*Dear Friends of the American Monetary Institute,
Beware the Economyths
*
The real questions on economics to ask the presidential contenders in
Wednesday's debate:
In a new York Times October 7, 2008 Op-Ed Contributors JOSEPH E.
STIGLITZ, R. GLENN HUBBARD and MYRON S. SCHOLES put forward economic
questions for the Presidential debate titled:
* **The Dismal Questions *
Their points were dismal all right, and shed light on why in Chapter 24 of
/*The Lost Science of Money*/ book, I warn that monetary reform must not
be left in the hands of economists.
Here is my response to their questions, which are below:
"Take a closer look at those questions and you can understand how
economists have represented a near total loss to society (yes we know
there are a handful of good ones in America).
All the questions deal with MICRO ECONOMICS, not with the big picture
MACRO questions. Here would be some basic macro monetary/economic
questions that illuminate the source of the current monetary debacle:
*Do you understand the difference between MONEY and CREDIT?* Would you
consider removing the special privilege financial institutions presently
have to create our money supply by lending their CREDIT; and instead
substitute government created MONEY in its place? Do you understand that
such CREDIT evaporates in periods of financial stress, but government
MONEY does not disappear?
*Do you understand that the above bank accounting privilege is the
ultimate source of the ridiculous concentration of wealth, *and has to be
addressed for moral reasons? Are you willing to seriously include
matters of justice, fairness and morality in monetary and economic
public policy decisions?
*Will you admit/agree that the private financial sector regime has
failed and
has to be rescued again(!)* by the public sector and therefore it must be
replaced by a publicly controlled structure* where money is issued by
government not private banks??*
Nationalize MONEY, not banking.
See http://www.monetary.org <http://www.monetary.org> for background,
especially the article The
Need for Monetary Reform.
Sincerely,
Stephen Zarlenga
Director, American Monetary Institute
Here is the New York Times piece, with the questions the economists
submitted:
October 7, 2008
Op-Ed Contributors
The Dismal Questions
By JOSEPH E. STIGLITZ, R. GLENN HUBBARD and MYRON S. SCHOLES
John McCain and Barack Obama will meet tonight in Nashville for the
second presidential debate. As Americans worry about a confusing federal
rescue plan, a falling stock market and a financial crisis that is
spreading across the globe, the editors of the Op-Ed page asked three
economists to suggest the questions they would most like to hear the
candidates answer.
1. When the current bailout of Wall Street fails to turn around the
economy and reinvigorate credit markets, will you propose another one?
How large should it be? Henry Paulson and Ben Bernanke have said what is
needed is a restoration of confidence in the economy. But won't the
failure of this bailout destroy confidence, with disastrous consequences
- as happened in Indonesia and other East Asian countries when similar
bailouts failed 10 years ago?
2. More than a million people have lost their homes in the past two
years. A million more are expected to lose their homes in the next 12
months or so. Do you support a more direct program of relief for
homeowners? The government pays more of the mortgage costs of rich
homeowners, through larger tax deductions, than of poorer homeowners.
What would you do to correct this injustice?
3. President Bush pushed tougher bankruptcy laws that were supposed to
reduce bankruptcy and lower lending costs. But the new laws made it more
difficult for ordinary Americans to discharge their debts, and
encouraged reckless lending on the part of lenders, who thought they
could more easily force poor borrowers to repay. Would you make any
changes in the bankruptcy laws? Currently, it is more difficult to
restructure a mortgage on a primary residence than other debts. Do you
support bankruptcy reforms that would make it easier for people to stay
in their homes?
- JOSEPH E. STIGLITZ, a professor of economics at Columbia who shared
the Nobel prize in economics in 2001 and who has advised the Obama campaign
**** **
1. Does the financial crisis indicate that we need more regulation? Or
is the problem less one of too little regulation than of poorly focused
regulation? The crisis had its origins in part in international capital
flows that led to extraordinarily low interest rates. But high-risk
mortgage lending drew some of its breath from regulatory interventions.
Some heavily regulated financial institutions managed to get themselves
in trouble. And it was government-sponsored enterprises, no strangers to
regulation, that stimulated the demand for questionable mortgage
products. Shouldn't the next president be standing up to protect markets
instead of sowing doubts about them?
2. The Federal Reserve has had to step into the political fray to an
uncomfortable degree. Are we asking too much of the Fed? Should we
create a strong financial regulator that would stand shoulder to
shoulder with the Fed?
3. The existing capital standards for financial companies helped create
the illusion that risky assets were "safe." A reformed system could
mandate more capital, to support incremental risk-taking, during a boom
and lower such capital requirements in a bust. By changing capital
cushions over credit cycles, banks would be less likely to be forced
into asset fire sales. Would you support such a change?
4. Do you support the appointment of a presidential commission to report
quickly on the causes of the current crisis and present options for
regulatory reform?
- R. GLENN HUBBARD, the dean of Columbia Business School and the
chairman of the Council of Economic Advisers from 2001 to 2003
* *****
1. Discuss the tradeoffs for our economy, if any, between growth
(so-called trickle down) and redistribution (so-called sprinkle around)
policies.
2. At this moment, there seems to be an overwhelming cry for
retribution, in the form of new regulations aimed at our financial
services industry (so-called Wall Street). To what extent do you believe
that these measures are necessary? How will you judge the benefits and
costs of the choices to be made? How will the new regulations take into
account the evolution of the financial services sector in trading
securities or goods and services, financing businesses and homes, saving
for college or retirement, and reducing and transferring risk?
3. Individual innovation and creativity in our society are the
cornerstones of our economy. They create wealth and improve the nation's
welfare. Through innovations, the 20th century became the American
Century. Will the 21st century be so as well or will it become the
Global Century? How, if at all, would your administration foster
innovation in the following areas: the provision of health care for our
citizens; an immigration policy that attracts and retains the best;
educational policies that increase the value of our human capital, our
most important resource; helping people accumulate enough retirement
savings; international trade and manufacturing; the evolution of
information technology, biotechnology, nanotechnology and neuroscience;
the allocation of water, food and energy and the development of
alternative energy sources; and, to some, the most important, the
environment?
- MYRON S. SCHOLES, who shared the Nobel prize in economics in 1997
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