April 25, 2011
Bernanke’s Boondoggle
The Big Shakedown
By MIKE WHITNEY
The New York Times is bit late to the party but, better late than never, right?
Times economics writer Binyamin Applebaum has just discovered that the Fed’s bond buying program–aka QE2–has lit a firecracker under stocks but done zilch for the real economy. Applebaum–who apparently never trolls the econo-blogs to expand his understanding of what’s going on in the world of finance– is “shocked” that Bernanke’s $600 billion “credit easing” strategy has turned out to be an utter boondoggle that’s had no measurable impact on output, unemployment or growth. Who could’ve known? But let’s allow Applebaum to speak for himself: http://counterpunch.org/whitney04252011.html
Maybe a better way to educate folks on MMT and the need for public spending is through metaphors rather than technical explanations. George Lakoff emphasizes the “values” aspect in metaphors but given MMT is concerned with “operational realities” it may make more sense to frame the debate in operational metaphors. Sense the primary hurdle of spending is the fear of public debt, it makes sense to reframe/reposition debt within a metaphor that is relevant, familiar, and somewhat accurate. As I have been listening to the discussions a couple metaphors come to mind.
1) Digital metaphor – Everything produced and sold in our economy is based upon finite resources except digital content. Digital content can be reproduced at essentially no cost in unlimited amounts. Digital content holds no value without copyright law authorized be government. Without exception, money in the modern economy is digital content.
2) Accounting Identity metaphor – The federal government, as currency issuer, is the monopoly producer of money within the marketplace. It has the capability to produce the money it wants to spend at essentially no cost in unlimited amounts. Within this capacity, deficits and surpluses are not finite constraints to a currency issuer but rather function as accounting identities. Just as every borrower must have a lender, government deficits are dollar for dollar must equal to the combined savings of the private and foreign sector.
government deficits = non-government surplus
national debt = private & foreign savings
3) Productivity metaphor – As productivity increases less and less of the population is needed to meet our population’s needs. The private sector requires less workers to provide the food and products of the population. The public sector is capable of filling the spending gap without causing inflation because it is the monopoly producer of currency.
“Changes in manufacturing employment during that last half of the twentieth century are remarkably similar to those in agriculture during the first half of the twentieth century. About a third of U.S. workers were employed in agriculture at the beginning of the century, but by 1950 that number was only a tenth. Likewise, manufacturing employed a third of the US workers in the 1950s and now only employs a tenth of the workers.”
Not sure the productivity metaphor is actually a metaphor but the point is that we are trying to create a different narrative that challenges the status quo on public spending, the nature of public debt, and the responsibility of the monopoly producer of currency within the economy. Once people have “bought” inside the frame MMT can help people understand the operating details.
Warren in other words the bank made bad loans and took the losses resulting in bankruptcy. Right? If the Fed didn’t intervene with QE1 and congressional bailouts then many of these banks/companies would be much harder hit and possibly even bankrupt no? And of course our economy would be even more decimated right? The choices seem difficult b/c the QE1 and bailouts helped to stop depression yet at the same time they also just propped up a corrupt and inefficient system…basically putting a dying man on life support even though he’s not going to recover, they are just avoiding death for no apparent reason. Isn’t that accurate?
Such little, involuntary smirks are more frequently attributed to people having to say something they’d rather not say. He was likely bracing for a torrent of questions that never even came.
It’s astounding that neither the interviewer nor interviewee expounded on the context & implications of that statement. That alone shows the intellectual dead zone in both media & policy. “We have approached some valuable truths, so let’s change course & head elsewhere, anywhere … quick.”
it’s called PR and propaganda and being bought out. If you look the Fed is a more complicated PR machine than than anything else imo. Trying to determine the impact of statements they make and how subtle they can be.
I personally think “they” are now trying to really promote this deficit story to #1. decrease overall wealth in America through “entitlement programs” #2. increase overall wealth in the richest through tax loopholes, international markets, and finance while the deficit is “balanced” and the people are kicking and screaming and give up all worker rights and salaries and benefits just to “get a job” and get working again. YIKES!!!! It’s power for power’s sake and I refuse to believe it will ever happen. ;D
Mario, what to do? 200 million chinese are willing to work with no labor unions, no child labor protection, no minimum wage, no OSHA, no healthcare, no pension, no 401k etc etc
Check out this recent article about chinese truckers finally starting to get angry:
We need to dig up jimmy hoffa and send him over there to organize the labor and get their expectations changed so they too demand more, that is the only way we can save the unions and rights here that have been won over many decades. Then the capitalits will just get robot labor and replace all humans and thier workers rights, then you can read that Asimov book, “I, Robot” to see if they demand rights too.
I agree with you on the propaganda issue, this is great stuff for me to watch the brainwashing and would probably make ed bernays very proud.
Finally Mario I want to ask you something, I am in washington DC right now, and a long time ago, England knew imports were a benefit, and exports a cost. So they wanted all the workers in america to do all the work on the farms and send them the goods, but the founding fathers got tired of that BS. Like China may soon do with us. So perhaps to expand the meme further, imports “of the means of production” are a benefit, and exports “of the means of production” will utlimately be a cost, as buffet says, perhaps we are selling off the farm (means of production) to keep spoiled shopping machine princess going.
It’s possible the slave plantation scenario you’re laying out. One difference is we don’t tax the Chinese the way the english taxed the colonies. We also don’t brainwash or influence the Chinese the way the english did the colonies. China is a separate nation that does what it does regardless of the US.
We have a mutually beneficial relationship at the moment. It is possible we are making ourselves more vulnerable in terms of manufacturing however there are other options and ways to handle this. Boosting our own economy and pushing the current technological barriers in space technology (I mean sci-fi novel space technology), green energy in all industries, teaching, small business, government JG’s, proper functional finance, and break-up of oligopolies, monopolies, subsidies, and lobbyists would all contribute greatly to our country getting its own distinct “life-blood” flowing again here at home.
All in good time, all in good time. Many times in chess we anticipate one move to come down the road but other plays happen that change the outcomes. Keep your eye on the ball while you hit it and it’s amazing what can take place! ;)
Cheers mate! I know South of the Border and have been through there many times…had no idea BB was from there!! that’s so freaking funny man…I grew up outside of Philly and have driven up and down the East Coast many times so I know all about I-95!!! Keep up the campaign man!! Why be a journalist or something eh!?!?
Through the OIL, and our military, that is a TAX on china and ROW as Benson clearly outlined years ago. We CANNOT let the world get off pricing stuff in dollars, because we can infinitely make those, but we can’t infinitely make other currencies can we?
As for brainwashing, holy jesus, through our movies and TV the chinese kids are getting such a dose of ed bernays propoganda that all the TIGER MOM’s heads are spinning how come thier strict disciplined kids are dissappointing them once they hit college or after! LOL! Former temporary acting emporer of china’s grandson used to tell me china was gonna take over, I said probably not before american shopping machine princess, movies, drugs, tv, games, elvis, hip hop rap and hotdogs ruin your culture, 15 years ago he was laughing at me, he doesn’t laugh at me anymore, he gets ANGRY now. (because I think he knows it is starting to come true)
Dude, in regards to our space program, holy frack! The shuttles are about to stop and we gonna turn over our stuff to our old enemy Russia to handle things for us, but I hear Obama told Nasa to make sure and be nice to some religious muslim people. Neil Degrasse Tyson (of NOVA on PBS) was freaking out about this when he came through my university.
PS, right on the Bernanke stuff, so much hush hush all over our media about his roots, why? Warren tells you in his book he was a pool boy in Miami and used a bean pit trader to trick some bonds people, he aint afraid of his roots, Warren has much more integrity that Bernank if you ask me.
save america Reply: April 23rd, 2011 at 3:14 pm
PS Mario, Erickson just said something about phd types that don’t think rationally I think and need to play more chess, I liked to play 3D Star trek chess, 2 dimensional chess is so limiting. LOL!
Mario Reply: April 23rd, 2011 at 3:45 pm
maybe so but it seems a weak argument to me man. By your argument then we are taxing everyone through oil.
Now Warren says that oil priced in another currency wouldn’t effect the US at all. He says that it’s “just a numeraire” but I still don’t see how that is possible. If oil was priced in another currency that was more valuable than ours (say the Euro) then we’d surely experience cost-push inflation b/c our demand sure wouldn’t decrease at all! But Warren hasn’t ever really addressed that issue fully when I asked him about it…I don’t know maybe he will now I just can’t see it.
Anyway culture is less of an economic issue than I think you make it out to be. My wife worked in China for the Olypmics and talked and worked with college kids there…dude they’re brainwashed. They don’t know jack shit about what has really gone on in their country. They might suspect some things but really they are way in the dark. And frankly that military and information lock-down force in China is so powerful and so strong I just don’t see much of anything changing there for quite some time.
I more often than not deflate much of the China hype.
no currency is ‘more valuable’ than any other. all there are is exchange rates
Craig Reply: April 23rd, 2011 at 3:48 pm
“Former temporary acting emporer of china’s grandson used to tell me china was gonna take over, I said probably not before american shopping machine princess, movies, drugs, tv, games, elvis, hip hop rap and hotdogs ruin your culture, 15 years ago he was laughing at me, he doesn’t laugh at me anymore, he gets ANGRY now.”
oh my god that is the funniest thing i’ve heard all year
btw – hotdogs alone would probably ruin a culture :-)
as i used to write about, the great satan of western culture seems unstoppable, as is the resentment as it robs others as well as ourselves of the children.
save america Reply: April 23rd, 2011 at 4:43 pm
Mario and Craig, few chinese know about Eugene Chen – he was temporary acting emporer of china (for just a few days – the regular emporer had problems with the communist revolution stuff that was going on back then) and Eugene couldn’t even speak chinese – only english – he was educated in England. Jay Chen, his grandson from Tobago talks to me a lot on silicon investor. I have talked to many political people in china, some know about eugene chen, he is celebrated as one of the 10 greatest heroes of china (because he was a big anti-west propogandist for them) few know he couldn’t speak a lick of chinese and temporarily was the emporer! LOL! BTW – His grandson is one of the biggest goldbugs on the planet, he is certain both china and america’s currency regimes are going to blow up in the near future and he is digging gold in the back of his yard like a madman. I sent him pictures of safes that washed up in the fukushima disaster and told him he was a fool and he got really pissed off and banned me from posting on his board (again)
He has a little daughter he nicknamed coconut and I told him she is going to turn into a ruined westernized shopping machine princess like so many other chinese I have seen, his wife is from Harvard, so he is already half way there :)
save america Reply: April 23rd, 2011 at 4:49 pm
Here is the board emporer of china’s grandson posts at, and below is his profile. Back during Katrina, I said look at all those FOOLS who buried gold in their backyard General Chen, they will have to swim 50 feet under water to get it, and he ridiculed me to high heaven what an idiot I was, that gold was the only way to save yourself. I said it looked like to me during Katrina the boyz with the big guns shot up any goldbugs and stole thier daughters and food, he really hated me then. Warren is right, the man in the room with the GUN holding it to your HEAD if you don’t play by his rules and follow his SCOREBOARD is the root of everything. All of society rests on a thug with a gun willing to do violence.
April 25, 2011
Bernanke’s Boondoggle
The Big Shakedown
By MIKE WHITNEY
The New York Times is bit late to the party but, better late than never, right?
Times economics writer Binyamin Applebaum has just discovered that the Fed’s bond buying program–aka QE2–has lit a firecracker under stocks but done zilch for the real economy. Applebaum–who apparently never trolls the econo-blogs to expand his understanding of what’s going on in the world of finance– is “shocked” that Bernanke’s $600 billion “credit easing” strategy has turned out to be an utter boondoggle that’s had no measurable impact on output, unemployment or growth. Who could’ve known? But let’s allow Applebaum to speak for himself:
http://counterpunch.org/whitney04252011.html
Reply
Oops,
I mean that he is the gov of Indiana. Warren, have you ever spoken to this man?
Reply
WARREN MOSLER Reply:
April 25th, 2011 at 5:35 am
never have
Reply
Warren,
I heard an interview with Mitch Daniels (gov of Iowa) where he said he never heard a person say that deficits were OK on a national level.
It was the Stanford University Hoover Institute that has the interview on I-tunes University.
Reply
Maybe a better way to educate folks on MMT and the need for public spending is through metaphors rather than technical explanations. George Lakoff emphasizes the “values” aspect in metaphors but given MMT is concerned with “operational realities” it may make more sense to frame the debate in operational metaphors. Sense the primary hurdle of spending is the fear of public debt, it makes sense to reframe/reposition debt within a metaphor that is relevant, familiar, and somewhat accurate. As I have been listening to the discussions a couple metaphors come to mind.
1) Digital metaphor – Everything produced and sold in our economy is based upon finite resources except digital content. Digital content can be reproduced at essentially no cost in unlimited amounts. Digital content holds no value without copyright law authorized be government. Without exception, money in the modern economy is digital content.
2) Accounting Identity metaphor – The federal government, as currency issuer, is the monopoly producer of money within the marketplace. It has the capability to produce the money it wants to spend at essentially no cost in unlimited amounts. Within this capacity, deficits and surpluses are not finite constraints to a currency issuer but rather function as accounting identities. Just as every borrower must have a lender, government deficits are dollar for dollar must equal to the combined savings of the private and foreign sector.
government deficits = non-government surplus
national debt = private & foreign savings
3) Productivity metaphor – As productivity increases less and less of the population is needed to meet our population’s needs. The private sector requires less workers to provide the food and products of the population. The public sector is capable of filling the spending gap without causing inflation because it is the monopoly producer of currency.
“Changes in manufacturing employment during that last half of the twentieth century are remarkably similar to those in agriculture during the first half of the twentieth century. About a third of U.S. workers were employed in agriculture at the beginning of the century, but by 1950 that number was only a tenth. Likewise, manufacturing employed a third of the US workers in the 1950s and now only employs a tenth of the workers.”
Not sure the productivity metaphor is actually a metaphor but the point is that we are trying to create a different narrative that challenges the status quo on public spending, the nature of public debt, and the responsibility of the monopoly producer of currency within the economy. Once people have “bought” inside the frame MMT can help people understand the operating details.
Any thoughts?
Reply
WARREN MOSLER Reply:
April 24th, 2011 at 4:32 pm
makes sense thanks
Reply
warren,
i appreciate your efforts to inform the public on various economic topics. please keep up the good work.
question….if the Fed just allocates more money to a certain bank via a computer, why do banks fail?
thx
bob
Reply
WARREN MOSLER Reply:
April 24th, 2011 at 1:49 pm
they fail when the govt won’t fund them anymore via fdic insured deposits or any other channel
Reply
Mario Reply:
April 25th, 2011 at 12:07 pm
Warren in other words the bank made bad loans and took the losses resulting in bankruptcy. Right? If the Fed didn’t intervene with QE1 and congressional bailouts then many of these banks/companies would be much harder hit and possibly even bankrupt no? And of course our economy would be even more decimated right? The choices seem difficult b/c the QE1 and bailouts helped to stop depression yet at the same time they also just propped up a corrupt and inefficient system…basically putting a dying man on life support even though he’s not going to recover, they are just avoiding death for no apparent reason. Isn’t that accurate?
Reply
WARREN MOSLER Reply:
April 25th, 2011 at 1:48 pm
qe doesn’t bail out any banks. with qe the fed simply purchases govt secs in the marketplace at market prices.
Such little, involuntary smirks are more frequently attributed to people having to say something they’d rather not say. He was likely bracing for a torrent of questions that never even came.
It’s astounding that neither the interviewer nor interviewee expounded on the context & implications of that statement. That alone shows the intellectual dead zone in both media & policy. “We have approached some valuable truths, so let’s change course & head elsewhere, anywhere … quick.”
Reply
I can tell by his evil little smile he knows its wrong…..
Reply
The man is bi-polar. Sometimes he understands this and sometimes he doesn’t.
Reply
Mario Reply:
April 22nd, 2011 at 6:08 pm
it’s called PR and propaganda and being bought out. If you look the Fed is a more complicated PR machine than than anything else imo. Trying to determine the impact of statements they make and how subtle they can be.
I personally think “they” are now trying to really promote this deficit story to #1. decrease overall wealth in America through “entitlement programs” #2. increase overall wealth in the richest through tax loopholes, international markets, and finance while the deficit is “balanced” and the people are kicking and screaming and give up all worker rights and salaries and benefits just to “get a job” and get working again. YIKES!!!! It’s power for power’s sake and I refuse to believe it will ever happen. ;D
Reply
save america Reply:
April 23rd, 2011 at 10:18 am
Mario, what to do? 200 million chinese are willing to work with no labor unions, no child labor protection, no minimum wage, no OSHA, no healthcare, no pension, no 401k etc etc
Check out this recent article about chinese truckers finally starting to get angry:
http://www.zerohedge.com/article/first-person-account-inside-china-protests
We need to dig up jimmy hoffa and send him over there to organize the labor and get their expectations changed so they too demand more, that is the only way we can save the unions and rights here that have been won over many decades. Then the capitalits will just get robot labor and replace all humans and thier workers rights, then you can read that Asimov book, “I, Robot” to see if they demand rights too.
I agree with you on the propaganda issue, this is great stuff for me to watch the brainwashing and would probably make ed bernays very proud.
Finally Mario I want to ask you something, I am in washington DC right now, and a long time ago, England knew imports were a benefit, and exports a cost. So they wanted all the workers in america to do all the work on the farms and send them the goods, but the founding fathers got tired of that BS. Like China may soon do with us. So perhaps to expand the meme further, imports “of the means of production” are a benefit, and exports “of the means of production” will utlimately be a cost, as buffet says, perhaps we are selling off the farm (means of production) to keep spoiled shopping machine princess going.
Reply
Mario Reply:
April 23rd, 2011 at 2:13 pm
Save Ameria
It’s possible the slave plantation scenario you’re laying out. One difference is we don’t tax the Chinese the way the english taxed the colonies. We also don’t brainwash or influence the Chinese the way the english did the colonies. China is a separate nation that does what it does regardless of the US.
We have a mutually beneficial relationship at the moment. It is possible we are making ourselves more vulnerable in terms of manufacturing however there are other options and ways to handle this. Boosting our own economy and pushing the current technological barriers in space technology (I mean sci-fi novel space technology), green energy in all industries, teaching, small business, government JG’s, proper functional finance, and break-up of oligopolies, monopolies, subsidies, and lobbyists would all contribute greatly to our country getting its own distinct “life-blood” flowing again here at home.
All in good time, all in good time. Many times in chess we anticipate one move to come down the road but other plays happen that change the outcomes. Keep your eye on the ball while you hit it and it’s amazing what can take place! ;)
Cheers mate! I know South of the Border and have been through there many times…had no idea BB was from there!! that’s so freaking funny man…I grew up outside of Philly and have driven up and down the East Coast many times so I know all about I-95!!! Keep up the campaign man!! Why be a journalist or something eh!?!?
Reply
save america Reply:
April 23rd, 2011 at 3:06 pm
Mario, we DO tax the chinese, think more globally, expand your horizons, read the article below:
http://www.321energy.com/editorials/benson/benson040405.html
Through the OIL, and our military, that is a TAX on china and ROW as Benson clearly outlined years ago. We CANNOT let the world get off pricing stuff in dollars, because we can infinitely make those, but we can’t infinitely make other currencies can we?
As for brainwashing, holy jesus, through our movies and TV the chinese kids are getting such a dose of ed bernays propoganda that all the TIGER MOM’s heads are spinning how come thier strict disciplined kids are dissappointing them once they hit college or after! LOL! Former temporary acting emporer of china’s grandson used to tell me china was gonna take over, I said probably not before american shopping machine princess, movies, drugs, tv, games, elvis, hip hop rap and hotdogs ruin your culture, 15 years ago he was laughing at me, he doesn’t laugh at me anymore, he gets ANGRY now. (because I think he knows it is starting to come true)
Dude, in regards to our space program, holy frack! The shuttles are about to stop and we gonna turn over our stuff to our old enemy Russia to handle things for us, but I hear Obama told Nasa to make sure and be nice to some religious muslim people. Neil Degrasse Tyson (of NOVA on PBS) was freaking out about this when he came through my university.
PS, right on the Bernanke stuff, so much hush hush all over our media about his roots, why? Warren tells you in his book he was a pool boy in Miami and used a bean pit trader to trick some bonds people, he aint afraid of his roots, Warren has much more integrity that Bernank if you ask me.
save america Reply:
April 23rd, 2011 at 3:14 pm
PS Mario, Erickson just said something about phd types that don’t think rationally I think and need to play more chess, I liked to play 3D Star trek chess, 2 dimensional chess is so limiting. LOL!
Mario Reply:
April 23rd, 2011 at 3:45 pm
maybe so but it seems a weak argument to me man. By your argument then we are taxing everyone through oil.
Now Warren says that oil priced in another currency wouldn’t effect the US at all. He says that it’s “just a numeraire” but I still don’t see how that is possible. If oil was priced in another currency that was more valuable than ours (say the Euro) then we’d surely experience cost-push inflation b/c our demand sure wouldn’t decrease at all! But Warren hasn’t ever really addressed that issue fully when I asked him about it…I don’t know maybe he will now I just can’t see it.
Anyway culture is less of an economic issue than I think you make it out to be. My wife worked in China for the Olypmics and talked and worked with college kids there…dude they’re brainwashed. They don’t know jack shit about what has really gone on in their country. They might suspect some things but really they are way in the dark. And frankly that military and information lock-down force in China is so powerful and so strong I just don’t see much of anything changing there for quite some time.
I more often than not deflate much of the China hype.
WARREN MOSLER Reply:
April 23rd, 2011 at 5:37 pm
no currency is ‘more valuable’ than any other. all there are is exchange rates
Craig Reply:
April 23rd, 2011 at 3:48 pm
“Former temporary acting emporer of china’s grandson used to tell me china was gonna take over, I said probably not before american shopping machine princess, movies, drugs, tv, games, elvis, hip hop rap and hotdogs ruin your culture, 15 years ago he was laughing at me, he doesn’t laugh at me anymore, he gets ANGRY now.”
oh my god that is the funniest thing i’ve heard all year
btw – hotdogs alone would probably ruin a culture :-)
WARREN MOSLER Reply:
April 23rd, 2011 at 5:38 pm
as i used to write about, the great satan of western culture seems unstoppable, as is the resentment as it robs others as well as ourselves of the children.
save america Reply:
April 23rd, 2011 at 4:43 pm
Mario and Craig, few chinese know about Eugene Chen – he was temporary acting emporer of china (for just a few days – the regular emporer had problems with the communist revolution stuff that was going on back then) and Eugene couldn’t even speak chinese – only english – he was educated in England. Jay Chen, his grandson from Tobago talks to me a lot on silicon investor. I have talked to many political people in china, some know about eugene chen, he is celebrated as one of the 10 greatest heroes of china (because he was a big anti-west propogandist for them) few know he couldn’t speak a lick of chinese and temporarily was the emporer! LOL! BTW – His grandson is one of the biggest goldbugs on the planet, he is certain both china and america’s currency regimes are going to blow up in the near future and he is digging gold in the back of his yard like a madman. I sent him pictures of safes that washed up in the fukushima disaster and told him he was a fool and he got really pissed off and banned me from posting on his board (again)
He has a little daughter he nicknamed coconut and I told him she is going to turn into a ruined westernized shopping machine princess like so many other chinese I have seen, his wife is from Harvard, so he is already half way there :)
save america Reply:
April 23rd, 2011 at 4:49 pm
Here is the board emporer of china’s grandson posts at, and below is his profile. Back during Katrina, I said look at all those FOOLS who buried gold in their backyard General Chen, they will have to swim 50 feet under water to get it, and he ridiculed me to high heaven what an idiot I was, that gold was the only way to save yourself. I said it looked like to me during Katrina the boyz with the big guns shot up any goldbugs and stole thier daughters and food, he really hated me then. Warren is right, the man in the room with the GUN holding it to your HEAD if you don’t play by his rules and follow his SCOREBOARD is the root of everything. All of society rests on a thug with a gun willing to do violence.
http://siliconinvestor.advfn.com/subject.aspx?subjectid=51736
http://siliconinvestor.advfn.com/profile.aspx?userid=7255592
WARREN MOSLER Reply:
April 23rd, 2011 at 5:28 pm
we can regulate aggregate demand and relative values domestically, including compensation, etc. regardless of what china or anyone else does
Reply