This entry was posted on Friday, April 22nd, 2011 at 3:45 pm and is filed under Fed.
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25 Responses to “Quick Bernanke video clip from 60 minutes on how the Fed spends/lends”
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.”
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.
April 25, 2011
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