Iatrogenesis is Greek for "doctor-caused" and the term iatrogenesis imperfect (borrowed from the horrible congenital bone formation disease osteogenesis imperfect, refers to the deterioration of the patient due to the physician's ministrations Medical students observe quite a bit of this in their early rotations, before they move on to a more causative role. This also seems to be the case with those practitioners attending to our economy.
Having been trained in the institutionalized neoliberal economics, their insights are akin to those inspired by the four humors whose imbalance was believed to be the source of disease. And this is what we are witnessing. The patient (the economy) is malnourished and anemic. The physicians (politicians, "leaders") are debating whether to bleed the patient from one arm (Dr. Obama) or both (Dr. Boehner). For although the patient lacks blood, the physicians believe what blood he has must certainly be bad.
The economic bad blood is "the debt". But here's the first problem. The debt is not the private sector's debt, it is the public debt. It is only debt because after paying our bills with money, we swapped the money for bonds that pay interest so that rich people can get richer on the public dole. We could just as easily pay the bills and not issue bonds. That is a choice that congress makes, an institutionalized kickback to the big money donors on both sides. But it is the spending part that is most important. There must a sufficient deficit spending to sustain the economy.
Returning to the medical analogy, the treasury and its deficit is the bone marrow and blood. Without it's proper functioning in response to the body's needs, the natural and unnatural blood losses (leakages - taxes, foreign spending, savings) produce anemia (inadequate net financial assets circulating) and a disease state. Red cells carry oxygen, net financial assets carry private sector credit creation. Lacking either produces weakness and disease.
A moment ago I saw Obama on TV saying
"Let's make sure we don't have a self-inflicted wound because there are a lot of silly games played up on Capital Hill."
That is an amazing thing to say as he draws the razor across the nation's wrist.
I am reminded of the patient who was admitted for general malaise and failure to thrive. The underlying diagnosis was elusive, prompting test after test until the patient had been bled sufficiently to induce a permanently disabling heart attack. This appears to be what is in store for the American economy.
There have been many excellent diaries on DK regarding Modern Monetary Theory (MMT). Rather than refer to specific posts, I encourage readers to go to the Money and Public Purpose group blog and learn about how our monetary system really works.
It will surprise you!
