More Money
Money, according to Paul Krugman, is the solution to the world’s problems. Writing in the New York Times Krugman expressed amazement in the inability of people to understand that government hasn’t spent enough of it.
It’s frustrating but not surprising that we’re still talking about fiscal policy in the frame of “Keynesians said the Obama stimulus would work, but the economy is still depressed”. It’s actually a trivial though telling point that this narrative requires fudging or outright lying about the point that prominent Keynesians warned in advance that the Obama stimulus was inadequate.
The obvious thing to do is for government to find ways to lay its hands on more of this vital item in order to spend it. Congress has proved obstructive in the the process to borrow more. Nancy Pelosi, who was once the Speaker of the House, has a wonderful idea to get around this. Why doesn’t the President just interpret the Constitution to mean that he can borrow any amount of money that he likes? Slate has the details:
At a lunch roundtable with columnists earlier today, House Minority Leader Nancy Pelosi urged President Barack Obama to avoid a new debt-ceiling showdown by stating that a statutory borrowing limit is inconsistent with Section 4 of the 14th Amendment, which states that “the validity of the public debt of the United States … shall not be questioned.”
Matthew Yglesias, who wrote the article, says the idea isn’t as harebrained as it sounds. It has a sound legal and intellectual basis. After all, Bill Clinton thinks it is a good idea.
Speaking last summer, former President Bill Clinton also endorsed this approach and anonymous members of Congress alleged that Pelosi privately supported it. Obama, however, has indicated that his administration’s lawyers are not persuaded the constitutional argument is correct. In my experience discussing this with constitutional scholars, the key point is less about the merits of the argument per se than it is about whether there’s anything the courts could or would do to prevent a president from acting unilaterally in this regard. Most people I’ve spoken to feel that this would be a classic nonjusticiable political question and no court would issue a restraining order enjoining the Treasury Department from issuing additional debt.
Bill Clinton’s recommendation should be reason enough. But if more were needed, it is worth noting that for once, Yglesias and I are in complete agreement. In an earlier post I argued that the administration’s definition of legal and constitutional is whatever you can get away with. If “there is simply no way anyone can make him follow the law” then the President can do what he wants, or as Yglesias puts it so much more elegantly, “the key point is less about the merits of the argument per se than it is about whether there’s anything the courts could or would do to prevent a president from acting unilaterally in this regard”.
The unstated corollary to dictum that one can do whatever one wants while in power however is the imperative to remain in power forever. For it will not quite do to yield authority one day to a political enemy who will be similarly unrestrained in his vengeance and desire to recoup.
The playwright Robert Bolt considered that issue when he wrote the script for St Thomas More in the film A Man for All Seasons. The situation was this: More was going to be framed by a perjurer, but he was in power. So why not use the power to do away with the perjurer?
“Although it is the law that eventually forces More’s execution, the play also makes several powerful statements in support of the rule of law. At one point More’s future son-in-law, Roper, urges him to arrest Richard Rich, whose perjury will eventually lead to More’s execution. More answers that Rich has broken no law, “And go he should if he were the Devil himself until he broke the law!” Roper is appalled at the idea of granting the Devil the benefit of law, but More is adamant.”
William Roper: So, now you give the Devil the benefit of law!
Sir Thomas More: Yes! What would you do? Cut a great road through the law to get after the Devil?
William Roper: Yes, I’d cut down every law in England to do that!
Sir Thomas More: Oh? And when the last law was down, and the Devil turned ’round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man’s laws, not God’s! And if you cut them down, and you’re just the man to do it, do you really think you could stand upright in the winds that would blow then? Yes, I’d give the Devil benefit of law, for my own safety’s sake!
I have elsewhere described dilemma as the Jackie Chan Fighting in the Ming Vase Museum problem. In those scenarios, Jackie Chan has to simultaneously keep the priceless jars from falling even while energetically defeating dozens of kung-fu fighting assailants amongst them. In terms of politics, the analogous problem for the patriot is to preserve the Republic’s institutions before he preserves himself. It’s a hard task.
That’s probably a quaint notion in Pelosi’s eyes. And besides, Jackie Chan just retired from action movies this year. The Ming Vases are on their own. But still the idea that President Obama should just declare Congress redundant suffers precisely from the problem that Robert Bolt identified. If to keep Barack Obama re-elected and keep the executive in Democratic Party hands, Pelosi should borrow every dollar within hail and cut down every law on the books, what would she do when the last dollar was borrowed and squandered? Where would she hide, what would she spend?
Well, she can always blame George Bush.
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Once the executive seizes the power to borrow independent of the congress I wonder how long it will be before it assumes the power to direct the borrowed money to any project, group or activity that it deems worthy of financial support. We don’t need no stinkin’ budget!
Paul Krugman agrees with Tom T. Hall!
“Son, it’s faster horses… younger women… older whiskey… and more money”
“A Man For All Seasons” is a “rule of law” propaganda film. “We must obey the law even if it destroys us, because without the law is tyranny and chaos.” But what liberals really mean is we obey the law as interpreted by them. And they interpret it any way they want.
scory @1: “We don’t need no stinkin’ budget!”
Unfortunately, it looks like too many Congress-critters (bipartisan) think, ‘We don’t need no stinkin’ Congress!’.
As long as they get those strange perks that turn ordinary folks into millionaires and the opportunity to bloviate on TV programs which nobody watches, too many Reps & Sens seem ready to duck every responsibility.
But at the end of the day, the Bond Market is the ultimate authority in this world. And the Bond Market will ensure that this does not end well.
Buy more ammo!
A law against robbing a bank does not stop you from robbing a bank, it provides the basis for punishing you after.
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k @ 3: But at the end of the day, the Bond Market is the ultimate authority in this world. And the Bond Market will ensure that this does not end well.
Well, but the bond market is already very late to the party, and it never *did* show up to put a stop to MBS and CDS and CDO and all that jazz.
The market never did correct itself, the market broke, that is the story of 2008. And our experts and authorities (aka “the market”) did not foresee it, did not prepare for it, did not price it in.
But yeah, in the end it will go Weimar, Zimbabwe, or worse (WZow).
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The horrible thing is, it will go WZow even if Krugman is right and in the short term, more printing and/or borrowing would “work”, because it will not work long, there are too many human beings involved in the game.
There was an article just about a week ago about the financial manager for FDR in WWII, and his *first* step was to get FDR to stop killing corporations on a dogmatic basis. In the story of what really ended the depression, maybe that was the critical step.
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The supposed advantage of the “rule of law” over it’s alternative, the rule of force.
The classic opposite of the “rule of law” is the “rule of men”.
“A Man For All Seasons” is a “rule of law” propaganda film.
The supposed advantage of the “rule of law” over it’s alternative, the rule of force, is that it claims to enforce a kind of equality between people in the public space. In rule of force scenarios, there is the probability p(ij) that i will prevail over j where p(ij) represents the likely i has a faster draw or harder fist than j.
Hence, Bolt argues that when faced with the “Devil”, we can hide behind a law. But if the laws are corruptly enforced or the Devil is itself more powerful than the law (something Yglesias considers) then the protection provided by the law is pretty useless.
In fact, you can argue that if the sum of society’s utility under the “rule of law” falls below the equivalent utility under a “rule of force” then the rational man will abandon the useless law and resort to force.
The problem that Pelosi would create is that by undermining the integrity of law, she lessens its incentive to be followed. If the President sets aside enough of the Constitution, at some point, he ceases to govern under its aegis at all. Having shredded enough of it, the document no longer provides cover for anyone, not even for him. At the limit, the degradation of the rule of law is equivalent to the reinstatement of the rule of force.
This should be obvious at a glance. But it seems not to have occurred to Pelosi, nor to Yglesias, unless I am mistaken.
That’s fine by me. The only thing about it is, once rule by force becomes the new norm, then everyone must play by it. You can’t selectively invoke the very law that you’ve shredded. So if people want the rule of law, they must preserve it. Jackie Chan, for all his comical antics, knew a thing or two more than Nancy Pelosi.
In order to understand the actions of Krugman, Pelosi, Reich, Obama, etal you have to understand where they are coming from. What they believe is stated in Modern Monetary Theory (MMT). MMT contends that sovereign money such as the dollar, pound, or yen cannot be over-issued. That government debt is never a problem for a sovereign nation such as the U.S. For an explanation of MMT go here: http://tinyurl.com/3ntgwgq
Basically, the idea is kind of like Keynes on steroids. The issue is basically supply and demand. Money is issued to increase demand for goods and services. When demand becomes too robust (inflation), the supply of money is decreased. Hence, you will read Krugnman, Reich, etal stating that demand is too low and must be propped up with more government spending. In their opinions the amount of debt or deficit spending is immaterial because sovereign debt is all basically owed to ourselves.
It’s a quaint theory that neglects the role of confidence in both the economy and the dollar. Much of the restrained demand, restrained job creation, and overall economic malaise is the result of lack of confidence in government policies, which are mostly viewed as anti-business. Also few countries in the past have enjoyed the status for their currency that the dollar enjoys today. The dollar is very difficult to debase because there is such a huge demand for it worldwide. That does not mean that eventually that demand will subside and be replaced by a currency that people have more confidence in.
Anyway, I think it is valuable to understand what the progressives believe (MMT) in order to be able to counter their arguments for unrestrained government spending.
“Yes, I’d give the Devil benefit of law, for my own safety’s sake!” – Judge Robert Bork cited this passage with approval in his history of constitutional jurisprudence, “The Tempting of America”.
The Matt Yglesiases of the world are an essential part of the rotting process that is going on. To cavalierly rationalize lawless and despotic behavior by those who have power makes one part of the problem.
The Krugmans of the world are alchemists who keep trying to make gold from lead, and are always frustrated by the results to the point that they blame externalities for their failure.
Why bother printing money when most accounts only function electronically? Banks could follow the Times example and make up all the figures they want.
However you represent the data, I believe most systems can handle 255 characters, as in $9999999999…{etc}
W @ 6: “At the limit, the degradation of the rule of law is equivalent to the reinstatement of the rule of force.”
Isn’t the Rule of Law really an agreement between us peons about who may use force, and under what conditions? If Big Luigi uses force against one peon, the rest of us peons can use greater force to slap Big Luigi down.
As Chairman Mao so succinctly stated, all power comes out of the barrel of a gun.
Sticion #4:
And rope. Although I am becoming more partial to 0.041 aviation stainless steel safety wire to make nooses.
And we need to inventory all the lampposts and start assigning politician’s and economic advisors’ names to them. Will save time.
I’m thinking that the overpass bridges will be reserved for the MSM. Not sure where to hang the public employee union leadership. Any opinions?
jj@ 7: Basically, the idea is kind of like Keynes on steroids.
Or crack.
Who or what is a Warren Mosler? I read your linked entry on WaPo, and followed links back to Mosler’s site http://moslereconomics.com/ but, what *is* he?
“MMT: Taxes function to regulate aggregate demand, and not to raise revenue per se.”
Oh reh?
“The funds to pay taxes and buy government securities come from government spending.”
Say what?
Hey, I’m just as much in search of a post-modern monetary theory as the next guy, but this sounds more like a perpetual motion machine than a coherent theory.
The Center of the Universe
St Croix, United States Virgin Islands
MOSLER’S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.
Uh-huh.
Paraphrased from Hayek, here is what “the Rule of Law” means to me.
“The Rule of Law means that Government in all its actions is bound by rules fixed and announced beforehand. Then, people can foresee with fair confidence how Government will use its coercive powers in given circumstances. On the basis of this knowledge, individuals and enterprise can plan their affairs. The rule of Law frees individuals to act and prevents Government from making arbitrary actions. Although the ideal can never be perfectly achieved, under the Rule of Law the government is prevented from stultifying individual efforts by ad hoc action. Within the known rules of the game, the individual is free to pursue his personal ends and desires, certain that the powers of government will not be used deliberately to frustrate his efforts.”
In my opinion, the Rule of Law flew out the window long ago. It has been replaced by collectivist economic planning. This determines a company’s business environment and limits the company’s options in achieving positive returns for the owners. I think this circumstance influences how companies react to government actions because the government planning authority cannot bear to confine itself to providing opportunities for unknown people to make whatever use of them they like. Instead, government believes it must provide for the actual needs of people and then choose deliberately between them. These decisions cannot be based on formal principles or settled for long periods in advance. The government planning authority depends on the circumstances of the moment and is forced to balance one against the other the interests of various persons and groups. This is opposite of the Rule of Law under which the government in all its actions would be bound by rules fixed and announced beforehand.
Because collectivist economic planning has replaced the Rule of Law in Western society, individuals and enterprise are constantly in a never-ending series of ad hoc negotiations with bureaucrats. In every case, the views of a government official will have to decide whose interests are more important; and these views will become part of the law of the land. This is wrong and leads to the destruction of wealth instead of its creation.
Who or what is a Warren Mosler?
Something to do with safes and strongboxes maybe. With regards to the theory itself, it sounds like a device for signaling to the underlying “real economy” based on a fiscal baton. Raise the baton and the orchestra amps up the sound. Lower it and down she goes. Except in this case, the baton is the amount of “money” in circulation.
Notice however, how the theory treats money as an object two properties: value and signal. It is invariant and variant at the same time. In reality this theory is probably just a model whose validity depends on its agreement with statistical behavior. In other words, there is no rational reason why this has to work in principle. The basic argument for it is that certain economic times appeared to work that way in the rear-view statistical mirror of the economists who believe in it.
If so, I would regard it as no more of a law than the hunches of a race track bettor who got a guess right once fifteen Saturdays ago and thinks he’s discovered an immutable law of nature. If the machinery cannot be explicated, if the principle cannot be described, and all you have is occasional correlation, you ain’t got squat.
But even supposing it were true, such a theory would be too coarse and imprecise to use in so reckless a fashion. Krugman’s assertion that the past stimulus “isn’t enough” is particularly dismaying, because all nicely behaved linear models improve proportionately to the input. So we would be able to observe the fall of shot, as it were, by noting the improvement from the stimulus and add more as needed.
That would be more convincing than Krugman’s model, which is like a volume control with only two settings not enough and prosperity with nothing in between. That sounds like a pretty hokey model.
My guess is that MMT is a vanity theory. It gets its power by appealing to the vanity of rulers. It tells them what they want to hear. O king, thou mayest borrow any quantity of lucre, so sayeth Krugman. Of course the King would like to hear that. And equally, it introduces moral hazard.
In a way Pelosi is making the same kind of vanity argument to Obama. O great ruler, setteth aside these trifles and borrow from the public purse! I would say, thee before me. But in Nancy’s universe, it is always other people’s money before theirs.
The end of next week we will know if Congress or the Supreme Court has the Balls to stop the sedition being played out by 0bama and it will determine if November 6th becomes irrelevant. We not only have our first 2nd term black president but our first Tyrant/Cesar!
ALL HAIL DEVIANTOUS MAXIMOUS 0BAMAOUS, THE MESSIAH OF HOPE AND CHANGE, DEFENDER OF THE OPPRESSED BLACK AFRICAN NORTH AMERICA PEOPLE AND GREATEST DESTORYER OF ALL THINGS EUROPEAN COLONIALIST!
ALL HAIL OUR “FORWARD” LEADING FROM BEHIND SUPERIOR INTELLECT AND EQULAITY FOR ALL (but whitey) LEADER, WHO HAS FREED HIMSELF OF THE SHACKLES OF OUR EVIL WHITE COLONIALIST SLAVE OWNING FOUNDERS!
There are volumes of writings on how quickly life in the Roman Republic sank into lawless depravity once the likes of Marius and Sulla placed their own ambition over the constitutional tradition that had composed the Republic for 400+ years.
Once the constitution was gone – it was gone forever. It wasn’t an academic discussion for Joe Q. Your name went on a list, you got a knife in the throat, and your property was confiscated and sold to the friends of the One.
That’s the difference between the Rule of Law and the rule of men.
And the wrinkled harlot said yesterday that the limp Boehner is the most radical speaker the House has ever had… This for agreeing to hold the vote on Holder’s contempt charge.
Friends: the enemy is within the gates. Wretched is correct that it’s hard to stand for the rule of law over force, especially when the enemy has been so successful in cutting that wide swath already.
I described Obama’s election as a coup d’état . I am certain that the vote was stolen, illegals voted, dead people voted, people were intimidated away from polling stations, others were rounded up and paid to vote. A man had his door broken down by Obama’s EPA fascist thug Almandariz and the EPA police team. His crime? Writing a pretty innocuous email to the EPA asking for Almandariz’s contact information. They took “so we can say hello” as a threat to Almandariz and assaulted an American citizen in his home. Soon after that facsist troll Napolitano retailed the lie that the most dangerous threat faced by America was right wing extremists, and returning war vets, another group of lawful Americans in Michigan was rounded up by the treasonous DoJ under that pig Holder, and deprived of their Constitutional rights. They were later released and all charges dropped, but the damage done.
The damage done by this hideous adnministration is only now coming to light, and if America can even survive his multi-pronged assaults on the fabric civility and law of our land, it will take years, and trillions, and probably many deaths to rectify Obama’s wreckage. The enemy is not just at the gate – he sits upon a throne.
7. Jimmy J. @ 7
What they believe is stated in Modern Monetary Theory (MMT). MMT contends hat sovereign money such as the dollar, pound, or yen cannot be over-issued.
Thanks for the explanation. So why does the state need taxes, then? Can’t the government just print 110% of everyone’s income, give everybody a permanent paid vacation, tax free, and use the leftover 10% to pay down the oh so irrelevant debt?
If the rulers are corrupt arbitrary and elevated through fraud then they are illigitimate. If so then they have no more right to issue money then a else. This idea that we need more money sounds great. How can we all start printing Blast Bucks or Belmont Dollars?
This is why I have been so alarmed at the erosion of prior traditions, be they the written rules or the “unwritten” rules of comity. So many of the courtesies and protocols that seem stilted or redundant turn out to be the ballast that keeps the ship of state (and the culture) afloat. Take them away during good times and they will not be available in a storm.
Somewhere near 60% want Obamacare to be declared unconstitutional. Likely because of the near illegitimate nature of it’s providence.
The rule of 3′s is evident here also. The middle third has largely joined the conservative third in renouncing this frankenstein.
Trouble is, the third that would have us become a festering, dismal welfare state worker’s paradise like unto Greece, well, they let their mask slip a little during the special deal making and bribing to birth the beast.
Any action such as that proposed by Yglesias would again slip the mask enough to frighten the middle third. Rebellion would ensue.
This election is about obtaining sufficient support from the middle third.
Probably well known to everyone here, but let’s say it again: Money is a symbol, which makes it easier for people to trade real, tangible, useful goods with one another more easily than in a barter system. Even precious metals have an intrinsic value considerably lower than an economy places on them; for example gold is useful for jewellery and for contacts on electronics and not much else. And a dollar bill (or a five pound note) is of less intrinsic value than a piece of blank paper, for obvious reasons.
The debt crisis most of the West is going through at the moment is basically a problem of resource mis-allocation; far too many resources being squandered on utterly non-productive activity and also far too many resource entitlements (in other words, too much money) tied up in places where the people in control of them want to keep them rather than doing something useful. In other words, too much money in the hands of investment bankers, hedge fund managers and other such parasites.
What is the value of what an investment banker does? Zero.
Interesting that La Pelosi and Julio’s little brother Matt, both leave out the most important phrase from their excursus on Amendment 14: “authorized by law”.
This is one case where the provision is truly self enforcing. Bond buyers will not bid on, nor will they take up, bonds that do not have legal opinions as to their authority. Administration officials may be ready to act on the stop me if you can theory, but no lawyer who wanted to keep his license to practice law or his professional reputation would issue that opinion, and no bond buyer’s counsel would accept it.
La Pelosi has been barking a lot lately. I think her family needs to get her to her doctor so that he can adjust her medications.
Krugman is like an ignorant doctor who knows only one treatment – Bleed the baxter until he recovers.
Having failed to fathom a complete set of variables for a very complex system, his understanding of the system behavior is insufficent.
As noted by others above, people who still have resources, have retired debt and repaired balance sheets. Why – largely, I think, because they have a reasonably good understanding of the economic incompetence of the operators on the bridge.
Responding to falling demand, businesses have contracted their production and expectations. Fact is, the recession is not really over until we the people say so. And we are voting with our dollars everyday.
Krugman’s solution will do nothing but harm the patient.
OT:
I see an ad on this page that asks, “BAN CONTRACEPTION?” About this ad in particular: does anyone remember any calls for outright banning of contraception?
Me neither.
It’s interesting that these rightosphere blogs are infested with leftie ads, like an intentional taunt.
I need to add that this idea was floated during the so called debt limit crisis of Summer 2011, and it sank of its weight then.
It seems we have just dispensed with basic common sense in our hurry to ‘get richer.’ The only reason we have money at all is because cows are too heavy and bulky to fit into our wallets. When on the gold standard, wasn’t money only printed to back up the gold on deposit? The theory being something of absolute value had to be represented by the paper?
So now our paper is just paper so why not just print more?
19. sanhetnik was correct, why tax at all? Just print what the government needs, no need for budgets or accounting, hell- fire the IRS.
In order for any of this to make sense again, money needs to be represented by something of real value. Otherwise it is just a shell game.
Please, anyone feel free to correct me on any wrong point as I am a novice on financial matters. But spare me the snake oil, I’m good for now.
This extra-legal end run around Constitution would probably result in retribution when power changes, but that’s a long term, speculative and future political issue. Our role as mere observers will either be as angry spectators or ecstatic cheerleaders, depending on which party’s ox is being gored at the time.
My concern is worry is not about long term possible retribution against the initial power abusers, it’s the immediate risk to us mere observers.
The moment you deposit money into your account in a bank, it loses its character and becomes a mere computer entry. The computer entry is all you have to represent your claim on your deposited funds. Do you think that this present criminal gang wouldn’t attempt to order federally insured financial institutions to assign or turn over these “mere” computer entries, heck, even just declare them to be federal government property? Violates the 5th Amendment “taking clause”?-Who cares? Declare the computer entries to be “public property” and you’re home free. Put your own flunkies on the Supreme Court and they’ll contort the Kelo decision to allow it. Your money’s gone and spent and the government, by then, is judgment proof.
What is the value of what an investment banker does? Zero.
Patently untrue. Investment banking has provided the capital to launch 1000s of start-ups and to finance the growth of innovative technologies. Millions of Americans have benefited directly from investment banking. The American economy would be but a fraction of what it is without investment bankers.
Paul Krugman noted that government spending was good. Never mind what it was for. Spending was beneficial, even when there was no rational purpose to it at all.
Peter Schiff remarked that what Krugman really wanted was another bubble, to save us from the effects of the last bubble. Schiff makes the point that what is missing from the Krugman theory is any notion of the possibility of misallocating resources. Now the market would never allocate resources to fight space aliens if the threat was wholly fictional. But Krugman would. Literally.
But it clearly makes a difference how you spend money. If I had 10 million dollars, I could either invest it in something that promised a return on investment or I could run down to the nearest casino and bar and blow it that way. I think it would make a difference. Others, one must admit, have a different point of view. British soccer player George Best, describing how he pissed away his fortune said, “I spent 90% of my money on women, drink and fast cars. The rest I wasted.” Wasted? Impossible, at least in the view of Paul Krugman.
Anyone ever seen Krugman on TV?-He’s exhibits a nervous, sweaty, jumpy-eyed, paranoia-the same countenance as a baptist minister in a whorehouse.
A question I ask my Lefty friends is ” Since you guys have abolished the rule of law, once the nasty Right Wing Rethugians regain power, which will surely happen sometime, what’s stopping them from lining all you up against that wall over there and shooting your brains out. Of course after a two minute trial for treason”. In their disdain for the Constitution, way too many lefties , I guess, have never gotten the idea that the Constitution was meant to protect them too.
The haughty oh so brilliant Left never thinks through to the consequences of their actions. Buraq and friends have apparently, deliberately embarked down a road to chaos where their leftwing cohorts will likely be the savagely beaten and battered losers in the end. All power, ultimately after the rule of law breaks down, does flow out from the barrel of a gun, and our side does seem to have a hefty advantage in the gun department.
Quite a game Obama plays here. Do things that are illegal and dare the Republicans to do something about it. He must be in so deep that now it is his only alternative. With the Democrats controlling the Senate, he seems safe for now (unless vunerable Democrats favor their own skin over his). If Republicans take the Senate and Presidency then all that is hidden will come to light. If not we slip into the same fate as Rome.
Nixon was taken down because some Republicans believed in the rule of law (though Nixon was not that much different than FDR, Kennedy and LBJ or Obama for that matter). Obama is safe because Democrats do not believe in the rule of law. I think Republicans should consider Game Theory here. Ultimately Democrats get what they want and thwart Republicans from attaining their goals. The next five months will be interesting.
Jackie Chan is great. Probably the greatest physical comedic actor ever; even better than Buster Keaton and Harold Lloyd.
“Investment banking has provided the capital to launch 1000s of start-ups and to finance the growth of innovative technologies. ”
Goebbels would be proud of you. Start ups and Innovative technology existed long before investment banking. It would be more accurate to say that investment banking was invented by unscrupulous people to cheat creative and innovative people out of the fruits of their labor.
I really don’t like this guy, considering him at best a RINO;
http://online.wsj.com/article/SB10001424052702304898704577478762573535618.html?mod=WSJ_Opinion_LEADTop
But he is correct. The voters will get a clear choice of economic futures this November.
#35
You make it glaringly obvious that you have no clue what capitalism is or how it works.
Seems to me, according to Krugman’s calculations, we should print money as fast as we can. Use some to buy faster presses. After all, in his opinion, every dollar spent by government creates 1.x times that amount in increased economic activity (residual rather than evanescent).
Perhaps others can explain why this situation would not be reason enough to roll the presses round the clock. Heck, we’ll all be wealthy when this kicks in.
12. RWE
As far as public employee union bosses are concerned, multi-laned street traffic signal standards over-reaching every major intersection should provide plenty of space. No problems. Let the good times roll.
Josh @13
RE: Mosler’s Law and the Crucian center of the universe.
Mosler is apparently our replacement for Sir Allen Stanford or something.
Like I said a few threads back…We are a petri dish for progressive BS. Free redistributed mystery bucks pour in and crap is extruded out into high speed fans.
The US Virgin Islands is once again the modern day [post-Keynesian] pirate home port of choice.
” It profits a man not to sell his soul for the world, but for Wales Rich, Wales?!
Wretchard @15
I’ve got to put up with the consequences of a star-struck idiot government every damn day.
The likes of Krugman, Stanford, Prosser, and Mosler come here and every .gov fool and private sector playa just goes gaga to be in the presence of such sages and kingmakers.
Uuuuugggh!
First they cursed us with the New Deal, then we got the Johnson Treatment, then the Carter reaming, and now this? Dear Lord.
Nancy Pelosi, the gift that keeps on giving. The more she motors her mouth the lower her NATIONAL approval rate goes. As the minority house leader she is the face of the legislative Democrats. She is going to cost them seats in the hard districts. Nancy for Democrat House leader forever…or is that Democrat hosed leader for ever.
Obama’s use of executive privilege has either scared some on the left or given them an excuse to dump on him:
http://www.punditpress.com/2012/06/liberals-turning-on-obama-after.html
wretchard (#31) Might I suggest we replace “space aliens” with “Global Warming” and the “Green Industries” as the bubble? The decivers just never got it to inflate enough… Just look at all the leeches that have tried to make it work!
Epig @ 38. I think what you are referring to is called the Multiplier Effect. Keynesians have long held the that the Multiplier effect was greater than 1, where for every guvmint dollar spent the economy grows more than that dollar.
Well, Buraq has kinda blown that theory all to hell. The Money Print plus the excessive borrowing under Bernank/Buraq has been in the trillions and net growth has only been about a trillion over his term in office. Ergo, it would seem the multiplier effect under Buraq has been significantly less than one, or in plainer english, for every dollar ‘invested” in guvmint spending, the return to the economy has been way less than that dollar. Now, since there is not really any provable control data the theory has not been scientifically disproven, but it has been thoroughly tarnished.
W @ 31: “But it clearly makes a difference how you spend money. If I had 10 million dollars, I could either invest it in something that promised a return on investment or I could run down to the nearest casino and bar and blow it that way. I think it would make a difference.”
It would definitely make a difference to you, but maybe not to the economy as a whole. This brings us to the Coase Theorem — the concept that, in the limit, it does not matter who holds the resource (your $10 Million) initially; it will end up in the hands of the entity who can put it to the best use.
If you blew the wad at the nearest casino, the casino owner would then have a part of the $10 Million, and might choose to invest it in building a dinner theater at the casino, creating an income stream which continued for years. One of the other gamblers might walk away with part of your $10 Million, and use the money to buy some construction equipment to build the dinner theater and a whole lot else, creating an income stream with continued for years. And you would have the story of a lifetime — how I lost $10 Million in one night — which would guarantee you many a drink at many bars for years to come.
Bottom line is — money circulates. But all money can be used for is to purchase real goods & services which others produce. Production precedes consumption, which is one way of expressing Say’s Law from about 150 years ago. The problem is that the Krugmans of this world and their clients in Big Intrusive Government have forgotten the basics; their excessive regulation discourages investment and encourages consumption. The consequent lack of production results in the failure of Keynesianism.
30. Peter Boston; 35. stoicheion
Investment bankers first appeared in the 13th century as manufacturing technologies were developed that required large capital investments. Due to their international trading, medieval Italians invented new financial instruments for financing international trade.
The bill of exchange appeared in the 13th century and with it the first true bankers. Limited liability appeared in Florence in 1408. The medieval bankers helped people to accumulate capital for investment in manufacturing enterprises.
Without investment bankers, there may not have been modern capitalism. For that reason alone I’d give a thumbs up for investment bankers. Nowadays, like all financial services, investment bankers have been sucked into the modern whirlpool of dodgy credit instruments. That does not mean that all credit instruments are crooked, nor that all investment bankers are crooks.
#35. You are out of your element. Put quite simply, there would be no investment bankers if there were no demand for their services. They supply much needed fuel that is otherwise not available.
Unsk – the unstated message, which seems to never work, no matter how often it is proffered, is that the liberal message is that we must take money from the rich.
Turns out, according to Krugman’s arguments, you don’t need to take it from the rich. In fact that would be counter productive. We would be better served just to print the stuff non-stop, purchasing additional presses if necessary.
If the multiplier is truly greater than one, the increased residual economic growth would outweigh any inflationary pressure. Better to just print, that prosperity may abound!
The deck’s will be awash, not just with cash, but with an economic tidal wave! Indeed we will all of us be roiling in wealth, thus sayeth the Krug.
The bottom line is that we conservatives (those who try to preserve the best of our past) are bringing knives to gun fights. One must descend into brutality if fighting for one’s life, or way of life. The Allies did not become National Socialists because they did whatever it took to defeat them unconditionally, but they did get damn down and dirty in the effort.
It would definitely make a difference to you, but maybe not to the economy as a whole. This brings us to the Coase Theorem — the concept that, in the limit, it does not matter who holds the resource (your $10 Million) initially; it will end up in the hands of the entity who can put it to the best use.
That presupposes that my malinvestment is the exception and ultimately, my stupid behavior is overruled by the overall rationality of the economic system.
Right now close to half the economy consists of government spending. If 1 out of every 2 economic units is running down to the casino — spending it on alien defense weapons systems — and counting on the other economic unit to make up in rational spending for what they are manifestly wasting, then the theorem has less and less to work with.
Now in a regulated economy an increasing share of nongovernment income is spent in fulfilling bureaucratic requirements. Paying lawyers to understand impenetrable tax provisions, building ramps in buildings which have almost zero probability of being visited by a disabled person. The regulation is friction. In productive terms all this lawyer rent paying is the equivalent of building defenses against alien invasion, in a manner of speaking. Surely the theorem must reach a breakdown point. When is it reached? When alien invasion defense preparations are at the 10% mark? 50%? 70% When does Krugman’s alien invasion theory cross the line into madness, if it was not there to begin with? I wish I could ask him.
When does Krugman’s alien invasion theory cross the line into madness, if it was not there to begin with? I wish I could ask him.
I sent him an e-mail stating that we needed to talk. Seeing the truth of the matter, that nothing was to be gained from the discourse of two idiots, he declined to respond.
What was the problem with the Weimar Republic then? It surely could have spent any amount of money. However, the fact its money wasn’t worth anything might have limited what it could buy.
It’s perhaps debatable whether money can buy happiness, but worthless money most surely can not – and never did.
Is the stock market a proxy for the economy? What about for the worth of the dollar? A whole lot of money has been pumped into the economy since Obama came to Washington town, which might help explain the corresponding runnup in the DJIA. But what happens when that money becomes widely believed to be devalued?
The Dow lost some 250 points today, the second worst day yet this year. Personally, I think this is but only a beginning. Would anyone care to predict what will be the low for the year?
Ok, I’ll start, and, since I’m an inveterate optimist, say: 4500
I hope that someone – Richard? – is going to undertake to explain to us how “and who’s going to stop me?” has anything to do with a system that is said to respect the Rule of Law. Please.
A solution might be to hold the President in contempt of Congress. At least that will eliminate the yearly state of the union address given as a speech before both houses because the Sargent at Arms would simply arrest him on Capitol Hill. I do wonder if during old Tricky Dick’s run whether the Secret Service worked through a protocol of what to do if the Sargent at Arms shows up at the door. I wonder what it is.
s @ 54: The Dow lost some 250 points today, the second worst day yet this year. Personally, I think this is but only a beginning. Would anyone care to predict what will be the low for the year?
Well, looks like the low so far this year was just a few weeks ago around 12100? Today it still closed at 12573. Let’s say the top 3500 points or so are artifacts of Bernankecare, the PPT, and the gnomes of Zurich. Bernanke is now going to twist again like he did last quarter, with what I presume (!) is the goal of keeping the US economy at least level even if and when Europe explodes. And as always, if hot war breaks out in the Straits (or the bends or the horns or anywhere else), all bets are off. But inflation is more likely to continue to boost the market up, than to establish new lows. Ben just won’t have it.
The entire world economy has been like an ongoing Road Runner cartoon since 2008, you need a *lot* of imagination to predict anything, especially the future.
37. Peter Boston
I understand quite well. Well enough to buy 1/3 of a toyota franchise for 600K and in 7 years own it entirely before selling it for 23 mill. That was in the early 90′s and I was well position for the tech bubble. I did well enough there to retire for the 3rd time. I’m not worried about my next meal and I have lots of ammo and several places I can fort up.
I think you have blinders on. Maybe your education was too narrow. The Roman Empire of 2000+ years ago had Business start ups and innovation. No stock markets or investment bankers. The concept of mass production is Roman. The first factories were Roman. Powered by overshot water wheels they mass produced weapons for the Legions;
http://dsc.discovery.com/news/2008/12/05/roman-oil-lamps.html
I couldn’t locate quickly an URL for the arms factory near Milan but this URL should give you some idea of the small factories the Romans created.
IIRC, the first stock market was in Holland. There the idea of common people pooling their money in a financial endeavor was created, at least as far as more modern times. Before that it was Royalty that funded Start ups and innovation. It was Royalty that created the industrial revolution that then destroyed them.
The reality of economics is that Adam Smith was correct. All the midgets that followed him are just trying to control the unseen hand. That is like giving orders to the wind and tide. Statism tries to ignore the unseen hand;
http://en.wikipedia.org/wiki/Statism#Economic_statism
The unseen hand really doesn’t care what the state does.
The upcoming election (November 06) will determine if the USA moves back toward Capitalism or Statism. Sorta. My problem with Mitt is that he is a statist also, just not as much as 0bama. Still, every little bit helps. One less regulation is one less regulation.
Technically, Capitalism is where the means of production and distribution are controlled by private citizens. Statism (or Socialism) is where those same means are controlled by the state. Keynes theory is (simplified) that the state can use money and the cost of money to control that unseen hand. History has proven him wrong many times over.
My theory is that the state uses it’s police powers expressed as “regulations” to try and control the unseen hand. Like always, the unseen hand writes what it will. No human or human creation can affect the unseen hand.
Control freaks go rabid over this theory.
So we have hundreds if not thousands of theories about how to control the unseen hand, all created by control freaks. It would be much better to round up the control freaks and cure them. Meanwhile everybody does what is best for them, in the long run the net results will be what is best for everybody.
Ammoral people selling derivatives IS NOT capitalism. It’s fraud.
The entire world economy has been like an ongoing Road Runner cartoon since 2008…
Josh, you are so inscrutable! So, has Wile E. Coyote already run off the cliff, and is desperately spinning his legs in mid-air, just waiting for the re-impositon of gravity and the correspondingly inevitable and inescapable fall?
Just for my own gratification, I did a quick search for Wile Coyote, and came up with this somewhat dated but still relevant piece from the Telegraph: http://www.telegraph.co.uk/finance/financialcrisis/8870210/The-euro-crisis-has-turned-us-into-Wile-E-Coyote-weve-run-off-a-cliff-legs-spinning…-are-we-ready-for-the-drop.html
http://reason.com/archives/2012/06/19/three-fallacies-in-obamas-public-sector
For the Wile E. Coyote crowd, remember Wile does good until he looks down. Then it’s the long drop and a cloud of dust.
s @ 59: So, has Wile E. Coyote already run off the cliff, and is desperately spinning his legs in mid-air, just waiting for the re-impositon of gravity and the correspondingly inevitable and inescapable fall?
Most likely. OTOH, Bernanke has just managed to run into the railroad tunnel that Wile E. Coyote painted on the mountainside, Europe followed him in, and now Wile E. is standing on the tracks, winding up to follow the parade. Maybe this time …
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ss @ 47: Without investment bankers, there may not have been modern capitalism.
Aha, but maybe it’s exactly this “modern” capitalism which is now failing. I share a lot of stoicheion’s skepticism about much of this, OTOH there is a huge distance between venture capital and AIG selling 110% fraudulent CDS. A cynical view is that banking allows the entrepreneur to buy off the powers that be by selling them a piece of the action. OTOH it appears that Hollywood money is now eagerly seeking Internet startups – having paid off big in Facebook. So, banking gives ill-gotten gains a path back to legitimate trade, that has to be a good thing!
I’ll point out again, we are extremely fortunate that the world’s problem today is certainly not a lack of money, but one of a problem of allocation and distribution. We have plenty of wheat and water and sunshine, and even natural gas and iPods. Surely all the rest can be worked out.
Gonna try again, because I tried posting a version of this a few hours ago and it went awa’ wi’ t’ cyber-fairies.
Much of this discussion seems to be enumerating the number of angels doing the funky boogaloo on the head of a pin. There are bits and pieces that need to be put together.
#1 scory
We have not had a constitutional budget for 3 ½ years. Congress has not passed one, except retroactively, in that time. Congress has not tried to reduce spending on anything the regime wants, because it can’t. It would be ignored.
The Executive already has found the power to borrow independently of Congress, and that borrowing has the tacit approval of what is pleased to consider itself to be the “Opposition” party. If I may, I will quote something I said back when we were fighting over the Debt Ceiling, slightly expurgated.
The Republicans collapse every time that the Debt Ceiling comes up, so there never is any limit on the regime’s power to borrow.
# 3 Kinuachdrach
But at the end of the day, the Bond Market is the ultimate authority in this world. And the Bond Market will ensure that this does not end well.
In the long term, surely. But the regime has found the “Ponzi Key” to run the table in the short to medium term.
Taxation is not there to pay for running the government. It is about power and control over society, or at least over those individuals and institutions who have not bought their way to exemptions. Tax revenues pay for some portion of what is spent by government, but the rest comes from the bond market. But the regime has found a way to rig the results.
There is a difference between what the Political Class wants to spend, and tax revenues. The shortfall is met by borrowing; i.e. the sale of US Government securities in the form of bonds and T-Bills. For some time now the largest purchaser of US Government securities, directly or indirectly, has been the supposedly independent but actually lapdog, United States Federal Reserve Bank.
The Federal Reserve Bank creates money out of thin air. It uses that money to buy US Government securities. Once it has them, they are defined as an asset. Using the concept of Fractional Reserve Banking, they use the asset [which under the Constitution cannot be questioned] as backing to create several times [not sure what the current multiplier is] the amount of securities as money. Some of which is recycled to buy more government securities. This creates money out of keystrokes, electrons, fictions, and unicorn farts for government use. It is what they mean by “printing money” even though physical currency is a miniscule fraction of our economy.
There is no Congressional power of the purse over the Executive.
Last week, the Executive Branch asserted, without any real protest, the right to overturn statutes passed by Congress and signed into law by a president; at will, in whole or in part, sparing some and enforcing against others, at whim.
There is no reason to have a Congress, except as a sinecure for members of the Political Class. Those with a historical bent may wish to compare the US Congress to the Roman Senate before and after the fall of the Republic.
# 16 CharlesWhite
1) We already know that while Congress can pass laws, it can no longer pass laws that it can expect will be enforced.
2) The power of the purse has gone from the Legislative Branch.
3) Having already arrogated that all that power to itself, it is far from inconceivable that if the Supreme Court should announce decisions against either ObamaCare or in favor of Arizona’s SB-1070; that the Executive will announce that they reject the decision and proceed as they wish.
4) Given that all impeachments are tried in the Senate, and the Senate is held by the Democrats, and that there is not one Democrat Senator who will side with the Constitution over Party; what options do the Congress or the Courts have?
5) Noting the increasing arrogance of the regime over the last few weeks, as if they are sure that they will never be called to account for anything; after going to a great deal of time and effort to establish dominance over the government outside the law and Constitution, what odds are there that they would willingly risk it all in an honest election, or any election at all?
# 6 wretchard
‘Strewth. We may find that in the next few days, to the next 7 months, that we are about to be forcefully disabused of the illusion that we live under a Constitutional government that values each individual equally, and face the reality of the value of your life being solely judged by your utility to the powers that be.
# 33 Unsk
Mention was made of lamp posts, overpass bridges, and street traffic signal standards. Your post, or at very least the part in “ ” should be cast on bronze plaques and permanently affixed to those locations as appropriate.
Subotai Bahadur
62. Josh
I guess I should have said “post enlightenment capitalism” instead of modern. The centuries go by so quickly. The financial Mexican Fire Drill that we see today isn’t capitalism; it’s unhinged barking madness.
The love of money is the root of all evil.
The love of theory is the root of all fallacy.
“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” Section 4, Amendment XIV
Our Constitution forbids questioning debt created by existing Federal Congressional Law, but it does not forbid questioning future debt not yet created by Federal Congressional Law. While on this subject, I believe we are in need of a Constitutional Amendment which forbids uncontrolled, self-destructive national debt. Something like the following would be helpful in Amendment XXVIII.
“Federal income shall only consist of a maximum 10% national sales tax, plus foreign tariffs, plus the sale of domestically purchased U.S. bonds by U.S. Citizens. Federal income shall not occur through borrowing, except for the sale of domestically purchased U.S. bonds by U.S. citizens, nor shall Federal income derive by fiat creation of money.”
The problem with our current national debt – authorized by Congressional Federal Law – is that it is destructive of a portion of our people’s unalienable God-given right to the fruit of their own labor in pursuit of happiness. Excessive Federal spending is, by law, destructive of one of the individual’s unalienable rights. What is law which is destructive of man’s equal unalienable rights to life, liberty or fruit of labor in pursuit of happiness? Thomas Jefferson answers.
“Law is often but the tyrant’s will, and always so when it violates the right of an individual.” Thomas Jefferson
When our Federal Laws – or even the Constitution its self – becomes destructive of the individual’s equal unalienable rights to life, liberty or fruit of labor in pursuit of happiness – then we simply have injected tyranny into our highest secular laws – in violation of our highest national moral/natural law -the Declaration of Independence. We are on the road to serfdom and tyranny. Our only escape, in addition to limiting national debt by Constitutional Amendment as above, is to enshrine our Declaration of Independence as the supreme, unamendable, natural/moral law of the United States – superior to our supreme, amendable secular law – the Constitution.
“#35. You are out of your element”
Why the ad hominem? Why not evidence to support your claim? Maybe because there isn’t any? Maybe because all you have is opinion, opinions that Everybody in your neighborhood knows. I’m sure investment bankers share that opinion. My question is why doesn’t the average Joe? Maybe because Joe isn’t part of the scam?
“If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months… And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better…” Paul Krugman
This is an example of Marxist propaganda, irrationally assuming the hard-working people in the middle class will keep on working no matter what is done by government with the fruit of their labor, and no matter how much of the fruit of their labor is taken. In reality Marxist (Keynesian) economics results in destruction of the hard-working middle class because they are eventually worn down by excessive taxation of the fruit of their labor, pushing them down into a new (Marxist) form of domestic slavery. The fruit of middle class labor is not just earmarked for the fight against non-existent aliens, but to pay off (in return for votes – and irregardless of the debt incurred) the so-called proletariat class, which in fact turns out to be the alien within.
“The proletariat [lazy, tax-eating, non-disabled, government-dependents] will use its political supremacy to wrest, by degree, all capital [property] from the bourgeoisie [laboring, tax-paying middle class], to centralize all instruments of production in the hands of the state [Marxist Government]… Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property. You must, therefore, confess that by “individual” you mean no other person than the bourgeois, than the middle-class owner of property. This person must, indeed, be swept out of the way, and made impossible.” Karl Marx
Once the dreaded middle class is extinguished, the production of food and other goods/services will diminish to the point of crisis and anarchy – conditions pre-requisite for a “Dictatorship of the Proletariat” – code for Marxist Dictatorship.
Oh! It is all so distressing! Every day I see coomenties on this bloggy thing that are mucho more offensive and disturbing to liberal sensibilities than those for which mein Oh! I mean my good friend was tarred, feathered, deleted only a few weeks ago. Talking the talk is very easy, ja? Buy more ammo? Hahaha! There, I laughed.
I was in downtown washington today for a public hearing on portable nuclear reactors. The pentagon wants to get off the grid because of the dangers of emp and virus attacks as well as very large solar events (two of which have happened in the last 150 years) the last of which will definitely take down the grid at some point. The military doesn’t have the same kind of regulatory problems on their bases that the civilian economy faces so they can go off grid as soon as they can get these portable nuclear reactors on site. There are a number of American companies that currently make them. They could have them onsite as soon as contracts can be signed. (The impression that I had was that it would still be two years before any contracts were signed.)
Another use for these portable nuclear reactors would be to supply power for insitu oil shale extraction (ie to cook the shale into oil below the surface and then pump the oil to the surface) on federal lands in northwestern colorado and southwestern wyoming where there is more oil in the form of oil shale than in all the rest of the world combined. Three independent studies have put the price of extraction at between 20 and 30 dollars a barrel. Royalties to the federal government would come to 60 trillion for oil at 100@barrel and a mere 18 trillion dollars for oil at $30@ barrel.
Since half the cost of producing the oil would be the cost of electricity. thorium reactors in the future would pull the cost of oil extraction down to $10-15@ barrel.
The effect of this oil on top of current shale oil extraction would turn the US into an oil exporter, eliminate the current 15 trillion dollar debt, return the US dollar to it hard currency status, and create the kind of energy platform and capital base that the USA needs to address the issues of the 21st century.
I’m going to have a free day on amazon for my ebook Collapsing Water and Energy Costs: How Bill Gates [Or You!] Can Create the Inventions That Spark the Next Industrial and Agricultural Revolution a week from tomorrow Friday June 29. You’ll be able to get a peek at the inventions that will power the world a decade from now for free.
69. Heinrich Stiftung
I live in the suburbs of a small city (pop. about 650,000). I’m sure there are more firearms in private ownership here then all of Germany with it’s 82 million people. I own several dozen, which is not a large collection by local standards.
I read the other day that some Greek politician wanted to disband the riot police, or at least he claimed so before the election. Vote pandering.
The last time we had a riot here, the police hid. The rioters burned down their part of town. They feared coming into other parts of town.
The 2nd amendment is what makes America America.
Krugman: “If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months …”
OK, let’s play Krugman’s game. Assume there is definitive evidence of an impending space alien attack, with limited time to prepare. What would happen?
Maybe governments would print & spend at a tremendous rate. But that would not be the major change.
The big change would be that governments would eliminate mountains of overhead & jumgles of red tape. No more delays to put braille on ATMs and handicapped access ramps at the gym. Jobs would be filled by the best person available, not by the best person with breasts or by the best person with a really good sun tan. Research & Development would be incentivized, instead of discouraged. Construction projects would start immediately, with no multi-year regulatory process being gamed by the Sierra Club. Lawyers would be locked out.
So perhaps Krugman is right about how quickly the slump would be over, but not for the reason he thinks. The real issue holding back the economy is the deadweight of excessive governmental regulation and unnecessary governmental overheads. But that real issue is not even considered to be a serious topic for discussion today.
Devoted lurker wants to know: Is the four-post rule no longer in effect?
leaving aside the fact that Krugman is an idiot, Pelosi show every sign of senile dementia, and Clinton can say anything on any given day and possibly even believe it when he says it who would be fool enough to buy illegally issued bonds? Maybe the same guys who bought Confederate War Bonds? That investment turned out well didn’t it?
The 14th Amendment says nobody can question the debt of the United States but it doesn’t say either me or TurboTax Timmy can print up a batch Treasuries and sell them whenever we need a few bucks.
The fact that Pelosi or anyone else would even suggest such a thing puts them dangerously close to a criminal conspiracy. But as I say in Pelosi’s case she is obviously not mentally competent.
Also I think the courts would get involved and rather quickly and decisively.
Well excuse me if you please, Mr Stoicheion, but here in my hometown in Bavaria, the Chief of Police is Mr. Amachi Xhosha, and he tolerates no rebellious impudence. I too am adequately armed, with Blaser (say “Blahser”) R98 6.5×55, but I always obey the rules of Mr Xhosha. My fellow pig hunters and I laugh at you silly Americans who have not yet learned to follow orders. You will.
The heart of the problem with Krugman’s arguments is his assumption of growth. That assumption is not his alone, in fact the finances of the world are based on it. Krugman assumes that the natural economy is one that’s by nature ever-expanding. Those moments that cause the economy to contract are policy based errors, due to human folly, which temporarily thwart the natural expanding trajectory of the human economy. His solutions are, simply, to overwhelm the error with a flood of easy money in order to force things back on their natural track.
The flaw in his thinking is the expectation of growth. Growth may have been the general trajectory of world economies since the beginning of the Enlightenment, but so what. All modern finance, and especially modern governmental finance, is based upon this assumption of growth.
But you don’t grow when birthrates collapse, when pension obligations rise, when union deals spiral upwards in cost, when the discussion about taxation becomes focused on how to tax the undeserving more, when state sponsored entitlements eat up the whole of discretionary budgets, and when the only way forward is to borrow more and more money to firm up ever declining numbers.
Only massive economic growth can ward off the sickness in Europe, the USA, and in Asia, or in fact everywhere. Only massive growth can keep it all happening.
Massive growth is not happening. The numbers simply aren’t there. We flirt with contraction instead, and that upsets the whole growth-based applecart to a huge degree.
this blog should have a 7 decade rule, as well as a 4 post rule
I find it interesting that we used to say that “the love of money is the root of much evil” and now Krugman is saying “Money is the answer to most problems.”
I think he fails to realize that a convertible – paper currencies value is only as great as the amount of trust that those using it have in the entity issuing it.His article looks to me to be a deliberate attempt to undermine the government in that it would cause the near immediate collapse of the monetary system.
Well, there you go again. You have now ruined my dreams of becoming a bartender in Massachusetts. Through the hardest fighting in Spain I always thought that Americans made America America. Now I am heartbroken to understand that she is just another Proposition Nation whose fundamental laws may be deleted at the whim of the next Soopreme Court. Who are the 650,000 well-armed people who live near you? Are they Americans?
For much of the last 35 years i have worked either in local government as an urban planner, or as a consultant who helped people negotiate the trails through the urban planning jungle. I would tell clients: “The city isn’t out to get you, it treats everyone this way.” I created value for clients by finding solution to problems. Making sure stuff got submitted in time, and we understood what conditions of approval meant, and how to meet them.
Earlier in the life cycle of regulation, i would not have been able to make a living as a consultant. The system was still simple enough that anyone with normal intelligence could negotiate the system. They didn’t need a guide.
I watched over 30 years the jungle grow ever denser. It was no longer guides who people needed, but lobbyists. The rules had grown so dense, the EIR’s so large, it was only the rich and powerful who could afford to pay people to make them exempt from the rules. Like Apple who has a sweetheart deal with Cupertino (a silicon valley town) to get a rebate on sales taxes the company pays. Apple’s new headquarters requires closing a major street. Should be a slam dunk. The rules don’t apply. It is no longer what you know, but who you know.
I no longer act as a guide to the urban planning jungle. If you are rich you don’t need me, you need the ex-councilman, or guy who bundled the money for the campaigns. The little guy i used to be able to help, is now trapped by rules that choked former paths. I could no longer tell clients “The City treats everyone the same.”
A few years ago i helped a contractor with a remodel. I looked at what had been required for the original construction by planning and building. The remodel required twice the plans, and many times the fees.
So the problem is not just with the Feds, it is also a jungle of regulation at state and local levels. Rules will be the death of our republic.
I can see from the comments that the modern audience does not get the term: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” in the context of the times.
Lincoln had issued massive quantities of fiat currency AND a fresh round of US Treasury bonds/ aka War Bonds…
( President Jackson had essentially extinguished US Treasury/ War debt via land sales a generation earlier.)
This specific line was crafted to eliminate any USSC litigation — from any quarter — over these items. As you might imagine, the states of the rebellion not only had the displeasure of eating their own losses — but now were being billed ( via tariffs — which mainly effected the South — for the expense of defeating them.
Eventually, Lincoln’s Greenbacks — our FRNS are still green backed — became as good as gold — thanks to the western silver and gold strikes. This last, remarkable, transition took a generation.
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The savant-idiot, Dr, K., fails to comprehend that in a fiat money regime fresh issuance is both hyper-inflation AND a wealth tax.
AFAIK, the average American is totally unaware of this economic truth.
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It is the fear of WEALTH TAXES that has Europeans stashing their stashes in Switzerland. It’s not enough to beat income taxation — you must also fight wealth taxation.
Right now, real estate wealth taxation is simply exploding. It’s not mentioned. It’s not even on the econometric radar.
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At some point, America is going to enact Capital Controls/ Wealth Departure Taxation. Such statist antics are old hat elsewhere. But. they’re so new to America that when I bring the matter up, my fellow citizens don’t have a CLUE as to what the heck I’m talking about.
ANYONE with serious wealth is going to have to study this prospect with great intensity from here on out.
Slightly off at a tangent, but regarding the “space alien defence” issue it is fairly obvious that was being used as an example. A fairly poor one, because any aliens we meet (who have come here) are overwhelmingly likely to be so far advanced over us that they could squash us like a bug were they so inclined. “Apes or angels, but never men”.
A better illustration might have been a threat that is possible. What would happen to the regulatory jungle if Lucifer’s Hammer was discovered tomorrow with two or three years’ lead time?
Regarding inventment bankers – IMHO there is a difference between venture capitalists and the sort of investment bankers who make astronomical amounts of money by buying and selling monstrously complicated instruments designed, with malice aforethought, to fleece those not in the club.
There are quite good explanations of parts of “Monetary Economic Theory” on this thread. I will just make several points.
The government’s “tweaking” of fiscal policy and altering monetary controls is very harmful. The government must stop this destructive practice at once. The fondling, molesting, or “tweaking” of the economy must be halted.
We use a fractional reserve system for banking. It can be used for good and for bad. The problem as Wretchard pointed out, is the government has abused it for partisan politics (the Donks power grab).
The 0bama/Pelosi gang has transferred wealth from productive republicans to unproductive democrats on the dole (a vote buying scheme). The economy cannot withstand this misallocation of resources in the long term.
The Fractional reserve system is like a bicycle chain. Loans are extended and then repaid (the loans expand the monetary system and then contract the monetary system to a natural level as they are repaid).
As long as the loans are repaid the system works and the chain continues. When a number of loans are not repaid, the chain breaks and the base the lending capital is evaporated.
The base capital used to make loans must be relatively safe and have a reasonable rate of return. Any “twisting” or expansion by the government usually is unsuccessful because it lags the actual economic conditions somewhat a driver who continually over-corrects a speeding unstable car with the controls until the car spins and crashes.
When government simply extends credit head-over-heals or actually prints money to cover prior non-repayments of loans the entire system is destabilized (aka, be-based). The extent of the debasement can last a time before the system totally collapses (the Roman Empire, Germany, Japan, Mexico, and many other countries). But, it will collapse.
The signs of a systemic monetary collapse are usually two fold. First inflation occurs which peaks. Then catastrophic deflation occurs as investors pull-out their capital from the banking system leaving it with no reserves (including investment banks).
It is possible for the opposite to occur where a long collapse of prices is followed by sudden inflation. Those are rare but do occur.
Further, it is possible for government statisticians to hide the true inflation rate or true deflation rate – but, only for a short time. The stock and bond markets usually quickly adjust for inflation or deflation.
To the current topic: Krugman is a known partisan hack. It would be foolish to take his advice. In fact, the exact opposite should occur.
The banking system needs more base capital to make loans. Hence, interest should be allowed to rise to a level which will attract depositors to increase the base capital. At that point successful and repayable loans will be made and the economy will expand. Continuing to dilute the currency only deepens the economic decay.
I don’t see interest rates rising to market rates under the current Administration. I see the opposite.
If the stock and bond markets continue to signal trouble most investors should get into cash, gold or other hard assets. It could be difference between survival and non-survival.
perhaps what we are seeing – experiencing — is the difficulty of the evolving Human Brains ability in differentiating fantasy from reality
this – very noticeable difference in interpretation- understanding – of what is one reality
is — – — interesting
@Storm-Rider in 68 gets to the meat of the matter. Our Beneficent Progressive Masters seem to be locked into completely static models (assuming that they actually believe their own BS). The so-called multiplier effect is a good example. Even if you grant them their assumption (which I don’t believe) that government stimulus of 1 produces 1.?x in economic effects, what in the bloody hell makes someone like Krugman think that it would be a >1 multiplier in perpetuity? Like just about every great progressive “thinker”, these fools can’t even game out the second-order effects of their policies, much less the more subtle emanations and penumbras (unless you believe that Cloward-Piven is in play, which wouldn’t surprise me).
It doesn’t take a Ph.D. in Economics to think this out to its logical conclusion. If the static model was right, then unlimited money printing would make each one of us God Kings walking the earth. There would be no need for taxes, nor even working for money. Keep feeding the money into the perpetual money positive feedback loop! So I’m still waiting for someone to ask one of the proponents of these theories why Our Progressive Masters are withholding the earthly paradise available simply by turning the money spigot on full-blast? Do they hate us that much?
But I’m restating what everyone knows. When things take a turn for the worse, the progs double-down on stupid every time. It’s never the failure of their model, it was just never applied vigorously enough. Kind of like how Communism was “really” tried properly.
PB @ 30,
It’s been my experience that the entities you describe are those involved in venture capital (venture investment) and not the investment bankers. Startups need $5M-$25M at their early stage; usually far too small a deal for the bankers, who will be happy to buy-out your successful enterprise.
There are 25,000+ public companies in the USA that exist only because of investment banking. Were it not for investment bankers maybe a half dozen people would remember that Steve Jobs and Steve Wosniack were nerdy kids who made weird electronic stuff in the garage. Venture capital is but one aspect of investment banking.
If the water in your kitchen faucet comes from a processing plant less than 75 years old its construction was financed by an investment banker. The list goes on and on.
Investment banking is the warp and woof of capitalism. Failure to understand that is ignorance.
db @ 85: The so-called multiplier effect is a good example. Even if you grant them their assumption (which I don’t believe) that government stimulus of 1 produces 1.?x in economic effects, what in the bloody hell makes someone like Krugman think that it would be a >1 multiplier in perpetuity?
Dworkin, I want to post on this because I’ve been wondering about it for a while, too. It’s Econ 1 that nearly *any* spending has a multiplier effect. What the leftoids ignore is the NEGATIVE multiplier effect when that money is taken OUT of the wallets of the taxpayers! That is why the NET effect of any government spending tends towards zero.
5 of 4, deficit posting
Josh @88
“5 of 4, deficit posting”
No worries Josh. I’ll spot you my last posting slot if you like; as I lifted a big chunk of the spirit of your Mosler post for use as a clue-bat on a local VI forum.
“Investment banking is the warp and woof of capitalism. Failure to understand that is ignorance.”
Capitalism existed long before investment banking. That is an easily proven fact;
http://en.wikipedia.org/wiki/History_of_capitalism
Wiki is using a very narrow definition of capitalism here.
Investment banking, on the other hand;
http://investmentbanking.jobsearchdigest.com/121/a-snapshot-history-of-investment-banking/
I don’t quite agree with their definition of investment banking. The above URL could be considered propaganda. To me there is a difference between raising stock through what today would be called an IPO and investment banking. That difference is an investment banker takes most of the profit while doing none of the work. An IPO sells SHARES, both in the profit and the risk. My experience with venture capitalist was that they claimed a huge share of the profit by claiming the risk required it. I say BS. If they invest in losers, they need to lose.
Make investment banking illegal and a more open, more honest way of raising capital would be found. You offer Steve Jobs and the personal computer. I offer as a counter, Texas Instrauments and the transistor, without with there would be no Steve Jobs.
I have to stop there, I’m way over posted. I retired from the car business. Ad hominem attacks just detract from your argument and lessen the debate quality.
I have been insulted by professionals as part of a “sales training” program. I have learned to keep my kool under all circumstances.
#90
IMO you may think way too much of yourself.
I have a question:
Can anybody see the present regime voluntarily relinquishing power come November,
regardless of the results of the election? I personally have difficulty believing that Obama and his merry band of Marxist tzars will leave peacefully.
If they are this lawless now, what will cause them to meekly submit to the will of the people or the results of the election (assuming he loses, of course, which I personally think he is on track to do)?
75. Heinrich Stiftung
Herr Stiftung. What has happened to Germany that you allow your town to have an Albanian chief-of-police?
#93
Can anybody see the present regime voluntarily relinquishing power come November
Well. January, actually. Yes, I see them relinquishing power because they haven’t had enough time to put sufficient mechanisms in place to make it difficult to oust them under such an extreme circumstance.
“Releinquishing power” at the top does not mean that in the 10 weeks left to them after an election defeat they won’t be madly scrambling to “burrow” as many people as possible throughout the executive branch to make mischief in the new GOP administration. That is very likley to happen. From a number of accounts, the occupation effort in Iraq was sabotaged by numerous government functionaries — especially in the State Department during the 2004 election campaign. The intent was to make Bush look bad and help make a Kerry victory possible. It was a disgrace and a betrayal that was never given the attention it deserved. If that could happen (and did), then the Obama people will leave as many moles and saboteurs behind as possible, and dare the Romney folks to fire them.
Another scenario is widespread rioting (which would be by disaffected Obama supporters of certain types) being used as an excuse to declare nation-wide martial law, despite the fact that such rioting will certainly be containable within a limited number of urban environments, and could be handled by States’ Guard units and other police.
93. DPeterson
If Obama et al lose the November election the country will not let them cling to power. No chance; no way. We may rightly Insult Democratic Party Congressman and Senators 24/7 but I bet that the majority of them would not for a minute stand for a coup d’état by Obama or anyone else.
Nor would the military, the boy scouts, Walmart greeters, Joe Lunchbucket, or Granny Bluerinse. Ain’t gonna happen.
No worries Josh. I’ll spot you my last posting slot if you like; as I lifted a big chunk of the spirit of your Mosler post for use as a clue-bat on a local VI forum.
Uh oh! Have we just opened a new form of exchange? Trading in Belmont posts? Well trading carbon credits may have been a bust, but trading Belmont spots has some real value! I got three open spots on this thread going to the highest bidder…
From a number of accounts, the occupation effort in Iraq was sabotaged by numerous government functionaries — especially in the State Department during the 2004 election campaign. The intent was to make Bush look bad and help make a Kerry victory possible. It was a disgrace and a betrayal that was never given the attention it deserved.
So so true. Bush never cleaned out the stables the way he needed to, and the rats at State, CIA and elsewhere fought him every step of the way. Romney will desperately need to clean house should he win — and I mean firings by the thousands. Unless he totally surprises me, I don’t see him doing it. Look at the media grief Bush got for firing seven lousy AGs, which he was perfectly in the right to do.
If Romney is to do the things he must do to right the ship of state, he will be facing the most intense media feces squall of all time. It’ll even make Bush/Palin derangement syndrome look like the reasoned voice of the honorable opposition.
#96 stevesmith
We may rightly Insult Democratic Party Congressman and Senators 24/7 but I bet that the majority of them would not for a minute stand for a coup d’état by Obama or anyone else.
I think we will have to agree to disagree on that part. There are no real “blue dog Democrats” left in office. There are only Democrats who have to pretend to be what they are not to stay in office. For the last 3 1/2 years we have seen that regardless of the principles involved, they will do as their masters bid every single time. Faust has that signed paper, don’t you know.
In fact, I am assuming that much of what I call the Institutional Republicans would go along with any “state of emergency” declared. There are rice bowls at stake, and they are first and foremost part of the Political Class. And the payoff [at least in the short term] for giving cover to the Democrats in the “dual power” [dvoevlastie] phase will appear irresistible.
As far as the others you listed; without doubt. But it ain’t gonna be pretty.
Subotai Bahadur
96. stevesmith
“If Obama et al lose the November election the country will not let them cling to power. No chance; no way. We may rightly Insult Democratic Party Congressman and Senators 24/7 but I bet that the majority of them would not for a minute stand for a coup d’état by Obama or anyone else.
Nor would the military, the boy scouts, Walmart greeters, Joe Lunchbucket, or Granny Bluerinse. Ain’t gonna happen.”
Part of the reason I think this is possible (Obama refusing to relinquish power) is precisely because virtually no believes an American President would do such a thing. But consider what he will lose, and what he and his tzars, advisers,cabinet officials, and far too many of the ‘political class’ may face when the lights are fully turned on their corruption and lawbreaking. They may consider that they have nothing to lose and everything to gain by trying to engineer a takeover (under some pretext, of course).
The point is, this is a plausible scenario, given the behavior and track record of this administration. I’m not claiming they would succeed; but the damage done would be almost inconceivable.
peterike @97
;^)
Goes to show ya that wherever there’s a demand for a good or service, there is a market which yearns to be free.