Richard Wolff: The Next Economic Crisis Is Coming

Truthdig has the article Richard Wolff: The Next Economic Crisis Is Coming.

Every time I sit down with economist Richard Wolff, he demonstrates why the field of economics is so necessary in the cultural critique of our American empire. In my recent interview with him, we discussed why the thriving economy touted by President Donald Trump hasn’t translated into real gains for the majority of Americans. We also went over what is hidden by the economic indicators that allow the financial industry to celebrate while so many Americans are still suffering.

There is a lot of great explanation in this video, 99% of which I agree with. However, lest you go away with some misinformation, I am going to comment on the mistake Wolff made.

We have paid an enormous price in hobbling the generation of people who would have otherwise lifted this economy and made us more productive. It is a disastrous mistake historically, and if you face that, and if you add to it the increased debt of our businesses, and the increased debt of our government, you see an economy that is held up by a monstrous increase in debt, not in underlying productivity, not in more jobs that really produce anything, but in debt.

That should frighten us because it was the debt bubble that burst in 2008 and brought us the crash. It is as if we cannot learn in our system to do other than we’ve always done and that’s taking us into another crash coming now.

The bubble that burst in 2008 was private sector debt, not Federal Government “debt”.

Wolff conflates the two, when actually Federal Government “debt” is private sector surplus. The Federal Government creates the money, and the private sector uses that money to conduct business. This difference between creator and user of money means our notions of debt among money users is just about the opposite of the meaning with the money creator.

I know that Wolff knows about Modern Money Theory. I am surprised he would make such a mistake. I am pretty sure he has not spent as much time as he should have in understanding MMT.

If you want to get some understanding of the economics I am talking about, watch what the Deficit Owls have to say.

Sorry, I am so pedantic, but I can’t help but note that one of the bullet points from the Deficit Owls should say “Deficits can be too big or too small.”

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