Comments on: Bernanke ‘Irresponsible’ to Compare US to Greece http://www.creditwritedowns.com/2012/02/bernanke-irresponsible-to-compare-us-to-greece.html Finance, Economics and Markets Wed, 23 May 2012 01:55:46 +0000 hourly 1 By: Iluvatar http://www.creditwritedowns.com/2012/02/bernanke-irresponsible-to-compare-us-to-greece.html#comment-80890 Iluvatar Sat, 11 Feb 2012 15:18:12 +0000 http://www.creditwritedowns.com/?p=41960#comment-80890 Hello Edward: Have just been a reader. Love your site and your stuff. Also an ex-Austrian (grin). Mostly post over a PragCap (Cullen Roche's site). Congratulations on a good interview. I think it went better than you felt. Continue to spread the word. We need Wynnes's sectoral balances understood by Congress so desperately. Could you just imagine if Ron Paul got this. Totally deadly. BTW, your comment about the deficit sounded like an Abba Lerner read (really big grin) - to wit, you don't target things like the deficit, you target policy and the deficit is what it is. Sounds like functional finance/economics to me. Hello Edward:

Have just been a reader. Love your site and your stuff. Also an ex-Austrian (grin).

Mostly post over a PragCap (Cullen Roche’s site).

Congratulations on a good interview. I think it went better than you felt.

Continue to spread the word. We need Wynnes’s sectoral balances understood by Congress so desperately.

Could you just imagine if Ron Paul got this. Totally deadly.

BTW, your comment about the deficit sounded like an Abba Lerner read (really big grin) – to wit, you don’t target things like the deficit, you target policy and the deficit is what it is. Sounds like functional finance/economics to me.

]]> By: Dave Holden http://www.creditwritedowns.com/2012/02/bernanke-irresponsible-to-compare-us-to-greece.html#comment-80859 Dave Holden Fri, 10 Feb 2012 14:51:05 +0000 http://www.creditwritedowns.com/?p=41960#comment-80859 Ah, ok. I get you. On the issue of government debt I'm still in the process of distilling my thoughts. Part of that I think is for me to get a better understanding of the relationship between the realms of money and real resources. Ah, ok. I get you. On the issue of government debt I’m still in the process of distilling my thoughts. Part of that I think is for me to get a better understanding of the relationship between the realms of money and real resources.

]]> By: Edward Harrison http://www.creditwritedowns.com/2012/02/bernanke-irresponsible-to-compare-us-to-greece.html#comment-80858 Edward Harrison Fri, 10 Feb 2012 13:41:58 +0000 http://www.creditwritedowns.com/?p=41960#comment-80858 Dave, I was talking about government debt to GDP here. But I like debt-to-GDP and debt to income statistics as a yardstick generally. I agree with you that it was private debt that was most problematic in the bubble economies. But public debt fetishism will continue and cause us to propose the wrong solutions to the problem. Dave, I was talking about government debt to GDP here. But I like debt-to-GDP and debt to income statistics as a yardstick generally.

I agree with you that it was private debt that was most problematic in the bubble economies. But public debt fetishism will continue and cause us to propose the wrong solutions to the problem.

]]> By: Dave Holden http://www.creditwritedowns.com/2012/02/bernanke-irresponsible-to-compare-us-to-greece.html#comment-80855 Dave Holden Fri, 10 Feb 2012 10:12:37 +0000 http://www.creditwritedowns.com/?p=41960#comment-80855 Are you talking about overall debt to GDP or government debt to GDP. Because to me it seems that for most countries the latter wasn't, at least in the short term, a problem. The reason it has become a problem I think can be summarised thus:- 1) a crony based economics profession dominated by neoclassicals who didn't (don't?) think private sector debt matters enabling a one way only interest rates policy. 2) A private sector banking system incentivised to create debt without regard for the productive ROI of that debt and a monetary system that facilitated this into essentially becoming a Ponzi scheme. 3) The unwillingness of government to let that Ponzi debt be destroyed in the private sector. i.e. because 3) is inevitable the key (which I agree is policy prescription) needs to take into account how money is created by the private sector. I know I've banged on this before but to me its the private sector "monetary system" where the problem is. Are you talking about overall debt to GDP or government debt to GDP. Because to me it seems that for most countries the latter wasn’t, at least in the short term, a problem.

The reason it has become a problem I think can be summarised thus:-

1) a crony based economics profession dominated by neoclassicals who didn’t (don’t?) think private sector debt matters enabling a one way only interest rates policy.

2) A private sector banking system incentivised to create debt without regard for the productive ROI of that debt and a monetary system that facilitated this into essentially becoming a Ponzi scheme.

3) The unwillingness of government to let that Ponzi debt be destroyed in the private sector.

i.e. because 3) is inevitable the key (which I agree is policy prescription) needs to take into account how money is created by the private sector.

I know I’ve banged on this before but to me its the private sector “monetary system” where the problem is.

]]> By: David Lazarus http://www.creditwritedowns.com/2012/02/bernanke-irresponsible-to-compare-us-to-greece.html#comment-80852 David Lazarus Thu, 09 Feb 2012 23:29:37 +0000 http://www.creditwritedowns.com/?p=41960#comment-80852 I prefer the U6 measure as it includes those that are dropped from the official figure because they have exhausted benefits. The fact that the U6 figure is going down is excellent. Though my definition of full employment is when unemployment is below 2%. I prefer the U6 measure as it includes those that are dropped from the official figure because they have exhausted benefits. The fact that the U6 figure is going down is excellent. Though my definition of full employment is when unemployment is below 2%.

]]> By: Edward Harrison http://www.creditwritedowns.com/2012/02/bernanke-irresponsible-to-compare-us-to-greece.html#comment-80850 Edward Harrison Thu, 09 Feb 2012 21:54:06 +0000 http://www.creditwritedowns.com/?p=41960#comment-80850 Hi Sam, The participation rate may be in secular decline because of an aging population just as it was increasing as women entered the workforce in the 1970s and 1980s. But I think your thought of targeting a higher participation rate from the 25-44 cohort makes a lot of sense to me. Hi Sam,

The participation rate may be in secular decline because of an aging population just as it was increasing as women entered the workforce in the 1970s and 1980s. But I think your thought of targeting a higher participation rate from the 25-44 cohort makes a lot of sense to me.

]]> By: Edward Harrison http://www.creditwritedowns.com/2012/02/bernanke-irresponsible-to-compare-us-to-greece.html#comment-80849 Edward Harrison Thu, 09 Feb 2012 21:48:09 +0000 http://www.creditwritedowns.com/?p=41960#comment-80849 I feel like I covered that aspect Chris, so it's not in this post: http://www.creditwritedowns.com/2012/02/chart-of-the-day-labor-force-participation-rate-at-30-year-low.html Your question is the right one: "Does anyone really trust a politician to spend responsibly if there are not deficit budgets to be held accountable to?" I think the answer is probably no and that's why this artificial constraint was built in. But it's based on a lie. It's a lie to say that the US is going to go bankrupt or similar types of propaganda used to scare people into restraint. And where has it gotten us? Nowhere. The flip side of the deficits are private sector surpluses. When we did follow the deficit mentality to its logical ends under Clinton we got huge private dissavings and a massive bubble. I like Debt to GDP or change in debt to GDP as a measuring stick. The question still will be what to do if it is rising to quickly. So it doesn't tell us enough on its own. I feel like I covered that aspect Chris, so it’s not in this post:

http://www.creditwritedowns.com/2012/02/chart-of-the-day-labor-force-participation-rate-at-30-year-low.html

Your question is the right one: “Does anyone really trust a politician to spend responsibly if there are not deficit budgets to be held accountable to?”

I think the answer is probably no and that’s why this artificial constraint was built in. But it’s based on a lie. It’s a lie to say that the US is going to go bankrupt or similar types of propaganda used to scare people into restraint. And where has it gotten us? Nowhere. The flip side of the deficits are private sector surpluses. When we did follow the deficit mentality to its logical ends under Clinton we got huge private dissavings and a massive bubble.

I like Debt to GDP or change in debt to GDP as a measuring stick. The question still will be what to do if it is rising to quickly. So it doesn’t tell us enough on its own.

]]> By: Sam http://www.creditwritedowns.com/2012/02/bernanke-irresponsible-to-compare-us-to-greece.html#comment-80848 Sam Thu, 09 Feb 2012 21:30:46 +0000 http://www.creditwritedowns.com/?p=41960#comment-80848 Why not be held accountable to the unemployment rate and participation rate rather than a debt ceiling? The participation numbers look grim, more participation from ages 55+ and less from 25-44. Not encouraging for birth rates either. Why not be held accountable to the unemployment rate and participation rate rather than a debt ceiling? The participation numbers look grim, more participation from ages 55+ and less from 25-44. Not encouraging for birth rates either.

]]> By: Sam McLaughlin on Facebook http://www.creditwritedowns.com/2012/02/bernanke-irresponsible-to-compare-us-to-greece.html#comment-80847 Sam McLaughlin on Facebook Thu, 09 Feb 2012 21:23:35 +0000 http://www.creditwritedowns.com/?p=41960#comment-80847 Why not be held accountable to the unemployment rate and participation rate rather than a debt ceiling? The participation numbers look grim, more participation from ages 55+ and less from 25-44. Not encouraging for birth rates either. Why not be held accountable to the unemployment rate and participation rate rather than a debt ceiling? The participation numbers look grim, more participation from ages 55+ and less from 25-44. Not encouraging for birth rates either.

]]> By: ChrisBern http://www.creditwritedowns.com/2012/02/bernanke-irresponsible-to-compare-us-to-greece.html#comment-80846 ChrisBern Thu, 09 Feb 2012 21:21:46 +0000 http://www.creditwritedowns.com/?p=41960#comment-80846 Doesn't the no-spin analysis of the current U.S. jobs data also require mention that the labor participation rate is at almost 30-year lows? Also, I completely agree with this: "...the policy prescriptions are the economic input and the deficit is the output. Focus on the policy and policy goals, not deficits." However, if deficits aren't used at least as a gauge or a measuring stick...how will politicians' propensity to spend (in order to appease their constituents and get re-elected) ever be reigned in? Does anyone really trust a politician to spend responsibly if there are not deficit budgets to be held accountable to? Doesn’t the no-spin analysis of the current U.S. jobs data also require mention that the labor participation rate is at almost 30-year lows?

Also, I completely agree with this: “…the policy prescriptions are the economic input and the deficit is the output. Focus on the policy and policy goals, not deficits.”

However, if deficits aren’t used at least as a gauge or a measuring stick…how will politicians’ propensity to spend (in order to appease their constituents and get re-elected) ever be reigned in? Does anyone really trust a politician to spend responsibly if there are not deficit budgets to be held accountable to?

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