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We all know that there is major corruption in our U.S. government and that Wall St. rules DC and buys "our" legislators.   It’s certainly nothing new.   But it isn’t something we talk about every day, not even here on Kos.  The omnipresent corruption often gets pushed to the backburner in favor of exciting races and the outrage of the moment;  things that our minds can actually cope with a little more easily; things over which we think we might have some control.

The ostrich syndrome often comes into play when something is just so damn overwhelming and we don’t know what we can do about it except the same ineffective things we’ve been doing:  support the politicians we think are less susceptible to the siren call of corruption, make phone calls, support legislation that seeks to amend the problems, sign petitions and attend some demonstrations.   You know...all those things that work so well.  

And then today I was sent a link to a clip by Dr. Jeffrey Sachs, Columbia University economist…and I was blown away.    He pulled no punches.   He wasn’t taking about some esoteric theory…he was talking about what is real and now…and he wasn't mincing words.    My head snapped out of the sand and I started typing.  

Jeffrey Sachs is a world-renowned professor of economics, leader in sustainable development, senior UN advisor, bestselling author, and syndicated columnist.  He's been on The Daily Show  and The New York Times Magazine called him "probably the most important economist in the world."   And while I'm not economic groupie I have read the writings of Stiglitz and Krugman and a couple of others.  Yet, amazingly I had never heard of Sachs!   How could that be? (she asked herself in horror)    And so I was compelled to share my newly found awareness of Dr. Jeffrey Sachs with my family here at Kos.

(Note that the clip is about an hour long

They are tough, greedy, aggressive and feel absolutely out of control...and they have gamed the system to a remarkable extent. And they have a docile President, a docile White House, and a docile regulatory system that can't find its voice.  It’s terrified of these banks. If you look at the campaign contributions the financial markets are the #1 campaign contributors in the US now.

 We have a corrupt politics to the core...and both parties are up to their necks in this. The corruption is as far as I can see everywhere. But what its lead to is this sense of impunity that is really stunning...and it is very unhealthy. I have waited four, five years now to see one figure on Wall St. speak in a moral language and I've not seen it once.
 And if they won't I've waited for a judge, a President, for somebody and it hasn't happened, and by the way, it’s not gonna happen any time soon.

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Comment Preferences

  •  Tip Jar (31+ / 0-)

    “... there is no shame in not knowing. The problem arises when irrational thought and attendant behavior fill the vacuum left by ignorance.” ― Neil deGrasse Tyson, The Sky Is Not the Limit: Adventures of an Urban Astrophysicist

    by leema on Sun May 05, 2013 at 07:51:15 PM PDT

  •  Go to the YouTube video, (7+ / 0-)

    click share, then embed, a bunch of code will appear in blue. Simply copy that code and paste it into your diary or comment. The person who put that video up on YouTube is Kossack aguadito.

    The free market is not the solution, the free market is the problem.

    by Azazello on Sun May 05, 2013 at 08:03:06 PM PDT

  •  This piece explains a lot (22+ / 0-)

    From Naked Capitalism:

    The dirty secret of American politics is that, for most politicians, getting elected is just not that important.  What matters is post-election employment.  It’s all about staying in the elite political class, which means being respected in a dense network of corporate-funded think tanks, high-powered law firms, banks, defense contractors, prestigious universities, and corporations.  If you run a campaign based on populist themes, that’s a threat to your post-election employment prospects.  This is why rising Democratic star and Newark Mayor Corey Booker reacted so strongly against criticism of private equity – he’s looking out for a potential client after his political career is over, or perhaps, during interludes between offices.   Running as a vague populist is manageable, as long as you’re lying to voters.  If you actually go after powerful interests while in office, then you better win, because if you don’t, you’ll have basically nowhere to go.  And if you lose, but you were a team player, then you’ll have plenty of money and opportunity.  The most lucrative scenario is to win and be a team player, which is what Bill and Hillary Clinton did.  The Clinton’s are the best at the political game – it’s not a coincidence that deregulation accelerated in the late 1990s, as Clinton and his whole team began thinking about their post-Presidential prospects.

    Corruption used to be more overt.  Lyndon Johnson made money while in office, by illicitly garnering lucrative FCC licenses.  It was the first neoliberal President, Jimmy Carter, who began the post-career payoff trend in the Democratic Party.  In 1978, Archer Daniels Midland CEO Dwayne Andreas convinced Carter to back ethanol subsidies.  After Carter lost to Reagan, he faced financial problems, as his peanut warehouse had been mismanaged and was going bankrupt.  AMD stepped in, overpaying for the property.  But Carter wasn’t nearly as skilled as Clinton, because he didn’t stay in the club.

    Some men see things as they are and ask why. I dream of things that never were and ask why not?

    by RFK Lives on Sun May 05, 2013 at 08:05:47 PM PDT

    •  Because In LBJ's Time There Was Such Steep (9+ / 0-)

      progressive individual taxation that public service, well OK for the corrupt, along with bribes, was about the best you could get.

      It wasn't till we decided we must let people keep the most they could garner, no matter how extreme, that the post public service career became the only important consideration during "public" service.

      We built this.

      Both of our two conservative political parties.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Sun May 05, 2013 at 08:08:42 PM PDT

      [ Parent ]

  •  Sachs embarrassed himsellf . . . (8+ / 0-)

    a few weeks ago penning a column with Joe Scarborough attempting to attack Keynesian economic policy -- which he doesn't understand.

    The guy is liberal on some policy issues, but on macro-economic policy he seems obsessed with this idea about renewables to the exclusion of every other consideration.   It clouds his political and economic judgment.

    And yes, sure money and organization are what drive policy in DC.  Jacob S. Hacker and Paul Pierson's book "Winner Take All Politics" is one of the best reads right now on how things actually work in DC.

    I don't get Sachs motivation though.  Here he is tag-teaming with Joe Scarborough trying to defend Scarborough stance that debt reduction is the most important thing AND he attacks the president from the left about croynism?  (does he think guys like Scarborough who were part of the Gingrich 1994 GOP class were better on these issues?)

    Does he actually care about policy outcomes?  I question the guys judgment.  He seems to be the embodiment of the stereotypical Ivy Tower liberal at the Ivy League University who doesn't understand how the world works.  His blunder on economic policy can't be attributed though just to being naive about politics.

    •  He's not liberal. He's just fair and honest (3+ / 0-)
      Recommended by:
      mollyd, BvueDem, Leo Flinnwood

      when it comes to austerity.  He wants to cut spending and entitlements AND raise taxes.  Yippee.  So progressive.

    •  I agree.... (2+ / 0-)
      Recommended by:
      NotGeorgeWill, BvueDem

      and he is so smug too.

      You shall know the truth, and the truth shall make you mad. Aldous Huxley

      by murrayewv on Sun May 05, 2013 at 08:44:20 PM PDT

      [ Parent ]

    •  trust me (5+ / 0-)
      Recommended by:
      BvueDem, Pluto, janislav, leema, Azazello

      As the guy who actually uploaded the original Sachs video from the conference and who has met the man, I can tell you that he's an ally in this fight (currently).

      Watch the entire video and try to claim that Dr. Sachs is doing anything but suggesting a radical overhaul of our financial system (even discussing limited purpose banking, and tightening regulations beyond glass-steagal), an idea that NO other mainstream economist would dare speak of right now.

      Yes, he has a questionable past advocating neoliberal policies which spawned corruption in the developing world, and he was an austerity hawk, but he has softened his points on austerity and his focus in recent months has been a lot more about tax havens and corruption in our system.

      It is actually possible to agree with somebody on some issues, and disagree with them on others. Don't disregard an influential Ivy League economist, especially one who has the guts to go out there and call out the corruption on Wall Street and in DC to the public.

      Deficits don't matter, jobs do.

      by aguadito on Sun May 05, 2013 at 11:10:17 PM PDT

      [ Parent ]

  •  I call bullshit. (11+ / 0-)

    Jeffrey Sachs is one of the austerity hawks that helped get us into this mess.  For him to start saying NOW that austerity has exposed corruption in the system is really laughable.  He might have considered that back when he was promoting it.

    http://www.bbc.co.uk/...

    IN FAVOUR OF AUSTERITY:

    Professor Jeffrey Sachs Columbia University

    I think bringing the deficit back under control is important, and it is equally important to start now.

    Budget cuts and tax increases are politically painful, and it neither credible nor politically possible to promise to take such painful actions in the future without taking some of the first steps now.

    This is especially true with a new government. It must use its five-year mandate to set out a five-year path of budget consolidation.

    Cutting public deficits is indeed important for market confidence. Markets have already shown signs of lower confidence in the debt of some European countries and those warnings should be taken seriously. Fortunately, the UK recognizes this reality.

    I have consistently supported the Cameron-Osborne budget approach, and I continue to think they are on the right track, even if one can debate some of the particulars. ...

    •  I think he may be trying to make up for (7+ / 0-)

      what he did in Russia. You can't argue with what he's saying now, better late than never.

      The free market is not the solution, the free market is the problem.

      by Azazello on Sun May 05, 2013 at 08:46:49 PM PDT

      [ Parent ]

      •  Russia and Eastern Europe. His advice... (7+ / 0-)

        ...helped what were the apparatchiks of the ancien regime in the USSR transform themselves into the oligarchs of Russia.

        Don't tell me what you believe, show me what you do and I will tell you what you believe.

        by Meteor Blades on Sun May 05, 2013 at 09:44:59 PM PDT

        [ Parent ]

        •  Total tragedy, (5+ / 0-)

          but then the Russians have never had anything like a democratic tradition. We, on the other hand, had such a tradition and pissed it off.

          The free market is not the solution, the free market is the problem.

          by Azazello on Sun May 05, 2013 at 09:58:47 PM PDT

          [ Parent ]

        •  To be fair (4+ / 0-)
          Recommended by:
          FG, Pluto, leema, Azazello

          It wasn't in Sachs' plans for corrupt officials to bribe workers to steal their share certificates from state companies.

          Lots of working class Russians held on to and later sold their shares.

          In theory, a lot of what Sachs was promoting in Russia/Eastern Europe wasn't that bad -- the workers all got shares in the public companies that were being auctioned to private investors. But the problem that Sachs didn't foresee perhaps was the widespread abuse that led to uneducated workers being swindled out of their bonds, often for as little as a bag of sugar (for shares later found to be worth hundreds if not thousands of dollars).

          A botched transition like Russia's has a lot of angles, to blame an American advisor for it all is a stretch.

          Deficits don't matter, jobs do.

          by aguadito on Sun May 05, 2013 at 11:28:52 PM PDT

          [ Parent ]

          •  And I DIDN'T blame Sachs "for it all"... (2+ / 0-)
            Recommended by:
            Azazello, leema

            ...I said "his advice helped." Letting him off for his part in this debacle because "Sachs didn't foresee" is the stretch, since others did predict what would happen and Sachs ignored them.

            Don't tell me what you believe, show me what you do and I will tell you what you believe.

            by Meteor Blades on Mon May 06, 2013 at 07:54:09 AM PDT

            [ Parent ]

            •  Okay (2+ / 0-)
              Recommended by:
              Azazello, leema

              Well maybe I read too much into your statement, but it came off like "Cheney's advice helped us go into Iraq" :>

              But my point stands, Sachs wasn't facilitating a pillaging -- the corrupt Russians at the KGB and former communist party officials going buck wild can't be pinned on economists trying to formulate a plan for market liberalization.

              What was the alternative? they had a revolution, Yeltsen was a corrupt asshole, and Sachs helped provide the blueprints for reform and lashed out repeatedly at Gerashchenko in public after he could not convince the Russians to change course to fight inflation.

              I'm genuinely curious to see what you think Sachs ignored and how things could have gone differently. After all there was an endogenous democracy movement and with the economy screwed up enough as it was corruption and social unrest was rife. So, what were the options Sachs ignored? Military dictatorship? Re-institution of Stalinism?

              Deficits don't matter, jobs do.

              by aguadito on Mon May 06, 2013 at 08:52:34 AM PDT

              [ Parent ]

      •  Sachs had a plan to rein in inflation in Russia, (5+ / 0-)
        Recommended by:
        Azazello, aguadito, FG, Pluto, marty marty

        which was out of control. He had succeeded with such a plan in Bolivia. It required balancing the budget and supporting the currency directly. Some other measures were needed in Russia, which had a much larger and very differently-structured economy.

        However, in Russia, the Communist head of the central bank made it clear that he would not play ball, making the Russian version of the plan impossible. Gorbachev also did not understand about reining in corruption, or was helpless to do so. Russia went ahead with the anti-inflation plan anyway, and the predicted catastrophe ensued. Sachs has since been crying, "It's not my fault," like Han Solo in Star Wars. Maybe it wasn't. Maybe the Communists, the KGB, the corruption, and the almost total lack of understanding of economics in Russia were too much for anybody to have dealt with.

        He has some useful ideas about the possibility of ending global poverty, but he refuses to talk to the people I deal with every day who have actual plans for how that could be done. This includes One Laptop Per Child and Sugar Labs, where I manage the Open Educational Resources (OER) program to replace printed textbooks with less expensive computers, Free Software, and digital learning materials under free Creative Commons licenses.

        Ceterem censeo, gerrymandra delenda est

        by Mokurai on Sun May 05, 2013 at 10:26:06 PM PDT

        [ Parent ]

        •  This (2+ / 0-)
          Recommended by:
          Pluto, Azazello

          is a much more fair account of Dr. Sachs, and it's good you posted that article by him.

          There's two aspects here:

          1) The botched monetary policy by a horrible corrupt central banker.

          2) The suppression of workers through a corrupt auction process for public shares.

          It's not due to Dr. Sachs' advice that Russian mafia bullied workers into giving their shares up under the guise of "investment plans" or sheer desperation to survive with real raw resources (a lot of them couldn't even grasp the idea that state share certificates had any value, so they thought it was a steal that some mafioso offered food in exchange for them!). These were a communist people who didn't grasp the sociopathic aspects of capitalism and the corruption, combined with this dearth of understanding, was a lot more toxic for the Russian people than he was.

          I understand why a lot of people are trying to write him off because of his austerity-mongering, but disregarding Sachs would be a major mistake in a time when we need anyone, absolutely ANYONE with credibility out there, to be suggesting the type of radical reforms that are being suggested in this video. Namely, an end to fractional reserve banking, going beyond reinstating glass-stegall, and the types of MAJOR reforms that can only be classified as radical. And coming from a mainstream economist, this is an incredibly important development.

          Don't be surprised when you see economists changing their minds, or "evolving" as the US congressmen who see the light on gay marriage say, in light of the evidence right now that austerity doesn't work and the system is corrupt & broken.

          But, as gay rights advocates say, don't harass the congressmen who "evolve" on the issue, embrace it and move on.

          On the same token: don't disregard an economist for stupid policy advocacy years ago, just be happy that he's on the right side now and embrace it.

          Deficits don't matter, jobs do.

          by aguadito on Sun May 05, 2013 at 11:38:26 PM PDT

          [ Parent ]

      •  His analysis is flat wrong right now . . . (1+ / 0-)
        Recommended by:
        marty marty

        Austerity may be an inevitable choice for a country that has difficulty borrowing on the open market AND which has its own currency.  Under those conditions you can devalue the currency and import growth through trade flows to offset budget cuts.

        What he's says about the UK and the US though is flat wrong.  In the U.S. our ten year debt is being priced below the expected rate of inflation -- meaning creditors are paying us to sell our debt.

        We can borrow cheaply, we get huge fiscal multipliers from that debt, because of slack demand in the economy (e.g. a multiplier of 1.5x every dollar spent right now), which helps to strengthen the economy over the long term -- even more so if those investments are targeted towards infrastructure, R&D and education, which yield long-term benefits.  The spending is offset somewhat by increases in tax revenue in the short-term as well.  e.g. $500 billion spent will only cost $350 to $400 billion, because a big chunk of that money flows back in the short-term as new tax revenue.

        The comments about "market confidence" and the UK are just silly.  The UK has now gone through a triple dip recession and there is no indication that it has turned the corner economically.  

        •  You're (1+ / 0-)
          Recommended by:
          leema

          responding to a comment that is referencing something Sachs wrote over 2.5 years ago.

          Beating up on him for his position on austerity (which, when recently clarified, is basically the same as the Keynesian argument) is fine, but it's not fair to ignore his powerful commentary on banking reform, corruption, and inequality as shown in this video. Especially when his pro-austerity comments are far older than his recent strong calling out of the elites.

          Deficits don't matter, jobs do.

          by aguadito on Sun May 05, 2013 at 11:14:15 PM PDT

          [ Parent ]

          •  Not quite the same (0+ / 0-)

            Basically two parts to it.

            One, I think Sachs is actually partly right, in that we do need to put more emphasis on productive spending, especially increased infrastructure spending (which has been neglected for some time).  And I'm not even opposed either to some reductions in transfer payments, including chained CPI.  

            But I don't think Krugman for example really would disagree on that so much, rather he thinks these things aren't nearly as important right now as simply getting whatever spending we can get.  On that he's right, in that so long as we aren't totally wasting the money, it will pay to put unemployed resources to work, even if it isn't done in the most efficient way possible.  But I think it actually strengthens the argument in a way to make the case more for sound spending.

            The part though where I think Sachs really goes wrong is in thinking the deficits and debt are important right now.  They really aren't at all.  In the long run, it does matter what we spend on.  But it doesn't matter so much how we finance it.  Borrowing rather than taxing right now is just a good deal for taxpayers.  The US (or Japan for that matter) is just not at all like the smaller third world countries where he has had some sucesses by advising them how to get budgets and inflation under control and open markets.  

            •  well (1+ / 0-)
              Recommended by:
              leema

              the point is that in the video he doesn't even talk about any of what you're expressing concern about.

              it would be silly to ignore that Sachs is going out on a limb and calling out the elites. the video has nothing to do with austerity or deficits or debts being a primary concern. it has to do with radical reforms to the system and that's why this discussion by Sachs in the video is such an eye-opener.

              all of his work recently has been about inequality, tax havens, corruption -- this is what you should be focusing on, rather than erupting at any mention of Dr. Sachs because he's buddy-buddy with Joe Scarborough and has made questionable comments about the issue of austerity.

              Deficits don't matter, jobs do.

              by aguadito on Mon May 06, 2013 at 03:00:40 AM PDT

              [ Parent ]

            •  Fundamentally wrong . . . (1+ / 0-)
              Recommended by:
              acerimusdux

              Sach's still thinks that the 2009 ARRA had no positive economic impact.

              I don't know what theoretical basis or model he is using, but pretty clearly at the zero-bound, when borrowing costs are low and there is slack demand in the economy, you get bang from stimulus spending.

              Sachs prefers that we spend money on new energy -- that's OK.  At a fundamental level though, he doesn't understand that spending in a depressed economy of pretty much any kind, tends to be stimulative.  He won't even grant that possibility.  As a matter of common sense though, if someone receives unemployment benefits, they spend that money, and that money becomes an income source that another person receives that they wouldn't have otherwise received.  That money gets taxed in the first and second instance, which offsets the cost.  

              In cases where borrowing costs are high, the effect may be washed out, but those aren't the circumstances that we are in right now.  We can literally borrow ten year debt at an interest rate below the expected rate of inflation.  That means that we are effectively getting $1 buck to spend today, which in time will be paid out in the equivalent of 98 cents.  This isn't even factoring in multipliers.

              •  Untrue Claims... (0+ / 0-)

                You don't have to repeat the case for stimulus over and over again, I've literally written a 20-page explanation of the situation last year.

                SO instead i'm going to focus on your claims about Dr. Sachs. First, here's an article Jeffrey Sachs wrote a few months ago.

                Give it a read through. Your claims of what he believes are, well, simply wrong. You write:

                "Sach's still thinks that the 2009 ARRA had no positive economic impact." -- false, he contends (rightly in my opinion) that tax cuts and spending increase from the stimulus that was light on productive infrastructure investments would be less effective. He does admit that it did "very little to solve the nation's long-term employment and growth problems." (can anyone really argue against that point? ARRA was just a bandaid thanks to Summers beating down the plan from Romer and then GOP beating down the plan from Summers to squeeze in TAX CUTS over spending...)

                You then proceed to make a claim that comes off as contradictory:

                "Sachs prefers that we spend money on new energy -- that's OK.  At a fundamental level though, he doesn't understand that spending in a depressed economy of pretty much any kind, tends to be stimulative.  He won't even grant that possibility."
                So you're saying he wants to spend money on new energy, but in the same breath claim that he fundamentally doesn't believe or "understand" that spending in a depressed economy is stimulative. Which is mindblowingly wrong! Jeffrey Sachs is a Keynesian economist! And he makes the distinction between "crude Keynesianism" and the focus of spending on productive assets for stimulus. But even then he doesn't make the claim that the ARRA did nothing positive! I don't know where you got this impression of him, I can only assume you got swept up in the partisan bickering when he sided with a poorly-written article by Joe Scarborough.

                 Here's a direct excerpt from the Sachs article earlier this year:

                " I have been against temporary tax cuts and temporary spending programs, believing that instead we need a consistent, planned, decade-long boost in public investments in people, technology, and infrastructure. Such a sustained rise in public investment should have been paid for by ending the Bush-era tax cuts in 2010, or by adopting a comparable boost in revenues. Instead Obama and Congress have now made almost all of those tax cuts permanent, putting us into a deeper fiscal bind."
                Does this look like a man who doesn't believe spending is stimulative...in a depressed economy? When he's arguing for BIGGER and PERMANENT spending increases?

                So while I have no problem with the general spirit of what you're espousing (as I mentioned, I've written extensively on the topic and created the "Lost Output Clock"), I do have a serious problem with you mischaracterizing a public intellectual's views, especially one who I consider to be an ally to progressives, and anyone who has read his work -- especially Price of Civilization.

                Krugman isn't the only economist out there. He regularly has spats with people who basically agree with him on 90% of things. In fact, those who have been students of MMT know that Krugman has been wrong on a lot of things, and it has taken him years to get to the point he's at now in understanding the monetary system and the economy (see: here from early 2011, as well as here from early 2012, and finally this year).

                Jeffrey Sachs is one of those Keynesians who just wants to focus the idea of fiscal stimulus less on transfer payments and tax cuts and more on productive infrastructure assets. It's two different approaches to sell the public and policymakers on the same idea: a stimulus plan. Their difference of opinion is highly nuanced and nowhere near the divergence you imply.

                Please, read the man's work (especially Price of Civilization as mentioned), before you go around maligning his character by saying he doesn't believe in stimulus plans. I'm sure your opinion will change greatly when you see his impassioned defense of public institutions, as well as his fight against corruption and inequality driven by the revolving door in DC/Wallstreet.

                Deficits don't matter, jobs do.

                by aguadito on Mon May 06, 2013 at 11:33:58 PM PDT

                [ Parent ]

                •  Not Gerge Will is right (0+ / 0-)

                  It's not mailgning Sachs's charachter to point out he opposes stimulus.  He says so himself right in the article you linked, "I have argued against short-term stimulus packages."

                  Now any Keyesian knows that all stimulus is short-term. Long term growth issues are another matter altogether.  I happen to agree with Sachs that we also need long term infrastructure investment, but it's not very Keynesian to use this as a reason to oppose short term stimulus.  Sachs flat out bashes Keynesians in that article:

                  Keynesians ignore or even disdain this kind of hard budget work. Just spend and cut taxes, we are told, and the economy will recover and go back to normal. Sad.
                  Sachs IS a progressive.  His alternatives to deficits are generally progressive, such as taxing high incomes, capital gains, carbon taxes, etc. but he's not much of a Keynesian.  

                  Also, you are incorrect on Krugman.  His basic monetary policy views really haven't changed that I can see in 20 years.  All the MMT people have demonstrated in the links you provide is their own lack of understanding.  

                  Fulwiler's "key point" is nonsensical:

                  The key point here is that “under normal circumstances” the monetary base’s size would be determined endogenously based on the public’s demand for currency and banks’ demand for reserve balances at the Fed’s target rate; the Fed or any other central bank can only control the size of the monetary base directly by creating “liquidity trap” conditions that set interest on reserve balances equal to interest on t-bills.
                  There is no reason at all to think that in normal times that interest on reserves would be set to equal that on short term t-bills.  Obviously it would be set lower, and the Fed would still be able to restrain monetary growth by hiking the Fed Funds rate.

                  Likewise, Wray seems confused:

                  All he has to do is to carry that analysis beyond the current downturn. This can go on forever, of course. Keep short term interest rates low, or keep Treasury out of long maturities.
                  Really?  The truth is Krugman isn't contradicting at all the earlier posts Wray linked too, and they still effectively explain why Wray is wrong.  

                  You can't simply keep interest rates low forever, and finance government only through borrowing and printing, even as an economy gets to full employment.  Eventually you are going to have to either restrain inflation or gain confidence of bond investors by raising taxes.

                  Wray is trying to deny that "crowding out" will occur in a full employment economy.  It's obvious that he's wrong.  

                  •  A number of mischaracterizations here as well (1+ / 0-)
                    Recommended by:
                    leema

                    Notice that I wrote "maligning his character by saying he doesn't believe in stimulus plans". I wouldn't use a term like "malign" unless i truly believed it to be an aggressive mischaracterization of Sachs.  He of course believes in fiscal stimulus plans and structural deficits, and is a Keynesian, and to suggest otherwise is more than just incorrect...

                    Notice the excerpt you cut out says  "I have argued against short-term stimulus packages."

                    Which loops back to the point I was making -- Sachs isn't against stimulus plans, he's against poorly-crafted ones that don't focus on productive asets (as ARRA was).

                    Then you write

                    Now any Keyesian knows that all stimulus is short-term.
                    I don't know where in the world you got this idea.

                    I'm not sure if you're referring to actual Keynesian economics or "pop culture" understanding of Keynes, but either way that's simply incorrect.

                    Case in point: avoiding proper stimulus has left us with a persistent output gap which has long-term implications on the unemployed, and represents lost income that we can't ever really get back.  Using the same logic, stimulus that would have kicked the economy back into shape would have avoided a prolonged output gap and thus had long-term positive implications.

                    I don't really know how else to explain this, Dr. Jeffrey Sachs is a fucking Keynesian! He attacks "crude" Keynesians and poorly crafted stimulus plans -- which is a simple intra-Keynesian debate involving nuance.

                    I guess the easiest way for you to understand this would be to go to his Wikipedia page. It classifies him as a "New Keynesian" which is another term for "Post Keynesian" -- but a Keynesian nonetheless of course. He studied under Paul Samuelson at Harvard, who is one of the single most famous Keynesian American economists! He's published papers that analyze DSGE models within a distinctly Keynesian framework. What more proof do you really need?

                    In light of this your next comment was:

                    Sachs IS a progressive.  His alternatives to deficits are generally progressive, such as taxing high incomes, capital gains, carbon taxes, etc. but he's not much of a Keynesian.  
                    It's not an "alternative to deficits".  PLEASE read Price of Civilization -- or watch this talk he gave at the London School of Economics. At around the 1-hour mark he goes through his version of what an ideal budget would be, and it included a structural deficit, not just funding the stimulus through higher taxes and carbon creds. So it's once again incorrect to say he represents some "alternative to deficits". And he's quite clearly a Keynesian in nearly every respect imaginable.
                    There is no reason at all to think that in normal times that interest on reserves would be set to equal that on short term t-bills.  Obviously it would be set lower, and the Fed would still be able to restrain monetary growth by hiking the Fed Funds rate.
                    You're misunderstanding Fulweiler. He's not making predictions or assumptions, he's simply stating fact: the way to re-create the liquidity trap "under normal conditions" is to merely set the IOR/IOER equal to short-term bonds so that they become perfect substitutes and the base money can be the determinant of macroeconomic liquidity.

                    Krugman seriously thought that banks didn't endogenuously create money. I kid you not:

                    First of all, any individual bank does, in fact, have to lend out the money it receives in deposits. Bank loan officers can’t just issue checks out of thin air;..
                    Operationally, loans create deposits, deposits don't create loans, so Krugman really demonstrated his lack of understanding of banking operations there.

                    It took a lot of explaining before he finally got it:

                    ...textbooks that describe monetary policy in terms of the money multiplier will have to be rewritten.
                    This is one of numerous points that Krugman has conceded to the MMT side (remember "Mint The Coin"? five years ago he would have never backed that, but he learned...).

                    And finally:

                    You can't simply keep interest rates low forever, and finance government only through borrowing and printing, even as an economy gets to full employment.  Eventually you are going to have to either restrain inflation or gain confidence of bond investors by raising taxes.
                    Please see the case of Japan:  0% rates for two decades ,  full employment, deflation rather than inflation, debt/gdp over 200%.

                    Plenty of economists and traders have been burned by trying to apply failed analysis to the Japanese economy. In banking/trading they call it "the widowmaker", because so many people have lost buckets of money trying to short JGBs and play off of a potential interest rate explosion in Japan over the years.

                    Deficits don't matter, jobs do.

                    by aguadito on Tue May 07, 2013 at 04:19:39 AM PDT

                    [ Parent ]

                    •  Sachs (0+ / 0-)

                      Sachs made it quite clear that he does not consider himself a "Keynesian".  See his comments about Keynesians above.  

                      Sachs also made it quite clear that he does not support stimulus.  A 10 year trillion dollar infrastructure plan is not stimulus.  That's a long term growth plan.  

                      Again, Sachs himself:

                      I think short-run stimulus has little effect on GDP. I want long-term growth strategy instead.
                      He also has made it clear that he does not believe the economy is suffering from demand deficiency.  He is claiming the problems are structural.  

                      And yes, Keynes liked infrastructure investment, but he also made it clear that timing issues made it ineffective as a counter-cyclical policy.  

                      And of course it was Sachs himself who offered the ideas I mentioned as alternatives to deficits; that is as ways to raise revenues in order to bring down the debt to GDP.  Nowhere did I say he wanted to eliminate deficits.

                      Finally, on the MMT silliness, what Krugman said was:

                      So as I see it, IOER leaves the basics unchanged.

                      It may, however, change the operational details; textbooks that describe monetary policy in terms of the money multiplier will have to be rewritten. But that was already true: serious applied monetary economists pretty much stopped talking about monetary aggregates as a measure of policy years ago, and these days it’s almost all in terms of target interest rates.

                      That is not a concession to MMT.  The Fed has only just begun paying interest on reserves.  New textbooks will include this new mechanism.  This changes nothing in monetary theory.  Per the NY Fed:

                       

                      5. Does paying interest on excess balances constitute a change in monetary policy?

                      No. The stance of monetary policy continues to be set by the target for the overnight federal funds rate established by the FOMC. Paying interest on excess balances just makes it easier for the Desk to implement the target federal funds rate chosen by the FOMC.

                      Basically, tagetting the money supply failed miserably when it was tried 30 years ago.  Since then we've had interest rate targetting, and now inflation targetting, and central banks have been successful at both.    

                      And no, banks in the aggregate can not endogenously create money without limit.  But way too much of this debate seems to be semantics.  

                      Most of the time, banks do in fact function primarily as financial intermediaries (matching loans with deposits) and the central bank acts as a lender of last resort, not a usual source of funds.  

                      You can also say that banks lend based on returns available from loans compared to the costs of obtaining deposits or other funds (inluding Fed Funds).  But this is really just another way of describing the same thing.  Because in any case, the central bank remains firmly in control of interest rates, inflation, and the monetary base, apart from liquidity trap conditions when monetary policy is constrained by the zero lower bound.

                      Japan is an example of the latter, as Krugman diagnosed correctly back in the 1990s.  That doesn't mean Japan will never ever again experience an overheating economy or inflation.  But even a debt level of 200% is modest for a country like Japan.  You could probably easily get a mortgage at 15 times your income, why would a stable modern industrial democracy with an ability to raise taxes be a credit risk at only 2 times?  Still, this financing decision only made sense for Japan because their interest rates were very low and their currency highly valued.

                      The key point is that this doesn't mean debt never matters for anyone.  Even a country whose debt is denominated in its own sovereign currency, while they would never have to default, could be capable of causing hyperinflation in the right circumstances.  But just having the ability to raise sufficient taxes is enough to be able to prevent that.

                      As for Fulweiler, what he said was wrong.  The Fed doesn't need a liquidity trap to be able to control the monetary base.  And if he only meant that they can create a liquidity trap by setting IOER equal to the interest rate on t-bills, well that's also wrong.  

                      Suppose we get a robust recovery and inflation picks up.  The Fed sets IOER to 6%, which also happens to be the rate on T-Bills.  Do you really think that would be a liquidity trap?

          •  How has his view fundamentally changed . . . (1+ / 0-)
            Recommended by:
            acerimusdux

            over two years on a central question of macro-economics?

            I don't see any indication that he has actually changed his view on this question in two years.  From the Washington Post op-ed two months ago:

            Not so long ago, Keynesians guaranteed that Obama’s stimulus plan would move the U.S. economy more quickly toward growth by providing full employment and lowering deficits. We both were skeptical from the start, for good reason. In May 2009, the White House forecast 4.6 percent growth in 2012, an unemployment rate of 6 percent and a budget deficit of $557 billion. The actual outcomes were much worse: growth of 2.3 percent, unemployment at 8.1 percent and a budget deficit of nearly $1.1 trillion.

            Both of us opposed the stimulus package, the increased spending in Afghanistan and Washington’s fixation on short-term thinking. We said that the only result of this short-termism would be exploding deficits. And well before Obama acknowledged the point, we said that there was no such thing as “shovel-ready” projects worthy of public investment in the 21st century.

            Sadly, our concerns have been borne out. Public debt was around 41 percent of the gross domestic product in 2008. Today it is around 76 percent and still rising. Yet the economy continues to languish.

            No recognition of the economic impact of the recession.  A strawman misrepresentation of the argument for stimulus.  

            What did Krugman actually say in Jan. 2009 -- did he assert that the stimulus would restore full employment?

            Finally, compare this with the economic outlook. “Full employment” clearly means an unemployment rate near 5 — the CBO says 5.2 for the NAIRU, which seems high to me. Unemployment is currently about 7 percent, and heading much higher; Obama himself says that absent stimulus it could go into double digits. Suppose that we’re looking at an economy that, absent stimulus, would have an average unemployment rate of 9 percent over the next two years; this plan would cut that to 7.3 percent, which would be a help but could easily be spun by critics as a failure.

            .. . . .

            I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.”

            Let’s hope I’ve got this wrong.

            •  Let's clarify a couple things. (1+ / 0-)
              Recommended by:
              leema

              First, Scarborough is the first on the byline of that article, it's fair to assume that Sachs probably injected some ideas and just approved the draft.

              Even with that in mind, what was written isn't actually entirely wrong.

              The Obama administration's projections of how the stimulus package would help the economy were laughably wrong, and many, including Krugman, underestimated just how bad the situation was (that's what prompted him to write End This Depression Now, when he realized this was something that really did require a massive spending plan).

              So while Krugman was "less wrong" of the Keynesians, the Obama advisors (Summers, Romer, et al --- Keynesians of course) were still overly optimistic about the outcomes, as indicated in the graph on the link above of the projections they had at the time versus what actually happened. And it's worth re-mentioning that -- Sachs is a Keynesian! (although more of a "post-Keynesian" technically)

              Nobody liked the stimulus package. It went from Good (Dr. Romer's initial plan) to Meh (Larry Summers' adjustment) to Bad (when Congress gutted it even more) -- did you really think that spending money in Afghanistan and wasting money on tax cuts with a small amount of ARRA actually going to productive assets, was good?

              I've read many of his books, including technical ones. He's not some pundit who makes outlandish generalized claims, he's an intellectual who makes nuanced arguments that must be paid attention to. It's not "team keynes vs. team hayek" -- hasn't been that way in half a century or more really...there's so many schools and so many minute differences in many cases that are enough to distinguish two approaches from one another.

              So when you ask "how his view has changed in two years on a central question of economics"... it just comes off as strange, because from the start Sachs was clarifying that yes he's pro-stimulus (and as i said before he had to actually clarify that he's against regressive austerity), but his focus is a lot more on quality of stimulus, and reduction of inequality through higher taxes on the rich (something that many scholars would claim is a form of austerity anyway, like Bill Black).

              Deficits don't matter, jobs do.

              by aguadito on Mon May 06, 2013 at 11:52:10 PM PDT

              [ Parent ]

    •  Could be...but I didn't get that msg in this clip. (1+ / 0-)
      Recommended by:
      aguadito

      Or if the msg was there it went over my head.

      “... there is no shame in not knowing. The problem arises when irrational thought and attendant behavior fill the vacuum left by ignorance.” ― Neil deGrasse Tyson, The Sky Is Not the Limit: Adventures of an Urban Astrophysicist

      by leema on Sun May 05, 2013 at 08:56:24 PM PDT

      [ Parent ]

    •  Actually, here's a neoliberal saying this... (5+ / 0-)
      Recommended by:
      leema, Azazello, aguadito, acerimusdux, Pluto

      ...and THAT is the story. (I posted a piece on this just a few days ago, with this clip in it.) What's notable is this is a guy that's come to his senses...and he's your basic establishment, neoliberal economist. Again, THAT is "the story," and it's a long way from "bullshit."

      "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

      by bobswern on Sun May 05, 2013 at 09:22:06 PM PDT

      [ Parent ]

    •  the video (1+ / 0-)
      Recommended by:
      acerimusdux

      in this diary has nothing to do with austerity!

      quite the opposite!

      please watch the whole thing and judge him on the issue at hand, not something he wrote back in 2010!

      Deficits don't matter, jobs do.

      by aguadito on Sun May 05, 2013 at 11:15:31 PM PDT

      [ Parent ]

  •  I don't think there's any way to fix capitalism (3+ / 0-)
    Recommended by:
    leema, Azazello, marty marty

    There's nothing special about these times except we're around for them.  A hundred years ago wasn't much different.  Nor a hundred years before that.  Who the oligarchs were and who they exploited may be different in the details, but there were oligarchs and there were those whom they exploited.

    Getting this boot off our throat will probably take longer than any of us will be alive.

    In the meantime, elections will never change the way things are, but they will affect how many of us are able to survive and live our lives to some degree of fulfillment.

    •  just more compromised resources and more people (2+ / 0-)
      Recommended by:
      Azazello, Urizen

      now...and there is no undiscovered island or pristine place left to hide.  No planet B as they say.  

      “... there is no shame in not knowing. The problem arises when irrational thought and attendant behavior fill the vacuum left by ignorance.” ― Neil deGrasse Tyson, The Sky Is Not the Limit: Adventures of an Urban Astrophysicist

      by leema on Sun May 05, 2013 at 08:54:00 PM PDT

      [ Parent ]

    •  FDR put a leash around capitalism and (4+ / 0-)
      Recommended by:
      Urizen, NotGeorgeWill, Pluto, marty marty

      contained it for 50 years...Reagan and Clinton unleashed it and Bush let it run wild until it almost destroyed us.  Obama bailed it out but it is just a matter of years until it does it happens again.

      •  I'm all for tying its shoelaces together (1+ / 0-)
        Recommended by:
        leema

        and otherwise harassing it (like FDR did).  Getting a pound of crumbs is better than getting half a pound.  But, we really need to stop doing things according to its "values".

        I don't think there's anything to be gained (and a lot to be lost) by hating people, but I think it would do 98-99% of us a lot of good to learn to hate the idea of capitalism.

        •  I agree that unregulated capitalism leads us (1+ / 0-)
          Recommended by:
          Urizen

          to corruption and other sweet things like global destruction for the sake of a golden egg right now...and Sachs points out that it has gotten to a pathological state.

          “... there is no shame in not knowing. The problem arises when irrational thought and attendant behavior fill the vacuum left by ignorance.” ― Neil deGrasse Tyson, The Sky Is Not the Limit: Adventures of an Urban Astrophysicist

          by leema on Sun May 05, 2013 at 09:32:45 PM PDT

          [ Parent ]

        •  I actually thinking there is a great deal to (2+ / 0-)
          Recommended by:
          NotGeorgeWill, marty marty

          despise in our culture(it may or may not be tied to capitalism) but it is certainly tied the culture we have created in this country...the glorification of the bully, the glorification of the extrovert and the type A personality, the glorification of what it means to be successful, the glorification of the rich and the financial services industry, the glorification of guns and the glorification of the consumer.   The Europeans have it right for the most part and only went wrong when they started to adopt our bad habits.  We are the Roman Empire reborn and the only difference is that we will not leave the world anything when we disappear, not even great art or architecture.  

    •  sure there is... (3+ / 0-)
      Recommended by:
      LI Mike, Urizen, leema

      here's how to fix capitalism:

      1. re-enforce state power over private by freeing the government from the corrupting influence of money interests,

      2. implement co-determination so that all stakeholders -- not just the capitalists, have a role in managing corporations

      3. tax anti-social economic behavior (value-destroying speculation, market power/monopolists)

      4. provide a minimum income guarantee that comes with strings attached involving job training and community work / job placement.

      There's numerous countries around the world who have all/most of these things in place and they represent the Top 10 happiest nations on earth in most UN reports.

      Deficits don't matter, jobs do.

      by aguadito on Mon May 06, 2013 at 03:07:16 AM PDT

      [ Parent ]

      •  clear..and I do believe correct, big issue (0+ / 0-)

        being will or can the  corrupt legislators  do that?  

        “... there is no shame in not knowing. The problem arises when irrational thought and attendant behavior fill the vacuum left by ignorance.” ― Neil deGrasse Tyson, The Sky Is Not the Limit: Adventures of an Urban Astrophysicist

        by leema on Mon May 06, 2013 at 07:38:28 AM PDT

        [ Parent ]

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