New Economic Perspectives has the article Corbynomics 101—It’s the Deficit, Stupid!

As anyone who’s followed the discussion has seen, the proposal from the newly-elected leader of the British Labor Party, Jeremy Corbyn, to implement “People’s Quantitative Easing” or PQE, has created a lot of controversy (Richard Murphy’s blog is a good place to see the PQE defense against these arguments).  The basics of the proposal are that the government would create a public bank for financing infrastructure (National Investment Bank, or NIB), which the Bank of England (BoE) would then lend to directly in order to fund.  The NIB would then carry out infrastructure projects to jumpstart the economy, create public capital, and create jobs.

Maybe this New Economic Perspectives article would be better titled “It’s Not The Deficit, Stupid!”

Here is an example of what Bernie Sanders could do if he managed to figure out how to get the public to understand this.

Notice the mention in the article of Stephanie Kelton whom Sanders brought in as chief economist for the Democrats on the Senate Budget Committee. “Stephanie Kelton termed it, Overt Monetary Financing of Government (OMFG)”

The details of the article are enough to make a CPA’s eyes glaze over, but the mere knowledge that something like “People’s Quantitative Easing” or PQE has been proposed somewhere is very important.

To put this PQE in context, note that The Wall Street Journal has the article Price Tag of Bernie Sanders’s Proposals: $18 Trillion.

Stephanie Kelton tweeted in Sep 2012

Randy Wray says #Fed intervention approx. $29 Trillion. #Bernanke says Fed created 2 million #jobs. Translation: $14.5 million per job.

Econo Monitor published the L. Randall Wray December 14th, 2011 article The $29 Trillion Bail-Out: A Resolution and Conclusion.

So Corby’s calling his program PQE to emphasize the similarity to the FED’s QE, makes it reasonable to compare The Wall Street Journal ‘s estimate of $19 Trillion for Bernie Sanders program to the $29 Trillion of the FED’s QE. Remember that the estimate on the FED’s spending was made before December 2011. By now the total is probably higher.

The Daily Kos has the post The Astonishing Story of the Federal Reserve on 9-11.

Still, while our President was posing for photo ops and our Vice President was hiding under a mountain, colleagues of Roger Ferguson speak of him as having been “cool under fire without being overbearing” and they praise him saying he “nailed it” when it truly mattered. Kenneth A. Gunther, President and CEO of the Independent Community Bankers of America, said, “The Federal Reserve’s response on September 11th ensured a fully functioning payments system when the private sector could not…. The Fed’s dual roles [as provider of services and regulator of the payments system] are an essential element of the ongoing homeland security of the United States.”

For all those politicians and the public who think they know all about what the FED does and think it should be abolished, this is the article that would disabuse them of their notions if it weren’t for the small factor of human nature. Once your gut has told you that we don’t need no stinkin fed, no facts are going to dissuade you. We all can come up with rationalizations for why we are right despite all the evidence that says we are wrong.

In my list of favorite quotes, I have an eloquent explanation.

Mark Twain

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

The New Statesman has the article What the Corbyn moment means for the left.

Rumours of the death of the political left have been exaggerated. Corbyn, like Syriza in Greece, Podemos in Spain and the Scottish National Party, is an immune response from a sick and suffering body politic trying to fight off a chronic infection that threatens to swallow hope for ever. There is a crisis in representative democracy in the west and it was established well before the stock-market collapse of 2008. The old centre left is at odds with its electorate because it decided for itself the limits of what was politically possible a decade ago.

There are many great paragraphs in the above article, but for me this one is the most powerful and succinct description of what has been wrong with US politics for many years. The most obvious symptom is the annoying habit of President Obama first negotiating with himself down to a minimal position that surely the Republicans will accept, and then finding out that the Republicans only want to negotiate him down even further. Then after negotiating the President down below the minimum acceptable compromise, they won’t vote for his proposal anyway.

How many times are we expected to be sold down the river, and then expected to ask for more of the same, please?

I really like the idea of thinking that Bernie Sanders’ rise as an “immune response from a sick and suffering body politic trying to fight off a chronic infection that threatens to swallow hope for ever.”

The Nation has the article It’s Official: The Pentagon Finally Admitted That Israel Has Nuclear Weapons, Too.

After five decades of pretending otherwise, the Pentagon has reluctantly confirmed that Israel does indeed posssess[sic] nuclear bombs, as well as awesome weapons technology similar to America’s.

As the article admits, there isn’t an awful lot of new information that people didn’t suspect anyway. I post this on my blog mainly to keep track of this article and the information in it. I know that someone, someday is going to argue with me that there is no proof that Israel has nuclear capabilities. I want to be able to refer back to this article for my own benefit, not that there is any hope that the article could change anyone’s mind.

The Atlantic has the article The Real Cuban Missile Crisis: Everything you think you know about those 13 days is wrong.

I’ll give you the closing paragraph of the article. You’ll have to read the article to be amazed at how this conclusion became inevitable.

This esoteric strategizing—this misplaced obsession with credibility, this dangerously expansive concept of what constitutes security—which has afflicted both Democratic and Republican administrations, and both liberals and conservatives, is the antithesis of statecraft, which requires discernment based on power, interest, and circumstance. It is a stance toward the world that can easily doom the United States to military commitments and interventions in strategically insignificant places over intrinsically trivial issues. It is a stance that can engender a foreign policy approximating paranoia in an obdurately chaotic world abounding in states, personalities, and ideologies that are unsavory and uncongenial—but not necessarily mortally hazardous.

For some Americans, this could change their whole view on the lessons of lying historians, real history, and what they think of our current foreign policy. Even for people who look askance at our current foreign policy and were never that enamored with JFK at the time, this is a surprising article.

This certainly has lessons for us to learn about our current situation and the Iran nuclear deal. The fact that LBJ took the actions that he did in Viet Nam that led to the eventual demise of “liberalism” in the US because he was misled by JFK, has a special poignancy.

Let me explain my convoluted argument about LBJ. LBJ did a lot of great things, civil rights acts, war on poverty, and great society, but what did him in has his obstinate stance on Viet Nam. Johnson’s vehemence over his Viet Nam policy may be a direct result of the secrets JFK kept from LBJ, and the lies he and his top people told to LBJ. The guns and butter strategy led to inflation and Richard Nixon. The inflation problem outlasted Nixon and Carter, and brought us right to the ascendancy of Ronald Reagan. It has taken over 50 years for this country to get to the edge of what might be a recovery if Bernie Sanders can win the Presidency.

The New York Times published the column The Deafness Before the Storm.

Administration officials dismissed the document’s significance, saying that, despite the jaw-dropping headline, it was only an assessment of Al Qaeda’s history, not a warning of the impending attack. While some critics considered that claim absurd, a close reading of the brief showed that the argument had some validity.
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That is, unless it was read in conjunction with the daily briefs preceding Aug. 6, the ones the Bush administration would not release.

To think that Dick Cheney is still running around trying to give us “honest” advice.

Bernie Sanders contingent in the Marlboro Labor Day Parade

Sharon and I are in the front row, left of center in the photograph. We are holding signs that I made as is the person to the left of me in the photo.

Aimée J. Dupont posted this on her Facebook site.

October 11, 2015

I had occasion to take post some other pictures that were give to me of the Labor Day parade. I posted them on the Worcester Wants Bernie team messaging center, do I might as well post them here, too.

Here is one of Sharon and I actually marching in the parade. There is a placard that I am carrying just below the sign I we had made for the parade.

Here is another picture as we started out on the parade. You can get a little better hint at the black placard that I carried along with my sign.

YouTube has the video Cornel West and Richard Wolff talk about Capitalism and White Supremacy.

A conversation about capitalism with two brilliant minds, Cornel West and Richard D. Wolff, together in a rare joint appearance. Richard D. Wolff is Professor of Economics Emeritus, University of Massachusetts, and author most recently of Capitalism’s Crisis Deepens: Essays on the Global Economic Meltdown 2010- 2014/ Dr. Cornel West has written or edited dozens of books, including classics like Race Matters, and Democracy Matters. His most recent is Black Prophetic Fire, written in conversation with Christa Buschendorf. Also in the show, activist Manju Rajendran tells us about a small business that is successfully operating under an anti-capitalist economic paradigm. And Laura raises questions about the record-setting settlement with BP over drilling disaster in the Gulf Coast.

Having only worked in capitalist workplaces all my life, I still have trouble understanding how the ideals of Marx would really work in practice, Government capitalism as practiced in the Soviet Union, did not work out, but I get that this is not an example of what Marx had in mind.

As Cornell West indicates, he thinks Marxian analysis is brilliant, but that is not the same as thinking that the Marxian prescription is just as brilliant.

The New York Times has the article Justice Department Sets Sights on Wall Street Executives.

Stung by years of criticism that it has coddled Wall Street criminals, the Justice Department issued new policies on Wednesday that prioritize the prosecution of individual employees — not just their companies — and put pressure on corporations to turn over evidence against their executives.

Perhaps Attorney General Loretta Lynch will turn out to be a much better Attorney general than I thought. Perhaps those years of criticism published (or noted) on blogs like this one, and the many more famous ones have had an impact.

Whatever its practical implications, the memo is likely to resonate on the presidential campaign trail. In a speech this summer, Hillary Rodham Clinton seized on the sentiment that too many executives were escaping accountability, declaring that, if she were elected, her administration would “prosecute individuals as well as firms when they commit fraud.”

Is The New York Times still playing the Where’s Bernie game? Bernie Sanders position on this is a lot stronger than Hillary Clinton’s and he has espoused it for a lot longer. The New York Times admits its site is searched more times for Bernie Sanders than for Hillary Clinton. If this newspaper refuses to inform its readers about the subject matters that they want to know about, they are going to be losing even more customers than they have already lost.

There is a great explanation in a comment on Michael Pettis’s Blog, about some Self-Reinforcing Relationships between Debts and Slowing Economies.

The start of the explanation got me interested.

The self-reinforcing relationship between rising debt loads, slowing economic growth and heightened financial volatility is visible in many different countries. Each political system is of course pressed to provide a response. This vicious circle is in itself very hard to break out of, and your analysis of the pro-cyclical effects of credit leading to fast profit growth on the way up and to financial distress on the way down is implacable. Yes, perhaps policymakers underestimate these effects. But it is also true, I believe, that the policy response is not so much dictated by the nature of the problem at hand. The way in which the political system is organized dictates to a large extent the formulation of the policy response, typically along the path of least resistance from the point of view of the vested interests.

The heart of what the comment’s author is explaining is in his statement

A few lucid minds observed in 2008-2009 that, to reduce global balances feeding the global debt snowball, a joint movement was necessary, involving the countries with excess domestic supply over domestic demand (China) increasing domestic consumption and the countries with excess domestic demand over domestic supply (the US) increasing domestic supply.

This is the rebalancing that has to happen.

My response to that comment was:

Now this is an explanation I can follow and believe. One big factor you left out, and only brushed by in the end was:

“Or, in other words, could it be the case that the interests of the political elite have diverged from the interests of their population in so many places?”

You didn’t say it, but in my view the rise of billionaires in almost all countries is the problem. If these billionaires didn’t get all the benefits of rising productivity, freer trade, etc., but left some of the money for other people in society to earn, then those other people wouldn’t be forced to go into debt. It is the Wall Street types who have been pushing on the debt bubble, repackaging, and selling debt, and reaping huge profits for putting people into debt.

You didn’t mention in your list of possible things to do to get out of the debt crisis is forcing a more even distribution of wealth. You may have been thinking of this outcome in your last sentence when you said “Things might happen.”

I’d like to see an orderly and controlled things happening, than to see it end in violence. However, one way or another, this imbalance will be rectified.

There was a massive amount of comments on the original article with which I struggled as explained in my previous post Michael Pettis: If We Don’t Understand Both Sides of China’s Balance Sheet, We Understand Neither. I am glad I kept reading, because the comment I focus on here was worth all the effort.

There was another great exchange in the comments on the original article. Here is part of a comment by Vinezi Karim about inadequate aggregate demand.

However, is there inadequate aggregate demand in the US? I don’t think so. I would argue that the US has *EXCESS* aggregate demand. This point was discussed in some detail in the comments section of one of Michael’s previous articles. Here is that comment:
http://goo.gl/LckF4X

Therefore, UNTIL the US closes its current account deficit (i.e. either balances the current account or runs a current account surplus), any Keynesian solution would be either ineffective or inefficient. In light of this, if underemployment continues to be a problem in the US, then the first order of business must be to wipe out that trade deficit BEFORE we go about playing Robin Hood.

I found this to be an enlightening explanation, that we may have sufficient demand, but it is getting fulfilled by making jobs in China, not in the USA. This is what Bernie Sanders has said many times about the job creation from our demand. I responded to this comment on the web site, but I am changing my mind as to how to respond.

Yes, we need to fix our trade deficit problem, and one way that I posited to fix that was to let the dollar depreciate relative to foreign currencies so that American workers could fulfill the domestic demand with goods produced in America. One trouble with this is that other countries will try to race us to the bottom of currency value in order to protect their domestic employment. Nobody is the ultimate winner in a race like this.

All the countries in the world can’t be net exporters to solve their domestic employment needs. If there are net exporters, then by simple arithmetic there have to be net importers.

The best solution is to have all countries have a balanced mix of exports, imports, and domestic production to satisfy there own needs, and keep the whole world in balance.

When the whole world is racing to be a net exporter, then there is an excess of supply over demand in the world. Perhaps we need some world wide cooperation to go along with some world-wide competition.