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As we continue heading into either another dip or an all-out, bad-times, depressionary spiral, it surprises almost no one anymore that some people might be looking forward to a (or another) depression.
Who Wants a Depression?
Paul Krugman
July 10, 2014
One unhappy lesson we’ve learned in recent years is that economics is a far more political subject than we liked to imagine. Well, duh, you may say. But, before the financial crisis, many economists — even, to some extent, yours truly — believed that there was a fairly broad professional consensus on some important issues.
This was especially true of monetary policy. It’s not that many years since the administration of George W. Bush declared that one lesson from the 2001 recession and the recovery that followed was that “aggressive monetary policy can make a recession shorter and milder.” Surely, then, we’d have a bipartisan consensus in favor of even more aggressive monetary policy to fight the far worse slump of 2007 to 2009. Right?
Well, no. I’ve written a number of times about the phenomenon of “sadomonetarism,” the constant demand that the Federal Reserve and other central banks stop trying to boost employment and raise interest rates instead, regardless of circumstances. I’ve suggested that the persistence of this phenomenon has a lot to do with ideology, which, in turn, has a lot to do with class interests. And I still think that’s true.
But I now think that class interests also operate through a cruder, more direct channel. Quite simply, easy-money policies, while they may help the economy as a whole, are directly detrimental to people who get a lot of their income from bonds and other interest-paying assets — and this mainly means the very wealthy, in particular the top 0.01 percent.
The story so far: For more than five years, the Fed has faced harsh criticism from a coalition of economists, pundits, politicians and financial-industry moguls warning that it is “debasing the dollar” and setting the stage for runaway inflation. You might have thought that the continuing failure of the predicted inflation to materialize would cause at least a few second thoughts, but you’d be wrong. Some of the critics have come up with new rationales for unchanging policy demands — it’s about inflation! no, it’s about financial stability! — but most have simply continued to repeat the same warnings.
Who are these always-wrong, never-in-doubt critics? With no exceptions I can think of, they come from the right side of the political spectrum. But why should right-wing sentiments go hand in hand with inflation paranoia? One answer is that using monetary policy to fight slumps is a form of government activism. And conservatives don’t want to legitimize the notion that government action can ever have positive effects, because once you start down that path you might end up endorsing things like government-guaranteed health insurance.
But there’s also a much more direct reason for those defending the interests of the wealthy to complain about easy money: The wealthy derive an important part of their income from interest on bonds, and low-rate policies have greatly reduced this income.
Complaints about low interest rates are usually framed in terms of the harm being done to retired Americans living on the interest from their CDs. But the interest receipts of older Americans go mainly to a small and relatively affluent minority. In 2012, the average older American with interest income received more than $3,000, but half the group received $255 or less. The really big losers from low interest rates are the truly wealthy — not even the 1 percent, but the 0.1 percent or even the 0.01 percent. Back in 2007, before the slump, the average member of the 0.01 percent received $3 million (in 2012 dollars) in interest. By 2011, that had fallen to $1.3 million — a loss equivalent to almost 9 percent of the group’s 2007 income.
That’s a lot, and it surely explains a lot of the hysteria over Fed policy. The rich are even more likely than most people to believe that what’s good for them is good for America — and their wealth and the influence it buys ensure that there are always plenty of supposed experts eager to find justifications for this attitude. Hence sadomonetarism.
Which brings me back to the politicization of economics.
Before the financial crisis, many central bankers and economists were, it’s now clear, living in a fantasy world, imagining themselves to be technocrats insulated from the political fray. After all, their job was to steer the economy between the shoals of inflation and depression, and who could object to that?
It turns out, however, that using monetary policy to fight depression, while in the interest of the vast majority of Americans, isn’t in the interest of a small, wealthy minority. And, as a result, monetary policy is as bound up in class and ideological conflict as tax policy.
The truth is that in a society as unequal and polarized as ours has become, almost everything is political. Get used to it.
Comments:
Socrates - Verona, N.J.
The sadists have been in complete charge for quite a few decades now.
What exactly are 350:1 CEO:worker pay ratios besides an extreme form of sadism?
What are discounted capital gain and dividend income tax rates for the fabulously wealthy while wage slave income taxes, payroll taxes, sales taxes and use taxes combine to make workers more heavily taxed than millionaires and billionaires besides an extreme form of economic violence ?
What is 'carried interest exemption' tax welfare for billionaires besides a kick in the face and shins to the average working person?
What was the Wall Street fueled real estate and mortgage fraud bubble besides a giant sadistic con game by the banksters and securitized rich to scam people into a gold rush that ended with millions and millions of homeless Americans and tens of millions more Americans with shattered life savings?
What is offshore-tax-evasion available only to the moneyed 0.1% besides an economic rape of the United States Treasury?
What are the very prevalent insider trading, front-running, and high-frequency trading behaviors on Wall St. besides a form of metastatic, sadistic and parasitic psychosis that seems to personify a healthy portion of the extremely wealthy?
We shouldn't be surprised that the 0.1% believe it's their right to strip-mine the last dollar from every wage laborer and his bank account.
Lao Tzu said that "he who is contented is rich."
The rich are never contented - it's never 'enough' for the rich.
Rima Regas - Mission Viejo, CA
What the professor described here is pervasive in every sector of our society. When you put it all together, what this describes is our descent into an almost completely corrupt state; one where the paralysis of government is almost complete, but not quite; where the plutocrats have almost gained control, but not quite.
We have two windows ahead of us. Election 2014 doesn't look very promising, so far. For those of us who vote blue, it has been disconcerting to watch the increasing disconnection of the Democratic leadership from its core constituencies either through statements or lack of them. As disconcerting, has been the growing number of op-eds in progressive media outlets openly criticizing the top leadership. I'm, quite frankly glad, but I am also pessimistic that these warnings will have any effect in time for Democrats to get back on message for November. I'm afraid it's going to take another 2010 to cause a shakeup and then the next two years preparing for 2016 for new leadership to take over. I hope, I really do, that it won't be in vain.
We need new blood in our leadership. It's time for the millenials to take over and undo the damage their parents and grandparents have caused. They'll need to get the money out of politics, bring back regulations over finance, pass a new Civil Rights Act (VRA included), and find a way to force the Supreme Court to subject itself to a new ethics code.
These things are a must if we are to remain a democracy.
andyreid1 - Portland, OR
If history is any indication the super rich are grabbing for what they can at the expense of the rest of the country. The rising inequality we are experiencing in the US has been seen in the recent past.
The rise of skinheads in the UK, unemployed and with "no future" is what happens when high unemployment happens. There are those that would disagree with me but I really feel the battle in Northern Ireland basically lost steam when the economy improved and the unemployed became employed.
One looks at the super rich and has to wonder why they want to destroy the middle class with all their buying power that drives the US economy. It can only be to return to the Gilded Age of 100 years ago with company towns, company stores where the company got back everything they paid you and then maybe some more.
History has a habit of repeating itself, the super rich delude themselves if they think it doesn't.
PJD - NYC
It's sad that Krugman has so given up on fiscal policy as an antidote the sad state of our economy, and particularly the lot of the 99% that he doesn't even talk about it. Let's be real: the Fed's printing money (a.k.a. Quantitative Easing) has kept the economy afloat, barely, but it benefits the super-rich, probably more than inflation would - through the artificial inflation of asset values. We know who holds the assets, and it's not the 99%.
What we've needed all along was far more stimulus, say, to put people to work rebuilding our infrastructure. But that's not happening. It would slow the accelerating redistribution of wealth and income from the 99% to the 1%.
Knitwit - The Middle
Implied in the title but not taken up in the article, giving the wealthy their interest will trigger a depression if FDR's stumble in '37 is anything to go by. The wealthy and their economist apologists argued then that the economy needed to lose the dead wood: if you're struggling, then you probably shouldn't be around at all. So, monetary policy softening the blow merely stretched out what should be swift drowning of kittens by throwing them over the bridge tied in a sack. Paul has excerpted several articles from the time saying so bluntly.
What we have now is drowning kittens 2.0, a one two punch with pretty much unfounded threat of inflation combined with getting the likes of Scot Walker or Rand Paul drowning the kittens: dismantling the safety net hammock and pushing austerity for "other people", not everybody and curiously excluding the wealthy.
The main difference between then and now is the optics. SNAP does not jar people into reality like bread lines did. With brazen discrimination of the unemployed so vicious that taking any job at any pay labels one a job hopper, the underemployed masquerade as young, confident and more employed looking than they are. Their plight is so invisible their own friends and family don't know.
Rather than patting the mess into more more pleasing form, we need to let everyone, and especially the wealthy experience the stink full on - now before we have a '37 style depression boomerang.
Jimmy Degan - Wilmette, IL
I had held out hope that Obama would acquire a Sec. Treasury or an advisor like Krugman. Instead, he had a string of "bond guys" who encouraged him to say "We want jobs and stimulus but of course we must keep a priority on controlling the deficit." There was NEVER a moment during the Obama years when reducing the deficit wasn't a STUPID goal to strive for. Bond-guys seem like sophisticated technocrats but they come with a very narrow understanding of economics. (The Tea-party movement came out of a misguided bond outlook.)
If you examine all of the math and models of the "bond outlook", what would appear to be sophistication is really only a cover for retaining existing wealth. Real new wealth creation does not come from policies that favor only bond-holders. While we should avoid destroying too much bond-wealth, our economy's future will be much brighter if we spend on jobs, research, education, infrastructure, etc. (It will even be better for the bond holders, in the long run.)
John F. McBride - Seattle
Everything is made to be political, yes, Paul, but our problems are old fashioned ones at one time identified as Seven Deadly Sins: anger, greed, laziness, pride, lust, envy and gluttony.
But they're all just self adulation, the assertion of the overwhelming importance of self and in this case a majority of the extremely wealthy.
We may be living in an age when the expression of ultimate selfishness has reached renewed heights in heavily financed control of the creation of widely distributed half truths, distortions, and outright lies, what never happened and what did but is purposefully concealed.
An example? "American Courage: Our Commitment to a Free Society," the Koch brothers recent extravaganza. The NET worth of those attending was over $100 billion. The 300 individuals who attended all had assets totaling over $1 billion. The intent was to raise $500 million to buy Congress and another $500 million to shipwreck Hillary Clinton.
Politicians attending? Among them were Tom Cotton, Cory Gardner, Jim Jordan, Mitch McConnell and Marco Rubio.
Subjects? "“Energy: Changing the Narrative,” “Collectivism: Exploring Its Nature and Consequences,” and “The Foundation for Progress,” as “Part One: Drive the National Conversation,” “Part Two: Leverage Science and the Universities,” and “Part Three: Advance in the States.”
The attack on monetary policy Paul is simply an attempt to return government to the control of private wealth, the ultimate expression of self adulation.
Mary Ann & Ken Bergman - Ashland, OR
Haven't the 0.1 percent been cleaning up in the stock market, now at record levels while the real economy remains fairly sluggish? One would think that the stock market run-up more than compensates for low interest rates on bonds. Besides, the rich were able to profit if they held on to older, higher-interest bonds, which appreciated in value as interest rates fell. And if interest rates were raised now, the value of existing low rate bonds would fall.
The fear of the rich over inflation may be genuine, even if expectations have been wrong (so far). The wealthy stand to lose the most in an inflationary economy, whereas debtors come out ahead when they can pay back loans with cheapened dollars. Many older well-off types remember the decade of the 1970's when inflation rates were high, as much as 10 percent. They don't want to see that kind of erosive dollar behavior again. In the '70's, many people with mortgages were actually making money when they paid off their loans. The banks and other lenders took a beating and don't want a have a repeat of that kind of thing.
Meanwhile, back in the jungle.
The real jungle (of war and its profiteers/touters).
Not just the economic war.
For the various rent-a-gun companies, construction and supply outfits, and weapons makers that have been the beneficiaries of the wholesale privatization of American war since 9/11, impunity has become the new reality. Pull back the lens further and the same might be said more generally about America’s corporate sector and its financial outfits. There was, after all, no accountability for the economic meltdown of 2007-2008. Not a single significant figure went to jail for bringing the American economy to its knees. (And many such figures made out like proverbial bandits in the government bailout and revival of their businesses that followed.)
The Age of Impunity.
What you get when you never look backwards (and thus never prosecute the felons who caused the reasons for never wanting to look back).
At least, not the big-boy felons.
The Age of Impunity
Posted by Tom Engelhardt, July 13, 2014.
An Exceptional Decline for the Exceptional Country?
The Empire as Basket Case
By Tom Engelhardt
For America’s national security state, this is the age of impunity. Nothing it does - torture, kidnapping, assassination, illegal surveillance, you name it - will ever be brought to court. For none of its beyond-the-boundaries acts will anyone be held accountable.
The only crimes that can now be committed in official Washington are by those foolish enough to believe that a government of the people, by the people, and for the people shall not perish from this earth. I’m speaking of the various whistleblowers and leakers who have had an urge to let Americans know what deeds and misdeeds their government is committing in their name but without their knowledge. They continue to pay a price in accountability for their acts that should, by comparison, stun us all.
As June ended, the New York Times front-paged an account of an act of corporate impunity that may, however, be unique in the post-9/11 era (though potentially a harbinger of things to come). In 2007, as journalist James Risen tells it, Daniel Carroll, the top manager in Iraq for the rent-a-gun company Blackwater, one of the warrior corporations that accompanied the U.S. military to war in the twenty-first century, threatened Jean Richter, a government investigator sent to Baghdad to look into accounts of corporate wrongdoing.
Here, according to Risen, is Richter’s version of what happened when he, another government investigator, and Carroll met to discuss Blackwater’s potential misdeeds in that war zone:
“Mr. Carroll said ‘that he could kill me at that very moment and no one could or would do anything about it as we were in Iraq,’ Mr. Richter wrote in a memo to senior State Department officials in Washington. He noted that Mr. Carroll had formerly served with Navy SEAL Team 6, an elite unit. ‘Mr. Carroll’s statement was made in a low, even tone of voice, his head was slightly lowered; his eyes were fixed on mine,’ Mr. Richter stated in his memo. ‘I took Mr. Carroll’s threat seriously. We were in a combat zone where things can happen quite unexpectedly, especially when issues involve potentially negative impacts on a lucrative security contract.’”
When officials at the U.S. Embassy in Baghdad, the largest in the world, heard what had happened, they acted promptly. They sided with the Blackwater manager, ordering Richter and the investigator who witnessed the scene out of the country (with their inquiry incomplete). And though a death threat against an American official might, under other circumstances, have led a CIA team or a set of special ops guys to snatch the culprit off the streets of Baghdad, deposit him on a Navy ship for interrogation, and then leave him idling in Guantanamo or in jail in the United States awaiting trial, in this case no further action was taken.
Power Centers But No Power to Act
Think of the response of those embassy officials as a get-out-of-jail-free pass in honor of a new age. For the various rent-a-gun companies, construction and supply outfits, and weapons makers that have been the beneficiaries of the wholesale privatization of American war since 9/11, impunity has become the new reality. Pull back the lens further and the same might be said more generally about America’s corporate sector and its financial outfits. There was, after all, no accountability for the economic meltdown of 2007-2008. Not a single significant figure went to jail for bringing the American economy to its knees. (And many such figures made out like proverbial bandits in the government bailout and revival of their businesses that followed.)
Meanwhile, in these years, the corporation itself was let loose to run riot. Long a “person” in the legal world, it became ever more person-like, benefitting from a series of Supreme Court decisions that hobbled unions and ordinary Americans even as it gave the corporation ever more of the rights and attributes of a citizen on the loose. Post-9/11, the corporate world gained freedom of expression, the freedom of the purse, as well as the various freedoms that staggering inequality and hoards of money offer. Corporate entities gained, among other things, the right to flood the political system with money, and most recently, at least in a modest way, freedom of religion.
In other words, two great power centers have been engorging themselves in twenty-first-century America: there was an ever-expanding national security state, ever less accountable to anyone, ever less overseen by anyone, ever more deeply enveloped in secrecy, ever more able to see others and less transparent itself, ever more empowered by a secret court system and a body of secret law whose judgments no one else could be privy to; and there was an increasingly militarized corporate state, ever less accountable to anyone, ever less overseen by outside forces, ever more sure that the law was its possession. These two power centers are now triumphant in our world. They command the landscape against what may be less effective opposition than at any moment in our history.In both cases, no matter how you tote it up, it’s been an era of triumphalism. Measure it any way you want: by the rising Dow Jones Industrial Average or the expanding low-wage economy, by the power of “dark money” to determine American politics in 1% elections or the rising wages of CEOs and the stagnating wages of their workers, by the power of billionaires and the growth of poverty, by the penumbra of secrecy and classification spreading across government operations and the lessening ability of the citizen to know what’s going on, or by the growing power of both the national security state and the corporation to turn your life into an open book. Look anywhere and some version of the same story presents itself - of ascendant power in the boardrooms and the backrooms, and of a sense of impunity that accompanies it.
Whether you’re considering the power of the national security state or the corporate sector, their moment is now. And what a moment it is - for them. Their success seems almost complete. And yet that only begins to tell the strange tale of our American times, because if that power is ascendant, it seems incapable of being translated into classic American power. The more successful those two sectors become, the less the U.S. seems capable of wielding its power effectively in any traditional sense, domestically or abroad.
Anyone can feel it, hence the recent Pew Research Center poll indicating a striking diminution in recent years of Americans who think the U.S. is exceptional, the greatest of all nations. By 2011, only 38% of Americans thought that; today, the figure has dropped to 28%, and -- a harbinger of future American attitudes -- just 15% among 18-to-29-year-olds. And no wonder. By many measures the U.S. may remain the wealthiest, most powerful nation on the planet, but in recent years its ability to accomplish anything, no less achieve national or imperial success, has shrunk drastically.
The power centers remain, but in some still-hard-to-grasp way, the power to accomplish anything seems to be draining from a country that was once the great can-do nation on the planet. On this, the record is both dismal and clear. To say that the American political system is in a kind of gridlock or paralysis from which -- given electoral prospects in 2014 and 2016 -- there can be no escape is to say the obvious. It’s a commonplace of news reports to suggest, for example, that in this midterm election year Congress and the president will be capable of accomplishing nothing together (except perhaps avoiding another actual government shutdown). Nada, zip, zero.
The president acts in relatively minimalist ways by executive order, Congress threatens to sue over his use of those orders, and (as novelist Kurt Vonnegut would once have said) so it goes. In the meantime, Congress has proven itself unable to act even when it comes to what once would have been the no-brainers of American life. It has, for instance, been struggling simply to fund a highway bill that would allow for ordinary repair work on the nation's system of roads, even though the fund for such work is running dry and jobs will be lost.
This sort of thing is but a symptom in a country of immense wealth whose infrastructure is crumbling and which lacks a single mile of high-speed rail. In all of this, in the rise of poverty and a minimum-wage economy, in a loss - particularly for minorities - of the wealth that went with home ownership, what can be seen is the untracked rise of a Third World country inside a First World one, a powerless America inside the putative global superpower.
An Exceptional Kind of Decline
And speaking of the “sole superpower,” it remains true that no combination of other militaries can compare with the U.S. military or the moneys the country continues to put into it and into the research and development of weaponry of the most futuristic sort. The U.S. national security budget remains a Ripley’s-Believe-It-Or-Not-style infusion of tax dollars into the national security state, something no other combination of major countries comes close to matching.
In addition, the U.S. still maintains hundreds of military bases and outposts across the planet (including, in recent years, ever more bases for our latest techno-wonder weapon, the drone). In 2014, it still garrisons the planet in a way that no other imperial power has ever done. In fact, it continues to sport all the trappings of a great empire, with an army impressive enough that our last two presidents have regularly resorted to one unembarrassed image to describe it: “the finest fighting force that the world has ever known.”
And yet, recent history is clear: that military has proven incapable of winning its wars against minor (and minority) insurgencies globally, just as Washington, for all its firepower, military and economic, has had a remarkably difficult time imposing its desires just about anywhere on the planet. Though it may still look like a superpower and though the power of its national security state may still be growing, Washington seems to have lost the ability to translate that power into anything resembling success.
Today, the U.S. looks less like a functioning and effective empire than an imperial basket case, unable to bring its massive power to bear effectively from Germany to Syria, Iraq to Afghanistan, Libya to the South China Sea, the Crimea to Africa. And stranger yet, this remains true even though it has no imperial competitors to challenge it. Russia is a rickety energy state, capable of achieving its version of imperial success only along its own borders, and China, clearly the rising economic power on the planet, though flexing its military muscles locally in disputed oil-rich waters, visibly has no wish to challenge the U.S. military anywhere far from home.
All in all, the situation is puzzling indeed. Despite much talk about the rise of a multi-polar world, this still remains in many ways a unipolar one, which perhaps means that the wounds Washington has suffered on numerous fronts in these last years are self-inflicted.
Just what kind of decline this represents remains to be seen. What does seem clearer today is that the rise of the national security state and the triumphalism of the corporate sector (along with the much publicized growth of great wealth and striking inequality in the country) has been accompanied by a decided diminution in the power of the government to function domestically and of the imperial state to impose its will anywhere on Earth.
Tom Engelhardt is a co-founder of the American Empire Project and author of The United States of Fear as well as a history of the Cold War, The End of Victory Culture. He runs the Nation Institute's TomDispatch.com. His latest book, co-authored with Nick Turse, is Terminator Planet: The First History of Drone Warfare, 2001-2050.
Follow TomDispatch on Twitter @TomDispatch. and join us on Facebook and Tumblr. Check out the newest Dispatch Book, Rebecca Solnit's Men Explain Things to Me.
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