The more I listen to David Stockman’s The Great Deformation audiobook, the more enraged I get, and so far there hasn’t been much in there that I didn’t already know.
TARP was a Grand Swindle, perhaps the crime of the century as the better part of a Trillion dollars was injected into the banking system to shield corrupt, incompetent thieves from a cleansing purge that is the basic fundamental mechanism of a free market.
Since then it has only gone from egregious to utterly shameful as the Fed and government policy makers dismantle any ostensible simulacrum of capitalism to doll up an utterly contemptible rigged-game into a grotesque caricature of “prosperity”.
Our leaders buy into deeply flawed “models” of economic reality and even then, bastardize those beyond their original intent. For example, even Keynes, who advocated deficit spending to stimulate the economy in bad times; also said the government was supposed to run surpluses and save up money during the good times. But that hasn’t happened in a long time. Those illusory “Clinton-era surpluses” aside, the last president to actually pay down on the national debt was Eisenhower – the same guy who warned us all about the emergence of The Military Industrial Complex. (The last president to pay off the national debt was Andrew Jackson).
Instead we have broken Keynes-ism and if that weren’t bad enough we now have nonsense called “Modern Monetary Theory” or “Modern Monetary Realism” being pushed by academics and theorists. In it, the government can print as much money as they want and it’ll never get over inflationary or dilute the currency too quickly, why?
Taxes. Instead of taxation being used to fund the operations of the government, the role of taxation morphs into something altogether different: it shores up demand for the currency by making it mandatory to pay said taxes in the currency of the realm, and serves to “suck out” excess liquidity from the economy. (Read: all that money is supposed to go toward asset inflation, so whatever leaks through into the main street economy gets recycled out via taxation).
Add to that “Open market operations” which is basically the Fed pumping 85 Billion a month into the asset markets to drive up the stock market because with the Dow Jones and S&P500 making “new highs” – everything must be “ok”, right? (Just don’t look at the markets priced in real inflation adjusted dollars or gold, lest the true picture emerge).
Source: http://pricedingold.com/dow-jones-industrials/
Now we have governments around the world becoming what can only be described as incoherently desperate and hell-bent on keeping “the game” going and claiming normalcy at every turn.
Bail-in’s are here, and have been officially “templated”. Obama has introduced a proposal to cap retirement accounts in the US
The budget will include a new proposal that prohibits individuals from accumulating over $3 million in IRAs and other tax-preferred retirement accounts. Under current rules, some wealthy individuals are able to accumulate more than is needed to fund reasonable levels of retirement saving.
Now that the government is deciding what a “reasonable” rate of interest is (0%, for the foreseeable future), where the stock market should be (higher, of course) and how much savings are “reasonable” for any one person to set aside, don’t you feel safe, prosperous and free?
The picture at the top of this post is of the tragic Lolo Ferrari, an apt symbolic representation of our “economy”. A monstrosity surgically and artificially enhanced beyond recognition, ostensibly into something desirable. The outcome? She was psychologically and physically damaged beyond repair and died at age 37, committing suicide with tranquilizers and muscle relaxants, and quite possibility asphyxiating to death under the weight of her own overclocked cleavage.
Yes, this is what we’ve already become and we are headed for a similar outcome.
With all du respect, I’m afraid you’ve got it completely wrong. Those associated with Modern Monetary Theory have never, ever suggested government can print and spend in unlimited quantities without consequence. Adjusting spending to remain within the real resource constraints of the economy is a requirement of MMT (which, by the way, views Quantitative Easing as largely a waste of time and effort).
It is replete through the literature that inflation is always a constraint.
I don’t understand how MMT can make it a requirement to adjust spending within the resource constraints of the economy, and yet eliminate financial constraints and do whatever it takes to guarantee employment.
Financial constraints ARE part of the resource constraints of an economy, or at least they should be. You can’t ignore what the market is signalling and issue fiat just to stabilize employment. The result (at best) would be that too many of those guaranteed jobs would be make work and largely useless. At worst you will just see all that money pile into asset bubbles.
As I understand it, MMT ignores deficits because they feel if they can issue fiat then fire away. How is this different from QE or other forms of market intervention, all in the guise of fostering employment?
Doesn’t MMT ignore actual market signals and try to defer consequences of excess credit creation indefinitely?
I guess in the broadest sense, it is trying to re-affirm the viability of government fiat currency, which has proven time again (always, every time, no exceptions) to see its intrinsic value (purchasing power) to trend toward zero.
Firstly, humans are a resource. In fact they’re the most valuable resource in the country. Creating one job for each person wishing to work stays within the constraints of our available resources. What government must not do is stimulate further once we’ve reached that stage, because the additional demand created by adding more net financial assets will only push up prices. Many MMTers advocate a Jobs Guarantee for anyone who cannot sell their labor in the private sector, and which will act as an automatic stabilizer by increasing spending in slumps and decreasing it in booms (countercyclically). I personally find this a superior solution to putting people on the dole, with all the socially and economically destructive baggage that goes with unemployment.
Secondly, MMT is politcally agnostic. Unemployment means one or both of two things, depending on your perspective: either spending is too low, or taxation is too high. MMT is as much about the taxation side as it is the spending side, and MMTers did in fact recommend the full suspension of FICA taxes for employees and employers at the onset of the financial crash. There are MMTers(more on the libertarian side) who do not support government jobs programs and would rather see spending via direct transfers to citizens on the assumption those funds would be much more efficiently spent. What I want to get across is that MMT at its core is a toolset for economic analysis, while the policy recommendations can be oriented anywhere along the political spectrum.
In regards to QE and credit, MMT teaches that runaway private sector debt growth is a major reason for the financial crash, that credit was growing at a completely unsustainable rate due to government and financial industry policies. Those policies go back to the Clinton Administration, when credit expanded so quickly it pushed the government into surplus and ironically forced the private sector to take on debt at an even more rapid pace as government became a drain on the private sector’s financial assets. QE itself is a misguided (and futile) attempt to re-ignite credit growth and get the bubble going again, which even if it could be successful would put us right back into a debt-deflation scenario within a few years.
Deficits themselves must be keyed to market signalling, in that the best deficit is one which precisely meets the desires of the non-government sector to save. Too little and not only do you get unemployment, but you get unhealthy credit expansion. Too much and you get inflation as too many dollars chase too few goods.
Sorry if this is a little rambling, it’s been a long day.
Not all, thanks. sorry for the delay on it showing up here, (your second comment should have shown up automatically once I approved the first one)