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These last three years, I’ve been teaching myself economics online. The most important thing I’ve learned is, if someone says, “It’s too complicated,” they’re either lying or they don’t understand the subject well enough to explain it; they also could be vain and derive some feeling of power from safeguarding “esoteric” knowledge. The second most important thing is, don’t trust people who say, “It’s simple. You put too many expenses on your credit card, they cut you off. Government is just like your household budget.” It’s just not that simple, but nor is it complicated. The basics are eminently graspable.
Several questions have bothered me for some time. If it is true that government money printing will cause raging inflation as conservatives are always lecturing us, where is the inflation? Answer: It’s stuck in the banks. Government is printing away like mad but the money supply is not increasing because banks, the retail money suppliers, are holding on to it, partly because (hold on to your hat) there’s no inflation! (those near-zero interest rates that were supposed to stimulate the economy) and partly because there’s no aggregate demand from the real economic engine in America, those folks too poor to hang on to money. Forget about “middle” and “lower”; together they comprise the “liquid” class: they are the money river that keeps all the wheels turning. Their taxes are effectively garnished directly from their paychecks; they can’t (or don’t) lobby Congress in order to collect interest due on their “tax refunds” that they have by default loaned to Treasury all those months. They’re grateful just to get that shot in the arm “refunded” back to them. If banks loan money to Uncle Sam, they get interest, you betcha! So that’s why those trillions of newly-minted greenbacks of the people’s money are illiquid. They’re not being lent out. Normally, banks would be leveraging those trillions out to a factor of twenty-five. Now, who still thinks there would be no inflation (and no growth) with fifty trillion more dollars injected into the economy? For it is banks who create most of the money supply by leveraging, not government by printing. If government had injected that money into the liquid class, it would be flowing today, or if the money to the banks had come with very tight strings attached, it would be flowing, but government did neither. And when Barack Obama says what the banks did to cause this mess was wrong, but not criminal, he’s either lying or incompetent. Yes, Obama failed us, if only by listening to economic conservatives. But Romney’s economics are off the planet; they’ve been shown to be wrong time and again. Conservative economics turns everything on its head. The rich aren’t “job creators”. They’re “labor market opportunists”, hiring when a new employee would add more to the bottom line than their net cost, firing when they become a liability. Stimulating the rich does nothing, as fifty years of tax cuts have shown. They already have plenty; add more, it’s just more plenty. And if plenty goes unspent, it’s like manure that just sits without getting plowed back into the field to stimulate growth.
The problem in a nutshell (no wisecracks) is, there is center-right economics, and wild-eyed, radical right economics. The Left, as in politics, is missing. There is no FDR today. There isn’t even any realism; realism has been herded into a virtual concentration camp and stamped with the label “extremist” or even “terrorist”, like some environmental groups. Economically and politically, we need an ethical rebirth, we need an ideology that speaks its name by representing ideals, not profits. We need a Communist party. (hear me out!) What could be more idealistic, egalitarian, democratic, utopian even, than the notion that all laborers are equal, whether they wear a lab coat, a uniform or a sharkskin suit? And deserve, basically, an equal, living wage. What would motivate folks to be doctors rather than rug shampooers? Well, OK – maybe roofers and rug shampooers get paid a little more. Education, remember, is free. Think about it, and that includes the question, “Why does it feel wrong to think about it?”
Other than the conclusion, if you have questions, if I have been unclear or incomplete on the economic issues, you can help me by asking questions. Thank You.
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Hey, glossolalique. I know you probably aren’t aware of the posting rules here, but we’re asked to have an maximum of two posts on the Recent Diaries lists at a time. The idea is to give others a chance to have theirs stay up as long as possible, and there’s only room for 25, so each time a new one is added, the others slide down a notch until they disappear. You can always unpublish one that you care about less.
The grammar one might be my choice, no offense.
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Thank you; I clicked in thinking he might want Unpublish instructions. As I remember, I had to ask the mods how to do that, and I kept them. ;o)
Your comment about being taken for a different gender cracked me up; forgot to go back to see if you’d answered me. Happens to me, too, on accountta my deep alto or lower voice. ;o)
The “printing money causes inflation” formulation was always political rhetoric. The theory says that when the money supply increases and production doesn’t, there is inflation. The theory is based on the idea that rich folks can bid up items they want more than less rich folk and money more that products is an effective scarcity of goods and services. Likewise decreases in the money supply relative to production is deflation. Which is sorta where we were going in late 2008. The expectation of deflation causes people not to want to produce, thereby reducing supply. That’s the standard explanation. The other thing to puzzle out is the effect of the condition on the next time period. Under the conventional assumptions, how will folks react in the next time period all things being equal (no government intervention, for example). Conventional economics is best thought of as a plumbing problem, with the money flowing in one direction and the goods and services flowing in the other. What goes around comes around.
There is a left economics. It starts from the point of view of not leaving Marx’s analysis Capital out of the tradition of economic scholarship. Its explanatory model is different from the “money plumbing” conventional model in that it considers more actors than buyers and sellers. And emphasizes how the existence of money creates trends that end with the holders of capital controlling the political and economic relationships in the society. David Harvey’s A Companion to Marx’s Capital is a good wading pool before diving into Capital itself.
heard you, and the others, loud and clear! When stumbling, one doesn’t always mind one’s feet.
Just read an excellent post by Niels Jensen on Credit Writedowns, titled “Kakistocracy” I think. He seems to support my long-held suspicion that the banks are the bottleneck.