Howard Dean Wants to Continue Austerity’s Assault on the Working Class

By William K. Black
Bloomington, MN     November 28, 2016

Howard Dean was attacked by the Democratic Leadership Council (DLC) for the high crime of opposing the second President Bush’s disastrous invasion of Iraq.  While I strongly support the candidacy of Representative Keith Ellison to chair the Democratic National Committee (DNC), I am not arguing that Dean is not a progressive voice that needs to be part of the leadership team transforming the Democratic Party.

I write to urge him to learn the foundation of the economics of sovereign currencies.  I urge his progressive supporters to encourage him to undertake this study.  It is vital to his success and his input to transforming the Democratic Party.

Dean has one enormous blind spot – his assumption that federal deficits are evil and that the answer is to continue to wage vigorously the long war – the repeated assaults on the working class through austerity.  I have been writing a series of columns about the fact that the Democratic Party must learn from the election that it has to stop this long war.  I have explained why austerity produces immoral results because it is economically self-destructive and politically suicidal.

I researched Dean’s statements about austerity to try to understand why a man who opposed the DLC would be so enthusiastic about inflicting austerity on the working class.  I found part of the answer.  Dean was Vermont’s governor.  Dean explained to a conservative “Squawk Box” host why he supported austerity based on his experience as a governor.

There’s a balance sheet that has to be met here and every Governor knows that, both Republicans and Democrats.  And you got to do that when you’re the President.

The first sentence is correct.  The second sentence is false.  States do not have sovereign currencies.  The United States has a sovereign currency.  A nation with a sovereign currency is nothing like a state when it comes to fiscal policy – or a household.  I cannot explain why Dean does not understand the difference and has apparently never read an economic explanation of the difference.  But we can fill that gap.  Again, I urge his supporters who have the ability to bring serious policy matters to his attention to intervene.  Dean is flat out wrong because he does not understand sovereign currencies.  The consequences of his error are terrible.  They would lock the Democratic Party into the continuing the long war on the working class through austerity.  That is a prescription for disaster for the Nation and the Democratic Party.

Progressive Democrats enlisted in the New Democrats’ austerity wars because they seemed to be politically attractive.  The political narrative was as simple as it was false.  The austerity creation myth was told first by Bob Woodward in the course of writing his sycophantic ode to Greenspan as the all-knowing “Maestro” of the economy.  Bill Clinton, as President-Elect, was given an economics lecture by Alan Greenspan.  The economics lecture – from an Ayn Rand groupie – was (shock) that austerity was good and New Deal stimulus was evil.  Bill’s genius was taking the “Maestro’s” words as revealed truth and turning his back on the New Deal.  Bill embraced austerity.  The economy grew.  Bill ran a budget surplus – the holy grail of austerity.  Bill was followed by Bush under whose administration economic growth slowed and the federal deficits reemerged.  There was a Great Recession.

The creation myth was clear.  The newly virtuous New Democrats (after instruction in economics by Saint Greenspan) embraced austerity and all was good.  The vile Republicans, hypocrites all, had renounced the true faith of austerity and they produced mountains of evil debt that caused poor economic growth.

Dean pushed this narrative in his Squawk Talk appearance.  When asked to explain the specific Bush policies that he claimed were to blame for poor growth continuing under President Obama, Dean went immediately and exclusively to Bush’s increases in the federal “debt” to answer the question.  “The biggest ones are the deficits that were run up…. The deficits were enormous.”

The New Democrats’ narrative, which Dean parroted, is false.  One of the definitive refutations of the Greenspan (and Robert Rubin) as Genius myth was by the economists Michael Meeropol and Carlos F. Liard-Muriente in 2007.  Their refutation was inherently incomplete because it was “too early” – the collapse of the housing bubble in 2007, the 2008 financial crisis and the Great Recession were vital facts that helped reduce the myth to the level of farce.  These facts were unavailable to academic authors publishing in 2007.  The authors discuss the enormous role that the stock bubble played in the Clinton expansion, but they do not discuss the housing bubble’s contribution.

Any tale that begins with Alan Greenspan providing Bill Clinton with the secret to economic success is justly laughable today.  Clinton was our luckiest president when it came to economics.  His expansion was largely produced by the high tech stock bubble.  When it collapsed, the housing bubble, explicitly encouraged by Greenspan as a means of avoiding a severe recession, took up much of the slack.  Bush eventually inherited from Clinton a moderate recession that led inevitably to moderately increased (not “enormous”) federal deficits.  The housing bubble then hyper-inflated, bringing the economy rapidly out of the moderate recession.  The hyper-inflation, of the housing bubble, however, was driven by the three most destructive epidemics of financial fraud in history and it caused a global financial crisis and the Great Recession.  A great recession leads inevitably to a very large increase in the federal budget deficit.

Greenspan, Bob Rubin, and Bill Clinton were lucky in their timing – for a time.  The historical record in the U.S. demonstrates that periods of material federal budget surpluses are followed with only modest lags by depressions and, now, the Great Recession.  Fortunately, such periods of running material budget surpluses have been unusual in our history.  As my colleagues have explained in detail, the U.S., which is extremely likely to run balance of trade deficits, should typically run budget deficits.

We all understand how attractive the myth of the virtuous and frugal Dems producing great economic results under Clinton while the profligate Republicans produced federal deficits and poor economic growth was to Democratic politicians.  But the Dems should not spread myths no matter how politically attractive they are.  The catastrophic consequences of President Obama and Hillary Clinton coming to believe such myths were shown when, as I have just described in several columns, they promised to lead the long war against the working class that is austerity.

If people like Dean focused on the origins of the Clinton creation myth they would run from its lies.  The original actual creation myth is found in the book of Woodward.  The brilliant Greenspan converted the young Bill Clinton by exposing him to the one true faith (theoclassical economics) and successfully calling on Clinton to renounce the devil (FDR) and all his work (the New Deal) and to sit at the (far) right hand of Ayn Rand.  The result was economic nirvana.  Politically, that’s a terrible creation myth for Democrats to tell around the campfire – or to voters.  Economically, it’s a lie, indeed, a farce.

31 responses to “Howard Dean Wants to Continue Austerity’s Assault on the Working Class

  1. “His expansion was largely produced by the high tech stock bubble. ”

    J.K. Galbraith pointed out the importance of ‘the reworking of the economic geography’. There was a technological innovation/infrastructure (computer, internet, fiberoptic, wireless) boom that was occurring as well as the stock bubble. The bubble wasn’t simply a massive private sector credit expansion for the stock market, but also for reworking of the economic geography. That was Clinton’s luck.

  2. I’m an old guy — nearly 70, and was a HS dropout who eventually got a G.E.D., some tech school and a couple of years (no degree) of silly courses from a rather bad college. I knew virtually nothing about economics or finance for most of my life and was bored by the books on it. I tried taking a course in once and dropped it within weeks.

    I had been on the internet about politics since 2001 0r 2002, when I first got access. When the 2008 crisis hit I figured I should learn something about it, so I started looking on the web, found some things about Georgian, circuit theory, Austrian, Chicago, a little Minsky, etc. — it’s all out there, easily accessible. I soon came across some information about MMT. I listened to some lectures and read the few things then available, and checked it out. ‘OK — this makes sense, and I understand this — fairly simple at the root.’ I thought. No big deal understanding the basics of this.

    I’m not exactly dim, but I’m not an academic or scholar or scholar either — but a cheap college dropout, and I get it — so what’s wrong with these politicians and economists? Are they stupid? Incapable of learning? Just embedded in the neoclassical stuff because that’s what they make their money on? It’s not, as they say, rocket science, and not even as difficult as understanding how to design a resonant circuit, writing a simple program on a computer, fixing the engine of a 1950 automobile — things which a great many people can do. And it’s even pretty easy to explain MMT to ordinary people if they give you a half hour to do it.

    So what’s wrong with these politicians, and do you want someone so stupid, or effectively stupid, and unable to handle a little common sense, or so easily trapped in an old belief system, to be in charge of anything? It’s like, OK, even if you toss a coin and it comes up heads 15 times in a row the next toss is still 50/50 odds, and the planets go around the sun, and infections are caused by bacteria or virii and not be demons. Maybe you are jarred to find out you were all wrong in your models and beliefs, but if you can think then you can understand you were wrong, and you can learn. If you can’t, you have no business trying to tell anyone else what to do or running anything. Anyone on politics, like Dean, who hasn’t taken the little trouble and time to find out how this works, which is a critical part of government, which even I could do on my own just looking on the web, should not be anywhere near public office or a political leadership position.

    They are incompetent. They shouldn’t even be a manager in a company if they are incapable of understanding such fundamental things. Same thing if they do understand and are just lying about it. That includes Trump, Clinton, and anyone else — it’s like no one who doesn’t understand germs can cause disease should be working in the medical field, and no one who doesn’t understand electricity or combustion should be messing with your car’s electrical system or engine. Sure stuff can get complicated, and does, and everyone doesn’t need to understand all the complexity, but I’m talking about the basics here, which can be explained in under an hour. There are 15 minute videos from experts which cover the basics. It’s too much to expect someone who wants to run a government to watch and learn this stuff?

    • John Zelnicker

      Blue Pilgrim – Upton Sinclair had it right over a hundred years ago. “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

      The wealthy elites want to maintain their power and the way to do that is by telling the Big Lie that the federal government needs to tax or borrow in order to have the money it wants to spend. That way they can tell everyone that the government can’t afford the social benefits and public goods that would support and lift up the 99%. Of course there is always enough money to propagate their wars of convenience, but you’re not supposed to notice that. They bribe the politicians with campaign contributions and promises of lucrative employment later, they bribe the economists with research grants and donations and they set up “think tanks” to put out “expert opinions” to keep promoting that Big Lie. As with most everything else, follow the money and examine the power relationships.

    • David Harold Chester

      Its not quite so simple as a 15 minute video. Many of the kinds of data being explained is slanted towards a particular political aim and this can be well concealed. I include MMT in this, which is warmed up Keynesian theory. Keynes has some good points about his ideas but he was also terribly wrong in others. What I am saying is to beware of illogical and unproved bald statements, which come from political sources.

      • Regardless of you what you call it — Keynesian or whatever — money is a legal creature that comes from the government, and which should reflect the amount of real wealth available and realistically expected in the future, such as crops expected from planting seeds. If you don’t invest in planting seeds, you won’t get the harvest. If you give all the seeds to some guy sitting in an office and never plants them, you won’t get the harvest. If you give the crops to the guy and he stores them in the office, then neither you or the rest of the people will get them.
        If you use money as a measure of seeds, crops, and other wealth, then the money has to follow the same basic rules for it to all work out.

        It’s pretty straight forward, really, when you relate money, finance, and economic theory to reality, and MMT is just an explanation of reality in economic terms. If you have farmers and other workers sitting around doing nothing, and empty fields and factories, then you won’t get a harvest or new wealth, and that’s just the reality — described in two paragraphs.

        When that’s understood it’s obvious that if people can’t find work, and productive resources are not utilized, then there will be less wealth for the world, even if some people grab more of it than others through their scams and destruction, regardless if you try to explain it and various elaborations with Marx, Keynes, George, Minsky, Smith, Ricardo, or whoever.

        We have politicians and ‘academics’ now who make fun of the ‘reality based community’, as if reality was only an optional choice, and their lies were as good as truth. Just a little bit Zen, or Korzybski (“the map is not the territory”), here can go a long way.

    • This is great.
      Having self-learned the non-science of ‘economics’, and self-realized the failures of ‘politics’ to embrace its own special identity, and its proper role in the national political economy, may I invite you, implore you, to proceed forward, indeed, to comprehend the national money system.
      These pages do yeoman’s work in advancing the learned post-keynesian, functional finance approach to the national political-economy, but unfortunately grasp not the foundation of a national money system, a national, central-governmental system that is supposed to function via certain roles and methods to distribute the ‘goods’ we create as national wealth. But alas, our Money System Common has been 100 percent captured by our Lords of finance, the One Percent who operate a national Creditocracy based on their manipulated saturation of the debt-servitude of we Commoners. Theirs is a system that perpetually assures the concentration, rather than the distribution, of that national wealth.

      Please. Come to understand money for what it really is, and proceed to understand that it is our heritage of a hard-won national SYSTEM of money that must become focused on achieving those worthwhile social and environmental goals, or we will surely continue to be relegated to that scrap heap of austerity economics that is the absolutely 100 percent objectives of the ‘privatized’, unworkable, debt-based, bankers’ money system.

      Because, ……… it’s the money system.

  3. Two additional facts. Greenspan admitted after the Great Recession that he had been completely wrong in his understanding, and he even testified that the federal government , as sovereign issuer of the currency, could create as much money as it wanted and spend it into the economy. Too bad Howard Dean, Barack Obama, and the Clintons stopped listening to the “maestro” before he became enlightened. Now the Democrats are married to Ayn Rand for bad and worst. Long past time for a divorce.

    • James,
      Yes, of course Greenspan HAD TO admit he was wrong – everything went exactly the opposite of what he predicted. But I think that you perhaps over-characterize the certainty of what Alan was implying by his ‘The Guv can always print the money to pay its debts’ …….. dissembling.

      Yes, indeed he said it, as sort of did Ruml, but unfortunately those are a couple of ’empty’ anecdotes, someone’s opinion of how things “might” work. Both were uttered for personal embellishments. Neither is peripherally related to the conduct of monetary policy. And neither offers any explanation of how the government was to fill its coffers, before spending or otherwise, in order to fulfill its budgeted responsibilities.

      In Ruml’s case, it was to advance the idea that corporate taxes should be abolished. Indeed, no need for taxes. In Greenspan’s case , it was ‘defensive’, against all the ‘WTF we gonna do now, white man?’ criticism out there. Good move.
      Our accidental – ” PRINT the money.” – cheerleader’s statement must have put the money-fears of those Guv reps to rest, because neither the brilliant Paul Ryan, nor the equal, and excellent, Bernie Sanders, were well enough informed to ask “Whadda ya mean, the government can always print the money?’
      (‘Since When? – PR)
      (How?- BS)

      Maybe it’s because Sanders and Ryan (the opposites) think that the government ‘prints the money’ right now.
      Perhaps they could even think that the ‘sovereign’, who THEY represent, is actually the monopoly-issuer of money today – in the sense of ‘money’ that Greenspan was advancing, issuing national exchange media to pay off public debt.
      Unfortunately, today, all of the purchasing power advanced in our national (GDP) economy is created and issued into existence by private banks (through journal entries based on loan contracts), and then that purchasing power is later ‘lent’ by those ‘creator-bankers’ to that same sovereign government that Ryan and Sanders seem to think is actually ‘issuing’ it in the first place.

      So, how can the government, today, add revenue to its budget without taxing or issuing debt?
      I am most interested in how to change that ‘could’ (of Greenspan and Ruml), to the ‘can’.
      Through the law.

      Read Soddy.

      • John Zelnicker

        Joe – The federal government does not need revenue to add to its budget. It creates new dollars each time it pays its bills by instructing a bank to mark up the balance in an account belonging to the person or company to which the payment is due. This adds dollars to the money supply and increases GDP (as does all spending for goods and services). There is no need for it to acquire those dollars from others by taxing or borrowing. That’s what sovereign issuer means. Current GDP is about $16.77 trillion and in 2015 US government spending was about $3.7 trillion, so the government contributes about 22% of GDP by creating new dollars with keystrokes. The net contribution to the money supply is smaller since the government removes about $3.2 trillion through taxation. IIRC, that net contribution is about 5% of the money supply.

        • The problem was never with government ‘printing’ money (just creating it). There are two problems which can occur: issuing so much money that inflation runs away because all correspondence to money and real wealth breaks down (as in Zimbabwe — hyper inflation), or that the wealth distribution goes awry, as we’ve seen in recent years as with ‘reforming’ welfare as the rich got richer, and then often just sits on it, or speculating, instead of ‘trickliing it down’.

          In both those cases the basic problem comes down to distribution.Even with inflation, if the numbers on the money were universally increased, so every dollar bill (or electronic equivalent) were marked up to a $10 bill, for everyone and everywhere, including all price tags, debts, and credits, it would not matter — same as multiplying both sides of an equation by a constant in algebra. But inflation is not felt equally, but hits consumers and those with less harder than the wealthy, and the producers (who can just raise prices), creditors lose to debtors who pay off their more cheaply on loans fixed at the old amounts, so some lose and some win. I’s like trying to work an algebraic equation by changing the expressions on each side in a non-proportional way.
          Like inches are made bigger on the lumber yards’ rulers than the carpenters or architects’ rulers. Measurements are no longer consistent so a piece of wood is called 6″ or 8″ depending on where it is when measure and who is measuring it. A fair wage is a different size depending on if the worker or the employer is looking at it, or a fair price varies between the buyer and supplier.

          The government issuing money should be a way to restore balance to the economy, or balance money supply with real wealth in an equatable way. That’s not what happens though: the banks and wealthy get more of the increased money supply and poor become relatively more poor, gains in production don’t go to the people.

          The question, then, is if the government ‘print’s money’ who is it printing it for? With the bailouts it printed it just for the banks and wealthier people (a jubilee in reverse).

          • John Zelnicker

            Blue Pilgrim – I basically agree with what you say about the problem of distribution. It is one of the key issues in our economy today. From 2009-12 the top 10% of Americans received over 100% of the increase in national income; meaning that the bottom 90% lost income during this period. This is a major contributor to the desperation of the working class that led to the election of Trump.

            However, there is one mistake in your comment. The hyper-inflation of Zimbabwe and the Wiemar Republic was not caused by printing too much money, that was a result. It was caused by the destruction of the productive capacity of those nations.

            In the case of Weimar, this occurred because the French occupied the Ruhr Valley of Germany which contained 80% of German industrial capacity. They could no longer produce the necessary goods for export that they needed in order to earn the gold (or dollars and pounds sterling) required to pay off the reparations required by the Treaty of Versailles. Deutsche Marks were unacceptable.

            In Zimbabwe, Robert Mugabe redistributed land holdings from the wealthy whites to the native population that did not have the farming knowledge to keep up the production of crops necessary to feed the people and other crops (tobacco mainly) grown for export. Money printing is a result of hyper-inflation, not a cause, although too much spending (not money printing) in a full-employment economy can cause regular inflation, but that is easily controlled.

            • You are correct. I was trying to say with “all correspondence to money and real wealth breaks down” that the relationship was broken without referring to the cause. That is, is Zimbabwe instead of ruining agricultural production had bumper crops, found huge deposits of precious metals, or otherwise increased the real wealth then the extra money would be no problem. But yes, the extra money creation there and in Germany was the result, not the cause. I apologize for being unclear in what I wrote; thanks for you explanation.

              It could be pointed out that withdrawing money from circulation so that there is not enough to represent real wealth leads to the opposite: deflation (and then a fall in production as liquidity/velocity dries up and people can’t afford to buy), which is what austerity, and government surplus, does — as you allude to in your other posts.

        • John,
          Thanks so much for your response that aims to answer my question on how this all works. Also to Bill Black and NEP.

          But in my 40 years of personal study of the national money system, despite many attempts since ’07 – ’08 to corroborate this particular and unique claim by MMT, I have never found a single person at the Treasury, being the payor for ALL governmental expenses, who would confirm THAT the Treasury does not NEED a positive balance in its TGA before it can carry out the Act of …. “”instructing a bank to mark up the balance in an account belonging to the person or company to which the payment is due.””

          So that would make the Guv no different from you and me.
          My hope would be that you have found someone at Treasury who could confirm your and MMT’s claim. …. Or know someone who has received confirmation as proof.

          Are you familiar with the construct of a Governmental Budgeting Constraint (GBC) ?
          It is actually fairly widely accepted among economists of all stripes, that the sum of the expense side of the government’s budget must be matched or balanced by revenues and incomes …… from taxation, from changes to the total Guv debt, and from ‘intergovernmental transfers’. The latter’s mal-definition includes the Fed’s repayment of interest income to Treasury, for instance.

          Actually, John, what ‘sovereign-issuer‘ means seems to lie in the eye of the beholder. Often the description includes being “the monopoly issuer’, but even by your postulated model, someone else is issuing 95 percent of the money. Is that correct?
          Or, is the entire tenet of a sovereign monopoly issuer of the money supply one of MMT’s previous understandings that has been subjugated, from Monopoly’ to ‘five-percenter’ ? ( Actually, it’s more like one percent).

          The way I see things, John, the government – all of it – is the ‘user’ and not the issuer, of the money supply, which is owned and operated by the bankers. I suggest availing yourself of the history of the Bank of Canada, where truly Great Canadians developed a public central bank that DID fund the government, much as you described, for most of its public-purposed spending NEEDS … from 1935 to 1975 ……. and then find out how the IMF, the BIS and the global bankers put a stop to all that, forcing the government there, as here, to “borrow” its funding needs from the private bankers who have the power to create and issue that money into circulation.
          As I’ve said, if you are the ‘issuer’ then you are not the borrower.

          So, thanks, but, proof ?

          • Ray LaPan-Love


            I think you have it partially correct, “As I’ve said, if you are the ‘issuer’ then you are not the borrower.” But to completely get that relationship right…the government must be seen as both the issuer, and the borrower. But, of course, it is the Fed that actually does the issuing, and it is of course privately owned, so, technically speaking, the government is the borrower. But, the government has enough power over the Fed that it can honestly be stated that the government is lending to itself. After-all, the government is the one and only borrower which pays no interest to the Fed, and the Fed exists only so long as it serves the government. Probably though, there has always been concern that this relationship being so deeply and thoroughly intertwined, that it might be defined as fascist. So, that stigma has been avoided somewhat by seeming separate when that separation is only a ruse, ‘probably’ again.

            • John Zelnicker

              Ray – The Fed is not privately owned:

              “The Federal Reserve System is not “owned” by anyone.”

              “The Federal Reserve derives its authority from the Congress, which created the System in 1913 with the enactment of the Federal Reserve Act.”

              “The Board of Governors in Washington, D.C., is an agency of the federal government. The Board–appointed by the President and confirmed by the Senate–provides general guidance for the Federal Reserve System and oversees the 12 Reserve Banks. The Board reports to and is directly accountable to the Congress…”

              “Some observers mistakenly consider the Federal Reserve to be a private entity because the [12 regional] Reserve Banks are organized similarly to private corporations.”

              All from

              The Treasury Dept. issues Treasury securities; the Fed issues dollars and buys and sells Treasuries in the secondary market as part of its management of monetary policy and the interest rate regime, i.e., Open Market Operations.

          • John Zelnicker

            The use of the TGA is an accounting fiction that makes it easier to see the “sources” and uses of government money. There is no real need for the requirement that the TGA has a balance prior to spending, that’s a holdover from the days of the gold standard. It’s basically the same as the scorekeeper in a baseball game with the old-style scoreboard that used cards with numbers on them, who has to make sure that he has enough 1’s and 2’s etc., to hang on the hooks when the teams score runs.

            The GBC, with which I am familiar, is a legal fiction that is also a holdover from the gold standard, and it is not accepted by economists of all stripes (MMT economists, for example). The federal monetary authorities (Treasury and the Fed combined) do not need to “balance” the budget with taxes and borrowings. We have a fiat money system. The government can issue dollars at will without constraint (other than the limits of available real resources). Without the legal fiction of the GBC, the government can issue as much fiat as it needs to purchase the real resources (labor and goods) that it needs to advance the public welfare. Like Monopoly, where the instructions tell you that if you run out of the included pieces of paper, to just cut other pieces paper into the correct shape and write numbers on them. Monopoly does not require the “banker” to “borrow from” or “tax” the other players to get back the pre-printed pieces of paper in order to continue the game.

            The banks issue money under license from the government (the sovereign) by granting loans that create deposits. This money is qualitatively different (in one aspect) from the money issued by the Fed when it pays the government’s bills. The money issued by the banks must be repaid, so that, over time, it is a wash. The money issued by the government when it pays its bills does not have to be repaid, as it is not a loan. This is the aspect referred to when one speaks of the sovereign monopoly issuer. “Monopoly issuer” may not be the best terminology, that’s why I didn’t use that label. However, it is correct in the sense of money that remains in the money supply as opposed to a loan that has to be repaid.

            I used the amount for M2, which is about $10.5 trillion and the federal budget deficit of about $500 billion, which means the contribution is about 5%. Not sure where you are getting 1%.

            BTW, one of the reasons that Reagan increased FICA taxes was to create a surplus in the Social Security “trust fund” so that a consolidated government budget would not show as big a deficit as it would otherwise. Intergovernmental transfers are another fiction; the government is the government, tout suite.

          • I can’t find it now — down a google or youtube memory hole, maybe, and it’s buried in my old disk archives, but there is a video out there somewhere where (going by my memory) the treasury secretary (Paulson?) is testifying before congress, I think about the TARP. and is asked if that was taxpayer money. He says no, it’s not tax money, they just make an entry on the computer. The clip is on several videos about MMT and fiat money — I think Stephanie Kelton includes in it one of hers.

            There is a similar statement in a video with one of Bank of England’s governors.

            It not even a question of whether someone from Treasury or the Fed say this, but if it’s so — if it can be done (as opposed to how often it is done). Bottom line — the only power money (exogenous to the private sector) which exists must come from the government because anything else is counterfeit, and no one else has the constitutional authority to make legal money. The banks don’t create money (legal tender), but credit.
            We also know that it takes an act of congress to declare war, and yet we are involved in many wars now with no congressional declarations, so what is done by people in government is not necessarily really lawful or constitutional.

          • Finally found it!

            Bernanke on taxpayer’s money for the bailouts.

            from 60 minutes interview

            “0:00 balance sheet is that tax money that the federal spending cuts not tax money the
            0:04 banks have accounts with the Fed much the same way that you have an account in
            0:10 a commercial bank so it’s lend to a bank we simply use the computer to mark up to
            0:15 the size of the account they have with the Fed so it’s much more akin although
            0:20 not exactly the same as much more akin to printing money than it is to
            0:23 borrowing you’ve been printing money”

  4. Keith Ellison has spent a decade on the House Financial Services Committee, yet I haven’t heard him so much as mention fraud the entire time.

  5. Something for Howard Dean to think about, and others. China lifted ~600 million people out of poverty while Eurozone plunged tens of millions into poverty, and created high unemployment rates. The sovereign currency issue is central in this. If upper policy circles don’t understand what’s required, well, that’s history.

  6. Ray LaPan-Love

    I don’t quite understand Bill Black’s affinity for the use of the word ‘austerity’. When the IMF recommends austerity measures to a troubled nation, those measures are broader than just debt servicing by the government. In fact, one of the issues addressed in Greece has been that of the upper-class being required to pay more in taxes, along with cutbacks on programs for the poor, and so austerity policies tend to be applied to the whole nation.

    What the Democrats have been doing, on the other hand, has been far more complicated and selective than that. The Democrats intentionally withdrew their support of the white working-class after the loss to Nixon in 1968, and thereafter cultivated the black vote. So, their viability has become dependent on providing a larger segment of their constituency with subsidized housing, SNAP and TANF benefits, grants for education, and so on. Thus, accusing the Democrats of an agenda based on ‘austerity’ just doesn’t quite fit.

    • John Zelnicker

      Ray – Actually TANF was a form of austerity. Remember Clinton “ended welfare as we know it”. Prior to TANF there was Aid to Families with Dependent Children (AFDC) which did not have the time limits that TANF has and had fewer additional requirements.

      In addition, the Clinton administration created a federal budget surplus for the first time in many years. This is also a form of austerity (and a major goal of the IMF with its “structural adjustments”). We just didn’t notice its effects due to the dot com bubble and the massive increase in consumer debt. This austerity came home to roost partially in the recession of 2001 although it was attenuated by the housing bubble. The full effect of the austerity of a budget surplus came with the housing crash in 2007-8 and subsequent Great Recession.

      • Ray LaPan-Love


        Yes, the shift from AFDC to TANF does qualify as ‘austerity’, but that is one program out of many. The more recent ‘sequestration’ cutbacks would be a more comprehensive example but that was pushed by the Republicans, and resisted by the Democrats, so that alone would make broad claims of austerity being a central intent of the Democrats weak. Naturally though, the Democrats have been complicit in an effort to cut government spending, so there is cause to apply ‘some’ blame for what could be called ‘austerity’ in some instances. But, the term used broadly creates an impression which obscures the fact that the Democrats have long supported the funding of many programs and policies which are the opposite of ‘austerity’.

        Bubbles can not exist without excess liquidity, and there was a capital glut involved in the 2008 downturn, so I don’t see how it might be possible to assign ‘any’ blame on austerity measures.

        • John Zelnicker

          Ray – I think you have to make a distinction between the traditional (New Deal) Democrats and the New Democrats of Bill Clinton and the DLC. You are correct when referring to the traditional Democrats, but the Clinton/DLC was different (They were essentially moderate Republicans.) and they are the ones who promoted austerity instead of continuing the widespread social benefits that were instituted by the traditional Democrats. Obama’s attempts at a Grand Bargain to cut Social Security is evidence of this. Clinton was about to try something similar by privatizing Social Security but was interrupted by the Lewinsky scandal, fortunately.

          The excess liquidity was provided by the banks being willing to lend to anyone and everyone to buy a home until they stopped and the bubble burst and liquidity dried up overnight. The blame for this belongs to the banks who perpetrated the three greatest accounting control frauds of modern times. See Bill Black for more info.

          BTW, you acknowledge “some” blame in your first paragraph and not “any” in your second. I think you were right in the first instance.

      • John,
        Hope you don’t think I’m nit-picking here, but Bill Clinton did absolutely ‘nothing’ to the traditional’ ‘deficit-spending’ construct in terms of a real budget surplus- just about 100 percent of his ‘budget-balancing’ technique can be laid to accounting shenanigans, coupled with full media ignorance of governmental finance. There was no surplus that transferred ‘monies’ from the public sector to the private sector, as functional finance would imply.

        Remember the GBC from above… well this is a REAL phenomena.
        It is at work in every year of government finance.
        And do you remember the three balancing offsets to spending?

        Well, if you recall the IGTs (intergovernmental transfers), then you can understand that ANY inter-governmental transfer can be claimed by the administration as revenue, and Clinton made a joke of all the politicians, the Press and the public.
        Jokes on us.
        There was no ‘surplus’ as we know it ,,,,,,,. being real excess revenues over expenses, and this was never the case.
        Look it up.
        It was a charade. And MMT has bought in that these IGTs somehow were responsible for a later recession.
        Not really possible.

        • John Zelnicker

          Joe – Nitpick all you want. 🙂 I enjoy the challenge. It keeps me sharp and I usually learn something.

          Within the sectoral balance model, the government under Clinton did achieve a surplus. A government surplus does not transfer money from the public to the private sector, it’s the opposite. The transfer is from the private sector to the public. Deficits transfer money from the public to the private sector. The only reason Clinton’s surplus did not create an instant recession by removing money from the private sector (reducing spending) was due to the massive increase in private consumer credit, which was unsustainable, and the dot com bubble which burst in 2000-01 causing the recession at that time. In US history surpluses have always led to recessions or depressions.

    • The real unemployment rate provides an arbiter for the use of the term austerity. Austerity it is. The Obama/Democrat policies have been in place long enough that is can’t be confused as to the source. The Republicans are no better.

  7. Democrats are shoring up nicely after the referendum. Howard Dean just poured lavish praise on Hank Paulson which indicates a keen understanding of the proper display of manners and respect to the owner-ruler class. No question that this is required by all elected courtesans – of any so-called political stripe. The good doctor, therefore, is able to selectively discriminate when it comes to austerity, which is what a politician really needs when performing their act in the circus.

  8. John Zelnicker

    I would like to express my gratitude to the moderators of this site. Joe B, Ray and others and I have been having quite an extended conversation and I appreciate your efforts.

    Thank you.