Skip to main content

Depressing Depressions

Steve Randy Waldman has a bracing post on the massive policy failure that we have witnessed over the last four years. This depression was a choice, he says:
But the preferences of developed, aging polities — first Japan, now the United States and Europe — are obvious to a dispassionate observer. Their overwhelming priority is to protect the purchasing power of incumbent creditors. That’s it. That’s everything. All other considerations are secondary. These preferences are reflected in what the polities do, how they behave. They swoop in with incredible speed and force to bail out the financial sectors in which creditors are invested, trampling over prior norms and laws as necessary. The same preferences are reflected in what the polities omit to do. They do not pursue monetary policy with sufficient force to ensure expenditure growth even at risk of inflation. They do not purse fiscal policy with sufficient force to ensure employment even at risk of inflation. They remain forever vigilant that neither monetary ease nor fiscal profligacy engender inflation. The tepid policy experiments that are occasionally embarked upon they sabotage at the very first hint of inflation. The purchasing power of holders of nominal debt must not be put at risk. That is the overriding preference, in context of which observed behavior is rational.
This preference is not at all difficult to understand. The ailing developed economies are plutocratic democracies. “The people” do have power, but influence is weighted in a manner correlated with wealth. The median influencer in these economies is not a billionaire, but an older citizen of some affluence who has mostly endowed her own future consumption. She would like to be richer, of course. But she is content with her present wealth, and is terrified of becoming poorer. For such a person, the depression status quo is unfortunate but tolerable. The risks associated with expansionary policy, on the other hand, are absolutely terrifying.
I think he is largely right about this. The elite class in this country (and far, far more so in Europe) is maniacally obsessed with inflation, and exercises veto power over policy decisions. However I think there is a glimmer of hope here and there.

First, I think there is significant room for action without actually triggering significant inflation. That is to say I don't think most of the elite class (especially businessmen) actually have much understanding of the macroeconomy and their fears of inflation are largely irrational. A bit of inflation would help somewhat, but I think if the Fed could have significantly more expansionary policy without leading to a wage-price spiral.

Second, just to poach some more from Steve (this is another excellent post, sheesh), there are some tricks we could use to try and buy off some of the poor and middle class, via strictly guarded inflation-protected bank accounts. This might ease up some of the clutching anxiety of the retired class.

Third, and perhaps most importantly, though the plutocratic part of our democracy has effectively stymied action, we still have enough democratic character for long depressions to have serious electoral consequences. The Democrats got hammered in 2010, and probably because the economy was still in the toilet. The flipside of that coin is that there is enormous political power waiting for anyone who manages to break through the plutocratic deadlock and jam through some massive stimulus. Just imagine--if Obama had appointed Scott Sumner as Fed chair and he had engineered a strong recovery, the Democrats surely would have kept power in 2010.

That might sound naive, but I think it can be done. I'll explain why tomorrow.


Popular posts from this blog

Why Did Reality Winner Leak to the Intercept?

So Reality Winner, former NSA contractor, is in federal prison for leaking classified information — for five years and three months, the longest sentence of any whistleblower in history. She gave documents on how Russia had attempted to hack vendors of election machinery and software to The Intercept , which completely bungled basic security procedures (according to a recent New York Times piece from Ben Smith, the main fault lay with Matthew Cole and Richard Esposito ), leading to her capture within hours. Winner recently contracted COVID-19 in prison, and is reportedly suffering some lingering aftereffects. Glenn Greenwald has been furiously denying that he had anything at all to do with the Winner clusterfuck, and I recently got in an argument with him about it on Twitter. I read a New York story about Winner, which clearly implies that she was listening to the Intercepted podcast of March 22, 2017 , where Greenwald and Jeremy Scahill expressed skepticism about Russia actually b

The Basic Instinct of Socialism

This year I finally decided to stop beating around the bush and start calling myself a democratic socialist. I think the reason for the long hesitation is the very long record of horrifying atrocities carried out by self-described socialist countries. Of course, there is no social system that doesn't have a long, bloody rap sheet, capitalism very much included . But I've never described myself as a capitalist either, and the whole point of socialism is that it's supposed to be better than that. So of course I cannot be a tankie — Stalin and Mao were evil, terrible butchers, some of the worst people who ever lived. There are two basic lessons to be learned from the failures of Soviet and Chinese Communism, I think. One is that Marxism-Leninism is not a just or workable system. One cannot simply skip over capitalist development, and any socialist project must be democratic and preserve basic liberal freedoms. The second, perhaps more profound lesson, is that there is no s

Varanus albigularis albigularis

That is the Latin name for the white-throated monitor lizard , a large reptile native to southern Africa that can grow up to two meters long (see pictures of one at the Oakland Zoo here ). In Setswana, it's called a "gopane." I saw one of these in my village yesterday on the way back from my run. Some kids from school found it in the riverbed and tortured it to death, stabbing out its eyes, cutting off its tail, and gutting it which finally killed it. It seemed to be a female as there were a bunch of round white things I can only imagine were eggs amongst the guts. I only arrived after it was already dead, but they described what had happened with much hilarity and re-enactment. When I asked why they killed it, they said it was because it would eat their chickens and eggs, which is probably true, and because it sucks blood from people, which is completely ridiculous. It might bite a person, but not unless threatened. It seems roughly the same as killing wolves tha