Monthly Archives: January 2013

America’s Deceptive 2012 Fiscal Cliff – Part 3

Posted on January 2, 2013 by Devin Smith | 5 comments

By Michael Hudson

Quantitative easing as free money creation – to subsidize the big banks

The Federal Reserve’s three waves of Quantitative Easing since 2008 show how easy it is to create free money. Yet this has been provided only to the largest banks, not to strapped homeowners or industry. Ben Bernanke’s helicopter only flies over Wall Street to drop its money. An immediate $2 trillion in “cash for trash” took the form of the Fed creating new bank-reserve credit in exchange for mortgage-backed securities valued far above market prices. QE2 provided another $800 billion in 2011-12. The banks used this injection of credit for interest rate arbitrage and exchange rate speculation on the currencies of Brazil, Australia and other high-interest-rate economies. So nearly all the Fed’s new money went abroad rather than being lent out for investment or employment at home. Continue reading →

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Posted in Michael Hudson

Tagged austerity, fiscal cliff

Functional Finance and the Debt Ratio—Part III

Posted on January 1, 2013 by Scott Fullwiler | 8 comments

By Scott Fullwiler

[Part 1] [Part 2] […] [Part 4] [Part 5]

This five part series will explore at length (warning!) and in detail (another warning—wonk alert!) the MMT perspective on the debt ratio and fiscal sustainability. While the approach suggests a macroeconomic policy mix and strategies for both fiscal and monetary policies that most neoclassical economists currently believe are unsustainable, ultimately the MMT preference for a significant role for fiscal policy in macroeconomic stabilization is shown to be consistent with traditional neoclassical views on fiscal sustainability.

This third part discusses the historical behavior of US interest rates on the national debt in the context of fiscal sustainability.

Continue reading →

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Posted in Scott Fullwiler

Tagged debt ratio, functional finance, MMT, Modern Monetary Theory

It’s Time for Progressives to Act

Posted on January 1, 2013 by Dan Kervick | 30 comments

By Dan Kervick

By the time I post this, the Republicans in the House of Representatives may already have torpedoed last night’s fiscal cliff budget deal. But the miserable lessons of both the budget deal and the White House political strategy that engendered it stand in any case: the Obama administration is both economically incompetent and hostile to progressive values. Progressives need to stop acting like submissive partisan hacks, and stop offering mealy-mouthed gestures of moral support to a conservative, deceitful and morally bankrupt administration that is complicit in the attack on progressive values and broad prosperity.

Continue reading →

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Posted in Dan Kervick

Greg Mankiw Discovers the Math and the Arithmetic on the Same Day

Posted on January 1, 2013 by Devin Smith | 28 comments

By Dale Pierce

Raising taxes is a good idea after all. In fact, it is now quite necessary, according to former Romney flack and alleged deep thinker Greg Mankiw of Harvard University. (Whose introductory textbook in economics may go down in history as the single greatest disinformational success of all time.)

In this Sunday’s New York Times, Prof. Mankiw bravely challenges what he takes to be the newly prevailing group-think in Washington – namely, the bi-partisan idea that “taxes on the middle class must not rise.” This is “Bad Math”, we are told. This does not accord with the “laws of arithmetic” – at least not as Prof. Mankiw understands them. It is, he concludes, our government’s stubborn reluctance to tax the non-rich which explains why “the political process has become so dysfunctional.”

Continue reading →