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Galbraith explains deficit hysteria in one sentence

James Galbraith:

Bankers don't like budget deficits because they compete with bank loans as a source of growth.

And who owns the legacy parties? The banksters. Who owns our famously free press? The banksters. And who just succeeded in pulling off the greatest transfer of wealth upward in world history, after crashing the economy? The banksters. QED.

And what's it all about? You know the answer! It's all about the rents! Galbraith:

For ordinary people, public budget deficits, despite their bad reputation, are much better than private loans. Deficits put money in private pockets. Private households get more cash. They own that cash free and clear, and they can spend it as they like. If they wish, they can also convert it into interest-earning government bonds or they can repay their debts. This is called an increase in "net financial wealth." Ordinary people benefit, but there is nothing in it for banks.

... When a bank makes a loan, cash balances in private hands also go up. But now the cash is not owned free and clear. There is a contractual obligation to pay interest and to repay principal. If the enterprise defaults, there may be an asset left over--a house or factory or company--that will then become the property of the bank. It's easy to see why bankers love private credit but hate public deficits.

All of this should be painfully obvious, but it is deeply obscure. It is obscure because legions of Wall Streeters--led notably in our time by Peter Peterson and his front man, former comptroller general David Walker, and including the Robert Rubin wing of the Democratic Party and numerous "bipartisan" enterprises like the Concord Coalition and the Committee for a Responsible Federal Budget--have labored mightily to confuse the issues.

What a shame that our tribunes of the people in the "progressive" blogosphere aren't laboring as mightily as the banksters! Instead, by attempting to moderate the hysteria, to ameliorate the results, or to make sure that the only the uncredentialled are thrown under the bus, they're driving to the same destination as the banksters -- just at 89 instead of 98 mph. Sad.

NOTE Et tu, Hillary? It's time to "make the national security case about reducing the deficit and getting the debt under control." I think what Clinton's really saying is that the hot money's going to go on strike again if Versailles doesn't force a lot of cat food down the throats of the American people, both old and not-yet-old. But the hot money's going to do what it's going to do. Maybe it's time to stop worrying and take the hit.

NOTE Hat tip to Selise. And just out of curiousity, why don't we turn the banks into regulated public utilities?

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selise's picture
Submitted by selise on

why don't we turn the banks into regulated public utilities?

via action by our elected D and R gov officials?

this quote seems applicable:

...who owns the legacy parties? The banksters. Who owns our famously free press? The banksters. And who just succeeded in pulling off the greatest transfer of wealth upward in world history, after crashing the economy? The banksters. QED.

there's just one possible chain in the loop that would me hope: if we could have, or help promote, an informed and engaged citizenry.

basement angel's picture
Submitted by basement angel on

The problem is that the rich aren't paying their fair share of taxes.

"The rich are not paying their fair share in any nation that is facing the kind of employment issues [America currently does] — whether it's individual, corporate or whatever [form of] taxation forms," Clinton told an audience at the Brookings Institution, where she was discussing the Administration's new National Security Strategy.


Clinton went on to cite Brazil as a model.

"Brazil has the highest tax-to-GDP rate in the Western Hemisphere and guess what — they're growing like crazy," Clinton said. "And the rich are getting richer, but they're pulling people out of poverty."

madamab's picture
Submitted by madamab on

that Hillary is accepting the frame of deficit hawkism instead of the ideas of MMT.

I certainly don't blame her for this, because she's not an economist, and she may never have heard of these ideas.

I would expect her to be very interested in the theory, and I think she is one of the few that could be convinced to adopt it.

Submitted by lambert on

Who can make a connection?

madamab's picture
Submitted by madamab on

who know some people.

Let's get the package all together (website, transcripts, videos, teasers) and then we can talk about distribution. ;-)

(I know you just LOVE IT when I talk like that!)

gqmartinez's picture
Submitted by gqmartinez on

A conservative economic story line is that taxes kill economic growth. Hillary is giving an explicit counter example to that. That is a very important statement of fact and should be repeated. As someone not completely convinced by MMT, I think this statement about Brazil is more important than MMT. In fact, I'm skeptical of MMT as a liberal policy because the rich can just say: I don't need to pay taxes, lets just print some more money. That doesn't seem to be consistent with a "we are all in this together" political philosophy.

I know its hip and cool to hate Bill Clinton and his presidency, but that shouldn't be an excuse to overlook one of the most important liberal things he accomplished: He provided direct evidence that raising top marginal rates does not stifle economic growth. This undercuts much of conservative economic dogma and is *always* overlooked by supposedly savvy and knowledgeable lefties. Bill Clinton's economic policies, while not popular, are an important piece of information to counter the conservative economists.

tarheel-leftist85's picture
Submitted by tarheel-leftist85 on

..doesn't MMT posit that taxation is a means of driving demand for money? Effectively, the government can balance both the supply and demand for money. And though HRC's statement reflects deficit hawkisness, she still has it right on taxes. But taxing w/o spending (i.e., a surplus) amounts to a shortage of household cash per MMT, right? With regard to taxes, we should take the same approach as single-payer--and elegantly-simple policy as opposed to the 2700pg ins. co. bailout. Start from scratch with two principles: (1) accumulated wealth should be taxed at rates above labor-derived income, and (2) the marginal rates should be highly graduated (so as to differentiate between $100k, $200k, ... $1mil, ...)--perhaps, with some sort of cap on wealth (at least accumulated wealth).

Also, the idea that the wealthy would assert their "right" not to pay taxes via MMT crossed my mind too! But taxation drives the demand side for money. I also agree from a previous post with notion that FICA taxes should remain in place (but, maybe no cap and highly graduated?) as a means to preserving the notion of a safety net (a FICA tax holiday would feed the catfood cheerleaders in their arguing/advertising "generational welfare" or its broke broke broke).

Someone, please let me know if i'm doing an injustice to MMT, as I'm still getting schooled :)

basement angel's picture
Submitted by basement angel on

that Obama's economics are not designed to create jobs and fix the problems in the economy, but to shore up the electoral fortunes of his friends in Congress and augment Obama's future ability to sit on boards and soak up the do-nothing cash.

I say send her the info, but I think this is a political move using politically convenient rhetoric.

tarheel-leftist85's picture
Submitted by tarheel-leftist85 on

but with regard to O's electoral strategy, don't they (everyone in the legacy parties) want split control when they give us catfood so their gooey fingerprints blend into an indistinguishable mess? If O wants another four years before reaping his sinecure (Giuliani-like speeches?), he's going to have to have a Republican Congress so that (1) his "hands are tied" and (2) the ensuing drama can be translated into legacy party rent-seeking (thank [Alan Grayson/Denny K/Progressive Hero] for "standing with" us!)?