Tuesday, April 5, 2011
Will a disaster liberate us or enslave us?
A government shutdown seems all but certain now. The tea party element of the Republican Party seems intent on imposing economic hell upon us all. If there is a disaster as a result of political manipulation then who will get the blame? Will it be the fanatics or the ineffective marketing ploy known as Barack Obama? Do ideas like Modern Monetary Theory stand a chance in the face of such madness? Economist Thomas Palley gave his thoughts on the matter back in 2008.
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3 comments:
I think that Palley has it right.
My view is that Reaganism will culminate in another Great Depression within seven years (could be anytime since this crisis is ongoing). From this will arise either another FDR or another Hitler. That is, if history is a reasonable guide. The US is divided between these alternatives.
It's not the Democrats fault. It's the momentum of the times. An dominant idea (Zeitgeist) has to play itself out. It could possibly have ended in 2008, but Obama and the Democrats used the enormous power of government to prolong the agony.
But they did not have much choice. There was no public appetite at the time to put the big banks into resolution, which would have amounted to nationalizing them because of the scale.
This is an institutional problem, and key national institutions are now imploding due to corruption. Could these institutions be reformed in time to reset? Not without a sea change that is virtually impossible without the elite getting on board, and that doesn't seem to be in the cards. It is not in their interest individually.
The task is get the MMT understanding out there so there is an alternative to pick up after the breakdown of the system, after neoliberalism is completely discredited.
But they did not have much choice. There was no public appetite at the time to put the big banks into resolution, which would have amounted to nationalizing them because of the scale.
The Dems had plenty of choice. There was an enormous public appetite, still is, for reining in, crushing the banks. Obama knew it - he said in a speech to them, when they were carping about the slaps on the wrist he administered, that his adminstration was the only thing standing between them and an enraged public. No appetite in the Beltway/Wall Street lunatic-run asylum, but anywhere else, yes.
Legally, the banks should have been put into resolution immediately. There wasn't the capacity to do that under the present system. I recall someone saying that there weren't enough legal and financial experts in America to do it. The option was full nationalization (government takeover of operations), and the administration did not want to go there for political reasons.
As a result the banks' position was basically covered up and remains so. The TBTF's are insolvent. The only out now is still nationalization. That is not going to happen.
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