.

              1. skippy

                I found it to be another notch in the neoliberal smoking gun.

                skippy… gezz I hate them viciously…

      2. Banger

        Great answer and Michael Parenti is one of the few commentators who tells the unvarnished truth and has been doing it for decades.

        Indeed, the imperial project has been intentional–the “mistakes were made” kind of BS that the mainstream media likes to chance whenever weird sh!t happens is enough to make me throw up and another example of American Exceptionalism. Where there is power and high stakes there are conspiracies and that is obvious if you study history.

        But, I have to add–and here we will disagree, is that the alliances that built the imperial and neoliberal project are in disarray. Just as they won complete control over the system and locked it up so that no reform of the system that did not itself just reinforce oligarchical power (ACA and so on), just as they have been able to put in place a beautiful police state apparatus with all kinds of contingencies form mass incarceration to picking off radicals by suppressing demonstrations before they even happen (I have stories), just as they can taste complete financial and military dominance over Europe, the Middle East, Central Asia, just as they have firmed up their deals with a variety of shady characters and organized crime gangs–they have fallen on their faces because of internal disagreements. The oligarchs are now at war with each other–the idiots!

        Why do I say that–unlike some here I don’t believe the current disorders are all Kabuki–I believe it reflects real differences and rivalries and that disorder seems to be breeding more disorder as the entire thing has started to unravel.

        Two points bear looking at:

        One, the Syria operation failed despite the fact that everyone was on board. The media was spouting propaganda night and day about Assad=Hitler and they’re BS didn’t work and moreover it almost didn’t have any effect. I knew the gig was up when I heard the hysterical turn of voice of the usual suspects on Diane Rehm (interesting to monitor if you want to understand official Washington thinking) who were almost sobbing that the American people had to respond to the crimes of Assad. I have never heard so much hysteria from “experts” on that show.

        Two, the fall of Larry Summers–here is the ultimate “made man”, deal maker, fixer, heavy, knower of secrets who maintains power always–Larry Summers was thrown out on his ass by his enemies. This is a much large event than most people think–it means the right side of the DP is crumbling–and there is still no left side of the DP but it could emerge now as Obama is clearly a weakened President.

        There are other factors as well that show me what I believe to be a period of political disunion is at hand. Yes, likely things will move in the direction of defunding the safety net but that’s because the left has still not strongly asserted itself independent of Obama and not because the oligarchs are all lined up in a row.

      3. Doug Terpstra

        Among your best, fM. We must henceforth dispense with the quaint notion that our overlords are in any way well-intentioned. The urine of trickle-down has become so rank and caustic, that even those defending it have thrown in with the thieves and killers perpetrating it.

    2. craazyboy

      It’s really not that hard to understand, craazyman.

      Money is the stuff bubbles are made of. But as soon as they get within reach, they pop.

      Then again, money is a shape shifting demon – so it doesn’t always work that way.

      1. craazyman

        whoa! don’t read Patrick Harpur’s books or you’ll freak out like I did. In bed with sheet over your head, trembling, with one eye looking out at the closet door just waiting for something to fly out.

        I think bubbles are waves in n-dimensions. Think about a Cartesian 2D wave in 3 or 4 and it’s a string of bubbles. Sine/cosine, etc. If you keep adding dimensions it gets kind of interesting — if you’re weird that is.

        1. craazyboy

          I’ve got a screen saver that works like that.

          Used to have a lava lamp too, but that got misplaced somewhere over the years. Or just disappeared. Kinda spooky now that I think about it.

        2. craazyboy

          Also, Patrick Harpur is a FRAUD.

          If you want to read the real thing, it’s Roger Zelazny, “The Great Book of Amber”.

          I finished all 1250 pgs, and it IS the definitive work on demons and sorcerers, the kingdoms of Order and Chaos, and the mystical forces that shape this universe. Makes the scheming royalty in Game of Thrones look like a bunch of amateurs, and Harry Potter wouldn’t live long enough to pull out and wave his magic stick (about 1 paragraph).

  2. from Mexico

    Dan Kervick said:

    The Fed simply can’t do what an energized and progressive national government can do. The center-left strategy of pretending that it can empowers reactionary politics, buttresses the reign of corruption and privilege, validates inequality and exploitation, and points toward generational failure.

    I think it’s about time we started takin’ names and kickin’ ass, and on top of that list of names should be traitorous faux-lefties like Evan Soltas.

    Soltas is nothing more than what Orwell called one of the “hired liars and bumsuckers” of the “lords of property.”

    1. Dan Kervick

      I’ve wondered what it is about the current generation of well-educated young people from our top institutions. Usually the young in America are the people full of democratic idealism and utopian spirit, and it is the old who have to correct them with a bit of realism. But so many of the young up-and-comers these days seem to have no heart, and not a whiff of utopianism. They just want to put the pre-2008 neoliberal economy back together, with all of its insane systems of privilege, plutocracy & dysfunction; and its endless assaults on democracy and human dignity.

      They seem so shallow. As a former educator I feel my generation really failed them.

      1. NotTimothyGeithner

        I disagree with this. The young are just dealing with the hand dealt to them, and there are less opportunities available which means there is a large pool of people to screen. The elite only need to promote “yes men” because they don’t have to worry about competition because so many things have turned in TFBTF. Then there are a host of obstacles to the cost of start ups.

        The kids who supported Obama are the products of a shallow society and mass marketing, but they were interested in major changes.

        Rock-the-boat types are dangerous to the existing order and will not be tolerated, and unlike previous eras of American history, they can’t go West anymore. We are just seeing who assuages the egos of men like Obama. Is Obama going to promote a liberal critic of his Administration?

        Since the Fed is always in the news, Carter Glass of the Federal Reserve Act and Glass-Steagall was a small town newspaperman. He became Senator because his anti-Republican and anti-Southern Democratic op-eds were reprinted in every little paper as those little papers looked for ways to keep people interested. Now those papers are gone with a handful of corporate news outlets left.

        1. Dan Kervick

          Yeah, I guess I’m not talking about all of the young, but about the best-educated folks from the top academic institutions. When I read about the early 20th century, I am often struck by the fact that the intellectual elite in that time was clearly moving left economically, and when FDR was elected, he was able to tap an army of folks who were raring to go. Now it seems like all of the Ivy league and other top institution grads are meritocratic neoliberals convinced that American capitalism is the end point of human development, that plutocratic control is natural and proper and that they occupy the top echelon in a natural genetic human hierarchy whose job is to run the system.

          1. NotTimothyGeithner

            Its just who is being promoted. Even in the 1920’s, power wasn’t as centralized. There are good people at these institutions. Professors had tenure and weren’t being watched as assiduously by the right wing, but there aren’t places to shine.

            I used Carter Glass as an example because he achieved great power from an era where his small town newspaper represented newspapers for the majority and the primary source of news. He’s not from a great New York family despite being the primary architect of international banking control (obvious snark). He was from a town in the middle of rural Virginia.

            Ezra Klein and Matt Yglesias have been plucked from blog anonymity for promoting conventional wisdom to the pages of major media companies. Glen Greenwald was stuck on a blog (not to dismiss blogs, but they have self-selective audiences) and despite great work time and time again, American media companies weren’t offering him platforms. He had to a non-American company.

            FDR and the liberals around him came when there was more positive competition and the states had more authority or more resources vis a vis the Federal government. The states could be actual laboratories for good government. Taliban Bob McDonnell is the current governor of Virginia, and despite his graft, he hasn’t been as bad as I thought he would be as governor. Part of the reason is much of what states do is automatic and dictated by matching funds. There isn’t much wiggle room, and this is true for every state. No state being held up as a shining example of ACA in action because of the limits states have.

            Occupy did bother the powers that be, but our institutions and general outlook are different than when FDR took office.

          2. jsn

            The crib forward competition that eventually yields up an Ivy League education is an elaborate and self reinforcing system for selecting conformists. Anyone who develops “deviant” interests, were real critical thinking comes into habitual use, has in doing so selected out of the “elite” system.

            There is plenty of this kind of “deviance” out there, but it is moated off from the elite and the levers they pull by gulfs of culture and cash and because it is self critical it is ferociously susceptible to the collective action problem.

      2. NotTimothyGeithner

        Remember Barack Obama, John Boehner, Hillary Clinton (a Goldwater girl; imagine the idealism and depth) were all young once. Imagine what they were like or how their educators failed them.

      3. Banger

        Young people are scared; they have neither the opportunities nor the freedom that boomers had. I could get busted, get my head beaten in, reover and find a job in a relatively short time–never had trouble finding work and you could manage to live on minimum wage or slightly more, I did. I could go to a different part of the country and no one would know my business or know about my debts or my record–it was not possible to reconstruct a broken life. Today, you step out of line and it’s much harder to find work and without work you have less of a safety net and a less friendly country, frankly, to deal with.

        You could work for a while then travel–you could earn enough to go to college at state funded institutions; you could put together an “alternative” lifestyle as long as you avoided certain areas and the police who were then, as they are now, dangerous and unpredictable.

        Mind you, there was more opposition to what many young people were doing but the other benefits we had outweighed the hostility among some parts of the population. Today, only cops harrass non-conformist kids but society has no interest in promoting opportunities for young people.

        1. DolleyMadison

          Exactly. And that very ability to re-invent oneself is what made America great. My nieghbor’s 28 year old son who has an MBA and lives with his granfather so the old man could remain at home, who has stellar references and job experience, was just denied a job based on a charge when he was 18 that was DISMISSED when the person bringing the charge recanted and admitted they were paid to file the complaint.

        2. Ed S.

          Good, very good point. I think that the young today (and anyone under 30 is young) realize that they will get ONE SHOT (if they’re lucky) and are terrified. Existential fear (and not incorrect).

          On a marginally related point NPR featured a story by a guy from the CATO institute about how welfare discourages work. All the usual crap, but to me the “dog that didn’t bark” was that NOBODY (CATO guy, interviewees, host) suggested raising the minimum wage. The thought that maybe the problem isn’t that benefits are too generous but that the minimum wage is too low never crossed their minds.


        3. gordon

          I’m not an American and I don’t live in America, but this comment certainly rings true to me. There seems to be a much higher level of violent political repression in the US than there was, say, in the 1960s. I can’t imagine anything like the Nation of Islam, the Black Panthers, Students for a Democratic Society or even the Merry Pranksters surviving for more than a millisecond in today’s America. They would have Homeland Security, the FBI, the DEA, local cops and even paunchy mall guards all over them.

          I particularly like Martin Luther King Day over there in the US. Every year I smile at these solemn celebrations of a man who if he lived today would be in gaol or maybe Guantanamo Bay.

          1. davidgmills

            Our neighborhood just had a security guard taze a 25 year old woman who was doingn othing other than sitting in a car with a male friend in front of her parents house.

            Tazed her not once but twice and the second time she was in handcuffs. All she did was give him lip.

            So far he has not even lost his job.

            1. anon y'mouse

              got pulled out of a car while sitting, talking with my boyfriend once back when I was 17. we were, admittedly, in a more upscale neighboring town whose cops had a xenophobic attitude towards “jungle denizens from across the bridge” due to the particular details of geography.

              there were about 4 of them, 3 cars, and they searched both him, me, and the vehicle. and we were doing nothing but sitting. since they couldn’t find anything, they warned us to move along.

              thank goodness it was in the time before tasers.

      4. LucyLulu

        Not necessarily limited to the young people, there is a lop-sided opposition afoot. The right has its faction with the Tea Party, those who are fervent in their ideals in willing to go to extremes to fight for their principles. OTOH, the left has no such faction. Democrats don’t worry about being primaried from the left the way that Republicans worry about threats from those to their right. It isn’t going to happen. The only threat Democrats face is from their Republican opponent. There is no incentive to promote more progressive policy such as fiscal stimulation. If there were, now would be ideal timing for the left to leverage some power with polls having shaken Republicans with the survival of their party being threatened by their obstructionist tactics. Instead we will see a “compromise” reached where revenues and benefits geared towards the more vulnerable will be sacrificed by the left. The right will allegedly compromise by allowing the government to operate and to pay its bills. Will even mildly progressive policies such as raising the cap on payroll wages be proposed as an alternative to chained CPI? The answer to this and what is accepted as meaningful negotiations tells us all we need to know about the state of politics.

        Even if the fiscal austerity vs. stimulus debate were to be ignored, is there anybody who argues that uncertainty doesn’t restrain the economy? Many of our Congress members campaigned on the importance of providing certainty for “job creators”. Have they acted to improve certainty? Polls say otherwise, and it looks like once again the can will be kicked down the road with another short-term solution. Congress has succeeded in making nobody happy, not only their wealthy benefactors but those who will be voting in future elections. While Republicans bear the brunt of the blame, 60% of those polled support voting “all the bums out”.

        I hear the same sentiment in my safe, red gerrymandered southern district, and my representative has good reason to be concerned his 20 year tenure in Congress will be coming to an end. Those safe red districts are the same ones who benefit most from public largesse, as is becoming painfully clear. Our food pantries are being overwhelmed by four times the demand they can meet, as WIC, TANF, child care, school meals funds are already depleted, and new applications for SNAP are not being taken. Then there are small business owners whose loans and grants have halted and ag subsidies cut off, and those who suffer the ecological decimation when regulatory agencies are shutdown and another oil pipeline ruptures (why not shut down the pipelines until the govt reopens?). I can’t predict how it will all turn out, but there is major disruption underfoot which TPTB seem to be underestimating, insulated from the real world in their protective DC cocoons.

        1. anon y'mouse

          there’s a lot of thrashing around here about “what does it mean?” and “who will save face/cave/get what they want?” over this budget thing.

          perhaps the whole point is to make the government, system and participants, look incompetent. mass hysteria, so that when they roll out Gov 3.0, everyone will heave a great sigh of relief.

          sad when the people who are acting in charge have to play their own court fools.

  3. Wade Kuettel

    The problem with this article is the problem with all those that push for a growing economy… what exactly do families need MORE of that a growing economy would provide? As far as I can tell, families need more disposable time which a growing economy would actually decrease. Families need a sustainable natural environment which a growing economy would only decrease despite attempts at energy efficiency gains and, anyway, the most energy efficient activity is the activity never done.

    Unemployment should be reduced by implementing work sharing policies such as reducing the hours in the full time work week, increasing vacation/sick/maternity days, reducing the retirement age, encouraging single income households,and reducing the labor participation of children and students. The goal of reducing employment by increasing aggregate demand is misguided.

    Unfortunately, the only real reason to grow the economy is to support our Ponzi Scheme monetary system. The monetary system must grow, as all Ponzi Schemes must, and to prevent the potential inflationary effects, the real economy must grow and in the push to grow the real economy, we implement harmful and unnecessary activities.

    It is ironic that those like Kervick who think we need to grow the economy, justify growing it by saying we need to implement innovation that counters the harmful effects of our growing economy but if we just stop the harmful activities then the innovation would be unnecessary…. the economy would shrink, of course, but who cares?

    In terms of macro and monetary policies, what we need is to change those to support a shrinking real economy instead of constantly trying to force growth of the real economy to support the current idiotic macro and montetary policies that require unsustainable growth.

    1. anon y'mouse

      this is the most cogent argument in favor of “neo primitivism” that i have read.

      exactly! +mil miliones

    2. Wade Kuettel

      Oops… what I meant to say, of course, was “The goal of reducing UNemployment by increasing aggregate demand is misguided.”

  4. Banger

    I liked your post and I agree with you on what the government should do–but we all know that the government cannot do any of what you suggest. I think the only course of action is, as you suggest:

    And if Yellen wants to be really bold, she could offer the Fed’s assistance in launching a special program of mission-oriented public investment, with creative forms of public financing directly organized through the central bank.

    We have witnessed the slow-motion fall of the Humpty-Dumpty government and it has shattered and, currently, there aren’t even any King’s men to put it together again until the next Congressional election. Only the Fed can assert economic policy. People can urge Obama to do this and that and he has the theoretical power to assert power but he has chosen not to. I don’t know if Obama is personally a coward or weak I don’t know–I know he’s dealing with forces that he cannot control but he is definitely a weak President. This is a time when firm-leadership is required and Obama is AWOL on that account.

    The good sign is that Obama was forced to dump Summers which further reflects on his weakness and the disorder in Washington. Summers is the prime example of a Washington “made man” who is always around no matter who is President. The fact he was booted to the sidelines is an example of the power changes going on in Washington. The good part is that the usual suspects have lost power the bad part is that there is no one and no faction in charge and what we have today is chaos.

    Yellen is perhaps the only political actor who can “do something” in today’s headless government.

    1. Dan Kervick

      Well, I think she could and should be more aggressive than Bernanke about using the prestige of her position to tell politicians what they should be doing. The economic world is not positively obsessed with Fed “communications”, and so if she talks, people will listen. But part of my argument is that it’s a illusion to think there is anything further of significance that the Fed itself can do. And if Yellen were to pursue an agenda of shifting even more policy-making power over to the Fed and away from the elected branches of government – a beloved goal of the neoliberal elites – I wouldn’t support it.

      I’m not so pessimistic about the potential for government action, despite the gloomy and conservative Zeitgeist that seems to prevail. Americans have been kicked into action before by the sudden shock of awareness that we are falling behind – think “missile gap” and Sputnik. Eventually some event, possibly something dramatic from China, will catalyze all of the general anxiety about the US falling behind and the message will sink in that the country needs a big push forward.

      1. Banger

        There is not even the remotest similarity between today and the 1950s. Patriotism is gone both in the ruling class and the ordinary America–it has been replaced, on the right, by a chauvinistic nostalgia of an imagined past and greatness that once was.

        There is no political unity anywhere in the country about anything and we are drifting apart.

        1. Dan Kervick

          No worse than the Gilded Age and the interwar years, I don’t think. I tend to think these things are more likely cyclical phases than permanent secular transformations.

          1. from Mexico

            America has proved the determinism of the harbingers of doom — regardless of whether they hail from the Marxist/Anarchist left or the Libertarian/Social-Darwinist right — wrong more than once.

            As Reihold Niebuhr put it in Moral Man and Immoral Society, the hope for democratic-political relief to the depredations of oligarchy springs from observation, “from the economic and political experiences of the more favored and less desperate proletarians.” Thus, historically speaking, the capture of the polity by the patriciate is “only a possible, and not an inevitable” outcome. He restated this in The Irony of American History as follows:

            The significant point in the American development is that here, no less than in Europe, a democratic political community has had enough virtue and honesty to disprove the Marxist indictment that government is merely the instrument of privileged classes.

            John Kenneth Galbraith said something similar in his conclusion to Money: Whence It Came, Where It Went:

            Those who pray for the end of capitalism should never welcome the activist and affirmative spirit of the New Deal, World War II and after, or the New Frontier. This spirit, however on occasion the victim of its own enthusiasm, optimism or obligation to appease the opposition, is open to the efforts that make the system work. When motivated by such spirit, the sytem has worked — in the United States to the satisfaction of, at a minimum, something exceeding a majority.

            1. MikeNY

              Yes. I very much appreciate Dan Kervick’s optimism and from Mexico’s note of hope, both because such an attitude is necessary if the struggle for justice is not be totally quixotic and absurd, and because the alternatives to a peaceful transformation of society scare me silly.

            2. Fiver

              But surely it was in response to “Marxism” or “communism” or “socialism” or the battles for “rights” or whatever you wish to designate the immense struggle for fundamental change(s) over the course of a century (1848-1945) that forced governments, including the US Government to finally respond to demands from below. Importantly in this context, consider the key role that the demise of the Soviet Union played in the full-bore push for a type of corporate globalization indistinguishable from US Empire that has taken place inside of 20 years – the same 20 years during which all those who looked to Government as a solution were given a kick down the stairs.

  5. Bapoy


    I agree with you, the Fed can’t do much to create inflation and that has been proven. All the Fed can do is make credit available, but it cannot dictate where the credit goes or if it goes anywhere at all. All the credit pushed out onto the banking system has ended up as excess reserves at the Central Bank anyway.

    I continue to be shocked at how the left and for the most part, most economists, including those you call “neo”, whatever that means. I’m not sure which paper you read, but here in the states all the ones I do read are supportive of Fed policies, Keynesian policies. So how you can call these economists neo in anyway is beyond my ability to comprehend. And than at the end of your post you call progressive, national government an “energized” movement. Where have you been all these years, the government has been “progressive” since 1970. If I was not familiar with economics at all, I’d say you are pushing propaganda BS.

    What shocks me most is that the people in the left are well educated. What you call economists in the mainstream, people like Bernanke, Krugman, Black, not only attended top schools in the nation, but are also highly educated. And aren’t these the same people leading the government’s financial institutions? Something tells me this is their agenda, and history proves none of it works. It’s a sham…

    Another shock is that these highly educated individuals can’t seem to grasp that the economy can grow in different ways. That instead of having pipe dreams about higher prices fixing all our issues, how about lower prices?

    How are lower salaries and lower prices not the same to higher salaries and higher prices if you were able to purchase the same amount of goods and services. What is it about lower prices that makes the left and so many other mainstream “economists” afraid?

    1. Dan Kervick

      I don’t think the US government has been in any significant degree progressive since the mid-seventies. Under both parties we have had a dramatic erosion in economic equality, a decline in labor bargaining power, consistently higher unemployment and growing economic insecurity for ordinary people. The middle class is being hollowed out, and the rich are now so unbelievably rich they are almost out of sight – but they have tightened their control over the direction of government. At the same time, the amount of federal spending devoted to long-term strategic economic investment has fallen. Americans. The “neo” refers to neoliberalism, a movement that took shape in the 70s and 80s and preached a return to a purer, less-regulated, less organized laissez faire market capitalism. That’s the intellectual culprit in my estimation.

      1. Bapoy

        I don’t think the US government has been in any significant degree progressive since the mid-seventies. Under both parties we have had a dramatic erosion in economic equality, a decline in labor bargaining power, consistently higher unemployment and growing economic insecurity for ordinary people. The middle class is being hollowed out, and the rich are now so unbelievably rich they are almost out of sight – but they have tightened their control over the direction of government. At the same time, the amount of federal spending devoted to long-term strategic economic investment has fallen. Americans. The “neo” refers to neoliberalism, a movement that took shape in the 70s and 80s and preached a return to a purer, less-regulated, less organized laissez faire market capitalism. That’s the intellectual culprit in my estimation.

        Thanks Dan,

        I see where you are coming from, although I’m not sure I agree. Historical data suggests that more people as percentage of total are on welfare, disability or some other type of government assistance than 30/40 years ago. And both parties have actually helped grow the dependence in government. The de-regulation you refer to I think only applies to the banking system, all else is more regulated, especially when you look at the things that make more difference. For instance, medicine – try going out and finding the price for any service across providers (good luck). In any other industry this would result in fraud and jail time, in the medical industry – it’s all good thanks to the government jacks.

        There is no laissez faire capitalism and more less so in the EU, that’s probably why we see things so differently. The Europeans are so socialists biased that US lefties look right wing in their view. I would argue that the US is the world’s only super power, and will likely remain so because of it’s a more free capital market leaning system. And given the issues we see with the shutdown, it is very unlikely that the US will suddenly turn to EU style socialism. I predict that if anything, Libertarianism will actually become more prevalent. Just like the “right wing” parties in France, Italy and Greece are making head wind as of late. That should be enough proof that socialism has not and will never work.

        The main issue in the US and the world is the enablers of fraud, Fractional Reserve Banking (as Beard would say) which allows for credit to be created out of thin air and allows the already wealthy and the banks to become more wealthier. FRL is the enabler of fraud within our government, within the medical industry and even within welfare and disability type programs. My solution tends to be a bit different than Beards, as he sees what has happened in the last centuries as a requirement for restitution, I don’t disagree, I just don’t think there is a way to refund. Who do you appropriate funds from and who do you give to? Based on what analysis and data? In one simple word, NO….

        In my view there has to be more than “good intent” from our leaders to be able to fix these issues. When was the last time you saw a politician with good intent, and not an intent to give something to gain votes? Not that there are no men/women without good intents, but power has a tendency to corrupt. I actually think many of our leaders have good intent, they just fail to see the underlying repercussions their policies have.

        Federal spending is enabled by FRL and although I’m sure there was always a good intent to it, it’s purpose is not to help people (these people are barely making ends meet), but as another subsidy that removes purchasing power from the middle class and into the hands of the already wealthy, i.e. Walmart. Is it the poor being helped or the wealthy? There are various good things the government has achieved for instance, our infrastructure (which is now in dire shape). And I’m sure the government can have a repeat and rebuild it once again, but not until we stop the thuggery from unions which makes it TOO costly to even try, unless you double taxes on the already destroyed tax payer.

        Only when we adopt a system that by design creates a barrier to fraud (medicine, unions, military), will we see a better more fare system. And the barrier by the way cannot be enforced by men…

        1. Banger

          Au, contraire, social democracy as practiced in the U.S., more or less, since FDR and in Europe post WWII has worked very well. The factors contributing to the Euro-crisis are part political and part a result of various scams, cons and frauds perpetuated by the criminal gangs on Wall Street. Most of the civilized world uses social democratic ideas, i.e., even hyper capitalist places like Singapore have “socialized” medicine. Why do they do that? Because guaranteeing medical care and regulating the market (when there is one) as public utilities is the only proven way to hold down costs. A society populated by people who don’t get basic health care that even third-world nations provide cannot remain a happy place to live. The right wing idea that the weak should just die-off is a subject which is beyond this discussion but it is an important moral issues. We can argue whether medical profession is too monopolistic (it is) but note that it is the U.S. system that has encouraged expensive drugs, operations, tests, and “heroic” procedures and has been hostile to alternatives..

          It is hard to argue with libertarians about markets, and I assume you are in that neighborhood of belief, because they believe in the “free market” something that does not and cannot exist. All markets have to have a context and that context is always political–no exceptions. So appeals to imaginary objects means nothing. The current system of markets is highly regulated, as you say, in favor of monopoly capitalists. If you are large enough or come together with others in the same industry you go to Washington and bribe, threaten, bamboozle your way to writing legislation that fulfills your interest and makes sure the playing field is tilted in your direction. When progressive politics had some strength regs were written more equitably as they were in Europe.

          You are right, however, about the future. It belongs to libertarians at least in the U.S. (not anywhere else in the developed world). Personally, I think that the left has no choice, at this time, but to support the libertarian right in its effort to limit government since it is becoming more toxic thanks to efforts on the right to debilitate it going back to Reagan and with Democrats joining in to ruin and corrupt government. But libertarians who are critiquing Empire and crony capitalism which have both contributed to destroy social democracy and institute criminality at both the corporate level (by not enforcing laws) and government.

          We are at time when everything is collapsing and we need some sort of direction. Above all, we need a period of more freedom, more experimentation, less regulation, more transparency, more coming together and establishing real communities rather than staying in our houses and watching “entertainment.” We need more parties not just political parties but parties. We need to be less fearful and more knowledgeable so we aren’t easily deceived by advertisers or stampeded into war through phony threats. The left will be able to revive once it has political “room” to live in. One of the people, btw, who is mainly a libertarian is Jesse Ventura and his views could bring alienated elements of the left and the libertarian right together.

        2. Banger

          I made a comment earlier but it didn’t show up. So I’ll be brief here. Social democracy has been very successful around the world and is the default system in the developed world. For example, health-care is considered a utility in all other developed countries and is regulated as a utility or, less frequently is nationalized. You know why? It works. The system we use is not just inefficient but is the worst in the world as a system because it is filled with corruption and banditry.

          Due to relentless propaganda by the oligarchical corporate interests that dominate public life in this country, moving after decades of retrenchment, towards social democracy is just not in the cards anytime soon. Libertarian ideas seem to be the most likely to take hold in this country–but only in this country. Certainly in Europe there is is plenty of room to loosen up their regulations but they’ll never go for a U.S. style welfare for the rich, a permanent underclass, a scared and compliant middle class and a rigid class structure.

          1. Dan Kervick

            A lot of the propaganda against the “debt” issue is really a war on social democracy. Look at Japan: a very successful society that has much less inequality than the US and uses formal government debt obligations to its citizens to redistribute the society’s wealth. Last I heard, somewhere around 95% of public debt in Japan is owed to other Japanese – so the Japanese public debt service just moves income from some Japanese bank accounts to others. Economists and policy makers in the US thus seem totally obsessed about Japan and its debt. The reason is that it is a model they are worried Americans might discover.

          2. Bapoy


            If I was wealthy and rich, I’d lobby for anything that would allow me to create a monopoly. The US has a monopoly medical system, created by your own government. Try price discovery and you will see what you get. There is no “market” when it comes to medicine.

            You think the rich are the ones against Obamacare? Again, if you were rich, would you prefer to have competition or would rather have a system in which your income was guaranteed by government contracts and a system that restricts providers?

            This system appears to be working in Canada, but then again, why are Canadians paying 50% more for gas when they are an oil producing country? And why are Europeans paying double?

            I think they are paying for their “efficient” healthcare and are oblivious to the fact. Free market competition is what works for the poor and the middle class, monopolies are a creation of the government and benefits those with power, the rich.

            1. Banger

              Most developed countries outside the U.S. believe carbon-based fuels need high taxes to decrease pollution and stimulate a higher level of technology and efficiency and what I call elegant engineering.

              As for monopolies–I agree the whole enterprise of lobbying in Washington is to enhance the monopolistic system in nearly all areas of life. Obamacare is just another method to ensconce the criminally minded medical industry to keep costs high. The virtue of Obamacare is that it presents some of the population with insurance they couldn’t get either because they lack income of because they have conditions that insurers won’t insure. My own wife was kicked off her insurance because she experienced a traumatic shock and had to take anti-depressants. In America if you have a problem, if you suffer and are in pain the system wants you to suffer even more so you will die early. You have to understand, if you don’t live in the USA, that the insurance companies are run by the scum of the earth who want to skin all of us alive if it assures their execs a slightly better class of mistress.

        3. LucyLulu

          >>”That should be enough proof that socialism has not and will never work”

          That depends on the criteria used to decide if an economy is “working”. Does it work if it has a military larger than the next 12 combined, and can thus impose it’s policy’s abroad? Is it working if it has the highest standard of living as the “socialist” Scandinavian countries do? Or the highest per capita incomes as “socialist” Switzerland does? Where does social mobility, wealth inequality, levels of poverty, health of population, homicide rates, rates of mental illness and incarceration all fit in? The US doesn’t do well on any of these criteria. It is a great place for those who are wealthy and looking for low taxation, low levels of social responsibility, and strong influence on public policy, which have a strong bearing on the preceding problems faced by those not members of the elite.

          In addition, I would question your assumptions about welfare causing dependency as opposed to poverty. Scandinavian and western European countries have stronger social safety nets than here in this country yet don’t suffer the same welfare “dependency” issues. If I have a job making $80,000/year and a novel idea for a new enterprise, will I quit my job and risk entrepreneurship if failure will mean economic devastation for myself and my children? Why do few manage to climb out of poverty while those whose parents are members of the upper class also end up in the upper class? Are only the rich smart and talented, or is the deck stacked?

          BTW, re: Detroit. Over a period of 30 years or so, the more affluent whites moved to the suburbs while blacks remained in the city. Money for infrastructure and new development also migrated beyond city limits, further inflating suburban property values while deflating the city’s tax base. This further added to white and middle upper class flight out of the city, especially in pursuit of the better school districts offered. Detroit today looks like a war zone but a short drive away one finds affluent neighborhoods such as Farmington Hills. The source of Detroit’s financial difficulties are multi-faceted but can’t be understood without taking the gutting of its tax base into account, which was largely the result of a long-term deliberate and planned process that invested her revenues outside city limits. To one degree or another, this was repeated in all of our major cities, but comhined with the collapse of the auto industry, corruption by city officials, and the state withholding money owed, Detroit was pushed over the edge.

          Imagine a “socialist” country allowing a major city such as Liverpool or Rotterdam to go bankrupt…. Only in the US….. And do states need to be granted the right to bankruptcy if their unprofitable cities can be looted by creditors and liabilities settled for pennies on the dollar?

          1. Bapoy


            People don’t react to socialism in the same way, but I disagree that it doesn’t create dependency. It’s not only about welfare, there are other issues. With jobs moving overseas, the US has slowly lost various skills required for manufacturing for instance. At the moment, it would take the US years to rebuild the infrastructure and re-train people should this be required, while China is already humming.

            I also don’t think the negative of socialism are immediate, but I do think that you will see them over time. Alot of the outcomes depend on the actions taken by the government. For instance, Switzerland is looking at this 1:12 law that may just break the camels back. Perhaps the global thieves that park their stolen wealth in Switzerland won’t care about the devaluation of their theft, perhaps they do. I’m sure there are many other countries waiting for FDI and would gladly open their doors.

            Regards Detroit – why should tax payers in Delaware, Alabama and the other host of states which had nothing to do with Detroit fork their savings to bailout a city that will soon be in the same issue anyway. Detroit has gotten what they themselves sought. And the issue was not the whites moving away to the burbs, the issue was the unions who went to bed with politicians and ransacked the city’s funds and more. When funds ran out, they went after loans. Did a hollowed city need so many services? I bet over half the workers were surfing the net and still got million dollar pensions?

            So you propose that the government be embarrassed about letting the thugs of Detroit fail, but not embarrassed about screwing the tax payer… To what depths have we fallen…

        4. Dan Kervick

          Historical data suggests that more people as percentage of total are on welfare, disability or some other type of government assistance than 30/40 years ago.

          That’s true, but I would say that indicates an absence of progressive change, Bapoy, not its triumph. I sometimes call that mainstream center-left phenomenon “charity state liberalism” – the idea that we shouldn’t work to change the basic structure of society, eliminate economic inequality, produce genuine full employment or integrate all citizens into a real functioning democratic polity, but should keep the basic structure of neoliberal capitalist society intact and through some alms, crumbs and food stamps at the lower orders to buy their passivity and obedience, and keep them right where they are. If this is social “progress” its lame, bastard kind of progress.

          1. Spring Texan

            Right on, that’s exactly what happened. Such as a local progressive think tank that would put out advocacy for a “family security portfolio”. The idea was that basic living standards required a certain amount of money and that since wage labor didn’t support that, laws needed to be passed to provide tax breaks and benefits to bring up the amount to a tolerable minimum.

            It’s back-assward, but it’s what has passed for progressivism for a long time (and it’s why I call myself a liberal, not a progressive).

            “The laborer is worthy of his hire.” is the principle lacking in this and the belief that ordinary workers really do contribute rather than needing “welfare.”

            But of course it’s better than wanting people to work ceaselessly and NOT have a minimum standard of living, sigh.

        5. LucyLulu

          >>” but not until we stop the thuggery from unions which makes it TOO costly to even try, unless you double taxes on the already destroyed tax payer.”

          Really? Union thuggery?

          Membership in unions is at a 97 year low per BLS, 11.3% in 2012. Private sector membership fell to 6.6%. Peak membership was 35% in the 1950’s, during a high investment rate in infrastructure. Membership has declined steadily since. Howard Roark’s been driving them out of town.


          1. Bapoy


            I did neglect to mention another issue aside from unions. I suggest a follow up on Davis Bacon and specifically prevailing wage laws. Yes, it is too expensive to build anything these days thanks to these wage laws which benefits a small pie of the population at the expense of the majority.

            While public unions strive to get the least done for the most costs, the government should strive to get the most done for the least cost. And the last time I checked, it is the government that makes the laws, not the unions.

        6. Gary G

          I agree with all your sentiments and analysis about fraud except for one important point.

          Fractional Reserve Banking is a MYTH.

          Reserves are not a source of loans at all, not even the mythical 10%-90% thing. Banks essentially do SWAPS of assets which are simultaneiously debts, contractual agreements, with credit customers.

          Customer signs a loan debt repayment agreement, which is an asset to bank and a liablity to the counter-party. Bank creates a deposit account, which is an asset to the account holder customer (usually moved to acct of designee, car seller house seller etc). The account is a liability of the counter-party bank, an IOU to the customer. So a swap of IOUs occurred.

          Reserves aren’t part of the story. Reserves are like the petty cash box that banks use for overnight check clearing operations, and banks lend overnight reserves to other banks for after-hours clearing.

          A bank looks back TWO WEEKS in arrears at past lending to determine if their reserve acct is too big or too small, and have two more weeks to adjust accordingly. With four weeks in arrears to make good on reserve acct balance, more proof that reserves are not the source of loans.

          Loans create deposits which adds to the total reserves in the inter-connected system.

          The issue for regulators is the bank’s RISK vs their actual capital base, how far they leverage, and how much capital they have to cover potential losses. This also depends on how they figure their Risk levels. If they claim that securitization of soon-to-become-toxic mortgage loans into a large pool eliminates risk, and regulators and ratings agencies buy that story, then banks are allowed stretch their risk and profits that much farther — at least short-term profits.

          When systemic risk blows up, when asset (housing) prices peak and can’t go farther and assets start to crumble as late-pays and no-pays grow, if the bank had the audacity and ability to pawn off “safe” mtg securities as ultra-safe AAA investments to boring, inept, or criminal pension fund and 401K manageres, and pawn off the rest on the Treasury or Fed, they got short-term mega-profits for virtually zero short-term risk dialed in, coupled with long-term catastrophic losses that are someone else’s problem.

          THAT is the issue — William Black, and citing Akerloff and Romer’s book: Looting – Bankruptcy for Profit.

          If the Fed buys that $10 M est value security for say $100 M, then that IS essentially “printing money” at least shoring up banks’ capital base by giving them more money than the Market would have … not that that $100 M has any pathway to trickle out into JOBS that pay the rent or gas bill.

      2. susan the other

        Agree completely. The danger of Yellen telling congress to stop making the Fed a scapegoat is that congress will take action. God forbid because we will have more of the same. We need a way to get the Fed to cooperate with the states, directly, by buying munis, or doing some revenue sharing (however that works) or some other grassroots money mechanism to start the economy up by specifically local and effective projects.

        1. Bapoy


          You know who really pays for these munis and the fraud that was rampant in Detroit for instance? Go check the living conditions of Detroins… High taxes, high prices, no jobs, the city is falling apart. All the while the Detroit ex-union members and public workers bask in the Florida sun (not even paying taxes in their old Detroit).

          Nobody thinks about how their actions have a negative effect on the same people they are “supposedly” trying to help. I get the sense that it’s not for the poor people that all this is being done. Perhaps I’m wrong.

          1. susan the other

            I’m thinking we are doing our economy backwards. It’s true Detroit is a mess – but it has lost half – a full half – of its population in the last 30 years. In that time jobs have been outsourced to Asia, and naturally people migrated. So obligations were agreed to in a more balanced time. The real problem was caused by the off-shoring of American jobs – not City Hall. We should start our calculations with the necessity for a retirement fund, which is protected by several layers of legislation, from there we can estimate what a good living wage is, which provides for things like education and health care extras, good food and housing, transportation etc. From that we need to figure the income tax and add it on. So cities with good transportation services can afford to pay less, for instance. Detroit was ransacked just like the rest of America. And now, in good capitalist fashion, it is being ransacked again.

            1. Bapoy

              Off-shoring is not an issue if you think about it a bit. Corporations have always moved from place to place, perhaps not outside of the country, but definitely within the country.

              The question is why are the corporations leaving and what can be done to prevent that. I think we all know what makes them leave, costs relative to other locations. If the costs can be highly reduced from another location, the corporation will move. So what makes costs go up? You tell me, could it be higher taxes? Or what about higher labor costs (unions)? Unfortunately, it is city hall making them leave.

              The other question is why are these corporations moving to other countries. Again the same concept, it’s the costs but there is more to consider. If a country decides to trade with another, nothing says the country should only buy while the other should only sell. How about we buy from China and China buys from us? But you see, nobody wants the second option because that means forcing China to settle with the US. And a fiat system does not enforce settlement.

              So there is your answer, we want our government to continue spending, our government does so and by doing so it does not enforce settlement, by not enforcing settlement we continuously run a deficit and corporations have a motive to move their operations overseas as there is NO external demand (China) for US products. And the last time I checked, the majority of people WANT more government spending. So technically, you don’t want the jobs to come back.

              If you want jobs, you need to face the music. The government spending must stop and the US must go on a system that enforces settlement.

              1. different clue

                Bussiness didn’t begin the export of multi-millions of jobs until various Free Trade laws and agreements like NAFTA, MFN for China, etc. were passed and signed.
                If we are forced to FreeTrade with foreign companies which can achieve lower costs based on slave-wage pay, zero environmental or safety regulation, secret-police assassination of every effort to unionise, then naturally our higher-cost production will go out of bussiness competing with the lower cost production unbalanced by any tariff or regulation to balance the unbalanced cost. That’s why the upper class sought Free Trade to begin with, to make Americans as poor and powerless and the victims living in the economic aggression platforms which the upper classes moved all the production to.
                The answer would be to abrogate and withdraw from every Free Trade Agreement and impose enough tariffs and regulations against products from the foreign-based economic aggression platforms so that the foreign economic aggression products would cost just as much to American end-buyers as the domestic economic patriotism products cost. Having Forced Fair Trade would be simple protectionism for the economy just as having an Army, Navy,
                Air Force, and Marines is simple protectionism for America’s physical territory and the natural persons on that territory.
                The Forced Parity economists at Acres USA and elsewhere have offered a more sophisticated approach which they call
                Equity of Trade. All tariffs imposed against cheaper priced production coming in from the foreign-based economic aggression platforms would be held in government accounts which every country sending tariffed goods into America would be allowed to spend on goods from America back into that country. None of the raised tariff money under this concept would be used for any government operations. It would all be held for spending by the exporting country on American goods from here back to the exporting country.
                Did I not explain it well enough? Well there are people at Acres USA and the National Organization for Raw Materials and other such places who could explain it better then.

              2. Bapoy


                If you increase taxes and abolish the trade agreements, will costs be cheaper here than overseas? I suggest not and by doing so you will be impacting the same folks you want are supposed to be defending. If items are expensive to the poor and middle class now, I don’t even want to think what would happen if you restrict the supply of those goods for the sake of “jobs”. You do not want to increase tariffs or impact the supply chain. People are barely making it as it is, impact the supply chain and you will wreck havoc.

                The off-shoring began much earlier, in the 1970s, especially after the gold standard was removed. Instead, what you want is settlement between nations, meaning, you want China to buy from US producers just like we buy from theirs. Makes sense?

                However, to have settlement, you need a currency that cannot be easily inflated by your government, something like gold.

                1. 1 kings

                  A-freaking-men! different clue. It all started with the so called ‘Free’ trade laws, selling us out to make a buck. Pretty much as simple as that.

                  And bapoy’s arguing after the fact that returning our old trade laws would hurt the poor is the oldest one in the book. ‘Pay not attention to the blah..blah..blah in the corner. Nothing we actually did in the past has any bearing on what goes on today.’ Please.

                  One question bapoy: ‘Does China have trade laws vs. US?’, you bet your sweet a.. they do. And to omit that fact borders on revealing the paid shill you probably are.

                  1. Bapoy


                    Be honest, you really think these jobs would come back if we increased tariffs or killed the free trade agreements on Chinese goods?

                    Here is what I think would happen, factories would move to other countries. And if China is still profitable, they will remain in China. See, China is no longer the unwelcoming communist country it was before the 1980s.

                    But I can see what is happening here. I sense that the majority of you answering me probably grew/worked up when these industries were prevalent in the US. And to you, these industries belong here. But then again, some felt the same way about the horse buggies. My advise, let it go already, the world will force us to adopt the next new thing and line of work.

                    The US was the manufacturing center of the world in the early 1900s, today, the US and the world are moving to a value add model, i.e. Apple. The manufacturing days are over, the value add days are ahead of us. The more we fight it off, the more we hold back innovation and the worst we will be (and that’s exactly what everyone is doing). It’s coming whether you are ready or not.

                  2. AbyNormal

                    yeah let it go King…corrupting patent laws and stacking free trades to value the 1% is the future orgasm(s) of the bapoys

                    1. Bapoy


                      Right, the 1% is the one benefited from cheaper prices. As if prices were an obstacle to them. Isn’t prices what the rich want to manipulate by lobbying for monopolies which kills off their competition?

                      Here is what the rich will do with your tariff. They will pass the additional costs to you and the rest of us and the jobs will not come back anyway.

                      I am in the middle, not the top of the income scale and I do not buy this 1% propaganda. After all, even with all the majority of the wealth, how many plates of food can the wealthy eat a day (probably less than what me and you eat)? How many cars can they own (I’m sure a few nice ones, but nonetheless we have cars just like them too)? How many homes can they own (probably 1 main and vacation home, we have 1)? How much more clothing can they buy and wear (the poor actually dress better than me)?

                      This 1% non-sense falls flat on it’s face? The ones competing for these goods and services are us, the poor and the middle class. If it’s demand that impacts prices, than by having their wealth stored away in Switzerland, how much does that impact your prices? Not much, that’s what…..

              3. Gary G

                This is so ridiculous. OF COURSE trade btw US and China is settled. Corps buy and pay. There’s nothing not settled.

                America is an advanced developed economy with prices and wages that rose over time. China is where America was at in 1920, re labor costs, housing costs, prices, etc. Labor is almost 20 times cheaper.

                Americans could not work for China’s current labor rates with America’s current prices. Americans could not survive on $25 or $50 per week. That was good at an earlier time of progress. (China also intends to develop a larger domestic middle class and allow wages to rise gradually.)

                There is ONE place America’s wages can match China’s wages. In prisons, which are run by Govt Spending. Prisoners can be paid as little as 18¢ or so. The are fed and housed by Govt spending, so prison is a competitive labor mkt.

                If all Americans agreed to live in Govt Run prisons or prison camps, then America could have a competitive labor pool.

                Most American labor DOES NOT work in Unions since Labor Unions were devastated in the 80s with Paul Volker pushing interest rates up to 22% to “wring inflation out of the economy” by destroying 55,000 businesses and countless good-paying jobs. Furthur globalization continued. The remaining Union jobs have taken harsh pay cuts and layoffs anyhow, and remaining Union jobs are largely public sector.

                There are still POWERFUL Unions in the USA — Unions of Corporate Capitalists, called business lobby groups, many which began forming in the early 70s as labor declined. Business Roundtable, Trilateral Commission, countless others. It is “politically acceptable” for big capitalists to form Unions to stick together and fight for THEIR interests, even “go on strike” if their demands are not met.

                Instead of business lobby pushing for cheaper competitive prices for housing and energy and such, business lobby pushed for finance regulation policies that allowed them to rapidly inflate housing and energy prices with cheap credit, and continue to look to inflating housing and energy prices, such that banks will start lending into a Bubble, as the ONLY possible economic recovery plan — an unsustainable serial Bubble economy is what business wants.

                Barack Obama and Harry Reid offered a CORP TAX CUT for domestic companies that hire US workers. This TAX CUT was fought vehemently by the U.S. Chamber of Commerce and other major business lobby groups, because it would give their largest member — transnational corporations — less of an advantage over domestic-only members. Republicans killed the Tax Cut idea.

                Nixon met with Chairman Mao specifically because Wall St wanted CEOs to move labor to China but CEOs could not do so because China’s Communist govt might confiscate factories. Nixon opened the door to secure property rights for US corps in China.

                This is the stupidest most incoherent Right Wing sarcasm I’ve heard in ages.

                It’s Econ 101 that it’s an overall GAIN for America to be trading it’s modern money for cheaper foreign imports, but the overall GAIN of Govt “Free Trade” policies is not shared equally by all Americans, who pay 2013 prices to US retailers while earning 1973 incomes. If unemployment and weak social welfare subsidies like $200 food stamps are averaged in, American wages are LESS than 1973, while cartel prices mostly continue to rise …. there’s huge social Gaps created by these policies.

                There’s some possiblities for Americans to purchase at similar prices to what US corporations pay in China, by ordering on Ebay directly from China, or flying to China, India, etc. for medical care.

                Economics is not run for the well-being of the entire country — Wealth of Nations — but for the “efficiency” of certain corporate practices. This is what the neoliberal “race to the bottom” is all about, but very recently huge sectors of American business are finally feeling the pain in the wake of the Great Financial Collapse, as credit markets for American business and consumption has dried up.

                MMT has sound answers to these issues, but the Post-Keynesian answers are like swear words to US govt officials, to many economists, to many top businessmen, to much of American ideology which remains vehmently and angrily opposed to such solutions, and is functionally incapable of fully understanding MMT from within the Neoclassical Econ paradigm.

  6. Benedict@Large

    While Kervick is correct; only fiscal policy can end the recession, it won’t matter if Yellen turns blue in the face telling Congress. You see, buried in every single speech Bernanke has ever made as Fed chair that has Congress as part of its audience, Ben has told them this very thing. Congress isn’t listening and won’t listen as long as power itself is more important to the right wing than what they do with it.

    1. LucyLulu

      Agreed. I’ve heard Bernanke repeatedly say that QE was being offered in the absence of the willingness of Congress to enact the more ideal alternative of fiscal stimulus. The austerity faction doesn’t respond to counter-arguments against its effectiveness. They are convinced that government is like a household and profligate spending must be reined in.

      (If only my household could print money…….)

      1. davidgmills

        If your household could print money you would not have any debt and you would not need a source of income.

        Yet they can never see the solution — that our government need not be in debt and it need not tax in order to buy what it needs.

    2. Fiver

      You’re assuming Bernanke and Congress are being genuine – all Bernanke had to do was do nothing, and the ball was back in Congress’ court. The entire schmozzle has been from the beginning a means to pump enormous sums of money into banks and those banks’ networks of “friendlies” as in big institutional money and big speculators. It absolutely was Bernanke’s duty to say “not mine to deal with”.

    3. Dan Kervick

      Yes, I agree. Bernanke has done that constantly. On the other hand he uses very diplomatic language criticizing fiscal “headwinds” and “uncertainty.” That leaves it open whether he is criticizing a lack of fiscal activism, or just criticizing the failure to come up with a budget deal. When he has appeared in looser forums expressing his own opinion, it seems pretty clear that he means something closer to the former. But in the official Fed statements he is constrained to give a consensus opinion, and I think he has been too vague as a result. Maybe the change to Yellen will create the opportunity for her to set the agenda with a big, initial policy speech. But who knows where she will go.

    4. Gary G

      You are absolutely correct, and this is what Dan is stating.

      The title of the article indicates that Fed MONETARY policies tweaking interest rates in the hope that banks will begin to lend and SOME will trickle down, cannot work.

      He says the Fed should tell Congress to carry the ball, which means FISCAL solutions instead of Monetary.

  7. Hugh

    I think we should all ask Yellen for a pony. There should always be a pony. I mean why not? We are as likely to get a pony from Yellen as we are policies that help those of us in the 99%.

    The Fed as private banking cartel is a major engine of kleptocracy. It has suppressed workers’ wages for 35 years through its interest rate policies. So all the gains from increased productivity over this period have gone to the rentier rich, resulting in massive transfers of wealth from workers to the rich.

    Yellen has been an integral part of this looting. That is how she got to be number two at the Fed and now in position to become number one. Does anyone seriously think because she sheds a few crocodile tears over workers anything is going to change? Expecting real change from Yellen is about as likely as expecting change we can believe in from Obama, or a pony. Like I said, there should always be a pony.

    1. Fiver

      Right you are, Hugh. I cannot understand how otherwise intelligent people have not yet apprehended that there isn’t anyone with integrity within miles of a position of real power. If the evidence documented to date is not sufficient, we’ve devolved to a state prior to the Age of Enlightenment.

    2. anon y'mouse

      Hugh, you will have to keep my pony for me, lest i and my class be forced to ask for a ranch to put it on as well, or at least stable/oats subsidies.

      then we’d be run by the Quaker Oats people. whose past involvement in feeding radiation to institutionalized children in human experiments really puts me off my oats.

  8. LucyLulu

    Agreed. Yellen will bring more of the same.

    It’s not just workers either. I am a baby-boomer retiree who was a “responsible saver” of the type once touted. Skipped the big annual vacations and fancy new cars to sock money away for a retirement that I never trusted SS to subsidize. I failed to predict ZIRP through infinity though, not that it would have made much difference. I’m getting killed. While I never anticipated the life of luxury, my care-free comfortable (upper middle class lifestyle) retirement I sacrificed and hoped for has gone. Yet I can’t complain because while my SS check is modest, having become disabled by 37 with a spinal cord injury, my savings exceed the vast majority with an income that allows my continued modest lifestyle…… at least until medical problems begin to escalate as doctors have predicted.

    I’m far from alone. Many babyboomers are being equally affected by ZIRP on the one hand, while public benefits are being squeezed and pensions challenged on the other hand. Every generation is being crushed in one way or another. If banks are obtaining reserves at little more than 0% and Treasuries pay 3% at most, why are non-dischargeable grad student loans issued at 8%, and some as much as 4 points origination? Perhaps a mutually beneficial arrangement between the two age groups?

  9. kevinearick

    Open & Closed

    If you take another look at your empire issued History, especially the resource atlases over time, what you see is an ebb and flow between agrarian and urban migration. Like all circuits, the snapshots are net flow. It’s like rotation cropping. The resulting breeding patterns are derivative. The urban bubbles get bigger, more complex and more corrupt with each cycle, until they blow up.

    The Internet is several derivative iterations down the development chain from its integral predecessors, all promise now and no delivery. Like Facebook, and all other legacy ponzi schemes, legacy capital seeks incremental derivation, roll out the minimum ‘improvement’ required to get Apple holders to throw away their old phones and buy the updates. Now you don’t really think that the folks that built the integrals simply turned off their brains and followed the herd downstream through the pipeline to the killing field do you?

    Labor concerns itself with time, capital concerns itself with property and middle class concerns itself with income, to buy…I develop and write for labor. If you are not serious about getting married and raising children as the means to building wealth, I don’t write for you, but there are things you can find useful just the same. (Sometimes I wonder why the majority doesn’t just plead to filter out my posts.)

    For example, buy and hold loses, less quickly than buy and sell with the herd. Recycling silver is much more ‘profitable’ than buying and holding gold due to herd volatility, the leverage available in many more feedback loops.

    If Yellen untapers, leverage will increase, real estate will inflate and associated labor will deflate, accelerating income inequality, measured or not. If she continues, income inequality will continue to rise, but at a slower pace. If she tapers, real estate will fall for those with ‘uncovered’ positions. If the Fed mandate is price stability, what happened to real estate? If the Fed mandate is full employment, why is the output between human potential and human actual so great?

    The State of CA and its clones have physically placed generation in the back of the stupid line, yet power generation distribution is well on its way, albeit with archaic generators, to the point where the utilities now find it compelling to follow. The corporation has no idea what is actually going on; it simply sees all kinds of leakage from its models in the direction of distributed generation. At threshold, those generators will be replaced, and like the typewriter and the buggy, a big chunk of the middle class will be swept into the black hole.

    I prototype just far enough to see the integral, set that prototype on the shelf, work ahead another prototype, put that prototype on the shelf and give the second derivative to capital. By the time capital figures out what to do with the derivatives and implements them, I am two bridges ahead, because I do not need anything the empire is selling.

    The keeper on the spring to the switch is going to snap, the switch is going to temporarily make, passing current forward and backward. labor has no interest in any nation/state strategy. Do as you like with the information. Where do you want to be?

  10. Fiver

    Had Bernanke been even remotely honest, he’d have tossed the entire thing back to Congress and the Admin at the outset. At a minimum, QE would’ve ended after the first mammoth round. But of course, we already knew he wasn’t honest at the time – nor were Obama, Geithner, Dimon, Blankfein, Yellen or anyone else party to the greatest heist in human history, i.e., the trillions and trillions of dollars Hoovered up by the criminal class running the show, in broad daylight, cheered on by joke media and an embarrassingly ignorant collection of economists. But not only did he not kick the ball straight back at the politicos, rather he/they have played an incredibly lucrative game of triangular finger-pointing for 5 fucking years.

    Yellen, if she had any class at all, would dump the economy back onto the Admin and Congress. But she won’t, because the Fed’s printing is precisely what has allowed Congress and the Admin to become so wildly irresponsible. They’ve all convinced themselves that the Fed really can control the economy, no matter if Congress and the Admin all gather together to piss on any remaining sparks of real, creative activity.

    Enormous sums of money have been made under Obama and Bernanke. The “market” action over the past several weeks has already generated huge profits for those closest to the info regarding the next “move” by one or other of these clowns. And tonight we hear how the “optimism” may be draining away, thus setting up for the next move up or down.

    This of course all smacks of “conspiracy theory” or what have you. Well, that’s fine by me. We seem to have become so used to gigantic numbers that we forget that a billion dollars is beyond the comprehension of most people, that a lot of greedy paws get greased with just One Billion. How many people can be bought for just One? How about when we’re talking Ten Bill? How about Fifty? Even if settled tomorrow, the haul is fabulous.

    I, for one, do not expect anything major out of this “deal” whenever it comes, and I note that the latest chatter envisions yet another round of this debt ceiling extortion stupidity before the mid-terms. How dramatic is that?

    Meanwhile, the “deep” Government is actively planning for a showdown with China, the imperial absorption implicit in TPP, the imperial carve-up of Africa, another big round of terror in the name of the “war on terror” and doubtless a war on activists of all stripes, the Internet variety front and centre.

    And another 5 years of crucial time completely wasted as we march towards the rapidly closing window of our very survival. This isn’t about being inept, or mistaken or even reckless – this is about an entire civilization captured by the singular drive for power. We have no more than 20 years to completely transform the entire global economy. I rather suspect Yellen just ain’t gonna do it for us.

    1. Doug Terpstra

      Accurate dire perspective, Fiver. It’s hard to comprehend the narcosis that fuels such greed and powerlust, but it’s important to expose it openly. The idea that the “elite” monsters running the world are misguided or mistaken, not malevolent, has to be loudly and clearly debunked. And we shouldn’t shrink from the conspiracy word. Whenever these monsters meet, in Jackson Hole, Davos, DC, Brussels, and wherever TPP is now being hatched, we must assume conspiracy. Their next venue should be the Hague, with no control of the agenda.

  11. skippy

    The funny thing – is – in a few decades all of this anguish over societal construct is going to be a moot point, as the BSDs can ride the wave ahead of the chattel, hell that’s their only impetus in life. Neoliberalism is just the embodiment – worship of that act, run faster that all the others.

    skippy… the more we run the planet as a business concern, the sooner we will observe the result of that activity and the priests are always the driving force to that end, so it was written thingy.

    1. Bapoy

      I’ve never seen a man be as productive as a man needing to feed himself. Since when is requiring to feed oneself a “business” need?

      You know… if one day I need help from anyone else, I will humbly ask for one while keeping my head high. And I don’t think I’d dare put forth terms, especially when I’m the one being helped.

  12. TC

    “The most important thing Janet Yellen could do upon assuming her new position at the Board of Governors, if she really cares about growing the economy and creating jobs, is to march right over to some live Congressional hearing and publicly lambaste both Congress and the White House, in the most strident terms becoming her position, for spending five years doing a criminally crappy job on our economy, and for smothering US growth, well-being and national development under the wet blanket of debt hysteria. Really, Congressional Republicans, Congressional Democrats, Obama … for shame!!!!”

    She need not march to Congress for that. The Confetti Fed has shown it is able to create out of thin air credit to backstop hopelessly insolvent money center banks, this to the tune of 10s of trillions of dollars. The same act of credit creation could be used to buy the bonds of states and municipalities whose proceeds are dedicated to infrastructure projects. These bonds need not pay interest and can be of duration up to a century.

    Going this route of employing “creative finance” as you call it (better call it the Hamiltonian makeover) the Fed’s employment mandate will be met in a mere matter of months.

    If she still wants to march over to Congress, she can tell the jellyfish that, the secret to making federal debt manageable is the same as the secret to finding who in the U.S. is animating al Qaeda: follow the money. Wall Street pays no tax on transactions totaling over $1 trillion per day. A 1% sales tax will do wonders for revenues at all levels of government, assuming a 50-50 split between federal and state.

    1. Doug Terpstra

      Right TC, and your implicit point is that none among the “elite” is remotely interested in justice. There are many effective supply-side solutions. Neither yours nor Kervick’s solutions will see daylight, dare I say it?, due to a criminal conspiracy.

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