Monday, November 18, 2013

Invisible Institutionalists: Samizdat 2

The latest framing device deployed by the gate keepers of the economic left is to assert, more or less, that the economy has established a new "optimal" state in which enormous slack in aggregate demand is organic and inevitable. We see this in today's Paul Krugman column riffing on Larry Summers recent exposition to similar effect. While these two "Invisible Institutionalists" prefer to frame this condition as a natural tragedy people of good heart should set their efforts against, like helping typhoon victims in the Philippines, the essence of their position is identical to that espoused by Tyler Cowen. Cowen's "Great Stagnation" dystopian vision of the present is essentially a claim that mankind, in its vast imperfection, has simply not proven up to the task of keeping up with the "natural" progress of technology because we're mostly too dumb and lazy to benefit from it except as consumers. Thus most of us, as a matter of charity, should be tricked out with minimum domiciles, super efficient calorie delivery devices and continuously supplied with the latest home entertainment so we can FPS and wank ourselves to oblivion at minimal cost to the creative class (of which Cowen sees himself a member). As best as I can tell Summers and Krugman differ only in preferring that we all have menial jobs instead instead of Play Stations.

Invisible are the Institutions. They're outside the frame. Our samizdat mindset requires that we search there first, and just peeking into the frame we find layer after layer of politically constructed institutions with narrowly focused rewards and broadly distributed penalties. Start with the Fed: the $85 billion a month in bonds it buys. Quantitative Easing scrubs risk from the balance sheets of criminal banking organizations without doing anything more for the real economy

Saturday, November 16, 2013

American Samizdat

Eighteen years after Robert Rubin took his seat as Secretary of Treasury I think it is safe to say he and his Goldman Sachs buddies have cemented the end of The New Deal. The open assault ongoing in DC, but almost exclusively there, against Social Security and Medicare, the last vestiges of an eclipsed era of progressive liberalism, will if successful finally remove the United States from the list of Advanced Economies. Beginning with the clever perversions of "economics" and "conservation" articulated by Milton Friedman and William Buckley in the sixties, a corporatist program codified by Lewis Powell in his infamous memo of 1971 has been assiduously pursued by the American rich that now verges on re-pinning the United States in the "middle income trap"(note that the Wiki entry ignores the centrality of social safety nets to all economies that have escaped the trap). This is a goal, not a failure: with finance as their van guard, corporatists have never liked the idea of a free American People, nor free people in general, and for the thirty years following World War II, from their point of view, Americans were dangerously so.

While I suspect Bill Clinton was a real populist, a man of the people, his personal ambition and real if opportunistic regard for the myth of a righteous America left him easy prey to the predators attracted by the pinnacles of finance. Mesmerized by the immediate results they promised and delivered, by unshackling Capital it was Clinton in his second term who de-criminalize the frauds and thefts financial
con-men had been successfully prosecuted for by George Bush Senior less than five years earlier. It had