Professor Karl Whelan backs up Joe Weisenthal and MMT on the sectoral balance approach, but questions Weisenthal's analysis. However, Professor Whelan does not actually work out the sectoral balances in terms of non-government saving desire and deficit offset. He concludes without deep analysis that the Bush Administration was also involved, but without a deeper analysis, he does not see that that the Bush deficit was not a large enough offset.
Moreover, saving/spending desire is also a changing viable, and the private sector appetite for debt was increasing as the housing bubble expanded, along with the trade deficit. The Bush administrations' fiscal liberality was not enough to offset the accumulating stock of private, however, and private debt growth is unsustainable. Stephanie Kelton qualifies Joe Wisenthal's argument:
Here’s a presentation I gave years ago on the housing crisis/deregulation, greed, etc. http://www.slideshare.net/MitchGreen/did-greenspan-blow-itScott Fullwiler tweets, Broader point is recognition of sectoral balances approach rather than household budget/deficit analogy to govt's fiscal position.
I never said (and never would say) that the Clinton surplus *caused* the housing bubble. The surplus emerged as the private sector took on more and more debt to finance a consumption binge that was, in part, fueled by rising home prices.
Forbes | Business
Did Bill Clinton's Budgets Really Destroy the American Economy?
Karl Whelan | Professor of Economics at University College, Dublin, PhD in economics from MIT, with Federal Reserve Board from 1996 to 2002, regularly briefing Alan Greenspan and working on the FOMC's macroeconomic forecast and from 2002 to 2007, with the Central Bank Ireland and attended many meetings at the European Central Bank.
(h/t Scott Fullwiler via Twitter)
This topic is going viral.
15 comments:
Looking at the sectoral balances chart, why did the Bush deficits flow more to the foreign sector than the domestic private sector? Is this globalization in action?
Looking at the sectoral balances chart, why did the Bush deficits flow more to the foreign sector than the domestic private sector? Is this globalization in action?
While the US KAS was funding growing cheap imports that were dampening inflation and keeping labor bargaining power in check, the deficit was being used by US firms to expand FDI especially in Asia instead of being used for US investment and profit distribution to shareholders.
Bush actually bragged about his "symbiotic relationship" between foreign saving in the USD and US FDI abroad that was producing profits for the US multinationals. He said this was the reason not to be concerned with the growing trade imbalance with China, for example. This has been the US strategy for Chimerica.
Senator Bernie Sanders-Six Points for Pres. Obama
http://www.sanders.senate.gov/newsroom/news/?id=4BEB6B72-159C-4B0A-BCBB-8D6EC5984886
September 5, 2012
In order to win support from the American middle class, it is absolutely imperative that the president provide a strong agenda that speaks to their needs, and that makes clear he will fight to win those proposals against the right-wing extremists who now control the Republican Party. Here is some of what the president should advocate:
1) The president must make it clear to the American people that he will not cut Social Security. Social Security has not added one penny to the deficit because it is funded by the payroll tax. Social Security has a $2.7 trillion surplus and can pay out every benefit owed to every eligible American for the next 21 years.
2) Obama must tell the American people that he is not going to balance the budget on the backs of the elderly, the children, the sick and the poor. The deficit was largely caused by Bush's two unpaid-for wars, tax breaks for the rich and the Wall Street-caused recession. The president must reduce the deficit by asking the wealthiest people in this country to start paying their fair share of taxes, by ending enormous corporate tax loopholes and by taking a hard look at wasteful military spending.
3) Given that real unemployment is 15%, the president must propose a major jobs program to rebuild our crumbling infrastructure (roads, bridges, water systems, waste water plants, airports and railroads) and, in the process, create millions of good paying jobs.
4) The president must accelerate his efforts to transform our energy system away from fossil fuel and into energy efficiency and such sustainable energy sources as wind, solar, geothermal and biomass. This would not only address the planetary crisis of global warming but also create jobs.
5) The president must call for real Wall Street reform that ends the largest unregulated gambling casino in the history of the world, and that demands Wall Street invest in the productive economy.
6) The president must support a constitutional amendment to overturn Citizens United, the disastrous U.S. Supreme Court decision that allows corporations and billionaires to buy politicians.
Yeah! "Bernie Buster" is a good one!
Anon,
Sanders is writing in the context that "deficits are bad".... which itself is BAD.
Sanders is out of paradigm.
Resp,
I agree Matt,i don´t think old Bernie catch up with MMT,but compared to Ryan GOP and most Democrats etc,Matt!
Bernie blow them away!
Short story: yes. Of course, greater deficits would have only spurred on the stock bubble for a while - but perhaps allowing the Fed to pop it sooner, and with more fiscal stimulus immediately ameliorating the pain caused by the burst.
Should interest rates only be used to burst bubbles, with fiscal policies used to combat recessions themselves?
Commodity futures modernation act, and the wet dream team of the dergulators, Summers, Rubin, Greenspan and the SEC chairman, along with the ENRON Scum senator Gramm, and his wife who sat on the ENRON board, all squashed Beardesly Bourne CFTC chairwomen, to undo what senile President Regan and his Merrill Lynch side did and that was to unleash the Bullshit on the american people along with wars unpaid for , kick the can and corporates privatizing gains and socializing expenses on the middle class, example no maintenenance done to the locks on the Major rivers that the farmer lobbyists move their grain on, and make one helluvah profit, now the locks need repair, oh lets do the usual let the tax credits begin and put it on the sheeple as usual, this 16 trillion dollar ponzi will end like a man who dates a hooker , its fun while it lasts, but it will end badly.
Seems like just yesterday we were talking about this:
Sen. Bernie Sanders names MMT advisers
Anyone know what became of that?
Matt,
Anyone claiming that "deficits are bad" (and believes it) is self-identifying as a moron.
It follows that a picture taken of a bridge after the collapse is a "bad picture".
It's good that our ideas are seeping more into the mainstream media. I sure as s**t hope that Mike gets a mainstream TV speaking spot.
Now I think we just need to keep things in perspective of other issues facing the US economy.
Clearly, not all deficits are the same. That lying scumbag Ryan's budget certainly results in deficits, but would crush the middle class and demolish America's productivity. And as for Bush, the additional private-sector financial wealth was channeled to the wealthy and those connected to the military.
I think if there are any ways for the government to spend less and get the same result for its people, it should do so. If healthcare reform can reduce the cost to government and the people, cover more people (at the cost of insurance company profits), it should do so. If America is not at war, it should not spend on its bloated military. And, I know most of you agree, tax the rich, who've had it for too nice for too long. (And don't get me started on tax-breaks for donating to the Mormon church).
Now, AFAIK, none of this is necessarily inconsistent with the teachings of MMT. The government can use the above savings to cut taxes or engage in further spending.
We will live to fight another day to get our message across, particularly after Obama wins (and he will). Until then, what we offer to the political debate is to tell people not to be distracted by the national debt, and to stop the fear-mongering that the US will end up like Greece.
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