By Glenn Stehle
Maximizing aggregate utility is the alpha and the omega of classical economics. It’s all part and parcel of the larger Modernist project of crafting “a human science that will make us masters and possessors of nature” so that we can make our lives on this earth more secure and more comfortable (Michael Allen Gillespie, The Theological Origins of Modernity). So who, we might ask, could be against this?
The Obama administration, for reasons that pass all understanding, has been running a campaign of leaks disparaging one of Obama’s few senior female appointees, Janet Yellen. Her high crimes include not being a protégée Bob Rubin and doing exceptionally well in economic forecasting. Rubin wants the job of Fed Chair to go to his top protégée, Larry Summers. Yellen, as Vice Chair of the Fed stands in the way of Rubin’s ambitions. (Rubin is too toxic to take the Chair directly.) The administration has been leaking primarily to the New York Times’ Binyamin Applebaum. His latest article contains this remarkable statement, without analysis.
Posted in William K. Black
Tagged banksters, Fed Chair, Financial crisis, Larry Summers, Robert Rubin, Rubinites
By Dan Kervick
Scott Sumner attempts to explain the so-called “hot potato effect” which has played such an important role in the theories and policy recommendations of the Market Monetarists. But the explanation contains two weaknesses. The first weakness is a muddle of inapt metaphors which seem to run together the concepts of diminishing marginal value and negative marginal value. The second weakness is more serious: Sumner and company refuse to take cognizance of the important institutional differences between the banking sector – an unusual and limited sector of the economy where only money and money-denominated financial assets are traded – and all of the other sectors of the economy where money is exchanged for everything else that can be bought and sold. As a result they seem to be incapable of distinguishing between realistic changes in the central bank’s patterns of doing business with the financial sector and imaginary changes in the central bank’s pattern of doing business with the rest of the world. And they mistakenly conclude that central bank statements about the former should have a major impact on beliefs about the latter.
Posted in Dan Kervick, MMT, Uncategorized
By William K. Black
(cross posted from Benzinga.com)
Perhaps the only useful thing to come out of the Obama administration’s inept contest between Larry Summers and Janet Yellen as Ben Bernanke’s successor is the purported agreement among economists and other policy makers that the Fed Chair should make the introduction of effective regulation and supervision by the Federal Reserve a top priority. It would be even better if this agreement were real and would be sustained. Regulation and supervision have never risen above tertiary concerns at the Fed and every institutional pressure will push the new Fed Chair to ignore supervision.
Posted in William K. Black
Tagged accounting control fraud, banksters, gresham's dynamic, Larry Summers
By Dan Kervick
Joshua Gans raises some doubts at Digitopogy.org about Mariana Mazzucato’s argument in Slate and New Scientist that it is time for the state to get something back for its investments. Gans’s brief argument isn’t very thorough, but he makes an interesting point. Let’s first establish the context. Mazzucato’s article recapitulates some of the central points from her book The Entrepreneurial State about the sizable role governments have played in driving innovation:
Posted in Dan Kervick
By Dan Kervick
Brad DeLong proposes that there are, broadly speaking, two camps among economists with respect to what a central bank is and the purposes it should serve: the Banking Camp and the Macroeconomic Camp:
Posted in Dan Kervick
By Fadhel Kaboub
Despite all the heated public debates that we have been witnessing in Egypt since the January 2011 uprisings, very little attention has been given to the root causes of the country’s deepest economic problems. Understandably, as a country moves towards democracy, it must address all the concerns about freedom of expression, religious rights, women’s rights, security and justice sector reforms, anti-corruption laws, political pluralism, elections, and constitutional reform. However, it is equally important to recognize that regardless of the political affiliation of the new government (Muslim Brotherhood, secular, or military), it must craft a long-term policy agenda to address the root causes of Egypt’s economic problems. Failure to do so will be catastrophic not only for the economy, but also for the creation of a secure and stable democratic society.
By Pavlina Tcherneva
(cross posted from ineteconomics.org)
This week workers in fast food restaurants across the country gathered to protest the minimum wage in the United States, which currently is a paltry $7.25, and to fight for a better standard of living. The battle for a living wage for the nation’s poorest workers is set against the backdrop of mass unemployment and the highest level of economic inequality in the U.S. in almost a century.
I do not think the twin epidemics of mortgage loan origination fraud (appraisal and “liar’s” loans) and the various epidemics of post-origination fraud by financial institutions are comparable crimes to the use of chemical weapons. The President’s job, however, is to deter a wide range of criminal conduct. The elite fraud epidemics cost over $11 trillion in losses to households alone and 10 million American jobs. The cost of these fraud epidemics is so vast that deterring future epidemics should be a high priority of every administration. The refusal of the Obama and Bush administrations to prosecute any elite banker whose actions contributed to the crisis has done the opposite of deterring future fraud epidemics – it has encouraged them.
Posted in William K. Black
Tagged Assad, banksters, obama, systemically dangerous institution, too big to prosecute
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