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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

NPR explains where govt spending comes from

Posted by WARREN MOSLER on August 27th, 2010

How To Spend $1.25 Trillion

By David Kestenbaum and Chana Joffe-Walt

Aug 26 (NPR) — In the face of the financial crisis, the Federal Reserve decided to buy $1.25 trillion of mortgage-backed bonds as part of its effort to prop up the economy.

It was a huge departure from ordinary policy — such an extraordinary departure, in fact, that it was easy to forget that somebody had to actually go out and buy all those mortgages.

This week, we visited the New York Fed to learn the story of how the central bank spent so much money, so fast.

In late 2008, Julie Remache got a call from her former employer, the New York Fed. She was working in the private sector, and the call came while she was at the office. She recognized the extension, and knew someone from the Fed was calling her. So she took the call in a conference room.

The guy on the other end of the phone was Richard Dzina, a senior VP at the New York Fed. His offer: Your job, should you choose to accept it, is to spend hundreds of billions of dollars and try to save the economy

“How could I say no?” Remache says.

The New York Fed is a big, fancy place — lots of marble, a vault full of gold in the basement. But Remache and her team worked in a plain room with four small cubicles. There were no marble floors or oak tables. Just a Nerf football net, a table-tennis trophy, and two yoga balls.

The team spent six weeks coming up with a plan of attack, and 15 months actually buying mortgage-backed bonds, all of which came with a government guarantee that they’d be paid back even if the borrowers defaulted.

The program’s intent was to keep interest rates low, and slow the decline in housing prices. The team ended up buying more than a fifth of all of the government-backed bonds on the market.

“It’s possible I was buying the mortgage on my own house,” says Nathaniel Wuerffel. “Very possible.”

In the end, they came very, very close to their target: They told us they were just 61 cents short. (In other words, they bought $1,249,999,999,999.39 worth of mortgage-backed bonds.)

The Fed was able to spend so much money so quickly because it has a unique power: It can create money out of thin air, whenever it decides to do so. So, Dzina explains, the mortgage team would decide to buy a bond, they’d push a button on the computer — “and voila, money is created.”

The thing about bonds, of course, is that people pay them back. So that $1.25 trillion in mortgage bonds will shrink over time, as they get repaid. Earlier this month, the Fed announced that it will use the proceeds from the mortgage bonds to buy Treasury bonds — essentially keeping all that newly created money in circulation.

The decision was a sign that the Fed thinks the economy still needs to be propped up with extraordinary measures. More clues about what the Fed may do next could come Friday, when Ben Bernanke is scheduled to address a big annual meeting of central bankers in Jackson Hole.

97 Responses to “NPR explains where govt spending comes from”

  1. Jim Baird Says:

    Yeah, but they still don’t get that this is how ALL government spending happens, not just Fed operations – and they’re still worried that a simple asset swap like this will cause inflation. So they still don’t get it.

    Reply

  2. jcmccutcheon Says:

    Why can’t Paul Krugman or the Democrats ever call for a tax cut? Not in their DNA?

    Reply

    Zanon Reply:

    Only rich pay tax. Therefore any cut benefit rich. (Aka professional couple)

    Dems cannot help professional couple with kids. Only union, Goldman sach, and black transvestite illegal alien4

    Reply

    Jim Baird Reply:

    Everyone who works pays FICA – and the poor pay more, proportionately. A FICA holiday would put money directly in the pockets of Dem’s constituency, and the Repubs would pretty much be forced to go along, since they can’t very well say no to a tax cut, even if it is for the hated workers. But the Dems would rather come up with ungainly pork spending that they can use to fill their slush funds…

    Reply

    zanon Reply:

    Aaah Jim:

    FICA is very very rarely part of “tax cut” because of fiction that SS payments are funded by FICA. Therefore, cutting FICA means you are cutting SS.

    So, primarily, tax cut talk is focus on Federal Income, which is paid by “rich”.

    I am supportive of FICA holiday btw.

    markg Reply:

    Jim,
    Maybe we should push for the earned income tax credit to be increased for income up to the SS cap. The FICA tax is paid, the SS trust fund credited, and the Treasury gives the money back to the tax payer. Sure, it’s just a numbers game, but sometimes you have to fight stupidity with stupidity.

    jaymaster Reply:

    So if the deficit hawks are now called deficit terrorists, shouldn’t we be calling the anti- tax cut crowd “tax terrorists”??? :)

    Reply

    Tom Hickey Reply:

    Just who is the “anti-tax cut” crowd? As far as I can see, the GOP wants across the board tax reduction, eschewing fiscal policy in favor of monetary policy, while Democrats want to a targeted tax policy as part of fiscal policy, letting the Bush tax cuts expire only at the top.

    Reply

    zanon Reply:

    Dems are anti-tax cut. This is because federal income only paid by educated professional middle class and up. Therefore, any tax cut primarily benefits wealthy.

    also, i am pretty sure that “across the board tax reduction” is fiscal policy, not monetary policy. unless you have become monetarist.

    Tom Hickey Reply:

    What I meant by preferring monetary, the GOP prefers the Fed to raise rates to fight inflation (rather than raise taxes) and lower rates to increase investment during contractions.

    Dems are not against tax cuts for the middle class. Obama campaigned on lowering middle class taxes, as I remember it.

    zanon Reply:

    Please don’t talk crap. Both Dem and Republicans prefer monetary policy over fiscal because both believe monetary work.

    Dem like for fiscal is that they get to pay $ to their special interest pets. Republicans also very happy to lard taxpayer money to their own special interest pork as well.

    Obama’s campaign promise and your memory are both equally full of holes. I believe Obama said taxes would not go up on family making less then $250K. Of course, health care premium requirement is not a tax so that does not count. More recently, Obama say he is now “agnostic” on issue. Obama is concern about deficit because he gets bad advice. But Clinton and Bush I had exactly same problem.

    The last stimulus, which was filled with pork and had a few scraps of pathetic tax cuts shows us exacly how obama, and other democrats, view tax cuts.

    Tom Hickey Reply:

    Both Dem and Republicans prefer monetary policy over fiscal because both believe monetary work.

    I would say instead that both Dems and Repubs prefer to rely on monetary policy instead of fiscal because it allows them to shift economic policy to unelected and unaccountable technocrats.

    zanon Reply:

    you continue to babble.

    you claim that politicians don’t want power. not true for republicans, and not true for dems

    Tom Hickey Reply:

    Not that they don’t want power. They don’t want responsibility when times are tough.

    They would rather dump policy over to the Fed instead of making tough political decisions. Dems will never cut FICA during down times for fear of undermining SS, and Repubs will never raise taxes to control inflation as a matter of principle. They both depend on the Fed handling the politically difficult things using interest rates and the (non-existent) money multiplier.

    zanon Reply:

    LOL!

    OK Toms Hickey — in your world, politicians do not want power. Dam that must be good weed.

    All of the “questioning authority” through the ages has severed the link between power and responsibility. This is obvious to anyone. Your claim that the two have any link left is laughable.

    Tom Hickey Reply:

    The big difference between the GOP and the Dems is that the Repubs are not afraid to use power when they have it, and the Dems are.

    ESM Reply:

    “The big difference between the GOP and the Dems is that the Repubs are not afraid to use power when they have it, and the Dems are.”

    You and I apparently live in different worlds.

    Tom Hickey Reply:

    You and I apparently live in different worlds.

    True. That is the big problem in the world right now. Disparate ideologies are increasingly coming into contact with each other and clashing. While intelligent people recognize that this involves differences in norms, which are subjective, it is presumed that facts are objective, hence, shared by rational observers.

    We now know from research in cognitive science, Gestalt psychology, and anthropology that this is not the case. What we call “facts” gets determined by how we look (subjective bias). All seeing is “seeing as” (Ludwig Wittgenstein, Philosophical Investigations). Since “reality is perception,” we do indeed live in different worlds. “The world is my world.” (Ludwig Wittgenstein, Tractatus).

    People that recognize this do their best to get along in spite of differences It’s called “compromise.” Those who don’t recognize this go to war when they cannot settle their differences.

    Greg Reply:

    “The big difference between the GOP and the Dems is that the Repubs are not afraid to use power when they have it, and the Dems are.”

    I’m not sure I’d quite word it like that. There is a difference in the methods used to exert their power.

    Today, I think the GOP is infested with many people who are not afraid to openly talk about using AND use physical violence to get what they want. There is an open appeal to force (just reload DR Laura!!) in a large segment of the conservative movement. Now, many think its warranted because the democrats are “taking their country away” when in fact its no more than the same political tough choices we’ve had to make over the decades. There IS in fact two schools of thought about how to achieve things in our fragile democracy and we vascillate between the amounts of govt we use to regulate and where we regulate. I have always felt that there was an unwritten rule that the party in power gets to try their way for a while and see how they do. There is the usual political grandstanding and fights but mostly we looked at our system as an experiment which would grow and tweek as we went along. After 1980, conservatives considered the discussion OVER. Govt was bad and just needed to be reigned in, in every form. SInce then both democrats, Clinton and now Obama, have been met with the most vehement political opposition and the battle lines have been drawn. There is no COMPROMISE form conservatives because they KNOW whats right. Its now all about mobilizing their forces for the big showdown. Stir up the social issues with the christans and the economic issues with the libertarians and just blast away at those secular and social engineering democrats.

    There are no statesmen in the GOP any more therefore we are tenuously holding onto a state. I’m sure many like ESM and Zanon see this as great. Shed some blood, some tears and lets get on with it. I think there is way more to lose than to gain from the violent restructuring. I hope cooler heads prevail, but we’ve got Glen and Sarah shaking the beehive in Washington as we speak. We’ll see where it leads.

    Tom Hickey Reply:

    Greg, I was referring to the Nixon, Reagan, Bush 41, and Bush 43 administrations in comparison with the Clinton and Obama administrations. Arnold Schwarzenegger summed it up in the pejorative girlie men. On the progressive side, they are called “spineless.”

    ESM Reply:

    Greg: The idea that conservatives or Republicans threaten violence, let alone USE violence more than the other side of the political spectrum is baseless. I actually think that it’s the other way around, but I’m willing to stipulate that in the US today the threat of violence does not have a measurable effect on our political discourse. I doubt that anybody of any importance in the last 30 years has altered his political views or changed his support for a bill or law because of the threat of violence.

    What you see as unusually vehement political opposition to Clinton or Obama is pretty much a normal level of political opposition. If you were a student of political history, you would be able to put such opposition in context. The opposition to GWB was unusually intense, however, which I think was driven by two factors: 1) the ridiculously close and controversial election in 2000; and 2) GWB’s unique combination of inarticulateness and Texas swagger.

    Tom: I’d certainly be interested to hear from you what Nixon, Reagan, Bush 41, or GWB accomplished which required winning any kind of big political battle. I certainly can’t think of anything substantive off the top of my head, except maybe Reagan putting intermediate range nuclear missiles in Europe. GWB’s implementation of the Iraq surge was impressive, but the president is commander-in-chief under our constitution, so it’s not a surprise that his power with respect to military decisions in an authorized war is almost plenary.

    Tom Hickey Reply:

    ESM, I think you response to Greg is correct. The rhetoric now appears “over the top” but it is just street theater, designed to get media attention and motivate the base. Having lived through the Sixties and Seventies and seen Washington actually burning (1968) and the huge anti-war marches complete with tear gas after Nixon bombed Cambodia, what is going on now is nothing. In fact, I have been wondering why the reaction has been so muted. I guess everyone is a keyboard warrior these days.

    Regarding Dems & Repubs, I am talking about the relative approaches to governing. The GOP hangs together, presenting a united front, and their people are willing to take tough votes for their constituencies to put party policy across. Most of the GOP held their noses at Bush’s Medicare expansion, but voted for it anyway, even though it violated their principles and enraged a lot of conservatives. They know how to move the ball forward, and when they lose control of the ball, they present an iron wall of defense to prevent the ball moving into their territory.

    The problem that the Dems face is disunity. They don’t seem to get that politics is a team sport, so they don’t handle the ball well. They have a difficult time resisting GOP initiatives when the GOP is in power, and they cower before opposition when they are in power themselves, neutering themselves. For example, the “Hillarycare” wasn’t killed by the GOP. It was killed by Dem disunity. Remembering 1994, this time the Dems hung tough to get a bill passed, but caved to neutering the bill itself, making it a political liability anyway since it is insufficient. Same with the stim.

    zanon Reply:

    last time violence had political effect in US was late 60s. It was left wing phenomenon and very effective.

    the same white folks who are now in tea-party were driven from urban centers they had lived in for several generations, and transgender-black studies were installed in the Academy to make sure revolution there stayed in place.

    Fast forward 50 years and we have 10 percent unemployment while president:
    1. tried to build mosque on ground zero
    2. tries to let in as many illegal pergnant mexicans as possible
    3. morons like Tom Hickey talk about “right wing violence”

    GREG: Where in Gods name did you get the idea that I 1) support Republicans, or 2) support violent political action??

    Tom Hickey Reply:

    morons like Tom Hickey talk about “right wing violence”

    Oh, like Tim McVeigh and the assassins of doctors that perform legal abortions? These are explicitly techniques to foment uprisings, coming from the extreme right.

    ESM Reply:

    Tom: “The problem that the Dems face is disunity.”

    I think there is an element of truth in this statement, but the disunity fundamentally comes from the fact that the Democratic Party is even more artificial than the Republican Party. The only way that somebody as far out of the mainstream as Nancy Pelosi gets to be Speaker of the House is by cobbling together a large coalition of disparate interest groups motivated by the single idea of getting the federal government to give them something that they can’t get for themselves in a free market. So you see the white union auto workers, government workers, the illegal agricultural laborers, the unemployed/underemployed, and the various race grievance-mongers assembled together in a marriage of convenience. This gets you majorities from time to time, but the majorities are unstable ones.

    Republicans do the same thing of course, but to a lesser extent, probably because their policy goals are fundamentally more popular. This is in fact a center-right country, given the size of government currently, and so if the Dems fashion a majority, it is necessarily going to be more precarious.

    You use Bush’s Medicare expansion as an example where many Republicans held their noses and voted for it, but the fact is 1) the policy was bipartisan and popular (not with me of course); and 2) many Republicans didn’t vote for it.

    The contrast with Obamacare is striking. What got passed is unpopular, and the coerced votes were all on the Democratic side, not on the Republican side. Many Democrats competed behind closed doors for the privilege of casting a dissenting vote.

    Ultimately, both parties will push the limit of their majorities. Bush never had a large majority, so he ended up pushing through pretty centrist legislation. Obama has/had large majorities, so he went for more extreme policies. But in both cases, you’re going to be playing poker or chess for those last 2 or 3 votes. Bush seems to have done a better job than Obama in getting those marginal votes, but maybe it’s because his administration was more hands on in the legislative process itself. Still, it’s too early to make general statements about their relative efficacy.

    ESM Reply:

    “Oh, like Tim McVeigh and the assassins of doctors that perform legal abortions? These are explicitly techniques to foment uprisings, coming from the extreme right.”

    The Oklahoma City bombing was over 15 years ago. I think you need an example which is a little more timely. And killing abortion doctors is about killing abortion doctors. It has nothing to do with fomenting uprisings. I’m sure that 99% of the people who are anti-abortion (I am not by the way) understand that these killings hurt their cause rather than help it.

    Tom Hickey Reply:

    And killing abortion doctors is about killing abortion doctors. It has nothing to do with fomenting uprisings.

    That is simply not the case. It is a coordinated effort to stop access to legal abortion in the US, not just a few crazies taking the law in their own hands. The anti-abortion institutitions glorify the “martyrs,” and the “martyrs” explicitly encourage others to follow in their footsteps.

    BTW, it is no coincidence that April 19th has become a right-wing May Day either. It was celebrated this year by a display your guns as close as you can get legally to DC.

    Tom Hickey Reply:

    I think there is an element of truth in this statement, but the disunity fundamentally comes from the fact that the Democratic Party is even more artificial than the Republican Party.

    Both parties practice interest politics, so the result is unstable coalitions. It is parliamentary representation in a two party system. A relatively small cohort often holds the balance of power and uses this advantage to deal, if not completely get its way.

    A significant difference between the GOP and Dems is that the GOP plays to the base and then moves to the middle toward election time (with a wink to the base), whereas the Dems take the base for granted (“Where else are they going to go?”) and play to the middle (Dick Morris’s “triangulation”) most of the time, throwing a crumb or two to the base now and then.

    This moves the Overton window steadily rightward.

    ESM Reply:

    “BTW, it is no coincidence that April 19th has become a right-wing May Day either. It was celebrated this year by a display your guns as close as you can get legally to DC.”

    It is absolutely a coincidence! April 19, 1775 was the day of the “shot heard round the world.” Good grief, do you really think that pro-gun people are celebrating the Oklahoma City bombing or commemorating the Waco raid?

    Tom Hickey Reply:

    Yeah, like revolution, as in overthrow the existing government. And these are not left wingers.

    zanon Reply:

    Toms Hickey:

    McVeigh effected no political change. Abortion doctor killers likeways have effected no political change. Roe vs Wade is not going anywhere.

    Successful political violence in US is all left wing. Go to Harvard and look at gay-transgender-black study department. Or go to south side Chicago. Or San Francisco. Or Detroit. The success of the radical, violent left of 60s is indelible.

    Even Reagan, what is his legacy? It is a joke.

    zanon Reply:

    And “Overton Window” has moved leftward. It is very clear.

    In 1910, what did average person think of man marrying man? what would average person think of 40% out of wedlock birth? what would average person think of god forsaken hell hole that is Baltimore? What would 1910 person think of marjuana being legalized, taxed, and then unionized! what would 1910 person think of Harvard teaching homosexual-black-anti-colonialism study.

    In 1910, Harvard let in rich whites. In 2010, if you are hard working white who lead church youth group with SAT 1400 you will never get in. But if you are black-transgender-lesbian with SAT 1200 not only will you be let in but you will get scholarship. This is dramatic left movement, not right.

    in 1910, what would person think about power of federal government in 2010. He would call it communist state, and he would be quite right by standards of this time.

    Martin Luther King himself would be appalled by what is “centre” in 2010 — and he is hardly right winger.

    zanon Reply:

    Finally, Toms Hickey, for a radical you are so idiot about actual government change.

    Tea Party does not want a revolution. They want a restoration.

    if you try to count number of successful restorations vs revolutions in past 100 years you will see how pitiful their hopes are and give up on them as the losers that they so obviously are.

    I mean, Glenn Beck. How pathetic.

    Tom Hickey Reply:

    Zanon: And “Overton Window” has moved leftward. It is very clear.

    Socially and culturally in the long run, agreed. The left is on the right side of history. (pun intended)

    I was talking about the political window from FDR and Reagan. Political dominance shifts from left to right and back again cyclically.

    But history is definitely moving leftward overall, because time seldom goes backward, and the right (conservatism) is generally considered “traditional,” i.e., backward looking to the status quo ante.

    Tom Hickey Reply:

    Zanon: McVeigh effected no political change. Abortion doctor killers likeways have effected no political change. Roe vs Wade is not going anywhere.

    I never claimed that they actually effected change. I asserted that this was a large component of their intention.

    Tom Hickey Reply:

    Zanon: Tea Party does not want a revolution. They want a restoration.

    I can agree with that in a certain sense. They want to restore something that never actually existed, namely, their idea of the Constitution. An examination of American history shows that these ideas were never in place. Moreover, the interpretation of the Constitution became controversial from day one.

    The idea of restoring a “pure” interpretation of the Constitution is hardly a restoration. It is a call for a revolution that would create a new idea of what America is about, and one that never previously existed on this soil.

    Reply

    WARREN MOSLER Reply:

    sad but true. not even a payroll tax holiday which removes a highly regressive tax

    Reply

  3. ESM Says:

    “In the end, they came very, very close to their target: They told us they were just 61 cents short. (In other words, they bought $1,249,999,999,999.39 worth of mortgage-backed bonds.)”

    Maybe I’m reading too much into this, but I think this sentence tells us a lot about what’s wrong with bureaucracy.

    Reply

    Tom Hickey Reply:

    Bureaucracy, or technocracy?

    Reply

  4. Tom Hickey Says:

    Earlier this month, the Fed announced that it will use the proceeds from the mortgage bonds to buy Treasury bonds — essentially keeping all that newly created money in circulation.

    Sitting as excess reserves is “in circulation”?

    Reply

    Rodger Malcolm Mitchell Reply:

    Money never “sits.” Except for vault dollars and the cash you buried in your back yard, money always is in circulation, moving hand to hand nearly every day. The notion that money “sits” is another economic myth.

    Rodger Malcolm Mitchell

    Reply

  5. beowulf Says:

    Ha ha, I guess the Antideficiency Act is for chumps. I believe Ms.Remache and her colleague are going to wish they’d kept their mouth shut and not talked to the press. $1.25 trillion in six weeks, that’s about what’s collected in federal payroll taxes and state sales taxes combined… in a whole year. Man, the tea party folks are going to eat this story up.

    The Antideficiency Act is one of the major laws through which Congress exercises its constitutional control of the public purse…In its current form, the law prohibits:

    * Making or authorizing an expenditure from, or creating or authorizing an obligation under, any appropriation or fund in excess of the amount available in the appropriation or fund unless authorized by law. 31 U.S.C. § 1341(a)(1)(A).
    * Involving the government in any obligation to pay money before funds have been appropriated for that purpose, unless otherwise allowed by law. 31 U.S.C. § 1341(a)(1)(B).
    * Accepting voluntary services for the United States, or employing personal services not authorized by law, except in cases of emergency involving the safety of human life or the protection of property. 31 U.S.C. § 1342.
    * Making obligations or expenditures in excess of an apportionment or reapportionment, or in excess of the amount permitted by agency regulations. 31 U.S.C. § 1517(a).

    http://www.gao.gov/ada/antideficiency.htm

    Reply

    beowulf Reply:

    Sorry, I misread it, thought they bought up the portfolio in six weeks and then spent 15 months unwinding. In fact the Fed kept buying up these assets for 15 months. Gotta give everyone on the Street a chance to front run them, I guess.
    http://boombustblog.com/how-to-front-run-the-fed-with-the-best-of-em.html?set_width=wide

    Reply

    Rodger Malcolm Mitchell Reply:

    The word “unless” answers the question.

    Rodger Malcolm Mitchell

    Reply

    beowulf Reply:

    Right. Beyond that, the Fed is funded by user fees and its cut of seigniorage income, not congressional appropriations. Congress gave away its money creation power fair and square, I guess.

    Reply

    Tom Hickey Reply:

    Congress gave away its money creation power fair and square, I guess.

    Constitutional?

    WARREN MOSLER Reply:

    for all practical purposes the fed is an arm of congress. like a congressional committee

    beowulf Reply:

    The delegation of seigniorage power is constitutional. Allowing Fed bank presidents, who aren’t appointed by either POTUS or FRB, to exercise executive power by voting in the FOMC, is almost certainly unconstitutional.

  6. Ramanan Says:

    Statement by Ben Bernanke :

    “Central bankers alone cannot solve the world’s economic problems.”

    http://www.federalreserve.gov/newsevents/speech/bernanke20100827a.htm

    Reply

    Matt Franko Reply:

    “A third option for further monetary policy easing is to lower the rate of interest that the Fed pays banks on the reserves they hold with the Federal Reserve System. Inside the Fed this rate is known as the IOER rate, the “interest on excess reserves” rate. The IOER rate, currently set at 25 basis points, could be reduced to, say, 10 basis points or even to zero. On the margin, a reduction in the IOER rate would provide banks with an incentive to increase their lending to nonfinancial borrowers or to participants in short-term money markets, reducing short-term interest rates further and possibly leading to some expansion in money and credit aggregates.

    He doesnt exactly say that banks ‘lend out the reserves’ but the logic of his statement here implies a similar conclusion imo. And he’s still stuck on quantity theory.

    Overall, he needs to tell Congress that its their turn as monetary has worked over the last 30 years from the once in a lifetime Volcker highs to todays 0% low, but thats now over and the only thing to do now to fight the employment and output gap is heavy doses of fiscal…when he gives these types of speeches he just gives Congress one more hope that they can wait a little more and see, then maybe being the cowards they are, they wont have to make what they view as politically risky decisions wrt fiscal.

    Reply

    Ramanan Reply:

    Thats absolutely right. The Congress will just wait and watch and time flows in only one direction – there is absolutely no compensation for the loss of output and the depression caused to citizens.

    Somewhere Bernanke says “At best, though, fiscal impetus and the inventory cycle can drive recovery only temporarily.”

    What a shame .. even physicists sometimes accuse each other of lack of rigour in their empirically proven works and we have the economics profession concluding with a “consensus” that fiscal policy has short term effects only without any proof whatsoever and in fact the evidence is exactly the opposite – that it has both short term and long term effects. Amazing.

    Reply

    Tom Hickey Reply:

    Even negative rates on reserves wouldn’t get banks to lend to people desiring loans that they do not deem creditworthy after tightening up loose policy. The would just put the funds into some other save haven paying minimal interest, waiting for things to turn around. The only way to increase lending in a trough is to have government to lend directly.

    The mortgage market would be dead right now if it were not for Fannie and Freddie, and even then it is moribund because Fannie and Freddie have also tightened their credit standards.

    The US is facing increasing prospect of a double dip and perhaps deflation. At this point government hiring and lending need to be implemented to stave off the growing odds of depression. David Rosenberg is already calling depression right now.

    This Is Great Depression II

    Reply

    ESM Reply:

    “The would just put the funds into some other save haven paying minimal interest, waiting for things to turn around.”

    Do you have any examples? I’m not sure that’s possible if the govt is paying negative interest. You could probably get zero not counting an upfront cost for a very large mattress, but positive?

    WARREN MOSLER Reply:

    negative interest on reserves is just a tax on banks (and savers) if the fed keeps reserve balances positive (and taxes vault cash as well).

    Tom Hickey Reply:

    ESM, I was referring to proposals for negative interest rate policy, e.g., from Greg Mankiw here.

    WARREN MOSLER Reply:

    they can create quite a few and then work long and hard to solve the ones they created…

    Reply

  7. Dave Begotka Says:

    :(

    Reply

  8. Greg Says:

    ESM

    “The idea that conservatives or Republicans threaten violence, let alone USE violence more than the other side of the political spectrum is baseless. I actually think that it’s the other way around, but I’m willing to stipulate that in the US today the threat of violence does not have a measurable effect on our political discourse. I doubt that anybody of any importance in the last 30 years has altered his political views or changed his support for a bill or law because of the threat of violence”

    Baseless? First off I’m not talking historically just recent history OK (although I think a good case can be made historically as well) but the number of politicians who have openly threatened or made allusions to physical violence (Ms Palins if we dont win with the ballot box we’ll use the bullet box) as well as conservative commentators with a prominent voice (Beck, Limbaugh, Savage ) in just the last two years numbers in double digits. Can you give me even ONE example from the other side. I hope Tom Hickey is right (street theater) and I suspect he mostly is however its a dangerous social experiment in my view and one which shows a certain recklessness towards a civil society to undertake.

    Secondly the metric is not “whether anyone has changed their support for a bill or altered their views” because of threats of violence, the question is are threats of violence acceptable behavior from people given the responsibility to govern ALL AMERICANS. It has a measurable affect on our discourse if it becomes the norm of our discourse. I posit that in TODAYS republican party it is inching closer and closer to the norm to talk of using violent means when you dont win at the polls. I’m 51 and Ive heard nothing like this in my time from as many politicians and pundits.

    “What you see as unusually vehement political opposition to Clinton or Obama is pretty much a normal level of political opposition. If you were a student of political history, you would be able to put such opposition in context.”

    I am not a student of political history however how we conducted ourselves in the early/mid 1900s should not be a metric for today. For Gods sake we didnt even let all Americans vote and attend the same schools til the 1970s. We are supposed to be advancing not stagnating.

    “The opposition to GWB was unusually intense, however, which I think was driven by two factors: 1) the ridiculously close and controversial election in 2000; and 2) GWB’s unique combination of inarticulateness and Texas swagger.”

    OK. So can you cite ANY examples of sitting democratic congressmen or senators who talked about killing the house speaker because he had passed the Bush tax cuts or created the medicare donut hole or was looking to privatize social security? Any liberal TV commentators or radio commentators?

    Tom

    You wonder why the reaction today is so muted compared to the 60s reaction to Nixons actions in VietNam? Maybe because the actions were much more egregious than
    simply costing people a little more on their health care or paying 3% more in taxes.

    “The problem that the Dems face is disunity. They don’t seem to get that politics is a team sport, so they don’t handle the ball well”

    Theres a great article by social scientist Jonathon Haidt where he concludes that those on the left of the spectrum treat politics like it is a battle for the mind, and they use reason and logic to try to appeal, whereas conservatives treat it like its a battle for the heart and use religious type tactics. I think in most cases the conservatives have the right view of politics.

    Zanon

    First off my comment was kind of clumsily worded I guess. I was trying to say that you and ESM might see it as great that we are tenuously holding on to a state. That you might favor dissolution of this state, not necessarily that you supported a violent means of doing so. I was trying to say also that in the dissolution of the state it would likely be bloody and nasty.

    So no, I’ve never seen you advocate violence.

    One comment about left wing vs right wing violence. Most instances of left wing populist violence are in the form of mass riots and demonstrations. Its quite clear why. In our left/right spectrum those in power usually sit on the right and their change from below does not come without threats to their way of life. Right wing violence is more everyday and systemic. The rules are made by the rulers and the little guy just has to take it or else.

    This is what makes todays environment unique. The American right has a significant populist element that see themselves as being treaded on. Not to say that there is no truth to it at all but largely these people are quite well off and the system has served them quite well (and still is). Most Tea Partiers are middle to upper middle class. Not a downtrodden lot to say the least. They are using techniques form the TRULY oppressed classes in our recent past (draftees in the 60s and blacks during civil right era) and our revolutionary forefathers who were breaking free from Englands tyranny.

    We live in interesting times indeed. Just like the Chinese curse.

    Reply

    Tom Hickey Reply:

    Greg, two big reasons that I see. First, the draft. This was huge. Secondly, young people especially were much more involved then. It started with the Free Speech Movement in Berkeley in 1964, when Mario Savio was addressing a crowd on the steps and someone handed him a bullhorn.

    I had no concern with the draft since I had already completed my tour and was in grad school. But most of the people who were agitating were facing the draft, which meant 90 days of boot camp and of to Hamburger Hill.

    At that time young people, especially students, were politically active, and the counter-cultural revolution was in full swing. So “question authority” and “revolution” were in the air. The talk on the left was more incendiary and wider spread that the talk on the right now, actually. Nixon was really hated as a warmonger surrounded by goons. Things were very intense. And there were even a few actual revolutionaries, like the Weather Underground. Wild times.

    But this was not just the US. Students around the world were in turmoil, too. Daniel Cohn-Bendit was student leader at the time of the 1968 protests in France against De Gaulle’s government. Intense times there, too.

    Interestingly, times were actually pretty good then. Now youth unemployment is historically high and a lot of young people are facing an uncertain future. Not much noise yet, though. Different mindset, I guess.

    Reply

    ESM Reply:

    Greg: “Can you give me even ONE example from the other side.”

    This is kind of like asking me if I can use the google machine for two minutes and type in “Keith Olbermann” or “Ed Schultz.” How about if I give you one example right off the top of my head, which is from a prominent, Nobel Prize winning economics commentator, and directed not at a conservative or a Republican but at a liberal who was deemed insufficiently liberal? Is that good enough for you? On an interesting side note, back when Joe Lieberman was threatening to filibuster the public option, I asked a good friend whose political views are close to mine whether the Daily Kos liberals hated “Holy Joe” even more than they did Osama bin Laden. He chided me for asking a question I already knew the answer to. I think you know in your heart what the answer is too. It’s both understandable and incomprehensible at the same time.

    Reply

    ESM Reply:

    Two minutes with the Google machine, and I found this which I had never seen before. That’s an example of Obama using some pretty incendiary rhetoric while he was running for president. Admittedly, it was three years ago, so maybe it doesn’t count in your book. Still, it’s amazing what kinds of stuff the mainstream media sent down the memory hole.

    Reply

    Tom Hickey Reply:

    That’s what you call “incendiary rhetoric”?

    Try this: In activist’s video, Glenn Beck fans agree with Ted Nugent on shooting illegal immigrants

    Reply

    ESM Reply:

    Hmmm. I didn’t see any presidential candidates in the video, but I did see something else that was quite revealing. Several gun rights supporters were thoughtful enough to realize that the government shouldn’t have the power to deny the constitutional right to own a gun to somebody just because a bureaucrat has decided he should be on a terrorism watch list. One of them even made a convincing argument for the NRA’s position on the issue.

    Yet the activists who made the video apparently thought it was extreme or ignorant enough to put it on their greatest hits clip of the Glenn Beck rally. Says a lot more about the people who made the video and posted it than it does about the average person at the rally.

    Tom Hickey Reply:

    Speaking of presidential candidates, who was it that was singing, “Bomb, bomb, bomb, Iran”? Oh right, they are Muslims.

    ESM Reply:

    It was in poor taste, but it was a joke. And bombing Iran is a perfectly legitimate foreign policy option that should be considered. I’m not saying we should do it (there are many policies we should be implementing first, and even then I would probably be against it), but it is not an example of illegitimate political discourse. Not sure what it has to do with Muslims per se, although I do think that the threat Iran represents is due in large part to Islamist ideology (i.e. Islam as a political philosophy as opposed to a religion).

    Tom Hickey Reply:

    What this conversation is further illustrating, ESM, is how differently we see the world. That is the difference between left and right. The center gravitates between right and left, usually holding some positions that lean right and others that lean left. The tipping of that balance decides elections and determines how politicians play their hand.

    The beauty of MMT is we can agree on operational descriptions, although we may disagree over policy options that flow from that description. That moves the economic debate a giant step forward. Policy decisions are matter that involve not only facts but also norms, and norms are not factual at bottom. Therefore, they not susceptible of truth and falsity. Cultures and subcultures are defined in part by the standards they set up for judging good and bad, right and wrong.

    This does not imply that values are relative. It just states the fact that humanity does not have an absolute standard available to it external to the heart. Rational arguments can be given for standards, but ultimately they rest on foundational principles that are asserted as self-evident. But humans don’t completely agree on self-evidence, even within a single culture. Arguments based on authority presume the authority of the supposed authority. Arguments based on practicality are expedient. Hypothetical imperatives are hypothetical but untestable, and categorical imperatives are categorical but unprovable. And so on.

    This has been debated for millennia, and the inquiry has produced no definitive answers accepted as universally compelling. So I don’t think that we are going to resolve this conundrum here.

    Factually, opposites test each other in the ongoing dialectic of history, as Hegel observed, as ideas have their moment until other ideas replace them. The individuals and groups espousing those ideas the historical manifestation of the ideas. During FDR’s time and for some time after the bias was predominantly liberal. Since Reagan it has been predominantly conservative. That won’t last forever, either.

    Matt Franko Reply:

    Tom/ESM,
    I just got this from SarahPAC (Palins PAC) in email:

    “Dear Friends

    As you know, in a few short months the American People will head to the polls to pass judgment on the current Democratic leadership in Washington to determine our country’s path at the crucial crossroads we are currently facing. We have to make the choice as a nation between continuing on our destructive path of deficit spending that is moving us towards economic disaster, and saying ‘enough is enough’. If the Democrats are allowed to maintain their large majorities in the House and Senate, our economy will continue to struggle under the looming threat of tax hikes, the scope of the Federal Government will continue to expand, and the national debt will spiral out of control.

    Italics mine. Then they ask for money. Ive seen her interviewed on Hannity and she said we are borrowing from the Chinese. This poor woman is being much misled by the mainstream GOP economic “experts”. Its too bad as I think she has (maybe now had) some good instincts wrt the proper role of govt. from what I saw of her way earlier interviews.

    Her whole pitch here, all of her issues she points out are illegitmate if you understand MMT. (Also from the Dems tax increase perspective also). They are really non-issues from our perspective. If the public understood these operations to the level for instance Scott F has explained in his paper here today, the political deck chairs would be re-arranged for sure.

    This is got to be the focus as if we could unleash fiscal, we would live in a much more harmonious country I am sure of it. The ‘Motor-City-Madman’ aside :)

    Resp,

    Tom Hickey Reply:

    Addendum to Disconnect

    Sharî’ah: Between Two Popes

    ESM Reply:

    Tom, one has to be very careful about polls dealing with complicated, subjective, or unusual questions. First, the way a question is worded has an effect on the respondent. Second, the very nature of the question can lead to selection bias in who is willing to respond (e.g. if a pollster called me up and he asked “Is Barack Obama a cannibal?” I would probably hang up and thus my response would not be counted). Third, in many of these kinds of polls people answer untruthfully as a way to register disapproval. If you don’t like Barack Obama, and the only question about him is whether or not he is a cannibal, you might answer yes just to show that you disapprove of him.

    For those reasons, I don’t generally pay attention to any polls except those that ask “Are you going to vote?” and “Who are you going to vote for?”

    It’s obviously a ridiculous notion that Obama wants to spread Sharia law. A less ridiculous notion, however, is that Obama is an appeaser of Sharia proponents , and his policies and actions make the encroachment of Sharia on the West more likely rather than less likely. I believe this to be true for instance.

    What I don’t truly understand is why the left-wing tends to take the side of Sharia proponents. It’s an extremely illiberal political system. I suspect they’re doing it mostly to annoy conservatives, but maybe it is done out of genuine fear.

    Tom Hickey Reply:

    What I don’t truly understand is why the left-wing tends to take the side of Sharia proponents. It’s an extremely illiberal political system. I suspect they’re doing it mostly to annoy conservatives, but maybe it is done out of genuine fear.

    The left doesn’t give a hoot about shari’ah. The issue is human rights. On one hand, people have a right to practice their religion. Shari’ah to Muslims is equivalent to Toral for Jews. Both religions are about obedience to God. Read the story of Abraham and Isaac (Jewish version) and Abraham and Ishmael (Muslim version). Same story. Following Torah and Shari’ah is how orthodox Jews and Muslims practice their religion.

    On the other hand, the US has decided that national law trumps religious law. That question has already been decided decisively. It is not in question. Mormons cannot be polygamous. Jews and Muslims cannot practice the harsher aspects of their religious laws in the US. Indeed, until recently Sikhs in the US military were not permitted to wear their required turbans.

    The US, regardless of administration, has strongly and consistently objected to violation of human rights in the name of religious law. Hillary Clinton has been out front in this regarding women’ rights, which are most often violated in traditional societies.

    So I don’t know where you are coming from on this.

    ESM Reply:

    Sharia is more than just about religion. It is a political system and a legal system far more extensive than anything that even Catholics have constructed.

    “Jews and Muslims cannot practice the harsher aspects of their religious laws in the US.”

    In theory that’s true. In practice, accommodations are being made, just as they are being made in England. Also, freedom of speech is being curtailed by credible threats of violence.

    “The US, regardless of administration, has strongly and consistently objected to violation of human rights in the name of religious law. Hillary Clinton has been out front in this regarding women’ rights, which are most often violated in traditional societies.”

    These statements are utterly false.

    “So I don’t know where you are coming from on this.”

    I am trying to understand why the left is vehemently opposed to any religion that tries to enforce its beliefs and ethical precepts in the public domain, except for the one major religion which tries to do this far more than any other.

    Tom Hickey Reply:

    ESM: I am trying to understand why the left is vehemently opposed to any religion that tries to enforce its beliefs and ethical precepts in the public domain, except for the one major religion which tries to do this far more than any other.

    You mean fundamentalist Christianity, I presume.

    Greg Reply:

    ESM
    Your Obama example is WEAK . He explicitly gave a story about a fetus having a bullet in its arm and took advantage of a very convenient metaphor to “take the bullet out”.
    Yes he used the word bullet, no he was not saying use bullets to get your way. You really had to reach deep for that one.

    Krugman specifically saying to hang Lieberman in effigy?? He did say in effigy not to actually hang him. Kind of like asking someone to use a voo doo doll. I’ll give you that one, sort of.

    However, not the same as what Ms Palin, Mr Beck, Mr Boehner or Mr Limbaugh have advocated.

    This is not a contest of “who’s meaner”. Certainly you can agree that when our discussions devolve into physical threats when we dont get our way, we are losing our way as a civilized society. TODAY, there is a strong physically threatening element on the right, that wasnt there even 15-20 years ago. I say this as a guy who voted for Reagan the first time I was eligible to vote in 1980 (how naive I was). I am only recently “anti republican”. They have completely turned me off with their anti evolution bullshit, their macho “mission accomplished” bullshit , their hyper religiosity bullshit and their general anti knowledge stance. The only thing you can agree with them is they are against bureaucracy, but then, they are running FOR bureaucracy.

    Reply

    ESM Reply:

    Greg, the bullet story was the usual Obama nonsense. I didn’t even understand what it was supposed to mean. The incendiary stuff had to do with his repeated references to the LA riots and how blacks were suffering quiet riots all the time due to government indifference. The implication was that these quiet riots could break out into real riots at any time, and that they would be justified to some extent by government inaction or indifference. I think this is inflammatory rhetoric, and far more likely to lead to real violence than any metaphorical talk about the American revolution.

    Krugman’s encouragement to hang Joe Lieberman in effigy is in a similar vein. While hanging somebody in effigy is not violence per se, it is incendiary and usually a key element in a protest that can explode into a riot. Can you imagine what it would be like if a prominent conservative said “By all means, hang Barack Obama in effigy?” I realize that there are connotations of lynching which make the offense seem even worse, but not only would there be a hue and a cry, there would be a serious response from the Secret Service (although the Secret Service apparently didn’t seem to care when left-wingers made explicit albeit metaphorical threats on GWB’s life during anti-war protests).

    Greg Reply:

    ESM

    “Can you imagine what it would be like if a prominent conservative said “By all means, hang Barack Obama in effigy?” I realize that there are connotations of lynching which make the offense seem even worse, but not only would there be a hue and a cry, there would be a serious response from the Secret Service (although the Secret Service apparently didn’t seem to care when left-wingers made explicit albeit metaphorical threats on GWB’s life during anti-war protests”

    You’re not seriously suggesting that secret service dont “care about” republican presidents as much as they do black democrats are you?? You’ve made some absurd statements but this might top them.

    And the left wingers thast made these threats to W during anti war protests were any SITTING elected officials? Were ANY pundits with a significant circulation.? What a yahoo yells at a protest does not rise to what Sarah, BillO, Mr Huckabee, Mr Boner etc etc yell, with their audiences and influence.

    Are we now to the point where yelling “Nigger” is exactly the same as calling someone stupid in your mind?

    Is all negative speech EXACTLY alike?

    ESM Reply:

    “You’re not seriously suggesting that secret service dont “care about” republican presidents as much as they do black democrats are you?? You’ve made some absurd statements but this might top them.”

    That’s not my interpretation of the situation, although I do expect and hope that the Secret Service is even more vigilant concerning Obama than they were about GWB. It would be far worse for this country for Obama to be assassinated than it would have been for GWB to be. I could explain further if you like, but I think you probably understand the point.

    My actual interpretation is that left-wing threats of political violence are so prevalent that they’re not taken seriously any more by the Secret Service. These days, it’s just talk. I think the same thing about right-wing threats of political violence, but I don’t think the mainstream media or the Secret Service have gotten to my level of comfort yet.

    oliver Reply:

    Obama noted that during the riots, a bullet pierced the abdomen of a pregnant woman and lodged in the elbow of her fetus. The baby was delivered by caesarian section, the bullet was removed and the child, Jessica Glennis Evers-Jones, has only a small scar on her arm to show for it.

    Using the incident as a metaphor, Obama said society’s problems are worsening because “in too many places across the country, we have not even bothered to take the bullet out.”

    “When we have more black men in prison than in college, then it’s time to take the bullet out,” he said.

    ESM, I’m taken aback by your standards. I’m neither a Christian, nor an American, but I can’t for the love of any hypothetical supreme being see anything incendiary in this metaphor. Unless that is, if you interpret ‘taking the bullet out’ as meaning the opposite of what it represents in the metaphor. But that says more about you as the interpreter than about the metaphor or Obama.

    Having a presidential candidate ‘joke’ (of all things) about the annihilation of another country on the other hand, is not just bad taste, but about as spiteful, xenophobic and incendiary as anything Ahmadinnerjacket could ever come up with. And last time I checked Dini’s hate-mongering wasn’t considered a benchmark for international diplomacy.

    Reply

    ESM Reply:

    Oliver, see my comment to Greg above.

    “But that says more about you as the interpreter than about the metaphor or Obama.

    No, it says more about you and Greg’s ability to interpret a simple news story than it says about me. I’ve already noted previously that Greg’s reading comprehension appears to be impaired. You at least have the excuse of living in a foreign country, so the LA riots might not have has much meaning for you.

    “…but about as spiteful, xenophobic and incendiary as anything Ahmadinnerjacket could ever come up with.”

    Do you really believe this?

    oliver Reply:

    1. I did not see the reference to LA riots. I’ll keep out of that one.

    2. Dini is a tireless demagogue which one certainly can’t say about McCain and I’ll even give him the benefit of the doubt and say it was an act of extreme stupidity and not malice. Sadly, that makes no difference to the receivers of the message. And if the history of US interventions in the region is anything to go by (what else?) who can blame them?

    Republican politicians seem very content to brag with US hegemonic power, then react ever so surprised if the odd clown from Arabistan or elsewhere dares to talk back and then take the reaction as proof for their own prejudices.

    Greg Reply:

    ESM

    “My actual interpretation is that left-wing threats of political violence are so prevalent that they’re not taken seriously any more by the Secret Service. These days, it’s just talk. I think the same thing about right-wing threats of political violence, but I don’t think the mainstream media or the Secret Service have gotten to my level of comfort yet.”

    Why have you so noticeably changed our discussion here? My original contention was that our political leaders form the conservative side and many pundits with broad audiences are using veiled and not so veiled threats of violence and that this is unprecedented in my voting lifetime. I dont care about the 40s 50s 60s we are supposed to be past that. I’m not talking about fringe groups on the left that were over top with W or the right wing white supremacist crowd that is always hiding in the wings and threatening. This isnt a talk about whos meaner, people on the left or right, but which party has resorted to bully tactics over the last few decades. Not just political bullying in our system but talk which I think goes over the line of civil discourse. You can say its mostly hot air (and I agree but the degree of “mostly” we might disagree, you say 95% I say 60% possibly) but thats not the total point. It has changed and its becoming worse.

    Reply

    zanon Reply:

    Greg:

    I do not see it as great that US is tenously holding onto state. First I do not believe that hold is tenous, as I have said elsewhere, and second, even if it was tenous I would not like it.

    I do not view Republican vistory in senate or house or presidency as being the end of the State as Toms Hickey does. I actually view it as non-event and do not care one way or another.

    US power holders are left, as is obvious when you look at which way Tom’s “Overton Window” has moved over past 100 years. Look further to past 300 or 400 years, and shift becomes even more clear. Once upon a time women could not vote and black were slave. Now women can vote, even illegal alien can vote, and black is president. This is not a shift to right, this is clear shift to left as topic of day become how many mosque can we get illegal gay mexicans to build on Ground Zero and then we can get them to be married. While smoking pot made by unionized illegal Raza activists.

    Left wing is simply better at populism and mob. Changes left wing mob have brought are indelibly written into syllabus at Harvard, hiring requirement of Fire and Police Departments, etc. Right wing mob is failure.

    The little guy definitely takes it though. The idiot just has no idea who he is taking it from (answer — he is monkey puzzle).

    “The American right has a significant populist element that see themselves as being treaded on.”

    Correct. Tea Party is populist right wing movement. It will fizzle and do nothing — just watch and see. Newspapers mock them, they will be dissappointed as anyone they elect just gets chewed up and spat out by left wing agency machine and runs DC irregardless of who is in power.

    “our revolutionary forefathers who were breaking free from Englands tyranny.”

    LOL! Whatever you do, do not start reading about Loyalists.

    Reply

  9. Keith Newman Says:

    For Tom H:
    Interesting times indeed. I was living in France in 1967 and there was no sign of the events to occur only one year later. Massive student strikes shutting down the universities, colleges and high schools. When the students were joined by more than 10 million workers in a general strike it looked like real change would occur. De Gaulle deftly defused it all by calling an election that was narrowly won by the conservative forces.

    Ironically times were very good in France at the time. Today throughout the West times are pretty dodgy for many people yet there has been no significant protest anywhere except in Greece.

    George Lakoff convincingly describes (see excerpt from interview below) how a very sophisticated conservative pushback was engineered in the 1970s by a group of wealthy US businessmen appalled by the questioning of the status quo by US university students. It took a while for them to figure out how to do it but they have managed to divide and confuse people to a remarkable degree. All quite openly in fact.

    “Why do conservatives appear to be so much better at framing?

    Because they’ve put billions of dollars into it. Over the last 30 years their think tanks have made a heavy investment in ideas and in language. In 1970, [Supreme Court Justice] Lewis Powell wrote a fateful memo to the National Chamber of Commerce saying that all of our best students are becoming anti-business because of the Vietnam War, and that we needed to do something about it. Powell’s agenda included getting wealthy conservatives to set up professorships, setting up institutes on and off campus where intellectuals would write books from a conservative business perspective, and setting up think tanks. He outlined the whole thing in 1970. They set up the Heritage Foundation in 1973, and the Manhattan Institute after that. [There are many others, including the American Enterprise Institute and the Hoover Institute at Stanford, which date from the 1940s.]

    And now, as the New York Times Magazine quoted Paul Weyrich, who started the Heritage Foundation, they have 1,500 conservative radio talk show hosts. They have a huge, very good operation, and they understand their own moral system. They understand what unites conservatives, and they understand how to talk about it, and they are constantly updating their research on how best to express their ideas.”

    (http://www.berkeley.edu/news/media/releases/2003/10/27_lakoff.shtml)

    Reply

    Tom Hickey Reply:

    Thanks for the report from the ground, Keith. The situation in France was far different from the US, where workers were in opposition to the youth. That’s when the construction workers took to wearing flags.

    Regarding Lakoff’s assessment, I like him and generally agree with his views, but I don’t think that it was right wing think tanks that changed the culture at the end of 70′s. I think that the countercultural revolution was about a youth that saw a future that seemed bleak, not so much economically as culturally. The countercultural revolution changed that. Business saw there was money to made through adopting new values, and this ended up co-opting the political revolution. Add to the end of the Vietnam War and the draft, too, and the major irritants were removed, so youth settled down to enjoy the new cultural standards that were to their liking, although shocking to their parents and grandparents. Now we are the grandparents.

    While the fuddy-duddies may make a lot of noise, but the cultural shift is not going backward anytime soon. Too much money in it, and too many powerful interests to impose any kind of “traditional values” across the board.

    It is the youth, now, that will be taking up the cause of sustainability. This is already an underground phenomenon that is going to surface more and more with tough times.This more than anything else will determine the overarching economic thrust in coming years. This is the developing trend to jump on early. It actually began in earnest back in the late 60′s, for example, with the phenomenal success of the Whole Earth Catalog that inspired a generation. That trend got submerged for a while but it is coming back strong lately, with colleges and universities offering programs in sustainable living, economics of sustainability, and so forth. This is a global phenomenon, and the Internet and social networking are key factors. It’s not all just “sex, drugs and rock and roll.”

    Reply

    Keith Newman Reply:

    Tom,
    I certainly agree the cultural change was important, freeing us all from an oppressive cloud of social conservatism. Thank God that’s gone! It demonstrates the ability of the economic system to adapt to non-threatening change – a good thing.

    Still, I don’t think cultural change of the sort you note can account for the change to the odd economic viewpoint so many people have. In many many cases people of modest means advocate ideas that are directly contrary to their day to day economic interests and are contrary to common sense. To me this is where Lakoff comes in, explaining how people develop and keep their ideas. I do think the development of conservative propaganda methods was very important and has been quite brilliant. It has also been sustained for the last 35 years. The 70s were only the start.

    Reply

    Tom Hickey Reply:

    Agreed.

    Jus’ sayin’ that there were other significant factors in the change. Actually, the beginning of the change was noticeably after Woodstock, when the hipness became trendy and the hard core was diluted by amateur and dress-up wannabes. But the big change didn’t take place until after Reagan when “greed is good” became the new mantra and the trend changed to have becoming cool instead of have-not. Now? All the kids are back to smoking cigarettes!

    ESM Reply:

    This is such garbage. The reason why conservatives dominate the think tanks is because liberals rule academia with an iron fist, and conservative intellectuals can’t get jobs in academia. And there is far more brainwashing and propagandizing by liberals in our educational system than there is by conservatives outside of it.

    Any political headway made by conservatives these last 30 years (and I don’t see all that much of it frankly) is more a reaction to a large leftward shift in the 60s and 70s. Fundamentally, however, there is a ratchet effect that moves us leftward over time. The state never shrinks. It can only grow or remain stagnant.

    Reply

    Tom Hickey Reply:

    There are two reasons for growth of the size of government. The first is obvious. Population growth. Government “growth” has to be assessed per capita over time.

    Secondly, and perhaps not so obvious, is that increasing complexity results in an increasing need for controls. A hamlet of tens of families doesn’t need police. A village of a hundreds families might need a couple of police. A town of thousand of families needs a police force. A city of ten or hundreds of thousands needs a disproportionally larger police force, perhaps on an order of five or ten times more per capita.

    Reply

    beowulf Reply:

    I hate stepping on Zanon’s lines, but you can mark out the contours of a metropolitan area by looking at the fire and police departments. You know you’re in the country when you get to the counties and townships where the fire fighters unions haven’t (yet) run off the volunteer fireman and then find themselves new things to do. Biohazards, Water rescue, ropes rescues, EMTs providing non-emergency clinical care (something that makes sense in Alaska; Pittsburgh and Raleigh-Durham, not so much), decade by decade those spoilsport construction engineers make buildings more and more fire resistant, they gotta do something to keep busy.

    The police unions are worse. They settle the frontier (so to speak) by kneecapping the elected sheriff, with only a couple of big city exceptions like LA County or Maricopa County AZ. First by running off the reserve deputies and then lobbying for every town that rates a post office to have its own police force and for appointed county police chiefs– politicians with guns– to oversee law enforcement (and umm, contract negotiations). The sheriff is left to guard the jail. And don’t get me started on how this country has enough SWAT teams to lay siege on Gibraltar. Between the various federal agencies, state police, county sheriffs, county and city police departments, a metro area might have a dozen SWAT teams on call. I wouldn’t be surprised if school security officers have a Quick Reaction Team or two.

    The police have so much firepower they almost have to throw in flashbangs and crash through windows with M4 carbines to save the hostag–, errr, to serve routine arrest warrants, to justify buying all those armored cars.

    Tom Hickey Reply:

    @Beowulf

    Granted, this has gotten way out of hand. The military actually gives security forces free firepower, and then the taxpayers have to pay to maintain it (very expensive). But you never know when you will need a tank or two, I guess. :)

    zanon Reply:

    And yet crime seems to remain out of control in places like south chicago, which were respectable upper class neighbourhood in 1950s. Heck — detroit was 4th largest city in american in 1950.

    By 1970 of course they were all rotting hollowed out hulk, predated by savage. detroit is returning to prarie.

    i wonder what happen in 1960. hmmmm

  10. warren mosler Says:

    Not to mention the likes of allowing the banking into areas beyond public purpose that require geometrically growing armies of regulators, etc.

    Reply

    ESM Reply:

    Good points all. But to carry Warren’s idea further, the ratchet effect comes primarily from the response of politicians to crises. Politicians always feel the need to do something, anything, in order to make the hoi polloi think that they care and are doing a good job. And so you have 535 know-nothings trying to write complex legislation in a couple of weeks or months, while all the time watching opinion polls and being hectored by lobbyists. Invariably, they craft inane laws with terrible side effects, and, because of the complexity that they themselves have no grasp of, they delegate tremendous power to new bureaucracies to craft regulations and implement the legislation. Then come newer laws to tinker with the old laws and newer regulations to fill in the gaps of the old.

    Politicians brag all the time about laws that they wrote or helped pass. A Congress that doesn’t pass any substantive laws during its term gets called a “do-nothing” Congress. When was the last time you heard any politician brag about laws that he blocked or helped repeal?

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    Tom Hickey Reply:

    o you have 535 know-nothings trying to write complex legislation

    Right. The political process is broken, for a variety of reasons, the biggest being the money needed to run a campaign. Politicians are consequently more interested in getting campaign donations than government, and the criterion of a successful politician is one who raise a lot of campaign cash. That, of course, is an incentive for soft and more than occasionally hard corruption. Plus, a lot of know nothing and care lessers.

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    beowulf Reply:

    Warren, an airline pilot once told me that the FAA is a “tombstone agency”, they don’t improve safety procedures until somebody dies. That’s unfair to the FAA, of course, aviation is a damn safe industry. If aviation was regulated as poorly as the banking industry; wind sheer radar, collision avoidance alarms and all-weather landing systems wouldn’t exist. However all planes would have Martin-Baker ejection seats standard for the captain and first officer.

    As for the passenger left in the back, its like what the TV pundit said in Airplane, “They bought their tickets, they knew what they were getting into, I say, let ‘em crash”.
    http://www.youtube.com/watch?v=1Bs7EqlLiSs

    Its funny how the same politicians who support creationism are also the biggest fans of Darwinian economics (except for their friends of course). I suppose any of use government authority to further the public purpose that’s called “socialism” could simply be rebranded “intelligent design”. :o)

    Reply

    ESM Reply:

    Beowulf, I’m not sure you should be giving much credit to the FAA for the safety record of the airline industry. Airplanes are inherently very stable (the bigger the better), and jet engines are inherently very reliable too. It has more to do with physics than regulation. Also, I’m pretty sure that wind shear radar and all-weather landing systems would exist without regulation.

    So on safety, I’m agnostic on how the FAA is doing. In other areas, I suspect the FAA has dropped the ball. I find flying to be an absolutely miserable experience today, and I don’t doubt that antiquated air traffic control systems and onerous regulation has something to do with it.

    Reply

  11. cash receipt template Says:

    I love the all the above discussion but that is how Government works.

    Reply

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