Thu Jun 21, 2012, 04:04 PM
cthulu2016 (10,317 posts)
Bernanke begs Congress to accept Keynesian Economics
Considering that the current RW line is that "no real economist takes Keynes seriously" it is amusing that in the last few weeks Ben Bernanke and Mitt Romney, leader of the Republican party, have both noted that the US economy would collapse if government spending was cut in the short-term.
Bernanke's testimony was quite extraordinary. He told Congress that they, and only they, can fix the economy. And that the method to do so is short-term fiscal stimulus. (It was, of course, couched in "Fed speak," the world's most understated language. But by Fed standards Bernanke's comments were his version of running around with his hair on fire.)
This was really the same is if Bernanke were a climate scientist begging Congress to stop their circle-jerk of ideological pseudo-science. Bernanke's comments included, as implicit, that everything the Republicans think about the soft science of economics is false.
Bernanke Implores Congress To Help Him Fix Economy
...Fed Chairman Ben Bernanke reminded reporters that the Fed isn’t the only game in town, and practically begged Congress to take affirmative steps to boost recovery.
Bernanke cited “Fiscal restraint at the federal state and local levels,” as a key head wind threatening the recovery.
“Monetary policy is not a panacea,” he implored. “Monetary policy by itself is not going to solve our economic problems. We welcome help and support from any other part of the government, from other economic policy makers. Collaboration would be great.”
...he offered Congress his familiar prescription — it amounts to stimulus in the short term paired with a credible long-term path to reduced deficits. “First is to do no harm as far as the economy is concerned, to avoid a fiscal cliff that would significantly damage the recovery,” Bernanke said, referring to automatic tax increases and across-the-board spending cuts scheduled to take effect at the beginning of 2013. “Second to maintain the effort to achieve a sustainable fiscal path over the longer term. Third to use fiscal policy effectively, to have a better tax code to make good use of government spending programs and make them efficient and effective…If Congress does all those things, the ultimate benefits would be substantial.”
24 replies, 5161 views
Bernanke begs Congress to accept Keynesian Economics (Original post)
|Uncle Joe||Jun 2012||#1|
|liberal N proud||Jun 2012||#3|
Response to cthulu2016 (Original post)
Thu Jun 21, 2012, 04:31 PM
liberal N proud (46,228 posts)
3. The republicans will tank the economy to win the election in November
Hope the voters are listening and noticing who is blocking recovery.
Response to liberal N proud (Reply #3)
Thu Jun 21, 2012, 06:24 PM
Ikonoklast (22,813 posts)
8. If they do, we will roll off that cliff we are headed to.
The Republicans will not adopt Keynsian remedies, they will cut taxes, spending, and employment even further, and that will implode this economy in a way not ever seen in modern history.
They will not be able to stop it once implementing their Randian agenda.
It will pick up steam and be a cascade failure, once started, almost impossible to control.
Deflation will destroy millions, and wipe out entire industries.
They are flirting with causing an economic disaster that will take a generation to fix...if ever.
Response to Ikonoklast (Reply #8)
Sat Jun 23, 2012, 11:38 AM
ensemble (115 posts)
18. Don't worry....
They will become Keynesians when it means we can, in the words of George Carlin, bomb some brown people.
If the economy tanks, they will start a new, bigger war requiring massive government spending.
Response to liberal N proud (Reply #3)
Fri Jun 22, 2012, 12:16 PM
jwirr (22,145 posts)
15. One of the best ways we can help this is to write editorials in our local papers. MSM will not tell
the truth and the local papers usually do not cover this stuff but with some luck we can get it into the papers. Billboards are another good way of getting the word out. Get together and buy one.
I feel so helpless. We here on DU know but does anyone else?
Response to cthulu2016 (Original post)
Thu Jun 21, 2012, 06:24 PM
clang1 (884 posts)
7. +1 n/t
The GOP/RW pigs hate Keynes because his ideas work. They are full of shit as usual. They subscribe to stuff like Friedman and for example south american disaster economics. Just read on disaster capitalism.
Response to cthulu2016 (Original post)
Thu Jun 21, 2012, 06:34 PM
bloomington-lib (851 posts)
10. They worked too hard to get Friedmans ideas into the mainstream. They've toppled govts, tortured,
started wars, all in the name of his ideas. There's no way asking them to stop will work.
Response to bloomington-lib (Reply #10)
Sat Jun 23, 2012, 02:38 PM
stockholmer (3,751 posts)
19. The Chicago School is simply the flip side to Keynesian one, both are failed neo-classical models
Keynesianism focuses on the value stability of currency, the Chicago School focuses on price stabilty. Both ignore the reflexive effects of debt built up in the system, especially private debt. As for the Austrian school, it is also a systemic controller ploy to allow for a complete private oligarchy. It is telling that the plutocratic David Rockefeller's personal tutor in economics was none other than Ludwig von Mises himself.
I am a much more of a believer in Steve Keen, Hyman Minsky (financial instability hypothesis) Irving Fisher (debt deflation theory), etc. I also find some utility in MMT (Modern Monetary Theory).
Here is a sampling of post-Keynesian thought taking on Keynesianism (with Paul Krugman as its proxy)
Paul Krugman vs. MMT: The Great Debate (BIG correction to this particular article: Steve Keen is NOT an MMT'er , he is an expander of Minsky's theories, Dr. Michael Hudson IS an MMT'er )
There’s a tremendously important debate being waged across a bunch of different websites, including Paul Krugman’s at The New York Times, about how banking really works. Unfortunately, it’s probably a bit tough to wade into the debate at this point. So I’ll do my best to summarize what’s going on.
ACT I: Krugman Answers Keen
Last week, a maverick Australian economist named Steve Keen linked to a paper http://ineteconomics.org/sites/inet.civicactions.net/files/keen-steve-berlin-paper.pdf he had written for a conference to be held in Berlin later this month. The paper, entitled “Instability in Financial Markets: Sources and Uses,” starts with a synopsis http://www.economonitor.com/blog/2012/03/a-primer-on-minsky/ of the work on the financial sources of economic instability by the late economist Hyman Minsky. In particular, Keen argues for the Minskyite point that an understanding of banking is central to understanding the economy.
Paul Krugman weighed in http://krugman.blogs.nytimes.com/2012/03/27/minksy-and-methodology-wonkish/ the very next day with a post arguing that Keen’s insistence that banking is crucial was misplaced. Krugman argues that bank lending doesn’t necessarily increase demand in the economy—it just shifts money around. “If I decide to cut back on my spending and stash the funds in a bank, which lends them out to someone else, this doesn’t have to represent a net increase in demand. Yes, in some (many) cases lending is associated with higher demand, because resources are being transferred to people with a higher propensity to spend; but Keen seems to be saying something else, and I’m not sure what,” Krugman writes.
A few hours and scores of blog comments later, Krugman returned to the debate to accuse Keen and the “Minskyites” of engaging in “banking mysticism.” http://krugman.blogs.nytimes.com/2012/03/27/banking-mysticism/ (The Minskyites he most likely had in mind were Modern Monetary Theorists like economist Randall Wray, a former student of Minsky.) Krugman compared Keen and the Minskyites of being similar to Austrian economists in that both assign “unique powers” to modern banks.
Of course, one of the best ways to pick a fight with a Minskyite is to compare him to an Austrian. The typically left-wing Minskyites typically despise what they regard as the right-wing quackery of Austrian economics. (Austrians, as far as I can tell, don’t spend much time thinking about Minsky or MMT at all.) Krugman no doubt knows this, which is why he decided to make the comment in the first place. He wanted to poke the bear.
Nobel Laureate Paul Krugman Selectively Quotes Rival to Stitch Him Up After Losing Argument
Yves here. If comments on this site are any guide, readers appear to have taken considerable interest in a blogosphere debate on the role of money and banking, with Steven Keen and Scott Fullwiler (among others) arrayed against Paul Krugman and Nick Rowe. Krugman’s latest piece http://krugman.blogs.nytimes.com/2012/04/02/oh-my-steve-keen-edition/ not only misrepresents Steve Keen’s argument, as Philip Pilkington explains below, but Krugman also appears to have shut down any discussion at his blog after quite a few of his readers pointed out his sleight of hand.
There were 65 comments from 12:46 PM to 5:22 PM. Krugman put an update (no time marker) at the top of the post”OK, I’m done with this conversation.” Did the last comment, reproduced in full below, hit a nerve?
I predict this sorry exchange that started about Krugman’s misuse of Minsky will one day haunt the good Professor if he doesn’t do his homework with an open mind immediately. If not, the damage to his credibility will be permanent and irreversible.
Paul, at least come clean and admit you misread Keen here and quoted him out of context. It’s obvious.
Your doubling down with each new post is very unbecoming and your beginning to look like a Republican.
What was that post you wrote awhile back on hypocrisy?
By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil
Oh, its a dark day, my friends. A pall has been cast over the econoblogosphere. Yes, Paul Krugman has just used the New York Times website to undertake a vicious stitch-up on an intellectual opponent who should have, by rights, won the original argument. Here’s how it went down. Post-Keynesian economist and sometimes Naked Capitalism contributor Steve Keen wrote a cogent article http://www.economonitor.com/blog/2012/03/a-primer-on-minsky/critiquing a Paul Krugman paper on Minsky and debt deflation. The key issue was that the so-called money multiplier does not function to restrict credit growth in modern economies operating on a floating exchange rate with a central bank that targets interest rate. We dealt with this briefly the other day http://www.economonitor.com/blog/2012/03/a-primer-on-minsky/ and pointed out the flaw in Krugman’s argument.
Krugman then started to get overwhelmingly negative comments from his usually receptive audience. Many were people who worked in banks trying to appeal to Krugman’s good sense so that he might consider that he failed to understand some fundamental things about modern banking. No luck there.
Then Scott Fulwiller ran a comprehensive rebuttal http://www.nakedcapitalism.com/2012/04/scott-fullwiler-krugmans-flashing-neon-sign.html here on Naked Capitalism yesterday. It was a one-two punch. Krugman fell back on a post written by Nick Rowe. http://krugman.blogs.nytimes.com/2012/04/02/things-i-should-not-be-wasting-time-on/ Rowe’s post was dodgy in the extreme. He made up a quote — specifically that “the money supply is demand-determined” — called it gibberish and then undertook a ‘deconstruction’ of the quote… that he had made up. I called his rhetorical tactics sophistical in the comments section. He called me rude.
Capital Account Interview on the Keen-Krugman Brawl
Paul Krugman And Steve Keen Got Into A Massive Fight On One Of The Biggest Issues In All Of Economics
During the last few weeks, economists Paul Krugman and Steve Keen have engaged in a lengthy (and ugly) blogger debate http://www.businessinsider.com/krugman-fights-keen-2012-4 about the role of banks in expanding the monetary base. But beyond the jargon, the nitpicking, and the insults (from both sides) the point they debated is a crucial one: Does the Fed have sufficient power to control the monetary system? Or are the Fed and other central banks given more credit than they are due? The impetuses for this debate are the theories of Hyman Minsky, an American economist who wrote that markets are intrinsically in a state of disequilibrium.
According to Keen, Minsky thought that irrational market actors can exacerbate disequilibrium's when they perceive future stability in the markets. For example, banks in the early 2000s continued extending loans to home-buyers with poor credit because they did not foresee (or did not want to accept) that home prices could not continue rising. Even the initially conservative activity of extending loans to creditworthy homebuyers soon became speculative, as home prices skyrocketed out of control because of unsustainable demand in the market. While it is quite conceivable that bank behavior did indeed exacerbate the housing bubble in this manner, Keen argues that this behavior demonstrates a deeper ideology: Fiscal and central bank policy have far less power in controlling credit conditions than we would like to believe. He writes:
We cannot rely upon laws or regulators to permanently prevent the follies of finance. After every great economic crisis come great new institutions like the Federal Reserve, and new regulations like those embodied in the Glass-Steagall Act. Then there comes great stability, due largely to the decline in debt, but also due to these new institutions and regulations; and from that stability arises a new hubris that “this time is different”—as the debt that causes crises rises once more. Regulatory institutions become captured by the financial system they are supposed to regulate, while laws are abolished because they are seen to represent a bygone age. Then a new crisis erupts, and the process repeats. Minsky’s aphorism that “stability is destabilizing” applies not just to corporate behaviour, but to legislators and regulators as well. Banks, Keen insisted, form the crux of the problem since they are in control of the monetary base. Banks' assessments of the risks and rewards to lending grows virtually without reference to the deposits they receive, so banks—and not the government—ultimately determine credit standards.
He wrote in a blog post: http://www.debtdeflation.com/blogs/2012/03/29/krugman-on-or-maybe-off-keen/
Why does it matter that “once you include banks, lending increases the money supply”? Simply, because the endogenous increase in the stock of money caused by the banking sector creating new money is a far larger determinant of changes in aggregate demand than changes in the velocity of an unchanging stock of money. And in reverse, the reduction in demand caused by borrowers repaying debt rather than spending is the cause of the downturn we are now in—and of the Great Depression too.
Economist Steve Keen Goes After Paul Krugman With A New Presentation
Post-Keynesian economist Steve Keen really socked it to Paul Krugman in a presentation this weekend in Scotland. http://www.justbanking.org.uk/
If you're just joining the battle http://www.businessinsider.com/paul-krugman-vs-steve-keen-2012-4 this is a good, albeit wonky, starting point.
Keen refutes first the idea that the creation of credit necessarily leads to crisis, and second the idea (Krugman's) that banks have nothing to do with debt crises. Instead he offers a theory of good and bad bank behavior.
We've posted the slides from his presentation. Go to his site http://www.debtdeflation.com/blogs/2012/04/21/just-banking-presentation/ to see a video of the presentation.
Click here to see the presentation
A Marxist viewpoint on Krugman v. Keen (and MMT) It's really an examination of MMT from a Marxist perspective. The author incorrectly seems to think that Steve Keen is MMT.
Read it at Michael Roberts Blog:
Paul Krugman, Steve Keen and the mysticism of Keynesian economics
But the Marxist theory of money makes an important distinction from the MMT guys. Capitalism is a monetary economy. Capitalists start with money capital to invest in production and commodity capital, which in turn, through the expending of labor power, eventually delivers new value that is realised in more money capital. Thus the demand for money capital drives the demand for credit. Banks create money or credit as part of this process of capitalist accumulation, not as something that makes finance capital separate from capitalist production. I would not say that there is an enormous gap here. It is an established fact that investment has been and remains the primary use of credit in capitalist economies and that interest rates are the cost of obtaining capital through acquiring debt. Most economists would agree with this, I believe, including MMT economists.
And they would also point out that consumer credit was virtually unknown in the day of Marx, other than for the wealthy and powerful. Since the introduction of the credit card and widespread home ownership made government policy, credit extended to workers rather than the ownership class has soared. So when Marx was writing industrial capital was paramount, whereas now finance capital is becoming dominant, with the financial sector responsible for a growing share of GDP. Michael Hudson has observed that Marx never expected that industrial capital would be challenged by finance capital. This is a new phenomenon that is characteristic of a stage of capitalism that Marx did not anticipate, since "capitalism" for him meant industrial capitalism. Financial capital served industrial capital at that time. This is no longer the case as finance capital becomes an ever bigger player.
But according to Roberts, the largest divergence between MMT-PKE and Marxism is that the former focuses on Minskian financial instability and Keynesian "animal spirits," which he sees as entangled in the mysticism of expectations, i.e., subjective, whereas the latter is based on falling rate of profits, which is objective. On the other hand, Wynne Godley was able to accurately predict the coming crisis based on his three sector model, which finds antecedents in the work of Keynes, Kalecki, Kaldor and Robinson on prices, wages, profit and capital accumulation. Godley attempted to "objectify" the Keynesian narrative in stock-flow consistent modeling based on accounting principles and national accounting identities in developing a fresh approach to macroeconomic modeling.
The Most Important Econoblog Post This Year: The Steve Keen/MMT Convergence
Neil Wilson has done yeoman’s duty to (perhaps) achieve a convergence that has been too-long delayed.
A Double Entry View on the Keen Circuit Model.
Steve Keen is, to my knowledge, the only person who is actually encoding a Godley-esque, MMT-style, accounting-based, stock-flow-consistent dynamic simulation model of how economies work. But many MMTers have been quite hostile or at least resistant to Steve’s work, based on some different concepts of endogenous/exogenous money, and — this may seem trivial but it isn’t, at least as it has played out over time — based on details of single- versus double-entry accounting.
The debate has been quite acrimonious at times, and that acrimony has greatly hindered a convergence that in my eyes would be the most salutary event possible in the development of economic thinking and practice. You can read the details in Neil’s post, but in short he’s re-jiggered Steve’s accounts to make them conform better to (at least Neil’s view of) standard bank-accounting practices. I’m not qualified to evaluate his new formulation, but I am excited to read Neil’s comment on the post, replying to uber-MMTer Scott Fullwiler:
We need to get all this pulled together into a coherent overall model. Steve’s up for it. I hope you are too. I’ll just say: I’m very much up for watching it happen. Also: run don’t walk to read Steve’s Debtwatch Manifesto, http://www.debtdeflation.com/blogs/2012/01/03/the-debtwatch-manifesto/ posted last week.
Cross-posted at Asymptosis. http://www.asymptosis.com/?p=4747
Dr. Michael Hudson (a conventional MMT'er) on The Federal Reserve System
What is the place of the Federal Reserve System in the American financial and economic structure?
Prior to the Federal Reserve’s founding in 1913, U.S. monetary policy was conducted by the Treasury. Like the Fed, it had district sub-treasuries that performed nearly all the financial functions that the Fed later took over: providing credit to move the crops in autumn, managing government debt, and so forth.
But after the severe 1907 financial crisis, a National Monetary Commission was reformed. Under the then-Republican administration, it recognized a need for more active government intervention to prevent future financial crises. It also recognized the desirability of moving away from the Anglo-Dutch-American system of “merchant banking” based on short-term lending against collateral in place, or for shipping of goods already produced. The National Monetary Commission’s longest volumes were on the great German industrial banks, and Republican policy aimed at bringing banking into the industrial era, to provide long-term funding after the model of German and other Central European banks.
However, the leading bankers sought to use the crisis as an opportunity to grab power for Wall Street, away from the Treasury. In this sense, the Fed was founded in large part to take monetary control away from Washington’s elected officials and appointees, and privatize the supply of money and credit. So its place in the U.S. financial and economic structure is to allocate credit, primarily to serve Wall Street financial interests. That explains the insistence on the financial class here and abroad in insisting on an “independent” central bank. It means that instead of serving the public interest, it serves the interests of the banking class. The hoped-for transformation of commercial banking into long-term industrial banking was not achieved.
Can we imagine the global economic system without Federal Reserve today? If yes/no, why?
As David Kinley’s book for the National Monetary Commission pointed out a century ago, nearly all the financial functions performed by the Fed already were performed by the national Treasury. In more recent times, Milton Friedman and his University of Chicago colleagues suggested that the entire Fed could be reduced to a single desk inside the Treasury. The “Chicago Plan” of the 1930s urged Treasury control, as does Congressman Dennis Kucinich’s current bank reform. There is no inherent need for a monetary agency to exist outside of the national government, except to serve the interests of the financial class as distinct from those of government, industry and labor. And the banking sector’s business plan is to load down real estate, labor, industry and the government with as much interest-bearing debt as possible.
Dr. Michael Hudson Employs MMT To Refute Peter Schiff's Austrian Lunacy
Response to Odin2005 (Reply #21)
Sun Jun 24, 2012, 03:36 PM
stockholmer (3,751 posts)
24. some great MMT mp3 shows from Radio Pacifica's Guns and Butter Show
Guns and Butter - April 25, 2012 at 1:00pm http://archives.kpfa.org/data/20120425-Wed1300.mp3
"A Debate On How To Get Out of the Euro" with Marshall Auerback, Michael Hudson, William K. Black and Stephanie Kelton in Rimini, Italy.
Guns and Butter - April 18, 2012 at 1:00pm http://archives.kpfa.org/data/20120418-Wed1300.mp3
"Modern Money Theory Explained" with Stephanie Kelton
Guns and Butter - March 28, 2012 at 1:00pm http://archives.kpfa.org/data/20120328-Wed1300.mp3
"Modern Money Theory and Private Banks" with Stephanie Kelton and Michael Hudson in Rimini, Italy.
Guns and Butter - March 21, 2012 at 1:00pm http://archives.kpfa.org/data/20120321-Wed1300.mp3
"European Integration: The ECB Laid Bare" with Marshall Auerback
Guns and Butter - March 14, 2012 at 1:00pm http://archives.kpfa.org/data/20120314-Wed1300.mp3
"The Birth of the European Central Bank: Its Real Agenda" with Alain Parquez at the first Italian Summit on Modern Money Theory in Rimini, Italy.
Guns and Butter - March 7, 2012 at 1:00pm http://archives.kpfa.org/data/20120307-Wed1300.mp3
"There IS An Alternative To European Austerity: Modern Money Theory (MMT)" with Stephanie Kelton and Michael Hudson in Rimini, Italy.
Guns and Butter - January 25, 2012 at 1:00pm http://archives.kpfa.org/data/20120125-Wed1300.mp3
"The New Junk Economics" with Michael Hudson. (One from the archives of 2010)
Response to cthulu2016 (Original post)
Fri Jun 22, 2012, 05:04 PM
ThomThom (1,483 posts)
16. well maybe somebody is finally seeing the republic party's
economic policies for what they are, complete junk.
They don't have any facts to stand on at all.
Everywhere you look their policies are failing and destroying lives.
Response to cthulu2016 (Original post)
Sun Jun 24, 2012, 09:26 AM
Turbineguy (18,394 posts)
22. Telling the republicans how to collapse the economy.
That's just the kind if help they need since they can't quite seem to figure it out for themselves.