This entry was posted on Thursday, January 26th, 2012 at 5:14 pm and is filed under Congress, Fed.
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33 Responses to “Why Won’t The Fed Tell Congress the Truth About Our Debt? – CNBC”
As things stand today, the vast majority of people who read CNBC will read your columns and shrug, because they don’t have even a basic understanding of how our financial-monetary system works — not in theory, but in reality.
It’s so frustrating to see so many otherwise smart and educated people talking and writing about things like government deficits and debt without truly understanding them, that I felt compelled to write a post explaining and demystifying basic macroeconomic and national-accounting concepts.
Hmm… I still fail to see how “constrained by inflation” instead of “constrained by revenue” is such a game changer that it should be easy to “restore output and employment to desired levels without excess inflation.”
For instance, even Alan Blinder, a former Fed Vice-Chairman, said on RT’s Capital Account today that the current deficit growth of the U.S. Gov is long-term unsustainable… So maybe the Fed can’t teach Congress what the Fed itself does not understand… Or maybe RT can interview Warren to get a different perspective.
Iran and India are about to get rid of the dollar as the reserve currency; Russia and China are already doing so. When all those dollars come home to roost, so to speak, the Fed is unlikely to have enough time to sell Tsys (at the pace it must use) to prevent “excess inflation” aka “gold booster.”
Seems Soros is going to spill the beans… he is pushing the panic button. NB the phrase “Greece borrowing in foreign currency” seems very MMT-ish.
From The Guardian:
“Unfortunately, the European authorities had little understanding of how financial markets really work, and did everything wrong.”
Soros proposed that Spain and Italy should be allowed to finance their deficits by issuing treasury bills with a 1% interest rate, and warned that the current policies were leaving the weaker eurozone nations “relegated to the status of third world countries that became highly indebted in a foreign currency.
“The trouble is that the austerity that Germany wants to impose will push Europe into a deflationary debt spiral.”
“The Greek crisis revealed two defects in the Maastricht treaty [that established the single currency] which could prove fatal. First, that when member countries become heavily indebted they become like third-world countries that have borrowed too much in a foreign currency. Second, that there are no provisions for correcting errors in the euro’s design. There is neither an enforcement mechanism nor an exit mechanism, and member countries cannot resort to printing money.”‘
Alexander Hamilton’s 1790 “Report on Public Credit.”
“It is a well known fact, that in countries in which the national debt is properly funded, and an object of established confidence, it answers most of the purposes of money. Transfers of stock or public debt are there equivalent to payments in specie; or in other words, stock, in the principal transactions of business, passes current as specie. The same thing would, in all probability happen here, under the like circumstances.”
This article is quite interesting if interpreted correctly (I won’t take Anders Aslund’s words at face value). It actually offers a very Marxist-style answer to the question “why won’t the Fed tell Congress the truth” and another one – who may challenge the old order. Just instead of thinking about Ukraine or Egypt, look at who rules the United States of America…
“The Orange Revolution, [Aslund] told me, was the rebellion of the millionaires against the billionaires. Ukraine’s crony capitalism worked extremely well for the small, well-connected group of oligarchs at the very top, but it was stifling the emerging business class.”
The following fragment is also interesting. Everyone obviously knows who Peter G. Peterson is and what his “charitable foundation” does in regards to promoting “fiscal discipline”. How can somebody who worked for Richard “We are all Keynesians now” Nixon and later at FRBNY not understand the nature of fiat money?
‘Holly Peterson, the daughter of private equity billionaire Pete Peterson – and herself a rather sly and eloquent chronicler of the 1 percent in her essays and fiction – tells a similar story of the tension at the very top. “I think people making five million dollars to 10 million dollars definitely don’t think they are making enough money,” she told me. “Wouldn’t it be nice to fly private? There are so many things you can aspire to, even making five million dollars a year. For the lower rung of this crowd, these people set up lives for themselves they can’t afford. They are broke and maxed out on their credit cards in December, just like middle-class couples living on one hundred thousand dollars. I don’t think the feel that rich. They are trying to play with the high-rollers, and there are things they can’t do, and they feel deprived, which is completely sick and absurd, but that’s the truth of the matter.”‘
It was the conflict between the old oligarchy (Aristocracy and Clergy) and the new oligarchy (The Third Estate) what triggered the French Revolution. So, “0.1%” beware of the “0.9%”…
There’s no point in telling Capitol Hill anything. Congress critters rely on threats from whatever source so they can pretend to ride to the rescue of their constituents. Carl Levin got lots of press by “revealing” that Capitol Hill is “owned” by the bankers and Romney is running around crying the bankers are scared. Chris Dodd has managed to shake his reputation of being in cahoots with the bankers by lobbying for private censorship of the internet. Now he’s hired on to secure the revenue stream of another group of middlemen, all champions of free enterprise until someone suggests they be weaned from the public teat.