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Bankers Surprise

The NY Times headline [“Central Bankers’ New Gospel: Spur Jobs, Wages and Inflation”] was a surprise, to say the least — to me and, I bet, to Paul Krugman, my favorite economist, who just the day before predicted it would report exactly the opposite, something like “Central Bankers Fear Looming Inflation.” PK’s not often wrong but this was a good time to be.

Interestingly, as the heads of the central banks of country after country stood to speak the same refrain was heard: job growth has been too slow, the recovery from the crisis of 2008 too weak, wages have stagnated and the fears of inflation were overblown. This message, for those who haven’t been paying attention, is precisely the one that Krugman and other Keynesians like Joseph Stiglitz have been saying since, oh, 2008.

But while there was unanimity on the need to stimulate the economy in these capitalist countries, there was a similarly shared sense that it wasn’t going to be easy to do — especially not here in the US. The reason is that there are limits on what central banks can do. They can control the money supply but they do not control the legislatures in democracies. And there is still a strong pro-austerity sentiment in many European, Asian and North American governments.

In the US, the Republicans still control the House and all financial bills start in the House. So long as they hold the balance of power there nothing will happen. The party is controlled by two wings, the classic, “GOP” as in “Grand Old Party” which represents the wealthy, the bankers, the one-percent. Their job is, and has been for a century now, to protect the financial well-being of the upper classes and those folks like it the way it is now. One of the things in Krugman’s earlier column that I liked was that he seemed, finally, to be listening to psychologists and sociologists and argued that the main reason Congress hasn’t pushed for a larger role of government is based on issues of class, not economic theory. Paul Ryan’s budgets aren’t based on sound economic models. They are designed to protect the status of the people behind his political career, the fabled one-percenters.

The other faction that calls themselves “Republicans” are either unabashed Tea Party types or lean in that direction and they will never do anything — at all, ever. They are utterly useless in any discussion of economic theory. Many are too stupid to understand the issues and those who aren’t don’t believe the Federal government should do anything — at all, ever.

We’re back in familiar don’t-hold-your-breath land. It’s sad but there is some hope with the veil being lifted from the folks who run the central banks. The most likely place for sanity to return to economic policy is the European Union. If they do the right thing and others see the benefits it could spread. Stay tuned.

Reader Comments (1)

God, I hope so ... as much as I hate to admit, the USA is turning into a financial basketcase more and more with each passing day!

September 7, 2014 | Unregistered CommenterPhil

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