The U.S. so obviously lived beyond its means. That’s what all those bonds piled up in China means. Our state governments lived beyond their means, that’s why California owes all that money. Our families lived beyond their means, they why they have that credit card debt. Since we can’t raise taxes enough to pay off those bonds, and they are going to eventually come due…

This is not Keynesian, Classical, Marxist, Ricardian, it’s Empirical. Which is what makes much of the political dialog on this so surreal.

“Stiglitz is right. Fiscal stimulus that gets Main St. going again is a much better (and smaller) investement than pumping trillions into the banking sector through monetary policy. Wall St. doesn’t care about America, only its narrow interests which are international capital.”

Getting money into Main Street is very difficult to do. Getting it back from Wall Street may be easier and also healthier for a future in which people are (slowly!) becoming more honest. This is because the means of getting it back can also serve to curb the endless externalizing of financial intermediary blunders and dishonesty. As Warren Buffett once said:

“Wall Street likes to characterize the proliferation of frenzied financial games as a sophisticated pro-social activity, facilitating the fine-tuning of a complex economy. But the truth is otherwise. Short-term transactions frequently act as an invisible foot, kicking society in the shin.”

In Europe they are getting serious about addressing this “invisible shin-kicking” through a financial transactions tax (FTT). That would be a good idea if the tax were designed to discriminate rationally between derivative contracts that serve the real economy and other derivatives which merely externalize costs to the future. To learn how this can be practically done through a rationally and ethically “smart” FTT take a look at the paper at:

http://www.authentixcoaches.com/dsFCTFin Reg.html

I wonder if The Greatest Generation would have bothered had they had the slightest notion how quickly — within three generations — would squander their toil and sacrifice, focusing instead on “Me, ME! The GLORIOUS ME!!!”

And it’s not just young people — they learned from their role models, i.e. people who came of age in around the 1980′s. Who learned, to an extent, from my generation — I was born in 1951.

America is a wonderful dream, excellently epitomized by the Statue of Liberty. It’s terribly sad it’s no longer a dream, but an unattainable fantasy. There’s little for which Lady Liberty can stand, these days. . . .

I think the whole problem is in part structural. The world is dollarized and the puts tremendous demand on our financial sector to extend credit. Look at the Fed, they are the bank of last resort to other central banks. The bankers see this is an immutable reality, even though it is a result of human consensus and human policy. Conclusion, the system will continue to operate in its own interests, which are the interests of multinational/international capital both productive and financial.

Stiglitz is right. Fiscal stimulus that gets Main St. going again is a much better (and smaller) investement than pumping trillions into the banking sector through monetary policy. Wall St. doesn’t care about America, only its narrow interests which are international capital.

Which is pretty stupid.

And the end result would be that the currency war probably just encourages China to properly finalise its economic growth through internal consumption and development than on exports. China’s counter tariffs against the US would cause even more job losses in the US, inflation and currency weakness, a cocktail so potent that it would strike a huge blow against the US economy. Which will then accelerate and ultimately cement China’s status as a… no… THE world economic superpower over the US.

From where I am looking, I hope the US leaders are insane enough to go into the trade war (god willing, Sarah Palin will win the 2012 presidential election). It is time for China to take over the car.

Thank you for putting this up. It is nice to be able to get these little “bite-size” lectures from Dr. Stiglitz without having to endure graduate school (again). I always enjoy the way Joe Stiglitz addresses the essential issues quickly and discusses them in a straightforward and uncomplicated manner.

Well done, Chrystia!

REG CROWDER
Financial & Investment Writer
Brittany, France and London, England
http://www.RegCrowder.com