Home > Main > Cutting Edge Monetary Policy: Pray for a Better Economy

Cutting Edge Monetary Policy: Pray for a Better Economy

August 26, 2011

Dude, your beard does not have magical powers. It's pretty cool, but not that cool.

I’ve got a great idea.  I’ll start praying to Alan Greenspan for the economy to get better, and telling people I am praying for the economy to get better.

If they think I’m not serious about this prayer, I’ll show them the exact words of my prayer.   That will prove to them I’m really, really serious about this prayer.

Then when the people know I’m really serious, they will spend trillions.

Trillions!  Imagine of all the spending they will do – and the massive hiring spree that will take place!

All this economic activity from the power of a few words.  I thought printing money was nearly free, but this – this is even better.  It’s just a few breaths of air for Ben Bernanke.

Do not think this is a joke.  This idea is Cutting Edge Monetary Policy.  This is modern monetary policy.  Really it is.

The most prominent economists in the world tell us this is what we should do.

They think that Ben Bernanke a changing a few words in a speech will cause people to spend and lend trillions of dollars more than they would have otherwise.

They really think trillions of dollars of spending are being held up because Ben Bernanke is a bit too mild with his words.

I say: This is faith based economics.   It has nothing to do with the real world and would not help even a whit.

MMT has a better idea on how to fix the economy.  MMT will use direct action on getting the economy moving.

Attack the demand problem directly with a payroll tax cut and infrastructure spending.

Mosler’s Law: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Remember, Businesses hire when they are swamped with demand, not when corporate profits are high.

I’m just sick that this prayer for more economic activity is the best we can offer to the world right now.  Absolutely sick.

[Update:  Astonishing video footage from a recent conference on Monetary Policy. thx MA!]

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  1. ocean
    August 26, 2011 at 2:36 pm

    “MMT will use direct action on getting the economy moving. Attack the demand problem directly with a payroll tax cut and infrastructure spending.”

    Nope…the real problem is “too much debt”
    The right solution to directly address the impaired consumer and banking balance sheets is through an orderly write down of impaired debt, wiping out TBTF and restriction of the political power of the banking cartel.

    Then fiscal spend or chose austerity afterwards. If you apply Fiscal on top of bad debts you get some variant of Japan.

    • TC
      August 26, 2011 at 2:48 pm

      Hi Ocean,

      You’re correct. But there are many ways to deal with this problem. The solution you propose is nearly impossible to implement because it is so painful to the lenders. They hate this idea of actually having to lose money.

      We’re four years into this, and “cramdowns” is a term I’ve only seen a few times.

      We could also just have people make lots of money. It would probably be slightly inflationary, but the growth would far outstrip the downside.

      To be clear – I don’t think the cramdown idea is bad. I’d like to see a consumer debt jubilee just like Steven Roach. My preferred plan would be cramdowns plus fiscal stimulus.

      The problem with cramdowns alone is that it bows to monetary policy as being worthwhile. It isn’t. I hate monetary policy because it creates debt slaves. You can look up “why monetary policy sucks” on this website for a full list of why MP stinks and should not be used.

  2. Dave
    August 27, 2011 at 5:40 am

    Out of interest what does “cramdown” mean?

    Personally I’m with Ocean, i.e., the debt needs to be dealt with for the simple reason the lenders should lose money less they repeat the error. Is it impossible to implement? Maybe but then how possible is a fiscal stimulus in todays world? Certainly in the states Obama wasted a great deal of political capital in bailing out the banks.

    • Tom Hickey
      August 27, 2011 at 7:22 pm

      In a practical sense, MMT has a fiscal solution for the problem facing the real economy — lack of effective demand. That is something that is worthy of support by people of all political persuasions, since it is not only the right thing to do, but also it is the economically most sensible thing to do, since the opportunity cost of idle resources outweighs any other factor that might be considered as a preferred option.

      However, that leaves the cause of why the real economy tanked intact. So the fiscal solutions alone is unsatisfactory, since the syndrome will just repeat with worse consequences as long as the causes are not addressed.

      Bill Black, Michael Hudson, and Randy Wray of UMKC have documented the principal underlying cause — a criminogenic environment that resulted in massive control fraud, that is, CEOs running their corporations as fraudulent enterprises — Enron gone viral. They have also document how this continues and will continue as long as the financial sector is able to continues its capture of the apparatus of the state both intellectually and politically. We need to recognize as a country that this constitutes a de facto coup d’état by an elite.

      A lot of people are now becoming aware of this owing to an outcry from both left and right, as well as by what they see for themselves. This is the predominant growing trend in the US at present, IMHO.

      To be taken seriously, MMT advocates have to speak with one voice on this and call out the perps and their political cronies. Otherwise, MMT will be associated with perpetrating the status quo if it just puts forward a fiscal solution while apparently giving the perps a pass.

      So what I am saying, let’s pile on and give Bill, Michael, Randy, Yves, and many others a hand in exposing this and offering solutions to correct it. After all, this is the Minskyian aspect of MMT rather than something added or imported. It involves addressing financial instability.

      • TC
        August 27, 2011 at 10:23 pm

        You’re correct.

        I’ve been largely silent about control fraud. And that’s wrong.

        This is the biggest crime ever. I have some insight into it, and I’ve been silent.

      • Dave
        August 28, 2011 at 5:04 am

        Not really a follower of MMT. It does seem to be an accurate description of the monetary system though and from what I’ve read appears to be well sourced.

        “To be taken seriously, MMT advocates have to speak with one voice on this and call out the perps and their political cronies. Otherwise, MMT will be associated with perpetrating the status quo if it just puts forward a fiscal solution while apparently giving the perps a pass.”

        Agreed! And in fact I’d apply this to any economic policy that wants to be taking seriously.

  3. Clonal Antibody
    August 27, 2011 at 12:44 pm

    Bernanke’s real thoughts, as per the Onion

    Claiming he wasn’t afraid to let everyone in attendance know about “the real mess we’re in,” Federal Reserve chairman Ben Bernanke……………

    • August 28, 2011 at 4:06 pm

      Customers at the bar told reporters the “shitfaced” and disruptive Bernanke refused to pay for his drinks with U.S. currency, claiming it was “worthless.”

    • TC
      August 28, 2011 at 5:52 pm

      Just seeing the link made me giggle. I’ve read this so many times in the last few weeks.

      While using beer bottles and pretzel sticks in an attempt to explain to the bartender the importance of infusing $650 billion into the bond market, the inebriated Fed chairman nearly fell off his stool and had to be held up by the patron sitting next to him.

      Another bargoer confirmed Bernanke stood about 2 inches from her face and sprayed her with saliva, claiming inflation was going to “totally screw” consumer confidence and then asking if he could bum a smoke.

      Witnesses also confirmed that near the end of the evening, Bernanke put money into the jukebox and selected Dire Straits’ “Money For Nothing” to play five times in a row.

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