The Continuing Recession

Whenever President Obama talks about his Grand Bargain to cut the deficit by four trillion dollars and how the federal government is like a household and needs to "tighten its belt" just like everyone else, I thought he was simply ignorant of how money works. In fact that was my thinking about all the people in government. After all if they knew that the federal government could never go broke and that deficits are, for the most part, not detrimental to our economy, they would surely spend what was needed to escape this recession.

Then there is the divided government and the need to destroy the other party, like the debt debate in 2011 and the congressional obstructionism these past two years.

Around these issues emotions run high and conspiracy theories are in vogue. For a time it was easy to reject those ideas as extreme. It becomes harder to do that anymore. In particular I now question whether the PTB have no idea of how money works and that includes the President.

These are smart people and they regularly meet with each other. MMT is an economic school of thought that is extant across the Internet.  So how is it possible this is all a mystery? In fact one could consider that saying no one ever heard about is as likely to be a conspiracy. Which leads to the notion, who gains by the faux ignorance?

Banks can borrow at near zero interest from the. federal reserve. They loan it out at much more than that. Almost nothing has been done to bring those causing the crisis to justice. Banks were bailed out but homeowners were not in any important amount. Randall Wray noted on his  blog that banks were bailed out to the tune of $29 trillion. Gross national product is around $15 trillion and the stimulus in 2009 was under $800 billion. Four years after the crash we still have twenty three million looking for work, as Mitt Romney regularly reminds us. We have around fifty million in poverty and without health care. And the banksters rake in huge bonuses in the tens of millions, in no small part resulting from profits from the fed. The gap between rich and poor grows larger. The Occupy movement tried to make some mention of these matters but were shut down cold.

What do we have to look forward to? No matter who wins this election we can expect cuts in the safety net, substantial cuts by the Romney team and a little less from Obama. Romney will cut medicare to an insurance voucher program. To make that appealing, he promises only to screw with those under 55.  Now if we believe those vouchers will  be sufficient, there's a bridge you need to buy. I can show it to you. Bring cash. Same sort of thing for medicaid and social security.

So now the question. Who is winning this little game?

The answer is clearly the elite. And it is likely no accident unless you believe the PTB are all fools and know nothing about money (MMT).

Now what?
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How Long Will It Take ?

Everyone has his favorite solution to the Great Recession. The MMT people are fond of saying that a deficit in the public sectors, including the current account, will lead to a surplus in the private sector. And so we can expect things to improve. And they are, at a glacial pace.

To be sure some of them - to name just  Randall Wray, Bill Mitchell and Warren Mosler - are in favor of the job guarantee. And Wray has written and defended a number of blogs in recent weeks on the idea.

I heard recently that the job creator, Mitt Romney, says unemployment will be down to 6% by 2016. I guess the budget office said the same thing. Wow! So how many real unemployed will that leave us with?

We have twenty five million today of real unemployment counting the "official" number plus all those who gave up looking for a job or are employed part time. That official number is 8.1% but the real number is around 14.5%. So I guess we wait for 2016 to get the real unemployment down to around twenty million.

It doesn't appear the MMT people have any real answers to the problem. Every once and a while one of them touts the job guarantee. But most of the time these folks would rather quarrel over an equation or the niceties of the current account. Debating is much more fun than solving a real world problem. But they are no different than our elites. None of them these days seems to give a rats ass about the people milling around the streets.

Which brings me to Jill Stein, the Green Party candidate for President. She has a snow ball's chance in hell of winning anything but she does have a comprehensive program to fix the country's problem. Now she could use a little MMT help to sell her ideas, since it appears she is struggling to say how she will pay for it. But she flat out says she will create sixteen million jobs not counting the knock on effects in other sectors. Now that is a Wow!.