Lakshmi Rhone wrote: > As the dominant or hegemoic fraction of the dominant the hegemonic class, > Wall Street is the dominant faction of the DP coalition.
> Rubin's conclusion is clear. He has concluded that American capitalism cannot > live with huge deficits and an entitlement state. < are the following comments Rubin's opinion or yours? > Huge deficits will have to be monetized away, given what the growth rate of > the private economy is likely to be. < What if fiscal and/or monetary policy (or better, debt relief for homeowners and the like) get GDP growing again? can we really take the growth of the private economy as a fixed number ahead of time. > Monetization of debts will lead to commodity price inflation and neutralize > any stimulus (we are already seeing this consequence of QE2).< Commodity inflation has happened and likely will happen in the future, but there is enough slack in the US economy that increased money supply won't cause big increases in the prices of most goods and services. (In Kalecki's terms, commodities have demand-determined prices and most goods and services have cost-determined prices.) As for neutralizing the stimulus, that has occurred because (1) banks won't lend much, so that the money supplies don't rise much compared to the monetary base, so that the monetary stimulus is very weak and made weaker by the inability of nominal interest rates to fall below (slightly above) zero; and (2) the fiscal stimulus in 2009 was weak and is ending, while the state and local governments are actually pushing the economy deeper into stagnation. > Monetization of debts will lead to currency and trade wars and bring chaos to > international markets. This alarmist prophecy can't happen if other countries expand their money supplies simultaneously. In addition, "currency wars" doesn't apply in a foreign exchange regime in which most exchange rates are floating. It's a deceiving flash-back from the early 1930s. Trade wars seem very unlikely when the dominant fraction of capital -- which includes Robert Rubin -- is internationalized and is more interested in promoting flows of capital than in fostering domestic prosperity in any one economy. Don't free markets thrive on chaos? > Monetization of debts will eventually put upward pressure on interest rates > which would require such a massive cut back of state expenses at the very > time the economy was sinking that it would only be possible with forms of > political authoritarianism or fascism.< The upward pressure on interest rates only happens if the economy actually recovers and/or significant inflation occurs. Both also reduce the relative impact of the government's debt. the "f word" again. It sure spices up the rhetoric! It sure keeps me from falling asleep: visions of jackboots dance in my head. > The number one priority to prevent international chaos, a Great Depression > and fascism is long-term deficit reduction, with cuts over the next two years > being minimal. Deficit reduction will require huge spending cuts and some > increased taxation. < is this Rubin's opinion or yours? -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
