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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!

Originally posted to Old Surgeon on Wed Dec 05, 2012 at 07:18 AM PST.

Also republished by Money and Public Purpose.

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Comment Preferences

  •  Yes! (2+ / 0-)
    Recommended by:
    phonegery, wilderness voice

    Our neo-liberal practitioners are right out of the "Dark Ages."

  •  Thoughtful diary! (3+ / 0-)

    Another musing I have is that of long lead times:  Since human beings in general take years to mature, we require many years of care and feeding (most on the planet at merely subsistence levels ) to become "self-sufficient" or "economically productive".  

    It's not like we are microorganisms that or even fruit flies that can grow and find food on our own in a short amount of time.
    And huge populations of humans require even more resources and infrastructure to maintain existence on such a scale.

    Therefore, we as a species are very "front-loaded" in terms of resource needs, and start out "in a hole" from day one!

    "..The political class cannot solve the problems it created. " - Jay Rosen

    by New Rule on Wed Dec 05, 2012 at 09:18:49 AM PST

  •  Have y'all considered what Alexander Hamilton (0+ / 0-)

    did, in the first instance of crippling national debt?

    a few tidbits:

    And yet Hamilton, who took office in 1789, deliberately avoided prolonged fights over tax policy, which he knew he couldn’t win. Indeed, his thinking perfectly describes the political situation today: “To extinguish a Debt which exists and to avoid contracting more are ideas almost always favored by public feeling and opinion, but to pay Taxes for the one or the other purpose, which are the only way of avoiding the evil, is always more or less unpopular.” Could there be a better description of today’s partisan intransigence toward adding a single tax dollar to federal revenues?
    So how to fix the debt without crushing burdens on the people?
    Not an easy task, and needing to be done the way all elephants are eaten: in small bites, one at a time.

    Hamilton  did one of the things Atrios advocates -- he nationalized banking via creation of a single bank: one, national, US Bank. For-profit, even, back when some of the big names among the founders opposed the entire notion of letting banks of any kind exist in the US. Branches of it in every state.

    Now, he wasn't up against a trivial problem:

    The face value of federal and state debts was about $74 million, including $12 million owed to Dutch banks. Federal income for 1790 amounted to just $1.6 million — a debt-to-income ratio of 46 to 1. (Today that same ratio is about 6.5 to 1.)
    So he faced a genuine cliff, rather than the jumped-up curbstone we face today. Had Hamilton's ability to answer the trouble not found success, the US would have dissolved before it turned 10, never mind passed 220 years old.  Indeed, the smart money in Europe had already made its bets, before the ink dried on the Constitution and long before the Bill of Rights reached ratification, that exactly that outcome could be expected. The riches of the New World's upstart independent nation, now in the throes of rebirth, looked like sugar plums disguised as low-hanging fruit to Dutch bankers as well as such well-heeled militaries as the Spanish, French, and Dutch, not to mention the English, still smarting (witness the war of 1812, even then in the planning stages) from their defeat a decade before.

    His reach exceeded mere finance, though:

    Hamilton was not, as some have claimed, a proto-Keynesian, but he thought like a modern macroeconomic planner. Some 150 years before the word macroeconomics was coined, he wrote that “in the affairs of a Country, to increase the total amount of industry and opulence, is ultimately beneficial to every part of it.”
    He was arguing not only in favor of a growth strategy — a rising tide to lift all boats — but also against the sectional and class disputes that were dividing the country. He was determined to promote growth by whatever means possible, and to rely on a surge of consumer confidence and business investment to increase federal revenues.
    We've seen this work, in my lifetime. The 1960s (before Nixon) come to mind. The 1990s, those Clinton years that represented a "long national nightmare of peace and prosperity", also come to mind.
    We're seeing today in Greece and Portugal and Spain and Ireland what austerity does to nations. It's not pretty, it doesn't fix the problem ... and it may yet bring us to the brink of war around the globe yet again.

    As a nation and an influence on the globe it behooves US, the USA, not to pour gasoline on the fires.

    LBJ, Lady Bird, Anne Richards, Barbara Jordan, Sully Sullenberger, Ike, Drew Brees, Molly Ivins --Texas is no Bush league! -7.50,-5.59

    by BlackSheep1 on Wed Dec 05, 2012 at 12:22:23 PM PST

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