How Media Amnesia Has Trapped Us in a Neoliberal Groundhog Day

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Yves here. I’m sure readers could write a US version of this timeline…despite the fact that we had a second crisis and bailout, that of way more foreclosures than were warranted, thanks to lousy incentives to mortgage servicers and lack of political will to intervene, and foreclosure fraud to cover up for chain of title failures.

By Laura Basu, a Marie Curie Research Fellow at Cardiff School of Journalism, Media and Culture. Originally published at openDemocracy

It hasn’t escaped many people’s attention that, a decade after the biggest economic crash of a generation, the economic model producing that meltdown has not exactly been laid to rest. The crisis in the NHS and the Carillion and Capital scandalsare testament to that. Sociologist Colin Crouch wrote a book in 2011 about the ‘strange non-death of neoliberalism’, arguing that the neoliberal model is centred on the needs of corporations and that corporate power actually intensified after the 2008 financial meltdown. This power has been maintained with the help of a robust ideology centred on free markets (though in reality markets are captured by corporations and are maintained by the state) and the superiority of the private sector over the public sector. It advocates privatisation, cuts in public spending, deregulation and tax cuts for businesses and high earners.

This ideology spread through the media from the 1980s, and the media have continued to play a key role in its persistence through a decade of political and economic turmoil since the 2008 crash. They have done this largely via an acute amnesia about the causes of the crisis, an amnesia that helped make policies like austerity, privatisation and corporate tax breaks appear as common sense responses to the problems.

This amnesia struck at dizzying speed. My research carried out at Cardiff University shows that in 2008 at the time of the banking collapse, the main explanations given for the problems were financial misconduct (‘greedy bankers’), systemic problems with the financial sector, and the faulty free-market model. These explanations were given across the media spectrum, with even the Telegraph and Sun complaining about a lack of regulation. Banking reform was advocated across the board.

Fast-forward to April 2009, barely 6 months after the announcement of a £500 billion bank bailout. A media hysteria was nowraging aroundBritain’sdeficit. While greedy bankers were still taking some of the blame, the systemic problems in finance and the problems with the free-market model had been forgotten. Instead, public profligacy had become the dominant explanation for the deficit. The timeline of the crisis was being erased and rewritten.

Correspondingly, financial and corporate regulation were forgotten. Instead, austerity became the star of the show, eclipsing all other possible solutions to the crisis. As a response to the deficit, austerity was mentioned 2.5 as many times as the next most covered policy-response option, which was raising taxes on the wealthy. Austerity was mentioned 18 times more frequently than tackling tax avoidance and evasion. Although coverage of austerity was polarized, no media outlet rejected it outright, and even the left-leaning press implicitly (and sometimes explicitly) backed ‘austerity lite’.

In 2010, the Conservative-Lib Dem government announced £99 billion in spending cuts and £29 billion in tax increases per year by 2014-15. Having made these ‘tough choices’, from 2011 the coalition wanted to focus attention away from austerity and towards growth (which was, oops, being stalled by austerity). To do this, they pursued a zealously ‘pro-business’ agenda, including privatisation, deregulation, cutting taxes for the highest earners, and cutting corporation tax in 2011, 2012, 2013, and in 2015 and 2016 under a Conservative government.

These measures were a ramped-up version of the kinds of reforms that had produced the crisis in the first place. This fact, however, was forgotten. These ‘pro-business’ moves were enthusiastically embraced by the media, far more so than austerity. Of the 5 outlets analysed (The BBC, Telegraph, Sun, Guardian and Mirror), only the Guardian rejected them more frequently than endorsing them.

The idea behind these policies is that what’s good for business is good for everyone. If businesses are handed more resources, freed from regulation and handed tax breaks, they will be encouraged to invest in the economy, creating jobs and growth. The rich are therefore ‘job creators’ and ‘wealth creators’.

This is despite the fact that these policies have an impressive fail rate. Business investment and productivity growth remain low, as corporations spend the savings not on training and innovation but on share buy-backs and shareholder dividends. According to the Financial Times, in 2014, the top 500 US companiesreturned 95 per cent of their profits to shareholders in dividends and buybacks. Meanwhile, inequality is spirallingand in the UK more than a million people are using food banks.

Poverty and inequality, meanwhile, attracted surprising little media attention. Of my sample of 1,133 media items, only 53 had a primary focus on living standards, poverty or inequality. This confirms other researchshowing a lack of media attention to these issues. Of these 53 items, the large majority were from the Guardian and Mirror. The coverage correctly identified austerity as a primary cause of these problems. However, deeper explanations were rare. Yet again, the link back to the 2008 bank meltdown wasn’t made, let alone the long-term causes of that meltdown. Not only that, the coverage failed even to identify the role of most of the policies pursued sincethe onset of the crisis in producing inequality – such as the bank bailouts, quantitative easing, and those ‘pro-business’ measures like corporation tax cuts and privatisation.

And so it seems we are living with a hyper-amnesia, in which it is increasingly difficult to reconstruct timelines and distinguish causes from effects. This amnesia has helped trap us in a neoliberal groundhog day. The political consensus around the free market model finally seems to be breaking. If we are to find a way out, we will need to have a lot more conversations about how to organise both our media systems and our economies.

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  1. Summer

    It depends. Do you believe the worst can be avoided or do you believe the world is already knee deep in all the things we’re told to be afraid will happen? There is a big difference between organizing for reform and organizing to break capture.

    1. makedoanmend

      ” Turning and turning in the widening gyre
      The falcon cannot hear the falconer;
      Things fall apart; the centre cannot hold;
      Mere anarchy is loosed upon the world,
      The blood-dimmed tide is loosed, and everywhere
      The ceremony of innocence is drowned;
      The best lack all conviction, while the worst
      Are full of passionate intensity.

      Surely some revelation is at hand;
      Surely the Second Coming is at hand…”

      W.B. Yeats

      I suppose we can take some succour from the fact that WWI (and the Spanish flu) seemed to be a harbinger of worse to come…but we’re still here…

      1. Doug

        The hyper-amnesia ground hog problem described in the post happens, in part, because the ‘centre continues to hold’. It demonstrates the center can, and does, hold. We don’t want the centre to hold. We want it to disappear and get replaced by policies and perspectives keen on an economy (and society) that works for all, not just some

        1. makedoanmend

          I know what you’re saying and I tend to agree. But the centre to Yeats (my interpretation, anyway) is that there is a cultural centre both apart from but also part of the social centre, and when that centre goes all hell breaks loose. Meaning of events becomes very confused or impossible to understand on many levels.

          Then, it’s often the little people (and don’t go making jokes about leprechauns) that get crushed in the confusion.

          1. neonoctafish

            The utter destruction of social cohesion and the constant state of atomisation which Thatcher cheerlead with her, ” No such thing as society” mantra has been the tool that has neoliberals’ wildest dreams. The MSM are now just the propaganda arm of the state. The merging of government and business (especially corporate) has effectively turned the UK into a fascist state.

        2. RepubAnon

          Rich people own the big media outlets. Large corporations buy most advertising. Why is it surprising that big media outlets blame something other than their owners or major revenue sources? It’s about as surprising as what the NRA claims causes gun violence…

      2. Summer

        We can’t act like the cumulative effects aren’t still with us, as if those are past events that still could be exerting negative influences as more are created.
        Those events are not exactly over…

        1. Summer

          “as if those are past events that still could be exerting negative influences as more are created.”

          Meant the past events still exert negative influences and not basically, they weren’t “the end of history.”

          Your comment assumes that all that was settled and all is good now.

  2. Pam of Nantucket

    We should reflect about the root causes of why our information is not informing us. How can decades go by with the meme “smoking has not been conclusively proven to cause cancer” or now “the science of climate change is inconclusive”, not to mention countless similar horror stories in pharma. Bullshit about the effectiveness of supply side economics is no different.

    Somehow we collectively need to expect and demand more objectivity from our information sources. We fall for the fox guarding hen houses scam over and over, from TARP bailouts, to FDA approvals to WMD claims. Not sure of the answer, but I know from talking with my boomer parents, skepticism about information sources is not in the DNA of many information consumers.

    1. Isotope_C14

      “One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back.”

      ― Carl Sagan, The Demon-Haunted World: Science as a Candle in the Dark

      One of Sagan’s best, I loaned this out to a not terribly thoughtful acquaintance and I was told it was “too preachy”.

      I guess Sagan proves himself correct time and time again.

    2. steelhead23

      It is also worth noting that a number of newspapers lauded Hitler’s rise to power – they overlooked violence against jews because the trains ran on time. Nor should we ignore disinformation campaigns, led by newspapers (e.g. Hearst and cannabis). In general, each media outlet is a reflection of its owners, most of whom are rich and adverse to any suggestion that we “tax the rich.”

    3. sharonsj

      I’ve come to the conclusion that we don’t have a media anymore. I was watching MSNBC this AM discuss the “missing” 1500 immigrant children. The agency responsible says it calls the people who now have the kids, but most of the people don’t call back within the 30-day requirement period.

      Now the next logical questions to ask the rep would be: What happens after 30 days? Do you keep calling them? Do send out investigators?” But are these questions asked? No. Instead we get speculation or non-answers. It’s the same with every issue.

      The internet is not any better. Many articles are just repeating what appears elsewhere with no one checking the facts, even on respected sites. I also got a chain email today regarding petition for a Constitutional Convention. The impetus is a list of grievances ranging from “a congressman can retire after just one term with a full pension” to “children of congressmen don’t have to pay back college loans.” I already knew most of the claims weren’t true but the 131 recipients of the organization I belong to didn’t. I did find out that this chain email has been circulating on the internet for five years and it is the work of a conservative groups whose real aim is to stop abortion and make Christianity the law of the land. I was not surprised.

      I have said for years that there is no news on the news. And I have repeated this meme for just as long: There is a reason why America is called Planet Stupid.

      1. JBird

        Now the next logical questions to ask the rep would be: What happens after 30 days? Do you keep calling them? Do send out investigators?” But are these questions asked? No. Instead we get speculation or non-answers. It’s the same with every issue.

        Even competent reporting takes practice, time, and effort, even money sometimes. The same with even half way competent governing. Neither is rewarded, and are often punished, for doing nowadays; asking as a followup question “did you call the local police or send over a pair of ICE officers just to politely knock on the door?” Police do people checks all the time. “I haven’t see so and so for a week”, or “my relative hasn’t returned my calls for a month, can you?” It is possible that the paperwork just got lost and asking the guardians/family some questions personally would solve.

        But all that is boring bovine excrement, which is just not done.

      2. JBird

        Now the next logical questions to ask the rep would be: What happens after 30 days? Do you keep calling them? Do send out investigators?” But are these questions asked? No. Instead we get speculation or non-answers. It’s the same with every issue.

        Even competent reporting takes practice, time, and effort, even money sometimes. The same with even half way competent governing. Neither is rewarded, and are often punished, for doing nowadays by the government and by the reporters’ publishers; asking as a followup question “did you call the local police or send over a pair of ICE officers just to politely knock on the door?” Police do people checks all the time. “I haven’t see so and so for a week”, or “my relative hasn’t returned my calls for a month, can you?” It is possible that the paperwork just got lost and asking the guardians/family some questions personally would solve.

        But all that is boring bovine excrement, which is just not done.

    4. Jeremy Grimm

      This post is disheartening in so many ways. Start with “media hysteria” — adding yet another glib coinage to hide a lack of explanation behind a simple but innapt analogy like the endless “addictions” from which personifications of various abstract entities suffer. This coinage presupposes a media sufficiently free to be possessed by hysteria. Dancing puppets might with some art appear “hysterical”. And the strange non-death of Neoliberalsm isn’t so strange or poorly understood in 2018 though the detailed explanation hasn’t reached as many as one might have hoped, including the authors of this brief post. Consider their unhappy mashup of thoughts in a key sentence of the first paragraph: “This power has been maintained with the help of a robust ideology centred on free markets (though in reality markets are captured by corporations and are maintained by the state) and the superiority of the private sector over the public sector.” The tail of this sentence obviates the rest of the post. And we ought not ignore the detail that Neoliberalism believes in the Market as a solution to all problems — NOT the ‘free market’ of neoclassical economics or libertarian ideology.

      From “media hysteria” the post postulates “amnesia” of a public convinced of “greedy bankers” who need regulation. In the U.S. the propaganda was more subtle — at least in my opinion. We were fed the “bad apples” theory mocked in a brief series of media clips presented in the documentary film “Inside Job”. Those clips suggest a better explanation for the swift media transitions from banking reform to balanced budgets and austerity with more tax cuts for the wealthy than “amnesia” or “hyper-amnesia”. The media Corporations are tightly controlled by the same forces that captured Corporations and — taking the phrase “the superiority of the private sector over the public sector” in the sense that a superior directs an inferior [rather than the intended(?) sense] — direct and essentially own our governments.

      1. Skip Intro

        This is the 3rd post in the last week or so that has this feeling of ignoring the elephant in the room. The one about Institutional Dysfunction carried on quite abit about the ‘failures’ of the field of economics to provide beneficial policy input, or foresee catastrophes, without entertaining the idea that the institutions are functioning as intended and are indeed providing propagandized rationalizations for policies beneficial to their captors. One wonders if this is deep intellectual capture, or something more mundane.

        While this article recognizes widespread capture, it also does not seem to draw that conclusion despite listing empirical evidence of same. If we run with the amnesia analogy, though it is measured as if the press reflected public sentiment, then it seems clear that growing numbers are not suffering from amnesia, do not believe the press, and vote against the advice of their betters. I suggest that neoliberalism is not recurrent because of amnesia, but because the institutions of the media are functioning correctly, and, despite strong headwinds eroding their credibility, producing benefits for their captors.

    5. orangecats

      “skepticism about information sources is not in the DNA of many information consumers”


  3. bruce wilder

    The essayist complains that poverty and the manifest failures of neoliberalism get little critical attention, but she leads off, “It hasn’t escaped many people’s attention . . .”

    The remarkable thing about public discourse and political and economic news reporting is how superficial it has become, so devoid of a foundation of any kind in history or theory. You can not have an effective critique of society or the economy or anything, if you do not see a system with a history and think it matters. Neoliberalism has become what people say when they think none of it really matters; it is all just noise.

    1. Summer

      “Neoliberalism has become what people say when they think none of it really matters; it is all just noise.”

      There is a connection there with movies like Deadpool 2.

  4. JohnnyGL

    Another thing to recall was how quickly talk of nationalizing banks evaporated. Even Paul Krugman, among others were supporting the idea that “real capitalists nationalize”.

    Once LIBOR came down, and the lending channels began to reopen, the happy talk ensued and the amnesia kicked in strongly.

    I also think that the crisis of neoliberalism echos a problem caused by capitalism, itself. I think David Harvey stated that “capitalism doesn’t solve problems, it often just moves them around”.

    The financial crisis and austerity have now manifested themselves into a media crisis of elites and elite legitimacy (BREXIT, Trump’s election, etc). The ability to manufacture consent is running into increased difficulty. I don’t think the financial crisis narrative shift helped very much at all. A massive crime requires an equally massive cover-up, naturally.

  5. WheresOurTeddy

    Why, it’s almost as if 90% of all media outlets are owned by 5 multibillion dollar conglomerates, controlled by the top 0.1%, for the purposes of protecting their unearned parasitic power, and the employees making six-to-low-seven figures are on the Upton Sinclair “paycheck demands I not understand it” model.

    Or it’s amnesia.

    Matt Stoller tweet from August 2017, as germane now as ever: “The political crisis we are facing is simple. American commerce, law, finance, and politics is organized around cheating people.”

      1. KLG

        A big thumbs up for that! Sobotka was a hero in very dark times.

        As my brother-in-law puts it: The American Dream used to be “work hard in a useful job, raise a family of citizens, retire with dignity, and hand the controls to the next generation.” Now? It’s just “Win the lottery.”

        Problem is, “The Lottery” is right out of Shirley Jackson.

    1. hemeantwell

      Or it’s amnesia.

      Agreed. The author is inclined to interpret at the level of cumulative effect — apparent forgetting — and to ignore how fear — of editors, of owners — plays any role. Her proposed unveiling of a coercive process becomes yet another veiling of it.

      1. Avalon Sparks

        He’s one I agree with too. His writings on monopoly activity are excellent.

  6. Alex morfesis

    Sadly…the narrative of details is lost to history… The German landesbanks who had guaranteed payments in loan pools in the USA were allowed to skirt thru crash and burn by the agencies (moody s&p and your little fitch too) fake and shake ratings process… But all things German are magical… Having lived thru NYC Mac Corp effective bankruptcy of man hat was amusing watching the hand wave given when the city of Berlin actually defaulted….

    Ah…reality…I remember it welll

  7. Eustache De Saint Pierre

    My own view for what it is worth is that the Guardian pays some lip service to the plight of the UK’s ” Deplorables “, but like most of it’s readership does not really give a damn. A state of being exacerbated by Brexit similar to the situation in the US with Trump. It’s much easier to imagine hordes of racist morons who inhabit places that you have no direct experience of, than to actually go & take a look. It’s also very easy to be in favour of mass immigration if it does not effect your employment, housing & never likely to spoil your early morning dawn chorus with a call to prayer.

    Unfortunately it has been left to the Right to complain about such things as the Rotherham abuse scandal, which involved a couple of thousand young girls, who I suspect are worth less to some than perhaps being mistaken as a racist. There are also various groups made up of Muslim women who protest about Sharia councils behaviour to their sex, but nobody in the media is at all interested.

    George Orwell noted that the middle class Left couldn’t handle dealing with real working class people, although there isn’t the same huge gulf these days, I believe there is still a vestige of it due to the British class system. The Fabians set up shop in the East End around the turn of the last century & directly rubbed shoulders with the likes of Coster Mongers – a combination that led to a strike that was one of the first success stories in the attempt to get a few more crumbs than what was usually allowed to fall from the top table.

    As for Mirror readers, I suspect that the majority are either the voiceless or are too busy fighting to avoid the fate of those who find themselves availing of food banks, while being labelled as lazy scroungers all having expensive holidays, twenty kids, about thirty grand a year, while being subjected to a now updated more vicious regime of that which was illustrated by ” I, Daniel Blake “.

    If Neoliberalism is now being noticed I imagine that it is because of it’s success in working it’s way up the food chain. After all these same Middle classes for the most part did not care much for the plight of the poor during those Victorian values. Many could not wait to employ maids of all work who slaved for up to fourteen hours a day with only Sunday afternoon’s off. The Suffragettes had a real problem with this as their relatively comfortable lives would soon descend into drudgery without their servants.

    Coincidentally, the NYT article on Austerity Britain is the closest I have read to an accurate picture that I have seen for a good while.

  8. David

    It’s also not a new thing. British media worship of neoliberalism has been growing since the 1980s, at the same time as newspapers have been closing and media sources of all kinds laying off their staff. 2008 was a temporary blip, and since the average journalist has the attention span of a hamster, it was back to usual a few months later. Once the crash stopped being “news” old patterns reasserted themselves. I wonder, incidentally, how many economics journalists in the UK actually remember the time before neoliberalism?

  9. precariat

    “And so it seems we are living with a hyper-amnesia”

    Consuming corporate media is increasingly a bizarro-world experience. Even something like the Trump scandal/constitutional crisis/investigation seems like the arrogant internecine warfare of corrupt factions of the establishment. Meanwhile, Americans are increasingly living out of their cars.

    The corporate media forgets the causes of the worst economic crisis since the Depression, and it put Trump in a position to be elected. Trump was the Republican nominee because he was relentlessly promoted by the media — because ratings, because neoliberal rigged markets.

    Break up the media monopolies, roll back Citizens United, enforce the fairness doctrine.

    1. Pamela More


      Slight edit…

      ” Consuming corporate media is increasingly a bizarro-world experience… the Trump scandal/constitutional crisis/investigation is nothing other than internecine warfare between corrupt factions of the establishment.”

  10. JBird

    I think there are several issues here for Americans, which can partially be applied to the Europeans.

    First, the American nation as whole only has short term memory. It is our curse.

    Second, those with the money spend a lot of money, time and effort the late 19th century covering up, massaging, or sometimes just creating lies about the past. American and British businesses, governments, and even private organizations are masters at advertising and propaganda. Perhaps the best on Earth.

    Third, the people and the institutions that would counter this somewhat, independent unions, multiple independent media, tenured professors at functioning schools, even non-neoliberalized churches, and social organizations like bowling, crocheting, or heck, the Masons would all maintain a separate continuing body of memory and knowledge.

    Lastly, we are all freaking terrified somewhere inside us. Those relative few who are not are fools, and most people, whatever their faults, truly are not fools. Even if they act like one. Whatever your beliefs, position, or knowledge, the knowing of the oncoming storm is in you. Money or poverty may not save you. The current set of lies, while they are lies, gives everyone a comfortable known position of supporting or opposing in the same old, same old while avoiding thinking about whatever catastrophe(s) and radical changes we all know are coming. The lies are more relaxing than the truth.

    Even if you are one of society’s homeless losers, who would welcome some changes, would you be comfortable thinking about just how likely it is to be very traumatic? Hiding behind begging for change might be more comfortable.

  11. precariat

    “Even if you are one of society’s homeless losers, who would welcome some changes, would you be comfortable thinking about just how likely it is to be very traumatic? Hiding behind begging for change might be more comfortable.”

    On the contrary, the upheaval the “losers” have been subjected to will be turned around and used as a just cause for rectification. Trumatic consequences can be unpredictable and this is why society should have socio-economic checks and balances to prevent an economic system running amok. Commonsense that necessitates amnesia for neoliberalism to seem viable.

  12. Peter Phillips

    Facing the current scenario in which we have:

    1. Oligarchs having captured thoroughly the media, the legislatures and the judiciary, (as well as large parts of what might be construed as “liberal” political organisations e.g. the Democratic Party of the USA)

    2. the seemingly inexorable trend to wealth concentration in the hands of said oligarchs asks oneself..”What is one to do?”

    My own response, (and I acknowledge straight off its limited impact), is to do the following:

    1. support financially in the limited ways possible media channels such as Naked Capitalism that do their level best to debunk the lies and deceptions perpetrated by the oligarchs

    2. support financially social organisations and structures that are genuinely citizen based and focused on a sustainable future for all

    3. Do very very limited monitoring of the oligarch’s “lies and deceptions” (one needs to understand one’s enemies to have a chance to counter them) and try on a personal level, in one’s day to day interactions, to present counter arguments

    We cannot throw in the towel. We must direct our limited financial resources and personal efforts to constructive change, as, for the 99%..there are no “bunker” to run to when the “proverbial” hits the it must in the fullness of time.

    1. Spring Texan

      Yep. One has to go ahead and do what one can. It all makes a difference. Thanks for your strategy, Peter Phillips. Limited impact is not no impact, and we don’t have the luxury of despairing because there is only a bit we can do.

  13. sgt_doom

    Yet this has been going on forever – – this past Sunday, for the first time I recall, I finally heard an accurate Real News story filed on the Bobby Kennedy assassination (50th anniversary coming this June 6, 2018) by the BBC World Service.
    They actually noted that there were multiple shooters, that Sen. Kennedy was shot from behind, not the front where Sirhan was located, etc., etc.
    I guess we do occasionally witness Real News – – – just that it takes 50 years or so to be reported . . .

    1. JBird

      And probably all the participants are long gone to whatever fate they have earned. At least one can hope. My parents were more shocked by that murder than of the older brother, I think.

  14. Sound of the Suburbs

    The worst thing is it has never worked in a way that had any long term future.

    It ran on debt from the start; pulling future prosperity into today.

    Look at the economics, neoclassical economics.

    The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at private debt, neoclassical economics.

    It doesn’t consider debt and so no one realises.

    It causes financial crises.

    The two elements of neoclassical economics that come together to cause financial crises.
    1) It doesn’t consider debt
    2) It holds a set of beliefs about markets where they represent the rational decisions of market participants; they reach stable equilibriums and the valuations represent real wealth.

    Everyone marvels at the wealth creation of rising asset prices, no one looks at the debt that is driving it.

    The “black swan” was obvious all along and it was pretty much the same as 1929.
    1929 – Inflating US stock prices with debt (margin lending)
    2008 – Inflating US real estate prices with debt (mortgage lending)

    “Stocks have reached what looks like a permanently high plateau.” Irving Fisher 1929.

    An earlier neoclassical economist believed in price discovery, stable equilibriums and the rational
    decisions of market participants, and what the neoclassical economist believes about the markets means they can’t even imagine there could be a bubble.

    The amount of real wealth stored in the markets becomes apparent once the bubble has burst.

    The debt overhang (ref. graph above) is dragging the US and UK economy down and is the cause of Janet Yellen’s inflation mystery, but they don’t know because they don’t consider debt.

    The problems that led to 2008 come from private debt in the economy and the problems now come from the overhang of private debt in the economy, but they are using an economics that doesn’t consider private debt.

    They don’t stand a chance.

  15. Sound of the Suburbs

    There is a much better way to run an economy but you would struggle to work it out as everything to do with money has been obfuscated to the nth degree.

    Banks don’t take deposits or lend money and this quite clear in the law.

    When you make a deposit you are lending the bank the money.
    When they lend you money they are actually purchasing a security off you, the loan agreement.

    Governments can never run out of money contrary to popular belief as they create the stuff along with private banks.

    Outside the mainstream this has now all been worked out.

    MMT has worked out public debt and public money creation.
    People like Richard Werner and Steve Keen have been working out private debt and money creation, which has now been confirmed by the BoE.

    Neoclassical economics predates the GDP measure and so is not helping us grow the economy.

    What is GDP?
    The amount of money spent into the economy by consumers, businesses and the Government plus the income we receive from the trade balance with the rest of the world.

    Now we know what GDP is, we can immediately see why austerity is contractionary. The cut in Government spending comes straight off GDP (someone tell Macron).

    The aim is to increase the amount of goods and services within the economy at the same rate as the demand for those goods and services, whilst increasing the money supply to allow those extra goods and services to be purchased.

    Milton Freidman understood the money supply had to rise gradually to grow the economy with his “Monetarism”. He thought that central bank reserves controlled the money supply and this is why it didn’t work.

    The economists focus on supply (neoclassical economics) or demand (Keynesian economics) until the balance of supply and demand gets out of step. The economy stagnates due to either insufficient supply (1970s stagflation) or insufficient demand (today’s ultra low inflation).

    Money needs to enter the economy to increase the supply of goods and services, while at the same time; the increased money supply enables the demand for those goods and services.

    Banks and governments create money and this is now well understood outside the mainstream.

    The banks have been creating money to lend into real estate and inflate financial asset prices. This is not what you want; they should be creating money to increase the supply of goods and services by lending into business and industry. Their lending hasn’t been increasing GDP.

    It all started going wrong when with financial liberalisation and a 1979 policy decision. The UK eliminated corset controls on banking in 1979 and the banks invaded the mortgage market. This is the start of the real estate frenzy.

    You can let bankers do what they want, but they have no idea how to grow the economy with bank credit.

    Supply had outstripped demand by the 1920s in the US and they used bank credit to maintain demand, but this can never work in the longer term as this money needs to be paid back. Government created money has to fill the gap as it doesn’t need to be paid back.

    Governments can create money, jobs and wages in the public sector, building the infrastructure for the economy and looking after the health and education of the population to provide the economic framework necessary for the private sector.

    The magic number is GDP, we need to focus on what increasing that number means.

    Our main problem is an ideological Left who think the answer always lies on the demand side and an ideological Right who always think the answer lies on the supply side.

    The Left think Government is the answer and the Right think the private sector is the answer.

    You need both, due to the increased productivity of the private sector that cannot create the necessary demand for those goods and services through private sector wages alone.

    The perfect economy.

    Supply, demand and the money supply rise together.
    Extra money is needed to consume the extra goods and services the economy now produces.

    Robots are no problem; the Government just needs to create the money, jobs and wages to balance the extra supply.

    There is always plenty to do in the public sector, e.g. infrastructure, schools, hospitals, public leisure and care services.

    1. Sound of the Suburbs

      Where is the real wealth of nations?

      The 1600s showed the Dutch tulip bulb market wasn’t a store of real wealth.
      The 1920s showed the US stock market wasn’t a store of real wealth.
      The 1980s showed the Japanese real estate market wasn’t a store of real wealth.
      The 1990s showed the US stock market wasn’t a store of real wealth.
      The 2000s showed the US real estate market wasn’t a store of real wealth.

      GDP is real wealth; the wealth in the markets has a habit of evaporating almost over-night.

      The real economy is the real wealth of nations.

      Why did they invent the GDP measure?

      Markets were all the rage in the 1920s and they thought the US stock market represented real economic activity, but in 1929 they found it didn’t.

      Financial markets are best thought of as somewhere the wealthy and bankers go to gamble against each other.

      It beats working for a living.

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