Observer News has the article Berniemania! Why Is Socialist Senator Bernie Sanders So Popular?

A very interesting article. One bit of insanity on the Observer’s part in an otherwise very sane article was the following which shows that even some experts don’t really understand the money system.

Some of his proposals, like making all public colleges free, may have unintended consequences.

“You put a lot of stress on the public system, to say you’re going to take away the tuition base. You can’t ensure government funding to make up for it,” said Sharyn O’Halloran, an economist at Columbia University’s School of Public Affairs. “If I’m sitting here trying to allocate scarce resources to benefit society, the economy, I have to allocate them in the most efficient way … if I give a rich kid a free education, I haven’t improved social welfare.”

She just does not understand what scarce resources she needs to be allocating. The colleges and universities are already there. The professors are already there. When we create our own money, this is not a scarce resource. Even if you don’t believe that, perhaps the FED could take back some of the trillions of dollars it created to give to the wealthy, and instead spend it where it will do some good. The stock market bubble the FED has created is temporary. An education is much more permanent.

By the way, if you don’t believe that US money is not a scarce resource in the US, then how do you account for the objective fact that the FED created trillions of dollars to prop up the banks and the rich? All this money, didn’t even create any inflation with the possible exception of stock market prices. I don’t hear rich people complaining about that kind of inflation, do you? (Although I do worry about that kind of inflation, and so should you.)

The FED never should have pumped that liquidity into the economy this way when it has been known for over 75 years that this strategy is not one that stimulates the economy under the then current conditions. When there is no industrial expansion worth investing in because industry is already too big for the shrinking customer base, inserting that much money into the hands of the rich does not expand industry. It does expand stock prices, though. Where else are rich people going to put their money? They either do believe in the greater fool theory, or they think they can get out before the other fools bring the market crashing down.

In case you are wondering, government buying stuff does stimulate the economy. Someone has to produce the actual goods that the government is buying. The government makes up for the shrinking customer base in the private sector. It can do that because we know from the lesson the FED gave us, that US money cannot be in short supply in the US if the FED is willing to do its job.