A low volume, high quality source from the demand side perspective.The podcast is produced weekly. A transcript is posted on the day of.

Friday, October 26, 2012

Transcript 528 Economists a joke or just irrelevant, plus Joseph Stiglitz

From Dean Baker

There is an old story from the heyday of the Soviet Union. As part of their May Day celebrations they were parading their latest weapon systems down the street in front of the Kremlin. There was a long column of their newest tanks, followed by a row of tractors pulling missiles. Behind these weapons were four pick-up trucks carrying older men in business suits waving to the crowds.
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Seeing this display, the Communist party boss turned to his defense secretary. He praised the tanks and missiles and then said that he didn’t understand the men in business suits. The defense secretary explained that these men were economists, and “their destructive capacity is incredible.”

People across the world now understand what the defense secretary meant. The amount of damage being inflicted on countries around the world by bad economic policy is astounding. As a result of unemployment or underemployment, millions of people are seeing their lives ruined. The current policies have led to trillions of dollars of lost output. From an economic standpoint this loss is every bit as devastating as if a building had been destroyed by tanks or bombs. And people have lost their lives, due to inadequate health care, food and shelter, or as a result of the depression associated with their grim economic fate.

If an enemy had inflicted this much damage on the United States, the countries of the European Union, or the countries elsewhere in the world that have been caught up in this downturn, millions of people would be lining up to enlist in the military, anxious to avenge this outrage. But, there is no external enemy to blame. The villains are the economists, still mostly men, in business suits.

Now it may be a good joke, but Baker is wrong. It is like blaming the mandarins for the actions of the emperor. Economists are trained, selected, employed based on their ability to say yes to the right people. Ben Bernanke, for example, is not employed because he is aware of how money or the Fed actually works, but because he believes it works in a way that is compatible with the needs of the Wall Street commissars. In fact, the pick-up should be filled with politicians and the boss should be looking down from a Manhattan skyscraper. But the joke is already becoming less funny.

How do we know that it is not the practitioners of the quasi-science of Economics that are driving the economic program?

The third presidential debate closed without a single word on climate change. Climate science is a hard science. The climate crisis is ever more apparent. The future of the planet is in the balance. Not a single word in any one of the three presidential debates.

So to blame the Mandarins of economics for not knowing economics is beside the point. They were selected exactly because they describe a cosmos where the powerful are in their positions by necessity and real and effective alternatives are not available.

Here with Joseph Stiglitz courtesy of Bloomberg


An update of conditions in Greece.

It appears that ECB and IMF bailouts to Greece along with their conditionalities of austerity are sucking money out of Greece rather than putting it in, quite the opposite of the advertisement.

From our friends at Real World Economic Review,

we see that the ECB and IMF are ever more eager to give the Greek's money to prevent their leaving the Eurozone. Unfortunately that money is not going to the Greek economy. A chart online shows the collapse of the money supply in Greece, a deeply deflationary spiral that is consistent with the madness of austerity.

The money supply collapsed beginning in 2009 and has been contracting at a rate of 10 percent or more a year since. Now at around minus 20 percent. A ten percent growth in the money supply is a level consistent with recovery, says Merijn Knibbe


Prime Minister Antonis Samaras on Friday expressed certainty that a 31.5-billion-euro tranche of the EC-ECB-IMF bailout package will be disbursed by mid-November, preferably in its entirety, as soon as a report by the troika is adopted.

Speaking in Brussels at the end of a two-day EU summit, Samaras explained that a new summit will not be required to approve the disbursement, adding that the country's current cash reserves would run out on November 16.

As Calculated Risk says,

Greece gets money, along with austerity and societal breakdown

Also via Calculated Risk, we see that the situation in Spain is darkening as well. The likelihood that Spain will follow Greece into the ECB's austerity program is not high.


From the WSJ: Bank of Spain Warns on Deficit Targets

Spain's central bank said Tuesday the country's economy contracted slightly less than expected in the third quarter but repeated a warning that tax-revenue shortfalls could cause the government to miss its 2012 budget-deficit target.

The euro zone's fourth-largest economy contracted by 0.4%, the same as in the second quarter, the Bank of Spain said in a quarterly report. On an annual basis, the contraction was 1.7% ...

The government has said its deficit will rise to 7.4% of GDP this year ...

[Demand Side Comment: this is lower than the U.S. deficit by a substantial amount.]

"The efforts to lower spending at the public sector have had a net contracting effect (on the economy) in the central months of the year," the central bank said. "We see drops in consumption and investment by all levels of government above those seen in previous quarters."

Today we begin serious advertising on Demand Side.

We have avoided this in the past because we are not likely to get very much revenue and we wanted you to enjoy a commercial-free space, but then we began to wonder What if? It seems like the only folks advertising are those who are toxic to the economy. Witness the enormous and destructive advertising in the political season. Witness the oil companies beginning their happy ads with the word "Clean." We're more capitalist than the capitalists here at Demand Side, because we see that to have a car, you need a road. So maybe we'll start advertising for roads.

And you have heard us plug our book, Demand Side Minds. Find it at DemandSideBooks dot com.

But to begin the new regime, we begin with :

My mom. Now ninety years old, living in a mountain town in the Black Hills of South Dakota, watching the seasons change and being grateful. She is sharp, discouraged like the rest of us, but interested still. Things have changed. Growing up in the Hills as the oldest daughter of miners turned farmers turned postal workers turned whatever could put food on the table, she survived smallpox in adolescence, served in the Navy as a DC secretary, took the GI Bill to Black Hills Teachers College, came out with three kids and a life as a first grade teacher, supported these and other kids over a long period, and then went on to a brilliant career as a hand quilter.

We invite you to send your appreciation to her. Or as she says, "You don't owe me anything. I paid my parents by raising you. Now whatever obligation you have to me, pass it on. This is not the way of every relationship. But what you get from the older, you give to the younger."

Or something like that.

Brought to you by Mom,

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