I need to get these notes down on record before I go on what may later look like an incoherent rant, because I'm so sick and tired of the lying austerian liars and the faux experts who they use as puppets. Forgive the rambling.
Here are some basic facts that are guiding the US economy right now:
1) We are not on the gold standard. The government creates money, people create real resources. Inflation comes about from many ways, usually too much money chasing too few resources, our capacity utilization is low, and unemployment high, so we have too MANY free resources right now.
2) You can't balance the budget while the dollar is the reserve currency (making us run a current account deficit), without sending the private sector into a deficit.
Private Balance = Current Account Balance - Fiscal Balance.
This is law. This is an accounting identity, an equality that is unbroken.
Since we have to supply the world with dollars the Current Account will maintain a deficit, and if we balance the Fiscal position it will send the private sector into a deficit that they may or may not be ready to take on (like the Clinton years).
3) All money is created by being borrowed into the economy -- either the Fed prints it and gives it to a bank to lend or the government to spend, or a bank creates loans to businesses or households and covers them with debt.
4) The "national debt" can't be paid off, it's not meant to be paid off, just like bank deposits aren't meant to be all withdrawn. Given the current system of how the Fed conducts monetary policy, this is just a truth. This keeps us interdependent in the economy, working for each other, buying things from each other, and investing in each other.
5) In a time of recession from overleveraging where the private sector won't stimulate the economy, austerity is destructive and only leads to job losses and recessions without improving the fiscal position (the UK is nearing a triple-dip). Outside the UK's disaster, we've seen the failure of austerity in Spain and Italy, and most famously in Greece. The supposed good examples of austerity involve nations who are still well below pre-crisis levels of employment and growth.
6) The government is not a family or a business. It is a government, and that is distinct from either a business or a family. The finances work completely differently for all the reasons listed above. Governments don't have to "live within their means", because they create money to distribute through the banking system or through spending. They don't need to "balance budgets", because doing so is destructive. The mechanics are completely different and this is a false analogy that people need to stop adhering to for their personal economic policy ideas.
How much more damage needs to be done to the British and Japanese people, and now the American people, with sovereign currencies, being told that we are going to run out of money, or that we can't afford to pay for things, before we accept that austerity is wrong and stimulus is the real solution? The austerians are lying to push their agenda of reducing labor costs and forcing the public to borrow from the private banks instead of getting government spent money directly.
We are not Greece, we have our own currency and we have a lot of freedom because of that which others don't. Japan, UK and US are being lied to and pushed into horrible policy based on voodoo and liar economics. How many years are we supposed to go on with austerity before they acknowledge it's a failure? At what point is it our turn to take the wheel?
This is here just to have on the record in case by some miracle years from now the nation has an epiphany and begins to understand the modern economy and monetary system. Then I can point to it and say: "see, I told you so!"
I've tried my best in the latest entries to stay objective and keep a tone that was accommodating and non-threatening to right-wingers. After all, I used to be a Republican, and I used to be a true believer in the sense that I didn't care about anyone else I just wanted low taxes, a high stock market, and to get as rich as possible. I was also stuck in the bubble, and at times I would literally make up facts to support myself in arguments. The ideology came first, and I would find the facts afterward with statistics (whatever would work for my argument) no matter how misleading or out of context they may have been. So again, I have sympathy for the right-wing, for low-information voters, and for people who really just don't understand the monetary system or the economy.
But I just can't take it anymore. I'm 26 and I feel as if I was part of the end of the generation that had debate clubs, political clubs, and reading clubs. I'm not into "cable news" (of any variety), debating in slogans or reading dubious Internet "news" sources with racy headlines that are usually put in question form to avoid civil libel lawsuits.
So when I was checking in on Paul Krugman's latest blog post about his time on Morning Joe, I was venturing into new territory by watching the interview. I was absolutely disgusted by the lack of quality of the debate, not because of Krugman, but because of "Mika" who is supposedly a liberal, and "Joe" who is allegedly a moderate Republican, and the other guests who were policymakers who grew up in the gold era and seem to think we're still on the gold standard.
When a distinguished economist like Paul Krugman is going out there to teach (and yes, I mean TEACH, because he IS the economist) these so-called "pundits" about the current economic issues we face, and they respond with nothing but disrespect and scowls, it makes me lose hope in a lot of things in this country.
Imagine, just for a second, that an expert on, say, physics was coming onto a show like "Morning Joe" to explain about some physics issue. Now, think of a group of clowns on a show like Morning Joe insisting that they know more about physics than the physicist and insulting him for making an effort to explain complex perceived paradoxes in the field of physics. How stupid would they look, and why is it that a well-decorated economist is treated with ridicule and arm-chair economists claiming they know more talk over the expert?
Granted, there are a lot of economists who don't know what they are talking about, and consensus is a lot harder to find in social sciences (even a "hard" social science like Economics), but still, this was a disgraceful interview with atrocious behavior from the hosts and guests.
So it was no surprise that this clown Joe Scarborough doubled down by writing an Op/Ed about how Krugman is against the whole world and he can't possibly be right about deficits not mattering in the short-run.
It's amazing that even when we have the examples of Japan's lost decade/perma-stagnation and Europe's failed austerity, the policy elites in DC push failed austerity and warped priorities about paying off debt instead of stimulating jobs. And the puppets in the media are good little doggies and continue the same old line about "tightening our belt" and "living within our means" and using failed analogies of government being like a business or household (all talking points from the era of the gold standard).
Well when I saw this article I just had to read through the comments and see how the general public was reacting to this kind of drivel. I was pleased to see that a lot of liberals, while still expressing fear of the deficit irrationally, were supporting Krugman and knew the priority had to be with jobs. But then I saw the right-wingers hit the comment section, and I lost my cool.
People talking about "skyrocketing debt that is going to bankrupt us" and "we need to balance the budget" and "hyperinflation is coming" or "we can't borrow forever" or even "we're stealing from our children" and, my favorite one, "we're running out of money!" All sorts of factually incorrect hyperbole designed only to instill fear in individuals so that they will go along with austerity.
Some of these individuals claim to be MBA's, or seasoned Washington insiders, people you would think should know how the system works, at least the very fact that we print our own money, and that there is no inflation from QE or that rates have improved as debt has gone up. It makes me wonder, how many of these people actually know the facts and just push lies to serve some agenda? How many of them are true believers? Why are all the people who do understand the system not correcting the mass public misconception? This smacks of the same misinformation on the Fiscal Cliff where individuals in the media were referring to it as if it was a debt crisis, rather than the austerity bomb that it was.
I'm forced to conclude there are one of two problems (or both) going on here:
1) The field of economics is in a dark age, with knowledgeable economists apparently forgetting basic tenets like accounting identities or fiat money creation/central banking (this is something Krugman has alluded to before as well),
2) People don't want to take the time to understand the system (or may even lack the capacity to) and they trust the wrong people to tell them how it works.
The entire public is vastly uninformed on key topics in this area, and it could really destroy the economy in the long-run if people don't understand them. The future looks very dim given this problem, if people keep talking about balancing budgets while the dollar is the world reserve currency.
People don't understand government finance, they don't understand business, and they're so used to learning things in slogans and flashy short-attention-span new media that they don't read the details that are required to be delved into in order to understand concepts that aren't superficial. And the most important issues are the ones that ARE NOT solved by screaming matches and sexy maxims and "gotchas."
Or maybe, like in Japan, the elderly population of the US is just irrationally afraid of inflation and won't do anything to risk destroying their nest egg, or doing anything that may help. The irony of course is that the austerity is what would hurt the kids and youth of the nation, not debt, not a risk of inflation, but cutting spending on the education and infrastructure that the youth need, THAT is what is hurting our children
My main fear is that the mismanagement of the fiat system will lead to a collapse in the system, not because a fiat system is bad, but just because so many policymakers don't seem to understand the basic ideas.
As Krugman finished the segment saying "How much longer do you have to be wrong, while I am proving to be right, until you actually accept what I'm saying?"
That's the end of my rant. I really hope I'm wrong and that the nation will have a collective epiphany on the system. And I'm not going to watch any cable news unless I've got a lifetime supply of hashish to calm me down from the viceral reaction I have to the display of utter ignorance and stupidity that dopey pundits flaunt.