Paleo Retiree writes:
This is Part Two of a three-part series. Part One is here.
Another distinction that I’ve found useful is between people who think the current system can be responsibly and successfully managed and people who think that our current system is hopelessly rigged in favor of the banks and needs rebuilding from the ground up.
As far as I can tell, whether you’re on one side or the other of this question has nothing to do with political alignments or philosophies, let alone with rationality generally. It has to do with temperament, and with personal reactions. The reason for this, I suspect, is that it can be hard to look very far into the financial crisis without finding your brain latching onto such larger questions as “What is money, exactly?”, and “Why do we accept money as money?”, and “How does money get created”?, and “Who gets to create it, and why?” Scary thought: If our financial world is at heart nothing but a confidence game, what happens when people start to lose confidence in it? If money is but a magic show, what becomes of the illusion when the curtains are pulled back?
Once questions like these start to be asked and answered, personal feelings start to intrude bigtime. Do you react to what you’ve learned by musing, “Hmm, a bit jerrybuilt, sure, but I can see ways of making it work”? Or do you respond by thinking, “Good lord, it’s a house of cards built on a shifting bed of quicksand!”? Which reaction you have seems to me to be entirely a matter of temperament.
Happy to admit that I’ve learned a lot from some representatives of the “We can make it work” crowd. My favorite responsible resources have been the book “13 Bankers” (by James Kwak and former IMF honcho Simon Johnson) and Charles Ferguson’s documentary movie “Inside Job.”
In fact, if a friend were to ask about the fastest way to get up to speed on What Just Happened, I’d suggest watching “Inside Job,” a tough (but easy-to-watch) look at the crisis that argues (as does “13 Bankers”) that what we’ve lived through has been a slow-motion coup d’état by the financial sector. Ferguson isn’t just another documentary filmmaker, by the way. He’s a successful entrepreneur and political insider who turned to documentary filmmaking in order to pass along what he’s seen and learned.
In essence: Over the course of some decades, the financial sector has taken over our political sector. And not just metaphorically, either: our bankers have made our political rulers their bitchez. That’s the main reason, IMHO, why it’s such a waste of time to let yourself get swept up in the usual Dem-vs-Repub, Obama-vs-Romney battles. It’s Wall Street that’s calling both their tunes. The real battle here is between Wall Street (and their political flunkies) and the Rest of Us.
“Inside Job” has occasionally been available on Netflix Instant View, but even if it isn’t currently on offer there it’s well worth buying. If you’re reluctant to shell out, try looking at it this way: the DVD is the same price as an inexpensive book and — let’s admit it — unlike most of the books you buy, which you’ll never read, you’re very likely to make your way through a DVD.
Another “it can be managed” group that I’ve learned a lot from is what’s called “MMT” — the Modern Monetary Theory crowd. Like many people who encounter the group, I’d initially been completely unaware of their existence — they’re very unorthodox by mainstream standards. And I found it hard not to react to them with intense suspicion. Most are academics (often based at the University of Missouri, Kansas City), and for some reason many of them are prone to both didacticism and high-flown “Don’t be ridiculous”-style language-use. Both these tendencies set my alarm bells to ringing loudly. Plus, the MMTers purport to be doing nothing more or less than describing the accounting-level basics — the by-definition truths — of how today’s monetary/financial system works. Crank that I am, I’m always suspicious of people who claim to be beyond ideology and to be delivering the mere simple factual truth.
A couple of further misgivings I have about them (not that I’m really entitled to these misgivings …): The MMTers tend to see the economy as more amenable to a lever-throwing-and-dial-twisting style of management than I’m comfortable with; and they radiate a kind of “If only decent people who REALLY understand how things REALLY work were in charge, everything would be fine” attitude that completely puts me off. FWIW: My aversion to both these things probably has its roots in the ’60s and ’70s, when hyper-confident, top-down government Keynesians lost all control of the economy while assuring us that they knew exactly what they were doing, as well as exactly which levers needed to be pulled.
Still, they’re a smart and startling crew. On an ultra-basic level the MMT message is: Too many people (and that would include politicians and economists as well as you and me) are applying notions that held true during the gold-standard years to the very different reality of our fiat-money world. (Fiat money, credit money, debt money … Whatever.) And we screw up because of this. If only we understood — and were honest with ourselves about how — today’s economy really works, then we could finally get back in charge of it.
Are the MMTers as right as they claim to be about How Things Really Work? Is their description of how our economic/financial world works as free from ideology as they say it is? And even if it is, does such knowledge really confer the kind of do-gooding power they seem to think it does?
Of course I don’t know. But I can say that the MMT crowd is starting to make an impact on the general discussion — you’ll be seeing and hearing more of them. I can also say that wrestling with their arguments has scrubbed some scales off my own brain. Plus, hey, it can’t be a bad thing that MMT sends both Gary North (hardcore Austrian) and Paul Krugman (hardcore Keynesian) into conniption fits.
Some prominent MMT types you might enjoy exploring include L. Randall Wray, Warren Mosler and Bill Mitchell. The popular website Naked Capitalism, hosted by a woman who calls herself Yves Smith, has been influenced by MMT. I haven’t gotten around to Yves Smith’s own book yet, but it’s on my bedside. (OK, in my Kindle.)
My personal favorites of the MMT crowd are two guys who are less academic-and-theory-bound and more practically-oriented than most of the others are: William Black and Michael Hudson. These days Black teaches, but back in the ’80s he helped clean up the Savings and Loan mess. (Here’s a great piece by Black.) Hudson currently writes and teaches, but back in the day he worked for Chase and for Arthur Anderson. (Here’s Hudson’s latest book.) Both of them have a lot of informed, enlightening and lively things to say. The easiest way to start with their contributions might be to type their names into the YouTube Search box. Both have been interviewed on video numerous times.
To be continued tomorrow …