I agree with Randy.

Thanks Bev and Randy and everyone who participated! Drive Pete Peterson nuts by reading the antidote to his efforts to panic you into making Wall Street even richer by privatizing Social Security.

The (false) rationale for the Bush tax cuts for the wealthy was not the multipilier effect (demand), but incentives. The wealthy were supposed to work much harder (not consume more) producing wealth. They are the only “wealth creators” — right?!?

Any scenario. One can conceive of truly weird scenarios in which all $2+ trillion in corporate cash is suddenly used in the same day to purchase assets that are very scarce producing “bottlenecks” and inflation. The fact that corporations are sitting on so much cash tells us, however, that the status quo has grossly inadequate deand and that inflationary risks are currently not present.

I’m more concerned than Randy by this. Consumers often have no conception of the currency risk they take in borrowing in a foreign conspiracy. It appears to be much cheaper to borrow in the sronger currency because the interst rate is much lower. If the home currency depreciates against the stronger foreign currency the interest rate the borrower must pay can suddenly increase dramatically. Defaulting on your home loan is a very big deal that can lead to homelessness and terrible situations for the kids.

The Fed (FOMC) minutes leading up to the crisis show that (1) they knew inflation was minimal and not causing any harm, (2) they were obsessed with the risk of inflation breaking out, and (3) they kept bringing up anecdotes designed to imply that huge inflation might be right around the corner even as the economy was hurtling towards the Great Recession.

As you know, the failure to prosecute is something we’ve been emphasizing at UMKC for years. We share your frustration, but our response is to be relentless in pushing for change. We have succeeded in more unlikely environments, e.g., the Reagan administration, where both Parties tried to block our efforts and drive us out of office.

As we discussed earlier, they manipulate markets because they hate competition. The CEO wants a “sure thing” — they want to be wealthy regardless of the quality of their products. The collective result of many individual CEOs manipulating markets can be a disaster (what neo-classical economists delight in calling “unintended consequences” — but always use to attack governmental efforts to aid the poor). None of this requires a vast, secret conspiracy or even requires that a Great Recession be profitable for “capitalists” as a whole.

See the FCIC report and the memo available on the FCIC website written by the Fed’s long-time head of supervision. It shows how institutional factors leave Fed supervision a continual failure.

Actually, Randy’s work de-mystifies money. It exposes the dogmas of neo-classical economics that are often relics of the worship of gold.

Because we’ve tax-advantaged “dead peasant insurance” and removed the usual requirement of having “an insurable interest.”

Again, no one claims that a better designed monetary system means that the government will be a good government. But a good government with a badly designed monetary system is a tragedy that causes immense harm to its people (and sometimes the world) despite the fact that we know how to design a wll-functioning monetary system.

No monetary system can ensure good decision-making by a society and its leaders. Any tool can be used for good or ill, but that doesn’t make it useless to design better tools.

Some derivatives have existed for centuries. They arose to help farmers deal with the vagaries of production. Overall, most folks think they’ve been helpful and have not led to recurrent fraud or crises.

Any derivative, however, where the folks that want to sell them demand immunity from the laws and regulation, has to be bad for the world.

I have written a number of columns explaining that the issue is primarily the net change in taxes. I have urged, for example, tax cuts for the working class (e.g., payroll tax) to counter the (modest) drag on growth that the (modest) tax increases for the wealthy could produce. Multipilier effects of particularl tax cuts also vary and are relevant.

No monetary system will “avert the depletion of natural resources.” Individual market decisions cannot properly with negative externalities like climate change. (And Coase’s work actually supports that conclusion because transaction costs are always present.) We need active government intervention against negative externalities.

A joke that Lincoln is reputed to have told, is that as the Confederacy was headed to defeat a Confederate supporter who lived on a river called out to the captain of a passing riverboat: “Do you take Confederate bills.” The captain answered: “Yes.” The man then asked the captain: “how do you take it?” (meaning what exchange rate v. the U.S. dollar) The captain called back: “by the cord.” (i.e., it was only useful as firewood because the Confederacy was collapsing and no one was going to need Confederate bills to pay Confederate taxes becauase no one would be paying those taxes.)

Amen. Well functioning markets where externalities are low are really good things (setting aside the hugely complex issue of what a “market” is). It is hard to make money honestly by producing a product that people like and wish to purchase at a price that produces a sufficient profit to stay in business. That’s why banksters hate honest competition and do everything they can to manipulate them.

Randy can explain how the Fed sets interest rates, why the U.S. borrows (hint: not because it needs “money” to spend) and why because we have a sovereign currency we can borrow at minimal interst rates whereas the eurozone’s periphery is subject to extortion from the bond vigilantes.

NY Fed economists have a very recent piece on the payroll tax (partial) moratorium having even greater stimulus effect than anticipated by Fed economists.