tag:blogger.com,1999:blog-53246864840716464.post7991532624927715512..comments2024-02-29T00:46:38.800-08:00Comments on Washingtons Blog: Bernanke Blames Banks For Slow Recovery and High Unemployment . . . Then Gives Them a Pat on the Back and a WinkUnknownnoreply@blogger.comBlogger3125tag:blogger.com,1999:blog-53246864840716464.post-82230819081818120762009-11-17T05:14:02.510-08:002009-11-17T05:14:02.510-08:00How many faces does Bernanke have? All of them Lie...How many faces does Bernanke have? All of them Lie!<br /><br />End the Fed.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-53246864840716464.post-15295371265324927722009-11-16T20:16:13.655-08:002009-11-16T20:16:13.655-08:00What this shows is that the neoliberal assumptions...What this shows is that the neoliberal assumptions that underlie monetarism as a policy tool are deeply flawed, especially in a liquidity trap. Bernanke obviously feels betrayed because according to the assumptions, loose policy should incentivize lending. Instead, the banks are taking advantage of the favorable spread to leverage themselves in asset markets rather than taking on the risk of lending in a uncertain economy for much less potential reward.<br /><br />This is disconcerting because fiscal policy is stymied. In this political climate, deficit spending is virtually impossible to augment since it requires congressional passage and approval by the president, when the polls show that the number one priority of the public is deficit reduction, on the false analogy that government finance is like household finance.<br /><br />Meanwhile, the country is increasing savings and deleveraging, decreasing consumption and reducing aggregate demand. Without the government making up for the shortfall by either spending or reducing taxes, the output gap will increase and so will unemployment. <br /><br />At this point, only reducing taxes seems politically feasible, but even that may be difficult, since the wealthy pay most of the taxes and the vast majority of people who are not wealthy are hurting. Reducing taxes on business and the rich would further enrage an already angry mob.<br /><br />So there are no good options that seem doable given the prevailing mindset. As a result, this ship is dead in the water. All we need is a shock, and the ship will be taking on water again.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-53246864840716464.post-47044572435283411332009-11-16T15:46:57.427-08:002009-11-16T15:46:57.427-08:00Your portrayal of the banking scene in the UK is t...Your portrayal of the banking scene in the UK is too flattering. It is true that the UK government has taken a large shareholding in most large banks, but the UK government is not doing anything effective with these powers: apart from (like Bernanke) pleading with banks to lend more.<br /><br />RBS said a few days ago that, “Our customers are generally seeking to repair their balance sheets, not to increase borrowing. As a result, the demand for our lending is muted, especially from business customers” (source: http://www.citywire.co.uk/personal/-/news/markets-companies-and-funds/content.aspx?ID=366669&re=7449&ea=227150)<br /><br />Businesses and households have learned their lesson from the credit crunch: don’t borrow too much. So they are now deleveraging. This rings an alarm bell in the brain of anyone who understands economics: the alarm bell is called “Keynes paradox of thrift”. Governments and central banks do not seem to have tumbled to this: far from accommodating the desire to save, i.e. the desire not to borrow, governments are trying to encourage borrowing.<br /> <br />Laurel and Hardy would have done better.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.com