NEP’s Stephanie Kelton appeared on Chris Hayes’ All In on Monday evening, (10/8/13). The topic of discussion was “Why the debt ceiling isn’t your family budget” examining the fallacy of comparing the debt ceiling to a family budget.
Today’s jobs report was lousy. Employers added just 169,000 jobs to non-farm payrolls in August, and downward revisions to June and July payroll numbers erased 74,000 jobs from the record. Lots of people are saying that the this weakness means that the Fed cannot, must not, dare not Septaper. Others have said what a bad time it would be to let a debt ceiling fight force a government shutdown. I’ve only seen one person zero in on the fundamental problem with our economy — the government’s deficit has gotten too small. Kudos to Ezra Klein for connecting the dots and to Carolyn McClanahan for immediately recognizing this as a key MMT insight
John Kenneth Galbriath’s book, The Good Society: The Humane Agenda, creates a blueprint for a more just, prosperous and stable world. I’m re-reading it for the nth time because I continue to believe we might just get there one day. Indeed, I’m convinced we must.
Brad DeLong has a post up today in which he advocates an expansion of the Social Security system. He opens with the following paragraph:
Edward Filene’s idea from the 1920s of having companies run employer-sponsored defined-benefit plans has, by and large, come a-crashing down. Companies turn out not to be long-lived enough to run pensions with a high enough probability. And when they are there is always the possibility of a Mitt Romney coming in and making his fortune by figuring out how to expropriate the pension via legal and financial process. Since pension recipients are stakeholders without either legal control rights or economic holdup powers, their stake will always be prey to the princes of Wall Street.
Ripping off pensioners is indeed reprehensible, and we should be prepared to call out anyone who schemes the pension system at the expense of the powerless. And we should do it even if it means calling out a certain would-be-Fed-Chairman whom DeLong has championed:
When it comes to Wall Street, Summers said he obtained insights based partly on working part-time for the hedge fund D.E. Shaw and Company where he earned over $5 million in just one year. Summers said the experience gave him “a better sense of how market participants sort of think and react to things from sort of listening to the conversations and listening to the way the traders at D. E. Shaw thought.”
One young female quant who worked with him had this to say on her blog, “But when I think about that last project I was working on, I still get kind of sick to my stomach. It was essentially, and I need to be vague here, a way of collecting dumb money from pension funds. There’s no real way to make that moral, or even morally neutral.”
By “dumb money,” she is referring to the fact that investors, including those who manage public pension funds, routinely buy certain types of secure assets on a regular schedule or in other predictable patterns. Hedge funds like D.E. Shaw take advantage of that predictable behavior by selling these assets to investors for a slightly higher price. Because of the huge dollar value and volume of these investments, such strategies can make hundreds of millions of dollars for hedge funds.
President Obama, who met with Greek Prime Minister Antonis Samaras at the White House yesterday, is reported to have said that while Athens can’t rely exclusively on austerity for its economic recovery, it will need to take tough action:
It is important that we have a plan for fiscal consolidation, to manage the debt, but it is also important that growth and jobs are a focus,” said President Obama.
I think Prime Minister Samaras is committed to taking the tough actions that are required, but also, understandably, wants to make sure the Greek people see a light at the end of the tunnel.
The Greek people have already seen household incomes fall by a third as a consequence of three years of “tough action.” Unemployment stands at nearly 28 percent, and youth unemployment is a staggering 64.9 percent. A quarter of the population has trouble putting food on the table, public health is deteriorating, suicide is up 26 percent, etc. Worst of all, there’s no end in sight.
The Greeks have served as Guinea Pigs in the most vile neoliberal macroeconomic experiment in modern history. From where I’m sitting, that light at the end of the tunnel looks like just another oncoming freight train.
Like all good Central Bankistas, Charles Evans (Chicago Fed) and Dennis Lockhart (Atlanta Fed) insist that if the Fed isn’t achieving its stated (employment and inflation) objectives, then it just isn’t doing monetary policy the right way. The flip side of the Central Bankista position is that whenever the macro data are more-or-less consistent with Fed targets, it must necessarily mean that central bankers have gotten it right. Nothing else, least of all fiscal stimulus/austerity, could possibly deserve credit (or blame) for whatever is happening at the macro level. It’s heads monetary policy succeeded, tails monetary policy failed. It also explains why Paul Volker’s policies are still widely credited for bringing an end to double-digit inflation, while President Carter’s deregulation of the natural gas industry (which finally brought energy prices down) doesn’t even merit a footnote in the textbooks.
In case you missed it, Charles Pierce has some thoughts on this thing we call “representative democracy.”
We are talking about voters who, by and large, vote against their own economic self-interest time and time again and who, quite honestly, are the biggest suckers in the history of representative democracy. They continue to support policies that render their states into third-world sweatshops for corporations headquartered thousands of miles away. They doom their kids to inadequate schools and themselves to the whims of free-market medicine. The problem, of course, is that the rest of us have to live with the consequences and, it should be noted, pay a fkload of the bills for it besides. You’re welcome, idiots.
The statutory objectives for monetary policy known as the “dual mandate” were imposed by Congress as part of the the Federal Reserve by Act of 1913. The mandate charges the Federal Reserve with responsibility for achieving two broad macroeconomic goals: “maximum employment and stable prices.” Much has been made (especially by those on the left) of the benefits of having a dual mandate. In contrast to the European Central Bank, which operates with a single mandate — price stability — the dual mandate is supposed to ensure a more balanced outcome in the public’s interest.
After I shared a few thoughts on the impending decision to replace Ben Bernanke as Chairman of the Federal Reserve, I couldn’t help revisiting the writings of Marriner Eccles. Eccles was a Republican and a businessman who, by the age of 22, had become a millionaire with an impressive record of restructuring and consolidating balance sheets (including those of financial institutions) to withstand the turmoil of the Great Depression. In 1934, Franklin D. Roosevelt tapped Eccles to head the Federal Reserve, a position he held until 1948.
The following memo – written May 19, 1938 – gives you a flavor of the way Eccles thought about important issues related to financial stability and macroeconomic policy. What he doesn’t say is at least as important as what he does. For those who struggle with econo-speak, my own plain-speak is interspersed throughout.
Should the federal government bailout Detroit? That’s the question everyone is debating. We think the discussion should be expanded well beyond this narrow question. Detroit is the canary in the coal mine, but it’s symptomatic of a bigger problem, which is the lack of jobs and decent demand in the economy.