By Steve Randy Waldman
April 17, 2012
"We (the U.S.) are in a depression, but not because we don’t know how to remedy the problem. We are in a depression because it is our revealed preference, as a polity, not to remedy the problem. We are choosing continued depression because we prefer it to the alternatives.
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." Read Full Article
An Example in Real Time
The Dutch Left’s Embrace of the Austerity Suicide Pact: It’s Necessary for the Children! by William K. Black, April 30, 2012 SOURCE: NewEconomicPerspectives.org
"A remarkable, thing has just taken place in the Netherlands. The ruling Dutch political coalition collapsed when the ultra-right wing party refused to support its coalition partners’ austerity package that called for tax increases and reduced government expenditures.
The bizarre fact is that European leaders, at the precise time that neoclassical (utopian?) economic dogma has utterly discredited itself empirically, has embraced the failed dogma with a passion worthy of the most formulaic romance novel. This embrace is not limited to politicians from the extreme right; much of the left’s political leadership has gotten all steamy about austerity." Read Full Article